Document:

f8k120409ex10iv_naturalnano.htm

     

    Exhibit
10.4

     

    
      SECURITY
AGREEMENT

      

      THIS SECURITY AGREEMENT (the
“Agreement”) is
made as of November 30, 2009 by and among NaturalNano, Inc., a Nevada
corporation (the “Company”), and the
subscribers identified on the signature pages hereto and their respective
endorsees, transferees and assigns (each a “Secured Party” and,
collectively, the “Secured
Parties”).

       

      WHEREAS, pursuant to the
Subscription Agreement, dated of even date herewith, the Company issued to the
Secured Parties a certain 10% Subordinated Secured Promissory Note (the “Note”).

       

      NOW, THEREFORE, in
consideration of the agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:

       

      1. Certain
Definitions.  As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1.  Terms used but
not otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “general intangibles” and “proceeds”) shall have the respective
meanings given such terms in Article 9 of the UCC.  All capitalized
terms not otherwise defined herein shall have the meaning ascribed to them in
the Subscription Agreement.

       

      a. “Collateral” means the
collateral in which the Secured Parties are granted a security interest by this
Agreement and which shall include the following, whether presently owned or
existing or hereafter acquired or coming into existence, and all additions and
accessions thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without limitation, all
proceeds from the sale or transfer of the Collateral and of insurance covering
the same and of any tort claims in connection therewith:

       

      i. All
goods, including, without limitation, all machinery, equipment, computers, motor
vehicles, trucks, tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items, owned by the Company and used in connection with
the Company’s businesses and all improvements thereto; and

       

      ii. All
inventory of the Company; and

       

      iii. All of
the Company’s contract rights and general intangibles, including, without
limitation, all partnership interests, stock or other securities, licenses,
distribution and other agreements, computer software development rights,
employee non-compete, non-disclosure and assignment of rights agreements,
leases, franchises, customer lists, quality control procedures, grants and
rights, goodwill, deposit accounts, and income tax refunds; and

       

      iv. All
receivables of the Company including, without limitation, all insurance
proceeds, and rights to refunds or indemnification whatsoever owing, together
with all instruments, all documents of title representing any of the foregoing,
all rights in any merchandising, goods, equipment, motor vehicles and trucks
which any of the same may represent, and all right, title, security and
guaranties with respect to each receivable, including any right of stoppage in
transit; and

       

      v. All of
the Company’s Intellectual Property; and

       

       

      
        
          
          

        

        
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      vi. All of
Company’s equity interest in its Subsidiaries (as defined in the Subordinated
Secured Note) and certificates evidencing such equity interest, and any shares
of stock (including, without limitation, a distribution in connection with any
reclassification, increase or reduction of capital or in connection with any
reorganization), or any option or right to acquire shares of stock, in
substitution of, or in exchange for, any of such equity interest, or any stock
dividend or split with respect to such equity interest, and any distributions,
whether dividend or liquidating or otherwise, of any cash or property with
respect to such equity interest; and

       

      vii. All of
the Company’s documents, instruments and chattel paper, files, records, books of
account, business papers, computer programs and the products and proceeds of all
of the foregoing Collateral set forth in paragraphs (i) through (vi), inclusive,
above.

       

      b. “Copyrights” shall
mean all of the following in which the Company now holds or hereafter acquires
any interest (i) all copyrights, whether registered or unregistered, held
pursuant to the laws of the United States, any State thereof or any other
country; (ii) registrations, applications and recordings in the United States
Copyright Office or in any similar office or agency of the United States, any
State thereof or any other country; (iii) any continuations, renewals or
extensions thereof; (iv) any registrations to be issued in any pending
applications; (v) prior versions of works covered by copyright and all works
based upon, derived from or incorporating such works; (vi) income, royalties,
damages, claims and payments now and hereafter due and/or payable with respect
to copyrights, including, without limitation, damages, claims and recoveries for
past, present or future infringement; (vii) rights to sue for past, present and
future infringements of any copyright; (viii) any rights in any material which
is copyrightable or which is protected by common law, United States copyright
laws or similar laws, or any law of any State, and (ix) any other rights
corresponding to any of the foregoing rights throughout the world.

       

      c. “Copyright License”
shall mean any agreement, written or oral, in which the Company now holds or
hereafter acquires any interest, granting any right in or to any Copyright or
Copyright registration (whether the Company is the licensee or the licensor
thereunder) including, without limitation, licenses pursuant to which the
Company has obtained the exclusive right to use a copyright owned by a third
party.

       

      d. “Intellectual
Property” shall mean, collectively, the Software Intellectual Property,
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark
Licenses and Trade Secrets.

       

      e. “Obligations” means
all of the Company’s obligations under this Agreement, the Subscription
Agreement and the Note, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later decreased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Parties as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time.

       

      f. “Patents” shall mean
all of the following in which the Company now holds or hereafter acquires any
interest: (i) all patents of the United States or any other country, all
registrations and recordings thereof and all applications for patents of the
United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country; (ii) all reissues, divisions, continuations,
renewals, continuations in part or extensions thereof; (iii) all patents to
issue in any such applications; (iv) income, royalties, damages, claims and
payments now and hereafter due and/or payable with respect to patents,
including, without limitation, damages, claims and recoveries for past, present
or future infringement; and (v) rights to sue for past, present and future
infringements of any patent.

       

       

      
        
          
          

        

        
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      g. “Patent License” shall
mean any agreement, whether written or oral, in which the Company now holds or
hereafter acquires any interest, granting any right with respect to any Patent
(whether the Company is the licensee or the licensor thereunder).

       

      h. “Software Intellectual
Property” shall mean (i) all software programs (including, without
limitation, all source code, object code and all related applications and data
files), whether now owned, upgraded, enhanced, licensed or leased or hereafter
acquired by the Company; (ii) all computers and electronic data processing
hardware and firmware associated therewith; (iii) all documentation (including,
without limitation, flow charts, logic diagrams, manuals, guides and
specifications) with respect to such software, hardware and firmware described
in the preceding subclauses (i) and (ii); and (iv) all rights with respect to
all of the foregoing, including, without limitation, any and all upgrades,
modifications, copyrights, licenses, options, warranties, service contracts,
program services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and substitutions, replacements,
additions, or model conversions of any of the foregoing.

       

      i. “Trademarks” shall
mean any of the following in which the Company now holds or hereafter acquires
any interest: (i) any trademarks, tradenames, corporate names, company names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings thereof and any
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country (collectively, the “Marks”); (ii) any
reissues, extensions or renewals thereof, (iii) the goodwill of the business
symbolized by or associated with the Marks, (iv) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to the
Marks, including, without limitation, damages, claims and recoveries for past,
present or future infringement and (v) rights to sue for past, present and
future infringements of the Marks.

       

      j. “Trademark License”
shall mean any agreement, written or oral, in which the Company now holds or
hereafter acquires any interest, granting any right in and to any Trademark or
Trademark registration (whether the Company is the licensee or the licensor
thereunder).

       

      k. “Trade Secrets” shall
mean common law and statutory trade secrets and all other confidential or
proprietary or useful information and all know-how obtained by or used in or
contemplated at any time for use in the business of the Company (all of the
foregoing being collectively called a “Trade Secret”),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including, without limitation, all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade Secret
Licenses, and including, without limitation, the right to sue for and to enjoin
and to collect damages for the actual or threatened misappropriation of any
Trade Secret and for the breach or enforcement of any such Trade Secret
license.

       

      l. “UCC” means the
Uniform Commercial Code, as the same may, from time to time, be in effect in the
State of New York; provided, however, in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Secured Parties’ security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term “UCC” shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection of priority and
for purposes of definitions related to such provisions.

       

       

      
        
          
          

        

        
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      2. Grant of
Security Interest.  As a further inducement for the Secured
Parties to enter into the Subordinated Secured Promissory Note and to secure the
complete and timely payment, performance and discharge in full, as the case may
be, of all of the Obligations, the Company hereby, unconditionally and
irrevocably, pledges, grants and hypothecates to the Secured Parties, a
continuing subordinated security interest in, a continuing third lien upon, a
right to possession and disposition of, and a right of set-off against, in each
case to the fullest extent permitted by law, all of the Company’s right, title
and interest of whatsoever kind and nature in and to the Collateral (the “Security
Interest”).

       

      3. Representations,
Warranties, Covenants and Agreements of the Company.  Except as
set forth on Schedule A
attached hereto, the Company represents and warrants to, and covenants and
agrees with, the Secured Parties as follows:

       

      a. The
Company has the requisite corporate power and authority to enter into this
Agreement and otherwise carry out its obligations thereunder.  The
execution, delivery and performance by the Company of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action
on the part of the Company and no further action is required by the
Company.  This Agreement constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor’s rights
generally.

       

      b. The
Company represents and warrants that it has no place of business or offices
where its respective books of account and records are kept (other than
temporarily at the offices of its attorneys or accountants) or places where the
Collateral is stored or located;

       

      c. The
Company is the sole owner of the Collateral (except for non-exclusive licenses
granted by the Company in the ordinary course of business), free and clear of
any liens, security interests, encumbrances, rights or claims, and is fully
authorized to grant the Security Interest in and to pledge the
Collateral.  There is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing covering or
affecting any of the Collateral.  So long as this Agreement shall be
in effect, without the prior consent of the Secured Parties, which consent shall
not be unreasonably withheld, the Company shall not execute and shall not
knowingly permit to be on file in any such office or agency any such financing
statement or other document or instrument.

       

      d. No part
of the Collateral or rights in connection therewith has been judged, by any
governmental body with proper jurisdiction, to be invalid or
unenforceable.  No written claim has been received alleging the
Company’s use of any Collateral violates the rights of any third party. There
has been no adverse decision to the Company’s claim of ownership rights in or
exclusive rights to use the Collateral in any jurisdiction or to the Company’s
right to keep and maintain such Collateral in full force and effect, and there
is no proceeding involving said rights pending or threatened before any court,
judicial body, administrative or regulatory agency, arbitrator or other
governmental authority.

       

      e. The
Company shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule
A attached hereto.

       

       

      
        
          
          

        

        
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      f. This
Agreement creates in favor of the Secured Parties a valid security interest in
the Collateral securing the payment and performance of the Obligations and, upon
making the filings described in the immediately following sentence, a perfected
third priority security interest in such Collateral and, to the extent that it
can be perfected through such filings, the Intellectual
Property.  Except for the filing of financing statements on Form-1
under the UCC with the jurisdictions indicated on Schedule A, attached hereto,
no authorization or approval of or filing with or notice to any governmental
authority or regulatory body is required either (i) for the grant by the Company
of, or the effectiveness of, the Security Interest granted hereby or for the
execution, delivery and performance of this Agreement by the Company or (ii) for the perfection of, or
exercise by the Secured Parties of, their rights and remedies
hereunder.

       

      g. Prior to
or promptly after the closing of the Subordinated Secured Note, the Secured
Parties shall file or cause to be filed one or more executed UCC financing
statements on Form-1 with respect to the Security Interest with the appropriate
jurisdictions.  Furthermore, upon request of the Secured Parties, the
Company shall execute and deliver any and all agreements, instruments,
documents, and papers as the Secured Parties may reasonably request to evidence
the Secured Parties’ security interest in the Intellectual Property and the
goodwill and general intangibles of the Company relating thereto or represented
thereby.

       

      h. The
execution, delivery and performance of this Agreement does not conflict with or
cause a material breach or default, or an event that with or without the passage
of time or notice, shall constitute a material breach or default, under any
agreement to which the Company is a party or by which the Company is
bound.  No consent (including, without limitation, from stockholders
or creditors of the Company) is required for the Company to enter into and
perform its obligations hereunder.

       

      i. The
Company shall at all times safeguard, protect and maintain the Collateral for
the account of the Secured Parties until this Agreement and the Security
Interest hereunder shall terminate pursuant to Section 12. Without limiting the
generality of the foregoing, the Company shall pay all governmental fees and
taxes necessary to maintain the Collateral and the Security Interest hereunder,
and the Company shall obtain and furnish to the Secured Parties from time to
time, upon demand, such releases and/or subordinations of claims and liens which
may be required to maintain the priority of the Security Interest
hereunder.

       

      j. The
Company will not transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral without the prior written consent of
the Secured Parties.

       

      k. The
Company shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of the occurrence of any event
which would have a material adverse effect on the value of the Collateral or on
the Secured Parties’ security interest therein.

       

      l. The
Company shall promptly execute and deliver to the Secured Parties such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Parties may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce the Security
Interest.

       

      m. The
Company shall permit the Secured Parties and its representatives and agents to
inspect the Collateral at any time and to make copies of records pertaining to
the Collateral as may be requested by the Secured Parties from time to
time.

       

       

      
        
          
          

        

        
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      n. The
Company will take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.

       

      o. The
Company shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by the
Company that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties
hereunder.

       

      p. All
information supplied to the Secured Parties by or on behalf of the Company with
respect to the Collateral is accurate and complete in all material respects as
of the date hereof, and all information supplied after the date hereof to the
Secured Parties shall be accurate in all material respects.

       

      q. With
respect to any of the Company’s Intellectual Property:

       

      i. such
Intellectual Property is subsisting and the rights in connection with such
Intellectual Property have not been adjudged invalid or unenforceable, in whole
or in part;

       

      ii. the
rights in connection with such Intellectual Property are valid and
enforceable;

       

      iii. the
Company has made all necessary filings and recordations necessary to protect its
interest in such Intellectual Property, including, without limitation,
recordations of all of its interests in the Patents, Patent Licenses, Trademarks
and Trademark Licenses in the United States Patent and Trademark Office and its
claims to the Copyrights and Copyright Licenses in the United States Copyright
Office;

       

      iv. the
Company is the exclusive owner of the entire and unencumbered right, title and
interest in and to such Intellectual Property and no claim has been made that
the use of such Intellectual Property infringes on the asserted rights of any
third party; and

       

      v. the
Company has performed and will continue to perform all acts and has paid all
required fees and taxes to maintain its rights with respect to each and every
item of Intellectual Property in full force and effect throughout the United
States, as applicable.

       

      r. Except
with respect to any Trademark or Copyright that the Company shall reasonably
determine is of negligible economic value to the Company, the Company
shall:

       

      i. maintain
each Trademark and Copyright in full force free from any claim of abandonment
for non-use, maintain as in the past the quality of products and services
offered under such Trademark or Copyright; employ such Trademark or Copyright
with the appropriate notice of registration; not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark or Copyright
unless the Secured Party shall obtain a perfected security interest in such mark
pursuant to this Agreement; and not (and not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby any Trademark or
Copyright may become invalidated;

       

       

      
        
          
          

        

        
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      ii. not,
except with respect to any Patent that it shall reasonably determine is of
negligible economic value to it, do any act, or omit to do any act, whereby any
Patent may become abandoned; and

       

      iii. notify
the Secured Parties immediately if it knows, or has reason to know, that any
application or registration relating to any Patent, Trademark or Copyright may
become abandoned, or of any material adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United States Copyright Office or any court or tribunal in the United
States) regarding its ownership of any Patent, Trademark or Copyright or its
right to register the same or to keep and maintain the same.

       

      s. Whenever
the Company, either by itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Patent,
Trademark or Copyright with the United States Patent and Trademark Office or the
United States Copyright Office or acquire rights to any new Patent, Trademark or
Copyright whether or not registered, report such filing to the Secured Parties
within five (5) business days after the last day of the fiscal quarter in which
such filing occurs.

       

      t. The
Company shall take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and Trademark
Office or the United States Copyright Office, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of the Patents, Trademarks and Copyrights, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability.

       

      u. In the
event that any Patent, Trademark or Copyright included in the Intellectual
Property is infringed, misappropriated or diluted by a third party, the Company
shall promptly notify the Secured Parties after it learns thereof and shall,
unless it shall reasonably determine that such Patent, Trademark or Copyright is
of negligible economic value to it, which determination it shall promptly report
to the Secured Parties: promptly sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution, or take such other
actions as it shall reasonably deem appropriate under the circumstances to
protect such Patent, Trademark or Copyright.  If the Company lacks the
financial resources to comply with this Section 3(v), the Company shall so
notify the Secured Parties and shall cooperate fully with any enforcement action
undertaken by the Secured Parties on behalf of the Company.

       

      v. None of
such Patents, Trademarks, Copyrights and Trade Secrets is the subject of any
licensing or franchise agreement as of the date of this Agreement.  No
holding, decision or judgment has been rendered by any governmental authority
which would limit, cancel or question the validity of any License, Patent,
Trademark, Copyright and Trade Secrets.  No action or proceeding is
pending (i) seeking to limit, cancel or question the validity of any License,
Patent, Trademark, Copyright or Trade Secret, or (ii) which, if adversely
determined, would have a material adverse effect on the value of any License,
Patent, Trademark, Copyright or Trade Secret.  The Company has used
and will continue to use for the duration of this Agreement, proper statutory
notice in connection with its use of the Patents, Trademarks and Copyrights and
consistent standards of quality in products leased or sold under the Patents,
Trademarks and Copyrights.

       

      4. Defaults.  The
following events shall be “Events of
Default”:

       

      a. The
occurrence of an Event of Default as defined in the Subordinated Secured
Note;

       

       

      
        
          
          

        

        
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      b. If any
representation or warranty of the Company in this Agreement proves to be
incorrect in any material respect when made; and

       

      c. The
failure by the Company to observe or perform any of its obligations hereunder
for ten (10) business days after receipt by the Company of notice of such
failure from the Secured Parties.

       

      5. Duty To
Hold In Trust.  Upon the occurrence of an Event of Default, and
at any time thereafter, the Company shall, upon receipt by it of any revenue,
income or other sums subject to the Security Interest, whether payable pursuant
to the Notes or otherwise, or of any check, draft, note, trade acceptance or
other instrument evidencing an obligation to pay any such sum, hold the same in
trust for the Secured Parties and shall forthwith endorse and transfer any such
sums or instruments, or both, to the Secured Parties for application to the
satisfaction of the Obligations.

       

      6. Rights
and Remedies Upon Default.  Upon occurrence and continuance of
any Event of Default and at any time thereafter, upon the approval and request
from the Secured Parties of at least a majority of the aggregate Principal
Amount of the Notes then outstanding, the Secured Parties shall have the right
to exercise all of the remedies conferred to the Secured Parties hereunder and
under the Notes, and the Secured Parties shall have all the rights and remedies
of a secured party under the UCC and/or any other applicable law (including the
Uniform Commercial Code of any jurisdiction in which any Collateral is then
subject).  Without limitation, the Secured Parties shall have the
following rights and powers:

       

      a. to have a
third party custodian take possession of the Collateral and, for that purpose,
enter, with the aid and assistance of any person, any premises where the
Collateral, or any part thereof, is or may be placed and remove the same, and
the Company shall assemble the Collateral and make it available to the Secured
Parties for the benefit of the Secured Parties at places which the Secured
Parties shall reasonably select, whether at the Company’s premises or elsewhere,
and make available to the Secured Parties, without rent, all of the Company’s
respective premises and facilities for the purpose of the Secured Parties taking
possession of, removing or putting the Collateral in saleable or disposable
form; and

       

      b. to
operate the business of the Company using the Collateral and shall have the
right to assign, sell, lease or otherwise dispose of and deliver all or any part
of the Collateral, at public or private sale or otherwise, either with or
without special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as the Secured Parties may deem
commercially reasonable, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon or notice to the
Company or right of redemption of the Company, which are hereby expressly
waived.  Upon each such sale, lease, assignment or other transfer of
Collateral, the Secured Parties may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral being sold, free
from and discharged of all trusts, claims, right of redemption and equities of
the Company, which are hereby waived and released.

       

      7. Indemnification
of the Secured Parties.  Neither the Secured Parties nor any of
its affiliates or representatives will be liable for any action taken or omitted
to be taken by it or them under this Agreement in good faith and believed by it
or them to be within the discretion or power conferred upon it or them by this
Agreement or be responsible for the consequences of any error of judgment
(except for fraud, gross negligence, or willful misconduct).  The Company
shall indemnify the Secured Parties and its representatives and hold them
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, reasonable expenses, and reasonable
disbursements of any kind or nature whatsoever that may be imposed on, asserted
against, or incurred by them in any way relating to or arising out of this
Agreement or any action taken or omitted by them under this
Agreement.

       

       

      
        
          
          

        

        
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      8. Applications
of Proceeds.  The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations on a pro rata basis
based on the Principal Amount of each Secured Parties’ Notes at the time of the
default, and to the payment of any other amounts required by applicable law,
after which the Secured Parties shall pay to the Company any surplus
proceeds.  If, upon the sale, license or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
the Secured Parties are legally entitled, then the Company will be liable for
the deficiency, together with interest thereon, plus interest at the Default
Rate as set forth in the Notes, and the reasonable fees of any attorneys
employed by the Secured Parties to collect such deficiency.  To the
extent permitted by applicable law, the Company waives all claims, damages and
demands against the Secured Parties arising out of the repossession, removal,
retention or sale of the Collateral.

       

      9. Costs and
Expenses.  The
Company agrees to pay all out-of-pocket fees, costs and expenses incurred in
connection with any filing required hereunder, including without limitation, any
financing statements, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Parties.  The Company shall also
pay all other claims and charges which would reasonably be expected to
prejudice, imperil or otherwise affect the Collateral or the Security Interest
therein.  Upon the occurrence and continuance of an Event of Default,
the Company shall upon demand, pay to the Secured Parties the amount of any and
all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Secured Parties incurs in
connection with (a) the enforcement of this Agreement, (b) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, or (c) the exercise or enforcement of any of the rights of
the Secured Parties under the Notes, including, without limitation, costs of
collection.  Until so paid, any fees payable hereunder shall be added
to the principal amount of the Notes and shall bear interest as set forth in the
Notes.

       

      10. Responsibility
for Collateral.  The Company assumes all liabilities and
responsibility in connection with all Collateral, and the obligations of the
Company hereunder or under the Notes shall in no way be affected or diminished
by reason of the loss, destruction, damage or theft of any of the Collateral or
its unavailability for any reason.

       

      11. Security
Interest Absolute.  All rights of the Secured Parties and all
Obligations of the Company hereunder, shall be absolute and unconditional,
regardless of: (a) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the Notes or
any other agreement entered into in connection with the foregoing; (b) any
exchange, release or nonperfection of any of the Collateral, or any release or
amendment or waiver of or consent to departure from any other collateral for, or
any guaranty, or any other security, for all or any of the Obligations; or
(c) any action by the Secured Parties to obtain, adjust, settle and cancel
in its sole discretion any insurance claims or matters made or arising in
connection with the Collateral.  The Company expressly waives
presentment, protest and notice of protest.  In the event that at any
time any transfer of any Collateral or any payment received by the Secured
Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise due to any party other than the Secured Parties, then, in any such
event, the Company’s obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions
hereof.  The Company waives all right to require the Secured Parties
to proceed against any other person or to apply any Collateral which the Secured
Parties may hold at any time, or to marshal assets, or to pursue any other
remedy.

       

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

       

      12. Term of
Agreement.  This Agreement and the Security Interest shall
terminate on the date on which all payments under the Notes have been
indefeasibly made in full and all other Obligations have been indefeasibly
paid.

       

      13. Power of
Attorney; Further Assurances.

       

      a. The
Company authorizes the Secured Parties, and does hereby make, constitute and
appoint it, and its respective officers, agents, successors or assigns with full
power of substitution, as the Company’s true and lawful attorney-in-fact, with
power, in its own name or in the name of the Company, to, after the occurrence
and during the continuance of an Event of Default, (i) endorse any notes,
checks, drafts, money orders, or other instruments of payment (including,
without limitation, payments payable under or in respect of any policy of
insurance) in respect of the Collateral that may come into possession of the
Secured Parties; (ii) to sign and endorse
any UCC financing statement or any invoice, freight or express bill, bill of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) to pay or discharge
taxes, liens, security interests or other encumbrances at any time levied or
placed on or threatened against the Collateral; (iv) to demand, collect,
receipt for, compromise, settle and sue for monies due in respect of the
Collateral; and (v) generally, to do, at
the option of the Secured Parties, and at the Company’s expense, at any time, or
from time to time, all acts and things which the Secured Parties deem necessary
to protect, preserve and realize upon the Collateral and the Security Interest
granted therein in order to effect the intent of this Agreement and the Notes,
all as fully and effectually as the Company might or could do; and the Company
hereby ratifies all that said attorney shall lawfully do or cause to be done by
virtue hereof.  This power of attorney is coupled with an interest and
shall be irrevocable for the term of this Agreement and thereafter as long as
any of the Obligations shall be outstanding.

       

      b. On a
continuing basis, the Company will cooperate in good faith with the Secured
Parties to make, execute, acknowledge, deliver, file and record, as the case may
be, in the proper filing and recording places in any applicable jurisdiction,
all such instruments, and take all such action as may reasonably be deemed
necessary or advisable, or as reasonably requested by the Secured Parties, to
perfect the Security Interest granted hereunder and otherwise to carry out the
intent and purposes of this Agreement, or for assuring and confirming to the
Secured Parties the grant or perfection of a security interest in all the
Collateral.

       

      c. The
Company hereby irrevocably appoints the Secured Parties as the Company’s
attorney-in-fact, with full authority in the place and stead of the Company and
in the name of the Company, from time to time in the Secured Parties’
discretion, to take any action and to execute any instrument which the Secured
Parties may deem necessary or advisable in order to perfect the Security
Interest, including the filing, in its sole discretion, of one or more financing
or continuation statements and amendments thereto, relative to any of the
Collateral without the signature of the Company where permitted by
law.

       

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

       

       

      14. Notices.  All
notices, requests, demands and other communications hereunder shall be in
writing, with copies to all the other parties hereto, and shall be deemed to
have been duly given (i) if delivered by hand,
(ii) upon receipt of proof
of sending thereof if sent by facsimile, (iii) upon receipt if sent
by nationally recognized overnight delivery service (receipt requested), the
next business day, or (iv) if mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, four days after posting in the U.S. mails, in each case if delivered to
the following addresses: (A)  if to the Company, to the address set
forth immediately below the Company’s name on the signature pages hereto; and
(B) if to the Investor, to the address set forth immediately below the
Investor’s name on the signature pages hereto.  Each party shall
provide notice to all of the other parties of any change in
address.

       

      15. Other
Security.  To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Parties shall have the right, in its sole discretion, to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties’
rights and remedies hereunder.

       

      16. Miscellaneous.

       

      a. No course
of dealing between the Company and the Secured Parties, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Parties, any
right, power or privilege hereunder or under the Notes shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

       

      b. All of
the rights and remedies of the Secured Parties with respect to the Collateral,
whether established hereby or by the Notes or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.

       

      c. This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto, including the prior
Agreement.  Any term of this Agreement may be terminated or amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with
written consent of the Company and the holders of more than fifty percent (50%)
of the then-outstanding principal amount of the Notes.  Any
termination, amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of the Notes, each future holder of the Notes,
their successors and assigns, and the Company.

       

      d. In the
event that any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, unless such provision is
narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable.  If, notwithstanding the foregoing, any provision of
this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other
jurisdiction.

       

      e. No waiver
of any breach or default or any right under this Agreement shall be considered
valid unless in writing and signed by the party giving such waiver, and no such
waiver shall be deemed a waiver of any subsequent breach or default or right,
whether of the same or similar nature or otherwise.

       

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

       

       

      f. This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns.

       

      g. Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

       

      h. The
validity and interpretation of this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New
York.  Each of the parties hereto hereby consents to the exclusive
jurisdiction and venue of the Courts of the State of New York, located in the
City and County of New York and the United States District Court, Southern
District, for the State of New York with respect to any matter relating to this
Agreement and performance of the parties’ obligations hereunder, the documents
and instruments executed and delivered concurrently herewith or pursuant hereto
and performance of the parties’ obligations thereunder and each of the parties
hereto hereby consents to the personal jurisdiction of such courts and shall
subject itself to such personal jurisdiction.  Any action, suit or
proceeding relating to such matters shall be commenced, pursued, defended and
resolved only in such courts and any appropriate appellate court having
jurisdiction to hear an appeal from any judgment entered in such
courts.  The parties irrevocably waive the defense of an inconvenient
forum to the maintenance of such suit or proceeding.  Service of
process in any action, suit or proceeding relating to such matters may be made
and served within or outside the State of New York by registered or certified
mail to the parties and their representatives at their respective addresses
specified in Section 14 hereof, provided that a reasonable time, not less than
thirty (30) days, is allowed for response.  Service of process may
also be made in such other manner as may be permissible under the applicable
court rules.

       

      i. Each
party hereto hereby agrees to waive its respective rights to a jury trial of any
claim or cause of action based upon or arising out of this
Agreement.  The scope of this waiver is intended to be all
encompassing of any disputes that may be filed in any court and that relate to
the subject mater of this Agreement, including without limitation contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims.  Each party hereto acknowledges that this waiver is
a material inducement for each party to enter into a business relationship, that
each party has relied on this waiver in entering into this Agreement and that
each party will continue to rely on this waiver in their related future
dealings.  Each party further warrants and represents that it has
reviewed this waiver with its legal counsel, and that such party has knowingly
and voluntarily waives its rights to a jury trial following such
consultation.  This waiver is irrevocable, meaning that,
notwithstanding anything herein to the contrary, it may not be modified either
orally or in writing, and this waiver shall apply to any subsequent amendments,
renewals and supplements or modifications to this agreement.  In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.

       

      17. Counterparts.  This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument.

       

      18. Facsimile
Signature.  In the event that any signature is delivered by
facsimile transmission, PDF, electronic signature or other similar electronic
means, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such signature page were an original thereof.

       

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

       

       

      19.           Priority.  The
security interest granted hereby shall be subordinate in all respects to any
liens securing the Senior Debt (as defined in the Note), irrespective of the
perfection and the priority of such liens, and the Secured Parties shall take no
action to enforce any right hereunder unless and until it shall have given 30
days advance notice to such secured parties.  If requested by such
secured parties, Secured Parties shall take no action to enforce any such right
until the prior secured parties shall have consented to such
actions.  Any enforcement of the provisions of this Agreement by the
Secured Parties shall provide for the prior payment in full of the Platinum
Debt, and the Secured Parties shall take no actions challenging the seniority of
the liens securing the Platinum Debt.  The holders of the Platinum
Debt are intended third party beneficiaries of this Section 19, which may not be
amended or waived without their prior written consent.

       

      [REMAINDER OF PAGE LEFT
BLANK]

       

       

       

       

       

       

      
 

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

       

      

       

      [SIGNATURE PAGE TO SECURITY
AGREEMENT]

      

       

      IN WITNESS WHEREOF, the
parties hereto have caused this Security Agreement to be duly executed on the
day and year first above written.

       

      COMPANY:

       

      NATURALNANO,
INC.

      

      

      By:          ______________________________________

      

      Name:     ______________________________________

      

      Title:      ______________________________________

      

      

      Notices:                 If
to the Company:

      

      NaturalNano,
Inc.

      Attn: Jim
Wemitt

      15 Schoen
Place

      Pittsford,
NY 14534

      Facsimile:
(585) 267-4861

      Telephone:
(585) 267-4848

      

      If to the
Subscribers: The addresses and fax numbers indicated on the signature page to
the
Subscription Agreement.

       
 

       
 

      

      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      

      

      

       

      ACKNOWLEDGEMENT

       

       

      

      STATE
OF               
                                           
                                        )

       

                                 
)  ss.:

       

      COUNTY
OF          
                                                   
                                  )

       

      On the
___ day of __________________, 200__, before me, the undersigned, a notary
public in and for such state, personally appeared ________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity as an executive
officer on behalf of _________________________, and that by his signature on the
instrument, he executed the instrument,
and that he make such appearance before the undersigned.

       

      

       

      __________________________________

       

      Notary Public

       

       

       

       

      
        
          
          

        

        
          -15-

          
            

          

        

        
          
          

        

      

       

       

       

      ADDITIONAL
SIGNATURE PAGES TO SECURITY AGREEMENT

      

      SECURED
PARTY:

      

      

      

      By:           ______________________________________

      

      Name:     ______________________________________

      

      Title:      ______________________________________

      

      
        Notices:

      

      

      
 

      with
copies to (which shall not constitute notice):

      

      Anslow
& Jaclin LLP

      195 Route
9 South, 2nd Floor

      Manalapan,
NJ 07726

      Attn:
Joseph M. Lucosky, Esq.

      Telephone:
(732) 409 1212

      Facsimile:
(732) 577 1188

      

       

      
 

      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

      

      

      

       

      

      

       

      SCHEDULE
A

       

       

      Principal Place of Business
of the Company:

      

      15 Schoen
Place

      Pittsford,
NY 14534

      

      Locations Where Collateral
is Located or Stored:

      

      15 Schoen
Place

      Pittsford,
NY 14534

      

      Exceptions to
Representations and Warranties Under Section 3:

      

      3q(iii):
The Company has not yet applied for any trademark registrations with the U.S.
Patent and Trademark Office for its any of its trademarks.

       

       

       

      
 

       

      

       -17-f8k120409ex10v_naturalnano.htm

    Exhibit 10.5

     

    
      PLATINUM
LONG TERM GROWTH IV, LLC

      152
West 57th
Street, 54th
Floor

      New
York, New York 10019

      

      

      Via
Facsimile and First Class Mail

      

      Effective November 30,
2009

      

      

      Re:  FORBEARANCE
AGREEMENT

      

      Ladies
and Gentlemen:

      

      Reference
is made to the $2,750,000 8% Senior Secured Promissory Note due March 6, 2009,
issued on or about March 6, 2007, the $150,000 8% Senior Secured Promissory Note
due March 6, 2009, issued on or about August 4, 2008, the $190,000 Senior
Secured Promissory Note due January 31, 2010, issued on or about September 29,
2008, the $59,500 Senior Secured Promissory Note due January 31, 2010, issued on
or about October 31, 2008 and one or more secured bridge notes in the current
principal amount of $70,961.12 (together the “Notes”) from NaturalNano, Inc. and
NaturalNano Research, Inc. (jointly and severally, the “Borrower”) to Platinum
Long Term Growth IV, LLC (the “Lender”).  Capitalized terms used
herein and not otherwise defined shall have the respective meanings given in the
Notes.

      

      The
Borrower has requested that the Lender forbear from exercising its various
rights and remedies under the Notes and other related documents (collectively,
the “Loan Documents”) that may otherwise be exercised by the Lender on the date
hereof, in order to provide the Borrower with additional time during which it
may resolve its current financial problems.

      

      The
Lender is prepared to forbear from demanding payment of principal on the Notes
on the Maturity Date of the Notes, or taking any other action to collect the
principal amount of the Notes until the earlier of June 1, 2010 (unless extended
by the Lender in its discretion) or the termination of the Forbearance Period
pursuant to the terms of this Letter Agreement (such period, the “Forbearance
Period”), provided the Borrower accepts and agrees to the terms, conditions and
covenants set forth herein, and communicates such acceptance (by delivering a
signed copy of this Letter Agreement) to the Lender no later than 5:00 p.m. on
November 30, 2009; provided further it is understood that Borrower is obligated
to make all interest payments required under the Notes during the Forbearance
Period and the Lender shall be permitted to convert any Note pursuant to its
terms.

      

      Upon
execution by the Borrower, this letter shall be a binding agreement among the
respective parties hereto (referred to as the “Letter Agreement”).

      

      By its
execution, the Borrower represents, warrants and covenants as
follows:

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        Effective
November 30, 2009

        Page
2

        
 

      

      1.           No
Duress.         The Borrower
has freely and voluntarily entered into this Letter Agreement after an adequate
opportunity to review and discuss the terms and conditions and all factual and
legal matters relevant hereto with counsel freely and independently chosen by it
and this Letter Agreement is being executed without fraud, duress, undue
influence or coercion of any kind or nature whatsoever having been exerted by or
imposed upon any party.

       

      2.           Amount
Due.      The Borrower does not contest the
amounts outstanding under the Notes as set forth on Schedule A hereto
(the “Outstanding Amount”).  The Borrower shall also be responsible
for reimbursing the Lender for all costs and expenses, including the fees and
expenses of legal counsel that may be incurred in connection with the
enforcement of this Letter Agreement, which, if incurred, shall be added to the
Outstanding Amount.  The Borrower acknowledges and agrees that the
Outstanding Amount, plus interest accrued thereon, shall be due and owing upon
termination of the Forbearance Period.

       

      3.           No
Defenses.      The Borrower has no defenses,
affirmative or otherwise, rights of setoff, rights of recoupment, claims,
counterclaims, or causes of action of any kind or nature whatsoever against the
Lender, its officers, directors, employees, attorneys, legal representatives or
affiliates (collectively, the “Lender Group”), directly or indirectly, arising
out of, based upon, or in any manner connected with, any transaction, event,
circumstance, action, failure to act, or occurrence of any sort or type, whether
known or unknown, which occurred, existed, was taken, permitted, or began prior
to the execution of this Letter Agreement and accrued, existed, was taken,
permitted or begun in accordance with, pursuant to, or by virtue of the Notes or
any of the terms or conditions of the Loan Documents, or which directly or
indirectly relate to or arise out of or in any manner are connected with the
Notes or any of the Loan Documents; TO THE EXTENT ANY SUCH DEFENSES, AFFIRMATIVE
OR OTHERWISE, RIGHTS OF SETOFF, RIGHTS OF RECOUPMENT, CLAIMS, COUNTERCLAIMS, OR
CAUSES OF ACTION EXIST, SUCH DEFENSES, RIGHTS, CLAIMS, COUNTERCLAIMS, AND CAUSES
OF ACTION ARE HEREBY FOREVER WAIVED, DISCHARGED AND RELEASED.

       

      4.           Interest Continues to
Accrue.      During the Forbearance Period, the
Outstanding Amount shall bear interest at the interest rate set forth under the
Notes (8% or 16% as the case may be); it being understood that the default rate
shall apply upon the occurrence of any Event of Default (other than Existing
Defaults) thereunder or upon termination of the Forbearance Period.

       

      5.           Other
Notes.      The Borrower agrees that it shall
not provide any holder of the Notes issued on or about March 6, 2007, August 5,
2008, September 29, 2008 or October 31, 2008 or the Subordinated Secured
Convertible Promissory Note issued on or about the date hereof (the
“Subordinated Note” and, collectively, the “Other Notes”) any concession or
payment with respect to such Other Notes without first offering the Lender the
opportunity to receive such payment or concession with respect to the
Notes.

       

      6.           Forbearance.     
During the Forbearance Period, the Lender agrees that it will not take any
further action against the Borrower or exercise or move to enforce any other
rights or remedies provided for in the Loan Documents or otherwise available to
it, at law or in equity, by virtue of the occurrence and/or continuation of any
default or Event of Default under the Notes existing on the date hereof,
including any default relating to the Borrower’s failure to maintain the
effectiveness of any registration statement (the “Existing Defaults”), or take
any action against any property in which the Borrower has any
interest.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

        
           

          Effective
November 30, 2009

          Page
3

           

        

      

       

      7.           Lender to Retain all
Rights.      It is understood and agreed that
this Letter Agreement does not waive or evidence consent to any default or Event
of Default (including the Existing Defaults) under the Notes or the Loan
Documents.  The parties hereto acknowledge and agree that the Lender
(i) shall retain all rights and remedies it may now have with respect to the
Notes and the Borrower’s obligations under the Loan Documents (“Default
Rights”), and (ii) shall have the right to exercise and enforce such Default
Rights upon termination of the Forbearance Period. The parties further agree
that the exercise of any Default Rights by the Lender upon termination of the
Forbearance Period shall not be affected by reason of this Letter Agreement, and
the parties hereto shall not assert as a defense thereto the passage of time,
estoppel, laches or any statute of limitations to the extent that the exercise
of any Default Rights was precluded by this Letter Agreement.

       

      8.           Termination of Forbearance
Period.       The Forbearance Period shall
terminate upon the earlier to occur of: (1) 5:00 pm (New York City Time) on June
1, 2010; (2) the Borrower shall fail to observe, perform, or comply with any of
the terms, conditions or provisions of this Letter Agreement as and when
required and/or any other Event of Default (other than the Existing Defaults
occurring prior to the date hereof) shall occur under the Notes or any of the
Loan Documents or any other agreement between the Borrower and the Lender (or
its affiliates) or any other indebtedness issued by the Borrower to the Lender
or its affiliates;  (3) any representation or warranty made herein, in
any document executed and delivered in connection herewith, or in any report,
certificate, financial statement or other instrument or document now or
hereafter furnished by or on behalf of the Borrower in connection with this
Letter Agreement, shall prove to have been false, incomplete or misleading in
any material respect on the date as of which it was made; (4) any suit preceding
or other action is commenced by any other creditor against the Company; (5) any
default or event of default shall occur under the Subordinated Note or the
“Transaction Documents” referred to therein; or (6) a court of competent
jurisdiction shall enter an order for relief or take any similar action in
respect of the Borrower in an involuntary case under any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law now or hereafter in effect
or a petition for relief under any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar law shall be filed by or against the
Borrower.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Effective
November 30, 2009

      
        
          Page
4

        

      

       

      Upon termination of the Forbearance
Period, should the Notes or any of the Borrower’s obligations under the Loan
Documents not be satisfied in full, the Lender shall be entitled to pursue
immediately its various rights and remedies, including its Default Rights,
against the Borrower, all collateral given by  the
Borrower to secure the Loan and the obligations under the Loan Documents,
without regard to notice and cure periods, all of which are hereby waived by the
Borrower.   Without limiting the generality of the foregoing,
upon termination of the Forbearance Period, the Lender shall be permitted to
immediately exercise its rights to demand and collect on the Outstanding
Amount.

       

      This Letter Agreement shall be deemed
to replace and terminate any existing agreement to forbear collection or other
rights with respect to the Notes that may currently in effect between the
Borrower and the Lender.

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        Effective
November 30, 2009

        Page
5

        
 

      

      If the
foregoing is acceptable to you, please sign in the space provided
below.

      

      Sincerely,

      

      PLATINUM LONG TERM GROWTH IV,LLC

      

      

      By:       
/s/ Mark Nordlicht                                              

      Name:
Mark Nordlicht

      Title:
G.M.

      

      

      

      Accepted
and Agreed as of this 30th day
of November, 2009

      

      

      NATURALNANO,
INC.

      

      

       

      
        By:         /s/
James
Wemett                                        
                                 

        Name:  James
Wemett

        Title:
Acting CEO

      

      

      NATURALNANO
RESEARCH, INC.

      

      

       

      
        By:         /s/
James
Wemett                                        
                                 

        Name:  James
Wemett

        Title:
Acting CEO

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
         

        Effective
November 30, 2009

        Page
6

      

      Schedule
A

      

      
        	
                Note

              	
                Principal
      Outstanding

              	
                Interest
      Outstanding

              
	
                $2,750,000
      8% Senior Secured Promissory Note due March 6, 2009 issued to
      Lender

              	
                $  2,750,000

              	
                $  333,666.67

              
	
                $150,000
      8% Senior Secured Promissory Note due March 6, 2009 issued to
      Lender

              	
                $  150,000

              	
                $  16,100

              
	
                $190,000
      8% Senior Secured Promissory Note due January 31, 2009 issued to
      Lender

              	
                $  190,000

              	
                $  18,028.89

              
	
                $59,500
      8% Senior Secured Promissory Note due January 31, 2010 issued to
      Lender

              	
                $  59,500

              	
                $  5,222.78

              
	
                Short
      Term Bridge Notes

              	
                $  70,961.12

              	
                $  3,088.18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}]]