Document:

STOCK
      PURCHASE AGREEMENT

    

    THIS
      STOCK PURCHASE AGREEMENT is made as of the 30th
      day
      of
      March,
      2006 by
      and
      between NaturalNano, Inc. (the “Company”), a corporation organized under the
      laws of the State of Nevada, with its principal offices at 150 Lucius Gordon
      Drive, Suite 115, West Henrietta, New York 14586, and SBI Brightline XIII,
      LLC a
      California limited liability company with its principal offices at 610 Newport
      Center Drive, Suite 1205, Newport Beach, California 92660 (the “Purchaser”).

    

    IN
      CONSIDERATION of the mutual covenants contained in this Agreement, the Company
      and the Purchaser hereby agree as follows: 

    

    SECTION
      1. Authorization
      of Sale of the Shares.
      Subject
      to the terms and conditions of this Agreement, the Company may issue and sell
      to
      the Purchaser and the Purchaser shall purchase from the Company up to
10,500,000
      shares
      of
      the Company’s Common Stock (the “Shares”), par value $.001 per share (the
“Common Stock”). The Company has authorized and has reserved and covenants to
      continue to reserve, free of preemptive rights and other similar contractual
      rights of stockholders, a sufficient number of its authorized but unissued
      shares of its Common Stock to cover the Shares which may be issued pursuant
      to
      the terms of this Agreement.

    

    SECTION
      2. Agreement
      to Purchase the Shares.

    

    2.1 Schedule
      2.1 attached hereto defines five
      (5)
      tranches
      of Shares that the Purchaser has agreed to purchase from the Company (each,
      a
“Tranche”) and, with respect to each Tranche, sets forth the number of Shares
      constituting such Tranche (the “Tranche Shares”) and the purchase price per
      share for the Tranche Shares in such Tranche (the “Tranche Purchase Price”).

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SECTION
      3. Closing
      of the Purchase of the Shares.

    

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

    

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

    

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

     

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

     

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

     

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

     

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

     

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

    

    (a) the
      representations and warranties of the Purchaser set forth in Section 5 of this
      Agreement shall be true and correct with the same force and effect as though
      expressly made on and as of such Tranche Closing Date, except for
      representations or warranties made as of a particular date which representations
      and warranties shall be true and correct as of such date;

     

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

     

    
      
        
        

      

      
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    (c) the
      Purchaser shall have delivered to the Company a certificate executed by a duly
      authorized officer of the Purchaser, dated the applicable Tranche Closing Date,
      to the effect that the conditions in clauses (a) and (b) have been satisfied;
      and

     

    (d) no
      stop
      order suspending the effectiveness of the Registration Statement shall be in
      effect, and no proceedings for the suspension of the effectiveness of the
      Registration Statement shall have been instituted or threatened by the
      Commission.

     

    3.4 At
      each
      Closing, (i) each of the Company and the Purchaser shall deliver to the other,
      as applicable, any documents required to be delivered by Sections 3.2 or 3.3
      which have not been delivered prior to such Closing, (ii) the Purchaser shall
      pay to the Company, by wire transfer of immediately available funds to an
      account designated in writing by the Company at or prior to the Closing, the
      applicable Tranche Purchase Price for the Tranche Shares being purchased at
      the
      Closing, and (iii) the Company shall deliver to the Purchaser a stock
      certificate representing the Tranche Shares being purchased or shall cause
      the
      Tranche Shares being purchased to be electronically transferred to the
      Purchaser.

     

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

     

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

    

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

    

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

     

    4.3 Authorized
      and Outstanding Capital Stock.
      The
      Company has authorized the issuance of 200,000,000 shares of Common Stock,
      of
      which approximately 121,074,740 shares are issued and outstanding as of the
      date
      of this Agreement. The Company has 10,000,000 shares of preferred stock
      authorized, none of which are issued or outstanding. The Company’s stock option
      plan provides for the granting of options to the Company’s employees, directors,
      consultants and advisors, to purchase an aggregate of up to 14,000,000 shares
      of
      Common Stock, of which as of the date of this Agreement, options to purchase
      an
      aggregate of 9,810,000 shares of Common Stock were outstanding. In addition,
      the
      Company has granted warrants to purchase an aggregate of 4,500,000 shares of
      Common Stock as of the date of this Agreement. Except for shares of Common
      Stock, options and warrants described in this Section 4.3, as
      of the
      date of this Agreement there
      are
      no
      authorized or outstanding options, warrants, preemptive rights, rights of first
      refusal or other rights to purchase any capital stock of the Company or any
      equity or debt securities convertible into or exchangeable or exercisable for
      capital stock of the Company.

    

    
      
        
        

      

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

    

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

    

    
      
        
        

      

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
        
        

      

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

    

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

    

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

    

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

     

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

    

    
      
        
        

      

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

    

    SECTION
      7.  Covenants. 

    

    7.1 Registration
      Procedures and Expenses.

    

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

    

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

    

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

    

    
      
        
        

      

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

    

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

    

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

    

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

    

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

    

    
      
        
        

      

      
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    (i) With
      a
      view to making available to the Purchaser the benefits of Rule 144, the Company
      agrees, throughout the Registration Period and so long as the Purchaser owns
      Shares purchased pursuant to this Agreement, to:

    

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

    

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

    

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

    

    7.2 Covenants
      of the Purchaser.

    

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

    

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

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

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

    

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

    

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

     

    7.3 Indemnification.
      For the
      purpose of this Section 7.3: 

    

    
      	 	
              (i)

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

            

    

    

    
      	 	
              (ii)

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

            

    

    

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

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

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

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

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

    

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

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      	
            	(a)	
              if
                to the Company, to:

            

    

    

    NaturalNano,
      Inc.

    150
      Lucius Gordon Drive

    Suite
      115

    West
      Henrietta, New York 14586

    Phone:
      585.214.8005

    Facsimile:
      585.214.8182

    Attn:
      Michael D. Riedlinger

    

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

            

    

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

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

    

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

    

    

    NaturalNano,
      Inc.

     

    

    

    By:
      /s/ Michael D.
      Riedlinger             

    Name:
      Michael
      D. Riedlinger

    Title:
      President

    

    SBI
      Brightline XIII, LLC

     

    

    

    By:  /s/
      Shelly
      Singhal                          

    Name:
      Shelly Singhal

    Title:
      Managing
      Member

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      2.1

    

    TRANCHES

    

    
      	
              Tranche
                No.

            	 	
              Number
                of Tranche Shares

              Included
                in Tranche

            	 	
              Tranche
                Purchase Price per

              Tranche
                Share (U.S. Dollars)

            
	
              1

            	 	
              2,500,000

            	 	
              $
                1.20 

            
	
              2

            	 	
              2,000,000

            	 	
              $
                1.35 

            
	
              3

            	 	
              2,000,000

            	 	
              $
                1.50 

            
	
              4

            	 	
              2,000,000

            	 	
              $
                1.65 

            
	
              5

            	 	
              2,000,000

            	 	
              $
                1.75 

            
	 	 	 	 	 
	
              Total

            	 	
              10,500,000

            	 	
              Average:
                $1.47NEITHER
      THESE WARRANTS NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THESE WARRANTS
      HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
      OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR
      TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
      SECURITIES UNDER THE ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
      AVAILABLE.

    

    
      	
              3,300,000
                Warrants

            	
              March
                30, 2006

            

    

    

    NATURALNANO
      INC.

    

    WARRANTS

    

    

    NaturalNano
      Inc., a Delaware corporation (“NaturalNano”),
      certifies that, for value received, SBI Brightline XIII LLC (“SBI”), or
      registered assigns (the “Holder”),
      is
      the owner of Three Million Three Hundred Thousand (3,300,000 ) Warrants of
      NaturalNano (the “Warrants”).
      Each
      Warrant entitles the Holder to purchase from NaturalNano at any time prior
      to
      the Expiration Date (as defined below) one share of the common stock of
      NaturalNano (the “Common
      Stock”)
      for
      the per share prices set forth on Schedule B, which is attached hereto and
      made
      part hereof (the “Exercise
      Price”),
      on
      the terms and conditions hereinafter provided. The Exercise Price and the number
      of shares of Common Stock purchasable upon exercise of each Warrant are subject
      to adjustment as provided in this Certificate. 

     

    1. Vesting;
      Expiration Date; Exercise

     

    1.1 
      Vesting.
      The Warrants shall vest and become exercisable as set forth on Schedule
      B.

     

    1.2 Expiration
      Date. The Warrants shall expire on March 30, 2008 (the “Expiration
      Date”).

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

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

     

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

     

    8. Notices
      of Record Date

    

    In
      the
      event:

     

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

     

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

     

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

     

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

     

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

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    9.  Cashless
      Exercise.
      

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

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

     

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

     

    
      
        	 	
                NaturalNano
                  Inc.

                

                

                By:  /s/
                  Michael D.
                  Riedlinger                            
                  

                       
                  Michael D. Riedlinger, President

              

      

       

       

    

    
      Agreed
        to
        and accepted by:

      SBI
        Brightline XIII, LLC

      

      

      By: /s/
        Shelly
        Singhal                                    

          
Shelly
        Singhal, Manager

    

    

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    EXHIBIT
      “A”

    NOTICE
      OF EXERCISE

    (To
      be signed only upon exercise of the Warrants)

    

    To: NaturalNano
      Inc.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    Number
      of
      Warrants Exercised: ______________

    

    Dated:
      ____________________

     

    
 

    
      	 	____________________________________

    

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

    Schedule
      B

    

    
      	
              Number
                Shares

            	
              Vesting
                Date

            	
              Exercise
                Price

            
	
              785,715

            	
              Upon
                completion of purchase of shares in Tranche 1

            	
              $1.20

            
	
              628,572

            	
              Upon
                completion of purchase of shares in Tranche 2

            	
              $1.35

            
	
              628,571

            	
              Upon
                completion of purchase of shares in Tranche 3

            	
              $1.50

            
	
              628,571

            	
              Upon
                completion of purchase of shares in Tranche 4

            	
              $1.65

            
	
              628,571

            	
              Upon
                completion of purchase of shares in Tranche 5

            	
              $1.75

            

    

    

    Tranche
      shall have the same meaning as set forth in the Stock Purchase Agreement between
      the parties dated March 30, 2006.

     

    
      
        
        

      

      
        -3-

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