Document:

f8kex10xxvii_pioneer.htm

    Exhibit
10.27

    
 

    
      
        	
                 

              	
                    TRANSFORMATEURS

                    PIONEER

                    TRANSFORMERS

              	
                COMMITMENT LETTER

                July 9, 2009

              

      

COMMITMENT
LETTER

    

    
      	
              NEEDS

            	 	
               

            	 	
              SOURCES

            	 	
               

            	 
	Future
      acquisitions (building & equipment)	 	$	1,750,000	 	Term
      loan facility	 	$	1,750,000	 
	Foreign
      exchange contracts	 	$	500,000	 	Settlement
      risk facility	 	$	500,000	 
	
              Misc
      business expenses

            	 	$	50,000	 	
              Corporate
      MasterCard account

            	 	$	50,000	 
	 	 	$	10,000,000	 	 	 	$	10,000,000	 

    

     

     

    
      	
              DEFINED

              TERMS:

            	
              In
      this Commitment Letter, certain terms used with the upper-case are defined in Schedule
      I hereto. Please refer to such Schedule I for the meaning of such terms.
      All amounts herein are in Canadian dollars
      unless expressly stated otherwise.

            
	 	 
	
              BORROWER:

            	
              PIONEER
      TRANSFORMERS LTD. (“Pioneer”) and/or BERNARD GRANBY REALTY INC.
      (“Bernard”), henceforth collectively, the “Borrower”.

            
	 	 
	
              LENDER:

            	
              BANK
      OF MONTREAL (henceforth, “BMO” or the “Bank”)

            
	
               

               

            	 
	
              CREDIT

              FACILITIES:

            	
              FACILITY A:Revolving overdraft demand loan
      not exceeding CDN$ 7,700,000 or the Equivalent Amount in
    US$.

            
	 	 
	 
      	
              FACILITY B:Non-revolving demand loan(s) up
      to CDN$ 1,750,000.

            
	 	 
	 
      	
              FACILITY C:MasterCard credit cards up to
      CDN$ 50,000 or the Equivalent Amount in US$.

               

            
	 	 
	 
      	
              FACILITY D:Treasury risk management
      facility for foreign exchange forward contracts having an aggregate risk
      content not exceeding CND$ 500,000.

            
	 	 
	
              LOAN
      PURPOSES:

            	
              FACILITY A: To finance ongoing
      operations.

              FACILITY B: To finance future acquisitions
      & working capital injection. 

              FACILITY C: For business
      expenses.

              FACILITY D: To hedge foreign exchange
      risk.

            
	 	 
	
              AVAILABILITY:

            	
              The
      Facilities will be available for drawdown for the specified Loan Purposes
      upon satisfaction of Conditions Precedent. Availability will be by way
      of:

            

    

     

     

    BMO Bank of Montreal

    
      
        
        

      

      
        Page 1 of
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                    TRANSFORMATEURS

                    PIONEER

                    TRANSFORMERS

              	
                COMMITMENT LETTER

                July 9, 2009

              

      

       

      
        	 	FACILITY A (subject
      to monthly Margin Requirement):
	 	 	 	 
	 	 	
                ▪

                 

                ▪

              	
                By way of
      direct advances in CDN$ or USD$ through overdraft in the accounts of the
      Borrower set up for such purpose;

                 

                By way of issue of letters of credit (standby and documentary) and
      letters of guarantee for a maximum term of 365 days, subject to renewal
      and extension.

                 

              
	 	
                FACILITY B (available for drawdown for a period of 12 months):

                 

              
	 	 	
                ▪

                 

                ▪

              	
                By way of direct advances through demand note(s) at variable interest
      and or;

                 

                
                  By way of fixed rate term loans (1 to 5 year
terms).

                

              
	 	
                 

                FACIITY
      C:

                Available
      through use of MasterCard cards issued from time to time by the Bank, at
      its discretion, in accordance with the terms and conditions of the
      MasterCard Card Agreement.

                 
      

                FACILITY D:

                By way of foreign exchange forward contracts for a maximum term of
      365 days for each agreement;

                 

              

      

    

    
      	
              MARGIN

              REQUIREMENT:

            	
              Notwithstanding
      any other provision of this Commitment Letter, the amount at any time
      outstanding under Facility A
      (including the aggregate undrawn amount of all outstanding Letters of
      Credit and Letters of Guarantee) and of all other obligations of the
      Borrower in respect of any Letter of Credit and Letter of Guarantee shall
      not exceed the Borrowing Base. For the purposes hereof, “Borrowing Base”
      shall mean the total of:

               

              80%
      of the Bank’s estimated worth of eligible accounts receivable (excluding
      Excluded Receivables) of the Borrower owing by debtors located in Canada
      and in the United States of America (advances supported by US receivables
      shall be Limited to CDN$ 1,000,0(10); plus

               

              The
      lesser of (i) CDN$ 3500,000 and (ii) 50% of the Bank’s estimated worth of
      eligible inventory, (excluding Excluded Inventory) of the Borrower.
      Eligible inventory shall include work in
      progress supported by booked orders to a maximum of CDN$ 1,000,000;
      less

               

              any
      amount secured by a Lien ranking prior to the security for the benefit of
      the Bank with respect to accounts receivable and/or inventory of the
      Borrower, and all current and past due amounts owed to the various
      governments by the Borrower, including, without limitation, Federal and
      Provincial income taxes, deductions at source, G.S.T., P.S.T., Q.S.T. and
      any other amount that could be considered as prior claim or as a deemed
      trust or as a super priority in favour of the various governments or
      governmental authorities or the payment of which would rank prior to the
      payment of debts and liabilities of the Borrower or any other Obligor
      under or pursuant to the Facilities or the Loan Documents; less Excluded
      Receivables.

               

            

    

     

     

    BMO Bank of Montreal

    
      
        
        

      

      
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                    TRANSFORMATEURS

                    PIONEER

                    TRANSFORMERS

              	
                COMMITMENT LETTER

                July 9, 2009

              

      

       

    

    
      	 	
              For
      the purposes hereof, “Excluded Receivables” shall mean accounts receivable
      which the Bank does not, according to its usual practice, consider as an
      eligible receivable, including without limitation, accounts over which the
      Bank does not have a fast ranking Lien, accounts receivable owing by
      debtors located outside of Canada and the United States of America,
      accounts receivable subject to set-off or compensation, accounts
      receivable owing by an affiliate, a shareholder, a director, an officer or
      an employee of the Borrower, accounts receivable which the Bank in good
      faith determines to be not of good quality or collectible in the ordinary
      course of business, accounts receivable subject to undue credit risk,
      accounts in dispute and accounts receivable which remain unpaid for more
      than 90 days from the date of invoice.

               

              For
      the purposes hereof, “Excluded Inventory” shall mean inventory which the
      Bank, in accordance with its usual practice, does not consider as eligible
      inventory, including without limitation, inventory over which the Bank
      does not have a first ranking Lien, 30-day goods, inventory located
      outside the premises of the Borrower or outside of Canada, in transit or
      otherwise not in possession of the Borrower or the relevant Obligor, goods
      on consignment, spare parts and production supplies. Value of inventory
      shall be determined at the lesser of its cost and fair market
      value.

               
      

              FACILITY D:Outstanding foreign exchange
      forward contracts shall riot exceed a risk content of CND$
      500,000.

            
	 	 	 
	
              PROGRESS

              DRAWS:

            	
              Advances
      for Facility B will be available by way of multiple draws for the
      specified Loan Purposes upon satisfaction of Conditions Precedent and
      shall not exceed:

               

              65%
      of land & building (existing + expansion) based on market value as
      determined by a professional evaluation to be remitted to the Lender;
      plus

               

              50%
      of equipment based on market value as determined by a professional
      evaluation to be remitted to the Lender; plus

               

              75%
      of new equipment based on value of invoices before
  taxes.

            
	 	 	 
	
              MATURITY
      AND

              INSTALMENTS:

            	
               

            
	 	
              FACILITY
      A:Repayable on demand (revolving overdraft facility).

               

              FACILITY
      B:Interest only for a maximum of 12 months, after which advances will be
      reimbursed as follows:

               

            
	 	▪	Advances
      based on land & buildings: Amortization not to exceed 12 years with
      monthly capital payments plus interest, or fixed monthly payments
      including capital & interest.
	 	▪	Advances
      based on existing and new equipment:  Amortization not to exceed
      5 years with monthly capital payments plus interest, or fixed monthly
      payments including capital & interest.
	 	 	 
	 	
               

            

    

     

     

    BMO Bank of Montreal

    
      
        
        

      

      
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                  TRANSFORMATEURS

                  PIONEER

                  TRANSFORMERS

            	
              COMMITMENT LETTER

              July 9, 2009

            

    

     

    
      	 	
              FACILITY C:Balance payable in full,
      monthly.

               

            
	
              PREPAYMENTS:

            	
              Direct
      advances (including any overdraft) in CDN$ and in US$ bearing interest
      based on the CDN Prime Rate and the US Base Rate respectively may be
      prepaid at any time and from time to time without penalty, subject to any
      applicable of prior notice periods to be determined by the
      Bank.

               

              Advances
      at a fixed rate of interest may be prepaid at any time, subject to
      penalties and to any application of prior notice periods to be determined
      by the Bank.

               

              Any
      outstanding Letter of Credit or Letter of Guarantee may be cancelled upon
      receipt by the Bank of the original thereof (and any amendment thereto)
      and evidence satisfactory to the Bank that the beneficiary has consented
      to such cancellation.

            
	 	 
	
              INTEREST

              RATES:

            	
              FACILITY A:CND Prime Rate and/or US Base
      Rate plus 0.75%, payable monthly in arrears.

               

              FACILITY B:CND Prime Rate plus 1.00%,
      payable monthly in arrears. A fixed rate option is available as per rates
      at loan drawdown or at reservation date.

               

              FACILITY C:Subject to the interest rates
      and fees set from time to time in accordance with the MasterCard Card
      Agreement and related agreements.

            
	 	 
	
              FEES:

            	
              Overdraft
      Facility fee of CND$ 950 payable monthly and subject to annual
      review.

               

              A
      fixed monthly fee of CND$ 350 covering all Banking services, including
      electronic cash management services and wholesale lockbox services);
      Subject to annual review.

               

              The
      Borrower shall pay to the Bank a one time non-refundable Application Fee
      of CDN$ 10,000 equivalent to 10 bps of credit facilities. Such fee shall
      be payable at closing.

               

              AB
      legal and other direct out of pocket costs of the Bank incurred with
      respect to due diligence and preparation of loan documents, arrangement
      expenses and advertising shall be for the account of the Borrower. The
      Borrower agrees to guarantee payment of all such legal fees and other
      direct out of pocket costs upon and by virtue of acceptance hereof by the
      Borrower.

            

    

     

     

    BMO Bank of Montreal

    
      
        
        

      

      
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                  TRANSFORMATEURS

                  PIONEER

                  TRANSFORMERS

            	
              COMMITMENT LETTER

              July 9, 2009

            

    

     

    
      	
              SECURITY:

            	
              The following security to be provided by the Borrower shall, unless
      otherwise indicated, support all present and future indebtedness and
      liability of the Borrower to the Bank including without limitation
      indebtedness and liability under guarantees and cash management products.
      Security shall be registered on the Bank’s standard forms, supported by
      resolutions and solicitor’s opinion, all acceptable to the Bank:

               

              a)Revolving overdraft loan facility
      agreement (Facility A).

               

              b)Demand notes (Facility B).

               

              c)Fixed rate term loan agreement(s) when
      and if option is selected.

               

              d)First ranking deed on hypothec on all
      present and future movable and immovable property of the Borrower for the
      amount of CDN$ 10,000,000.

               

              e)Security pursuant to Section 427 of the
      Bank Act on all present and future inventory of the Borrower.

               

              f)First ranking collateral mortgage on the
      land & buildings belonging to the Borrower for the amount of CDN$
      10,000,000.

               

              g)Satisfactory letter of opinion from
      notary as to validity and enforceability of the security.

               

              h)Cross guarantees between Pioneer
      Transformers Ltd and Bernard Granby Realty Inc. with required resolutions
      and legal opinions.

               

              i)Bank to be named as loss payee on
      business and fire insurance. Certified copy of policy to be provided.
      Standard mortgage clause to be contained in the policy.

               

              j)Environmental evaluation by a recognized
      firm confirming satisfactory status of the property, and acceptable to the
      Bank.

               

              k)Required
      documentation for foreign exchange forward contracts.

               

              l)Bank’s
      standard application and indemnity agreement for letters of credit,
      letters of guarantee or documentary letter of credit.

               

              m)MasterCard
      Agreement and other related agreements for Facility C.

               

              n)Commercial
      Loan Insurance for principal shareholders & officers to be
      offered.

               

            

    

     

     

    BMO Bank of Montreal

    
      
        
        

      

      
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                  TRANSFORMATEURS

                  PIONEER

                  TRANSFORMERS

            	
              COMMITMENT LETTER

              July 9, 2009

            

    

     

    
      	
              CONDITIONS PRECEDENT

              TO DRAWDOWN:

            	Those customarily found in loan documentation for
      credit facility of this nature including, without limitation, the
      following:
	
               

            	 	
              a)Completion of all security documentation and all loan documentation
      in form and substance satisfactory to the Bank’s legal counsel;

               

              b)Receipt of all necessary material governmental, regulatory and
      other third party approvals and compliance with all laws to specifically
      include all appropriate environmental approvals and certificates, to the
      satisfaction of the Bank’s legal counsel;

               

              c)Receipt of professional evaluations for land, buildings, and
      equipment belonging to the Borrower, to the satisfaction of the Bank (for
      Facility B only);

               

              d)Accuracy of representations and warranties;

               

              e)Satisfactory legal opinions relating to all matters considered
      relevant by the Bank, including due authorization, execution, delivery and
      enforceability of the loan and security documentation by the
      Borrower;

               

              f)Release and mainlevée of all prior ranking Liens;

               

              g)Nothing shall have occurred which would have a Material Adverse
      Effect on the business, operations or properties of the Borrower, on the
      rights and remedies of the Lender, or on the ability of the Borrower to
      perform their obligations to the Lender;

               

              h)No default or event of default exists at the time of, or after
      giving effect to the closing and/or disbursement;

               

              i)Due diligence review satisfactory to the Bank including but not
      limited to review of the Borrower’s existing operations and financial
      position, review of contracts, review of historical financial
      information.

               

            
	
              REPRESENTATIONS

              &
      WARRANTIES:

            	
              Usual,
      including confirmation of corporate status and authority, non-violation of
      law or existing agreements, no material litigation, satisfactory insurance
      coverage, continued compliance with environmental regulations and other
      such representations and warranties customarily contained in loan
      agreements for similar financing.

               

            
	
              NEGATIVE

              COVENANTS:

            	
              Usual
      negative covenants for transactions of this nature including but not
      limited to the following and subject to exceptions and limitations to be
      agreed:

               

              · Amalgamate,
      merge or consolidate with any legal entity and cause its subsidiaries to
      wind up, liquidate or dissolve its affairs;

               

              · Change
      the nature of its core business;

               

              · Alter
      its capital structure in a manner that would be materially adverse to the
      Bank or undergo a change of control.

               

              · No
      investments and/or advances to affiliated or related companies without the
      Bank’s prior written consent.

               

            

    

     

     

    BMO Bank of Montreal

    
      
        
        

      

      
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                    TRANSFORMATEURS

                    PIONEER

                    TRANSFORMERS

              	
                COMMITMENT LETTER

                July 9, 2009

              

      

       

    

    
      	
              FINANCIAL

              COVENANTS:

            	
              The
      following covenants will be tested annually (based on consolidated
      financial statements of the Borrower):

               

              · Minimum
      Debt Service Coverage Ratio of 1.25

               

              · Minimum
      Current Ratio of 120

               

              · Maximum
      Total Debt to Tangible Net Worth Ratio of 3.00 for the fiscal 2009 and
      reduced to 230 starting in fiscal 2010 (to be tested
      quarterly.)

               

            
	
              REPORTING

              REQUIREMENTS:

            	The
      Borrower shall deliver to the Bank the following:
	 	
               

              a)From Pioneer Transformers Ltd.: Signed, aged lists of
      accounts receivable, accounts payable (including declaration of any deemed
      touts) and inventory are to be provided by the 20th day of each month.
      Inventory lists are to be provided on the Bank’s standard form.

               

              b)From Pioneer Transformers Ltd.: Quarterly in-house financial
      statements within 45 days of quarter end.

               

              c)Annual audited financial statements of the Borrower
      (non-consolidated + consolidated) within 120 days of fiscal year
end.

               

              d)Annual forecasts to be provided at time of annual review including
      income statement, balance sheet and cashflow.

               

              e)Other documents as the Bank may reasonably require from time to
      time.

               

            
	
              EVENTS
      OF

              DEFAULT:

            	
              Those
      customarily found in loan documentation for similar financing including
      but not limited to failure to pay principal and interest when due;
      representations and warranties materially incorrect; breach of covenants
      and security undertakings; Material Adverse Change; failure to comply with
      the terms of other financing agreements of the Borrower (with notice and
      cure periods as applicable); cross-default to material obligations of the
      Borrower, bankruptcy/insolvency of the Borrower, non-compliance with any
      environmental regulation imposed by any government or its agency, change
      of ownership - either directly or indirectly; merger with any other
      corporation or person.

               

            
	
              BANKING

              SERVICES:

               

            	
              The
      borrower agrees to maintain bank accounts only with the Bank of
      Montreal.

            
	
              GOVERNING

              LAW:

            	
              The
      laws of the Province of Québec and the laws of Canada applicable therein
      shall apply subject to the right of the Bank to subject any security to
      the laws of the jurisdiction which the Bank deems most
      appropriate.

               

            

    

     

     

    BMO Bank of Montreal

    
      
        
        

      

      
        Page 7 of
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                  TRANSFORMATEURS

                  PIONEER

                  TRANSFORMERS

            	
              COMMITMENT LETTER

              July 9, 2009

            

    

     

    
      	 	 
	
              LANGUAGE

              CLAUSE:

            	
              The
      parties hereby confirm their express wish that this Commitment Letter and
      all documents and agreements directly or indirectly related thereto,
      including notices, be drawn up in the English language. Notwithstanding
      such express wish, the parties agree that any of such documents,
      agreements and notices or any part thereof may be drawn up in the French
      language. Les parties reconnaissent leer volonté expresse que le present
      Sommaire des termes et conditions ainsi que tons les documents et
      conventions qui s’y rattachent directement ou indirectement, y compris les
      avis, soient rédigés en langue anglaise. Nonobstant telle volonté
      expresse, les parties conviennent que n importe quel desdits documents,
      conventions et avis ou toute panic de ceux-ci puissent etre rédigés en
      langue française.

               

            
	
              ACCEPTANCE:

            	
              This
      Commitment Letter is open for acceptance until close of business on August
      7, 2009 after which date. it will automatically become null and void
      unless accepted as provided for below or unless such delay has been
      extended in writing by the Bank. This Commitment Letter may be accepted by
      signing the attached copy in the space provided for herein and returning
      it to the Bank.

            

    

    

     

    BMO Bank of Montreal

    
      
        
        

      

      
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                  TRANSFORMATEURS

                  PIONEER

                  TRANSFORMERS

            	
              COMMITMENT LETTER

              July 9, 2009

            

    

     

     

    ACCEPTANCE

     

    We hereby
accept the foregoing terms and conditions.

     

    This
3 day
of    August  2009.

     

    

     

    PIONEER
TRANSFORMERS LTD

     

    By:  
/s/  Nathan J.
Mazurek            ,
president

    duly authorized

     

    By: 
 /s/  Nathan J.
Mazurek            ,
president

    duly authorized

     

     

     

     

     

    
BMO Bank of Montreal

    
      
        
        

      

      
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                  TRANSFORMATEURS

                  PIONEER

                  TRANSFORMERS

            	
              COMMITMENT LETTER

              July 9, 2009

            

     

    SCHEDULE
I

    

    DEFINITIONS

     

    “CDN$”
means lawful money of Canada.

     

    “Current
Ratio” means the ratio of current assets to• current liabilities at such time,
all as shown on the financial statements in accordance with GAAP.

     

    “Debt
Service Coverage Ratio” means total earnings before depreciation and interest
less unfinanced capital expenses divided by annual interest expenses, current
portion of long-term debt, dividends, purchase, redemption, defeasance,
retirement or other acquisition of any shares of any class of capital stock of
the Borrower.

     

    “Equivalent
Amount” means, on any date, the amount in CDN$ or US$, as the case may be, which
would be obtained on the conversion of an amount in US$ or any other currency to
CDN$ or an amount in CDN$ or any other currency into US$, respectively, at the
Bank of Canada noon spot rate for the purchase of US$ or such other currency
with CDN$ or for the purchase of CDN$ or such other currency with US$,
respectively, as quoted or published or otherwise made available by the Bank of
Canada on such date.

     

    “GAAP”
means generally accepted accounting principles in Canada in effect from time to
time, applied in a consistent manner from period to period.

     

    “Indebtedness”
means the indebtedness of any Obligor and includes, without duplication (in each
case, whether such obligation is with full or limited recourse):

     

     

    
      	a)	
              any
      obligation of such Obligor for borrowed money;

               

            
	b)	
              any
      obligation of such Obligor evidenced by a bond, debenture, note or other
      similar instrument;

               

            
	c)	
              any
      obligation of such Obligor to pay the deferred purchase price of property
      or services, except a trade account payable that arises in the ordinary
      course of business;

               

            
	d)	
              any
      obligation of such Obligor as lessee under any capital
      lease;

               

            
	e)	
              any
      obligation of such Obligor to reimburse any other person in respect of
      amounts drawn or drawable under any letter of credit or other guarantee
      or-under any bankers’ or trade acceptance issued or accepted by such other
      person, whether contingent or non-contingent;

               

            
	f)	all
      obligations of such Obligor to purchase, redeem, retire, decrease or
      otherwise make any payment in respect of any capital stock of or other
      ownership or profit interest in such Obligor or any other person, valued,
      in the case of redeemable preferred stock, at the greater of its voluntary
      liquidation reference plus accrued and unpaid
  dividends;

    

    
       

      BMO Bank of Montreal

      
        
        

      

      
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                  TRANSFORMATEURS

                  PIONEER

                  TRANSFORMERS

            	
              COMMITMENT LETTER

              July 9, 2009

            

    

     

    
      	g)	
              
                any obligation of such Obligor to purchase securities or other
      property that arises out of or in connection with the sale of the same or
      substantially similar securities or property;

              

            
	 	 
	h)	
              
                any Indebtedness of others secured by a Lien on any asset of such
      Obligor;

              

            
	 	 
	i)	
              any Indebtedness of others guaranteed by such Obligor,
and

            
	 	 
	j)	
              all obligations and liabilities of such Obligor in respect of
      “Specified Transactions” (as such term is defined in the 1992
      Multicurrency — Cross Border Master Agreement published by the
      International Swaps and Derivatives Association,
Inc.).

            

    

     

    “Lien”
means a mortgage, hypothec, legal hypothec, prior claim, pledge, lien, charge or
encumbrance, whether fixed or floating, on, or any Security Interest in any
property, whether immovable or real, movable or immovable, or mixed, tangible or
intangible or a pledge for hypothecation thereof or trust or presumed or deemed
mist or any other mechanisms of right benefiting the holder thereof or any
conditional sale agreement or other title retention agreement or equipment trust
relating thereto or any lease relating to property which would be required to be
accounted for as a capital lease on the balance sheet.

     

    “Loan
Documents” means, collectively, this Commitment Letter, the Credit Agreement,
the Security Documents and all other documents, instruments and agreements
executed and delivered by any Obligor in connection directly or indirectly with
this Commitment Letter, the Facilities or otherwise referred to or contemplated
under or by this Commitment Letter or any such documents, instruments or
agreements.

     

    “Material
Adverse Event” means a material adverse change in or effect on, either
individually or in the aggregate, the business, assets, liabilities, financial
positions or operating results of the Obligors taken as a whole or which
adversely affects or could reasonably be expected to adversely affect the
ability of any Obligor to perform any of its obligations under or pursuant to
the Facilities and this Commitment Letter or the other Loan Documents in
accordance with their respective terms or the validity or enforceability of any
of the Loan Documents.

     

    “Person”
means any individual, corporation, company, partnership, association, trust or
joint venture.

     

    “Prime Rate” means
the variable
annual rate of interest established by the Bank from time to time as the
reference rate of interest it will use at such time to determine interest rates
for loans in CDN$ to its Canadian commercial borrowers in Canada and designated
as its Prime
Rate.

     

    “Security
Documents” means the collective reference to all present and future documents,
agreements and instruments pursuant to which an Obligor grants a Security
Interest to or for the benefit of the Bank, alone or together with any other
person or persons, in any of its assets securing all or part of the obligations
of the Borrower under or pursuant to the Facilities and this Commitment Letter
or any other Loan Documents.

     

    “Security
Interest” means a hypothec, mortgage, pledge, fixed or floating charge,
assignment by way of security or any other security interest securing payment or
performance of an obligation.

     

    BMO Bank of Montreal

    
      
        
        

      

      
        Page 11
of 12

        
          

        

      

      
        
        

      

      
        
          	
                   

                	
                      TRANSFORMATEURS

                      PIONEER

                      TRANSFORMERS

                	
                  COMMITMENT LETTER

                  July 9, 2009

                

        

      

       

      “Subordinated
Debt” of a Person means indebtedness of such Person for borrowed money
(including principal and accrued interest), which is validly and effectively
subordinated and postponed in right of payment of principal, interest and
premium if any, to the payment in full of all amounts owing from time to lime
under or pursuant to any of the Facilities by way of an agreement in form and
substance satisfactory to the Lender and is unsecured on the property of such
Person, provided (a)
that such indebtedness is treated as subordinated debt in accordance with
GAAP, (b) without limiting the foregoing, the Lender shall be satisfied with the
covenants and default clauses in the agreement pursuant to which such
indebtedness is created, and (c) the terms of the instrument evidencing such
indebtedness or under which such indebtedness is outstanding reflect the
provisions of this definition to the satisfaction of the
Lender.

    

     

    “Tangible
Net Worth” of a Person means, as of any date, the sum of Shareholders’ Equity of
such Person and the Subordinated. Debt of such Person, less, without
duplication, any goodwill, organizational expenses, trademarks, trade names,
copyrights, patents, patent applications, licenses, deferred costs, deferred
charges, and any other assets that am properly classified as “intangible” less
amounts due by directors, officers and other Persons related to the Borrowers
and its Affiliates, all determined as of such date in accordance with GAAP and
to the satisfaction of BMO acting reasonably.

     

    “Total
Debt” of a Person shall mean the total amount of liabilities of such Person,
plus the amount of all cheques in circulation less deferred taxes and
Subordinated Debt of such Person.

     

    “Total
Debt to Tangible Net Worth Ratio” means the ratio of Total Debt to Tangible Net
Worth, in accordance with GAAP.

     

    “US Base
Rate” means the variable annual rate of interest established by the Bank from
time to time as being the reference rate of interest it will use at such time in
Canada to determine rates of interest on US$ commercial loans to Canadian
residents in Canada and designated as its US Base
Rate.

     

    “US$”-means
lawful money for the time being of the United States of America in same day
immediately available funds or, if such funds are not available, the form of
money of the United States of America which is customarily used in the
settlement of international banking transaction on that day.

     

    

      BMO Bank
of Montreal

    

    
      
        
        

      

      
        Page 12
of 12f8k120409ex10i_naturalnano.htm

     

     

    Exhibit
10.1

    
      

       

      SUBSCRIPTION
AGREEMENT

       

       

      THIS SUBSCRIPTION AGREEMENT
(this “Agreement”), is
dated as of November 30, 2009, by and between NaturalNano, Inc., a Nevada
corporation (the “Company”), and the subscribers
identified on the signature page hereto (each a “Subscriber” and collectively,
the “Subscribers”).

      

      WHEREAS, the Company and each
Subscriber are executing and delivering this Agreement in reliance upon an
exemption from securities registration afforded by the provisions of Section
4(2), Section 4(6) and/or Regulation D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “Commission”) under the
Securities Act of 1933, as amended (the “1933 Act”).

       

      WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscribers (the “Offering”), as provided
herein, and such Subscribers shall purchase (i) up to an aggregate $225,000 (the
“Principal Amount”) of
10% Subordinated Secured Convertible Promissory Notes (the “Notes”) of the Company, a form
of which is annexed hereto as Exhibit A; and (ii) share
purchase warrants (the “Warrants”) in the form
attached hereto as Exhibit
B.

       

      WHEREAS, the Note shall be
offered at a purchase price of $225,000 (the “Purchase Price”) and shall
mature on the date that is fifteen (15) months following the Closing Date (the
“Maturity
Date”).  Additionally, such Notes shall be convertible into
shares of the Company’s Common Stock (the “Conversion Shares”) at any
time prior to the Maturity Date at a price per share equal to $0.005 (the “Conversion
Price”).  The Warrants shall entitle the Subscribers to
purchase shares of the Company’s Common Stock equal to 100% of the number of
shares that would be issuable upon full conversion of the Notes at the
Conversion Price (the “Warrant
Shares”) and shall be exercisable at a price of $0.025 per
share.  The Notes, Conversion Shares, the Warrants and the Warrant
Shares are collectively referred to herein as (the “Securities”); and

       

      WHEREAS, the aggregate
proceeds of the Offering shall be held in escrow pursuant to the terms of a
Funds Escrow Agreement to be executed by the parties substantially in the form
attached hereto as Exhibit
C (the “Escrow
Agreement”).

       

      NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Subscribers hereby agree as follows:

       

      1.        
Closing
Date.   The “Closing Date” shall be on or
before November 30, 2009, unless extended at the option of the Company. The
consummation of the transactions contemplated herein shall take place at the
offices of Anslow & Jaclin LLP., 195 Route 9 South, Suite 204, Manalapan,
NJ, 07726, upon the satisfaction or waiver of all conditions to closing set
forth in this Agreement.   Subject to the satisfaction or waiver
of the terms and conditions of this Agreement, on the Closing Date, Subscribers
shall purchase and the Company shall sell to Subscribers the Notes in the
Principal Amount of up to $225,000 and Warrants as described in Section 2 of
this Agreement.

      

      2.         
Notes and
Warrants.

      

      (a)      Notes.  Subject
to the satisfaction or waiver of the terms and conditions of this Agreement, on
the Closing Date, each subscriber shall purchase and the Company shall sell to
each Subscriber a Note in the Principal Amount designated on the signature page
hereto for such Subscriber’s Principal Amount indicated thereon. 

       

      (b)     Warrants.  On
the Closing Date, the Company will issue and deliver Warrants to each
Subscriber.  The Warrants entitle the holder to purchase a number of
shares of the Company’s Common Stock equal to 100% of the number of shares that
would be issuable upon full conversion of the Note at the initial Conversion
Price on the Closing Date.  The Warrants shall have an exercise price
of $0.025 per share.  The Warrants shall include cashless exercise
provisions and shall feature full-ratchet and other standard anti-dilution
protections and shall have a five (5) year term.

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      
 

      3.          Allocation of Purchase
Price.   The Purchase Price will be allocated among the
components of the Securities so that each component of the Securities will be
fully paid and nonassessable.

      

      4.          Subscriber Representations
and Warranties.  Each Subscriber hereby represents and warrants
to and agrees with the Company that:

      

      (a)           Organization and Standing of
the Subscriber.   If such Subscriber is an entity, such Subscriber is a
corporation, partnership or other entity duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization.

      

      (b)           Authorization and
Power.   Such Subscriber has the requisite power and
authority to enter into and perform this Agreement and the other Transaction
Documents (as defined herein) and to purchase the Notes and Warrants being sold
to it hereunder.  The execution, delivery and performance of this
Agreement and the other Transaction Documents by such Subscriber and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Subscriber or its Board of Directors,
stockholders, partners, members, as the case may be, is
required.  This Agreement and the other Transaction Documents have
been duly authorized, executed and delivered by such Subscriber and constitutes,
or shall constitute when executed and delivered, a valid and binding obligation
of such Subscriber enforceable against such Subscriber in accordance with the
terms thereof.

      

      (c)           No Conflicts.   The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation by such
Subscriber of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Subscriber’s
charter documents or bylaws or other organizational documents or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Subscriber is a party or by which its
properties or assets are bound, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on such Subscriber).  Such Subscriber is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement and the other
Transaction Documents or to purchase the Securities in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
such Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.

      

      (d)           Information on
Company.    Such Subscriber has
had access to the EDGAR Website of the Commission to the Company's Form 10-Q
filed on November 24, 2009 for the quarter ended September 30, 2009, together
with all other filings made with the Commission available at the EDGAR website
until five (5) days before the Closing Date (hereinafter referred to
collectively as the “Reports”).   In
addition, such Subscriber has received in writing from the Company, such other
information concerning its operations, financial condition and other matters as
such Subscriber has requested in writing,
identified thereon as OTHER WRITTEN INFORMATION (such other information is
collectively, the “Other
Written Information”), and considered all factors such Subscriber deems material in deciding on the
advisability of investing in the Securities.  Such Subscriber has
relied on the Reports and Other Written Information in making its investment
decision.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
 

      (e)           Information on
Subscriber.   Subscriber is, and will be at the time of
the conversion of the Notes and exercise of the Warrants, an “accredited investor”, as such
term is defined in Regulation D promulgated by the Commission under the 1933
Act, is experienced in investments and business matters, has made investments of
a speculative nature and has purchased securities of United States
publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable such
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative
investment.  Such Subscriber has
the authority and is duly and legally qualified to purchase and own the
Securities.  Such Subscriber is
able to bear the risk of such investment for an indefinite period and to afford
a complete loss thereof.  The information set forth on the signature
page hereto regarding such Subscriber is
accurate.

      

      (f)           Purchase of Notes and
Warrants.  On the Closing Date, such Subscriber will purchase the Note and Warrant as
principal for its own account for investment only and not with a view toward, or
for resale in connection with, the public sale or any distribution
thereof.

      

      (g)           Compliance with Securities
Act.   Such Subscriber understands and agrees that the
Securities have not been registered under the 1933 Act or any applicable state
securities laws, by reason of their issuance in a transaction that does not
require registration under the 1933 Act (based in part on the accuracy of the
representations and warranties of the Subscriber contained herein), and that such
Securities must be held indefinitely unless a subsequent disposition is
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration.   Prior to the execution of
this Agreement, the Subscriber and any affiliates of Subscriber have not
participated in any hedging transactions involving the Company’s common
stock and have not sold short any of the Company’s common
stock. The Subscriber does not
have a present arrangement or intention to effect any distribution of any of the
Securities to or through any person or entity for purposes of selling, offering,
distributing or otherwise disposing of any of the Securities.

      

      (h)           Conversion Shares and
Warrant Shares Legend.  The Conversion Shares, and Warrant
Shares shall bear the following or similar legend:

      

      “THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.”

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
 

      (i)           Note and Warrant
Legend.  The Note and Warrant shall bear the following
legend:

       

      “NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE –OR-EXERCISABLE] HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.”

       

      (j)           Communication of
Offer.  The offer to sell the Securities was directly
communicated to such Subscriber by the Company.  At no time was such
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.

      

      (k)           Restricted
Securities.   Such Subscriber understands that the
Securities have not been registered under the 1933 Act and such Subscriber will
not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any
of the Securities unless pursuant to an effective registration statement under
the 1933 Act, or unless an exemption from registration is
available.  Notwithstanding anything to the contrary contained in this
Agreement, such Subscriber may transfer (without restriction and without the
need for an opinion of counsel) the Securities to its Affiliates (as defined
below) provided that each such Affiliate is an “accredited investor” under
Regulation D and such Affiliate agrees to be bound by the terms and conditions
of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or
entity means any other person or entity directly or indirectly controlling,
controlled by or under direct or indirect common control with such person or
entity.  Affiliate includes each Subsidiary of the
Company.  For purposes of this definition, “control” means the power to
direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

      

      (l)           No Governmental
Review.   Such Subscriber understands that no United
States federal or state agency or any other governmental or state agency has
passed on or made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

      

      (m)           Correctness of
Representations.  Such Subscriber represents as to such
Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and, unless such Subscriber otherwise notifies the
Company prior to the Closing Date shall be true and correct as of the Closing
Date.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
 

      (n)           Acknowledgement of Going
Concern.  Such Subscriber recognizes and acknowledges that the
Company is a “going concern” as disclosed in its Reports and Other Written
Information and as reported by its auditor and is unable to meet its financial
obligations over the next twelve months.

      

      (o)           Survival.  The
foregoing representations and warranties shall survive the Closing Date and for
a period of two years thereafter.

       

      5.           Company Representations and
Warranties.  The Company represents and warrants to and agrees
with each Subscriber that:

       

      (a)           Due
Incorporation.  The Company is a corporation or other entity
duly incorporated or organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has the
requisite corporate power to own its properties and to carry on its business as
presently conducted.  The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a Material Adverse Effect.  For purposes of
this Agreement, a “Material
Adverse Effect” shall mean a material adverse effect on the financial
condition, results of operations, prospects, properties or business of the
Company and its Subsidiaries taken as a whole.  For purposes of this
Agreement, “Subsidiary”
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which more than 30% of
(i) the outstanding capital stock having (in the absence of contingencies)
ordinary voting power to elect a majority of the board of directors or other
managing body of such entity, (ii) in the case of a partnership or limited
liability company, the interest in the capital or profits of such partnership or
limited liability company or (iii) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity.  As of the Closing Date, all of the
Company’s Subsidiaries and the Company’s ownership interest therein is set forth
on Schedule
5(a).

       

      (b)           Outstanding
Stock.  All issued and outstanding shares of capital stock and
equity interests in the Company have been duly authorized and validly issued and
are fully paid and non-assessable.

       

      (c)           Authority;
Enforceability.  This Agreement, the Notes, Conversion Shares,
Warrants, the Escrow Agreement, and any other agreements delivered together with
this Agreement or in connection herewith (collectively “Transaction Documents”) have
been duly authorized, executed and delivered by the Company and/or Subsidiaries
and are valid and binding agreements of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of
equity.  The Company has full corporate power and authority necessary
to enter into and deliver the Transaction Documents and to perform its
obligations thereunder.

       

      (d)           Capitalization and
Additional Issuances.   The authorized and outstanding
capital stock of the Company and Subsidiaries on a fully diluted basis as of the
date of this Agreement and the Closing Date (not including the Securities) are
set forth on Schedule
5(d).  Except as set forth on Schedule 5(d), there are no
options, warrants, or rights to subscribe to, securities, rights, understandings
or obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock or other equity interest of the
Company or any of the Subsidiaries.  The only officer, director,
employee and consultant stock option or stock incentive plan or similar plan
currently in effect or contemplated by the Company is described on Schedule
5(d).  There are no outstanding agreements or preemptive or
similar rights affecting the Company's Common Stock.

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (e)           Consents.  Other
than the consent of Platinum Long Term Growth, Platinum Advisors LLC (together,
“Platinum”) and Longview Special Finance (“Longview”), no consent, approval,
authorization or order of any court, governmental agency or body or arbitrator
having jurisdiction over the Company, or any of its Affiliates, the OTC Bulletin
Board (the “Bulletin
Board”) or the Company's shareholders is required for the execution by
the Company of the Transaction Documents and compliance and performance by the
Company of its obligations under the Transaction Documents, including, without
limitation, the issuance and sale of the Securities.  The Transaction
Documents and the Company’s performance of its obligations thereunder have been
unanimously approved by the Company’s Board of Directors. Except for the
requirement to file the Transaction Documents with the SEC, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with any governmental authority in the world,
including without limitation, the United States, or elsewhere is required by the
Company or any Affiliate of the Company in connection with the consummation of
the transactions contemplated by this Agreement, except for those of Platinum
and Longview, and as would not otherwise have a Material Adverse Effect or the
consummation of any of the other agreements, covenants or commitments of the
Company or any Subsidiary contemplated by the other Transaction Documents. Any
such qualifications and filings will, in the case of qualifications, be
effective on the Closing and will, in the case of filings, be made within the
time prescribed by law.

       

      (f)           No Violation or
Conflict.  Assuming the representations and warranties of the
Subscriber in Section 4 are true and correct, neither the issuance nor sale of
the Securities nor the performance of the Company’s obligations under this
Agreement and all other agreements entered into by the Company relating thereto
by the Company will:

       

      (i)           violate,
conflict with, result in a breach of, or constitute a default (or an event which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the articles of incorporation or
bylaws of the Company, (B) to the Company's knowledge, any decree, judgment,
order, law, treaty, rule, regulation or determination applicable to the Company
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company or over the properties or assets of the Company or any of its
Affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its Affiliates is a party, by which the Company or any of its Affiliates is
bound, or to which any of the properties of the Company or any of its Affiliates
is subject, other than those issued to Platinum and Longview; or

       

      (ii)           result
in the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates except
in favor of Subscriber as described herein; or

       

      (iii)           result
in the activation of any anti-dilution rights or a reset or repricing of any
debt, equity or security instrument of any creditor or equity holder of the
Company, or the holder of the right to receive any debt, equity or security
instrument of the Company nor result in the acceleration of the due date of any
obligation of the Company, except those issued to Platinum and Longview;
or

       

                 
(iv)           result in
the triggering of any piggy-back or other registration rights of any person or
entity holding securities of the Company or having the right to receive
securities of the Company.

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (g)           The
Securities.  The Securities upon issuance:

       

      (i)         are,
or will be, free and clear of any security interests, liens, claims or other
encumbrances, subject only to restrictions upon transfer under the 1933 Act and
any applicable state securities laws;

      

      (ii)         have
been, or will be, duly and validly authorized and on the dates of issuance of
the Conversion Shares upon conversion of the Notes, and the Warrant Shares upon
exercise of the Warrants, such Conversion Shares and Warrant Shares will be duly
and validly issued, fully paid and non-assessable;

       

      (iii)       will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of
the Company or rights to acquire securities of the Company except those issued
to Platinum and Longview; and

       

      (iv)       will
not subject the holders thereof to personal liability by reason of being such
holders.

       

      (h)           Litigation.  There
is no pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates that
would affect the execution by the Company or the complete and timely performance
by the Company of its obligations under the Transaction
Documents.  Except as disclosed in the Reports, there is no pending
or, to the best knowledge of the Company, basis for or threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates which
litigation if adversely determined would have a Material Adverse
Effect.

       

      (i)           No Market
Manipulation.  The Company and its Affiliates have not taken,
and will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Securities
or affect the price at which the Securities may be issued or
resold.

       

      (j)           Information Concerning
Company.  The Reports and Other Written Information contain all
material information relating to the Company and its operations and financial
condition as of their respective dates which information is required to be
disclosed therein.   Since March 31, 2009 and except as modified
in the Reports and Other Written Information or in the Schedules hereto, there
has been no Material Adverse Effect relating to the Company's business,
financial condition or affairs. The Reports and Other Written Information
including the financial statements included therein do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, taken as a whole,
not misleading in light of the circumstances and when made.

       

      (k)           Defaults.  The
Company is not in violation of its articles of incorporation or
bylaws.   Except as modified in the Reports, the Company is (i)
not in default under or in violation of any other material agreement or
instrument to which it is a party or by which it or any of its properties are
bound or affected, which default or violation would have a Material Adverse
Effect, (ii) not in default with respect to any order of any court, arbitrator
or governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) not in violation of any statute, rule
or regulation of any governmental authority which violation would have a
Material Adverse Effect.

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

       

      (l)           No Integrated
Offering.   Neither the Company, nor any of its
Affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security of the Company nor solicited
any offers to buy any security of the Company under circumstances that would
cause the offer of the Securities pursuant to this Agreement to be integrated
with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of the Bulletin Board.  No prior offering
will impair the exemptions relied upon in this Offering or the Company’s ability
to timely comply with its obligations hereunder.  Neither the Company
nor any of its Affiliates will take any action or steps that would cause the
offer or issuance of the Securities to be integrated with other offerings which
would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder.  The Company
will not conduct any offering other than the transactions contemplated hereby
that may be integrated with the offer or issuance of the Securities that would
impair the exemptions relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder.

       

      (m)           No General
Solicitation.  Neither the Company, nor any of its Affiliates,
nor to its knowledge, any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.

       

      (n)           No Undisclosed
Liabilities.  The Company has no liabilities or obligations
which are material, individually or in the aggregate, other than those incurred
in the ordinary course of the Company businesses since December 31, 2008 and
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed in the Reports or Other Written
Information.

       

      (o)           No Undisclosed Events or
Circumstances.  Since March 31, 2009, except as disclosed in
the Reports, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.

       

      (p)           Dilution.   The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders of
the Company’s equity or rights to receive equity of the Company.  The
board of directors of the Company has concluded, in its good faith business
judgment that the issuance of the Securities is in the best interests of the
Company.  The Company specifically acknowledges that its obligation to
issue the Conversion Shares upon conversion of the Notes and the Warrant Shares
upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company or parties entitled to receive equity of the
Company.

       

      (q)           No Disagreements with
Accountants.  Other than the opinion regarding the Company’s
ability to continue as a “going concern,” as disclosed in the Company’s Reports,
there are no material disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise between the Company and the
accountants previously and presently employed by the Company, including but not
limited to disputes or conflicts over payment owed to such accountants, nor have
there been any such disagreements during the two years prior to the Closing
Date.

      

      (r)           Investment
Company.   Neither the Company nor any Affiliate of the
Company is an “investment company” within the meaning of the Investment Company
Act of 1940, as amended.

       

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      
 

      (s)           Reporting Company/Shell
Company.  The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the “1934
Act”) and has a class of Common Stock registered pursuant to Section
12(g) of the 1934 Act.  Pursuant to the provisions of the 1934 Act,
the Company has timely filed all reports and other materials required to be
filed thereunder with the Commission during the preceding twelve
months.  As of the Closing Date, the Company is not considered a
“shell company” as those terms are employed in Rule 144(i) under the 1933
Act.

      

      (t)           Listing.  The
Company's Common Stock is quoted on the Bulletin Board under the symbol
NNAN.  The Company has not received any oral or written notice that
its Common Stock is not eligible nor will become ineligible for quotation on the
Bulletin Board nor that its Common Stock does not meet all requirements for the
continuation of such quotation.  The Company satisfies all the
requirements for the continued quotation of its Common Stock on the Bulletin
Board.

      

      (u)           Company Predecessor and
Subsidiaries.  The Company makes each of the representations
contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (k), (n), (o),
(q) and (r) of this Agreement, as same relate or could be applicable to each
Subsidiary.  All representations made by or relating to the Company of
a historical or prospective nature and all undertakings described in Sections
9(g) through 9(l) shall relate, apply and refer to the Company and its
predecessors and successors.  The Company represents that it owns all
of the equity of the Subsidiaries and rights to receive equity of the
Subsidiaries identified on Schedule 5(a), free and clear
of all liens, encumbrances and claims, except as set forth on Schedule 5(a).  No
person or entity other than the Company has the right to receive any equity
interest in the Subsidiaries.  The Company further represents that the
Subsidiaries have not been known by any other name for the prior five
years.

      

      (v)           Correctness of
Representations.  The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscribers
prior to the Closing Date, shall be true and correct in all material respects as
of the Closing Date; provided, that, if such representation or warranty is made
as of a different date, in which case such representation or warranty shall be
true as of such date.

       

      (w)           Survival.  The
foregoing representations and warranties shall survive the Closing Date and for
a period of two years thereafter.

       

      6.           Regulation D Offering/Legal
Opinion.  The offer and issuance of the Securities to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder.  On the
Closing Date, the Company will provide an opinion reasonably acceptable to the
Subscribers from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers.  A form of the legal opinion is annexed hereto as Exhibit D.  The
Company will provide, at the Company's expense, such other legal opinions, if
any, as are reasonably necessary in each Subscriber’s opinion for the issuance
and resale of the Common Stock issuable upon conversion of the Notes and
exercise of the Warrants pursuant to an effective registration statement, Rule
144 under the 1933 Act or an exemption from registration.

       

       

      
        
          
          

        

        
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      7.1.        Conversion of
Note.

      

      (a)           Upon
the conversion of a Note or part thereof, the Company shall, at its own cost and
expense, take all necessary action, including obtaining and delivering, an
opinion of counsel to assure that the Company's transfer agent shall issue stock
certificates in the name of Subscriber (or its permitted nominee) or such other
persons as designated by Subscriber and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such
conversion.  The Company warrants that no instructions other than
these instructions have been or will be given to the transfer agent of the
Company's Common Stock and that the certificates representing such shares shall
contain no legend other than the legend set forth in Section 4(h).  If
and when Subscriber sells the Conversion Shares, assuming (i) a registration
statement including such Conversion Shares for registration, filed with the
Commission is effective and the prospectus, as supplemented or amended,
contained therein is current and (ii) Subscriber or its agent confirms in
writing to the transfer agent that Subscriber has complied with the prospectus
delivery requirements, the Company will reissue the Conversion Shares without
restrictive legend and the Conversion Shares will be free-trading, and freely
transferable.  In the event that the Conversion Shares are sold in a
manner that complies with an exemption from registration, the Company will
promptly instruct its counsel to issue to the transfer agent an opinion
permitting removal of the legend indefinitely, if pursuant to Rule 144(b)(1)(i)
of the 1933 Act, or for 90 days if pursuant to the other provisions of Rule 144
of the 1933 Act, provided that Subscriber delivers all reasonably requested
representations in support of such opinion.

      

      (b)           Subscriber
will give notice of its decision to exercise its right to convert the Note,
interest, or part thereof by telecopying, or otherwise delivering a completed
Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the
Company via confirmed telecopier transmission or otherwise pursuant to Section
13(a) of this Agreement.  Subscriber will not be required to surrender
the Note until the Note has been fully converted or satisfied.  Each
date on which a Notice of Conversion is telecopied to the Company in accordance
with the provisions hereof by 6 PM Eastern Time (“ET”) (or if received by the
Company after 6 PM ET, then the next business day) shall be deemed a “Conversion
Date.”  The Company will itself or cause the Company’s transfer
agent to transmit the Company's Common Stock certificates representing the
Conversion Shares issuable upon conversion of the Note to Subscriber via express
courier for receipt by Subscriber within seven (7) business days after the
Conversion Date (such third day being the “Delivery Date”).  In
the event the Conversion Shares are electronically transferable, then delivery
of the Conversion Shares must be made by
electronic transfer provided request for such electronic transfer has been made
by the Subscriber.   A Note representing the balance of the Note
not so converted will be provided by the Company to Subscriber if requested by
Subscriber, provided Subscriber delivers the original Note to the
Company.

      

      (c)           The
Company understands that a delay in the delivery of the Conversion Shares in the
form required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
described in Section 7.2 hereof, respectively, later than the Delivery Date or
the Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber.  As compensation to Subscriber for
such loss, the Company agrees to pay (as liquidated damages and not as a
penalty) to Subscriber for late issuance of Conversion Shares in the form
required pursuant to Section 7.1 hereof upon Conversion of the Note, the amount
of $100 per business day after the Delivery Date for each $10,000 of Note
principal amount and interest (and proportionately for other amounts) being
converted of the corresponding Conversion Shares which are not timely
delivered.  The Company shall pay any payments incurred under this
Section upon demand.  Furthermore, in addition to any other remedies
which may be available to the Subscriber, in the event that the Company fails
for any reason to effect delivery of the Conversion Shares within seven (7)
business days after the Delivery Date or make payment within seven (7) business
days after the Mandatory Redemption Payment Date (as defined in Section 7.2
below), Subscriber will be entitled to revoke all or part of the relevant Notice
of Conversion or rescind all or part of the notice of Mandatory Redemption by
delivery of a notice to such effect to the Company whereupon the Company and
Subscriber shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that the damages payable in
connection with the Company’s default shall be payable through the date notice
of revocation or rescission is given to the Company.

       

       

      
        
          
          

        

        
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      7.2.        Mandatory Redemption at
Subscriber’s Election.  In the event (i) the Company is
prohibited from issuing Conversion Shares or Warrant Shares, (ii) the Company
redeems any securities junior to the Notes, (iii) upon the occurrence of any
other Event of Default (as defined in the Note or in this Agreement), that
continues for more than ten (10) business days, or (iv) of the liquidation,
dissolution or winding up of the Company, then at the Subscriber's election, the
Company must pay to the Subscriber ten (10) business days after request by
Subscriber (“Calculation
Period”), a sum of money determined by the outstanding principal amount
of the Note designated by Subscriber, plus accrued but unpaid interest and any
other amounts due under the Transaction Documents (“Mandatory Redemption
Payment”). The Mandatory Redemption Payment must be received by
Subscriber not later than ten (10) business days after request (“Mandatory Redemption Payment
Date”). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal, interest and other amounts will be deemed paid and
no longer outstanding.  The Subscriber may rescind the election to
receive a Mandatory Redemption Payment at any time until such payment is
actually received.  Liquidated damages calculated pursuant to Section
7.1(c) hereof, that have been paid or accrued for the ten (10) day period prior
to the actual receipt of the Mandatory Redemption Payment by Subscriber shall be
credited against the Mandatory Redemption Payment.

       

      In the event of a Change in Control (as
defined below), then at the Subscriber's election, the Company must pay to the
Subscriber ten (10) business days after request by Subscriber (“Change in Control Calculation
Period”), a sum of money determined by multiplying up to the outstanding
principal amount of the Note designated by Subscriber by 125%, plus accrued but
unpaid interest and any other amounts due under the Transaction Documents (the
“Change in Control Mandatory
Redemption Payment”). The Change in Control Mandatory Redemption Payment
must be received by Subscriber not later than ten (10) business days after
request (“Change in Control
Mandatory Redemption Payment Date”). Upon receipt of the Change in
Control Mandatory Redemption Payment, the corresponding Note principal, interest
and other amounts will be deemed paid and no longer outstanding.  The
Subscriber may rescind the election to receive a Change in Control Mandatory
Redemption Payment at any time until such payment is actually
received.  Liquidated damages calculated pursuant to Section 7.1(c)
hereof, that have been paid or accrued for the ten (10) day period prior to the
actual receipt of the Mandatory Redemption Payment by Subscriber shall be
credited against the Change in Control Mandatory Redemption
Payment.  For purposes of this Section 7.2, “Change in Control” shall mean
(i) a third party acquiring greater than 50% in voting rights in one or a series
of related transactions, (ii) a transaction in which the shares of the common
stock shall be changed into securities of another entity, (iii) the sale or
transfer of more than 40% in aggregate of the properties or assets of the
Company to another person or persons in any rolling twelve (12) month period (an
“Asset Sale”), or (iv) a purchase, tender or exchange offer made to and accepted
by the holders of more than 50% of the outstanding shares of Common
Stock.

      

                 7.3.         Maximum
Conversion.  Subscriber shall not be entitled to convert on a
Conversion Date that amount of the Note nor may the Company make any payment
including principal, interest, or liquidated or other damages by delivery of
Conversion Shares in connection with that number of Conversion Shares which
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by Subscriber and its Affiliates on a Conversion Date or
payment date, and (ii) the number of Conversion Shares issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a calculation date, which would result in beneficial ownership
by Subscriber and its Affiliates of more than 4.99% of the outstanding shares of
Common Stock of the Company on such Conversion Date.  For the purposes
of the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Rule 13d-3 thereunder.  Subject to the foregoing, the
Subscriber shall not be limited to aggregate conversions of only 4.99% and
aggregate conversions by the Subscriber may exceed 4.99%.  The
Subscriber may increase the permitted beneficial ownership amount up to 9.99%
upon and effective after 61 days prior written notice to the
Company.  Subscriber may allocate which of the equity of the Company
deemed beneficially owned by Subscriber shall be included in the 4.99% amount
described above and which shall be allocated to the excess above
4.99%.

       

       

      
        
          
          

        

        
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      7.4.        Injunction Posting of
Bond.  In the event Subscriber shall elect to convert a Note or
part thereof, the Company may refuse conversion based on a claim that Subscriber
or anyone associated or affiliated with Subscriber has been engaged in any
violation of law or breach of this Agreement.

      

                 7.5.         Buy-In.   In
addition to any other rights available to Subscriber, if the Company fails to
deliver to Subscriber the Conversion Shares by the Delivery Date and if after
the Delivery Date Subscriber or a broker on Subscriber’s behalf purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by Subscriber of the Common Stock which Subscriber was
entitled to receive upon such conversion (a “Buy-In”), then the Company
shall pay to Subscriber (in addition to any remedies available to or elected by
the Subscriber) the amount by which (A) Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion request was not timely honored together with interest
thereon at a rate of ten percent (10%) per annum, accruing until such amount and
any accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty).  For example, if a
Subscriber purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of
Note principal and/or interest, the Company shall be required to pay Subscriber
$1,000 plus interest. Subscriber shall provide the Company written notice and
evidence indicating the amounts payable to Subscriber in respect of the
Buy-In.

      

      7.6         Adjustments.   The
Conversion Price, Warrant exercise price and amount of Conversion Shares
issuable upon conversion of the Notes and Warrant Shares issuable upon exercise
of the Warrants shall be equitably adjusted and as otherwise described in this
Agreement, the Notes and Warrants.

       

      7.7.        Redemption.  The
Note shall not be redeemable or callable by the Company, except as described in
the Note.

       

      8.           Legal Fees and Commitment
Fees.  The Company shall pay to Anslow & Jaclin, LLP a fee
of $7,500 (the “Subscriber’s Legal Fees) out of the proceeds from the initial
closing as reimbursement for services rendered to the Subscribers in connection
with this Agreement and the purchase and sale of the Offering.

       

      The Company shall also be responsible
for a commitment fee payable to the Investor (the “Commitment
Fee”).  The Commitment Fee shall be $20,000, which shall be paid from
escrow upon the initial closing.

       

      9.           Covenants of the
Company.  The Company covenants and agrees with the Subscribers
as follows:

       

      (a)           Stop
Orders.  Subject to the prior notice requirement described in
Section 9(n), the Company will advise the Subscribers, within twenty-four hours
after it receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.  The Company will not issue any stop transfer order
or other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the
Subscribers.

       

      
        
          
          

        

        
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      (b)           Listing/Quotation.  The
Company shall promptly secure the quotation or listing of the Conversion Shares
and Warrant Shares upon each national securities exchange, or automated
quotation system upon the Company’s Common Stock is quoted or listed and upon
which such Conversion Shares and Warrant Shares are or become eligible for
quotation or listing (subject to official notice of issuance) and shall maintain
same so long as any Notes and Warrants are outstanding.  The Company
will maintain the quotation or listing of its Common Stock on the NYSE Amex
Equities, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq Global Select
Market, Bulletin Board, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock
(the “Principal
Market”), and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market,
as applicable. The Company will provide Subscribers with copies of all notices
it receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market.  As of the date of this
Agreement and the Closing Date, the Bulletin Board is and will be the Principal
Market.

       

      (c)           Market
Regulations.  If required, the Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to the Subscribers.

       

      (d)           Filing
Requirements.  From the date of this Agreement and until the
last to occur of (i) two (2) years after the Closing Date, (ii) until all the
Conversion Shares and Warrant Shares have been resold or transferred by the
Subscriber pursuant to a registration statement or pursuant to Rule
144(b)(1)(i), or (iii) the Note and Warrants are no longer outstanding (the date
of such latest occurrence being the “End Date”), the Company will
(A) cause its Common Stock to continue to be registered under Section 12(b) or
12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing
obligations under the 1934 Act, (C) voluntarily comply with all reporting
requirements that are applicable to an issuer with a class of shares registered
pursuant to Section 12(g) of the 1934 Act, if the Company is not subject to such
reporting requirements, and (D) comply with all requirements related to any
registration statement filed pursuant to this Agreement.  The Company
will use its best efforts not to take any action or file any document (whether
or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under said acts until the End Date.  Until the
End Date, the Company will continue the listing or quotation of the Common Stock
on a Principal Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Market.  The Company agrees to timely file a Form D with
respect to the Securities if required under Regulation D and to provide a copy
thereof to each Subscriber promptly after such filing.

       

      (e)           Use of
Proceeds.   The proceeds of the Offering will be employed
by the Company for expenses of the Offering and for general working capital,
only.  The Purchase Price may not and will not be used for accrued and
unpaid officer and director salaries, payment of financing related debt,
redemption of outstanding notes or equity instruments of the Company nor
non-trade obligations outstanding on the Closing Date, provided however, the
Company shall be allowed to pay up to $40,000 of any indebtedness incurred
between October 15, 2009 and November 30, 2009.

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (f)           Reservation.   Prior
to the Closing, the Company undertakes to reserve on behalf of Subscribers from
its authorized but unissued Common Stock, a number of shares of Common Stock
equal to 100% of the amount of Common Stock necessary to allow Subscribers to be
able to convert the entire Note.  The Company undertakes to reserve on
behalf of Subscribers from its authorized but unissued Common Stock, a number of
shares of Common Stock equal to 100% of the amount of Warrant Shares issuable
upon exercise of the Warrants (“Required
Reservation”).   Failure to have sufficient shares
reserved pursuant to this Section 9(f) at any time shall be a material default
of the Company’s obligations under this Agreement and an Event of Default under
the Note.  If at any time Notes and Warrants are outstanding the
Company has insufficient Common Stock reserved on behalf of the Subscribers in
an amount less than 100% of the amount necessary for full conversion of the
outstanding Note principal and interest at the conversion price that would be in
effect on every such date and 100% of the Warrant Shares (“Minimum Required
Reservation”), the Company will promptly reserve the Minimum Required
Reservation, or if there are insufficient authorized and available shares of
Common Stock to do so, the Company will take all action necessary to increase
its authorized capital to be able to fully satisfy its reservation requirements
hereunder, including the filing of a preliminary proxy with the Commission not
later than fifteen days after the first day the Company has less than the
Minimum Required Reservation.  The Company agrees to provide notice to
the Subscribers not later than three days after the date the Company has less
than the Minimum Required Reservation reserved on behalf of the
Subscribers.

       

      (g)          Taxes.  From
the date of this Agreement and until the End Date, the Company will promptly pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.

       

      (h)           Insurance.  As
reasonably necessary as determined by the Company, from the date of this
Agreement and until the End Date, the Company will keep its assets which are of
an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily insured
against by companies in the Company’s line of business and location, in amounts
and to the extent and in the manner customary for companies in similar
businesses similarly situated and located and to the extent available on
commercially reasonable terms.

       

      (i)          
 Books and
Records.  From the date of this Agreement and until the End
Date, the Company will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.

       

      (j)         
  Governmental
Authorities.   From the date of this Agreement and until
the End Date, the Company shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to the
conduct of its business or to its properties or assets.

       

      (k)           Intellectual
Property.  From the date of this Agreement and until the End
Date, the Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for
value.  Schedule
9(k) hereto identifies all of the intellectual property owned by the
Company and Subsidiaries.

       

      (l)           Properties.  From
the date of this Agreement and until the End Date, the Company will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases and claims to which it is a party
or under which it occupies or has rights to property if the breach of such
provision could reasonably be expected to have a Material Adverse
Effect.  The Company will not abandon any of its assets except for
those assets which have negligible or marginal value or for which it is prudent
to do so under the circumstances.

       

      
        
          
          

        

        
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      (m)          Confidentiality/Public
Announcement.   From the date of this Agreement and until
the End Date, the Company agrees that except in connection with a Form 8-K and
the registration statement or statements regarding the Subscriber’s Securities
or in correspondence with the SEC regarding same, it will not disclose publicly
or privately the identity of the Subscriber unless expressly agreed to in
writing by a Subscriber or only to the extent required by law.  In any
event and subject to the foregoing, the Company undertakes to file a Form 8-K
describing the Offering not later than the fourth (4th)
business day after the Closing Date.  Prior to the Closing Date, such
Form 8-K will be provided to Subscribers for their review and
approval.  In the Form 8-K, the Company will specifically disclose the
nature of the Offering and amount of Common Stock outstanding immediately after
the Closing, not including any Conversions.  Upon 
delivery by the Company to the Subscribers after the Closing Date of any
notice or information, in writing, electronically or otherwise, and while a
Note, Conversion Shares or Warrants are held by Subscribers, unless the 
Company has in good faith determined that the matters relating to such
notice do not constitute material, nonpublic information relating to
the Company or Subsidiaries, the Company  shall within one
business day after any such delivery publicly disclose such 
material,  nonpublic  information on a
Report on Form 8-K.  In the event that
the Company believes that a notice or communication to
Subscribers contains material, nonpublic information relating to the Company or
Subsidiaries, the Company shall so indicate to Subscribers prior to delivery of
such notice or information.  Subscribers will be granted sufficient
time to notify the Company that such Subscriber elects not to receive such
information.   In such case, the Company will not deliver such
information to Subscribers.  In the absence of any such
indication, Subscribers shall be allowed to presume that all matters
relating to such notice and information do not constitute material,
nonpublic information relating to the Company or
Subsidiaries.

       

                
 (n)         Non-Public
Information.  The Company covenants and agrees that except for
the Reports, Other Written Information and schedules and exhibits to this
Agreement and the Transaction Documents, which information the Company
undertakes to publicly disclose on the Form 8-K described in Section 9(m) above,
neither it nor any other person acting on its behalf will at any time provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber shall have agreed in writing to accept such
information.  The Company understands and confirms that each
Subscriber shall be relying on the foregoing representations in effecting
transactions in securities of the Company.

      

      (o)           Negative
Covenants.   So long as a Note is outstanding, without the
consent of the Subscribers, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly:

      

      (i)           create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired, unless such Lien is junior in
ranking to the outstanding Notes, and except for:  (A)  the
Excepted Issuances (as defined in Section 11.3 hereof), and (B) (a) Liens
imposed by law for taxes that are not yet due or are being contested in good
faith and for which adequate reserves have been established in accordance with
generally accepted accounting principles; (b) carriers’, warehousemen’s,
mechanics’, material men’s, repairmen’s and other like Liens imposed by law,
arising in the ordinary course of business and securing obligations that are not
overdue by more than 30 days or that are being contested in good faith and by
appropriate proceedings; (c) pledges and deposits made in the ordinary course of
business in compliance with workers’ compensation, unemployment insurance and
other social security laws or regulations; (d) deposits to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each
case in the ordinary course of business; (e) Liens created with respect to the
financing of the purchase of new property in the ordinary course of the
Company’s business up to the amount of the purchase price of such property; (f)
easements, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of business that do
not secure any monetary obligations and do not materially detract from the value
of the affected property; and (g) the Senior Debt  (each of (a)
through (g), a “Permitted
Lien”).

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      
 

                                                  (ii)           amend
its articles of incorporation or bylaws so as to materially and adversely affect
any rights of the Subscriber (an increase in the amount of authorized shares and
an increase in the number of directors will not be deemed adverse to the rights
of the Subscribers);

      

      (iii)          repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock
or other equity securities other than to the extent permitted or required under
the Transaction Documents.

      

      (iv)          engage
in any transactions with any officer, director, employee or any Affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $100,000
other than (i) for payment of salary, or fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company, and (iii) for
other employee benefits, including Excepted Issuances; or

      

      (v)           prepay
or redeem any financing related debt or past due obligations or securities
outstanding as of the Closing Date, or past due obligations (except with respect
to vendor obligations, any such obligations which in management’s good faith,
reasonable judgment must be repaid to avoid disruption of the Company’s
businesses.

       

      The
Company agrees to provide Subscribers not less than ten (10) days notice prior
to becoming obligated to or effectuating a Permitted Lien or Excepted Issuance,
provided, however that failure to give notice shall not be deemed an Event of
Default or breach of a covenant.

       

      (p)           Notices.  For
so long as the Subscribers hold any Securities, the Company will maintain a
United States address and United States fax number for notice purposes under the
Transaction Documents.

       

      (q)           Security
Agreement.  The Company shall execute a Security Agreement with
the Subscribers granting the Subscriber’s a blanket security interest in and
against all of the assets of the Company (the “Security Agreement”) in the
form annexed hereto as Exhibit
E.

       

      10.           Covenants of the Company
Regarding Indemnification.

       

      (a)           The
Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers’ officers, directors, agents, Affiliates, members,
managers, control persons, and principal shareholders, against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal fees)
of any nature, incurred by or imposed upon the Subscribers or any such person
which results, arises out of or is based upon (i) any material misrepresentation
by Company or breach of any representation or warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto in any Transaction
Document, or other agreement delivered pursuant hereto or in connection
herewith, now or after the date hereof; or (ii) after any applicable notice
and/or cure periods, any breach or default in performance by the Company of any
covenant or undertaking to be performed by the Company hereunder, or any other
agreement entered into by the Company and Subscribers relating
hereto.

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (b)           In
no event shall the liability of the Company or permitted successor hereunder or
under any Transaction Document or other agreement delivered in connection
herewith be greater in amount than the dollar amount of the net proceeds
actually received by the Company or successor upon the sale of
Securities.

      

      11.           Additional Post-Closing
Obligations.

       

      11.1.        Piggy-Back
Registrations.   If at any time the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
1933 Act of any of its equity securities, but excluding Forms S-4 or S-8 and
similar forms which do not permit such registration, then the Company shall
include in such registration statement all or any part of the Conversion Shares
and Warrant Shares such Subscribers still own, subject to customary underwriter
cutbacks applicable to all holders of registration rights and any cutbacks
in  accordance with guidance provided by the Securities and Exchange
Commission (including, but not limited to, Rule 415).  The obligations
of the Company under this Section may be waived by any holder of any of the
Securities entitled to registration rights under this Section 11.1. The holders
whose Conversion Shares and Warrant Shares are included or required to be
included in such registration statement are granted the same rights, benefits,
liquidated or other damages and indemnification granted to other holders of
securities included in such registration statement.  Notwithstanding
anything to the contrary herein, the registration rights granted hereunder to
the holders of Securities shall not be applicable for such times as such
Conversion Shares and Warrant Shares may be sold by the holder thereof
without restriction pursuant to Section 144(b)(1) of the 1933 Act.  In
no event shall the liability of any holder of Securities or permitted successor
in connection with any Conversion Shares and Warrant Shares included in any such
registration statement be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber upon the sale of the Conversion
Shares and Warrant Shares sold pursuant to such registration or such lesser
amount applicable to other holders of Securities included in such registration
statement. All expenses incurred by the Company in complying with Section 11,
including, without limitation, all registration and filing fees, printing
expenses (if required), fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or “blue sky”
laws, fees of the NASD, transfer taxes, and fees of transfer agents and
registrars, are called “Registration Expenses.” All
underwriting discounts and selling commissions applicable to the sale of
registrable securities are called “Selling
Expenses.”  The Company will pay all Registration Expenses in
connection with the registration statement under Section 11.  Selling
Expenses in connection with each registration statement under Section 11 shall
be borne by the holder and will be apportioned among such holders in proportion
to the number of Conversion Shares included therein for a holder relative to all
the Securities included therein for all selling holders, or as all holders may
agree.

       

      11.2.        Delivery of Unlegended
Shares.

       

      (a)           Within
seven (7) business days (such seventh business day being the “Unlegended Shares Delivery
Date”) after the business day on which the Company has received (i) a
notice that Conversion Shares, or any other Common Stock held by Subscriber has
been sold pursuant to a registration statement or Rule 144 under the 1933 Act,
(ii) a representation that the prospectus delivery requirements, or the
requirements of Rule 144, as applicable and if required, have been satisfied,
(iii) the original share certificates representing the shares of Common Stock
that have been sold, and (iv) in the case of sales under Rule 144, customary
representation letters of the Subscriber and, if required, Subscriber’s broker
regarding compliance with the requirements of Rule 144, the Company at its
expense, (y) shall deliver, and shall cause legal counsel selected by the
Company to deliver to its transfer agent (with copies to Subscriber) an
appropriate instruction and opinion of such counsel, directing the delivery of
shares of Common Stock without any legends including the legend set forth in
Section 4(h) above (the “Unlegended Shares”); and (z)
cause the transmission of the certificates representing the Unlegended Shares
together with a legended certificate representing the balance of the submitted
Common Stock certificate, if any, to the Subscriber at the address specified in
the notice of sale, via express courier, by electronic transfer or otherwise on
or before the Unlegended Shares Delivery Date.

       

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      (b)           In
lieu of delivering physical certificates representing the Unlegended Shares,
upon request of Subscriber, and, if the Company is DTC and/or DWAC eligible, so
long as the certificates therefor do not bear a legend and the Subscriber is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its transfer agent to electronically transmit the Unlegended
Shares by crediting the account of Subscriber’s prime broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission system, if such
transfer agent participates in such DWAC system.  Such delivery must
be made on or before the Unlegended Shares Delivery Date.

      

      (c)           The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than the Unlegended Shares Delivery Date
could result in economic loss to a Subscriber.  As compensation to a
Subscriber for such loss, the Company agrees to pay late payment fees (as
liquidated damages and not as a penalty) to the Subscriber for late delivery of
Unlegended Shares in the amount of $100 per business day after the Delivery Date
for each $10,000 of purchase price of the Unlegended Shares subject to the
delivery default.  If during any 360 day period, the Company fails to
deliver Unlegended Shares as required by this Section 11.2 for an aggregate of
thirty days, then each Subscriber or assignee holding Securities subject to such
default may, at its option, require the Company to redeem all or any portion of
the Conversion Shares subject to such default at a price per share equal to the
greater of (i) 120%, or (ii) a fraction in which the numerator is the highest
closing price of the Common Stock during the aforedescribed thirty day period
and the denominator of which is the lowest conversion price during such thirty
day period, multiplied by the price paid by Subscriber for such Common Stock
(“Unlegended Redemption
Amount”).  The Company shall pay any payments incurred under
this Section in immediately available funds upon demand.

      

      (d)           In
the event a Subscriber shall request delivery of Unlegended Shares as described
in Section 11.2 and the Company is required to deliver such Unlegended Shares
pursuant to Section 11.2, the Company may refuse to deliver Unlegended Shares
based on a claim that such Subscriber or anyone associated or affiliated with
such Subscriber has been engaged in any violation of law or a violation of this
Agreement..

       

      11.3.        Most Favored
Nations.   If at any time during the term of the Note the
Company consummates a New Transaction, then the Company shall offer to each
Subscriber the option to exchange the Note issued pursuant to this Offering for
the securities issued in the New Transaction in the amount of the Principal
Amount of the Note at the time of the closing of the New
Transaction.  Additionally, such Subscriber shall also assume all
rights, privileges and benefits under the New Transaction.

       

      For the
purposes of the Transaction Documents, a “New Transaction” shall mean any
private equity, equity-linked financing or any other financing transaction consummated directly or indirectly
by the Company after the Closing Date with parties other than the Subscribers
involving issuance of Common Stock or other securities convertible into or
exercisable for Common Stock; provided, however, that the following share
issuances (the “Excepted
Issuances”) shall not be deemed a New
Transaction: (i) issuances pursuant to Employee Stock Ownership Plans; ii)
transactions with strategic industry or operating partners of the Company
involving the issuance of Common Stock or securities convertible into Common
Stock, or upon the exercise of warrants related to the deal terms of the
foregoing; (iii) issuance of restricted stock, stock options or warrants to
employees, officers or directors pursuant to compensation arrangements approved
by the Company’s Board of Directors; (iv) issuances as consideration in
transactions for the acquisition of stock or assets of companies; or (v)
conversion or exercise of convertible securities existing on the date
hereof.

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      12.           Miscellaneous.

       

      (a)           Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be:

      

      If to the
Company:

      

      NaturalNano,
Inc.

      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 pages
hereto.

       

      With a
copy by fax only to (which copy shall not constitute notice):

       

      Anslow
& Jaclin LLP

      Attn:
Joseph Lucosky, Esq.

      195 Route
9 South, Suite 204

      Manalapan,
New Jersey 07726

      Phone:
732-409-1212

      Facsimile:
(732) 577-1188

       

      (b)           Entire Agreement;
Assignment.  This Agreement and other documents delivered in
connection herewith represent the entire agreement between the parties hereto
with respect to the subject matter hereof and may be amended only by a writing
executed by both parties.  Neither the Company nor the Subscriber has
relied on any representations not contained or referred to in this Agreement and
the documents delivered herewith.   No right or obligation of the
Company shall be assigned without prior notice to and the written consent of the
Subscribers.  The Notes and Warrants may not be sold, pledged, or
otherwise transferred from the original purchaser without the prior written
consent of the Company, which will not be unreasonably withheld.

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (c)           Counterparts/Execution.  This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument.  This Agreement may be executed by facsimile
signature and delivered by electronic transmission.

       

      (d)           Law Governing this
Agreement.  This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state and county of New York.  The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens.  The parties executing this Agreement
and other agreements referred to herein or delivered in connection herewith on
behalf of the Company agree to submit to the in personam jurisdiction of such
courts and hereby irrevocably waive trial by jury.  The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs.  In the event that any provision
of this Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law.  Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of any agreement.  Each party hereby irrevocably waives
personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other Transaction
Document by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law.

       

      (e)           Damages.   In
the event the Subscriber is entitled to receive any liquidated damages pursuant
to the Transactions Documents, the Subscriber may elect to receive the greater
of actual damages or such liquidated damages.

       

      (f)           Maximum
Payments.   Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law.  In the event that
the rate of interest or dividends required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Company to the Subscriber and thus
refunded to the Company.

       

      (g)           Calendar
Days.   All references to “days” in the Transaction
Documents shall mean calendar days unless otherwise stated.  The terms
“business days” and “trading days” shall mean days that the New York Stock
Exchange is open for trading for three or more hours.  Time periods
shall be determined as if the relevant action, calculation or time period were
occurring in New York City.  Any deadline that falls on a non-business
day in any of the Transaction Documents shall be automatically extended to the
next business day and interest, if any, shall be calculated and payable through
such extended period.

       

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      (h)           Captions: Certain
Definitions.  The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.  As used in this Agreement the term
“person” shall
mean and include an individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.

       

      (i)           Severability.  In
the event that any term or provision of this Agreement shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability: (i) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other authority of any
of the terms and provisions of this Agreement.

       

      (j)           Successor
Laws.  References in the Transaction Documents to laws, rules,
regulations and forms shall also include successors to and functionally
equivalent replacements of such laws, rules, regulations and forms.  A
successor rule to Rule 144(b)(1)(i) shall include any rule that would be
available to a non-Affiliate of the Company for the sale of Common Stock not
subject to volume restrictions and after a six month holding
period.

       

      (k)           Payment of Senior
Debt.  The subscriber acknowledges that payment in respect of
the Note, whether upon redemption, acceleration, maturity, or otherwise is
expressly subordinate to the payment in full of the Senior Debt (as defined in
the Note), and to the extent the Senior Debt is accelerated or any remedies are
exercised with respect to the collateral securing the Note or the Senior Debt,
any such remedies shall provide for the payment in full of the Senior Debt prior
to payment of any obligation in respect of the Note or the other Transaction
Documents.

       

      

       

      [REMAINDER
OF PAGE LEFT BLANK]

       

       

       

       

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

       

      [SIGNATURE PAGE TO SUBSCRIPTION
AGREEMENT]

       

      

      Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.

      

       

      NATURALNANO,
INC.

      a Nevada
corporation

      

      

      By:_________________________________

      Name: Jim
Wemett

      Title:
Chief Executive Officer

      

      Dated:
November 30, 2009

      

      

      

      
        	
                SUBSCRIBER

              	
                PURCHASE
      PRICE

              	
                NOTE
      PRINCIPAL

              	
                WARRANTS

              
	
                 

                 

                 

                 

                 

                ___________________________________

                By:

                 

              	 
      	 
      	 
      

      

      

       

       
 

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      LIST OF EXHIBITS AND
SCHEDULES

       

      

       

      
        
          	
                  Exhibit
      A

                	
                  Form
      of Note

                
	 	 
	
                  Exhibit
      B

                	
                  Form
      of Warrant

                
	 	 
	
                  Exhibit
      C

                	
                  Escrow
      Agreement

                
	 	 
	
                  Exhibit
      D

                	
                  Form
      of Security Agreement

                
	 	 
	
                  Schedule
      5(a)

                	
                  Subsidiaries

                
	 	 
	
                  Schedule
      5(d)

                	
                  Additional
      Issuances / Capitalization

                
	 	 
	
                  Schedule
      9(k)

                	
                  Intellectual
      Property

                

        

      

       

       

      

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      

      

       

      SCHEDULE
5(a)

      

      None.

      

      

      

      

      

      

      

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      

       

      

      SCHEDULE
5(d)

      

      As of
November 30, 2009, the number of shares of the Company’s outstanding common
stock is 73,682,045.

      

       

       

       

      
 

      

      

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      

      

      

       

      

      SCHEDULE
9(k)

      

      None.

       

       

       

       

       

       

       

       26

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