PROMISSORY NOTE
For value received, NaturalNano, Inc., having an
office at 15 Schoen Place, Pittsford, NY 14534 (“
Borrower ”), hereby promises to pay to Ross B. Kenzie
or order ("Lender"), at 6975 Sweetland Road, Derby, NY 14047 at
such other place as Lender may specify from time to time, in lawful
money of the United States, the principal amount of
$200,000.
1. The outstanding principal balance
of this Secured Promissory Note (this “ Note
”) shall not bear interest. Reference is made to that certain
Warrant – Special C, issued by Borrower to Lender
contemporaneously herewith (the “ Warrant
”). The parties acknowledge and agree that the Warrant is in
lieu of interest that would have accrued from the date hereof until
the Maturity Date (hereinafter defined).
2.
(a) The entire unpaid
principal amount of this Note, together with all accrued but unpaid
interest thereon, shall be due and payable on July 18, 2008 (the
“ Maturity Date ”).
(b) Borrower covenants and agrees that the
principal amount of this Note shall be used only to pay the
following expenses of the Company: $95,000 – Salary and
benefits; $30,000 – Operating costs; and $75,000 –
Emerson build-out (the “ Approved Disbursements
”).
(c) If Borrower shall use the principal amount
of this Note for any purpose other than to pay the Approved
Disbursements, then the Maturity Date shall be accelerated and
entire principal balance of this Note shall become due and payable
on the date (which shall become the “Maturity Date” for
all purposes) that any portion of the principal amount of this Note
is not used to pay the Approved Disbursements.
3.
This Note may be prepaid at any time, in whole or in part, without
restriction, penalty or premium in Borrower’s sole and
absolute discretion; provided, however, that prepayment shall in no
way affect the Warrant or Lender’s rights in respect of or as
provided in the Warrant.
4. Borrower hereby waives
presentment, demand, notice of dishonor, protest, notice of protest
and all other demands, protests and notices in connection with the
execution, delivery, performance, collection and enforcement of
this Note.
5. If Borrower shall fail to repay
this Note in full on or before the Maturity Date, then until this
Note is repaid in full, interest shall accrue on the outstanding
principal balance of this Note, and be payable, from the Maturity
Date until the date of repayment in full (together with all accrued
but unpaid interest) at the rate of interest (the “
Default Rate ”) that is the lesser of (x) 18%
per annum, or (y) the highest rate of interest permitted by law.
Interest payable at the Default Rate may be paid in cash or, at the
election of Borrower, in its sole discretion, in shares of the
common stock of NaturalNano, Inc., par value $.001 per share
(“ Common Stock ”). In such event, the
number of shares of Common Stock to be issued shall be determined
by dividing the amount of the interest payment by the daily volume
weighted average price (“ VWAP ”) of
the
Common Stock for the 20 trading days
immediately preceding (but not including) the day that is one
trading day prior to the interest payment date. For
purpose
