EXHIBIT 10.1

NEONODE INC.

SBE NOTE PURCHASE AGREEMENT

NOTE PURCHASE AGREEMENT (the “Agreement”) dated as of May 18, 2007 among NEONODE
INC., a Delaware corporation (“Company”), and SBE, Inc., a Delaware limited
liability company ( “SBE” or the “New Investor”).

Background: The Company desires to sell to the New Investor, and the New
Investor desires to purchase, in two closings, senior secured notes, in
substantially the form attached hereto as Exhibit 1 (the “Notes”) in aggregate
principal amount of $1,000,000.
 
On February 28, 2006, November 20, 2006 and January 22, 2007, the Company sold
senior secured notes in aggregate principal amount of $10,000,000 (the “Bridge
Notes”) to accredited and non-US investors (collectively in this capacity, the
“Bridge Investors”), and in connection therewith (i) the Company entered into
the Security Agreement with AIGH (as agent for the Bridge Investors), (ii) the
Intercreditor Agreement was amended and restated to reflect the issuance of
additional Bridge Notes, and (iii) the Pledgors entered into the Stockholder
Pledge Agreements with the Bridge Investors.
 
The Company intends to sell additional Senior Secured Notes, substantially
similar to the Bridge Notes, in the principal amount of up to $3,000,000 (the
“May 2007 Notes”). The proceeds from the Notes and the May 2007 Notes are
necessary for the development and continuance of the business of the Company and
each of its Subsidiaries.
 
The Company has entered into an Agreement and Plan of Merger and Reorganization,
dated January 19, 2007 (the “Merger Agreement”), by and among the Company, SBE
and Cold Winter Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of SBE (“Merger Sub”), which provides for a merger (the “Merger”) of
the Company with and into Merger Sub.
 
Certain Definitions:

“AIGH” means AIGH Investment Partners, LLC, a Delaware limited liability
company.

“Capitalization Table” means the Capitalization Table attached as Exhibit 7 to
this Agreement.

“Certificate of Incorporation” has the meaning set forth in Section 2.2.

“Closing” or “Closings” have the meanings set forth in Section 1.2.

“Collateral” has the meaning set forth in the Security Agreement, as amended, a
copy of which is included with Exhibit 2 hereto.
 
 
 

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“Common Stock” shall mean stock of the Company of any class (however designated)
whether now or hereafter authorized, which generally has the right to
participate in the voting and in the distribution of earnings and assets of the
Company without limit as to amount or percentage, including the Company’s Common
Stock, $.01 par value per share.

“Company” includes the Company and any Person which shall succeed to or assume,
directly or indirectly, the obligations of the Company hereunder.

“Company Disclosure” means the disclosure materials in the form attached as
Exhibit 6 to this Agreement.

“First Closing” has the meaning set forth in Section 1.2.

“First Closing Date” has the meaning set forth in Section 1.2.

“Governmental Body” shall mean any: (a) nation, state, commonwealth, province,
municipality or district; (b) federal, state, local, municipal, foreign or other
government; or (c) governmental or quasi-governmental authority of any nature
(including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or entity and any court or
other tribunal).

“Guaranties” means the respective guaranties, dated February 28, 2006, as
amended, delivered to the investors identified on Exhibit A of the Stockholder
Pledge Agreements, respectively, copies of which are included with Exhibit 4
hereto.

“Guarantors” means each of Thomas Erickson, Magnus Goertz and Per Bystedt, each
as a party to his respective Guaranty.

“Intercreditor Agreement” means the Intercreditor Agreement, dated February 28,
2006, as amended, between AIGH and Petrus.

“Material Adverse Change” shall mean any change in the facts represented by the
Company in the Agreement or the business, financial condition, results of
operation, prospects, properties or operations of the Company and its
Subsidiaries taken as a whole which may have a material adverse effect on the
value of the Common Stock of the Company.

“Material Adverse Effect” shall mean a material adverse effect on the
operations, assets, liabilities, financial condition, prospects or business of
the Company.

“May 2007 Notes” has the meaning set forth in the recitals.

“Merger” has the meaning set forth in the recitals.

“Merger Agreement” has the meaning set forth in the recitals.

“Neonode AB” means Neonode AB, a Swedish corporation.
 
 
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“Notes” has the meaning set forth in the recitals.

“Own” shall mean own beneficially, as that term is defined in the rules and
regulations of the SEC.

“Petrus” means Petrus Holdings, SA, a corporation organized under the laws of
Luxembourg.

“Person” means any individual, sole proprietorship, partnership, corporation,
limited liability company, business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity, any university or
similar institution, or any government or any agency or instrumentality or
political subdivision thereof.

“Pledged Collateral” has the meaning set forth in the Stockholder Pledge
Agreements, as amended, copies of which are included with Exhibit 3 hereto.

“Pledgors” means Rector AB (or its successor in interest, Athemis Limited), Iwo
Jima Sarl and Wirelesstoys Sweden AB, each as a party to its respective
Stockholder Pledge Agreement.

“Proprietary Assets” shall mean any: (i) patent, patent application, trademark
(whether registered or unregistered), trademark application, trade name,
fictitious business name, service mark (whether registered or unregistered),
service mark application, copyright (whether registered or unregistered),
copyright application, maskwork, maskwork application, trade secret, know-how,
customer list, franchise, system, computer software, computer program,
invention, design, blueprint, engineering drawing, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset relating to the foregoing; or (ii) right to use or exploit any of the
foregoing.

“SEC” means the Securities and Exchange Commission.

“Second Closing” has the meaning set forth in Section 1.2.

“Second Closing Date” has the meaning set forth in Section 1.2.

“Securities Act” means the Securities Act of 1933, as amended.

“Security Agreement” means the Security Agreement, dated February 28, 2006, as
amended, between the Company and AIGH, as agent for the Bridge Investors, a copy
of which is included with Exhibit 2 hereto.

“Stockholder Pledge Agreements” means the Stockholder Pledge and Security
Agreements, dated February 28, 2006, as amended, between the Bridge Investors
and each of the Pledgors, respectively, copies of which are included with
Exhibit 3 hereto.
 
 
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“Subsidiary” shall mean, immediately prior to each Closing, any corporation of
which stock or other interest having ordinary power to elect a majority of the
board of directors (or other governing body) of such entity (regardless of
whether or not at the time stock or interests of any other class or classes of
such corporation shall have or may have voting power by reason of the happening
of any contingency) is, immediately prior to the applicable Closing, directly or
indirectly Owned by the Company or by one or more of its Subsidiaries.

“U.S. person” shall have the meaning set forth in Regulation S of the SEC.

In consideration of the mutual covenants contained herein, the parties agree as
follows:

1.    Purchase and Sale of Notes.

1.1.    Sale and Issuance of Notes. The Company shall sell to the New Investor
and the New Investor shall purchase from the Company, Notes in an aggregate
principal amount of $1,000,000 at par, subject to acceptance, in whole or in
part, by the Company.

1.2.    Closings. The purchase and sale of the Notes hereunder shall take place
in two closings (each a “Closing” and collectively, the “Closings”). The first
closing (the “First Closing”) hereunder shall be for $500,000 in principal
amount of Notes and shall take place within three business days after the date
hereof (the “First Closing Date”). A second closing (the “Second Closing”) for
the purchase and sale of an additional $500,000 in principal amount of Notes
shall take place on a date requested by Investor, but no later than June 15,
2007 (the “Second Closing Date”). Each Closing shall take place at the offices
of Hahn & Hessen LLP, the Company’s counsel, in New York, New York, or at such
other location as is mutually acceptable to the New Investor and the Company.

1.3.    Conditions of the First Closing. The obligation of the New Investor to
complete the purchase of the Notes at the First Closing is subject to
fulfillment of the following conditions:

(a)    the Company and AIGH shall execute and deliver Amendment 3 to the
Security Agreement, dated the First Closing Date, in the form attached as
Exhibit 2 (“Security Agreement Amendment No. 3”);

(c)    each Pledgor and AIGH shall execute and deliver the appropriate Amendment
3 to such Pledgor’s respective Stockholder Pledge Agreement, dated the First
Closing Date, each in substantially the form attached as Exhibit 3 (“Stockholder
Pledge Amendment No. 3”);

(d)    each Guarantor and AIGH shall execute and deliver the appropriate
Amendment 3 to such Guarantor’s respective Guaranty, dated the First Closing
Date, each in substantially the form attached as Exhibit 4 (“Guaranty Amendment
No. 3”, and with the Agreement, the Notes, Security Agreement Amendment No. 3,
Stockholder Pledge Amendment No. 3 and the other documents required in
connection with the transactions contemplated in the Agreement, the “Transaction
Documents”);
 
 
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(e)    the Company shall have executed and delivered all documents, such as
financing statements and assignments, reasonably requested by counsel for the
New Investor; and

(f)    the absence of any Material Adverse Change since the date hereof.

1.4.    Conditions of the Second Closing. The obligation of the New Investor to
complete the purchase of the Notes at the Second Closing is subject to
fulfillment of the following condition:
 
(a)    the Merger Agreement shall have not have been terminated as of the Second
Closing Date.

2.    Representations and Warranties of the Company. The Company hereby
represents and warrants to the New Investor as follows:

2.1.    Corporate Organization; Authority; Due Authorization.

(a)    The Company (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (ii) has
the corporate power and authority to own or lease its properties as and in the
places where such business is now conducted and to carry on its business as now
conducted and (iii) is duly qualified and in good standing as a foreign
corporation authorized to do business in every jurisdiction where the failure to
so qualify, individually or in the aggregate, would have a Material Adverse
Effect. Set forth in the Company Disclosure is a complete and correct list of
all Subsidiaries. Each Subsidiary is duly incorporated, and validly existing
under the laws of its jurisdiction of incorporation and is qualified to do
business as a foreign corporation in each jurisdiction in which qualification is
required, except where failure to so qualify would not have a Material Adverse
Effect.

(b)    The Company (i) has the requisite corporate power and authority to
execute, deliver and perform this Agreement and the other Transaction Documents
to which it is a party and to incur the obligations herein and therein and (ii)
has been authorized by all necessary corporate action to execute, deliver and
perform this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby (the
“Contemplated Transactions”). Each of this Agreement and the other Transaction
Documents is a valid and binding obligation of the Company enforceable in
accordance with its terms except as limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting the enforcement
of creditors’ rights and the availability of equitable remedies (regardless of
whether such enforceability is considered in a proceeding at law or equity).
 
 
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2.2.    Capitalization. The authorized capital stock of the Company is
10,000,000 shares of Common Stock, $.01 par value per share. Except as
contemplated by this Agreement, and as set forth in the Capitalization Table,
there are (i) no outstanding subscriptions, warrants, options, conversion
privileges or other rights or agreements obligating the Company or Neonode AB to
purchase or otherwise acquire or issue any shares of capital stock of the
Company or Neonode AB (or shares reserved for such purpose), (ii) no preemptive
rights contained in the Company’s Certificate of Incorporation, as amended (the
“Certificate of Incorporation”), By-Laws of the Company or contracts to which
the Company is a party or rights of first refusal with respect to the issuance
of additional shares of capital stock of the Company, and (iii) no commitments
or understandings (oral or written) of the Company or Neonode AB to issue any
shares, warrants, options or other rights. Except as disclosed in the Company
Disclosure with respect to each Subsidiary, (x) all the issued and outstanding
shares of the Subsidiary’s capital stock have been duly authorized and validly
issued, are fully paid and nonassessable, have been issued in compliance with
applicable federal and state securities laws, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities, (y) except as disclosed in the Company Disclosure, there are no
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of the Subsidiary’s
capital stock or any such options, rights, convertible securities or
obligations, and (z) the Company owns 100% of the outstanding equity of each
Subsidiary. The Capitalization Table sets forth accurately and completely the
capitalization of the Company as of the date hereof and the anticipated
capitalization of SBE after giving effect to the Merger.
 
2.3.    Validity of Notes. The issuance of the Notes has been duly authorized
and upon each Closing the Notes are valid and binding and will be in full force
and effect and enforceable in accordance with their terms.

2.4.    Private Offering. Neither the Company nor anyone acting on its behalf
has within the last 12 months issued, sold or offered any security of the
Company (including, without limitation, any Notes) to any Person under
circumstances that would cause the issuance and sale of the Notes, as
contemplated by this Agreement, to be subject to the registration requirements
of the Securities Act.

2.5.    Brokers and Finders. The Company has not retained any investment banker,
broker or finder in connection with the Contemplated Transactions. The Company
has, however, retained Griffin Securities, Inc., as an advisor in connection
with the Merger.

2.6.    Financial Statements; Absence of Certain Changes. Each of (a) the
audited balance sheet of the Company as of December 31, 2006, (b) the audited
statements of income, and that the unaudited statements may not contain all
footnotes required by generally accepted accounting principles, retained
earnings and cash flows of the Company for the period ended on December 31,
2006, and (c) the audited statements of income, retained earnings and cash flows
of the Company for the period ended on December 31, 2006, included in the
Company Disclosure (including any related notes and schedules, if any), (the
“Financial Statements”) fairly presents, in all material respects, the financial
position of the Company, or the results of operations, retained earnings or cash
flows, as the case may be, of the Company as of the referenced date or for the
periods set forth therein (subject to normal year-end audit adjustments which
would not be material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Neither the Company nor any Subsidiary
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), including for taxes, that would be required to be
reflected on, or reserved against in, Financial Statements, except for (i)
liabilities or obligations that were so reserved on, or reflected in (including
the notes to), the Financial Statements; and (ii) liabilities or obligations
which would not, individually or in the aggregate, have a Material Adverse
Effect. Other than the indebtedness as set forth in the Financial Statements or
the Company Disclosure, neither the Company nor any Subsidiary has any
indebtedness other than reasonable accounts payable. Except as specifically
contemplated by this Agreement or as set forth in the Company Disclosure and the
Financial Statements, there has not been any Material Adverse Change since
December 31, 2006.
 
 
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2.7.    Litigation. Except as set forth in the Company Disclosure, there are no
claims, actions, suits, investigations, inquiries or proceedings (“Actions”)
pending against the Company or its Subsidiaries or, to the knowledge of the
Company, threatened against the Company or its Subsidiaries, or any officer,
director, employee or agent thereof in his or her capacity as such, at law or in
equity, or before or by any court, tribunal, arbitrator, mediator or any federal
or state commission, board, bureau, agency or instrumentality that would
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. To the Company’s knowledge, there is no factual or
legal basis for any such Action. The Company and each Subsidiary is not a party
to or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality and there is no
Action by the Company or any Subsidiary currently pending or which the Company
or any Subsidiary intends to initiate.

2.8.    Proprietary Assets.

(a)    The Company Disclosure sets forth, with respect to each Proprietary Asset
of the Company and any Subsidiary registered with or issued by any Governmental
Body or for which an application has been filed with any Governmental Body, (i)
a brief description of such Proprietary Asset and (ii) the names of the
jurisdictions covered by the applicable registration or application. The Company
Disclosure identifies and provides a brief description of all other Proprietary
Assets owned by the Company and any Subsidiary, and identifies and provides a
brief description of each Proprietary Asset licensed to the Company and any
Subsidiary by any person (except for any Proprietary Asset that is licensed to
the Company or any Subsidiary under any third party license generally available
to the public at a cost of less than $10,000), and identifies the license
agreement under which such Proprietary Asset is being licensed to the Company or
Subsidiary, as appropriate. Except as set forth in the Company Disclosure, the
Company and its Subsidiaries, as a whole, have good, valid and marketable title
to, or have a valid right to use, all of the Proprietary Assets used in the
Company’s business (including without limitation all Proprietary Assets
identified in the Company Disclosure), free and clear of all liens and other
encumbrances to the knowledge of the Company; and are not obligated to make any
payment to any person for the use of any Proprietary Asset. The Company and each
Subsidiary has not developed jointly with any other person any Proprietary Asset
with respect to which such other person has any rights. Except as set forth in
the Company Disclosure, none of which shall have a Material Adverse Effect, the
Company has no knowledge that any other person has any right, title or interest
in any of the Proprietary Assets of the Company or its Subsidiaries.
 
 
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(b)    The Company and its Subsidiaries, as appropriate, have taken reasonable
and customary measures and precautions to protect and maintain the
confidentiality and secrecy of all Proprietary Assets of the Company and its
Subsidiaries (except Proprietary Assets whose value would be unimpaired by
public disclosure) and otherwise to maintain and protect the value of all
Proprietary Assets of the Company and its Subsidiaries. Each employee, officer,
director, consultant and contractor (not including contractors without access to
confidential information of the Company) of the Company and its Subsidiaries
(each, an “Employee”) has entered into and executed an agreement providing for
(i) the assignment to the Company (or to any of its Subsidiaries) of personal
rights or claims to Proprietary Assets for which such Employee’s personal rights
or claims arose out of the scope of his/her employment or retainer by the
Company or its Subsidiaries and (ii) the nondisclosure of confidential
information acquired by the Employee with respect to the Proprietary Assets of
the Company and its Subsidiaries or an employment or consulting agreement
containing substantially similar terms. Except as set forth in the Company
Disclosure, the Company and each Subsidiary has not (other than pursuant to
license agreements identified in the Company Disclosure) disclosed or delivered
to any person, or permitted the disclosure or delivery to any person of, (i) the
source code, or any portion or aspect of the source code, of any Proprietary
Asset of the Company or its Subsidiaries, (ii) the object code, or any portion
or aspect of the object code, of any Proprietary Asset of the Company or its
Subsidiaries or (iii) any patent applications (except as required by law).

(c)    (i) To the knowledge of the Company, none of the Proprietary Assets of
the Company or its Subsidiaries necessary for the conduct of their businesses
infringes or conflicts with any Proprietary Asset owned or used by any other
Person, (ii) to the knowledge of the Company, the Company and each Subsidiary is
not infringing, misappropriating or making any unlawful use of, and the Company
and each Subsidiary has not at any time infringed, misappropriated or made any
unlawful use of, or received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Proprietary Asset owned or used by any
other person, and (iii) to the knowledge of the Company, no other person is
infringing, misappropriating or making any unlawful use of, and no Proprietary
Asset owned or used by any other person infringes or conflicts with, any
Proprietary Asset of the Company or its Subsidiaries.

(d)    There has not been any claim by any customer or other person alleging
that any Proprietary Asset of the Company or its Subsidiaries (including each
version thereof that has ever been licensed or otherwise made available by the
Company or its Subsidiaries to any person) does not conform in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of the Company or
its Subsidiaries, and, to the knowledge of the Company, there is no basis for
any such claim.

(e)    The Company is not knowledgeable of any Proprietary Asset owned or used
by any other person (except for any Proprietary Asset that is licensed to the
Company or any Subsidiary under any third party license set forth in the Company
Disclosure or would otherwise be commercially available) necessary to enable the
Company and each Subsidiary to conduct its businesses in the manner in which
such businesses have been and are being conducted or are expected to be
conducted pursuant to the Company Disclosure. Neither the Company nor any
Subsidiary has licensed, or agreed to license, any of its Proprietary Assets to
any person on an exclusive, semi-exclusive or royalty-free basis. Neither the
Company nor any Subsidiary has entered into any covenant not to compete or
contract limiting its ability to exploit fully any of its Proprietary Assets or
to transact business in any market or geographical area or with any person.
Without limitation on the foregoing, except as set forth in the Company
Disclosure, no officer, director or Stakeholder, either as an individual or
through an affiliate, has any claim to own or any other rights to use any of the
Proprietary Assets.
 
 
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(f)    Except as set forth in the Company Disclosure, the Company is not
knowledgeable that any Employee is obligated under any agreement (including
licenses, covenants or commitments of any nature) or subject to any judgment,
decree or order of any court or administrative agency, or any other restriction
that would interfere with the use of his or her best efforts to carry out his or
her duties for the Company and its Subsidiaries, as appropriate, or to promote
the interests of the Company and its Subsidiaries, as appropriate, or that would
conflict with the Company’s or its Subsidiaries’ business as proposed to be
conducted. The Company does not believe it is or will be necessary to utilize
any inventions of any Employees (or persons the Company or its Subsidiaries
currently intend to hire) made prior to their employment or retainer by the
Company or its Subsidiaries, as appropriate, which have not been assigned to the
Company. To the Company’s knowledge, after due inquiry, at no time during the
conception of, or reduction to practice, or development of, any of the Company’s
or its Subsidiaries’ Proprietary Assets was any developer, inventor or other
contributor to such Proprietary Assets operating under any grants from any
governmental entity or agency or private source, performing research sponsored
by any governmental entity or agency or private source or subject to any
employment agreement or invention assignment or nondisclosure agreement or other
obligation with any third party that could adversely affect the Company’s or its
Subsidiaries’ rights in such Proprietary Assets.

(g)    The Company believes that the exceptions, qualifications and other
disclosures relating to the Proprietary Assets set forth in the Company
Disclosure shall not have a Material Adverse Effect in the aggregate.

2.9.    Company Disclosure. No representation or warranty of the Company herein,
no exhibit or schedule hereto, and no information contained or referenced in the
Company Disclosure, when read together, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.

3.    Representations and Warranties of the New Investor. The New Investor
represents and warrants to the Company as follows:
 
 
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3.1.    The New Investor (i) has full power and authority to execute, deliver
and perform this Agreement and the other Transaction Documents to which it is a
party and to incur the obligations herein and therein and (ii) if applicable has
been authorized by all necessary corporate or equivalent action to execute,
deliver and perform this Agreement and the other Transaction Documents and to
consummate the Contemplated Transactions. Each of this Agreement and the other
Transaction Documents to which the New Investor is a party is a valid and
binding obligation of the New Investor enforceable in accordance with its terms,
except as limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors’ rights and
the availability of equitable remedies (regardless of whether such
enforceability is considered in a proceeding at law or equity).

3.2.    The New Investor has not retained any investment banker, broker or
finder in connection with the Contemplated Transactions.

3.3.    The Notes will be acquired for investment for the New Investor’s own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof such that the New Investor would constitute an
“underwriter” under the Securities Act.

3.4.    The New Investor understands and acknowledges that the offering of the
Notes pursuant to this Agreement will not be registered under the Securities Act
or qualified under any state securities laws on the grounds that the offering
and sale of the Notes are exempt from registration and qualification,
respectively, under the Securities Act and the Blue Sky Laws.

3.5.    The New Investor represents that (i) the New Investor is able to fend
for itself in the Contemplated Transactions; (ii) the New Investor has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of the New Investor’s prospective investment in
the Notes; (iii) the New Investor recognizes that its investment in the Notes
involves a high degree of risk which may result in the loss of the total amount
of its investment and can afford the complete loss of such investment (iv) the
New Investor recognizes that the Company has a very limited operating history
upon which an evaluation of its business and prospects can be based; (v) the New
Investor recognizes that the Company's prospects must be considered in light of
its limited operating history, together with the expenses, difficulties,
uncertainties and delays frequently encountered in connection with the early
phases of a new business; and (vi) the New Investor recognizes that there can be
no assurance that the Company will ever achieve any time soon or sustain
profitability.

3.6.    The New Investor has read and had the opportunity to discuss with
management of the Company: (i) this Agreement, (ii) the Merger Agreement, (iii)
the Company Disclosure and (iv) the Risk Factors in the form attached as Exhibit
5 hereto.

3.7    The New Investor (i) qualifies as an “accredited investor” as such term
is defined under Rule 501 promulgated under the Securities Act, and (ii) the New
Investor has not been organized for the purpose of purchasing the Notes.

4.    Securities Laws; Certain Covenants of New Investor.
 
 
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4.1.    The New Investor agrees that the Notes may not be sold by the New
Investor without registration under the Securities Act or an exemption
therefrom, and therefore the New Investor may be required to hold the Notes for
an indeterminate period.

4.2.    The New Investor agrees that the obligations under the Notes shall be
subject to the Security Agreement, Stockholder Pledge Agreement and the
Intercreditor Agreement, each as amended as contemplated herein. AIGH shall have
no duty to the New Investor arising out of its actions or failure to act under
the Security Agreement, Stockholder Pledge Agreement, the Intercreditor
Agreement or Guaranties, each as amended as contemplated herein, provided that
AIGH shall apply the same standard of care as it would use in determining
whether to act under such agreements in its capacity as a New Investor.

4.4.    The New Investor agrees to indemnify AIGH from and against any and all
reasonable claims, losses, and liabilities (including, without limitation,
reasonable attorney fees) arising out of or resulting from the Notes, Security
Agreement, Stockholder Pledge Agreement, the Intercreditor Agreement or
Guaranties, each as amended as contemplated herein, except claims, losses, or
liabilities resulting from the gross negligence or willful misconduct of AIGH.

4.5.    The New Investor will upon demand pay the amount of any and all
reasonable expenses, including, without limitation, the reasonable fees and
expenses of counsel and of any experts and agents, which AIGH may incur in
connection with (i) the preparation and administration of the Security
Agreement, Stockholder Pledge Agreement, the Intercreditor or Guaranties, each
as amended as contemplated herein; (ii) the exercise or enforcement of any of
the rights of AIGH or the New Investor thereunder; or (iii) the failure by the
New Investor to perform or observe any of the provisions hereof or thereof.

4.6.    The New Investor hereby appoints AIGH as its agent under the Security
Agreement with respect to the Collateral and the creation, perfection, priority,
preservation, protection and enforcement of a security interest therein in
accordance with the terms of the Security Agreement. The New Investor hereby
authorizes AIGH to take such actions with respect to the Collateral, for the
pro-rata benefit of the New Investor, and the Bridge Investors in accordance
with Section 9 of the Security Agreement, as AIGH determines to take in its sole
discretion, and the New Investor agrees to indemnify and hold harmless AIGH for
all costs, claims or expenses (including without limitation attorneys’ fees and
expenses) in connection with such actions taken or omitted to be taken, except
to the extent resulting from the gross negligence or willful misconduct of AIGH.
AIGH shall provide prompt notice of any material action under the Security
Agreement to the New Investor.

4.7.    The New Investor hereby appoints AIGH as its agent under the Stockholder
Pledge Agreements with respect to the Pledged Collateral and the creation,
perfection, priority, preservation, protection and enforcement of a security
interest therein in accordance with the terms of the Stockholder Pledge
Agreements. The New Investor hereby authorizes AIGH to take such actions with
respect to the Pledged Collateral, for the pro-rata benefit of the New Investor
and the Bridge Investors in accordance with Section 9 of the Stockholder Pledge
Agreements, as AIGH determines to take in its sole discretion, and the New
Investor agrees to indemnify and hold harmless AIGH for all costs, claims or
expenses (including without limitation attorneys’ fees and expenses) in
connection with such actions taken or omitted to be taken, except to the extent
resulting from the gross negligence or willful misconduct of AIGH. AIGH shall
provide prompt notice of any material action under the Stockholder Pledge
Agreements to the New Investor.
 
 
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5.    Additional Covenants of the Company.

5.1.    Form D. As soon as is practicable following each Closing, the Company
shall prepare and file with the SEC a Form D concerning the sale of the Notes.

5.2.    Financial Reports and Tax Returns. Until the Company is a public company
required to file financial reports with the U.S. Securities and Exchange
Commission, the Company will furnish or will cause to be furnished to the New
Investor:

(a)    within 90 days after the end of each fiscal quarter and fiscal year of
the Company, respectively, financial statements (including income statement and
balance sheet) in accordance with generally accepted accounting standards
(except that interim financial statements need not contain footnotes or normal
year-end adjustments); and

(b)    within 90 days after the end of each fiscal year of the Company, an
independent certified audit of financial statements for such fiscal year.

6.    Miscellaneous.

6.1.    Entire Agreement; Successors and Assigns. This Agreement and the other
Transaction Documents constitute the entire contract between the parties
relative to the subject matter hereof and thereof, and no party shall be liable
or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein. This Agreement and
the other Transaction Documents supersede any previous agreement among the
parties with respect to the Notes. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective executors,
administrators, heirs, successors and assigns of the parties. Except as
expressly provided herein, nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.

6.2.    Survival of Representations and Warranties. All representations and
warranties of the Company shall survive the execution and delivery of this
Agreement and the Closings hereunder and shall continue in full force and effect
for one year after the Second Closing. The covenants of the Company set forth in
Section 5 shall remain in effect as set forth therein.

6.3.    Governing Law; Jurisdiction. 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 law. Each party hereby irrevocably consents and
submits to the jurisdiction of any New York State or United States Federal Court
sitting in the State of New York, County of New York, over any action or
proceeding arising out of or relating to this Agreement and irrevocably consents
to the service of any and all process in any such action or proceeding by
registered mail addressed to such party at its address specified in Section 6.6
(or as otherwise noticed to the other party). Each party further waives any
objection to venue in New York and any objection to an action or proceeding in
such state and county on the basis of forum non conveniens. Each party also
waives any right to trial by jury.
 
 
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6.4.    Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

6.5.    Headings. The headings of the sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.

6.6.    Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon (i) personal delivery, (ii)
delivery by fax (with answer back confirmed) or (iii) delivery by electronic
mail (with reception confirmed), addressed to a party at its address or sent to
the fax number or e-mail address shown below or at such other address, fax
number or e-mail address as such party may designate by three days advance
notice to the other party.

Any notice to the New Investor shall be sent to:

if to New Investor: 

SBE, Inc.
Attn: David Brunton
4000 Executive Parkway
Suite 200
San Ramon, CA 94583
Facsimile: (925) 355-2041

with a copy to:  

Cooley Godward Kronish LLP
101 California Street, 5th Floor
San Francisco, CA 94111-5800
Attention: Jodie Bourdet, Esq.
Fax: 415-693-2222

Any notice to the Company shall be sent to:

Neonode Inc.
Biblioteksgatan 11
S111 46 Stockholm, Sweden
Attention: President
Fax Number: +46-8-678 18 51
 
 
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with a copy to:

Hahn & Hessen LLP
488 Madison Avenue
New York, New York 10022
Attention: James Kardon, Esq.
Fax Number: (212) 478-7400

6.7.    Rights of Transferees. Any and all rights and obligations of the New
Investor herein incident to the ownership of Notes shall pass successively to
all subsequent transferees of such securities until extinguished pursuant to the
terms hereof.

6.8.    Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be deemed prohibited or
invalid under such applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, and such prohibition or invalidity
shall not invalidate the remainder of such provision or any other provision of
this Agreement.

6.9.    Expenses. Irrespective of whether the Closings are effected, the Company
shall pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement. The New Investor shall be
responsible for all costs incurred by the New Investor in connection with the
negotiation, execution, delivery and performance of this Agreement including,
but not limited to, legal fees and expenses.

6.10.    Amendments and Waivers. Unless a particular provision or section of
this Agreement requires otherwise explicitly in a particular instance, any
provision of this Agreement may be amended and the observance of any provision
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and the holders of a majority of the principal amount of the Notes. Any
amendment or waiver effected in accordance with this Section 6.10 shall be
binding upon each holder of any Notes at the time outstanding (including
securities into which such Notes are convertible), each future holder of all
such Notes, and the Company.

6.11.    Conflicts. The Company and the New Investor (i) acknowledge that Hahn &
Hessen LLP, counsel to the Company in the Contemplated Transactions and the
Merger, has acted, and from time to time continues to act, as counsel to (A) the
Bridge Investors or affiliates thereof, in connection with the Bridge Notes, and
(B) AIGH in connection with the Bridge Notes, the Security Agreement,
investments in SBE, and in unrelated matters, (ii) consent to the representation
of the Company and such other representation of the Bridge Investors, or
affiliates thereof, by Hahn & Hessen LLP, (iii) acknowledge that partners of
Hahn & Hessen LLP own securities of SBE constituting less than 0.2% of
outstanding stock of SBE, and (iv) waive any conflicts of interest claim which
may arise from any or all of the foregoing.

[signature page follows]
 
 
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SIGNATURE PAGE
TO
NEONODE INC.
SBE NOTE PURCHASE AGREEMENT
Dated May 18, 2007

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the 18th
day of May, 2007, and execution of this Agreement shall constitute execution of
the consent to the applicable Stockholder Pledge Agreement, Guaranties and the
Security Agreement, each as amended.

     
SBE, INC.
     
By: /s/ David W. Brunton
 
Name: David W. Brunton
 
Title: CFO
       

ACCEPTED AND AGREED:

NEONODE INC.

By: /s/ Mikael Hagman
Name: Mikael Hagman
Title: President & CEO
Dated: May 18, 2007
 
 
 

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EXHIBITS
TO THE SBE NOTE PURCHASE AGREEMENT

Exhibit 1:
Form of Note

Exhibit 2:
Form of Security Agreement Amendment No. 3, Security Agreement Amendment No. 2,
Security Agreement Amendments No. 1 and Security Agreement

Exhibit 3:
Form of Stockholder Pledge Amendment No. 3, Stockholder Pledge Amendment No. 2,
Stockholder Pledge Amendment No. 1 and Stockholder Pledge Agreements, for each
of

Rector AB
Iwo Jima Sarl
Wirelesstoys
 

Exhibit 4:
Form of Guaranty Amendment No. 3, Guaranty Amendment No. 2, Guaranty Amendment
No. 1 and Guaranties, for each of:

Per Bystedt
Thomas Eriksson
Magnus Goertz

Exhibit 5:
Risk Factors

Exhibit 6:
Company Disclosure

Exhibit 7:
Capitalization Table

 
 
 

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