**EXECUTION        COPY**

| $                800,000.00 | New                York, New York |
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|                        | November                20, 2006  |

|   | 1. | This                Note may be prepaid without premium or penalty, in whole or in part,                on 20                days notice; provided that the Lender shall have the opportunity,                prior to                such prepayment, to convert this Note into common stock of the Company                at                a price based on the pre money valuation set forth in Section A.2                below. |
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|   | 2. | In                the event the undersigned completes a registered public offering                with                gross proceeds in excess of $5,500,000 on or before August 28, 2007,                this                Note, including without limitation all accrued interest (unless paid                in                cash by the undersigned) and other obligations under this Note, shall                automatically convert without any action of the holder into the securities                offered in such financing at a price per security equal to the price                paid                by public investors based on the pre-money valuation of the fully-diluted                equity of the undersigned, including for this purpose as equity all                debt                held by stockholders or their affiliates, of FIFTEEN MILLION AND                FIVE                HUNDRED THOUSAND DOLLARS ($15,500,000) (determined based on the                Capitalization Table attached as an exhibit to the Note Purchase                Agreement); and provided further the undersigned has                not suffered any material adverse change since the date                hereof. |
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|   | 3. | In                the event the undersigned fails to complete a registered public offering                with gross proceeds in excess of $5,500,000 by August 28, 2007 due                to                circumstances beyond the undersigned’s control, this Note, including                without limitation all accrued interest and other obligations under                this                Note, shall be converted into common stock of the undersigned at                a price                per share equal to the fair market value of such shares as determined                by                negotiations between the undersigned and the holder of this Note                and in                the aggregate amount of all such obligations, subject to compliance                with                applicable securities law; provided that (i) the pre-money valuation                of                the fully-diluted equity of the undersigned in the event and at the                time                of such conversion, including for this purpose as equity all debt                held by                stockholders or their affiliates, does not exceed US $15,500,000,                (ii) the                undersigned has not suffered any material adverse changes since the                date                hereof and (iii) the Lender and the undersigned enter into an investor                rights agreement which provides the Lender with demand and piggyback                registration rights, preemptive rights, tagalong rights with principal                stockholders of the undersigned, rights to Company information and                a bar                on issuance of toxic preferreds or other death spiral convertible                securities. During the term of the Notes, the undersigned shall not                issue                any equity securities or securities convertible into, exercisable                to                purchase or exchangeable for equity securities without offering to                holders                of Notes rights to purchase up to a percentage (the “Percentage”) of such                issue equal to the ratio of (A) the aggregate principal amounts of                notes                of similar tenor to this Note then outstanding divided by (B) the                sum of                $15,500,000 and such aggregate principal amounts, and shall not permit                Neonode AB to issue any such securities or incur any indebtedness                other                than reasonable accounts payable and indebtedness from                affiliates. |
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|   | 1. | default                shall be made in the payment of any principal or interest of this                Note                when the same shall become due and payable, whether at maturity,                by                acceleration, by notice of intention to prepay or                otherwise; |
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|   | 2. | the                undersigned shall become unable to pay its debts as they mature,                seek to                auction all or a substantial portion of its assets, make a general                assignment for the benefit of creditors, commence or cause to be                commenced                a meeting of his creditors or take advantage of any of the insolvency                laws, or a case is commenced or a petition in bankruptcy or for an                arrangement or reorganization under the Federal Bankruptcy Code (i)                is                filed against the undersigned, or (ii) is filed by the undersigned,                or a                custodian or receiver (or other court designee performing the functions                of                a receiver) is appointed for or takes possession of the undersigned’s                assets or affairs, or an order for relief in a case commenced under                the                Federal Bankruptcy Code is entered; |
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|   | 3. | any                judgment or judgments against the undersigned or its property for                any                amount remains unpaid, undischarged, unsatisfied, unbonded or undismissed                for a period of ten (10) days, or a levy, sequestration or attachment                against the undersigned or his property for any amount remains unpaid,                undischarged, unstayed, unsatisfied or undismissed for a period of                ten                (10) days; |
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|   | 4. | any                guaranty of the obligations of the undersigned to Lender is terminated                or                breached, or if any guarantor of the obligations of the undersigned                to the                Lender attempts to terminate, challenge the validity of, or its liability                under, any such guaranty or similar agreement, or the undersigned                terminates any guaranty which he has given to Lender to secure the                indebtedness of any third party; or |
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|   | 5. | any                event of default shall occur under any agreement between Lender and                the                undersigned, including without limitation the Security Agreement,                any                Stockholder Pledge Agreement or any guaranty related thereto, which                is not                cured within any applicable grace                period, |
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|   | 1. | The                holder of this Note, each transferee hereof and any holder and transferee                of any shares issued upon conversion hereof other than in a registered                public offering, by his acceptance thereof, agrees that (i) no public                distribution of Notes or such shares will be made in violation of                the Act,                and (ii) during such period as the delivery of a prospectus with                respect                to such shares may be required by the Act, no public distribution                of such                shares will be made in a manner or on terms different from those                set forth                in, or without delivery of, a prospectus then meeting the requirements                of                Section 10 of the Act and in compliance with applicable state securities                laws. The holder of this Note and each transferee hereof further                agrees                that if any distribution of any shares issued upon conversion hereof                other                than in a registered public offering is proposed to be made by them                otherwise than by delivery of a prospectus meeting the requirements                of                Section 10 of the Act, such action shall be taken only after submission                to                the undersigned of an opinion of counsel, reasonably satisfactory                in form                and substance to the undersigned’s counsel, to the effect that the                proposed distribution will not be in violation of the Act or of applicable                state law. Furthermore, it shall be a condition to the transfer of                this                Note that any transferee thereof be bound by all of the terms and                conditions contained in this Note. |
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|   | 2. | Each                certificate for shares issued upon conversion hereof shall bear a                legend                relating to the non-registered status of such shares under the Act,                unless                at the time of conversion of this Note such shares are subject to                a                currently effective registration statement under the                Act. |
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|   | 1. | No                information provide by the undersigned to the Lender contains or                will on                the Closing Date contain any untrue statement of a material fact                or omits                or will on the Closing Date omit to state any material fact necessary                to                make the statements contained herein or therein not misleading. During                the                term of this Note, the Company shall provide the Lender upon its                request                with any and all information about the Company reasonably deemed                necessary                for the Lender to evaluate this Note or a possible conversion                thereof. |
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|   | 2. | While                this Note is outstanding, the Company (a) shall not issue (i) any                equity                securities or securities convertible into, exercisable to purchase                or                exchangeable for equity securities without offering to the Lender                and all                other holders of notes of similar tenor rights to purchase an aggregate                of                up to the Percentage of such issue or (ii) any toxic convertibles                or death                spiral preferreds, and (b) shall not permit its 100% owned subsidiary                Neonode AB, a Swedish corporation, to issue any such securities or                incur                any indebtedness other than reasonable accounts payable and indebtedness                from affiliates. |
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|   | 3. | The                Company shall keep reserved for issuance a sufficient number of authorized                but unissued shares of Common Stock (or other securities into which                the                Notes are convertible) so that the Notes may be converted or exercised                to                purchase Common Stock (or such other securities) at any                time. |
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|   | 4. | If                any event occurs as to which the provisions of this Note are strictly                applicable and the application thereof would not fairly protect the                rights                of the Lenders in accordance with the essential intent and principles                of                such provisions, including but not limited to protection from dilution,                then the Company shall make such adjustments in the application of                such                provisions, in accordance with such essential intent and principles,                as                the Board of Directors, in good faith, determines to be reasonably                necessary to protect such rights as                aforesaid. |
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| NEONODE,                  INC.                           |
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|                                                     |
| By:________________________________                      |
| _________________,                  Authorized Signatory |

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