**NEONODE,
      INC.**





**NOTE
      PURCHASE AGREEMENT**




NOTE
      PURCHASE AGREEMENT (the “ Agreement ”)
      dated
      as of February 28, 2006 among NEONODE, INC., a Delaware corporation
      (“ Company ”),
      AIGH
      Investment Partners LLC, a Delaware limited liability company ( “AIGH”), and any
      other person who executes this agreement from time to time as purchaser of
      Notes
      (collectively with AIGH, the “Investors”).





Background:  The
      Company desires to sell to the Investors, and the Investors desire to purchase
      up to $5,500,000 in principal amount of Senior Secured Notes, in substantially
      the form attached hereto as Exhibit 1 (the “ Notes ”).
      It is
      anticipated there will be up to two closings since the Notes will be issued
      in
      tranches. The proceeds are necessary for the development and continuance of
      the
      business of the Company and each of its subsidiaries.




Certain
      Definitions:





“ 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 corporation or other entity which shall succeed
      to
      or assume, directly or indirectly, the obligations of the Company hereunder.
      The
      term “ corporation ”
shall
      include an association, joint stock company, business trust, limited liability
      company or other similar organization.





“ Company
      Disclosure ”
means
      the disclosure delivered to the Investors prior to the execution of this
      Agreement.





“ 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.





“ Neonode
      AB ”
means
      Neonode AB, a Swedish corporation.





“ 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.





“ Public
      Offering ”
shall
      mean a registered public offering of Common Stock of the Company.









“ SEC ”
means
      the Securities and Exchange Commission.





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




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 Investors and the Investors shall purchase from the
      Company, up to an aggregate in principal amount of $5,500,000 of Notes at par.
      The principal amount of Notes to be purchased by the Investors from the Company
      in the First Closing (as defined herein) is set forth opposite the name of
      each
      Investor on the signature page hereof, subject to acceptance, in whole or in
      part, by the Company. Subject to Section 1.4 hereof, AIGH shall purchase the
      Notes included in the Second Closing whether or not any other Investor agrees
      to
      participate in such purchase.





1 . 2 .  Closings .
      The
      closings of the purchase and sale of the Notes hereunder (each a “ Closing ”)
      shall
      take place (i) within three business days after the date hereof, for the
      purchase of $4,000,000 principal amount of Notes (the “ First
      Closing ”)
      and,
      (ii) immediately prior to filing of an appropriate registration statement in
      connection with a Public Offering with Griffin Securities, Inc. or other
      investment bank satisfactory to the Investors, for the purchase of $1,500,000
      principal amount of Notes (the “ Second
      Closing ”);
      provided in each case the Company has not suffered any Material Adverse Change
      since the date hereof. Any date on which a Closing occurs is referred to herein
      as the “ Closing
      Date .”
The
      date on which the First Closing takes place is referred to herein as the
“ First
      Closing Date .”
The
      date on which the Second Closing takes place is referred to herein as the
“ Second
      Closing Date .”
Each
      Closing shall take place at the offices of Hahn & Hessen LLP, the Investors’
counsel, in New York, New York, or at such other location as is mutually
      acceptable to the Investors and the Company.





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





(a)  the
      Company and the Investors shall execute and deliver a Security Agreement, dated
      the First Closing Date, in the form attached as Exhibit 2 (the
“ Security
      Agreement ”);





(b)  certain
      stockholders of the Company (the “ Pledgors ”)
      and
      the Investors shall execute and deliver a Pledge and Security Agreement, dated
      the First Closing Date, in the form attached as Exhibit 3 (the
“ Stockholder
      Pledge Agreement ”);




2




(c)  each
      Pledgor shall execute and deliver to the Investors a Guaranty Agreement, dated
      the First Closing Date, in the form attached as Exhibit
      4 (the
“ Guaranty ”);





(d)  Petrus
      and the Investors shall enter into the Intercreditor Agreement, dated the First
      Closing Date, in the form attached hereto as Exhibit
      5 (the
“ Intercreditor
      Agreement ”,
      and
      with the Agreement, the Notes, the Security Agreements, the Stockholder
      Pledge Agreement, the Guaranty and
      other
      documents required in connection with the transactions contemplated in the
      Agreement, the “ Transaction
      Documents ”) ;





(e)  the
      Company shall have executed and delivered all documents, such as financing
      statements and assignments, reasonably requested by counsel for the Investors;





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





(g)  the
      Company shall pay the Investors expenses to the extent set forth in Section
      6.9
      hereof.





1.4.  Conditions
      of Second Closing .
      The
      obligations of the Investors to complete the purchase of the Notes at the Second
      Closing are subject to fulfillment of the following conditions:





(a)  the
      absence of Material Adverse Change since the date hereof; and





(b)  the
      Company shall pay the Investors expenses to the extent set forth in Section
      6.9
      hereof.





2 .  Representations
      and Warranties of the Company .
      The
      Company hereby represents and warrants to each of the Investors 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 on the operations, prospects, assets, liabilities, financial condition
      or
      business of the Company




3




( 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).





2. 2 .  Capitalization .
      As of
      February 28, 2006, the authorized capital stock of the Company is 6,500,000
      shares of Common Stock, $.01 par value per share. Except as contemplated by
      this
      Agreement or as set forth in the Company Disclosure, 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) except as set forth in the
      Capitalization Table attached hereto as Exhibit 6 (the “ Capitalization
      Table ”),
      (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, the Company owns
      100% of the outstanding equity of Neonode AB.




2. 3 .  Validity
      of Notes .
      The
      issuance of the Notes has been duly authorized.





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.





2 . 6 .  Absence
      of Certain Changes .
      Except
      as specifically contemplated by this Agreement or set forth in the Company
      Disclosure, there has not been any Material Adverse Change since December 31,
      2005.





2 . 7 .  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.




4




3 .  Representations
      and Warranties of the Investors .
      Each
      Investor represents and warrants to the Company as follows:





3 . 1 .  Authorization .
      Such
      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 Investors are parties is a valid and binding obligation
      of such 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 .  Brokers
      and Finders .
      Such
      Investor has not retained any investment banker, broker or finder in connection
      with the Contemplated Transactions.





4 .  Securities
      Laws .





4 . 1 .  This
      Agreement is made with each Investor in reliance upon such Investor’s
      representation to the Company, which by such Investor’s execution of this
      Agreement such Investor hereby confirms, that the Notes to be received by such
      Investor will be acquired for investment for such 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 such Investors would constitute an “underwriter” under
      the Securities Act.





4 . 2 .  Each
      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 Blue Sky 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.





4 . 3 .  Each
      Investor represents that (i) such Investor is able to fend for itself in
      the Contemplated Transactions; (ii) such Investor has such knowledge and
      experience in financial and business matters as to be capable of evaluating
      the
      merits and risks of such Investor’s prospective investment in the Notes; and
      (iii) such Investor has the ability to bear the economic risks of such
      Investor’s prospective investment and can afford the complete loss of such
      investment.





4 . 4 .  Each
      Investor further represents by execution of this Agreement that such Investor
      qualifies as an “accredited investor” as such term is defined under Rule 501
      promulgated under the Securities Act. Any Investor that is a corporation, a
      partnership, a limited liability company, a trust or other business entity
      further represents by execution of this Agreement that it has not been organized
      for the purpose of purchasing the Notes.




5




4 . 5 .  By
      acceptance hereof, each Investor agrees that the Notes and any shares of capital
      stock of the Company received in respect of the foregoing held by it may not
      be
      sold by such Investor without registration under the Securities Act or an
      exemption therefrom, and therefore such Investor may be required to hold such
      securities for an indeterminate period.





5 .  Additional
      Covenants of the Company .





5 . 1 .  Reports
      and Information .
      Until
      the sooner of repayment or conversion of all the Notes or a Public Offering,
      the
      Company shall deliver to such Investor (or the successor or assign of such
      Investor), contemporaneously with delivery to Petrus or its affiliates, a copy
      of each report of the Company delivered to any such person.





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 Closing hereunder and shall continue in
      full
      force and effect for one year after the Fourth 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.





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




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 Investors shall be sent to the addresses set forth on the signature
      pages hereof, with a copy to:





Hahn
      & Hessen LLP


488
      Madison Avenue


New
      York,
      New York 10022


Attention:
      James Kardon, Esq.


Fax
      Number: (212) 478-7400


e-mail: jkardon@hahnhessen.com





Any
      notice to the Company shall be sent to:





Neonode,
      Inc.


Biblioteksgatan
      11


S111
      46
      Stockholm, Sweden


Attention:
      President


Fax
      Number:





with
      a
      copy to:





Reed
      Smith LLP


435
      Sixth
      Avenue


Pittsburgh,
      PA 15219


Attention:
      Daniel Gallagher, Esq.


Fax
      Number: 412-288-3063





6 . 7 .  Rights
      of Transferees .
      Any and
      all rights and obligations of the 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.




7




6 . 9 .  Expenses .
      Irrespective of whether any Closing is effected, the Company shall pay all
      costs
      and expenses that it incurs with respect to the negotiation, execution, delivery
      and performance of this Agreement. Each Investor shall be responsible for all
      costs incurred by such Investor in connection with the negotiation, execution,
      delivery and performance of this Agreement including, but not limited to, legal
      fees and expenses, except that, at each Closing, the Company shall pay legal
      fees and expenses to Hahn & Hessen LLP, as counsel to the
      Investors.





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
      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 Securities are convertible), each future
      holder of all such Notes, and the Company.




IN
      WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
      as of the date first above written.





NEONODE
                INC.By:Its:AIGH
                INVESTMENT PARTNERS, LLCBy:Its:




8




SIGNATURE
      PAGE


TO


NEONODE,
      INC.


SUBSCRIPTION
      AGREEMENT


Dated
      February 28, 2006







IF
      the
      PURCHASER is an INDIVIDUAL, please complete the following:





IN
      WITNESS WHEREOF, the undersigned has executed this Agreement this ____ day
      of
      ________, 2006.


Amount
                  of Subscription:$__________principal
                  amount of NotesPrint
                  NameSignature
                  of InvestorSocial
                  Security NumberAddress
                  and Fax NumberE-mail
                  AddressACCEPTED
                  AND AGREED:NEONODE,
                  INC.By:Dated:




9


SIGNATURE
      PAGE


TO


NEONODE,
      INC.


SUBSCRIPTION
      AGREEMENT


Dated
      February 28, 2006





IF
      the
      PURCHASER is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY, TRUST or
      OTHER ENTITY, please complete the following:





IN
      WITNESS WHEREOF, the undersigned has executed this Agreement this __th day
      of
      __________, 2006.





Amount
                of subscription:
              $____________
                principal amount of Notes___________________________________
              Print
                Full Legal Name of Partnership,
              Company,
                Limited Liability Company, Trust or Other EntityBy:
                __________________________________
              (Authorized
                Signatory)Name:
                ________________________________Title:
                _________________________________Address
                and Fax Number: _____________
              
              ___________________________________Taxpayer
                Identification Number: __________


Date
      and
      State of Incorporation or Organization:__________________________


Date
      on
      which Taxable Year Ends:_____________________________________





E-mail
      Address: ________________________





ACCEPTED
      AND AGREED:





NEONODE,
      INC.




By:  ____________________________


Name:
      __________________________


Title:  ___________________________


Dated:  __________________________







EXHIBITS


TO
      THE
      NOTE PURCHASE AGREEMENT




Exhibit
      1:  Form
      of
      Notes


Exhibit
      2:  Form
      of
      Security Agreement


Exhibit
      3:  Form
      of
      Stockholder Pledge Agreement


Exhibit
      4:  Form
      of
      Guaranty


Exhibit
      5:  Form
      of
      Intercreditor Agreement


Exhibit
      6:  Capitalization
      Table







Exhibit
      1





Form
      of
      Notes







Exhibit
      2





Form
      of
      Security Agreement








Exhibit
      3





Form
      of
      Stockholder Pledge Agreement








Exhibit
      4





Form
      of
      Guaranty








Exhibit
      5





Form
      of
      Intercreditor Agreement








Exhibit
      6





Capitalization
      Table