THIS
        NOTE
        AND THE COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) NOR UNDER ANY STATE
        SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE
        TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
        UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY
        RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER
        OF
        SUCH NOTE WHICH OTHER COUNSEL IS SATISFACTORY TO THE COMPANY THAT SUCH NOTE
        AND/OR COMMON STOCK MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED
        WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE
        SECURITIES LAWS.
 
 THESE
        SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
        MAY NOT
        BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
        1933,
        AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
        OR EXEMPTION THEREFROM.
  SENIOR
        SECURED NOTE
 
 $3,200,000.00
              New
                  York, New YorkFebruary
                  28, 2006
 
 FOR
        VALUE
        RECEIVED, the undersigned (sometimes referred to herein as the “Company”), a
        Delaware corporation having an address at Biblioteksgatan 11, S111 46 Stockholm,
        Sweden, hereby promises to pay to the order of AIGH Investment Partners,
        LLC, a
        Delaware limited liability company, or assigns (“Lender”), at its offices
        located at 6006 Berkeley Ave., Baltimore, MD 21209 or at such other place
        as the
        Lender may from time to time designate to the undersigned in writing, on
        August
        28, 2007 subject to the conversion rights set forth herein, or such earlier
        date
        as required hereunder, the sum of THREE MILLION AND TWO HUNDRED THOUSAND
        DOLLARS
        ($3,200,000.00) at a rate per annum equal to four percent (4%). In no event,
        however, shall interest hereunder be in excess of the maximum interest rate
        permitted by law.
 
 The
        obligations of the undersigned are secured in accordance with the terms of
        (i) a
        Pledge and Security Agreement (as amended, restated, modified and supplemented
        from time to time, the “Stockholder Pledge Agreement”) between certain
        stockholders of the Company and Lender, dated February 28, 2006, by the pledge
        of certain Collateral, as defined in such Stockholder Pledge Agreement and
        (ii)
        a Security Agreement (as amended, restated, modified and supplemented from
        time
        to time, the “Security Agreement”) between the Company and Lender, dated
        February 28, 2006, by the pledge of certain Collateral, as defined in such
        Security Agreement This Note is one of the Senior Secured Notes issued pursuant
        to a certain Note Purchase Agreement dated the date hereof between the Company
        and each Lender (the “Note Purchase Agreement”) in connection with a financing
        of the undersigned up to an aggregate principal amount of FIVE MILLION AND
        FIVE
        HUNDRED THOUSAND DOLLARS ($5,500,000).
  
 
 A.
              Prepayment;
                  Conversion:
 
 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.
 
 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.
 
 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 the 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 Bridge 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 Bridge 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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 B.  Default;
        Remedy .
        If any
        one or more of the following events of default (each, an “Event of Default”)
        shall occur, that is to say:
 
 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;
 
 2.  [intentionally
        omitted;]
 
 3.  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;
 
 4.  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;
 
 5.  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
 
 6.  any
        event
        of default shall occur under any agreement between Lender and the undersigned,
        including without limitation the Security Agreement, Stockholder Pledge
        Agreement or any guaranty related thereto, which is not cured within any
        applicable grace period,
 
 then
        this
        Note (x)(i) upon the occurrence of an Event of Default pursuant to subsection
        3
        of this Section (B) shall immediately become due and payable, without notice;
        and (ii) upon the occurrence of any other Event of Default, shall become
        due and
        payable, upon delivery of written notice of such Event of Default by Lender
        to
        the undersigned, in each case together with reasonable attorneys’ fees, if the
        collection hereof is placed in the hands of an attorney to obtain or enforce
        payment hereof; and (y) shall bear interest at a rate of interest per annum
        equal to fifteen percent (15%). To the extent permitted by applicable law
        interest shall accrue with respect to interest that is due and not paid.
        In the
        event the Lender takes action under the Security Agreement or Stockholder
        Pledge
        Agreement, the Lenders shall proceed first under the Security Agreement and
        thereafter only if the Company’s obligations to the Lender are not satisfied,
        under the Stockholder Pledge Agreement.
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            3
            -
 
 C.  Governing
        Law .
        This
        Note is being delivered in the State of New York, and shall be construed
        and
        enforced in accordance with the laws of such State. Any judicial proceeding
        by
        the undersigned against Lender involving, directly or indirectly, any matter
        or
        claim in any way arising out of, related to or connected with this Note,
        shall
        be brought only in federal or state court located in the City of New York,
        State
        of New York. Any judicial proceeding brought against the undersigned with
        respect to this Note may be brought in any court of competent jurisdiction
        in
        the City of New York, State of New York, United States of America, and, by
        execution and delivery of this Note, the undersigned accepts, generally and
        unconditionally, the non-exclusive jurisdiction of the aforesaid courts,
        and
        irrevocably agrees to be bound by any judgment rendered thereby in connection
        with this Note or any related agreement. Nothing herein shall affect the
        right
        to serve process in any manner permitted by law or shall limit the right
        of
        Lender to bring proceedings against the undersigned in the courts of any
        other
        jurisdiction. The undersigned waives 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 .
 
 D.  Waiver
        of Jury Trial .
        THE
        UNDERSIGNED EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
        ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR ANY OTHER INSTRUMENT,
        DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2)
        IN
        ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
        HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT,
        DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
        TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING
        OR
        HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE;
        AND
        THE UNDERSIGNED HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION
        OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT
        ANY
        PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
        COURT
        AS WRITTEN EVIDENCE OF THIS WAIVER OF THE RIGHT TO TRIAL BY JURY.
 
 E.  Notices .
        All
        notices required hereunder shall be given in the manner set forth in the
        Note
        Purchase Agreement.
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            4
            -
 
 F.  Transfer
        to Comply with the Securities Act of 1933 .
 
 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.
 
 3.  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.
 
 G.  Certain
        Representations and Covenants .
 
 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.
 
 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.
 
 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.
 
 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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            5
            -
 
 H.  The
        undersigned expressly waives any presentment, demand, protest, notice of
        protest, or notice of any kind.
 
 NEONODE,
                  INC.By:______________________,
                  Authorized Signatory
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            6
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