Document:

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

     

    
      
        	
                $200,000.00

              	
                New
                  York, New York

              

      

    

    February
      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 Joshua Hirsch, a US citizen,
      or
      assigns (“Lender”), c/o AIGH Investment Partners, LLC, 6006 Berkeley Ave.,
      Baltimore, MD 21209 or 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 TWO HUNDRED THOUSAND DOLLARS ($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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    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.

     

    F. Transfer
      to Comply with the Securities Act of 1933.

    
      

      
        
          
          

        

        
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            4
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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. 

    

    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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    H. The
      undersigned expressly waives any presentment, demand, protest, notice of
      protest, or notice of any kind.

     

    
      	NEONODE,
              INC.
	 	 
	
              By:

            	 

    

    
      	 	
              ,
                Authorized Signatory

            

    

     

    
      
        
        

      

      
        -
          6
          -SECURITY
      AGREEMENT

     

    SECURITY
      AGREEMENT dated February 28, 2996, made by Neonode, Inc. a Delaware corporation
      (the “Grantor”), and AIGH Investment Partners, LLC, a Delaware limited liability
      company, or assigns, having an office located at 6006 Berkeley Ave., Baltimore,
      MD 21209, as agent for the Investors (as defined herein) (“Secured Party”), in
      connection with the Notes (as hereinafter defined).

     

    PRELIMINARY
      STATEMENT:

     

    The
      Grantor has issued to the parties listed on the attached Schedule I, as amended
      from time to time (each an “Investor” and collectively the “Investors”) certain
      secured term notes listed opposite the respective Investor’s name on Schedule I,
      in the aggregate amount of up to $5,500,000 (initially $4,000,000) and such
      other amounts as may be loaned to the Grantor from time to time by the Investors
      pursuant to notes of similar tenor to the Senior Secured Notes (collectively,
      the “Notes”). The parties desire to provide security for the obligations of the
      Grantor to the Investors under the Notes.

     

    NOW,
      THEREFORE, in consideration of the premises, and in order to induce the
      Investors to make the loan under the Notes, the parties hereby agree as
      follows:

     

    SECTION
      1.  Grant
      of Security.
      The
      Grantor hereby grants to Secured Party, for its benefit and for the ratable
      benefit of each Investor, a continuing security interest in all of the Grantor’s
      right, title and interest in and to all the securities of Neonode AB the
      Grantor, whether now owned or hereafter acquired, and all proceeds of any and
      all of the foregoing, including without limitation any dividends or other
      distributions in respect of such securities (the “Collateral”). The Grantor
      represents and warrants that the Collateral includes all of the equity
      securities, including without limitation all securities convertible into,
      exchangeable for or exercisable to purchase, equity securities of Neonode AB.
      During the term of this Agreement, the Grantor shall not permit Neonode AB,
      a
      Swedish corporation, to issue any equity securities or securities convertible
      into, exercisable to purchase or exchangeable for equity securities or incur
      an
      indebtedness other than reasonable accounts payable and indebtedness from
      affiliates.

     

    SECTION
      2.  Security
      for Obligations.
      This
      Agreement secures the payment and performance of all obligations of the Grantor
      to Secured Party and the Investors now or hereafter existing under this
      Agreement and the Notes, whether for principal, interest, fees, expenses, or
      otherwise (all such obligations of the Grantor being the
“Obligations”).

     

    SECTION
      3.  Voting
      Rights, Dividends, Etc. in Respect of the Collateral.
      So long
      as no Event of Default shall have occurred and be continuing, the Grantor may
      exercise any and all voting and other consensual rights pertaining to any
      Collateral for any purpose not inconsistent with the terms of this Agreement.
      The Grantor may receive and retain in trust for the benefit of the Investors
      in
      case there is an Event of Default, any and all dividends paid in cash with
      respect of the Collateral; and Secured Party and the Investors will execute
      and
      delivery (or cause to be executed and delivered) to the Grantor all such proxies
      and other instruments as Grantor may reasonably request for the purpose of
      enabling Grantor exercise the voting and other rights which it is entitled
      to
      exercise and to receive the dividends which it is authorized to receive and
      retain in trust herein.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SECTION
      4.  Voting
      Rights, Dividends, Etc. in Respect of the Collateral Upon the Occurrence and
      During the Continuance of an Event of Default.
      Upon
      the occurrence of an Event of Default and while an Event of Default is
      continuing, all rights of the Grantor to exercise the voting and other
      consensual rights which it would otherwise be entitled to exercise pursuant
      to
      Section 3 of this Agreement, and to receive the dividends which it would
      otherwise be authorized to receive and retain in trust pursuant to Section
      3 of
      this Agreement, shall cease, and all such rights shall thereupon become vested
      in Secured party and the Investors, who shall thereupon have the sole right
      to
      exercise such voting and other consensual rights and to receive and hold as
      Collateral such dividends.

     

    Without
      limiting the generality of the foregoing, Secured Party and the Investors may,
      at its option, exercise any and all rights of conversion, exchange, subscription
      or any other rights, privileges or options pertaining to any of the Collateral
      as if it were the absolute owner thereof, including, without limitation, the
      right to exchange, in its discretion, any and all of the Collateral upon the
      merger, consolidation, reorganization, recapitalization or other adjustment
      of
      the Grantor, or upon the exercise by the Grantor of any right, privilege or
      option pertaining to any Collateral, and, in connection therewith, to deposit
      and deliver any and all of the Collateral with any committee, depository,
      transfer agent, registrar or other designated agent upon such terms and
      conditions as it may determine.

     

    All
      dividends which are received by the Grantor contrary to the provisions of this
      Section 4 shall be received in trust for the benefit of the Investors,
      shall be segregate from other funds of the Grantor, and shall be forthwith
      paid
      over to the Investors as Collateral in the exact form received with any
      necessary endorsement and/or appropriate stock powers duly executed in blank,
      to
      be held by Secured party as Collateral and as further collateral security for
      the Obligations. 

     

    SECTION
      5.  Representations,
      Warranties and Covenants.
      The
      Grantor represents, warrants and covenants as follows:

     

    (1)  The
      Grantor will notify Secured Party immediately in writing of any change in its
      address, name, or state or form of organization.

     

    (2)  The
      Grantor is the legal and beneficial owner of the Collateral free and clear
      of
      any Lien except for the security interest created by this Agreement. No
      effective financing statement or other document similar in effect covering
      all
      or any part of the Collateral is on file in any recording office.

     

    (3)  The
      Grantor has exclusive and absolute right to collect the Collateral.

     

    (4)  This
      Agreement creates a valid security interest in the Collateral, securing payment
      of the Obligations, and all filings and other actions necessary or desirable
      to
      perfect and protect such security interest have been duly taken, or shall be
      taken promptly upon execution hereof.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (5)  The
      Grantor is a corporation duly incorporated, validly existing, and in good
      standing under the laws of Delaware; has the corporate power and authority
      to
      own its assets and to transact its business, and is duly qualified and in good
      standing under the laws of each jurisdiction in which qualification is
      required.

     

    (6)  The
      execution and performance by the Grantor of this Agreement have been duly
      authorized by all necessary corporate action and do not and will not
      (a) require any consent or approval of the stockholders of such
      corporation; (b) contravene such corporation’s character or bylaws;
      (c) violate any provision of any law, rule, or regulation; or
      (d) result in a breach of or constitute a default under, any indenture or
      loan or credit agreement or any other agreement, lease, or instrument to which
      such corporation is a party of by which it or its properties may be bound or
      affected.

     

    (7)  This
      Agreement is the legal, valid, and binding obligation of the Grantor,
      enforceable in accordance with its terms, except to the extent that such
      enforcement may be limited by applicable bankruptcy, insolvency, and other
      similar laws affecting creditor’s rights generally.

     

    (8)  No
      consent of any other person or entity and no authorization, approval, or other
      action by, and no notice to or filing with, any governmental authority or
      regulatory body is required (a) for the grant by the Grantor of the
      assignment and security interest granted hereby or for the execution, delivery,
      or performance of this Agreement by the Grantor; (b) for the perfection or
      maintenance of this assignment, and security interest created hereby (including
      the first priority nature of such assignment, and security interest); or
      (c) for the exercise by Secured Party of the rights provided for in this
      Agreement or the remedies in respect of the Collateral pursuant to this
      Agreement.

     

    (9)  There
      are
      no conditions precedent to the effectiveness of this Agreement that have not
      been satisfied or waived.

     

    (10)  Grantor
      shall not pledge, sell, assign, transfer, create or suffer to exist any security
      interest in or other lien or encumbrance on any part of the Collateral or grant
      or suffer to exist any security interest in or other lien or encumbrance on
      any
      of Grantor’s inventory or other assets to anyone other than Secured Party,
      without Secured Party’s prior written consent. Grantor hereby agrees to defend
      the same against any and all persons whatsoever.

     

    SECTION
      6.  Certain
      Grantor Covenants.

     

    (1)  The
      Grantor, at its sole expense, will take any and all actions as may be necessary
      or appropriate to facilitate the perfection and preservation of the security
      interest granted herein, or to enable Secured Party to exercise and enforce
      its
      rights and remedies hereunder with respect to any Collateral.

     

    (2)  The
      Grantor hereby authorizes Secured Party to file one or more financing or
      continuation statements, and amendments thereto, relating to all or any part
      of
      the Collateral without the signature of the Grantor where permitted by law.
      A
      photocopy or other reproduction of this Agreement or any financing statement
      covering the Collateral or any part thereof shall be sufficient as a financing
      statement where permitted by law.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (3)  The
      Grantor will furnish to Secured Party from time to time statements and schedules
      further identifying and describing the Collateral and such other reports in
      connection with the Collateral as Secured Party may reasonably request, all
      in
      reasonable detail.

     

    (4)  The
      Grantor hereby irrevocably appoints Secured Party the Grantor’s
      attorney-in-fact, with full authority in the place and stead of the Grantor
      and
      in the name of the Grantor or otherwise, from time to time in the Secured
      party’s discretion, to take any action and to execute any instrument which
      Secured Party may deem necessary or advisable to accomplish the purposes of
      this
      Agreement.

     

    SECTION
      7.  The
      Secured Party’s Duties.
      The
      powers conferred on Secured Party hereunder are solely to protect the Investor’s
      interest in the Collateral and shall not impose any duty upon it to exercise
      any
      such powers. Except for the safe custody of any Collateral in their possession
      and the accounting for moneys actually received by them hereunder, Secured
      party
      shall have no duty as to any Collateral, as to ascertaining or taking action
      with respect to any Collateral, whether or not Secured Party have or are deemed
      to have knowledge of such matters, or as to the taking of any necessary steps
      to
      preserve rights against prior parties or any other rights pertaining to any
      Collateral. Secured Party shall be deemed to have exercised reasonable care
      in
      the custody and preservation of any Collateral in their possession if such
      Collateral is accorded treatment substantially equal to that which it accords
      its own property.

     

    SECTION
      8.  Events
      of Default.
      It
      shall be an event of default (an “Event of Default”) hereunder if:

     

    (a)  The
      Grantor breaches any of the representations, warranties or covenants under
      the
      Notes, this Agreement, or any other agreements between the Investors and the
      Grantor, of even date herewith, or there occurs an Event of Default under the
      Note;

     

    (b)  The
      Grantor becomes insolvent, admits its inability to pay its debts as they mature,
      or is in any form of bankruptcy, arrangement or reorganization proceeding
      (whether governed by Federal, state or common law);

     

    (c)  The
      Grantor fails to comply with, or defaults under, any term of any present or
      future agreement between it and any of the Investors.

     

    SECTION
      9.  Remedies.
      If any
      Event of Default shall have occurred and be continuing Secured Party may
      exercise in respect of the Collateral, in addition to any other rights and
      remedies provided for herein or otherwise available to it, all the rights and
      remedies of a secured party on default under the Uniform Commercial Code (the
      “Code”) (whether or not the Code applies to the affected Collateral), and also
      may (a) require the Grantor to, and the Grantor hereby agrees that it will,
      at its expense and upon request of Secured Party forthwith, assemble all or
      part
      of the Collateral as directed by Secured party and make it available to Secured
      Party at a place to be designated by the Secured Party which is convenient
      to
      the parties and (b) without notice except as specified below, sell the
      Collateral or any part thereof in one or more parcels at public or private
      sale,
      at any of the Secured Party’s offices or elsewhere, for cash, on credit or for
      future delivery, and upon such other terms as Secured Party may deem
      commercially reasonable. The Grantor agrees that, to the extent notice of sale
      shall be required by law, at least ten (10) days notice to the Grantor of
      the time and place of any public sale or the time after which any private sale
      is to be made shall constitute reasonable notification. Secured party shall
      not
      be obligated to make any sale of Collateral regardless of notice of sale having
      been given. Secured party may adjourn any public or private sale from time
      to
      time by announcement at the time and place fixed therefore, and such sale may.
      Without further notice, be made at the time and place to which is was adjourned.
      All proceeds of Collateral shall be applied in the following order of priority:
      (i) fees and expense incurred by Secured Party as described in Section
      10(2) until paid and satisfied in full, (ii) fees and expenses incurred by
      any Investor as described in Section 10(2) until paid and satisfied in full,
      (iii) due and unpaid interest on the Notes until paid and satisfied in
      full, (iv) due and unpaid principal on the Notes until paid and satisfied
      in full, and (v) the remainder, if any, to Grantor or any other person or
      entity lawfully entitled thereto.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SECTION
      10.  Indemnity
      and Expenses.

     

    (a)  The
      Grantor agrees to indemnify the Secured Party and the Investors from and against
      any and all claims, losses, and liabilities (including, without limitation,
      reasonable attorney fees) growing out of or resulting from this Agreement
      (including, without limitation, enforcement of this Agreement), except claims,
      losses, or liabilities resulting from the gross negligence or willful misconduct
      of the Investors or Secured Party.

     

    (b)  The
      Grantor will upon demand pay the amount of any and all reasonable expenses,
      including, without limitation, the reasonable fees and expenses of its counsel
      and of any experts and agents, which the Investors or Secured Party may incur
      in
      connection with (a) the preparation and administration of this Agreement
      and the Note; (b) the custody, preservation, use or operation of, or the
      sale of, collection from, or other realization upon, any of the Collateral;
      (c) the exercise or enforcement of any of the rights of the Investors or
      Secured Party hereunder; or (d) the failure by the Grantor to perform or
      observe any of the provisions hereof.

     

    SECTION
      11.  Amendments;
      Etc.
      No
      amendment, modification, termination, or waiver of any provision of this
      Agreement, and no consent to any departure by the Grantor here from, shall
      in
      any event be effective unless the same shall be in writing and signed by Secured
      Party and then such waiver or consent shall be effective only in the specific
      instance and for the specific purpose for which given.

     

    SECTION
      12.  Addresses
      for Notices.
      All
      notices and other communications provided for hereunder shall be in writing
      (including telegraphic, telex, and facsimile transmissions) and mailed or
      transmitted or delivered to the address for each such party set forth in the
      Note Purchase Agreement dated the date hereof or, as to either party, at such
      other address as shall be designated by such party in a written notice to the
      other party. All such notices and other communications shall be effective when
      deposited in the mails or delivered to the telegraph company, or sent, answer
      back received, respectively.

     

    SECTION
      13.  Waiver
      of Rights.
      The
      Grantor waives the right to assert against any of the Investor or Secured party
      or other holder any defense , counterclaim or set-off which it could assert
      against such person in any action brought by such holder upon the Grantor’s
      obligations hereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SECTION
      14.  Continuing
      Security Interest: Assignments Under The Notes.
      This
      Agreement shall create a continuing security interest in the Collateral and
      shall: (1) remain in full force and effect until the payment in full of the
      Obligations and all other amounts payable under this Agreement; (2) be binding
      upon the Grantor, its successors and assigns; and (3) inure to the benefit
      of, and be enforceable by, each of the Secured party and Investors and their
      respective successors, transferees, and assigns. Without limiting the generality
      of the foregoing clause (3) the Secured Party and Investors may assign or
      otherwise transfer all or any portion of their rights and Obligations to any
      other person or entity, and such other person or entity shall thereupon become
      vested with all the benefits in respect thereof granted to the respected Secured
      Party or Investor therein or otherwise. Upon the payment in full of the
      Obligations and all other amounts payable under this Agreement, the security
      interest granted hereby shall terminate and all rights to the Collateral shall
      revert to the Grantor. Upon any such termination, Secured party will, at the
      Grantor’s expense, execute and deliver to the Grantor such documents as the
      Grantor shall reasonably request to evidence such termination.

     

    SECTION
      15.  Governing
      Law; Terms.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New Your, except to the extent that the validity or perfection of
      the
      security interest hereunder, or remedies hereunder, in respect of any particular
      Collateral are governed by the laws of a jurisdiction other than the State
      of
      New York.

     

    SECTION
      16.  Submission
      to Jurisdiction.
      The
      Parties hereby submit to the non-exclusive jurisdiction of the United States
      District Court for the Southern District of New York and of any State court
      sitting in New York County for purposes of all legal proceedings which may
      arise
      hereunder or under the Note. The parties irrevocably waives to the fullest
      extent permitted by law, any objection which it may have or hereafter have
      to
      the laying of the venue or any such proceeding brought in an inconvenient forum
      and trial by jury. The parties hereby consent to process being served in any
      such proceeding by the mailing of a copy thereof by registered or certified
      mail, postage prepaid, to its address specified above or in any other manner
      permitted by law.

     

    SECURED
      PARTY AND THE GRANTOR HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING,
      CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING
      OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT. NO OFFICER OF SECURED PARTY
      HAS
      AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.

     

    SECTION
      17.  Agency;
      Action by Secured Party.
      Each
      Investor hereby appoints the Secured Party as its agent hereunder 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 this Agreement. Each Investor hereby authorizes Secured Party to take
      such actions with respect to the Collateral, for the pro-rata benefit of the
      Investors in accordance with Section 9, as Secured Party determines to take
      in
      its sole discretion, and each Investors agrees to indemnify and hold harmless
      Secured Party 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 Secured Party. Secured Party shall provide prompt notice of any
      material action under this Agreement to the Investors.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Investors, the Secured Party and the Grantor have caused
      this Agreement to be duly executed and delivered by duly authorized
      representatives as of the date first written above.

     

    
      	
              NEONODE
                INC

            	
              AIGH
                INVESTMENT PARTNERS, LLC

            
	 	 
	
              /s/                                                                                          
                

            	
              
                /s/                                                                                          
                  

              

            
	
              By:
                Per Bystedt

            	
              By:
                Orin Hirschman

            
	
              Its:
                President

            	
              Its:
                President, General Partner

            

    

    

     

    

     

    

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    SCHEDULE
      I

     

    
      	 	
              Principal
                Amount of

            
	
              Name
                and Address

            	
              Existing
                Notes

            
	 	 
	
              Secured
                Party Investment

            	
              [$4,000,000.00]

            
	
              Partners,
                LLC

            	 
	
              6006
                Berkeley Ave.

            	 
	
              Baltimore,
                MD 21209

            	 
	 	 
	
              TOTAL

            	
              $4,000,000.00

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