8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 19, 2008

NEONODE INC.

(Exact name of registrant as specified in its charter)

Delaware	0-8419	94-1517641
(State or other jurisdiction	(Commission File Number)	(IRS Employer Identification No.)
of incorporation)

Warfvingesväg 45, SE-112 51 Stockholm, Sweden 4000 Executive Parkway, Suite 200, San Ramon, CA	94583
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code: +468 678 18 50 — Sweden (925) 355-7700 — USA
Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 3.02 Unregistered Sales of Equity Securities.

Neonode Inc. (the “Company”) completed a $5,086,091 private placement with accredited investors through the exercise at a reduced price on May 19, 2008, of existing warrants, for net proceeds of approximately $4,450,000. Members of Neonode’s Board of Directors and management contributed approximately $500,000 of the new capital. In all, 4,004,796 outstanding warrants were exercised at a strike price of $1.27 per warrant (including $375,000 of surrender of debt). In addition, the Company issued two new common stock purchase warrants, with an exercise price of $1.45, for each outstanding warrant exercised, for a total of 8,009,592 new warrants. Neonode also extended the maturity date of $2.85 million of convertible debt that was due on June 30, 2008 until December 31, 2008 by issuing the note holders 510,293 common stock purchase warrants, with an exercise price of $1.45. Empire Asset Management Company acted as financial advisor for the transaction and received 1,201,439 warrants exercisable at prices ranging from $1.27 to $1.45 per share, and a cash fee. The securities in this private placement were sold under Section 4(2) and Regulation D of the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

Exhibit Number	Description
10.48	Form of Warrant Exercise Subscription Agreement, dated as of May 19, 2008
10.49	Form of Warrant Transfer Agreement, dated as of May 19, 2008.
10.50	Form of New Warrant, pursuant to Warrant Exercise Subscription Agreement and Warrant Transfer Agreement, each dated as of May 19, 2008
10.51	Amendment No. 4 to Note Purchase Agreement, dated as of May 19, 2008
10.52	Form of Extension Warrant pursuant to Amendment No. 4 to Note Purchase Agreement, dated as of May 19, 2008
10.53	Financial Advisor Agreement with Empire Asset Management Company, dated as of May 12, 2008

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 27, 2008

	Neonode Inc.
By:	/s/ David Brunton
	David Brunton
	Chief Financial Officer

INDEX TO EXHIBITS

Exhibit Number	Description
10.48	Warrant Exercise Subscription Agreement, dated as of May 19, 2008
10.49	Warrant Transfer Agreement, dated as of May 19, 2008.
10.50	Form of New Warrant, pursuant to Warrant Exercise Subscription Agreement and Warrant Transfer Agreement, each dated as of May 19, 2008
10.51	Amendment No. 4 to Note Purchase Agreement, dated as of May 19, 2008
10.52	Form of Extension Warrant pursuant to Amendment No. 4 to Note Purchase Agreement, dated as of May 19, 2008
10.53	Financial Advisor Agreement with Empire Asset Management Company, dated as of May 12, 2008

EX-10.48

Exhibit 10.48

WARRANT EXERCISE SUBSCRIPTION AGREEMENT

This SUBSCRIPTION AGREEMENT ("Subscription Agreement") is made and entered into as of May 16, 2008 by and between Neonode Inc., a Delaware corporation ("Company"), and the subscribers whose names and addresses are set forth on the signature page hereto (each a "Subscriber").

Background: The Company has issued (i) 5,376,453 warrants, each exercisable to purchase one share of common stock, par value $.01 per share, of the Company (“Common Stock”), exercisable at a price of $2.8313 expiring August 10, 2012 (the “$2.83 Warrants”), issued pursuant to the Warrant Agreement, dated August 10, 2007 (the “$2.83 Warrant Agreement”), (ii) 206,000 warrants, each exercisable to purchase Common Stock, exercisable at a price per share of $16.65, expiring July 6, 2010 (the “$16.65 Warrants”), (iii) 11,000 warrants, each exercisable to purchase Common Stock, exercisable at a price per share of $7.50, expiring June 26, 2008 (the “$7.50 Warrants”), (iv) 11,000 warrants, each exercisable to purchase Common Stock, exercisable at a price per share of $8.75, expiring June 26, 2008 (the “$8.75 Warrants”), (v) 1,432,445warrants, each exercisable to purchase Common Stock, exercisable at a price per share of $3.92, expiring September 26, 2012 (the “$3.92 Warrants”), (vi) 213,077 warrants, each exercisable to purchase Common Stock, exercisable at a price per share of approximately $3.92, expiring on dates through September 26, 2012 (the “Additional Warrants”), and (vii) 10,000 warrants, each exercisable to purchase Common Stock, exercisable at a price per share of $10.00, expiring June 26, 2008 (the “$10.00 Warrants”, and collectively with the $2.83 Warrants, the $16.65 Warrants, the $7.50 warrants, the $3.92 Warrants, the Additional Warrants and the $8.75 Warrants the “Exercise Warrants”). In order to induce exercise of the Exercise Warrants, the Company is offering (the “Warrant Offering”)to holders of Exercise Warrants (the “Warrantholders”) for a period expiring at 3:30 p.m. on May 19, 2008 to reduce the exercise price per Exercise Warrant to $[__]¹ (payable in cash or by surrender of Company debt only) per share of Common Stock and to issue two new warrants to purchase Common Stock in the form attached hereto as Exhibit A (the “New Warrants”) for each Exercise Warrant exercised. Holders of the $2.83 Warrants are requested to amend the Warrant Agreement to eliminate a requirement for a 30 day period for a temporary reduction in exercise price and to waive certain notice provisions contained therein to enable the Company to carry out the Warrant Offering. The New Warrants will be exercisable for a term of five (5) years at an exercise price of $[   ]². The aggregate reduced exercise price is hereafter referred to as the “Subscription Price”. The shares of Common Stock issuable upon exercise of the Exercise Warrants are hereafter referred to as the “New Shares”.

¹ The price shall be the closing sale price per share of the Common Stock on the date hereof (“Market Value”) plus $.01. The closing sale price per share of the Common Stock on May 13, 2008 was $1.37 per share

² The exercise price of the new warrant shall be 115% of Market Value.

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The New Shares and New Warrants are sometimes referred to herein as the “Securities.”

The Company has also entered into a financial advisory agreement (the “Financial Advisory Agreement”) with Empire Asset Management Company (“Empire”) in connection with the transactions contemplated in this Subscription Agreement. Under the Financial Advisory Agreement, Empire Asset Management Company will receive cash fees equal to 10% of the gross proceeds from the Warrant offering, plus warrants (the “Empire Warrants”) in substantially the form of the New Warrants to purchase a number of shares of Common Stock equal to 10% of the aggregate number of New Shares and New Warrants issued in the Warrant Offering at an exercise price equal to the Market Value plus $.01 and the New Warrant Price, respectively, and a non-accountable expense allowance of $35,000.

Holders of Exercise Warrants who do not wish to exercise Exercise Warrants pursuant to this Subscription Agreement (the “Transfer Holders”) may transfer the Exercise Warrants to an accredited investor(s) (each, a “Transferee”) who will simultaneously exercise such Exercise Warrants for cash or surrender of Company debt, in exchange for delivery to the Transfer Holders of one New Warrant issuable upon exercise per Exercise Warrant transferred, as provided in the Warrant Transfer Agreement (the “Transfer Agreement”) in the form attached hereto as Exhibit B. Accordingly, Transferees who exercise Exercise Warrants acquired pursuant to a Transfer Agreement shall be required to execute this Subscription Agreement and shall receive one New Share upon exercise thereof and one New Warrant, with one additional New Warrant delivered to the Transfer Holder of the exercised Exercise Warrant.

The Company has outstanding $3,250,000 principal amount of 8% convertible notes (the “8% Notes”). The 8% Notes plus accrued interest are convertible at the option of the holders exercised prior to November 10, 2007, into Common Stock and warrants. Simultaneously with the issuance of the 8% Notes, the Company also agreed to sell up to $750,000 of additional 8% Notes to Ellis International at its option, expiring June 30, 2008. The Company has agreed with holders of the 8% Notes (the “Warrant Extension Agreement”) to issue to them warrants, substantially similar to the New Warrants (the “Extension Warrants”), to purchase an aggregate of 1,252,998 shares of Common Stock, in exchange for an extension of the maturity date of the 8% Notes to December 31, 2008, and has also agreed to extend the Ellis option to December 31, 2008. The foregoing is a condition to the Closing hereunder.

This Subscription Agreement, the New Warrants, the Financial Advisory Agreement and the Transfer Agreement are referred to herein as the “Transaction Documents.”

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In connection with this subscription, each Subscriber and the Company agree as follows:

1.        Subscription; Closing.

1.1.Purchase of New Shares and New Warrants; Transfer of Exercise Warrants.The undersigned Subscriber (which includes both Warrantholders and Transferees of New Warrants) hereby irrevocably agrees, represents and warrants with, to and for the benefit of the Company, that such Subscriber is executing this Subscription Agreement in connection with the exercise by the Subscriber of the number of Exercised Warrants set forth on the signature page hereof. Each Subscriber shall receive one New Share and two New Warrants for each Exercise Warrant exercised by the Subscriber; provided that Subscribers who are Transferees shall deliver one New Warrant to the Applicable Transfer Holder for each Exercise Warrant in accordance with the applicable Transfer Agreement. Subject to the terms and conditions of this Subscription Agreement, upon execution and delivery hereof by the Subscriber, the Subscriber hereby agrees to purchase the Securities pursuant to the terms of this Subscription Agreement, and against concurrent delivery to the Company of the Exercise Warrants exercised and the Subscription Price for such Securities.

1.2.Offering. This offering of the Securities (the “Offering”) is being made to a limited group of Warrantholders and Transferees, all of whom shall represent to the Company pursuant to this Subscription Agreement that they are "accredited investors," as that term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act") or who have otherwise been qualified as investors by the Company. All of the Securities offered hereby are being sold by the Company. The Company is offering the Securities for the consideration set forth herein. The Company may sell less than all of the Securities offered hereby, and shall be entitled to accept subscriptions and receive the Subscription Price for each subscription prior to the entire Offering being subscribed for. The Offering is being made on a “best efforts” no minimum basis, and accordingly the risk to Subscribers may be greater is only a small amount of Securities are sold hereunder.

1.3.Escrow. Each Subscriber subscribing for cash shall deliver to Signature Bank, a New York State chartered bank and having an office at 261 Madison Avenue, New York, New York 10016 (the “Escrow Agent”), via wire transfer or a certified check, immediately available funds equal to its Subscription Price, which proceeds shall remain in escrow until the Closing (as defined below) occurs hereunder.

1.4.Closing. The closing (“Closing”) of the purchase and sale of the Securities hereunder shall take place on or about May 19, 2008 (the “Closing Date”) at the offices of Hahn & Hessen LLP, counsel for the Company (“Counsel”), in New York, NY; provided that the Note Extension Agreement shall be executed and effective as of Closing. At the Closing:

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(a)The Subscriber shall deliver the Exercise Warrants to be exercised (or an appropriate Affidavit of Loss);

(b)The Escrow Agent shall deliver the Subscription Price to the Company or as otherwise directed by the Company (and Subscribers subscribing by surrender of Company debt shall deliver evidence of such debt (or an affidavit of loss and indemnity) to Counsel);

(c)The Company shall deliver the New Warrants to the Subscribers; and

(d)The Company shall cause its transfer agent to deliver the New Shares to the Subscriber.

2.        Representations and Warranties of the Subscriber.

The Subscriber hereby represents and warrants to the Company as of the date hereof:

2.1.Place of Business. The principal place of business address set forth below is such Subscriber's true and correct principal place of business and is the only jurisdiction in which an offer to sell the Securities was made to such Subscriber and such Subscriber has no present intention of moving its principal place of business to or of becoming a resident of any other state or jurisdiction.

2.2.Sale or Transfer of the Securities; Unregistered Securities.The Subscriber understands that the Securities have not been registered under the Securities Act, or under the laws of any other jurisdiction. The Subscriber understands and agrees that transfer or sale of the Securities may be restricted or prohibited unless they are subsequently registered under the Securities Act and, where required, under the laws of other jurisdictions or an exemption from registration is available. The Subscriber will not offer, sell, transfer or assign its Securities or any interest therein in contravention of this Subscription Agreement, the Securities Act or any state or federal law. The Subscriber understands and acknowledges that, because of the substantial restrictions on the transferability of the Securities, it may not be possible for the Subscriber to liquidate the Subscriber's investment in the Company readily, even in the case of an emergency. Subscriber acknowledges that the Offering has not been registered with the Securities and Exchange Commission (the “Commission”)because the Company is relying on an exemption from registration under Section 4(2) of the Securities Act and Regulation D promulgated thereunder.

2.3.Representation of Accredited Investor Status (if a U.S. person). If the Subscriber is a U.S. person (as defined in Regulation S of the Commission), (i) such Subscriber, if it is a corporation, a partnership, a limited liability company, a trust or other business entity, has not been organized for the purpose of purchasing the Securities and (ii) Subscriber represents that at the time of the sale of the Securities to Subscriber, Subscriber (or, if Subscriber is a corporation, limited liability company or trust, each of its equity owners) qualifies as an "accredited investor" (as defined under Rule 501 of Regulation D promulgated under the Securities Act) using the following qualification factors (check all appropriate items):

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(__) $1,000,000 Net Worth Test:

I, Subscriber, am a natural person and my individual net worth, or joint net worth with my spouse (if any), inclusive of home, furnishings and automobiles, at the time of this purchase is in excess of $1,000,000.

(__) $200,000 Individual/$300,000 Joint Annual Income Test:

I, Subscriber, am a natural person and my individual annual gross income (exclusive of my spouse’s income) has been in excess of $200,000 in each of the two most recent tax years, and I reasonably expect individual annual gross income (exclusive of my spouse’s income) to be in excess of $200,000 for the current tax year; or I am a natural person and my joint annual gross income (including my spouse’s annual gross income) has been in excess of $300,000 in each of the two most recent tax years, and I reasonably expect our joint annual gross incomes to be in excess of $300,000 for the current tax year.

(“Income” under this test is defined as adjusted gross income for federal income tax purposes plus (i) deductions for long-term capital gains under the Internal Revenue Code; (ii) deductions for depletion under section 611 et seq. of the Code; (iii) any exclusion for interest received on tax-exempt securities; and (iv) any losses of a Company allocated to the individual limited partners of the Company as reported on Form 1040).

(__) Bank or Investment Company Test:

Subscriber is a bank as defined in section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; or is a broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; or is an insurance company as defined in section 2(13) of the Securities Act; or is any investment company registered under the Investment Corporation Act of 1940, or a business development company as defined in section 2(a)(48) of that Act; or is a Small Business Investment Corporation licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; is a plan established and maintained by a state, its political subdivision, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; or is an employee benefit plan within the meaning of the employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors.

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(__) Private Business Development Corporation Test:

Subscriber is a private business development company as defined in section 202(a)(22) of the Investment Advisors Act of 1940.

(__) IRC Section 501c(3) Organization Test:

Subscriber is an organization described in Section 501c(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or Company, not formed for the specific purpose of acquiring the securities being offered, with total assets in excess of $5,000,000.

(__) Direct Relationship to Issuer Test:

Subscriber is a director, executive officer, partner or manager of the Company of the securities being offered or sold, or any director, executive officer or manager of a partner or partner of that issuer.

(__) $5,000,000 Noninvestment Trust Test:

Subscriber is a trust with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring the securities being offered, whose purchase is directed by a “sophisticated person” as described in section 230.506(b)(2)(ii).

(__) Equity Entity Comprised of Accredited Investors Test:

Subscriber is any equity entity in which all of the equity owners are accredited investors as defined above. Subscriber has had one of the persons responsible for overseeing and/or managing one or more of Subscriber’s financial accounts complete the attestation in Section 2 hereof in order to verify the information in this Section 2:

Yes _________ No _________

2.4.Non U.S. Purchasers. If the Subscriber is not a U.S. person (each, a “Non-U.S. Purchaser”), (i) such Non-U.S. Purchaser is not a U.S. person; (ii) such Non-U.S. Purchaser was outside the United States at the time the offer to sell the Securities was made and at the time the buy order for the Securities was originated; (iii) such Non-U.S. Purchaser will not offer or sell the Securities, or any securities of the Company received in respect thereof, to a U.S. person or for the account or benefit of a U.S. person (other than a distributor), for a period of one year commencing on the Closing.

2.5.Investment Experience and Ability to Bear Risk. Subscriber is knowledgeable and experienced with respect to the financial and business activities contemplated by the Company and is capable of evaluating the risks and merits of investing in the Securities and, in making a decision to proceed with this investment, has not relied upon any representations, warranties or agreements, other than those set forth in this Subscription Agreement and can bear the economic risk of an investment in the Company for an indefinite period of time, and can afford to suffer the complete loss thereof.

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2.6.Own Advice. In connection with the Subscriber’s investment in the Company, the Subscriber has carefully considered and has, to the extent the Subscriber believes such discussion necessary, discussed with the Subscriber’s professional legal, tax and financial advisers (the “Investment Advisors”) the suitability of an investment in the Securities for the Subscriber’s particular tax and financial situation and the Subscriber has determined that the Securities are a suitable investment for the Subscriber.

2.7.Risks. The Subscriber represents and warrants that the Subscriber is aware (i) that the Securities involve a substantial degree of risk of loss of the Subscriber’s entire investment and that there is no assurance of any income from the Subscriber’s investment; and (ii) that any federal or State income tax benefits which may be available to the Subscriber, if any, may be lost through the adoption of new laws or regulations, to changes to existing laws and regulations and to changes in the interpretation of existing laws and regulations. The Subscriber further represents that the Subscriber is relying solely on the Subscriber’s own conclusions or the advice of the Subscriber’s Investment Advisors with respect to tax aspects of any investment in the Securities. The Subscriber further represents that it has read and reviewed the SEC Documents (as defined below) and Company Disclosure Letter, including without limitation the risk factors set forth therein.

2.8.Inquiries. The Subscriber and its Investment Advisors have been given access to, and prior to the execution of this Subscription Agreement, have been provided with an opportunity to ask questions of, and receive answers from, the Company officers concerning the Company and the terms and conditions of the Offering and the Securities, and to obtain any other information which the Subscriber and the Subscriber’s Investment Advisors required with respect to the Company and an investment in the Company in order to evaluate such investment and verify the accuracy of all information furnished to the Subscriber and its Investment Advisors regarding the Company. All such questions, if asked, were answered satisfactorily and all information or documents provided were found to be satisfactory. Neither the Subscriber nor its Investment Advisors have been furnished any offering literature on which they have relied on other this Subscription Agreement and the Subscriber and its Investment Advisors have relied only on this Subscription Agreement. At no time was the Subscriber presented with or solicited by any leaflet, public promotion meeting, newspaper or magazine article, radio or television advertisement or any other form of general advertising or general solicitation.

2.9.Authority. The Subscriber is authorized and has full right and power to subscribe for the Securities and to perform the Subscriber’s obligations pursuant to the provisions of this Subscription Agreement; the person signing this Subscription Agreement and any other instrument executed and delivered herewith on behalf of such Subscriber has been duly authorized by such entity and has full power and authority to do so. If the Subscriber is a corporation, partnership, unincorporated association or other entity, the person signing this agreement has the legal capacity to authorize, deliver and be bound by this Subscription Agreement and to take all actions required pursuant hereto and further certifies that all necessary approvals of directors, stockholders or otherwise have been given and obtained; and if the Subscriber is an individual, it is of the full age of majority in the jurisdiction in which the Subscriber is resident and is legally competent to execute, deliver and be bound by this Subscription Agreement and take all action pursuant hereto.

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2.10.No Default. The execution and delivery of this Subscription Agreement and the consummation of the transactions contemplated hereby and thereby will not conflict with, or result in any violation of or default pursuant to, any provision of any governing instrument applicable to the Subscriber, or any agreement or other instrument to which the Subscriber is a party or by which the Subscriber or any of the Subscriber’s properties are bound or any permit, franchise, judgment, decree, statute, rule or regulation applicable to the Subscriber or any of the Subscriber’s business or properties.

2.11.ERISA. If the Subscriber is an employee benefit plan subject to ERISA, then such Subscriber acknowledges that such Subscriber has been informed of and understands the operations and business of the Company, and represents that such Subscriber’s investment in the Company (i) is permissible under the documents and instruments governing such plan; (ii) satisfies the diversification requirements of ERISA; (iii) is prudent considering all the facts and circumstances, including the fact that there is no trading market for the Securities; and (iv) is not a “prohibited transaction” within the meaning of Section 406 of ERISA.

2.12.Purchase Entirely For Own Account. This Subscription Agreement is made with the Subscriber in reliance upon the Subscriber’s representations to the Company, which by the Subscriber’s execution of this Subscription Agreement, the Subscriber hereby confirms, that the Securities issuable to the Subscriber will be acquired for investment for the Subscriber’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Subscriber has no present intention of selling, granting any participation in, or otherwise distributing the same. The Subscriber represents and warrants that the Subscriber has no contract, understanding, agreement or arrangement with any person to sell or transfer or pledge to such person or anyone else any of the Securities for which the Subscriber hereby subscribes (in whole or in part) or any interest therein; and the Subscriber represents and warrants that the Subscriber has no present plans to enter into any such contract, undertaking, agreement or arrangement.

2.13.Certain Legal Issues. The Subscriber represents and warrants that the funds representing the Subscription Price which will be advanced by the Subscriber hereunder will not represent proceeds of crime and the Subscriber acknowledges that the Company may in the future be required by law to disclose the Subscriber’s name and other information relating to this Subscription Agreement and the Subscriber’s subscription hereunder, on a confidential basis, and to the best of the Subscriber’s knowledge (i) none of the subscription funds to be provided by the Subscriber (a) have been or will be derived from or related to any activity that is deemed criminal under the laws of the United States of America, or any other jurisdiction, or (b) are being tendered on behalf of a person or entity who has not been identified to the Subscriber, and (ii) it shall promptly notify the Company if the Subscriber discovers that any of such representations ceases to be true, and to provide the Company with appropriate information in connection therewith.

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The Subscriber represents and warrants that the current structure of this transaction and all transactions and activities contemplated hereunder is not a plan or scheme to evade the registration provisions of the Securities Act.

The Subscriber acknowledges that:

(i)	no securities commission or similar regulatory authority has reviewed or  passed on the merits of the Securities; and
(ii)	There is no government or other insurance covering the Securities; and
(iii)	there are risks associated with the purchase of the Securities; and
(iv)	there are restrictions on the Subscriber’s ability to resell the Securities and  it is the responsibility of the Subscriber to find out what those restrictions  are and to comply with them before selling the Securities; and
(v)	the Company has advised the Subscriber that the Company is relying on  an exemption from the requirements to provide the Subscriber with a  prospectus and to sell securities through a person or company registered to  sell securities under applicable securities laws and, as a consequence of  acquiring the Securities pursuant to this exemption, certain protections,  rights and remedies provided by applicable securities laws, including  statutory rights of rescission or damages, will not be available to the  Subscriber.

The Subscriber represents and warrants that neither the Company, nor any of their respective directors, officers, employees or representatives, have made any representations (oral or written) to the Subscriber regarding the future value of the Securities.

The Subscriber acknowledges that (i) the Company may complete secured or unsecured debt financings or equity financings in the future in order to develop the Company’s business and to fund its ongoing development, (ii) there is no assurance that such financings will be available and, if available, on reasonable terms, (iii) any such future financings may have a dilutive effect on current security holders, including the Subscriber, and (iv) if such future financings are not available, the Company may be unable to fund its ongoing development and the lack of capital resources may result in the failure of its business.

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The Subscriber will not, directly or indirectly, except in compliance with (that is, only to the extent required to comply with) the Securities Act and such other securities or “Blue Sky” laws as may be applicable, (i) offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Securities, (ii) engage in any short sale which results in a disposition of any of the Securities by Subscriber, or (iii) hedge the economic risk of the Subscriber’s investment in the Securities.

2.14.The Subscriber hereby covenants with the Company not to make any sale of the Registrable Shares (as defined below) under the Registration Statement without effectively causing the prospectus delivery requirement under the Securities Act to be satisfied, and the Subscriber acknowledges and agrees that such Registrable Shares are not transferable on the books of the Company pursuant to a sale under a Registration Statement unless the certificate submitted to the transfer agent evidencing the Registrable Shares is accompanied by a separate Subscriber’s certificate of subsequent sale in reasonable form, executed by an officer of, or other authorized person designated by, the Subscriber, to the effect that (A) the Registrable Shares have been sold in accordance with the Registration Statement, the Securities Act and any applicable state securities or Blue Sky laws and (B) if applicable, the requirement of delivering a current prospectus has been satisfied. The Subscriber acknowledges that there may occasionally be times when the Company must suspend the use of the prospectus forming a part of the Registration Statement (a “Suspension”) until such time as an amendment to the Registration Statement has been filed by the Company and declared effective by the Commission, or such time as such prospectus has been supplemented, or until such time as the Company has filed an appropriate report with the Commission pursuant to the Exchange Act. The Subscriber hereby covenants that it will not sell any Registrable Shares pursuant to said prospectus during the period commencing at the time at which it receives written notice of the Suspension of the use of said prospectus (without providing any other material information other than at the written request of the Subscriber) and ending at the time the Company gives the Subscriber written notice that the Subscriber may thereafter effect sales pursuant to said prospectus. The Subscriber shall not be prohibited from selling Registrable Shares under the Registration Statement as a result of Suspensions on more than two occasions of not more than thirty (30) days each in any 12-month period, unless, in the good faith judgment of the Company’s Board of Directors following the written advice of counsel, the sale of Registrable Shares under the Registration Statement in reliance on this paragraph would be reasonably likely to cause a violation of the Securities Act or the Exchange Act; provided that the Company shall remain liable for liquidated damages pursuant to Section 7.7 hereof with respect to any Suspensions exceeding the aforementioned two permitted 30-day Suspensions in any 12-month period.

2.15.If the Subscriber is exercising $2.83 Warrants, the Subscriber hereby agrees (i) to amend the definition of "Purchase Price" set forth in the $2.83 Warrant Agreement to delete the phrase "for a period of not less than 30 days on not less than 30 days' prior written notice to the Registered Holders", so that such definition shall read in its entirety: " 'Purchase Price' shall mean, subject to modification and adjustment as provided in Section 8, $2.8313 and further subject to the Company's right, in its sole discretion, to decrease the Purchase Price on notice to the Registered Holders." and (ii) that such amendment be effective immediately prior to the reduction of the Purchase Price (as newly defined in the $2.83 Warrant Agreement) pursuant to the Warrant Offering.

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3.        Representations and Warranties of the Company.

3.1.Corporate Organization; Authority; Due Authorization.

(a)The Company (A) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of the State of Delaware, (B) has the corporate power and authority to own or lease its properties as and in the places where its business is now conducted and to carry on its business as now conducted, and (C) is duly qualified 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, assets, liabilities, financial condition or business of the Company taken as a whole (a “Material Adverse Effect”).

(b)The Company (A) has the requisite corporate power and authority to execute, deliver and perform its obligations under this Subscription Agreement, the Financial Advisory Agreement and to issue and perform its obligations under the New Warrants and Empire Warrants (except that the Company is barred from taking actions that may trigger adjustments under Section 4 of each of the New Warrants, Empire Warrants and Extension Warrants) and to incur the obligations herein and therein and (B) has been authorized by all necessary corporate action to execute, deliver and perform the Transaction Documents and to consummate the transactions contemplated hereby and thereby (the “Contemplated Transactions”). The Transaction Documents will be on the Closing Date valid and binding obligations of the Company enforceable in accordance with their terms except as limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding at law or equity).

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3.2.Capitalization. The authorized capital stock of the Company consists of seventy five million (75,000,000) shares of common stock, $.01 par value, of which as of May 13, 2008, 25,919,162 shares of Common Stock are outstanding. All outstanding shares of capital stock of the Company were issued in compliance with all applicable federal and State securities laws, and the issuance of such shares was duly authorized by all necessary corporate action on the part of the Company. Except as contemplated by this Subscription Agreement or as set forth in the SEC Documents, there are (A) no outstanding subscriptions, warrants, options, conversion privileges or other rights or agreements obligating the Company to purchase or otherwise acquire or issue any shares of capital stock of the Company (or shares reserved for such purpose), (B) no preemptive rights contained in the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the 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, including without limitation the Securities and (C) no commitments or understandings (oral or written) of the Company to issue any shares, warrants, options or other rights to acquire any equity securities of the Company other than with respect to existing antidilution rights of existing investors (certain of which antidilution rights will be triggered by the sale of Securities hereunder). To the Company’s knowledge, except as set forth in the SEC Documents, none of the shares of common stock are subject to any stockholders’ agreement, voting trust agreement or similar arrangement or understanding. Except as set forth in the SEC Documents, the Company has no outstanding bonds, debentures, Common Stock or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter.

3.3.Due Execution, Delivery and Performance of the Transaction Documents. The Company has all requisite corporate power and authority to enter into each Transaction Document and perform the transactions contemplated hereby or thereby. Each Transaction Document has been duly authorized, executed and delivered by the Company. The execution, delivery and performance of each Transaction Document by the Company and the consummation of the transactions contemplated herein or therein will not violate any provision of the organizational documents of the Company and will not result in the creation of any lien, charge, security interest or encumbrance upon any assets of the Company pursuant to the terms or provisions of, or will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under, any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company is a party or by which the Company or any of its properties may be bound or affected or, to the Company’s knowledge, any statute or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or any of its properties where such conflict, breach, violation or default is reasonably likely to result in a material adverse effect. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of the Transaction Documents or the consummation of the transactions contemplated by the Transaction Documents, except for compliance with the Blue Sky laws and federal securities laws applicable to the offering of the Securities. Upon the execution and delivery of (i) this Subscription Agreement by the Company, and assuming the valid execution hereof by the Subscriber, (ii) the New Warrants by the Company and (iii) the Financial Advisory Agreement and the Transfer Agreement by the applicable parties, each Transaction Document will constitute a valid and binding obligation of the Company, enforceable in accordance with its terms, except as (x) enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally, (y) enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (z) the indemnification agreements of the Company in Section 7.3 hereof may be legally unenforceable.

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3.4.Validity of Securities. The issuance of the Securities has been duly authorized by all necessary corporate action on the part of the Company and, when issued to, delivered to, and paid for by the Subscribers in accordance with this Subscription Agreement, the Securities will be validly issued, fully paid and non-assessable.

3.5.Underlying Securities. The issuance of the New Shares has been duly authorized, and the shares issuable upon exercise of the New Warrants (the “New Warrant Shares”), prior to exercise of the New Warrants, will have been duly reserved for issuance upon such exercise and, when so issued, will be validly issued, fully paid and non assessable.

3.6.Private Offering. The Company agrees that neither the Company nor anyone authorized to act on its behalf will offer the Securities or any part thereof or any similar securities for issuance or sale to, or solicit any offer to acquire any of the same from, anyone so as to make the issuance and sale of the Securities subject to the registration requirements of Section 5 of the Securities Act.

3.7.Compliance. Except as set forth in the SEC Documents (as defined below), the Company is not in conflict with, or in default or violation of (i) any law, rule, regulation, order, judgment or decree applicable to the Company or by which any property or asset of the Company is bound or affected (“Legal Requirement”), or (ii) any material agreement, in each case except for any such conflicts, defaults or violations that would not, individually or in the aggregate, have a material adverse effect. The Company has not received any written notice or other communication from any governmental body regarding any actual or possible violation of, or failure to comply with, any Legal Requirement, except any such violations or failures that would not, individually or in the aggregate, have a material adverse effect.

4.SEC Documents; Financial Statements.

4.1.(a)The information contained in the following documents, did not, as of the date of the applicable document, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading, as of their respective filing dates or, if amended, as so amended (the following documents, collectively, the “SEC Documents”), provided that the representation in this sentence shall not apply to any misstatement or omission in any SEC Document filed prior to the date of this Subscription Agreement which was superseded by a subsequent SEC Document filed prior to the date of this Subscription Agreement:

(i) the Company’s Annual Report on Form 10-K for the year ended December 31, 2007; and

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(iii) The Company’s interim filings on Form 8-K or other appropriate forms filed on any date after December 31, 2007 and on or before the Closing.

(b)In addition, as of the date of this Subscription Agreement, when read together with the SEC Documents and the Company Disclosure Letter in the form attached hereto as Exhibit C (the “Company Disclosure Letter”), the information, qualifications and exceptions contained in this Subscription Agreement do not include any untrue statement of a material fact or omit to state a material fact in light of the circumstances in which such written disclosures were made.

(c)The Company has filed all forms, reports and documents required to be filed by it with the SEC for the 12 months preceding the date of this Subscription Agreement, including without limitation the SEC Documents. As of their respective dates, the SEC Documents filed prior to the date hereof complied as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act, and the rules and regulations thereunder.

(d)The Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007, includes consolidated balance sheets as of December 31, 2006 and 2007 and consolidated statements of income for the one year periods then ended (collectively, the “Form 10-K Financial Statements”).

(e)The Company Disclosure Letter includes consolidated balance sheets as of March 31, 2008 and consolidated statements of income for the quarters ended March 31, 2007 and 2008 (the “Interim Financial Statements” and together with the Form 10-K Financial Statements, the “Financial Statements”).

(f)The Financial Statements (including the related notes and schedules thereto) fairly present in all material respects the consolidated financial position, the results of operations, retained earnings or cash flows, as the case may be, of the Company for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end audit adjustments that would not be material in amount or effect), in each case in accordance with generally accepted accounting principles consistently applied during the periods involved, except as may be noted therein.

4.2.Use of Proceeds. The net proceeds received by the Company from the sale of the Securities shall be used by the Company for working capital and general corporate purposes. The Company will use its best efforts to reduce its burn rate to less than $600,000 per month through at least December 31, 2008.

4.3.Legend. The certificates representing the Securities issued by the Company shall bear the following (or similar) legends:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION THEREFROM.

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5.Variable Securities; Dilutive Issuances.

5.1.So long as any Subscriber beneficially owns any New Warrants, (a) the Company will not issue any, the Company shall not, in any manner, issue or sell any rights, warrants or options to subscribe for or purchase Common Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more reset(s) to any fixed price unless the conversion, exchange or exercise price of any such security cannot be less than the then applicable Exercise Price (as defined in the New Warrants), and (b) the Company shall not, in any manner, enter into or effect any issuance of securities (a “Dilutive Issuance”) if the effect of such Dilutive Issuance is to cause, or but for the Securities Limitations (as defined below) would cause, the Company to be required to issue upon exercise of the New Warrants any shares of Common Stock in excess of that number of shares of Common Stock which the Company may issue upon exercise of the New Warrants without breaching the Company's obligations under the rules or regulations of the NASDAQ Capital Market (the "Securities Limitations") unless or until the Stockholder Approval (as defined below) has been obtained.

5.2.Stockholder Approval. The Company shall provide each stockholder entitled to vote at either (x) the next annual meeting of stockholders of the Company or (y) a special meeting of stockholder of the Company (the "Stockholder Meeting"), which shall be promptly called and held not later than September 1, 2008 (the "Stockholder Meeting Deadline"), a proxy statement, soliciting each such stockholder's affirmative vote at the Stockholder Meeting for approval of resolutions ("Stockholder Resolutions") ratifying the issuance of all of the Securities as described in the Transaction Documents and, without limitation on the foregoing, the antidilution provisions of the New Warrants, Empire Warrants and the Extension Warrants, in accordance with applicable law and the rules and regulations of the NASDAQ Capital Market (such affirmative approval being referred to herein as the “Stockholder Approval”), and the Company shall use its reasonable best efforts to solicit its stockholders’ approval of such resolutions and to cause the Board of Directors of the Company to recommend to the stockholders that they approve such resolutions. The Company shall be obligated to seek to obtain the Stockholder Approval by the Stockholder Meeting Deadline. If, despite the Company’s reasonable best efforts, the Stockholder Approval is not obtained on or prior to the Stockholder Meeting Deadline, the Company shall cause an additional Stockholder Meeting to be held once in each twelve month period thereafter until such Stockholder Approval is obtained, provided that if the Board of Directors of the Company does not recommend to the stockholders that they approve the Resolutions at any such Stockholder Meeting and the Stockholder Approval is not obtained, the Company shall cause an additional Stockholder Meeting to be held each calendar quarter thereafter until such Stockholder Approval is obtained.

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6.Assignability. This Subscription Agreement and the rights and obligations hereunder are not transferable or assignable by the Subscriber.

7.Registration; Compliance with the Securities Act.

7.1.Registration Procedures and Expenses.

The Company shall:

(a)Subject to receipt of necessary information in writing from the Subscribers that may be requested by the Company, as soon as reasonably practicable, but in no event later than forty five (45) days following the Closing Date (the “Filing Date”), prepare and file with the Securities and Exchange Commission (the “Commission”) a Registration Statement on Form S-3 (or such other form which is available to the Company) relating to the resale of the New Shares and New Warrant Shares (collectively, with shares issuable upon exercise of the Extension Warrants and the Empire Warrants, the “Registrable Shares”) by the Subscribers from time to time on NASDAQ Capital Market or the facilities of any national securities exchange on which the Common Stock is then traded or in privately negotiated transactions (the “Registration Statement”) and will use its best efforts to list such Registrable Shares on NASDAQ Capital Market or the facilities of any other national securities exchange on which the Common Stock is then traded;

(b)use its commercially reasonable efforts, subject to receipt of necessary information from the Subscribers, to cause the Commission to declare the Registration Statement effective within seventy five (75) calendar days after the Closing Date (the “Required Effective Date”). However, so long as the Company filed the Registration Statement by the Filing Date, if the Registration Statement receives Commission review, then the Required Effective Date will be the one hundred and twenty (120) calendar days after the Closing Date. The Company’s commercially reasonable efforts will include, but not be limited to, promptly responding to all comments received from the staff of the Commission. If the Company receives notification from the Commission that the Registration Statement will receive no action or review from the Commission, then the Company will, subject to its rights under this Agreement, use its commercially reasonable efforts to cause the Registration Statement to become effective within three business days after such Commission notification;

(c)use its commercially reasonable efforts to promptly prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective until the earliest of (i) the date on which the Subscribers may sell all of the Registrable Shares then held by the Subscribers, without registration pursuant to Rule 144 of the Securities Act, without any restriction as to the number of securities as of a particular date that can then be immediately sold and the adequate current public information requirement of Rule 144(c)(1) promulgated under the Securities Act no longer applies to the sale of such shares without registration or (ii) such time as all Registrable Shares issuable to all holders of Securities have been sold pursuant to a Registration Statement or Rule 144 promulgated under the Securities Act. Thereafter, the Company shall be entitled to withdraw the Registration Statement and the Subscribers shall have no further right to offer or sell any of the Registrable Shares pursuant to the Registration Statement. The Company shall not file any registration statements with the Commission relating to securities other than the Registrable Shares until ninety (90) days after the Required Effective Date; provided nothing herein will prohibit the filing of amendments or supplements to already filed registration statements;

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(d)use commercially reasonably efforts to furnish (i) to the Subscribers with respect to the Registrable Shares registered under the Registration Statement by fax or email (in each case with answerback confirmed) or other prompt means one copy of the prospectus promptly after effectiveness of the Registration Statement and in any case before the next opening of the principal market for the Registrable Shares and (ii) to the Subscribers with respect to the Registrable Shares registered under the Registration Statement (and to each underwriter, if any, of such Registrable Shares) such number of copies of prospectuses and such other documents as the Subscribers may reasonably request within a reasonable time, in order to facilitate the public sale or other disposition of all or any of the Registrable Shares by the Subscribers;

(e)file documents required of the Company for normal Blue Sky clearance in states specified in writing by the Subscribers and reasonably acceptable to the Company; provided, however, that the Company shall not be required to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 7.1; (ii) file a general consent to service of process in any such jurisdiction; (iii) subject itself to taxation in any such jurisdiction; (iv) provide any undertakings that cause material expense or burden to the Company; or (v) make any change to its organizational documents, which in each case the Board of Directors of the Company determines to be contrary to the best interests of the Company and its stockholders;

(f)bear all expenses in connection with the procedures in paragraphs (a) through (e) of this Section 7.1 and the registration of the Registrable Shares pursuant to the Registration Statement, other than fees and expenses, if any, of counsel or other advisers to the Subscribers or underwriting discounts, brokerage fees and commissions incurred by the Subscribers, if any; and

(g)promptly notify the Subscribers of the effectiveness of a Registration Statement, and any post-effective amendments thereto, as well as of the receipt by the Company of any stop orders of the Commission with respect to a Registration Statement and the lifting of any such order.

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Notwithstanding the foregoing, it shall be a condition precedent to the obligations of the Company to take any action pursuant to paragraphs (a) through (f) of this Section 7.1, that each Subscriber shall furnish to the Company such information regarding itself, the Registrable Shares to be sold by the Subscriber, and the intended method of disposition of such Registrable Shares as shall be required to effect the registration of the Registrable Shares, all of which information shall be furnished to the Company in writing specifically for use in the Registration Statement.

The Registration Statement may include additional securities pursuant to existing registration rights.

The Company understands that each Subscriber disclaims being an underwriter, but a Subscriber being deemed an underwriter shall not relieve the Company of any obligations it has hereunder, provided, however, that if the Company receives notification from the Commission that the Subscriber is deemed an underwriter, then the period in which the Company is obligated to submit an acceleration request to the Commission shall be extended to the earlier of (i) the sixtieth (60th) day after such Commission notification, or (ii) ninety (90) days after the initial filing of the Registration Statement with the Commission. Notwithstanding the foregoing, the parties understand and agree that the Company shall not be obligated to retain an underwriter with respect to the offer and sale of Registrable Shares pursuant to the Registration Statement

7.2.Transfer of Securities After Registration. While the Registration Statement is effective and available for resale, each Subscriber agrees that it will not effect any disposition of New Warrants or Registrable Shares that would constitute a sale within the meaning of the Securities Act, except as contemplated in the Registration Statement referred to in Section 7.1 hereof in the section titled “Plan of Distribution” or pursuant to an applicable exemption from registration, the availability of which is confirmed in writing by counsel to the Subscriber (the form, substance and scope of which opinion shall be reasonably acceptable to the Company) and delivered to the Company, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the Subscriber or its plan of distribution.

7.3.Indemnification.

(a)For purpose of this Agreement, the term “Subscriber/Affiliate” shall mean any affiliate of a Subscriber (as defined in Rule 405 under the Securities Act) and any person who controls the Subscriber or any affiliate of the Subscriber within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act; and

(b)For purpose of this Section 7.3, the term “Registration Statement” shall include any final prospectus, exhibit, supplement or amendment included in or relating to, and any document incorporated by reference in, the Registration Statement referred to in Section 7.1 hereof.

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The Company agrees to indemnify and hold harmless each Subscriber and each Subscriber/Affiliate against any losses, claims, damages, liabilities or expenses, joint or several, to which the Subscriber or Subscriber/Affiliate may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, including the prospectus, financial statements and schedules, and all other documents filed as a part thereof, as amended at the time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and Regulations, or the prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations, or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required (the “Prospectus”), or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in the Registration Statement or any amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement thereto not misleading in the light of the circumstances under which they were made, or arise out of or are based in whole or in part on any material breach of the representations and warranties of the Company contained in this Agreement (except that where representations and warranties are qualified by materiality, any breach), or any material breach by the Company of its obligations hereunder, and will reimburse the Subscriber or Subscriber/Affiliate for any legal and other expenses as such expenses are reasonably incurred by the Subscriber or Subscriber/Affiliate in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such case to the extent, but only to the extent, that any such loss, claim, damage, liability or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Subscriber expressly for use therein, or (ii) the failure of the Subscriber to comply with the covenants and agreements contained in Section 2.12 or Section 7.2 hereof respecting the sale of the Registrable Shares, or (iii) the inaccuracy of any representations made by the Subscriber herein or (iv) any statement or omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the Subscriber prior to the pertinent sale or sales by the Subscriber.

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Each Subscriber will severally, but not jointly, indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Subscriber) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure to comply with the covenants and agreements contained in Sections 2.12 or 7.2 hereof respecting the sale of the Registrable Shares or (ii) any material breach of any representation made by the Subscriber herein or (iii) any untrue or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements in the Registration Statement or any amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement thereto not misleading in the light of the circumstances under which they were made, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by the Subscriber expressly for use therein, and the Subscriber will reimburse the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person for any legal and other expense reasonably incurred by the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the obligations of the Subscriber under this Section 7.3 shall not exceed the net proceeds to such Subscriber from the sale of Registrable Shares pursuant to such Registration Statement.

Promptly after receipt by an indemnified party under this Section 7.3 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 7.3, promptly notify the indemnifying party in writing thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise under the indemnity agreement contained in this Section 7.3 (except to the extent that such omission materially and adversely affects the indemnifying person’s ability to defend such action). Subject to provisions hereinafter stated, in case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party, and the indemnifying party and the indemnified party, based upon the advice of such indemnified party’s counsel, shall have reasonably concluded that there may be a conflict of interest between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 7.3 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, approved by such indemnifying party in the case of paragraph (a), representing the indemnified parties who are parties to such action (including indemnified parties under Agreements with Other Subscribers, plus local counsel, if appropriate) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party. In no event shall any indemnifying person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided that such consent shall not be unreasonably withheld. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person is or could have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject matter of such proceeding.

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If the indemnification provided for in this Section 7.3 is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under paragraphs (a), (b) or (c) of this Section 7.3 in respect to any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Subscriber from the sale of securities contemplated by this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but the relative fault of the Company and the Subscriber in connection with the statements or omissions or inaccuracies in the representations and warranties in this Agreement that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and the Subscriber on the other shall be determined by reference to, among other things, whether the untrue or alleged statement of a material fact or the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Company or by the Subscriber and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in paragraph (c) of this Section 7.3, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in paragraph (c) of this Section 7.3 with respect to the notice of the threat or commencement of any threat or action shall apply if a claim for contribution is to be made under this paragraph (d); provided, however, that no additional notice shall be required with respect to any threat or action for which notice has been given under paragraph (c) for purposes of indemnification. The Company and the Subscriber agree that it would not be just and equitable if contribution pursuant to this Section 7.3 were determined solely by pro rata allocation (even if the Subscriber were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding the provisions of this Section 7.3, the Subscriber shall not be required to contribute any amount in excess of the amount by which the amount realized by the Subscriber on Sale of Registrable Shares exceeds the amount of any damages which such Subscriber has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Subscriber’s obligation to contribute pursuant to this Section 7.3 is several and not joint.

Each Subscriber hereby acknowledges that it is a sophisticated business person who was represented by counsel during the negotiations regarding the provisions hereof including, without limitation, the provisions of this Section 7.3, and is fully informed regarding said provisions. Each of the Company and the Subscriber is advised that federal or state public policy as interpreted by the courts in certain jurisdictions may be contrary to certain of the provisions of this Section 7.3, and each of the Company and the Subscriber hereby expressly waives and relinquishes any right or ability to assert such public policy as a defense to a claim under this Section 7.3 and further agrees not to attempt to assert any such defense.

7.4.Termination of Conditions and Obligations. The conditions precedent imposed by Section 2 or this Section 7 upon the transferability of Securities or the Registrable Shares shall cease and terminate as to any particular number of the Registrable Shares upon the earliest to occur of (i) the sale of such Registrable Shares pursuant to the Registration Statement, (ii) the sale of such Registrable Shares pursuant to Rule 144 under the Securities Act or (iii) the passage of one year from the effective date of the Registration Statement covering such Registrable Shares, provided that the holder of such Securities is not at such time, and was not for the 90 days immediately prior thereto, an affiliate of the Company (as such term is defined in Rule 144) or at such time as an opinion of counsel satisfactory in form and substance to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act.

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7.5.Information Available. As long as any Subscriber owns New Warrants and the Company is subject to the filing requirements of the Exchange Act, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. So long as the Registration Statement is effective covering the resale of Registrable Shares, the Company will furnish to the Subscriber upon such Subscriber’s request:

(a)as soon as practicable after available (but in the case of the Company’s Annual Report to Stockholders, concurrently with delivery to its stockholders generally) one copy of (i) its Annual Report to Stockholders (which Annual Report shall contain financial statements audited in accordance with U.S. generally accepted accounting principles by a nationally recognized firm of certified public accountants), (ii) if not included in substance in the Annual Report to Stockholders, upon the request of the Subscriber, its Annual Report on Form 10-KSB or 10-K, (iii) upon the request of the Subscriber, its Quarterly Reports on Form 10-QSB or 10-Q, (iv) upon the request of the Subscriber, its Current Reports on Form 8-K, and (v) a full copy of the particular Registration Statement covering the Registrable Shares (the foregoing, in each case, excluding exhibits);

(b)all exhibits excluded by the parenthetical to subparagraph (a)(v) of this Section 7.5; and

(c)upon the reasonable request of the Subscriber, a reasonable number of copies of the prospectuses and supplements thereto to supply to any other party requiring such prospectuses and supplements.

7.6.Assignment of Registration Rights. The rights of a Subscriber hereunder, including the right to have the Company register the Registrable Shares pursuant to this Agreement, will be automatically assigned by the Subscriber to transferees or assignees of Securities, but only if (a) the Subscriber agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (b) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of the name and address of such transferee or assignee and the Securities with respect to which such registration rights are being transferred or assigned, (c) after such transfer or assignment, the further disposition of such Securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (d) at or before the time the Company received the written notice contemplated by clause (b) of this sentence, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein, (e) the transferee is an “accredited investor” as that term is defined in Rule 501 of Regulation D, and (f) the transfer of the Securities is made in accordance with the provisions of Section 5 and Section 7.2 hereof.

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7.7.Delay in Filing or Effectiveness of Registration Statement. If the Registration Statement is not filed by the Company with the Commission on or prior to the Filing Date, then for each day following the Filing Date, until but excluding the date the Registration Statement is filed, or if a prospectus included in the Registration Statement which has been declared effective by the Commission, is not delivered to the Subscribers (as set forth in Section 7.1(d)) by the Required Effective Date, then for each day following the Required Effective Date, until but excluding the date the Commission declares the Registration Statement effective, the Company shall, for each such day, pay the Subscriber with respect to any such failure, as liquidated damages and not as a penalty, an amount equal to 0.0333% of the purchase price paid by such Subscriber for its Securities pursuant to this Agreement; and for any such day, such payment shall be made no later than the first business day of the calendar month next succeeding the month in which such day occurs. If the Subscriber shall be prohibited from selling Registrable Shares under the Registration Statement as a result of a Suspension of more than thirty (30) days or Suspensions on more than two occasions of not more than thirty (30) days each in any 12-month period, then for each day on which a Suspension is in effect that exceeds the maximum allowed period for a Suspension or Suspensions, but not including any day on which a Suspension is lifted, the Company shall pay the Subscriber, as liquidated damages and not as a penalty, an amount equal to 0.0333% of the purchase price paid by such Subscriber for the Securities pursuant to this Agreement for each such day, and such payment shall be made no later than the first business day of the calendar month next succeeding the month in which such day occurs. For purposes of this Section 7.7, a Suspension shall be deemed lifted on the date that notice that the Suspension has been lifted is delivered to the Subscriber pursuant to Section 17 of this Subscription Agreement. Any payments made pursuant to this Section 7.7 shall not constitute the Subscriber’s exclusive remedy for such events. Notwithstanding the foregoing provisions, in no event shall the Company be obligated to pay such liquidated damages to more than one Subscriber in respect of the same Securities for the same period of time. The liquidated damage payments imposed hereunder shall be made to the Subscriber in cash.

7.8.Integration with Subsequent Transactions. The Company shall not, indirectly or directly, sell, offer for sale or solicit offers to buy or otherwise negotiate with respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities or the issuance of the New Warrant Shares in a manner that would require the registration under the Securities Act of the sale of the Securities or the issuance of the New Warrant Shares to the Subscriber or that would be integrated with the offer or sale of the Securities or the issuance of the New Warrant Shares for purposes of the rules or regulations of NASDAQ Capital Market or any national securities exchange on which the Common Stock are listed or designated such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained prior to the closing of such subsequent transactions.

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8.Broker’s Fees. The Subscriber acknowledges that the Company intends to pay fees and expenses to the Financial Advisor in respect of the Financial Advisory Agreement. Each Subscriber and the Company hereby agree that the Subscriber shall not be responsible for such fees and expenses. Each of the parties hereto hereby represents that, on the basis of any actions and agreements by it, there are no other brokers or finders entitled to compensation in connection with the transactions contemplated by the Transaction Documents.

9.Independent Nature of Subscribers’ Obligations and Rights. The obligations of each Subscriber under this Subscription Agreement are several and not joint with the obligations of any other Subscriber, and no Subscriber shall be responsible in any way for the performance of the obligations of any other Subscriber under this Subscription Agreement. The decision of each Subscriber to purchase Securities pursuant to this Subscription Agreement or a Transfer Agreement, has been made independently of any other Subscriber.

Nothing contained herein, and no action taken by any Subscriber thereto, shall be deemed to constitute the Subscribers as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Subscribers are in any way acting in concert or as a group with respect to such obligations or transactions contemplated by this Agreement.

Each Subscriber shall be entitled to independently protect and enforce its rights, including without limitation, its rights arising out of this Subscription Agreement, and it shall not be necessary for any other Subscriber to be joined as an additional party in any proceeding for such purpose. No Subscriber shall incur any liability to any other Subscriber with respect to exercising or refraining from exercising any right or rights that such Subscriber may have by reason of this Subscription Agreement.

Each Subscriber has been represented or had the opportunity to be represented by its own separate legal counsel, at such Subscriber’s own expense, in review and negotiation of this Subscription Agreement.

Each Subscriber agrees that neither a Subscriber nor any affiliate of a Subscriber shall be liable to any other Subscriber or such other Subscriber’s affiliate for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Securities.

10.Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby (“Related Proceedings”) may be instituted in the federal courts of the United States of America or the state courts of New York State located in New York, New York (collectively, the “Specified Courts”), and each party irrevocably submits to the non-exclusive jurisdiction of such Specified Courts of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. With respect to any Related Proceeding, each party irrevocably waives, to the fullest extent permitted by applicable law, all immunity (whether on the basis of sovereignty or otherwise) from jurisdiction, service of process, attachment (both before and after judgment) and execution to which it might otherwise be entitled in the Specified Courts or any other court of competent jurisdiction.

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11.Amendments and Waivers. Unless a particular provision or section of this Subscription Agreement requires otherwise explicitly in a particular instance, any provision of this Subscription Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the New Shares (not including for this purpose any New Shares which have been sold to the public pursuant to a Registration Statement under the Securities Act or an exemption therefrom). Any amendment or waiver effected in accordance with this Section 11 shall be binding upon each Subscriber, each holder of any Securities at the time outstanding (including without limitation securities into which any such Securities are convertible or exercisable), each future holder thereof, and the Company.

12.Survival of Representations and Warranties. All representations and warranties made by the Subscriber and Company in this Subscription Agreement shall survive the execution and delivery of this Subscription Agreement, as well as any investigation at any time made by or on behalf of the Company and the issue and sale of the Securities.

13.Reliance. The Subscriber understands and acknowledges that the Subscriber's representations, warranties, acknowledgements and agreements in this Subscription Agreement will be relied upon by the Company in determining the Subscriber's suitability as a Subscriber of the Securities.

14.Further Assurances. The Subscriber agrees to provide, if requested, any additional information that may be requested or required to determine the Subscriber's eligibility to purchase the Securities.

15.Entire Agreement. This Subscription Agreement, with the other Transaction Documents, constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein.

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16.Severability. In the event one or more of the provisions of this Subscription Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Subscription Agreement, and this Subscription Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

17.Notices. Any notice or other communication required or permitted to be given hereunder (each a “Notice”) shall be given in writing and shall be made by personal delivery, sent by fax (with answerback confirmed) or sent by courier or certified or registered first-class mail (postage prepaid), addressed to a party at its address shown below or at such other address as such party may designate by three days’ advance Notice to the other parties.

Any Notice to any of the Subscribers shall be sent to the addresses for such Subscriber set forth on the signature pages hereof.

Any Notice to the Company shall be sent to:

Neonode Inc.

Attn: CFO

4000 Executive Parkway

San Ramon, California 94549

Fax: (925) 355-2041

with a copy to:

Hahn & Hessen LLP

488 Madison Avenue

New York, NY 10022

Fax: (212) 478-7400

Attention: James Kardon

Each Notice shall be deemed given and effective upon receipt (or refusal of receipt).

18.Conflicts. The Company and each Subscriber (i) acknowledge that Hahn & Hessen LLP, counsel to the Company in the transactions contemplated in this Subscription Agreement, has acted, and from time to time continues to act, as counsel to (A) certain Subscribers, or affiliates thereof, in connection with the acquisition of the Existing Warrants, and (B) AIGH Investment Partners, LLC in connection with its investments in the Company, and in unrelated matters, (ii) consent to the representation of the Company and such other representation of the Subscribers and AIGH, or affiliates thereof, by Hahn & Hessen LLP, (iii) acknowledge that partners of Hahn & Hessen LLP own securities of the Company constituting less than 0.1% of outstanding stock of the Company, and (iv) waive any conflicts of interest claim which may arise from any or all of the foregoing.

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19.Third Party Beneficiary. The Company and each Subscriber agree that Empire is an intended third party beneficiary of the representations and warranties made by (x) the Subscribers in Section 2 hereto and (y) the Company in Section 3 hereto and the covenants of the Company set forth in Section 7 hereto.

20.Counterparts. This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or 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.

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IN WITNESS WHEREOF, the undersigned has executed this Warrant Exercise Subscription Agreement as of the date set forth on this signature page.

Subscription Price:    $____________________________

Manner of exercise: Check applicable box:

o Casho Surrender of Company debt (as described below)

_______________________________________________

Number of Exercise Warrants exercised:___________

Check applicable box:

o Warrant Holder    o Transferee

Name of Subscriber:

[___________________________]

By:

Name:

Title:

U.S. person [please initial]: yes o  no o

Date:_____________

Address: ______________________________________

       ______________________________________

SSN or U.S. Tax ID No: ___________________________

 SUBSCRIPTION ACCEPTED:

NEONODE INC., a Delaware corporation

By:	Date:	, 2008
Name:
Title:

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EXHIBIT A

FORM OF

NEW WARRANTS

EXHIBIT B

FORM OF WARRANT TRANSFER AGREMENT

EXHIBIT C

COMPANY DISCLOSURE LETTER

EX-10.49

Exhibit 10.49

EX-10.52

Exhibit 10.52

Exhibit A to Amendment 4 to Note Purchase Agreement

EXTENSION WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

[Alternate Legend for Non-U.S. Purchasers]

[THIS WARRANT AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR UNDER ANY STATE SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE REOFFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, OTHER THAN TO DISTRIBUTORS (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT) IN THE ABSENCE OF SUCH REGISTRATION UNTIL (A) A REGISTRATION STATEMENT WITH RESEPCT THERETO IS EFFECTIVE UNDER THE ACT OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH WARRANT WHICH OTHER COUNSEL IS SATISFACTORY TO THE COMPANY THAT SUCH WARRANT AND/OR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED, SOLD ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT.]

Right to Purchase ____________ shares of Common Stock of

Neonode Inc. (subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

No. 2008-D-001Issue Date: May ___, 2008

NEONODE INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, __________________________________, _____________________________________________________________, or its assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company at any time commencing six months after the Issue Date until 5:00 p.m., E.S.T on the third anniversary of the Issue Date (the “Expiration Date”), up to ____________ fully paid and nonassessable shares of Common Stock at a per share purchase price of $______. The aforedescribed purchase price per share, as adjusted from time to time as herein provided, is referred to herein as the "Purchase Price." The number and character of such shares of Common Stock and the Purchase Price are subject to adjustment as provided herein. The Company may reduce the Purchase Price for some or all of the Warrants, temporarily or permanently. This Warrant is one of the Warrants issued pursuant to that certain Amendment 4 to Note Purchase Agreement (the “Amendment 4 to Note Purchase Agreement”), dated as of May ___, 2008, entered into by the Company and certain holders of New Notes as described therein. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Amendment 4 to Note Purchase Agreement.

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As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)The term “Company” shall include Neonode Inc. and any corporation which shall succeed or assume the obligations of Neonode Inc. hereunder.

(b)The term “Common Stock” includes (i) the Company's Common Stock, $0.01 par value per share, as authorized on the date of the Amendment 4 to Note Purchase Agreement, and (ii) any other securities into which or for which any of the securities described in (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(c)The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

(d)The term “Warrant Shares” shall mean the Common Stock issuable upon exercise of this Warrant.

1.Exercise of Warrant.

1.1.Number of Shares Issuable upon Exercise. From and after the Issue Date through and including the Expiration Date, the Holder hereof shall be entitled to receive, upon exercise of this Warrant in whole in accordance with the terms of subsection 1.2 or upon exercise of this Warrant in part in accordance with subsection 1.3, shares of Common Stock of the Company, subject to adjustment pursuant to Sections 3 and 4.

1.2.Full Exercise. This Warrant may be exercised in full by the Holder hereof by delivery of an original or facsimile copy of the form of subscription attached as Exhibit A hereto (the “Subscription Form”) duly executed by such Holder and delivery within two days thereafter of payment, in cash, wire transfer or by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of shares of Common Stock for which this Warrant is then exercisable by the Purchase Price then in effect. The original Warrant is not required to be surrendered to the Company until it has been fully exercised.

1.3.Partial Exercise. This Warrant may be exercised in part (but not for a fractional share) by delivery of a Subscription Form in the manner and at the place provided in subsection 1.2 except that the amount payable by the Holder on such partial exercise shall be the amount obtained by multiplying (a) the number of whole shares of Common Stock designated by the Holder in the Subscription Form by (b) the Purchase Price then in effect. On any such partial exercise provided the Holder has surrendered the original Warrant, the Company, at its expense, will forthwith issue and deliver to or upon the order of the Holder hereof a new Warrant of like tenor, in the name of the Holder hereof or as such Holder (upon payment by such Holder of any applicable transfer taxes) may request, the whole number of shares of Common Stock for which such Warrant may still be exercised for the balance of.

1.4.Fair Market Value. Fair Market Value of a share of Common Stock as of a particular date (the "Determination Date") shall mean:

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(a)If the Company's Common Stock is traded on an exchange or is quoted on the NASDAQ Global Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the New York Stock Exchange or the American Stock Exchange, LLC, then the average of the closing or last sale prices, respectively, reported for the ten trading days immediately preceding the Determination Date;

(b)If the Company's Common Stock is not traded on an exchange or on the NASDAQ Global Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the New York Stock Exchange or the American Stock Exchange, LLC, but is traded in the over-the-counter market, then the average of the closing bid and ask prices reported for the ten trading days immediately preceding the Determination Date;

(c)Except as provided in clause (d) below and Section 3.1, if the Company's Common Stock is not publicly traded, then as the Holder and the Company agree, or in the absence of such an agreement, by arbitration in accordance with the rules then standing of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided; or

(d)If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company's charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of all of the Warrants are outstanding at the Determination Date.

1.5.Company Acknowledgment. The Company will, at the time of the exercise of the Warrant, upon the request of the Holder hereof acknowledge in writing its continuing obligation to afford to such Holder any rights to which such Holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder any such rights.

1.6.Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the Holder of the Warrants pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Company or such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

1.7Delivery of Stock Certificates, etc. on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder hereof as the record owner of such shares as of the close of business on the date on which delivery of a Subscription Form shall have occurred and payment made for such shares as aforesaid. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter (“Warrant Share Delivery Date”), the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and non-assessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share of Common Stock, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise. The Company understands that a delay in the delivery of the Warrant Shares after the Warrant Share Delivery Date could result in economic loss to the Holder. As compensation to the Holder for such loss, the Company agrees to pay (as liquidated damages and not as a penalty) to the Holder for late issuance of Warrant Shares upon exercise of this Warrant the proportionate amount of $100 per business day after the Warrant Share Delivery Date for each $10,000 of Purchase Price of Warrant Shares for which this Warrant is exercised which are not timely delivered. The Company shall pay any payments incurred under this Section in immediately available funds upon demand. Furthermore, in addition to any other remedies which may be available to the Holder, in the event that the Company fails for any reason to effect delivery of the Warrant Shares by the Warrant Share Delivery Date, the Holder may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to the Company, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the liquidated damages described above shall be payable through the date notice of revocation or rescission is given to the Company.

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1.8Buy-In. In addition to any other rights available to the Holder, if the Company fails to deliver to a Holder the Warrant Shares as required pursuant to this Warrant, within seven (7) business days after the Warrant Share Delivery Date and the Holder or a broker on the Holder’s behalf, purchases (in an open market transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by such Holder of the Warrant Shares which the Holder was entitled to receive from the Company (a "Buy-In"), then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (A) the Holder's total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds (B) the aggregate Purchase Price of the Warrant Shares required to have been delivered together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of Purchase Price of Warrant Shares to have been received upon exercise of this Warrant, the Company shall be required to pay the Holder $1,000, plus interest. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

2.Cashless Exercise.

(a)If a registration statement covering all the Warrant Shares (“Registration Statement”) is effective and the Holder may sell its Warrant Shares pursuant to the Registration Statement, this Warrant may be exercisable in whole or in part for cash only as set forth in Section 1 above. If such Registration Statement is not available, then commencing one year after the Issue Date, payment upon exercise may be made at the option of the Holder either in (i) cash, wire transfer or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Purchase Price, (ii) by delivery of Common Stock issuable upon exercise of the Warrants in accordance with Section (b) below or (iii) by a combination of any of the foregoing methods, for the number of Common Stock specified in such form (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the holder per the terms of this Warrant) and the holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

(b)Subject to the provisions herein to the contrary, if the Fair Market Value of one share of Common Stock is greater than the Purchase Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being cancelled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Subscription Form in which event the Company shall issue to the holder a number of shares of Common Stock computed using the following formula:

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X=Y (A-B)

         A

Where	X=	the number of shares of Common Stock to be issued to the holder
	Y=	the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such calculation)
	A=	the average of the closing sale prices of the Common Stock for the five (5) Trading Days immediately prior to (but not including) the Exercise Date, or Fair Market Value, whichever is less
	B=	Purchase Price (as adjusted to the date of such calculation)

For purposes of Rule 144 promulgated under the Securities Act of 1933, as amended (the “1933 Act”), it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Amendment 4 to Senior Secured Notes.

3.Adjustment for Reorganization, Consolidation, Merger, etc.

3.1.Fundamental Transaction.  If, at any time while this Warrant is outstanding, (A) the Company  effects any merger or  consolidation  of the Company with or into another entity, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions,  (C) any tender offer or exchange offer (whether by the Company or another entity) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, (D) the Company consummates a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more persons or entities whereby such other persons or entities acquire more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by such other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock purchase agreement or other business combination), (E) any "person" or "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate Common Stock of the Company, or (F) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental  Transaction"), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder, (a) upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the "Alternate Consideration") receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event or (b) if the Company is acquired in (1) a transaction where the consideration paid to the holders of the Common Stock consists solely of cash, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the 1934 Act, or (3) a transaction involving a person or entity not traded on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market, cash equal to the Black-Scholes Value.  For purposes of any such exercise, the determination of the Purchase Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Purchase Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3.1 and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. “Black-Scholes Value” shall be determined in accordance with the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (i) a price per share of Common Stock equal to the VWAP of the Common Stock for the Trading Day immediately preceding the date of consummation of the applicable Fundamental Transaction, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the date of such request and (iii) an expected volatility equal to the 100 day volatility obtained from the HVT function on Bloomberg L.P. determined as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction.

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3.2.Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the Holder of the Warrants after the effective date of such dissolution pursuant to this Section 3 to a bank or trust company (a "Trustee") having its principal office in New York, NY, as trustee for the Holder of the Warrants. Such property shall be delivered only upon payment of the Warrant exercise price.

3.3.Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the Other Securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any Other Securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full force and effect after the consummation of the transaction described in this Section 3, then only in such event will the Company's securities and property (including cash, where applicable) receivable by the Holder of the Warrants be delivered to the Trustee as contemplated by Section 3.2.

4.Other Adjustments.

4.1.General. Commencing after Stockholder Approval (as defined in the Subscription Agreement), in any case to which the provisions of Sections 3 or 5 hereof are not applicable, where the Company shall issue or sell shares of its Common Stock after the Original Issue Date for a consideration per share less than the Purchase Price per share in effect pursuant to the terms of this Warrant at the time of issuance or sale of such additional shares (the “Lower Exercise Price”), then the Purchase Price in effect hereunder shall simultaneously with such issuance or sale be reduced to the Lower Exercise Price In the event of an adjustment to the Purchase Price under this Section 4, the number of shares of Underlying Securities issuable upon exercise hereof shall be increased so that the aggregate exercise price of this Warrant is not reduced as a result of such reduction of Purchase Price. The Company shall not issue or sell shares of its Common Stock after the Original Issue Date and prior to Stockholder Approval at a Lower Exercise Price.

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4.2.Convertible Securities. (a)In case the Company shall issue or sell any securities convertible into Common Stock of the Company (“Convertible Securities”) after the date hereof, there shall be determined the price per share for which Common Stock is issuable upon the conversion or exchange thereof, such determination to be made by dividing (a) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (b) the maximum number of shares of Common Stock of the Company issuable upon the conversion or exchange of all of such Convertible Securities.

(b)If the price per share so determined shall be less than the applicable Purchase Price per share, then such issue or sale shall be deemed to be an issue or sale for cash (as of the date of issue or sale of such Convertible Securities) of such maximum number of shares of Common Stock at the price per share so determined, provided that, if such Convertible Securities shall by their terms provide for an increase or increases or decrease or decreases, with the passage of time, in the amount of additional consideration, if any, to the Company, or in the rate of exchange, upon the conversion or exchange thereof, the adjusted Purchase Price per share shall, forthwith upon any such increase or decrease becoming effective, be readjusted to reflect the same, and provided further, that upon the expiration of such rights of conversion or exchange of such Convertible Securities, if any thereof shall not have been exercised, the adjusted Purchase Price per share shall forthwith be readjusted and thereafter be the price which it would have been had an adjustment been made on the basis that the only shares of Common Stock so issued or sold were issued or sold upon the conversion or exchange of such Convertible Securities, and that they were issued or sold for the consideration actually received by the Company upon such conversion or exchange, plus the consideration, if any, actually received by the Company for the issue or sale of all of such Convertible Securities which shall have been converted or exchanged.

4.3.Rights and Options. (a)In case the Company shall grant any rights or options to subscribe for, purchase or otherwise acquire Common Stock (other than pursuant to an incentive plan for employees adopted by a majority of the stockholders of the Company), there shall be determined the price per share for which Common Stock is issuable upon the exercise of such rights or options, such determination to be made by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of such rights or options, by (ii) the maximum number of shares of Common Stock of the Company issuable upon the exercise of such rights or options.

(b)If the price per share so determined shall be less than the applicable Purchase Price per share, then the granting of such rights or options shall be deemed to be an issue or sale for cash (as of the date of the granting of such rights or options) of such maximum number of shares of Common Stock at the price per share so determined, provided that, if such rights or options shall by their terms provide for an increase or increases or decrease or decreases, with the passage of time, in the amount of additional consideration payable to the Company upon the exercise thereof, the adjusted Purchase Price per share shall, forthwith upon any such increase or decrease becoming effective, be readjusted to reflect the same, and provided, further, that upon the expiration of such rights or options, if any thereof shall not have been exercised, the adjusted Purchase Price per share shall forthwith be readjusted and thereafter be the price which it would have been had an adjustment been made on the basis that the only shares of Common Stock so issued or sold were those issued or sold upon the exercise of such rights or options and that they were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised.

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4.4.Exceptions. This Section 4 shall not apply to the issuance of shares of Common Stock, Convertible Securities, rights and options in connection with: (a)a bona fide strategic transaction, such as a merger or joint venture which is not intended primarily as a financing, (b) equity incentives granted to bona fide commercial finance companies or banks, (c) issuances that have been approved by the holders of not less than a majority of the outstanding shares of Common Stock, (d) a registered public offering, or (e) issuances pursuant to the exercise of options, warrants and rights outstanding on the date hereof.

5.Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 5. The number of shares of Common Stock that the Holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 5 be issuable on such exercise by a fraction of which (a) the numerator is the Purchase Price that would otherwise (but for the provisions of this Section 5 be in effect, and (b) the denominator is the Purchase Price in effect on the date of such exercise.

6.Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of the Warrants, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder of the Warrant and any Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

7.Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial Statements. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all shares of Common Stock (or Other Securities) from time to time issuable on the exercise of the Warrant. This Warrant entitles the Holder hereof to receive copies of all financial and other information distributed or required to be distributed to the holders of the Company's Common Stock.

8.Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a "Transferor"). On the surrender for exchange of this Warrant, with the Transferor's endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form") and together with an opinion of counsel reasonably satisfactory to the Company that the transfer of this Warrant will be in compliance with applicable securities laws, the Company will issue and deliver to or on the order of the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

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9.Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of like tenor.

10.Warrant Agent. The Company may, by written notice to the Holder of the Warrant, appoint an agent (a “Warrant Agent”) for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 8, and replacing this Warrant pursuant to Section 9, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent.

11.Maximum Exercise. The Holder shall not be entitled to exercise this Warrant on an exercise datein connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on an exercise date, and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an exercise date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock on such date; provided that the restrictions on exercise set forth in this Section 11 shall not apply in event of completion of a Fundamental Transaction. For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities 1934 Act, and Rule 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate exercises which would result in the issuance of more than 4.99%. The restriction described in this paragraph may be waived, in whole or in part, upon sixty-one (61) days prior notice from the Holder to the Company to increase such percentage to up to 9.99%, but not in excess of 9.99%. The Holder may decide whether to convert a Convertible Note or exercise this Warrant to achieve an actual 4.99% or up to 9.99% ownership position as described above, but not in excess of 9.99%.

12.Registration Rights. To the extent the Holder of this Warrant is unable to sell Warrant Shares under Rule 144 of the Securities and Exchange Commission (the “Commission”), commencing March 31, 2008, such Holder shall have piggyback registration rights, as follows:

12.1.Registration Rights. If the Company at any time proposes to register any of its securities under the 1933 Act for sale to the public, whether for its own account or for the account of other security holders or both, except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Warrant Shares for sale to the public, provided the Warrant Shares are not otherwise registered for resale by the Holder pursuant to an effective registration statement, each such time it will give at least ten (10) days' prior written notice to the record holder of the Warrant Shares of its intention so to do. Upon the written request of the holder, received by the Company within ten (10) days after the giving of any such notice by the Company, to register any of the Warrant Shares not previously registered, the Company will cause such Warrant Shares as to which registration shall have been so requested to be included with the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent required to permit the sale or other disposition of the Warrant Shares so registered by the holder of such Warrant Shares (the “Seller” or “Sellers”). In the event that any registration pursuant to this Section 11.1 shall be, in whole or in part, an underwritten public offering of common stock of the Company, the number of Warrant Shares to be included in such an underwriting may be reduced by the managing underwriter if and to the extent that the Company and the underwriter shall reasonably be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that the Company shall notify the Seller in writing of any such reduction. Notwithstanding the foregoing provisions, the Company may withdraw or delay or suffer a delay of any registration statement referred to in this Section 11.1 without thereby incurring any liability to the Seller.

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12.2.Registration Procedures. If and whenever the Company is required by the provisions of Section 11.1 to effect the registration of any Warrant Shares under the 1933 Act, the Company will, as expeditiously as possible:

(a)subject to the timelines provided in this Agreement, prepare and file with the Commission a registration statement required by Section 11, with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as herein provided), promptly provide to the holders of the Warrant Shares copies of all filings and Commission letters of comment and notify the Holders (by telecopier and by e-mail addresses provided by the Holders) on or before the second business day thereafter that the Company receives notice that (i) the Commission has no comments or no further comments on the Registration Statement, and (ii) the registration statement has been declared effective;

(b)prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until such registration statement has been effective for a period of two (2) years after the date of this Agreement, and comply with the provisions of the 1933 Act with respect to the disposition of all of the Warrant Shares covered by such registration statement in accordance with the Sellers’ intended method of disposition set forth in such registration statement for such period;

(c)furnish to the Sellers, at the Company’s expense, such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or their disposition of the securities covered by such registration statement or make them electronically available;

(d)use its reasonable best efforts to register or qualify the Warrant Shares covered by such registration statement under the securities or “blue sky” laws of New York and such jurisdictions as the Sellers shall request in writing, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;

(e)if applicable, list the Warrant Shares covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed;

(f)notify the Holders within twenty-four hours of the Company’s becoming aware that a prospectus relating thereto is required to be delivered under the 1933 Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing or which becomes subject to a Commission, state or other governmental order suspending the effectiveness of the registration statement covering any of the Warrant Shares;

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(g)provided same would not be in violation of the provision of Regulation FD of the Commission, make available for inspection by the Sellers during reasonable business hours, and any attorney, accountant or other agent retained by the Seller or underwriter, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the seller, attorney, accountant or agent in connection with such registration statement at such requesting Seller’s expense; and

(h)provide to the Sellers copies of the such registration statement and amendments thereto five business days prior to the filing thereof with the Commission.

12.3.Provision of Documents. In connection with each registration described in this Section 11, each Seller will furnish to the Company in writing such information and representation letters with respect to itself and the proposed distribution by it as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws.

12.4.Rule 415. The amount of Warrant Shares required to be included in the Registration Statement as described in Section 11.1 may be reduced in proportion to other securities included in such Registration Statement by persons whose registration rights are on a par with the Holder (and 100% if so required under senior registration rights of other persons) in the event failure to effect such a reduction could cause the Registration Statement to exceed registration limitations imposed by the Commission pursuant to Rule 415 of the 1933 Act.

12.5.Expenses. All expenses incurred by the Company in complying with Section 11, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the NASD, transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of Warrant Shares are called "Selling Expenses." The Company will pay all Registration Expenses in connection with the registration statement under Section 11. Selling Expenses in connection with each registration statement under Section 11 shall be borne by the Seller and may be apportioned among the Sellers in proportion to the number of shares sold by the Seller relative to the number of shares sold under such registration statement or as all Sellers thereunder may agree.

12.6.Indemnification and Contribution.

(a)In the event of a registration of any Warrant Shares under the 1933 Act pursuant to this Section 11, the Company will, to the extent permitted by law, indemnify and hold harmless the Seller, each officers, directors, agents, Affiliates, members, managers, control persons, and principal shareholders of the Seller, each underwriter of such Warrant Shares thereunder and each other person, if any, who controls such Seller or underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which the Seller, or such underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Warrant Shares was registered under the 1933 Act pursuant to this Section 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made, and will subject to the provisions of Section 11.6(c) reimburse the Seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable to the Seller to the extent that any such damages arise out of or are based upon an untrue statement or omission made in any preliminary prospectus if (i) the Seller failed to send or deliver a copy of the final prospectus delivered by the Company to the Seller with or prior to the delivery of written confirmation of the sale by the Seller to the person asserting the claim from which such damages arise, (ii) the final prospectus would have corrected such untrue statement or alleged untrue statement or such omission or alleged omission, or (iii) to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such Seller in writing specifically for use in such registration statement or prospectus.

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(b)In the event of a registration of any of the Warrant Shares under the 1933 Act pursuant to Section 11, each Seller severally but not jointly will, to the extent permitted by law, indemnify and hold harmless the Company, and each person, if any, who controls the Company within the meaning of the 1933 Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the 1933 Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Warrant Shares were registered under the 1933 Act pursuant to Section 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the Seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such Seller, as such, furnished in writing to the Company by such Seller specifically for use in such registration statement or prospectus, and provided, further, however, that the liability of the Seller hereunder shall be limited to the net proceeds actually received by the Seller from the sale of Warrant Shares pursuant to such registration statement.

(c)Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 11.6(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 11.6(c), except and only if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 11.6(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnifying party shall have reasonably concluded that there may be reasonable defenses available to indemnified party which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties, as a group, shall have the right to select one separate counsel, reasonably satisfactory to the indemnified and indemnifying party, and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred.

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(d)In order to provide for just and equitable contribution in the event of joint liability under the 1933 Act in any case in which either (i) a Seller, or any controlling person of a Seller, makes a claim for indemnification pursuant to this Section 11.6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 11.6 provides for indemnification in such case, or (ii) contribution under the 1933 Act may be required on the part of the Seller or controlling person of the Seller in circumstances for which indemnification is not provided under this Section 11.6; then, and in each such case, the Company and the Seller will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Seller is responsible only for the portion represented by the percentage that the public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, provided, however, that, in any such case, (y) the Seller will not be required to contribute any amount in excess of the public offering price of all such securities sold by it pursuant to such registration statement; and (z) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation and provided, further, however, that the liability of the Seller hereunder shall be limited to the net proceeds actually received by the Seller from the sale of Warrant Shares pursuant to such Registration Statement.

13.Transfer on the Company's Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

14.Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: if to the Company, to: Neonode Inc., 4000 Executive Parkway, Suite 200, San Ramon, CA 94583, Attn: Chief Financial Officer, telecopier: (925) 355-2020, with a copy by telecopier only to: Hahn & Hessen LLP, 488 Madison Avenue, New York, NY 10022, Attn: James Kardon, Esq., telecopier: (212) 478-7400, and (ii) if to the Holder, to the address and telecopier number listed in the records of the Company, or such other address as such party may designate by notice hereunder.

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15.Law Governing This Warrant. This Warrant shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York. The parties to this Warrant hereby irrevocably waive 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. The Company and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

[signature page follows]

14

IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

NEONODE INC.
By:
	Name:

15

Exhibit A

FORM OF SUBSCRIPTION

(to be signed only on exercise of Warrant)

TO: NEONODE INC.

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):

___________ shares of the Common Stock covered by such Warrant; or

___the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full purchase price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes):

___$__________ in lawful money of the United States; and/or

___the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

___the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to _____________________________________________________ whose address is ____________________________________________________________________________________________________________

___________________________________________________________________________________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the "1933 Act"), or pursuant to an exemption from registration under the 1933 Act.

Dated:___________________   (Signature must conform to name of holder as specified on the face of the Warrant)       (Address)

16

Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading "Transferees" the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of NEONODE INC. to which the within Warrant relates specified under the headings "Percentage Transferred" and "Number Transferred," respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of NEONODE INC. with full power of substitution in the premises.

Transferees Percentage Transferred Number Transferred

Dated: ______________, ___________       Signed in the presence of:     (Name)     ACCEPTED AND AGREED: [TRANSFEREE]     (Name)   (Signature must conform to name of holder as specified on the face of the warrant)       (address)     (address)

EX-10.53

Exhibit 10.53

CONFIDENTIAL

Empire Asset Management Company

2 Rector Street, 15th Floor

New York, NY 10006

May 12, 2008

Neonode, Inc.

Biblioteksgatan 11, 1st floor.

SE-111 46 Stockholm, Sweden

Attention: Mr. Mikael Hagman,

Chief Executive Officer

Mr. Hagman:

Reference is made to that certain letter agreement dated February 19, 2008 (the “Engagement Letter”) between Empire Asset Management Company ("Empire") and Neonode, Inc., a Delaware corporation (“Neonode” or the “Company”) pursuant to which the Company engaged Empire to act as its financial advisor and exclusive placement agent during the Term. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Engagement Letter.

This letter agreement shall serve to confirm the Company’s request and Empire’s acceptance to act as the Company’s financial advisor with respect to a transaction pursuant to which the Company shall offer (the “Warrant Offering”), for a period expiring May 15, 2008, subject to extension as may be agreed by the Company and Empire (the “Warrant Offering Term”), to holders (the “Warrantholders”) of an aggregate of 5,614,453 warrants issued by the Company (the “Exercise Warrants”), each exercisable to purchase one share of the Company’s common stock, par value $0.01 per share (the “Common Stock”) at current exercise prices ranging from $2.83 to $16.65 per share (i) to reduce the exercise price per Exercise Warrant to the closing sale price per share of the Common Stock on May 14, 2008 plus $0.01, for those Warrantholders agreeing to exercise the Exercise Warrants for cash only (the “Exercise Warrantholders”) or (ii) to facilitate the transfer of Exercise Warrants by Warrantholders who do not wish to exercise all of such Exercise Warrants to third parties located by the Placement Agent (the “Transferee Warrantholders”), with such Transferee Warrantholders simultaneously exercising such Warrants for cash at the reduced exercise price. The specific terms of the Warrant Offering will be described in certain transaction documents and disclosure materials (collectively and as may be amended and supplemented, the “Disclosure Materials”) that the Company and Empire will negotiate in good faith prior to the commencement of the Warrant Offering.

The Warrant Offering (also referred to herein as the “Private Placement”) will be made in accordance with an exemption from the registration requirements of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the “Act”) provided by Regulation D under the Act (“Regulation D”) and the qualification and registration requirements of applicable state and foreign securities or blue sky laws and regulations. Investors in the Private Placement will be persons who qualify as “accredited investors” under Regulation D.

1. Engagement. Neonode hereby engages Empire during the Warrant Offering Term (as hereinafter defined) as its exclusive financial advisor with respect to the Private Placement. In such capacity, Empire will provide the Company with financial advice and assistance in connection with the Private Placement, which may include assisting the Company in planning the Private Placement, reviewing with the Company and its counsel all preliminary and final Disclosure Materials and subscription documents, and working with the Company in identifying potential Transferee Holders and using Empire’s reasonable efforts to assist in locating such Transferee Holders. Empire reserves the right to retain other properly licensed and registered broker-dealers to act as sub-agents on Empire’s behalf and to retain foreign representatives to act on Empire’s behalf for offers to non-United States persons (as defined for purposes of the Act). All documents to be used in the Private Placement, including, without limitation, the Disclosure Materials, will be reviewed by, and subject to the approval of, Empire and its counsel prior to their use in making offers or sales pursuant to the Warrant Offering. The Company will be responsible for updating, amending and supplementing the Disclosure Materials prior to the closing of the Private Placement as required by applicable laws. The Company represents and agrees that it will not during the Term, directly or indirectly, take any action to offer any of the securities for sale to, or solicit any offers to buy from, any person or persons otherwise than through Empire as its exclusive placement agent in connection with the Private Placement. In order to coordinate the efforts of Empire and the Company to most efficiently execute the Private Placement, the Company will promptly inform Empire of any inquiries received by the Company (or its directors, officers, employees, agents or shareholders) from a third party in respect of the Private Placement and will not initiate any discussions in respect of the Private Placement with such third party without first consulting with Empire. Neonode will furnish to Empire all documents and information regarding Neonode and its business, operations, financial matters and shareholders that Empire may reasonably request in connection with it services hereunder. Empire shall have no authority to bind Neonode to any specific terms of a Private Placement or other obligation and Neonode shall have the right to reject any proposed terms for a Private Placement or refuse to consummate the Private Placement without incurring any obligation to Empire except as provided in this agreement.

2. Success Fee. The Company agrees to pay Empire as compensation for its services under this engagement, the following fees in connection with the Private Placement

(a)a cash fee equal to 10% of the gross proceeds received at any closing of the Private Placement through the exercise of Exercise Warrants by Exercise Warrantholders and Transferee Warrantholders; and

(b)5 year warrants to purchase a number of shares of common stock equal to 10% of the gross number of shares (i) that are issued upon exercise of the Exercise Warrants at an exercise price equal to the reduced exercise price of said warrants and (ii) that are issuable upon exercise of any new warrants that are issued to Exercise Warrantholders and Transferee Warrantholders at an exercise price equal to the exercise price of the new warrants The foregoing warrants shall contain the same provisions (including, without limitation, anti-dilution protections and registration rights) that are applicable to the Exercise Warrants and new warrants, as the case may be. The foregoing warrants shall be issued to Empire and/or its designees.

Unless otherwise specified in this Agreement, compensation which is payable to Empire pursuant to this Agreement shall be paid by the Company to Empire upon the closing of the Private Placement.

3. Intentionally Omitted.

4. Expenses. Neonode shall bear all of its expenses in connection with the Private Placement. In addition, if the Private Placement is consummated, Empire will be entitled to withhold at the initial closing from the amount otherwise due to the Company a non-accountable expense allowance equal to Thirty Five Thousand Dollars ($35,000). Lastly, upon the reasonable determination by Empire that a FINRA Rule 2710 filing is required in connection with the registration statement relating to the resale of the securities sold in the Private Placement, the Company will pay all filing fees, costs and reasonable legal fees in connection with such filing to be prepared by the Empire’s counsel. If the Private Placement is not consummated for any reason, Empire will be entitled, upon presentation of a written accounting therefor in reasonable detail, to prompt reimbursement of its actual, out-of-pocket expenses related to the Private Placement, including but not limited to fees and expenses of our legal counsel, travel expenses, and due diligence related expenditures. The provisions of this paragraph shall survive the closing and any termination of the Private Placement.

CONFIDENTIAL

5. Term. The term of this agreement (“Term”) shall commence on the date hereof and shall until expiration or termination of the Warrant Offering Term. In addition, upon consummation of the Warrant Offering, the term of the Engagement Letter shall automatically be extended for a one year period commencing upon the closing of the Warrant Offering. The foregoing proviso and the provisions of paragraphs 4, 7 and 8 and Exhibit A to this agreement shall survive any termination of this agreement.

6.Further Representations and Covenants of Neonode.

(a)The Company represents and agrees that (i) it has the corporate power and authority to enter into and perform this agreement and all corporate action necessary for the authorization, execution, delivery and performance of this Agreement has been taken, (ii) this agreement constitutes a legal, valid and binding obligation of Neonode enforceable in accordance with its terms, (iii) the execution and performance of this Agreement by the Company and the offer and sale of the securities in the Private Placement will not violate any provision of the Company’s charter or bylaws or any agreement or other instrument to which the Company is a party or by which it is bound and (iv) any necessary approvals, governmental and private, will be obtained by the Company before the closing of the Private Placement.

(b) The Company represents and warrants that the Disclosure Materials will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein or previously made, in light of the circumstances under which they made not misleading. The Company will advise Empire immediately of the occurrence of any event or any other change known to the Company which results in the Disclosure Materials containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein or previously made, in light of the circumstance under which they were made, not misleading.

(c)The Company acknowledges and agrees that Empire’s obligations to commence the Private Placement may be subject to execution of a Placement Agency Agreement on customary terms and incorporating the principal terms hereof. In the absence of such Placement Agency Agreement, the Company agrees that Empire may rely upon, and will be named as a third party beneficiary of, the representations and warranties, and applicable covenants, set forth in any subscription agreement or similar agreement that the Company executes with investors in the Private Placement. The Company will, at the closing of the Private Placement, furnish Empire with a favorable opinion of its outside counsel in form and substance reasonably acceptable to Empire and its legal counsel. In addition, at the closing of the Private Placement, the Company will provide Empire with the same certificates of the officers of the Company as are furnished to the investors and such other certification, opinions and documents as Empire or its counsel may deem appropriate, in form and substance satisfactory to Empire and its counsel.

(d)The Company agrees to provide Empire with due diligence materials as we request or copies of due diligence materials which are provided to investors in the Private Placement.

CONFIDENTIAL

(e)The Company will file appropriate notices on Form D with the SEC, as well as all filings required to be made with respect to state and foreign securities or blue sky laws and regulations.

(f)The Company will not, for a period of six months following the final closing date of the Private Placement, offer for sale or sell any securities unless, in the opinion of the Company’s counsel, concurred in by Empire’s counsel, such offer or sale does not jeopardize the availability of the exemptions from the registration and qualification requirements of the Act and state and foreign securities or blue sky laws and regulations with respect to the Private Placement, and the Company has not engaged in any such offering during the six months prior to the date of this Agreement.

(g)In the event the Warrant Offering is consummated, and for so long as Empire elects, the Company agrees that it shall take, and shall cause its Board of Directors to take, all action within its powers to nominate two (2) representatives designated by Empire and/or significant Transferee Warrantholders (the “Director Designees”) as members of the Board of Directors, who shall be named at or promptly following the closing of the Warrant Offering. In the event that any Director Designee is unable to serve, or once having commenced to serve, is removed or withdraws from the Board of Directors (a “Withdrawing Director”), the Company agrees that it shall take, and shall cause its Board of Directors to take, all action within its powers to nominate or elect an individual designated by Empire and/or the Transferee Warrantholders as such Withdrawing Director’s replacement. In addition to the foregoing board designee rights, Empire shall have the right to send Robert Giannini (“Giannini”) to observe each meeting of the Board of Directors for a period of eighteen (18) months. The Company agrees to give Giannini notice of each such meeting (or copies of any consents in lieu of meetings) and to provide Giannini with an agenda and minutes of the meeting no later than it gives such notice and provides such items to the directors. In addition, as a board observer, Giannini shall be entitled to receive reimbursement for all reasonable costs incurred in attending such meetings including, but not limited to, food, lodging and transportation.

(h)In the event the Warrant Offering is consummated, the Company and Empire will enter into a financial advisory agreement for a term of eighteen (18) months pursuant to which the Company will agree to pay Empire a monthly fee of $5,000 per month in consideration of the provision of regular and customary financial advisory services as are reasonably requested by the Company, provided that Empire shall not be required to undertake duties not reasonably within the scope of the financial advisory services in which it is generally engaged.

(i)Provided that such person(s) are bound by appropriate non disclosure agreements, the Company shall cause its management to be available for weekly telephone calls with Empire and/or significant Transferee Warrantholders to discuss current financial and business updates and the Company shall make financial information, product updates and any other substantive information available to such persons upon request.

7.Indemnification. Neonode agrees to indemnify and hold harmless Empire in accordance with the agreement set forth on Exhibit A attached hereto, the term of which are specifically incorporated herein by reference.

8.Miscellaneous.

(a) Governing Law; Jurisdiction. This agreement shall be governed by and construed under the laws of the State of New York, without giving effect to principles of conflict of laws. The parties agree that any dispute, claim or controversy directly or indirectly relating to or arising out of this Agreement, the termination or validity hereof, any alleged breach of this Agreement or the engagement contemplated hereby (any of the foregoing, a “Claim”) shall be submitted to JAMS, or its successor, in New York, for final and binding arbitration in front of a panel of three arbitrators with JAMS in New York, New York under the JAMS Comprehensive Arbitration Rules and Procedures (with each of Empire and the Company choosing one arbitrator, and the chosen arbitrators choosing the third arbitrator).  The arbitrators shall, in their award, allocate all of the costs of the arbitration, including the fees of the arbitrators and the reasonable attorneys’ fees of the prevailing party, against the party who did not prevail. The award in the arbitration shall be final and binding. The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. Sec.1-16, and the judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.  The Company and Empire agree and consent to personal jurisdiction, service of process and venue in any federal or state court within the State and County of New York in connection with any action brought to enforce an award in arbitration.

CONFIDENTIAL

(b) Notices. Whenever notice is required to be given pursuant to this agreement, such notice shall be in writing and shall either be mailed by certified first class mail, postage prepaid, delivered personally, or sent by recognized overnight courier, addressed to the parties at the respective addresses set forth above. Notice shall be deemed given, if sent by mail, on the third day after deposit in a United States post office receptacle, or if delivered personally or by courier, upon receipt. Any party may change such address by like notice.

(c) Entire Agreement; Binding Effect. This agreement, together with the Engagement Letter (which continues in full force and effect in accordance with its terms except to the extent specifically amended herein), constitutes the entire agreement between Neonode and Empire with respect to the subject matter hereof and supersedes and cancels any other agreements, oral or written, with respect thereto. This agreement may not be assigned by either party without the prior written consent of the other party. This agreement shall be binding on the parties and their respective successors and permitted assigns.

(d) No Commitment. The execution of this Agreement does not constitute a commitment by Empire or the Company to consummate any transaction contemplated hereunder and does not ensure the successful placement of securities of the Company or the success of Empire with respect to securing any financing on behalf of the Company. No promises or representations have been made except as expressly set forth in this agreement and the parties have not relied on any promises or representations except as expressly set forth in this agreement.

(e) Other Services. In the event that other services are required and/or transactions which are the result of Empire’s efforts that are not as contemplated herein, the parties hereto shall negotiate in good faith to determine a mutually acceptable level of compensation in such an eventuality.

(f) Severability. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, then such determination will not affect such provision in any other respect or any other provision of this Agreement, which will remain in full force and effect. No material provision of this agreement shall be deemed waived and no breach excused, unless such waiver or consent excusing the breach shall be in writing and signed by the party to be charged with such waiver or consent.

(g)Independent Contractor. In carrying out its responsibilities under this letter, the parties agree that Empire shall be an independent contractor with complete supervision and control over its own activities, and shall have no right or authority to assume or create any obligation on behalf of the Company and Empire’s engagement by the Company shall not create any partnership, joint venture or similar business relationship between the Company and Empire. Empire shall have no restrictions on its ability to provide services to companies other than the Company, except as stated herein. Empire shall be under no obligation hereunder to make an independent appraisal of assets or investigation or inquiry as to any information regarding, or any representations of, the Company and shall have no liability hereunder in regard thereto.

CONFIDENTIAL

(h)Advice Given; Public Announcements. The Company agrees that all advice given by Empire n connection with its engagement hereunder is for the benefit and use of the Company in considering the Private Placement to which such advice relates, and the Company agrees that no such advice shall be used for any other purpose or be disclosed, reproduced, disseminated, quoted or referred to at any time, in any manner or for any purpose, nor shall any public references to Empire be made by or on behalf of the Company, in each case without Empire’s prior written consent, which consent shall not be unreasonably withheld.

(i) Counterparts. This Agreement may be executed in one or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

Please confirm your agreement to the foregoing below whereupon this letter shall constitute a binding agreement between us.

Very truly yours,
EMPIRE ASSET MANAGEMENT COMPANY
By:	/s/ Gregg Zeoli
	Gregg Zeoli
	President & CEO

Confirmed and agreed to:
NEONODE, INC.
By:	/s/ Mikael Hagman
	Mikael Hagman
	Chief Executive Officer

CONFIDENTIAL

EXHIBIT A

May 12, 2008

Empire Asset Management Company

2 Rector Street, 15th Floor

New York, NY 10006

Gentlemen:

In connection with our engagement of Empire Asset Management Company ("Empire") as our financial advisor, we hereby agree to indemnify and hold harmless Empire and its affiliates, and the respective controlling persons, directors, officers, shareholders, agents (including sub-agents) and employees of any of the foregoing (collectively the "Indemnified Persons"), from and against any and all claims, actions, suits, proceedings, damages, liabilities and expenses incurred by any of them (including the reasonable fees and expenses of counsel), (collectively a "Claim"), which are related to or arise out of (i) any actions taken or omitted to be taken by us, (ii) any actions taken or omitted to be taken by any Indemnified Person in connection with Empire's engagement or services on our behalf, or (iii) any material misstatement or alleged misstatement, or omission or alleged omission to state a material fact required to be stated or necessary to make the statements made in light of the circumstances not misleading, in any materials disseminated or filed by us or by another party to a Private Placement ((i), (ii) and (iii) are collectively referred to as the “Matters”), and we shall reimburse any Indemnified Person for all expenses (including the reasonable fees and expenses of counsel) incurred by such Indemnified Person in connection with investigating, preparing or defending any such claim, action, suit or proceeding, whether or not in connection with pending or threatened litigation in which any Indemnified Person is a party. We will not, however, be responsible to any Indemnified Person for any Claim which is finally judicially determined to have resulted from the gross negligence or willful misconduct of such Indemnified Person.

We also agree that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to us or our security holders or creditors related to, arising out of, or in connection with, any Matters, the engagement of Empire pursuant to, or the performance by Empire of the services contemplated by, our engagement letter, except to the extent any loss, claim, damage or liability if found in a final judgment by a court of competent jurisdiction to have resulted from Empire’s gross negligence or willful misconduct.

We further agree that we will not, without the prior written consent of Empire, settle, compromise or consent to the entry of any judgment in any pending or threatened Claim in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or potential party to such Claim), unless such settlement, compromise or consent includes an unconditional, irrevocable release of each Indemnified Person hereunder from any and all liability arising out of such Claim.

Promptly upon receipt by an Indemnified Person of notice of any complaint or the assertion or institution of any Claim with respect to which indemnification is being sought hereunder, such Indemnified Person shall notify us in writing of such complaint or of such assertion or institution but failure to so notify us shall not relieve us from any obligation we may have hereunder, unless and only to the extent such failure results in the forfeiture by us of substantial rights and defenses. If we so elect or are requested by such Indemnified Person, we will assume the defense of such Claim, including the employment of counsel reasonably satisfactory to such Indemnified Person and the payment of the fees and expenses of such counsel. In the event, however, that legal counsel to such Indemnified Person reasonably concludes and provides written correspondence to us, that having common counsel would present such counsel with a conflict of interest or if the defendant in, or target of, any such Claim, includes an Indemnified Person and us, and legal counsel to such Indemnified Person reasonably concludes that there may be legal defenses available to it or other Indemnified Persons different from or in addition to those available to us, then such Indemnified Person may employ its own separate counsel to represent or defend it in any such Claim and we shall pay the reasonable fees and expenses of such counsel. Notwithstanding anything herein to the contrary, if we fail timely or diligently to defend, contest, or otherwise protect against any Claim, the Indemnified Party shall have the right, but not the obligation, to defend, contest, compromise, settle, assert crossclaims or counterclaims or otherwise protect against the same, and shall be fully indemnified by us therefor, including without limitation, for the reasonable fees and expenses of its counsel and all amounts paid as a result of such Claim or the compromise or settlement thereof. In any Claim in which we assume the defense, the Indemnified Person shall have the right to participate in such Claim and to retain its own counsel at its own expense.

We agree that if any indemnity sought by an Indemnified Person hereunder is unavailable for any reason then (whether or not Empire is the Indemnified Person), we and Empire shall contribute to the Claim for which such indemnity is held unavailable in such proportion as is appropriate to reflect the relative benefits to us, on the one hand, and Empire on the other, in connection with Empire 's engagement referred to above, subject to the limitation that in no event shall the amount of Empire 's contribution to such Claim exceed the amount of fees actually received by Empire from us pursuant to Empire 's engagement. We hereby agree that the relative benefits to us, on the one hand, and Empire on the other, with respect to Empire 's engagement shall be deemed to be in the same proportion as (a) the total value paid or proposed to be paid or received by us pursuant to the Private Placement for which Empire is engaged to render services bears to (b) the fee paid or proposed to be paid to Empire in connection with such engagement.

Our indemnity, reimbursement and contribution obligations under this Agreement shall be in addition to, and shall in no way limit or otherwise adversely affect any rights that any Indemnified Party may have at law or at equity.

The provisions of this Agreement shall remain in full force and effect following the completion or termination of Empire's engagement.

Very truly yours,
NEONODE, INC.
By:
	Mikael Hagman
	Chief Executive Officer

EMPIRE ASSET MANAGEMENT COMPANY.
By:
	Gregg Zeoli
	President & CEO