IRREVOCABLE TRANSFER AGENT INSTRUCTIONS August 24, 2006
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
August
24, 2006
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American
Stock Transfer & Trust Company
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▇▇▇▇▇▇, ▇▇▇
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Brooklyn,
NY 11219
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RE: NEOMEDIA
TECHNOLOGIES, INC.
Ladies
and Gentlemen:
Reference
is made to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”)
of
even date herewith by and between Neomedia Technologies, Inc, a Delaware
corporation (the “Company”),
and
the Buyers set forth on Schedule I attached thereto (collectively the
“Buyers”).
Pursuant to the Securities Purchase Agreement, the Company shall sell to the
Buyers, and the Buyers shall purchase from the Company, convertible debentures
(collectively, the “Debentures”)
in the
aggregate principal amount of Five Million Dollars ($5,000,000), plus accrued
interest, which are convertible into shares of the Company’s common stock, par
value $.001 per share (the “Common
Stock”),
at
the Buyers’ discretion. The Company has also issued to the Buyers warrants to
purchase up to 175,000,000 shares of Common Stock, at the Buyers’ discretion
(the “Warrant”).
These
instructions relate to the following stock or proposed stock issuances or
transfers:
| 1. |
76,277,650
Shares of Common Stock to be issued to the Buyers upon conversion of
the
Debentures (“Conversion
Shares”)
plus the shares of Common Stock to be issued to the Buyers upon conversion
of accrued interest and liquidated damages into Common Stock (the
“Interest
Shares”).
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| 2. |
Up
to 175,000,000 shares of Common Stock to be issued to the Buyers upon
exercise of the Warrant (the “Warrant
Shares”).
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This
letter shall serve as our irrevocable authorization and direction to American
Stock Transfer & Trust Company (the “Transfer
Agent”)
to do
the following:
| 1. |
Conversion
Shares, Warrant Shares and Interest Shares.
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| a. |
Instructions
Applicable to Transfer Agent.
With respect to the Conversion Shares, Warrant Shares and the Interest
Shares, the Transfer Agent shall issue the Conversion Shares, Warrant
Shares and the Interest Shares to the Buyers from time to time upon
delivery to the Transfer Agent of a properly completed and duly executed
Conversion Notice (the “Conversion
Notice”)
in the form attached hereto as Exhibit A to the Debentures, or a properly
completed and duly executed Exercise Notice (the “Exercise
Notice”)
in the form attached as Exhibit A to the Warrant, delivered to the
Transfer Agent by the Company or on behalf of the Company by ▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq. as escrow agent (the “Escrow
Agent”).
Upon receipt of a Conversion Notice or an Exercise Notice, the Transfer
Agent shall, as soon as reasonably practical thereafter, (i) issue
and
surrender to a common carrier for overnight delivery to the address
as
specified in the Conversion Notice or the Exercise Notice, a certificate,
registered in the name of the Buyer or its designees, for the number
of
shares of Common Stock to which the Buyer shall be entitled as set
forth
in the Conversion Notice or Exercise Notice, or (ii) provided the Transfer
Agent is participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the
Buyers, credit such aggregate number of shares of Common Stock to which
the Buyers shall be entitled to the Buyer’s or their designees’ balance
account with DTC through its Deposit Withdrawal At
Custodian (“DWAC”)
system, provided that the Buyer causes its bank or broker to initiate
the
DWAC transaction, and further provided that a certificate representing
such shares of Common Stock would not be required to bear a legend
restricting transfer.
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| b. |
The
Company hereby confirms to the Transfer Agent and the Buyers that
certificates representing the Conversion Shares, Warrant Shares and
Interest Shares shall not bear any legend restricting transfer and
should
not be subject to any stop-transfer restrictions and shall otherwise
be
freely transferable on the books and records of the Company; provided
that Buyers
confirm to the Transfer Agent and the Company that the Conversion Shares,
Warrant Shares and Interest Shares have been or will be sold only pursuant
to an effective registration statement for such securities under the
Securities Act of 1933, as amended (the “Act”), and that the Buyers have
complied, or will comply, with all applicable prospectus delivery
requirements;
and
further provided that counsel to the Company delivers (i) the Notice
of
Effectiveness set forth in Exhibit
I
attached hereto and (ii) an opinion of counsel in the form set forth
in
Exhibit
II
attached hereto, and that if the Conversion Shares, Warrant Shares
and the
Interest Shares are not registered for sale under the Act, then the
certificates for the Conversion Shares, Warrant Shares and Interest
Shares
shall bear the following legend:
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“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID
ACT.”
| c. |
In
the event that counsel to the Company fails or refuses to render an
opinion as required to issue the Conversion Shares,
the Warrant Shares or the Interest Shares in
accordance with the preceding paragraph (either with or without
restrictive legends, as applicable), then the Company irrevocably and
expressly authorizes counsel to the Buyer to render such opinion. The
Transfer Agent shall accept and be entitled to rely on such opinion
for
the purposes of issuing the Conversion Shares, the Warrant Shares or
the
Interest Shares.
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| d. |
Upon
the Company’s or the Escrow Agent’s receipt of a properly completed
Conversion Notice or Exercise Notice (along with evidence that the
Aggregate Exercise Price (as defined in the Warrant) has been delivered
to
the Company), the Company or the Escrow Agent, as the case may be,
shall,
within one (1) Trading Day thereafter, send to the Transfer Agent the
Conversion Notice or Exercise Notice, as the case may be, which shall
constitute an irrevocable instruction to the Transfer Agent to process
such Conversion Notice or Exercise Notice in accordance with the terms
of
these instructions. For purposes hereof “Trading
Day”
shall mean any day on which the Nasdaq Market is open for customary
trading.
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| 2. |
All
Shares.
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| a. |
The
Company hereby irrevocably appoints the Escrow Agent as a duly authorized
agent of the Company for the purposes of authorizing the Transfer Agent
to
process issuances and transfers specifically contemplated
herein.
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| b. |
The
Transfer Agent shall rely exclusively on the Conversion Notice or the
Exercise Notice, and shall have no liability for relying on such
instructions. Any Conversion Notice or Exercise Notice delivered hereunder
shall constitute an irrevocable instruction to the Transfer Agent to
process such notice or notices in accordance with the terms thereof.
Such
notice or notices may be transmitted to the Transfer Agent by facsimile
or
any commercially reasonable method.
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| c. |
The
Company hereby confirms to the Transfer Agent and the Buyers that no
instructions other than as contemplated herein will be given to Transfer
Agent by the Company with respect to the matters referenced herein.
The
Company hereby authorizes the Transfer Agent, and the Transfer Agent
shall
be obligated, to disregard any contrary instructions received by or
on
behalf of the Company.
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Certain
Notice Regarding the Escrow Agent.
The
Company and the Transfer Agent hereby acknowledge that the Escrow Agent is
general counsel to the Buyers, a partner of the general partner of the Buyers
and counsel to the Buyers in connection with the transactions contemplated
and
referred herein. The Company and the Transfer Agent agree that in the event
of
any dispute arising in connection with this Agreement or otherwise in connection
with any transaction or agreement contemplated and referred herein, the Escrow
Agent shall be permitted to continue to represent the Buyers and neither the
Company nor the Transfer Agent will seek to disqualify such
counsel.
The
Company hereby agrees that it shall not replace the Transfer Agent as the
Company’s transfer agent without the prior written consent of the
Buyers.
The
Company agrees that in the event that the Transfer Agent resigns as the
Company’s transfer agent the Company shall engage a suitable replacement
transfer agent that will agree to serve as transfer agent and to be bound by
the
terms and conditions of these Irrevocable Transfer Agent Instructions within
5
business days from the effectiveness of such resignation.
The
Company acknowledges that the Buyers are relying on the representations and
covenants made by the Company hereunder and are a material inducement to the
Buyers purchasing convertible debentures under the Securities Purchase
Agreement. The Company further acknowledges that without such representations
and covenants of the Company made hereunder, the Buyers would not purchase
the
Debentures.
The
Company specifically acknowledges and agrees that in the event of a breach
or
threatened breach by a party hereto of any provision hereof, the Buyers will
be
irreparably damaged and that damages at law would be an inadequate remedy if
these Irrevocable Transfer Agent Instructions were not specifically enforced.
Therefore, in the event of a breach or threatened breach by the Company,
including, without limitation, the attempted termination of the agency
relationship created by this instrument, the Buyers shall be entitled, in
addition to all other rights or remedies, to an injunction restraining such
breach, without being required to show any actual damage or to post any bond
or
other security, and/or to a decree for specific performance of the provisions
of
these Irrevocable Transfer Agent Instructions.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties have caused this letter agreement regarding Irrevocable Transfer Agent
Instructions to be duly executed and delivered as of the date first written
above.
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COMPANY:
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Neomedia
Technologies, Inc.
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By:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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Title: President
& Chief Executive Officer
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/s/
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq.
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American
Stock Transfer & Trust Company
By:
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
Title: Vice
President
SCHEDULE
I
SCHEDULE
OF BUYERS
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Name
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Signature
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Address/Facsimile
Number
of Buyers
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Cornell
Capital Partners, LP
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By: Yorkville
Advisors, LLC
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▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
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Its: General
Partner
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Jersey
City, NJ 07303
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Facsimile:
(▇▇▇)
▇▇▇-▇▇▇▇
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By:
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Name: ▇▇▇▇
▇▇▇▇▇▇
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Its: Portfolio
Manager
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EXHIBIT
I
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
_________,
200_
________
Attention:
RE: NEOMEDIA
TECHNOLOGIES, INC.
Ladies
and Gentlemen:
We
are
counsel to Neomedia Technologies, Inc., (the “Company”),
and
have represented the Company in connection with that certain Securities Purchase
Agreement, dated as of ________________ ____, 200_ (the “Securities
Purchase Agreement”),
entered into by and among the Company and the Buyers set forth on Schedule
I
attached thereto (collectively the “Buyers”)
pursuant to which the Company has agreed to sell to the Buyers up to $5,000,000
of secured convertible debentures, which shall be convertible into shares (the
“Conversion
Shares”)
of the
Company’s common stock, par value $.01 per share (the “Common
Stock”),
in
accordance with the terms of the Securities Purchase Agreement. Pursuant to
the
Securities Purchase Agreement, the Company also has entered into a Registration
Rights Agreement, dated as of ______________ ___, 200_, with the Buyers (the
“Investor
Registration Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Conversion Shares under the Securities Act of 1933, as amended (the
“1933
Act”).
In
connection with the Company’s obligations under the Securities Purchase
Agreement and the Registration Rights Agreement, on _______, 200_, the Company
filed a Registration Statement (File No. ___-_________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the sale of the Conversion Shares.
In
connection with the foregoing, we advise the Transfer Agent that a member of
the
SEC’s staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at ____ P.M.
on __________, 200_ and we have no knowledge that any stop order suspending
its
effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the SEC and the Conversion Shares are
available for sale under the 1933 Act pursuant to the Registration
Statement.
The
statement made herein that “we have no knowledge” is based solely on information
actually known to those attorneys currently practicing with this firm and
engaged in the representation of the Company in connection with the transactions
contem-plated by the Securities Purchase Agreement.
| Very truly yours, |
EXHIBIT
II
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF OPINION
VIA
FACSIMILE AND REGULAR MAIL
American
Stock Transfer and Trust
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇,
▇▇▇
▇▇▇▇▇
Brooklyn,
NY 11212
RE: NEOMEDIA
TECHNOLOGIES, INC.
Ladies
and Gentlemen:
We
have
acted as counsel to Neomedia Technologies, Inc., a Delaware corporation (the
“Company”),
in
connection with the registration under the Securities Act of 1933, as amended
(the “Act”), of an offering of up to ____________ shares of the Company’s common
stock, par value $0.001 per share (the “Common Stock”), issued or to be issued
to the selling stockholders (the “Selling Stockholders”) listed in the selling
stockholders table at page __ of the final prospectus, a copy of which is
attached hereto as Exhibit A. We understand that the certificates representing
the Common Stock currently contain a legend (the “Securities Act Legend”)
stating that the Common Stock represented by such certificates may not be sold
or transferred without registration under the Act.
The
sale
of the Common Stock by the Selling Stockholders has been registered under the
Act pursuant to a Registration Statement on Form S-1 (SEC File No. 333-______),
filed with the Securities and Exchange Commission (the “Commission”) on ________
__, 200_ (the “Registration Statement”). The Registration Statement was declared
effective under the Act by the Commission on ________ __, 200_. Therefore,
the
Common Stock identified in the Registration Statement, including those shares
issued upon exercise of the Convertible Debentures and Warrants referenced
in
Exhibit A, may, upon receipt of confirmation from the Selling Stockholder that
the Common Stock has been or will be sold only pursuant to the Registration
Statement and that the Selling Stockholder has complied, or will comply, with
all applicable prospectus delivery requirements, be issued or reissued, as
applicable, without bearing the Securities Act Legend.
| Very truly yours, |
EXHIBIT
A
Prospectus