NeoMedia Technologies, Inc (NEOM)

[ss9173]

From the 10K: Notes Payable

NOTES PAYABLE

On March 30, 2005, NeoMedia borrowed from Cornell the principal amount
of $10,000,000 before discounts and fees in the form of a secured promissory
note. Cornell withheld structuring and escrow fees of $68,000 related to the
note. The note was originally scheduled to be repaid at a rate of $1,120,000 per
month commencing May 1, 2005, which was subsequently changed to $840,000 per
month, continuing until principal and interest are paid in full. The note
accrues interest at a rate of 8% per annum on any unpaid principal. NeoMedia has
the option to prepay any remaining principal of the note in cash without
penalty. In connection with the note, NeoMedia and Cornell entered into a
Security Agreement under which the note is secured by all of NeoMedia's assets
other than its patents and patent applications. NeoMedia also escrowed
25,000,000 shares of its restricted common stock as security for the note. As of
December 31, 2005, NeoMedia had made payments of $7,000,000 against the
principal, reducing the principal balance to $3,000,000. During February 2006,
NeoMedia satisfied the remaining principal plus interest due on the note in
connection with its $27 million convertible preferred stock sale to Cornell (see
"subsequent events").

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SS9173