Replies to post #148264 on NeoMedia Technologies, Inc (NEOM)

[clawmann]

Hmmmm.....

"(l) Neither the Buyer(s) nor any of its affiliates have an open short position in the Common Stock of the Company, and the Buyer(s) agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the Common Stock as long as any Convertible Debentures shall remain outstanding."

That clause is from the Securities Purchase Agreement dated July 29, 2008. http://www.sec.gov/Archives/edgar/data/1022701/000114420408043681/v121767_ex10-1.htm

Question/Comment: are there any Convertible Debentures currently outstanding?...... Has the "First Closing" referred to in that agreement occurred yet? (Very Good Question for the CC). If not, there would be no Convertible Debentures currently outstanding.

Question/Comment: "Affiliate" is defined as follows: “'Affiliate' for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a ten percent (10%) or more equity interest in that person or entity, (ii) has ten percent (10%) or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control with that person or entity. “Control” or “controls” for purposes hereof means that a person or entity has the power, direct or indirect, to conduct or govern the policies of another person or entity."

But how could YA agree that it "will cause its affiliates not to engage in any short sales of or hedging transactions with respect to [NEOM's] Common Stock" when it is clear that the definition of the word "affiliate" includes entities that YA does not have the power to control? (Also, I should note that, because YA has the right to vote more than 10% of Neom's stock, it is quite arguable that YA could be deemed an "Affiliate" of NEOM.)

Question/Comment: Why does the language of the "no-shorting" provision not also prohibit YA from encouraging or advising, directly or indirectly, any other person to short Neom's stock? I believe the wording of the "no shorting" provision is simply far too narrow.

Finally, for the moment, there are some special provisions granting rights to "Non-Affiliated Buyers" (meaning buyers that are not affiliates of NEOM). However, as I noted above, it is quite arguable that YA could be considered an "Affiliate" of NEOM, especially if -as I currently assume - this agreement was drafted by YA (because there is a basic rule that ambigities in a contract are to be construed to the disadvantage of the party that drafted the contract).

[krays]

Jonsie, I'm aware of the no shorting language associated with the latest financing. I do not know, and have not had the time to look, at whether or not that type of language existed in earlier financings but I do not believe that it did. If in fact the shorting option available to YA has been eliminated by new language it may mark a turning point in pps as the stock may be allowed to trade in a more natural supply/demand scenario with less downward manipulation. I would appreciate any knowledge you can provide regarding earlier language.
Regards