Exhibit 10.2


 


NEITHER THIS DEBENTURE NOR THE SECURITIES
INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.


 


NEOMEDIA
TECHNOLOGIES, INC.


 


Secured
Convertible Debenture


 


	Issuance Date: June 1, 2012	Original Principal Amount:     $450,000
	No. NEOM-12-5	 


 


FOR VALUE RECEIVED,
NEOMEDIA TECHNOLOGIES, INC., a Delaware corporation (the “Company”), hereby promises to pay to the order
of YA GLOBAL INVESTMENTS, L.P. or registered assigns (the “Holder”) the amount set out above as the Original
Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”)
when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance
with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest
Rate from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable,
whether upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms
hereof). This Secured Convertible Debenture (including all Secured Convertible Debentures issued in exchange, transfer or replacement
hereof, this “Debenture”) is issued pursuant to the Agreement dated June 1, 2012 (the “SPA Agreement”).
Certain capitalized terms used herein are defined in Section 17.


 


(1)         GENERAL
TERMS


 


(a)          Payment
of Principal. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing
all outstanding Principal, accrued and unpaid Interest.  The “Maturity Date” shall be August 1, 2013
as may be extended at the option of the Holder (i) in the event that, and for so long as, an Event of Default (as defined below)
shall have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall have
occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and
the failure to cure would result in an Event of Default. Other than as specifically permitted by this Debenture, the Company may
not prepay or redeem any portion of the outstanding Principal without the prior written consent of the Holder.


 



    	 



    	 



    

 


(b)          Interest.
Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to nine and one-half percent (9.5%) (“Interest
Rate”). Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent
permitted by applicable law. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder
or its assignee in whose name this Debenture is registered on the records of the Company regarding registration and transfers of
Debentures at the option of the Company in cash, or, provided that the Equity Conditions are then satisfied converted into Common
Stock at the applicable Conversion Price.


 


(c)          Security.
The Debenture is secured by a security interest in all of the assets of the Company and of each of the
Company’s subsidiaries as evidenced by and further described in the SPA Agreement.


 


(2)         EVENTS
OF DEFAULT. 


 


(a)          An
“Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether
it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court,
or any order, rule or regulation of any administrative or governmental body):


 


(i)          the
Company’s failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Debenture
(including, without limitation, the Company’s failure to pay any redemption payments, or other amounts hereunder) or any
agreement between the Company and/or any of its subsidiaries and the Holder, including without limitation, the Transaction Documents;


 


(ii)         The
Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the
Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company
or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating
to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any
such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary
of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding
is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed
receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 61
days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or
any subsidiary of the Company shall state that it is unable to pay its debts generally as they become due; or the Company or any
subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring
of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent
to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary
of the Company for the purpose of effecting any of the foregoing;


 



    	 



    	 



    

 


(iii)        The
Company or any subsidiary of the Company shall default in any of its obligations under any other debenture or any mortgage, credit
agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring
arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists
or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable;


 


(iv)        If
the Common Stock is quoted or listed for trading on any of the following and it ceases to be so quoted or listed for trading and
shall not again be quoted or listed for trading on any Primary Market within five Trading Days of such delisting: (a) the NYSE
Amex, (b) New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin
Board (“OTCBB”) (each, a “Primary Market”);


 


(v)         The
Company or any subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6) unless
in connection with such Change of Control Transaction this Debenture is retired;


 


(vi)        the
Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within five
Business Days after the applicable Conversion Failure or (B) notice, written or oral, to any holder of the Debentures, including
by way of public announcement, at any time, of its intention not to comply with a request for conversion of any Debentures into
shares of Common Stock that is tendered in accordance with the provisions of the Debentures, other than pursuant to Section 4(c);


 


(vii)       The
Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three Business
Days after such payment is due;


 


(viii)      The
Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach
or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(vii) hereof) or any Transaction
Document (as defined in Section 17) which is not cured within the time prescribed; or


 


(ix)         The
occurrence of a default or event of default under one or more of the document, instruments, or agreements between one or more of
the Company and its subsidiaries and affiliates, and the Holder.


 



    	 



    	 



    

 


(b)          During
the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full unpaid Principal amount
of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become
at the Holder’s election, immediately due and payable in cash; provided however, the Holder may request (but shall have no
obligation to request) payment of such amounts in Common Stock of the Company. If an Event of Default occurs and for so long as
such Event of Default remains uncured, the Interest Rate on this Debenture shall immediately become the lesser of 20% per annum
and the maximum interest rate allowable by law and shall remain at such increased interest rate until the applicable Event of Default
is cured. Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this
Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Default Conversion Price. The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, (other than required notice
of conversion) and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled
by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default
or impair any right consequent thereon.


 


(c)          REDEMPTION.
The Company at its option shall have the right to redeem (“Optional Redemption”) a portion or all amounts outstanding
under this Debenture prior to the Maturity Date provided that as of the date of the Holder’s receipt of a Redemption Notice
(as defined herein) (i) the Closing Bid Price is less than the Fixed Conversion Price and (ii) there is no Equity Conditions
Failure. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium (“Redemption
Premium”) equal to 10% of the Principal amount being redeemed, and accrued Interest, (collectively referred to as the
“Company Additional Redemption Amount”). In order to make an Optional Redemption, the Company shall first provide
written notice to the Holder of its intention to make a redemption (the “Optional Redemption Notice”) setting
forth the amount of Principal it desires to redeem. After receipt of the Optional Redemption Notice the Holder shall have 45 Business
Days to elect to convert all or any portion of this Debenture, subject to the limitations set forth in Section 4(c). On the 46th
Business Day after the Optional Redemption Notice, the Company shall deliver to the Holder the Company Additional Redemption Amount
with respect to the Principal amount redeemed after giving effect to conversions effected during the 45 Business Day period.


 


(3)         CONVERSION
OF DEBENTURE. This Debenture shall be convertible into shares of
the Company’s Common Stock, on the terms and conditions set forth in this Section 4.


 


(a)          Conversion
Right. Subject to the provisions of Section 4(c), at any time or times on or after the Issuance Date, the Holder shall be entitled
to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares
of Common Stock in accordance with Section 4(b), at the Conversion Rate (as defined below). The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to this Section 4(a) shall be determined by dividing (x) such Conversion
Amount by (y) the Conversion Price (the “Conversion Rate”). The Company shall not issue any fraction of a share
of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer,
stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion
Amount.


 



    	 



    	 



    

 


(i)          “Conversion
Amount” means the portion of the Principal and accrued Interest to be converted, redeemed or otherwise with respect to
which this determination is being made.


 


(ii)         “Conversion
Price” means, as of any Conversion Date (as defined below), any Redemption Date or other date of determination the lesser
of (a) $0.10 (the “Fixed Conversion Price”), subject to adjustment as provided herein, or (b) ninety five percent (95%)
of the lowest Volume Weighted Average Price during the 60 Trading Days immediately preceding the Conversion Date, Redemption Date
or other date of determination (the “Market Conversion Price”).


 


(b)          Mechanics
of Conversion.


 


(i)          Optional
Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”),
the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such
date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”)
to the Company and (B) if required by Section 4(b)(iv), surrender this Debenture to a nationally recognized overnight delivery
service for delivery to the Company (or an indemnification undertaking reasonably satisfactory to the Company with respect to this
Debenture in the case of its loss, theft or destruction). On or before the third Business Day following the date of receipt of
a Conversion Notice (the “Share Delivery Date”), the Company shall (X) if legends are not required to be placed
on certificates of Common Stock pursuant to the Securities Purchase Agreement and provided that the Transfer Agent is participating
in the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate
number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account
with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered
in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which
certificates shall not bear any restrictive legends unless required pursuant to Section 2(g) of the Securities Purchase Agreement.
If this Debenture is physically surrendered for conversion and the outstanding Principal of this Debenture is greater than the
Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later
than three (3) Business Days after receipt of this Debenture and at its own expense, issue and deliver to the holder a new Debenture
representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable
upon a conversion of this Debenture shall be treated for all purposes as the record holder or holders of such shares of Common
Stock upon the transmission of a Conversion Notice.


 



    	 



    	 



    

 


(ii)         Company’s
Failure to Timely Convert. If within three Trading Days after the Company’s receipt of the facsimile copy of a Conversion
Notice the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder’s balance account with
DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion
Amount (a “Conversion Failure”), and if on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion
that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three Business
Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal
to the Holder’s total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the shares
of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation
to deliver such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Bid Price
on the Conversion Date.


 


(iii)        Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Debenture in accordance with
the terms hereof, the Holder shall not be required to physically surrender this Debenture to the Company unless (A) the full Conversion
Amount represented by this Debenture is being converted or (B) the Holder has provided the Company with prior written notice (which
notice may be included in a Conversion Notice) requesting reissuance of this Debenture upon physical surrender of this Debenture.
The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender
of this Debenture upon conversion.


 


(c)          Limitations
on Conversions.


 


(i)          Beneficial
Ownership. The Company shall not effect any conversions of this Debenture and the Holder shall not have the right to convert
any portion of this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent that after giving
effect to such conversion or receipt of such interest payment, the Holder, together with any affiliate thereof, would beneficially
own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.99%
of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as
payment of interest. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may
hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock
in excess of 9.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially
owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction
contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible
shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount
of this Debenture that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result
in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 4(a) and,
any principal amount tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this Debenture.
The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than
65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.


 



    	 



    	 



    

 


(d)          Other
Provisions.


 


(i)          All
calculations under this Section 4 shall be rounded to the nearest $0.0001 or whole share.


 


(ii)         Initial
Reserve. The Company covenants that it will at all times from and after the date hereof reserve and keep available out of its
authorized and unissued shares of Common Stock, Three Billion (3,000,000,000) shares (the “Initial Share Reserve”)
solely for the purpose of issuance of Common Stock pursuant to this Debenture and the Other Securities.


 


(iii)        Procedures
to Increase Reserve. If at any time the total number of shares of Common Stock that may be issued pursuant to this Debenture
and the Other Securities (in each case, and solely for the purpose of this clause, ignoring any restrictions or limitations
on the number of shares of Common Stock that may be presently issuable pursuant to each instrument) exceeds the number of shares
then reserved for issuance under the Initial Share Reserve, then the Holder shall have the right to provide written notice to the
Company (a “Reserve Increase Notice”) to increase the Initial Share Reserve to a number of shares of Common
Stock selected by the Holder, which shall not exceed the maximum number of shares of Common Stock that may be issuable pursuant
to the instruments held by the Holder at the time of the Reserve Increase Notice (the Initial Share Reserve, as increased, the
“YA Share Reserve”). Within sixty (60) days of receipt of a Reserve Increase Notice, the Company shall increase
the Initial Share Reserve in accordance with such notice. Notwithstanding the foregoing, in the event the Company does not have
a sufficient number of authorized shares of Common Stock available to satisfy its obligation to reserve for issuance such number
of shares as set forth in the Reserve Increase Notice to create the YA Share Reserve, then (A) the Company shall promptly reserve
such portion of its authorized shares of Common Stock that is available to be reserved for the creation of the YA Share Reserve,
and (B) with respect to any shortfall, the Company shall (i) take all steps necessary to increase its authorized shares of Common
Stock to an amount sufficient to allow the Company to reserve the required amount as quickly as practicable, and (ii) use its best
efforts to amend the Company’s certificate of incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the required amount, as soon as practicable and in any event not later than the seventy-fifth (75th)
day after receipt of a Reserve Increase Notice. All reservations or increases of amounts of reserved shares and authorized shares
of Common Stock under this section shall be subject to the due and proper approval, as applicable and required by all relevant
laws, of the shareholders of the Company. With respect to the Company’s maintenance of the Initial Share Reserve and the
YA Share Reserve as set forth in this section, an Event of Default shall only occur upon the Company’s inability to increase
the amount of reserved shares of Common Stock via the amendment of its certificate of incorporation as prescribed above, subsequent
to its receipt of a Reserve Increase Notice. The Company’s receipt of a Reserve Increase Notice shall not constitute an Event
of Default.


 



    	 



    	 



    

 


(iv)        Nothing
herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein
for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security.
The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof
or under applicable law.


 


(4)         Adjustments
to Conversion Price


 


(a)          Adjustment
of Conversion Price upon Issuance of Common Stock. If the Company, at any time while this Debenture is outstanding, issues
or sells, or in accordance with this Section 5(a) is deemed to have issued or sold, any shares of Common Stock, excluding shares
of Common Stock deemed to have been issued or sold by the Company in connection with any Excluded Securities, for a consideration
per share (the “New Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior
to such issue or sale (such price the “Applicable Price”) (the foregoing a “Dilutive Issuance”),
then immediately after such Dilutive Issuance the Conversion Price then in effect shall be reduced to an amount equal to the New
Issuance Price. For purposes of determining the adjusted Conversion Price under this Section 5(a), the following shall be applicable:


 


(i)          Issuance
of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities
issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per
share. For purposes of this Section, the “lowest price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company
with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion
or exchange or exercise of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion
Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such Common Stock upon conversion or exchange or exercise of such Convertible Securities.


 



    	 



    	 



    

 


(ii)         Issuance
of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon such conversion or exchange or exercise thereof is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section, the “lowest
price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise” shall be equal
to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share
of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock upon
conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of such Convertible Securities
is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other
provisions of this Section, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.


 


(iii)        Change
in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable or exercisable for Common Stock changes at any time, the Conversion Price in effect
at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options
or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold. For purposes of this Section, if the terms of any Option or Convertible
Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an
increase of the Conversion Price then in effect.


 


(iv)        Calculation
of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto,
the Options will be deemed to have been issued for the difference of (x) the aggregate fair market value of such Options and other
securities issued or sold in such integrated transaction, less (y) the fair market value of the securities other than such Option,
issued or sold in such transaction and the other securities issued or sold in such integrated transaction will be deemed to have
been issued or sold for the balance of the consideration received by the Company. If any Common Stock, Options or Convertible Securities
are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the
gross amount raised by the Company; provided, however, that such gross amount is not greater than 110% of the net amount received
by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount of consideration received by the Company will be the
Closing Bid Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued
to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount
of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving
entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement
within ten days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value
of such consideration will be determined within five (5) Business Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser
shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the
Company.


 



    	 



    	 



    

 


(v)         Record
Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the Common
Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may be.


 


(b)          Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock. If the Company, at any time while this Debenture is outstanding,
shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller
number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then
the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or re-classification.


 


(c)          Purchase
Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which
the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion
of this Debenture (without taking into account any limitations or restrictions on the convertibility of this Debenture) immediately
before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.


 


(d)          Other
Events. If any event occurs of the type contemplated by the provisions of this Section 5 but not expressly provided for by
such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Conversion Price
so as to protect the rights of the Holder under this Debenture; provided that no such adjustment will increase the Conversion Price
as otherwise determined pursuant to this Section 5.


 



    	 



    	 



    

 


(e)          Other
Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a conversion of this Debenture, at the Holder’s
option, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which
the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the
Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility
of this Debenture) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or
other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Debenture initially been issued with conversion rights for the
form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with
the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without
regard to any limitations on the conversion or redemption of this Debenture.


 


(f)          Whenever
the Conversion Price is adjusted pursuant to Section 5 hereof, the Company shall promptly mail to the Holder a notice setting forth
the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.


 


(g)          In
case of any (1) merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale
by the Company or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related
transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount of
this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales
would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder
a convertible Debenture with a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder,
plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have
terms identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights
and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued.
In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible
Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such
transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive
the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision
shall similarly apply to successive such events.


 



    	 



    	 



    

 


(5)         REISSUANCE
OF THIS DEBENTURE.


 


(a)          Transfer.
If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will, subject
to the satisfaction of the transfer provisions of the Securities Purchase Agreement, forthwith issue and deliver upon the order
of the Holder a new Debenture (in accordance with Section 6(d)), registered in the name of the registered transferee or assignee,
representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being
transferred, a new Debenture (in accordance with Section 6(d)) to the Holder representing the outstanding Principal not being transferred.
The Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of Section
4(b)(iii) following conversion or redemption of any portion of this Debenture, the outstanding Principal represented by this Debenture
may be less than the Principal stated on the face of this Debenture.


 


(b)          Lost,
Stolen or Mutilated Debenture. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Debenture, and, in the case of loss, theft or destruction, of any indemnification undertaking
by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Debenture,
the Company shall execute and deliver to the Holder a new Debenture (in accordance with Section 6(d)) representing the outstanding
Principal.


 


(c)          Debenture
Exchangeable for Different Denominations. This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Debenture or Debentures (in accordance with Section 6(d)) representing in the aggregate the outstanding
Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated
by the Holder at the time of such surrender.


 


(d)          Issuance
of New Debentures. Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such
new Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture,
the Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 6(a) or Section 6(c), the
Principal designated by the Holder which, when added to the principal represented by the other new Debentures issued in connection
with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance
of new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the
Issuance Date of this Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued
and unpaid Interest from the Issuance Date.


 



    	 



    	 



    

 


(6)         NOTICES.  Any
notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii)
one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such communications shall be:


 


	If to the Company, to:	
        NeoMedia Technologies, Inc.

        100 West Arapahoe Avenue

        Suite 9

        Boulder, Colorado 80302

	 	Attention:  Chief Executive Officer or Chief Financial Officer
	 	Telephone:      678-638-0460
	 	Facsimile:       678-638-0466
	 	 
	With a copy to:	K&L Gates LLP
	 	200 South Biscayne Boulevard – Suite 3900
	 	Miami, FL  33131-2399
	 	Attention:        Clayton E. Parker, Esq.
	 	Telephone:      (305) 539-3300
	 	Facsimile:       (305) 358-7095


 


	If to the Holder:	YA Global Investments, LP
	 	101 Hudson Street, Suite 3700
	 	Jersey City, NJ  07302
	 	Attention:        Mark Angelo
	 	Telephone:      (201) 985-8300
	 	 
	With a copy to:	David Gonzalez, Esq.
	 	101 Hudson Street – Suite 3700
	 	Jersey City, NJ 07302
	 	Telephone:      (201) 985-8300
	 	Facsimile:       (201) 985-8266


 


or at such other
address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice
given to each other party three Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given
by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or
(iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt
by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.


 



    	 



    	 



    

 


(7)         Except
as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute
and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate,
and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. As long as this Debenture
is outstanding, the Company shall not and shall cause their subsidiaries not to, without the consent of the Holder, (i) amend its
certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder (which shall
include combining (by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares); (ii) repay,
repurchase or offer to repay, repurchase or otherwise acquire shares of its Common Stock or other equity securities other than
as to the Underlying Shares to the extent permitted or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing.


 


(8)         This
Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders
or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the
terms hereof.


 


(9)         No
indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon
liquidation or dissolution or otherwise. Without the Holder’s consent, the Company will not and will not permit any of their
subsidiaries to, directly or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits
there from that is senior in any respect to the obligations of the Company under this Debenture.


 


(10)        This
Debenture shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts
of laws thereof. Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in
Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection
with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.


 


(11)        If
the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for
all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action
in connection with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or
in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any
sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal;
or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.


 



    	 



    	 



    

 


(12)        Any
waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon
strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in
writing.


 


(13)        If
any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and
if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and
circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws
governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate
of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture,
and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has been enacted.


 


(14)        Whenever
any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.


 


(15)        THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS DEBENTURE OR ANY TRANSACTION DOCUMENT OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE PARTIES’ ACCEPTANCE OF THIS DEBENTURE.


 


(16)        CERTAIN
DEFINITIONS For purposes of this Debenture, the following terms shall have the following meanings:


 


(a)          “Approved
Stock Plan” means a stock option plan that has been approved by the Board of Directors of the Company, pursuant to which
the Company’s securities may be issued only to any employee, officer, or director for services provided to the Company.


 


(b)          “Bloomberg”
means Bloomberg Financial Markets.


 



    	 



    	 



    

 


(c)          “Business
Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or
a day on which banking institutions are authorized or required by law or other government action to close.


 


(d)          “Change
of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through
legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of
the voting securities of the Company (except that the acquisition of voting securities by the Holder or any other current holder
of convertible securities of the Company shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement
at one time or over time of more than one-half of the members of the board of directors of the Company which is not approved by
a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving
as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members
of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or
more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions with or into another
entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing
for any of the events set forth above in (a), (b) or (c).


 


(e)          “Closing
Bid Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange
which the Common Stock is then listed as quoted by Bloomberg.


 


(f)          “Convertible
Securities” means any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for Common Stock.


 


(g)          “Commission”
means the Securities and Exchange Commission.


 


(h)          “Common
Stock” means the common stock, par value $.001, of the Company and stock of any other class into which such shares may
hereafter be changed or reclassified.


 


(i)          “Default
Conversion Price” means, the lower of (i) the Fixed Conversion Price and (ii) that price which shall be computed as 50%
of the lowest daily Volume Weighted Average Price of the Common Stock during the sixty (60) consecutive Trading Days immediately
preceding the applicable Conversion Date. All such determinations to be appropriately adjusted for any stock split, stock dividend,
stock combination or other similar transaction


 



    	 



    	 



    

 


(j)          “Equity
Conditions” means that each of the following conditions is satisfied: (i) on each day during the period beginning two
weeks prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity
Conditions Measuring Period”), either (x) an Underlying Shares Registration Statement shall be effective and available for
the resale of all applicable shares of Common Stock to be issued in connection with the event requiring determination or (y) all
applicable shares of Common Stock to be issued in connection with the event requiring determination shall be eligible for sale
without restriction and without the need for registration under any applicable federal or state securities laws; (ii) on each day
during the Equity Conditions Measuring Period, the Common Stock is designated for quotation on the Principal Market and shall not
have been suspended from trading on such exchange or market nor shall delisting or suspension by such exchange or market been threatened
or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance
requirements of such exchange or market; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered
Conversion Shares upon conversion of the Debentures to the Holder on a timely basis as set forth in Section 4(b)(ii) hereof; (iv)
any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without
violating Section 4(c) hereof and the rules or regulations of the Primary Market; (v) during the Equity Conditions Measuring Period,
there shall not have occurred either (A) an Event of Default or (B) an event that with the passage of time or giving of notice
would constitute an Event of Default; and (vii) the Company shall have no knowledge of any fact that would cause (x) the Registration
Statements required pursuant to the Registration Rights Agreement not to be effective and available for the resale of all applicable
shares of Common Stock to be issued in connection with the event requiring determination or (y) any applicable shares of Common
Stock to be issued in connection with the event requiring determination not to be eligible for sale without restriction and without
the need for registration under any applicable federal or state securities laws.


 


(k)          “Equity
Conditions Failure” means that on any applicable date the Equity Conditions have not been satisfied (or waived in writing
by the Holder).


 


(l)          “Exchange
Act” means the Securities Exchange Act of 1934, as amended.


 


(m)          “Excluded
Securities” means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan
(b) shares of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any right,
option, obligation or security outstanding on the date prior to date of the Securities Purchase Agreement, provided that the terms
of such right, option, obligation or security are not amended or otherwise modified on or after the date of the Securities Purchase
Agreement, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted
or otherwise modified and the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or
in accordance with, the relevant governing documents or otherwise) on or after the date of the Securities Purchase Agreement, (c)
shares issued in connection with any acquisition by the Company, whether through an acquisition of stock or a merger of any business,
assets or technologies, leasing arrangement or any other transaction the primary purpose of which is not to raise equity capital,
and (d) the shares of Common Stock issued or deemed to be issued by the Company upon conversion of this Debenture.


 



    	 



    	 



    

 


(n)          “Fundamental
Transaction” means any of the following: (1) the Company effects any merger or consolidation of the Company with
or into another Person and the Company is the non-surviving company (other than a merger or consolidation with a wholly owned subsidiary
of the Company for the purpose of redomiciling the Company), (2) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (3) any tender offer or exchange offer (whether by the Company or another Person)
is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash
or property, or (4) 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.


 


(o)          “Options”
means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible
Securities.


 


(p)          “Original
Issue Date” means the date of the first issuance of this Debenture regardless of the number of transfers and regardless
of the number of instruments, which may be issued to evidence such Debenture.


 


(q)          “Other
Securities” shall mean all other securities convertible into Common Stock issued to the Holder by the Company.


 


(r)          “Person”
means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.


 


(s)          
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 


(t)          “Securities
Purchase Agreement” means the Securities Purchase Agreement dated May 27, 2010 by and among the Company and the Holder,
and any amendments and supplements thereto.


 


(u)          “Trading
Day” means a day on which the shares of Common Stock are quoted on the OTCBB or quoted or traded on such Primary Market
on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are
not listed or quoted, then Trading Day shall mean a Business Day.


 


(v)         “Transaction
Documents” means the Securities Purchase Agreement, the SPA Agreement and any other agreement delivered in connection
with the Securities Purchase Agreement and/or the SPA Agreement including, without limitation, the Ratification Agreement and the
Irrevocable Transfer Agent Instructions.


 


(w)          “Underlying
Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance
with the terms hereof.


 


(x)          “Underlying
Shares Registration Statement” means a registration statement covering among other things the resale of the Underlying
Shares and naming the Holder as a “selling stockholder” thereunder.


 



    	 



    	 



    

 


(y)          “Volume
Weighted Average Price” means, for any security as of any date, the daily dollar volume-weighted average price of such
security for such date on the Principal Market as reported by Bloomberg, LP (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:00 p.m. (New York City time) if no dollar volume-weighted average price is reported for such security by Bloomberg,
the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC.


 


(z)          
“Warrants” has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all
warrants issued in exchange therefor or replacement thereof and all warrants issued pursuant to the SPA Agreement.


 



    	 



    	 



    

 


IN WITNESS WHEREOF,
the Company has caused this Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth
above.


 


	 	COMPANY:
	 	NEOMEDIA TECHNOLOGIES, INC.
	 	 
	 	By: /s/ Barry S Baer                                           
	 	Name: Barry S Baer
	 	Title:   Colonel US Army (Retired), Chief Financial Officer


 



    	 



    	 



    

 


 


EXHIBIT I

CONVERSION NOTICE


 


(To be executed by the Holder in order
to Convert the Debenture)


 


TO: 


 


The undersigned hereby
irrevocably elects to convert $_______________________________ of the principal amount of Debenture No. NEOM 12-5 into Shares
of Common Stock of NEOMEDIA TECHNOLOGIES, INC., according to the conditions stated therein, as of the Conversion Date written
below.


 


	Conversion Date:	 	 
	 	 	 
	Conversion Amount to be converted:	$	 
	 	 	 
	Conversion Price:	$	 
	 	 	 
	Number of shares of Common Stock to be issued:	 	 
	 	 	 
	Amount of Debenture Unconverted:	$	 


 


	Please issue the shares of Common Stock in the following name and to the following address:
	Issue to:	 
	 	 
	 	 


 


	Authorized Signature:	 
	 	 
	Name:	 
	 	 
	Title:	 
	 	 
	Broker DTC Participant Code:	 
	 	 
	Account Number: