Exhibit 10.5

[FORM OF SERIES [A][B][C] 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, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, 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.

MARSHALL EDWARDS, INC.

WARRANT TO PURCHASE COMMON STOCK

Warrant No.:         

Number of Shares of Common Stock:        

Date of Issuance: May [    ], 2011 (“Issuance Date”)

Marshall Edwards, Inc., a company organized under the laws of Delaware (the
“Company”), hereby certifies that, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, [HUDSON BAY MASTER
FUND LTD.] [OTHER BUYERS], the registered holder hereof or its permitted assigns
(the “Holder”), is entitled, subject to the terms set forth below, to purchase
from the Company, at the Exercise Price (as defined below) then in effect, upon
surrender of this Warrant to Purchase Common Stock (including any Warrants to
Purchase Common Stock issued in exchange, transfer or replacement hereof, the
“Warrant”), at any time or times on or after [SERIES A: the six month
anniversary of the date hereof][SERIES B: the Series B Eligibility Date] [SERIES
C: the First Reset Date] (the “Initial Exercisability Date”), but not after
11:59 p.m., New York time, on the Expiration Date (as defined below),
            (            )1 fully paid nonassessable shares of Common Stock, par
value $0.00000002 per share, subject to adjustment as provided herein (the
“Warrant Shares”). Except as otherwise defined herein, capitalized terms in this
Warrant shall have the meanings set forth in Section 16. This Warrant is one of
the Warrants to purchase Common Stock (the “SPA Warrants”) issued pursuant to
Section 1 of that certain Securities Purchase Agreement, dated as of May 2, 2011
(the “Subscription Date”), by and among the Company and the investors (the
“Buyers”) referred to therein (the “Securities Purchase Agreement”).

 

1 

[SERIES A: Insert 1,125,282.] [SERIES B: Insert 1,082,767.] [SERIES C: Insert
8,000,000.]

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1. EXERCISE OF WARRANT.

(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any time or times on or after the
Initial Exercisability Date, in whole or in part, by (i) delivery of a written
notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the
Holder’s election to exercise this Warrant and (ii) [SERIES A: (A)] [SERIES A&B:
payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being
exercised (the “Aggregate Exercise Price”) in cash or by wire transfer of
immediately available funds] [SERIES A: or (B) by notifying the Company that
this Warrant is being exercised pursuant to a Cashless Exercise (as defined in
Section 1(d))] [SERIES C: deemed payment to the Company of an amount equal to
the applicable Exercise Price multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the “Aggregate Exercise Price”) pursuant
to a Cashless Exercise (as defined in Section 1(d).]. The Holder shall not be
required to deliver the original Warrant in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice with respect to less
than all of the Warrant Shares shall have the same effect as reducing the number
of Warrant Shares on the face of this Warrant to the remaining number of Warrant
Shares underlying this Warrant. On or before the first (1st) Trading Day
following the date on which the Company has received the Exercise Notice, the
Company shall transmit by facsimile an acknowledgment of confirmation of receipt
of the Exercise Notice to the Holder and the Company’s transfer agent (the
“Transfer Agent”). On or before the third (3rd) Trading Day following the date
on which the Exercise Notice has been delivered to the Company (the “Share
Delivery Date”) [SERIES A&B:(provided that if the Aggregate Exercise Price
[SERIES A: (unless notice of Cashless Exercise was given in the Exercise
Notice)] has not been delivered by such date, the Share Delivery Date shall be
one Trading Day after the Aggregate Exercise Price is delivered)], the Company
shall (X) provided that the Transfer Agent is participating in The Depository
Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit such
aggregate number of Warrant Shares to which the Holder is entitled pursuant to
such exercise to the Holder’s or its designee’s balance account with DTC through
its Deposit / Withdrawal At Custodian system, or (Y) if the Transfer Agent is
not participating in the DTC Fast Automated Securities Transfer Program or upon
the request of the Holder, issue and dispatch by overnight courier to the
address as specified in the Exercise Notice, a certificate, registered in the
Company’s share register in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder is entitled pursuant to
such exercise. The Company shall be responsible for all fees and expenses of the
Transfer Agent and all fees and expenses with respect to the issuance of Warrant
Shares via DTC, if any. Upon proper delivery of the Exercise Notice [SERIES A&B:
(provided that payment of the Aggregate Exercise Price [SERIES A: or notice of
Cashless Exercise] is delivered in accordance herewith, as applicable)], the
Holder shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares, as the case may be. If this Warrant is submitted in connection
with any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company shall as soon
as practicable and in no event later than three (3) Trading Days after any
exercise and at its own expense, issue a new Warrant (in accordance

 

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with Section 7(d)) representing the right to purchase the number of Warrant
Shares issuable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all taxes
which may be payable with respect to the issuance and delivery of Warrant Shares
upon exercise of this Warrant.] [SERIES A & C: NOTWITHSTANDING ANY PROVISION OF
THIS WARRANT TO THE CONTRARY, NO MORE THAN THE MAXIMUM ELIGIBILITY NUMBER OF
WARRANT SHARES SHALL BE EXERCISABLE HEREUNDER.]

(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means [SERIES
A: $1.57, subject to adjustment as provided herein][SERIES B: the lowest of
(i) $1.333, subject to adjustment as provided herein, (ii) (A) if with respect
to a forced exercise pursuant to Section 4A, eighty five percent (85%) of the
arithmetic average of the lowest eight (8) Weighted Average Prices of the Common
Stock during the twenty (20) consecutive Trading Day period immediately
following the fifth (5th) Trading Day following the Forced Exercise Notice Date
or (B) if with respect to an exercise by the Holder pursuant to Section 1(a),
eighty five percent (85%) of the arithmetic average of the lowest eight
(8) Weighted Average Prices of the Common Stock during the twenty
(20) consecutive Trading Day period ending on the Trading Day immediately
preceding the date of delivery of the Exercise Notice and (iii) the lowest
deemed consideration per share of Common Stock (as determined in accordance with
the provisions of Section 2(a) of the Series A Warrants (as defined in the
Securities Purchase Agreement)) issued in any Allowed Subsequent Placement (as
defined in the Securities Purchase Agreement).] [SERIES C: $0.00000002, subject
to the adjustment as provided herein.]

(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail
for any reason or for no reason to issue to the Holder on or before the Share
Delivery Date, a certificate for the number of shares of Common Stock to which
the Holder is entitled and register such shares of Common Stock on the Company’s
share register or to credit the Holder’s balance account with DTC for such
number of shares of Common Stock to which the Holder is entitled upon the
Holder’s exercise of this Warrant, then, in addition to all other remedies
available to the Holder, the Company shall pay in cash to the Holder on each day
after such Share Delivery Date that the issuance of such shares of Common Stock
is not timely effected an amount equal to 1.5% of the product of (A) the sum of
the number of shares of Common Stock not issued to the Holder on a timely basis
and to which the Holder is entitled and (B) the Closing Sale Price of the Common
Stock on the Trading Day immediately preceding the last possible date which the
Company could have issued such shares of Common Stock to the Holder without
violating Section 1(a). In addition to the foregoing, if on or prior to the
Share Delivery Date the Company shall fail to issue and deliver a certificate to
the Holder and register such shares of Common Stock on the Company’s share
register or credit the Holder’s balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise hereunder or pursuant to the Company’s obligation pursuant to clause
(ii) below, and if on or after such Trading Day the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of shares of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company (a
“Buy-In”), then the Company shall, within three (3) Trading 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

 

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purchase price (including brokerage commissions and other reasonable
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 shares of Common Stock) or credit such Holder’s
balance account with DTC shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate or certificates representing such shares
of Common Stock or credit such Holder’s balance account with DTC 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 date of exercise.

(d) [SERIES A & C: Cashless Exercise. Notwithstanding anything contained herein
to the contrary, [SERIES A: if a Registration Statement (as defined in the
Registration Rights Agreement) covering the resale of the Warrant Shares that
are the subject of the Exercise Notice pursuant to the 1933 Act (the
“Unavailable Warrant Shares”) is not available for the resale of such
Unavailable Warrant Shares, the Holder may, in its sole discretion, exercise
this Warrant in whole or in part and, in lieu of making the cash payment
otherwise contemplated to be made to the Company upon such exercise in payment
of the Aggregate Exercise Price, elect instead to] [SERIES C: upon exercise of
this Warrant, in whole or in part, the Holder shall] receive upon such exercise
the “Net Number” of shares of Common Stock determined according to the following
formula (a “Cashless Exercise”):

Net Number = (A x B) - (A x C)

                        D

For purposes of the foregoing formula:

 

  A=

the total number of shares with respect to which this Warrant is then being
exercised.

 

  B=

the arithmetic average of the Weighted Average Prices of the Common Stock (as
reported by Bloomberg) for the five (5) consecutive Trading Days ending on the
date immediately preceding the date of the Exercise Notice.

 

  C=

the Exercise Price then in effect for the applicable Warrant Shares at the time
of such exercise.

 

  D=

the Weighted Average Price of the Common Stock on the Exercise Date.

For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the
date hereof, it is intended and the Company acknowledges that the Warrant Shares
issued in a Cashless Exercise 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 Issuance Date.]

[SERIES B: [Intentionally Omitted]]

 

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(e) Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are not disputed
and resolve such dispute in accordance with Section 12.

(f) Limitations on Exercises. The Company shall not effect the exercise of this
Warrant and the Holder shall not have the right to exercise this Warrant, to the
extent that after giving effect to such exercise, such Person (together with
such Person’s affiliates) would beneficially own in excess of 9.99% (the
“Maximum Percentage”) of the shares of Common Stock outstanding immediately
after giving effect to such exercise. For purposes of the foregoing sentence,
the aggregate number of shares of Common Stock beneficially owned by such Person
and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “1934 Act”). For purposes of this Warrant, in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company’s most recent
Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the
Securities and Exchange Commission, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock outstanding.
For any reason at any time, upon the written or oral request of the Holder, the
Company shall within one (1) Business Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including the
SPA Warrants, by the Holder and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. By written notice to
the Company, the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective until the
sixty-first (61st) day after such notice is delivered to the Company, and
(ii) any such increase or decrease will apply only to the Holder and not to any
other holder of SPA Warrants. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 1(f) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended beneficial ownership
limitation herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation.

(g) Insufficient Authorized Shares. If at any time while this Warrant remains
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon

 

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exercise of this Warrant at least a number of shares of Common Stock equal to
100% (the “Required Reserve Amount”) of the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of all of this
Warrant then outstanding (an “Authorized Share Failure”), then the Company shall
immediately take all action necessary to increase the Company’s authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for this Warrant then outstanding. Without limiting
the generality of the foregoing sentence, as soon as practicable after the date
of the occurrence of an Authorized Share Failure, but in no event later than
sixty (60) days after the occurrence of such Authorized Share Failure, the
Company shall hold a meeting of its stockholders for the approval of an increase
in the number of authorized shares of Common Stock. In connection with such
meeting, the Company shall provide each stockholder with a proxy statement and
shall use its best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such proposal.

(h) [SERIES C: Cash Settlement. If (a) on any Reset Date the Maximum Eligibility
Number exceeds the Number of Shares of Common Stock set forth on the first page
of this Warrant, the Company shall promptly notify the Holder in writing of such
event and no later than three (3) Trading Days following such event, the Company
shall pay the Holder in cash by wire transfer of immediately available funds a
dollar amount determined by multiplying such excess number of shares of Common
Stock by the Weighted Average Price of the Common Stock on the date of such
event or (b) the Stockholder Approval (as defined in the Securities Purchase
Agreement) is not obtained on or prior to the First Reset Date, upon exercise of
this Warrant, in lieu of delivering the shares of Common Stock otherwise
required to be delivered hereunder, the Company shall pay the Holder in cash by
wire transfer of immediately available funds in a dollar amount determined by
multiplying the number of shares of Common Stock otherwise deliverable upon such
exercise by the Weighted Average Price of the Common Stock on the date of such
exercise.]

2. [SERIES A & B: ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:

(a) Adjustment upon Issuance of shares of Common Stock. If and whenever on or
after the Subscription Date, the Company issues or sells, or in accordance with
this Section 2 is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding shares of Common Stock deemed to
have been issued by the Company in connection with any Excluded Securities (as
defined below) for a consideration per share (the “New Issuance Price”) less
than a price (the “Applicable Price”) equal to the Exercise Price in effect
immediately prior to such issue or sale or deemed issuance or sale (the
foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance,
the Exercise Price then in effect shall be reduced to an amount equal to the New
Issuance Price. For purposes of determining the adjusted Exercise Price under
this Section 2(a), the following shall be applicable:

 

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(i) Issuance of Options. If the Company in any manner grants 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, exercise or exchange of any
Convertible Securities issuable upon exercise of any 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 2(a)(i), the “lowest price per share for which one share of Common Stock
is issuable upon exercise of such Options or upon conversion, exercise or
exchange of such Convertible Securities issuable upon exercise of any 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 the granting or sale of the Option, upon exercise of the
Option and upon conversion, exercise or exchange of any Convertible Security
issuable upon exercise of such Option less any consideration paid or payable by
the Company with respect to such one share of Common Stock upon the granting or
sale of such Option, upon exercise of such Option and upon conversion exercise
or exchange of any Convertible Security issubale upon exercise of such Option.
No further adjustment of the Exercise Price or number of Warrant Shares shall be
made upon the actual issuance of such shares of Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such shares of Common Stock upon conversion, exercise or exchange 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 the conversion, exercise or exchange
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 2(a)(ii), the “lowest price per
share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security less any
consideration paid or payable by the Company with respect to such one share of
Common Stock upon the issuance or sale of such Convertible Security and upon
conversion, exercise or exchange of such Convertible Security. No further
adjustment of the Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange 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

 

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this Warrant has been or is to be made pursuant to other provisions of this
Section 2(a), no further adjustment of the Exercise Price or number of Warrant
Shares 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, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or exercisable
or exchangeable for shares of Common Stock increases or decreases at any time,
the Exercise Price and the number of Warrant Shares in effect at the time of
such increase or decrease shall be adjusted to the Exercise Price and the number
of Warrant Shares which would have been in effect at such time had such Options
or Convertible Securities provided for such increased or decreased purchase
price, additional consideration or increased or decreased conversion rate, as
the case may be, at the time initially granted, issued or sold. For purposes of
this Section 2(a)(iii), if the terms of any Option or Convertible Security that
was outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or decrease. No adjustment pursuant
to this Section 2(a) shall be made if such adjustment would result in an
increase of the Exercise Price then in effect or a decrease in the number of
Warrant Shares.

(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, (x) the Options will be deemed to have
been issued for the Option Value of such Options and (y) the other securities
issued or sold in such integrated transaction shall be deemed to have been
issued for the difference of (I) the aggregate consideration received by the
Company less any consideration paid or payable by the Company pursuant to the
terms of such other securities of the Company, less (II) the Option Value. If
any shares of 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 net amount received by the Company therefor.
If any shares of Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of such consideration
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 Sale Price of such
security on the date of receipt. If any shares of Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in

 

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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 shares of 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 Required Holders. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation Event”), the fair value of such consideration will be
determined within five (5) Trading Days after the tenth (10th) day following the
Valuation Event by an independent, reputable appraiser jointly selected by the
Company and the Required Holders. The determination of such appraiser shall be
final and 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 shares of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of 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) Voluntary Adjustment By Company. The Company may at any time during the term
of this Warrant reduce the then current Exercise Price to any amount and for any
period of time deemed appropriate by the Board of Directors of the Company.]
[SERIES C: [Intentionally Omitted]

(c) Adjustment upon Subdivision or Combination of shares of Common Stock. If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately increased. If
the Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately decreased.
Any adjustment under this Section 2(c) shall become effective at the close of
business on the date the subdivision or combination becomes effective.

(d) Other Events. If any event occurs of the type contemplated by the provisions
of this Section 2 but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with

 

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equity features), then the Company’s Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares so as to
protect the rights of the Holder; provided that no such adjustment pursuant to
this Section 2(d) will increase the Exercise Price or decrease the number of
Warrant Shares as otherwise determined pursuant to this Section 2.

(e) [SERIES A: Stockholder Approval. Unless and until such time as the Company
obtains the Stockholder Approval (as defined in the Securities Purchase
Agreement), no adjustment pursuant to this Section 2 shall cause the Exercise
Price to be less than $1.57, as adjusted for any stock dividend, stock split,
stock combination, reclassification or similar transaction (the “Exercise Floor
Price”). Upon the receipt of the Stockholder Approval any adjustment to the
Exercise Price and number of Warrant Shares that would have made pursuant to
this Section 2 but for this Section 2(e) shall be made on the date of such
receipt.]

3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a “Distribution”), at any time after the issuance of this
Warrant, then, in each such case, the Holder shall be entitled to participate in
such Distribution to the same extent that the Holder would have participated
therein if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on
exercise hereof, including without limitation, the Maximum Percentage)
immediately before the date of which a record is taken for such Distribution,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the Holder’s right to
participate in any such Distribution would result in the Holder exceeding the
Maximum Percentage, then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any shares of
Common Stock as a result of such Distribution to such extent) and the portion of
such Distribution shall be held in abeyance for the benefit of the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Maximum Percentage.

4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above,
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 exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) 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
shares of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

 

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(b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes in writing
(unless the Company is the Successor Entity) all of the obligations of the
Company under this Warrant and the other Transaction Documents in accordance
with the provisions of this Section (4)(b) pursuant to written agreements in
form and substance reasonably satisfactory to the Required Holders and approved
by the Required Holders prior to such Fundamental Transaction, including
agreements to deliver to each holder of the SPA Warrants in exchange for such
SPA Warrants a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value for
the shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and reasonably satisfactory
to the Required Holders and (ii) the Successor Entity (including its Parent
Entity) is a publicly traded corporation whose common stock is quoted on or
listed for trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Warrant with the same effect as
if such Successor Entity had been named as the Company herein. Upon consummation
of the Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon exercise of this Warrant at any
time after the consummation of the Fundamental Transaction, in lieu of the
shares of Common Stock (or other securities, cash, assets or other property)
issuable upon the exercise of the Warrant prior to such Fundamental Transaction,
such shares of the publicly traded common stock or common shares (or its
equivalent) of the Successor Entity (including its Parent Entity) which the
Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Warrant been converted immediately prior to
such Fundamental Transaction, as adjusted in accordance with the provisions of
this Warrant. 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 an exercise of this
Warrant at any time after the consummation of the Corporate Event but prior to
the Expiration Date, in lieu of shares of Common Stock (or other securities,
cash, assets or other property) purchasable upon the exercise of this Warrant
prior to such Corporate Event, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Corporate Event had this Warrant been exercised
immediately prior to such Corporate Event. Provision made pursuant to the
preceding sentence shall be in a form and substance reasonably satisfactory to
the Required Holders. The provisions of this Section 4(b) shall apply similarly
and equally to successive Fundamental Transactions and Corporate Events and
shall be applied without regard to any limitations on the exercise of this
Warrant.

(c) Notwithstanding the foregoing, in the event of a Fundamental Transaction, at
the request of the Holder delivered before the ninetieth (90th) day after the

 

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consummation of such Fundamental Transaction, the Company (or the Successor
Entity) shall purchase this Warrant from the Holder by paying to the Holder,
within five (5) Business Days after such request (or, if later, on the effective
date of the Fundamental Transaction), cash in an amount equal to the Black
Scholes Value of the remaining unexercised portion of this Warrant on the date
of such Fundamental Transaction.

4A. [SERIES B: FORCED EXERCISE. From and after the twenty sixth (26th) Trading
Day after the Initial Exercisability Date, the Company may deliver a notice to
the Holder (a “Forced Exercise Notice” and, for purposes of this Section 4A,
such date, the “Forced Exercise Notice Date”), of its irrevocable election to
require the exercise of all, or any portion, of this Warrant, which notice must
be delivered at least twenty six (26) Trading Days prior to date of such forced
exercise. Subject to the provisions herein, the date of such forced exercise
shall be the twenty sixth (26th) Trading Day after the Forced Exercise Notice
Date (the “Forced Exercise Date”). The Company may only deliver a Forced
Exercise Notice if there is no Equity Conditions Failure (unless the Holder has
waived such Equity Conditions Failure) and the Company shall so certify in the
Forced Exercise Notice and set forth the number of Warrant Shares to which the
forced exercise relates (the “Forced Exercise Share Number”). The forced
exercise thereunder may only occur on the Forced Exercise Date, if each of the
following shall be true: (i) there is no Equity Conditions Failure (unless the
Holder has waived such Equity Conditions Failure), (ii) the conditions in
clauses (i) through (iii) of the definition of Series B Eligibility Date are
satisfied and (iii) the daily dollar trading volume of shares traded on each
Trading Day during the period from the Forced Exercise Notice Date through the
Forced Exercise Date (but excluding the three (3) Trading Days with the lowest
daily dollar trading volume during such period) is greater than 4% of the
product of (a) the Forced Exercise Share Number and (b) the Exercise Price
(clauses (i), (ii) and (iii), the “Forced Exercise Conditions”). The Company
shall deliver to the Holder a notice no later than 10:00 a.m., New York time on
the Forced Exercise Date (the “Forced Exercise Bring-Down Notice”), which notice
shall certify whether or not the Forced Exercise Conditions have been satisfied.
If the Forced Exercise Conditions have not been satisfied at such time (and are
not waived by the Holder), the Forced Exercise Notice will be null and void, ab
initio. The Company may deliver up to two (2) Forced Exercise Notices hereunder
provided that the second such notice may not be delivered until after the Forced
Exercise Date relating to the previous Forced Exercise Notice. Notwithstanding
the foregoing, nothing in this Warrant (including delivery of a Forced Exercise
Notice) shall prevent the Holder from exercising this Warrant, in whole or part,
on or prior to the Expiration Date. The Company covenants and agrees that it
will honor all Exercise Notices tendered from the time of delivery of the Forced
Exercise Notice through the Expiration Date. Upon an Equity Conditions Failure,
the Holder may revoke any Exercise Notice delivered after the Forced Exercise
Notice is received by the Holder and the Company, within one (1) Business Day of
such revocation, shall return the Aggregate Exercise Price applicable to any
such Exercise Notice(s) to the Holder by wire transfer of immediately available
funds and any Warrants so exercised shall be deemed reinstated and returned to
the Holder, if applicable. Any actions by the Company pursuant to this
Section 4A, including delivery of any Forced Exercise Notice or determining a
Forced Exercise Share Number shall be made pro rata with the Holder and all
other Holders of Series B Warrants (as defined in the Securities Purchase
Agreement) based on the number of Series B Warrants initially issued on the
Issuance Date.]

 

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5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate of Incorporation or Bylaws, or through
any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, 100% of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).

6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically
provided herein, the Holder, solely in such Person’s capacity as a holder of
this Warrant, shall not be entitled to vote or receive dividends or be deemed
the holder of share capital of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in such
Person’s capacity as the Holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of the Warrant Shares which such Person is then entitled
to receive upon the due exercise of this Warrant. In addition, nothing contained
in this Warrant shall be construed as imposing any liabilities on the Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a
stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company [Series B: , other than in connection with a
forced exercise pursuant to Section 4A]. Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.

 

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7. REISSUANCE OF WARRANTS.

(a) Transfer of Warrant. If this Warrant is to be transferred as permitted
herein, the Holder shall surrender this Warrant to the Company, whereupon the
Company will forthwith issue and deliver upon the order of the Holder a new
Warrant (in accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.

(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, 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 Warrant,
the Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Warrant or Warrants (in accordance with Section 7(d)) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional shares of
Common Stock shall be given.

(d) Issuance of New Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and
(iv) shall have the same rights and conditions as this Warrant.

8. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefor. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen (15) days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the shares of

 

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Common Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to holders of shares of Common Stock other than pursuant to an
Approved Stock Plan or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to the Holder.

9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Holder.

10. GOVERNING LAW. This Warrant shall be governed by and construed and enforced
in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted
by the Company and all the Buyers and shall not be construed against any person
as the drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant.

12. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Business Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Business Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within two (2) Business Days submit via facsimile
(a) the disputed determination of the Exercise Price to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Warrant Shares to the Company’s
independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.

13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other
remedies available under this Warrant and the other Transaction Documents, at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company acknowledges that a breach by it of its

 

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obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of
this Warrant shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.

14. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company, except as may otherwise be required
by Section 2(f) of the Securities Purchase Agreement.

15. SEVERABILITY. If any provision of this Warrant is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Warrant so long as this Warrant as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

16. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall
have the following meanings:

(a) “Approved Stock Plan” means any employee benefit plan or other issuance,
employment agreement or option grant or similar agreement which has been
approved by the Board of Directors of the Company, pursuant to which the
Company’s securities may be issued to any employee, officer or director for
services provided to the Company.

(b) “Black Scholes Value” means the value of this Warrant based on the Black and
Scholes Option Pricing Model obtained from the “OV” function on Bloomberg
determined as of the Trading Day immediately following the public announcement
of the applicable Fundamental Transaction for pricing purposes and reflecting
(i) 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 such date of request,
(ii) an expected volatility equal to the greater of 100% and the 100 day
volatility obtained from the HVT function on Bloomberg as of the day immediately
following the public announcement of the applicable Fundamental Transaction,
(iii) the underlying price per share used in such calculation shall be the sum
of the price per share being offered in cash, if any, plus the value of any non
cash consideration, if any, being offered in the Fundamental Transaction and
(iv) a 360 day annualization factor.

(c) “Bloomberg” means Bloomberg Financial Markets.

 

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(d) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

(e) “Closing Bid Price” and “Closing Sale Price” means, for any security as of
any date, the last closing bid price and last closing trade price, respectively,
for such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price, as the case may be,
then the last bid price or the last trade price, respectively, of such security
prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price or last trade price, respectively, of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the
case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 12. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.

(f) “Common Stock” means (i) the Company’s shares of Common Stock, par value
$0.00000002 per share, and (ii) any share capital into which such Common Stock
shall have been changed or any share capital resulting from a reclassification
of such Common Stock.

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

(h) “Eligible Market” means the Principal Market, The NASDAQ Global Market, The
NASDAQ Global Select Market, The New York Stock Exchange, Inc., or The NYSE
Amex.

(i) [SERIES B: “Equity Conditions” means (i) on each day during the period
beginning thirty (30) Trading Days prior to the applicable date of determination
and ending on and including the applicable date of determination (the “Equity
Conditions Measuring Period”), the Common Stock is designated for quotation on
the Principal Market or any other Eligible 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; (ii) no
Allowed

 

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Subsequent Placement shall have occurred; (iii) during the Equity Conditions
Measuring Period, the Company shall have delivered shares of Common Stock upon
all exercises of the SPA Warrants in accordance with their terms to the holders
on a timely basis as set forth in Section 1(a) of the SPA Warrants; (iv) any
applicable shares of Common Stock to be issued in connection with the event
requiring determination may be issued in full without violating the rules or
regulations of the Principal Market or any applicable Eligible Market or
Section 1(f) hereof; (v) during the Equity Conditions Measuring Period, the
Company shall not have failed to timely make any payments within five
(5) Business Days of when such payment is due pursuant to any Transaction
Document (as defined in the Securities Purchase Agreement); (vi) during the
Equity Conditions Measuring Period, there shall not have occurred the public
announcement of a pending, proposed or intended Fundamental Transaction which
has not been abandoned, terminated or consummated, (vii) the Company shall have
no knowledge of any fact that would cause (x) the Registration Statement not to
be effective and available for the resale of all the Warrant Shares or (y) both
the Registration Statement not to be effective and available and Rule 144 (as
defined in the Securities Purchase Agreement) not to be available for the resale
of all the Registrable Securities (as defined in the Registration Rights
Agreement) and shares of Common Stock underlying the Series C Warrants; and
(viii) the Company otherwise shall have been in compliance with and shall not
have breached any provision, covenant, representation or warranty of any
Transaction Document.

(j) “Equity Conditions Failure” means that on each Trading Day during the period
commencing on the date of the Forced Exercise Notice through the Forced Exercise
Date, the Equity Conditions have not been satisfied (or waived in writing by the
Holder).]

(k) “Expiration Date” means the date [SERIES A: five years after the Initial
Exercisability Date] [SERIES B: one year after the Issuance Date] [SERIES C: one
year after the Initial Exercisability Date] or, if such date falls on a day
other than a Business Day or on which trading does not take place on the
Principal Market (a “Holiday”), the next day that is not a Holiday.

(l) “Excluded Securities” means: (i) any equity or equity equivalent security of
the Company issued or issuable, including any shares of Common Stock issued or
issuable upon conversion or exercise thereof, in connection with any Approved
Stock Plan, (ii) any shares of Common Stock issued or issuable upon exercise of
any Warrants; provided that the terms of such Warrants are not amended, modified
or changed on or after the Subscription Date, (iii) any shares of Common Stock
issued or issuable upon conversion of any Options or Convertible Securities
which are outstanding on the day immediately preceding the Subscription Date,
provided that the terms of such Options or Convertible Securities are not
amended, modified or changed on or after the Subscription Date and (iv) the
Series A Preferred Stock, par value $0.01 per share, of the Company issuable to
Novogen Limited (“Novogen”) pursuant to the Asset Purchase Agreement, dated as
of December 21, 2010, by and among the Company, Novogen and Novogen Research Pty
Limited in the form attached to the Current Report on Form 8-K filed by the
Company on December 22, 2010 (the “Asset Purchase Agreement”) (the “Series A
Preferred Stock”) and the shares of Common Stock issuable upon conversion by
Novogen of the Series A Preferred Stock on the terms set forth in the
certificate of designations attached as Exhibit A to the Asset Purchase
Agreement.

 

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(m) “Fundamental Transaction” means that (A) the Company shall, directly or
indirectly, in one or more related transactions, (i) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another
Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person,
or (iii) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock purchase agreement or other business combination), or (iv) reorganize,
recapitalize or reclassify its Common Stock, (B) a Person makes a purchase,
tender or exchange offer that is accepted by the holders of more than the 50% of
the outstanding shares of Common Stock (not including any shares of Common Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer) or
(C) 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 (x) 50% of
the aggregate ordinary voting power represented by issued and outstanding shares
of Common Stock, (y) 50% of the aggregate ordinary voting power represented by
issued and outstanding shares of Common Stock not beneficially owned by such
Person on the Subscription Date or (z) a percentage of the aggregate ordinary
voting power represented by issued and outstanding shares of Common Stock or
other equity securities of the Company sufficient to allow such Person to effect
a statutory short form merger or other transaction requiring other stockholders
of the Company to surrender their shares of Common Stock without approval of the
stockholders of the Company.

(n) [SERIES A: “Maximum Eligibility Number” means initially a number of shares
equal to 75% of the number of Common Shares (as defined in the Securities
Purchase Agreement) issued to the Holder on the Issuance Date and shall be
successively increased (but not decreased) upon each exercise of the Holder’s
Series B Warrants (as defined in the Securities Purchase Agreement) by an amount
equal to 75% of the number of shares of Common Stock issued upon each such
exercise of the Series B Warrants.] [SERIES C: “Maximum Eligibility Number”
means initially zero and such number shall be increased (but not decreased) on
each of the First Reset Date (as defined below) and, if applicable, the Second
Reset Date (as defined below), the Third Reset Date (as defined below) and the
Allowed Subsequent Placement Reset Date (as defined below). The Maximum
Eligibility Number shall be increased (but not decreased) on the First Reset
Date to equal the number obtained by subtracting (I) the sum of [            ]2
and the number of Series B Warrants exercised by the Holder (each as adjusted
for stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other similar events )
(the “Initial Shares”) from (II) the quotient determined by dividing (x) the sum
of $[            ]3 and the aggregate exercise price paid upon exercise of the
Series B Warrants exercised by the Holder by (y) the First Reset Price (such
increased number, the “First Maximum Eligibility Number”). If (A) the First

 

2 

Insert the number of Common Shares (as defined in the Securities Purchase
Agreement) issued to the Holder on the Issuance Date.

3 

Insert the Purchase Price (as defined in the Securities Purchase Agreement) paid
by the Holder.

 

- 19 -

--------------------------------------------------------------------------------

Reset Date was triggered by clause (1) of such definition and the Registration
Statement is not available for the resale of all Registrable Securities
thereunder at all times from the First Reset Date until the sixtieth (60th) day
following the First Reset Date or (B) the First Reset Date was triggered by
either clause (2) or clause (3) of such definition and there shall occur a
Public Information Failure (as defined in the Securities Purchase Agreement) at
any time on or prior to the sixtieth (60th) day following the First Reset Date,
the Maximum Eligibility Number shall be further increased (but not decreased) on
the Second Reset Date, to equal the number obtained by subtracting the sum of
the First Maximum Eligibility Number and the Initial Shares from the quotient
determined by dividing the sum of $[            ]4 and the aggregate exercise
price paid upon exercise of the Series B Warrants exercised by the Holder by the
Second Reset Price. If (A) the Second Reset Date was triggered by clause (1) of
such definition and the Registration Statement is not available for the resale
of all Registrable Securities thereunder at all times from the Second Reset Date
until the sixtieth (60th) day following the Second Reset Date or (B) the Second
Reset Date was triggered by clause (2) of such definition and there shall occur
a Public Information Failure at any time on or prior to the sixtieth (60th) day
following the Second Reset Date, the Maximum Eligibility Number shall be further
increased (but not decreased) on the Third Reset Date, to equal the number
obtained by subtracting the sum of the Second Maximum Eligibility Number, the
First Maximum Eligibility Number and the Initial Shares from the quotient
determined by dividing the sum of $[            ]5 and the aggregate exercise
price paid upon exercise of the Series B Warrants exercised by the Holder by the
Third Reset Price. The Maximum Eligibility Number shall be increased (but not
decreased) upon the occurrence of any Allowed Subsequent Placement (the “Allowed
Subsequent Placement Reset Date”) by the number of shares obtained by
subtracting (I) the number of Common Shares issued to the Holder on the Issuance
Date from (II) the quotient obtained by dividing (i) the aggregate Purchase
Price (as defined in the Securities Purchase Agreement) paid by the Holder by
(ii) the lowest deemed consideration per share of Common Stock (as determined in
accordance with the provisions of Section 2(a) of the Series A Warrants (as
defined in the Securities Purchase Agreement)) issued in such Allowed Subsequent
Placement. As used herein, (u) the “First Reset Date” means the date that is the
twenty sixth (26th) Trading Day after the earliest of (1) the date that all
Registrable Securities (as defined in the Registration Rights Agreement) and the
Warrant Shares issuable hereunder have become registered pursuant to an
effective Registration Statement that is available for the resale of all such
Registrable Securities and Warrant Shares, (2) the date that the Holder can sell
all of the Warrant Shares issuable hereunder pursuant to Rule 144 and (3) the
six month anniversary of the Issuance Date (the earliest of (1), (2) and (3),
the “First Trigger Date”); (v) the “First Reset Price” means eighty five percent
(85%) of the eight (8) lowest Weighted Average Prices of the Common Stock during
the twenty (20) Trading Days immediately following the fifth (5th) Trading Day
after the First Trigger Date (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassification, combinations, reverse
stock splits or other similar events during such period); (w) the “Second Reset
Date” means the earlier of (1) the date that all Registrable Securities and the
Warrant Shares issuable hereunder are registered pursuant to an effective
Registration Statement that is available for the resale of all such Registrable
Securities and Warrant Shares (2) the date that the Holder can sell all of the
Warrant Shares issuable hereunder pursuant to Rule 144 and (3) the one (1) year

 

4 

Insert the Holder’s Purchase Price paid by the Holder.

5 

Insert the Holder’s Purchase Price paid by the Holder.

 

- 20 -

--------------------------------------------------------------------------------

anniversary of the Issuance Date (the earliest of (1), (2) and (3), the “Second
Trigger Date”); (x) “Second Reset Price” means eighty five percent (85%) of the
eight (8) lowest Weighted Average Prices of the Common Stock during the twenty
(20) Trading days immediately following the fifth (5th) Trading Day after the
Second Trigger Date (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassification, combinations, reverse
stock splits or other similar events during such period), (y) the “Third Reset
Date” means the one (1) year anniversary of the Issuance Date; and (z) “Third
Reset Price” means eighty five percent (85%) of the eight (8) lowest Weighted
Average Prices of the Common Stock during the twenty (20) Trading days
immediately following the fifth (5th) Trading Day after the one (1) year
anniversary of the Issuance Date (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassification, combinations, reverse
stock splits or other similar events during such period).]

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

(p) “Option Value” means the value of an Option based on the Black and Scholes
Option Pricing model obtained from the “OV” function on Bloomberg determined as
of the day prior to the public announcement of the applicable Option for pricing
purposes and reflecting (i) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of the applicable Option
as of the applicable date of determination, (ii) an expected volatility equal to
the greater of (a) 100% and (b) the 100 day volatility obtained from the HVT
function on Bloomberg as of the day immediately following the public
announcement of the issuance of the applicable Option, (iii) the underlying
price per share used in such calculation shall be the highest Weighted Average
Price of the Common Stock during the period beginning on the day prior to the
execution of definitive documentation relating to the issuance of the applicable
Option and the public announcement of such issuance and (iv) a 360 day
annualization factor.

(q) “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common shares or common stock or
equivalent equity security is quoted or listed on an Eligible Market, or, if
there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date of consummation of
the Fundamental Transaction.

(r) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.

(s) “Principal Market” means The NASDAQ Capital Market.

(t) “Registration Rights Agreement” means that certain registration rights
agreement by and among the Company and the Buyers.

(u) “Required Holders” means the holders of the SPA Warrants representing at
least seventy-five percent (75%) of the shares of Common Stock underlying the
SPA Warrants then outstanding.

 

- 21 -

--------------------------------------------------------------------------------

(v) [SERIES B: “Series B Eligibility Date” means the first date on which all of
the following conditions are satisfied (or waived by the Holder): (i) the
Stockholder Approval shall have been obtained, (ii) all of the Warrant Shares
shall be able to be resold without restriction or limitation pursuant to the
Registration Statement and (iii) all of the Registrable Securities and shares of
Common Stock underlying the Series C Warrants shall be able to be resold without
restriction or limitation pursuant to the Registration Statement or Rule 144.]

(w) “Successor Entity” means the Person (or, if so elected by the Required
Holders, the Parent Entity) formed by, resulting from or surviving any
Fundamental Transaction or the Person (or, if so elected by the Required
Holders, the Parent Entity) with which such Fundamental Transaction shall have
been entered into.

(x) “Trading Day” means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded; provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time).

(y) “Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during
the period beginning at 9:30:01 a.m., New York time (or such other time as the
Principal Market publicly announces is the official open of trading), and ending
at 4:00:00 p.m., New York time (or such other time as the Principal Market
publicly announces is the official close of trading), as reported by Bloomberg
through its “Volume at Price” function or, if the foregoing does not apply, the
dollar volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time (or such other time as the Principal
Market publicly announces is the official open of trading), and ending at
4:00:00 p.m., New York time (or such other time as the Principal Market publicly
announces is the official close of trading), as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, 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 (formerly the National Quotation Bureau,
Inc.). If the Weighted Average Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Weighted Average Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 12 with the term “Weighted Average Price” being substituted
for the term “Exercise Price.” All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.

[Signature Page Follows]

 

- 22 -

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set out above.

 

MARSHALL EDWARDS, INC.

By:

 

 

Name:

 

Title:

 

--------------------------------------------------------------------------------

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

MARSHALL EDWARDS, INC.

The undersigned holder hereby exercises the right to purchase
                     of the Common Stock (“Warrant Shares”) of Marshall Edwards,
Inc., a company incorporated under the laws of Delaware (the “Company”),
evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.

[SERIES A&B: 1. Form of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as:

 

                      

  a “Cash Exercise” with respect to                                  Warrant
Shares; [SERIES A: and/or

                      

  a “Cashless Exercise” with respect to                                  Warrant
Shares.]

2. Payment of Exercise Price. In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$                                 to the Company in accordance with the terms of
the Warrant.

3.] Delivery of Warrant Shares. The Company shall deliver to the holder
                     Warrant Shares in accordance with the terms of the Warrant.

Account Number (if electronic book entry transfer):
                                        

DTC Participant Number (if electronic book entry transfer):
                                        

Date:                  ,         

 

 

Name of Registered Holder

By:

 

 

 

Name:

 

Title:

--------------------------------------------------------------------------------

ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and hereby directs
Computershare, Inc. to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated May [__], 2011
from the Company and acknowledged and agreed to Computershare, Inc.

 

MARSHALL EDWARDS, INC.

By:

 

 

Name:

 

Title: