Document:

EX-10.1

 

Exhibit 10.1

STANDBY EQUITY DISTRIBUTION AGREEMENT

     THIS AGREEMENT dated as of the 11th day of July 2006 (the “Agreement”)
between CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the “Investor”), and
MARSHALL EDWARDS, INC., a corporation organized and existing under the laws of the State of
Delaware (the “Company”).

     WHEREAS, the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Investor, from time to time as provided herein, and
the Investor shall purchase from the Company up to Fifteen Million Dollars ($15,000,000) of the
Company’s common stock, par value $0.00000002 per share (the “Common Stock”); and

     WHEREAS, such investments will be made in reliance upon the provisions of Regulation D
(“Regulation D”) of the Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the “Securities Act”), and or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or all of the
investments to be made hereunder.

     WHEREAS, the Company has engaged Janney Montgomery Scott, LLC (the “Placement Agent”),
to act as the Company’s exclusive placement agent in connection with the sale of the Company’s
Common Stock to the Investor hereunder.

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I.

Certain Definitions

     Section 1.1. “Advance” shall mean the portion of the Commitment Amount requested by
the Company in the Advance Notice.

     Section 1.2. “Advance Date” shall mean the first (1st) Trading Day after
expiration of the applicable Pricing Period for each Advance.

     Section 1.3. “Advance Notice” shall mean a written notice in the form of Exhibit
A attached hereto to the Investor executed by an officer of the Company and setting forth the
Advance amount that the Company requests from the Investor.

     Section 1.4. “Advance Notice Date” shall mean each date the Company delivers (in
accordance with Section 2.2(b) of this Agreement) to the Investor an Advance Notice requiring the
Investor to advance funds to the Company, subject to the terms of this Agreement. No Advance
Notice Date shall be less than five (5) Trading Days after the prior Advance Notice Date.

 

 

     Section 1.5. “Bid Price” shall mean, on any date, the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market or if the Common Stock is not traded
on a Principal Market, the highest reported bid price for the Common Stock, as furnished by the
National Association of Securities Dealers, Inc.

     Section 1.6. “Closing” shall mean one of the closings of a purchase and sale of Common
Stock pursuant to Section 2.3.

     Section 1.7. “Commitment Amount” shall mean the aggregate amount of up to Fifteen
Million Dollars ($15,000,000) which the Investor has agreed to provide to the Company in order to
purchase the Company’s Common Stock pursuant to the terms and conditions of this Agreement.

     Section 1.8. “Commitment Period” shall mean the period commencing on the earlier to
occur of (i) the Effective Date, or (ii) such earlier date as the Company and the Investor may
mutually agree in writing, and expiring on the earliest to occur of (x) the date on which the
Investor shall have made payment of Advances pursuant to this Agreement in the aggregate amount of
the Commitment Amount, (y) the date this Agreement is terminated pursuant to Section 10.2 or (z)
the date occurring twenty-four (24) months after the Effective Date.

     Section 1.9. “Common Stock” shall mean the Company’s common stock, par value
$0.000000002 per share.

     Section 1.10. “Condition Satisfaction Date” shall have the meaning set forth in
Section 7.2.

     Section 1.11. “Damages” shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorney’s fees and disbursements and costs and
expenses of expert witnesses and investigation).

     Section 1.12. “Effective Date” shall mean the date on which the SEC first declares
effective a Registration Statement registering the resale of the Registrable Securities as set
forth in Section 7.2(a).

     Section 1.13. “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

     Section 1.14. “Material Adverse Effect” shall mean any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement or the Registration Rights
Agreement.

     Section 1.15. “Market Price” shall mean the lowest VWAP of the Common Stock during the
Pricing Period.

     Section 1.16. “Maximum Advance Amount” shall be One Million Five Hundred Thousand
Dollars ($1,500,000) per Advance Notice.

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     Section 1.17. “NASD” shall mean the National Association of Securities Dealers, Inc.

     Section 1.18. “Person” shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.

     Section 1.19. “Placement Agent” shall mean Janney Montgomery Scott, LLC, a registered
broker-dealer.

     Section 1.20. “Pricing Period” shall mean the five (5) consecutive Trading Days after
the Advance Notice Date.

     Section 1.21. “Principal Market” shall mean the Nasdaq National Market, the Nasdaq
Capital Market, the American Stock Exchange, the OTC Bulletin Board or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common Stock.

     Section 1.22. “Purchase Price” shall be set at ninety seven percent (97%) of the
Market Price during the Pricing Period but in no event less than the Minimum Acceptable Price.

     Section 1.23. “Registrable Securities” shall mean the shares of Common Stock to be
issued hereunder (i) in respect of which the Registration Statement has not been declared effective
by the SEC, (ii) which have not been sold under circumstances meeting all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the Securities Act (“Rule
144”) or (iii) which have not been otherwise transferred to a holder who may trade such shares
without restriction under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive legend.

     Section 1.24. “Registration Rights Agreement” shall mean the Registration Rights
Agreement dated the date hereof, regarding the filing of the Registration Statement for the resale
of the Registrable Securities, entered into between the Company and the Investor.

     Section 1.25. “Registration Statement” shall mean a registration statement on Form S-1
or SB-2 (if use of such form is then available to the Company pursuant to the rules of the SEC and,
if not, on such other form promulgated by the SEC for which the Company then qualifies and which
counsel for the Company shall deem appropriate, and which form shall be available for the resale of
the Registrable Securities to be registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement, and in accordance with the intended method of
distribution of such securities), for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.

     Section 1.26. “Regulation D” shall have the meaning set forth in the recitals of this
Agreement.

     Section 1.27. “SEC” shall mean the United States Securities and Exchange Commission.

     Section 1.28. “Securities Act” shall have the meaning set forth in the recitals of
this Agreement.

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     Section 1.29. “SEC Documents” shall mean Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements of the Company as
supplemented to the date hereof, filed by the Company for a period of at least twelve (12) months
immediately preceding the date hereof or the Advance Date, as the case may be, until such time as
the Company no longer has an obligation to maintain the effectiveness of a Registration Statement
as set forth in the Registration Rights Agreement.

     Section 1.30. “Trading Day” shall mean any day during which the New York Stock
Exchange shall be open for business.

     Section 1.31. “VWAP” shall mean the volume weighted average price of the Company’s
Common Stock as quoted by Bloomberg, LP.

ARTICLE II.

Advances

     Section 2.1. Advances.

          Subject to the terms and conditions of this Agreement (including, without limitation, the
provisions of Article VII hereof), the Company, at its sole and exclusive option, may issue and
sell to the Investor, and the Investor shall purchase from the Company, shares of the Company’s
Common Stock by the delivery, in the Company’s sole discretion, of Advance Notices. The number of
shares of Common Stock that the Investor shall purchase pursuant to each Advance shall be
determined by dividing the amount of the Advance by the Purchase Price. No fractional shares shall
be issued. Fractional shares shall be rounded to the next higher whole number of shares. The
aggregate maximum amount of all Advances that the Investor shall be obligated to make under this
Agreement shall not exceed the Commitment Amount.

     Section 2.2. Mechanics.

          (a) Advance Notice. At any time during the Commitment Period, the Company may require
the Investor to purchase shares of Common Stock by delivering an Advance Notice to the Investor,
subject to the conditions set forth in Section 7.2; provided, however, the amount for each Advance
as designated by the Company in the applicable Advance Notice shall not be more than the Maximum
Advance Amount and the aggregate amount of the Advances pursuant to this Agreement shall not exceed
the Commitment Amount. The Company acknowledges that the Investor may sell shares of the Company’s
Common Stock corresponding with a particular Advance Notice after the Advance Notice is received by
the Investor. There shall be a minimum of five (5) Trading Days between each Advance Notice Date.

          (b) Date of Delivery of Advance Notice. An Advance Notice shall be deemed delivered
on (i) the Trading Day it is received by facsimile or otherwise by the Investor if such notice is
received prior to 5:00 pm Eastern Time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 5:00 pm Eastern Time on a Trading Day or at any time on a
day which is not a Trading Day. No Advance Notice may be deemed delivered on a day that is not a
Trading Day.

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          (c). Minimum Acceptable Price. The lowest Market Price of the Common Stock (before
taking into account any discount used to calculate the Purchase Price) for any particular Advance
(the “Minimum Acceptable Price”) shall, in connection with each Advance Notice delivered
by the Company, be equal to ninety seven percent (97%) of the VWAP on the Trading Day immediately
preceding the Advance Notice Date for such Advance Notice. Subject to the next sentence, upon the
issuance by the Company of an Advance Notice along with a Minimum Acceptable Price, (i) the
Company shall automatically reduce the amount of the Advance set forth in such Advance Notice by
twenty percent (20%) for each Trading Day during the Pricing Period that the VWAP of the Common
Stock is below the Minimum Acceptable Price (each such day, an “Excluded Day”), and (ii)
each Excluded Day shall be excluded from the Pricing Period for purposes of determining the Market
Price. The number of shares of Common Stock to be delivered to the Investor at the Closing (in
accordance with Section 2.3 of this Agreement) shall correspond with the Advance Notice amount as
reduced pursuant to clause (i) above, except that the Company shall be obligated to sell, and the
Investor shall be obligated to purchase any shares of Common Stock corresponding to such Advance
Notice that have been sold by the Investor and such shares shall be priced at the greater of the
Purchase Price or the applicable Minimum Acceptable Price. The Company, and only the Company, may
waive the Minimum Acceptable Price with respect to any particular Advance Notice by providing the
Investor with written notice of waiver on or prior to the Advance Notice Date.

     Section 2.3. Closings. On each Advance Date (i) the Company shall deliver to the
Investor such number of shares of the Common Stock registered in the name of the Investor as shall
equal (x) the amount of the Advance specified in such Advance Notice pursuant to Section 2.1
herein, divided by (y) the Purchase Price and (ii) upon receipt of such shares, the Investor shall
deliver to the Company the amount of the Advance specified in the Advance Notice by wire transfer
of immediately available funds. In addition, on or prior to the Advance Date, each of the Company
and the Investor shall deliver to the other all documents, instruments and writings required to be
delivered by either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein. To the extent the Company has not paid the fees, expenses, and
disbursements of the Investor in accordance with Section 12.4, the amount of such fees, expenses,
and disbursements may be deducted by the Investor (and shall be paid to the relevant party)
directly out of the proceeds of the Advance with no reduction in the amount of shares of the
Company’s Common Stock to be delivered on such Advance Date.

     (a) Company’s Obligations Upon Closing:

          (i) The Company shall deliver to the Investor the shares of Common Stock applicable to the
Advance in accordance with Section 2.3. The certificates evidencing such shares shall be free of
restrictive legends.

          (ii) the Company’s Registration Statement with respect to the resale of the shares of Common
Stock delivered in connection with the Advance shall have been declared effective by the SEC;

          (iii) the Company shall have obtained all material permits and qualifications required by any
applicable state for the offer and sale of the Registrable Securities, or shall have

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the
availability of exemptions there from. The sale and issuance of the Registrable Securities shall
be legally permitted by all laws and regulations to which the Company is subject;

          (iv) the Company shall have filed with the SEC in a timely manner all reports, notices and
other documents required of a “reporting company” under the Exchange Act and applicable Commission
regulations;

          (v) the fees as set forth in Section 12.4 below shall have been paid or can be withheld as
provided in Section 2.3; and

          (vi) The Company’s transfer agent shall be DWAC eligible.

     (b) Investor’s Obligations Upon Closing. Upon receipt of the shares referenced in
Section 2.3(a)(i) above and provided the Company is in compliance with its obligations in Section
2.3, the Investor shall deliver to the Company the amount of the Advance specified in the Advance
Notice by wire transfer of immediately available funds; provided that if the amount of such Advance
is not delivered at Closing, such shares shall be returned to the Company upon request thereby.

ARTICLE III.

Representations and Warranties of Investor

     Investor hereby represents and warrants to, and agrees with, the Company that the following
are true and correct as of the date hereof and as of each Advance Date:

     Section 3.1. Organization and Authorization. The Investor is duly incorporated or
organized and validly existing in the jurisdiction of its incorporation or organization and has all
requisite power and authority to purchase and hold the securities issuable hereunder. The decision
to invest and the execution and delivery of this Agreement by such Investor, the performance by
such Investor of its obligations hereunder and the consummation by such Investor of the
transactions contemplated hereby have been duly authorized and requires no other proceedings on the
part of the Investor. The undersigned has the right, power and authority to execute and deliver
this Agreement and all other instruments (including, without limitations, the Registration Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and delivered by the
Investor and, assuming the execution and delivery hereof and acceptance thereof by the Company,
will constitute the legal, valid and binding obligations of the Investor, enforceable against the
Investor in accordance with its terms.

     Section 3.2. Evaluation of Risks. The Investor has such knowledge and experience in
financial, tax and business matters as to be capable of evaluating the merits and risks of, and
bearing the economic risks entailed by, an investment in the Company and of protecting its
interests in connection with this transaction. It recognizes that its investment in the Company
involves a high degree of risk.

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     Section 3.3. No Legal Advice From the Company. The Investor acknowledges that it had
the opportunity to review this Agreement and the transactions contemplated by this Agreement with
his or its own legal counsel and investment and tax advisors. The Investor is relying solely on
such counsel and advisors and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any jurisdiction.

     Section 3.4. Investment Purpose. The securities are being purchased by the Investor
for its own account, and for investment purposes. The Investor agrees not to assign or in any way
transfer the Investor’s rights to the securities or any interest therein and acknowledges that the
Company will not recognize any purported assignment or transfer except in accordance with
applicable Federal and state securities laws. No other person has or will have a direct or
indirect beneficial interest in the securities. The Investor agrees not to sell, hypothecate or
otherwise transfer the Investor’s securities unless the securities are registered under Federal and
applicable state securities laws or unless, in the opinion of counsel satisfactory to the Company,
an exemption from such laws is available.

     Section 3.5. Accredited Investor. The Investor is an “Accredited Investor” as
that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.

     Section 3.6. Information. The Investor and its advisors (and its counsel), if any,
have been furnished with all materials relating to the business, finances and operations of the
Company and information it deemed material to making an informed investment decision. The Investor
and its advisors, if any, have been afforded the opportunity to ask questions of the Company and
its management. Neither such inquiries nor any other due diligence investigations conducted by
such Investor or its advisors, if any, or its representatives shall modify, amend or affect the
Investor’s right to rely on the Company’s representations and warranties contained in this
Agreement. The Investor understands that its investment involves a high degree of risk. The
Investor is in a position regarding the Company, which, based upon employment, family relationship
or economic bargaining power, enabled and enables such Investor to obtain information from the
Company in order to evaluate the merits and risks of this investment. The Investor has sought such
accounting, legal and tax advice, as it has considered necessary to make an informed investment
decision with respect to this transaction.

     Section 3.7. Receipt of Documents. The Investor and its counsel have received and read
in their entirety: (i) this Agreement and the Exhibits annexed hereto; (ii) all due diligence and
other information necessary to verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company’s Form 10-K for the year ended June 30, 2005 and Forms
10-Q for the periods ended September 30, 2005, December 31, 2005 and March 31, 2006; and (iv)
answers to all questions the Investor submitted to the Company regarding an investment in the
Company; and the Investor has relied on the information contained therein and has not been
furnished any other documents, literature, memorandum or prospectus.

     Section 3.8. Registration Rights Agreement. The parties have entered into the
Registration Rights Agreement dated the date hereof.

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     Section 3.9. No General Solicitation. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities Act) in connection
with the offer or sale of the shares of Common Stock offered hereby.

     Section 3.10. Not an Affiliate. The Investor is not an officer, director or a person
that directly, or indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with the Company or any “Affiliate” of the Company (as that term is
defined in Rule 405 of the Securities Act).

     Section 3.11. Trading Activities. The Investor’s trading activities with respect to
the Company’s Common Stock shall be in compliance with all applicable federal and state securities
laws, rules and regulations and the rules and regulations of the Principal Market on which the
Company’s Common Stock is listed or traded. Neither the Investor nor its affiliates has an open
short position in the Common Stock of the Company, the Investor agrees that it shall not, and that
it will cause its affiliates not to, engage in any short sales of or hedging transactions with
respect to the Common Stock, provided that the Company acknowledges and agrees that upon receipt of
an Advance Notice the Investor has the right to sell the shares to be issued to the Investor
pursuant to the Advance Notice during the applicable Pricing Period.

     Section 3.12. Anti-Money-Laundering Representations. Investor hereby acknowledges
that the Company seeks to comply with all applicable laws concerning money laundering and related
activities. In furtherance of those efforts, the Investor hereby represents, warrants and agrees
that, to the best of the Investor’s knowledge based upon appropriate diligence and
investigation:

     (i) None of the cash or property that the Investor or, if applicable, any
underlying beneficial owner, has paid, will pay or will contribute to the Company has been or shall
be derived form, or related to, any activity that is deemed criminal under United States law or
other applicable law; and

     (ii) No contribution or payment by the Investor or, if applicable, any underlying
beneficial owner, to the Company, to the extent that they are within the Purchaser’s control, shall
cause the Company or the Placement Agent to be in violation of the United States Bank Secrecy Act,
the United States Money Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001.

     Section 3.13. Own Account. Investor understands that the Investor’s Shares,
Warrants and Warrant Shares are “restricted securities” and have not been registered under the
Securities Act or any applicable state securities law and is acquiring such securities as principal
for its own account and not with a view to or for distributing or reselling such securities or any
part thereof in violation of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such securities in violation of the Securities Act or any
applicable state securities law and has no arrangement or understanding with any other persons
regarding the distribution of such securities (this representation and warranty not limiting
Investor’s right to sell such securities pursuant to an effective registration statement or
otherwise in compliance with applicable federal and state securities laws) in violation of the
Securities Act or any

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applicable state securities law. Investor is acquiring such securities
hereunder in the ordinary course of its business. Investor does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of such securities.

ARTICLE IV.

Representations and Warranties of the Company

     Except as stated below or in the SEC Documents (as defined herein), the Company hereby
represents and warrants to, and covenants with, the Investor that the following are true and
correct as of the date hereof:

     Section 4.1. Organization and Qualification. The Company is duly incorporated or
organized and validly existing in the jurisdiction of its incorporation or organization and has all
requisite corporate power to own its properties and to carry on its business as now being
conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect on the Company and its
subsidiary taken as a whole.

     Section 4.2. Authorization, Enforcement, Compliance with Other Instruments. (i) The
Company has the requisite corporate power and authority to enter into and perform this Agreement,
the Registration Rights Agreement, the Placement Agent Agreement and any related agreements, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement,
the Registration Rights Agreement, the Placement Agent Agreement and any related agreements by the
Company and the consummation by it of the transactions contemplated hereby and thereby, have been
duly authorized by the Company’s Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii) this Agreement, the
Registration Rights Agreement, the Placement Agent Agreement and any related agreements have been
duly executed and delivered by the Company, (iv) this Agreement, the Registration Rights Agreement,
the Placement Agent Agreement and assuming the execution and delivery thereof and acceptance by the
Investor and any related agreements constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such enforceability may
be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of
creditors’ rights and remedies.

     Section 4.3. Capitalization. The authorized capital stock of the Company consists of
113,000,000 shares of Common Stock and 100,000 shares of Preferred Stock, $0.01 par value per share
(“Preferred Stock”), of which 56,938,000 shares of Common Stock and no shares of Preferred
Stock are issued and outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. Except as disclosed in the SEC Documents, no shares of Common Stock
are subject to preemptive rights or any other similar rights or any liens

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or encumbrances suffered
or permitted by the Company. Except as disclosed in the SEC Documents, as of the date hereof, (i)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings
or arrangements by which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities (iii) there are no outstanding
registration statements other than on Form S-8 and (iv) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the Securities Act (except pursuant to the Registration Rights Agreement).
There are no securities or instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the consummation of the transactions
described herein or therein. The Company has furnished to the Investor true and correct copies of
the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the
“Certificate of Incorporation”), and the Company’s By-laws, as in effect on the date hereof
(the “By-laws”), and the terms of all securities convertible into or exercisable for Common
Stock and the material rights of the holders thereof in respect thereto.

     Section 4.4. No Conflict. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions contemplated hereby will not
(i) result in a violation of the Certificate of Incorporation, any certificate of designations of
any outstanding series of preferred stock of the Company or By-laws or (ii) conflict with or
constitute a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the rules and regulations
of the Principal Market on which the Common Stock is quoted) applicable to the Company or any of
its subsidiaries or by which any material property or asset of the Company or any of its
subsidiaries is bound or affected and which would cause a Material Adverse Effect. Except as
disclosed in the SEC Documents, neither the Company nor its subsidiaries is in violation of any
term of or in default under its Articles of Incorporation or By-laws or their organizational
charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to
the Company or its subsidiaries. The business of the Company and its subsidiaries is not being
conducted in violation of any material law, ordinance, regulation of any governmental entity.
Except as specifically contemplated by this Agreement and as required under the Securities Act and
any applicable state securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations under or contemplated
by this Agreement or the Registration Rights Agreement in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or effected on or prior

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to
the date hereof. The Company and its subsidiaries are unaware of any fact or circumstance which
might give rise to any of the foregoing.

     Section 4.5. SEC Documents; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with the SEC under the
Exchange Act since July 11, 2004. The Company has delivered to the Investor or its
representatives, or made available through the SEC’s website at http://www.sec.gov, true and
complete copies of the SEC Documents. As of their respective dates, the financial statements of
the Company disclosed in the SEC Documents (the “Financial Statements”) complied as to form
in all material respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). No other information provided by or on behalf of the Company to the
Investor which is not included in the SEC Documents contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

     Section 4.6. 10b-5. The SEC Documents do not include any untrue statements of
material fact, nor do they omit to state any material fact required to be stated therein necessary
to make the statements made, in light of the circumstances under which they were made, not
misleading.

     Section 4.7. No Default. Except as disclosed in the SEC Documents, the Company is not
in default in the performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material instrument or
agreement to which it is a party or by which it is or its property is bound and neither the
execution, nor the delivery by the Company, nor the performance by the Company of its obligations
under this Agreement or any of the exhibits or attachments hereto will conflict with or result in
the breach or violation of any of the terms or provisions of, or constitute a default or result in
the creation or imposition of any lien or charge on any assets or properties of the Company under
its Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of trust or other
material agreement applicable to the Company or instrument to which the Company is a party or by
which it is bound, or any statute, or any decree, judgment, order, rules or regulation of any court
or governmental agency or body having jurisdiction over the Company or its properties, in each case
which default, lien or charge is likely to cause a Material Adverse Effect on the Company’s
business or financial condition.

     Section 4.8. Absence of Events of Default. Except for matters described in the SEC
Documents and/or this Agreement, no Event of Default, as defined in the respective agreement to
which the Company is a party, and no event which, with the giving of notice or the passage of time
or both, would become an Event of Default (as so defined), has occurred and is continuing,

11

 

which
would have a Material Adverse Effect on the Company’s business, properties, prospects, financial
condition or results of operations.

     Section 4.9. Intellectual Property Rights. The Company has, or has rights or to use,
all patents, patent applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses, trade secrets and other similar rights necessary or material for use in
connection with its and the Subsidiary’s businesses and which the failure to so have could have a
Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company
nor the Subsidiary has received a written notice that the Intellectual Property Rights used by the
Company violates or infringes upon the rights of any Person. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights of others.

     Section 4.10. Employee Relations. Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its subsidiaries, is
any such dispute threatened. None of the Company’s or its subsidiaries’ employees is a member of a
union and the Company and its subsidiaries believe that their relations with their employees are
good.

     Section 4.11. Environmental Laws. The Company and its subsidiaries are (i) in
compliance with any and all applicable material foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have
received all permits, licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval; except, in each case, to the extent that the
failure to so comply or be in receipt would not have a Material Adverse Effect on the Company
and its subsidiary taken as a whole.

     Section 4.12. Title. Except as set forth in the SEC Documents, the Company has good
and marketable title to its properties and material assets owned by it, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are
not material to the business of the Company except to the extent that it would not have a
Material Adverse Effect on the Company and its subsidiary taken as a whole. Any real property
and facilities held under lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the Company and its
subsidiaries except to the extent that it would not have a Material Adverse Effect on the
Company and its subsidiary taken as a whole.

     Section 4.13. Insurance. The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks and in such amounts
as management of the Company believes to be prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar insurers

12

 

as
may be necessary to continue its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or operations of the Company and
its subsidiaries, taken as a whole.

     Section 4.14. Regulatory Permits. The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings relating to the revocation
or modification of any such certificate, authorization or permit.

     Section 4.15. Internal Accounting Controls. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any differences.

     Section 4.16. No Material Adverse Breaches, etc. Except as set forth in the SEC
Documents, neither the Company nor any of its subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment
of the Company’s officers has or is expected in the future to have a Material Adverse Effect on the
business, properties, operations, financial condition, results of operations or prospects of the
Company or its subsidiaries. Except as set forth in the SEC Documents, neither the Company nor any
of its subsidiaries is in breach of any contract or agreement which breach, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects of the Company or
its subsidiaries.

     Section 4.17. Absence of Litigation. Except as set forth in the SEC Documents, there
is no action, suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or
finding would (i) have a Material Adverse Effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents contemplated herein, or (iii)
except as expressly disclosed in the SEC Documents, have a Material Adverse Effect on the business,
operations, properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.

     Section 4.18. Subsidiaries. Except as disclosed in the SEC Documents, the Company
does not presently own or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity.

     Section 4.19. Tax Status. Except as disclosed in the SEC Documents, the Company and
each of its subsidiaries has made or filed all federal and state income and all other tax returns,

13

 

reports and declarations required by any jurisdiction to which it is subject and (unless and only
to the extent that the Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and
other governmental assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in good faith and has
set aside on its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.

     Section 4.20. Certain Transactions. Except as set forth in the SEC Documents none of
the officers, directors, or employees of the Company is presently a party to any transaction with
the Company (other than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.

     Section 4.21. Fees and Rights of First Refusal. The Company is not obligated to offer
the securities offered hereunder on a right of first refusal basis or otherwise to any third
parties including, but not limited to, current or former shareholders of the Company, underwriters,
brokers, agents or other third parties.

     Section 4.22. Use of Proceeds. The Company shall use the net proceeds from this
offering for general corporate purposes.

     Section 4.23. Further Representation and Warranties of the Company. For so long as
any securities issuable hereunder held by the Investor remain outstanding, the Company
acknowledges, represents, warrants and agrees that it use its best efforts to maintain the listing
of its Common Stock on the Principal Market. Notwithstanding the foregoing, the Company shall
not be obligated to maintain such listing beyond the first anniversary of the termination of this
agreement.

     Section 4.24. Opinion of Counsel. Investor shall receive an opinion letter from
counsel to the Company prior to the first Advance hereunder in the form attached hereto.

     Section 4.25. Dilution. The Company is aware and acknowledges that issuance of shares
of the Company’s Common Stock could cause dilution to existing shareholders and could significantly
increase the outstanding number of shares of Common Stock.

ARTICLE V.

Indemnification

     The Investor and the Company represent to the other the following with respect to itself:

14

 

     Section 5.1. Indemnification.

          (a) In consideration of the Investor’s execution and delivery of this Agreement, and in
addition to all of the Company’s other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Investor, and all of its officers, directors, partners,
employees and agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Investor Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any
such Investor Indemnitee is a party to the action for which indemnification hereunder is sought),
and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by the Investor Indemnitees or any of them as a result of, or arising out of, or relating
to (a) any misrepresentation or breach of any representation or warranty made by the Company in
this Agreement or the Registration Rights Agreement or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Company contained in this Agreement or the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action,
suit or claim brought or made against such Investor Indemnitee not arising out of any action or
inaction of an Investor Indemnitee, and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Investor Indemnitees. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.

          (b) In consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Investor’s other obligations under this Agreement, the Investor shall
defend, protect, indemnify and hold harmless the Company and all of its officers, directors,
shareholders, employees and agents (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the “Company
Indemnitees”) from and against any and all Indemnified Liabilities incurred by the Company
Indemnitees or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the Investor in this
Agreement, the Registration Rights Agreement, or any instrument or document contemplated hereby or
thereby executed by the Investor, (b) any breach of any covenant, agreement or obligation of the
Investor(s) contained in this Agreement, the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby executed by the Investor, or (c)
any cause of action, suit or claim brought or made against such Company Indemnitee based on
misrepresentations or due to a breach by the Investor and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Company Indemnitees. To the extent that the
foregoing undertaking by the Investor may be unenforceable for any reason, the Investor shall make
the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities,
which is permissible under applicable law.

15

 

          (c) The obligations of the parties to indemnify or make contribution under this Section 5.1
shall survive termination.

ARTICLE VI.

Covenants of the Company

     Section 6.1. Registration Rights. The Company shall cause the Registration Rights
Agreement to remain in full force and effect and the Company shall comply in all material respects
with the terms thereof.

     Section 6.2. Listing of Common Stock. The Company shall maintain the Common Stock’s
authorization for quotation on the Principal Market until the earlier of (i) the time at which
no securities issuable hereunder remain outstanding and (ii) the first anniversary of the
termination of this agreement.

     Section 6.3. Exchange Act Registration. The Company will use its best efforts to
cause its Common Stock to continue to be registered under Section 12(g) of the Exchange Act, use
its best efforts to file in a timely manner all reports and other documents required of it as a
reporting company under the Exchange Act and will not take any action or file any document (whether
or not permitted by Exchange Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under said Exchange Act prior
to the earlier of (i) the time at which no securities issuable hereunder remain outstanding and
(ii) the first anniversary of the termination of this agreement.

     Section 6.4. Transfer Agent Instructions. Upon effectiveness of the Registration
Statement the Company shall deliver instructions to its transfer agent to issue shares of Common
Stock to the Investor free of restrictive legends on or before each Advance Date.

     Section 6.5. Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.

     Section 6.6. Notice of Certain Events Affecting Registration; Suspension of Right to Make
an Advance. The Company will immediately notify the Investor upon its becoming aware of the
occurrence of any of the following events in respect of a registration statement or related
prospectus relating to an offering of Registrable Securities: (i) receipt of any request for
additional information by the SEC or any other Federal or state governmental authority during the
period of effectiveness of the Registration Statement for amendments or supplements to the
registration statement or related prospectus; (ii) the issuance by the SEC or any other Federal or
state governmental authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification
with respect to the suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus of any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material fact or omit to

16

 

state any material fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading; and (v) the Company’s reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company will promptly make
available to the Investor any such supplement or amendment to the related prospectus. The Company
shall not deliver to the Investor any Advance Notice during the continuation of any of the
foregoing events.

     Section 6.7. Consolidation; Merger. The Company shall not, at any time after the date
hereof, effect any merger or consolidation of the Company with or into, or a transfer of all or
substantially all the assets of the Company to another entity (a “Consolidation Event”)
unless the resulting successor or acquiring entity (if not the Company) assumes by written
instrument the obligation to deliver to the Investor such shares of stock and/or securities as the
Investor is entitled to receive pursuant to this Agreement.

     Section 6.8. Issuance of the Company’s Common Stock. The sale of the shares of Common
Stock shall be made in accordance with the provisions and requirements of Regulation D and any
applicable state securities law.

     Section 6.9. Review of Public Disclosures. All SEC filings (including, without
limitation, all filings required under the Exchange Act, which include Forms 10-Q and 10-QSB, 10-K
and 10K-SB, 8-K, etc) and other public disclosures made by the Company, including, without
limitation, all press releases, investor relations materials, and scripts of analysts meetings and
calls, shall be reviewed and approved for release by the Company’s attorneys and, if containing
financial information, the Company’s independent certified public accountants.

     Section 6.10. Market Activities. The Company will not, directly or indirectly, (i)
take any action designed to cause or result in, or that constitutes or might reasonably be expected
to constitute, the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Common Stock or (ii) bid for or purchase the Common Stock, or
pay anyone any compensation for soliciting purchases of the Common Stock.

ARTICLE VII.

Conditions for Advance and Conditions to Closing

     Section 7.1. Conditions Precedent to the Obligations of the Company. The obligation
hereunder of the Company to issue and sell the shares of Common Stock to the Investor incident to
each Closing is subject to the satisfaction, or waiver by the Company, at or before each such
Closing, of each of the conditions set forth below.

          (a) Accuracy of the Investor’s Representations and Warranties. The representations
and warranties of the Investor shall be true and correct in all material respects.

17

 

          (b) Performance by the Investor. The Investor shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required by this Agreement
and the Registration Rights Agreement to be performed, satisfied or complied with by the Investor
at or prior to such Closing.

     Section 7.2. Conditions Precedent to the Right of the Company to Deliver an Advance
Notice. The right of the Company to deliver an Advance Notice is subject to the fulfillment by
the Company, on such Advance Notice (a “Condition Satisfaction Date”), of each of the
following conditions:

          (a) Registration of the Common Stock with the SEC. The Company shall have filed with
the SEC a Registration Statement with respect to the resale of the Registrable Securities in
accordance with the terms of the Registration Rights Agreement. As set forth in the Registration
Rights Agreement, the Registration Statement shall have previously become effective and shall
remain effective on each Condition Satisfaction Date and (i) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends to issue a stop order with respect to
the Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness
of the Registration Statement, either temporarily or permanently, or intends or has threatened to
do so (unless the SEC’s concerns have been addressed and the Investor is reasonably satisfied that
the SEC no longer is considering or intends to take such action), and (ii) no other suspension of
the use or withdrawal of the effectiveness of the Registration Statement or related prospectus
shall exist. The Registration Statement must have been declared effective by the SEC prior to the
first Advance Notice Date.

          (b) Authority. The Company shall have obtained all permits and qualifications
required by any applicable state in accordance with the Registration Rights Agreement for the offer
and sale of the shares of Common Stock, or shall have the availability of exemptions therefrom.
The sale and issuance of the shares of Common Stock shall be legally permitted by all laws and
regulations to which the Company is subject.

          (c) Fundamental Changes. There shall not exist any fundamental changes to the
information set forth in the Registration Statement which would require the Company to file a
post-effective amendment to the Registration Statement.

          (d) Performance by the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required by this
Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the
Company at or prior to each Condition Satisfaction Date.

          (e) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been commenced that may
have the effect of prohibiting or adversely affecting any of the transactions contemplated by this
Agreement.

18

 

          (f) No Suspension of Trading in or Delisting of Common Stock. The trading of the
Common Stock is not suspended by the SEC or the Principal Market (if the Common Stock is traded on
a Principal Market). The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the Principal Market
(if the Common Stock is traded on a Principal Market). The Company shall not have received any
notice threatening the continued listing of the Common Stock on the Principal Market (if the Common
Stock is traded on a Principal Market).

          (g) Maximum Advance Amount. The amount of an Advance requested by the Company shall
not exceed the Maximum Advance Amount. In addition, in no event shall the number of shares
issuable to the Investor pursuant to an Advance cause the aggregate number of shares of Common
Stock beneficially owned by the Investor and its affiliates to exceed nine and 9/10 percent (9.9%)
of the then outstanding Common Stock of the Company. For the purposes of this section beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.

          (h) No Knowledge. The Company has no knowledge of any event which would be more
likely than not to have the effect of causing such Registration Statement to be suspended or
otherwise ineffective.

          (i) Executed Advance Notice. The Investor shall have received the Advance Notice
executed by an officer of the Company and the representations contained in such Advance Notice
shall be true and correct as of each Condition Satisfaction Date.

ARTICLE VIII.

Due Diligence Review; Non-Disclosure of Non-Public Information

     Section 8.1. Non-Disclosure of Non-Public Information.

          (a) The Company covenants and agrees that it shall refrain from disclosing, and shall cause
its officers, directors, employees and agents to refrain from disclosing, any material non-public
information to the Investor without also disseminating such information to the public, unless prior
to disclosure of such information the Company identifies such information as being material
non-public information and provides the Investor with the opportunity to accept or refuse to accept
such material non-public information for review.

          (b) Nothing herein shall require the Company to disclose non-public information to the
Investor or its advisors or representatives, and the Company represents that it does not
disseminate non-public information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any event or the
existence of any circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information (whether or not
requested of the Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or to omit a material

19

 

fact
required to be stated therein in order to make the statements, therein, in light of the
circumstances in which they were made, not misleading; provided that a filing with the SEC will
constitute actual notice. Nothing contained in this Section 8.2 shall be construed to mean that
such persons or entities other than the Investor (without the written consent of the Investor prior
to disclosure of such information) may not obtain non-public information in the course of
conducting due diligence in accordance with the terms of this Agreement and nothing herein shall
prevent any such persons or entities from notifying the Company of their opinion that based on such
due diligence by such persons or entities, that the Registration Statement contains an untrue
statement of material fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in light of the circumstances in
which they were made, not misleading.

ARTICLE IX.

Choice of Law/Jurisdiction

     Section 9.1. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be heard in New York County,
New York, and expressly consent to the jurisdiction and venue of the Supreme Court of New York,
sitting in New York County, New York and the United States District Court of Southern District of
New York, sitting in New York, New York, for the adjudication of any civil action asserted
pursuant to this paragraph.

ARTICLE X.

Assignment; Termination

     Section 10.1. Assignment. Neither this Agreement nor any rights of the Company
hereunder may be assigned to any other Person.

     Section 10.2. Termination.

          (a) The obligations of the Investor to make Advances under Article II hereof shall terminate
twenty-four (24) months after the Effective Date.

          (b) The
obligation of the Investor to make an Advance to the Company pursuant to this
Agreement shall terminate permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension of the effectiveness
of the Registration Statement for an aggregate of fifty (50) Trading Days, other than due to the
acts of the Investor, during the Commitment Period, or (ii) the Company shall at any time fail
materially to comply with the requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written notice from the Investor, provided,
however, that this termination provision shall not apply to any period commencing upon the
filing of a post-effective amendment to such Registration Statement and ending upon the date on
which such post effective amendment is declared effective by the SEC.

          (c) This
agreement shall terminate upon thirty (30) calendar days written
notice by the Company to Investor, provided that there are no Advance
Notices pending.

20EX-10.2

 

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

     REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of July 11, 2006, by and
between MARSHALL EDWARDS, INC., a Delaware corporation (the “Company”), and CORNELL CAPITAL
PARTNERS, LP, a Delaware limited partnership (the “Investor”).

     WHEREAS:

     A. In connection with the Standby Equity Distribution Agreement by and between the parties
hereto of even date herewith (the “Standby Equity Distribution Agreement”), the Company has
agreed, upon the terms and subject to the conditions of the Standby Equity Distribution Agreement,
to issue and sell to the Investor that number of shares of the Company’s common stock, par value
$0.000000002 per share (the “Common Stock”), which can be purchased pursuant to the terms
of the Standby Equity Distribution Agreement for an aggregate purchase price of up to Fifteen
Million Dollars ($15,000,000). Capitalized terms not defined herein shall have the meaning
ascribed to them in the Standby Equity Distribution Agreement.

     B. To induce the Investor to execute and deliver the Standby Equity Distribution Agreement,
the Company has agreed to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor statute (collectively,
the “Securities Act”), and applicable state securities laws.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Investor hereby agree as follows:

     1. DEFINITIONS.

     As used in this Agreement, the following terms shall have the following meanings:

          a. “Person” means a corporation, a limited liability company, an association, a
partnership, an organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.

          b. “Register,” “registered,” and “registration” refer to a
registration effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or
any successor rule providing for offering securities on a continuous or delayed basis (“Rule
415”), and the declaration or ordering of effectiveness of such Registration Statement(s) by
the United States Securities and Exchange Commission (the “SEC”).

          c. “Registrable Securities” means the Investor’s Shares, as defined in the Standby
Equity Distribution Agreement, the Warrant Shares, as defined in the Standby Equity Distribution
Agreement, and the shares of Common Stock issuable to Investors pursuant to the Standby Equity
Distribution Agreement.

 

 

          d. “Registration Statement” means a registration statement under the Securities Act
which covers the Registrable Securities.

     2. REGISTRATION.

          a. Mandatory Registration. The Company shall prepare and file with the SEC a
Registration Statement on Form S-1, S-3 or on such other form as is available and the Company shall
cause such Registration Statement to be declared effective by the SEC prior to the first sale to
the Investor of the Company’s Common Stock pursuant to the Standby Equity Distribution Agreement.
The Company shall cause the Registration Statement to remain effective until the earlier of (i) the
full completion of the Commitment Period (as such term is defined in the Standby Equity
Distribution Agreement) or (ii) the time at which all Registrable Securities shall be eligible for
resale under Rule 144(k).

          b. Sufficient Number of Shares Registered. In the event the number of shares
available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover
all of the Registrable Securities pursuant to the Standby Equity Distribution Agreement, the
Company shall amend the Registration Statement, or file a new Registration Statement (on the short
form available therefore, if applicable), or both, so as to cover all of such Registrable
Securities pursuant to the Standby Equity Distribution Agreement as soon as practicable, but in any
event not later than fifteen (15) days after the necessity therefore arises. The Company shall use
it best efforts to cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the foregoing provision, the
number of shares available under a Registration Statement shall be deemed “insufficient to cover
all of the Registrable Securities” if at any time the number of Registrable Securities issuable on
an Advance Notice Date is greater than the number of shares available for resale under such
Registration Statement.

     3. RELATED OBLIGATIONS.

          a. The Company shall keep use its best efforts to the Registration Statement effective
pursuant to Rule 415 at all times until the completion of the Commitment Period (as such term is
defined in the Standby Equity Distribution Agreement) (the “Registration Period”), which
Registration Statement (including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.

          b. The Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under
the Securities Act, as may be necessary to keep such Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of the Company covered
by such Registration Statement until such time as all of such Registrable Securities shall have
been disposed of in accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration

2

 

Statement. In the case of amendments and supplements to a Registration Statement which are
required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason
of the Company’s filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall
have incorporated such report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the Exchange Act report
is filed which created the requirement for the Company to amend or supplement the Registration
Statement.

          c. The Company shall furnish to the Investor without charge, (i) at least one copy of such
Registration Statement as declared effective by the SEC and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by reference, all exhibits
and each preliminary prospectus, (ii) ten (10) copies of the final prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other number of copies
as such Investor may reasonably request) and (iii) such other documents as such Investor may
reasonably request from time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.

          d. The Company shall use its best efforts to (i) register and qualify the Registrable
Securities covered by a Registration Statement under such other securities or “blue sky” laws of
such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file
in those jurisdictions, such amendments (including post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to maintain the effectiveness thereof
during the Registration Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (w) make any change to its certificate of incorporation or
by-laws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction. The Company shall
promptly notify the Investor of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable Securities for sale under
the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

          e. As promptly as practicable after becoming aware of such event or development, the Company
shall notify the Investor in writing of the happening of any event as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material, nonpublic
information), and promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of such supplement or
amendment to each Investor. The Company shall also promptly notify the Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective

3

 

amendment has been filed, and when a Registration Statement or any post-effective amendment
has become effective (notification of such effectiveness shall be delivered to the Investor by
facsimile on the same day of such effectiveness), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related information, and (iii) of
the Company’s reasonable determination that a post-effective amendment to a Registration Statement
would be appropriate.

          f. The Investor agrees to accept copies of the Registration Statement as declared
effective by the SEC, copies of the prospectus included in the Registration Statement and any
amendments to such registration Statement or prospectus by electronic delivery.

          g. The Company shall use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction within the United States of America
and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension
and to notify the Investor of the issuance of such order and the resolution thereof or its receipt
of actual notice of the initiation or threat of any proceeding for such purpose.

          h. The Company shall hold in confidence and not make any disclosure of information concerning
the Investor provided to the Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final, non-appealable order from a
court or governmental body of competent jurisdiction, or (iv) such information has been made
generally available to the public other than by disclosure in violation of this Agreement or any
other agreement. The Company agrees that it shall, upon learning that disclosure of such
information concerning the Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to the Investor and allow the
Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

          i. The Company shall use its best efforts either to cause all the Registrable Securities
covered by a Registration Statement (i) to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of such exchange or to
secure the inclusion for quotation on the National Association of Securities Dealers, Inc. OTC
Bulletin Board for such Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(h).

          j. The Company shall cooperate with the Investor to the extent applicable, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the Investor may
reasonably request and registered in such names as the Investor may request.

4

 

          k. The Company shall use its best efforts to cause the Registrable Securities covered by the
applicable Registration Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to consummate the disposition of such Registrable
Securities.

          l. The Company shall otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.

          m. Within two (2) business days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver to the transfer agent for
such Registrable Securities (with copies to the Investor) confirmation that such Registration
Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.

          n. The Company shall take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of Registrable Securities pursuant to a Registration Statement.

     4. OBLIGATIONS OF THE INVESTOR.

     The Investor agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will
immediately discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or receipt of notice that no
supplement or amendment is required.

     5. EXPENSES OF REGISTRATION.

     All expenses incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees,
printers, legal and accounting fees shall be paid by the Company.

     6. INDEMNIFICATION.

     With respect to Registrable Securities which are included in a Registration Statement under
this Agreement:

          a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold
harmless and defend the Investor, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls the Investor within the meaning of the
Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’
fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or governmental,
administrative or other

5

 

regulatory agency, body or the SEC, whether pending or threatened, whether or not an
indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of
them may become subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the offering under the
securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered
(“Blue Sky Filing”), or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any final prospectus (as
amended or supplemented, if the Company files any amendment thereof or supplement thereto with the
SEC) or the omission or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any state securities law, or any rule or regulation there under relating to
the offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters
in the foregoing clauses (i) through (iii) being, collectively, “Violations”). The Company
shall reimburse the Investor and each such controlling person promptly as such expenses are
incurred and are due and payable, for any legal fees or disbursements or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement contained in this Section
6(a): (x) shall not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information furnished in writing to
the Company by such Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto; (y) shall not be
available to the extent such Claim is based on a failure of the Investor to deliver or to cause to
be delivered the prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(e); and (z) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the Indemnified Person.

          b. In connection with a Registration Statement, the Investor agrees to indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration Statement and each
Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange
Act (each an “Indemnified Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or is based upon any Violation, in each case to the
extent, and only to the extent, that such Violation (i) occurs in reliance upon and in conformity
with written information furnished to the Company by the Investor expressly for use in connection
with such Registration Statement or (ii) is a result of a failure of the Investor to deliver or to
cause to be delivered the prospectus made available by the Company, if such prospectus was timely
made available by the Company pursuant to Section 3(e); and, subject to Section 6(d), the Investor
will reimburse any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim;

6

 

provided, however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written consent of the
Investor, which consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to the Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified Party.
Notwithstanding anything to the contrary contained herein, the indemnification agreement contained
in this Section 6(b) with respect to any prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained in the prospectus
was corrected and such new prospectus was delivered to the Investor prior to the Investor’s use of
the prospectus to which the Claim relates.

          c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses of not more than
one counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such proceeding. The
Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably available to the Indemnified
Party or Indemnified Person which relates to such action or claim. The indemnifying party shall
keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of
the defense or any settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without its prior written
consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or
condition its consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all
liability in respect to such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not relieve such

7

 

indemnifying party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend
such action.

          d. The indemnification required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

          e. The indemnity agreements contained herein shall be in addition to (i) any cause of action
or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
Notwithstanding the foregoing neither punitive nor extraordinary damages will be available in
connection with any cause of action brought in connection with the Agreement or the transactions
contemplated hereby or by the Standby Equity Contribution Agreement.

     7. CONTRIBUTION.

     To the extent any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale of such Registrable
Securities.

     8. REPORTS UNDER THE EXCHANGE ACT.

     With a view to making available to the Investor the benefits of Rule 144 promulgated under the
Securities Act or any similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration (“Rule 144”)
the Company agrees to use its best efforts to:

          a. make and keep public information available, as those terms are understood and defined in
Rule 144;

          b. file with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the Company’s obligations
under Section 6.3 of the Standby Equity Distribution Agreement) and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and

          c. furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the

8

 

most recent annual or quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably requested to permit the
Investor to sell such securities pursuant to Rule 144 without registration.

     9. AMENDMENT OF REGISTRATION RIGHTS.

     Provisions of this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively), only by a written
agreement between the Company and the Investor. Any amendment or waiver effected in accordance
with this Section 9 shall be binding upon the Investor and the Company. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of any provision of
any of this Agreement unless the same consideration also is offered to all of the parties to this
Agreement.

     10. MISCELLANEOUS.

          a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is
deemed to own of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or election received from
the registered owner of such Registrable Securities.

          b. Any notices, consents, waivers or other communications required or permitted to be given
under the terms of this Agreement 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 business 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 :	 	Marshall Edwards, Inc.

140 Wicks Road

North Ryde, NSW, 2113

Australia
	 

	 	Attention:
	 	David R. Seaton
	 

	 	Telephone:	 	 
	 

	 	Facsimile:
	 	+61 2 9878 8474
	 

	 	E-mail:
	 	david.seaton@novogen.com
	 
	 	 	 	 
	With a copy to:	 	Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, NY 10178
	 

	 	Attention:
	 	Sean Hayes, Esq.
	 

	 	Telephone:
	 	(212) 309-6350
	 

	 	Facsimile:
	 	(212) 309-6001

9

 

	 	 	 	 	 
	If to the Investor, to:	 	Cornell Capital Partners, LP

101 Hudson Street – Suite 3700

Jersey City, New Jersey 07302
	 

	 	Attention:
	 	Mark Angelo
Portfolio Manager
	 

	 	Telephone:
	 	(201) 985-8300
	 

	 	Facsimile:
	 	(201) 985-8266
	 
	 	 	 	 
	With a copy to:	 	Cornell Capital Partners, LP

101 Hudson Street – Suite 3700

Jersey City, NJ 07302
	 

	 	Attention:
	 	David Gonzalez, Esq.
	 

	 	Telephone:
	 	(201) 985-8300
	 

	 	Facsimile:
	 	(201) 985-8266

Any party may change its address by providing written notice to the other parties hereto at least
five days prior to the effectiveness of such change. Written confirmation of receipt (A) given by
the recipient of such notice, consent, waiver or other communication, (B) 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 (C) provided by a courier
or overnight courier 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.

          c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

          d. The corporate laws of the State of New York shall govern all issues concerning the
relative rights of the Company and the Investor. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement 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 jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the Supreme Courts of the State of New
York, sitting in New York County, New York and the Federal District Court for the Southern District
of New York sitting in New York County, New York , for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any

10

 

manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.

          e. This Agreement and the Standby Equity Distribution Agreement, constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those set forth or referred
to herein and therein. This Agreement and the Standby Equity Distribution Agreement supersede all
prior agreements and understandings among the parties hereto with respect to the subject matter
hereof and thereof.

          f. This Agreement shall inure to the benefit of and be binding upon the permitted successors
and assigns of each of the parties hereto.

          g. The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.

          h. This Agreement may be executed in identical counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this Agreement.

          i. Each party shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.

          j. The language used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent and no rules of strict construction will be applied against any
party.

          k. This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

11

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly
executed as of day and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	Marshall Edwards, Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	Christopher Naughton	 	 
	 	 	Title:	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Cornell Capital Partners, LP	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	Yorkville Advisors, LLC	 	 
	 

	 	Its:
	 	 	 	General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	Mark Angelo	 	 
	 	 	Title:	 	Portfolio Manager	 	 

12

 

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

Attention:

          Re:     MARSHALL EDWARDS, INC.

Ladies and Gentlemen:

     In connection with that certain Standby Equity Distribution Agreement (the “Standby Equity
Distribution Agreement”) entered into by and between the Company and Cornell Capital Partners,
LP (the “Investor”) pursuant to which the Company issued to the Investor shares of its
Common Stock, par value $0.000000002 per share (the “Common Stock”). Pursuant to the
Standby Equity Distribution Agreement, the Company also has entered into a Registration Rights
Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement) under the Securities Act of 1933, as amended (the “Securities
Act”). In connection with the Company’s obligations under the Registration Rights Agreement,
on                      ___, the Company filed a Registration Statement on Form                      (File No.
333-                    ) (the “Registration Statement”) with the Securities and Exchange
Commission (the “SEC”) relating to the Registrable Securities which names the Investor as a
selling stockholder thereunder.

     In connection with the foregoing, we advise you that a member of the SEC’s staff has advised
us or our counsel by telephone that the SEC has entered an order declaring the Registration
Statement effective under the Securities Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff,
that any stop order suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable Securities are available
for resale under the Securities Act pursuant to the Registration Statement.

	 	 	 	 	 	 	 
	 

	 	Very truly yours,
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

cc:     Cornell Capital Partners, LP

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