PRE 14A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Marshall Edwards, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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(1) Title of each class of securities to which transaction applies: |
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(2) Aggregate number of securities to which transaction applies: |
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined): |
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(4) Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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(1) Amount Previously Paid: |
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(2) Form, Schedule or Registration Statement No.: |
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(3) Filing Party: |
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(4) Date Filed: |
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Marshall Edwards, Inc.
140 Wicks Road
North Ryde, New South Wales 2113
Australia
October ___, 2006
Dear Marshall Edwards Stockholder:
You are cordially invited to attend the 2006 Annual Meeting of the Stockholders of Marshall
Edwards, Inc., a Delaware corporation. The Annual Meeting will be held on Tuesday, December 12,
2006, commencing at 1:00 pm (local time) at the offices of Morgan Lewis & Bockius LLP, located at
1111 Pennsylvania Avenue, NW, Washington, D.C. 20004. We look forward to meeting with as many of
our stockholders as possible.
At the meeting, we will (i) elect two directors, (ii) act upon a proposal to ratify the
appointment of our independent auditors for the fiscal year ending June 30, 2007 and (iii) act upon
a proposal to approve the issuance of our Common Stock to Cornell Capital Partners, LP pursuant to
the Standby Equity Distribution Agreement entered into by us and Cornell Capital Partners, LP on
July 11, 2006. There will also be a report on our business, and you will have an opportunity to
ask questions about the Company.
It is important that your shares be represented at the meeting. Whether or not you plan to
attend in person, you are invited to complete, sign, date and return the enclosed proxy in the
envelope provided.
The Companys Annual Report for the fiscal year ended June 30, 2006 is being mailed to you
together with the enclosed proxy materials.
Yours sincerely,
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Christopher Naughton, President and Chief Executive Officer
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Notice of Annual Meeting of Stockholders
To Be Held on December 12, 2006
MARSHALL EDWARDS, INC.
140 Wicks Road
North Ryde, New South Wales 2113
Australia
October ___, 2006
To the Stockholders of Marshall Edwards, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Marshall Edwards, Inc., a
Delaware corporation, has been called and will be held on Tuesday, December 12, 2006, at 1:00 pm
(local time) at Morgan Lewis & Bockius LLP, located at 111 Pennsylvania Avenue, NW, Washington,
D.C. 20004, for the following purposes:
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To elect two members to the Board of Directors; |
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To ratify the appointment of our independent auditors for the fiscal year
ending June 30, 2007; |
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To vote upon a proposal to approve the issuance of our Common Stock to Cornell
Capital Partners, LP pursuant to the Standby Equity Distribution Agreement entered into
by us and Cornell Capital Partners, LP on July 11, 2006; and |
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To consider and act on such matters as may properly come before the Annual
Meeting and any adjournment thereof. |
Only stockholders of record at the close of business on October 23, 2006, will be entitled to
notice of and to vote at the Annual Meeting and at any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON, WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD AT YOUR EARLIEST CONVENIENCE. YOU MAY RETURN YOUR PROXY CARD IN THE
ENCLOSED ENVELOPE (NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES).
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BY ORDER OF THE BOARD OF DIRECTORS |
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David R. Seaton, Chief Financial Officer and Secretary |
TABLE OF CONTENTS
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OTHER INFORMATION |
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MARSHALL EDWARDS, INC.
140 Wicks Road
North Ryde, New South Wales 2113
Australia
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation of Proxies by and
on behalf of the Board of Directors of Marshall Edwards, Inc. (the Company) to be used at the
Annual Meeting of Stockholders to be held on Tuesday, December 12, 2006, and at any adjournment
thereof (the Annual Meeting), for the purposes set forth in the accompanying Notice of Annual
Meeting. The Companys Annual Report for the fiscal year ended June 30, 2006 accompanies this
Proxy Statement. This Proxy Statement and the accompanying materials are expected to be first sent
or given to stockholders of the Company on or about October 31, 2006.
The close of business on October 23, 2006 has been fixed as the record date for the
determination of the stockholders entitled to notice of and to vote at the Annual Meeting. Only
holders of record as of that date of shares of the Companys common stock, $0.00000002 par value
per share (the Common Stock), are entitled to notice of and to vote at the Annual Meeting.
Each share of the Common Stock entitles the holder thereof to one vote per share on each
matter presented to the stockholders for approval at the Annual Meeting. On October 23, 2006,
there were
shares of Common Stock outstanding and entitled to vote.
Execution of a Proxy by a stockholder will not affect such stockholders right to attend the
Annual Meeting and to vote in person. Any stockholder who executes a Proxy has a right to revoke
it at any time before it is voted by advising David R. Seaton, Secretary of the Company, in writing
of such revocation, by executing a later-dated Proxy which is presented to the Company at or prior
to the Annual Meeting or by appearing at the Annual Meeting and voting in person. Attendance at
the Annual Meeting will not in and of itself constitute revocation of a Proxy. Please note,
however, that if your shares are held of record by a bank, broker or other agent and you wish to
vote at the Annual Meeting, you must obtain a proxy issued in your name from that record holder.
The presence, in person or by Proxy, of the holders of one-third of the shares of the Common
Stock entitled to vote at the Annual Meeting will constitute a quorum. Assuming a quorum is met,
each nominee for director who receives a plurality of the votes cast by holders of the shares of
Common Stock voting in person or by proxy at the Annual Meeting will be elected as a director. The
proposal to ratify the appointment of BDO as the Companys independent auditors for the fiscal year
ended June 30, 2007 will require approval by the majority of the votes cast by the holders of the
shares of Common Stock voting in person or by proxy at the Annual Meeting. The proposal to approve
the issuance of shares of Common Stock to Cornell Capital Partners, LP (Cornell Capital) under
the Standby Equity Distribution Agreement (the SEDA) entered into by the Company and Cornell on
July 11, 2006 will require approval by a majority of the votes cast by holders of the shares of
Common Stock voting in person or by proxy at the Annual Meeting.
With regard to the election of directors, votes may be cast in favor or withheld. Votes that
are withheld and broker non-votes, if any, will be counted for purposes of determining the presence
or absence of a quorum, but will have no effect on the election of directors. You may vote either
for or against or abstain from voting on the proposal to ratify the selection of BDO as the
Companys
1
independent auditors. Abstentions and broker non-votes, if any, will be counted for the
purposes of determining the presence or absence of a quorum, but will have no effect on the
ratification of BDO as the Companys independent auditors. You may vote either for or against or
abstain from voting on the proposal to approve the issuance of the Companys Common Stock to
Cornell Capital pursuant to the SEDA. Abstentions and broker non-votes, if any, will be counted
for the purposes of determining the presence or absence of a quorum, but will have no effect on the
approval of the issuance of the Companys Common Stock to Cornell Capital pursuant to the SEDA.
Unless specified otherwise, the Proxies will be voted (i) FOR the election of all the nominees
to serve as directors of the Company until the annual meeting in 2009 and until their successors
are duly elected and qualified, (ii) FOR the ratification of the appointment of BDO as the
Companys independent auditors and (iii) FOR the issuance of the Companys Common Stock to Cornell
Capital pursuant to with the SEDA. In the discretion of the Proxy holders, the Proxies will also
be voted for or against such other matters as may properly come before the Annual Meeting.
Management is not aware of any other matters to be presented for action at the Annual Meeting.
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Proposal 1
ELECTION OF DIRECTORS
Below are the two nominees for election to the Board of Directors to serve for terms expiring
at the annual meeting in 2009 and until their respective successors have been duly elected and
qualified. The Companys restated certificate of incorporation and amended and restated bylaws
provide that the authorized number of directors shall be determined by a resolution of the Board of
Directors, but shall be between two and nine. The number of directors on the Board of Directors is
currently fixed at six. Also, under the Companys restated certificate of incorporation and
amended and restated bylaws, the Companys Board of Directors is divided into three classes, with
the classes serving three-year staggered terms. Each class contains one-third (or if that number
is not a whole number, the whole number nearest one-third) of the directors, with members of each
class holding office for a three-year term. Currently there are two directors whose terms expire
in 2007, two directors whose terms expire in 2008 and two directors whose terms will expire at the
Annual Meeting in 2006.
The presence, in person or by Proxy, of the holders of one-third of the shares of the Common
Stock entitled to vote at the Annual Meeting will constitute a quorum. Assuming a quorum is met,
each nominee for director who receives a plurality of the votes cast by holders of the shares of
Common Stock voting in person or by proxy at the Annual Meeting will be elected as a director.
Votes may be cast in favor or withheld. Votes that are withheld and broker non-votes, if any, will
be counted for purposes of determining the presence or absence of a quorum, but will have no effect
on the election of directors.
Nominees
The following table sets forth information, as of October 23, 2006, regarding the nominees.
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Stephen Breckenridge |
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Director |
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64 |
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Professor Bryan Williams |
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Director |
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Business Experience of Nominees
Stephen Breckenridge, age 64, Director
M Tax, FCA, FTIA
Mr. Breckenridge has been one of the Companys directors since August 2003. Mr. Breckenridge
has had over 25 years of experience in public practice as a chartered accountant in Australia and,
since July 2004, has been the head of international transfer pricing for Australia and Asia at
Baker & McKenzie (a global law firm) in Sydney. Mr. Breckenridge has been managing director of
Breckenridge Consulting Pty Ltd since 2001, which provides independent tax and management advice to
multi-nationals and small and medium enterprises, (SMEs). Until 2001, Mr. Breckenridge was a tax
partner for 24 years with KPMG in Sydney where he provided corporate tax advice to a wide cross
section of businesses in Australia and overseas with particular emphasis in later years on
international transfer pricing. Mr. Breckenridge has also been involved in the pharmaceutical and
chemical industries over a long period including several industry association committees and
leading industry focus groups within KPMG. From 2003 to 2004, Mr. Breckenridge was employed by
Pitcher Partners Pty Ltd., an accounting firm in Sydney where he provided international tax advice
to a broad range of businesses. Mr. Breckenridge has been a member of the Australian Institute of
Company Directors since May 2006. Mr. Breckenridge
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holds a Master of Tax degree from the University of Sydney and is a fellow of the Institute of
Chartered Accountants and the Tax Institute of Australia. Mr. Breckenridges term as a director
expires at the annual meeting in 2006.
Professor Bryan Williams, age 57, Director
Professor Bryan Williams has been one of the Companys directors since March 2006 when he was
appointed by the Companys Board to fill the vacancy created by the resignation of Professor David
de Kretser from the Board of Directors. Professor Williams has over 30 years of experience in
basic and pre-clinical cancer research. Since January 1, 2006, Professor Williams has been the
director of the Monash Institute of Medical Research in Melbourne, Australia. From 1991 to 2005,
Professor Williams was Chairman of the Department of Cancer Biology, Lerner Research Institute, The
Cleveland Clinic Foundation, Cleveland, Ohio. From 1993 to 2005, Professor Williams was Professor,
Department of Genetics at Case Western Reserve University, Cleveland, Ohio. From 1998 to 2005,
Professor Williams was an Adjunct Professor in the Departments of Chemistry at Cleveland State
University and Kent State University, also both in Ohio. Professor Williams holds a B.Sc.
(Hons)(Microbiology) and PhD (Microbiology) from the University of Otago, New Zealand. He is an
Honorary Fellow of the Royal Society of New Zealand. Professor Williams term as a director
expires at the annual meeting in 2006.
The Board of Directors unanimously recommends that you vote FOR the election of Stephen
Breckenridge and Professor Bryan Williams as directors of the Company.
Business Experience of Members of the Board of Directors Continuing in Office
Members Whose Terms Expire at the Annual Meeting in 2007
Mr. Philip Johnston, age 59, Director
Dip Eng (Production)
Mr. Johnston has been a director since April 2001. Mr. Johnston has more than 25 years of
experience in the pharmaceutical industry. He has been a non-executive director of Novogen Limited
(Novogen), the Companys parent, since 1997 and chairman of Novogen since January 2001. Since
June 2004, Mr. Johnston has been a non-executive director of LIPA Pharmaceuticals Limited. He is
also the managing director of Qualcare Management Pty. Ltd. Mr. Johnston has been a director of
Glycotex, Inc. (Glycotex), a subsidiary of Novogen, since September 2005. From June 1988 to
September 1997, Mr. Johnston was an executive director of Wellcome Australia Limited. He was
previously a director of two subsidiary companies of GlaxoWellcome. He has had responsibility for
production, distribution, quality assurance and consumer product development and has been directly
involved in the establishment of strategic alliances and joint ventures. Mr. Johnston has
completed a number of executive development programs including programs at the University of New
South Wales and the London Business School.
Professor Paul John Nestel, age 76, Director
AO MD, FTSE, FRACP, FAHA, FCSAND
Professor Nestel has been a director since April 2001. Professor Nestel has been a
non-executive director of Novogen since September 2001. Since January 1995, Professor Nestel has
been senior principal research fellow and head of the cardiovascular nutrition laboratory at the
Baker Medical Research Institute, Victoria. Professor Nestel has also been a consultant physician
at the Alfred Hospital, Melbourne. He is president of the International Life Sciences Institute
(Australasia) and is a member of the board of directors of ILSI South East Asia. He was formally a
clinical professor in medicine at The Flinders University of South Australia. Professor Nestel is
an Officer of the Order of Australia.
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Members Whose Terms Expire at the Annual Meeting in 2008
Christopher Naughton, age 53, Director
BEc, LLB
Mr. Naughton has been President, Chief Executive Officer and director of the Company since the
Companys inception in December 2000. Mr. Naughton has been the Managing Director of Novogen since
March 1997. Mr. Naughton was appointed Chairman of Glycotex in September 2005. Mr. Naughton
received degrees in Economics from the Australian National University and in Law from the
University of New South Wales. He completed the Program for Management Development at the Harvard
Business School and is admitted to practice as an attorney in New South Wales. After working in
merchant banking, he has spent the past 20 years in the pharmaceutical industry including
appointments as a director of Wellcome Australia Limited and in world-wide business development
with the Wellcome Foundation Limited in the UK.
Professor Graham E. Kelly, age 61, Director
BSc(Vet), BVSc, PhD
Professor Kelly was appointed Chairman of the Board of Directors in 2000. Professor Kelly is
the founder and the first managing director of Novogen. Professor Kelly was chairman of Novogen
from March 1997 until December 31, 2000. Professor Kelly was an executive director of Novogen from
1994 to September 2005 and is currently the Oncology Research Director of Novogen, a position he
has held since 2000. Professor Kelly was chairman of Glycotex from 1997 to September 2005.
Professor Kelly has spent nearly 30 years in medical research involving drug development,
immunology, surgery and cancer. Professor Kelly was Senior Research Fellow in Experimental Surgery
in the Faculty of Medicine at the University of Sydney and was appointed an Adjunct Professor of
the University of Sydney in May 2004. He developed the (1-3)(1-6)-ß-glucan and isoflavone
intellectual property now owned by Novogen.
Professor Kelly is one of a number of individuals who, and whose associated entities and
advisors, have been the subject of investigations by certain Australian authorities relative to
their alleged involvement in the evasion of Australian tax, fraud and money laundering. Professor
Kelly has informed the Company that he does not believe that he has committed any wrongdoing and
denies that he has been involved in any wrongdoing.
Information About the Board of Directors and its Committees
The Board of Directors has responsibility for the overall corporate governance of the Company.
Three of the six Board members are also currently directors of Novogen. The Company is a
controlled corporation within the meaning given to that term by Nasdaq because Novogen owns more
than 50% of the Companys voting power. As a controlled corporation, the Company is exempt from
the requirement that the Companys Board be composed of a majority of independent directors,
however, a majority of the members of the Board of Directors are independent in accordance with
Nasdaq requirements.
The Board of Directors held a total of eleven meetings during the fiscal year ended June 30,
2006. Each incumbent director attended at least 75% of the total number of meetings of the Board of
Directors and the total number of meetings held by the committees of the Board of Directors on
which each incumbent director served, in each case during the periods in which he served. In
addition to regularly scheduled meetings, the directors discharge their responsibility through
telephone and other
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communications with each other and with the executive officers. As required under The Nasdaq
Stock Market listing standards, the independent directors meet in regularly scheduled executive
sessions at which only independent directors are present, in conjunction with regularly scheduled
meetings of the Board of Directors. All of the directors are expected to attend the Companys
annual meeting of stockholders. Five of the Companys six directors attended the 2005 annual
meeting of stockholders.
The Board has established an Audit Committee to oversee the Companys financial matters and a
Remuneration Committee to review the performance of executive directors and their remuneration.
Effective March 31, 2006, Professor David de Kretser resigned from the Companys Board of
Directors and the Board appointed Professor Bryan Williams to fill the vacancy created by Professor
de Kretsers resignation. Professor Williams also assumed Professor de Kretsers positions on the
Audit Committee and the Remuneration Committee.
Audit Committee
The Audit Committee is responsible for overseeing financial and accounting activities. The
Audit Committees responsibilities include the annual appointment of independent auditors and the
review of the scope of audit and non-audit assignments and related fees, the accounting principles
used in financial reporting, internal auditing and the Companys internal control procedures. The
members of the Audit Committee are Mr. Stephen Breckenridge (chairman), Mr. Philip Johnston,
Professor Bryan Williams and Professor Paul John Nestel, all of whom are independent as defined by
applicable Nasdaq and U.S. Securities and Exchange Commission (SEC) rules. The Board of
Directors has also determined that Mr. Stephen Breckenridge is an audit committee financial
expert as defined by SEC rules. The Company has adopted a written audit committee charter which
is available on the Companys website at www.marshalledwardsinc.com.
The Audit Committee held four meetings during the fiscal year ended June 30, 2006.
Remuneration Committee
The Remuneration Committee generally reviews the performance of the executive directors and
sets their remuneration. The Remuneration Committee also has the power to make recommendations to
the full Board concerning the allocation of share options to directors and employees. The
remuneration and terms of appointment of non-executive directors is set by the Board of Directors.
The members of the Remuneration Committee are Mr. Philip Johnston, Professor Bryan Williams, Mr.
Stephen Breckenridge and Professor Paul John Nestel.
Because the Company has no employees and no remuneration was paid directly to the Chief
Executive Officer or to any of the other executive officers of the Company, there were no meetings
of the Remuneration Committee held during the fiscal year ended June 30, 2006.
Nominating Committee
As a controlled corporation, the Company is not subject to the Nasdaq rules requiring (i)
Board of Director nominations to be selected, or recommended for the Boards selection, by either a
nominating committee comprised solely of independent directors or by a majority of the independent
directors on the Board, and (ii) each Nasdaq-listed company to have a formal written charter or
Board resolutions addressing the nominating process. Accordingly, during the year ended June 30,
2006, the Company did not have a separately established Nominating Committee. The Board of
Directors does not believe that
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any marked efficiencies or enhancements would be achieved by the creation of a separate
Nominating Committee.
The duties and responsibilities typically delegated to a nominating committee are included in
the responsibilities of the entire Board of Directors. The Board of Directors identifies nominees
by first evaluating the current members of the Board of Directors willing to continue in service.
If any member of the Board of Directors does not wish to continue in service or if the Board of
Directors decides not to re-nominate a member for re-election, the Board will consider all
qualified director candidates identified by members of the Board, by senior management and
stockholders. Stockholders who would like to propose an independent director candidate for
consideration by the Board of Directors may do so by submitting the candidates name, résumé and
biographical information to the attention of David R. Seaton, Secretary of the Company, Marshall
Edwards, Inc., 140 Wicks Road, North Ryde, New South Wales, 2113, Australia, no later than the
deadline for submission of stockholder proposals set forth under the section of this Proxy
Statement entitled Stockholder Proposals for the 2007 Annual Meeting. All proposals for
nomination received by the Secretary of the Company will be presented to the Board of Directors for
consideration.
The Board of Directors reviews each director candidates biographical information and assesses
each candidates independence, skills and expertise based on a variety of factors, including the
following criteria:
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Whether the candidate has exhibited behavior that indicates he or she is committed
to the highest ethical standards. |
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Whether the candidate has had broad business, governmental, non-profit or
professional experience that indicates that the candidate will be able to make a
significant and immediate contribution to the Board of Directors discussion and
decision-making. |
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Whether the candidate will be able to devote sufficient time and energy to the
performance of his or her duties as a director. |
Application of these factors requires the exercise of judgment by members of the Board of
Directors and cannot be measured in a quantitative way.
Communications with the Board of Directors
The stockholders may communicate with the Board of Directors, including non-executive
directors or officers, by sending written communications addressed to such person or persons in
care of Marshall Edwards, Inc., 140 Wicks Road, North Ryde NSW 2113, Australia. All communications
will be compiled by the Secretary and submitted to the addressee. If the Board of Directors
modifies this process, the revised process will be posted on the Companys website.
7
Proposal 2
RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee and the Board of Directors have selected BDO as independent auditors to
audit the financial statements of the Company for the fiscal year ending June 30, 2007. The Board
of Directors is submitting the appointment of BDO to the stockholders for ratification as a matter
of good corporate practice.
The ratification of the appointment of BDO as the Companys independent auditors for the
fiscal year ended June 30, 2007 will require approval by the majority of the votes cast by the
holders of the shares of Common Stock voting in person or by proxy at the Annual Meeting.
Stockholders may vote either for or against or abstain from voting on the proposal to ratify the
selection of BDO as the Companys independent auditors. Abstentions and broker non-votes, if any,
will be counted for the purposes of determining the presence or absence of a quorum, but will have
no effect on the ratification of BDO as the Companys independent auditors for the fiscal year
ended June 30, 2007.
In the event that the stockholders fail to ratify the appointment, the Audit Committee will
reconsider its selection of audit firms, but may decide not to change its selection. Even if the
appointment is ratified, the Audit Committee may appoint different independent auditors at any time
if it determines that such a change would be in the Companys stockholders best interest.
Representatives of BDO are not expected to be present at the Annual Meeting.
The Audit Committee and the Board of Directors unanimously recommend the stockholders vote
FOR the ratification of BDO to act as independent auditors for the fiscal year ending June 30,
2007.
BDO served as the Companys independent accountants to audit the Companys fiscal years ended
June 30, 2006 and June 30, 2005.
Ernst & Young served as the Companys independent accountants to audit the Companys fiscal
year ended June 30, 2004. Ernst & Young LLP served as the Companys independent accountants to
audit the Companys fiscal year ended June 30, 2003. Ernst & Young were dismissed as the Companys
independent auditors effective September 12, 2004 and were replaced by BDO. The Audit Committee
approved the dismissal of Ernst & Young and the Board of Directors ratified the Audit Committees
dismissal of Ernst & Young. The Audit Committee approved the appointment of BDO effective from
September 12, 2004. The appointment of BDO occurred following a bid process which the Company
regularly undertakes to ensure it receives cost effective audit services.
Ernst &Youngs and Ernst & Young LLPs respective reports on the Companys financial
statements for the fiscal years ended June 30, 2004 and 2003 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles.
During the Companys two most recent fiscal years prior to the dismissal of Ernst & Young,
there were no disagreements, as that term is described in Item 304(a)(1)(iv) of Regulation S-K of
the SEC between the Company and Ernst &Young or Ernst &Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Ernst &Young or Ernst &Young LLP, would have
caused Ernst &Young or Ernst &Young LLP to make reference to the subject matter of the disagreement
in connection with its
report.
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During the Companys two most recent fiscal years prior to the dismissal of Ernst & Young,
there were no reportable events, as that term is described in Item 304(a)(1)(v) of Regulation
S-K, except for a material weakness in the Companys internal control for the year ended June 30,
2004 which was identified and disclosed in Item 9A in the Registrants Annual Report on Form 10-K
for the years ended June 30, 2004, June 30, 2005 and June 30, 2006. Specifically, the Company
noted that the personnel and management of Novogen who performed the Companys accounting and
financial reporting functions pursuant to a services agreement were not sufficiently expert in U.S.
GAAP and the requirements of the SEC and the Public Company Accounting Oversight Board and that
this lack of expertise represented a material weakness in the operation of the Companys internal
control over financial reporting. It was further noted that the Companys system of financial
reporting was not designed to prepare financial statements in accordance with U.S. GAAP and that
the Companys system of internal control, in particular its processes to review and analyze
elements of the financial statement close process and prepare consolidated financial statements in
accordance with U.S. GAAP, had not reduced to a relatively low level the risk that errors in
amounts that would be material in relation to those financial statements might occur and might not
be detected within a timely period by management in the normal course of business.
The Company now believes that Novogen has adopted processes that are designed to ensure that
the preparation of the Companys consolidated financial statements, including the process to review
and analyze elements of the Companys financial statement close process, is in accordance with U.S.
GAAP and that relevant information about U.S. GAAP, SEC financial reporting requirements and the
requirements of the Public Company Accounting Oversight Board is available to those persons
involved in the process by which the financial statements are prepared. As a result, the Company
has re-assessed the effectiveness of Novogens disclosure controls and procedures as they relate to
the Company and having allowed a period of time to determine the effectiveness of additional
controls and procedures, it now believes that the weakness in internal accounting control as
described above has been eliminated.
During the Companys two most recent fiscal years prior to the dismissal of Ernst & Young, the
Company did not consult BDO on (i) either the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that might be rendered on
the Companys financial statements, and neither a written report nor oral advice was provided to
the Company that BDO concluded was an important factor considered by the Company in reaching a
decision as to the accounting, auditing or financial reporting issue; or (ii) the subject of any
disagreement or reportable event.
9
Proposal 3
APPROVAL OF ISSUANCE OF COMMON STOCK PURSUANT TO
STANDBY EQUITY DISTRIBUTION AGREEMENT
The Board of Directors is submitting for the stockholders approval a proposal to approve the
issuance of the Companys Common Stock in an amount equal to 20% or more of the shares of Common
Stock outstanding pursuant to the Standby Equity Distribution Agreement (the SEDA), the Company
entered into with Cornell Capital effective July 11, 2006.
Under the terms of the SEDA, Cornell Capital has committed to purchase up to $15,000,000 of
the Companys Common Stock, subject to certain restrictions. The Company entered into the SEDA
with Cornell Capital to provide a source of future capital for ongoing research and development of
the Companys products in addition to general working capital.
The Companys Common Stock currently trades on the Nasdaq Global Market. Nasdaq Market Place
Rule 4350(i)(1)(D)(ii) requires the Company to obtain stockholder approval for the sale, issuance
or potential issuance by the Company of Common Stock (or securities convertible into Common Stock)
equal to 20% or more of the Common Stock or 20% or more of the voting power outstanding before the
issuance for a purchase price that is less than the greater of the book or market value of the
Common Stock (the Nasdaq Share Limit). As described in detail below, because the number of
shares of Common Stock which may be sold to Cornell Capital under the SEDA may equal or exceed 20%
of the Companys Common Stock outstanding before such sale, the Board of Directors is requesting
the stockholders approval of such potential issuances of Common Stock under the SEDA in accordance
with Nasdaq Market Place Rule 4350 (i)(1)(D)(ii).
The issuance of the Companys Common Stock to Cornell Capital under the SEDA in excess of the
Nasdaq Share Limit will require approval by the majority of the votes cast by the holders of the
shares of Common Stock voting in person or by proxy at the Annual Meeting. Stockholders may vote
either for or against or abstain from voting on the proposal to approve the issuance of the
Companys Common Stock to Cornell Capital under the SEDA in excess of the Nasdaq Share Limit.
Abstentions and broker non-votes, if any, will be counted for the purposes of determining the
presence or absence of a quorum, but will have no effect on the approval of the issuance of the
Companys Common Stock to Cornell Capital under the SEDA in excess of the Nasdaq Share Limit.
The Board of Directors unanimously recommends the stockholders vote FOR the approval of the
issuance of Common Stock to Cornell Capital under the SEDA in excess of the Nasdaq Share Limit.
Standby Equity Distribution Agreement
This summary does not purport to be complete and is qualified in its entirety by reference to
the full text of the SEDA and the related Registration Rights Agreement between the Company and
Cornell Capital dated July 11, 2006. Copies of such documents have been filed with the SEC as
exhibits 10.1 and 10.2 to the Companys Current Report on Form 8-K dated July 12, 2006.
On July 11, 2006, the Company entered into the SEDA with Cornell Capital pursuant to which the
Company may issue and sell, from time to time, up to $15,000,000 of the Companys Common Stock to
Cornell Capital. The SEDA requires that the Company have an effective registration statement filed
with the SEC registering the Common Stock issuable to Cornell Capital under the SEDA for resale
before
10
the Company makes its first sale of Common Stock to Cornell Capital under the SEDA. Commencing as
of the effective date of the registration statement and continuing for up to 24 months thereafter,
the Company may, from time to time, at the Companys sole and exclusive option, and subject to
certain restrictions set forth in the SEDA, sell shares of the Companys Common Stock to Cornell
Capital at a purchase price equal to 97% of the lowest volume weighted average price of the
Companys Common Stock as quoted by Bloomberg, LP (subject to a minimum acceptable price as
described below) during the five consecutive trading days after the Company sends advance notice to
Cornell Capital of the Companys intention to sell it shares of the Companys Common Stock, or the
pricing period. Such sales may be made every five days up to a maximum of $1,500,000 per sale.
The minimum acceptable price at which the Company may sell shares of the Companys Common
Stock, unless the Company waives (in its sole discretion) the minimum acceptable price, is no less
than 97% of the lowest volume weighted average price for the Companys shares of Common Stock on
the trading day immediately preceding the date the Company gives advance notice to Cornell Capital
of the Companys intention to sell. For any day in the pricing period when the lowest volume
weighted average price is less than the minimum acceptable price, (i) that days lowest volume
weighted average price will be excluded from the pricing mechanism during the pricing period; (ii)
the Company will automatically reduce the amount of the purchase price to be paid by Cornell
Capital by 20%; and (iii) the number shares of the Companys Common Stock to be sold to Cornell
Capital will be reduced proportionately.
The Companys ability to sell shares of Common Stock to Cornell Capital and Cornell Capitals
obligation to purchase the shares, is conditioned upon the satisfaction of certain conditions.
These conditions include, among others: (i) the initial and continued effectiveness of the
registration statement covering the resale of the shares of Common Stock issued to Cornell Capital
under the SEDA; (ii) that no fundamental changes to the information set forth in the registration
statement exist that require the Company to file a post-effective amendment to the registration
statement; (iii) that the Company has performed and complied with its obligations under the SEDA
and Registration Rights Agreement as of the date of each sale; (iv) that the Companys Common Stock
has not been suspended from trading by the SEC or the Nasdaq Global Market nor delisted from the
Nasdaq Global Market; and (v) that the number of shares of Common Stock issuable to Cornell
Capital, together with any shares then beneficially owned by Cornell Capital and its affiliates,
does not exceed 9.9% of the Companys outstanding Common Stock as of the date each sale.
In connection with the SEDA, on July 11, 2006, the Company issued to Cornell Capital as a
commitment fee 123,626 shares of Common Stock and warrants to purchase 600,000 shares of Common
Stock of the Company in a private placement. The warrants have an exercise price of $4.35 per
share, subject to certain adjustments, and expire on July 11, 2010.
Use of Proceeds
The Company may sell up to $15,000,000 of Common Stock to Cornell under the SEDA, minus
certain deductions and commissions associated with such sales. The Company intends to use the net
proceeds from sales under the SEDA to provide a source of future capital for ongoing research and
development of the Companys products and general working capital.
Effect on Outstanding Common Stock
The issuance of Common Stock under SEDA will have no effect on the rights or privileges of
existing holders of Common Stock with the exception that the economic and voting interests of each
stockholder will be diluted as a result of such issuance. The issuance of Common Stock to Cornell
Capital under the SEDA may result in a decrease in the market price of the Common Stock. Because
11
Cornell Capital will purchase shares of Common Stock through the SEDA at a discount to market
price, Cornell Capital will have an incentive to immediately sell the shares of Common Stock that
it purchases in order to realize a gain on the difference between the purchase price and the
then-prevailing market price of the Common Stock. These sales may result in a decrease in the
market price of the Common Stock.
Cornell is deemed to beneficially own the shares corresponding to a particular notice on the
date that the Company delivers such notice to Cornell Capital of its intention to sell shares of
Common Stock to Cornell under the SEDA. The delivery of such notice to Cornell Capital is prior to
the date the shares of Common Stock are delivered to Cornell Capital. Cornell Capital may sell
such shares any time after the Company delivers notice, and its sales during the pricing period
could cause the market price of the Common Stock to decline. Even with the SEDAs price floor (the
minimum acceptable price of 97% of the lowest volume weighted average price of the Common Stock as
quoted by Bloomberg LP during the pricing period), Cornell Capitals sales could adversely impact
share price by as much as three percent or more if the Company waives the minimum acceptable price.
In addition, stockholders may experience dilution if the Company sells shares of Common Stock to
Cornell Capital under the SEDA at a price which is less than the Companys net tangible book value
per share of Common Stock.
Consequences if Stockholder Approval is not Obtained
If the stockholder approval sought hereby is not obtained, the Company will not issue any
shares of Common Stock to Cornell Capital under the SEDA. In the event that the Company needs
additional capital, it will have to seek alternative forms of financing which may be less favorable
or unavailable.
12
COMPENSATION AND OTHER INFORMATION
CONCERNING OFFICERS, DIRECTORS
AND CERTAIN STOCKHOLDERS
Executive Officers
The Companys executive officers are appointed by the Board of Directors and serve at the
discretion of the Board of Directors. Set forth below are the names and certain biographical
information regarding the Companys executive officers as of October 23, 2006.
|
|
|
|
|
Name |
|
Position Held |
|
Age |
Professor Graham E. Kelly |
|
Chairman |
|
61 |
|
Christopher Naughton |
|
President and Chief Executive Officer |
|
53 |
|
David R. Seaton |
|
Chief Financial Officer and Secretary |
|
52 |
See Proposal No. 1 Election of Directors for biographical information regarding Professor
Kelly and Mr. Naughton.
David Ross Seaton
B Bus KCAE, M Com UNSW, CPA
Mr. Seaton has been the Companys Chief Financial Officer and Secretary since December 2000
and has been Chief Financial Officer of Novogen since September 1999. Mr. Seaton has been a
director of Glycotex since September 2005. He holds a degree in Business Studies as well as a
Master of Commerce Degree from the University of New South Wales. He has completed management
development programs at Northwestern University in Chicago as well as Duke University and the
London Business School. He has 20 years experience in the pharmaceutical industry. Prior to
joining Novogen in 1999, he was Finance Director of GlaxoWellcome Australia Limited from 1995 to
1999.
Director and Executive Remuneration
Directors
Effective October 1, 2006, directors, who are not officers of the Company, will receive
directors fees of A$45,000 per annum (approximately $33,404 based upon an exchange rate of
US$0.7423//A$1.00 at June 30, 2006). In addition, effective October 1, 2006, the chairman of the
Audit Committee will receive an additional A$10,000 per annum (approximately $7,423 based upon an
exchange rate of US$ 0.7423//A$1.00 at June 30, 2006) for his additional responsibilities.
Prior to October 1, 2006, directors, who were not officers of the Company received directors
fees of $A30,000 per annum (approximately US$22,269 based upon an exchange rate of US$0.7423/A$1.00
at June 30, 2006).
Professor Kelly and Mr. Naughton do not receive any remuneration for performing their duties
as directors.
13
Executive Officers
The executive officers, Professor Kelly, Mr. Naughton and Mr. Seaton, are also executive
officers of Novogen and do not receive any remuneration directly from the Company in performing
their duties as executive officers of the Company. At the present time, their services are
provided pursuant to the Companys services agreement with Novogen which is described in this Proxy
Statement under the section heading Certain Transactions of this Proxy Statement.
14
Equity Compensation Plan Information
The following table sets forth, as of June 30, 2006 outstanding awards and shares remaining
available for future issuance under the Companys compensation plans under which equity securities
are authorized for issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
|
|
(a) |
|
|
|
Number of |
|
|
Number of |
|
(b) |
|
Securities |
|
|
Securities to be |
|
Weighted-Average |
|
Remaining |
|
|
Issued Upon |
|
Exercise Price of |
|
Available |
|
|
Exercise of |
|
Outstanding |
|
for Future Issuance |
|
|
Outstanding Options |
|
Options, |
|
Under Equity |
Plan Category |
|
Warrants and Rights |
|
Warrants and Rights |
|
Compensation Plans |
Equity compensation plans
approved by security
holders
|
|
Not Applicable
|
|
Not Applicable
|
|
Not Applicable |
|
|
|
|
|
|
|
Equity compensation plans
not approved by security
holders (1)
|
|
None
|
|
Not Applicable
|
|
Indeterminable |
|
|
|
|
|
|
|
Total
|
|
None
|
|
Not Applicable
|
|
Indeterminable |
|
|
|
(1) |
|
The Companys employee share option plan provides its directors, employees, employees of the
Companys affiliates and certain of its contractors and consultants with the opportunity to
participate in the Companys ownership. To date, no options have been issued under the plan.
The Companys remuneration committee addresses participation, the number of options offered
and any conditions of exercise. In making these determinations the committee will generally
consider the participants position and record of service to the Company and the Companys
affiliates and potential contribution to the growth of the Company and the Companys
affiliates. Any other matters tending to indicate the participants merit may also be
considered. Options will be exercisable between two years and five years after grant, unless
otherwise determined by the committee appointed by the board. Options granted will be
exercisable at a price determined by the committee at the time of issue (and will be subject
to adjustment in accordance with the terms of the plan). Other key terms of the plan include: |
|
|
|
Options will lapse if the participants cease to be engaged by the Company or its
affiliates. The committee will have the discretion to waive this provision. |
|
|
|
|
The terms of the plan also provide for adjustments to the rights of an option holder
as a result of a reorganization of the Companys capital or other corporate event. The
holder of an option is not permitted to participate in any distribution by the Company
or in any rights or other entitlements issued by the Company to stockholders in respect
of the Companys shares unless the options are exercised prior to the relevant record;
and |
|
|
|
|
All options vest on the occurrence of certain events such as a change of control, as
defined in the share option plan |
The plan also contains standard provisions dealing with matters such as administration of the
plan, amendment of the plan and termination or suspension of the plan.
15
STOCK PERFORMANCE GRAPH
The graph set forth below compares the change in the Companys cumulative total stockholder
return on its Common Stock between December 18, 2003 (the date the Common Stock commenced public
trading) and June 30, 2006 with the cumulative total return of the NASDAQ Composite Index and the
NASDAQ Biotechnology Index during the same period. This graph assumes the investment of $100 on
December 18, 2003 in the Companys Common Stock and each of the comparison groups and assumes
reinvestment of dividends, if any. The Company has not paid any dividends on the Common Stock, and
no dividends are included in the report of the Companys performance. This graph is not
soliciting material, is not deemed filed with the SEC and is not to be incorporated by reference
in any filing of the Company under the Securities Act or the Securities Exchange Act of 1934, as
amended (the Exchange Act), whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
Stock
Performance Comparison
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/18/03 |
|
|
6/30/04 |
|
|
6/30/05 |
|
|
6/30/06 |
|
|
Marshall Edwards, Inc.
Common Stock |
|
|
$ |
100.00 |
|
|
|
$ |
99.07 |
|
|
|
$ |
95.07 |
|
|
|
$ |
45.20 |
|
|
|
NASDAQ Composite Index |
|
|
$ |
100.00 |
|
|
|
$ |
104.68 |
|
|
|
$ |
105.15 |
|
|
|
$ |
111.04 |
|
|
|
NASDAQ Biotechnology Index |
|
|
$ |
100.00 |
|
|
|
$ |
107.78 |
|
|
|
$ |
98.00 |
|
|
|
$ |
105.44 |
|
|
|
16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
None of the Companys directors or executive officers owns any shares of the Companys Common
Stock. The following table sets forth information with respect to the beneficial ownership, as of
October 4, 2006 of shares of Common Stock of the Company by each person known to beneficially own
more than 5% of the Companys Common Stock as of the record date.
|
|
|
|
|
Name & Address of |
|
Amount & Nature of Beneficial |
|
Percentage of Shares |
Beneficial Owners |
|
Ownership |
|
Beneficially Owned (3) |
Novogen Limited
140 Wicks Road
North Ryde
New South Wales 2113
Australia |
|
49,500,000 (1) |
|
78.1% |
|
|
|
|
|
OppenheimerFunds, Inc.
|
|
5,226,128 (2) |
|
8.2% |
6803 S Tucson Way
Centennial, CO 80112 |
|
|
|
|
|
|
|
(1) |
|
Novogen Limited is the beneficial owner of, and has sole voting and
investment power with respect to, the shares of Common Stock. |
|
(2) |
|
OppenheimerFunds, Inc is the beneficial holder of, and has sole voting
and investment power with respect to, the shares of Common Stock. The
shares of Common Stock are held by six separate funds (the Funds) as
follows: Oppenheimer International Growth Fund/VA holds 465,600 shares
of Common Stock in the street name of its custodian, Kane & Co;
Oppenheimer International Growth Fund holds 2,732,701 shares of Common
Stock in the street name of its custodian, Kane & Co; Mass Mutual
International Equity Fund holds 1,711,880 shares of Common Stock in
the street name of its custodian, Hare & Co; AZL Oppenheimer
International Growth Fund holds 231,700 shares of Common Stock in the
street name of its custodian, Ell & Co; OTC International Growth Fund
holds 51,257 shares of Common Stock in the street name of its
custodian Gerlach & Co; and OFI International Equity Fund holds 32,990
shares of Common Stock in the street name of its custodian Gerlach &
Co. OppenheimerFunds, Inc. is the investment advisor for each of the
Funds. |
|
(3) |
|
Based upon 63,390,937 shares of the Companys Common Stock outstanding
as of October 4, 2006. |
17
CERTAIN TRANSACTIONS
The Companys agreements with Novogen are each summarized below. Each of these agreements was
approved by a majority of the Companys independent directors who did not have an interest in the
transaction. The Company believes that each of the Companys agreements with Novogen is on terms
as favorable to the Company as the Company could have obtained from unaffiliated third parties.
The following description is only a summary of what the Company believes are the material
provisions of the agreements.
The License Agreement for Phenoxodiol
Novogens subsidiary, Novogen Research Pty Limited, has granted the Companys subsidiary,
Marshall Edwards Pty Limited, a world-wide, non-transferable license under its patents and patent
applications and in its licensed know-how to conduct clinical trials and commercialize and
distribute phenoxodiol products. The Company and Novogen have each guaranteed the obligations of
the Companys respective subsidiaries under this license agreement. See Guarantee and Indemnity
Agreement. The license is exclusive until the expiration or lapsing of the last relevant Novogen
patents or patent applications in the world, which the Company expects will be no earlier than
August 29, 2017, and thereafter is non-exclusive for the remainder of the term of the agreement.
The license grants the Company the right to make, have made, market, distribute, sell, hire or
otherwise dispose of phenoxodiol products in the field (the Field) of prevention treatment or
cure of cancer in humans by pharmaceuticals delivered in all forms except topical applications.
The Company is obliged to continue current and undertake further clinical trials of phenoxodiol,
and is responsible for paying for all materials necessary to conduct clinical trials. The Company
must conduct all such trials diligently and professionally, must use reasonable endeavors to design
and conduct clinical trials to generate outcomes which are calculated to result in regulatory
approval of phenoxodiol products. The Company must also keep proper records of all clinical trials
and allow Novogen to inspect those records.
All intellectual property rights in the compound, trial protocols, results of the clinical
trials, case report forms and any other materials used in the conduct of the clinical trials are
assigned by the Company to Novogen and the Company may not publish the results of clinical trials
without the prior written consent of Novogen. Each party must disclose to the other party
developments, improvements, enhancements or new know-how in relation to the phenoxodiol product
which are made or acquired by either party.
The Company may not sub-license, sub-contract, or engage agents without the prior written
consent of Novogen. Any proposed sub-contractors and agents must first agree in writing to comply
with certain confidentiality obligations and to assign to Novogen all intellectual property rights
in the Field created or acquired by them in the course of their engagement.
Marketing and Commercialization
The Company may market and commercialize phenoxodiol products under the license in any manner
the Company thinks fit, so long as the Company conducts any marketing and commercialization
activities on a commercially reasonable basis in compliance with applicable laws and regulations,
comply with reasonable directions given by Novogen, act in a manner which the Company considers to
be most beneficial to the interests of the Company and Novogen, and otherwise act in good faith to
Novogen. All advertising and promotional material must be submitted to Novogen for prior approval.
18
Fees, Charges and Costs
Marshall Edwards Pty Limited paid $5,000,000 to Novogen in February 2004 which was the first
lump sum license fee payment due under the terms of the license agreement. Also, Marshall Edwards
Pty Limited paid $2,000,000 to Novogen in January 2005 and $4,000,000 in January 2006 which were
the annual milestone license fee payments due under terms of the license agreement. The Company
paid a second lump sum licence fee of $5,000,000 to Novogen in July 2006 following the raising of
funds in a private placement closed on July 11, 2006. This licence fee was due on the later of
November 1, 2003 or such later date when the cumulative total of all funds received from debt or
equity issuances and revenue received from commercialization (income other than sales) and sales of
phenoxodiol products exceeds $50,000,000. Following the private placement, the funds received by
the Company from equity issuances exceeded $50,000,000 which triggered this licence fee payment.
Future amounts payable to Novogen under terms of the licence agreement are as follows:
|
1. |
|
Until the expiration of the exclusivity period of the license, Marshall Edwards
Pty Limited must pay Novogen 2.5% of all net sales and 25% of commercialization income.
After the exclusivity period of the license, 1.5% of net sales must be paid to
Novogen. |
|
|
2. |
|
In addition to the amounts listed above, upon the receipt by Marshall Edwards
Pty Limited of the first of: |
|
(a) |
|
approval by the U.S. Food and Drug Administration (FDA) of a New Drug
Application (NDA) for phenoxodiol; |
|
|
(b) |
|
approval or authorization of any kind to market phenoxodiol in the United
States; or |
|
|
(c) |
|
approval or authorization of any kind by a government agency in any other
country to market phenoxodiol. |
Marshall Edwards Pty Limited must pay Novogen $8,000,000, together with interest on that amount
from (and including) December 31, 2006, calculated at the bank bill rate. This milestone license
fee replaces the $8,000,000 December 31, 2006 milestone license fee which was deferred as per the
amendment deed to the license agreement agreed between the Company and Novogen in June 2006.
In addition to the amounts above, beginning in 2007, an $8,000,000 annual milestone license fee is
payable under the amended terms of the license agreement for each calendar year ending December 31
during the exclusivity period of the license agreement.
The exclusivity period of the license ends on the later of:
|
(a) |
|
the date of expiration or lapsing of the last patent right in the patents and
patent applications set out in the license agreement with Novogen; or |
|
|
(b) |
|
the date of expiration or lapsing of the last licensed patent right in which
Marshall Edwards Pty Limited would, but for the license granted in the license
agreement, infringe in any country in the territory covered by the license agreement by
doing in that country any of the things set out in the license agreement. |
19
For the fiscal year ended June 30, 2006, the Company has included $2,000,000 as a license fee
expense under this license agreement in the Companys consolidated statements of operations. This
expense related to the December 31, 2005 milestone license fee.
Termination
The Company may terminate the license agreement at any time, by giving three months notice to
Novogen. The Company may also terminate the agreement if Novogen commits a breach of any of its
material obligations under the agreement, becomes the subject of certain bankruptcy proceedings or
is unable to lawfully perform its obligations. Novogen may terminate the agreement if the Company
commits a breach of any of the Companys material obligations under the agreement, becomes the
subject of certain bankruptcy proceedings or is unable to lawfully perform its obligations.
Novogen may also terminate the agreement immediately if a change of control, as defined in the
license agreement, occurs without the consent of Novogen.
The License Agreement for NV-196 and NV-143
In May 2006, the Company entered into a second license agreement with Novogen for two oncology
compounds, NV-196 and NV-143. Novogens subsidiary, Novogen Research Pty Limited, has granted
Marshall Edwards Pty Limited a world-wide, non-transferable license under its patents and patent
applications and in its licensed know-how to conduct clinical trials and commercialize and
distribute NV-196 and NV-143 products. The license is exclusive until the expiration or lapsing of
the last relevant Novogen patents or patent applications in the world, which the Company expects
will be no earlier than August 29, 2017, and thereafter is non-exclusive for the remainder of the
term of the license agreement. The license grants the Company the right to make, have made,
market, distribute, sell, hire or otherwise dispose of NV-196 and NV-143 products in the Field of
prevention treatment or cure of cancer in humans by pharmaceuticals delivered in all forms except
topical applications.
The Company is obligated to continue current and undertake further clinical trials of NV-196
and NV-143, and is responsible for paying for all materials necessary to conduct clinical trials.
The Company must conduct all such trials diligently and professionally. The Company must use
reasonable endeavors to design and conduct clinical trials to generate outcomes which are
calculated to result in regulatory approval of NV-196 and NV-143 products. The Company must also
keep proper records of all clinical trials and allow Novogen to inspect those records.
All intellectual property rights in the compounds, trial protocols, results of clinical
trials, case report forms and any other materials used in the conduct of the clinical trials are
assigned by the Company to Novogen and the Company may not publish the results of clinical trials
without the prior written consent of Novogen. Each party must disclose to the other party
developments, improvements, enhancements or new know-how in relation to the NV-196 and NV-143
products which are made or acquired by either party.
The Company may not sub-license, sub-contract or engage agents without the prior written
consent of Novogen. Any proposed sub-contractors and agents must first agree in writing to comply
with certain confidentiality obligations and to assign to Novogen all intellectual property rights
in the Field created or acquired by them in the course of their engagement.
Marketing and Commercialization
The Company may market and commercialize NV-196 and NV-143 products under the license
agreement in any manner that the Company thinks fit so long as the Company conducts any marketing
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and commercialization activities on a commercially reasonable basis in compliance with applicable
laws and regulations. The Company must also comply with reasonable direction given to the Company
by Novogen, act in a manner which the Company considers to be most beneficial to the interests of
the Company and Novogen and otherwise act in good faith to Novogen. All advertising and
promotional material must be submitted to Novogen for prior approval.
Fees, Charges and Costs
Marshall Edwards Pty Limited paid $1,000,000 to Novogen in May 2006 which was the first lump
sum license fee payment due under the terms of the license agreement. Future amounts payable to
Novogen under the terms of the license agreement are as follows:
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Marshall Edwards Pty Limited must pay to Novogen the following milestone license fees upon
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the first licensed product containing NV-196 to reach a milestone as described below; and |
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$1,000,000 on the date an investigational new drug application for the licensed product
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$2,000,000 on the date of enrollment of the first clinical
trial subject in a Phase II clinical trial of the licensed product. If this event does not occur before June 30, 2009,
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$3,000,000 on the date of enrollment of the first clinical trial in a Phase III clinical
trial of the licensed product. If this event does not occur before June 30, 2011, then this amount
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$8,000,000 on the date of the receipt of the first NDA for the licensed product from the
FDA or the equivalent approval from a government agency in another country. If this event does not
occur before December 31, 2013, then this amount will be due on this date. |
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Marshall Edwards Pty Limited must pay Novogen 5% of all net sales and 25% of
commercialization income for the term of the license. The royalty rate is reduced by 50% if the
licensed patent right in any country or territory expires, lapses, is revoked, does not exist or is
assigned to Marshall Edwards Pty Limited and the product is entirely manufactured and supplied in
such country. |
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Minimum royalties of $3,000,000 per year are payable following the date of the first
receipt of a new drug application for a licensed product from the FDA (or equivalent approval from
a government agency in any other country) until the expiration of the term. |
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For the fiscal year ended June 30, 2006, the Company has included $1,000,000 as a license fee
expense under this license agreement in the Companys consolidated statement of operations. This
expense related to the initial milestone license fee due upon execution of the agreement.
Termination
The Company may terminate the license agreement at any time by giving three months notice to
Novogen. The Company may also terminate the agreement if Novogen commits a breach of any of its
material obligations under the agreement, becomes the subject of certain bankruptcy proceedings or
is unable to lawfully perform its obligations. Novogen may terminate the agreement if the Company
commits a breach of any of the Companys material obligations under the agreement, become the
subject of certain bankruptcy proceedings or is unable to lawfully perform its obligations.
Novogen may also terminate the agreement immediately if a change of control, as defined in the
license agreement, occurs without the consent of Novogen.
The Manufacturing License and Supply Agreement
The Companys subsidiary, Marshall Edwards Pty Limited has granted to Novogens subsidiary,
Novogen Laboratories Pty Limited, an exclusive, non-transferable sub-license to manufacture and
supply phenoxodiol to the Company in its primary manufactured form. The Company and Novogen have
each guaranteed the obligations of the Companys respective subsidiaries under this manufacturing
license and supply agreement. See Guarantee and Indemnity Agreement. Novogen must not sublicense
its rights or engage agents or subcontractors to exercise its rights or perform its obligations
under the agreement without the Companys prior written consent.
Supply of Phenoxodiol
The Company provides to Novogen rolling forecasts quarterly of the Companys estimated supply
requirements for phenoxodiol, and issues purchase orders for phenoxodiol to Novogen specifying the
volume of phenoxodiol required. Novogen must confirm the quantity that it is able to supply to
fulfill the purchase order within five business days of receiving the purchase order. Novogen must
then supply the volume of phenoxodiol it agreed to supply, and must otherwise use all reasonable
endeavors to fulfill the purchase order. Novogen must manufacture and deliver phenoxodiol to the
Company at a port nominated by the Company. Title to the phenoxodiol does not pass to the Company
until the Company has paid the purchase price (as described below) and retention of title
arrangements apply. The Company is not obligated to purchase any minimum amount of phenoxodiol
from Novogen.
The Company must also provide to Novogen at least one years advance written notice of the
date on which the phenoxodiol product will be first offered for sale commercially.
If Novogen materially and persistently fails to supply the amount of phenoxodiol ordered by
the Company by the required date, the Company may manufacture (or engage a third party, without
Novogens consent, to manufacture) the amount of the shortfall of phenoxodiol until Novogen
demonstrates that it is able to consistently supply phenoxodiol in accordance with the Companys
requirements. In this case, Novogen must take all reasonable steps to make available to the
Company or the third party, on commercial terms, the know-how necessary to enable that manufacture
to occur.
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Fees and Charges
The purchase price for phenoxodiol supplied is the total costs to Novogen plus a mark-up of
50%. The purchase price may be adjusted quarterly by Novogen by reference to the actual costs
referred to above for the preceding quarter. If at any time the Company does not pay any amount
due to Novogen, Novogen may suspend the supply of phenoxodiol to the Company until payment is
received. Interest accrues daily on the outstanding balance of all overdue amounts payable to
Novogen under the manufacturing license and supply agreement.
For the fiscal year ended June 30, 2006, the Company expensed $527,000 in fees under the
manufacturing license and supply agreement.
Manufacturing Developments and Improvements
Each party must disclose to the other any new developments, improvements and new know-how
relating to the manufacture of phenoxodiol which are made or acquired by it during the term of the
agreement. All intellectual property rights in developments, improvements and new know-how made or
acquired by Novogen are to be assigned to the Company. The Company must provide to Novogen such
technical information and assistance as Novogen reasonably requests in order to exercise its rights
and perform its obligations.
Each party acknowledges that nothing in the agreement shall have the effect of transferring or
assigning to Novogen any right, title or interest in any intellectual property rights in the
phenoxodiol products licensed under the agreement.
Novogen agrees to notify the Company immediately on becoming aware of any infringement of the
intellectual property rights in the licensed products or any claim by a third party that the
activities of the parties under the agreement infringe such third partys intellectual property
rights. If required, Novogen agrees to be a party to any proceedings brought by the Company in
relation to any infringement of intellectual property rights in the licensed products and also
agrees, at the Companys cost, to provide all reasonable assistance in relation to such proceedings
and to execute such documents as the Company reasonably requires.
Novogen has taken the strategic decision not to manufacture commercial scale Active
Pharmaceutical Ingredients (API) for cancer drugs, including phenoxodiol, as these can be more
economically supplied by third parties with particular expertise in this area. The contract
facilities that have been identified are FDA licensed, have a track record of large scale API
manufacture and have already invested in capital and equipment. The Company has completed the
novation to Marshall Edwards Pty Limited of contracts that Novogen had entered into with third
parties to develop a scalable manufacturing method to ensure that sufficient quantities of
phenoxodiol can be manufactured in compliance with cGMP (Current Good Manufacturing Practices) and
to complete the analytical and stability work necessary for an NDA submission.
Termination
Either party may terminate the agreement immediately at any time if the other party becomes
the subject of certain bankruptcy proceedings, becomes unable to carry out the transactions
contemplated by the agreement or breaches its obligations and does not cure such breach within
twenty-one days notice. The Company may also terminate the agreement immediately if the license
agreement expires or is terminated. Novogen may also terminate the agreement immediately if a
change of control, as defined in the manufacturing license and supply agreement, occurs without the
consent of Novogen.
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Limitation of Liability
The liability of Novogen for breach of conditions or warranties imposed by statute is limited
to the replacement of goods, supply of equivalent goods, repair or replacement value of goods or
the re-supply or payment for re-supply of services.
The License Option Deed
Novogens subsidiary, Novogen Research Pty Limited, has granted the Companys subsidiary,
Marshall Edwards Pty Limited, an exclusive first right to accept and an exclusive last right to
match any proposed dealing by Novogen with its intellectual property rights with a third party
relating to certain synthetic pharmaceutical compounds (other than phenoxodiol) developed by
Novogen or its affiliates.
Option Compounds
The rights relate to all synthetic pharmaceutical compounds, known as option compounds,
delivered or taken in all forms except topical applications (other than phenoxodiol, which is the
subject of the license agreement), developed before or during the term of the deed, by or on behalf
of Novogen or its affiliates, which have known applications in the Field of prevention, treatment
or cure of cancer in humans.
Dealings in Option Compounds and Exercise of Rights
Novogen must not, and must ensure that its affiliates other than the Company do not, deal,
solicit entertain or discuss dealings with any intellectual property rights in the Field or in
relation to any option compounds without giving the Company an exclusive first right to accept and
an exclusive last right to match any such dealing. If the Company exercises its first right to
accept or last right to match, Novogen must deal with the intellectual property rights in favor of
the Company on the terms and conditions proposed. The Company has fifteen business days to
exercise those rights and, if the Company fails to do so, Novogen may deal with those intellectual
property rights in favor of a third party provided that the terms are no more favorable to that
third party than those first offered to the Company or which the Company declined to match.
Protection of Intellectual Property
Novogen must act in good faith toward the Company in relation to its obligations under the
deed and must ensure that all persons involved in any research or development work in the Field in
relation to option compounds assign all intellectual property rights relating to the option
compounds to Novogen. Novogen must also ensure that its affiliates, other than the Company, do the
same. Novogen continues to be solely responsible for the maintenance of any patent rights in the
option compounds, which it may maintain and enforce at its sole discretion and expense.
Development Reports
Novogen must provide to the Company from time to time, and in no event less frequently than
every six months, development reports relating to the clinical trials and development of option
compounds, and must notify the Company immediately of any regulatory approvals granted and
assessments made by any government agency.
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Term and Termination
The term of the deed is sixteen years from the commencement date of the agreement, unless
terminated earlier. The Company may terminate the deed at any time on three months notice to
Novogen. Either party may terminate the deed immediately at any time if the other party becomes
the subject of certain bankruptcy proceedings, becomes unable to carry out the transactions
contemplated by the agreement or breaches its obligations and does not cure such breach within
twenty-one days notice.
Novogen may also terminate the deed immediately if a change of control, as defined in the
license option deed, occurs without the consent of Novogen.
The Services Agreement
Novogen has agreed to provide a range of services to the Company, or ensure that its
subsidiaries provide those services.
These services include providing general assistance and advice on research and development and
commercializing phenoxodiol products and other compounds in which the Company may acquire
intellectual property rights in the future, such as option compounds in relation to which the
Company has exercised its rights under the license option deed.
Novogens obligations also include providing, within the agreed budgets described below, the
Companys needs with respect to secretarial, marketing, finance, logistics, administrative and
managerial support. Novogen also plans, conducts and supervises pre-clinical and clinical trials
with phenoxodiol and with other compounds in which the Company has intellectual property rights.
Novogen provides scientific and technical advice on management of pre-clinical and clinical
research programs undertaken by the Company and manages such research provisions. The Company has
guaranteed the obligations of the Companys subsidiary under the services agreement. See
Guarantee and Indemnity Agreement.
Novogen may not sub-contract the provision of any part of the services without the Companys
prior written consent.
Fees for Services
The Company pays services fees to Novogen on a monthly basis in accordance with an agreed
annual budget. At the beginning of each financial year Novogen prepares a budget estimate for the
Company with respect to the percentage of time spent by Novogens employees and consultants in the
provision of services to the Company in the previous financial year and any relevant considerations
which are likely to influence the time spent for the following financial year. Each estimate must
include the remuneration paid by Novogen to each person expected to provide the services and the
percentage of time Novogen expects those persons will spend on the Companys business, the
allocated on-costs attributable to each person, a premises rental charge and a charge for asset
usage and general overheads. The total estimate is to be the sum of these charges plus a mark-up
of 10%. The Company also pays Novogens reasonable out of pocket expenses incurred in providing
the services to the Company. At the end of the fiscal year an adjustment is made to reflect actual
costs incurred where they differ from budget.
For the fiscal year ended June 30, 2006, the Company expensed $1,294,000 in fees under the
services agreement.
25
Intellectual Property and Confidentiality
All intellectual property rights created by Novogen in the performance of the services for or
at the request of the Company are licensed to the Company. Each party also has obligations to the
other party to honor the others confidential information.
Termination
The Company may terminate its rights and obligations under the services agreement on three
months written notice to Novogen. Either the Company or Novogen may terminate the agreement
immediately at any time if the other party becomes the subject of certain bankruptcy proceedings,
becomes unable to carry out the transactions contemplated by the agreement, breaches its
obligations and does not cure such breach within twenty-one days notice or if a change of control
in the other party occurs. Novogen may also terminate the agreement immediately if a change of
control, as defined in the services agreement, occurs without the consent of Novogen.
Guarantee and Indemnity Agreement
The Company has guaranteed the payment and performance of the obligations of the Companys
subsidiary, Marshall Edwards Pty Limited, to Novogen and its subsidiaries, Novogen Laboratories Pty
Limited and Novogen Research Pty Limited, under the license agreement, the manufacturing license
and supply agreement and the services agreement. Novogen has guaranteed the performance of the
obligations of Novogen Research Pty Limited under the license agreement and the obligations of
Novogen Laboratories Pty Limited under the manufacturing license and supply agreement to Marshall
Edwards Pty Limited. Each of the Companys and Novogens obligations in the guarantee and indemnity
agreement are absolute, unconditional and irrevocable.
Indemnification
The Company and Novogen have each agreed to indemnity the other if either of the Companys
respective subsidiaries default in the performance of any obligation under the license agreement,
the manufacturing license and supply agreement or the services agreement. The defaulting party
must indemnify the other against all losses, liabilities and expenses, including legal expenses on
a full indemnity basis, incurred, directly or indirectly, as a result of that default. The party
in default must pay the amount of those losses, liabilities and expenses on demand to the
non-defaulting party. Furthermore, if Marshall Edwards Pty Limited defaults on its payment
obligations, the Company must pay that money as directed by Novogen.
Termination
This agreement is a continuing obligation, and remains in full force until all the guaranteed
obligations have been irrevocably paid and performed in full.
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AUDIT COMMITTEE REPORT
The Audit committee of the Board of Directors has furnished the following report on its
activities during the fiscal year ended June 30, 2006. The report is not deemed to be soliciting
material or filed with the SEC or subject to the SECs proxy rules or to the liabilities of
Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference
into any prior or subsequent filing under the Securities Act or the Exchange Act except to the
extent that the Company specifically incorporates it by reference into any such filing.
The Audit Committee oversees the financial reporting process on behalf of the Board of
Directors. Management has the primary responsibility for the financial reporting process,
principles and internal controls as well as preparation of the Companys financial statements. The
audit committee is comprised of Mr. Stephen Breckenridge (chairman), Mr. Philip Johnston, Professor
Bryan Williams and Professor Paul Nestel, each of whom is an independent director as defined by the
applicable Nasdaq and SEC rules. The audit committee held four meetings during the fiscal year
ended June 30, 2006. Professor Williams was appointed as a member of the Audit Committee effective
March 31, 2006 to fill the vacancy caused by the resignation of Professor David de Kretser from the
Audit Committee.
In fulfilling its responsibilities, the Audit Committee appointed independent auditors BDO for
the fiscal year ended June 30, 2006. The Audit Committee reviewed and discussed with the
independent auditors the overall scope and specific plans for their Audit. The Audit Committee
also reviewed and discussed with the independent auditors and with management the Companys audited
financial statements and the adequacy of the Companys internal controls. The Audit Committee met
with the independent auditors, without management present, to discuss the results of the Companys
independent auditors audits, their evaluations of the Companys internal controls and the overall
quality of the Companys financial reporting. Although the Audit Committee has the sole authority
to appoint the independent auditors, the Audit Committee will continue its practice of recommending
that the Board ask the stockholders, at their annual meeting, to ratify their appointment of the
independent auditors.
The Audit Committee monitored the independence and performance of the independent auditors.
The Audit committee discussed with the independent auditors the matters required to be discussed by
Statements on Auditing Standards No 61 as amended by Statements on Auditing Standards No 90
(Communication with Audit Committees). The Companys independent auditors have provided the Audit
Committee with the written disclosures and the letter required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, and the Audit Committee has
discussed with the independent auditor and management the independent auditors independence.
Based upon the review and discussions referred to above, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in the annual report on
Form 10-K for the fiscal year ended June 30, 2006 for filing with the SEC.
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Mr. Stephen Breckenridge |
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Mr. Philip Johnston |
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Professor Bryan Williams |
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Professor Paul Nestel |
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INDEPENDENT AUDITORS FEES
The following presents aggregate fees billed to the Company for the fiscal years ended June
30, 2006 and June 30, 2005 by BDO, the Companys independent auditors and principle outside
accountants and Ernst & Young, the Companys former independent auditors and principle outside
accountants.
Audit Fees
Audit fees were $102,000 and $83,000 for the years ended June 30, 2006 and June 30, 2005,
respectively. The fees were for professional services rendered for audits of the Companys annual
consolidated financial statements and for reviews of the Companys quarterly reports on Form 10-Q.
Audit Related Fees
There were no audit related fees for the year ended June 30, 2006 and June 30, 2005.
Tax Fees
Tax fees were $2,550 and $8,850 for the years ended June 30, 2006 and June 30, 2005,
respectively. Tax fees were incurred in connection with the preparation of tax returns.
All Other Fees
There were fees of $5,700 billed by BDO for the year ended June 30, 2006 in connection with
the Companys removal of the previously reported material weakness. There were no other fees
billed by BDO for the year ended June 30, 2005.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted a policy and the procedure for pre-approving all audit and
non-audit services to be performed by the Companys independent auditors. The policy requires
pre-approval of all services rendered by the Companys independent auditors either as part of the
Audit Committees approval of the scope of the engagement of the independent auditors or on a case
by case basis.
The services provided for 2006 were 93% audit services, 0% audit related fees, 2% tax fees and
5% all other fees. The services provided above for 2005 were 90% audit services, 0% audit related
fees and 10% tax fees.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Companys officers and directors and persons
who beneficially own more than 10% of the Common Stock of the Company to file initial reports of
ownership of such securities and reports of changes in ownership of such securities with the SEC.
Such officers, directors and 10% stockholders of the Company are also required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Companys review of the copies of the forms furnished by such persons, the
Company believes that, for the fiscal year ended June 30, 2006, officers, directors and 10%
stockholders filed all required 16(a) forms on a timely basis.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the fiscal year ended June 30, 2006, the members of the Remuneration Committee were Mr.
Philip Johnston, Professor Bryan Williams and Mr. Stephen Breckenridge. Professor Williams was
appointed as a member of the Remuneration Committee effective March 31, 2006 to fill the vacancy
caused by the resignation of Professor David de Kretser from the Remuneration Committee. All of
the Remuneration Committee members during the fiscal year ended June 30, 2006 were non-employee
directors and not former officers. No executive officer of the Company served as a director or
member of the remuneration committee of another entity, one of whose executive officers served as a
director of the Company or member of the Remuneration Committee.
CODE OF ETHICS
The Company has adopted a Code of Business and Ethics policy that applies to the Companys
directors and employees (including the Companys principal executive officer and the Companys
principal financial officer), and has posted the text of the Companys policy on its website at
www.marshalledwardsinc.com.
STOCKHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING
To be considered for inclusion in next years proxy statement, stockholder proposals must be
received in writing, addressed to the Companys Secretary and be received at the Companys
executive offices at 140 Wicks Road, North Ryde Sydney NSW Australia 2113 no later than the close
of business on July 2, 2007.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
Only one copy of the Companys most recent Annual Report on Form 10-K and this Proxy
Statement is delivered to two or more stockholders who share an address unless the Company or its
agent has received contrary instructions from one or more of the stockholders. To request that
separate copies of these documents be delivered, stockholders can contact the Companys registrar
or transfer agent by mail at: Computershare Investor Services LLC, P.O. Box A3504, Chicago,
Illinois 60690-3504; or by telephone at: (312) 360-5494. You may also contact the Companys
transfer agent if you received multiple copes of the annual meeting materials and would prefer to
receive a single copy in the future.
GENERAL
Management does not intend to bring any business before the meeting other than the matters
referred to in the accompanying notice. If, however, any other matters properly come before the
meeting, it is intended that the persons named in the accompanying proxy will vote pursuant to the
proxy in accordance with their best judgment on such matters.
A copy of the Companys most recent Annual Report on Form 10-K is available on the Companys
website at www.marshalledwardsinc.com or can be made available without charge upon written
request to: Marshall Edwards, Inc., 140 Wicks Road, North Ryde, New South Wales 2113, Australia,
Attention: Secretary.
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OTHER INFORMATION
The Company will pay all costs, estimated at $20,000, in the aggregate, of soliciting proxies
for the Annual Meeting. Computershare Investor Services, LLC, the Companys transfer agent, is
assisting the Company in the mailing of the proxies for an approximate fee of $16,000. In addition
to solicitation by mail, proxies may be solicited in person, by telephone, telecopy or other means,
or by directors, officers and regular employees of the Company who will not receive additional
compensation for such solicitations. Proxy cards and materials will also be distributed to
beneficial owners of Common Stock through brokers, custodians, nominees and other like parties, and
the Company expects to reimburse such parties for their charges and expenses.
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BY ORDER OF THE BOARD OF DIRECTORS |
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David R. Seaton, Chief Financial Officer and Secretary |
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Marshall Edwards, Inc.
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C. Authorized Signatures Sign Here This section must be completed for your instructions to be
executed.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders
must sign. When signing as attorney, trustee, executor, administrator, guardian or corporate
officer, please provide your FULL title.
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Proxy Marshall Edwards, Inc.
Proxy Solicited by Board of Directors for Annual Meeting (December 12, 2006)
The undersigned hereby appoints Christopher Naughton and David Seaton and each of them, as proxies,
with full power of substitution in each of them, for and on behalf of the undersigned to vote as
proxies, as directed and permitted herein to vote your shares of Marshall Edwards, Inc. Common
Stock at the Annual Meeting of Stockholders of Marshall Edwards, Inc. to be held on Tuesday,
December 12, 2006, at 1:00 pm (local time) at the offices of Morgan Lewis & Bockius LLP, located at
1111 Pennsylvania Avenue, NW, Washington, D.C. 20004, and at any adjournments thereof upon matters
set forth in the proxy statement, and, in their judgment and discretion, upon such other business
as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed on the reverse hereof by
the stockholder. IF NO DIRECTION IS MADE ON THIS MATTER, THIS PROXY WILL BE VOTED FOR THE NOMINEES
FOR DIRECTOR LISTED, FOR PROPOSAL 2 (RATIFICATION OF BDO AS AUDITORS) AND FOR PROPOSAL 3 (APPROVAL
OF ISSUANCE OF COMPANYS COMMON STOCK TO CORNELL CAPITAL PARTNERS, LP PURSUANT TO THE STANDBY
EQUITY DISTRIBUTION AGREEMENT ENTERED INTO BY THE COMPANY AND CORNELL CAPITAL PARTNERS, LP ON JULY
11, 2006).