Exhibit 10.5

 

NEITHER THESE WARRANTS NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.

 

 

1,000,000 Warrants

November 4, 2004

 

SPESCOM SOFTWARE, INC.

 

WARRANTS

 

 

Spescom Software, Inc., a California corporation (“SPCO”), certifies that, for
value  received, Trilogy Capital Partners, Inc. (“Trilogy”), or registered
assigns (the “Holder”), is the owner of One Million (1,000,000) Warrants of SPCO
(the “Warrants”).  Each Warrant entitles the Holder to purchase from SPCO at any
time prior to the Expiration Date (as defined below) one share of the common
stock of SPCO (the “Common Stock”) for $0.40 (the “Exercise Price”), on the
terms and conditions hereinafter provided.  The Exercise Price and the number of
shares of Common Stock purchasable upon exercise of each Warrant are subject to
adjustment as provided in this Certificate.

1.             VESTING; EXPIRATION DATE; EXERCISE

1.1           VESTING.  THE WARRANTS SHALL VEST AND BECOME EXERCISABLE AS
FOLLOWS:   (I) 500,000 WARRANTS SHALL VEST AT SUCH TIME AS THE MARKET PRICE (AS
DEFINED IN SECTION 1.4 OF THIS CERTIFICATE) EXCEEDS $0.60 PER SHARE; (II)
250,000 WARRANTS SHALL VEST AND BECOME EXERCISABLE AT SUCH TIME AS THE MARKET
PRICE EXCEEDS $0.70 PER SHARE; AND (III) THE REMAINING 250,000 WARRANTS SHALL
VEST AND BECOME EXERCISABLE AT SUCH TIME AS THE MARKET PRICE EXCEEDS $0.80 PER
SHARE.

1.2           EXPIRATION DATE.  THE WARRANTS SHALL EXPIRE ON NOVEMBER 3, 2007
(THE “EXPIRATION DATE”).

1.3           MANNER OF EXERCISE.  THE WARRANTS ARE EXERCISABLE BY DELIVERY TO
SPCO OF THE FOLLOWING (THE “EXERCISE DOCUMENTS”): (A) THIS CERTIFICATE (B) A
WRITTEN NOTICE OF ELECTION TO EXERCISE THE WARRANTS; AND (C) PAYMENT OF THE
EXERCISE PRICE IN CASH, BY CHECK OR BY “NET” EXERCISE AS CONTEMPLATED BY SECTION
1.4 OF THIS CERTIFICATE.  WITHIN THREE BUSINESS DAYS FOLLOWING RECEIPT OF THE
FOREGOING, SPCO SHALL EXECUTE AND DELIVER TO THE HOLDER: (A) A CERTIFICATE OR
CERTIFICATES REPRESENTING THE AGGREGATE NUMBER OF SHARES OF COMMON STOCK
PURCHASED BY THE HOLDER, AND (B) IF

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LESS THAN ALL OF THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE EXERCISED, A NEW
CERTIFICATE EVIDENCING THE WARRANTS NOT SO EXERCISED.

1.4           Net Exercise.  In lieu of the payment methods set forth in
Section 1.3 above, the Holder may elect to exchange all or some of the Warrant
for the number of shares of Common Stock computed using the following formula:

X = Y (A-B)
            A

Where X = the number of shares of Common Stock to be issued to Holder.

Y = the number of shares of Common Stock purchasable under the Warrants being
exchanged (as adjusted to the date of such calculation).

A = the Market Price on the date of receipt by SPCO of the exercise documents.

B = THE EXERCISE PRICE OF THE WARRANTS BEING EXCHANGED (AS ADJUSTED IN
ACCORDANCE WITH THE TERMS OF SECTION 2 HEREOF).

THE “MARKET PRICE” ON ANY DATE SHALL BE THE AVERAGE OF THE DAILY MARKET PRICES
FOR EACH OF THE 10 TRADING DAYS IMMEDIATELY PRECEDING SUCH DATE.  THE “DAILY
MARKET PRICE” ON ANY TRADING DAY SHALL BE DEEMED TO BE THE LAST REPORTED SALE
PRICE OF THE COMMON STOCK ON SUCH DAY, OR, IN THE CASE NO SUCH REPORTED SALES
TAKE PLACE ON SUCH DAY, THE LAST REPORTED SALE PRICE ON THE PRECEDING TRADING
DAY ON WHICH THERE WAS A LAST REPORTED SALES PRICE, AS OFFICIALLY REPORTED BY
THE PRINCIPAL SECURITIES EXCHANGE IN WHICH THE SHARES OF COMMON STOCK ARE LISTED
OR ADMITTED TO TRADING OR BY THE NASDAQ STOCK MARKET, OR IF THE COMMON STOCK IS
NOT LISTED OR ADMITTED TO TRADING ON ANY NATIONAL SECURITIES EXCHANGE OR THE
NASDAQ STOCK MARKET, THE LAST SALE PRICE, OR IF THERE IS NO LAST SALE PRICE, THE
CLOSING BID PRICE, AS FURNISHED BY THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC. (SUCH AS THROUGH THE OTC BULLETIN BOARD) OR A SIMILAR ORGANIZATION
OR IF NASDAQ IS NO LONGER REPORTING SUCH INFORMATION.  IF THE MARKET PRICE
CANNOT BE DETERMINED PURSUANT TO THE SENTENCE ABOVE, THE MARKET PRICE SHALL BE
DETERMINED IN GOOD FAITH (USING CUSTOMARY VALUATION METHODS) BY THE BOARD OF
DIRECTORS OF SPCO BASED ON THE INFORMATION BEST AVAILABLE TO IT, INCLUDING
RECENT ARMS-LENGTH SALES OF COMMON STOCK TO UNAFFILIATED PERSONS.

2.             ADJUSTMENTS OF EXERCISE PRICE AND NUMBER AND KIND OF CONVERSION
SHARES

2.1           IN THE EVENT THAT SPCO SHALL AT ANY TIME HEREAFTER (A) PAY A
DIVIDEND IN COMMON STOCK OR SECURITIES CONVERTIBLE INTO COMMON STOCK; (B)
SUBDIVIDE OR SPLIT ITS OUTSTANDING COMMON STOCK; (C) COMBINE ITS OUTSTANDING
COMMON STOCK INTO A SMALLER NUMBER OF SHARES; THEN THE NUMBER OF SHARES TO BE
ISSUED IMMEDIATELY AFTER THE OCCURRENCE OF ANY SUCH EVENT SHALL BE ADJUSTED SO
THAT THE HOLDER THEREAFTER MAY RECEIVE THE NUMBER OF SHARES OF COMMON STOCK IT
WOULD HAVE OWNED IMMEDIATELY FOLLOWING SUCH ACTION IF IT HAD EXERCISED THE
WARRANTS IMMEDIATELY PRIOR TO SUCH ACTION

 

2

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AND THE EXERCISE PRICE SHALL BE ADJUSTED TO REFLECT SUCH PROPORTIONATE INCREASES
OR DECREASES IN THE NUMBER OF SHARES.

2.2           IN CASE OF ANY RECLASSIFICATION OF THE OUTSTANDING SHARES OF
COMMON STOCK (OTHER THAN A CHANGE COVERED BY SECTION 2.1 HEREOF OR A CHANGE
WHICH SOLELY AFFECTS THE PAR VALUE OF SUCH SHARES) OR IN THE CASE OF ANY MERGER
OR CONSOLIDATION OR MERGER IN WHICH SPCO IS NOT THE CONTINUING CORPORATION AND
WHICH RESULTS IN ANY RECLASSIFICATION OR CAPITAL REORGANIZATION OF THE
OUTSTANDING SHARES), THE HOLDER SHALL HAVE THE RIGHT THEREAFTER (UNTIL THE
EXPIRATION DATE) TO RECEIVE UPON THE EXERCISE HEREOF, FOR THE SAME AGGREGATE
EXERCISE PRICE PAYABLE HEREUNDER IMMEDIATELY PRIOR TO SUCH EVENT, THE KIND AND
AMOUNT OF SHARES OF STOCK OR OTHER SECURITIES OR PROPERTY RECEIVABLE UPON SUCH
RECLASSIFICATION, CAPITAL REORGANIZATION, MERGER OR CONSOLIDATION, BY A HOLDER
OF THE NUMBER OF SHARES OF COMMON STOCK OBTAINABLE UPON THE EXERCISE OF THE
WARRANTS IMMEDIATELY PRIOR TO SUCH EVENT; AND IF ANY RECLASSIFICATION ALSO
RESULTS IN A CHANGE IN SHARES COVERED BY SECTION 2.1, THEN SUCH ADJUSTMENT SHALL
BE MADE PURSUANT TO BOTH THIS SECTION 2.2 AND SECTION 2.1 (WITHOUT
DUPLICATION).  THE PROVISIONS OF THIS SECTION 2.2 SHALL SIMILARLY APPLY TO
SUCCESSIVE RECLASSIFICATIONS, CAPITAL REORGANIZATIONS AND MERGERS OR
CONSOLIDATIONS, SALES OR OTHER TRANSFERS.

3.             RESERVATION OF SHARES.  SPCO SHALL AT ALL TIMES RESERVE AND KEEP
AVAILABLE OUT OF ITS AUTHORIZED BUT UNISSUED SHARES OF COMMON STOCK, SUCH NUMBER
OF SHARES OF COMMON STOCK AS SHALL FROM TIME TO TIME BE ISSUABLE UPON EXERCISE
OF THE WARRANTS.  IF AT ANY TIME THE NUMBER OF AUTHORIZED BUT UNISSUED SHARES OF
COMMON STOCK SHALL NOT BE SUFFICIENT TO PERMIT THE EXERCISE OF THE WARRANTS,
SPCO SHALL PROMPTLY SEEK SUCH CORPORATE ACTION AS MAY NECESSARY TO INCREASE ITS
AUTHORIZED BUT UNISSUED SHARES OF COMMON STOCK TO SUCH NUMBER OF SHARES AS SHALL
BE SUFFICIENT FOR SUCH PURPOSE.

4.             CERTIFICATE AS TO ADJUSTMENTS.  IN EACH CASE OF ANY ADJUSTMENT IN
THE EXERCISE PRICE, OR NUMBER OR TYPE OF SHARES ISSUABLE UPON EXERCISE OF THESE
WARRANTS, THE CHIEF FINANCIAL OFFICER OF SPCO SHALL COMPUTE SUCH ADJUSTMENT IN
ACCORDANCE WITH THE TERMS OF THESE WARRANTS AND PREPARE A CERTIFICATE SETTING
FORTH SUCH ADJUSTMENT AND SHOWING IN DETAIL THE FACTS UPON WHICH SUCH ADJUSTMENT
IS BASED, INCLUDING A STATEMENT OF THE ADJUSTED EXERCISE PRICE.  SPCO SHALL
PROMPTLY SEND (BY FACSIMILE AND BY EITHER FIRST CLASS MAIL, POSTAGE PREPAID OR
OVERNIGHT DELIVERY) A COPY OF EACH SUCH CERTIFICATE TO THE HOLDER.

5.             LOSS OR MUTILATION.  UPON RECEIPT OF EVIDENCE REASONABLY
SATISFACTORY TO SPCO OF THE OWNERSHIP OF AND THE LOSS, THEFT, DESTRUCTION OR
MUTILATION OF THIS CERTIFICATE, AND OF INDEMNITY REASONABLY SATISFACTORY TO IT,
AND (IN THE CASE OF MUTILATION) UPON SURRENDER AND CANCELLATION OF THESE
WARRANTS, SPCO WILL EXECUTE AND DELIVER IN LIEU THEREOF A NEW CERTIFICATE OF
LIKE TENOR AS THE LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATE.

6.             REPRESENTATIONS AND WARRANTIES OF SPCO.  SPCO HEREBY REPRESENTS
AND WARRANTS TO HOLDER THAT:

6.1           DUE AUTHORIZATION.  ALL CORPORATE ACTION ON THE PART OF SPCO, ITS
OFFICERS, DIRECTORS AND SHAREHOLDERS NECESSARY FOR (A) THE AUTHORIZATION,
EXECUTION AND DELIVERY OF, AND THE PERFORMANCE OF ALL OBLIGATIONS OF SPCO UNDER,
THESE WARRANTS, AND (B) THE AUTHORIZATION, ISSUANCE, RESERVATION FOR ISSUANCE
AND DELIVERY OF ALL OF THE COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS, HAS BEEN DULY TAKEN.  THESE WARRANTS CONSTITUTE A VALID AND BINDING
OBLIGATION OF SPCO ENFORCEABLE IN

3

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ACCORDANCE WITH THEIR TERMS, SUBJECT, AS TO ENFORCEMENT OF REMEDIES, TO
APPLICABLE BANKRUPTCY, INSOLVENCY, MORATORIUM, REORGANIZATION AND SIMILAR LAWS
AFFECTING CREDITORS’ RIGHTS GENERALLY AND TO GENERAL EQUITABLE PRINCIPLES.

6.2           ORGANIZATION.  SPCO IS A CORPORATION DULY ORGANIZED, VALIDLY
EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE STATE REFERENCED IN THE
FIRST PARAGRAPH OF THIS CERTIFICATE AND HAS ALL REQUISITE CORPORATE POWER TO
OWN, LEASE AND OPERATE ITS PROPERTY AND TO CARRY ON ITS BUSINESS AS NOW BEING
CONDUCTED AND AS CURRENTLY PROPOSED TO BE CONDUCTED.

6.3           VALID ISSUANCE OF STOCK.  ANY SHARES OF COMMON STOCK ISSUED UPON
EXERCISE OF THESE WARRANTS WILL BE DULY AND VALIDLY ISSUED, FULLY PAID AND
NON-ASSESSABLE.

6.4           GOVERNMENTAL CONSENTS.  ALL CONSENTS, APPROVALS, ORDERS,
AUTHORIZATIONS OR REGISTRATIONS, QUALIFICATIONS, DECLARATIONS OR FILINGS WITH
ANY FEDERAL OR STATE GOVERNMENTAL AUTHORITY ON THE PART OF SPCO REQUIRED IN
CONNECTION WITH THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREIN HAVE
BEEN OBTAINED.

7.             REPRESENTATIONS AND WARRANTIES OF TRILOGY.  TRILOGY HEREBY
REPRESENTS AND WARRANTS TO SPCO THAT:

7.1           TRILOGY IS ACQUIRING THE WARRANTS FOR ITS OWN ACCOUNT, FOR
INVESTMENT PURPOSES ONLY.

7.2           TRILOGY UNDERSTANDS THAT AN INVESTMENT IN THE WARRANTS INVOLVES A
HIGH DEGREE OF RISK, AND TRILOGY HAS THE FINANCIAL ABILITY TO BEAR THE ECONOMIC
RISK OF THIS INVESTMENT IN THE WARRANTS, INCLUDING A COMPLETE LOSS OF SUCH
INVESTMENT. TRILOGY HAS ADEQUATE MEANS FOR PROVIDING FOR ITS CURRENT FINANCIAL
NEEDS AND HAS NO NEED FOR LIQUIDITY WITH RESPECT TO THIS INVESTMENT.

7.3           TRILOGY HAS SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND
BUSINESS MATTERS THAT IT IS CAPABLE OF EVALUATING THE MERITS AND RISKS OF AN
INVESTMENT IN THE WARRANTS AND IN PROTECTING ITS OWN INTEREST IN CONNECTION WITH
THIS TRANSACTION.

7.4           TRILOGY UNDERSTANDS THAT THE WARRANTS HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR UNDER ANY
STATE SECURITIES LAWS.  TRILOGY IS FAMILIAR WITH THE PROVISIONS OF THE
SECURITIES ACT AND RULE 144 THEREUNDER AND UNDERSTANDS THAT THE RESTRICTIONS ON
TRANSFER ON THE WARRANTS MAY RESULT IN TRILOGY BEING REQUIRED TO HOLD THE
WARRANTS FOR AN INDEFINITE PERIOD OF TIME.

7.5           TRILOGY AGREES NOT TO SELL, TRANSFER, ASSIGN, GIFT, CREATE A
SECURITY INTEREST IN, OR OTHERWISE DISPOSE OF, WITH OR WITHOUT CONSIDERATION
(COLLECTIVELY, “TRANSFER”) ANY OF THE WARRANTS EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN EXEMPTION FROM
REGISTRATION.  AS A FURTHER CONDITION TO ANY SUCH TRANSFER, EXCEPT IN THE EVENT
THAT SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IF IN THE REASONABLE OPINION OF COUNSEL TO SPCO ANY TRANSFER
OF THE WARRANTS BY THE CONTEMPLATED TRANSFEREE THEREOF WOULD NOT BE EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT,
SPCO MAY REQUIRE THE CONTEMPLATED TRANSFEREE TO FURNISH SPCO WITH AN INVESTMENT
LETTER SETTING FORTH SUCH INFORMATION AND AGREEMENTS AS MAY BE REASONABLY
REQUESTED BY SPCO TO ENSURE COMPLIANCE BY SUCH TRANSFEREE WITH THE SECURITIES
ACT.

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8.             NOTICES OF RECORD DATE

                                In the event:

8.1           SPCO SHALL TAKE A RECORD OF THE HOLDERS OF ITS COMMON STOCK (OR
OTHER STOCK OR SECURITIES AT THE TIME RECEIVABLE UPON THE EXERCISE OF THESE
WARRANTS), FOR THE PURPOSE OF ENTITLING THEM TO RECEIVE ANY DIVIDEND OR OTHER
DISTRIBUTION, OR ANY RIGHT TO SUBSCRIBE FOR OR PURCHASE ANY SHARES OF STOCK OF
ANY CLASS OR ANY OTHER SECURITIES OR TO RECEIVE ANY OTHER RIGHT; OR

8.2           OF ANY CONSOLIDATION OR MERGER OF SPCO WITH OR INTO ANOTHER
CORPORATION, ANY CAPITAL REORGANIZATION OF SPCO, ANY RECLASSIFICATION OF THE
CAPITAL STOCK OF SPCO, OR ANY CONVEYANCE OF ALL OR SUBSTANTIALLY ALL OF THE
ASSETS OF SPCO TO ANOTHER CORPORATION IN WHICH HOLDERS OF SPCO’S STOCK ARE TO
RECEIVE STOCK, SECURITIES OR PROPERTY OF ANOTHER CORPORATION; OR

8.3           OF ANY VOLUNTARY DISSOLUTION, LIQUIDATION OR WINDING-UP OF SPCO;
OR

8.4           OF ANY REDEMPTION OR CONVERSION OF ALL OUTSTANDING COMMON STOCK;

then, and in each such case, SPCO will mail or cause to be mailed to the Holder
a notice specifying, as the case may be, (a) the date on which a record is to be
taken for the purpose of such dividend, distribution or right, or (b) the date
on which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, redemption or conversion is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such stock or securities as at the time are
receivable upon the exercise of these Warrants), shall be entitled to exchange
their shares of Common Stock (or such other stock or securities), for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up.  SPCO
shall use all reasonable efforts to ensure such notice shall be delivered at
least 15 days prior to the date therein specified.

9.             REGISTRATION RIGHTS.

9.1           IF SPCO SHALL DETERMINE TO REGISTER ANY COMMON STOCK UNDER THE
SECURITIES ACT FOR SALE IN CONNECTION WITH A PUBLIC OFFERING OF COMMON STOCK
(OTHER THAN PURSUANT TO AN EMPLOYEE BENEFIT PLAN OR A MERGER, ACQUISITION OR
SIMILAR TRANSACTION), SPCO WILL GIVE WRITTEN NOTICE THEREOF TO HOLDER AND WILL
INCLUDE IN SUCH REGISTRATION ANY OF THE REGISTRABLE SHARES WHICH HOLDER MAY
REQUEST BE INCLUDED (“INCLUDED SHARES”) BY A WRITING DELIVERED TO SPCO WITHIN 15
DAYS AFTER THE NOTICE GIVEN BY SPCO TO HOLDER; PROVIDED, HOWEVER, THAT IF THE
OFFERING IS TO BE FIRMLY UNDERWRITTEN, AND THE REPRESENTATIVE OF THE
UNDERWRITERS OF THE OFFERING REFUSE IN WRITING TO INCLUDE IN THE OFFERING ALL OF
THE SHARES OF COMMON STOCK REQUESTED BY SPCO AND OTHERS, THE SHARES TO BE
INCLUDED SHALL BE ALLOCATED FIRST TO SPCO AND ANY SHAREHOLDER WHO INITIATED SUCH
REGISTRATION AND THEN AMONG THE OTHERS BASED ON THE RESPECTIVE NUMBER OF SHARES
OF COMMON STOCK HELD BY SUCH PERSONS.  IF SPCO DECIDES NOT TO, AND DOES NOT,
FILE A REGISTRATION STATEMENT WITH RESPECT TO SUCH REGISTRATION, OR AFTER FILING
DETERMINES TO WITHDRAW THE SAME BEFORE THE EFFECTIVE DATE THEREOF, SPCO WILL
PROMPTLY SO INFORM HOLDER, AND SPCO WILL NOT BE OBLIGATED TO COMPLETE THE
REGISTRATION OF THE INCLUDED SHARES INCLUDED THEREIN.  SPCO WILL PAY ALL COSTS
AND EXPENSES OF SUCH REGISTRATION OTHER THAN UNDERWRITING DISCOUNTS OR BROKERAGE
FEES OR COMMISSIONS IN CONNECTION WITH THE SALE OF THE INCLUDED SHARES AND FEES
AND COSTS OF ACCOUNTANTS, ATTORNEYS OR OTHERS RETAINED BY HOLDER.  FOR PURPOSES
OF THIS AGREEMENT,

5

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“REGISTRABLE SHARES” SHALL MEAN THE SHARES OF COMMON STOCK (OR SUCH STOCK OR
SECURITIES AS AT THE TIME ARE RECEIVABLE UPON THE EXERCISE OF THESE WARRANTS)
ISSUABLE UPON EXERCISE OF THE WARRANTS AND ANY SHARES ISSUED AS A RESULT OF
STOCK SPLIT, STOCK DIVIDEND OR RECLASSIFICATION OF SUCH SHARES; PROVIDED,
HOWEVER, THAT ANY SHARE SHALL CEASE TO BE A REGISTRABLE SHARE IF AND WHEN (A) IT
HAS BEEN EFFECTIVELY REGISTERED UNDER THE SECURITIES ACT AND DISPOSED OF
PURSUANT THERETO, OR (B) THE HOLDER MAY SELL SUCH SHARE (OR IN THE CASE OF A
SHARE NOT YET ISSUED UNDER THIS WARRANT, THE HOLDER MAY EXERCISE THIS WARRANT,
INCLUDING PURSUANT TO SECTION 1.4, AND SELL SUCH SHARE ISSUED UPON SUCH
EXERCISE) IN THE MARKET ON WHICH SPCO COMMON STOCK IS THEN TRADED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT.

9.2           IN CONNECTION WITH ANY REGISTRATION UNDER THIS SECTION 9, SPCO
WILL:

9.2.1        FURNISH TO HOLDER A COPY OF THE REGISTRATION STATEMENT AND EACH
AMENDMENT TO THE REGISTRATION STATEMENT AND SUCH NUMBER OF COPIES OF THE FINAL
PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT AS HOLDER MAY REASONABLY
REQUEST IN ORDER TO FACILITATE THE DISTRIBUTION OF THE INCLUDED SHARES OWNED BY
HOLDERS;

9.2.2        NOTIFY HOLDER OF THE ISSUANCE OF ANY STOP ORDER BY THE SECURITIES
AND EXCHANGE COMMISSION IN CONNECTION WITH THE REGISTRATION STATEMENT; AND

9.2.3        REQUIRE EACH LEGAL OPINION AND ACCOUNTANT’S “COLD COMFORT” LETTER
IN CONNECTION WITH THE OFFERING, IF ANY, TO BE RENDERED TO HOLDER AS WELL AS
SPCO AND/OR ITS BOARD OF DIRECTORS.

9.3           AS A CONDITION TO INCLUDING REGISTRABLE SHARES IN THE REGISTRATION
STATEMENT, HOLDER MUST PROVIDE TO SPCO SUCH INFORMATION REGARDING ITSELF, THE
REGISTRABLE SHARES HELD BY IT AND THE INTENDED METHOD OF DISTRIBUTION OF SUCH
SHARES AS SHALL BE REQUIRED TO EFFECT THE REGISTRATION OF THE REGISTRABLE SHARES
AND, IF THE OFFERING IS BEING UNDERWRITTEN, HOLDER MUST PROVIDE SUCH POWERS OF
ATTORNEY, INDEMNITIES AND OTHER DOCUMENTS AS MAY BE REASONABLY REQUESTED BY THE
MANAGING UNDERWRITER.

9.4           FOLLOWING THE EFFECTIVENESS OF THE REGISTRATION STATEMENT, UPON
RECEIPT FROM SPCO OF A NOTICE THAT THE REGISTRATION STATEMENT CONTAINS AN UNTRUE
STATEMENT OF MATERIAL FACT OR OMITS TO STATE ANY MATERIAL FACT REQUIRED TO BE
STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING IN
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, HOLDER WILL IMMEDIATELY
DISCONTINUE DISPOSITION OF INCLUDED SHARES PURSUANT TO THE REGISTRATION
STATEMENT UNTIL SPCO NOTIFIES HOLDER THAT IT MAY RESUME SALES OF INCLUDED SHARES
AND, IF NECESSARY, PROVIDES TO HOLDER COPIES OF THE SUPPLEMENTAL OR AMENDED
PROSPECTUS.  IN SUCH EVENT, HOLDER WILL DELIVER TO SPCO ALL COPIES, OTHER THAN
PERMANENT FILE COPIES THEN IN HOLDER’S POSSESSION, OF THE MOST RECENT PROSPECTUS
COVERING THE INCLUDED SHARES.

9.5           SPCO AGREES TO INDEMNIFY AND HOLD HARMLESS HOLDER, AND ITS
OFFICERS, DIRECTORS AND AGENTS, AND EACH PERSON, IF ANY, WHO CONTROLS HOLDER
WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT OR SECTION 20 OF THE
SECURITIES  EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE ACT”) FROM AND
AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES AND LIABILITIES CAUSED BY (I) ANY
VIOLATION OR ALLEGED VIOLATION BY SPCO OF THE SECURITIES ACT, EXCHANGE ACT, ANY
STATE SECURITIES LAWS OR ANY

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RULE OR REGULATION PROMULGATED UNDER THE SECURITIES ACT, EXCHANGE ACT OR ANY
STATE SECURITIES LAWS, (II) ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF
A MATERIAL FACT CONTAINED IN ANY REGISTRATION STATEMENT OR PROSPECTUS RELATING
TO THE INCLUDED SHARES (AS AMENDED OR SUPPLEMENTED IF SPCO SHALL HAVE FURNISHED
ANY AMENDMENTS OR SUPPLEMENTS THERETO) OR ANY PRELIMINARY PROSPECTUS, OR (III)
CAUSED BY ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT
REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT
MISLEADING IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, EXCEPT
INSOFAR AS SUCH LOSSES, CLAIMS, DAMAGES OR LIABILITIES ARE CAUSED BY ANY SUCH
UNTRUE STATEMENT OR OMISSION OR ALLEGED UNTRUE STATEMENT OR OMISSION BASED UPON
INFORMATION FURNISHED IN WRITING TO SPCO BY HOLDER OR ON HOLDER’S BEHALF
EXPRESSLY FOR USE THEREIN.

9.6           HOLDER AGREES TO INDEMNIFY AND HOLD HARMLESS SPCO, ITS OFFICERS,
DIRECTORS AND AGENTS AND EACH PERSON, IF ANY, WHO CONTROLS SPCO WITHIN THE
MEANING OF EITHER SECTION 15 OF THE SECURITIES ACT OR SECTION 20 OF THE EXCHANGE
ACT TO THE SAME EXTENT AS THE FOREGOING INDEMNITY FROM SPCO TO HOLDER, BUT ONLY
WITH RESPECT TO INFORMATION FURNISHED IN WRITING BY HOLDER OR ON HOLDER’S BEHALF
EXPRESSLY FOR USE IN ANY REGISTRATION STATEMENT OR PROSPECTUS RELATING TO THE
REGISTRABLE SHARES, OR ANY AMENDMENT OR SUPPLEMENT THERETO, OR ANY PRELIMINARY
PROSPECTUS.

9.7           IN CASE ANY PROCEEDING (INCLUDING ANY GOVERNMENTAL INVESTIGATION)
SHALL BE INSTITUTED INVOLVING ANY PERSON IN RESPECT OF WHICH INDEMNITY MAY BE
SOUGHT PURSUANT TO THIS SECTION 10, SUCH PERSON (AN “INDEMNIFIED PARTY”) SHALL
PROMPTLY NOTIFY THE PERSON AGAINST WHOM SUCH INDEMNITY MAY BE SOUGHT (THE
“INDEMNIFYING PARTY”) IN WRITING AND THE INDEMNIFYING PARTY SHALL ASSUME THE
DEFENSE THEREOF, INCLUDING THE EMPLOYMENT OF COUNSEL REASONABLY SATISFACTORY TO
SUCH INDEMNIFIED PARTY, AND SHALL ASSUME THE PAYMENT OF ALL FEES AND EXPENSES;
PROVIDED THAT THE FAILURE OF ANY INDEMNIFIED PARTY SO TO NOTIFY THE INDEMNIFYING
PARTY SHALL NOT RELIEVE THE INDEMNIFYING PARTY OF ITS OBLIGATIONS HEREUNDER
EXCEPT TO THE EXTENT (AND ONLY TO THE EXTENT THAT) THAT THE INDEMNIFYING PARTY
IS MATERIALLY PREJUDICED BY SUCH FAILURE TO NOTIFY.  IN ANY SUCH PROCEEDING, ANY
INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO RETAIN ITS OWN COUNSEL, BUT THE FEES
AND EXPENSES OF SUCH COUNSEL SHALL BE AT THE EXPENSE OF SUCH INDEMNIFIED PARTY
UNLESS (I) THE INDEMNIFYING PARTY AND THE INDEMNIFIED PARTY SHALL HAVE MUTUALLY
AGREED TO THE RETENTION OF SUCH COUNSEL OR (II) IN THE REASONABLE JUDGMENT OF
SUCH INDEMNIFIED PARTY REPRESENTATION OF BOTH PARTIES BY THE SAME COUNSEL WOULD
BE INAPPROPRIATE DUE TO ACTUAL OR POTENTIAL DIFFERING INTERESTS BETWEEN THEM. 
IT IS UNDERSTOOD THAT THE INDEMNIFYING PARTY SHALL NOT, IN CONNECTION WITH ANY
PROCEEDING OR RELATED PROCEEDINGS IN THE SAME JURISDICTION, BE LIABLE FOR THE
REASONABLE FEES AND EXPENSES OF MORE THAN ONE SEPARATE FIRM OF ATTORNEYS (IN
ADDITION TO ANY LOCAL COUNSEL) AT ANY TIME FOR ALL SUCH INDEMNIFIED PARTIES
(INCLUDING IN THE CASE OF HOLDER, ALL OF ITS OFFICERS, DIRECTORS AND CONTROLLING
PERSONS) AND THAT ALL SUCH FEES AND EXPENSES SHALL BE REIMBURSED AS THEY ARE
INCURRED.  IN THE CASE OF ANY SUCH SEPARATE FIRM FOR THE INDEMNIFIED PARTIES,
THE INDEMNIFIED PARTIES SHALL DESIGNATE SUCH FIRM IN WRITING TO THE INDEMNIFYING
PARTY.  THE INDEMNIFYING PARTY SHALL NOT BE LIABLE FOR ANY SETTLEMENT OF ANY
PROCEEDING EFFECTED WITHOUT ITS WRITTEN CONSENT (WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED), BUT IF SETTLED WITH SUCH CONSENT, OR IF THERE
BE A FINAL JUDGMENT FOR THE PLAINTIFF, THE INDEMNIFYING PARTY SHALL INDEMNIFY
AND HOLD HARMLESS SUCH INDEMNIFIED PARTIES FROM AND AGAINST ANY LOSS OR
LIABILITY (TO THE EXTENT STATED ABOVE) BY REASON OF SUCH SETTLEMENT OR
JUDGMENT.  NO INDEMNIFYING PARTY SHALL, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
INDEMNIFIED PARTY, EFFECT ANY SETTLEMENT OF ANY PENDING OR THREATENED PROCEEDING
IN RESPECT OF WHICH ANY INDEMNIFIED PARTY IS OR COULD HAVE BEEN A PARTY AND
INDEMNITY COULD HAVE BEEN SOUGHT HEREUNDER BY SUCH INDEMNIFIED PARTY, UNLESS
SUCH SETTLEMENT INCLUDES AN UNCONDITIONAL RELEASE OF SUCH INDEMNIFIED PARTY FROM
ALL LIABILITY ARISING OUT OF SUCH PROCEEDING.

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10.          SEVERABILITY.  IF ANY TERM, PROVISION, COVENANT OR RESTRICTION OF
THESE WARRANTS IS HELD BY A COURT OF COMPETENT JURISDICTION TO BE INVALID, VOID
OR UNENFORCEABLE, THE REMAINDER OF THE TERMS, PROVISIONS, COVENANTS AND
RESTRICTIONS OF THESE WARRANTS SHALL REMAIN IN FULL FORCE AND EFFECT AND SHALL
IN NO WAY BE AFFECTED, IMPAIRED OR INVALIDATED.

11.          NOTICES.  ALL NOTICES, REQUESTS, CONSENTS AND OTHER COMMUNICATIONS
REQUIRED HEREUNDER SHALL BE IN WRITING AND SHALL BE EFFECTIVE WHEN DELIVERED OR,
IF DELIVERED BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT
REQUESTED, SHALL BE EFFECTIVE ON THE THIRD DAY FOLLOWING DEPOSIT IN UNITED
STATES MAIL: TO THE HOLDER, AT TRILOGY CAPITAL PARTNERS, INC., 1406½  KENTER
AVENUE, LOS ANGELES, CA 90049; AND IF ADDRESSED TO SPCO, AT SPESCOM SOFTWARE
INC., ATTN: CARL MOSTERT, CEO, 10052 MESA RIDGE COURT, SUITE 100, SAN DIEGO, CA
92121, OR SUCH OTHER ADDRESS AS HOLDER OR SPCO MAY DESIGNATE IN WRITING.

12.          NO RIGHTS AS SHAREHOLDER.  THE HOLDER SHALL HAVE NO RIGHTS AS A
SHAREHOLDER OF SPCO WITH RESPECT TO THE SHARES ISSUABLE UPON EXERCISE OF THE
WARRANTS UNTIL THE RECEIPT BY SPCO OF ALL OF THE EXERCISE DOCUMENTS.

 

 

SPESCOM SOFTWARE, INC.

 

 

 

 

 

By:

/s/ John W. Low

 

 

John W. Low, Chief Financial Officer

 

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EXHIBIT “A”
NOTICE OF EXERCISE
(To be signed only upon exercise of the Warrants)

 

To:          Spescom Software Inc.

The undersigned hereby elects to purchase shares of Common Stock (the “Warrant
Shares”) of Spescom Software Inc. (“SPCO”), pursuant to the terms of the
enclosed warrant certificate (the “Certificate”). The undersigned tenders
herewith payment of the exercise price pursuant to the terms of the Certificate.

The undersigned hereby represents and warrants to, and agrees with, SPCO as
follows:

1.             Holder is acquiring the Warrant Shares for its own account, for
investment purposes only.

2.             Holder understands that an investment in the Warrant Shares
involves a high degree of risk, and Holder has the financial ability to bear the
economic risk of this investment in the Warrant Shares, including a complete
loss of such investment. Holder has adequate means for providing for its current
financial needs and has no need for liquidity with respect to this investment.

3.             Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Warrant Shares and in protecting its own interest in
connection with this transaction.

4.             Holder understands that the Warrant Shares have not been
registered under the Securities Act or under any state securities laws.  Holder
is familiar with the provisions of the Securities Act and Rule 144 thereunder
and understands that the restrictions on transfer on the Warrant Shares may
result in Holder being required to hold the Warrant Shares for an indefinite
period of time.

5.             Holder agrees not to sell, transfer, assign, gift, create a
security interest in, or otherwise dispose of, with or without consideration
(collectively, “Transfer”) any of the Warrant Shares except pursuant to an
effective registration statement under the Securities Act or an exemption from
registration.  As a further condition to any such Transfer, except in the event
that such Transfer is made pursuant to an effective registration statement under
the Securities Act, if in the reasonable opinion of counsel to SPCO any Transfer
of the Warrant Shares by the contemplated transferee thereof would not be exempt
from the registration and prospectus delivery requirements of the Securities
Act, SPCO may require the contemplated transferee to furnish SPCO with an
investment letter setting forth such information and agreements as may be
reasonably requested by SPCO to ensure compliance by such transferee with the
Securities Act.

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Each certificate evidencing the Warrant Shares will bear the following legend:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE “ACT”) OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE EXERCISED, SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 

Number of Warrants Exercised:  ______________

Net Exercise  ___ Yes    ___ No

Dated:  ____________________

 

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