Exhibit 10.4


 


WARRANT TO
PURCHASE COMMON STOCK


 


THIS WARRANT AND
THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.


 


WARRANT TO PURCHASE
COMMON STOCK


 


	
  Number
  of Shares:

  	
   

  	
  462,963 shares

  
	
   

  	
   

  	
   

  
	
  Warrant
  Price:

  	
   

  	
  $0.27 per share

  
	
   

  	
   

  	
   

  
	
  Issuance
  Date:

  	
   

  	
  October 25, 2005

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
  October 25, 2008

  



 


THIS
WARRANT CERTIFIES THAT for value received, M.A.G. Capital,
LLC, or its registered assigns (hereinafter called the “Holder”) is entitled
to purchase from Spescom Software Inc. (hereinafter called the “Company”), the above
referenced number of fully paid and nonassessable shares (the “Shares”) of common
stock (the “Common Stock”),
of Company, at the Warrant Price per Share referenced above; the number of
shares purchasable upon exercise of this Warrant referenced above being subject
to adjustment from time to time as described herein. This Warrant is issued in
connection with that certain Subscription Agreement dated as of October 25,
2005, by and between the Company and Holder (the “Subscription Agreement”). The exercise
of this Warrant shall be subject to the provisions, limitations and
restrictions contained herein.


 


1.              Term and Exercise.


 


1.1  Term.  This Warrant is exercisable in whole or in part (but
not as to any fractional share of Common Stock), at any time and from time to
time after the date hereof prior to 6:00 p.m. on the Expiration Date set forth
above.


 


1.2  Warrant Price.  The Warrant shall be exercisable at the Warrant Price
described above.


 


1.3  Maximum Number of Shares. 
The maximum number of Shares of Common Stock exercisable pursuant to
this Warrant is 462,963 Shares.  However,
notwithstanding anything herein to the contrary, in no event shall the Holder
be permitted to exercise this Warrant for a number of Shares greater than the
number that would cause the aggregate beneficial ownership of the Company’s
Common Stock (calculated pursuant to Rule 13d-3 of the Securities Exchange Act
of 1934, as amended) of (a) the Holder and its affiliates or (b) M.A.G.
Capital, LLC, and its affiliates to equal 9.99% of the Company’s Common Stock
then outstanding.


 


1.4  Procedure for Exercise of Warrant. 
Holder may exercise this Warrant by delivering the following to the
principal office of the Company in accordance with Section 5.1 hereof:
(i) a duly executed Notice of Exercise in substantially the form attached
as Schedule A, (ii) payment of the Warrant Price then in effect for
each of the Shares being purchased, as designated in the Notice of Exercise,
and (iii) this Warrant.  Payment of the
Warrant Price may be in cash, certified or official bank check payable to the
order of the Company, or wire transfer of funds to the Company’s account (or
any combination of any of the foregoing) in the amount of the Warrant Price for
each share being purchased.


 


1.5  Delivery of Certificate and New Warrant. 
In the event of any exercise of the rights represented by this Warrant,
a certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, together with any other securities or other property
which the Holder is entitled to receive upon exercise of this Warrant, shall be
delivered to the Holder hereof, at the Company’s expense, within a reasonable
time, not exceeding fifteen (15) calendar days, after the rights represented by
this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of Shares (except a remaining
fractional share), if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the Holder hereof within such time.  The person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which the Warrant was surrendered and payment of the Warrant Price was
received by the Company, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is on a
date when the stock transfer books of the Company are closed, such person shall
be deemed to have become the holder of such Shares at the close of business on
the next succeeding date on which the stock transfer books are open.


 


1.6  Restrictive Legend. 
Each certificate for Shares shall bear a restrictive legend in
substantially the form as follows, together with any additional legend required
by (i) any applicable state securities laws and (ii) any securities
exchange upon which such Shares may, at the time of such exercise, be listed:


 


The
shares of stock evidenced by this certificate have not been registered under
the U.S. Securities Act of 1933, as amended, and may not be offered, sold,
pledged or otherwise transferred (“transferred”) in the absence of such
registration or an applicable exemption therefrom. In the absence of such
registration, such shares may not be transferred unless, if the Company
requests, the Company has received a written opinion from counsel in form and
substance satisfactory to the Company stating that such transfer is being made
in compliance with all applicable federal and state securities laws.


 


Any certificate issued at any time in exchange or
substitution for any certificate bearing such legend shall also bear such
legend unless, in the opinion of counsel for the Holder thereof (which counsel
shall be reasonably satisfactory to the Company), the securities represented
thereby are not, at such time, required by law to bear such legend.


 


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1.7  Fractional Shares. 
No fractional Shares shall be issuable upon exercise or conversion of
the Warrant.  In the event of a
fractional interest, the number of Shares to be issued shall be rounded down to
the nearest whole Share.


 


2.              Representations,
Warranties and Covenants.


 


2.1       Representations and
Warranties.


 


(a)   The Company is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has all necessary power and authority to perform its
obligations under this Warrant;


 


(b)   The execution, delivery and performance of
this Warrant has been duly authorized by all necessary actions on the part of
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms; and


 


(c)   This Warrant does not violate and is not in
conflict with any of the provisions of the Company’s Articles of Incorporation
or Certificate of Determination, Bylaws and any resolutions of the Company’s
Board of Directors or stockholders, or any agreement of the Company, and no
event has occurred and no condition or circumstance exists that might (with or
without notice or lapse of time) constitute or result directly or indirectly in
such a violation or conflict.


 


2.2  Issuance of Shares.  The Company
covenants and agrees that all shares of Common Stock that may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
validly issued, fully paid and nonassessable, and free from all taxes, liens
and charges with respect to the issue thereof. 
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state taxes which may be payable in respect of
the issue of this Warrant or any Common Stock or certificates therefor issuable
upon the exercise of this Warrant.  The
Company further covenants and agrees that the Company will at all times have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of Common Stock to provide for the exercise in full of the rights
represented by this Warrant.  If at any time
the number of authorized but unissued shares of Common Stock of the Company
shall not be sufficient to effect the exercise of the Warrant in full, subject
to the limitations set forth in Section 1.3 hereto, then the Company will take
all such corporate action as may, in the opinion of counsel to the Company, be
necessary or advisable to increase the number of its authorized shares of
Common Stock as shall be sufficient to permit the exercise of the Warrant in
full, subject to the limitations set forth in Section 1.3 hereto, including
without limitation, using its best efforts to obtain any necessary stockholder
approval of such increase.  The Company
further covenants and agrees that if any shares of capital stock to be reserved
for the purpose of the issuance of shares upon the exercise of this Warrant
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly issued or delivered upon
exercise, then the Company will in good faith and as expeditiously as possible
endeavor to secure such registration or approval, as the case may be.  If and so long as the Common Stock issuable
upon the exercise of this Warrant is listed on any national securities exchange
or the Nasdaq Stock Market, the Company will, if permitted by the rules of such
exchange or market, list and keep listed on such exchange or market, upon
official notice of issuance, all shares of such Common Stock issuable upon
exercise of this Warrant.


 


3.              Other Adjustments.


 


3.1  Subdivision or Combination of Shares. 
In case the Company shall at any time subdivide its outstanding Common
Stock into a greater number of shares, the Warrant Price in effect immediately
prior to such subdivision shall be proportionately reduced, and the number of
Shares subject to this Warrant shall be proportionately increased, and
conversely, in case the outstanding Common Stock of the Company shall be
combined into a smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased, and
the number of Shares subject to this Warrant shall be proportionately
decreased.


 


3.2  Dividends in Common Stock, Other Stock or Property. 
If at any time or from time to time the holders of Common Stock (or any
shares of stock or other securities at the time receivable upon the exercise of
this Warrant) shall have received or become entitled to receive, without
payment therefor:


 


(a)   Common Stock, Options or any shares or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;


 


(b)         any cash paid or payable otherwise than as a regular
cash dividend; or


 


(c)   Common Stock or additional shares or other
securities or property (including cash) by way of spin-off, split-up,
reclassification, combination of shares or similar corporate rearrangement
(other than Common Stock issued as a stock split or adjustments in respect of
which shall be covered by the terms of Section 3.1 above) and additional
shares, other securities or property issued in connection with a Change (as
defined below) (which shall be covered by the terms of Section 3.4 below), then
and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clause (b) above and this clause (c)) which such
Holder would hold on the date of such exercise had such Holder been the holder
of record of such Common Stock as of the date on which holders of Common Stock
received or became entitled to receive such shares or all other additional
stock and other securities and property.


 


3.3  Reorganization, Reclassification,
Consolidation, Merger or Sale.  If any recapitalization,
reclassification or reorganization of the share capital of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its shares and/or assets or other transaction
(including, without limitation, a sale of substantially all of its assets
followed by a liquidation) shall be effected in such a way that holders of
Common Stock shall be entitled to receive shares, securities or other assets or
property (a “Change”), then, as a condition of such Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof
shall thereafter have the right to purchase and receive (in lieu of the Common
Stock of the Company immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby) such shares, securities or other
assets or property as may be issued or payable with respect to or in exchange
for the number of outstanding Common Stock which such Holder would have been
entitled to receive had such Holder exercised this Warrant immediately prior to
the consummation of such Change.  The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property.  The
new Warrant shall provide for adjustments which shall be as nearly equivalent
as may be practicable to give effect to the adjustments provided for in this
Section 3 including, without limitation, adjustments to the Warrant Price and
to the number of securities or property issuable upon exercise of the new
Warrant.  The provisions of this Section
3.3 shall similarly apply to successive Changes.


 


4.              Ownership and
Transfer.


 


4.1  Ownership of This Warrant.  The Company
may deem and treat the person in whose name this Warrant is registered as the
holder and owner hereof (notwithstanding any notations of ownership or writing
hereon made by anyone other than the Company) for all purposes and shall not be
affected by any notice to the contrary until presentation of this Warrant for
registration of transfer as provided in this Section 4.


 


4.2  Transfer and Replacement.  Subject to
the terms and conditions of this Warrant and compliance with all applicable
securities laws, and upon prior written consent of the Company, which consent
shall not be unreasonably withheld, this Warrant and all rights hereunder are


 


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transferable in whole or in part upon
the books of the Company by the Holder hereof in person or by duly authorized
attorney, and a new Warrant or Warrants, of the same tenor as this Warrant but
registered in the name of the transferee or transferees (and in the name of the
Holder, if a partial transfer is effected) shall be made and delivered by the
Company upon surrender of this Warrant duly endorsed, at the office of the
Company in accordance with Section 6.1 hereof. 
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity
by such Holder shall be sufficient for all purposes of this Warrant, and no
evidence of loss or theft or destruction shall be necessary.  This Warrant shall be promptly cancelled by
the Company upon the surrender hereof in connection with any transfer or
replacement.  Except as otherwise
provided above, in the case of the loss, theft or destruction of a Warrant, the
Company shall pay all expenses, taxes and other charges payable in connection
with any transfer or replacement of this Warrant, other than income taxes and
stock transfer taxes (if any) payable in connection with a transfer of this
Warrant, which shall be payable by the Holder. 
Holder will not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws and except after providing
evidence of such compliance reasonably satisfactory to the Company.


 


5.  Compliance with Securities Laws.  By acceptance of this Warrant, the Holder
hereby represents, warrants and covenants that any shares of stock purchased
upon exercise of this Warrant or acquired upon conversion thereof shall be
acquired for investment only and not with a view to, or for sale in connection with,
any distribution thereof; that the Holder has had such opportunity as Holder
has deemed adequate to obtain from representatives of the Company such
information as is necessary to permit the Holder to evaluate the merits and
risks of its investment in the Company; that the Holder is able to bear the
economic risk of holding such shares as may be acquired pursuant to the
exercise of this Warrant for an indefinite period; that the Holder understands
that the shares of stock acquired pursuant to the exercise of this Warrant or
acquired upon conversion thereof will not be registered under the Act (unless
otherwise required pursuant to exercise by the Holder of the registration
rights, if any, previously granted to the registered Holder) and will be “restricted
securities” within the meaning of Rule 144 under the Securities Act of 1933 and
that the exemption from registration under Rule 144 will not be available for
at least one year from the date of exercise of this Warrant, and even then will
not be available unless a public market then exists for the stock, adequate
information concerning the Company is then available to the public, and other
terms and conditions of Rule 144 are complied with; and that all stock
certificates representing shares of stock issued to the Holder upon exercise of
this Warrant or upon conversion of such shares may have affixed thereto a
legend substantially in the form set forth in Section 1.6 above.


 


6.              Miscellaneous
Provisions.


 


6.1  Notices.
Any notice or other document required or permitted to be given or delivered to
the Holder shall be delivered or forwarded to the Holder at c/o M.A.G. Capital,
LLC, 555 South Flower Street, Suite 4200, Los Angeles, California 90071,
Attention:  David F. Firestone
(Facsimile No. 213/553-8285), or to such other address or number as shall have
been furnished to the Company in writing by the Holder, with a copy to Sheppard
Mullin Richter & Hampton LLP, 333 South Hope Street, 48th Floor,
Los Angeles, California 90071-1448 Attention David C. Ulich (Facsimile No.
213/620-1398).  Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered or forwarded to the Company at 10052
Mesa Ridge Court, Suite 100, San Diego, California, 92121, Attention:  John Low (Facsimile No. 858/625-3010), with a
copy to Gibson, Dunn & Crutcher LLP, 1881 Page Mill Rd., Palo Alto,
California, 94304 Attention: Russell C. Hansen (Facsimile No. 650/849-5083), or
to such other address or number as shall have been furnished to Holder in
writing by the Company.


 


6.2  All notices, requests and approvals required by this
Warrant shall be in writing and shall be conclusively deemed to be given (i)
when hand-delivered to the other party, (ii) when received if sent by facsimile
at the address and number set forth above; provided that notices given by
facsimile shall not be effective, unless either (a) a duplicate copy of such
facsimile notice is promptly given by depositing the same in the mail, postage
prepaid and addressed to the party as set forth below or (b) the receiving
party delivers a written confirmation of receipt for such notice by any other
method permitted under this paragraph; and further provided that any notice
given by facsimile received after 5:00 p.m. (recipient’s time) or on a
non-business day shall be deemed received on the next business day; (iii) five
(5) business days after deposit in the United States mail, certified, return
receipt requested, postage prepaid, and addressed to the party as set forth
below; or (iv) the next business day after deposit with an international
overnight delivery service, postage prepaid, addressed to the party as set
forth below with next business day delivery guaranteed; provided that the
sending party receives confirmation of delivery from the delivery service
provider.


 


6.3  No Rights as Shareholder; Limitation of Liability. 
This Warrant shall not entitle the Holder to any of the rights of a
shareholder of the Company except upon exercise in accordance with the terms
hereof.  No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the Warrant Price hereunder or as
a shareholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.


 


6.4  Governing Law.  This Warrant
shall be governed by and construed in accordance with the laws of the State of
California as applied to agreements among California residents made and to be
performed entirely within the State of California, without giving effect to the
conflict of law principles thereof.


 


6.5  Binding Effect on Successors.  This Warrant
shall be binding upon any corporation succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets and/or securities.  All of the
obligations of the Company relating to the Shares issuable upon the exercise of
this Warrant shall survive the exercise and termination of this Warrant.  All of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the Holder.


 


6.6  Waiver, Amendments and Headings.  This Warrant
and any provision hereof may be changed, waived, discharged or terminated only
by an instrument in writing signed by both parties (either generally or in a
particular instance and either retroactively or prospectively).  The headings in this Warrant are for purposes
of reference only and shall not affect the meaning or construction of any of
the provisions hereof.


 


6.7  Jurisdiction.  Each of the
parties irrevocably agrees that any and all suits or proceedings based on or
arising under this Agreement may be brought only in and shall be resolved in the
federal or state courts located in the City of Los Angeles, California and
consents to the jurisdiction of such courts for such purpose.  Each of the parties irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding
in any such court.  Each of the parties
further agrees that service of process upon such party mailed by first class
mail to the address set forth in Section 6.1 shall be deemed in every respect
effective service of process upon such party in any such suit or
proceeding.  Nothing herein shall affect
the right of a Holder to serve process in any other manner permitted by
law.  Each of the parties agrees that a
final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.


 


6.8  Attorneys’ Fees and Disbursements.  If any action
at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party or parties shall be entitled to receive from
the other party or parties reasonable attorneys’ fees and disbursements in
addition to any other relief to which the prevailing party or parties may be
entitled.


 


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IN
WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer this 25th day of October, 2005.


 


	
  COMPANY:

  	
   

  
	
   

  	
  SPESCOM
  SOFTWARE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  John W. Low

  	
   

  
	
   

  	
   

  
	
   

  	
  Print
  Name: John W. Low

  
	
   

  	
   

  
	
   

  	
  Title:
  Chief Financial Officer

  



 


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SCHEDULE
A


 


FORM
OF NOTICE OF EXERCISE


 


[To be signed only upon exercise of the Warrant]


 


TO
BE EXECUTED BY THE REGISTERED HOLDER


TO
EXERCISE THE WITHIN WARRANT


 


 


The undersigned hereby
elects to purchase
             shares
of Common Stock (the “Shares”) of Spescom Software, Inc. under the Warrant to
Purchase Common Stock dated October 25, 2005, which the undersigned is entitled
to purchase pursuant to the terms of such Warrant.   The undersigned has delivered $              ,
the aggregate Warrant Price for         
Shares purchased herewith, in full in cash or by certified or official bank
check or wire transfer.


 


Please issue a certificate or certificates
representing such shares of Common Stock in the name of the undersigned or in
such other name as is specified below and in the denominations as is set forth
below:


 


	
   

  	
   

  
	
  [Type Name of
  Holder as it should appear on the stock certificate]

  
	
   

  
	
   

  	
   

  
	
  [Requested
  Denominations – if no denomination is specified, a single certificate will be
  issued]

  
	
   

  
	
  The initial
  address of such Holder to be entered on the books of Company shall be:

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
			



 


The undersigned hereby represents and warrants that
the undersigned is acquiring such shares for his own account for investment
purposes only, and not for resale or with a view to distribution of such shares
or any part thereof.


 


	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  
							



 


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FORM
OF ASSIGNMENT


(ENTIRE)


 


[To
be signed only upon transfer of entire Warrant]


 


TO
BE EXECUTED BY THE REGISTERED HOLDER

TO TRANSFER THE WITHIN WARRANT


 


 


FOR
VALUE RECEIVED                                                
hereby sells, assigns and transfers unto                                                
all rights of the undersigned under and pursuant to the within Warrant, and the
undersigned does hereby irrevocably constitute and appoint                                        
Attorney to transfer the said Warrant on the books of             
            , with
full power of substitution.


 


 


	
   

  	
   

  
	
  [Type Name of
  Holder]

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  Dated:

  	
   

  	
   

  
					



 


 


NOTICE


 


The signature to
the foregoing Assignment must correspond exactly to the name as written upon
the face of the within Warrant, without alteration or enlargement or any change
whatsoever.


 


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FORM
OF ASSIGNMENT

(PARTIAL)


 


[To
be signed only upon partial transfer of Warrant]


 


TO
BE EXECUTED BY THE REGISTERED HOLDER

TO TRANSFER THE WITHIN WARRANT


 


 


FOR VALUE RECEIVED
                                               
hereby sells, assigns and transfers unto                                                
(i) the rights of the undersigned to purchase                                        
shares of Common Stock under and pursuant to the within Warrant, and
(ii) on a non-exclusive basis, all other rights of the undersigned under
and pursuant to the within Warrant, it being understood that the undersigned
shall retain, severally (and not jointly) with the transferee(s) named herein,
all rights assigned on such non-exclusive basis.  The undersigned does hereby irrevocably
constitute and appoint                                        
Attorney to transfer the said Warrant on the books of Spescom Software,
Inc.,  with full power of substitution.


 


	
   

  	
   

  
	
  [Type Name of
  Holder]

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  Dated:

  	
   

  	
   

  
					



 


 


NOTICE


 


The signature to
the foregoing Assignment must correspond exactly to the name as written upon
the face of the within Warrant, without alteration or enlargement or any change
whatsoever.


 


1