Document:

EXHIBIT 10.1

 

WARRANT

 

THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON
STOCK ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND
MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT UNLESS EITHER (i) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION
WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH SECURITIES IS MADE PURSUANT
TO SECURITIES AND EXCHANGE COMMISSION RULE 144.

 

WARRANT TO PURCHASE COMMON STOCK OF SPESCOM
SOFTWARE INC.

 

NO. A - 30    

 

THIS CERTIFIES THAT, for value
received, Cappello Capital Corp. or the permitted registered assigns thereof
(the “Holder”) is entitled, subject to the terms and conditions of this
Warrant, at any time or from time to time after the date this Warrant is issued
(the “Effective Date”), and before 5:00 p.m. Pacific Time on the
fifth anniversary of the Effective Date (the “Expiration Date”), to
purchase from Spescom Software Inc., a California corporation (the “Company”),
Five Hundred Fifty Thousand (550,000) shares of common stock, no par value (“Common
Stock”) of the Company at a price per share of $0.40 (the “Purchase
Price”).  Both the number of shares
of Common Stock purchasable upon exercise of this Warrant and the Purchase
Price are subject to adjustment and change as provided herein.

 

1.             CERTAIN
DEFINITIONS.  As used in this
Warrant, the following terms shall have the following respective meanings:

 

“Effective Date” shall mean November 5, 2004.

 

“Fair Market Value” of a share of Common Stock
as of a particular date shall mean:

 

(a)           If traded
on a securities exchange or the Nasdaq National Market, the Fair Market Value
shall be deemed to be the average of the closing prices of the Common Stock of
the Company on such exchange or market over the 20 trading days ending
immediately prior to the applicable date of valuation;

 

(b)           If traded
over-the-counter, the Fair Market Value shall be deemed to be the average of
the closing bid prices over the 30-day period ending immediately prior to the
applicable date of valuation; and

 

(c)           If there
is no active public market, the Fair Market Value shall be the value as
determined in good faith by the Company’s Board of Directors.

 

“HSR Act” shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended from time to time.

 

 

“Registered Holder” shall mean any Holder in
whose name this Warrant is registered upon the books and records maintained by
the Company.

 

“Warrant” as used herein, shall include this
Warrant and any warrant delivered in substitution or exchange therefor as provided
herein.

 

2.             EXERCISE
OF WARRANT

 

2.1.          Payment.  Subject to compliance with the terms and
conditions of this Warrant and applicable securities laws, this Warrant may be
exercised in whole or in part at any time or from time to time, on or before
the Expiration Date by the delivery (including, without limitation, delivery by
facsimile) of the form of Notice of Exercise attached hereto as Exhibit 1 (the “Notice of Exercise”), duly
executed by the Holder, at the principal office of the Company, and as soon as
practicable after such date, surrendering:

 

(a) this Warrant at the principal office of the
Company; and

 

(b) payment in cash, certified or official bank check
in same-day funds, or by wire transfer of an amount equal to the product
obtained by multiplying the number of shares of Common Stock being purchased
upon such exercise by the then effective Purchase Price (the “Exercise
Amount”), except that if Holder is subject to HSR Act Restrictions (as
defined in Section 2.4 below), the Exercise Amount shall be paid to the Company
within five (5) business days of the termination of all HSR Act Restrictions.

 

2.2           Net
Exercise.  In lieu of the payment
methods set forth in Section 2.1 above, the Holder may elect to exchange
all or some of the Warrant for shares of Common Stock equal to the value of the
amount of the Warrant being exchanged on the date of exchange.  If Holder elects to exchange this Warrant as
provided in this Section 2.2, Holder shall tender to the Company the
Warrant for the amount being exchanged, along with written notice of Holder’s
election to exchange some or all of the Warrant, and the Company shall issue to
Holder the number of shares of the 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 amount of the Warrant being
exchanged (as adjusted to the date of such calculation).

 

A = the Fair
Market Value of one share of the Company’s Common Stock.

 

B = exercise
price hereunder (as adjusted to the date of such calculation).

 

2.3.          Stock
Certificates; Fractional Shares.  As
soon as practicable on or after such date, the Company shall issue and deliver
to the person or persons entitled to receive the same a certificate or
certificates for the number of whole shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share equal to such
fraction of the current Fair Market Value of one whole share of Common Stock as
of the date of exercise of this

 

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Warrant.  No fractional shares or scrip representing
fractional shares shall be issued upon an exercise of this Warrant.

 

2.4.          HSR
Act.  The Company hereby acknowledges
that exercise of this Warrant by Holder may subject the Company and/or the
Holder to the filing requirements of the HSR Act and that Holder may be
prevented from exercising this Warrant until the expiration or early
termination of all waiting periods imposed by the HSR Act (“HSR Act
Restrictions”).  If on or before the
Expiration Date, Holder has sent the Notice of Exercise to Company and Holder
has not been able to complete the exercise of this Warrant prior to the
Expiration Date because of HSR Act Restrictions, the Holder shall be entitled
to complete the process of exercising this Warrant in accordance with the
procedures contained herein notwithstanding the fact that completion of the
exercise of this Warrant would take place after the Expiration Date.

 

2.5.          Partial
Exercise; Effective Date of Exercise. 
In case of any partial exercise of this Warrant, the Company shall
cancel this Warrant upon surrender hereof and shall execute and deliver a new
Warrant of like tenor and date for the balance of the shares of Common Stock
purchasable hereunder.  This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above.  However, if Holder is subject to HSR Act
filing requirements this Warrant shall be deemed to have been exercised on the
date immediately following the date of the expiration of all HSR Act
Restrictions.  The person entitled to
receive the shares of Common Stock issuable upon exercise of this Warrant shall
be treated for all purposes as the holder of record of such shares as of the
close of business on the date the Holder is deemed to have exercised this
Warrant.

 

3.             VALID
ISSUANCE; TAXES.  All shares of
Common Stock issued upon the exercise of this Warrant shall be validly issued,
fully paid and non-assessable, and the Company shall pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery
thereof.  The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer involved
in the issuance of any certificate for shares of Common Stock in any name other
than that of the Registered Holder of this Warrant, and in such case the
Company shall not be required to issue or deliver any stock certificate or
security until such tax or other charge has been paid, or it has been
established to the Company’s reasonable satisfaction that no tax or other
charge is due.

 

4.             ADJUSTMENT
OF PURCHASE PRICE AND NUMBER OF SHARES.  The
number of shares of Common Stock issuable upon exercise of this Warrant (or any
shares of stock or other securities or property receivable or issuable upon
exercise of this Warrant) and the Purchase Price are subject to adjustment upon
occurrence of the following events:

 

4.1.          Adjustment
for Stock Splits, Stock Subdivisions or Combinations of Shares.  The Purchase Price of this Warrant shall be
proportionally decreased and the number of shares of Common Stock issuable upon
exercise of this Warrant (or any shares of stock or other securities at the
time issuable upon exercise of this Warrant) shall be proportionally increased
to reflect any stock split or subdivision of the Company’s Common Stock.  The Purchase Price of this Warrant shall be
proportionally increased and the number of shares of Common Stock issuable upon
exercise of this Warrant (or any shares of stock or other securities at the
time issuable upon exercise of this Warrant) shall be proportionally decreased
to reflect any combination of the Company’s Common Stock.

 

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4.2.          Adjustment
for Dividends or Distributions of Stock or Other Securities or Property.  In case the Company shall make or issue, or
shall fix a record date for the determination of eligible holders entitled to
receive, a dividend or other distribution with respect to the Common Stock (or
any shares of stock or other securities at the time issuable upon exercise of
the Warrant) payable in shares of any class or series of capital stock of the
Company, then, in each such case, the Holder of this Warrant on exercise hereof
at any time after the consummation, effective date or record date of such
dividend or other distribution, shall receive, in addition to the shares of
Common Stock (or such other stock or securities) issuable on such exercise
prior to such date, and without the payment of additional consideration
therefor, the shares of the Company to which such Holder would have been
entitled upon such date if such Holder had exercised this Warrant on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period giving effect
to all adjustments called for by this Section 4.

 

4.3.          Reclassification.  If the Company, by reclassification of
securities or otherwise, shall change any of the securities as to which
purchase rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to
such reclassification or other change and the Purchase Price therefore shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 4.  No adjustment shall be made
pursuant to this Section 4.3 upon any conversion or redemption of the Common
Stock which is the subject of Section 4.5.

 

4.4.          Adjustment
for Capital Reorganization, Merger or Consolidation.  In case of any capital reorganization of the
capital stock of the Company (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), or any merger
or consolidation of the Company with or into another corporation, then, and in
each such case, as a part of such reorganization, merger or consolidation,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Purchase Price then in effect,
the number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger or consolidation that a
holder of the shares deliverable upon exercise of this Warrant would have been
entitled to receive in such reorganization, consolidation or merger if this
Warrant had been exercised immediately before such reorganization, merger or
consolidation, all subject to further adjustment as provided in this Section
4.  The foregoing provisions of this
Section 4.4 shall similarly apply to successive reorganizations, consolidations
or mergers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant.  If the per-share consideration payable to the
Holder hereof for shares in connection with any such transaction is in a form
other than cash or marketable securities, then the value of such consideration
shall be determined in good faith by the Company’s Board of Directors.  In all events, appropriate adjustment (as determined
in good faith by the Company’s Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the Holder after the transaction, to the end that the provisions
of this Warrant shall be applicable after that event, as near as reasonably may
be, in relation to any shares or other property deliverable after that event
upon exercise of this Warrant.

 

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4.5.          Conversion
of Common Stock.  In case all or any
portion of the authorized and outstanding shares of Common Stock of the Company
are redeemed or converted or reclassified into other securities pursuant to the
Company’s Articles of Incorporation or otherwise, or the Common Stock otherwise
ceases to exist, then, in such case, the Holder of this Warrant, upon exercise
hereof at any time after the date on which the Common Stock is so redeemed or
converted, reclassified or ceases to exist (the “Termination Date”),
shall receive, in lieu of the number of shares of Common Stock that would have
been issuable upon such exercise immediately prior to the Termination Date, the
securities that would have been received if this Warrant had been exercised in
full and the Common Stock received thereupon had been simultaneously converted
immediately prior to the Termination Date, all subject to further adjustment as
provided in this Warrant.  Additionally,
the Purchase Price shall be immediately adjusted to equal the quotient obtained
by dividing (x) the aggregate Purchase Price of the maximum number of
shares of Common Stock for which this Warrant was exercisable immediately prior
to the Termination Date by (y) the number of shares of Common Stock or the
number of shares or other units of securities of the Company for which this
Warrant is exercisable immediately after the Termination Date, all subject to
further adjustment as provided herein.

 

5.             CERTIFICATE
AS TO ADJUSTMENTS.  In each case of
any adjustment in the Purchase Price, or number or type of shares or securities
issuable upon exercise of this Warrant, the Chief Financial Officer or
Controller of the Company shall compute such adjustment in accordance with the
terms of this Warrant 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 Purchase Price. 
The Company 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.

 

6.             LOSS OR
MUTILATION.  Upon receipt of evidence
reasonably satisfactory to the Company of the ownership of and the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilated
Warrant.

 

7.             RESERVATION
OF COMMON STOCK.  The Company hereby
covenants that at all times there shall be reserved for issuance and delivery
upon exercise of this Warrant such number of shares of Common Stock or other
shares of capital stock of the Company as are from time to time issuable upon
exercise of this Warrant and, from time to time, will take all steps necessary
to amend its Articles of Incorporation to provide sufficient reserves of shares
of Common Stock issuable upon exercise of this Warrant (and shares of its
Common Stock for issuance on conversion of such Common Stock).  All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to
the Company’s officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock and Common Stock upon the exercise of this Warrant.

 

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8.             TRANSFER
AND EXCHANGE.  Subject to the terms
and conditions of this Warrant and compliance with all applicable securities
laws, and upon the prior written consent of the Company, which consent shall
not be unreasonably withheld, this Warrant and all rights hereunder may be
transferred to the parent, subsidiary or affiliate of any Registered Holder, in
whole or in part, on the books of the Company maintained for such purpose at
the principal office of the Company referred to above, by the Registered Holder
hereof in person, or by duly authorized attorney, upon surrender of this
Warrant properly endorsed and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer.  Any attempted or purported transfer of this
Warrant or any of the rights hereunder that does not comply with the provisions
of this Section 8 shall be null and void and of no force or effect.  Upon any permitted partial transfer, the
Company will issue and deliver to the Registered Holder a new Warrant or
Warrants with respect to the shares of Common Stock not so transferred.  Each taker and holder of this Warrant, by
taking or holding the same, consents and agrees that when this Warrant shall
have been so endorsed, the person in possession of this Warrant may be treated
by the Company, and all other persons dealing with this Warrant, as the
absolute owner hereof for any purpose and as the person entitled to exercise
the rights represented hereby, any notice to the contrary notwithstanding; provided,
however, that until a transfer of this Warrant is duly registered on the
books of the Company, the Company may treat the Registered Holder hereof as the
owner for all purposes.

 

9.             RESTRICTIONS
ON TRANSFER.  The Holder, by
acceptance hereof, agrees that, absent an effective registration statement
filed with the Securities and Exchange Commission (the “SEC”) under the
Securities Act, covering the disposition or sale of this Warrant or the Common
Stock issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge or hypothecate any or all such Warrants
or Common Stock, as the case may be, unless either (i) the Company has
received an opinion of counsel, in form and substance reasonably satisfactory to
the Company, to the effect that such registration is not required in connection
with such disposition or (ii) the sale of such securities is made pursuant
to Rule 144 under the Securities Act.

 

10.          REGISTRATION
RIGHTS.

 

10.1         If the
Company 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), the Company will give written notice thereof to Holder and will
include in such registration any of the Registrable Shares (as defined below)
which Holder may request be included (“Included Shares”) by a writing delivered to the Company within
15 days after the notice given by the Company to Holder; provided, however,
that if the offering is to be firmly underwritten, and the representative of
the underwriters of the offering refuses in writing to include in the offering
all of the shares of Common Stock requested by the Company and others, the
shares to be included shall be allocated first to the Company 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 the Company 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, the
Company will promptly so inform Holder, and the Company will not be obligated
to complete the registration of the Included Shares included therein.  The Company will pay all

 

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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 Warrant, “Registrable Shares”
shall mean the shares of Common Stock (or such stock or securities as at the
time are receivable upon the exercise of this Warrant) issuable upon exercise
of the Warrant 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 and sell such
share issued upon such exercise) in the market on which the Company common
stock is then traded without registration under the Securities Act.

 

10.2         In
connection with any registration under this Section 10, the Company will:

 

10.2.1      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;

 

10.2.2      notify
Holder of the issuance of any stop order by the Securities and Exchange
Commission in connection with the registration statement; and

 

10.2.3      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 the Company and/or
its Board of Directors.

 

10.3         As a
condition to including Registrable Shares in the registration statement, Holder
must provide to the Company 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.

 

10.4         Following
the effectiveness of the registration statement, upon receipt from the Company
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 the
Company 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 the Company all copies, other than permanent file copies then in
Holder’s possession, of the most recent prospectus covering the Included
Shares.

 

10.5         The Company
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 the Company of the Securities Act, Exchange Act, any

 

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state securities laws or any 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 the Company 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 the Company by Holder or on Holder’s behalf
expressly for use therein.

 

10.6         Holder
agrees to indemnify and hold harmless the Company, its officers, directors and
agents and each person, if any, who controls the Company 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 the Company 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.

 

10.7         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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11.          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 such 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 Securities 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 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 following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
THE SECURITIES LAWS OF ANY STATE.  THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.  INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.  THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.

 

12.          NO RIGHTS
OR LIABILITIES AS SHAREHOLDERS.  This
Warrant shall not entitle the Holder to any voting rights or other rights as a
shareholder of the Company.  In the
absence of affirmative action by such Holder to purchase Common Stock by
exercise of this Warrant, no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof, shall cause such
Holder hereof to be a shareholder of the Company for any purpose.

 

13.          NOTICES.  Any notice required or permitted by this
Warrant must be in writing and must be sent by facsimile, by nationally
recognized commercial overnight courier, or mailed

 

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by United States registered or certified mail,
addressed to the other party at the address below or to such other address for
notice (or facsimile number, in the case of a notice by facsimile) as a party
gives the other party written notice of in accordance with this
Section 13.  Any such notice will be
effective as of the date of receipt:

 

Notices should be addressed as follows:

 

(i)            If
to Holder, to:

 

Cappello Capital Corp.

100 Wilshire Blvd., Suite 1200

Santa Monica, CA  90401

Attention:

Facsimile:  (310) 393-4838

 

(ii)           If
to the Company, to:

 

Spescom Software Inc.

10052 Mesa Ridge Court, Suite 100

San Diego, CA  92121

Attention:  Chief Executive Officer

Facsimile:  (858) 625-3000

 

14.          HEADINGS.  The headings in this Warrant are for
purposes of convenience in reference only, and shall not be deemed to
constitute a part hereof.

 

15.          LAW
GOVERNING.  This Warrant shall be
construed and enforced in accordance with, and governed by, the laws of the
State of California.

 

16.          NO
IMPAIRMENT.  The Company will not, by
amendment of its Articles of Incorporation or Bylaws, or through
reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the Registered Holder of this Warrant against
impairment.  Without limiting the
generality of the foregoing, the Company (a) will not increase the par value of
any shares of stock issuable upon the exercise of this Warrant above the amount
payable therefor upon such exercise and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable shares of Common Stock upon exercise of
this Warrant.

 

17.          NOTICES OF
RECORD DATE.  In case:

 

17.1.        the
Company shall take a record of the holders of its Common Stock (or other stock
or securities at the time receivable upon the exercise of this Warrant), 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

 

10

 

17.2.        of
any consolidation or merger of the Company with or into another corporation,
any capital reorganization of the Company, any reclassification of the capital
stock of the Company, or any conveyance of all or substantially all of the
assets of the Company to another corporation in which holders of the Company’s
stock are to receive stock, securities or property of another corporation; or

 

17.3.        of
any voluntary dissolution, liquidation or winding-up of the Company; or

 

17.4.        of
any redemption or conversion of all outstanding Common Stock;

 

then, and in each such case, the Company will mail or
cause to be mailed to the Registered Holder of this Warrant a notice
specifying, as the case may be, (i) the date on which a record is to be
taken for the purpose of such dividend, distribution or right or (ii) 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 this Warrant), 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.  Such notice shall be
delivered at least ten (10) days prior to the date therein specified.

 

18.          SEVERABILITY.  If any term, provision, covenant or
restriction of this Warrant is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.

 

19.          ENTIRE AGREEMENT.  This
Warrant contains the entire understanding of the parties, supersedes all prior
agreements and understandings relating to the subject matter hereof.

 

20.          COUNTERPARTS.  For the convenience of the parties, any
number of counterparts of this Warrant may be executed by the parties hereto
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.

 

21.          SATURDAYS,
SUNDAYS AND HOLIDAYS.  If the
Expiration Date falls on a Saturday, Sunday or legal holiday, the Expiration
Date shall automatically be extended until 5:00 p.m. Pacific Time on the next
day that is not a Saturday, Sunday or legal holiday.

 

11

 

IN WITNESS WHEREOF, the parties
hereto have executed this Warrant as of the Effective Date.

 

 

	
  CAPPELLO
  CAPITAL CORP.

  	
  SPESCOM
  SOFTWARE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Alexander L. Cappello

  	
   

  	
  By:

  	
  /s/ John W. Low

  
	
   

  	
   

  
	
  Alexander L. Cappello

  	
   

  	
  John W. Low

  
	
  Printed Name

  	
  Printed Name

  
	
   

  	
   

  
	
  Managing
  Director

  	
   

  	
  Chief Financial
  Officer

  
	
  Title

  	
  Title

  
						

 

 

SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON
STOCK

 

12

 

EXHIBIT 1

 

NOTICE OF EXERCISE

 

(To be executed upon exercise of Warrant)

 

	
  SPESCOM SOFTWARE INC.

  	
  WARRANT NO.    

  

 

The undersigned hereby irrevocably elects to exercise
the right of purchase represented by the within Warrant Certificate for, and to
purchase thereunder, the securities of Spescom Software Inc., as provided for
therein, and tenders herewith payment of the exercise price in full in the form
of cash or a certified or official bank check in same-day funds in the amount
of $               
for                
such securities.

 

Please issue a certificate or certificates for such
securities in the name of, and pay any cash for any fractional share to (please
print name, address and social security number):

 

	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  

 

Note:  The above
signature should correspond exactly with the name on the first page of this
Warrant Certificate or with the name of the assignee appearing in the
assignment form below.

 

If said number of shares shall not be all the shares
purchasable under the within Warrant Certificate, a new Warrant Certificate is
to be issued in the name of said undersigned for the balance remaining of the
shares purchasable thereunder rounded up to the next higher whole number of
shares.

 

 

EXHIBIT 2

 

ASSIGNMENT

 

	
  (To be executed only upon
  assignment of Warrant Certificate)

  	
  WARRANT NO.

  

 

For value received, hereby sells, assigns and transfers unto                                         
the within Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint                                         
attorney, to transfer said Warrant Certificate on the books of the within-named
Company with respect to the number of Warrants set forth below, with full power
of substitution in the premises:

 

	
  Name(s) of Assignee(s)

  	
   

  	
  Address

  	
   

  	
  # of Warrants

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

And if said number of Warrants shall not be all the Warrants
represented by the Warrant Certificate, a new Warrant Certificate is to be
issued in the name of said undersigned for the balance remaining of the
Warrants registered by said Warrant Certificate.

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  

 

Notice:  The
signature to the foregoing Assignment must correspond to the name as written
upon the face of this security in every particular, without alteration or any
change whatsoever; signature(s) must be guaranteed by an eligible guarantor
institution (banks, stock brokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program)
pursuant to Securities and Exchange Commission Rule 17Ad-15.

 

Pursuant to the terms of Section 8 of the
Warrant to which this Assignment pertains, this Assignment shall be null and
void and of no force or effect unless a duly authorized officer of the Company
indicates the Company’s consent to this Assignment by signing below:

 

 

Spescom Software Inc. hereby consents to the sale, assignment and
transfer unto                                                  the
within Warrant Certificate, together with all right, title and interest
therein.

 

	
   

  	
  SPESCOM SOFTWARE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

3EXHIBIT 10.2

WARRANT

 

THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON
STOCK ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND
MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT UNLESS EITHER (i) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION
WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH SECURITIES IS MADE PURSUANT
TO SECURITIES AND EXCHANGE COMMISSION RULE 144.

 

WARRANT TO PURCHASE COMMON STOCK OF SPESCOM
SOFTWARE INC.

 

NO. B - 31    

 

THIS CERTIFIES THAT, for value
received, Cappello Capital Corp. or the permitted registered assigns thereof
(the “Holder”) is entitled, subject to the terms and conditions of this
Warrant, at any time or from time to time after the date this Warrant is issued
(the “Effective Date”), and before 5:00 p.m. Pacific Time on the
third anniversary of the Effective Date (the “Expiration Date”), to
purchase from Spescom Software Inc., a California corporation (the “Company”),
Two Hundred Seventy Five Thousand (275,000) shares of common stock, no par
value (the “Common Stock”), of the Company at a price per share price of
$0.44 (the “Purchase Price”)  Both
the number of shares of Common Stock purchasable upon exercise of this Warrant
and the Purchase Price are subject to adjustment and change as provided herein.

 

1.             CERTAIN
DEFINITIONS.  As used in this
Warrant, the following terms shall have the following respective meanings:

 

“Effective Date” shall mean November 5, 2004.

 

“Fair Market Value” of a share of Common Stock
as of a particular date shall mean:

 

(a)           If traded
on a securities exchange or the Nasdaq National Market, the Fair Market Value
shall be deemed to be the average of the closing prices of the Common Stock of
the Company on such exchange or market over the 20 trading days ending
immediately prior to the applicable date of valuation;

 

(b)           If traded
over-the-counter, the Fair Market Value shall be deemed to be the average of
the closing bid prices over the 30-day period ending immediately prior to the
applicable date of valuation; and

 

(c)           If there
is no active public market, the Fair Market Value shall be the value as
determined in good faith by the Company’s Board of Directors.

 

“HSR Act” shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended from time to time.

 

 

“Registered Holder” shall mean any Holder in
whose name this Warrant is registered upon the books and records maintained by
the Company.

 

“Warrant” as used herein, shall include this
Warrant and any warrant delivered in substitution or exchange therefor as
provided herein.

 

2.             EXERCISE
OF WARRANT

 

2.1.          Payment.  Subject to compliance with the terms and
conditions of this Warrant and applicable securities laws, this Warrant may be
exercised in whole or in part at any time or from time to time, on or before
the Expiration Date by the delivery (including, without limitation, delivery by
facsimile) of the form of Notice of Exercise attached hereto as Exhibit 1 (the “Notice of Exercise”), duly
executed by the Holder, at the principal office of the Company, and as soon as
practicable after such date, surrendering:

 

(a) this Warrant at the
principal office of the Company; and

 

(b) payment in cash,
certified or official bank check in same-day funds, or by wire transfer of an
amount equal to the product obtained by multiplying the number of shares of
Common Stock being purchased upon such exercise by the then effective Purchase
Price (the “Exercise Amount”), except that if Holder is subject to HSR
Act Restrictions (as defined in Section 2.4 below), the Exercise Amount shall
be paid to the Company within five (5) business days of the termination of all
HSR Act Restrictions.

 

2.2           Net
Exercise.  In lieu of the payment
methods set forth in Section 2.1 above, the Holder may elect to exchange
all or some of the Warrant for shares of Common Stock equal to the value of the
amount of the Warrant being exchanged on the date of exchange.  If Holder elects to exchange this Warrant as
provided in this Section 2.2, Holder shall tender to the Company the
Warrant for the amount being exchanged, along with written notice of Holder’s
election to exchange some or all of the Warrant, and the Company shall issue to
Holder the number of shares of the 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 amount of the Warrant being
exchanged (as adjusted to the date of such calculation).

 

A = the Fair
Market Value of one share of the Company’s Common Stock.

 

B = exercise
price hereunder (as adjusted to the date of such calculation).

 

2.3.          Stock
Certificates; Fractional Shares.  As
soon as practicable on or after such date, the Company shall issue and deliver
to the person or persons entitled to receive the same a certificate or
certificates for the number of whole shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share equal to such
fraction of the current Fair Market Value of one whole share of Common Stock as
of the date of exercise of this Warrant. 
No fractional shares or scrip representing fractional shares shall be
issued upon an exercise of this Warrant.

 

2

 

2.4.          HSR
Act.  The Company hereby acknowledges
that exercise of this Warrant by Holder may subject the Company and/or the
Holder to the filing requirements of the HSR Act and that Holder may be
prevented from exercising this Warrant until the expiration or early
termination of all waiting periods imposed by the HSR Act (“HSR Act
Restrictions”).  If on or before the
Expiration Date, Holder has sent the Notice of Exercise to Company and Holder
has not been able to complete the exercise of this Warrant prior to the
Expiration Date because of HSR Act Restrictions, the Holder shall be entitled
to complete the process of exercising this Warrant in accordance with the
procedures contained herein notwithstanding the fact that completion of the
exercise of this Warrant would take place after the Expiration Date.

 

2.5.          Partial
Exercise; Effective Date of Exercise. 
In case of any partial exercise of this Warrant, the Company shall
cancel this Warrant upon surrender hereof and shall execute and deliver a new
Warrant of like tenor and date for the balance of the shares of Common Stock
purchasable hereunder.  This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above.  However, if Holder is subject to HSR Act
filing requirements this Warrant shall be deemed to have been exercised on the
date immediately following the date of the expiration of all HSR Act
Restrictions.  The person entitled to
receive the shares of Common Stock issuable upon exercise of this Warrant shall
be treated for all purposes as the holder of record of such shares as of the
close of business on the date the Holder is deemed to have exercised this
Warrant.

 

3.             VALID
ISSUANCE; TAXES.  All shares of
Common Stock issued upon the exercise of this Warrant shall be validly issued,
fully paid and non-assessable, and the Company shall pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery
thereof.  The Company shall not be
required to pay any tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common Stock in any
name other than that of the Registered Holder of this Warrant, and in such case
the Company shall not be required to issue or deliver any stock certificate or
security until such tax or other charge has been paid, or it has been
established to the Company’s reasonable satisfaction that no tax or other
charge is due.

 

4.             ADJUSTMENT
OF PURCHASE PRICE AND NUMBER OF SHARES.  The
number of shares of Common Stock issuable upon exercise of this Warrant (or any
shares of stock or other securities or property receivable or issuable upon
exercise of this Warrant) and the Purchase Price are subject to adjustment upon
occurrence of the following events:

 

4.1.          Adjustment
for Stock Splits, Stock Subdivisions or Combinations of Shares.  The Purchase Price of this Warrant shall be
proportionally decreased and the number of shares of Common Stock issuable upon
exercise of this Warrant (or any shares of stock or other securities at the
time issuable upon exercise of this Warrant) shall be proportionally increased
to reflect any stock split or subdivision of the Company’s Common Stock.  The Purchase Price of this Warrant shall be
proportionally increased and the number of shares of Common Stock issuable upon
exercise of this Warrant (or any shares of stock or other securities at the
time issuable upon exercise of this Warrant) shall be proportionally decreased
to reflect any combination of the Company’s Common Stock.

 

3

 

4.2.          Adjustment
for Dividends or Distributions of Stock or Other Securities or Property.  In case the Company shall make or issue, or
shall fix a record date for the determination of eligible holders entitled to
receive, a dividend or other distribution with respect to the Common Stock (or
any shares of stock or other securities at the time issuable upon exercise of
the Warrant) payable in shares of any class or series of capital stock of the
Company, then, in each such case, the Holder of this Warrant on exercise hereof
at any time after the consummation, effective date or record date of such
dividend or other distribution, shall receive, in addition to the shares of
Common Stock (or such other stock or securities) issuable on such exercise
prior to such date, and without the payment of additional consideration
therefor, the shares of the Company to which such Holder would have been
entitled upon such date if such Holder had exercised this Warrant on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period giving effect
to all adjustments called for by this Section 4.

 

4.3.          Reclassification.  If the Company, by reclassification of
securities or otherwise, shall change any of the securities as to which
purchase rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to
such reclassification or other change and the Purchase Price therefore shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 4.  No adjustment shall be made
pursuant to this Section 4.3 upon any conversion or redemption of the Common
Stock which is the subject of Section 4.5.

 

4.4.          Adjustment
for Capital Reorganization, Merger or Consolidation.  In case of any capital reorganization of the
capital stock of the Company (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), or any merger
or consolidation of the Company with or into another corporation, then, and in
each such case, as a part of such reorganization, merger or consolidation,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Purchase Price then in effect, the
number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger or consolidation that a
holder of the shares deliverable upon exercise of this Warrant would have been
entitled to receive in such reorganization, consolidation or merger if this
Warrant had been exercised immediately before such reorganization, merger or
consolidation, all subject to further adjustment as provided in this Section
4.  The foregoing provisions of this
Section 4.4 shall similarly apply to successive reorganizations, consolidations
or mergers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant.  If the per-share consideration payable to the
Holder hereof for shares in connection with any such transaction is in a form
other than cash or marketable securities, then the value of such consideration
shall be determined in good faith by the Company’s Board of Directors.  In all events, appropriate adjustment (as
determined in good faith by the Company’s Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the Holder after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable
after that event upon exercise of this Warrant.

 

4

 

4.5.          Conversion
of Common Stock.  In case all or any
portion of the authorized and outstanding shares of Common Stock of the Company
are redeemed or converted or reclassified into other securities pursuant to the
Company’s Articles of Incorporation or otherwise, or the Common Stock otherwise
ceases to exist, then, in such case, the Holder of this Warrant, upon exercise
hereof at any time after the date on which the Common Stock is so redeemed or
converted, reclassified or ceases to exist (the “Termination Date”),
shall receive, in lieu of the number of shares of Common Stock that would have
been issuable upon such exercise immediately prior to the Termination Date, the
securities that would have been received if this Warrant had been exercised in
full and the Common Stock received thereupon had been simultaneously converted
immediately prior to the Termination Date, all subject to further adjustment as
provided in this Warrant.  Additionally,
the Purchase Price shall be immediately adjusted to equal the quotient obtained
by dividing (x) the aggregate Purchase Price of the maximum number of
shares of Common Stock for which this Warrant was exercisable immediately prior
to the Termination Date by (y) the number of shares of Common Stock or the
number of shares or other units of securities of the Company for which this
Warrant is exercisable immediately after the Termination Date, all subject to
further adjustment as provided herein.

 

5.             CERTIFICATE
AS TO ADJUSTMENTS.  In each case of
any adjustment in the Purchase Price, or number or type of shares or securities
issuable upon exercise of this Warrant, the Chief Financial Officer or
Controller of the Company shall compute such adjustment in accordance with the
terms of this Warrant 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 Purchase Price. 
The Company 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.

 

6.             LOSS OR
MUTILATION.  Upon receipt of evidence
reasonably satisfactory to the Company of the ownership of and the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilated
Warrant.

 

7.             RESERVATION
OF COMMON STOCK.  The Company hereby
covenants that at all times there shall be reserved for issuance and delivery
upon exercise of this Warrant such number of shares of Common Stock or other
shares of capital stock of the Company as are from time to time issuable upon
exercise of this Warrant and, from time to time, will take all steps necessary
to amend its Articles of Incorporation to provide sufficient reserves of shares
of Common Stock issuable upon exercise of this Warrant (and shares of its
Common Stock for issuance on conversion of such Common Stock).  All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to
the Company’s officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock and Common Stock upon the exercise of this Warrant.

 

5

 

8.             TRANSFER
AND EXCHANGE.  Subject to the terms
and conditions of this Warrant and compliance with all applicable securities
laws, and upon the prior written consent of the Company, which consent shall
not be unreasonably withheld, this Warrant and all rights hereunder may be
transferred to the parent, subsidiary or affiliate of any Registered Holder, in
whole or in part, on the books of the Company maintained for such purpose at
the principal office of the Company referred to above, by the Registered Holder
hereof in person, or by duly authorized attorney, upon surrender of this
Warrant properly endorsed and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer.  Any attempted or purported transfer of this
Warrant or any of the rights hereunder that does not comply with the provisions
of this Section 8 shall be null and void and of no force or effect.  Upon any permitted partial transfer, the
Company will issue and deliver to the Registered Holder a new Warrant or Warrants
with respect to the shares of Common Stock not so transferred.  Each taker and holder of this Warrant, by
taking or holding the same, consents and agrees that when this Warrant shall
have been so endorsed, the person in possession of this Warrant may be treated
by the Company, and all other persons dealing with this Warrant, as the
absolute owner hereof for any purpose and as the person entitled to exercise
the rights represented hereby, any notice to the contrary notwithstanding; provided,
however, that until a transfer of this Warrant is duly registered on the
books of the Company, the Company may treat the Registered Holder hereof as the
owner for all purposes.

 

9.             RESTRICTIONS
ON TRANSFER.  The Holder, by
acceptance hereof, agrees that, absent an effective registration statement
filed with the Securities and Exchange Commission (the “SEC”) under the
Securities Act, covering the disposition or sale of this Warrant or the Common
Stock issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge or hypothecate any or all such Warrants
or Common Stock, as the case may be, unless either (i) the Company has
received an opinion of counsel, in form and substance reasonably satisfactory
to the Company, to the effect that such registration is not required in
connection with such disposition or (ii) the sale of such securities is
made pursuant to Rule 144 under the Securities Act.

 

10.          REGISTRATION
RIGHTS.

 

10.1         If the
Company 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), the Company will give written notice thereof to Holder and will
include in such registration any of the Registrable Shares (as defined below)
which Holder may request be included (“Included Shares”) by a writing delivered to the Company within
15 days after the notice given by the Company to Holder; provided, however,
that if the offering is to be firmly underwritten, and the representative of
the underwriters of the offering refuses in writing to include in the offering
all of the shares of Common Stock requested by the Company and others, the
shares to be included shall be allocated first to the Company 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 the Company 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, the
Company will promptly so inform Holder, and the Company will not be obligated
to complete the registration of the Included Shares included therein.  The Company will pay all

 

6

 

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 Warrant, “Registrable Shares”
shall mean the shares of Common Stock (or such stock or securities as at the
time are receivable upon the exercise of this Warrant) issuable upon exercise
of the Warrant 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 and sell such
share issued upon such exercise) in the market on which the Company common
stock is then traded without registration under the Securities Act.

 

10.2         In
connection with any registration under this Section 10, the Company will:

 

10.2.1      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;

 

10.2.2      notify
Holder of the issuance of any stop order by the Securities and Exchange
Commission in connection with the registration statement; and

 

10.2.3      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 the Company and/or
its Board of Directors.

 

10.3         As a
condition to including Registrable Shares in the registration statement, Holder
must provide to the Company 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.

 

10.4         Following
the effectiveness of the registration statement, upon receipt from the Company
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 the Company
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 the
Company all copies, other than permanent file copies then in Holder’s
possession, of the most recent prospectus covering the Included Shares.

 

10.5         The Company
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 the Company of the Securities Act, Exchange Act, any

 

7

 

state securities laws or any 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 the Company 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 the Company by Holder or on Holder’s behalf
expressly for use therein.

 

10.6         Holder
agrees to indemnify and hold harmless the Company, its officers, directors and
agents and each person, if any, who controls the Company 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 the Company 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.

 

10.7         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.

 

8

 

11.          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 such 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 Securities 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 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 following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
THE SECURITIES LAWS OF ANY STATE.  THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.  INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.  THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.

 

12.          NO RIGHTS
OR LIABILITIES AS SHAREHOLDERS.  This
Warrant shall not entitle the Holder to any voting rights or other rights as a
shareholder of the Company.  In the
absence of affirmative action by such Holder to purchase Common Stock by
exercise of this Warrant, no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof, shall cause such
Holder hereof to be a shareholder of the Company for any purpose.

 

13.          NOTICES. Any
notice required or permitted by this Warrant must be in writing and must be
sent by facsimile, by nationally recognized commercial overnight courier, or
mailed

 

9

 

by United States registered or certified mail,
addressed to the other party at the address below or to such other address for
notice (or facsimile number, in the case of a notice by facsimile) as a party
gives the other party written notice of in accordance with this
Section 13.  Any such notice will be
effective as of the date of receipt:

 

Notices should be addressed as follows:

 

(i)            If
to Holder, to:

 

Cappello Capital Corp.

100 Wilshire Blvd., Suite 1200

Santa Monica, CA  90401

Attention:

Facsimile:  (310) 393-4838

 

(ii)           If
to the Company, to:

 

Spescom Software Inc.

10052 Mesa Ridge Court, Suite 100

San Diego, CA  92121

Attention:  Chief Executive Officer

Facsimile:  (858) 625-3000

 

14.          HEADINGS.  The headings in this Warrant are for
purposes of convenience in reference only, and shall not be deemed to
constitute a part hereof.

 

15.          LAW
GOVERNING.  This Warrant shall be
construed and enforced in accordance with, and governed by, the laws of the
State of California.

 

16.          NO
IMPAIRMENT.  The Company will not, by
amendment of its Articles of Incorporation or Bylaws, or through
reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Registered Holder of this Warrant against
impairment.  Without limiting the
generality of the foregoing, the Company (a) will not increase the par value of
any shares of stock issuable upon the exercise of this Warrant above the amount
payable therefor upon such exercise and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable shares of Common Stock upon exercise of
this Warrant.

 

17.          NOTICES OF
RECORD DATE.  In case:

 

17.1.        the
Company shall take a record of the holders of its Common Stock (or other stock
or securities at the time receivable upon the exercise of this Warrant), 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

 

10

 

17.2.        of
any consolidation or merger of the Company with or into another corporation,
any capital reorganization of the Company, any reclassification of the capital
stock of the Company, or any conveyance of all or substantially all of the
assets of the Company to another corporation in which holders of the Company’s
stock are to receive stock, securities or property of another corporation; or

 

17.3.        of
any voluntary dissolution, liquidation or winding-up of the Company; or

 

17.4.        of
any redemption or conversion of all outstanding Common Stock;

 

then, and in each such case, the Company will mail or
cause to be mailed to the Registered Holder of this Warrant a notice
specifying, as the case may be, (i) the date on which a record is to be
taken for the purpose of such dividend, distribution or right or (ii) 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 this Warrant), 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.  Such notice shall be
delivered at least ten (10) days prior to the date therein specified.

 

18.          SEVERABILITY.  If any term, provision, covenant or
restriction of this Warrant is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.

 

19.          ENTIRE AGREEMENT.  This
Warrant contains the entire understanding of the parties, supersedes all prior
agreements and understandings relating to the subject matter hereof.

 

20.          COUNTERPARTS.  For the convenience of the parties, any
number of counterparts of this Warrant may be executed by the parties hereto
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.

 

21.          SATURDAYS,
SUNDAYS AND HOLIDAYS.  If the
Expiration Date falls on a Saturday, Sunday or legal holiday, the Expiration
Date shall automatically be extended until 5:00 p.m. Pacific Time on the next
day that is not a Saturday, Sunday or legal holiday.

 

11

 

IN WITNESS WHEREOF, the parties
hereto have executed this Warrant as of the Effective Date.

 

	
  CAPPELLO
  CAPITAL CORP.

  	
  SPESCOM
  SOFTWARE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Alexander L. Cappello

  	
   

  	
  By:

  	
    /s/ John W. Low

  
	
   

  	
   

  
	
  Alexander L. Cappello

  	
   

  	
  John W. Low

  
	
  Printed Name

  	
  Printed Name

  
	
   

  	
   

  
	
  Managing
  Director

  	
   

  	
  Chief Financial
  Officer

  
	
  Title

  	
  Title

  

 

 

SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON
STOCK

 

12

 

EXHIBIT 1

 

NOTICE OF EXERCISE

 

(To be executed upon exercise of Warrant)

 

	
  SPESCOM SOFTWARE INC.

  	
  WARRANT NO.

  

 

The undersigned hereby irrevocably elects to exercise
the right of purchase represented by the within Warrant Certificate for, and to
purchase thereunder, the securities of Spescom Software Inc., as provided for
therein, and tenders herewith payment of the exercise price in full in the form
of cash or a certified or official bank check in same-day funds in the amount
of $                     
for                      
such securities.

 

Please issue a certificate or certificates for such
securities in the name of, and pay any cash for any fractional share to (please
print name, address and social security number):

 

	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  

 

Note:  The above
signature should correspond exactly with the name on the first page of this
Warrant Certificate or with the name of the assignee appearing in the
assignment form below.

 

If said number of shares shall not be all the shares
purchasable under the within Warrant Certificate, a new Warrant Certificate is
to be issued in the name of said undersigned for the balance remaining of the
shares purchasable thereunder rounded up to the next higher whole number of
shares.

 

 

EXHIBIT 2

 

ASSIGNMENT

 

	
  (To be executed only upon
  assignment of Warrant Certificate)

  	
  WARRANT NO.

  

 

For value received, hereby sells, assigns and transfers unto                                              
the within Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint                                              
attorney, to transfer said Warrant Certificate on the books of the within-named
Company with respect to the number of Warrants set forth below, with full power
of substitution in the premises:

 

	
  Name(s) of Assignee(s)

  	
   

  	
  Address

  	
   

  	
  # of Warrants

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

And if said number of Warrants shall not be all the Warrants
represented by the Warrant Certificate, a new Warrant Certificate is to be
issued in the name of said undersigned for the balance remaining of the
Warrants registered by said Warrant Certificate.

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  

 

Notice:  The
signature to the foregoing Assignment must correspond to the name as written
upon the face of this security in every particular, without alteration or any
change whatsoever; signature(s) must be guaranteed by an eligible guarantor
institution (banks, stock brokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program)
pursuant to Securities and Exchange Commission Rule 17Ad-15.

 

Pursuant to the terms of Section 8 of the
Warrant to which this Assignment pertains, this Assignment shall be null and
void and of no force or effect unless a duly authorized officer of the Company
indicates the Company’s consent to this Assignment by signing below:

 

 

Spescom Software Inc. hereby consents to the sale, assignment and
transfer unto                                                  
the within Warrant Certificate, together with all right, title and interest
therein.

 

	
   

  	
  SPESCOM SOFTWARE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

3

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