Document:

Exhibit 10.5

 

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, Monarch Pointe
Fund, Ltd., 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.

 

1

 

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

 

2

 

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.

 

3

 

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

  

 

4

 

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:

  	
   

  	
   

  
							

 

1

 

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.

 

1

 

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.

 

1Exhibit
10.6

 

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,                                                   ,
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                          
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.

 

1

 

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.

 

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.

 

2

 

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 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.

 

3

 

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.

 

 

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

 

	
  COMPANY:

  	
   

  
	
   

  	
  SPESCOM
  SOFTWARE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

4

 

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
    , 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:

  	
   

  	
   

  
							

 

1

 

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.

 

1

 

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

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