Document:

Exhibit 10.3

 

EXHIBIT D

to
Subscription Agreement

 

REGISTRATION
RIGHTS AGREEMENT

 

AGREEMENT dated as of                                  ,
2005, between [INSERT NAME(S) OF SECOND CLOSING PURCHASER(S)] (the “Fund”)
and M.A.G. CAPITAL, LLC (“MAG”) (the Fund and MAG are referred to
individually as a “Holder” and collectively as the “Holders”),
and Spescom Software Inc., a California corporation (the “Company”).

 

WHEREAS, on October 25, 2005, (i) the Fund
purchased, for an aggregate of $500,000, an aggregate of 500 shares of Series H
Convertible Preferred Stock from the Company, (ii) each Fund and MAG acquired
warrants from the Company, pursuant to which the Holders have the right to
purchase in the aggregate up to 925,926 shares of Common Stock, and (iii) in connection
with such purchase of Series H Convertible Preferred Stock and such acquisition
of warrants, the Company, MAG and Monarch Pointe Fund, Ltd., entered into a
registration rights agreement (the “Initial Closing Registration Rights
Agreement”);

 

WHEREAS, on the date hereof, the Fund has purchased,
for an aggregate of $500,000, an aggregate of 500 additional shares of Series H
Convertible Preferred Stock (the “Series H Stock”) from the Company, and has
the right to cause such Series H Stock to be converted into shares of Common
Stock, no par value (the “Common Stock”), of the Company, pursuant to
the conversion formula set forth in the Certificate of Determination of Series
H Preferred Stock as filed with the Secretary of State of the State of
California on October 25, 2005 (the “Certificate of Determination”);

 

WHEREAS, on the date hereof, each Fund and MAG have
acquired additional warrants (together, the “Warrants”) from the
Company, pursuant to which the Holders have the right to purchase in the aggregate
up to 925,926 shares of Common Stock;

 

WHEREAS, the Company desires to grant to the Holders
the registration rights set forth herein with respect to the shares of Common
Stock issuable upon the conversion of the Series H Stock and the exercise of
the Warrants.

 

NOW, THEREFORE, the parties hereto mutually agree as
follows:

 

1.  Registrable
Securities.  As used
herein the terms “Registrable Security” means each of the shares of
Common Stock issued (i) upon the conversion of the Series H Stock (the “Conversion
Shares”) and (ii) upon exercise of the Warrants (the “Warrant Shares”),
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security as of the date of
determination that (a) it has been effectively registered under the
Securities Act of 1933, as amended (the “Securities Act”), and disposed
of pursuant thereto, or (b) registration under the Securities Act is no
longer required for the immediate public distribution of such security.  The term “Registrable Securities”
means any and/or all of the securities falling within the foregoing definition
of a “Registrable Security.”  In the
event of any merger, reorganization, consolidation, recapitalization or other
change in corporate structure

 

1

 

affecting the Common Stock, such adjustment shall be
made in the definition of “Registrable Security” as is appropriate in order to
prevent any dilution or enlargement of the rights granted pursuant to this
Section 1.

 

2.  Registration.

 

(a) The Company shall use its commercially reasonable efforts to file a
registration statement, an amendment to the Company’s existing Registration
Statement No. 333-121038, or an amendment to any registration statement filed
pursuant to Section 2 of the Initial Closing Registration Rights Agreement (the
“Registration Statement”) with the Securities and Exchange Commission
(the “SEC”) no later than thirty (30) days after the date of this
Agreement in order to register the resale of the Registrable Securities under
the Securities Act.  The Company shall
use its commercially reasonable efforts to cause the Registration Statement to
become effective no later than (a) ninety (90) days after the filing date if
such Registration Statement is not subject to SEC review, or (b) one hundred
twenty (120) days after the filing date if such Registration Statement is
subject to SEC review.  Once effective,
the Company shall use its commercially reasonable efforts to maintain the
effectiveness of the Registration Statement until the earliest of the following
dates (the “Expiration Date”) (i) the date that all of the
Registrable Securities have been sold, or (ii) the date that the Company
receives an opinion of counsel to the Company that all of the Registrable
Securities may be freely traded without registration under the Securities Act,
under Rule 144 promulgated under the Securities Act or otherwise.

 

(b) The Company will initially include in the
Registration Statement as Registrable Securities (i) Six Million Eight Hundred
Ninety Six Thousand Five Hundred Fifty Two (6,896,552) shares of Common Stock issuable upon conversion of the Series H
Stock and (ii) the maximum numbers of shares of Common Stock issuable upon
exercise of the Warrants.

 

(c) If (i) the Company fails to file the Registration Statement with
the SEC within thirty (30) days after the date of this Agreement, or (ii) the
Registration Statement fails to become effective within the applicable time
period set forth in Section 2(a) above of ninety (90) or one hundred twenty
(120) days, as the case may be, the Company shall pay to Holders an amount
equal to Five Hundred Dollars ($500) per day until the Registration Statement
is declared effective; provided, however, that in no event shall the aggregate
liability of the Company under this Section exceed Fifty Thousand Dollars
($50,000).

 

3.  Covenants
of the Company with Respect to Registration.

 

The Company covenants and agrees as follows:

 

(a) If any stop order shall be issued by the SEC in connection
therewith, the Company shall use commercially reasonable efforts to obtain
promptly the removal of such order. 
Following the effective date of the Registration Statement, the Company
shall, upon the request of any Holder, forthwith supply such reasonable number
of copies of the Registration Statement, preliminary prospectus and prospectus
meeting the requirements of the Securities Act, and any other documents
necessary or incidental to the public offering of the Registrable Securities, as
shall be reasonably requested by the Holder to permit the Holder to make a
public

 

2

 

distribution
of the Holder’s Registrable Securities. 
The obligations of the Company hereunder with respect to the Holder’s
Registrable Securities are subject to the Holder’s furnishing to the Company
such appropriate information concerning the Holder, the Holder’s Registrable
Securities and the terms of the Holder’s offering of such Registrable
Securities as the Company may reasonably request in writing.

 

(b) The Company shall pay all costs, fees and expenses in connection
with the Registration Statement filed pursuant to Section 2 hereof
including, without limitation, the Company’s legal and accounting fees,
printing expenses, and blue sky fees and expenses; provided, however, that each
Holder shall be solely responsible for the fees of any counsel retained by the
Holder in connection with such registration and any transfer taxes or
underwriting discounts, commissions or fees applicable to the Registrable
Securities sold by the Holder pursuant thereto.

 

(c) The Company will take all actions which may be required to qualify
or register the Registrable Securities included in the Registration Statement
for the offer and sale under the securities or blue sky laws of such states as
are reasonably requested by each Holder of such securities, provided that the
Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.

 

4.  Additional
Terms.

 

(a) The Company shall indemnify and hold harmless the Holders and each
underwriter, within the meaning of the Securities Act, who may purchase from or
sell for any Holder, any Registrable Securities, from and against any and all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in the Registration Statement, any other registration
statement filed by the Company under the Securities Act with respect to the
registration of the Registrable Securities, any post-effective amendment to
such registration statements, or any prospectus included therein or caused by
any omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission based upon information furnished or required to be furnished in
writing to the Company by the Holders or underwriter expressly for use therein,
which indemnification shall include each person, if any, who controls any
Holder or underwriter within the meaning of the Securities Act and each
officer, director, employee and agent of each Holder and underwriter; provided,
however, that the indemnification in this Section 4(a) with respect to any
prospectus shall not inure to the benefit of any Holder or underwriter (or to
the benefit of any person controlling any Holder or underwriter) on account of
any such loss, claim, damage or liability arising from the sale of Registrable
Securities by the Holder or underwriter, if a copy of a subsequent prospectus
correcting the untrue statement or omission in such earlier prospectus was
provided to such Holder or underwriter by the Company prior to the subject sale
and the subsequent prospectus was not delivered or sent by the Holder or
underwriter to the purchaser prior to such sale and provided further, that the
Company shall not be obligated to so indemnify any Holder or any such
underwriter or other person referred to above unless the Holder or underwriter
or other person, as the case may be, shall at the same time indemnify the
Company, its directors, each officer signing the Registration Statement and
each person, if any, who

 

3

 

controls
the Company within the meaning of the Securities Act, from and against any and
all losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in the Registration Statement, any registration
statement or any prospectus required to be filed or furnished by reason of this
Agreement or caused by any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, insofar as such losses, claims, damages or liabilities are caused
by any untrue statement or omission based upon information furnished in writing
to the Company by the Holder or underwriter expressly for use therein.

 

(b) The Holder shall indemnify and hold harmless the Company, from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in the Registration Statement,
any registration statement or any prospectus required to be filed or furnished
by reason of this Agreement or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, insofar as such losses, claims, damages or liabilities
are caused by any material untrue statement or material omission based upon
information furnished in writing to the Company by the Holder expressly for use
therein.

 

(c) If for any reason the indemnification provided for in the preceding
section is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage, liability or expense
referred to therein, then the indemnifying party, in lieu of indemnifying
such indemnified party thereunder, shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnified party and the indemnifying party, as well as any other relevant
equitable considerations.

 

(d) Promptly after receipt by an indemnified party under this
Section 4 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 4,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation
of such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential conflict of interests between
such indemnified party and any other party represented by such counsel in such
proceeding.  The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of
liability to the indemnified party under this Section 4 only to the extent
the indemnifying party is prejudiced as a result thereof.

 

(e) Neither the filing of a Registration Statement by the Company
pursuant to this Agreement nor the making of any request for prospectuses by
the Holder shall impose upon any Holder any obligation to sell the Holder’s
Registrable Securities.

 

4

 

(f) Each Holder, upon receipt of notice from the Company that an event
has occurred which requires a Post-Effective Amendment to the Registration
Statement or a supplement to the prospectus included therein, shall promptly
discontinue the sale of Registrable Securities until the Holder receives a copy
of a supplemented or amended prospectus from the Company, which the Company
shall provide as soon as practicable after such notice.

 

(g) If the Company fails to keep the Registration Statement referred to
above continuously effective during the requisite period, then the Company
shall, promptly upon the request of any Holder, use commercially reasonable
efforts to update the Registration Statement or file a new registration
statement covering the Registrable Securities remaining unsold, subject to the
terms and provisions hereof, so that the registration of such unsold Registered
Securities is maintained for a number of days beyond the Expiration Date equal
to the number of days that the Holder is unable to sell pursuant to Section
4(f) above.

 

(h) Each Holder agrees to provide the Company with any information or
undertakings reasonably requested by the Company in order for the Company to
include any appropriate information concerning the Holder in the Registration
Statement or in order to promote compliance by the Company or the Holder with
the Securities Act.

 

(i) Each Holder, by its acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of a Registration Statement
hereunder.

 

(j)
Each Holder, on behalf of itself, its affiliates, its successors and assigns
and any other direct or indirect transferee holding any of the Warrants, the
Series H Stock or the Registrable Securities, hereby covenants and agrees not
to, directly or indirectly, offer to “short sell”, contract to “short sell” or
otherwise “short sell” or encourage others to “short sell” any securities of
the Company, including, without limitation, shares of Common Stock that will be
received as a result of the conversion of the Series H Stock or the exercise of
the Warrants.  For purposes of this
Agreement, “short selling” shall include any sale, any trade in any option or
other derivative security, any hedging transaction relating to the securities
of the Company or any transaction intended to affect the price of the Company’s
common stock.

 

(k) If requested in writing by the Company and the managing underwriter
of an underwritten registered public offering by the Company of its Common
Stock, the Holders shall agree not to sell or otherwise transfer or dispose of
any Common Stock of the Company held by such Holders (other than those included
in the registration statement) for a period not to exceed 90 days following the
effective date of a registration statement of the Company filed under the
Securities Act, provided that all officers and directors of the Company enter
into similar agreements identical in terms to that of the Holders.

 

5.  Governing
Law.  The Registrable
Securities will be, if and when issued, delivered in California. 
This Agreement shall be deemed to have been made and delivered in the
State of California and
shall be governed as to validity, interpretation, construction, effect and in
all other respects by the internal substantive laws of the State of California, without giving effect
to the choice of law rules thereof.

 

6.  Amendment.  This Agreement may only be amended by a
written instrument executed by the Company and the Holders.

 

5

 

7.  Entire
Agreement.  This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings
of the parties, oral and written, with respect to the subject matter hereof.

 

8.  Execution
in Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
document.

 

9.  Notices.  All communications hereunder shall be in
writing and shall be hand delivered, mailed by first-class mail, couriered by
next-day air courier or by facsimile at the addresses set forth below.

 

	
  If to the Holders,

  	
   

  	
  M.A.G. Capital, LLC

  
	
   

  	
   

  	
  [SECOND CLOSING PURCHASER]

  
	
   

  	
   

  	
  555 South Flower
  Street, Suite 4200

  
	
   

  	
   

  	
  Los Angeles, CA 90071

  
	
   

  	
   

  	
  Attention: David Firestone

  
	
   

  	
   

  	
   

  
	
  With a copy to

  	
   

  	
  Sheppard Mullin Richter
  & Hampton LLP

  
	
   

  	
   

  	
  333 South Hope Street

  
	
   

  	
   

  	
  48th Floor

  
	
   

  	
   

  	
  Los Angeles, CA 90071-1448

  
	
   

  	
   

  	
  Telephone No.: (213)
  620-1780

  
	
   

  	
   

  	
  Facsimile No.:  (213) 620-1398

  
	
   

  	
   

  	
  Attention:     David
  C. Ulich

  
	
   

  	
   

  	
   

  
	
  If to the Company,

  	
   

  	
  Spescom Software Inc.

  
	
   

  	
   

  	
  10052 Mesa Ridge Court,
  Suite 100

  
	
   

  	
   

  	
  San Diego, CA 92121

  
	
   

  	
   

  	
  Telephone No.: (858)
  625-3000 (ext. 6831)

  
	
   

  	
   

  	
  Facsimile No.:  (858) 625-3010

  
	
   

  	
   

  	
  Attention: John Low

  
	
   

  	
   

  	
   

  
	
  With a copy to

  	
   

  	
  Gibson, Dunn &
  Crutcher LLP

  
	
   

  	
   

  	
  1881 Page Mill Rd.

  
	
   

  	
   

  	
  Palo Alto, CA 94063

  
	
   

  	
   

  	
  Telephone No.: (650)
  849-5383

  
	
   

  	
   

  	
  Facsimile No.:  (650) 849-5083

  
	
   

  	
   

  	
  Attention:     Russell
  C. Hansen

  

 

6

 

All such notices and communications shall be
deemed to have been duly given:  (i) when
delivered by hand, if personally delivered; (ii) five business days after being
deposited in the mail, postage prepaid, if mailed certified mail, return
receipt requested; (iii) one business day after being timely delivered to a
next-day air courier guaranteeing overnight delivery; (iv) the date of
transmission if sent via facsimile to the facsimile number as set forth in this
Section or the signature page hereof prior to 4:00 p.m. on a business day, or
(v) the business day following the date of transmission if sent via facsimile
at a facsimile number set forth in this Section or on the signature page hereof
after 4:00 p.m. or on a date that is not a business day.  Change of a party’s address or facsimile
number may be designated hereunder by giving notice to all of the other parties
hereto in accordance with this Section.

 

10.  Binding
Effect; Benefits.  Any
Holder may assign its rights hereunder; provided, however, that the rights of a
Holder hereunder may be transferred by such Holder or its transferee only to a
person or entity who acquires Series H Preferred Stock or Warrants convertible
into or exercisable for an aggregate of at least 200,000 shares of Common
Stock.  This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.  Nothing herein contained, express or implied,
is intended to confer upon any person other than the parties hereto and their
respective heirs, legal representatives and successors, any rights or remedies
under or by reason of this Agreement.

 

11.  Headings.  The headings contained herein are for the
sole purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions of this
Agreement.

 

12.  Severability.  Any provision of this Agreement which is held
by a court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of
such provision in any other jurisdiction.

 

13.  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 9 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 either party
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.

 

14.  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.

 

[The balance of this page is
intentionally left blank.]

 

7

 

IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto as of the date first above written.

 

	
   

  	
  SPESCOM
  SOFTWARE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  
	
   

  	
  HOLDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SECOND CLOSING PURCHASER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Harry Aharonian

  
	
   

  	
  Its:

  	
  Portfolio Manager

  
	
   

  	
   

  
	
   

  	
  M.A.G. CAPITAL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Harry Aharonian

  
	
   

  	
  Its:

  	
  Portfolio Manager

  
					

 

8Exhibit 10.4

 

WARRANT TO
PURCHASE COMMON STOCK

 

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

 

WARRANT TO PURCHASE
COMMON STOCK

 

	
  Number
  of Shares:

  	
   

  	
  462,963 shares

  
	
   

  	
   

  	
   

  
	
  Warrant
  Price:

  	
   

  	
  $0.27 per share

  
	
   

  	
   

  	
   

  
	
  Issuance
  Date:

  	
   

  	
  October 25, 2005

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
  October 25, 2008

  

 

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

 

1.              Term and Exercise.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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.

 

1

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