Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

AGREEMENT dated as of March 10, 2006, between Monarch Pointe Fund, Ltd.
(“Monarch”), Mercator Momentum Fund III, L.P. (“MMF”) and M.A.G. CAPITAL, LLC
(“MAG”) (Monarch, MMF 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) Monarch purchased, for aggregate consideration
of $500,000 and 1,450 shares of the Company’s Series G Convertible Preferred
Stock, which were transferred to the Company for cancellation, an aggregate of
1,950 shares of Series H Convertible Preferred Stock (the “Series H Stock”) from
the Company, (ii) Monarch and MAG acquired warrants from the Company, pursuant
to which they have the right to purchase in the aggregate up to 925,926 shares
of Common Stock (the “Initial Closing Warrants”), and (iii) in connection with
such purchase of Series H Convertible Preferred Stock and such acquisition of
warrants, the Company, MAG and Monarch entered into that certain Registration
Rights Agreement dated as of October 25, 2005 (the “Initial Closing Registration
Rights Agreement”);

 

WHEREAS, on the date hereof, Monarch and MMF have purchased from the Company,
for aggregate consideration of $500,000 and the Series H Stock, which has been
transferred to the Company for cancellation, an aggregate of 2,450 shares of the
Company’s Series I Convertible Preferred Stock (the “Series I Stock”), and have
the right to cause such Series I Stock to be converted into shares of the
Company’s common stock, no par value (“Common Stock”), pursuant to the
conversion formula set forth in the Certificate of Determination of Series I
Convertible Preferred Stock as filed with the Secretary of State of the State of
California on March 9, 2006 (the “Certificate of Determination”);

 

WHEREAS, on the date hereof, the Holders have acquired warrants (such warrants,
together with the Initial Closing Warrants, 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; and

 

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 I 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 I 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

 

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merger, reorganization, consolidation, recapitalization or other change in
corporate structure 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 (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) Thirty Three Million Seven Hundred Ninety Three
Thousand One Hundred Four (33,793,104) shares of Common Stock issuable upon
conversion of the Series I 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 distribution of the Holder’s Registrable
Securities. The obligations of the Company hereunder

 

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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
controls the Company within the meaning of the Securities Act, from and against
any and all

 

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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.

 

(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

 

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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 I 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 I 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.               Termination of the Initial Closing Registration Rights
Agreement. The Company, MAG, MMF and Monarch agree that the Initial Closing
Registration Rights Agreement is hereby terminated and each of them waives any
and all rights thereunder.

 

6.               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.

 

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

 

8.               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.

 

9.               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.

 

10.         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

 

 

Monarch Pointe Fund, Ltd.

 

 

Mercator Momentum Fund III, L.P.

 

 

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 94304

 

 

Telephone No.: (650) 849-5383

 

 

Facsimile No.:  (650) 849-5083

 

 

Attention:       Russell C. Hansen

 

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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.

 

11.         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 I 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.

 

12.         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.

 

13.         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.

 

14.         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 10 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.

 

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

 

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

 

 

 

SPESCOM SOFTWARE INC.

 

 

 

 

 

 

 

 

By:

 /s/John W. Low

 

 

Name:  John W. Low

 

 

Its:

Chief Financial Officer

 

 

 

 

 

HOLDERS:

 

 

 

 

 

 

 

 

MONARCH POINTE FUND, LTD.

 

 

 

 

 

By: M.A.G. CAPITAL, LLC

 

 

Its:  General Partner

 

 

 

 

 

 

 

 

By:

 /s/ Harry Aharonian

 

 

Name:  Harry Aharonian

 

 

Its:

Portfolio Manager,

 

 

 

Authorized Representative

 

 

 

 

 

MERCATOR MOMENTUM FUND III, L.P.

 

 

 

 

 

By: M.A.G. CAPITAL, LLC

 

 

Its:  General Partner

 

 

 

 

 

 

 

 

By:

 /s/ Harry Aharonian

 

 

Name:  Harry Aharonian

 

 

Its:

Portfolio Manager,

 

 

 

Authorized Representative

 

 

 

 

 

 

 

 

M.A.G. CAPITAL, LLC

 

 

 

 

 

 

 

 

By:

 /s/ Harry Aharonian

 

 

Name:  Harry Aharonian

 

 

Its:

Portfolio Manager,

 

 

 

Authorized Representative

 

 

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