**Exhibit10.32**

SECURITY AGREEMENT

 

This Security Agreement(“Agreement”) is executed as of March 15, 2002 between Altris Software, Inc., aCalifornia corporation (“Debtor”) and Spescom Ltd., a United Kingdomcorporation (the “Secured Party”), who agree as follows:

 

1.  Definitions.  For purposes of this Agreement, thefollowing definitions shall apply:

 

1.1.  ”Accounts”shall mean all “accounts” as defined in the UCC now owned or hereafter acquiredby Debtor, including without limitation (a) all accounts receivable, contractrights, notes, drafts and other obligations or indebtedness owing to Debtor andarising from whatever source; (b) all present and future monies, securities,credit balances, deposits, deposit accounts and other property of Debtor now orhereafter held or received by or in transit to the Secured Party or theiraffiliates or at any other depository or other institution from or for theaccount of Debtor, whether for safekeeping, pledge, custody, transmission,collection or otherwise, and all present and future liens, security interests,rights, remedies, title and interest in, to and in respect of Accounts andother Collateral, including (i) rights and remedies under or relating toguaranties, contracts of suretyship, letters of credit and credit and otherinsurance related to the Collateral, (ii) rights of stoppage in transit,replevin, repossession, reclamation and other rights and remedies of an unpaidvendor, lien holder or secured party, (iii) goods described in invoices,documents, contracts or instruments with respect to, or otherwise representingor evidencing, Accounts or other Collateral, including returned, repossessedand reclaimed goods, and (iv) deposits by and property of account debtors orother Persons securing the obligations of account debtors; (c) all of therights of Debtor in, to and under all purchase orders for goods, services orother property; (d) all monies due to or to become due to Debtor under allcontracts for the sale, lease or exchange of goods or other property and/or theperformance of services by it (whether or not yet earned by performance on thepart of Debtor) and (e) all of the rights of Debtor to any goods, services orother property represented by any of the foregoing, in each case whether now inexistence or hereafter arising or acquired including, without limitation, theright to receive the proceeds of said purchase orders and contracts and allcollateral security and guarantees of any kind given by any Person with respectto any of the foregoing.

 

1.2.  “Collateral”has the meaning set forth in the Paragraph in this Agreement titled “SecurityInterests”

 

1.3.  “Default”shall mean any Event of Default and any event which with the passing of time orthe giving of notice would, unless cured or waived, constitute an Event ofDefault.

 

1.4.  “Documents”shall mean all “documents” as defined in the UCC or other receipts covering,evidencing or representing goods, now owned or hereafter acquired by Debtor.

 

1.5.  “Equipment”shall mean all “equipment” as defined in the UCC (excluding motor vehicles, andrailway rolling stock), now or hereafter used or acquired for use in thebusiness or otherwise of Debtor (together with all accessions thereto and allsubstitutions and replacements thereof and parts therefor), whether or not thesame shall be 

 

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deemed affixed to realproperty, and all rights under or arising out of present or future contractsrelating to the acquisition or use of the above.

 

1.6.  “Event ofDefault” shall mean any default by Debtor in the full and punctual performanceof its obligations under this Agreement or the Loan.

 

1.7.  “GeneralIntangibles” shall mean all “general intangibles” as defined in the UCC nowowned or hereafter acquired by Debtor, including without limitation(a) all obligations or indebtedness owing to Debtor (other than Accounts)from whatever source arising, (b) all registered and unregistered (i)patent licenses, (ii) patents, (iii) trademark licenses, (iv) trademarks, (v)rights in intellectual property, (vi) trade names, (vii) service marks, (viii)trade secrets, (ix) copyrights, (x) permits, (xi) licenses, and (xii)applications for the foregoing, (c) goodwill, processes, drawings, blueprintsand customer lists, (d) all rights or claims in respect of refunds fortaxes paid, (e) all rights in respect of any pension plan or similararrangement maintained for employees of Debtor or any of its Subsidiaries, and(f) the Subsidiary Interests.

 

1.8.  “Instruments”shall mean (a) all “instruments”, “chattel paper” or “letters of credit”,each as defined in the UCC, evidencing, representing, arising from or existingin respect of, relating to, securing or otherwise supporting the payment of,any of the Accounts, including without limitation promissory notes, drafts,bills of exchange and trade acceptances, and (b) notes or otherobligations or indebtedness owing to a Debtor (including without limitationobligations of Debtor to any other Debtor) from whatever source arising, in eachcase now owned or hereafter acquired by Debtor.

 

1.9.  “Inventory”shall mean all “inventory” as defined in the UCC, now owned or hereafteracquired by Debtor, wherever located, including without limitation all rawmaterials and other materials and supplies, work–in–process andfinished goods and any products made or processed therefrom and all substances,if any, commingled therewith or added thereto.

 

1.10.  “Lien”shall mean, with respect to any asset, any mortgage, lien, pledge, charge,security interest or encumbrance of any kind in respect of such asset,including the interest of a vendor or lessor under any conditional saleagreement, capital lease or other title retention agreement.

 

1.11.  “Loan”shall mean collectively, all loans made by the Secured Party to the Debtor oneven date herewith or subsequent hereto.

 

1.12.  “Note”shall mean, collectively, all promissory notes executed by Debtor in favor ofthe Secured Party on even date herewith or subsequent hereto.

 

1.13.  “Proceeds”shall mean all products and proceeds of, and all other profits, rentals orreceipts, in whatever form, arising from the collection, sale, lease, exchange,assignment, licensing or other disposition of, or realization upon, any item orportion of the Collateral, including without limitation all claims of Debtoragainst third parties for loss of, damage to, destruction of, or for proceedspayable under, or unearned premiums with respect to, policies of insurance inrespect of, any Collateral and any condemnation or requisition 

 

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payments with respect toany Collateral, in each case whether now existing or hereafter arising.

 

1.14.  “SecurityInterests” shall mean the security interests securing the Secured Obligations,including without limitation the Security Interests granted pursuant to thisAgreement.

 

1.15.  “SecuredObligations” shall mean the Note and all obligations, liabilities and indebtedness pursuant to the Loan,including, without limitation,principal, interest, charges, fees, costs and expenses, however evidenced,whenever arising (including without limitation arising after the commencementof any case with respect to Debtor under the United States Bankruptcy Code orany similar statute and including the payment of interest and other amountswhich would accrue and become due but for the commencement of such case,whether or not such amounts are allowed or allowable in whole or in part insuch case).

 

1.16.  “Site”shall mean the Debtor’s principal place of business located at the address setforth in the Paragraph in this Agreement titled “Notices”.

 

1.17.  “Subsidiary”shall mean, with respect to any Person, any corporation or other entity ofwhich securities or other ownership interests having ordinary voting power toelect a majority of the board of directors or other Person performing similarfunctions are at the time directly or indirectly owned by such Person.

 

## 1.18.  ”SubsidiaryInterests” shall mean any and all of Debtor’s interest in any Person, as amember, partner, shareholder or otherwise.

 

## 1.19.  “UCC” shall mean the Uniform Commercial Codeas in effect on the date hereof in the State of California; provided that if byreason of mandatory provisions of law, the perfection or the effect ofperfection or non–perfection of the Security Interest in any item orportion of the Collateral is governed by the Uniform Commercial Code as ineffect in a jurisdiction other than the State of California, then “UCC” shallmean the Uniform Commercial Code as in effect in such other jurisdiction forpurposes of the provisions hereof relating to such perfection or effect ofperfection or non–perfection.

 

2.  Representationsand Warranties.  Except as set forthin writing to the Secured Party on even date herewith, Debtor represents andwarrants to the Secured Party as follows (which shall survive the execution and delivery ofthis Agreement):

 

2.1.  Debtorhas good and marketable title to all of the Collateral owned by it, free andclear of any Liens other than the Security Interests.

 

2.2.  Debtorhas not performed any acts which might prevent the Secured Party from enforcingany of the terms and conditions of this Agreement or which would limit theSecured Party in any such enforcement.  Otherthan financing statements or other similar or equivalent documents orinstrument with respect to the Security Interests, as of the date hereof andthereafter no financing statement, mortgage, security agreement or othersimilar or equivalent document or instrument covering all or any part of theCollateral is or will be on file or of record in any government office in anyjurisdiction in which such filing or recording would be effective to perfect aLien on such Collateral.  No Collateralis in the 

 

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possession of any Personor entity whatsoever (other than Debtor) which has taken action to assert anyclaim thereto or security interest therein, except that the Secured Party ortheir designee may have possession of Collateral as contemplated hereby.

 

2.3.  TheSecurity Interests constitute valid security interests under the UCC securingthe Secured Obligations.

 

2.4.  ThisAgreement has been duly authorized, executed and delivered by Debtor andconstitutes a valid and binding agreement of Debtor.  The execution, delivery and performance by Debtor of thisAgreement, each filing, statement, supplementary assignment, pledge agreementor other document related to this Agreement to which Debtor is a party do notand will not contravene, or constitute (with or without the giving of notice orlapse of time or both) a default under, any provision of applicable law orregulation or of the charter or by–laws of Debtor or of any agreement,judgment, injunction, order, decree or other instrument binding upon it orresult in the creation of any Lien (other than the Security Interests) on anyasset of Debtor or any of its Subsidiaries.

 

2.5.  Debtorhas filed, or caused to be filed, in a timely manner all tax returns, reportsand declarations which are required to be filed by it. All information in suchtax returns, reports and declarations is complete and accurate in all materialrespects. Debtor has paid or caused to be paid all taxes due and payable orclaimed due and payable in any assessment received by it, except taxes thevalidity of which are being contested in good faith by appropriate proceedingsdiligently pursued and available to Debtor and with respect to which adequatereserves have been set aside on its books. Adequate provision has been made forthe payment of all accrued and unpaid Federal, State, county, local, foreignand other taxes whether or not yet due and payable and whether or not disputed.

 

2.6.  Thereis no present investigation by any governmental agency pending, or to the bestof Debtor’s knowledge threatened, against or affecting Debtor, its assets orbusiness and there is no action, suit, proceeding or claim by any Person orentity pending, or to the best of Debtor’s knowledge threatened, against Debtoror its assets or goodwill, or against or affecting any transactionscontemplated by this Agreement, which if adversely determined against Debtorwould result in any material adverse change in the assets, business orprospects of Debtor or would impair the ability of Debtor to perform itsobligations hereunder or under the Note or the Loan or of the Secured Party toenforce any Secured Obligations or realize upon any Collateral.

 

2.7.  Debtoris not in default in any material respect under, or in violation in anymaterial respect of any of the terms of, any agreement, contract, instrument,lease or other commitment to which it is a party or by which it or any of itsassets are bound and Debtor is in compliance in all material respects with allapplicable provisions of laws, rules, regulations, licenses, permits, approvalsand orders of any foreign, Federal, State or local governmental authority.

 

2.8.  Allrepresentations and warranties contained in this Agreement or any of theagreements concerning the Note or the Loan shall survive the execution anddelivery of this Agreement and shall be deemed to have been made again to theSecured Party on the date of each additional borrowing or other creditaccommodation hereunder and shall be conclusively presumed to have been reliedon by the Secured Party regardless of any 

 

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investigationmade or information possessed by the Secured Party. The representations andwarranties set forth herein shall be cumulative and in addition to any otherrepresentations or warranties which Debtor shall now or hereafter give, orcause to be given, to the Secured Party.

 

3.  SecurityInterests.  In order to secure thefull and punctual payment and performance of the Secured Obligations inaccordance with the terms thereof, Debtor hereby grants to the Secured Party acontinuing security interest in and to all of the following property of Debtor,whether now owned or existing or hereafter acquired or arising and regardlessof where located (collectively, “Collateral”):

 

3.1.  Accounts;

 

3.2.  Documents;

 

3.3.  Equipment;

 

3.4.  GeneralIntangibles;

 

3.6.  Instruments;

 

3.7.  Inventory;

 

3.8.  SubsidiaryInterests;

 

3.9.  All otherpersonal property and assets of Debtor;

 

3.10.  Allbooks and records (including, without limitation, customer lists, supplierlists, credit files, computer programs, printouts and other computer materialsand records) of such Debtor pertaining to any of the Collateral; and

 

## 3.11.  AllProceeds of any of the Collateral described in the preceding clauses of thisParagraph, in any form, including without limitation insurance proceeds and allclaims against third parties for loss or damage to or destruction of any or allof the foregoing.

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4.  FurtherAssurances; Covenants.

 

4.1.  Debtorshall not change the location of (a) its chief executive office or chiefplace of business or (b) the locations where it keeps or holds anyCollateral, or any records relating to such Collateral, from the Site unless itshall have given the Secured Party at least 45 days’ prior writtennotice.  Debtor shall not in any eventchange the location of any Collateral if such change would cause the SecurityInterests in such Collateral to lapse or cease to be perfected.

 

4.2.  Debtorshall maintain Inventory only at (a) the Site, (b) at a location inthe United States of which the Secured Party have received at least45 days’ prior written notice, or (c) in transit to a locationspecified in the preceding clauses.

 

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4.3.  Debtorshall not change its name, identity, any tradename used by it or its corporatestructure in any manner unless it shall have given the Secured Party at least45 days’ prior written notice.

 

4.4.  Debtorshall cause the Secured Party to be named as an insured party and loss payee oneach insurance policy covering  risksrelating to any of its Collateral.  Suchinsurance shall be maintained against such risks as are insured against bycompanies of established repute in the same or similar lines of business asDebtor, in amounts, under policies, and with insurers reasonably acceptable tothe Secured Party.  Debtor will deliverto the Secured Party, upon request of the Secured Party, the insurance policiesfor such insurance.  Each such insurancepolicy shall include effective waivers by the insurer of all claims forinsurance premiums against the Secured Party, shall provide that, for so longas any Event of Default shall have occurred and be continuing and the insurershall have received notice thereof from the Secured Party, all insuranceproceeds shall be adjusted with and payable to the Secured Party and shallprovide that no cancellation or termination thereof shall be effective until atleast 30 days after receipt by the Secured Party of written noticethereof.

 

4.5.  Debtorwill, promptly upon request, provide to the Secured Party all information andevidence it may reasonably request concerning the Collateral to enable theSecured Party to enforce the provisions of this Agreement.

 

## 4.6.  Atthe request of the Secured Party, Debtor will join with the Secured Party inexecuting one or more (1) Financing Statements, (2) Copyright RegistrationApplications, and/or (3) Notices of Assignment of Copyright pursuant to anyapplicable law, in form satisfactory to the Secured Party.

 

4.7  Except inthe ordinary course of business, the Debtor shall not, without the priorwritten approval of the Secured Party sell, encumber or otherwise transfer anyCollateral, or agree or attempt to do so.

 

4.8

(a) Debtor shall notifythe Secured Party promptly of: (i) any material delay in Debtor’s performanceof any of its obligations to any account debtor or the assertion of any claims,offsets, defenses or counterclaims by any account debtor, or any disputes withaccount debtors, or any settlement, adjustment or compromise thereof, (ii) allmaterial adverse information relating to the financial condition of any accountdebtor and (iii) any event or circumstance which, to Debtor’s knowledge wouldcause any then existing Accounts to no longer be collected pursuant to theiroriginal terms. No credit, discount, allowance or extension or agreement forany of the foregoing shall be granted to any account debtor without the SecuredParty’s consent, except in the ordinary course of Debtor’s business inaccordance with practices and policies previously disclosed in writing toDebtor. So long as no Event of Default exists or has occurred and iscontinuing, Debtor shall settle, adjust or compromise any claim, offset,counterclaim or dispute with any account debtor. At any time that an Event ofDefault exists or has occurred and is continuing, the Secured Party shall, attheir option, have the exclusive right to settle, adjust or compromise anyclaim, offset, counterclaim or dispute with account debtors or grant anycredits, discounts or allowances.

 

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(b) The Secured Partyshall have the right at any time or times, in the Secured Party’s name or inthe name of a nominee of the Secured Party, to verify the validity, amount orany other matter relating to any Account or other Collateral, by mail,telephone, facsimile transmission or otherwise.

 

(c) The Secured Partymay, at any time or times that an Event of Default exists or has occurred andis continuing, (i) notify any or all account debtors that the Accounts havebeen assigned to the Secured Party and that the Secured Party has a securityinterest therein and the Secured Party may direct any or all accounts debtorsto make payment of Accounts directly to the Secured Party, (ii) extend the timeof payment of, compromise, settle or adjust for cash, credit, return ofmerchandise or otherwise, and upon any terms or conditions, any and allAccounts or other obligations included in the Collateral and thereby dischargeor release the account debtor or any other party or parties in any way liablefor payment thereof without affecting any of the Obligations, (iii) demand,collect or enforce payment of any Accounts or such other obligations, butwithout any duty to do so, and the Secured Party shall not be liable for itsfailure to collect or enforce the payment thereof nor for the negligence of itsagents or attorneys with respect thereto and (iv) take whatever other actionthe Secured Party may deem necessary or desirable for the protection of itsinterests. At any time that an Event of Default exists or has occurred and iscontinuing, at the Secured Party’s request, all invoices and statements sent toany account debtor shall state that the Accounts and such other obligationshave been assigned to the Secured Party and are payable directly and only tothe Secured Party and Debtor shall deliver to the Secured Party such originalsof documents evidencing the sale and delivery of goods or the performance of servicesgiving rise to any Accounts as the Secured Party may require.

 

4.9  With respect to the Equipment:

 

(a) upon the SecuredParty’s request, Debtor shall, at its expense, at any time or times as theSecured Party may request on or after an Event of Default, deliver or cause tobe delivered to the Secured Party written reports or appraisals as to theEquipment in form, scope and methodology acceptable to the Secured Party and byan appraiser acceptable to the Secured Party;

 

###  (b) Debtor shall keep the Equipment in goodorder, repair, running and marketable condition (ordinary wear and tearexcepted);

 

### (c)Debtor shall use the Equipment with all reasonable care and caution and inaccordance with applicable standards of any insurance and in conformity withall material applicable laws;

 

### (d) theEquipment is and shall be used in Debtor’s business and not for personal,family, household or farming use;

 

### (e) theEquipment is now and shall remain personal property and Debtor shall not permitany of the Equipment to be or become a part of or affixed to real property; and

 

### (f)Debtor assumes all responsibility and liability arising from the use of theEquipment unless in the Secured Party’s possession.

 

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4.10  With respect to the Inventory:

 

(a) upon the SecuredParty’s request, Debtor shall, at its expense, no more than once in any twelve(12) month period, but at any time or times as the Secured Party may request onor after an Event of Default, deliver or cause to be delivered to the SecuredParty written reports or appraisals as to the Inventory in form, scope andmethodology acceptable to the Secured Party and by an appraiser acceptable tothe Secured Party, addressed to the Secured Party, upon which the Secured Partyare expressly permitted to rely;

 

(b) Debtor shall produce,use, store and maintain the Inventory with all reasonable care and caution andin accordance with applicable standards of any insurance and in conformity withapplicable laws (including the requirements of the Federal Fair Labor StandardsAct of 1938, as amended and all rules, regulations and orders related thereto);

 

(c) Debtor assumes allresponsibility and liability arising from or relating to the production, use,sale or other disposition of the Inventory; and

 

(d) Debtor shall keep theInventory in good and marketable condition.

 

## 4.11  Debtor shall duly pay and discharge alltaxes, assessments, contributions and governmental charges upon or against itor its properties or assets, except for taxes the validity of which are beingcontested in good faith by appropriate proceedings diligently pursued andavailable to Debtor and with respect to which adequate reserves have been setaside on its books. Debtor shall be liable for any tax or penalties (other thanincome taxes, franchise taxes and any penalties related thereto) imposed on theSecured Party as a result of the financing arrangements provided for herein andDebtor agrees to indemnify and hold the Secured Party harmless with respect tothe foregoing, and to repay to the Secured Party on demand the amount thereof,and until paid by Debtor such amount shall be added and deemed part of theLoan. The foregoing indemnity shall survive the payment of the SecuredObligations and the termination or non-renewal of this Agreement.

 

4.12.  Except in the ordinary course of business,other than the Secured Obligations, Debtor shall not incur, create, assume,become liable in any manner with respect to, or permit to exist, anyobligations or indebtedness.

 

5.  GeneralAuthority. Debtor hereby irrevocably appoints the Secured Party as its trueand lawful attorney, with full power of substitution, in the name of Debtor,the Secured Party or otherwise, for the sole use and benefit of the SecuredParty, but at such Debtor’s expense, to the extent permitted by law toexercise, at any time and from time to time while an Event of Default hasoccurred and is continuing, all or any of the following powers with respect toall or any of the Collateral owned by Debtor: (a) to settle, compromise, compound, prosecute or defend any actionor proceeding with respect to the Collateral, (b) to sell, transfer,assign or otherwise deal in or with the same or the proceeds or avails thereof,as fully and effectually as if the Secured Party were the absolute owner of theCollateral; provided, that the Secured Party shall give Debtor not lessthan 10 days’ prior written notice of the time and place of any sale orother intended disposition of any of the Collateral, except any Collateralwhich is perishable or threatens to decline speedily in value or is of a type 

 

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customarily sold on arecognized market.  Debtor agrees thatsuch notice constitutes “reasonable notification” within the meaning ofSection 9-504(3) of the UCC.

 

# 6.  RemediesUpon Event of Default.

 

6.1.  If anyEvent of Default has occurred and is continuing, the Secured Party may exerciseall other rights of a secured party under the UCC (whether or not in effect inthe jurisdiction where such rights are exercised) and, in addition, the SecuredParty may, without being required to give any notice, except as herein providedor as may be required by mandatory provisions of law, sell the Collateral orany part thereof at public or private sale or at any broker’s board or on anysecurities exchange, for cash, upon credit or for future delivery, and at suchprice or prices as the Secured Party may deem satisfactory.  The Secured Party may be the purchaser ofany or all of the Collateral so sold at any public sale (or, if the Collateralis of a type customarily sold in a recognized market or is of a type which isthe subject of widely distributed standard price quotations, at any privatesale) and thereafter hold the same, absolutely, free from any right or claim ofwhatsoever kind.  Debtor agrees toexecute and deliver such documents and take such other action as the SecuredParty deems necessary or advisable in order that any such sale may be made incompliance with law.  Upon any suchsale, the Secured Party shall have the right to deliver, assign and transfer tothe purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold to itabsolutely, free from any claim or right of whatsoever kind, including anyequity or right of redemption of Debtor which may be waived and Debtor, to theextent permitted by law, hereby specifically waives all rights of redemption,stay or appraisal which it has or may have under any law now existing orhereafter adopted.  The notice of saleshall, (1) in case of a public sale, state the time and place fixed forsuch sale, and (2) in the case of a private sale, state the day afterwhich such sale may be consummated.  Anysuch public sale shall be held at such time or times within ordinary businesshours and at such place or places as the Secured Party may fix in the notice ofsuch sale.  At any such sale theCollateral may be sold in one lot as an entirety or in separate parcels, as theSecured Party may determine.  TheSecured Party shall not be obligated to make any such sale pursuant to any suchnotice.  The Secured Party may, withoutnotice or publication, adjourn any public or private sale or cause the same tobe adjourned from time to time by announcement at the time and place fixed forthe sale, and such sale may be made at any time or place to which the same maybe so adjourned.  In case of any sale ofall or any part of the Collateral on credit or for future delivery, theCollateral so sold may be retained by the Secured Party until the selling priceis paid by the purchaser thereof, but the Secured Party shall not incur anyliability in case of the failure of such purchaser to take up and pay for theCollateral so sold and, in case of any such failure, such Collateral may againbe sold upon like notice.  The SecuredParty, instead of exercising the power of sale herein conferred upon them, mayproceed by a suit or suits at law or in equity to foreclose the SecurityInterests and sell the Collateral, or any portion thereof, under a judgment ordecree of a court or courts of competent jurisdiction.

 

6.2.  For thepurpose of enforcing any and all rights and remedies under this Agreement, ifany Event of Default has occurred and is continuing, then the Secured Party may(a) require Debtor to, and Debtor agrees that it will, at its own expense,forthwith assemble all or any part of the Collateral as directed by the SecuredParty and make it available at a place designated by the Secured Party which is,in its opinion, reasonably convenient to the Secured Party and Debtor, whetherat the premises of Debtor or otherwise, (b) to the extent permitted byapplicable law, enter, with or without process of law and 

 

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without breach of thepeace, any premise where any of the Collateral is or may be located, andwithout charge or liability to it seize and remove such Collateral from suchpremises, (c) have access to and use any of Debtor’s books and records relatingto the Collateral and (d) prior to the disposition of the Collateral,process, repair or recondition it or otherwise prepare it for disposition inany manner and to the extent the Secured Party deems appropriate and, inconnection with such preparation and disposition, use without charge anytrademark, trade name, copyright, patent or technical process used by Debtor.

 

## 6.3.  Anylaboratory which has possession of any of the Collateral is hereby constitutedand appointed by Debtor as pledgeholder for the Secured Party and the SecuredParty may authorize each such pledgeholder to sell all or any portion of theCollateral upon the order and direction of the Secured Party, and Debtor herebywaives any and all claims for damages, or otherwise, for any action taken bysuch pledgeholder.

 

7.  Applicationof Proceeds. Upon the occurrence and during the continuance of an Event ofDefault, the proceeds of any sale of, or other realization upon, all or anypart of the Collateral shall be applied by the Secured Party in the followingorder of priorities:

 

7.1.  First, topayment of the expenses of such sale or other realization, including, on a paripassu basis, reasonable compensation to agents and counsel for the SecuredParty and all expenses, liabilities and advances incurred or made by theSecured Party in connection therewith, and any other unreimbursed expenses forwhich the Secured Party is to be reimbursed under any other agreement orinstrument entered into in connection with the Loan or this Agreement and unpaidfees owing to the Secured Party.

 

7.2.  Next, tothe payment of the Secured Obligations, on a pari passu basis, in accordancewith the provisions of the Loan, until all such amounts have been paid in full.

 

7.3.  Finally,to Debtor or its successors or assigns, or as a court of competent jurisdictionmay direct, of any surplus then remaining from such proceeds.

 

The Secured Party maymake distributions hereunder in cash or in kind or in any combination thereof.

 

8.  Terminationof Security Interest; Release of Collateral. Upon the repayment in full ofall Secured Obligations, the Security Interests shall terminate and all rightsto the Collateral shall revert to Debtor. At any time and from time to time prior to such termination of theSecurity Interests, the Secured Party may release any of the Collateral orrelease Debtor of its obligations hereunder with the prior written consent ofthe Secured Party.

 

9.  GoverningLaw. This Agreement is governed by and construed in accordance with thelaws of the State of California, irrespective of California’s choice-of-lawprinciples.

 

10.  FurtherAssurances. Each party to this Agreement shall execute and deliver allinstruments and documents and take all actions as may be reasonably required orappropriate to carry out the purposes of this Agreement.

 

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11.  Counterpartsand Exhibits. This Agreement may be executed in counterparts, each of whichis deemed an original and all of which together constitute one document.  All exhibits attached to and referenced inthis Agreement are incorporated into this Agreement.

 

12.  Time ofEssence. Time and strict and punctual performance are of the essence withrespect to each provision of this Agreement.

 

13.  Attorney’sFees. The prevailing party(ies) in any litigation, arbitration, mediation,bankruptcy, insolvency or other proceeding (“Proceeding”) relating to theenforcement or interpretation of this Agreement may recover from theunsuccessful party(ies) all costs, expenses, and actual attorney’s fees(including expert witness and other consultants’ fees and costs) relating to orarising out of (a) the Proceeding (whether or not the Proceeding proceedsto judgment), and (b) any post-judgment or post-award proceeding including,without limitation, one to enforce or collect any judgment or award resultingfrom the Proceeding.  All such judgmentsand awards shall contain a specific provision for the recovery of all suchsubsequently incurred costs, expenses, and actual attorney’s fees.

 

14.  Modification.This Agreement may be modified only by a contract in writing executed by theparty to this Agreement against whom enforcement of the modification is sought.

 

15.  Headings.  The paragraph headings in thisAgreement:  (a) are included only forconvenience, (b) do not in any manner modify or limit any of theprovisions of this Agreement, and (c) may not be used in the interpretation ofthis Agreement.

 

16.  PriorUnderstandings.  This Agreement andall documents specifically referred to and executed in connection with thisAgreement:  (a) contain the entire andfinal agreement of the parties to this Agreement with respect to the subjectmatter of this Agreement, and (b) supersede all negotiations, stipulations,understandings, agreements, representations and warranties, if any, withrespect to such subject matter, which precede or accompany the execution ofthis Agreement.

 

17.  Interpretation.  Whenever the context so requires in thisAgreement, all words used in the singular may include the plural (and viceversa) and the word “Person” includes a natural person, a corporation, a firm,a partnership, a joint venture, a trust, an estate or any other entity.  The terms “includes” and “including” do notimply any limitation.  For purposes ofthis Agreement, the term “day” means any calendar day and the term “businessday” means any calendar day other than a Saturday, Sunday or any other daydesignated as a holiday under California Government Code Sections 6700-6701.  Any act permitted or required to beperformed under this Agreement upon a particular day which is not a businessday may be performed on the next business day with the same effect as if it hadbeen performed upon the day appointed. No remedy or election under this Agreement is exclusive, but rather, tothe extent permitted by applicable law, each such remedy and election iscumulative with all other remedies at law or in equity.

 

18.  PartialInvalidity.  Each provision of thisAgreement is valid and enforceable to the fullest extent permitted by law.  If any provision of this Agreement (or theapplication of such provision to any Person or circumstance) is or becomesinvalid or unenforceable, the remainder of this Agreement, and the applicationof such provision to Persons or 

 

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circumstances other thanthose as to which it is held invalid or unenforceable, are not affected by suchinvalidity or unenforceability.

 

19.  Successors-in-Interestand Assigns.  Debtor may not voluntarilyor by operation of law assign, hypothecate, delegate or otherwise transfer orencumber all or any part of its rights, duties or other interests in thisAgreement without the prior written consent of the Secured Party, which consentmay be withheld in the Secured Party’s sole and absolute discretion.  Any such transfer in violation of thisparagraph is void.  Subject to theforegoing and any other restrictions on transferability contained in thisAgreement, this Agreement is binding upon and inures to the benefit of thesuccessors-in-interest and assigns of each party to this Agreement

 

20.  Notices.All notices or other communications required or permitted to be given to aparty to this Agreement shall be in writing and shall be personally delivered,sent by certified mail, postage prepaid, return receipt requested, or sent byan overnight express courier service that provides written confirmation ofdelivery, to such party at the following respective address:

 

SecuredParty:              Spescom Ltd.

P.O. Box 288

Halfway House 1685Midrand

South Africa

Attention:  Hilton Isaacman

 

with a copyto:             Solomon, Ward,Seidenwurm & Smith, LLP

401 B Street, Suite 1200

San Diego, CA 92101

Attention: Norman L.Smith

 

Debtor:                          Altris Software, Inc.

9339 Carroll Park Drive

San Diego, CA 92121

Attention:  John Low

 

Each such noticeor other communication shall be deemed given, delivered and received upon itsactual receipt, except that if it is sent by mail in accordance with thisparagraph, then it shall be deemed given, delivered and received three daysafter the date such notice or other communication is deposited with the UnitedStates Postal Service in accordance with this paragraph.  Any party to this Agreement may give a noticeof a change of its address to the other party(ies) to this Agreement.

 

21.  Waiver.  Any waiver of a default or provision underthis Agreement must be in writing.  Nosuch waiver constitutes a waiver of any other default or provision concerningthe same or any other provision of this Agreement.  No delay or omission by a party in the exercise of any of itsrights or remedies constitutes a waiver of (or otherwise impairs) such right orremedy.  A consent to or approval of anact does not waive or render unnecessary the consent to or approval of anyother or subsequent act.

 

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22.  DraftingAmbiguities.  Each party to thisAgreement has reviewed and revised this Agreement and has had the opportunityto have such party’s legal counsel review and revise this Agreement.  Each party to this Agreement acknowledgesthat this Agreement has been prepared by Solomon Ward Seidenwurm & Smith,LLP (“SWSS”) which represents only the Secured Party, that Debtor is not beingrepresented by SWSS in relation to this Agreement and that Debtor has beenadvised to retain its own legal counsel. The rule of construction thatambiguities are to be resolved against the drafting party or in favor of theparty receiving a particular benefit under an agreement may not be employed inthe interpretation of this Agreement or any amendment to this Agreement.

 

23.  ThirdParty Beneficiaries.  Nothing inthis Agreement is intended to confer any rights or remedies on any Person orentity other than the parties to this Agreement and their respectivesuccessors-in-interest and permitted assignees, unless such rights areexpressly granted in this Agreement to another Person specifically identifiedas a “Third Party Beneficiary.”

 

24.  ARBITRATIONOF DISPUTES.  WITHOUT LIMITING INANY WAY THE SECURED PARTY’S RIGHT TO ENFORCE ANY REMEDY AVAILABLE UNDER THE UCCWITHOUT FORMAL LEGAL OR JUDICIAL ACTION, ANY CONTROVERSY OR CLAIM RELATING TOTHIS AGREEMENT SHALL BE SETTLED BY ARBITRATION IN SAN DIEGO, CALIFORNIA, INACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATIONASSOCIATION, AND JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR(S) MAY BEENTERED IN ANY COURT HAVING JURISDICTION. THE ARBITRATOR(S) SHALL NOT HAVE THE AUTHORITY TO AWARD PUNITIVE DAMAGESAGAINST ANY PARTY(IES) TO THIS AGREEMENT. NO PROVISION OF THIS PARAGRAPH SHALL LIMIT THE RIGHT OF ANY PARTY TOEXERCISE SELF–HELP REMEDIES SUCH AS FORECLOSURE AGAINST OR SALE OF ANYREAL OR PERSONAL PROPERTY COLLATERAL OR SECURITY, OR TO OBTAIN PROVISIONAL ORANCILLARY REMEDIES FROM A COURT OF COMPETENT JURISDICTION BEFORE, AFTER, ORDURING THE PENDENCY OF ANY ARBITRATION OR OTHER PROCEEDING.  THE EXERCISE OF A REMEDY SHALL NOT WAIVE THERIGHT OF EITHER PARTY TO RESORT TO ARBITRATION.

 

**[SignaturePage Follows]**

 

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IN WITNESS WHEREOF,Debtor and the Secured Party have each caused this Security Agreement to beexecuted by its duly authorized representative as of the day and year firstwritten above.

 
|   | DEBTOR:        | ALTRIS SOFTWARE, INC.         |                        |   |
|--------|----------------|-------------------------------|-----------------------------|--------|
|   |           | a California  corporation     |                        |   |
|   |           |                          |                        |   |
|   |           | By:                           | /s/John W. Low              |   |   |   |   |
|   |           |                          | John W. Low                 |   |   |   |
|   |           |                          | Chief Financial Officer     |   |   |   |
|   |           |                          |                        |   |
|   | SECURED PARTY: | SPESCOM LTD.,                 |                        |   |
|   |           | a United Kingdom  corporation |                        |   |
|   |           |                          |                        |   |
|   |           | By:                           | /s/Hilton Isaacman          |   |   |   |
|   |           |                          | Hilton Isaacman             |   |   |   |
|   |           |                          | Director Corporate  Finance |   |   |   |
|        |                |                               |                             |        |  |  |  |  |  |

 

SIGNATURE PAGE TOSECURITY AGREEMENT