Document:

Exhibit 10.1

 

Spescom Software Inc.

Shares of Series I Convertible Preferred Stock and Common Stock Warrants

 

SUBSCRIPTION AGREEMENT

 

March 10, 2006

 

M.A.G. Capital, LLC

Monarch Pointe Fund, Ltd.

Mercator Momentum Fund III,
L.P.

555 South Flower Street, Suite 4200

Los Angeles, California 90071

 

Ladies and Gentlemen:

 

Spescom Software Inc., a
California corporation (the “Company”), hereby confirms its agreement with Monarch
Pointe Fund, Ltd. (“Monarch”),
Mercator Momentum Fund III, L.P. (“MMF” and, together with Monarch, the “Purchasers”) and
M.A.G. Capital, LLC (“MAG”),
as set forth below.

 

1.                                       The Securities. Subject to
the terms and conditions herein contained, the Company proposes to issue and
sell (a) to the Purchasers an aggregate of Two Thousand Four Hundred Fifty
(2,450) shares of its Series I Convertible Preferred Stock (the “Series I Stock”),
which shall be convertible into shares (the “Conversion Shares”) of the Company’s
Common Stock (the “Common
Stock”) in accordance with the formula set forth in the
Certificate of Determination further described below and (b) to the
Purchasers and MAG, warrants, substantially in the form attached hereto as
Exhibit A (the “Warrants”), to acquire up to an aggregate of 925,926
shares of Common Stock (the “Warrant Shares”), in accordance with the terms and
conditions set forth in Section 3 hereof. The rights, preferences and
privileges of the Series I Stock are as set forth in the Certificate of
Determination of Series I Preferred Stock, as amended, as filed with the
Secretary of State of the State of California (the “Certificate of Determination”)
in the form attached hereto as Exhibit B. The number of
Conversion Shares and Warrant Shares that either of the Purchasers or MAG may acquire
at any time is subject to limitation in the Certificate of Determination and in
the Warrants, respectively, so that the aggregate number of shares of Common
Stock of which such Purchaser or MAG and all persons affiliated with such
Purchaser or MAG have beneficial ownership (calculated pursuant to Rule 13d-3
of the Securities Exchange Act of 1934, as amended) does not at any time exceed
9.99% of the Company’s then outstanding Common Stock.

 

The Series I Stock and the Warrants are
sometimes herein collectively referred to as the “Securities.”  This Agreement, the Certificate of
Determination, and the Registration Rights Agreement by and among the Company,
the Purchasers and MAG, entered into concurrently herewith and attached hereto
as Exhibit C, are sometimes herein collectively referred to as the “Transaction Documents.”

 

1

 

The Securities will be offered and sold to the
Purchasers and MAG without such offers and sales being registered under the
Securities Act of 1933, as amended (together with the rules and
regulations of the Securities and Exchange Commission (the “SEC”) promulgated
thereunder, the “Securities
Act”), in reliance on exemptions therefrom.

 

In connection with the sale of the Securities, the
Company has made available (including electronically via the SEC’s EDGAR
system) to the Purchasers and MAG its periodic and current reports, forms,
schedules, proxy statements and other documents (including exhibits and all
other information incorporated by reference) filed with the SEC under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s Annual
Report on Form 10-K for the year ended September 30, 2005, as
amended, its Quarterly Report on Form 10-Q for the quarter ended December 31,
2005 and all subsequent reports, forms, schedules, statements, documents,
filings and amendments filed by the Company with the SEC under the Exchange
Act, are collectively referred to as the “Disclosure Documents.”  All references in this Agreement to financial
statements and schedules and other information which is “contained,” “included”
or “stated” in the Disclosure Documents (or other references of like import)
shall be deemed to mean and include all such financial statements and
schedules, documents, exhibits and other information which is incorporated by
reference in the Disclosure Documents.

 

2.                                       Representations
and Warranties of the Company. Except as set forth on the
Disclosure Schedule (the “Disclosure Schedule”) delivered by the Company to
Purchasers and MAG on the Closing Date (as defined in Section 3 below),
the Company represents and warrants to and agrees with Purchasers and MAG as
follows:

 

(a)                                  The Disclosure
Documents as of their respective dates did not, and will not (after giving
effect to any updated disclosures therein) as of the Closing Date, contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The Disclosure Documents and the documents
incorporated or deemed to be incorporated by reference therein, at the time
they were filed or hereafter are filed with the SEC, complied and will comply,
at the time of filing, in all material respects with the requirements of the Securities
Act and/or the Exchange Act, as the case may be, as applicable.

 

(b)                                 Schedule A attached
hereto sets forth a complete list of the subsidiaries of the Company (the “Subsidiaries”). Each
of the Company and its Subsidiaries has been duly incorporated and each of the
Company and the Subsidiaries is validly existing in good standing as a
corporation under the laws of its jurisdiction of incorporation, with the
requisite corporate power and authority to own its properties and conduct its
business as now conducted as described in the Disclosure Documents and is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the business, condition (financial or other), properties or results
of operations of the Company and the Subsidiaries, taken as a whole (any such
event, a “Material
Adverse Effect”); as of the Closing Date, the Company will have
the authorized, issued and outstanding capitalization set forth in on Schedule B
attached hereto (the “Company
Capitalization”); except as set forth in the Disclosure
Documents or on Schedule A, the Company does not have any
subsidiaries or own

 

2

 

directly or indirectly any
of the capital stock or other equity or long-term debt securities of or have
any equity interest in any other person; all of the outstanding shares of
capital stock of the Company and the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights and are owned free and clear of
all liens, encumbrances, equities, and restrictions on transferability (other
than those imposed by the Securities Act and the state securities or “Blue Sky”
laws) or voting; except as set forth in the Disclosure Documents, all of the
outstanding shares of capital stock of the Subsidiaries are owned, directly or
indirectly, by the Company; except as set forth in the Disclosure Documents, no
options, warrants or other rights to purchase from the Company or any Subsidiary,
agreements or other obligations of the Company or any Subsidiary to issue or
other rights to convert any obligation into, or exchange any securities for,
shares of capital stock of or ownership interests in the Company or any
Subsidiary are outstanding; and except as set forth in the Disclosure Documents
or on Schedule C, there is no agreement, understanding or
arrangement among the Company or any Subsidiary and each of their respective
stockholders or any other person relating to the ownership or disposition of
any capital stock of the Company or any Subsidiary or the election of directors
of the Company or any Subsidiary or the governance of the Company’s or any
Subsidiary’s affairs, and, if any, such agreements, understandings and
arrangements will not be breached or violated as a result of the execution and
delivery of, or the consummation of the transactions contemplated by, the
Transaction Documents.

 

(c)                                  The Company has
the requisite corporate power and authority to execute, deliver and perform its
obligations under the Transaction Documents. Each of the Transaction Documents
has been duly and validly authorized by the Company and, when executed and
delivered by the Company, will constitute a valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its terms
except as the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors’ rights
generally or (ii) general principles of equity and the discretion of the
court before which any proceeding therefore may be brought (regardless of
whether such enforcement is considered in a proceeding at law or in equity)
(collectively, the “Enforceability
Exceptions”).

 

(d)                                 The Series I
Stock and the Warrants have been duly authorized and, when issued upon payment
thereof in accordance with this Agreement, will have been validly issued, fully
paid and non-assessable. The Conversion Shares issuable have been duly
authorized and validly reserved for issuance, and when issued upon conversion
of the Series I Stock in accordance with the terms of the Certificate of
Determination, will have been validly issued, fully paid and non-assessable. The
Warrant Shares have been duly authorized and validly reserved for issuance, and
when issued upon exercise of the Warrants in accordance with the terms thereof,
will have been validly issued, fully paid and non-assessable. The Common Stock
of the Company conforms to the description thereof contained in the Disclosure
Documents. The stockholders of the Company have no preemptive or similar rights
with respect to the Common Stock.

 

(e)                                  No consent,
approval, authorization, license, qualification, exemption or order of any
court or governmental agency or body or third party is required for the
performance of the Transaction Documents by the Company or for the consummation
by the Company of any of the transactions contemplated thereby, or the
application of the proceeds of

 

3

 

the issuance of the
Securities as described in this Agreement, except for such consents, approvals,
authorizations, licenses, qualifications, exemptions or orders (i) as have
been obtained on or prior to the Closing Date, (ii) as are not required to
be obtained on or prior to the Closing Date that will be obtained when
required, or (iii) the failure to obtain which would not, individually or
in the aggregate, have a Material Adverse Effect.

 

(f)                                    Except as set
forth on Schedule D, none of the Company or the Subsidiaries is (i) in
material violation of its articles of incorporation or bylaws (or similar
organizational document), (ii) in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to it or any of its
properties or assets, which breach or violation would, individually or in the
aggregate, have a Material Adverse Effect, or (iii) except as described in
the Disclosure Documents, in default (nor has any event occurred which with
notice or passage of time, or both, would constitute a default) in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate or agreement or
instrument to which it is a party or to which it is subject, which default
would, individually or in the aggregate, have a Material Adverse Effect.

 

(g)                                 The execution,
delivery and performance by the Company of the Transaction Documents and the
consummation by the Company of the transactions contemplated thereby and the
fulfillment of the terms thereof will not (i) violate, conflict with or
constitute or result in a breach of or a default under (or an event that, with
notice or lapse of time, or both, would constitute a breach of or a default
under) any of (A) the terms or provisions of any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate or agreement or instrument to which any of the
Company or the Subsidiaries is a party or to which any of their respective
properties or assets are subject, (B) the Certificate of Incorporation or
bylaws of any of the Company or the Subsidiaries (or similar organizational
document) or (C) any statute, judgment, decree, order, rule or
regulation of any court or governmental agency or other body applicable to the
Company or the Subsidiaries or any of their respective properties or assets or (ii) result
in the imposition of any lien upon or with respect to any of the properties or
assets now owned or hereafter acquired by the Company or any of the
Subsidiaries; which violation, conflict, breach, default or lien would,
individually or in the aggregate, have a Material Adverse Effect.

 

(h)                                 The audited
consolidated financial statements included in the Disclosure Documents present
fairly the consolidated financial position, results of operations, cash flows
and changes in shareholders’ equity of the entities, at the dates and for the
periods to which they relate and have been prepared in all material respects in
accordance with generally accepted accounting principles applied on a
consistent basis; the interim un-audited consolidated financial statements
included in the Disclosure Documents present fairly the consolidated financial
position, results of operations and cash flows of the entities, at the dates
and for the periods to which they relate subject to year-end audit adjustments
and have been prepared in all material respects in accordance with generally
accepted accounting principles applied on a consistent basis with the audited
consolidated financial statements included therein; the selected financial and
statistical data included in the Disclosure Documents present fairly the
information shown therein and have been prepared and compiled in all material
respects on a basis consistent with the audited financial statements included
therein, except as otherwise stated therein; and

 

4

 

each of the auditors
previously engaged by the Company or to be engaged in the future by the Company
is an independent certified public accountant as required by the Securities Act
for an offering registered thereunder.

 

(i)                                     Except as
described in the Disclosure Documents, there is not pending or, to the
knowledge of the Company, threatened any action, suit, proceeding, inquiry or
investigation, governmental or otherwise, to which any of the Company or the
Subsidiaries is a party, or to which their respective properties or assets are
subject, before or brought by any court, arbitrator or governmental agency or
body, that, if determined adversely to the Company or any such Subsidiary,
would, individually or in the aggregate, have a Material Adverse Effect or that
seeks to restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance or sale of the Securities to be sold hereunder or the application
of the proceeds therefrom or the other transactions described in the Disclosure
Documents.

 

(j)                                     The Company and
the Subsidiaries own or possess adequate licenses or other rights to use all
patents, trademarks, service marks, trade names, copyrights and know-how that
are necessary to conduct their businesses as described in the Disclosure
Documents. None of the Company or the Subsidiaries has received any written
notice of infringement of (or knows of any such infringement of) asserted
rights of others with respect to any patents, trademarks, service marks, trade
names, copyrights or know-how that, if such assertion of infringement or
conflict were sustained, would, individually or in the aggregate, have a
Material Adverse Effect.

 

(k)                                  Each of the
Company and the Subsidiaries possesses all licenses, permits, certificates,
consents, orders, approvals and other authorizations from, and has made all
declarations and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other tribunals
presently required or necessary to own or lease, as the case may be, and
to operate its respective properties and to carry on its respective businesses
as now or proposed to be conducted as set forth in the Disclosure Documents (“Permits”), except where
the failure to obtain such Permits would not, individually or in the aggregate,
have a Material Adverse Effect and none of the Company or the Subsidiaries has
received any notice of any proceeding relating to revocation or modification of
any such Permit, except as described in the Disclosure Documents and except
where such revocation or modification would not, individually or in the
aggregate, have a Material Adverse Effect.

 

(l)                                     Subsequent to December 31,
2005 and except as described in the Company’s Quarterly Report on Form 10-Q
for the quarter ended December 31, 2005 or in the Company’s Annual Report
on Form 10-K for the year ended September 30, 2005, as amended, (i) the
Company and the Subsidiaries have not incurred any material liabilities or
obligations, direct or contingent, or entered into any material transactions
not in the ordinary course of business or (ii) the Company and the
Subsidiaries have not purchased any of their respective outstanding capital
stock, or declared, paid or otherwise made any dividend or distribution of any
kind on any of their respective capital stock or otherwise (other than, with
respect to any of such Subsidiaries, the purchase of capital stock by the
Company), (iii) there has not been any material increase in the long-term
indebtedness of the Company or any of the Subsidiaries, (iv) there has not
occurred any event or condition, individually or in the aggregate, that has a
Material Adverse Effect, and (v) the Company and the Subsidiaries have not
sustained any material loss or

 

5

 

interference with respect to
their respective businesses or properties from fire, flood, hurricane,
earthquake, accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding.

 

(m)                               There are no
material legal or governmental proceedings nor are there any material contracts
or other documents required by the Securities Act to be described in a
prospectus that are not described in the Disclosure Documents. Except as
described in the Disclosure Documents, none of the Company or the Subsidiaries
is in default under any of the contracts described in the Disclosure Documents,
has received a notice or claim of any such default or has knowledge of any
breach of such contracts by the other party or parties thereto, except for such
defaults or breaches as would not, individually or in the aggregate, have a
Material Adverse Effect.

 

(n)                                 Each of the
Company and the Subsidiaries has good and marketable title to all real property
described in the Disclosure Documents as being owned by it and good and
marketable title to the leasehold estate in the real property described therein
as being leased by it, free and clear of all liens, charges, encumbrances or
restrictions, except, in each case, as described in the Disclosure Documents or
such as would not, individually or in the aggregate, have a Material Adverse
Effect. All material leases, contracts and agreements to which the Company or
any of the Subsidiaries is a party or by which any of them is bound are valid
and enforceable against the Company or any such Subsidiary, are, to the
knowledge of the Company, valid and enforceable against the other party or
parties thereto and are in full force and effect, in each case subject to the
Enforceability Exceptions.

 

(o)                                 Each of the
Company and the Subsidiaries has filed all necessary federal, state and foreign
income and franchise tax returns, except where the failure to so file such
returns would not, individually or in the aggregate, have a Material Adverse
Effect, and has paid all taxes shown as due thereon; and other than tax
deficiencies which the Company or any Subsidiary is contesting in good faith
and for which adequate reserves have been provided in accordance with generally
accepted accounting principles, there is no tax deficiency that has been
asserted against the Company or any Subsidiary that would, individually or in
the aggregate, have a Material Adverse Effect.

 

(p)                                 None of the
Company or the Subsidiaries is, or immediately after the Closing Date will be,
required to register as an “investment company” or a company “controlled by” an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended (the “Investment
Company Act”).

 

(q)                                 Since January 2002
none of the Company or the Subsidiaries or, to the knowledge of any of such
entities’ directors, officers, employees, agents or controlling persons, has
taken, directly or indirectly, any action for the purpose of causing the
stabilization or manipulation of the price of the Common Stock.

 

(r)                                    None of the
Company, the Subsidiaries or any of their respective Affiliates (as defined in Rule 501(b) of
Regulation D under the Securities Act) directly, or through any agent,
engaged in any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) in
connection with the offering of the Securities or engaged in any other conduct
that would cause such offering to be constitute a

 

6

 

public offering within the
meaning of Section 4(2) of the Securities Act. Assuming the accuracy
of the representations and warranties of the Purchasers in Section 6
hereof, it is not necessary in connection with the offer, sale and delivery of
the Securities to the Purchasers in the manner contemplated by this Agreement
to register any of the Securities under the Securities Act.

 

(s)                                  There is no
strike, labor dispute, slowdown or work stoppage with the employees of the
Company or any of the Subsidiaries which is pending or, to the knowledge of the
Company or any of the Subsidiaries, threatened.

 

(t)                                    Each of the
Company and the Subsidiaries carries general liability insurance coverage
comparable to other companies of its size and similar business.

 

(u)                                 Each of the
Company and the Subsidiaries maintains internal accounting controls which
provide reasonable assurance that (i) transactions are executed in
accordance with management’s authorization, (ii) transactions are recorded
as necessary to permit preparation of its financial statements and to maintain
accountability for its assets, and (iii) access to its material assets is
permitted only in accordance with management’s authorization and (iv) the
values and amounts reported for its material assets are compared with its
existing assets at reasonable intervals.

 

(v)                                 The Company
does not know of any claims for services, either in the nature of a finder’s
fee or financial advisory fee, with respect to the offering of the Securities
and the transactions contemplated by the Transaction Documents.

 

(w)                               The Common
Stock is traded on the Over-the-Counter Bulletin Board (the “OTC BB”). Except as
described in the Disclosure Documents, the Company currently is not in
violation of, and the consummation of the transactions contemplated by the
Transaction Documents will not violate, any rule of the National
Association of Securities Dealers.

 

(x)                                   The Company is
eligible to use Form S-1 for the resale of the Conversion Shares by
Purchasers or their transferees and the Warrant Shares by Purchasers, MAG or
their transferees. The Company has no reason to believe that it is not capable
of satisfying the registration or qualification requirements (or an exemption
therefrom) necessary to permit the resale of the Conversion Shares and the
Warrant Shares under the securities or “blue sky” laws of any jurisdiction
within the United States.

 

(y)                                 Set forth on Schedule E
is the Company’s intended use of the proceeds from this transaction.

 

(z)                                   Except as set
forth on Schedule F, to the Company’s knowledge, none of the
officers or directors of the Company (i) has been convicted of any crime
(other than traffic violations or misdemeanors not involving
fraud) or is currently under investigation or indictment for any
such crime, (ii) has been found by a court or governmental agency to have
violated any securities or commodities law or to have committed fraud or
is currently a party to any legal proceeding in which either is alleged, (iii) has been
the subject of a proceeding under the bankruptcy laws or any similar state
laws, or (iv) has been an officer, director, general partner, or
managing member of an entity which has been the subject of such a
proceeding.

 

7

 

3.                                       Purchase, Sale,
Exchange and Delivery of the Securities. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, (i) the Company
agrees to issue and sell to Monarch, and Monarch agrees to purchase from the
Company, a total of 2,320 shares of Series I Stock as follows: (A) 370
shares of Series I Stock at $1,000.00 per share as set forth below, and (B) 1,950
shares of Series I Stock in exchange for 1,950 shares of Series H
Convertible Preferred Stock of the Company owned by Monarch, represented by
stock certificates nos. H-01 and H-02; and (ii) the Company agrees to
issue and sell to MMF, and MMF agrees to purchase from the Company, a total of
130 shares of Series I Stock at $1,000.00 per share as set forth below. In
connection with the purchase and sale of Series I Stock, for no additional
consideration, the Purchasers and MAG will receive Warrants to purchase an
aggregate of 925,926 shares of Common Stock, as set forth below.

 

The closing of the transactions described
herein (the “Closing”)
shall take place at a time and on a date
(the “Closing Date”)
to be specified by the parties, which will be no later than 5:00 p.m.
(Pacific time) on March 10, 2006. On the Closing Date, the Company shall
deliver (i) a certificate in definitive form for 2,320 shares of Series I
Stock issued to Monarch, (ii) a certificate in definitive form for
130 shares of Series I Stock issued to MMF, (iii) Warrants in the amounts
of (A) 342,593 to Monarch, (B) 120,370 to MMF, and (C) 462,963
to MAG, and (iv) the Subscription Agreement, Certificate of Determination
and Registration Rights Agreement, each duly executed on behalf of the Company.
On the Closing Date, (i) Monarch shall deliver Three Hundred Seventy
Thousand Dollars ($370,000) and MMF shall deliver One Hundred Thirty Thousand
Dollars ($130,000)  (such two amounts
together, the “Purchase
Price”), in each case, by wire transfer of immediately available
funds to an account as directed by the Company, and (ii) each of the
Purchasers and MAG shall deliver the Subscription Agreement and Registration
Rights Agreement, each duly executed on behalf of each such Purchaser and MAG. The
Closing will occur when all documents and
instruments necessary or appropriate to effect the transactions contemplated
herein are exchanged by the parties and all actions taken at the Closing will
be deemed to be taken simultaneously. Within five (5) business days
following the Closing, Monarch shall deliver stock certificates nos. H-01 and
H-02 in the aggregate amount of One Thousand Nine Hundred Fifty (1,950) shares
of Series H Convertible Preferred Stock of the Company; provided, however,
that notwithstanding the physical delivery of such stock certificates following
the Closing, such stock certificates shall be deemed cancelled and the shares
of Series H Convertible Preferred Stock represented thereby shall be
deemed to no longer be outstanding as of the Closing.

 

4.                                       Certain
Covenants of the Company. The Company covenants and agrees with
Purchasers as follows:

 

(a)                                  None of the
Company or any of its Affiliates will sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any “security” (as defined in the
Securities Act) which would be integrated with the sale of the Securities in a
manner which would require the registration under the Securities Act of the
Securities.

 

(b)                                 The Company
will not become, at any time prior to the expiration of three years after the
Closing Date, an open-end investment company, unit investment trust,

 

8

 

closed-end investment
company or face-amount certificate company that is or is required to be
registered under the Investment Company Act.

 

(c)                                  None of the
proceeds of the Series I Stock will be used to reduce or retire any
insider note or convertible debt held by an officer or director of the Company.

 

(d)                                 Subject to Section 10
of this Agreement, the Conversion Shares and the Warrant Shares will be
eligible for trading on the OTC BB or such market on which the Company’s shares
are subsequently listed or traded, immediately following the effectiveness of
the Registration Statement.

 

(e)                                  The Company
will use reasonable efforts to do and perform all things required to be
done and performed by it under this Agreement and the other Transaction
Documents and to satisfy all conditions precedent on its part to the
obligations of the Purchasers to purchase and accept delivery of the
Securities.

 

5.                                       Conditions of
the Purchasers’ Obligations. The obligations of the
Purchasers to consummate the Closing is subject to the following conditions
unless waived in writing by the Purchasers:

 

(a)                                  The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects (other than representations and
warranties with a Material Adverse Effect qualifier, which shall be true and
correct as written) on and as of the Closing Date; the Company shall have
complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior
to the Closing Date.

 

(b)                                 None of the
issuance and sale of the Securities pursuant to this Agreement or any of the
transactions contemplated by any of the other Transaction Documents shall be
enjoined (temporarily or permanently) and no restraining order or other
injunctive order shall have been issued in respect thereof; and there shall not
have been any legal action, order, decree or other administrative proceeding
instituted or, to the Company’s knowledge, threatened against the Company or
against either Purchaser relating to the issuance of the Securities or either
Purchaser’s activities in connection therewith or any other transactions
contemplated by this Agreement, the other Transaction Documents or the
Disclosure Documents.

 

(c)                                  The Purchasers
shall have received an opinion of Gibson, Dunn & Crutcher LLP with
respect to the authorization of the Series I Stock, the Conversion Shares,
the Warrants and the Warrant Shares and other customary matters in the form attached
hereto as Exhibit D.

 

6.                                       Representations
and Warranties of the Purchasers.

 

(a)                                  Each of the
Purchasers and MAG represents and warrants to the Company that the Securities
to be acquired by it hereunder (including the Conversion Shares and the Warrant
Shares that it may acquire upon conversion or exercise of the Series I
Stock or the Warrants, respectively) are being acquired for their own account
for investment and with no

 

9

 

intention of distributing or
reselling such Securities (including the Conversion Shares and the Warrant
Shares that it may acquire upon conversion or exercise thereof, as the
case may be) or any part thereof or interest therein in any
transaction which would be in violation of the securities laws of the United
States of America or any State. Nothing in this Agreement, however, shall
prejudice or otherwise limit the right of each Purchaser or MAG to sell or
otherwise dispose of all or any part of such Conversion Shares or Warrant
Shares under an effective registration statement under the Securities Act and
in compliance with applicable state securities laws or under an exemption from
such registration. By executing this Agreement, each Purchaser and MAG further
represents that such Purchaser or MAG, as the case may be, does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to any person with respect to any of the
Securities.

 

(b)                                 Each of the
Purchasers and MAG understands that the Securities (including the Conversion
Shares and the Warrant Shares that it may acquire upon conversion or
exercise thereof, as the case may be) have not been registered under the
Securities Act and may not be offered, resold, pledged or otherwise
transferred except (a) pursuant to an exemption from registration under
the Securities Act (and, if requested by the Company, based upon an opinion of
counsel acceptable to the Company) or pursuant to an effective registration
statement under the Securities Act and (b) in accordance with all
applicable securities laws of the states of the United States and other
jurisdictions.

 

Each of the Purchasers and MAG agrees to the
imprinting, so long as appropriate, of the following legend on the Securities
(including the Conversion Shares and the Warrant Shares that it may acquire
upon conversion or exercise thereof, as the case may be):

 

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.

 

The legend set forth above may be removed if
and when the Conversion Shares or the Warrant Shares, as the case may be,
are disposed of pursuant to an effective registration statement under the
Securities Act or in the opinion of counsel to the Company experienced in the
area of United States Federal securities laws such legends are no longer
required under applicable requirements of the Securities Act. The Series I
Stock, the Warrants, the Conversion Shares and the Warrant Shares shall also
bear any other legends required by applicable Federal or state securities laws,
which legends may be removed when in the opinion of counsel to the Company
experienced in the applicable securities laws, the same are no longer required
under the applicable requirements of such securities laws. The Company agrees
that it will provide either Purchaser or MAG, upon request, with a substitute
certificate, not bearing such legend at such time as such legend is no longer
applicable. Each of the Purchasers and MAG agrees that, in connection with any
transfer of the Conversion Shares or the Warrant Shares by it pursuant to an
effective registration statement under the Securities Act, such Purchaser or
MAG, as the case

 

10

 

may be, will comply
with all prospectus delivery requirements of the Securities Act. The Company
makes no representation, warranty or agreement as to the availability of any
exemption from registration under the Securities Act with respect to any resale
of the Series I Stock, the Warrants, the Conversion Shares or the Warrant
Shares.

 

(c)                                  Each of the
Purchasers and MAG represents and warrants to the Company that it is an “accredited
investor” within the meaning of Rule 501(a) of Regulation D under the
Securities Act and that neither such Purchaser nor MAG is an “underwriter”
within the meaning of Section 2(11) of the Securities Act. Each of the
Purchasers and MAG represents and warrants to the Company that neither such Purchaser
nor MAG learned of the opportunity to acquire Securities or any other security
issuable by the Company through any form of general advertising or public
solicitation.

 

(d)                                 Each of the
Purchasers and MAG represents and warrants to the Company that it has such
knowledge, sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, having been represented by counsel, and has so
evaluated the merits and risks of such investment and is able to bear the
economic risk of such investment and, at the present time, is able to afford a
complete loss of such investment.

 

(e)                                  Each of the
Purchasers and MAG represents and warrants to the Company that its overall
commitment to investments which are not readily marketable is not
disproportionate to its net worth, and its purchase of the Securities will not
cause such overall commitment to become excessive.

 

(f)                                    Each of the
Purchasers and MAG recognizes that the purchase of the Securities involves a
high degree of risk.

 

(g)                                 Each of the
Purchasers and MAG represents and warrants to the Company that all information
it has provided to the Company including, but not limited to, its financial
position and its knowledge of financial and business matters is true, correct
and complete as of the date of execution of this Subscription Agreement. Each
of the Purchasers and MAG undertakes to provide promptly to the Company written
notice of any material changes in its financial position or otherwise, and such
information shall be true, correct and complete as of the date given. Each of
the Purchasers and MAG understands that the Company will rely to a material
degree upon the representations contained therein.

 

(h)                                 Each of the Purchasers
and MAG represents and warrants to the Company that (i) the purchase of
the Securities to be purchased by it has been duly and properly authorized and
this Agreement has been duly executed and delivered by it or on its behalf and
constitutes the valid and legally binding obligation of such Purchaser or MAG,
enforceable against such Purchaser or MAG in accordance with its terms, subject
to the Enforceability Exceptions, (ii) the purchase of the Securities to
be purchased by it does not conflict with or violate its charter, by-laws or
any law, regulation or court order applicable to it; and (iii) the
purchase of the Securities to be purchased by it does not impose any penalty or
other onerous condition on such Purchaser or MAG under or pursuant to any
applicable law or governmental regulation.

 

11

 

(i)                                     Each of the
Purchasers and MAG represents and warrants to the Company that neither it nor
any of its directors, officers, employees, agents, partners, members,
controlling persons or shareholders holding 5% or more of the Common Stock
outstanding on the Closing Date, has taken or will take, directly or
indirectly, any actions designed, or might reasonably be expected to cause or
result in the stabilization or manipulation of the price of the Common Stock.

 

(j)                                     Each of the
Purchasers and MAG acknowledges it or its representatives have reviewed and
understand the Transaction Documents and Disclosure Documents and further
acknowledges that it or its representatives have been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and risks of investing
in the Securities; (ii) access to information about the Company and the
Company’s financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment in
the Securities; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy and completeness of
the information contained in the Disclosure Documents.

 

(k)                                  Each of the
Purchasers and MAG represents and warrants to the Company that it has based its
investment decision solely upon the information contained in the Disclosure
Documents and such other information as may have been provided to it or
its representatives by the Company in response to their inquiries, and has not
based its investment decision on any research or other report regarding the
Company prepared by any third party (“Third Party Reports”). Each of the Purchasers
and MAG understands and acknowledges that (i) the Company does not endorse
any Third Party Reports and (ii) its actual results may differ
materially from those projected in any Third Party Report.

 

(l)                                     Each of the
Purchasers and MAG represents and warrants to the Company that no oral or
written representations have been made and no oral or written information has
been furnished to them or their advisors in connection with this offering that
were in any way inconsistent with the information set forth in the Disclosure
Documents.

 

(m)                               Each of the
Purchasers and MAG understands and acknowledges that (i) any
forward-looking information included in the Disclosure Documents supplied to
such Purchaser or MAG by the Company or its management is subject to risks and
uncertainties, including those risks and uncertainties set forth in the
Disclosure Documents; and (ii) the Company’s actual results may differ
materially from those projected by the Company or its management in such
forward-looking information.

 

(n)                                 Each of the
Purchasers and MAG understands and acknowledges that (i) the Securities
are offered and sold without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends in part on, and
that the Company and its counsel will rely upon, the accuracy and truthfulness
of the foregoing representations and each of the Purchasers and MAG hereby
consents to such reliance.

 

12

 

(o)                                 Each of the
Purchasers and MAG understands that no U.S. federal or state agency, or any
agency or governmental or regulatory authority in any other country, including
without limitation, the U.S. Securities and Exchange Commission, has passed
upon the Securities or made any finding or determination as to the fairness of
this investment.

 

(p)                                 Each of the
Purchasers and MAG represents and warrants to the Company that it is not a
prohibited investor under the anti-money laundering or anti-terrorism laws of
any jurisdiction, including without limitation, any country, territory, nation
or national association.

 

(q)                                 Each of the
Purchasers and MAG understands that the Company and its assets may be
subject to the laws and regulations of many jurisdictions, including but not
limited to anti-terrorism laws and anti-money laundering laws. Neither MAG nor
either Purchaser, nor any person or entity who controls MAG or either
Purchaser, nor, to the best of MAG’s and the Purchasers’ knowledge, any person
or entity who owns any direct equity interest in MAG or either Purchaser, is
identified on the list of “Specially Designated Nationals and Blocked Persons”
(“SDNs”) maintained by the U.S. Department of Treasury’s Office of Foreign
Assets Control (“OFAC”), and neither MAG nor either Purchaser is owned or
controlled by any SDN. Neither MAG nor either Purchaser is involved in business
arrangements or otherwise engaged in transactions with or involving countries
subject to economic or trade sanctions imposed by the United States Government,
or with or involving SDNs in violation of the regulations maintained by the
OFAC. Each of the Purchasers and MAG is in full compliance with the Bank
Secrecy Act (31 U.S.C. § 5311 et. seq.) and 18 U.S.C. §§ 1956 and
1957 and the regulations under such statutes; and any other applicable
anti-terrorist or anti-money laundering Laws and regulations.

 

(r)                                    Each of the
Purchasers and MAG represents and warrants to the Company that neither MAG nor
either of the Purchasers, nor any of their affiliates has, directly or
indirectly, offered to “short sell”, contracted to “short sell,” otherwise
engaged in any “short selling” or encouraged others to “short sell” the
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 short sale (whether or not against the box) and any
similar hedging or derivative securities transaction.

 

7.                                       Covenants of
Purchasers.

 

(a)                                  Not to Short
Sell Stock. Each of the Purchasers and MAG, 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” the 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.

 

13

 

8.                                       Termination.

 

(a)                                  This Agreement may be
terminated in the sole discretion of the Company by notice to Purchasers and
MAG if at the Closing Date:

 

(i)                                     the
representations and warranties made by either Purchaser or MAG in Section 6
are not true and correct in all material respects; or

 

(ii)                                  as to the
Company, the sale of the Securities hereunder (i) is prohibited or
enjoined by any applicable law or governmental regulation or (ii) subjects
the Company to any penalty, or in its reasonable judgment, other onerous
condition under or pursuant to any applicable law or government regulation that
would materially reduce the benefits to the Company of the sale of the
Securities to Purchasers, so long as such regulation, law or onerous condition
was not in effect in such form at the date of this Agreement.

 

(b)                                 This Agreement may be
terminated by either Purchaser or by MAG by notice to the Company given in the
event that the Company shall have failed, refused or been unable to satisfy all
material conditions on its part to be performed or satisfied hereunder on
or prior to the Closing Date, or if after the execution and delivery of this
Agreement and immediately prior to the Closing Date, trading in securities of
the Company on the OTC BB shall have been suspended.

 

(c)                                  This Agreement may be
terminated by mutual written consent of all parties.

 

9.                                       Registration. The Company
shall use commercially reasonable efforts to prepare and file with the SEC a
registration statement (the “Registration Statement”), covering the resale of the
maximum number of Conversion Shares issuable upon conversion of the Series I
Stock then issued to Purchasers and the Warrant Shares issuable upon exercise
of the Warrants (collectively, the “Registrable Securities”), within thirty (30)
days following the Closing Date, as set forth in the Registration Rights
Agreement.

 

10.                                 Redemption. At any time
after the Closing, the Company may, at its option, issue a redemption notice to
the Purchasers and MAG (a “Redemption Notice”) providing that the Company (or
its designee) will purchase all or a portion of the outstanding Series I
Stock and Warrants (including any Common Stock issued upon the conversion of
the Series I Stock or exercise of the Warrants). The Redemption Notice
shall specify (a) the redemption date (the “Redemption Date”), which date
shall be at least five (5) trading days after the date the Redemption
Notice is received by Purchasers and MAG, and (b) the number of shares of Series I
Stock and/or Warrants to be redeemed. The redemption price for the Series I
Stock shall equal $1500 per share (or the equivalent value on an as-converted
basis for each share of Common Stock). The redemption price per share for the
Warrants shall equal 150% of the exercise price per share. Unless full payment
is received by Purchasers and MAG within three (3) trading days after the
Redemption Date, the Redemption Notice shall be void.

 

11.                                 Event of
Default. If an Event of Default (as defined below) occurs and remains uncured
for a period of 15 days, the Purchasers and MAG shall have the right to
exercise any or all of the rights given to the Purchasers and MAG relating to
the Securities, as further described in the Certificate of Determination. In
addition, the Conversion Price (as defined in the Certificate of Determination)
shall be reduced from 85% of the Market Price (as defined in

 

14

 

the
Certificate of Determination) to 75% of the Market Price, subject to the
Ceiling Price and Floor Price as those terms are defined in the Certificate of
Determination.

 

Neither Purchaser need provide and the Company
hereby waives any presentment, demand, protest or other notice of any kind, and
either Purchaser may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be
rescinded and annulled by such Purchaser at any time prior to payment
hereunder. No such rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.

 

An “Event of Default” shall include the commencement by the
Company of a voluntary case or proceeding under the bankruptcy laws or the
Company’s failure to: (i) discharge or stay a bankruptcy proceeding within
60 days of such action being taken against the Company, (ii) file the
Registration Statement with the SEC within thirty (30) days following the
Closing Date, (iii) maintain trading of the Company’s Common Stock on the
OTC BB except for any periods when the stock is listed on the NASDAQ Small
Stock Market, the NASDAQ National Stock Market, the AMEX or the NYSE; or (iv) deliver
to either Purchaser, or such Purchaser’s broker, as directed, Common Stock that
such Purchaser has converted within three (3) business days of such
conversion.

 

12.                                 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 and confirmed in writing (i) if to the Company, at the addresses
set forth below, or (ii) if to a Purchaser or MAG, to the address set
forth for such party on the signature page hereto.

 

	
   

  	
  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

  

 

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

 

15

 

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 6:00 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 6:00 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.

 

13.                                 Survival Clause. The
respective representations, warranties, agreements and covenants of the Company
and each Purchaser and MAG set forth in this Agreement shall survive until the
first anniversary of the Closing.

 

14.                                 Fees and
Expenses. Within three (3) days of Closing, the Company
agrees to pay (i) Purchasers’ legal expenses incurred in connection with
the preparation and negotiation of the Transaction Documents up to $15,000 and (ii) to
MAG a due diligence fee in the amount of $10,000.

 

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

 

16.                                 Successors. This
Agreement shall inure to the benefit of and be binding upon each Purchaser, MAG
and the Company and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provisions herein
contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person. Neither the Company nor either Purchaser may assign
this Agreement or any rights or obligation hereunder without the prior written
consent of the other party.

 

17.                                 No Waiver;
Modifications in Writing. No failure or delay on the part of the
Company, MAG or either Purchaser in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company, MAG or either Purchaser at
law or in equity or otherwise. No waiver of or consent to any departure by the
Company, MAG or either Purchaser from any provision of this Agreement shall be
effective unless signed in writing by the party entitled to the benefit
thereof, provided that notice of any such waiver shall be given to each party
hereto as set forth below. Except as otherwise provided herein, no amendment,
modification or termination of any provision of this Agreement shall be
effective unless signed in writing by or on behalf of each of the Company and
MAG, and each Purchaser. Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company, MAG or either Purchaser from

 

16

 

the
terms of any provision of this Agreement shall be effective only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no notice to or demand
on the Company in any case shall entitle the Company to any other or further
notice or demand in similar or other circumstances.

 

18.                                 Entire Agreement. This
Agreement, together with the Transaction Documents, constitutes the entire
agreement among the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, among the parties hereto with
respect to the subject matter hereof and thereof.

 

19.                                 Severability. If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby.

 

20.                                 APPLICABLE LAW. THE VALIDITY
AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH
HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO PROVISIONS RELATING TO CONFLICTS
OF LAW TO THE EXTENT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD
BE REQUIRED THEREBY. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE
THAT ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT
MAY BE BROUGHT ONLY IN STATE OR FEDERAL COURTS LOCATED IN THE CITY OF
LOS ANGELES, CALIFORNIA AND HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS FOR SUCH PURPOSE.

 

21.                                 Counterparts. This
Agreement may be executed in two or more counterparts and may be
delivered by facsimile transmission, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.

 

22.                                 If the
foregoing correctly sets forth our understanding, please indicate your
acceptance thereof in the space provided below for that purpose, whereupon this
Agreement shall constitute a binding agreement among the Company, the
Purchasers and MAG.

 

17

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  Spescom Software Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Keith Stentiford

  	
   

  
	
   

  	
   

  	
  Keith Stentiford

  
	
   

  	
   

  	
  Chief Executive Officer

  

 

18

 

ACCEPTED AND AGREED:

 

 

	
  Monarch
  Pointe Fund Ltd.

  	
   

  	
  Mercator
  Momentum Fund III, L.P.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  M.A.G. CAPITAL, LLC

  	
   

  	
  By:

  	
  M.A.G. CAPITAL, LLC

  
	
  Its:

  	
  General Partner

  	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Harry Aharonian

  	
   

  	
   

  	
  By:

  	
  /s/ Harry Aharonian

  	
   

  
	
   

  	
  Harry Aharonian

  	
   

  	
   

  	
  Harry Aharonian

  
	
   

  	
  Portfolio Manager,

  	
   

  	
   

  	
  Portfolio Manager,

  
	
   

  	
  Authorized Representative

  	
   

  	
   

  	
  Authorized Representative

  
	
   

  	
   

  	
   

  
	
  M.A.G.
  Capital, LLC

  	
   

  	
  Addresses for Notice to
  Purchasers and MAG:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  M.A.G., Capital, LLC

  
	
   

  	
   

  	
  555 South Flower Street, Suite 4200

  
	
  By:

  	
  /s/ Harry Aharonian

  	
   

  	
   

  	
  Los Angeles, California
  90071

  
	
   

  	
  Harry Aharonian

  	
   

  	
  Attention: David Firestone

  
	
   

  	
  Portfolio Manager,

  	
   

  	
  Facsimile: (213) 533-8285

  
	
   

  	
  Authorized Representative

  	
   

  	
   

  
	
   

  	
   

  	
  with copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  David C. Ulich, Esq.

  
	
   

  	
   

  	
  Sheppard, Mullin, Richter &
  Hampton LLP

  
	
   

  	
   

  	
  333 South Hope Street, 48th
  Floor

  
	
   

  	
   

  	
  Los Angeles, California
  90071

  
	
   

  	
   

  	
  Facsimile: (213) 620-1398

  

 

19Exhibit 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

 

1

 

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

 

2

 

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

 

3

 

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

 

4

 

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.

 

5

 

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

  

 

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.

 

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.

 

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: 

  	
   /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

  	
   

  
					

 

8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}]]