**Exhibit 10.28**

 

**EXHIBIT B**

 

**SECURITY AGREEMENT**

 

THIS SECURITYAGREEMENT is made and executed as of the 16th day of April 2004, by and betweenTIME AMERICA, INC., a Nevada corporation (hereinafter called “Debtor”) andFrances L. Simek (hereinafter called “Secured Party”).  Capitalized terms used but not otherwisedefined herein shall have the meaning assigned to such terms in that certainNote Purchase Agreement dated as of April 16, 2004 (the “Note PurchaseAgreement”).

 

**WITNESSETH:**

 

In order tosecure the due and timely payment of all of the Secured Indebtedness (ashereinafter defined), including the due and timely performance by Debtor of allof the covenants, agreements and undertakings of Debtor made herein, Debtorhereby grants to Secured Party a continuous and continuing security interest inall of the following property now owned or at any time hereafter acquired byus, or in which we now have or at any time in the future may acquire any right,title or interest (the “Collateral”): all accounts, inventory, equipment, goods, documents, instruments(including, without limitation, promissory notes), contract rights, generalintangibles (including, without limitation, payment intangibles and an absoluteright to license on terms no less favorable than those currently in effectamong our affiliates, but not own intellectual property), chattel paper,supporting obligations, investment property, letter-of-credit rights,trademarks and tradestyles in which we now have or hereafter may acquire anyright, title or interest, all proceeds and products thereof (including, withoutlimitation, proceeds of insurance) and all additions, accessions andsubstitutions thereto or therefore. In the event Debtor wishes to finance theacquisition of any hereafter acquired equipment and has obtained a commitmentfrom a financing source to finance such equipment from an unrelated thirdparty, Secured Party agrees to release its security interest on such hereafteracquired equipment so financed by such third party financing source.

 

ARTICLE I

 

SECURED INDEBTEDNESS

 

1.1           This Security Agreementis made to provide collateral and security for the payment and performance byDebtor of all of the following:

 

(a)           Debtor’sNote, dated as of even date herewith, issued pursuant to the Note PurchaseAgreement, payable to the order of Secured Party with interest and with a finalmaturity date of April 1, 2009 together with any and all extensions, renewals,modifications, substitutions and changes in form thereof (collectively, the“Notes”);

 

(b)           Theamount of all reasonable expenditures made and obligations incurred by SecuredParty in attempting to remedy any material default on the part of Debtor inrespect of this Security Agreement or the Notes;

 

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(c)           Theamount of all expenditures made and obligations incurred by Secured Party inattempting to collect any Secured Indebtedness or to enforce any right orremedy for realizing upon any Collateral for any Secured Indebtedness; and

 

(d)           Intereston all amounts expended by Secured Party for any of the purposes specified in(b) and (c) next hereinabove at an annual rate of interest equal to 18% perannum.

 

(All of the foregoing isreferred to herein as the “Secured Indebtedness”.)

 

ARTICLE II

 

REPRESENTATIONS

 

Debtorrepresents to Secured Party as follows:

 

2.1           Debtor is dulyorganized and existing under the laws of the State of Nevada.

 

2.2           The execution, deliveryand performance of this Security Agreement are within Debtor’s corporatepowers, have been duly authorized and are not in contravention of lawapplicable to Debtor or the powers of Debtor’s charter, bylaws or otherincorporation papers or of any indenture agreement or undertaking to whichDebtor is a party or by which it is bound.

 

2.3           Debtor is the owner ofthe Collateral and has good right and authority to grant a security interest inthe Collateral.

 

2.4           There are no presentlyoutstanding liens, security interests or encumbrances in or on the Collateralor the proceeds (except those list in 2.5), nor any financing statementscovering the Collateral or the proceeds thereof, except for the securityinterest granted in this Security Agreement and the financing statementsexecuted pursuant hereto.

 

2.5           The address of Debtor’splace of business is correctly set forth at the beginning of this SecurityAgreement.

 

ARTICLE III

 

COVENANTS

 

So long as theSecured Indebtedness or any part thereof remains unpaid, Debtor, for itself,its successors and assigns, covenants and agrees with Secured Party, itssuccessors and assigns, as follows:

 

3.1           Debtor shall makeprompt payment, as the same becomes due, of all the Secured Indebtedness inaccordance with the terms and provisions of the agreements evidencing suchIndebtedness.

 

3.2           Debtor shall maintainits corporate existence and pay all necessary corporate franchise and licensetaxes, fees and charges.

 

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3.3           Debtor shall pay allreasonable expenses and reimburse Secured Party for any reasonableexpenditures, including reasonable attorneys’ fees and legal expenses, inconnection with Secured Party’s exercise of any of its rights and remediesunder Article IV or Secured Party’s protection of the Collateral and itssecurity interest therein.

 

3.4           Debtor shall at alltimes keep accurate and complete records of the Collateral and its proceeds.

 

3.5           Debtor agrees toexecute such documents and perform all acts and things which Secured Party maydeem necessary to perfect and continue to perfect the security interest createdby this Security Agreement, to protect the Collateral and to enforce thesecurity interest, including the execution and filing of financing statements,which appointment as attorney-in-fact is irrevocable and coupled with aninterest.

 

3.6           Notwithstanding thesecurity interest in proceeds granted herein, Debtor shall not sell, lend,rent, lease or otherwise dispose of the equipment forming a part of theCollateral, except for dispositions made in the ordinary course of businessconsistent with past practice, or any interest therein, and Debtor shall keepsuch Collateral free from unpaid charges, including taxes, and from liens,encumbrances and security interests other than that of Secured Party and willwarrant and defend the Collateral against the claims and demands of all otherpersons, except the holders of the security interests described herein.

 

3.7           Debtor shall pay beforedelinquency all taxes and assessments upon the Collateral or for its use oroperation.

 

3.8           Debtor shall insure theCollateral constituting Goods (as defined in Article 9 of the Arizona UniformCommercial Code) with companies acceptable to Secured Party against suchcasualties and in such amounts as Secured Party shall require.

 

3.9           The Collateralconstituting Goods will be properly maintained in good condition and will notbe misused or abused, wasted or allowed to deteriorate, except for the ordinarywear and tear of its intended primary use.

 

3.10         If Debtor shall defaultin paying when due any tax, assessment or charge levied upon the Collateral orany part thereof or if Debtor fails to maintain the Collateral as aboveprovided, Secured Party may at its option and without waiver of any righthereunder, pay such tax, assessment or charge, or take whatever action isnecessary to maintain the Collateral and in each such case the amount paid inrespect thereof shall be payable to Secured Party forthwith with interest at18% per annum until paid and shall become part of the indebtedness secured bythis Security Agreement.

 

3.11         The equipment forming apart of the Collateral will be used in the business of Debtor and shall remainin Debtor’s possession or control at all times.

 

3.12         Debtor shall providednotice to Secured Party within ten days after changing the address of itsprincipal place of business.

 

3.13         Ifthe Collateral is evidenced by promissory notes, trade acceptances or other

 

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instruments for the payment ofmoney, Debtor will, at the request of Secured Party, immediately deliver themto Secured Party, appropriately endorsed to Secured Party’s order, Debtorwaives presentment, demand, notice of dishonor, protest and notice of protest.

 

ARTICLE IV

 

ASSIGNMENT OF PAYMENTS;CERTAIN POWERS OF SECURED PARTY

 

Subject to the provisions of the Subordination Agreement, Debtor herebyauthorizes and directs each issuer and each account debtor and each otherperson or entity obligated to make payment in respect of any of the intangibleproperty constituting Collateral (each issuer and each such account debtor andother person or entity being herein called a “Collateral Obligor”) to pay overto Secured Party (on behalf of all of the holders of the Notes), its officers,agents or assigns, upon demand by Secured Party, all or any part of theCollateral without making any inquiries as to the status or balance of theSecured Indebtedness and without any notice to or further consent ofDebtor.  To facilitate the rights ofSecured Party hereunder, Debtor hereby authorizes Secured Party, its officers,employees, agents or assigns upon the occurrence of a default hereunder, and atany time thereafter:

 

(a)           to notify Collateral Obligors of thesecurity interest in the respective Collateral created hereunder and to collectall or any part of the Collateral without further notice to or further consentby Debtor, and Debtor hereby constitutes and appoints Secured Party the trueand lawful attorney of Debtor (such agency being coupled with an interest),irrevocably, with power of substitution, in the name of Debtor or in its ownname or otherwise, to take any of the actions described in the followingclauses (b), (c), (d), (e) and (f);

 

(b)           to ask, demand, collect, receive, receiptfor, sue for, compound and give acquittance for any and all amounts which maybe or become due or payable under the Collateral and to settle and/or adjustall disputes and/or claims directly with any Collateral Obligor and tocompromise, extend the time for payment arrange for payment in installments,otherwise modify the terms of, or release, any of the Collateral, on such termsand conditions as Secured Party may determine (without thereby incurringresponsibility to or discharging or otherwise affecting the liability of Debtorto Secured Party under this Security Agreement or otherwise);

 

(c)           to direct delivery of, receive, open anddispose of all mail addressed to Debtor and to execute, sign, endorse, transferand deliver (in the name of Debtor or in its own name or otherwise) any and allreceipts or other orders for the payment of money drawn on the Collateral andall notes, acceptances, commercial paper, drafts, checks, money orders andother instruments given in payment or in part payment thereof and all invoices,freight and express bills and bills of lading, storage receipts, warehousereceipts and other instruments and documents in respect of any of theCollateral and any other documents necessary to evidence, perfect and realizeupon the security interests and obligations of this Security Agreement;

 

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(d)           in its discretion to file any claim or takeany other action or proceeding which Secured Party may deem necessary orappropriate to protect and preserve the rights, titles and interests of SecuredParty hereunder;

 

(e)           to sign the name of Debtor to financingstatements, drafts against Collateral Obligors, assignments or verifications ofany of the Collateral and notices to Collateral Obligors.

 

Secured Party hereby agrees that any action taken by a Secured Partyhereunder shall be taken on behalf of all Holders of the Notes and any amountscollected shall be paid over to each Holder in accordance with the terms of theNotes and the Note Purchase Agreement. Unless and until a default hereunder shall have occurred, Debtor shall beentitled, except as herein provided and subject to the terms of any other loandocument, receive and retain all distributions on the Collateral or any partthereof.

 

The powers conferred on Secured Party pursuant to this Article IV areconferred solely to protect Secured Party’s interest in the Collateral andshall not impose any duty or obligation on Secured Party to perform any of thepowers herein conferred.

 

ARTICLE V

 

REMEDIES IN EVENT OF DEFAULT

 

5.1           The term “default” asused in this Security Agreement shall mean the occurrence of any event ofdefault as defined in the Note or the occurrence of any of the followingevents:

 

(a)           Thefailure of Debtor to make due and punctual payment of the Secured Indebtednesssecured hereby, principal or interest, or any part thereof, as the same shallbecome due and payable, whether at the scheduled due date, maturity or whenaccelerated pursuant to any power to accelerate held by Secured Party.

 

(b)           Thefailure of Debtor punctually and properly to observe, keep or perform anycovenant, agreement or condition relating to the Secured Indebtedness or hereinrequired to be observed, kept or performed, if such failure continues forthirty (30) days after written notice and demand by Secured Party for theperformance of such covenant, agreement or condition.

 

(c)           Anymaterial representation made in this Security Agreement shall prove to beuntrue, and shall not be cured within fifteen (15) days after the discoverythereof.

 

(d)           Debtordeclares itself insolvent or is determined to be insolvent by a court of competentjurisdiction, or makes an assignment for the benefit of creditors.

 

(e)           Areceiver is appointed for all or substantially all of the properties of Debtoror of the Collateral or any part thereof.

 

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(f)            Debtoris adjudicated a bankrupt or requests, either by way of petition or answer,that Debtor be adjudicated a bankrupt or that Debtor be allowed or granted anycomposition, rearrangement, extension, reorganization or other relief under anybankruptcy law or under any other law for the relief of debtors now orhereafter existing; and such judgment is nor vacated within ninety (90) daysthereof.

 

(g)           Thedissolution or other termination of Debtor.

 

5.2           Upon the occurrence ofa default and pursuant to the terms of that certain Subordination Agreementdated as of March 22, 2004, by and among the Debtor, the Secured Party, JosephL. Simek and Laurus Master Fund, Ltd. (the “Subordination Agreement”), SecuredParty shall have the option, with or without notice, of declaring all theSecured Indebtedness in its entirety to be immediately due and payable.

 

5.3           Upon the occurrence ofa default and pursuant to the provisions of the Subordination Agreement,Secured Party may exercise its right of enforcement under the UniformCommercial Code in force in the State of Arizona at the date of this SecurityAgreement.  In conjunction with,addition to or substitution for those rights and remedies:

 

(a)           SecuredParty may enter upon Debtor’s premises to take possession of, assemble andcollect the Collateral or to render it unusable; and

 

(b)           SecuredParty may require Debtor to assemble the Collateral and make it available at aplace Secured Party designates which is mutually convenient to allow SecuredParty to take possession or dispose of the Collateral; and

 

(c)           SecuredParty may waive any default or remedy any default in any reasonable mannerwithout waiving the default remedied and without waiving any other prior orsubsequent default; and

 

(d)           Writtennotice mailed to Debtor at its address set forth at the beginning of thisSecurity Agreement ten (10) days prior to the date of public sale of theCollateral or prior to the date after which private sale of the Collateral willbe made shall constitute reasonable notice.

 

5.4           Also upon theoccurrence of a default and pursuant to the provisions of the SubordinationAgreement, Secured Party may at any time, whether before or after anyrevocation of such power and authority or the maturity of any of the SecuredIndebtedness, (i) notify any parties obligated on any of the Accounts, notesreceivable, contracts or General Intangibles to make payment to Secured Partyof any amounts due or to become due thereunder and enforce collection of anysuch Accounts, notes receivable, contracts or General Intangibles by suit orotherwise and surrender, release or exchange all or any part thereof, orcompromise or extend or renew for any period (whether or not longer than theoriginal period) any obligations thereunder or evidenced thereby; (ii) Debtorwill, at its own expense, notify any parties obligated on any of the Accounts,notes receivable, contracts or General Intangibles to make payment to theSecured Party of any amounts due or to become due thereunder; and (iii) SecuredParty is authorized to endorse, in the name of Debtor, any item howsoeverreceived by Secured Party, representing any payment on or other proceeds of anyof the Collateral.  In each instance inwhich Secured Party

 

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may elect hereunder to effectdirect collection of any one or more Accounts, notes receivable, contracts orGeneral Intangibles, Secured Party is also entitled to take possession of allbooks and records of Debtor relating to the Debtor’s Accounts, notes receivable,contracts or General Intangibles and Debtor will not in any manner take orsuffer any action to be taken to hinder, delay or interfere with the SecuredParty’s attempts to effect collection.

 

5.5           In addition to theabove, Secured Party shall have and may exercise, pursuant to the provisions ofthe Subordination Agreement, all other rights conferred by law or under thisSecurity Agreement and may resort to any remedy existing at law or in equityfor the collection of the Secured Indebtedness and for the enforcement of thecovenants and agreements contained herein and the resort to any remedy shallnot prevent the concurrent or subsequent employment of any other appropriateremedy or remedies.

 

5.6           The rights grantedhereunder are cumulative of any and all other security now or hereafter held bySecured Party or other holder for payment of the Secured Indebtedness andSecured Party may resort to any security now or hereafter existing for thepayment of such indebtedness in such portions and in such order as may seembest to Secured Party in its sole and uncontrolled discretion.  No failure on the part of Secured Party toexercise and no delay in exercising any right, power or remedy hereunder shalloperate as a waiver thereof nor shall any single or partial exercise by SecuredParty of any right, power or remedy hereunder preclude any other or furtherexercise thereof or the exercise of any right, power or remedy.

 

ARTICLE VI

 

MISCELLANEOUS

 

6.1           When all of the SecuredIndebtedness has been paid in full and all obligations and liabilities ofDebtor hereunder shall have been performed and discharged, then and in thatcase only the security interests evidenced hereby or provided for herein shallterminate and shall be released at the expense of Debtor and the Collateralthen held as such by Secured Party shall become free and clear of such securityinterests.  In such event, Secured Partyshall execute such instruments, including, but not limited to, TerminationStatements, necessary to give effect to this Section 6.1.

 

6.2           No modification orwaiver of any provision of this Security Agreement nor consent to any departureby Debtor therefrom shall in any event be effective unless the same shall be inwriting and signed by Secured Party and then such waiver or consent shall beeffective only in the specific instances, for the purpose for which given andto the extent therein specified.  Nonotice to nor demand on Debtor in any case shall of itself entitle Debtor toany other or further notice or demand in similar or other circumstances.

 

6.3           Secured Party may enterupon Debtor’s premises at any reasonable time to inspect the Collateral andDebtor’s books and records pertaining to the Collateral or its proceeds andDebtor shall assist Secured Party in whatever way necessary to make any suchinspection.

 

6.4           Secured Party may atany time notify the account debtors or obligors of any accounts, chattel paper,negotiable instruments or other evidences of indebtedness remitted by Debtor toSecured Party as proceeds to pay Secured Party directly.

 

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6.5           Secured Party may, byany employee or employees Secured Party may designate, execute, sign, endorse,transfer or deliver in the name of Debtor, notes, checks, drafts or other instruments,for the payment of money and receipts, certificates of origin, applications forcertificates of title or any other documents necessary to evidence, perfect andrealize upon the security interests and obligations of this Security Agreement.

 

6.6           Secured Party mayassign this Security Agreement so that the assignee shall be entitled to therights and remedies of Secured Party hereunder and in the event of suchassignment, Debtor will assert no claims or defenses it may have against theassignee except those granted in this Security Agreement.

 

6.7           All notices andcommunications provided for herein shall be delivered or mailed, registered orcertified, postage prepaid, addressed to the parties hereto at their addressesset forth at the beginning of this Security Agreement, or such other address asany party hereto shall hereafter designate by written notice to the otherparty.

 

6.8           A determination thatany provision of this Security Agreement is unenforceable or invalid shall notaffect the validity or enforceability of any other provision.

 

6.9           Unless the contextclearly indicates otherwise, “Debtor” and “Secured Party” as used in thisSecurity Agreement include the respective successors and assigns of thoseparties.

 

6.10         The law governing thisSecurity Agreement shall be that of the State of Arizona in force at the dateof this Security Agreement.

 

IN WITNESSWHEREOF, this Security Agreement has been duly executed as of the date firstabove written.

 

 

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|   | TIME  AMERICA, INC.       |
|--------|---------------------------|
|   |                      |
|   | By:                       | /s/ Thomas  S. Bednarik |   |
|   | Name: Thomas  S. Bednarik |
|   | Title:  President and CEO |
|   |                      |
|   |                      |
|   | INVESTOR                  |
|   |                      |
|   |                      |
|   | By:                       | /s/ Frances  L. Simek |   |
|   | Name:  Frances L. Simek   |
|        |                           |  |  |  |

 

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