Document:

Exhibit 10.2

 

THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS.  THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO TIME AMERICA, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED.

 

SECURED CONVERTIBLE TERM NOTE

 

FOR VALUE RECEIVED, TIME AMERICA, INC., a Nevada corporation (the “Borrower”), hereby promises to pay to
LAURUS MASTER FUND, LTD., c/o Ironshore Corporate Services Ltd., P.O. Box 1234 G.T.,
Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax:
345-949-9877 (the “Holder”) or its
registered assigns or successors in interest, on order, the sum of TWO MILLION
DOLLARS ($2,000,000.00), together with any accrued and unpaid interest hereon,
on March 22, 2007 (the “Maturity Date”)
if not sooner paid.

 

Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Securities Purchase Agreement
dated as of the date hereof between the Borrower and the Holder (the “Purchase Agreement”).

 

The following terms shall apply to this Note:

 

ARTICLE I

INTEREST & AMORTIZATION

 

1.1                                 Interest
Rate and Payment.  (a) Subject to
Sections 4.10 and 5.6 hereof, interest payable on this Note shall accrue at a
rate per annum (the “Interest Rate”)
equal to the “prime rate” published in The Wall Street Journal from time
to time.  The prime rate shall be
increased or decreased as the case may be for each increase or decrease in the
prime rate in an amount equal to such increase or decrease in the prime rate;
each change to be effective as of the day of the change in such rate.  The Interest Rate shall not be less
than  four  percent (4%) unless the Company shall be in compliance with
Section 2.2 hereof.  If the Company
has satisfied the requirements of 
Section 2.2 hereof, the Interest Rate will be subject to adjustment
as set forth in Section 1.1(b). In no event, however, shall the Interest
Rate be less than zero percent 0.0%). 
Interest shall be payable monthly in arrears commencing on April 1,
2004, on the first day of each consecutive calendar month thereafter (each, a “Repayment
Date”), and on the Maturity Date, whether by acceleration or
otherwise.

 

(b) On the
last business day of each month hereafter until the Maturity Date (each a
“Determination Date”), the Interest Rate shall be adjusted: if (i) the Company
shall have registered

 

1

 

the
shares of the Company’s common stock underlying each of the conversion of the
Note and that certain warrant issued to Holder on a registration statement
declared effective by the Securities and Exchange Commission (the “SEC”), and
(ii) the volume weighted average price of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market (as defined in Section 4.7 hereof)
for the five (5)  consecutive trading
days immediately preceding a Determination Date exceeds the then applicable
Fixed Conversion Price, the Interest Rate for the succeeding calendar month
shall automatically be  reduced by the
greater of  (i) one percent  (1.0%) or (ii) two percent (2.0%)  if there is an effective Registration
Statement (as defined in the Registration Rights Agreement of even date
herewith), for each incremental twenty five percent (25%) increase in the
market price of the Common Stock above the then applicable Fixed Conversion
Price, provided, however, that in no event shall the Interest Rate exceed the
Interest Rate on the date hereof.  If the
average closing price of the Common Stock for the five (5) trading days
immediately preceding the start of any such month is below the then Fixed
Conversion Price, the Interest Rate for any such month will be reset to the
“prime rate” published in The Wall Street Journal from time to time.

 

1.2           Minimum
Monthly Principal Payments. Amortizing payments of the aggregate principal
amount outstanding under this Note at any time 
(the “Principal Amount”)
shall begin on June 1, 2004 and shall recur on the first calendar day of each
succeeding month thereafter until the Maturity Date (each, an “Amortization Date”) as set forth in the
table below:

 

	
  Date

  	
   

  	
  Principal
  Amount

  	
   

  
	
  6/1/04

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  71/04

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  8/1/04

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  9/1/04

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  10/1/04

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  11/1/04

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  12/1/04

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  1/1/05

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  2/1/05

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  3/1/05

  	
   

  	
   

  	
  $

  	
  50,000.00

  	
   

  
	
  4/1/05

  	
   

  	
   

  	
  $

  	
  50,000.00

  	
   

  
	
  5/1/05

  	
   

  	
   

  	
  $

  	
  50,000.00

  	
   

  
	
  6/1/05

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  7/1/05

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  8/1/05

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  9/1/05

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  10/1/05

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  11/1/05

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  12/1/05

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  1/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  2/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  3/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  4/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  5/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  6/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  7/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  8/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  9/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  10/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  11/1/06

  	
   

  	
   

  	
  $

  	
  72,083.34

  	
   

  
	
  12/1/06

  	
   

  	
   

  	
  $

  	
  94,166.68

  	
   

  
	
  1/1/07

  	
   

  	
   

  	
  $

  	
  94,166.68

  	
   

  
	
  2/1/07

  	
   

  	
   

  	
  $

  	
  94,166.68

  	
   

  

 

2

 

Subject to Section 3 below, beginning on the first Amortization
Date, the Borrower shall make monthly payments to the Holder on each Repayment
Date, each in the amount set forth above, together with any accrued and unpaid
interest  to date on such portion of the
Principal Amount plus any and all other amounts which are then owing under this
Note but have not been paid (collectively, the “Monthly Amount”).

 

ARTICLE II

CONVERSION REPAYMENT OPTION

 

2.1                                 (a)
Payment of Monthly Amount in Cash or Common Stock.  Subject to the terms hereof, the Holder
shall have the sole option to determine whether to elect to accept  payment of the Monthly Amount on each
Repayment Date either in cash or in shares of Common Stock (as defined in the
Purchase Agreement), or a combination of both. 
Each month by the fifth (5th) business day prior to each
Amortization Date (the “Notice Date”),
the Holder  shall deliver to Borrower a
written  notice in the form of Exhibit B
attached hereto electing to convert the Monthly Amount payable on the next
Repayment Date in either cash or Common Stock, or a combination of both (each,
a “Repayment Election Notice”).  If a Repayment Election Notice is not
delivered by  the Holder on or
before  the applicable Notice Date for
such Repayment Date, then the Borrower shall pay the Monthly Amount due on such
Repayment Date  in cash.  Any portion of the Monthly Amount paid in
cash on a Repayment Date, shall be paid to the Holder an amount equal to 102%
of  the principal portion of the Monthly
Amount due and owing to Holder on the Repayment Date.  If the Holder converts 
all or a portion of the Monthly Amount in shares of Common Stock, the
number of such shares to be issued by the Borrower to the Holder on such
Repayment Date shall be the number

 

3

 

determined by dividing (x) the portion of the Monthly Amount to be paid
in shares of Common Stock, by (y) the then applicable Fixed Conversion
Price.  For purposes hereof, the initial
“Fixed Conversion Price” means
$1.17.

 

(b)           Monthly Amount
Conversion Guidelines.  Subject to
Sections 2.1(a),  2.2, and 3.2
hereof,  the Holder  shall 
elect to convert  all or a
portion of the Monthly Amount due on each 
Repayment Date in shares of Common Stock if  the average closing price of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market (as defined in Section 4.7 hereof)
for the five (5)  trading days
immediately preceding such Repayment Date was greater  than 110% of the Fixed Conversion Price.   Any part of the Monthly Amount due on  a Repayment Date that the Holder  has not elected to convert into shares of
Common Stock shall be paid by the Borrower in cash on such Repayment Date. Any
part of the Monthly Amount due on such Repayment Date which the Holder has  elected to convert  into shares of Common Stock but which must be paid in cash (as a
result of the closing price of the Common Stock on one or more of the five (5)
trading days immediately  preceding the
applicable Repayment Date was less than 110% of the Fixed Conversion Price)
shall be paid  in cash at the rate of
102% of the Monthly Amount otherwise due on the Repayment Date within three (3)
business days of the applicable Repayment Date.

 

2.2                                 No
Effective Registration. 
Notwithstanding anything to the contrary herein and subject to
applicable securities laws,  none
of  the Borrower’s  obligations to the Holder may be converted
into Common Stock unless (a) either (i) an effective current Registration
Statement (as defined in the Registration Rights Agreement) covering the shares
of Common Stock to be issued in connection with satisfaction of such
obligations exists, or (ii) an exemption from registration of the Common Stock
is available to pursuant to Rule 144 of the Securities Act and (b) no  Event of Default hereunder exists and is
continuing, unless such Event of Default is cured within any applicable cure
period or  is otherwise waived in
writing by the Holder in whole or in part at the Holder’s option.

 

Any amounts  converted by the Holder  pursuant to this Section 2.2 shall be deemed
to constitute payments of outstanding principal applying to Monthly Amounts for
the remaining Repayment Dates in chronological order.

 

2.3                                 Optional
Redemption in Cash.  The Borrower
will have the option of prepaying this Note (“Optional
Redemption”) by paying to the Holder a sum of money equal to one
hundred fifteen percent (115%) of the outstanding principal amount of this Note
together with accrued but unpaid interest thereon and any and all other sums
due, accrued or payable to the Holder arising under this Note, the Security
Agreement, or any Ancillary Agreement 
(as defined in the Security Agreement) (the “Redemption Amount”) outstanding on the day written notice of
redemption (the “Notice of Redemption”)
is given to the Holder. The Notice of Redemption shall specify the date for
such Optional Redemption (the “Redemption
Payment Date”) which date shall be ten (10) days after the date of
the Notice of Redemption (the “Redemption
Period”). A Notice of Redemption shall not be effective with respect
to any portion of this Note for which the Holder has a pending

 

4

 

election to convert pursuant to Section 3.1, or for conversions
elected to be made by the Holder pursuant to Section 3.1 during the
Redemption Period.  The Redemption
Amount shall be determined as if such Holder’s conversion elections had been
completed immediately prior to the date of the Notice of Redemption. On the
Redemption Payment Date, the Redemption Amount must be paid in good funds to
the Holder.  In the event the Borrower
fails to pay the Redemption Amount on the Redemption Payment Date, then such
Redemption Notice will be null and void.

 

ARTICLE III

CONVERSION RIGHTS

 

3.1.                              Holder’s Conversion
Rights.  Subject to the requirement
of Section 2.1 (b) hereof,  the
Holder shall have the right, but not the obligation, to convert all or any
portion of the then aggregate outstanding 
principal amount  of this Note,
together with interest and fees due hereon, into shares of Common Stock subject
to the terms and conditions set forth in this Article III.  The Holder may exercise such right by
delivery to the Borrower of a written notice of conversion not less than one
(1) day prior to the date upon which such conversion shall occur.  The date upon which such conversion shall
occur is (the “Conversion Date”).

 

3.2                                 Conversion Limitation.  Notwithstanding anything contained herein to
the contrary, the Holder shall not be entitled to convert pursuant to the terms
of this Note an amount that would be convertible into that number of Conversion
Shares which would exceed the difference between the number of shares of Common
Stock beneficially owned by such Holder or issuable upon exercise of warrants
held by such Holder and 4.99% of the outstanding shares of Common Stock of the Borrower.  For the purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The
Holder may void the Conversion Share limitation described in this
Section 3.2 upon 75 days prior notice to the Borrower or without any
notice requirement upon an Event of Default.

 

3.3                                 Mechanics of Holder’s
Conversion. (a) In the event that the Holder elects to convert
this Note into Common Stock, the Holder shall give notice of such election by
delivering an executed and completed notice of conversion (“Notice of
Conversion”) to the Borrower and such Notice of Conversion shall
provide a breakdown in reasonable detail of the Principal Amount, accrued
interest and fees being converted.  On
each Conversion Date (as hereinafter defined) and in accordance with its Notice
of Conversion, the Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its records and shall use its
best efforts to provide written notice thereof to the Borrower within two (2)
business days after the Conversion Date. 
Each date on which a Notice of Conversion is delivered or telecopied to
the Borrower in accordance with the provisions hereof shall be deemed a
Conversion Date (the “Conversion Date”). A form of Notice of
Conversion to be employed by the Holder is annexed hereto as Exhibit A.

 

(b) Pursuant to the terms of the Notice of
Conversion, the Borrower will use its best efforts to issue instructions to the
transfer agent accompanied by an opinion of counsel within one (1) business

 

5

 

day of the date of the delivery to Borrower of the  Notice of Conversion  and shall cause the transfer agent to transmit
the certificates representing the Conversion Shares to the Holder by crediting
the account of the Holder’s designated broker with the Depository Trust
Corporation (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system within three (3) business
days after receipt by the Borrower of the Notice of Conversion (the “Delivery
Date”).  In the case of the
exercise of the conversion rights set forth herein the conversion privilege
shall be deemed to have been exercised and the Conversion Shares issuable upon
such conversion shall be deemed to have been issued upon the date of receipt by
the Borrower of the Notice of Conversion. 
The Holder shall be treated for all purposes as the record holder of
such Common Stock, unless the Holder provides the Borrower written instructions
to the contrary.

 

3.4                                 Conversion
Mechanics.

 

(a)                                  The number of shares of
Common Stock to be issued upon each conversion of this Note shall be determined
by dividing that portion of the principal and interest and fees to be
converted, if any, by the then applicable Fixed Conversion Price.  In the event of any conversions of
outstanding principal amount under this Note in part pursuant to this
Article III, such conversions shall be deemed to constitute conversions of
outstanding principal amount applying to Monthly Amounts for the remaining
Repayment Dates in chronological order. 
By way of example, if the original principal amount of this Note is
$2,000,000, the Holder converted $50,000.00 of such original principal amount prior
to the first Repayment Date and the Monthly Amortization is $30,000.00, then
(1) the principal amount of the Monthly Amount due on the first Repayment Date
would equal $0.00, (2) the principal amount of the Monthly Amount due on the
second Repayment Date would equal $10,000.00 and (3) the principal amount of
the Monthly Amount due on the third Repayment Date would be $30,000.00.

 

(b)                                 The
Fixed Conversion Price and number and kind of shares or other securities to be
issued upon conversion is subject to adjustment from time to time upon the
occurrence of certain events, as follows:

 

A.                                   Stock
Splits, Combinations and Dividends. 
If the shares of Common Stock are subdivided or combined into a greater
or smaller number of shares of Common Stock, or if a dividend is paid on the
Common Stock in shares of Common Stock, the Fixed Conversion Price or the
Conversion Price, as the case may be, shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the
case of combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.

 

B.                                     During
the period the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of

 

6

 

Common Stock upon the full conversion of this Note.  The Borrower represents that upon issuance,
such shares will be duly and validly issued, fully paid and
non-assessable.  The Borrower agrees
that its issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing and
issuing stock certificates to execute and issue the necessary certificates for
shares of Common Stock upon the conversion of this Note.

 

C.                                     Share
Issuances.  Subject to the provisions of
this Section 3.5, if the Borrower shall at any time 35 days after the
Closing Date and prior to the conversion or repayment in full of the Principal
Amount issue any shares of Common Stock to a person other than the Holder
(except (i) pursuant to Subsections A or B above; (ii) pursuant to options,
warrants, or other obligations to issue shares outstanding on the date hereof
as disclosed to Holder in writing; or (iii) pursuant to options that may be
issued under any employee incentive stock option and/or any qualified stock
option plan adopted by the Borrower) for a consideration per share (the “Offer
Price”) less than the Fixed Conversion Price in effect at the time of such
issuance, then the Fixed Conversion Price shall be immediately reset to such
lower Offer Price. For purposes hereof, the issuance of any security of the
Borrower convertible into or exercisable or exchangeable for Common Stock shall
result in an adjustment to the Fixed Conversion Price at the time of issuance
of such securities.

 

D.            Reclassification,
etc.  If the Borrower at any time
shall, by reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes, this Note, as to
the unpaid Principal Amount and accrued interest thereon, shall thereafter be
deemed to evidence the right to purchase an adjusted number of such securities
and kind of securities as would have been issuable as the result of such change
with respect to the Common Stock immediately prior to such reclassification or
other change.

 

3.5                                 Issuance
of New Note.  Upon any partial
conversion of this Note, a new Note containing the same date and provisions of
this Note shall, at the request of the Holder, be issued by the Borrower to the
Holder for the principal balance of this Note and interest which shall not have
been converted or paid. The Borrower will pay no costs, fees or any other
consideration to the Holder for the production and issuance of a new Note.

 

ARTICLE IV

EVENTS
OF DEFAULT

 

Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder may make all sums of principal, interest
and other fees then remaining unpaid hereon and all other amounts payable
hereunder due and payable within five (5) days after written notice from Holder
to Borrower (each occurrence being a “Default
Notice Period”).  In the
event of such an acceleration, the amount due and owing to the Holder shall be
125% of the outstanding principal amount of the Note (plus accrued and unpaid
interest and fees, if any).  If, with
respect to any Event of Default other than a payment default described in
Section 4.1 below, within the Default Notice Period the Borrower cures the
Event of Default, the Event of Default will be deemed to no

 

7

 

longer exist and any rights and remedies of  Holder pertaining to such Event of Default will be of no further
force or effect.

 

The occurrence of any of the following events is an “Event of Default”:

 

4.1                                 Failure
to Pay Principal, Interest or other Fees. 
The Borrower fails to pay when due any installment of principal,
interest or other fees hereon in accordance herewith, or the Borrower fails to
pay when due any amount due under any other promissory note issued by Borrower
and such failure continues for a period of three (3) days after such payment is
the due.

 

4.2                                 Breach
of Covenant.  The Borrower breaches
any material covenant or other term or condition of this Note or the Purchase
Agreement in any material respect and such breach, if subject to cure,
continues for a period of thirty (30) days after the occurrence thereof, except
where a longer cure period has been provided.

 

4.3                                 Breach
of Representations and Warranties. 
Any material representation or warranty of the Borrower made herein, in
the Purchase Agreement, or in any Related Document (as defined in the Purchase
Agreement) shall be materially false or misleading and shall not be cured for a
period of fifteen (15) days after the occurrence thereof.

 

4.4                                 Receiver
or Trustee.  The Borrower shall make
an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be appointed.

 

4.5                                 Judgments.  Any money judgment, writ or similar final
process shall be entered or filed against the Borrower or any of its property
or other assets for more than $250,000, and shall remain unvacated, unbonded or
unstayed for a period of ninety (90) days.

 

4.6                                 Bankruptcy.  Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower which is not vacated within ninety (90) days.

 

4.7                                 Stop
Trade.  An SEC stop trade order or
Principal Market trading suspension of the Common Stock shall be in effect for
5 consecutive days or 5 days during a period of 10 consecutive days, excluding
in all cases a suspension of all trading on a Principal Market, provided
that the Borrower shall not have been able to cure such trading suspension
within 30 days of the notice thereof or list the Common Stock on another
Principal Market within 60 days of such notice.  The “Principal Market” for the Common Stock shall include the
NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System,
American Stock Exchange, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock,
or any securities exchange or other securities market on which the Common Stock
is then being listed or traded.

 

8

 

4.8    Failure to Deliver
Common Stock or Replacement Note.  The
Borrower’s failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note, and Section 9 of the Purchase
Agreement, if such failure to timely deliver Common Stock shall not be cured
within two (2) Business Days after written notice.  If Borrower is required to issue 
a replacement Note  to Holder and
Borrower shall  fail to deliver
such  replacement Note within seven (7)
Business Days after receipt of a written request from the Purchaser to replace
the Note.

 

4.9  Default
Under Related Agreements.  The
occurrence and continuance of any Event of Default as defined in the Related
Agreements.

 

4.10                           Cross-Default.  An occurrence of a default under any
indebtedness or other obligations of the Borrower to each of  Frances L. Simek and Joseph L. Simek (each
an “Investor”), as more fully described in separate  Notes dated March 22, 2004 issued by the Borrower in favor
of each Investor and in separate Security Agreements dated March 22, 2004
by and between each Investor and the Borrower.

 

4.11                           Breach in Subordination
Provisions.  Any of the
Borrower, Frances L. Simek or Joseph L. Simek breach any provisions in the
certain subordination agreement dated as of March 22, 2004 by and among
the Borrower, Ms. Simek, Mr. Simek and the Holder.

 

DEFAULT RELATED PROVISIONS

 

4.12                           Payment
Grace Period.  The Borrower shall
have a three (3) business day grace period to pay any monetary amounts due
under this Note or the Purchase Agreement or any Related Document, after which
grace period a default interest rate of two percent (2%) per month  shall apply to the monetary amounts due
hereunder.

 

4.13                           Conversion
Privileges.  The conversion
privileges set forth in Article III shall remain in full force and effect
immediately from the date hereof and until this Note is paid in full.

 

4.14                           Cumulative
Remedies.  The remedies under this
Note shall be cumulative.

 

ARTICLE V

MISCELLANEOUS

 

5.1                                 Failure
or Indulgence Not Waiver.  No
failure or delay on the part of the Holder hereof in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.  All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

 

5.2                                 Notices.  Any notice herein required or permitted to
be given shall be in writing and shall be deemed effectively given:  (a) upon receipt of successful transmission
by  facsimile, with

 

9

 

original deposited with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt, (b) upon
personal delivery to the party notified, (c) one day after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (d)
one day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.  All communications shall be sent to the
Borrower shall be sent to Time America, Inc., 51 West Third Street, Suite 310,
Tempe, Arizona 85281, Attention: Craig J. Smith, Chief Financial Officer,
Facsimile: (480) 967-5444, with a copy to Gregory R. Hall, Esq, Facsimile:
(602) 253-8129, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to John E. Tucker, Esq., 825 Third
Avenue, 14th Floor, New York, New York 10022, facsimile number (212)
541-4434, or at such other address as the Borrower or the Holder may designate
by ten days advance written notice to the other parties hereto.  A Notice of Conversion shall be deemed given
when made to the Borrower pursuant to the Purchase Agreement.

 

5.3                                 Amendment
Provision.  The term “Note” and all
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented, and any successor instrument issued pursuant to
Section 3.5 hereof, as it may be amended or supplemented.

 

5.4                                 Assignability.  This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to the benefit of the Holder
and its successors and assigns, and may be assigned by the Holder in accordance
with the requirements of the Purchase Agreement.

 

5.5                                 Governing
Law.  This Note shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of laws. 
Any action brought by either party against the other concerning the
transactions contemplated by this Agreement shall be brought only in the state
courts of New York or in the federal courts located in the state of New
York.  Both parties and the individual
signing this Note on behalf of the Borrower agree to submit to the jurisdiction
of such courts.  The prevailing party
shall be entitled to recover from the other party its reasonable attorney’s
fees and costs.  In the event that any
provision of this Note is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or unenforceability
of any other provision of this Note. Nothing contained herein shall be deemed
or operate to preclude the Holder from bringing suit or taking other legal
action against the Borrower in any other jurisdiction to collect on the
Borrower’s obligations to Holder, to realize on any collateral or any other
security for such obligations, or to enforce a judgment or other court in favor
of the Holder.

 

5.6                                 Maximum
Payments.  Nothing contained herein
shall be deemed to establish or require the payment of a rate of interest or
other charges in excess of the maximum permitted by applicable law.  In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be

 

10

 

credited against amounts owed by the Borrower to the Holder and thus
refunded to the Borrower.

 

5.7                                 Security
Interest.  The holder of this Note
has been granted a security interest in certain assets of the Borrower more
fully described in a Security Agreement dated as of  March 22, 2004.

 

5.8                                 Construction.  Each party acknowledges that its legal
counsel participated in the preparation of this Note and, therefore, stipulates
that the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Note to favor
any party against the other.

 

5.9                                 Cost of Collection.  If default is made in the payment of this
Note, the Borrower shall pay to Holder reasonable costs of collection,
including reasonable attorney’s fees.

 

 

[Balance of page intentionally left blank;
signature page follows.]

 

11

 

IN WITNESS WHEREOF,  Borrower has caused this Convertible Term
Note to be signed in its name effective as of this 22nd of March, 2004.

 

	
   

  	
  TIME AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  WITNESS:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
							

 

12

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert all or part of the
Note into Common Stock

 

[Name and Address of Holder]

 

 

The Undersigned hereby elects to convert 
$            of
the principal due on [specify applicable Repayment Date] under the Convertible
Term Note issued by TIME AMERICA, INC. dated
March      , 2004 by delivery of Shares of Common
Stock of TIME AMERICA, INC. on and subject to the conditions set forth in
Article III of such Note.

 

 

	
  1.

  	
  Date of Conversion

  	
   

  
	
   

  	
   

  
	
  2.

  	
  Shares To Be Delivered:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

13

 

EXHIBIT B

 

CONVERSION ELECTION NOTICE

 

(To be executed by the Holder in order to convert  all or part of a Monthly Amount into Common
Stock)

 

[Name and Address of Holder]

 

Holder  hereby elects to
convert 
$            
of the Monthly Amount due on [specify applicable Repayment Date] under the
Convertible Term Note issued by TIME AMERICA, INC. dated
March     , 2004 by delivery of Shares of Common Stock
of TIME AMERICA, INC. on and subject to the conditions set forth in
Article III of such Note.

 

 

	
  1.

  	
   

  	
  Fixed Conversion Price:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Amount to be paid:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Shares To Be Delivered (2 divided by 1):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Cash payment to be made by Borrower :

  	
  $

  	
   

  	
   

  
										

 

 

	
  Date: 

  	
   

  	
   

  	
  LAURUS  MASTER FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
								

 

14Exhibit 10.3

 

THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT
AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO TIME
AMERICA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

 

Right to Purchase 280,000 Shares of Common
Stock of

TIME AMERICA, INC. 

(subject to adjustment as provided herein)

 

COMMON STOCK PURCHASE WARRANT

 

	
  No.
                                    

  	
   

  	
  Issue Date:  March 22, 2004

  

 

TIME AMERICA, INC. a corporation organized
under the laws of the State of Nevada, hereby certifies that, for value
received, LAURUS MASTER FUND, LTD., or assigns (the “Holder”), is entitled,
subject to the terms set forth below, to purchase from the Company (as defined
herein) from and after the Issue Date of this Warrant and at any time or from
time to time before 5:00 p.m., New York time, through the close of business
March 22, 2011 (the “Expiration Date”), up to Two Hundred Eighty Thousand
fully paid and nonassessable shares of Common Stock (as hereinafter defined),
$0.005 par value per share, at the applicable Exercise Price per share (as
defined below).  The number and
character of such shares of Common Stock and the applicable Exercise Price per
share are subject to adjustment as provided herein.

 

As used herein the following terms, unless
the context otherwise requires, have the following respective meanings:

 

(a)                                  The term “Company”
shall include Time America, Inc.  and
any corporation which shall succeed, or assume the obligations of, Time
America, Inc.  hereunder.

 

(b)                                 The term “Common
Stock” includes (i) the Company’s Common Stock, par value $0.005 per share; and
(ii) any other securities into which or for which any of the securities
described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

 

(c)                                  The term “Other
Securities” refers to any stock (other than Common Stock) and other securities
of the Company or any other person (corporate or otherwise) which the holder of
the Warrant at any time shall be entitled to receive, or shall have received,
on the exercise of the Warrant, in lieu of or in addition to Common Stock, or

 

 

which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.

 

(d)                                 The “Exercise Price”
applicable under this Warrant shall be as follows:

 

(i)                                     a
price of $1.29 [110% of the Fixed Conversion Price (as such term is defined in
the Securities Purchase Agreement executed on the same date as the issue date
of this Warrant) for the first 200,000 shares acquired hereunder;

 

(ii)                                  a
price of $1.35 [115% of the Fixed Conversion Price for the next 40,000 shares
acquired hereunder; and

 

(iii)                               a
price of $1.40 [120% of the Fixed Conversion Price for any additional shares
acquired hereunder.

 

1.                                       Exercise of
Warrant.

 

1.1                                 Number of Shares
Issuable upon Exercise.  From and
after the date hereof through and including the Expiration Date, the Holder
shall be entitled to receive, upon exercise of this Warrant in whole or in
part, by delivery of an original or fax copy of an exercise notice in the form
attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of
the Company, subject to adjustment pursuant to Section 4.

 

1.2                                 Fair Market Value.  For purposes hereof, the “Fair Market Value”
of a share of Common Stock as of a particular date (the “Determination Date”)
shall mean:

 

(a)                                  If
the Company’s Common Stock is traded on the American Stock Exchange or  another national exchange or is quoted on
the National or SmallCap Market of The Nasdaq Stock Market, Inc.(“Nasdaq”),
then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.

 

(b)                                 If
the Company’s Common Stock is not traded on the American Stock Exchange or
another national exchange or on the Nasdaq but is traded on the NASD OTC
Bulletin Board, then the mean of the average of the closing bid and asked
prices reported for the last business day immediately preceding the
Determination Date.

 

(c)                                  Except
as provided in clause (d) below, if the Company’s Common Stock is not publicly
traded, then as the Holder and the Company agree or in the absence of agreement
by arbitration in accordance with the rules then in effect of the American
Arbitration Association, before a single arbitrator to be chosen from a panel
of persons qualified by education and training to pass on the matter to be
decided.

 

(d)                                 If
the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to
the Company’s charter, then all amounts to be payable per share to holders of
the Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common

 

2

 

Stock in liquidation under the charter,
assuming for the purposes of this clause (d) that all of the shares of Common
Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.

 

1.3                                 Company
Acknowledgment.  The Company will,
at the time of the exercise of the Warrant, upon the request of the holder
hereof acknowledge in writing its continuing obligation to afford to such
holder any rights to which such holder shall continue to be entitled after such
exercise in accordance with the provisions of this Warrant. If the holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder any such rights.

 

1.4                                 Trustee for Warrant
Holders.  In the event that a bank
or trust company shall have been appointed as trustee for the holders of the
Warrant pursuant to Subsection 3.2, such bank or trust company shall have
all the powers and duties of a warrant agent (as hereinafter described) and
shall accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the Company
or such successor, as the case may be, on exercise of this Warrant pursuant to
this Section 1.

 

2.                                       Procedure for
Exercise.

 

2.1                                 Delivery of Stock
Certificates, Etc., on Exercise. 
The Company agrees that the shares of Common Stock purchased upon
exercise of this Warrant shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered and payment made for such shares in
accordance herewith.  As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.

 

2.2                                 Exercise.  Payment may be made either (i) in cash or by
certified or official bank check payable to the order of the Company equal to
the applicable aggregate Exercise Price, (ii) by delivery of the Warrant, or
shares of Common Stock and/or Common Stock receivable upon exercise of the
Warrant in accordance with Section (b) below, or (iii) by a combination of
any of the foregoing methods, for the number of Common Shares specified in such
Exercise Notice (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder
per the terms of this Warrant) and the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully-paid and
non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.

 

3

 

(b)                                 Notwithstanding any
provisions herein to the contrary, if the Fair Market Value of one share of
Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being exercised) by surrender of this Warrant
at the principal office of the Company together with the properly endorsed
Exercise Notice in which event the Company shall issue to the Holder a number
of shares of Common Stock computed using the following formula:

 

	
  X=Y

  	
   

  	
  (A-B)

  	
   

  
	
   

  	
   

  	
  A

  	
   

  

 

 

	
  Where X =

  	
   

  	
  the number
  of shares of Common Stock to be issued to the Holder

  
	
   

  	
   

  	
   

  
	
  Y =

  	
   

  	
  the number
  of shares of Common Stock purchasable under the Warrant or, if only a portion
  of the Warrant is being exercised, the portion of the Warrant being exercised
  (at the date of such calculation)

  
	
   

  	
   

  	
   

  
	
  A =

  	
   

  	
  the Fair
  Market Value of one share of the Company’s Common Stock (at the date of such
  calculation)

  
	
   

  	
   

  	
   

  
	
  B =

  	
   

  	
  Exercise
  Price (as adjusted to the date of such calculation)

  

 

3.                                       Company
Redemption Option.  Upon five (5)
business days prior notice to  Holder,
the Company shall have the right to redeem any unexercised portion of the
Warrant in cash for a price of 
$0.01  per warrant if (i) the
Company’s obligations to the Holder under the Note have been irrevocably repaid
in full; (ii) the closing price of the Company’s Common Stock has closed above
two hundred percent (200%) of the then applicable Exercise Price for twenty
(20) consecutive trading days; and (iii) the Company has filed a registration
statement on Form SB-2 (or such other Form allowing for the registration of the
resale of the shares of Common Stock issuable upon exercise of the Warrant)
with the Securities Exchange Commission covering the shares of the Company’s
Common Stock to be issued upon the full exercise of this Warrant, and such
registration statement has been declared and remains effective on the date of
such notice.

 

4.                                       Effect of
Reorganization, Etc.; Adjustment of Exercise Price.

 

4.1                                 Reorganization,
Consolidation, Merger, Etc.  In case
at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c)
transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, as a condition to the consummation of such a
transaction, proper and adequate provision shall be made by the Company whereby
the Holder of this Warrant, on the exercise hereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such effective date,
the stock and other securities and property (including cash) to which such
Holder would have been entitled upon such consummation or in connection

 

4

 

with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 5.

 

4.2                                 Dissolution.  In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, concurrently with any distributions made to holders of its
Common Stock, shall at its expense deliver or cause to be delivered to the
Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrant pursuant to
Section 4.1, or, if the Holder shall so instruct the Company, to a bank or
trust company specified by the Holder and having its principal office in New
York, NY as trustee for the Holder of the Warrant (the “Trustee”).

 

4.3                                 Continuation of
Terms.  Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 4, this Warrant shall continue in full force
and effect and the terms hereof shall be applicable to the shares of stock and
other securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 5.  In the event this
Warrant does not continue in full force and effect after the consummation of
the transactions described in this Section 4, then the Company’s
securities and property (including cash, where applicable) receivable by the
Holders of the Warrant will be delivered to Holder or the Trustee as contemplated
by Section 4.2.

 

5.                                       Extraordinary
Events Regarding Common Stock.  In
the event that the Company shall (a) issue additional shares of the Common
Stock as a dividend or other distribution on outstanding Common Stock, (b)
subdivide its outstanding shares of Common Stock, or (c) combine its
outstanding shares of the Common Stock into a smaller number of shares of the
Common Stock, then, in each such event, the Exercise Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
then Exercise Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be
the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 5.  The number of shares of Common Stock that the holder of this
Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive shall be increased to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 5) be issuable on such exercise by a fraction
of which (a) the numerator is the Exercise Price that would otherwise (but for
the provisions of this Section 5) be in effect, and (b) the denominator is
the Exercise Price in effect on the date of such exercise.

 

6.                                       Certificate
as to Adjustments.  In each case of
any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of the Warrant, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate

 

5

 

designee to compute such adjustment or readjustment in accordance with
the terms of the Warrant and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares
of Common Stock (or Other Securities) issued or sold or deemed to have been
issued or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Exercise Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. 
The Company will forthwith mail a copy of each such certificate to the
holder of the Warrant and any Warrant agent of the Company (appointed pursuant
to Section 12 hereof).

 

7.                                       Reservation
of Stock, Etc., Issuable on Exercise of Warrant.  The Company will at all times reserve and keep available, solely
for issuance and delivery on the exercise of the Warrant, shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of the
Warrant.

 

8.                                       Assignment;
Exchange of Warrant.  Subject to
compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a
“Transferor”) in whole or in part.  On
the surrender for exchange of this Warrant, with the Transferor’s endorsement
in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”)
and together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, which shall include, without
limitation, a legal opinion from the Transferor’s counsel that such transfer is
exempt from the registration requirements of applicable securities laws, the
Company at its expense but with payment by the Transferor of any applicable
transfer taxes) will issue and deliver to or on the order of the Transferor
thereof a new Warrant of like tenor, in the name of the Transferor and/or the
transferee(s) specified in such Transferor Endorsement Form (each a
“Transferee”), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.

 

9.                                       Replacement
of Warrant.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of
any such mutilation, on surrender and cancellation of this Warrant, the Company
at its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.

 

10.                                 Registration Rights.  The Holder of this Warrant has been granted
certain registration rights by the Company. 
These registration rights are set forth in a Registration Rights
Agreement entered into by the Company and Purchaser dated as of even date of
this Warrant.

 

11.                                 Maximum Exercise.  The Holder shall not be entitled to exercise
this Warrant on an exercise date, in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock

 

6

 

issuable upon the exercise of this Warrant with respect to which the
determination of this proviso is being made on an exercise date, which would
result in beneficial ownership by the Holder and its affiliates of more than
4.99% of the outstanding shares of Common Stock of the Company on such date.  For the purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. 
Notwithstanding the foregoing, the restriction described in this
paragraph may be revoked upon 75 days prior notice from the Holder to the
Company and is automatically null and void upon an Event of Default under the
Note.

 

12.                                 Warrant Agent.  The Company may, by written notice to the
each Holder of the Warrant, appoint an agent for the purpose of issuing Common
Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 8, and
replacing this Warrant pursuant to Section 9, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.

 

13.                                 Transfer on the
Company’s Books.  Until this Warrant
is transferred on the books of the Company, the Company may treat the
registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.

 

14.                                 Notices, Etc.  All notices and other communications from
the Company to the Holder of this Warrant shall be mailed by first class
registered or certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such Holder or, until any such Holder
furnishes to the Company an address, then to, and at the address of, the last
Holder of this Warrant who has so furnished an address to the Company.

 

15.                                 Voluntary
Adjustment by the Company.  The
Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.

 

16.                                 Miscellaneous.  This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Warrant shall be governed by and construed in
accordance with the laws of State of New York without regard to principles of
conflicts of laws.  Any action brought
concerning the transactions contemplated by this Warrant shall be brought only
in the state courts of New York or in the federal courts located in the state
of New York; provided, however, that the Holder may choose to waive this
provision and bring an action outside the state of New York.  The Company agrees to submit to the
jurisdiction of such courts and waive trial by jury.  The prevailing party shall be entitled to recover from the other
party its reasonable attorney’s fees and costs.  In the event that any provision of this Warrant is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform to such statute or rule of law.  Any such provision which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision of this Warrant. 
The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.  The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of 

 

7

 

any other provision.  The
Company acknowledges that legal counsel participated in the preparation of this
Warrant and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Warrant to favor any party against the other
party.

 

[BALANCE OF PAGE INTENTIONALLY
LEFT BLANK;

SIGNATURE PAGE FOLLOWS.]

 

8

 

IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above. 

 

	
   

  	
  TIME
  AMERICA, INC.

  
	
   

  	
   

  
	
  WITNESS:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
				

 

9

 

EXHIBIT A

 

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

 

	
  To:

  	
   

  	
  Time
  America, Inc.

  
	
   

  	
   

  	
  51 West
  Third Street, Suite 310,

  
	
   

  	
   

  	
  Tempe,
  Arizona 85281

  
	
  Attention:

  	
   

  	
  Corporate
  Secretary

  

 

The undersigned, pursuant to the provisions
set forth in the attached Warrant
(No.        ), hereby irrevocably
elects to purchase (check applicable box):

 

	
   

  	
               shares
  of the Common Stock covered by such Warrant; or

  
	
   

  	
   

  
	
   

  	
  the maximum
  number of shares of Common Stock covered by such Warrant pursuant to the
  cashless exercise procedure set forth in Section 2.

  

 

The undersigned herewith makes payment of the
full Exercise Price for such shares at the price per share provided for in such
Warrant, which is
$                      .  Such payment takes the form of (check
applicable box or boxes):

 

	
   

  	
  $              
  in lawful money of the United States; and/or

  
	
   

  	
   

  
	
   

  	
  the
  cancellation of such portion of the attached Warrant as is exercisable for a
  total of
                
  shares of Common Stock (using a Fair Market Value of
  $               
  per share for purposes of this calculation); and/or

  
	
   

  	
   

  
	
   

  	
  the
  cancellation of such number of shares of Common Stock as is necessary, in
  accordance with the formula set forth in Section 2.2, to exercise this
  Warrant with respect to the maximum number of shares of Common Stock
  purchasable pursuant to the cashless exercise procedure set forth in
  Section 2.

  

 

The undersigned requests that the
certificates for such shares be issued in the name of, and delivered to
                                                     whose
address is
                                                                        .

 

The undersigned represents that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned
for investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned will not offer, sell or otherwise
dispose of any such shares except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
law.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  must conform to name of holder as specified on the face of the Warrant)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

A-1

 

EXHIBIT B

 

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

 

For value received, the undersigned hereby
sells, assigns, and transfers unto the person(s) named below under the heading
“Transferees” the right represented by the within Warrant to purchase the
percentage and number of shares of Common Stock of Time America, Inc.  into which the within Warrant relates
specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of Time America,
Inc. with full power of substitution in the premises.

 

	
  Transferees

  	
   

  	
  Address

  	
   

  	
  Percentage

  Transferred

  	
   

  	
  Number

  Transferred

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  must conform to name of holder as specified on the face of the Warrant)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

 

	
   

  	
  SIGNED IN
  THE PRESENCE OF:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Name)

  
	
  ACCEPTED AND
  AGREED:

  	
   

  
	
  [TRANSFEREE]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Name)

  	
   

  

 

B-1

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