Document:

Exhibit
10.5

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights
Agreement (this “Agreement”) is made and entered into as of June 23, 2005, by
and between TIME AMERICA, INC., a Nevada corporation (the “Company”), and
Laurus Master Fund, Ltd., a Cayman Islands company (the “Purchaser”).

 

This Agreement is made
pursuant to the Security Agreement, dated as of the date hereof, by and among
the Purchaser, the Company and various subsidiaries of the Company (as amended,
modified or supplemented from time to time, the “Security Agreement”), and
pursuant to each Note and the Warrants referred to therein.

 

The Company and the
Purchaser hereby agree as follows:

 

1.                                       Definitions.  Capitalized terms used and not otherwise
defined herein that are defined in the Security Agreement shall have the
meanings given such terms in the Security Agreement.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Commission”
means the Securities and Exchange Commission.

 

“Common Stock”
means shares of the Company’s common stock, par value $0.005 per share.

 

“Effectiveness
Date” means, (i) with
respect to the Registration Statement required to be filed in connection with
the Minimum Borrowing Note issued on the initial funding date under the
Security Agreement and the Warrants issued on such initial funding date, a date
no later than ninety (90) days following the initial Filing Date and (ii) with
respect to each additional Registration Statement required to be filed
hereunder, a date no later than thirty (30) days following the applicable
Filing Date.

 

“Effectiveness
Period” shall have the meaning set forth in Section 2(a).

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and any successor
statute.

 

“Filing
Date” means, with
respect to (1) the Registration Statement which is required to be filed in
connection with the shares of Common Stock issuable upon conversion of the
Minimum Borrowing Note made on the initial funding date, the date which is
thirty (30) days after the date hereof, (2) the Registration Statement required
to be filed in connection with each additional Minimum Borrowing Note funded
after the initial funding date, the date which is thirty (30) days after such
funding of such additional Minimum Borrowing Note, (3) the Registration
Statement required to be filed in connection with the shares of Common Stock
issuable to the Holder upon exercise of a Warrant, the date which is thirty
(30) days after the issuance of such Warrant, and (4) the Registration
Statement required to be filed in connection with the shares of Common Stock
issuable to the Holder as a result of adjustments to the Fixed Conversion Price
or the Exercise Price, as the case may be, made pursuant to Section 2.5 of the
Revolving Note, Section 3.5 of the Minimum Borrowing Notes, Section 4 of the
Warrant or otherwise, thirty (30) days after the occurrence of such event or
the date of the adjustment of the Fixed Conversion Price or Exercise Price, as
the case may be.

 

“Holder”
or “Holders” means the Purchaser or any of
its affiliates or transferees to the extent any of them hold Registrable
Securities.

 

“Indemnified
Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying
Party” shall have the meaning set forth in Section 5(c).

 

“Notes”
has the meaning set forth in the Security Agreement.

 

 

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

 

“Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

 

“Registrable
Securities” means the shares of Common Stock issuable upon the
conversion of each Note and upon exercise of the Warrants.

 

“Registration
Statement” means each registration statement required to be filed
hereunder, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

 

“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.

 

“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.

 

“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.

 

“Securities
Act” means the Securities Act of 1933, as amended, and any successor
statute.

 

“Security
Agreement” has the
meaning given to such term in the Preamble hereto.

 

“Trading
Market” means any of the NASD OTC Bulletin Board, NASDAQ SmallCap
Market, the Nasdaq National Market, the American Stock Exchange or the New York
Stock Exchange.

 

“Warrants”
means the Common Stock purchase warrants issued in connection with the Security
Agreement, whether on the date thereof or thereafter.

 

2.                                       Registration.

 

(a)                                  On or prior to the Filing Date the Company
shall prepare and file with the Commission a Registration Statement covering
the Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415.  The Registration
Statement shall be on Form S-2, Form SB-2 or Form S-3 (except if the Company is
not then eligible to register for resale the Registrable Securities on such
Forms, in which case such registration shall be on another appropriate form in
accordance herewith).  The Company shall
cause the Registration Statement to become effective and remain effective as
provided herein.  The Company shall use
its reasonable commercial efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event no later than the Effectiveness Date.  The Company shall use its reasonable
commercial efforts to keep the Registration Statement continuously effective
under the Securities Act until the date which is the earlier date of when (i)
all Registrable Securities have been sold or (ii) all Registrable Securities
may be sold immediately without registration under the Securities Act and
without volume restrictions pursuant to Rule

 

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144(k), as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company’s
transfer agent and the affected Holders (the “Effectiveness Period”).

 

(b)                                 If: (i) the Registration Statement is not
declared effective by the Commission by the Effectiveness Date; (ii) after the
Registration Statement is filed with and declared effective by the Commission,
the Registration Statement ceases to be effective (by suspension or otherwise)
as to all Registrable Securities to which it is required to relate at any time
prior to the expiration of the Effectiveness Period (without being succeeded
immediately by an additional registration statement filed and declared
effective) for a period of time which shall exceed 45 days in the aggregate per
year or more than 20 consecutive calendar days (defined as a period of 365 days
commencing on the date the Registration Statement is declared effective); or
(iii) the Common Stock is not listed or quoted, or is suspended from trading on
any Trading Market for a period of three (3) consecutive Trading Days (provided
the Company shall not have been able to cure such trading suspension within 30
days of the notice thereof or list the Common Stock on another Trading Market);
(any such failure or breach being referred to as an “Event,” and for purposes
of clause (i) the date on which such Event occurs, or for purposes of clause
(ii) the date which such 30 day or 20 consecutive day period (as the case may
be) is exceeded, or for purposes of clause (iii) the date on which such three
(3) Trading Day period is exceeded, being referred to as “Event Date”), then
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as liquidated damages and not as a penalty, equal to 1.0% for
each thirty (30) day period (prorated for partial periods) on a daily basis of
the original principal amount of each Minimum Borrowing Note outstanding at
such time.  While such Event continues,
such liquidated damages shall be paid not less often than each thirty (30)
days.  Any unpaid liquidated damages as
of the date when an Event has been cured by the Company shall be paid within
three (3) days following the date on which such Event has been cured by the
Company.

 

(c)                                  Within three business days of the
Effectiveness Date, the Company shall cause its counsel to issue a blanket
opinion in the form attached hereto as Exhibit A, to the transfer agent stating
that the shares are subject to an effective registration statement and can be
reissued free of restrictive legend upon notice of a sale by the Purchaser and
confirmation by the Purchaser that it has complied with the prospectus delivery
requirements, provided that the Company has not advised the transfer agent
orally or in writing that the opinion has been withdrawn. Copies of the blanket
opinion required by this Section 2(c) shall be delivered to the Purchaser
within the time frame set forth above.

 

3.                                       Registration Procedures.  If and whenever the Company is required by
the provisions hereof to effect the registration of
any Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:

 

(a)                                  prepare and file with the Commission the
Registration Statement with respect to such Registrable Securities, respond as
promptly as possible to any comments received from the Commission, and use its
best efforts to cause the Registration Statement to become and remain effective
for the Effectiveness Period with respect thereto, and promptly provide to the
Purchaser copies of all filings and Commission letters of comment relating
thereto;

 

(b)                                 prepare and file with the Commission such
amendments and supplements to the Registration Statement and the Prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement and to keep such Registration
Statement effective until the expiration of the Effectiveness Period;

 

(c)                                  furnish to the Purchaser such number of copies of
the Registration Statement and the Prospectus included therein (including each
preliminary Prospectus) as the Purchaser reasonably may request to facilitate
the public sale or disposition of the Registrable Securities covered by the
Registration Statement;

 

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(d)                                 use its commercially reasonable efforts to
register or qualify the Purchaser’s Registrable Securities covered by the
Registration Statement under the securities or “blue sky” laws of such
jurisdictions within the United States as the Purchaser may reasonably request,
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;

 

(e)                                  list the Registrable Securities covered by the
Registration Statement with any securities exchange on which the Common Stock
of the Company is then listed;

 

(f)                                    immediately notify the Purchaser at any time
when a Prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event of which the Company has
knowledge as a result of which the Prospectus contained in such Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing; and

 

(g)                                 make available for inspection by the
Purchaser and any attorney, accountant or other agent retained by the
Purchaser, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company’s officers, to supply all publicly available, non-confidential
information reasonably requested by the attorney, accountant or agent of the
Purchaser.

 

4.                                       Registration Expenses.  All expenses relating to the Company’s
compliance with Sections 2 and 3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including reasonable counsel fees) incurred in connection with complying with
state securities or “blue sky” laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars, fees of, and disbursements incurred by, one
counsel for the Holders (upon prior agreement by the parties and to the extent
such counsel is required due to Company’s failure to meet any of its
obligations hereunder), are called “Registration Expenses”. All selling
commissions applicable to the sale of Registrable Securities, including any
fees and disbursements of any special counsel to the Holders beyond those
included in Registration Expenses, are called “Selling Expenses.”   The Company shall only be responsible for
all Registration Expenses.

 

5.                                       Indemnification.

 

(a)                                  In the event of a registration of any
Registrable Securities under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless the Purchaser, and its officers,
directors and each other person, if any, who controls the Purchaser within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser, or such persons may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable
Securities were registered under the Securities Act pursuant to this Agreement,
any preliminary Prospectus or final Prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Purchaser, and each such person for any reasonable legal or other
expenses incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case if and to the extent that any such loss,
claim, damage or liability arises out of Purchaser’s failure to comply with the
prospectus delivery requirements under the Securities Act or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by or on behalf of the Purchaser
or any such person in writing specifically for use in any such document.

 

(b)                                 In the event of a registration of the
Registrable Securities under the Securities Act pursuant to this Agreement, the
Purchaser will indemnify and hold harmless the Company, and its officers,

 

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directors and each other person, if any, who controls the Company
within the meaning of the Securities Act, against all losses, claims, damages
or liabilities, joint or several, to which the Company or such persons may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact which was furnished in writing by the Purchaser to the Company expressly
for use in (and such information is contained in) the Registration Statement
under which such Registrable Securities were registered under the Securities
Act pursuant to this Agreement, any preliminary Prospectus or final Prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and each such person for any
reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the Purchaser will be liable in any such case if and
only to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished in writing to
the Company by or on behalf of the Purchaser specifically for use in any such
document.  Notwithstanding the provisions
of this paragraph, the Purchaser shall not be required to indemnify any person
or entity in excess of the amount of the aggregate net proceeds received by the
Purchaser in respect of Registrable Securities in connection with any such
registration under the Securities Act.

 

(c)                                  Promptly after receipt by a party entitled to
claim indemnification hereunder (an “Indemnified Party”) of notice of the
commencement of any action, such Indemnified Party shall, if a claim for
indemnification in respect thereof is to be made against a party hereto
obligated to indemnify such Indemnified Party (an “Indemnifying Party”), notify
the Indemnifying Party in writing thereof, but the omission so to notify the
Indemnifying Party shall not relieve it from any liability which it may have to
such Indemnified Party other than under this Section 5(c) and shall only
relieve it from any liability which it may have to such Indemnified Party under
this Section 5(c) if and to the extent the Indemnifying Party is prejudiced by
such omission. In case any such action shall be brought against any Indemnified
Party and it shall notify the Indemnifying Party of the commencement thereof,
the Indemnifying Party shall be entitled to participate in and, to the extent
it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such Indemnified Party, and, after notice from the Indemnifying
Party to such Indemnified Party of its election so to assume and undertake the
defense thereof, the Indemnifying Party shall not be liable to such Indemnified
Party under this Section 5(c) for any legal expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof; if the Indemnified
Party retains its own counsel, then the Indemnified Party shall pay all
reasonable fees, costs and expenses of such counsel, provided, however, that,
if the defendants in any such action include both the indemnified party and the
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the Indemnifying Party or if the interests
of the Indemnified Party reasonably may be deemed to conflict with the
interests of the Indemnifying Party, the Indemnified Party shall have the right
to select one separate counsel and to assume such legal defenses and otherwise
to participate in the defense of such action, with the reasonable expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the Indemnifying Party as incurred.

 

(d)                                 In order to provide for just and equitable
contribution in the event of joint liability under the Securities Act in any
case in which either (i) the Purchaser, or any officer, director or controlling
person of the Purchaser, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section 5
provides for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of the Purchaser or such officer,
director or controlling person of the Purchaser in circumstances for which
indemnification is provided under this Section 5; then, and in each such case,
the Company and the Purchaser will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that the Purchaser is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the Registration Statement bears to the public offering
price of all

 

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securities offered by such Registration Statement, provided, however,
that, in any such case, (A) the Purchaser will not be required to contribute
any amount in excess of the public offering price of all such securities
offered by it pursuant to such Registration Statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of
the Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.

 

6.                                       Representations and
Warranties.

 

(a)                                  The Common Stock of the Company is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act and, except with respect
to certain matters which the Company has disclosed to the Purchaser on Schedule
12(u) to the Security Agreement, the Company has timely filed all proxy
statements, reports, schedules, forms, statements and other documents required
to be filed by it under the Exchange Act. 
The Company has filed (i) its Annual Report on Form 10-KSB for its
fiscal year ended June 30, 2004 and (ii) its Quarterly Report on Form 10-QSB
for the fiscal quarters ended September 30, 2004 and December 31, 2004 and
March 31, 2005 and all Current Reports on Form 8-K that the Company was
required to file in its fiscal year 2005 (collectively, the “SEC Reports”).  Each SEC Report was, at the time of its
filing, in substantial compliance with the requirements of its respective form
and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  The financial statements of
the Company included in the SEC Reports comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto.  Such financial
statements have been prepared in accordance with generally accepted accounting
principles (“GAAP”) applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed) and fairly present
in all material respects the financial condition, the results of operations and
the cash flows of the Company and its subsidiaries, on a consolidated basis, as
of, and for, the periods presented in each such SEC Report.

 

(b)                                 The Common Stock is listed for trading on the
National Association of Securities Dealers, Inc. Over the Counter Bulletin
Board (“NASD OTCBB”) and satisfies all requirements for the continuation of
such listing.  The Company has not
received any notice that its Common Stock will be delisted from the NASD OTCBB
(except for prior notices which have been fully remedied) or that the Common
Stock does not meet all requirements for the continuation of such listing.

 

(c)                                  Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to the Security Agreement to be integrated with prior
offerings by the Company for purposes of the Securities Act which would prevent
the Company from selling the Common Stock pursuant to Rule 506 under the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Securities to be
integrated with other offerings.

 

(d)                                 The Warrants, each Note and the shares of
Common Stock which the Purchaser may acquire pursuant to the Warrants and each
Note are all restricted securities under the Securities Act as of the date of this
Agreement.  The Company will not issue
any stop transfer order or other order impeding the sale and delivery of any of
the Registrable Securities at such time as such Registrable Securities are
registered for public sale or an exemption from registration is available,
except as required by federal or state securities laws.

 

(e)                                  The Company understands the nature of the
Registrable Securities issuable upon the conversion of each Note and the
exercise of the Warrant and recognizes that the issuance of such Registrable
Securities may have a potential dilutive effect.  The Company specifically acknowledges that

 

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its obligation to issue the Registrable Securities is binding upon the
Company and enforceable regardless of the dilution such issuance may have on
the ownership interests of other shareholders of the Company.

 

(f)                                    Except for agreements made in the ordinary
course of business, there is no agreement that has not been filed with the
Commission as an exhibit to a registration statement or to a form required to
be filed by the Company under the Exchange Act, the breach of which could
reasonably be expected to have a material and adverse effect on the Company and
its subsidiaries, or would prohibit or otherwise interfere with the ability of
the Company to enter into and perform any of its obligations under this
Agreement in any material respect.

 

(g)                                 The Company will at all times have authorized
and reserved a sufficient number of shares of Common Stock for the full
conversion of each Note and the exercise of the Warrants.

 

7.                                       Miscellaneous.

 

(a)                                  Remedies.  In the event of a breach by
the Company or by a Holder, of any of their respective obligations under this
Agreement, each Holder or the Company, as the case may be, in addition to being
entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement.

 

(b)                                 No Piggyback on Registrations. 
Except as and to the extent specified in Schedule 7(b) hereto or
provided that the Holders give their consent, neither the Company nor any of
its security holders (other than the Holders in such capacity pursuant hereto)
may include securities of the Company in any Registration Statement other than
the Registrable Securities, and the Company shall not after the date hereof
enter into any agreement providing any such right for inclusion of shares in
the Registration Statement to any of its security holders. Except as and to the
extent specified in Schedule 7(b) hereto, the Company has not previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person that have not been fully satisfied.

 

(c)                                  Compliance.  Each Holder covenants and
agrees that it will comply with the prospectus delivery requirements of the
Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement.

 

(d)                                 Discontinued Disposition.  Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of a Discontinuation
Event (as defined below), such Holder will forthwith discontinue disposition of
such Registrable Securities under the applicable Registration Statement until
such Holder’s receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement or until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company may provide appropriate stop
orders to enforce the provisions of this paragraph.  For purposes of this Section 7(d), a “Discontinuation
Event” shall mean (i) when the Commission notifies the Company whether there
will be a “review” of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement (the Company shall provide
true and complete copies thereof and all written responses thereto to each of
the Holders); (ii) any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to such Registration
Statement or Prospectus or for additional information; (iii) the issuance by
the Commission of any stop order suspending the effectiveness of such
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) the receipt by the Company
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and/or (v) the occurrence of any event or passage of time that makes
the financial statements included in such Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the

 

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case of such Registration Statement or Prospectus, as the case may be,
it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

 

(e)                                  Piggy-Back Registrations.  If
at any time during the Effectiveness Period there is not an effective
Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form
S-4 or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered to
the extent the Company may do so without violating registration rights of
others which exist as of the date of this Agreement, subject to customary
underwriter cutbacks applicable to all holders of registration rights and
subject to obtaining any required the consent of any selling stockholder(s) to
such inclusion under such registration statement.

 

(f)                                    Amendments and Waivers.  The
provisions of this Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and the Holders of the then outstanding
Registrable Securities. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of certain Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.

 

(g)                                 Notices.  Any notice or request
hereunder may be given to the Company or the Purchaser at the respective
addresses set forth below or as may hereafter be specified in a notice
designated as a change of address under this Section 7(g).  Any notice or request hereunder shall be
given by registered or certified mail, return receipt requested, hand delivery,
overnight mail, Federal Express or other national overnight next day carrier
(collectively, “Courier”) or telecopy (confirmed by mail).  Notices and requests shall be, in the case of
those by hand delivery, deemed to have been given when delivered to any party
to whom it is addressed, in the case of those by mail or overnight mail, deemed
to have been given three (3) business days after the date when deposited in the
mail or with the overnight mail carrier, in the case of a Courier, the next
business day following timely delivery of the package with the Courier, and, in
the case of a telecopy, when confirmed. 
The address for such notices and communications shall be as follows:

 

	
  If to
  the Company:

  	
  Time
  America, Inc.

  8840 East Chaparral Road, Suite 100

  Scottsdale, Arizona 85250

  Attention: Craig J. Smith

  Facsimile: (480) 967-5444

  
	
   

  	
   

  
	
   

  	
  with
  a copy to:

  
	
   

  	
   

  
	
   

  	
  Gregory
  R. Hall, Esq.

  Squire, Sanders & Dempsey L.L.P.

  Two Renaissance Square

  40 North Central Avenue, Suite 2700

  Phoenix, Arizona 85004 

  Facsimile: (602) 253-8129

  

 

8

 

	
  If to
  a Purchaser: With a copy to:

  	
  Laurus
  Master Fund, Ltd.

  c/o M&C Corporate Services Limited

  P.O. Box 309 GT, Ugland House, South Church Street

  Grand Cayman, Cayman Islands

  Facsimile: 345-949-8080

  

  John E. Tucker, Esq.

  825 Third Avenue – 14th Floor

  New York, New York 10022

  Facsimile: (212) 541-4434

  
	
   

  	
   

  
	
  If to
  any other Person who is then the registered Holder:

  	
  To
  the address of such Holder as it appears in the stock transfer books of the
  Company

  

 

or such
other address as may be designated in writing hereafter in accordance with this
Section 7(g) by such Person.

 

(h)                                 Successors and Assigns.  This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the benefit of each
Holder. The Company may not assign its rights or obligations hereunder without
the prior written consent of each Holder. 
Each Holder may assign their respective rights hereunder in the manner
and to the Persons as permitted under the Notes and the Security Agreement with
the prior written consent of the Company, which consent shall not be
unreasonably withheld.

 

(i)                                     Execution and Counterparts.  This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.

 

(j)                                     Governing Law.  All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan. Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such Proceeding
is improper.  Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating
to this Agreement or the transactions contemplated hereby. If either party
shall commence a Proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such Proceeding shall be reimbursed by
the other party for its reasonable attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.

 

9

 

(k)                                  Cumulative Remedies.  The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.

 

(l)                                     Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 

(m)                               Headings.  The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.

 

IN WITNESS WHEREOF, the
parties have executed this Registration Rights Agreement as of the date first
written above. 

 

	
  TIME
  AMERICA, INC., A NEVADA CORPORATION

  	
   

  	
  LAURUS
  MASTER FUND, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  

 

10

 

EXHIBIT A

 

[           ,
2005]

 

 

[                    Stock
Transfer

   & Trust Company

[Address]

Attn:[                                  ]

 

Re:                               Time
America, Inc. Registration Statement on Form
[SB-2]                                       

 

Ladies
and Gentlemen:

 

As counsel to Time America, Inc., a Nevada corporation
(the “Company”), we have been requested to render our opinion to you in
connection with the resale by the individuals or entitles listed on Schedule A
attached hereto (the “Selling Stockholders”), of an aggregate of [amount] shares
(the “Shares”) of the Company’s Common Stock.

 

A Registration Statement
on Form [SB-2] under the Securities Act of 1933, as amended (the “Act”), with
respect to the resale of the Shares was declared effective by the Securities
and Exchange Commission on [date].  Enclosed is the Prospectus dated [date].  We understand that the Shares are to be
offered and sold in the manner described in the Prospectus.

 

Based upon the foregoing, upon request by the Selling
Stockholders at any time while the registration statement remains effective, it
is our opinion that the Shares have been registered for resale under the Act
and new certificates evidencing the Shares upon their transfer or
re-registration by the Selling Stockholders may be issued without restrictive legend.  We will advise you if the registration
statement is not available or effective at any point in the future.

 

Very truly yours,

 

 

[Company counsel]

 

 

Schedule A

 

	
  Selling Stockholder

  	
   

  	
  R/N/O

  	
   

  	
  Shares

  Being OfferedExhibit 10.6

 

AMENDED AND RESTATED

SUBORDINATION AGREEMENT

 

This AMENDED AND
RESTATED  SUBORDINATION AGREEMENT
(this “Amended and Restated Agreement”) is made as of the
23rd day of June, 2005, by and among JOSEPH L. SIMEK (“Mr. Simek”), FRANCES L. SIMEK
(“Mrs. Simek” and together with Mr. Simek,
the “Subordinated Lenders”), TIME
AMERICA, INC., a Nevada corporation (“Time
America-Nevada”), TIME AMERICA, INC., an Arizona corporation (“Time America-Arizona”, and,
together with Time America-Nevada and each of their respective subsidiaries
acqiured or formed after the date hereof, “Borrower”)
and LAURUS MASTER FUND, LTD., a Cayman Islands company (“Senior Lender”).

 

PRELIMINARY STATEMENTS:

 

WHEREAS,
Subordinated Lenders, Borrower, and Senior Lender entered into a Subordination
Agreement, dated March 22, 2004 (the “Agreement”), wherein each
Subordinated Lender agreed to subordinate payment and performance of all
Subordinated Debt (as defined in the Agreement) to the Senior Debt (as defined
in the Agreement);

 

WHEREAS,
the Agreement was amended by that certain First Amendment to Subordination
Agreement, dated as of April 15, 2004, by and among each Subordinated
Lender, Borrower, and Senior Lender;

 

WHEREAS,
the Agreement was further amended by that certain Second Amendment to
Subordination Agreement, dated as of November 17, 2004, by and among each
Subordinated Lender, Borrower, and Senior Lender;

 

WHEREAS, Borrower and
Senior Lender intend to enter into a Security Agreement, dated as of June 23,
2005 (as amended, modified or supplemented from time to time, the “Security
Agreement”), whereby Senior Lender has agreed to make available to Borrower
revolving loans of up to $1,500,000, subject to Borrower’s eligible accounts
receivable and certain other conditions set forth in the Security Agreement;
and

 

WHEREAS, as a condition
to the closing of the transactions contemplated under the Security Agreement,
Senior Lender requires that payment and performance of all Subordinated Debt be
subordinated to the Senior Debt (as such term is modified by this Amended and
Restated Agreement) to the extent and on the terms and conditions set forth
herein and that Subordinated Lenders amend and restate the Subordination
Agreement to evidence such subordination.

 

AGREEMENTS:

 

NOW THEREFORE, in
consideration of the foregoing premises and the mutual agreements herein
contained, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower, the Subordinated Lenders and Senior
Lender hereby agree as follows:

 

1.                                       Definitions.
The following terms shall have the meanings specified below. Any reference to
any renewal, extension, replacement or other modification of any of the Senior
Loan Documents that may be contained in the definitions of the Senior Loan
Documents set forth below shall not be deemed to waive any consent of any
respective Subordinated Lender to the extent such consent is required under Section 4(b) below
or otherwise limit in any way any respective Subordinated Lender’s rights under
Section 4(b). Any reference to any renewal, extension, replacement or
other modification of any of the Subordinated Loan Documents that may be
contained in the definitions of the Subordinated Loan Documents set forth below
shall not be deemed to waive any consent of the Senior Lender to the extent
such consent is required under Section 6 below or otherwise limit in any
way Senior Lender’s rights under Section 6.

 

 

“Agreement”
shall have the meaning assigned to such term in the Preliminary Statements of
this Agreement.

 

“Borrower”
shall have the meaning assigned to such term in the first paragraph of this
Agreement.

 

“Collateral”
means all assets now or hereafter securing or intended to secure the payment
and performance of the Senior Debt and the Subordinated Debt including without
limitation all assets covered by any of the Senior Loan Security Documents and
the Subordinated Loan Security Documents.

 

 “Paid in
Full” or “Payment in Full” means, with respect to the
payment of the Senior Debt, that the Senior Debt has been fully, finally and
indefeasibly paid in cash and all of the financing arrangements and commitments
between Borrower and Senior Lender have been terminated.

 

“Permitted
Subordinated Lender Actions” means any lawful action taken by
any Subordinated Lender pursuant to their respective Subordinated Loan Security
Documents or applicable law in order to enforce payment of the Subordinated
Debt and their rights against the Collateral, but only to the extent such
action is permitted pursuant to Section 2.2(b) of this Agreement.

 

“Secured Convertible Minimum
Borrowing Note” means each Secured Convertible Minimum
Borrowing Note issued pursuant to the Security Agreement by the Borrower to the
Senior Lender (including, without limitation, that certain Secured Convertible
Minimum Borrowing Note made as of June 23, 2005, in the principal amount
of $1,000,000), together with, in each case, all amendments, extensions,
modifications, substitutions, or renewals thereof.

 

“Secured Convertible Term Note”
means that certain Secured Convertible Term Note issued
pursuant to the Securities Purchase Agreement by the Borrower to the Senior
Lender made as of March 22, 2004, in the principal amount of $2,000,000,
together with all amendments, extensions, modifications, substitutions or
renewals thereof.

 

“Secured
Revolving Note” means that certain Secured Revolving Note issued
pursuant to the Security Agreement by the Borrower to the Senior Lender made as
of June 23, 2005, in the principal amount $1,500,000, together with all amendments,
extensions, modifications, substitutions or renewals thereof.

 

“Securities Purchase Agreement”
means that certain Securities Purchase Agreement between
Borrower and Senior Lender regarding the issuance and sale of the Secured
Convertible Term Note and warrant to purchase 280,000 shares of the Borrower’s
common stock, as such Securities Purchase Agreement is amended, modified or
supplemented from time to time.

 

“Security Agreement” shall
have the meaning set forth in the Preliminary Statements hereto.

 

“Senior Debt”
means the debt evidenced by the Secured Convertible Term Note, Secured
Revolving Note, each Secured Convertible Minimum Borrowing Note.  The Securities Purchase Agreement, the
Related Agreements (as defined in the Securities Purchase Agreement), the
Security Agreement and the Ancillary Agreements (as defined in the Security
Agreement), including without limitation all principal, interest, fees,
expenses, premiums and penalties incurred in connection therewith.

 

“Senior
Lender” shall have the meaning assigned to such term in the
first paragraph of this Agreement.

 

“Senior
Loan Documents” means any and all documents, instruments or
agreements now or hereafter evidencing, securing or executed in connection with
the Senior Debt including, without limitation, the Securities Purchase
Agreement, the Security Agreement, the Secured Convertible Term Note, the
Secured Revolving Note, the Secured Convertible Minimum Borrowing Note, the
Senior Loan Security Documents and any other instruments or agreements now or
hereafter executed in connection therewith, as any such documents may be
restated, amended, supplemented or otherwise modified from time to time.

 

2

 

“Senior
Loan Security Documents” means, singly and collectively any
documents, instruments or agreements now or hereafter securing, or intended to
secure, the Senior Debt, including without limitation, the Security Agreement,
the Security Documents (as defined in the Security Agreement), the Amended and
Restated Stock Pledge Agreement, the Grant of Security Interest in Patents and
Trademarks, and any security agreement entered into in connection with the
execution of the Securities Purchase Agreement.

 

“Subordinated
Debt” means the amounts owing on the Subordinated Notes and any
other loans, obligations or indebtedness hereafter provided by any Subordinated
Lender to Borrower, however evidenced.

 

“Subordinated Notes” mean (i) that
certain Promissory Note issued by Borrower to Mrs. Simek, on September 4,
2001, in the aggregate principal amount of $500,000, (ii) that certain
promissory note issued by Borrower to Mr. Simek on March 31, 2001, in
the aggregate principal amount of $400,000, (iii) that certain Promissory
Note issued by Borrower to Mr. Simek on November 2, 2001, in the
aggregate principal amount of $200,000, (iv) that certain Promissory Note
issued by Borrower to Mrs. Simek, on April 15, 2004, in the aggregate
principal amount of $500,000, and (v) that certain Revolving Promissory
Note in the aggregate principal amount of $500,000 issued by Borrower to Mrs. Simek
pursuant to the Credit Agreement, each together with all extensions,
modifications, substitutions or renewals thereof.

 

 “Subordinated Lenders”
shall have the meaning assigned to such term in the first paragraph of this
Agreement.

 

“Subordinated
Loan Documents” means the Subordinated Notes, the Subordinated
Loan Security Documents, and all other documents and instruments now or
hereafter evidencing, securing or executed in connection with the Subordinated
Debt.

 

“Subordinated
Loan Security Documents” means, singly and collectively any
documents, instruments or agreements now or hereafter securing, or intended to
secure, the Subordinated Debt.

 

2.                                       Subordination.

 

2.1                                 Payments
on Subordinated Debt.  Except as
otherwise provided in this Agreement, each of the Subordinated Lenders agrees
that it will not ask for, demand, sue for, or take or receive from Borrower or
any successor or assign of Borrower, including a receiver, trustee or debtor in
possession, whether by setoff or in any other manner, the whole or any part of
the Subordinated Debt, unless and until all of the Senior Debt shall have been
Paid in Full.  Notwithstanding the
foregoing sentence to the contrary, so long as (i) Senior Lender has
received all payments then due and owing under the Senior Loan Documents; and (ii) Senior
Lender has not delivered to the Subordinated Lenders written notice of the
occurrence of an event of default under the Senior Loan Documents, then,
Borrower may pay to the Subordinated Lenders, and the Subordinated Lenders may
accept and retain from Borrower payments of principal and interest on the
Subordinated Debt (the “Permitted Payments”).  If Permitted Payments are suspended, in the
case of an event of default under the Senior Loan Documents, such Permitted
Payments may be resumed only after such an event of default is cured or waived
or after the Senior Debt is Paid in Full.

 

2.2                                 Subordinated
Lenders’ Liens.

 

(a)                                  Notwithstanding
the date, manner or order of perfection or attachment of the security interests
and liens granted by Borrower to Senior Lender or any Subordinated Lender, and
notwithstanding the usual application of the priority provisions of the UCC or
any other applicable law or judicial decision, or whether Senior Lender or any
Subordinated Lender holds possession of all or any part of the Collateral,
Senior Lender shall have a first and prior continuing security interest in and
lien on the Collateral, and Subordinated Lender shall have a security interest
therein subordinate in priority to the lien and security interest held by
Senior Lender.  Senior Lender and the
Subordinated Lenders nevertheless, each agree to make such filings and
recordings in the public records to evidence the priorities made herein as the
other may reasonably request.

 

3

 

(b)                                 Each
Subordinated Lender agrees that such Subordinated Lender will not without
Senior Lender’s written permission and in concert with and at the direction of
Senior Lender:  (a) commence any
action or proceeding or otherwise take action against Borrower to recover all
or any portion of the Subordinated Debt, including any action to foreclose or
realize upon any Collateral securing the Subordinated Debt; or (b) commence,
or join with any creditor, other than Senior Lender, in commencing, directly or
indirectly, or cause Borrower to commence, or assist Borrower in commencing,
any proceeding under any bankruptcy, insolvency, reorganization, receivership
or similar laws for arrangement of debts of Borrower.

 

(c)                                  Except
as provided in Section 2.2(b) above and subject at all times to
Senior Lender’s prior and superior lien in the Collateral, in the event any
payment or distribution to any Subordinated Lender is made from any of the
Collateral upon or with respect to any of the Subordinated Debt, other than any
payments of principal and interest which such Subordinated Lender is permitted
to accept and retain hereunder, prior to the time all of the Senior Debt shall
have been fully, finally and indefeasibly paid, such Subordinated Lender shall
receive and hold the same in trust, as trustee, for the benefit of Senior
Lender and shall immediately deliver the same to Senior Lender in precisely the
form received for application against the Senior Debt, whether due or not due,
and, until so delivered, the same shall be held in trust by such Subordinated
Lender as the property of Senior Lender.

 

(d)                                 The
provisions of this Agreement are applicable regardless of whether the security
interest and/or lien of Senior Lender in the Collateral is not perfected or is
voidable for any reason.

 

2.3                                 Payments
Held in Trust.  In the event that any
Subordinated Lender shall receive any payment, or security for payment, on the
Subordinated Debt which such Subordinated Lender is not entitled to receive or
accept under the provisions of this Section 2, such Subordinated Lender
will hold any such amount or security so received as trustee of an express
trust for the sole and exclusive benefit of Senior Lender, and such
Subordinated Lender will forthwith assign and turn over the same to Senior
Lender, in the form received, properly endorsed and assigned, to be applied to
payment of or held by Senior Lender, as security for the Senior Debt, as the
case may be.  In the event of any failure
by such Subordinated Lender to make any such endorsement or assignment, Senior
Lender is hereby irrevocably authorized, as attorney-in-fact for the respective
Subordinated Lender, to make the same.

 

3.                                       Further
Limitations on Actions of Subordinated Lenders.

 

3.1                                 Other
than Permitted Subordinated Lender Actions (which Subordinated Lenders may take
at any time, but only to the extent permitted by this Agreement and the
Subordinated Loan Documents and applicable law), until Senior Lender has
received Payment in Full of all Senior Debt, no Subordinated Lender shall
enforce or exercise, or seek to enforce or exercise, any right of acceleration
or demand, or commence any other action or proceeding (including without limitation
the initiation of any legal proceedings) to collect all or any part of the
Subordinated Debt.

 

3.2                                 Senior
Lender hereby approves the execution and delivery of the Subordinated Loan
Documents as the same exist as of the date hereof and acknowledges that such
execution and delivery shall not constitute an event of default under the
Senior Loan Documents.

 

3.3                                 Subordinated
Lender hereby approves the execution and delivery of the Senior Loan Documents
as the same exist as of the date hereof and acknowledges that such execution
and delivery shall not constitute an event of default under the Subordinated
Loan Documents.

 

4.                                       Continuing
Subordination.

 

The subordination effected by this Agreement is a continuing
subordination and may not be modified or terminated by any Subordinated Lender
or any other holder of any Subordinated Debt until all of the Senior Debt shall
have been Paid in Full. At any time and from time to time, without the consent
of or notice to the Subordinated Lenders or any other holder of any
Subordinated Debt, and without impairing or affecting the obligations of any of
them hereunder:

 

4

 

4.1                                 Senior
Lender may exercise or refrain from exercising any rights or remedies against
Borrower subject to each respective Subordinated Lender’s rights pursuant to Section 2.2(b) of
this Agreement;

 

4.2                                 The
Senior Loan Documents may be revised, amended or otherwise modified for the
purpose of adding or changing any provisions thereof or changing in any manner
the rights of Senior Lender and/or Borrower;

 

4.3                                 The
terms of this Agreement shall continue in full force and effect in the event
that all or any portion of the Senior Debt is refunded, refinanced, or extended
and the term “Senior Debt” shall include any Senior Debt which is refunded,
refinanced or extended on one or more occasions, and in any such case, the
terms “Securities Purchase Agreement,” “Security Agreement” and “Senior Loan
Documents” and the like as used herein shall refer to the agreements and
instruments executed in connection with any such refunding, refinancing or
extension;

 

4.4                                 The
maturity of the Senior Debt may be accelerated after the occurrence of an event
of default and any Collateral or any other rights of Senior Lender may be exchanged,
sold, surrendered, released or otherwise dealt with in any lawful manner; and

 

4.5                                 Any
person liable in any manner for payment of all or any part of the Senior Debt
may be released.

 

Notwithstanding the
occurrence of any of the foregoing, the provisions of this Agreement shall
remain in full force and effect.

 

5.                                       No
Modification of Subordinated Debt.

 

Until the Senior Debt shall have been Paid in Full, neither Borrower
nor any Subordinated Lender shall amend, modify or terminate the Subordinated
Notes, or any other Subordinated Loan Document (as the same exist on the date
hereof) without the prior written consent of Senior Lender, which consent shall
not be unreasonably withheld; and any such purported amendment, modification or
termination without such consent shall be ineffective; this prohibition
includes, but not by way of limitation, any acceleration of the amortization schedule of
the Subordinated Debt and any increase in the rate of interest that accrues
thereon. Notwithstanding the foregoing, any Subordinated Lender may agree to
amend their respective Subordinated Loan Documents without Senior Lender’s
consent to (i) reduce the interest rate, (ii) extend the maturity of
any principal amount or interest due thereunder, or (iii) waive or
otherwise delete any provision thereof with respect to such Subordinated Lender’s
rights thereunder, provided  that a copy of any such amendment
shall be provided to Senior Lender contemporaneously with the execution
thereof. Any reference to any renewal, extension, replacement or other
modification of any of the Subordinated Loan Documents that may be contained in
the definition of any of the Subordinated Loan Documents set forth in this
Agreement shall not be deemed to waive the consent required by this Section 5
or otherwise limit in any way Senior Lender’s rights under this Section 5.

 

6.                                       Senior
Debt and Subordinated Debt Default and Default Notices.

 

6.1                                 If
an event of default shall occur under or within the meaning of any of the
Senior Loan Documents, a default and event of default shall occur under the
Subordinated Lender Documents.  The
Senior Lender shall use its reasonable best effort to provide to the
Subordinated Lender any notice of an “event of default” under the Senior Loan
Documents which Senior Lender sends to Borrower at the address set forth in Section 13
below.

 

6.2                                 If
a default or event of default shall occur under or within the meaning of any of
the Subordinated Lender Documents, an event of default shall occur under the
Senior Loan Documents.  Any notice of “default”
or “event of default” under the Subordinated Loan Documents which any
respective Subordinated Lender sends to Borrower shall also be simultaneously
sent to Senior Lender (and its counsel) at the addresses set forth in Section 13
below.

 

5

 

7.                                       Bankruptcy
Financing Issues.

 

This Agreement shall continue in full force and effect after the filing
of any petition for relief by or against Borrower under the United States
Bankruptcy Code (the “Code”)
and all converted or succeeding cases in respect thereof (all references herein
to Borrower being deemed to apply to Borrower as debtor-in-possession and to a
trustee for Borrower), and shall apply with full force and effect with respect
to all Collateral acquired by Borrower, and to all Senior Debt and Subordinated
Debt incurred by Borrower, subsequent to such filing.  If Borrower shall become subject to a
proceeding under the Code, and if the Senior Lender shall desire to permit the
use of cash collateral by Borrower or to provide post-petition financing from
the Senior Lender to Borrower, each Subordinated Lender agrees as follows:  (a) no notice need be provided to any
respective Subordinated Lender for such use of cash collateral or such
post-petition financing; and (b) no objection will be raised by the
Subordinated Lenders to any such use of cash collateral or such post-petition
financing from the Senior Lender.  No
objection will be raised by the Subordinated Lenders to the Senior Lender’s
motion for relief from automatic stay in any such proceeding to foreclose on,
sell or otherwise realize upon the Collateral. 
In case of any assignment by Borrower for the benefit of creditors, and
in case of the appointment of any receiver for Borrower or Borrower’s business
or assets, and in case of any dissolution or other winding up of the affairs of
Borrower, or of Borrower’s business, and in all such cases respectively, the
officer of Borrower and any assignee, trustee in bankruptcy, receiver, and
other person or persons in charge, are hereby directed to pay to Senior Lender
the full amount of Senior Lender’s claims against Borrower before making any
payment to any Subordinated Lender, and so far as may be necessary for that
purpose, the Subordinated Lenders hereby transfer and assign to Senior Lender
all their rights to any payment or distribution which might otherwise be coming
to it.  Senior Lender is hereby
irrevocably constituted and appointed the attorney-in-fact of the Subordinated
Lenders to file any and all proofs of claim and any other documents and to take
all other action, either in the name of Senior Lender or any Subordinated
Lender, which in the opinion of Senior Lender is necessary or desirable to
enable Senior Lender to obtain all such payments.

 

8.                                       Transfers:
Binding Effect.

 

8.1                                 Subject
to Section 8.2 below, Senior Lender shall have the right to sell, assign,
transfer or otherwise dispose of any of the Senior Debt, or any interest
therein, from time to time, without the prior consent of any other party
hereto.

 

8.2                                 This
Agreement shall extend to and bind the respective successors, assigns, and
transferees of the parties hereto and shall inure to the benefit of any such
successor, assignee or transferee but shall not otherwise create any rights or
benefits for any third party.

 

9.                                       Headings.  The headings in this Agreement are for
convenience of reference only and shall not after or otherwise affect the
meaning hereof.

 

10.                                 Conflicts
with Senior or Subordinated Loan Documents. Notwithstanding any term or
provision of the Senior Loan Documents or the Subordinated Loan Documents or
any other agreement to which Borrower, Senior Lender or the Subordinated
Lenders are a party or by which any of them is bound, in the event that any
term or provision of any such instrument or agreement conflicts or is
inconsistent with the terms and provisions of this Agreement, until such time
as the Senior Debt shall have been Paid in Full, the terms and provisions of
this Agreement shall control.

 

11.                                 Governing
Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
SUCH STATE’S PRINCIPLES OF CONFLICT OF LAWS.

 

12.                                 Waivers:
Amendments, Etc.  Neither this
Agreement nor any of the terms hereof may be amended, waived, discharged or
terminated unless such amendment, waiver, discharge or termination is in
writing signed by each of Senior Lender and each Subordinated Lender.

 

6

 

13.                                 Notice.
Any notices or other communications required or permitted to be given hereunder
must be given in writing and (i) personally delivered or (ii) mailed
by prepaid certified or registered mail or by Federal Express or similar
courier service, to the party to whom such notice of communication is directed,
to the address of such party as follows:

 

(a)                                  Mrs. Simek:

 

Mrs. Frances L.
Simek

860 Vega Lane

Medford, WI 54451

 

with a
copy to:

 

Robert W. Zimmerman, Esq.

Mallery &
Zimmerman, S.C.

101 Grand Avenue

PO Box 479

Wausau, WI

 

(b)                                 Mr. Simek:

 

Mr. Joseph Simek

860 Vega Lane

Medford, WI 54451

 

with a
copy to:

 

Robert W. Zimmerman, Esq.

Mallery &
Zimmerman, S.C.

101 Grand Avenue

PO Box 479

Wausau, WI

 

(c)                                  Senior
Lender:

 

Laurus
Master Fund, Ltd.

c/o
Laurus Capital Management, LLC

825
Third Avenue, 14th Floor

New
York, NY 10022

Facsimile:  (212) 541-5800

 

with a
copy to:

 

John
E. Tucker, Esq.

c/o
Laurus Capital Management, LLC

825
Third Avenue, 14th Floor

New
York, NY 10022

Facsimile:  (212) 541-4434

 

(d)                                 Borrower:

 

Time
America, Inc.

51 West Third Street

Suite 310

Tempe, Arizona 85281

Telephone:  480-967-5800

Attn:  Thomas S. Bednarik

President and Chief Executive Officer

 

7

 

with
copies to:

 

Squire,
Sanders & Dempsey L.L.P.

Two Renaissance Square

40 North Central Avenue, Suite 2700

Phoenix, Arizona 85004-4498

Telephone:  602-528-4134

Facsimile:  602-253-8129

Attn:     Gregory
R. Hall, Esq.

 

Any such notice or other
communication shall be deemed to have been given (whether actually received or
not) on the day it is mailed or personally delivered as aforesaid. Any party
may change its address for purposes of this Agreement by giving notice of such
change to the other parties pursuant to this Section 13.

 

14.                                 Multiple
Counterparts.  This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart.

 

15.                                 Further
Assurances. Each of the parties hereto hereby agree to promptly execute and
deliver to the other parties hereto any and all such further instruments and
documents and to take such further action as such other parties may at any time
reasonably request in order to fully effect the purposes of this Agreement.

 

16.                                 Reliance
by Senior Lender; Waiver of Notices; No Representations by Senior Lender;
Management of Credit Facilities by Senior Lender.  All of the Senior Debt shall be deemed to
have been made or incurred in reliance upon this Agreement.  Each Subordinated Lender expressly waives all
notice of the acceptance by Senior Lender of the provisions of this Agreement
and all other notices not specifically required pursuant to the terms of this
Agreement.  Each Subordinated Lender
agrees that Senior Lender has not made any representation or warranty with
respect to the due execution, legality, validity, completeness or
enforceability of any of the Senior Loan Documents, the perfection or priority
or any security interest or lien securing any or all of the Senior Debt or the
collectibility of any of the Senior Debt. 
Senior Lender shall be entitled to manage and supervise its credit
facilities with Borrower in accordance with applicable law and its usual
business practices (subject to the provisions of this Agreement), modified from
time to time as it deems appropriate under the circumstances, and Senior Lender
shall have no liability to any Subordinated Lender for any loss, claim or
damage allegedly suffered by any Subordinated Lender in any proceeding by
Senior Lender to foreclose or otherwise enforce any of its security interests
in and/or liens on any of the Collateral.

 

17.                                 Financial
Condition of Borrower.  Each
Subordinated Lender hereby assumes responsibility for keeping itself informed
of the financial condition of Borrower and any and all guarantors of the
Subordinated Debt and of all other circumstances bearing upon the risk of
nonpayment of the Subordinated Debt that diligent inquiry would reveal and each
Subordinated Lender hereby agrees that Senior Lender shall have no duty to
advise any Subordinated Lender of any information regarding such condition or
any such circumstances.

 

18.                                 Miscellaneous.

 

18.1                           Every
word herein importing the singular number shall also be construed to extend to
and include the plural number also and vice versa.

 

18.2                           In
the event that any term or provision of this Agreement or the application
thereof to any person or circumstance shall, to any extent, be held invalid or
unenforceable, the remainder of this Agreement or the application of such term
or provision to persons or circumstances than those to which it is held invalid
or unenforceable, shall be valid and enforceable to the fullest extent
permitted by law.

 

18.3                           This
Agreement and all covenants, agreements, representations and warranties made
herein shall survive and continue in full force and effect until such time as
all of the Senior Debt has been indefeasibly Paid in Full.

 

8

 

18.4                           The
parties acknowledge that each party and its respective counsel have reviewed
and revised this Agreement and agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
apply in the interpretation of this Agreement.

 

18.5                           Neither
Senior Lender nor any Subordinated Lender shall be deemed to have waived any of
their respective rights or remedies under this Agreement unless such waiver is
in writing and signed by the party to be charged.  No delay or omission on the part of any party
in exercising any such right or remedy shall operate as a waiver of any such
right or remedy or any other right or remedy. 
A waiver on any one occasion shall not be construed as bar to or a
waiver of the same right or remedy on any future occasion.  Without limiting the generality of the
foregoing, Senior Lender’s acquiescence in the payment of any sum to any
Subordinated Lender in contravention of the terms of this Agreement shall not
constitute a waiver of the right of Senior Lender to require prompt performance
of any and all of the covenants contained in this Agreement.

 

18.6                           Time
is of the essence with respect to the payment, performance and observance of
each of the covenants of each of the parties to this Agreement.

 

18.7                           Each
party hereto acknowledges that to the extent that no adequate remedy at law
exists for breach of its obligations under this Agreement in the event any
party fails to comply with its obligations hereunder, the other party shall
have the right to obtain specific performance of the obligations of such
defaulting party, injunctive relief or such other equitable relief as may be
available.

 

18.8                           The
failure of any party to perform any of the terms, covenants or conditions set
forth in this Agreement shall not alter, or be deemed to alter, in any way the
subordination provisions hereof or the relative priorities established hereby.

 

19.                                 NO
REFINANCING COMMITMENT.  Borrower and
Subordinated Lenders each hereby acknowledge and agree that notwithstanding any
references herein to the refunding, refinancing or extension of the Senior
Debt, the Senior Lender has not impliedly or expressly committed to provide any
such refunding, refinancing or extension nor have any terms of any such
refunding, refinancing or extension been in any way agreed to.  Borrower and Senior Lender hereby acknowledge
and agree that notwithstanding any references herein to the refinancing or
extension of the Subordinated Debt, no Subordinated Lender has impliedly or
expressly committed to provide such refinancing or extension, nor has any terms
of any such refinancing or extension been in any way agreed to.

 

20.                                 FINAL
AGREEMENT.  THIS WRITTEN
SUBORDINATION AGREEMENT, THE SENIOR LOAN DOCUMENTS AND THE SUBORDINATED LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES.

 

21.                                 WAIVER
OF JURY TRIAL.  EACH PARTY TO THIS
AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED UPON THIS AGREEMENT OR THE
SENIOR LOAN DOCUMENTS OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THE
TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART, OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN). OR ACTIONS BY ANY
PARTY. THIS MUTUAL WAIVER IS GIVEN AS A MATERIAL INDUCEMENT FOR THE PARTIES TO
EXECUTE THIS AGREEMENT.

 

[Signatures on following page]

 

9

 

IN WITNESS WHEREOF, the
parties hereto by their duly authorized representatives have executed this
Agreement as an instrument under seal as of the date first above written.

 

	
   

  	
  SUBORDINATED
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FRANCES L. SIMEK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JOSEPH L. SIMEK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SENIOR
  LENDER:

  
	
   

  	
   

  
	
   

  	
  LAURUS MASTER
  FUND, LTD., a Cayman Islands company,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  TIME AMERICA,
  INC., a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TIME AMERICA,
  INC., an Arizona corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
						

 

10

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