S-2

As filed with the Securities and Exchange Commission on July 22, 2005

Registration No. 333-      

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM S-2

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

TIME AMERICA, INC.

(Exact name of registrant as specified in its charter)

Nevada	13-3465289
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

8840 East Chaparral Road, Suite 100, Scottsdale, Arizona 85250

(480) 296-0400

(Address, including zip code, and telephone number, including area code,

of registrant’s principal executive offices)

Copies to:
Thomas S. Bednarik	Gregory R. Hall, Esq.
Time America, Inc.	Squire, Sanders & Dempsey L.L.P.
8840 East Chaparral Road, Suite 100	Two Renaissance Square
Scottsdale, Arizona 85250	40 North Central Avenue, Suite 2700
(480) 296-0400	Phoenix, Arizona 85004-4498
	(602) 528-4000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ý

If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this Form, check the following box.  ý

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  o

Calculation of Registration Fee

Title of Each Class of Securities to be Registered	Amount to be Registered		Proposed Maximum Offering Price Per Share			Proposed Maximum Aggregate Offering Price		Amount of Registration Fee
Common Stock, $.005 par value per share, issuable upon conversion of secured convertible note	2,500,000	(1)	$	0.55	(5)	$	1,375,000	$	161.84
Common Stock, $.005 par value per share, issuable upon conversion of warrant	210,000	(2)	$	0.78	(6)	$	163,800	$	19.28
Common Stock, $.005 par value per share, issuable as compensation for fees	140,625	(3)	$	0.55	(5)	$	77,344	$	9.10
Common Stock, $.005 par value per share, issuable upon conversion of warrant	136,364	(4)	$	1.10	(6)	$	150,000	$	17.66
Common Stock, $.005 par value per share, issuable upon conversion of warrant	173,077	(4)	$	0.65	(6)	$	112,500	$	13.24
TOTAL:	3,160,066					$	1,878,644	$	221.12

(1)Represents the estimated maximum number of shares of common stock to which one of the selling shareholders, Laurus Master Funds, Ltd. (“Laurus”), may be entitled upon conversion of the $1,000,000 secured convertible minimum borrowing note issued by us to Laurus on June 23, 2005.  The initial conversion price of the convertible note is $0.65 per share, but is subject to adjustment to the extent the price at which we issue shares of our common stock to a person other than Laurus is less than the then current conversion price of the convertible note.  Accordingly, the 2,500,000 shares being registered include 1,538,461 shares at the initial fixed conversion price, plus additional shares in the event of any price adjustments.  Pursuant to Rule 416 under the Securities Act, this registration statement also covers an indeterminate number of additional securities that may be issuable from time to time in connection with any stock split, stock dividend or similar transaction.

(2)Represents shares of common stock issuable upon the conversion of a warrant granted to Laurus in connection with the issuance of the convertible note.

(3)Represents the estimated maximum number of shares of common stock to which one of the selling shareholders, Oberon Securities, LLC (“Oberon”), may be entitled in connection with certain fees due by us to Oberon.

(4)Represents shares of common stock issuable upon the conversion of warrants granted to Oberon.

(5)Pursuant to Rule 457(c), and solely for purposes of calculating the registration fee, the proposed maximum offering price per share is calculated based upon the average of the high and low prices of the common stock on the OTC Bulletin Board as of July 15, 2005.

(6)Pursuant to Rule 457(g), and solely for purposes of calculating the registration fee, the proposed maximum offering price per share is calculated based upon the highest price at which the warrants may be exercised.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

TABLE OF CONTENTS

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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JULY 22, 2005

Prospectus

TIME AMERICA, INC.

3,160,066 Shares of

Common Stock

This prospectus relates to the resale of up to 3,160,066 shares of our common stock, of which up to 2,500,000 are issuable upon the conversion of a Secured Convertible Minimum Borrowing Note dated June 23, 2005, 519,441 shares are issuable upon the exercise of related warrants, and up to 140,625 shares are issuable in connection with certain related fees.  The 2,500,000 shares underlying the Secured Convertible Minimum Borrowing Note include 1,538,461 shares at the initial $0.65 fixed conversion price, plus additional shares in the event of any price adjustments.

We will not receive any of the proceeds from the shares of common stock sold by the selling shareholders, but if the warrants are exercised in whole or in part, we will receive payment for the exercise price.

Our common stock is traded on the NASDAQ Over-the-Counter Bulletin Board under the symbol TMAM.OB. On July 15, 2005, the closing sale price of our common stock was $0.55 per share.

The price you pay for shares of common stock sold by the selling shareholders named in this prospectus will be determined at the time of such sale, as set forth under the heading “Plan of Distribution.”

Investing in our common stock involves a high degree of risk. See Risk Factors on page 6

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is July   , 2005.

WHERE YOU CAN FIND MORE INFORMATION

We file reports and other information with the U.S. Securities and Exchange Commission. You may read and copy any document that we file at the SEC’S public reference facilities at 450 Fifth Street N.W., Room 1024, Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities. Our SEC filings are also available to you free of charge at the SEC’s web site at http://www.sec.gov.

Copies of publicly available documents that we have filed with the SEC can also be inspected and copied at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

INCORPORATION OF DOCUMENTS BY REFERENCE

The SEC allows us to incorporate by reference the information we file with them. This means that we can disclose information to you by referring you to those documents. The documents that have been incorporated by reference are an important part of the prospectus, and you should review that information in order to understand the nature of any investment by you in the common stock. Information contained in this prospectus automatically updates and supersedes previously filed information. We are incorporating by reference the documents listed below and all of our filings under the Securities Exchange Act of 1934.

•our Annual Report on Form 10-KSB for the fiscal year ended June 30, 2004;

•our Quarterly Reports on Form 10-QSB for the periods ended September 30, 2004, December 31, 2004, and March 31, 2005;

•our Current Report on Form 8-K filed with the SEC on June 29, 2005.

If you would like a copy of any of these documents, at no cost, please write or call us at:

Time America, Inc.

8840 East Chaparral Road, Suite 100

Scottsdale, Arizona 85250

Telephone: (480) 296-0400

You should only rely upon the information included in or incorporated by reference into this prospectus or in any prospectus supplement that is delivered to you. We have not authorized anyone to provide you with additional or different information. You should not assume that the information included in or incorporated by reference into this prospectus or any prospectus supplement is accurate as of any date later than the date on the front of the prospectus or prospectus supplement.

We have not authorized any person to provide you with information different from that contained or incorporated by reference in this prospectus. The selling shareholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock.

FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus, including the summary, contains “forward-looking statements” concerning Time America, Inc. and its operations, performance, financial condition and likelihood of success.

You can identify these statements by use of terms such as “expect,” “believe,” “goal,” “plan,” “intend,” “estimate,” “may,” and “will” or similar words. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those described in the “Risk Factors” section and other parts of this prospectus that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

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These forward looking statements include statements regarding the belief or current expectation of management and are based on management’s current understanding of the markets and industries in which we operate. That understanding could change or could prove to be inconsistent with actual developments. Our actual results could differ materially from the results discussed in this prospectus, including those anticipated in or implied by any forward-looking statements. Factors that could cause or contribute to such differences include those previously described, as well as those discussed elsewhere in this prospectus.

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SUMMARY

This summary highlights information contained in other parts of this prospectus. Because this is a summary, it may not contain all of the information you should consider before investing in our common stock. You should carefully read this entire prospectus, including the factors described under Risk Factors at page 6 of this prospectus. Throughout this prospectus, we refer to Time America, Inc. as Time America, we, our, ours, and us.

TIME AMERICA, INC.

Overview of Our Business

Time America, Inc. was organized in 1988 as a Nevada corporation under the name Richard Barrie Fragrances, Inc. Since our formation we have undergone a number of changes to our corporate name and to the nature of the business we conduct. We entered the time and attendance industry in 1999 when we acquired the outstanding capital stock of Vitrix Incorporated, a privately held Arizona corporation formed in 1996, which became our only operating subsidiary. In 2001, we acquired Time America, Inc. through the merger of that entity into our subsidiary Vitrix Incorporated. In 2003, we changed our name from Vitrix, Inc. to Time America, Inc. to capitalize on the then 13-year history and name recognition of Time America in the time and attendance industry.

We develop, manufacture and market a line of time and labor management software and hardware products which are designed to improve productivity by automating time and attendance, workforce scheduling and management of labor resources. Our product solutions are designed for use by a broad range of businesses, from small single location companies with only a few employees to enterprise level companies with multiple sites and thousands of employees.

Our products are internally developed, proprietary software applications that maintain and automate the process of collecting timesheet information, provide interfaces to popular payroll software solutions and enable users to generate a variety of reports that aid in the tracking and analyzing of how employees utilize their work time. Our product solutions use a variety of technologies, including products that are delivered through a 100% Web-based application service provider model, as well as client/server and
PC-based applications. Our current products include:

•NETtime—is a 100% Web-based service deliverable to users through both a licensed and application service provider model.

•HourTrack—is a powerful workforce management solution that combines client/server software with a wide range of data collection devices designed to automate the process of tracking, managing, auditing, and reporting employee time and attendance.

•GENESIS SQL—is an enterprise level software that helps clients optimize productivity and more effectively manage their bottom line by automating not only time and attendance, but job costing, benefit administration, employee review processing, access control, bell ringing and data collection needs.

•TA50 PRO—is a simple to use yet powerful time and attendance solution designed for companies with fewer than 200 employees. It enables users to automate their timekeeping and attendance tracking with built-in setup wizards and simplified daily operations.

•TA50XL—is also a simple to use time and attendance solution that includes the software features of TA50 PRO and an XL data terminal and accessories in a cost-effective package.

•TA100 PRO—is a time and attendance solution designed for companies with fewer than 500 employees. This product allows users to automatically calculate employee time and wages using the client’s specific payroll policies.

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•GENESIS PRO—is an enterprise level PC-based software application that has the same feature set as GENESIS SQL.

We market our products to companies in the U.S. and abroad through our direct sales and support organization and through Business Alliance and Reseller Program. Our direct sales and reseller sales efforts accounted for approximately 45% and 55%, respectively, of our total revenues for the nine-month period ended March 31, 2005.

Market Opportunity

We believe the market for time and labor management software and hardware products is large and growing. There are currently no definitive figures on the market size of the time and attendance market.

Growth Strategy

We have a long history of providing high quality time and labor management products to our targeted markets. Our goal is to maintain and strengthen our market position. We intend to pursue the following growth strategies to attain this goal:

•Expand Direct Sales Organization. We have recently added a Vice-President of Direct Sales and plan to add additional direct sales personnel to bolster our direct sales efforts.

•Leveraged Distribution. We plan to continue to sign strategic partners to enable us to do rapid and wide-scale private label distribution of our products.

•Introduction of New Technologies. The Company will continue to introduce and expand into new technologies that will differentiate us from our competitors.

•Expand through Mergers and Acquisitions. The Company plans to enter into mergers and acquisitions with target companies that provide complimentary products, markets or distributions channels to the Company.

Recent Developments

On June 23, 2005, we entered into agreements with Laurus Master Funds, Ltd, a Cayman Islands corporation, or “Laurus”, pursuant to which we issued convertible debt and a warrant to purchase common stock to Laurus in a private offering pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933. The securities issued to Laurus include the following:

•A Secured Convertible Minimum Borrowing Note with a principal amount of $1,000,000, convertible into our common stock at an initial fixed conversion price of $0.65 per share;

•A Secured Revolving Note with a principal amount not to exceed $1,500,000; and

•A common stock purchase warrant, exercisable for a period of seven years, to purchase 210,000 shares of common stock, at exercise prices of $0.72 per share for the first 150,000 shares, $0.75 per share for the next 30,000 shares, and $0.78 per share for any additional shares.

We are permitted to borrow an amount based upon our eligible accounts receivable, as defined in the agreements with Laurus, not to exceed an aggregate of $1,500,000.  Our obligations under the notes are secured by all of the assets of Time America, Inc. and its wholly-owned subsidiary, Time America, Inc., an Arizona corporation, including but not limited to inventory and accounts receivable. The notes mature on June 23, 2008. Annual interest on the notes is equal to the “prime rate” published in The Wall Street Journal from time to time.  Interest on the notes is payable monthly in arrears on the first business day of each month, commencing on July 1, 2005.

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The principal amount of the secured convertible minimum borrowing note, together with accrued interest thereon is payable on June 23, 2008. The secured convertible minimum borrowing note may be redeemed by us in cash by paying the holder 115% of the principal amount, plus accrued interest. The holder of the term note may require us to convert all or a portion of the term note, together with interest and fees thereon, into fully paid shares of our common stock at any time. The number of shares to be issued shall equal the total amount of debt to be converted, divided by the initial fixed conversion price of $0.65.

Upon an issuance of shares of common stock below the fixed conversion price, the fixed conversion price of the notes will be reduced accordingly. The conversion price of the secured convertible minimum borrowing notes may also be adjusted in certain circumstances such as if we pay a stock dividend, subdivide or combine outstanding shares of common stock into a greater or lesser number of shares, or take such other actions as would otherwise result in dilution.

In the event of default, 125% of the outstanding principal amount of the note plus accrued but unpaid interest is due.  Laurus has contractually agreed to restrict its ability to convert the convertible minimum borrowing notes if it would exceed the difference between the number of shares of common stock beneficially owned by the holder or issuable upon exercise of the warrant and the option held by such holder and 4.99% of the outstanding shares of our common stock.

We are obligated to file a registration statement registering the resale of shares of the common stock issuable upon conversion of the secured convertible minimum borrowing notes and exercise of the warrants.  If the registration statement is not filed by July 23, 2005, and declared effective within 90 days thereafter, or if the registration is suspended other than as permitted in the registration rights agreement between us and Laurus, we are obligated to pay Laurus certain fees.

We paid a fee at closing to Laurus Capital Management LLC, the manager of Laurus Master Funds, Ltd., equal to 3.60% of the total maximum funds to be borrowed under the Company’s agreements with Laurus.

Pursuant to agreements with Oberon Securities, LLC (“Oberon”) relating to our financing transactions with Laurus, we are registering 450,066 shares of common stock to be resold by Oberon, a selling shareholder listed in this prospectus, which represent up to 140,625 shares issuable in payment of certain fees due by us to Oberon, shares underlying a three-year warrant, issued March 22, 2004, to purchase 136,364 shares at an exercise price of $1.10 per share, and shares underlying a three-year warrant, issued June 23, 2005, to purchase 173,077 shares at an exercise price of $0.65 per share.

Our principal executive offices are located at 8840 East Chaparral Road, Scottsdale, Arizona 85250.  Our telephone number is (480) 296-0400.

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RISK FACTORS

An investment in our common stock involves a significant degree of risk and you should not invest in our common stock unless you can afford to lose some or even all of your investment. You should consider these risk factors together with all the other information included in this prospectus before you decide to purchase shares of our common stock.

WE HAVE A HISTORY OF OPERATING LOSSES AND MAY NEVER GENERATE SUSTAINED OPERATING INCOME FROM THE SALE OF OUR TIME AND ATTENDANCE PRODUCTS.

As of March 31, 2005, we had an accumulated deficit of $8,768,145. In addition, we have reported net income in only one fiscal quarter over the past six fiscal years ended June 30, 2004, and through March 31, 2005.  No assurance can be made that we will ever be able to generate sustained operating income from the sale of our time and attendance products.

We believe that our future profitability and success will depend in large part on our ability to generate revenue from the sale of our products. Our profitability and success will depend on:

•our ability to generate sufficient sales volume.

•our ability to maintain existing reseller relationships and our ability to enter into new relationships.

WE WILL REQUIRE ADDITIONAL FUNDS IN ORDER TO GROW OUR BUSINESS, WHICH MAY NOT BE AVAILABLE TO US WHEN WE NEED THEM OR, IF AVAILABLE, ON TERMS THAT ARE ACCEPTABLE TO US.

The growth of our business could require us to expend funds in excess of the cash generated by our operations. We may need to raise additional funds in the future in order to fund more rapid expansion; to develop new and enhanced products; to increase Customer support or technical staff; to respond to competitive pressures; and to acquire complimentary businesses, technologies, or services. We cannot predict the timing and amount of any such capital requirements at this time. If we raise additional funds through the issuance of equity or convertible securities, existing shareholders may experience additional dilution and such securities may have rights, preferences, or privileges senior to those of the rights of our common shareholders. There can be no assurance that we will be able to obtain additional financing on acceptable terms, or at all. If adequate funds are not available on acceptable terms, we may not be able to fund expansion, promote our products, take advantage of acquisition opportunities, develop or enhance products and services, or respond to competitive pressures.

We may wish to acquire complementary businesses, products, services, or technologies in the future. We may not be able to identify suitable acquisition candidates or make acquisitions on commercially acceptable terms. We may have difficulty integrating an acquired company’s personnel, operations, products, services, or technologies into our operations. These difficulties could disrupt our ongoing business, distract our management and employees, increase our expenses, and adversely affect our business.

ANY INCREASE IN COMPETITION IN OUR INDUSTRY COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

The market for software solutions is constantly evolving and extremely competitive. We expect competition to intensify in the future. We compete with major domestic companies. Many of these competitors have greater market recognition and substantially greater financial, technical, marketing, distribution, and other resources than we have, and we may be unable to compete effectively against them. Emerging companies also may increase their participation in the market for software applications such as that offered by the Company.

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OUR BUSINESS MAY BE MATERIALLY ADVERSELY IMPACTED BY OUR ABILITY TO CONTINUALLY IMPROVE OUR PRODUCTS AND DEVELOP NEW PRODUCTS THAT WILL HELP US MAINTAIN OUR COMPETITIVENESS IN THE TIME AND ATTENDANCE INDUSTRY.

Our success depends in part upon our ability to enhance our existing products and services and to develop new products and services on a timely and cost-effective basis. We cannot provide assurance that we will be able to successfully identify new opportunities and develop and bring to market new products and services in a timely and cost-effective manner. In addition, we cannot provide assurance that our products and services will not become obsolete, noncompetitive, or that they will sustain market acceptance.

We may not be able to adapt to rapidly changing technologies or we may incur significant costs in doing so. The software industry is characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions, and changing customer demands. New turn-key business solution products and services based on new technologies or new industry standards could render our existing products and services obsolete and unmarketable. To be successful, we must adapt to our rapidly evolving market by continually enhancing our products and services and introducing new products and services to address our users’ changing and increasingly sophisticated requirements. We may use new technologies ineffectively or we may fail to adapt our products and infrastructure to meet customer requirements, competitive pressures, or emerging industry standards. We could incur substantial costs if we need to modify our services or infrastructure. Our business could be materially and adversely affected if we incur significant costs to adapt, or cannot adapt, to these changes.

OUR BUSINESS WILL BE MATERIALLY ADVERSELY IMPACTED BY AN INABILITY TO MAINTAIN AND CONTINUALLY DEVELOP RELATIONSHIPS WITH AFFILIATES, RESELLERS AND LICENSEES.

Our success depends on forming relationships with affiliates, resellers and licensees. The success of our business model depends upon a constant revenue stream generated by a high number of end-users. Our business model contemplates attracting
end-users by forming relationships with affiliates, resellers, and licensees that market our products and services. We believe that it will be less costly and more efficient for us to attract end-users through indirect distribution channels than to attempt to attract the end-users directly. Consequently, we must establish and maintain relationships with resellers and licensees. We may not be able to attract additional affiliates, resellers, or licensees on acceptable terms, or at all. Our business, financial condition and results of operations will be materially and adversely affected if we fail to establish and maintain relationships with affiliates, resellers, and licensees on a cost-effective basis.

THE CURRENT CAPITALIZATION COULD DELAY, DEFER, OR PREVENT A CHANGE OF CONTROL.

We are authorized to issue up to 50,000,000 shares of common stock and up to 10,000,000 shares of preferred stock, in one or more series, and to determine the price, rights, preferences and privileges of the shares of each such series without any further vote or action by the shareholders. The issuance of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company, thereby delaying, deferring, or preventing a change of control of the Company.

THE LIMITED TRADING VOLUME OF OUR COMMON STOCK, HISTORICAL PRICE VOLATILITY, NUMBER OF SHARES REGISTERED FOR RESALE, AND THE PRICE AT WHICH THE SELLING SHAREHOLDERS MAY SELL SHARES OF COMMON STOCK PURSUANT TO THIS PROSPECTUS, MAY CAUSE DOWNWARD PRESSURE ON THE PRICE OF OUR COMMON STOCK AND NEGATIVELY IMPACT AN INVESTOR’S ABILITY TO SELL SHARES OF OUR COMMON STOCK IN THE FUTURE.

The price at which the selling shareholders will sell the shares of common stock described in this prospectus may vary from time to time and will be determined at the time of such sale. The negotiated selling price may represent a discount from our trading price. Any level of discount from the current market price, together with any of the following factors, may cause downward pressure on the price of our common stock and negatively impact your ability to sell your shares of common stock when you desire to do so:

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•We are registering for resale an aggregate of 3,160,066 shares of common stock to be sold by the selling shareholders named in this prospectus. The ability to freely trade these shares may create downward pressure on the price of our common stock.

•The trading price of our common stock has been volatile over the past 11 fiscal quarters and may continue to be volatile in the future. During the two fiscal years ended June 30, 2004 and 2003, and the three fiscal quarters ended March 31, 2005, our stock price has ranged from a high of $1.50 per share and a low of $0.15 per share.

•The average daily trading volume of our common stock over the three-month period ended June 30, 2005 is approximately 8,750 shares.  Any material increase in trading volume resulting from the sale of the shares that are the subject of this prospectus or otherwise could cause downward pressure on the trading price of our common stock.

The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss due to potential illiquidity and the possibility that our common stock may suffer greater declines.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of shares by the selling shareholders. We may receive proceeds from the exercise of warrants entitling the selling shareholders to purchase an aggregate of 519,441 shares of our common stock. If all warrants held by the selling shareholders are exercised, we will receive an aggregate of $416,400.  We expect to use any proceeds we receive from the exercise of the warrants for general corporate purposes, including, but not limited to, working capital, capital expenditures and repaying or refinancing of our obligations.

DESCRIPTION OF SECURITIES

Common Stock

The Company’s Certificate of Incorporation authorizes the issuance of 50,000,000 shares of common stock, $.005 par value per share, and 10,000,000 shares of preferred stock, par value $.01 per share.

The holder of common stock is entitled to receive dividends when and as declared by the board of directors of the company out of funds legally available therefor, provided that if any shares of common stock are at the time outstanding, the payment of dividends on common stock and other distributions (including purchases of common stock) may be subject to the declaration and payment of full cumulative dividends, and the absence of arrearages in any mandatory sinking funds, on outstanding shares of common stock.

The holder of common stock is entitled to one vote for each share on all matters voted on by stockholders, including election of directors. The holder of common stock does not have any conversion, redemption or preemptive rights. In the event of the dissolution, liquidation or winding up of the company, holders of common stock are entitled to share ratably in any assets remaining after the satisfaction in full of the prior rights of creditors, including holders of the Company’s indebtedness, and the aggregate liquidation preference of any preferred stock then outstanding.

All outstanding shares of common stock are, and the shares offered hereby, upon issuance, will be, fully paid and
non-assessable.

Certain provisions of the Company’s Certificate of Incorporation and Bylaws may be considered as having an anti-takeover effect. Such provisions empower the board of directors of the Company to fix the rights and preferences of and to issue shares of preferred stock. In addition, certain provisions of law may have the effect of protecting the Company against undesired takeover attempts. Specifically, under Nevada law, in certain instances, significant holders (as specified) of the Company’s voting stock may not, without approval of a specified vote of the

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other stockholders, or approval of the Company’s board of directors (or the independent members thereof) prior to becoming a significant holder, acquire additional interests in the Company’s assets or capital stock.

The transfer agent for the common stock is American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.

Pursuant to agreements with Oberon in connection with our financing transactions with Laurus, we are registering 450,066 shares of common stock to be resold by Oberon, a selling shareholder listed in this prospectus, which represent shares issuable to Oberon as follows:

•   Up to 140,625 shares issuable in payment of certain fees due by us to Oberon;

•   136,364 shares issuable pursuant to a common stock purchase warrant, issued March 22, 2004, exercisable for a period of three years, at an exercise price of $1.10 per share; and

•   173,077 shares issuable pursuant to a common stock purchase warrant, issued June 23, 2005, exercisable for a period of three years, at an exercise price of $0.65 per share.

Pursuant to an agreement with Laurus dated June 23, 2005, we are registering 2,710,000 shares of common stock to be resold by Laurus, a selling shareholder listed in this prospectus, to which we issued convertible debt in a private offering pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933. The securities issued to Laurus include the following:

•   A secured convertible minimum borrowing note with a principal amount of $1,000,000, convertible into our common stock at an initial fixed conversion price of $0.65 per share;

•   A secured revolving note with a principal amount not to exceed $1,500,000; and

•   A common stock purchase warrant, exercisable for a period of seven years, to purchase 210,000 shares of common stock, at exercise prices of $0.72 per share for the first 150,000 shares, $0.75 per share for the next 30,000 shares, and $0.78 per share for any additional shares.

We are permitted to borrow an amount based upon our eligible accounts receivable, as defined in the agreements with Laurus, not to exceed an aggregate of $1,500,000.  Our obligations under the notes are secured by all of the assets of Time America, including but not limited to inventory and accounts receivable. The notes mature on June 23, 2008. Annual interest on the notes is equal to the “prime rate” published in The Wall Street Journal from time to time.  Interest on the notes is payable monthly in arrears on the first business day of each month, commencing on July 1, 2005.

The principal amount of the secured convertible minimum borrowing note, together with accrued interest thereon is payable on June 23, 2008. The secured convertible minimum borrowing note may be redeemed by us in cash by paying the holder 115% of the principal amount, plus accrued interest. The holder of the term note may require us to convert all or a portion of the term note, together with interest and fees thereon, into fully paid shares of our common stock at any time. The number of shares to be issued shall equal the total amount to be converted, divided by an initial fixed conversion price of $0.65.

Upon an issuance of shares of common stock below the fixed conversion price, the fixed conversion price of the notes will be reduced accordingly. The conversion price of the secured convertible notes may be adjusted in certain circumstances such as if we pay a stock dividend, subdivide or combine outstanding shares of common stock into a greater or lesser number of shares, or take such other actions as would otherwise result in dilution.

In the event of default, 125% of the outstanding principal amount of the note plus accrued but unpaid interest is due.  Laurus has contractually agreed to restrict its ability to convert the convertible notes if it would exceed the difference between the number of shares of common stock beneficially owned by the holder or issuable upon exercise of the warrant and the option held by such holder and 4.99% of the outstanding shares of our common stock.

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Warrants

In this prospectus we are also registering for resale by the selling shareholders an aggregate of 519,441 shares of common stock issuable upon exercise of warrants issued to the selling shareholders.  In connection with the financing transaction described in this prospectus, we have issued to Laurus a warrant to purchase 210,000 shares of our common stock.  Laurus may exercise the warrant at any time through June 23, 2012. The first 150,000 shares may be exercised at a price of $.72 per share, the next 30,000 for $.75 per share and any additional shares may be exercised for $.78 per share.  We have also issued three-year warrants to Oberon in connection with our financing transactions with Laurus.  Oberon may exercise one warrant, granted on March 22, 2004, for 136,364 shares at an exercise price of $1.10 per share, and may exercise the other warrant, granted on June 23, 2005, for 173,077 shares at an exercise price of $0.65 per share.

The warrants provide for anti-dilution adjustments in the event of certain mergers, consolidations, reorganizations, recapitalizations, stock dividends, stock splits or other changes in our corporate structure. As of July 15, 2005, we have outstanding warrants to purchase an aggregate of 1,042,799 shares of our common stock at exercise prices ranging from $0.15 to $4.30.

PLAN OF DISTRIBUTION

Any or all of the shares of common stock to be sold by the selling shareholders may be sold from time to time by the selling shareholders, or by pledgees, donees, transferees or other successors in interest. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and at terms than prevailing or at prices related to the then current market price, or in negotiated transactions. There is no assurance that the selling shareholders will sell any or all of the shares of common stock in this offering. The common stock may be sold in one or more of the following types of transactions:

(a)a block trade in which a selling shareholder will engage a broker-dealer who will then attempt to sell the common stock, or position and resell a portion of the block as principal to facilitate the transaction;

(b)purchases by a broker-dealer as principal and resale by such broker-dealer for its account pursuant to this prospectus;

(c)an exchange distribution in accordance with the rules of such exchange;

(d)ordinary brokerage transactions and transactions in which the broker solicits purchasers; and

(e)any combination of the foregoing, or by any other legally available means. In effecting sales,
broker-dealers engaged by the selling shareholders may arrange for other broker-dealers to participate in the resales.

The selling shareholders may enter into option or other transactions with broker-dealers that require the delivery to the broker-dealer of the common stock, which the broker-dealer may resell or otherwise transfer pursuant to this prospectus. The selling shareholders may also loan or pledge common stock to a broker-dealer and the broker-dealer may sell the common stock so loaned or, upon a default, the broker-dealer may effect sales of the pledged common stock pursuant to this prospectus.

Underwriter Status.  Any broker-dealers or agents that are involved in selling the common stock covered by this prospectus, may be considered to be “underwriters” within the meaning of the Securities Act for such sales. An underwriter is a person who has purchased shares from an issuer with a view towards distributing the shares to the public. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be considered to be underwriting commissions or discounts under the Securities Act. In addition, any of the shares of common stock covered by this prospectus that qualify for sale pursuant to Rule 144

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promulgated under the Securities Act may be sold in an unregistered transaction under Rule 144 rather than pursuant to this prospectus.

Additionally, under applicable rules and regulations of the Exchange Act, any person engaged in the distribution of the common stock may not simultaneously engage in market-making activities with respect to our common stock for a period of up to five business days prior to the commencement of such distribution. In addition to those restrictions, each selling shareholder will be subject to the Exchange Act and the rules and regulations under the Exchange Act, including, Regulation M and Rule 10b-7, which provisions may limit the timing of the purchases and sales of our securities by the selling shareholders.

We have agreed to indemnify Laurus against certain liabilities in connection with the offering of the common stock, including liabilities arising under the Securities Act. The selling shareholders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the common stock against various liabilities, including liabilities arising under the Securities Act.

Penny Stock Rules.  Our common stock is subject to the “penny stock” rules that impose additional sales practice requirements because the price of our common stock is below $5.00 per share. For transactions covered by these rules, broker-dealers must make special suitability determinations for the purchase of our common stock and must have received a purchaser’s written consent to the transaction prior to the purchase. The “penny stock” rules also require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market. Broker-dealers must also disclose:

•the commission payable to both the broker-dealer and the registered representative,

•current quotations for the securities, and

•if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market.

Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

These rules apply to sales by broker-dealers to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse), unless our common stock trades above $5.00 per share. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our common stock, and may affect the ability to sell our common stock in the secondary market as well as the price at which such sales can be made. Also, some brokerage firms will decide not to effect transactions in “penny stocks” and it is unlikely that any bank or financial institution will accept “penny stock” as collateral.

Expenses of the Distribution.  We will bear all of the costs and expenses of registering under the Securities Act the sale of securities offered by this prospectus. Commissions and discounts, if any, attributable to the sales of the common stock will be borne by the selling shareholders.

State Securities Laws.  In order to comply with the securities laws of various states, if applicable, sales of the common stock made in those states will only be made through registered or licensed brokers or dealers. In addition, some states do not allow the securities to be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with by us and the selling shareholders.  We have no obligation to obtain such registrations or qualifications.

SELLING SHAREHOLDERS

The table below sets forth information concerning the resale by the selling shareholders of the common stock. We will not receive any proceeds from the resale of the common stock by the selling shareholders, but may receive proceeds from the exercise of warrants entitling the selling shareholders to purchase an aggregate of 519,441

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shares of our common stock. Because the selling shareholders may sell all, a portion or none of their shares, no estimate can be made of the aggregate number of shares that may actually be sold by the selling shareholders or that may be subsequently owned by the selling shareholders.

The table below sets forth the name of each selling shareholder who may offer the resale of the common stock by this prospectus, the number of such securities beneficially owned by the selling shareholder, the number of such securities that may be sold in this offering and the number of such securities the selling shareholder will own after the offering, assuming it sells all of the shares offered.

Selling Shareholder	Total Shares Included in Prospectus	Beneficial Ownership of Shares Before Offering (1)	% of Shares Owned Before Offering (1)		Beneficial Ownership of Shares After Offering (1)	% of Shares Owned After Offering (1)
Laurus Master Fund, Ltd. (2)	2,710,000	5,602,785	30.1	%	2,892,785	15.5	%
Oberon Securities, LLC	450,066	450,066	3.2	%	0	0	%
TOTAL	3,160,066

(1)The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the selling shareholder has sole or shared voting power or investment power and also any shares that the selling shareholder has the right to acquire within 60 days.

(2)Laurus Capital Management, LLC is the investment manager for Laurus Master Fund, Ltd. The directors of Laurus Capital Management, LLC are David and Eugene Grin. By virtue of their position as directors of Laurus Capital Management, LLC, Messrs. Grin share voting and dispositive power over these securities.

DIVIDEND POLICY

We do not expect to pay any dividends in the foreseeable future. Any profits we earn will be retained and used to finance our growth. We have no current plans to initiate payment of cash dividends, and future dividend policy will depend on Time America’s earnings, capital requirements, financial condition and other factors deemed relevant by our board of directors.

COMPANY OVERVIEW

General

Time America, Inc. is a Nevada corporation. We changed our name from Vitrix, Inc. to Time America, Inc. in December 2003. We develop, manufacture and market a line of time and labor management software and hardware products. Our products are designed to improve productivity by automating time and attendance, workforce scheduling and management of labor resources. We target our product solutions at small to mid-sized companies from 25 to 2,000 or more employees. Our solutions are offered in a 100% Web-based application service provider model, client/server, and PC-based applications.

The following bullet points provide a timeline and overview of our development and corporate history:

•June 6, 1988—Richard Barrie Fragrances, Inc., a Nevada corporation, was formed on this date for the purpose of developing, manufacturing and marketing fragrances, cosmetics, skin treatment and personal care products sold primarily through department and specialty stores and drugstores.

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•June 30, 1996—Richard Barrie Fragrances sells substantially all of its properties and rights to Parlux Fragrances, Inc. During the period from this asset sale to April 1999, our operations were limited to conducting administrative activities and discussions with third parties regarding possible business combinations.

•July 1, 1996—Following the Asset sale, Richard Barrie Fragrances changes its name to FBR Capital Corporation.

•April 15, l999—FBR Capital Corporation acquires the outstanding capital stock of Vitrix Incorporated, a privately held Arizona corporation formed on April 26, 1996, pursuant to the terms of an Exchange Agreement, dated as of such date, among FBR Capital Corporation, Vitrix Incorporated and certain of the Vitrix Incorporated shareholders. Vitrix Incorporated becomes a majority owned subsidiary of FBR Capital Corporation as a result of this transaction. FBR Capital Corporation issued an aggregate of 8,592,826 shares of common stock and 10,000,000 shares of preferred stock in consideration for the purchase of Vitrix Incorporated. This transaction resulted in the shareholders of Vitrix Incorporated acquiring approximately 80% of the outstanding shares of common stock of FBR Capital Corporation, assuming conversion of the preferred stock into common stock and excluding outstanding options and warrants. The existing shareholders of FBR Capital Corporation held the remaining 20% of its outstanding common stock. This transaction was accounted for as a recapitalization of Vitrix Incorporated and the purchase of FBR capital Corporation by Vitrix Incorporated, since Vitrix Incorporated became the controlling company after the transaction.

•October 7, 1999—On this date we changed our name from FBR Capital Corporation to Time America, Inc. in order to associate the name of the parent corporation to our operating subsidiary Vitrix Incorporated.

•March 28, 2001—Time America, Inc. acquires Time America in a merger transaction pursuant to which Time America is merged into our wholly-owned subsidiary, Vitrix Incorporated. This transaction was accounted for as a pooling of interests. As a condition to the merger, we sought and obtained the approval of our shareholders to effect a 1-for-10 reverse stock split, which occurred on April 5, 2001. We issued 3,147,914 shares of Time America, Inc. common stock, on a post reverse stock split basis, as consideration in the merger, which represented approximately 50% of Vitrix Inc.’s then issued and outstanding capital stock.

•April 17, 2001—We changed the name of our wholly-owned subsidiary from Vitrix Incorporated to Time America, Inc. in order to capitalize on Time America’s name recognition gained from its 13 year history in the time and attendance industry.

•December 9, 2003—On this date we changed our name from Vitrix, Inc. to Time America, Inc. to further capitalize on Time America’s name recognition described above.

Time America, Inc. is a holding corporation. Our operations are conducted through our wholly-owned subsidiary, Time America. Unless the context indicates otherwise, references to the company in this report shall include both the Time America, Inc. the parent company, and Time America, Inc. our wholly-owned subsidiary.

Products and Services

We design, develop, manufacture and market a line of time and labor management hardware and software products targeting small, mid-sized, and enterprise level companies. Our solutions are offered in a 100% Web-based licensed and application service provider model, client/server configuration, and in a PC-based application. Our products are internally developed, proprietary software applications that maintain and automate the process of collecting time sheet information, provide automated interfaces to the most popular payroll software solutions and enable users to generate a variety of reports that help track and analyze how employees spend their time. Our products also automatically accrue vacation, sick and personal time, and effectively replace the traditional punch

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clock with a fully automated system designed to improve workforce productivity and provide significant savings to its users. Our current products include:

Labor Management Solutions

100% Web-based Licensed and ASP Product

NETtime

NETtime is a 100% Web-based service deliverable to clients through both a licensed and ASP model. It delivers the functionality of HourTrack, its client/server predecessor, through Web distribution. The main features of NETtime include:

•HourTrack Structure—By building on top of the HourTrack engine, NETtime has all of the functionality of HourTrack.  NETtime was introduced with a robust feature-set in the areas of time and attendance, leave management, job and task tracking, employee scheduling and data analysis.

•Customization—NETtime allows for customization and flexibility. Administrators and employees determine exactly which data NETtime will display for them, allowing clients to work at optimum efficiency in the NETtime environment. Additionally, NETtime will work in the manner required by clients. For example, clients with a mobile workforce have the ability to access the NETtime pages using any Web-enabled cellular phone.

•Anytime, Anywhere—Because NETtime is delivered via the Internet through any Web browser, it brings the user closer to our “anytime, anywhere” vision for performing or self-servicing human resources tasks. Wherever clients have Internet access, they have access to NETtime and the functionality and wealth of information it provides.

•Customer Account Self-Service—NETtime gives users the ability to view their account status online. They can even order additional Vitrix products, obtain system help, or contact a support representative directly from the NETtime website.

Client/Server Applications

HourTrack

Our HourTrack product is a powerful workforce management solution that combines “client/server” software with a wide range of data collection devices to automate the process of tracking, managing, auditing, and reporting the many aspects of employee time and attendance. By replacing traditional punch clocks and paper time sheets with a fully automated system, we believe HourTrack enables companies of all sizes to effectively manage their workforce, resulting in substantial savings to the organization. The primary features of HourTrack include:

•Time and Attendance—HourTrack’s open architecture is easily customized to conform to an organization’s unique set of payroll policies and concerns.

•Leave Management—Leave records for vacation, sick and personal time are maintained by HourTrack. It also tracks hours that are specific to a certain organization, such as PTO, jury duty, training, etc., and automates benefit accruals by using a company’s policies to calculate how much benefit time an employee has earned.

•Job and Task Tracking—In addition to tracking total time spent on the job, HourTrack enables employers to track the time employees spend on specific jobs and tasks. This powerful reporting feature assists companies with job costing, analysis and billing.

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•Workforce Scheduling—HourTrack’s scheduling features help manage payroll costs and productivity concerns by minimizing the likelihood of expensive overstaffing and the negative effects of understaffing. Schedule creation is performed with the assistance of a unique visual interface, allowing administrators to view employees’ schedules in a convenient calendar format.

•Strategic Reporting—HourTrack also features over 60 standard reports. These reports allow users to transform raw data into helpful information that allows managers and executives to gain valuable insight and more effectively manage their organizations. Reports can also be used to share information such as time tracking, benefit usage, job costing, human resource functionality and employee scheduling with third-party applications and/or service bureaus.

GENESIS SQL

GENESIS SQL is an enterprise level software that helps clients optimize productivity and better manage their bottom line by automating not only time and attendance, but job costing, benefit administration, employee review processing, access control, bell ringing, and data collection needs. The main features of GENESIS SQL include:

•Time and Attendance—GENESIS SQL is easily customized to conform to an organization’s unique set of payroll policies and concerns.

•Leave Management—Leave records for vacation, sick and personal time are maintained by GENESIS SQL. It also tracks hours that are specific to a certain organization, such as PTO, jury duty, training, etc., and automates benefit accruals by using a company’s policies to calculate how much benefit time an employee has earned.

•Job and Task Tracking—In addition to tracking total time spent on the job, GENESIS SQL enables employers to track the time employees spend on specific jobs and tasks. Powerful reporting features assist with job costing, analysis and billing.

•Workforce Scheduling—This feature has the same functionality as the Company’s HourTrack product.

•Strategic Reporting—GENESIS SQL includes over 140 standard reports. The reports can be used to share information such as time tracking, benefit usage, job costing, human resource functionality and employee scheduling with third-party applications and/or service bureaus.

PC-Based Products

TA50 PRO

TA50 PRO is a simple to use yet powerful time and attendance solution designed for companies with fewer than 200 employees. TASO PRO enables companies to automate their timekeeping and attendance tracking with built-in setup wizards and simplified daily operations. The main features of TA50 PRO include:

•Ease of Use—TA50 PRO is a user-friendly menu-driven solution that uses color-coded screens to simplify its use. All processes are clearly marked and follow a common operating theme throughout.

•Time and Attendance—TA50 PRO’s tools relieve payroll staff of time consuming, stressful procedures such as manual review and calculation of time cards by automating the calculation of employee time and wages.

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•Workforce scheduling—TAS0 PRO’s scheduling features help manage payroll costs and productivity concerns by minimizing the likelihood of expensive overstaffing and the negative effects of understaffing.

•Strategic Reporting—TA50 PRO includes over 80 standard reports. This reporting feature, which is also included in the company’s TA100 PRO and GENESIS PRO products, allows users to transform raw data into helpful information that allows managers and executives to gain valuable insight and more effectively manage their organizations.

TA50XL

TAS0XL is a simple to use time and attendance solution that includes the software features of TA50 PRO and an XL data terminal and accessories in a cost effective package.

TA100 PRO

The TA100 PRO time and attendance solution, is designed for companies with fewer than 500 employees and automatically calculates employee time and wages using the client’s specific payroll policies. An optional feature of the TA100 PRO solution includes a Bell control Module that allows a client to define bell-ringing schedules and prompt terminals to activate a user supplied bell, alarm, or other audible signaling device. The main features of TA100 PRO include:

•Time and Attendance—TA100 PRO is easily customized to conform to an organization’s unique set of payroll policies and concerns.

•Policy Management—Rounding rules can be setup around start/stop times or the actual punch time to avoid overpaying employees. Overtime can be paid on a weekly, bi-weekly, or semi-monthly basis.

•Workforce Scheduling—This feature has the same functionality as the Company’s TAS0 PRO and GENESIS products.

•Strategic Reporting—TA100 PRO includes over 100 standard reports. Reports can also be used to share information such as time tracking, benefit usage, job costing, human resource functionality and employee scheduling with
third-party applications and/or service bureaus.

GENESIS PRO

GENESIS PRO is an enterprise level PC-based software application that has the same feature set of GENESIS SQL, as discussed above in the client/server production section.

Data Collection Options

Our time and attendance product solutions include hardware for collecting employees’ clock in and out times. Set forth below are the various hardware devices designed to meet the challenges of a diverse set of work environments,

•Badge Terminals—These badge readers are well suited for a wide variety of environments, from doctors’ offices to manufacturing plants. Employees clock in and out by simply sliding a badge through a scanner.

•Hand Punch Biometric Terminals—This device analyzes the biometric measurements of a user’s hand to verify their identity. Instead of using a badge, an employee clocks in and out by placing his or her hand onto the scanner and awaiting verification. This method eliminates losses due to buddy-punching—the practice of clocking in or out for another employee.

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•TelePunch—The TelePunch solution allows employees to clock in and out for the day, for jobs, or for departments using any touch-tone telephone. Clients who purchase this solution receive a pre-configured, telephony server from us. This server runs Vitrix’s software, and allows callers to interact with HourTrack from a remote location.

•eWebClock—eWebClock partially reduces a user’s total time and attendance product investment, by utilizing the Internet to collect employee clock in and out times. By simply logging on to a Web page via the local network or the World Wide Web, employees can clock in and out.

•PC Time Clock—PC Time Clock, allows employees to clock in and out on a Windows-based computer. This is generally beneficial in office environments where employees each have access to their own desktop computer.

•Web browser—NBTtime allows clients to access the service through a standard Web browser. The full range of actions, including clocking in and out, transferring jobs and departments, etc., and information (hours worked, schedules, status board, etc.) are available.

•Web-enabled cell phone—A streamlined version of NETtime is available to clients accessing the service through a text-only browser, such as those operating on cell phones. Essential services such as clocking in and out are available.

•TCP/IP-enabled hardware—Customers may utilize TCP/IP-enabled hardware devices, such as badge readers, to collect clock in and out data from their employees.

•Wireless enabled hardware—Allows clients to connect their time clocks to the host system without the hassle of wiring. The wireless units are small, reliable and easy to integrate into any existing system.

Services and Support

We maintain a professional service and technical support organization, which provides a suite of maintenance and professional services. These services are designed to support Time America customers throughout the life cycle of our products. Our professional services include implementation, training, technical and business technical consulting. Maintenance service options are delivered through our centralized support operation or through local service personnel. Our educational services offer a full range of curriculums, which are delivered through local training at our Scottsdale, Arizona headquarters or the Internet. When necessary, we also may provide software customization services to meet any unique customer requirements.

Marketing and Sales

We market and sell our products to the small, mid-sized and enterprise markets in the United States and foreign countries through our direct sales and support organization and through our Business Alliance and Reseller Program. We believe the market for time and labor management products consists of the following three business segments:

•Small Businesses.  This segment is comprised of companies with fewer than 250 employees and one to three administrator(s) who perform time sheet edits and prepare employee hours for payroll.

•Mid-Sized Businesses.  This segment is comprised of companies with 250 to 1,000 employees. These companies normally have two or more administrators who perform time sheet edits and prepare employee hours from a single office. In many cases multiple stations are necessary for clocking in and out, however, all data is administered from a central location.

•Enterprise Businesses.  Enterprise businesses generally have over 1,000 employees with multiple field offices, each of which have one or more administrators. Payroll is performed at a central or

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headquarter office. An enterprise customer is analogous to a collection of mid-sized businesses requiring centralized data collection and storage.

Direct Sales

The Company has five direct sales account managers responsible for designated geographic regions. The account managers work in offices in their respective regions. The primary markets for direct sales are the upper mid-sized and enterprise markets. End users include companies in the manufacturing and service industries, and in the public and private sectors. For the fiscal years ended June 30, 2004 and 2003, the company’s direct sales efforts accounted for approximately 40% and 38% of the company’s total revenues, respectively.

Partner Sales

Partner sales are conducted through our Business Alliance and Reseller Programs. Our Business Alliance Program is a program that allows organizations to align with the Company through the use of private label, OEM, or referral programs.

Our Reseller Program is comprised of a network of approximately 250 value added resellers located throughout the United States and in certain foreign countries, which market our products along with the resellers’ complementary product offerings. The resellers typically sell to the small and mid-sized markets. For the fiscal years ended June 30, 2004 and 2003, the Company’s reseller sales accounted for approximately 60% and 62% of the Company’s total revenues, respectively.

Backlog

The Company believes that the dollar amount of backlog is not material to an understanding of its business as substantially all of the company’s product revenues in each quarter result from orders received in that quarter.

Manufacturing and Sources of Supply

The duplication of Time America software is performed internally. The printing of documentation is primarily outsourced to suppliers. Although most of the parts and components included within our products are available from multiple suppliers, certain parts and components are purchased from single suppliers. We have chosen to source these items from single suppliers because we believe that the supplier chosen is able to consistently provide us with the highest quality product at a competitive price on a timely basis. While to date we have been able to obtain adequate supplies of these parts and components, the inability to transition to alternate supply sources on a timely basis if required in the future, could result in delays or reductions in product shipments, which could have a material adverse effect on our business and operating results.

Product Development

Our product development efforts are focused on enhancing and increasing the performance of our existing products and developing new products. During fiscal 2004 and 2003, research and development expenses were $890,093 and $641,125, respectively, and were $995,378 during the nine-months ended March 31, 2005. We intend to continue to commit resources to enhance and extend our product lines and develop interfaces to third party products. Although we are continually seeking to further enhance our product offerings and to develop new products, there can be no assurance that these efforts will succeed, or that, if successful, such product enhancements or new products will achieve widespread market acceptance, or that our competitors will not develop and market products that are superior to our products or achieve greater market acceptance. We also depend upon the reliability and viability of a variety of software development tools owned by third parties to develop our products. If these tools prove inadequate or are not properly supported, our ability to release competitive products in a timely manner could be adversely impacted.

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Proprietary Rights

We rely on a combination of trademarks, trade secret law and contracts to protect our proprietary technology. We generally provide software products to end-users under non-exclusive shrink-wrap licenses or under signed licenses, both of which may be terminated by Time America if the end user breaches the terms of the license. These licenses generally require that the software be used only internally subject to certain limitations, such as the number of employees, simultaneous users, computer model and serial number, features and/or terminals for which the end user has paid the required license fee. We authorize our resellers to sublicense software products to end users under similar terms. In certain circumstances, we also make master software licenses available to end users which permit either a specified limited number of copies or an unlimited number of copies of the software to be made for internal use. Some customers license software products under individually negotiated terms. Despite these precautions, it may be possible to copy or otherwise obtain and use our products or technology without authorization. In addition, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries.

Competition

We provide time and attendance, data collection and labor management solutions that enable businesses to optimize their labor resources. The labor management industry is highly competitive. Competition is increasing as businesses in related industries, such as human resources management, payroll processing and enterprise resource planning enter the time and attendance market. Advances in software development tools have accelerated the software development process and, therefore, enable competitors to penetrate our markets more readily. Although we believe we have certain technological and other advantages over our current competitors, maintaining those advantages will require continued investment by the Company in research and development and marketing and sales initiatives. There can be no assurance that we will have sufficient resources to make such investments or to achieve the technological advances necessary to maintain our competitive advantages. Increased competition could adversely affect our operating results through price reductions and/or loss of market share.

We compete primarily on the basis of price/performance, quality, reliability and customer service. In the time and attendance market, we compete against firms that sell automated time and attendance products to many industries, firms that focus on specific industries, and firms selling related products, such as payroll processing, human resources management, or ERP systems. Our major competitor, Kronos Corporation, is substantially larger and has access to significantly greater financial resources than the Company. Competitive market conditions could have a material adverse effect on our business, financial condition and results of operations.

Employees

As of July 15, 2005, we employed 53 individuals. None of our employees are represented by a union or other collective bargaining agreement, and we consider our relations with our employees to be good. We have encountered intense competition for experienced technical personnel for product development, technical support and sales and expect such competition to continue in the future. Any inability to attract and retain a sufficient number of qualified technical personnel could adversely affect our ability to produce, support and sell products in a timely manner.

MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Our common stock is quoted on the OTC Bulletin Board.  The high and low bid prices of our common stock as reported for the periods presented, by fiscal quarter, (i.e., 1^st Quarter = July 1 through September 30) were as follows.

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	High		Low
FISCAL YEAR ENDED: June 30, 2003
First Quarter	$	0.40	$	0.17
Second Quarter	0.30		0.16
Third Quarter	0.23		0.15
Fourth Quarter	0.51		0.15
FISCAL YEAR ENDED: June 30, 2004
First Quarter	$	1.00	$	0.35
Second Quarter	1.50		0.77
Third Quarter	1.45		1.05
Fourth Quarter	1.20		0.85
FISCAL YEAR ENDED: June 30, 2005
First Quarter	$	0.91	$	0.51
Second Quarter	1.00		0.51
Third Quarter	1.00		0.55

As of July 15, 2005, we had 139 shareholders of record of our common stock.  This does not reflect persons or entities that hold stock through various brokerage firms or depositories.

SELECTED AND SUMMARY CONSOLIDATED FINANCIAL DATA

The following selected and summary consolidated financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations, our financial statements included in our Form l0-KSB for the fiscal year ended June 30, 2004, our financial statements included in our Form 10-QSB for the nine-month period ended March 31, 2005, and the related notes included elsewhere in this prospectus. The selected consolidated statement of operations data for the fiscal years ended June 30, 2000, 2001, 2002 and 2003, and the nine-month period ended March 31, 2004 are derived from our audited financial statements not included elsewhere in this prospectus.

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	Fiscal Year Ended June 30, (1)															Nine Months Ended March 31,
	2000			2001			2002			2003			2004			2004			2005
Statement of Operations Data:
Total Revenue	$	3,913,579		$	4,077,736		$	3,285,315		$	4,256,854		$	4,837,121		$	3,559,828		$	4,523,095
Cost of Revenues	1,800,065			2,069,740			1,557,736			1,897,319			2,123,704			1,612,749			1,886,990
Gross Profit	2,113,514			2,007,996			1,727,579			2,359,535			2,713,417			1,947,079			2,636,105
Sales and Marketing Expenses	1,118,987			1,060,316			903,112			1,112,762			1,903,044			1,381,869			1,431,227
Research and Development Expense	1,220,174			1,159,666			691,426			641,125			890,093			623,583			995,378
General and Administrative Expense	1,095,352			1,168,276			741,820			685,675			922,495			639,198			769,654
Loss from operations	1,320,999			1,463,342			608,779			80,027			1,002,215			697,571			560,154
Other Income and (Expenses)	(8,070		)	(102,168		)	(81,141		)	(72,701		)	(148,228		)	(56,409		)	(234,105		)
Net Loss	$	1,329,069		$	1,565,510		$	655,852		$	152,728		$	1,150,443		$	753,980		$	794,259
Net loss per share, basic & diluted	$	0.23		$	0.25		$	0.09		$	0.02		$	0.09		$	0.06		$	0.06
Weighted average share outstanding, basic & diluted	5,877,492			6,263,920			7,344,280			9,364,650			12,853,452			12,608,561			13,600,762
Balance Sheet Data:
Cash & Cash Equivalents	$	636,932		$	177,586		$	195,249		$	245,795		$	2,058,929		$	2,320,742		$	625,639
Working Capital	(83,165		)	(156,171		)	17,505			50,060			2,020,628			2,062,223			36,694
Total Assets	1,830,585			1,139,618			1,175,722			1,180,270			4,187,059			4,047,455			3,128,486
Long-term Liabilities	34,231			487,865			733,555			597,505			2,337,345			1,961,687			1,224,033
Total Liabilities	1,593,512			1,619,032			1,748,788			1,612,082			4,065,826			3,587,102			3,785,651
Accumulated Deficit	4,449,353			6,014,863			6,670,715			6,823,443			7,973,886			7,577,423			8,768,145
Shareholders’ Equity (Deficit)	237,073			(479,414		)	(573,066		)	(431,812		)	121,233			460,353			(657,165		)

(1)On March 28, 2001, the Company completed a merger with Time America, Inc. which was accounted for as a pooling of interests. Pursuant to the terms of the Merger Agreement, Time America Inc. merged with and into the Company’s wholly owned subsidiary, Vitrix Incorporated, with Vitrix Incorporated continuing as the surviving corporation. In connection with the acquisition, the Company’s shareholders approved a proposal effecting a 1-for-10 reverse stock split. The above selected and summary consolidated financial data for the fiscal years ended June 30, 2000 and 2001 are based on the assumption that the companies were combined for the full fiscal year.

DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the small business issuer according to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.

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LEGAL MATTERS

Certain legal matters have been passed upon for us by Squire, Sanders & Dempsey L.L.P., Phoenix, Arizona.

EXPERTS

Our consolidated financial statements included in our Annual Report on Form l0-KSB for the fiscal years ended June 30, 2004 and 2003 have been audited by Semple & Cooper LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such financial statements have been incorporated herein by reference, in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

INFORMATION WITH RESPECT TO THE REGISTRANT

This prospectus is being delivered with a copy of our Form l0-KSB for the fiscal year ended June 30, 2004, and
Form 10-QSB for the period ended March 31, 2005.

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PART II TO FORM S-2

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14.OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth our estimated costs and expenses in connection with the offering other than commissions and discounts, if any.

SEC Registration Fee	$	221.12
Legal Fees and Expenses	$	7,500.00
Accounting Fees and Expenses	$	3,000.00
Printing and Engraving Expenses	$	5,000.00
Miscellaneous	$	5,000.00
Total	$	20,721.12

ITEM 15.INDEMNIFICATION OF DIRECTORS AND OFFICERS

Articles 11 and 12 of our Articles of Incorporation provide as follows:

1.To the fullest extent permitted by the laws of the State of Nevada, as the same exist or may hereinafter be amended, no director or officer of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director or officer, provided, however, that nothing contained herein shall eliminate or limit the liability of a director or officer of the Corporation to the extent provided by applicable laws(i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of law or (ii) for authorizing the payment of dividends in violation of Nevada Revised Statutes Section 78.300. The limitation of liability provided herein shall continue after a director or officer has ceased to occupy such position as to acts or omissions occurring during such director’s or officer’s term or terms of office. No repeal, amendment or modification of this Article, whether direct or indirect, shall eliminate or reduce its effect with respect to any act or omission of a director or officer of the Corporation occurring prior to such repeal, amendment or modification.

2.The Corporation shall indemnify, defend and hold harmless any person who incurs expenses, claims, damages or liability by reason of the fact that he or she is, or was, an officer, director, employee or agent of the Corporation, to the fullest extent allowed under Nevada law.

ITEM 16.EXHIBITS

Exhibit Number	Description	Method of Filing
5.l	Opinion re: legality of the securities	Filed herein
10.1	Security Agreement, dated June 23, 2005, among Time America, Inc., a Nevada corporation, Time America, Inc., an Arizona corporation, and Laurus Master Fund, Ltd.	Filed herein
10.2	Secured Convertible Minimum Borrowing Note, dated June 23, 2005, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.3	Secured Revolving Note, dated June 23, 2005, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.4	Common Stock Purchase Warrant, dated June 23, 2005, issued to Laurus Master Fund, Ltd.	Filed herein

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10.5	Registration Rights Agreement, dated June 23, 2005, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.6	Amended and Restated Subordination Agreement, dated June 23, 2005, among Time America, Inc., a Nevada corporation, Time America, Inc., an Arizona corporation, Laurus Master Fund, Ltd. and Joseph and Frances Simek	Filed herein
10.7	Amended and Restated Stock Pledge Agreement, dated June 23, 2005, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.8	Amendment, dated June 23, 2005, to Secured Convertible Term Note dated March 22, 2004, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.9	Grant of Security Interest in Patents and Trademarks, dated June 23, 2005, issued by Time America, Inc., a Nevada corporation, in favor of Laurus Master Fund, Ltd.	Filed herein
23.l	Consent of Independent Auditors	Filed Herein
23.2	Consent of Squire, Sanders & Dempsey L.L.P.	Included in Exhibit 5.1
24	Powers of Attorney	Included in Signature Page

ITEM 17.UNDERTAKINGS

1.The undersigned registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement,

(a)To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.

(b)To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; provided, however, that paragraphs (a) and (b) shall not apply if such information is contained in periodic reports filed by the registrant under Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, that is incorporated by reference into this Registration Statement.

(c)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

2.The undersigned registrant hereby undertakes that, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3.The undersigned registrant hereby undertakes to remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.

4.The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, as amended, each filing of the registrant’s annual report under Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable, each filing of an employee benefit plan’s annual report under Section 15(d) of the Securities Exchange Act of 1934, as amended) that is

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incorporated by reference into this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

5.The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished under and meeting the requirements of Rule l4a-3 or Rule l4c-3 under the Securities Exchange Act of 1934, as amended; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.

6.Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the undersigned registrant according the foregoing provisions, or otherwise, the undersigned registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-2 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Scottsdale, State of Arizona, on July 22, 2005.

TIME AMERICA, INC.
By:	/s/ THOMAS S. BEDNARIK
Thomas S. Bednarik,
President and Chief Executive Officer
By:	/s/ CRAIG J. SMITH
Craig J. Smith,
Chief Financial Officer
(Principal Financial and Accounting Officer)

In accordance with the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature		Title	Date
/s/ THOMAS S. BEDNARIK		President, Chief Executive Officer and Director
Thomas S. Bednarik		(Principal Executive Officer)	July 22, 2005
/s/ CRAIG J. SMITH		Chief Financial Officer (Principal Financial and
Craig J. Smith		Accounting Officer)	July 22, 2005
*		Chairman of the Board	July 22, 2005
Todd P. Belfer
*		Director	July 22, 2005
Lise M. Lambert
*		Director	July 22, 2005
Robert W. Zimmerman
*		Director	July 22, 2005
Robert J. Novak
* By:	/s/ THOMAS S. BEDNARIK
	Thomas S. Bednarik, Attorney-in-Fact

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EXHIBIT INDEX

Exhibit Number	Description	Method of Filing
5.l	Opinion re: legality of the securities	Filed herein
10.1	Security Agreement, dated June 23, 2005, among Time America, Inc., a Nevada corporation, Time America, Inc., an Arizona corporation, and Laurus Master Fund, Ltd.	Filed herein
10.2	Secured Convertible Minimum Borrowing Note, dated June 23, 2005, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.3	Secured Revolving Note, dated June 23, 2005, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.4	Common Stock Purchase Warrant, dated June 23, 2005, issued to Laurus Master Fund, Ltd.	Filed herein
10.5	Registration Rights Agreement, dated June 23, 2005, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.6	Amended and Restated Subordination Agreement, dated June 23, 2005, among Time America, Inc., a Nevada corporation, Time America, Inc., an Arizona corporation, Laurus Master Fund, Ltd. and Joseph and Frances Simek	Filed herein
10.7	Amended and Restated Stock Pledge Agreement, dated June 23, 2005, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.8	Amendment, dated June 23, 2005, to Secured Convertible Term Note dated March 22, 2004, between Time America, Inc., a Nevada corporation, and Laurus Master Fund, Ltd.	Filed herein
10.9	Grant of Security Interest in Patents and Trademarks, dated June 23, 2005, issued by Time America, Inc., a Nevada corporation, in favor of Laurus Master Fund, Ltd.	Filed herein
23.l	Consent of Independent Auditors	Filed Herein
23.2	Consent of Squire, Sanders & Dempsey L.L.P.	Included in Exhibit 5.1
24	Powers of Attorney	Included in Signature Page

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EX-5.1

Exhibit 5.1

Squire, Sanders & Dempsey L.L.P.

Two Renaissance Square, Suite 2700

40 N. Central Avenue

Phoenix, Arizona 85004

Ph: (602) 528-4134

Fax: (602) 253-8129

July 22, 2005

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549-1004

Re: Time America, Inc.

Ladies and Gentlemen:

This firm is counsel for Time America, Inc. (formerly Vitrix, Inc.), a Nevada corporation (the “Company”).  As such, we are familiar with the Certificate of Incorporation, as amended, and the Bylaws, as amended, of the Company.  An aggregate of 3,160,066 shares of common stock to be sold by certain selling shareholders (the “Selling Shareholder Shares”), are the subject of a Registration Statement on Form S-2 (the “Registration Statement”) under the Securities Act of 1933, as amended.

We also have examined all instruments, documents, and records that we deemed relevant and necessary for the basis of our opinion hereinafter expressed.  In such an examination, we have assumed the genuineness and authority of all signatures and the authenticity of all documents submitted to us as originals and the conformity to the originals of all documents submitted to us as copies.

Based on such examination, we are of the opinion that the Selling Shareholder Shares that are being registered pursuant to the Registration Statement, are duly authorized, and will be, when issued and paid for in the manner described in the Registration Statement, validly issued, fully paid and non-assessable.

We acknowledge that we are referred to under the heading “Legal Matters” in the Prospectus which is part of the Registration Statement and we hereby consent to the use of our name in such Registration Statement.  We further consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and with the state regulatory agencies in such states as may require such filing in connection with the registration of the Common Stock for offer and sale in such states.

Respectfully Submitted,

SQUIRE, SANDERS & DEMPSEY L.L.P.

/s/ Squire, Sanders & Dempsey L.L.P.

EX-10.1

Exhibit 10.1

SECURITY AGREEMENT

This Security Agreement is made as of June 23, 2005 by and among LAURUS MASTER FUND, LTD., a Cayman Islands corporation (“Laurus”), TIME AMERICA, INC., a Nevada corporation (“the Parent”), and each party listed on Exhibit A attached hereto (each an “Eligible Subsidiary” and collectively, the “Eligible Subsidiaries”) the Parent and each Eligible Subsidiary, each a “Company” and collectively, the “Companies”).

BACKGROUND

The Companies have requested that Laurus make advances available to the Companies; and

Laurus has agreed to make such advances on the terms and conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and undertakings and the terms and conditions contained herein, the parties hereto agree as follows:

1.General Definitions and Terms; Rules of Construction.

(a)General Definitions.  Capitalized terms used in this Agreement shall have the meanings assigned to them in Annex A.

(b)Accounting Terms.  Any accounting terms used in this Agreement which are not specifically defined shall have the meanings customarily given them in accordance with GAAP and all financial computations shall be computed, unless specifically provided herein, in accordance with GAAP consistently applied.

(c)Other Terms.  All other terms used in this Agreement and defined in the UCC, shall have the meaning given therein unless otherwise defined herein.

(d)Rules of Construction.  All Schedules, Addenda, Annexes and Exhibits hereto or expressly identified to this Agreement are incorporated herein by reference and taken together with this Agreement constitute but a single agreement.  The words “herein”, “hereof” and “hereunder” or other words of similar import refer to this Agreement as a whole, including the Exhibits, Addenda, Annexes and Schedules thereto, as the same may be from time to time amended, modified, restated or supplemented, and not to any particular section, subsection or clause contained in this Agreement.  Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter.  The term “or” is not exclusive.  The term “including” (or any form thereof) shall not be limiting or exclusive.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.  All references in this Agreement or in the Schedules, Addenda, Annexes and Exhibits to this Agreement to sections, schedules, disclosure schedules, exhibits, and attachments shall refer to the corresponding sections, schedules, disclosure schedules, exhibits, and attachments of or to this Agreement.  All references to any instruments or agreements, including references to any of this Agreement or the Ancillary Agreements shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.

2.Loan Facility.

(a)Loans.

(i)Subject to the terms and conditions set forth herein and in the Ancillary Agreements, Laurus may make loans (the “Loans”) to Companies from time to time during the Term which, in the

aggregate at any time outstanding, will not exceed the lesser of (x) (I) the Capital Availability Amount minus (II) such reserves as Laurus may reasonably in its good faith judgment deem proper and necessary from time to time (the “Reserves”) and (y) an amount equal to (I) the Accounts Availability minus (II) the Reserves.  The amount derived at any time from Section 2(a)(i)(y)(I) minus 2(a)(i)(y)(II) shall be referred to as the “Formula Amount.”  The Companies shall, jointly and severally, execute and deliver to Laurus on the Closing Date the Revolving Note and a Minimum Borrowing Note evidencing the Loans funded on the Closing Date.  From time to time thereafter, the Companies shall jointly and severally execute and deliver to Laurus immediately prior to the final funding of each additional $1,000,000 tranche of Loans allocated to any Minimum Borrowing Note issued after the date hereof (calculated on a cumulative basis for each such tranche) an additional Minimum Borrowing Note evidencing such tranche, substantially in the form of the Minimum Borrowing Note delivered by the Companies to Laurus on the Closing Date.  Notwithstanding anything herein to the contrary, whenever during the Term the outstanding balance on the Minimum Borrowing Note shall be less than the Minimum Borrowing Amount (such amount being referred to herein as the “Transferable Amount”) to the extent that the outstanding balance on the Revolving Note should equal or exceed $500,000, that portion of the balance of the Revolving Note that exceeds $500,000, but does not exceed the Transferable Amount, shall be segregated from the outstanding balance under the Revolving Note and allocated to and aggregated with the then existing balance of the next unissued serialized Minimum Borrowing Note (the “Next Unissued Serialized Note”); provided that such segregated amount shall remain subject to the terms and conditions of such Revolving Note until a new serialized Minimum Borrowing Note is issued as set forth below.  The Next Unissued Serialized Note shall remain in book entry form until the balance thereunder shall equal the Minimum Borrowing Amount, at which time a new serialized Minimum Borrowing Note in the face amount equal to the Minimum Borrowing Amount will be issued and registered as set forth in the Registration Rights Agreement (and the outstanding balance under the Revolving Note shall at such time be correspondingly reduced in the amount equal to the Minimum Borrowing Amount as a result of the issuance of such new serialized Minimum Borrowing Note).

(ii)Notwithstanding the limitations set forth above, if requested by any Company, Laurus retains the right to lend to such Company from time to time such amounts in excess of such limitations as Laurus may determine in its sole discretion.

(iii)The Companies acknowledge that the exercise of Laurus’ discretionary rights hereunder may result during the Term in one or more increases or decreases in the advance percentages used in determining Accounts Availability and each of the Companies hereby consent to any such increases or decreases which may limit or restrict advances requested by the Companies, provided that in the case of any such decrease in the advance percentages the events giving rise to such decrease and Laurus’ use of such discretion are attributable to a significant change in the assets, liabilities, condition (financial or otherwise), properties, operations, prospects or Eligible Accounts in the reasonable good faith judgment of Laurus.

(iv)If any interest, fees, costs or charges payable to Laurus hereunder are not paid when due, each of the Companies shall thereby be deemed to have requested, and Laurus is hereby authorized at its discretion to make and charge to the Companies’ account, a Loan as of such date in an amount equal to such unpaid interest, fees, costs or charges.

(v)If any Company at any time fails to perform or observe any of the covenants contained in this Agreement or any Ancillary Agreement, Laurus may, but need not, perform or observe such covenant on behalf and in the name, place and stead of such Company (or, at Laurus’ option, in Laurus’ name) and may, but need not, take any and all other actions which Laurus may deem necessary to cure or correct such failure (including the payment of taxes, the satisfaction of Liens, the performance of obligations owed to Account Debtors, lessors or other obligors, the procurement and maintenance of insurance, the execution of assignments, security agreements and financing statements, and the endorsement of instruments).  The amount of all monies expended and all costs and expenses (including attorneys’ fees and legal expenses) incurred by Laurus in connection with or as a result of the performance or observance of such agreements or the taking of such action by Laurus shall be charged to the Companies’ account as a Loan and added to the Obligations.  To facilitate Laurus’ performance or observance of such covenants by each Company, each Company hereby irrevocably appoints Laurus, or Laurus’ delegate, acting alone, as such Company’s attorney in fact (which appointment is coupled with an interest) with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file in the name and on behalf of such Company any and all instruments, documents, assignments, security agreements, financing statements,

2

applications for insurance and other agreements and writings required to be obtained, executed, delivered or endorsed by such Company.  This power of attorney shall only be exercisable following the occurrence and during the continuation of an Event of Default, except with respect to the filing of financing statements, in which case such power of attorney shall be exercisable on and after the date hereof.

(vi)Laurus will account to Company Agent monthly with a statement of all Loans and other advances, charges and payments made pursuant to this Agreement, and such account rendered by Laurus shall be deemed final, binding and conclusive unless Laurus is notified by Company Agent in writing to the contrary within thirty (30) days of the date each account was rendered specifying the item or items to which objection is made.

(vii)During the Term, the Companies may borrow and prepay Loans in accordance with the terms and conditions hereof.

(viii)If any Eligible Account is not paid by the Account Debtor within one hundred twenty (120) days after the date that such Eligible Account was invoiced or if any Account Debtor asserts a deduction, dispute, contingency, set-off, or counterclaim with respect to any Eligible Account, (a “Delinquent Account”), the Companies shall jointly and severally (i) reimburse Laurus for the amount of the Loans made with respect to such Delinquent Account plus an adjustment fee in an amount equal to one-half of one percent (0.35%) of the gross face amount of such Eligible Account or (ii) immediately replace such Delinquent Account with an otherwise Eligible Account.

(b)Receivables Purchase.  Following the occurrence and during the continuance of an Event of Default, Laurus may, at its option, elect to convert the credit facility contemplated hereby to an accounts receivable purchase facility.  Upon such election by Laurus (subsequent notice of which Laurus shall provide to Company Agent), the Companies shall be deemed to hereby have sold, assigned, transferred, conveyed and delivered to Laurus, and Laurus shall be deemed to have purchased and received from the Companies, all right, title and interest of the Companies in and to all Accounts which shall at any time constitute Eligible Accounts (the “Receivables Purchase”).  All outstanding Loans hereunder shall be deemed obligations under such accounts receivable purchase facility.  Following payment in full of all Obligations Laurus shall promptly assign to Parent any remaining Eligible Accounts which were deemed to be purchased by Laurus pursuant to this Section 2(b).  The conversion to an accounts receivable purchase facility in accordance with the terms hereof shall not be deemed an exercise by Laurus of its secured creditor rights under Article 9 of the UCC.  Immediately following Laurus’ request, the Companies shall execute all such further documentation as may be required by Laurus to more fully set forth the accounts receivable purchase facility herein contemplated, including, without limitation, an accounts receivable purchase agreement and account debtor notification letters in form and substance reasonably satisfactory to Laurus, but any Company’s failure to enter into any such documentation shall not impair or affect the Receivables Purchase in any manner whatsoever.

(c)Minimum Borrowing Amount.  After a registration statement registering the Registrable Securities (as defined in the Registration Rights Agreement) has been declared effective by the SEC, conversions of the Minimum Borrowing Amount into the Common Stock may be initiated as set forth in the respective Minimum Borrowing Note.  From and after the date upon which any outstanding principal of the Minimum Borrowing Amount (as evidenced by the first Minimum Borrowing Note) is converted into Common Stock (the “First Conversion Date”), (i) corresponding amounts of all outstanding Loans (not attributable to the then outstanding Minimum Borrowing Amount) existing on or made after the First Conversion Date will be aggregated in accordance with Section 2(a)(i) and (ii) the Companies will issue a new (serialized) Minimum Borrowing Note to Laurus in accordance with Section 2(a)(i), and (iii) the Parent shall prepare and file a subsequent registration statement with the SEC to register such subsequent Minimum Borrowing Note as set forth in the Registration Rights Agreement.

3.Repayment of the Loans.  The Companies (a) may prepay the Obligations from time to time in accordance with the terms and provisions of the Notes (and Section 17 hereof if such prepayment is due to a termination of this Agreement); (b) shall repay on the expiration of the Term (i) the then aggregate outstanding principal balance of the Loans together with accrued and unpaid interest, fees and charges and; (ii) all other amounts owed Laurus under this Agreement and the Ancillary Agreements; and (c) subject to Section 2(a)(ii), shall repay on any day on which the then aggregate outstanding principal balance of the Loans are in excess of the Formula

3

Amount at such time, Loans in an amount equal to such excess. Any payments of principal, interest, fees or any other amounts payable hereunder or under any Ancillary Agreement shall be made prior to 2:00 p.m. (New York time) on the due date thereof in immediately available funds.

4.Procedure for Loans.  Company Agent may by written notice request a borrowing of Loans prior to 2:00 p.m. (New York time) on the Business Day of its request to incur, on the next Business Day, a Loan.  Together with each request for a Loan (or at such other intervals as Laurus may request), Company Agent shall deliver to Laurus a Borrowing Base Certificate in the form of Exhibit B attached hereto, which shall be certified as true and correct by the Chief Executive Officer or Chief Financial Officer of Parent together with all supporting documentation relating thereto.  All Loans shall be disbursed from whichever office or other place Laurus may designate from time to time and shall be charged to the Companies’ account on Laurus’ books.  The proceeds of each Loan made by Laurus shall be made available to Company Agent on the Business Day following the Business Day so requested in accordance with the terms of this Section 4 by way of credit to the applicable Company’s operating account maintained with such bank as Company Agent designated to Laurus.  Any and all Obligations due and owing hereunder may be charged to the Companies’ account and shall constitute Loans.

5.Interest and Payments.

(a)Interest.

(i)Except as modified by Section 5(a)(iii) below, the Companies shall jointly and severally pay interest at the Contract Rate on the unpaid principal balance of each Loan until such time as such Loan is collected in full in good funds in dollars of the United States of America.

(ii)Interest and payments shall be computed on the basis of actual days elapsed in a year of 360 days.  At Laurus’ option, Laurus may charge the Companies’ account for said interest.

(iii)Effective upon the occurrence of any Event of Default and for so long as any Event of Default shall be continuing, the Contract Rate shall automatically be increased as set forth in the Notes (such increased rate, the “Default Rate”), and all outstanding Obligations, excluding unpaid interest, shall continue to accrue interest from the date of such Event of Default at the Default Rate applicable to such Obligations.

(iv)In no event shall the aggregate interest payable hereunder exceed the maximum rate permitted under any applicable law or regulation, as in effect from time to time (the “Maximum Legal Rate”), and if any provision of this Agreement or any Ancillary Agreement is in contravention of any such law or regulation, interest payable under this Agreement and each Ancillary Agreement shall be computed on the basis of the Maximum Legal Rate (so that such interest will not exceed the Maximum Legal Rate).

(v)The Companies shall jointly and severally pay principal, interest and all other amounts payable hereunder, or under any Ancillary Agreement, without any deduction whatsoever, including any deduction for any set-off or counterclaim.

(b)Payments; Certain Closing Conditions.

(i)Closing/Annual Payments.  Upon execution of this Agreement by each Company and Laurus, the Companies shall jointly and severally pay to Laurus Capital Management, LLC a closing payment in an amount equal to three and six-tenths percent (3.60%) of the Capital Availability Amount.  Such payment shall be deemed fully earned on the Closing Date and shall not be subject to rebate or proration for any reason.

(ii)Overadvance Payment.  Without affecting Laurus’ rights hereunder in the event (x) the Loans exceed the Formula Amount (each such event, an “Overadvance”) without the written consent of Laurus, all such Overadvances shall bear additional interest at a rate of 1.0% per annum for all times such amounts shall be in excess of the Formula Amount and (y) an Overadvance exists following the receipt by the Companies of the written consent of Laurus, all such Overadvances shall bear additional interest at a rate mutually acceptable to

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Laurus and Parent for all times such amounts shall be in excess of the Formula Amount.  All amounts that are incurred pursuant to this Section 5(b)(ii) shall be due and payable by the Companies monthly, in arrears, on the first business day of each calendar month and upon expiration of the Term.

(iii)Financial Information Default.  Without affecting Laurus’ other rights and remedies, in the event any Company fails to deliver the financial information required by Section 11 on or before the date required by this Agreement, the Companies shall jointly and severally pay Laurus an aggregate fee in the amount of $500.00 per week (or portion thereof) for each such failure until such failure is cured to Laurus’ satisfaction or waived in writing by Laurus.  All amounts that are incurred pursuant to this Section 5(b)(iii) shall be due and payable by the Companies monthly, in arrears, on the first business of each calendar month and upon expiration of the Term.

(iv)Expenses.  The Companies shall jointly and severally reimburse Laurus for its expenses (including reasonable legal fees and expenses) incurred in connection with the preparation and negotiation of this Agreement and the Ancillary Agreements, and expenses incurred in connection with Laurus’ due diligence review of each Company and its Subsidiaries and all related matters.  Amounts required to be paid under this Section 5(b)(iv) will be paid on the Closing Date and shall be $30,000 for such expenses referred to in this Section 5(b)(iv).

6.Security Interest.

(a)To secure the prompt payment to Laurus of the Obligations, each Company hereby assigns, pledges and grants to Laurus a continuing security interest in and Lien upon all of the Collateral.  All of each Company’s Books and Records relating to the Collateral shall, until delivered to or removed by Laurus, be kept by such Company in trust for Laurus until all Obligations have been paid in full.  Each confirmatory assignment schedule or other form of assignment hereafter executed by each Company shall be deemed to include the foregoing grant, whether or not the same appears therein.

(b)Each Company hereby (i) authorizes Laurus to file any financing statements, continuation statements or amendments thereto that (x) indicate the Collateral (1) as all assets and personal property of such Company or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC of such jurisdiction, or (2) as being of an equal or lesser scope or with greater detail, and (y) contain any other information required by Part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment and (ii) ratifies its authorization for Laurus to have filed any initial financial statements, or amendments thereto if filed prior to the date hereof.  Each Company acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of Laurus and agrees that it will not do so without the prior written consent of Laurus, subject to such Company’s rights under Section 9-509(d)(2) of the UCC.

(c)Each Company hereby grants to Laurus an irrevocable, non-exclusive license (exercisable upon the termination of this Agreement due to an occurrence and during the continuance of an Event of Default without payment of royalty or other compensation to such Company) to use, transfer, license or sublicense any Intellectual Property now owned, licensed to, or hereafter acquired by such Company, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer and automatic machinery software and programs used for the compilation or printout thereof, and represents, promises and agrees that any such license or sublicense is not and will not be in conflict with the contractual or commercial rights of any third Person; provided, that such license will terminate on the termination of this Agreement and the payment in full of all Obligations.

7.Representations, Warranties and Covenants Concerning the Collateral.  Each Company represents, warrants (each of which such representations and warranties shall be deemed repeated upon the making of each request for a Loan and made as of the time of each and every Loan hereunder) and covenants as follows:

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(a)all of the Collateral (i) is owned by it free and clear of all Liens (including any claims of infringement) except those in Laurus’ favor and Permitted Liens and (ii) is not subject to any agreement prohibiting the granting of a Lien or requiring notice of or consent to the granting of a Lien.

(b)it shall not encumber, mortgage, pledge, assign or grant any Lien in any Collateral or any other assets to anyone other than Laurus and except for Permitted Liens.

(c)the Liens granted pursuant to this Agreement, upon completion of the filings and other actions listed on Schedule 7(c) (which, in the case of all filings and other documents referred to in said Schedule, have been delivered to Laurus in duly executed form) constitute valid perfected security interests in all of the Collateral in favor of Laurus as security for the prompt and complete payment and performance of the Obligations, enforceable in accordance with the terms hereof against any and all of its creditors and purchasers and such security interest is prior to all other Liens in existence on the date hereof.

(d)no effective security agreement, mortgage, deed of trust, financing statement, equivalent security or Lien instrument or continuation statement covering all or any part of the Collateral is or will be on file or of record in any public office, except those relating to Permitted Liens.

(e)it shall not dispose of any of the Collateral whether by sale, lease or otherwise except for the sale of Inventory in the ordinary course of business and for the disposition or transfer in the ordinary course of business during any fiscal year of obsolete and worn-out Equipment having an aggregate fair market value of not more than $25,000.  and only to the extent that (i) the proceeds of any such disposition are used to acquire replacement Equipment which is subject to Laurus’ first priority security interest or are used to repay Loans or to pay general corporate expenses, or (ii) following the occurrence of an Event of Default which continues to exist the proceeds of which are remitted to Laurus to be held as cash collateral for the Obligations.

(f)it shall defend the right, title and interest of Laurus in and to the Collateral against the claims and demands of all Persons whomsoever, and take such actions, including (i) all actions necessary to grant Laurus “control” of any Investment Property, Deposit Accounts, Letter-of-Credit Rights or electronic Chattel Paper owned by it, with any agreements establishing control to be in form and substance reasonably satisfactory to Laurus, (ii) the prompt (but in no event later than five (5) Business Days following Laurus’ request therefor) delivery to Laurus of all original Instruments, Chattel Paper, negotiable Documents and certificated Stock owned by it (in each case, accompanied by stock powers, allonges or other instruments of transfer executed in blank), (iii) notification of Laurus’ interest in Collateral at Laurus’ request, and (iv) the institution of litigation against third parties as shall be prudent in order to protect and preserve its and/or Laurus’ respective and several interests in the Collateral.

(g)it shall promptly, and in any event within five (5) Business Days after the same is acquired by it, notify Laurus of any commercial tort claim (as defined in the UCC) acquired by it and unless otherwise consented by Laurus, it shall enter into a supplement to this Agreement granting to Laurus a Lien in such commercial tort claim.

(h)it shall place notations upon its Books and Records and any of its financial statements to disclose Laurus’ Lien in the Collateral.

(i)if it retains possession of any Chattel Paper or Instrument with Laurus’ consent, upon Laurus’ request such Chattel Paper and Instruments shall be marked with the following legend:  “This writing and obligations evidenced or secured hereby are subject to the security interest of Laurus Master Fund, Ltd.” Notwithstanding the foregoing, upon the reasonable request of Laurus, such Chattel Paper and Instruments shall be delivered to Laurus.

(j)it shall perform in a reasonable time all other steps requested by Laurus to create and maintain in Laurus’ favor a valid perfected first Lien in all Collateral subject only to Permitted Liens.

(k)it shall notify Laurus promptly and in any event within three (3) Business Days after obtaining knowledge thereof (i) of any event or circumstance that, to its knowledge, would cause Laurus to consider

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any then existing Account as no longer constituting an Eligible Account; (ii) of any material delay in its performance of any of its obligations to any Account Debtor; (iii) of any assertion by any Account Debtor of any material claims, offsets or counterclaims; (iv) of any allowances, credits and/or monies granted by it to any Account Debtor; (v) of all material adverse information relating to the financial condition of an Account Debtor; (vi) of any material return of goods; and (vii) of any loss, damage or destruction of any of the Collateral.

(l)Except as set forth on Schedule 7(l), all Eligible Accounts (i) represent complete bona fide transactions which require no further act, other than the Company’s implementation, training, custom programming and maintenance services, under any circumstances on its part to make such Accounts payable by the Account Debtors, (ii) are not subject to any present, future contingent offsets or counterclaims, and (iii) do not represent bill and hold sales, consignment sales, guaranteed sales, sale or return or other similar understandings or obligations of any Affiliate or Subsidiary of such Company.  It has not made, nor will it make, any agreement with any Account Debtor for any extension of time for the payment of any Account, any compromise or settlement for less than the full amount thereof, any release of any Account Debtor from liability therefor, or any deduction therefrom except a discount or allowance for prompt or early payment allowed by it in the ordinary course of its business consistent with historical practice and as previously disclosed to Laurus in writing.

(m)it shall keep and maintain its Equipment in good operating condition, except for ordinary wear and tear, and shall make all necessary repairs and replacements thereof so that the value and operating efficiency shall at all times be maintained and preserved.  It shall not permit any such items to become a Fixture to real estate or accessions to other personal property.

(n)it shall maintain and keep all of its Books and Records concerning the Collateral at its executive offices listed in Schedule 12(aa).

(o)it shall maintain and keep the tangible Collateral at the addresses listed in Schedule 12(bb), provided, that it may change such locations or open a new location, provided that it provides Laurus at least thirty (30) days prior written notice of such changes or new location and (ii) prior to such change or opening of a new location where Collateral having a value of more than $50,000 will be located, it executes and delivers to Laurus such agreements deemed reasonably necessary or prudent by Laurus, including landlord agreements, mortgagee agreements and warehouse agreements, each in form and substance reasonably satisfactory to Laurus, to adequately protect and maintain Laurus’ security interest in such Collateral.

(p)Schedule 7(p) lists all banks and other financial institutions at which it maintains deposits and/or other accounts, and such Schedule correctly identifies the name, address and telephone number of each such depository, the name in which the account is held, a description of the purpose of the account, and the complete account number.  It shall not establish any depository or other bank account with any financial institution (other than the accounts set forth on Schedule 7(p)) without Laurus’ prior written consent.

8.Payment of Accounts.

(a)Each Company will irrevocably direct all of its Account Debtors who receive invoices from any Company following the date hereof and other Persons obligated to make payments constituting Collateral to make such payments directly to the lockboxes maintained by such Company (the “Lockboxes”) with Wells Fargo Bank or such other financial institution accepted by Laurus in writing as may be selected by such Company (the “Lockbox Bank”) pursuant to the terms of the certain agreements among one or more Companies, Laurus and/or the Lockbox Bank dated as of              , 2005.  On or prior to the Closing Date, each Company shall and shall cause the Lockbox Bank to enter into all such documentation acceptable to Laurus pursuant to which, among other things, the Lockbox Bank agrees to:  (a) sweep the Lockbox on a daily basis and deposit all checks received therein to an account designated by Laurus in writing and (b) comply only with the instructions or other directions of Laurus concerning the Lockbox.  All of each Company’s invoices, account statements and other written or oral communications directing, instructing, demanding or requesting payment of any Account of any Company or any other amount constituting Collateral shall conspicuously direct that all payments be made to the Lockbox or such other address as Laurus may direct in writing.  If, notwithstanding the instructions to Account Debtors, any Company receives any payments, such Company shall immediately remit such payments to Laurus in their original

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form with all necessary endorsements.  Until so remitted, such Company shall hold all such payments in trust for and as the property of Laurus and shall not commingle such payments with any of its other funds or property.

(b)At Laurus’ election, following the occurrence of an Event of Default which is continuing, Laurus may notify each Company’s Account Debtors of Laurus’ security interest in the Accounts, collect them directly and charge the collection costs and expenses thereof to Company’s and the Eligible Subsidiaries joint and several account.

9.Collection and Maintenance of Collateral.

(a)Laurus may verify each Company’s Accounts from time to time, but not more often than once every three (3) months, unless an Event of Default has occurred and is continuing, utilizing an audit control company or any other agent of Laurus.

(b)Proceeds of Accounts received by Laurus will be deemed received on the Business Day after Laurus’ receipt of such proceeds in good funds in dollars of the United States of America to an account designated by Laurus.  Any amount received by Laurus after 12:00 noon (New York time) on any Business Day shall be deemed received on the next Business Day.

(c)As Laurus receives the proceeds of Accounts of any Company, it shall (i) apply such proceeds, as required, to amounts outstanding under the Notes, and (ii) remit all such remaining proceeds (net of interest, fees and other amounts then due and owing to Laurus hereunder) to Company Agent (for the benefit of the applicable Companies) upon request (but no more often than twice a week).  Notwithstanding the foregoing, following the occurrence and during the continuance of an Event of Default, Laurus, at its option, may (a) apply such proceeds to the Obligations in such order as Laurus shall elect, (b) hold all such proceeds as cash collateral for the Obligations and each Company hereby grants to Laurus a security interest in such cash collateral amounts as security for the Obligations and/or (c) do any combination of the foregoing.

10.Inspections and Appraisals.  At all times during normal business hours, Laurus, and/or any agent of Laurus shall have the right to (a) have access to, visit, inspect, review, evaluate and make physical verification and appraisals of each Company’s properties and the Collateral, (b) inspect, audit and copy (or take originals if necessary) and make extracts from each Company’s Books and Records, including management letters prepared by the Accountants, and (c) discuss with each Company’s directors, principal officers, and independent accountants, each Company’s business, assets, liabilities, financial condition, results of operations and business prospects., provided, however, such visits inspections, etc. shall not occur more than one every three (3) months.  The limitation set forth in the immediately preceding proviso shall not apply following the occurrence and during the continuation of an Event of Default.  Each Company will deliver to Laurus any instrument necessary for Laurus to obtain records from any service bureau maintaining records for such Company.  If any internally prepared financial information, including that required under this Section is unsatisfactory in any manner to Laurus, Laurus may request that the Accountants review the same.

11.Financial Reporting.  Company Agent will deliver, or cause to be delivered, to Laurus each of the following, which shall be in form and detail acceptable to Laurus:

(a)As soon as available, and in any event within ninety (90) days after the end of each fiscal year of the Parent, each Company’s audited financial statements with a report of independent certified public accountants of recognized standing selected by the Parent and acceptable to Laurus (the “Accountants”), which annual financial statements shall be without qualification and shall include each Company’s balance sheet as at the end of such fiscal year and the related statements of each Company’s income, retained earnings and cash flows for the fiscal year then ended, prepared, if Laurus so requests, on a consolidating and consolidated basis to include all Subsidiaries and Affiliates of each Company, all in reasonable detail and prepared in accordance with GAAP, together with (i) if and when available, copies of any management letters prepared by the Accountants; and (ii) a certificate of the Parent’s President, Chief Executive Officer or Chief Financial Officer stating that such financial statements have been prepared in accordance with GAAP and whether or not such officer has knowledge of the occurrence of any Default or Event of Default hereunder and, if so, stating in reasonable detail the facts with respect thereto;

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(b)As soon as available and in any event within forty five (45) days after the end of each quarter, an unaudited/internal balance sheet and statements of income, retained earnings and cash flows of each Company as at the end of and for such quarter and for the year to date period then ended, prepared, if Laurus so requests, on a consolidating and consolidated basis to include all Subsidiaries and Affiliates of each Company, in reasonable detail and stating in comparative form the figures for the corresponding date and periods in the previous year, all prepared in accordance with GAAP, subject to year-end adjustments and accompanied by a certificate of the Parent’s President, Chief Executive Officer or Chief Financial Officer, stating (i) that such financial statements have been prepared in accordance with GAAP, subject to year-end audit adjustments, and (ii) whether or not such officer has knowledge of the occurrence of any Default or Event of Default hereunder not theretofore reported and remedied and, if so, stating in reasonable detail the facts with respect thereto;

(c)Within thirty (30) days after the end of each month (or more frequently if Laurus so requests), agings of each Company’s Accounts, unaudited trial balances and their accounts payable and a calculation of each Company’s Accounts and Eligible Accounts, provided, however, that if Laurus shall request the foregoing information more often than as set forth in the immediately preceding clause, each Company shall have thirty (30) days from each such request to comply with Laurus’ demand; and

(d)Promptly after (i) the filing thereof, copies of the Parent’s most recent registration statements and annual, quarterly, monthly or other regular reports which the Parent files with the Securities and Exchange Commission (the “SEC”), and (ii) the issuance thereof, copies of such financial statements, reports and proxy statements as the Parent shall send to its stockholders.

Notwithstanding the financial reporting requirements set forth in Sections 11(a) and (b) hereof, Company Agent shall have no obligation to deliver the financial statement information set forth in such subsections so long as Parent has timely filed its Quarterly Reports on Form 10-QSB and Annual Report on Form 10-KSB (or Forms 10-Q and 10-K, as applicable) with the Securities and Exchange Commission.

12.Additional Representations and Warranties.  Each Company hereby represents and warrants to Laurus as follows:

(a)Organization, Good Standing and Qualification.  It and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.  It and each of its Subsidiaries has the corporate power and authority to own and operate its properties and assets and, insofar as it is or shall be a party thereto, to (i) execute and deliver this Agreement and the Ancillary Agreements, (ii) to issue the Notes and the shares of Common Stock issuable upon conversion of the Notes (the “Note Shares”), (iii) to issue the Warrants and the shares of Common Stock issuable upon conversion of the Warrants (the “Warrant Shares”), and to (iv) carry out the provisions of this Agreement and the Ancillary Agreements and to carry on its business as presently conducted.  It and each of its Subsidiaries is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature or location of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so has not had, or could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b)Subsidiaries.  Each of its direct and indirect Subsidiaries, the direct owner of each such Subsidiary and its percentage ownership thereof, is set forth on Schedule 12(b).

(c)Capitalization; Voting Rights.

(i)The authorized capital stock of the Parent, as of the date hereof consists of 50,000,000 shares, of which 50,000,000 are shares of Common Stock, par value $0.005 per share, 13,601,052 shares of which are issued and outstanding as of March 31, 2005, and 10,000,000 are shares of preferred stock, par value $0.01 per share of which no shares of preferred stock are issued and outstanding.  The authorized, issued and outstanding capital stock of each Subsidiary of each Company is set forth on Schedule 12(c).

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(ii)Except as disclosed on Schedule 12(c), other than:  (i) the shares reserved for issuance under the Parent’s stock option plans; and (ii) shares which may be issued pursuant to this Agreement and the Ancillary Agreements, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or arrangements or agreements of any kind for the purchase or acquisition from the Parent of any of its securities.  Except as disclosed on Schedule 12(c), neither the offer or issuance of any of the Notes or the Warrants, or the issuance of any of the Note Shares nor the Warrant Shares, nor the consummation of any transaction contemplated hereby will result in a change in the price or number of any securities of the Parent outstanding, under anti-dilution or other similar provisions contained in or affecting any such securities.

(iii)All issued and outstanding shares of the Parent’s Common Stock:  (i) have been duly authorized and validly issued and are fully paid and nonassessable; and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities.

(iv)The rights, preferences, privileges and restrictions of the shares of the Common Stock are as stated in the Parent’s Certificate of Incorporation (the “Charter”).  The Note Shares and the Warrant Shares have been duly and validly reserved for issuance.  When issued and paid for in compliance with the provisions of this Agreement and the Parent’s Charter, the Securities will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances; provided, however, that the Securities may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed.

(d)Authorization; Binding Obligations.  All corporate action on its and its Subsidiaries’ part (including their respective officers and directors) necessary for the authorization of this Agreement and the Ancillary Agreements, the performance of all of its and its Subsidiaries’ obligations hereunder and under the Ancillary Agreements on the Closing Date and, the authorization, issuance and delivery of the Notes and the Warrant has been taken or will be taken prior to the Closing Date.  This Agreement and the Ancillary Agreements, when executed and delivered and to the extent it is a party thereto, will be its and its Subsidiaries’ valid and binding obligations enforceable against each such Person in accordance with their terms, except:

(i)as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and

(ii)general principles of equity that restrict the availability of equitable or legal remedies.

The issuance of the Notes and the subsequent conversion of the Notes into Note Shares are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.  The issuance of the Warrants and the subsequent exercise of the Warrants for Warrant Shares are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.

(e)Liabilities.  Neither it nor any of its Subsidiaries has any liabilities, except current liabilities incurred in the ordinary course of business and liabilities disclosed in any Exchange Act Filings.

(f)Agreements; Action.  Except as set forth on Schedule 12(f) or as disclosed in any Exchange Act Filings:

(i)There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which it or any of its Subsidiaries is a party or to its knowledge by which it is bound which may involve:  (i) obligations (contingent or otherwise) of, or payments to, it or any of its Subsidiaries in excess of $50,000 (other than obligations of, or payments to, it or any of its Subsidiaries arising from purchase or sale agreements entered into in the ordinary course of business); or (ii) the transfer or license of any patent, copyright, trade secret or other proprietary right to or from it (other than licenses arising from the purchase of “off the shelf” or other standard products); or (iii) provisions restricting the development, manufacture or

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distribution of its or any of its Subsidiaries’ products or services; or (iv) indemnification by it or any of its Subsidiaries with respect to infringements of proprietary rights.

(ii)Since June 30, 2004 (the “Balance Sheet Date”) neither it nor any of its Subsidiaries has:  (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock; (ii) incurred any indebtedness for money borrowed or any other liabilities (other than ordinary course obligations) individually in excess of $50,000 or, in the case of indebtedness and/or liabilities individually less than $50,000, in excess of $100,000 in the aggregate; (iii) made any loans or advances to any Person not in excess, individually or in the aggregate, of $100,000, other than ordinary advances for travel expenses; or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its Inventory in the ordinary course of business.

(iii)For the purposes of subsections (i) and (ii) of this Section 12(f), all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same Person (including Persons it or any of its applicable Subsidiaries has reason to believe are affiliated therewith or with any Subsidiary thereof) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections.

(iv)the Parent maintains disclosure controls and procedures (“Disclosure Controls”) designed to ensure that information required to be disclosed by the Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the rules and forms of the SEC.

(v)The Parent makes and keeps books, records, and accounts, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of its assets.  It maintains internal control over financial reporting (“Financial Reporting Controls”) designed by, or under the supervision of, its principal executive and principal financial officers, and effected by its management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including that:

(1)transactions are executed in accordance with management’s general or specific authorization;

(2)unauthorized acquisition, use, or disposition of the Parent’s assets that could have a material effect on the financial statements are prevented or timely detected;

(3)transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that its receipts and expenditures are being made only in accordance with authorizations of the Parent’s management and board of directors;

(4)transactions are recorded as necessary to maintain accountability for assets; and

(5)the recorded accountability for assets is compared with the existing assets at reasonable intervals, and appropriate action is taken with respect to any differences.

(vi)There is no weakness in any of its Disclosure Controls or Financial Reporting Controls that is required to be disclosed in any of the Exchange Act Filings, except as so disclosed.

(g)Obligations to Related Parties.  Except as set forth on Schedule 12(g), neither it nor any of its Subsidiaries has any obligations to their respective officers, directors, stockholders or employees other than:

(i)for payment of salary for services rendered and for bonus payments;

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(ii)reimbursement for reasonable expenses incurred on its or its Subsidiaries’ behalf;

(iii)for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by its and its Subsidiaries’ Board of Directors, as applicable); and

(iv)obligations listed in its and each of its Subsidiary’s financial statements or disclosed in any of the Parent’s Exchange Act Filings.

Except as described above or set forth on Schedule 12(g), none of its officers, directors or, to the knowledge, key employees or stockholders, any of its Subsidiaries or any members of their immediate families, are indebted to it or any of its Subsidiaries, individually or in the aggregate, in excess of $50,000 or have any direct or indirect ownership interest in any Person with which it or any of its Subsidiaries is affiliated or with which it or any of its Subsidiaries has a business relationship, or any Person which competes with it or any of its Subsidiaries, other than passive investments in publicly traded companies (representing less than one percent (1%) of such company) which may compete with it or any of its Subsidiaries. Except as described above, none of its officers, directors or stockholders, or any member of their immediate families, is, directly or indirectly, interested in any material contract with it or any of its Subsidiaries and no agreements, understandings or proposed transactions are contemplated between it or any of its Subsidiaries and any such Person.  Except as set forth on Schedule 12(g), neither it nor any of its Subsidiaries is a guarantor or indemnitor of any indebtedness of any other Person.

(h)Changes.  Since the Balance Sheet Date, except as disclosed in any Exchange Act Filing or in any Schedule to this Agreement or to any of the Ancillary Agreements, there has not been:

(i)any change in its or any of its Subsidiaries’ business, assets, liabilities, condition (financial or otherwise), properties, operations or prospects, which, individually or in the aggregate, has had, or could reasonably be expected to have, a Material Adverse Effect;

(ii)any resignation or termination of any of its or its Subsidiaries’ officers, key employees or groups of employees;

(iii)any material change, except in the ordinary course of business, in its or any of its Subsidiaries’ contingent obligations by way of guaranty, endorsement, indemnity, warranty or otherwise;

(iv)any damage, destruction or loss, whether or not covered by insurance, which has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(v)any waiver by it or any of its Subsidiaries of a valuable right or of a material debt owed to it;

(vi)any direct or indirect material loans made by it or any of its Subsidiaries to any of its or any of its Subsidiaries’ stockholders, employees, officers or directors, other than advances made in the ordinary course of business;

(vii)any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

(viii)any declaration or payment of any dividend or other distribution of its or any of its Subsidiaries’ assets;

(ix)any labor organization activity related to it or any of its Subsidiaries;

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(x)any debt, obligation or liability incurred, assumed or guaranteed by it or any of its Subsidiaries, except those for immaterial amounts and for current liabilities incurred in the ordinary course of business;

(xi)any sale, assignment or transfer of any Intellectual Property or other intangible assets;

(xii)any change in any material agreement to which it or any of its Subsidiaries is a party or by which either it or any of its Subsidiaries is bound which, either individually or in the aggregate, has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(xiii)any other event or condition of any character that, either individually or in the aggregate, has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; or

(xiv)any arrangement or commitment by it or any of its Subsidiaries to do any of the acts described in subsection (i) through (xiii) of this Section 12(h).

(i)Title to Properties and Assets; Liens, Etc.  Except as set forth on Schedule 12(i), it and each of its Subsidiaries has good and marketable title to their respective properties and assets, and good title to its leasehold interests, in each case subject to no Lien, other than Permitted Liens.

All facilities, Equipment, Fixtures, vehicles and other properties owned, leased or used by it or any of its Subsidiaries are in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used.  Except as set forth on Schedule 12(i), it and each of its Subsidiaries is in compliance with all material terms of each lease to which it is a party or is otherwise bound.

(j)Intellectual Property.

(i)It and each of its Subsidiaries owns or possesses sufficient legal rights to all Intellectual Property necessary for their respective businesses as now conducted and, to its knowledge as presently proposed to be conducted, without any known infringement of the rights of others.  There are no outstanding options, licenses or agreements of any kind relating to its or any of its Subsidiary’s Intellectual Property, nor is it or any of its Subsidiaries bound by or a party to any options, licenses or agreements of any kind with respect to the Intellectual Property of any other Person other than such licenses or agreements arising from the purchase of “off the shelf” or standard products.

(ii)Neither it nor any of its Subsidiaries has received any communications alleging that it or any of its Subsidiaries has violated any of the Intellectual Property or other proprietary rights of any other Person, nor is it or any of its Subsidiaries aware of any basis therefor.

(iii)Neither it nor any of its Subsidiaries believes it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by it or any of its Subsidiaries, except for inventions, trade secrets or proprietary information that have been rightfully assigned to it or any of its Subsidiaries.

(k)Compliance with Other Instruments.  Neither it nor any of its Subsidiaries is in violation or default of (x) any term of its Charter or Bylaws, or (y) any provision of any indebtedness, mortgage, indenture, contract, agreement or instrument to which it is party or by which it is bound or of any judgment, decree, order or writ applicable to it or any of its Subsidiaries, which violation or default, in the case of this clause (y), has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.  The execution, delivery and performance of and compliance with this Agreement and the Ancillary Agreements to which it is a party, and the issuance of the Notes and the other Securities each pursuant hereto and thereto, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term or provision, or result in the creation of any Lien upon any of its or any of

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its Subsidiary’s properties or assets or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to it or any of its Subsidiaries, their businesses or operations or any of their assets or properties.

(l)Litigation.  Except as set forth on Schedule 12(l), there is no action, suit, proceeding or investigation pending or, to its knowledge, currently threatened against it or any of its Subsidiaries that prevents it or any of its Subsidiaries from entering into this Agreement or the Ancillary Agreements, or from consummating the transactions contemplated hereby or thereby, or which has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, or could result in any change in its or any of its Subsidiaries’ current equity ownership, nor is it aware that there is any basis to assert any of the foregoing.  Neither it nor any of its Subsidiaries is a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no action, suit, proceeding or investigation by it or any of its Subsidiaries currently pending or which it or any of its Subsidiaries intends to initiate.

(m)Tax Returns and Payments.  It and each of its Subsidiaries has timely filed all tax returns (federal, state and local) required to be filed by it.  All taxes shown to be due and payable on such returns, any assessments imposed, and all other taxes due and payable by it and each of its Subsidiaries on or before the Closing Date, have been paid or will be paid prior to the time they become delinquent.  Except as set forth on Schedule 12(m), neither it nor any of its Subsidiaries has been advised:

(i)that any of its returns, federal, state or other, have been or are being audited as of the date hereof; or

(ii)of any adjustment, deficiency, assessment or court decision in respect of its federal, state or other taxes.

Neither it nor any of its Subsidiaries has any knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for.

(n)Employees.  Except as set forth on Schedule 12(n), neither it nor any of its Subsidiaries has any collective bargaining agreements with any of its employees.  There is no labor union organizing activity pending or, to its knowledge, threatened with respect to it or any of its Subsidiaries.  Except as disclosed in the Exchange Act Filings or on Schedule 12(n), neither it nor any of its Subsidiaries is a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement.  To its knowledge, none of its or any of its Subsidiaries’ employees, nor any consultant with whom it or any of its Subsidiaries has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, it or any of its Subsidiaries because of the nature of the business to be conducted by it or any of its Subsidiaries; and to its knowledge the continued employment by it and its Subsidiaries of their present employees, and the performance of its and its Subsidiaries contracts with its independent contractors, will not result in any such violation.  Neither it nor any of its Subsidiaries is aware that any of its or any of its Subsidiaries’ employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency that would interfere with their duties to it or any of its Subsidiaries.  Neither it nor any of its Subsidiaries has received any notice alleging that any such violation has occurred.  Except for employees who have a current effective employment agreement with it or any of its Subsidiaries, none of its or any of its Subsidiaries’ employees has been granted the right to continued employment by it or any of its Subsidiaries or to any material compensation following termination of employment with it or any of its Subsidiaries.  Except as set forth on Schedule 12(n), neither it nor any of its Subsidiaries is aware that any officer, key employee or group of employees intends to terminate his, her or their employment with it or any of its Subsidiaries, as applicable, nor does it or any of its Subsidiaries have a present intention to terminate the employment of any officer, key employee or group of employees.

(o)Registration Rights and Voting Rights.  Except as set forth on Schedule 12(o) and except as disclosed in Exchange Act Filings, neither it nor any of its Subsidiaries is presently under any obligation, and neither it nor any of its Subsidiaries has granted any rights, to register any of its or any of its Subsidiaries’ presently

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outstanding securities or any of its securities that may hereafter be issued.  Except as set forth on Schedule 12(o) and except as disclosed in Exchange Act Filings, neither it nor any of its Subsidiaries has entered into any agreement with respect to its or any of its Subsidiaries’ voting of equity securities.

(p)Compliance with Laws; Permits.  Neither it nor any of its Subsidiaries is in violation of the Sarbanes-Oxley Act of 2002 or any SEC related regulation or rule or any rule of the Principal Market promulgated thereunder or any other applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.  No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement or any Ancillary Agreement and the issuance of any of the Securities, except such as have been duly and validly obtained or filed, or with respect to any filings that must be made after the Closing Date, as will be filed in a timely manner.  It and each of its Subsidiaries has all material franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(q)Environmental and Safety Laws.  Neither it nor any of its Subsidiaries is in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.  Except as set forth on Schedule 12(q), no Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by it or any of its Subsidiaries or, to its knowledge, by any other Person on any property owned, leased or used by it or any of its Subsidiaries.  For the purposes of the preceding sentence, “Hazardous Materials” shall mean:

(i)materials which are listed or otherwise defined as “hazardous” or “toxic” under any applicable local, state, federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous substances, including building materials; and

(ii)any petroleum products or nuclear materials.

(r)Valid Offering.  Assuming the accuracy of the representations and warranties of Laurus contained in this Agreement, the offer and issuance of the Securities will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws.

(s)Full Disclosure.  It and each of its Subsidiaries has provided Laurus with all information requested by Laurus in connection with Laurus’ decision to enter into this Agreement.  Neither this Agreement, the Ancillary Agreements nor the exhibits and schedules hereto and thereto nor any other document delivered by it or any of its Subsidiaries to Laurus or its attorneys or agents in connection herewith or therewith or with the transactions contemplated hereby or thereby, contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they are made, not misleading.  Any financial projections and other estimates provided to Laurus by it or any of its Subsidiaries were based on its and its Subsidiaries’ experience in the industry and on assumptions of fact and opinion as to future events which it or any of its Subsidiaries, at the date of the issuance of such projections or estimates, believed to be reasonable.

(t)Insurance.  It and each of its Subsidiaries has general commercial, product liability, fire and casualty insurance policies with coverages which it believes are customary for companies similarly situated to it and its Subsidiaries in the same or similar business.

(u)SEC Reports and Financial Statements.  Except as set forth on Schedule 12(u), it and each of its Subsidiaries has filed all proxy statements, reports and other documents required to be filed by it under the Exchange Act.  The Parent has furnished Laurus with copies of:  (i) its Annual Report on Form 10-KSB for its

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fiscal year ended June 30, 2004; and (ii) its Quarterly Reports on Form 10-QSB for its fiscal quarters ended September 30, 2004, December 31, 2004 and March 31, 2005 and the Form 8-K filings which it has made during its fiscal year 2005 to date (collectively, the “SEC Reports”).  Except as set forth on Schedule 12(u), 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.  Such financial statements have been prepared in accordance with 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 cash flows of the Parent and its Subsidiaries, on a consolidated basis, as of, and for, the periods presented in each such SEC Report.

(v)Listing.  The Parent’s Common Stock is listed or quoted, as applicable, on the Principal Market and satisfies all requirements for the continuation of such listing or quotation, as applicable, and the Parent shall do all things necessary for the continuation of such listing or quotation, as applicable.  The Parent has not received any notice that its Common Stock will be delisted from, or no longer quoted on, as applicable, the Principal Market or that its Common Stock does not meet all requirements for such listing or quotation, as applicable.

(w)No Integrated Offering.  Neither it, nor any of its Subsidiaries 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 this Agreement or any Ancillary Agreement to be integrated with prior offerings by it for purposes of the Securities Act which would prevent it from issuing the Securities pursuant to Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will it 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.

(x)Stop Transfer.  The Securities are restricted securities as of the date of this Agreement.  Neither it nor any of its Subsidiaries will issue any stop transfer order or other order impeding the sale and delivery of any of the Securities at such time as the Securities are registered for public sale or an exemption from registration is available, except as required by state and federal securities laws.

(y)Dilution.  It specifically acknowledges that the Parent’s obligation to issue the shares of Common Stock upon conversion of the Notes and exercise of the Warrants is binding upon the Parent and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Parent.

(z)Patriot Act.  It certifies that, to its knowledge, neither it nor any of its Subsidiaries has been designated, nor is or shall be owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224.  It hereby acknowledges that Laurus seeks to comply with all applicable laws concerning money laundering and related activities.  In furtherance of those efforts, it hereby represents, warrants and covenants that:  (i) none of the cash or property that it or any of its Subsidiaries will pay or will contribute to Laurus has been or shall be derived from, or related to, any activity that is deemed criminal under United States law; and (ii) no contribution or payment by it or any of its Subsidiaries to Laurus, to the extent that they are within its or any such Subsidiary’s control shall cause Laurus to be in violation of the United States Bank Secrecy Act, the United States International Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001.  It shall promptly notify Laurus if any of these representations, warranties and covenants ceases to be true and accurate regarding it or any of its Subsidiaries.  It shall provide Laurus with any additional information regarding it and each Subsidiary thereof that Laurus deems necessary or convenient to ensure compliance with all applicable laws concerning money laundering and similar activities.  It understands and agrees that if at any time it is discovered that any of the foregoing representations, warranties and covenants are incorrect, or if otherwise required by applicable law or regulation related to money laundering or similar activities, Laurus may undertake appropriate actions to ensure compliance with applicable law or regulation, including but not limited to segregation and/or redemption of Laurus’ investment in it.  It further understands that Laurus may release confidential information about it and its Subsidiaries and, if applicable, any underlying beneficial owners, to proper

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authorities if Laurus, in its sole discretion, determines that it is in the best interests of Laurus in light of relevant rules and regulations under the laws set forth in subsection (ii) above.

(aa)Company Name; Locations of Offices, Records and Collateral.  Schedule 12(aa) sets forth each Company’s name as it appears in official filings in the state of its organization, the type of entity of each Company, the organizational identification number issued by each Company’s state of organization or a statement that no such number has been issued, each Company’s state of organization, and the location of each Company’s chief executive office, corporate offices, warehouses, other locations of Collateral and locations where records with respect to Collateral are kept (including in each case the county of such locations) and, except as set forth in such Schedule 12(aa), such locations have not changed during the preceding twelve months.  As of the Closing Date, during the prior five years, except as set forth in Schedule 12(aa), no Company has been known as or conducted business in any other name (including trade names).  Each Company has only one state of organization.

(bb)ERISA.  Based upon the Employee Retirement Income Security Act of 1974 (“ERISA”), and the regulations and published interpretations thereunder:  (i) neither it nor any of its Subsidiaries has engaged in any Prohibited Transactions (as defined in Section 406 of ERISA and Section 4975 of the Code); (ii) it and each of its Subsidiaries has met all applicable minimum funding requirements under Section 302 of ERISA in respect of its plans; (iii) neither it nor any of its Subsidiaries has any knowledge of any event or occurrence which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate any employee benefit plan(s); (iv) neither it nor any of its Subsidiaries has any fiduciary responsibility for investments with respect to any plan existing for the benefit of persons other than its or such Subsidiary’s employees; and (v) neither it nor any of its Subsidiaries has withdrawn, completely or partially, from any multi-employer pension plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of 1980.

13.Covenants.  Each Company, as applicable, covenants and agrees with Laurus as follows:

(a)Stop-Orders.  It shall advise Laurus, promptly after it receives notice of issuance by the SEC, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Parent, or of the suspension of the qualification of the Common Stock of the Parent for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose.

(b)Listing.  It shall promptly secure the listing or quotation, as applicable, of the shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants on the Principal Market upon which shares of Common Stock are listed or quoted, as applicable, (subject to official notice of issuance) and shall maintain such listing or quotation, as applicable, so long as any other shares of Common Stock shall be so listed or quoted, as applicable.  The Parent shall maintain the listing or quotation, as applicable, of its Common Stock on the Principal Market, and will comply in all material respects with the Parent’s reporting, filing and other obligations under the bylaws or rules of the National Association of Securities Dealers (“NASD”) and such exchanges, as applicable.

(c)Market Regulations.  It shall notify the SEC, NASD and applicable state authorities, in accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to Laurus and promptly provide copies thereof to Laurus.

(d)Reporting Requirements.  It shall timely file with the SEC all reports required to be filed pursuant to the Exchange Act and refrain from terminating its status as an issuer required by the Exchange Act to file reports thereunder even if the Exchange Act or the rules or regulations thereunder would permit such termination.

(e)Use of Funds.  It shall use the proceeds of the Loans for general working capital purposes only.

(f)Access to Facilities.  It shall, and shall cause each of its Subsidiaries to, permit any representatives designated by Laurus (or any successor of Laurus), upon reasonable notice and during normal

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business hours, at Company’s expense and accompanied by a representative of Company Agent (provided that no such prior notice shall be required to be given and no such representative shall be required to accompany Laurus in the event Laurus believes such access is necessary to preserve or protect the Collateral or following the occurrence and during the continuance of an Event of Default), to:

(i)visit and inspect any of its or any such Subsidiary’s properties;

(ii)examine its or any such Subsidiary’s corporate and financial records (unless such examination is not permitted by federal, state or local law or by contract) and make copies thereof or extracts therefrom; and

(iii)discuss its or any such Subsidiary’s affairs, finances and accounts with its or any such Subsidiary’s directors, officers and Accountants.

Notwithstanding the foregoing, neither it nor any of its Subsidiaries shall provide any material, non-public information to Laurus unless Laurus signs a confidentiality agreement and otherwise complies with Regulation FD, under the federal securities laws.

(g)Taxes.  It shall, and shall cause each of its Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon it and its Subsidiaries’ income, profits, property or business, as the case may be; provided, however, that any such tax, assessment, charge or levy need not be paid currently if (i) the validity thereof shall currently and diligently be contested in good faith by appropriate proceedings, (ii) such tax, assessment, charge or levy shall have no effect on the Lien priority of Laurus in the Collateral, and (iii) if it and/or such Subsidiary, as applicable, shall have set aside on its and/or such Subsidiary’s books adequate reserves with respect thereto in accordance with GAAP; and provided, further, that it shall, and shall cause each of its Subsidiaries to, pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor.

(h)Insurance.  It shall bear the full risk of loss from any loss of any nature whatsoever with respect to the Collateral.  It and each of its Subsidiaries shall keep its assets which are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in similar business similarly situated as it and its Subsidiaries; and it and its Subsidiaries shall maintain, with financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner which it and/or such Subsidiary thereof reasonably believes is customary for companies in similar business similarly situated as it and its Subsidiaries and to the extent available on commercially reasonable terms.  It and each of its Subsidiaries will jointly and severally bear the full risk of loss from any loss of any nature whatsoever with respect to the assets pledged to Laurus as security for its obligations hereunder and under the Ancillary Agreements.  At its own cost and expense in amounts and with carriers reasonably acceptable to Laurus, it and each of its Subsidiaries shall (i) keep all their insurable properties and properties in which they have an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to it or the respective Subsidiary’s including business interruption insurance; (ii) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to it and its Subsidiaries’ insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have access to its or any of its Subsidiaries assets or funds either directly or through governmental authority to draw upon such funds or to direct generally the disposition of such assets; (iii) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others; (iv) maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it or any of its Subsidiaries is engaged in business; and (v) furnish Laurus with (x) copies of all policies and evidence of the maintenance of such policies at least thirty (30) days before any expiration date, (y) excepting its and its Subsidiaries’ workers’ compensation policy, endorsements to such policies naming Laurus as “co-insured” or “additional insured” and appropriate loss payable endorsements in form and substance reasonably satisfactory to Laurus, naming Laurus as lenders loss payee, and (z) evidence that as to Laurus the insurance coverage shall not be impaired or invalidated by any act or neglect of any Company or any of its Subsidiaries and the insurer will provide

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Laurus with at least thirty (30) days notice prior to cancellation.  It shall instruct the insurance carriers that in the event of any loss thereunder, the carriers shall make payment for such loss to Laurus and not to any Company or any of its Subsidiaries and Laurus jointly.  If any insurance losses are paid by check, draft or other instrument payable to any Company and/or any of its Subsidiaries and Laurus jointly, Laurus may endorse, as applicable, such Company’s and/or any of its Subsidiaries’ name thereon and do such other things as Laurus may deem advisable to reduce the same to cash.  Laurus is hereby authorized to adjust and compromise claims.  All loss recoveries received by Laurus upon any such insurance may be applied to the Obligations, in such order as Laurus in its sole discretion shall determine or shall otherwise be delivered to Company Agent for the benefit of the applicable Company and/or its Subsidiaries.  Any surplus shall be paid by Laurus to Company Agent for the benefit of the applicable Company and/or its Subsidiaries, or applied as may be otherwise required by law.  Any deficiency thereon shall be paid, as applicable, by Companies and their Subsidiaries to Laurus, on demand.

(i)Intellectual Property.  It shall, and shall cause each of its Subsidiaries to, maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use Intellectual Property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business.

(j)Properties.  It shall, and shall cause each of its Subsidiaries to, keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time make all needful and proper repairs, renewals, replacements, additions and improvements thereto; and it shall, and shall cause each of its Subsidiaries to, at all times comply with each provision of all leases to which it is a party or under which it occupies property if the breach of such provision could reasonably be expected to have a Material Adverse Effect.

(k)Confidentiality.  It shall not, and shall not permit any of its Subsidiaries to, disclose, and will not include in any public announcement, the name of Laurus, unless expressly agreed to by Laurus or unless and until such disclosure is required by the terms of this Agreement, law or applicable regulation, and then only to the extent of such requirement.  Notwithstanding the foregoing, each Company and its Subsidiaries may disclose Laurus’ identity and the terms of this Agreement to its current and prospective debt and equity financing sources.

(l)Required Approvals.  It shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Laurus, (i) create, incur, assume or suffer to exist any indebtedness (exclusive of trade debt) whether secured or unsecured other than each Company’s indebtedness to Laurus and as set forth on Schedule 13(l)(i) attached hereto and made a part hereof; (ii) cancel any debt owing to it in excess of $50,000 in the aggregate during any 12 month period; (iii) assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligations of any other Person, except the endorsement of negotiable instruments by it or its Subsidiaries for deposit or collection or similar transactions in the ordinary course of business; (iv) directly or indirectly declare, pay or make any dividend or distribution on any class of its Stock or apply any of its funds, property or assets to the purchase, redemption or other retirement of any of its or its Subsidiaries’ Stock outstanding on the date hereof, or issue any preferred stock; (v) purchase or hold beneficially any Stock or other securities or evidences of indebtedness of, make or permit to exist any loans or advances to, or make any investment or acquire any interest whatsoever in, any other Person, including any partnership or joint venture, except (x) travel advances, (y) loans to its and its Subsidiaries’ officers and employees not exceeding at any one time an aggregate of $10,000, and (z) loans to its existing Subsidiaries so long as such Subsidiaries are designated as either a co-borrower hereunder or has entered into such guaranty and security documentation required by Laurus, including, without limitation, to grant to Laurus a first priority perfected security interest in substantially all of such Subsidiary’s assets to secure the Obligations; (vi) create or permit to exist any Subsidiary, other than any Subsidiary in existence on the date hereof and listed in Schedule 12(b) unless such new Subsidiary is a wholly-owned Subsidiary and is designated by Laurus as either a co-borrower or guarantor hereunder and such Subsidiary shall have entered into all such documentation required by Laurus, including, without limitation, to grant to Laurus a first priority perfected security interest in substantially all of such Subsidiary’s assets to secure the Obligations; (vii) directly or indirectly, prepay any indebtedness (other than to Laurus and in the ordinary course of business), or repurchase, redeem, retire or otherwise acquire any indebtedness (other than to Laurus and in the ordinary course of business) except to make scheduled payments of principal and interest thereof; (viii) enter into any merger, consolidation or other reorganization with or into any other Person or acquire all or a portion of the assets or Stock of any Person or permit any other Person to consolidate with or merge with it, unless (1) such Company is the surviving entity of such merger or consolidation, (2) no Event of Default shall exist immediately prior to and after giving effect to such merger or consolidation, (3) such Company shall have provided Laurus copies of all documentation relating to such

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merger or consolidation and (4) such Company shall have provided Laurus with at least thirty (30) days’ prior written notice of such merger or consolidation; (ix) materially change the nature of the business in which it is presently engaged; (x) become subject to (including, without limitation, by way of amendment to or modification of) any agreement or instrument which by its terms would (under any circumstances) restrict its or any of its Subsidiaries’ right to perform the provisions of this Agreement or any of the Ancillary Agreements; (xi) change its fiscal year or make any changes in accounting treatment and reporting practices without prior written notice to Laurus except as required by GAAP or in the tax reporting treatment or except as required by law; (xii) enter into any transaction with any employee, director or Affiliate, except in the ordinary course on arms-length terms; (xiii) bill Accounts under any name except the present name of such Company; or (xiv) sell, lease, transfer or otherwise dispose of any of its properties or assets, or any of the properties or assets of its Subsidiaries, except for (1) the sale of Inventory in the ordinary course of business and (2) the disposition or transfer in the ordinary course of business during any fiscal year of obsolete and worn-out Equipment and only to the extent that (x) the proceeds of any such disposition are used to acquire replacement Equipment which is subject to Laurus’ first priority security interest or are used to repay Loans or to pay general corporate expenses, or (y) following the occurrence of an Event of Default which continues to exist, the proceeds of which are remitted to Laurus to be held as cash collateral for the Obligations.

(m)Reissuance of Securities.  The Parent shall reissue certificates representing the Securities without the legends set forth in Section 39 below at such time as:

(i)the holder thereof is permitted to dispose of such Securities pursuant to Rule 144(k) under the Securities Act; or

(ii)upon resale subject to an effective registration statement after such Securities are registered under the Securities Act.

The Parent agrees to cooperate with Laurus in connection with all resales pursuant to Rule 144(d) and Rule 144(k) and to cause its counsel to provide such legal opinions as are necessary to allow such resales provided the Parent and its counsel receive reasonably requested representations from Laurus and broker, if any.

(n)Opinion.  On the Closing Date, it shall deliver to Laurus an opinion acceptable to Laurus from each Company’s legal counsel.  Each Company will provide, at the Companies’ joint and several expense, such other legal opinions in the future as are reasonably necessary for the conversion of the Notes and the exercise of the Warrants.

(o)Legal Name, etc.  It shall not, without providing Laurus with 30 days prior written notice, change (i) its name as it appears in the official filings in the state of its organization, (ii) the type of legal entity it is, (iii) its organization identification number, if any, issued by its state of organization, (iv) its state of organization or (v) amend its certificate of incorporation, by-laws or other organizational document.

(p)Compliance with Laws.  The operation of each of its and each of its Subsidiaries’ business is and shall continue to be in compliance in all material respects with all applicable federal, state and local laws, rules and ordinances, including to all laws, rules, regulations and orders relating to taxes, payment and withholding of payroll taxes, employer and employee contributions and similar items, securities, employee retirement and welfare benefits, employee health and safety and environmental matters.

(q)Notices.  It and each of its Subsidiaries shall promptly inform Laurus in writing of:  (i) the commencement of all proceedings and investigations by or before and/or the receipt of any notices from, any governmental or nongovernmental body and all actions and proceedings in any court or before any arbitrator against or in any way concerning any event which could reasonably be expected to have singly or in the aggregate, a Material Adverse Effect; (ii) any change which has had, or could reasonably be expected to have, a Material Adverse Effect; (iii) any Event of Default or Default; and (iv) any default or any event which with the passage of time or giving of notice or both would constitute a default under any agreement for the payment of money to which it or any of its Subsidiaries is a party or by which it or any of its Subsidiaries or any of its or any such Subsidiary’s properties may be bound the breach of which would have a Material Adverse Effect.

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(r)Margin Stock.  It shall not permit any of the proceeds of the Loans made hereunder to be used directly or indirectly to “purchase” or “carry” “margin stock” or to repay indebtedness incurred to “purchase” or “carry” “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect.

(s)Offering Restrictions.  Except as previously disclosed in the SEC Reports or in the Exchange Act Filings, or stock or stock options granted to its employees or directors, neither it nor any of its Subsidiaries shall, prior to the full repayment or conversion of the Notes (together with all accrued and unpaid interest and fees related thereto), (x) enter into any equity line of credit agreement or similar agreement or (y) issue, or enter into any agreement to issue, any securities with a variable/floating conversion and/or pricing feature which are or could be (by conversion or registration) free-trading securities (i.e. common stock subject to a registration statement).

(t)Authorization and Reservation of Shares.  The Parent shall at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the conversion of the Notes and exercise of the Warrants.

(u)Financing Right of First Refusal.

(i)It hereby grants to Laurus a right of first refusal to provide any Additional Financing (as defined below) to be issued by any Company and/or any of its Subsidiaries (the “Additional Financing Parties”), subject to the following terms and conditions.  From and after the date hereof, prior to the incurrence of any additional convertible indebtedness by the Additional Financing Parties (an “Additional Financing”), Company Agent shall notify Laurus of such Additional Financing.  In connection therewith, Company Agent shall submit a fully executed term sheet (a “Proposed Term Sheet”) to Laurus setting forth the terms, conditions and pricing of any such Additional Financing (such financing to be negotiated on “arm’s length” terms and the terms thereof to be negotiated in good faith) proposed to be entered into by the Additional Financing Parties.  Laurus shall have the right, but not the obligation, to deliver to Company Agent its own proposed term sheet (the “Laurus Term Sheet”) setting forth the terms and conditions upon which Laurus would be willing to provide such Additional Financing to the Additional Financing Parties.  The Laurus Term Sheet shall contain terms no less favorable to the Additional Financing Parties than those outlined in Proposed Term Sheet.  Laurus shall deliver to Company Agent the Laurus Term Sheet within ten Business Days of receipt of each such Proposed Term Sheet.  If the provisions of the Laurus Term Sheet are at least as favorable to the Additional Financing Parties as the provisions of the Proposed Term Sheet, the Additional Financing Parties shall enter into and consummate the Additional Financing transaction outlined in the Laurus Term Sheet.

(ii)It shall not, and shall not permit its Subsidiaries to, agree, directly or indirectly, to any restriction with any Person which limits the ability of Laurus to consummate an Additional Financing with, or provide additional debt or equity financing to, it or any of its Subsidiaries.

(v)Prohibition of Amendments to Subordinated Debt Documentation.  It shall not, without the prior written consent of Laurus, amend, modify or in any way alter the terms of any of the Subordinated Debt Documentation.

(w)Prohibition of Grant of Collateral for Subordinated Debt Documentation.  It shall not, without the prior written consent of Laurus, grant or permit any of its Subsidiaries to grant to any Person any Collateral of such Company or any collateral of any of its Subsidiaries as security for any obligation arising under the Subordinated Debt Documentation.

(x)Prohibitions of Payment Under Subordinated Debt Documentation.  Neither it nor any of its Subsidiaries shall, without the prior written consent of Laurus, make any payments in respect of the indebtedness evidenced by the Subordinated Debt Documentation, other than as expressly permitted by the terms thereof.

14.Further Assurances.  At any time and from time to time, upon the written request of Laurus and at the sole expense of Companies, each Company shall promptly and duly execute and deliver any and

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all such further instruments and documents and take such further action as Laurus may request (a) to obtain the full benefits of this Agreement and the Ancillary Agreements, (b) to protect, preserve and maintain Laurus’ rights in the Collateral and under this Agreement or any Ancillary Agreement, and/or (c) to enable Laurus to exercise all or any of the rights and powers herein granted or any Ancillary Agreement.

15.Representations, Warranties and Covenants of Laurus.  Laurus hereby represents, warrants and covenants to each Company as follows:

(a)Requisite Power and Authority.  Laurus has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and the Ancillary Agreements and to carry out their provisions.  All corporate action on Laurus’ part required for the lawful execution and delivery of this Agreement and the Ancillary Agreements have been or will be effectively taken prior to the Closing Date.  Upon their execution and delivery, this Agreement and the Ancillary Agreements shall be valid and binding obligations of Laurus, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, and (b) as limited by general principles of equity that restrict the availability of equitable and legal remedies.

(b)Investment Representations.  Laurus understands that the Securities are being offered pursuant to an exemption from registration contained in the Securities Act based in part upon Laurus’ representations contained in this Agreement, including, without limitation, that Laurus is an “accredited investor” within the meaning of Regulation D under the Securities Act.  Laurus has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Notes to be issued to it under this Agreement and the Securities acquired by it upon the conversion of the Notes.

(c)Laurus Bears Economic Risk.  Laurus has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Parent so that it is capable of evaluating the merits and risks of its investment in the Parent and has the capacity to protect its own interests.  Laurus must bear the economic risk of this investment until the Securities are sold pursuant to (i) an effective registration statement under the Securities Act, or (ii) an exemption from registration is available.

(d)Investment for Own Account.  The Securities are being issued to Laurus for its own account for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with their distribution.

(e)Laurus Can Protect Its Interest.  Laurus represents that by reason of its, or of its management’s, business and financial experience, Laurus has the capacity to evaluate the merits and risks of its investment in the Notes, and the Securities and to protect its own interests in connection with the transactions contemplated in this Agreement, and the Ancillary Agreements.  Further, Laurus is aware of no publication of any advertisement in connection with the transactions contemplated in the Agreement or the Ancillary Agreements.

(f)Accredited Investor.  Laurus represents that it is an accredited investor within the meaning of Regulation D under the Securities Act.

(g)Shorting.  Neither Laurus nor any of its Affiliates or investment partners has, will, or will cause any Person, to directly engage in “short sales” of the Parent’s Common Stock as long as any Minimum Borrowing Note shall be outstanding.

(h)Patriot Act.  Laurus certifies that, to the best of Laurus’ knowledge, Laurus has not been designated, and is not owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224.  Laurus seeks to comply with all applicable laws concerning money laundering and related activities.  In furtherance of those efforts, Laurus hereby represents, warrants and covenants that:  (i) none of the cash or property that Laurus will use to make the Loans has been or shall be derived from, or related to, any activity that is deemed criminal under United States law; and (ii) no disbursement by Laurus to any Company to the extent within Laurus’ control, shall cause Laurus to be in violation of the United States Bank Secrecy Act, the United States International Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing

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Act of 2001.  Laurus shall promptly notify the Company Agent if any of these representations ceases to be true and accurate regarding Laurus.  Laurus agrees to provide the Company any additional information regarding Laurus that the Company deems necessary or convenient to ensure compliance with all applicable laws concerning money laundering and similar activities.  Laurus understands and agrees that if at any time it is discovered that any of the foregoing representations are incorrect, or if otherwise required by applicable law or regulation related to money laundering similar activities, Laurus may undertake appropriate actions to ensure compliance with applicable law or regulation, including but not limited to segregation and/or redemption of Laurus’ investment in the Parent.  Laurus further understands that the Parent may release information about Laurus and, if applicable, any underlying beneficial owners, to proper authorities if the Parent, in its sole discretion, determines that it is in the best interests of the Parent in light of relevant rules and regulations under the laws set forth in subsection (ii) above.

(i)Limitation on Acquisition of Common Stock.  Notwithstanding anything to the contrary contained in this Agreement, any Ancillary Agreement, or any document, instrument or agreement entered into in connection with any other transaction entered into by and between Laurus and any Company (and/or Subsidiaries or Affiliates of any Company), Laurus shall not acquire stock in the Parent (including, without limitation, pursuant to a contract to purchase, by exercising an option or warrant, by converting any other security or instrument, by acquiring or exercising any other right to acquire, shares of stock or other security convertible into shares of stock in the Parent, or otherwise, and such options, warrants, conversion or other rights shall not be exercisable) to the extent such stock acquisition would cause any interest (including any original issue discount) payable by any Company to Laurus not to qualify as portfolio interest, within the meaning of Section 881(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) by reason of Section 881(c)(3) of the Code, taking into account the constructive ownership rules under Section 871(h)(3)(C) of the Code (the “Stock Acquisition Limitation”).  The Stock Acquisition Limitation shall automatically become null and void without any notice to any Company upon the earlier to occur of either (a) the Parent’s delivery to Laurus of a Notice of Redemption (as defined in the Notes) or (b) the existence of an Event of Default at a time when the average closing price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for the immediately preceding five trading days is greater than or equal to 150% of the Fixed Conversion Price (as defined in the Notes).

16.Power of Attorney.  Each Company hereby appoints Laurus, or any other Person whom Laurus may designate as such Company’s attorney, with power to:  (i) endorse such Company’s name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into Laurus’ possession; (ii) sign such Company’s name on any invoice or bill of lading relating to any Accounts, drafts against Account Debtors, schedules and assignments of Accounts, notices of assignment, financing statements and other public records, verifications of Account and notices to or from Account Debtors; (iii) verify the validity, amount or any other matter relating to any Account by mail, telephone, telegraph or otherwise with Account Debtors; (iv) do all things necessary to carry out this Agreement, any Ancillary Agreement and all related documents; and (v) on or after the occurrence and during the continuation of an Event of Default, notify the post office authorities to change the address for delivery of such Company’s mail to an address designated by Laurus, and to receive, open and dispose of all mail addressed to such Company.  Each Company hereby ratifies and approves all acts of the attorney.  Neither Laurus, nor the attorney will be liable for any acts or omissions or for any error of judgment or mistake of fact or law, except for gross negligence or willful misconduct.  This power, being coupled with an interest, is irrevocable so long as Laurus has a security interest and until the Obligations have been fully satisfied.  The power of attorney set forth in this Section 16 shall only be exercisable following the occurrence and during the continuation of an Event of Default, except with respect to the filing of financing statements, in which case such power of attorney shall be exercisable on and after the date hereof.

17.Term of Agreement.  Laurus’ agreement to make Loans and extend financial accommodations under and in accordance with the terms of this Agreement or any Ancillary Agreement shall continue in full force and effect until the expiration of the Term.  At Laurus’ election following the occurrence of an Event of Default, Laurus may terminate this Agreement.  The termination of the Agreement shall not affect any of Laurus’ rights hereunder or any Ancillary Agreement and the provisions hereof and thereof shall continue to be fully operative until all transactions entered into, rights or interests created and the Obligations have been irrevocably disposed of, concluded or liquidated.  Notwithstanding the foregoing, Laurus shall release its security interests at any time after thirty (30) days notice upon irrevocable payment to it of all Obligations.

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18.Termination of Lien.  The Liens and rights granted to Laurus hereunder and any Ancillary Agreements and the financing statements filed in connection herewith or therewith shall continue in full force and effect, notwithstanding the termination of this Agreement or the fact that any Company’s account may from time to time be temporarily in a zero or credit position, until all of the Obligations have been indefeasibly paid or performed in full after the termination of this Agreement.  Laurus shall not be required to send termination statements to any Company, or to file them with any filing office, unless and until this Agreement and the Ancillary Agreements shall have been terminated in accordance with their terms and all Obligations indefeasibly paid in full in immediately available funds.

19.Events of Default.  The occurrence of any of the following shall constitute an “Event of Default”:

(a)failure to make payment of any of the Obligations when required hereunder, and, in any such case, such failure shall continue for a period of three (3) days following the date upon which any such payment was due;

(b)failure by any Company or any of its Subsidiaries to pay any taxes when due unless such taxes are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been provided on such Company’s and/or such Subsidiary’s books;

(c)failure to perform under, and/or committing any breach of, in any material respect, this Agreement or any covenant contained herein, which failure or breach shall continue without remedy for a period of thirty (30) days after the occurrence thereof;

(d)any representation, warranty or statement made by any Company or any of its Subsidiaries hereunder, in any Ancillary Agreement, any certificate, statement or document delivered pursuant to the terms hereof, or in connection with the transactions contemplated by this Agreement should prove to be false or misleading in any material respect on the date as of which made or deemed made;

(e)the occurrence of any default (or similar term) in the observance or performance of any other agreement or condition relating to any indebtedness or contingent obligation of any Company or any of its Subsidiaries (including, without limitation, the indebtedness evidenced by the Subordinated Debt Documentation) beyond the period of grace (if any), the effect of which default is to cause, or permit the holder or holders of such indebtedness or beneficiary or beneficiaries of such contingent obligation to cause, such indebtedness to become due prior to its stated maturity or such contingent obligation to become payable;

(f)attachments or levies in excess of $250,000 in the aggregate are made upon any Company’s assets or a judgment is rendered against any Company’s property involving a liability of more than $250,000 which shall not have been vacated, discharged, stayed or bonded within ninety (90) days from the entry thereof;

(g)any change in any Company’s or any of its Subsidiary’s condition or affairs (financial or otherwise) which in Laurus’ reasonable, good faith opinion, could reasonably be expected to have a Material Adverse Effect;

(h)any Lien created hereunder or under any Ancillary Agreement for any reason ceases to be or is not a valid and perfected Lien having a first priority interest, excluding invalidations or imperfections that arise as a direct result of actions taken by Laurus;

(i)any Company or any of its Subsidiaries shall (i) apply for, consent to or suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to without challenge within ten (10) days of the filing thereof, or failure to have dismissed within ninety

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(90) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing;

(j)any Company or any of its Subsidiaries shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business;

(k)any Company or any of its Subsidiaries directly or indirectly sells, assigns, transfers, conveys, or suffers or permits to occur any sale, assignment, transfer or conveyance of any assets of such Company or any interest therein, except as permitted herein;

(l)any “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof), other than the Holder, is or becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 40% or more on a fully diluted basis of the then outstanding voting equity interest of any Company, (ii) the Board of Directors of the Parent shall cease to consist of a majority of the Board of Directors of the Parent on the date hereof (or directors appointed by a majority of the board of directors in effect immediately prior to such appointment) or (iii) the Parent or any of its Subsidiaries merges or consolidates with, or sells all or substantially all of its assets to, any other person or entity;

(m)the indictment or threatened indictment of any Company or any of its Subsidiaries or any executive officer of any Company or any of its Subsidiaries under any criminal statute, or commencement or threatened commencement of criminal or civil proceeding against any Company or any of its Subsidiaries or any executive officer of any Company or any of its Subsidiaries pursuant to which statute or proceeding penalties or remedies sought or available include forfeiture of any of the property of any Company or any of its Subsidiaries;

(n)an Event of Default shall occur under and as defined in (x) any Note or in any other Ancillary Agreement or (y) that certain Securities Purchase Agreement, dated as of March 22, 2004, by and between the Parent and Laurus (as amended, modified or supplemented from time to time, the “2004 Securities Purchase Agreement”) or any Related Agreement referred to in, and defined in, the 2004 Securities Purchase Agreement;

(o)any Company or any of its Subsidiaries shall breach any term or provision of any Ancillary Agreement to which it is a party, in any material respect which breach is not cured within any applicable cure or grace period provided in respect thereof (if any);

(p)any Company or any of its Subsidiaries attempts to terminate, challenges the validity of, or its liability under this Agreement or any Ancillary Agreement, or any proceeding shall be brought to challenge the validity, binding effect of any Ancillary Agreement or any Ancillary Agreement ceases to be a valid, binding and enforceable obligation of such Company or any of its Subsidiaries (to the extent such Persons are a party thereto);

(q)an SEC stop trade order or Principal Market trading suspension of the Common Stock shall be in effect for five (5) consecutive days or five (5) days during a period of ten (10) consecutive days, excluding in all cases a suspension of all trading on a Principal Market, provided that the Parent shall not have been able to cure such trading suspension within thirty (30) days of the notice thereof or list the Common Stock on another Principal Market within sixty (60) days of such notice;

(r)the Parent’s failure to deliver Common Stock to Laurus pursuant to and in the form required by the Notes and this Agreement, if such failure to deliver Common Stock shall not be cured within two (2) Business Days or any Company is required to issue a replacement Note to Laurus and such Company shall fail to deliver such replacement Note within seven (7) Business Days; or

(s)any Company, or any of its Subsidiaries shall take or participate in any action which would be prohibited under the provisions of any of the Subordinated Debt Documentation or make any payment on the indebtedness evidenced by the Subordinated Debt Documentation to a Person that was not entitled to receive such payments under the subordination provisions of applicable Subordinated Debt Documentation.

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20.Remedies.  Following the occurrence of an Event of Default, Laurus shall have the right to demand repayment in full of all Obligations, whether or not otherwise due.  Until all Obligations have been fully and indefeasibly satisfied, Laurus shall retain its Lien in all Collateral.  Laurus shall have, in addition to all other rights provided herein and in each Ancillary Agreement, the rights and remedies of a secured party under the UCC, and under other applicable law, all other legal and equitable rights to which Laurus may be entitled, including the right to take immediate possession of the Collateral, to require each Company to assemble the Collateral, at Companies’ joint and several expense, and to make it available to Laurus at a place designated by Laurus which is reasonably convenient to both parties and to enter any of the premises of any Company or wherever the Collateral shall be located, with or without force or process of law, and to keep and store the same on said premises until sold (and if said premises be the property of any Company, such Company agrees not to charge Laurus for storage thereof), and the right to apply for the appointment of a receiver for such Company’s property.  Further, Laurus may, at any time or times after the occurrence of an Event of Default, sell and deliver all Collateral held by or for Laurus at public or private sale for cash, upon credit or otherwise, at such prices and upon such terms as Laurus, in Laurus’ sole discretion, deems advisable or Laurus may otherwise recover upon the Collateral in any commercially reasonable manner as Laurus, in its sole discretion, deems advisable.  The requirement of reasonable notice shall be met if such notice is mailed postage prepaid to Company Agent at Company Agent’s address as shown in Laurus’ records, at least ten (10) days before the time of the event of which notice is being given.  Laurus may be the purchaser at any sale, if it is public.  In connection with the exercise of the foregoing remedies, Laurus is granted permission to use all of each Company’s Intellectual Property.  The proceeds of sale shall be applied first to all costs and expenses of sale, including attorneys’ fees, and second to the payment (in whatever order Laurus elects) of all Obligations.  After the indefeasible payment and satisfaction in full of all of the Obligations, and after the payment by Laurus of any other amount required by any provision of law, including Section 9-608(a)(1) of the UCC (but only after Laurus has received what Laurus considers reasonable proof of a subordinate party’s security interest), the surplus, if any, shall be paid to Company Agent (for the benefit of the applicable Companies) or its representatives or to whosoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct.  The Companies shall remain jointly and severally liable to Laurus for any deficiency.  In addition, the Companies shall jointly and severally pay Laurus a liquidation fee (“Liquidation Fee”) in the amount of five percent (5%) of the actual amount collected in respect of each Account outstanding at any time during a Liquidation Period”.  For purposes hereof, “Liquidation Period” means a period:  (i) beginning on the earliest date of (x) an event referred to in Section 19(i) or 19(j), or (y) the cessation of any Company’s business; and (ii) ending on the date on which Laurus has actually received all Obligations due and owing it under this Agreement and the Ancillary Agreements.  The Liquidation Fee shall be paid on the date on which Laurus collects the applicable Account by deduction from the proceeds thereof.  Each Company and Laurus acknowledge that the actual damages that would be incurred by Laurus after the occurrence of an Event of Default would be difficult to quantify and that such Company and Laurus have agreed that the fees and obligations set forth in this Section and in this Agreement would constitute fair and appropriate liquidated damages in the event of any such termination.

21.Waivers.  To the full extent permitted by applicable law, each Company hereby waives (a) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all of this Agreement and the Ancillary Agreements or any other notes, commercial paper, Accounts, contracts, Documents, Instruments, Chattel Paper and guaranties at any time held by Laurus on which such Company may in any way be liable, and hereby ratifies and confirms whatever Laurus may do in this regard; (b) all rights to notice and a hearing prior to Laurus’ taking possession or control of, or to Laurus’ replevy, attachment or levy upon, any Collateral or any bond or security that might be required by any court prior to allowing Laurus to exercise any of its remedies; and (c) the benefit of all valuation, appraisal and exemption laws.  Each Company acknowledges that it has been advised by counsel of its choices and decisions with respect to this Agreement, the Ancillary Agreements and the transactions evidenced hereby and thereby.

22.Expenses.  The Companies shall jointly and severally pay all of Laurus’ out-of-pocket costs and expenses, including reasonable fees and disbursements of outside counsel and appraisers, in connection with the preparation, execution and delivery of this Agreement and the Ancillary Agreements, and in connection with the prosecution or defense of any action, contest, dispute, suit or proceeding concerning any matter in any way arising out of, related to or connected with this Agreement or any Ancillary Agreement.  The Companies shall also jointly and severally pay all of Laurus’ reasonable fees, charges, out-of-pocket costs and expenses, including fees and disbursements of counsel and appraisers, in connection with (a) the preparation, execution and delivery of any

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waiver, any amendment thereto or consent proposed or executed in connection with the transactions contemplated by this Agreement or the Ancillary Agreements, (b) Laurus’ obtaining performance of the Obligations under this Agreement and any Ancillary Agreements, including, but not limited to, the enforcement or defense of Laurus’ security interests, assignments of rights and Liens hereunder as valid perfected security interests, (c) any attempt to inspect, verify, protect, collect, sell, liquidate or otherwise dispose of any Collateral, (d) any appraisals or re-appraisals of any property (real or personal) pledged to Laurus by any Company or any of its Subsidiaries as Collateral for, or any other Person as security for, the Obligations hereunder and (e) any consultations in connection with any of the foregoing.  The Companies shall also jointly and severally pay Laurus’ customary bank charges for all bank services (including wire transfers) performed or caused to be performed by Laurus for any Company or any of its Subsidiaries at any Company’s or such Subsidiary’s request or in connection with any Company’s loan account with Laurus.  All such costs and expenses together with all filing, recording and search fees, taxes and interest payable by the Companies to Laurus shall be payable on demand and shall be secured by the Collateral.  If any tax by any Governmental Authority is or may be imposed on or as a result of any transaction between any Company and/or any Subsidiary thereof, on the one hand, and Laurus on the other hand, which Laurus is or may be required to withhold or pay, the Companies hereby jointly and severally indemnifies and holds Laurus harmless in respect of such taxes, and the Companies will repay to Laurus the amount of any such taxes which shall be charged to the Companies’ account; and until the Companies shall furnish Laurus with indemnity therefor (or supply Laurus with evidence reasonably satisfactory to it that due provision for the payment thereof has been made), Laurus may hold without interest any balance standing to each Company’s credit and Laurus shall retain its Liens in any and all Collateral.

23.Assignment By Laurus.  Laurus may assign any or all of the Obligations together with any or all of the security therefor to any Person and any such assignee shall succeed to all of Laurus’ rights with respect thereto; provided that Laurus shall not be permitted to effect any such assignment to a competitor of any Company unless an Event of Default has occurred and is continuing.  Upon such assignment, Laurus shall be released from all responsibility for the Collateral to the extent same is assigned to any transferee.  Laurus may from time to time sell or otherwise grant participations in any of the Obligations and the holder of any such participation shall, subject to the terms of any agreement between Laurus and such holder, be entitled to the same benefits as Laurus with respect to any security for the Obligations in which such holder is a participant.  Each Company agrees that each such holder may exercise any and all rights of banker’s lien, set-off and counterclaim with respect to its participation in the Obligations as fully as though such Company were directly indebted to such holder in the amount of such participation.

24.No Waiver; Cumulative Remedies.  Failure by Laurus to exercise any right, remedy or option under this Agreement, any Ancillary Agreement or any supplement hereto or thereto or any other agreement between or among any Company and Laurus or delay by Laurus in exercising the same, will not operate as a waiver; no waiver by Laurus will be effective unless it is in writing and then only to the extent specifically stated.  Laurus’ rights and remedies under this Agreement and the Ancillary Agreements will be cumulative and not exclusive of any other right or remedy which Laurus may have.

25.Application of Payments.  Each Company irrevocably waive the right to direct the application of any and all payments at any time or times hereafter received by Laurus from or on such Company’s behalf and each Company hereby irrevocably agrees that Laurus shall have the continuing exclusive right to apply and reapply any and all payments received at any time or times hereafter against the Obligations hereunder in such manner as Laurus may deem advisable notwithstanding any entry by Laurus upon any of Laurus’ books and records.

26.Indemnity.  Each Company hereby jointly and severally indemnify and hold Laurus, and its respective affiliates, employees, attorneys and agents (each, an “Indemnified Person”), harmless from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses of any kind or nature whatsoever (including attorneys’ fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) which may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement or any of the Ancillary Agreements or with respect to the execution, delivery, enforcement, performance and administration of, or in any other way arising out of or relating to, this Agreement, the Ancillary Agreements or any other documents or transactions contemplated by or referred to herein or therein and any actions or failures to act with respect to any of the foregoing, except to the extent that any such indemnified liability is finally determined by a court of competent

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jurisdiction to have resulted solely from such Indemnified Person’s gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

27.Revival.  The Companies further agree that to the extent any Company makes a payment or payments to Laurus, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been made.

28.Borrowing Agency Provisions.

(a)Each Company hereby irrevocably designates Company Agent to be its attorney and agent and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and further assurances now or hereafter required hereunder, on behalf of such Company, and hereby authorizes Laurus to pay over or credit all loan proceeds hereunder in accordance with the request of Company Agent.

(b)The handling of this credit facility as a co-borrowing facility with a borrowing agent in the manner set forth in this Agreement is solely as an accommodation to the Companies and at their request.  Laurus shall not incur any liability to any Company as a result thereof.  To induce Laurus to do so and in consideration thereof, each Company hereby indemnifies Laurus and holds Laurus harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Laurus by any Person arising from or incurred by reason of the handling of the financing arrangements of the Companies as provided herein, reliance by Laurus on any request or instruction from Company Agent or any other action taken by Laurus with respect to this Paragraph 28.

(c)All Obligations shall be joint and several, and the Companies shall make payment upon the maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the part of the Companies shall in no way be affected by any extensions, renewals and forbearance granted by Laurus to any Company, failure of Laurus to give any Company notice of borrowing or any other notice, any failure of Laurus to pursue to preserve its rights against any Company, the release by Laurus of any Collateral now or thereafter acquired from any Company, and such agreement by any Company to pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by Laurus to any Company or any Collateral for such Company’s Obligations or the lack thereof.

(d)Each Company expressly waives any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which such Company may now or hereafter have against the other or other Person directly or contingently liable for the Obligations, or against or with respect to any other’s property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or performance of this Agreement, until all Obligations have been indefeasibly paid in full and this Agreement has been irrevocably terminated.

(e)Each Company represents and warrants to Laurus that (i) Companies have one or more common shareholders, directors and officers, (ii) the businesses and corporate activities of Companies are closely related to, and substantially benefit, the business and corporate activities of Companies, (iii) the financial and other operations of Companies are performed on a combined basis as if Companies constituted a consolidated corporate group, (iv) Companies will receive a substantial economic benefit from entering into this Agreement and will receive a substantial economic benefit from the application of each Loan hereunder, in each case, whether or not such amount is used directly by any Company and (v) all requests for Loans hereunder by the Company Agent are

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for the exclusive and indivisible benefit of the Companies as though, for purposes of this Agreement, the Companies constituted a single entity.

29.Notices.  Any notice or request hereunder may be given to any Company, Company Agent or Laurus 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.  Any notice or request hereunder shall be given by registered or certified mail, return receipt requested, hand delivery, overnight mail 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 officer of the 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, and, in the case of a telecopy, when confirmed.

Notices shall be provided as follows:

If to Laurus:	Laurus Master Fund, Ltd.
	c/o Laurus Capital Management, LLC
	825 Third Avenue, 14th Fl.
	New York, New York 10022
	Attention:	John E. Tucker, Esq.
	Telephone:	(212) 541-4434
	Telecopier:	(212) 541-5800
If to any Company,
or Company Agent:	Time America, Inc.
	8840 East Chaparral Road, Suite 100
	Scottsdale, Arizona 85250
	Attention:	Craig Smith
	Telephone:	(480) 296-0442
	Facsimile:	(480) 296-0444
With a copy to:	Squire, Sanders & Dempsey L.L.P.
	Two Renaissance Square
	40 North Central Avenue, Suite 2700
	Phoenix, Arizona 85004
	Attention:	Gregory R. Hall, Esq.
	Telephone:	(602) 528-4134
	Facsimile:	(602) 253-8129

or such other address as may be designated in writing hereafter in accordance with this Section 29 by such Person.

30.Governing Law, Jurisdiction and Waiver of Jury Trial.

(a)THIS AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

(b)EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND, AND LAURUS, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS; PROVIDED, THAT LAURUS AND EACH COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF

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NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LAURUS.  EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.  EACH COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO COMPANY AGENT AT THE ADDRESS SET FORTH IN SECTION 29 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF COMPANY AGENT’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

(c)THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

31.Limitation of Liability.  Each Company acknowledges and understands that in order to assure repayment of the Obligations hereunder Laurus may be required to exercise any and all of Laurus’ rights and remedies hereunder and agrees that, except as limited by applicable law, neither Laurus nor any of Laurus’ agents shall be liable for acts taken or omissions made in connection herewith or therewith except for actual bad faith.

32.Entire Understanding; Maximum Interest.  This Agreement and the Ancillary Agreements contain the entire understanding among each Company and Laurus as to the subject matter hereof and thereof and any promises, representations, warranties or guarantees not herein contained shall have no force and effect unless in writing, signed by each Company’s and Laurus’ respective officers.  Neither this Agreement, the Ancillary Agreements, nor any portion or provisions thereof may be changed, modified, amended, waived, supplemented, discharged, cancelled or terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party to be charged.  Nothing contained in this Agreement, any Ancillary Agreement or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum rate permitted by applicable law.  In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Companies to Laurus and thus refunded to the Companies.

33.Severability.  Wherever possible each provision of this Agreement or the Ancillary Agreements shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement or the Ancillary Agreements shall be prohibited by or invalid under applicable law such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions thereof.

34.Survival.  The representations, warranties, covenants and agreements made herein shall survive any investigation made by Laurus and the closing of the transactions contemplated hereby to the extent provided therein.  All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Companies pursuant hereto in connection with the transactions contemplated herebly shall be deemed to be representations and warranties by the Companies hereunder solely as of the date of such certificate or instrument.  All indemnities set forth herein shall survive the execution, delivery and termination of this Agreement and the Ancillary Agreements and the making and repaying of the Obligations.

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35.Captions.  All captions are and shall be without substantive meaning or content of any kind whatsoever.

36.Counterparts; Telecopier Signatures.  This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which taken together shall constitute one and the same agreement.  Any signature delivered by a party via telecopier transmission shall be deemed to be any original signature hereto.

37.Construction.  The parties acknowledge that each party and its counsel have reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments, schedules or exhibits thereto.

38.Publicity.  Each Company hereby authorizes Laurus to make appropriate announcements of the financial arrangement entered into by and among each Company and Laurus, including, without limitation, announcements which are commonly known as tombstones, in such publications and to such selected parties as Laurus shall in its sole and absolute discretion deem appropriate, or as required by applicable law.

39.Joinder.  It is understood and agreed that any Person that desires to become a Company hereunder, or is required to execute a counterpart of this Agreement after the date hereof pursuant to the requirements of this Agreement or any Ancillary Agreement, shall become a Company hereunder by (a) executing a Joinder Agreement in form and substance reasonably satisfactory to Laurus, (b) delivering supplements to such exhibits and annexes to this Agreement and the Ancillary Agreements as Laurus shall reasonably request and (c) taking all actions as specified in this Agreement as would have been taken by such Company had it been an original party to this Agreement, in each case with all documents required above to be delivered to Laurus and with all documents and actions required above to be taken to the reasonable satisfaction of Laurus.

40.Legends.  The Securities shall bear legends as follows;

(a)The Notes shall bear substantially the following legend:

“THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.  THIS NOTE AND THE COMMON STOCK 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 OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO TIME AMERICA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

(b)Any shares of Common Stock issued pursuant to conversion of the Notes or exercise of the Warrants, shall bear a legend which shall be in substantially the following form until such shares are covered by an effective registration statement filed with the SEC:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.  THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF

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COUNSEL REASONABLY SATISFACTORY TO TIME AMERICA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

(c)The Warrants shall bear substantially the following legend:

“THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.  THIS WARRANT AND THE COMMON SHARES 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 OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO TIME AMERICA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

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

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

TIME AMERICA, INC., a Nevada corporation

By:

Name:

Title:

TIME AMERICA, INC., an Arizona corporation

By:

Name:

Title:

LAURUS MASTER FUND, LTD.

By:

Name:

Title:

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Annex A - Definitions

“Account Debtor” means any Person who is or may be obligated with respect to, or on account of, an Account.

“Accountants” has the meaning given to such term in Section 11(a).

“Accounts” means all “accounts”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, including:  (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper or Instruments) (including any such obligations that may be characterized as an account or contract right under the UCC); (b) all of such Person’s rights in, to and under all purchase orders or receipts for goods or services; (c) all of such Person’s rights to any goods represented by any of the foregoing (including unpaid sellers’ rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods); (d) all rights to payment due to such Person for Goods or other property sold, leased, licensed, assigned or otherwise disposed of, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract, arising out of the use of a credit card or charge card, or for services rendered or to be rendered by such Person or in connection with any other transaction (whether or not yet earned by performance on the part of such Person); and (e) all collateral security of any kind given by any Account Debtor or any other Person with respect to any of the foregoing.

“Accounts Availability” means up to ninety percent (90%) of the net face amount of Eligible Accounts.

“Affiliate” means, with respect to any Person, (a) any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person or (b) any other Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above.  For the purposes of this definition, control of a Person shall mean the power (direct or indirect) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“Ancillary Agreements” means the Notes, the Warrants, the Registration Rights Agreements, each Security Document and all other agreements, instruments, documents, mortgages, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, trust agreements and guarantees whether heretofore, concurrently, or hereafter executed by or on behalf of any Company, any of its Subsidiaries or any other Person or delivered to Laurus, relating to this Agreement or to the transactions contemplated by this Agreement or otherwise relating to the relationship between or among any Company and Laurus, as each of the same may be amended, supplemented, restated or otherwise modified from time to time.

“Available Minimum Borrowing” has the meaning given such term in Section 2(a)(i).

“Balance Sheet Date” has the meaning given such term in Section 12(f)(ii).

“Books and Records” means all books, records, board minutes, contracts, licenses, insurance policies, environmental audits, business plans, files, computer files, computer discs and other data and software storage and media devices, accounting books and records, financial statements (actual and pro forma), filings with Governmental Authorities and any and all records and instruments relating to the Collateral or otherwise necessary or helpful in the collection thereof or the realization thereupon.

“Business Day” means a day on which Laurus is open for business and that is not a Saturday, a Sunday or other day on which banks are required or permitted to be closed in the State of New York.

“Capital Availability Amount” means $1,500,000.

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“Charter” has the meaning given such term in Section 12(c)(iv).

“Chattel Paper” means all “chattel paper,” as such term is defined in the UCC, including electronic chattel paper, now owned or hereafter acquired by any Person.

“Closing Date” means the date on which any Company shall first receive proceeds of the initial Loans or the date hereof, if no Loan is made under the facility on the date hereof.

“Code” has the meaning given such term in Section 15(i).

“Collateral” means all of each Company’s property and assets, whether real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title or interests including all of the following property in which it now has or at any time in the future may acquire any right, title or interest:

(a)all Inventory;

(b)all Equipment;

(c)all Fixtures;

(d)all General Intangibles;

(e)all Accounts;

(f)all Deposit Accounts, other bank accounts and all funds on deposit therein;

(g)all Investment Property;

(h)all Stock;

(i)all Chattel Paper;

(j)all Letter-of-Credit Rights;

(k)all Instruments;

(l)all commercial tort claims set forth on Schedule 1(A);

(m)all Books and Records;

(n)all Intellectual Property;

(o)all Supporting Obligations including letters of credit and guarantees issued in support of Accounts, Chattel Paper, General Intangibles and Investment Property;

(p)(i) all money, cash and cash equivalents and (ii) all cash held as cash collateral to the extent not otherwise constituting Collateral, all other cash or property at any time on deposit with or held by Laurus for the account of any Company (whether for safekeeping, custody, pledge, transmission or otherwise); and

(q)all products and Proceeds of all or any of the foregoing, tort claims and all claims and other rights to payment including (i) insurance claims against third parties for loss of, damage to, or destruction of, the foregoing Collateral and (ii) payments due or to become due under leases, rentals and hires of any or all of the foregoing and Proceeds payable under, or unearned premiums with respect to policies of insurance in whatever form.

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“Common Stock” means the shares of stock representing the Parent’s common equity interests.

“Company Agent” means the Parent.

“Contract Rate” has the meaning given such term in the respective Note.

“Default” means any act or event which, with the giving of notice or passage of time or both, would constitute an Event of Default.

“Deposit Accounts” means all “deposit accounts” as such term is defined in the UCC, now or hereafter held in the name of any Person, including, without limitation, the Lockboxes.

“Disclosure Controls” has the meaning given such term in Section 12(f)(iv).

“Documents” means all “documents”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including all bills of lading, dock warrants, dock receipts, warehouse receipts, and other documents of title, whether negotiable or non-negotiable.

“Eligible Accounts” means each Account of each Company which conforms to the following criteria:  (a) shipment of the merchandise or the rendition of services, other than the Company’s implementation, training, custom programming and maintenance services, has been completed; (b) no return, rejection or repossession of the merchandise has occurred; (c) merchandise or services shall not have been rejected or disputed by the Account Debtor and there shall not have been asserted any offset, defense or counterclaim; (d) continues to be in full conformity with the representations and warranties made by such Company to Laurus with respect thereto; (e) Laurus is, and continues to be, satisfied with the credit standing of the Account Debtor in relation to the amount of credit extended; (f) there are no facts existing or threatened which are likely to result in any adverse change in an Account Debtor’s financial condition; (g) is documented by an invoice in a form approved by Laurus and shall not be unpaid more than one hundred twenty (120) days from invoice date; (h) not more than twenty-five percent (25%) of the unpaid amount of invoices due from such Account Debtor remains unpaid more than one hundred twenty (120) days from invoice date; (i) is not evidenced by chattel paper or an instrument of any kind with respect to or in payment of the Account unless such instrument is duly endorsed to and in possession of Laurus or represents a check in payment of an Account; (j) the Account Debtor is located in the United States; provided, however, Laurus may, from time to time, in the exercise of its sole discretion and based upon satisfaction of certain conditions to be determined at such time by Laurus, deem certain Accounts as Eligible Accounts notwithstanding that such Account is due from an Account Debtor located outside of the United States; (k) Laurus has a first priority perfected Lien in such Account and such Account is not subject to any Lien other than Permitted Liens; (l) does not arise out of transactions with any employee, officer, director, stockholder or Affiliate of any Company; (m) is payable to such Company; (n) does not arise out of a bill and hold sale prior to shipment and does not arise out of a sale to any Person to which such Company is indebted; (o) is net of any returns, discounts, claims, credits and allowances; (p) if the Account arises out of contracts between such Company, on the one hand, and the United States, on the other hand, any state, or any department, agency or instrumentality of any of them, such Company has so notified Laurus, in writing, prior to the creation of such Account, and there has been compliance with any governmental notice or approval requirements, including compliance with the Federal Assignment of Claims Act; (q) is a good and valid account representing an undisputed bona fide indebtedness incurred by the Account Debtor therein named, for a fixed sum as set forth in the invoice relating thereto with respect to an unconditional sale and delivery upon the stated terms of goods sold by such Company or work, labor and/or services rendered by such Company; (r) does not arise out of progress billings prior to completion of the order; (s) the total unpaid Accounts from such Account Debtor does not exceed twenty-five percent (25%) of all Eligible Accounts; (t) such Company’s right to payment is absolute and not contingent upon the fulfillment of any condition, other than the Company’s implementation, training, custom programming and maintenance services; (u) such Company is able to bring suit and enforce its remedies against the Account Debtor through judicial process; (v) does not represent interest payments, late or finance charges owing to such Company, and (w) is otherwise satisfactory to Laurus as determined by Laurus in the exercise of its sole discretion.  In the event any Company requests that Laurus include within Eligible Accounts certain Accounts of one or more of such Company’s acquisition targets, Laurus shall at the time of such request consider such inclusion, but any such inclusion shall be at the sole option of Laurus and shall at all times be subject

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to the execution and delivery to Laurus of all such documentation (including, without limitation, guaranty and security documentation) as Laurus may require in its sole discretion.

“Eligible Subsidiary” means each Subsidiary of the Parent set forth on Exhibit A hereto, as the same may be updated from time to time with Laurus’ written consent.

“Equipment” means all “equipment” as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including any and all machinery, apparatus, equipment, fittings, furniture, Fixtures, motor vehicles and other tangible personal property (other than Inventory) of every kind and description that may be now or hereafter used in such Person’s operations or that are owned by such Person or in which such Person may have an interest, and all parts, accessories and accessions thereto and substitute ons and replacements therefor.

“ERISA” has the meaning given such term in Section 12(bb).

“Event of Default” means the occurrence of any of the events set forth in Section 19.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Act Filings” means the Parent’s filings under the Exchange Act made prior to the date of this Agreement.

“Financial Reporting Controls” has the meaning given such term in Section 12(f)(v).

“Fixtures” means all “fixtures” as such term is defined in the UCC, now owned or hereafter acquired by any Person.

“Formula Amount” has the meaning given such term in Section 2(a)(i).

“GAAP” means generally accepted accounting principles, practices and procedures in effect from time to time in the United States of America.

“General Intangibles” means all “general intangibles” as such term is defined in the UCC, now owned or hereafter acquired by any Person including all right, title and interest that such Person may now or hereafter have in or under any contract, all Payment Intangibles, customer lists, Licenses, Intellectual Property, interests in partnerships, joint ventures and other business associations, permits, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, Software, data bases, data, skill, expertise, experience, processes, models, drawings, materials, Books and Records, Goodwill (including the Goodwill associated with any Intellectual Property), all rights and claims in or under insurance policies (including insurance for fire, damage, loss, and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key-person, and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit accounts, rights to receive tax refunds and other payments, rights to received dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, and rights of indemnification.

“Goods” means all “goods”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including embedded software to the extent included in “goods” as defined in the UCC, manufactured homes, standing timber that is cut and removed for sale and unborn young of animals.

“Goodwill” means all goodwill, trade secrets, proprietary or confidential information, technical information, procedures, formulae, quality control standards, designs, operating and training manuals, customer lists, and distribution agreements now owned or hereafter acquired by any Person.

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“Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Instruments” means all “instruments”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including all certificated securities and all promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper.

“Intellectual Property” means any and all patents, trademarks, service marks, trade names, copyrights, trade secrets, Licenses, information and other proprietary rights and processes.

“Inventory” means all “inventory”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including all inventory, merchandise, goods and other personal property that are held by or on behalf of such Person for sale or lease or are furnished or are to be furnished under a contract of service or that constitute raw materials, work in process, finished goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in such Person’s business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software.

“Investment Property” means all “investment property”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located.

“Letter-of-Credit Rights” means “letter-of-credit rights” as such term is defined in the UCC, now owned or hereafter acquired by any Person, including rights to payment or performance under a letter of credit, whether or not such Person, as beneficiary, has demanded or is entitled to demand payment or performance.

“License” means any rights under any written agreement now or hereafter acquired by any Person to use any trademark, trademark registration, copyright, copyright registration or invention for which a patent is in existence or other license of rights or interests now held or hereafter acquired by any Person.

“Lien” means any mortgage, security deed, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the UCC or comparable law of any jurisdiction.

“Loans” has the meaning given such term in Section 2(a)(i) and shall include all other extensions of credit hereunder and under any Ancillary Agreement.

“Lockboxes” has the meaning given such term in Section 8(a).

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, liabilities, condition (financial or otherwise), properties, operations or prospects of any Company or any of its Subsidiaries (taken individually and as a whole), (b) any Company’s or any of its Subsidiary’s ability to pay or perform the Obligations in accordance with the terms hereof or any Ancillary Agreement, (c) the value of the Collateral, the Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Laurus’ rights and remedies under this Agreement and the Ancillary Agreements.

“Minimum Borrowing Amount” means $1,000,000.

“Minimum Borrowing Notes” means that certain Secured Convertible Minimum Borrowing Note dated as of the Closing Date made by the Companies in favor of Laurus evidencing the Minimum Borrowing Amount and each other Secured Convertible Minimum Borrowing Note made by the Companies in favor of Laurus

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which evidences the Minimum Borrowing Amount, as each of the same may be amended, supplemented, restated and/or otherwise modified from time to time.

“NASD” has the meaning given such term in Section 13(b).

“Next Unissued Serialized Note” has the meaning given such term in Section 2(a)(i).

“Note Shares” has the meaning given such term in Section 12(a).

“Notes” means the Minimum Borrowing Notes and the Revolving Note made by Companies in favor of Laurus in connection with the transactions contemplated hereby, as each of the same may be amended, supplemented, restated and/or otherwise modified from time to time.

“Obligations” means all Loans, all advances, debts, liabilities, obligations, covenants and duties owing by each Company and each of its Subsidiaries to Laurus (or any corporation that directly or indirectly controls or is controlled by or is under common control with Laurus) of every kind and description (whether or not evidenced by any note or other instrument and whether or not for the payment of money or the performance or non-performance of any act), direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, whether existing by operation of law or otherwise now existing or hereafter arising including any debt, liability or obligation owing from any Company and/or each of its Subsidiaries to others which Laurus may have obtained by assignment or otherwise and further including all interest (including interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed or allowable in such proceeding), charges or any other payments each Company and each of its Subsidiaries is required to make by law or otherwise arising under or as a result of this Agreement, the Ancillary Agreements or otherwise, together with all reasonable expenses and reasonable attorneys’ fees chargeable to the Companies’ or any of their Subsidiaries’ accounts or incurred by Laurus in connection therewith.

“Payment Intangibles” means all “payment intangibles” as such term is defined in the UCC, now owned or hereafter acquired by any Person, including, a General Intangible under which the Account Debtor’s principal obligation is a monetary obligation.

“Permitted Liens” means (a) Liens of carriers, warehousemen, artisans, bailees, mechanics and materialmen incurred in the ordinary course of business securing sums not overdue; (b) Liens incurred in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other forms of governmental insurance or benefits, relating to employees, securing sums (i) not overdue or (ii) being diligently contested in good faith provided that adequate reserves with respect thereto are maintained on the books of the Companies and their Subsidiaries, as applicable, in conformity with GAAP; (c) Liens in favor of Laurus; (d) Liens for taxes (i) not yet due or (ii) being diligently contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Companies and their Subsidiaries, as applicable, in conformity with GAAP; and which have no effect on the priority of Liens in favor of Laurus or the value of the assets in which Laurus has a Lien; (e) Purchase Money Liens securing Purchase Money Indebtedness to the extent permitted in this Agreement and (f) Liens specified on Schedule 2 hereto.

“Person” means any individual, sole proprietorship, partnership, limited liability partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof), and shall include such Person’s successors and assigns.

“Principal Market” means the NASD Over The Counter 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).

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“Proceeds” means “proceeds”, as such term is defined in the UCC and, in any event, shall include:  (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Company or any other Person from time to time with respect to any Collateral; (b) any and all payments (in any form whatsoever) made or due and payable to any Company from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any Collateral by any governmental body, governmental authority, bureau or agency (or any person acting under color of governmental authority); (c) any claim of any Company against third parties (i) for past, present or future infringement of any Intellectual Property or (ii) for past, present or future infringement or dilution of any trademark or trademark license or for injury to the goodwill associated with any trademark, trademark registration or trademark licensed under any trademark License; (d) any recoveries by any Company against third parties with respect to any litigation or dispute concerning any Collateral, including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral; (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock; and (f) any and all other amounts, rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral.

“Purchase Money Indebtedness” means (a) any indebtedness incurred for the payment of all or any part of the purchase price of any fixed asset, including indebtedness under capitalized leases, (b) any indebtedness incurred for the sole purpose of financing or refinancing all or any part of the purchase price of any fixed asset, and (c) any renewals, extensions or refinancings thereof (but not any increases in the principal amounts thereof outstanding at that time).

“Purchase Money Lien” means any Lien upon any fixed assets that secures the Purchase Money Indebtedness related thereto but only if such Lien shall at all times be confined solely to the asset the purchase price of which was financed or refinanced through the incurrence of the Purchase Money Indebtedness secured by such Lien and only if such Lien secures only such Purchase Money Indebtedness.

“Registration Rights Agreements” means that certain Minimum Borrowing Note Registration Rights Agreement dated as of the Closing Date by and between the Parent and Laurus and each other registration rights agreement by and between the Parent and Laurus, as each of the same may be amended, modified and supplemented from time to time.

“Revolving Note” means that certain Secured Revolving Note dated as of the Closing Date made by the Companies in favor of Laurus in the original principal amount of One Million Five Hundred Thousand Dollars ($1,500,000), as the same may be amended, supplemented, restated and/or otherwise modified from time to time.

“SEC” means the Securities and Exchange Commission.

“SEC Reports” has the meaning given such term in Section 12(u).

“Securities” means the Notes and the Warrants and the shares of Common Stock which may be issued pursuant to conversion of such Notes in whole or in part or exercise of such Warrants.

“Securities Act” has the meaning given such term in Section 12(r).

“Security Documents” means all security agreements, mortgages, cash collateral deposit letters, pledges and other agreements which are executed by any Company or any of its Subsidiaries in favor of Laurus.

“Software” means all “software” as such term is defined in the UCC, now owned or hereafter acquired by any Person, including all computer programs and all supporting information provided in connection with a transaction related to any program.

“Stock” means all certificated and uncertificated shares, options, warrants, membership interests, general or limited partnership interests, participation or other equivalents (regardless of how designated) of or in a

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corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Securities Exchange Act of 1934).

“Subordinated Debt Documentation” shall mean, collectively, (i) that certain Subordination Agreement, dated as of March 22, 2004, by and among Joseph L. Simek, Frances L. Simek, the Parent and Laurus (as amended, modified or supplemented from time to time, the “2004 Subordination Agreement”) and (ii) each “Subordinated Loan Document” under, and as defined in, the 2004 Subordination Agreement, as each are amended, modified or supplemented from time to time.

“Subsidiary” means, with respect to any Person, (i) any other Person whose shares of stock or other ownership interests having ordinary voting power (other than stock or other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the directors or other governing body of such other Person, are owned, directly or indirectly, by such Person or (ii) any other Person in which such Person owns, directly or indirectly, more than 50% of the equity interests at such time.

“Supporting Obligations” means all “supporting obligations” as such term is defined in the UCC.

“Term” means the Closing Date through the close of business on the day immediately preceding the third anniversary of the Closing Date, subject to acceleration at the option of Laurus upon the occurrence of an Event of Default hereunder or other termination hereunder.

“Transferable Amount” has the meaning given such term in Section 2(a)(i).

“UCC” means the Uniform Commercial Code as the same may, from time to time be in effect in the State of New York; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Laurus’ Lien on any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions; provided further, that to the extent that UCC is used to define any term herein or in any Ancillary Agreement and such term is defined differently in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern.

“Warrant Shares” has the meaning given such term in Section 12(a).

“Warrants” means that certain Common Stock Purchase Warrant dated as of the Closing Date made by the Parent in favor of Laurus and each other warrant made by the Parent in favor Laurus, as each of the same may be amended, restated, modified and/or supplemented from time to time.

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Exhibit A

Eligible Subsidiaries

Time America, Inc., an Arizona corporation

1

Exhibit B

Borrowing Base Certificate

[To be inserted]

2

Disclosure Schedules

Schedule 1(A)

None

Schedule 2

None

Schedule 7(c)

UCC-1 Blanket Financing Statement to be filed in Nevada and Arizona

Schedule 7(l)

None

Schedule 7(p)

Bank Accounts:

Borrower (Type of Account)	Name, Address, Phone and Fax No. of Bank and Bank Contract
Time America, Inc.	Sunrise Bank, 4350 E. Camelback Rd., Ste. 100A, Phoenix AZ 85018
(Checking and Money Market)	Tyrone Couch, Ph: 602-522-5733; Fax: 602-956-6258
Time America, Inc. (Inactive)	Morgan Stanley, 2375 E. Camelback Rd., Ste. 600, Phoenix AZ 85016

Schedule 12(b)

Subsidiaries:

Time America, Inc. an Arizona corporation; 100% owned.

Schedule 12(c)

Subsidiary Capitalization:

Time America, Inc. (AZ); 10,000,000 shares authorized; 9,314,445 shares issued and outstanding.

The Company has the following warrant agreements outstanding:

During the year ended June 30, 2001, the Company issued 12,000 warrants to an entity for consulting services.  The exercise price of the warrants ranges from $1.25 per share to $4.30 per share and are exercisable through March 2006.  None of the warrants have been exercised.

During the year ended June 30, 2002, the Company issued 62,958 warrants to a related party in consideration for entering into a promissory note agreement with the Company.  The exercise price of the warrant is $.25 per share and is exercisable through September 2006.  None of the warrants have been exercised.

During the year ended June 30, 2002, the Company issued 25,000 warrants to a related party in consideration for entering into a revolving line of credit agreement with the Company.  The exercise price of the warrant is $.15 per share and is exercisable through November 2006.  None of the warrants have been exercised.

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In December 2003, the Company issued 20,000 warrants to a related party in consideration for extending the term of revolving credit facility agreements with the Company.  The exercise price of the warrant is $1.20 per share and is exercisable through December 2008.  None of the warrants have been exercised.

In March 2004, the Company consummated a private placement pursuant to which the Company issued a $2,000,000 principal amount secured convertible term note (the “Laurus Note”), together with a common stock purchase warrant entitling the holder to purchase 280,000 shares of common stock (the “Laurus Warrant”).  The Laurus Warrant entitles the holder thereof to purchase, at any time through March 22, 2011:  200,000 shares of the Company’s common stock at a price of $1.29 per share; 40,000 shares of the Company’s common stock at a price of $1.35 per share; and 40,000 shares of the Company’s common stock at a price of $1.40 per share.  None of the warrants have been exercised.

The private placement of the Laurus Note and the Laurus Warrant was facilitated by The Oberon Group, LLC (Oberon) in consideration for which Oberon was issued a warrant to purchase, at any time through March 22, 2007, 136,364 shares of the Company’s common stock at a price of $1.10.  None of the warrants have been exercised.

Schedule 12(g)

Related Party Transactions

On March 31, 2001, the Company borrowed $400,000 from Joseph L. Simek, a significant stockholder of the Company.  The loan bears interest at an annual rate of prime plus one percent (1%) and is secured by all of the Company’s assets.  Principal and interest payments of approximately $8,500 are due monthly, with the outstanding principal balance due on October 1, 2004.  On November 2, 2001, Mr. Simek agreed to provide the Company with a $200,000 line of credit, which is also secured by all of the Company’s assets.  On September 24, 2002, Mr. Simek agreed to provide the Company with an additional $200,000 revolving line of credit, which is also secured by all of the Company’s assets.  Borrowings under the lines of credit bear interest at an annual rate of 10%.  In January 2004, Mr. Simek and the Company agreed to extend the maturity date of the line of credit facility to December 31, 2005.  At June 30, 2004, $190,345 was outstanding under the $400,000 loan and $150,000 was outstanding under the line of credit.  These loans are contractually subordinated to Laurus Master Fund, Ltd.

On September 4, 2001, the Company borrowed $500,000 from Francis Simek, the spouse of Mr. Simek.  On March 22, 2004, the Company and Mrs. Simek entered into a subordinated note agreement.  Under the terms of the agreement, the existing term note was refinanced as a five year term note with monthly principal and interest payments at 15%.  The Company issued 25,000 shares of restricted common stock to Mrs. Simek in consideration for her agreement to subordinate the obligations under the note to Laurus Master Fund, Ltd.  The loan is secured by a junior lien all of the Company’s assets.  Principal and interest payments of $9,831 are due and payable monthly over a 60-month period.  At June 30, 2004, $394,219 was outstanding under this loan.

In May 2003, Todd P. Belfer, director, purchased 450,000 shares of common stock of the Company in a private placement transaction.

In May 2003, Circle F. Ventures LLC, a 5% security holder, purchased 111,111 shares of common stock of the Company in private placement transaction.

In October 2003, the Company entered into a consulting services agreement with Mr. Belfer for a four year period.  In exchange for the consulting services, Mr. Belfer was granted a non-statutory option to purchase 200,000 shares of the Company’s common stock at $0.75 per share.  The options vest over four years and have a term of four years.

On April 16, 2004, the Company borrowed $500,000 from Mrs. Simek.  The note is a five year term note with monthly principal and interest payments at 15%.  In consideration for agreeing to subordinate the note, the Company issued 25,000 shares of restricted common stock to Mrs. Simek.  The loan is secured by all of the Company’s assets.  Principal and interest payments of $11,821 are due and payable monthly over a 60-month period.  At June 30, 2004, $479,831 was outstanding under this loan.  These loans are contractually subordinated to Laurus Master Fund, Ltd.

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In September 2004, the Company and Mr. Simek agreed to extend the balloon payment on a promissory note from October 1, 2004 to October 1, 2005.  All other terms of the agreement remained unchanged.

In November 2004, the Company paid $456,100 to retire the remaining balance on a term note with Mrs. Simek.  The Company and the shareholder then entered into a $456,100 revolving credit note agreement.  The revolving credit note agreement expires in November 2007.  Borrowings under the note bear interest at 10% per annum with interest payments due monthly.  Unused borrowings are subject to a 2% commitment fee paid quarterly.  These loans are contractually subordinated to Laurus Master Fund, Ltd.

Schedule 12(i)

None

Schedule 12(l)

None

Schedule 12(m)

None

Schedule 12(n)

The Company has granted registration rights to Laurus Master Fund, Ltd. in connection with the financing transactions with Laurus described elsewhere in these disclosure schedules and in connection with the financing transactions contemplated by the Security Agreement to which these schedules are a part.

Schedule 12(o)

None

Schedule 12(q)

None

Schedule 12(u)

None

Schedule 12(aa)

Current Location (Since Jan 15, 2005)

8840 East Chaparral Road, Suite 100

Scottsdale, AZ 85250

Previous Location (November 1999 to January 2005)

51 West 3^rd Street, Suite 310

Tempe, AZ 85280

Schedule 12(bb)

8840 East Chaparral Road, Suite 100

Scottsdale, AZ 85250

3

Schedule 13(l)(i)

In March 2005, the Company executed a $2,000,000 convertible note payable to Laurus Master Fund, Ltd.

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EX-10.2

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 MINIMUM BORROWING NOTE

FOR VALUE RECEIVED, each of TIME AMERICA, INC., a Nevada corporation (the “Parent”), and the other companies listed on Exhibit A attached hereto (such other companies together with the Parent, each a “Company” and collectively, the “Companies”), jointly and severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or its registered assigns or successors in interest, the sum of One Million Dollars ($1,000,000), or, if different, the aggregate principal amount of all Loans (as defined in the Security Agreement referred to below), together with any accrued and unpaid interest hereon, on June 23, 2008 (the “Maturity Date”), if not sooner paid.

Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Security Agreement among the Companies and the Holder dated as of the date hereof (as amended, modified and/or supplemented from time to time, the “Security Agreement”).

The following terms shall apply to this Minimum Borrowing Note (this “Note”):

ARTICLE I
CONTRACT RATE

1.1Contract Rate.  Subject to Sections 4.2 and 5.10, interest payable on the outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum (the “Contract Rate”) equal to the “prime rate” published in The Wall Street Journal from time to time (the “Prime Rate”).  The Contract 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 the Prime Rate.  Interest shall be (i) calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears, commencing on July 1, 2005 on the first business day of each consecutive calendar month thereafter through and including the Maturity Date and on the Maturity Date, whether by acceleration or otherwise.

1.2Contract Rate Adjustments and Payments.  The Contract Rate shall be calculated on the last business day of each calendar month hereafter (other than for increases or decreases in the Prime Rate which shall be calculated and become effective in accordance with the terms of Section 1.1) until the Maturity Date (each a “Determination Date”) and shall be subject to adjustment as set forth herein.  If (i) the Parent shall have registered the shares of the Common Stock underlying the conversion of each Minimum Borrowing Note and the exercise of each Warrant on a registration statement declared effective by the Securities and Exchange Commission (the “SEC”), and (ii) the market price (the “Market Price”) of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for the five (5) trading days immediately preceding a Determination Date exceeds the then applicable Fixed Conversion Price by at least twenty-five percent (25%), the Contract Rate for the succeeding calendar month shall automatically be reduced by 200 basis points (200 b.p.) (2%) for each incremental twenty-five percent (25%) increase in the Market Price of the Common Stock above the then applicable Fixed Conversion Price.  If (i) the Parent shall not have registered the shares of the Common Stock underlying the conversion of each Minimum Borrowing Note and each Warrant on a registration statement declared effective by the SEC and which remains effective, and (ii) the Market Price of the Common Stock as reported by Bloomberg, L.P. on the principal

market for the five (5) trading days immediately preceding a Determination Date exceeds the then applicable Fixed Conversion Price by at least twenty-five percent (25%), the Contract Rate for the succeeding calendar month shall automatically be decreased by 100 basis points (100 b.p.) (1%) for each incremental twenty-five percent (25%) increase in the Market Price of the Common Stock above the then applicable Fixed Conversion Price.  Notwithstanding the foregoing (and anything to the contrary contained herein), in no event shall the Contract Rate at any time be less than zero percent (0%).

ARTICLE II
LOANS; PAYMENTS UNDER THIS NOTE

2.1Loans.  All Loans evidenced by this Note shall be made in accordance with the terms and provisions of the Security Agreement.

2.2No Effective Registration.  Notwithstanding anything to the contrary herein, the Holder shall not be required to accept shares of Common Stock as payment following a conversion by the Holder if there fails to exist an effective current Registration Statement (as defined in the Registration Rights Agreement) covering the shares of Common Stock to be issued, or if an Event of Default hereunder exists and is continuing, unless such requirement is otherwise waived in writing by the Holder in whole or in part at the Holder’s option.

2.3Optional Redemption in Cash.  The Companies 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 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 other Ancillary Agreement (the “Redemption Amount”) outstanding on the Redemption Payment Date (as defined below).  The Company shall deliver to the Holder a written notice of redemption (the “Notice of Redemption”) specifying the date for such Optional Redemption (the “Redemption Payment Date”), which date shall be seven (7) 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 previously delivered a Notice of Conversion (defined below) 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 (plus any additional interest and fees accruing on the Notes during the Redemption Period) must be irrevocably paid in full in immediately available funds to the Holder.  In the event the Companies fail to pay the Redemption Amount on the Redemption Payment Date, then such Redemption Notice shall be null and void.

ARTICLE III
CONVERSION RIGHTS AND FIXED CONVERSION PRICE

3.1Optional Conversion. Subject to the terms of this Article III, the Holder shall have the right, but not the obligation, at any time until the Maturity Date, or during an Event of Default (as defined in Article IV), and, subject to the limitations set forth in Section 3.2 hereof, to convert all or any portion of the outstanding Principal Amount and/or accrued interest and fees due and payable into fully paid and nonassessable shares of the Common Stock at the Fixed Conversion Price.  For purposes hereof, subject to Section 3.6 hereof, the initial “Fixed Conversion Price” means $.65.  The shares of Common Stock to be issued upon such conversion are herein referred to as the “Conversion Shares.”

3.2Conversion 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 (i) 4.99% of the outstanding shares of Common Stock and (ii) the number of shares of Common Stock beneficially owned by the Holder.  For 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 Conversion Shares limitation described in this Section 3.2 shall automatically become null and void following notice to any Company upon the occurrence and during the continuance of an Event of Default, or upon 75 days prior notice to the Parent.  Notwithstanding anything contained

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herein to the contrary, the provisions of this Section 3.2 are irrevocable and may not be waived by the Holder or any Company.

3.3Mechanics of Holder’s Conversion.  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 in substantially the form of Exhibit A hereto (appropriately completed) (“Notice of Conversion”) to the Parent and such Notice of Conversion shall provide a breakdown in reasonable detail of the Principal Amount, accrued interest and fees that are 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 provide written notice thereof to the Parent within two (2) Business Days after the Conversion Date.  Each date on which a Notice of Conversion is delivered or telecopied to the Parent in accordance with the provisions hereof shall be deemed a Conversion Date (the “Conversion Date”).  Pursuant to the terms of the Notice of Conversion, the Parent will issue instructions to the transfer agent accompanied by an opinion of counsel within three (3) Business Day of the date of the delivery to the Parent 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 Parent 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 Parent of the Notice of Conversion.  The Holder shall be treated for all purposes as the record holder of the Conversion Shares, unless the Holder provides the Parent written instructions to the contrary.

3.4Late Payments.  Each Company understands that a delay in the delivery of the Conversion Shares in the form required pursuant to this Article beyond the Delivery Date could result in economic loss to the Holder.  As compensation to the Holder for such loss, in addition to all other rights and remedies which the Holder may have under this Note, applicable law or otherwise, the Companies shall, jointly and severally, pay late payments to the Holder for any late issuance of Conversion Shares in the form required pursuant to this Article III upon conversion of this Note, in the amount equal to $500 per Business Day after the Delivery Date.  The Companies shall, jointly and severally, make any payments incurred under this Section in immediately available funds upon demand.

3.5Conversion Mechanics.  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.

3.6Adjustment Provisions. The Fixed Conversion Price and number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 3.1 shall be subject to adjustment from time to time upon the occurrence of certain events during the period that this conversion right remains outstanding, as follows:

(a)Reclassification.  If the Parent 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 (i) immediately prior to or (ii) immediately after such reclassification or other change at the sole election of the Holder.

(b)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 or any preferred stock issued by the Parent in shares of Common Stock, the Fixed Conversion Price 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.

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(c)Share Issuances.  Subject to the provisions of this Section 3.6, if the Parent shall on any date on or after June 23, 2006 and prior to the conversion or repayment in full of the Principal Amount issue any shares of Common Stock or securities convertible into Common Stock to a person other than the Holder (except (i) pursuant to Sections 3.6(a) or (b) above; (ii) pursuant to options, warrants, or other obligations to issue shares outstanding on the date hereof as disclosed to the 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 Parent) 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 Parent convertible into or exercisable or exchangeable for Common Stock shall result in an adjustment to the Fixed Conversion Price upon the issuance of such securities.

(d)Computation of Consideration.  For purposes of any computation respecting consideration received pursuant to Section 3.6(c) above, the following shall apply:

(i)in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Parent for any underwriting of the issue or otherwise in connection therewith;

(ii)in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Parent (irrespective of the accounting treatment thereof); and

(iii)upon any such exercise, the aggregate consideration received for such securities shall be deemed to be the consideration received by the Parent for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Parent upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in subsections (i) and (ii) of this Section 2.5).

3.7Reservation of Shares.  During the period the conversion right exists, the Parent will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Conversion Shares upon the full conversion of this Note and the warrant.  The Parent represents that upon issuance, the Conversion Shares will be duly and validly issued, fully paid and non-assessable.  The Parent 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 the Conversion Shares upon the conversion of this Note.

3.8Registration Rights.  The Holder has been granted registration rights with respect to the Conversion Shares as set forth in a Registration Rights Agreement.

3.9Issuance 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 Parent to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.  Subject to the provisions of Article IV of this Note, the Parent shall not pay any costs, fees or any other consideration to the Holder for the production and issuance of a new Note.

ARTICLE IV
EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS

4.1Events of Default.  The occurrence of an Event of Default under the Security Agreement shall constitute an event of default (“Event of Default”) hereunder.

4.2Default Interest.  Following the occurrence and during the continuance of an Event of Default, the Companies shall, jointly and severally, pay additional interest on the outstanding principal balance of

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this Note in an amount equal to four percent (4.0%) per annum, and all outstanding Obligations, excluding unpaid interest, shall continue to accrue interest at such additional interest rate from the date of such Event of Default until the date such Event of Default is cured or waived.

4.3Default Payment.  Following the occurrence and during the continuance of an Event of Default, the Holder, at its option, may elect, in addition to all rights and remedies of the Holder under the Security Agreement and the Ancillary Agreements and all obligations of each Company under the Security Agreement and the Ancillary Agreements, to require the Companies, jointly and severally, to make a Default Payment (“Default Payment”).  The Default Payment shall be 125% of the outstanding principal amount of the Note, plus accrued but unpaid interest, all other fees then remaining unpaid, and all other amounts payable hereunder.  The Default Payment shall be applied first to any fees due and payable to the Holder pursuant to the Notes and/or the Ancillary Agreements, then to accrued and unpaid interest due on the Notes, the Security Agreement and then to the outstanding principal balance of the Notes.  The Default Payment shall be due and payable immediately on the date that the Holder has exercised its rights pursuant to this Section 4.3.

ARTICLE V
MISCELLANEOUS

5.1Conversion Privileges.  The conversion privileges set forth in Article III shall remain in full force and effect immediately from the date hereof until the date this Note is indefeasibly paid in full and irrevocably terminated.

5.2Cumulative Remedies.  The remedies under this Note shall be cumulative.

5.3Failure 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.

5.4Notices.  Any notice herein required or permitted to be given shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days 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 respective Company at the addresses provided for such Company in the Security Agreement executed in connection herewith, and to the Holder at the address provided in the Security Agreement for such Holder, with a copy to John E. Tucker, Esq., 825 Third Avenue, 14^th Floor, New York, New York 10022, facsimile number (212) 541-4434, or at such other address as the respective Company or the Holder may designate by ten days advance written notice to the other parties hereto.

5.5Amendment Provision.  The term “Note” and all references 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 as such successor instrument may be amended or supplemented.

5.6Assignability.  This Note shall be binding upon each Company 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 Security Agreement.  No Company may assign any of its obligations under this Note without the prior written consent of the Holder, any such purported assignment without such consent being null and void.

5.7Cost of Collection.  In case of any Event of Default under this Note, the Companies shall, jointly and severally, pay the Holder’s reasonable costs of collection, including reasonable attorneys’ fees.

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5.8Governing Law, Jurisdiction and Waiver of Jury Trial.

(a)THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

(b)EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS; PROVIDED, THAT EACH COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER.  EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.  EACH COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

(c)EACH COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY AGREEMENT, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

5.9Severability.  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 enforceability of any other provision of this Note.

5.10Maximum 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 rate permitted by such law, any payments in excess of such maximum rate shall be credited against amounts owed by the Companies to the Holder and thus refunded to the Companies.

5.11Security Interest.  The Holder has been granted a security interest (i) in certain assets of the Companies as more fully described in the Security Agreement, as amended, restated, modified or supplemented from time to time and (ii) pursuant to that certain Amended and Restated Stock Pledge Agreement dated as of March

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22, 2004 and amended and restated as of the date hereof, among the Holder and the Companies, as amended, restated, modified or supplemented from time to time.

5.12Construction.  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.

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

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IN WITNESS WHEREOF, each Company has caused this Secured Convertible Minimum Borrowing Note to be signed in its name effective as of this 23rd day of June 2005.

	TIME AMERICA, INC., a Nevada corporation
	By:
		Name:
		Title:
WITNESS:
	TIME AMERICA, INC., an Arizona corporation
	By:
		Name:
		Title:
WITNESS:

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EXHIBIT A

OTHER COMPANIES

Time America, Inc., an Arizona corporation

EXHIBIT B

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert the
Secured Convertible Minimum Borrowing Note)

The undersigned hereby elects to convert $          of the principal and $          of the interest due on the Secured Convertible Minimum Borrowing Note dated as of June    , 2005 (the “Note”) issued by Time America, Inc., a Nevada corporation (the “Parent”) and the other Companies named and as defined therein into shares of Common Stock of the Parent in accordance with the terms and conditions set forth in the Note, as of the date written below.

Date of Conversion:

Conversion Price:

Shares To Be Delivered:

Signature:

Print Name:

Address:

Holder DWAC instructions:

EX-10.3

Exhibit 10.3

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 REVOLVING NOTE

FOR VALUE RECEIVED, each of TIME AMERICA, INC., a Nevada corporation (the “Parent”), and the other companies listed on Exhibit A attached hereto (such other companies together with the Parent, each a “Company” and collectively, the “Companies”), jointly and severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or its registered assigns or successors in interest, the sum of One Million Five Hundred Thousand Dollars ($1,500,000), without duplication of any amounts owing by the Companies to the Holder under the Minimum Borrowing Notes (as defined in the Security Agreement referred to below), or, if different, the aggregate principal amount of all Loans (as defined in the Security Agreement referred to below), together with any accrued and unpaid interest hereon, on June 23, 2008 (the “Maturity Date”) if not sooner indefeasibly paid in full.

Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Security Agreement among the Companies and the Holder dated as of the date hereof (as amended, modified and/or supplemented from time to time, the “Security Agreement”).

The following terms shall apply to this Secured Revolving Note (this “Note”):

ARTICLE I
CONTRACT RATE AND MINIMUM BORROWING NOTE

1.1Contract Rate.  Subject to Sections 3.2 and 4.10, interest payable on the outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum (the “Contract Rate”) equal to the “prime rate” published in The Wall Street Journal from time to time (the “Prime Rate”).  The Contract 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 the Prime Rate.  Interest shall be (i) calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears, commencing on July 1, 2005 on the first business day of each consecutive calendar month thereafter through and including the Maturity Date, and on the Maturity Date, whether by acceleration or otherwise.

1.2Contract Rate Adjustments and Payments.  The Contract Rate shall be calculated on the last business day of each calendar month hereafter (other than for increases or decreases in the Prime Rate which shall be calculated and become effective in accordance with the terms of Section 1.1) until the Maturity Date (each a “Determination Date”) and shall be subject to adjustment as set forth herein.  If (i) the Parent shall have registered the shares of the Common Stock underlying the conversion of each Minimum Borrowing Note and the exercise of each Warrant on a registration statement declared effective by the Securities and Exchange Commission (the “SEC”), and (ii) the market price (the “Market Price”) of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for the five (5) trading days immediately preceding a Determination Date exceeds the then applicable Fixed Conversion Price by at least twenty-five percent (25%), the Contract Rate for the succeeding calendar month shall automatically be reduced by 200 basis points (200 b.p.) (2%) for each incremental twenty-five percent (25%) increase in the Market Price of the Common Stock above the then applicable Fixed Conversion Price. If (i) the Parent shall not have registered the shares of the Common Stock underlying the conversion of each Minimum Borrowing Note and each Warrant on a registration statement declared effective by the SEC and which

remains effective, and (ii) the Market Price of the Common Stock as reported by Bloomberg, L.P. on the principal market for the five (5) trading days immediately preceding a Determination Date exceeds the then applicable Fixed Conversion Price by at least twenty-five percent (25%), the Contract Rate for the succeeding calendar month shall automatically be decreased by 100 basis points (100 b.p.) (1%) for each incremental twenty-five percent (25%) increase in the Market Price of the Common Stock above the then applicable Fixed Conversion Price.  Notwithstanding the foregoing (and anything to the contrary contained herein), in no event shall the Contract Rate at any time be less than zero percent (0%).

1.3Allocation of Principal to Minimum Borrowing Note.  Notwithstanding anything herein to the contrary, whenever during the Term the outstanding balance on the Minimum Borrowing Note shall be less than the Minimum Borrowing Amount (such amount being referred to herein as the “Transferable Amount”) to the extent that the outstanding balance on the Revolving Note should equal or exceed $500,000, that portion of the balance of the Revolving Note that exceeds $500,000, but does not exceed the Transferable Amount, shall be segregated from the outstanding balance under the Revolving Note and allocated to and aggregated with the then existing balance of the next unissued serialized Minimum Borrowing Note (the “Next Unissued Serialized Note”); provided that such segregated balance shall remain subject to the terms and conditions of such Revolving Note until a new serialized Minimum Borrowing Note is issued as set forth below.  The Next Unissued Serialized Note shall remain in book entry form until the balance thereunder shall equal the Minimum Borrowing Amount, at which time a new serialized Minimum Borrowing Note in the face amount equal to the Minimum Borrowing Amount will be issued and registered as set forth in the Registration Rights Agreement (and the outstanding balance under the Revolving Note shall at such time be correspondingly reduced in the amount equal to the Minimum Borrowing Amount as a result of the issuance of such new serialized Minimum Borrowing Note).

ARTICLE II
CONVERSION RIGHTS AND FIXED CONVERSION PRICE

2.1Optional Conversion.  Subject to the terms of this Article II, the Holder shall have the right, but not the obligation, at any time until the Maturity Date, or during an Event of Default (as defined in Article III), and, subject to the limitations set forth in Section 2.2 hereof, to convert all or any portion of the outstanding Principal Amount and/or accrued interest and fees due and payable into fully paid and nonassessable restricted shares of the Common Stock at the Fixed Conversion Price (defined below).  For purposes hereof, subject to Section 2.6 hereof, the initial “Fixed Conversion Price” means $.65.  The shares of Common Stock to be issued upon such conversion are herein referred to as the “Conversion Shares.”

2.2Conversion 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 (i) 4.99% of the issued and outstanding shares of Common Stock and (ii) the number of shares of Common Stock beneficially owned by the Holder.  For 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 Conversion Shares limitation described in this Section 2.2 shall automatically become null and void following notice to any Company upon the occurrence and during the continuance of an Event of Default, or upon 75 days prior notice to the Parent.  Notwithstanding anything contained herein to the contrary, the provisions of this Section 2.2 are irrevocable and may not be waived by the Holder or any Company.

2.3Mechanics of Holder’s Conversion.  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 in substantially the form of Exhibit B hereto (appropriately completed) (“Notice of Conversion”) to the Parent and such Notice of Conversion shall provide a breakdown in reasonable detail of the Principal Amount, accrued interest and fees that are 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 provide written notice thereof to the Parent within two (2) Business Days after the Conversion Date.  Each date on which a Notice of Conversion is delivered or telecopied to the Parent in accordance with the provisions hereof shall be deemed a Conversion Date (the “Conversion Date”).  Pursuant to the terms of the Notice of Conversion, the Parent will issue instructions to the

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transfer agent accompanied by an opinion of counsel within three (3) Business Days of the date of the delivery to the Parent 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 Parent 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 Parent of the Notice of Conversion.  The Holder shall be treated for all purposes as the record holder of the Conversion Shares, unless the Holder provides the Parent written instructions to the contrary.

2.4Late Payments.  Each Company understands that a delay in the delivery of the Conversion Shares in the form required pursuant to this Article beyond the Delivery Date could result in economic loss to the Holder.  As compensation to the Holder for such loss, in addition to all other rights and remedies which the Holder may have under this Note, applicable law or otherwise, the Companies shall, jointly and severally, pay late payments to the Holder for any late issuance of Conversion Shares in the form required pursuant to this Article II upon conversion of this Note, in the amount equal to $500 per Business Day after the Delivery Date.  The Companies shall, jointly and severally, make any payments incurred under this Section in immediately available funds upon demand.

2.5Conversion Mechanics.  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.

2.6Adjustment Provisions.  The Fixed Conversion Price and number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1 shall be subject to adjustment from time to time upon the occurrence of certain events during the period that this conversion right remains outstanding, as follows:

(a)Reclassification.  If the Parent 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 (i) immediately prior to or (ii) immediately after, such reclassification or other change at the sole election of the Holder.

(b)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 or any preferred stock issued by the Parent in shares of Common Stock, the Fixed Conversion Price 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.

(c)Share Issuances.  Subject to the provisions of this Section 2.6, if the Parent shall on any date on or after June 23, 2006 and prior to the conversion or repayment in full of the Principal Amount issue any shares of Common Stock or securities convertible into Common Stock to a Person other than the Holder (except (i) pursuant to Sections 2.6(a) or (b) above; (ii) pursuant to options, warrants, or other obligations to issue shares outstanding on the date hereof as disclosed to the 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 Parent) 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 Parent convertible into or exercisable or exchangeable for Common Stock shall result in an adjustment to the Fixed Conversion Price upon the issuance of such securities.

(d)Computation of Consideration.  For purposes of any computation respecting consideration received pursuant to Section 2.6(c) above, the following shall apply:

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(i)in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Parent for any underwriting of the issue or otherwise in connection therewith;

(ii)in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Parent (irrespective of the accounting treatment thereof); and

(iii)upon any such exercise, the aggregate consideration received for such securities shall be deemed to be the consideration received by the Parent for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Parent upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in subsections (i) and (ii) of this Section 2.6(d)).

2.7Reservation of Shares.  During the period the conversion right exists, the Parent will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Conversion Shares upon the full conversion of this Note and the Warrant.  The Parent represents that upon issuance, the Conversion Shares will be duly and validly issued, fully paid and non-assessable.  The Parent 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 the Conversion Shares upon the conversion of this Note.

ARTICLE III
EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS

3.1Events of Default.  The occurrence of an Event of Default under the Security Agreement shall constitute an event of default (“Event of Default”) hereunder.

3.2Default Interest.  Following the occurrence and during the continuance of an Event of Default, the Companies shall, jointly and severally, pay additional interest on the outstanding principal balance of this Note in an amount equal to four percent (4.0%) per annum, and all outstanding Obligations, excluding unpaid interest, shall continue to accrue interest at such additional interest rate from the date of such Event of Default until the date such Event of Default is cured or waived.

3.3Default Payment.  Following the occurrence and during the continuance of an Event of Default, the Holder, at its option, may elect, in addition to all rights and remedies of the Holder under the Security Agreement and the other Ancillary Agreements and all obligations and liabilities of each Company under the Security Agreement and the other Ancillary Agreements, to require the Companies, jointly and severally, to make a Default Payment (“Default Payment”).  The Default Payment shall be 125% of the outstanding principal amount of the Note, plus accrued but unpaid interest, all other fees then remaining unpaid, and all other amounts payable hereunder.  The Default Payment shall be applied first to any fees due and payable to the Holder pursuant to the Notes, the Security Agreement and/or the Ancillary Agreements, then to accrued and unpaid interest due on the Notes and then to the outstanding principal balance of the Notes.  The Default Payment shall be due and payable immediately on the date that the Holder has exercised its rights pursuant to this Section 3.3.

ARTICLE IV
MISCELLANEOUS

4.1Conversion Privileges.  The conversion privileges set forth in Article II shall remain in full force and effect immediately from the date hereof until the date this Note is indefeasibly paid in full and irrevocably terminated.

4.2Cumulative Remedies.  The remedies under this Note shall be cumulative.

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4.3Failure 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.

4.4Notices.  Any notice herein required or permitted to be given shall be in writing and shall be deemed effective given (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days 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 respective Company at the address provided for such Company in the Security Agreement executed in connection herewith, and to the Holder at the address provided in the Security Agreement for the Holder, with a copy to John E. Tucker, Esq., 825 Third Avenue, 14^th Floor, New York, New York 10022, facsimile number (212) 541-4434, or at such other address as the respective Company 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 Parent pursuant to the Purchase Agreement.

4.5Amendment Provision.  The term “Note” and all references 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 as such successor instrument may be amended or supplemented.

4.6Assignability.  This Note shall be binding upon each Company 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 Security Agreement.  No Company may not assign any of its obligations under this Note without the prior written consent of the Holder, any such purported assignment without such consent being null and void.

4.7Cost of Collection.  In case of any Event of Default under this Note, the Companies shall, jointly and severally, pay the Holder the Holder’s reasonable costs of collection, including reasonable attorneys’ fees.

4.8Governing Law, Jurisdiction and Waiver of Jury Trial.

(a)THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

(b)EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTSPROVIDED, THAT EACH COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER.  EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.  EACH

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COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID

(c)EACH COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY AGREEMENT, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

4.9Severability.  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 enforceability of any other provision of this Note.

4.10Maximum 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 rate permitted by such law, any payments in excess of such maximum rate shall be credited against amounts owed by the Companies to the Holder and thus refunded to the Companies.

4.11Security Interest.  The Holder has been granted a security interest (i) in certain assets of the Companies as more fully described in the Security Agreement, as amended, restated, modified or supplemented from time to time and (ii) pursuant to that certain Amended and Restated Stock Pledge Agreement dated as of March 22, 2004 and amended and restated as of the date hereof, among the Holder and the Companies, as amended, restated, modified or supplemented from time to time.

4.12Construction.  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.

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

6

IN WITNESS WHEREOF, each Company has caused this Secured Revolving Note to be signed in its name effective as of this 23th day of June 2005.

	TIME AMERICA, INC. a Nevada corporation
	By:
		Name:
		Title:
WITNESS:
	TIME AMERICA, INC., an Arizona corporation
	By:
		Name:
		Title:
WITNESS:

7

EXHIBIT A

OTHER COMPANIES

Time America, Inc., an Arizona corporation

EXHIBIT B

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert the Secured Revolving Note)

The undersigned hereby elects to convert $                   of the principal and $                   of the interest due on the Secured Revolving Note dated as of June 23, 2005 (the “Note”) issued by Time America, Inc., a Nevada corporation (the “Parent”) and the other Companies named and as defined therein into shares of Common Stock of the Parent (“Shares) in accordance with the terms and conditions set forth in the Note, as of the date written below.

Date of Conversion:

Conversion Price:

Shares To Be Delivered:

Signature:

Print Name:

Address:

Holder DWAC instructions:

EX-10.4

Exhibit 10.4

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 210,000 Shares of Common Stock of
TIME AMERICA, INC.
(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

No. Issue Date: June 23, 2005

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 June 23, 2012   (the “Expiration Date”), up to Two Hundred Ten Thousand (210,000) 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., a Nevada corporation and any corporation which shall succeed, or assume the obligations of, Time America, Inc., a Nevada corporation,  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 $.72 for the first 150,000 shares acquired hereunder;

(ii)a price of $.75 for the next 30,000 shares acquired hereunder; and

(iii)a price of $.78 for any additional shares acquired hereunder.

1.Exercise of Warrant.

1.1Number 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.

1.2Fair 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 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.

1.3Company 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.

1.4Trustee 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.

2.1Delivery 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

2

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.

2.2Exercise.  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.

(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.[Intentionally Deleted]

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

4.1Reorganization, 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 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.

4.2Dissolution.  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

3

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”).

4.3Continuation 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 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

4

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 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.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

5

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 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.

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

	TIME AMERICA, INC., A NEVADA CORPORATION
WITNESS:
	By:
	Name:
	Title:

6

EXHIBIT A

FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)

To:	Time America, Inc.
	8840 East Chaparral Road, Suite 100
	Scottsdale, Arizona 85250
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 and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

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

EX-10.5

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

7

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

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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.

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(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:

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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 Offered

EX-10.6

Exhibit 10.6

AMENDED AND RESTATED
SUBORDINATION AGREEMENT

This AMENDED AND RESTATED SUBORDINATION AGREEMENT (this “Amended and Restated Agreement”) is made as of the 23^rd 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.

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“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.

2.1Payments 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.

2.2Subordinated 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.

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(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.

2.3Payments 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.

3.1Other 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.

3.2Senior 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.

3.3Subordinated 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:

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4.1Senior 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;

4.2The 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;

4.3The 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;

4.4The 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

4.5Any 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.

6.1If 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.

6.2If 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.

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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.

8.1Subject 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.

8.2This 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.

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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, 14^th 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, 14^th 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

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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.

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

18.2In 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.

18.3This 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.

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18.4The 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.

18.5Neither 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.

18.6Time 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.

18.7Each 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.

18.8The 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]

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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:

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EX-10.7

Exhibit 10.7

AMENDED AND RESTATED STOCK PLEDGE AGREEMENT

STOCK PLEDGE AGREEMENT (the “Agreement”) dated this 22nd day of March, 2004, and amended and restated this 23rd day of June, 2005, made by and among Time America, Inc., a Nevada corporation (the “Company”), and each of the other undersigned parties (other than the Noteholder (as defined below)) (the Company and each such other undersigned party, a “Pledgor” and collectively, the “Pledgors”), and Laurus Master Fund, Ltd., a Cayman Islands company (the “Noteholder”).

PRELIMINARY STATEMENTS:

(1)The Company and the Noteholder have entered into (x) a Securities Purchase Agreement, dated as of March 22, 2004 (as amended, modified, restated or supplemented from time to time, the “2004 Securities Purchase Agreement”), and (y) a Security Agreement, dated as of June 23, 2005 (as amended, modified, restated or supplemented from time to time, the “2005 Security Agreement”), pursuant to which the Pledgee has provided or will provide certain financial accommodations to the Company and/or certain subsidiaries of the Company.

(2)The securities held by each Pledgor in their respective wholly-owned subsidiaries as listed in Schedule A hereof are collectively referred to herein as the “Pledged Securities”.

NOW, THEREFORE, in consideration of the premises and in further consideration of the covenants contained herein, the parties hereto agree as follows:

SECTION 1.Pledge.  For the benefit of the Noteholder, each Pledgor hereby pledges and grants a security interest in, the following (the “Pledged Collateral”):

(a)the Pledged Securities and the certificates representing the Pledged Securities, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Securities; and

(b)all proceeds of any and all of the foregoing (including, without limitation, proceeds that constitute property of the types described above).

SECTION 2.Security for Obligations.  This Agreement and the Pledged Collateral pledged hereunder secures the full and punctual payment and performance of (the following clauses (a), (b) and (c), collectively, the “Obligations”) (a) the obligations under the 2004 Securities Purchase Agreement and the Related Agreements referred to in the 2004 Securities Purchase Agreement, (b) the 2005 Security Agreement and the Ancillary Agreements referred to in the 2005 Security Agreement (the 2004 Securities Purchase Agreement, the Related Agreements referred to in the 2004 Securities Purchase Agreement, the 2005 Security Agreement and the Ancillary Agreements referred to in the 2005 Security Agreement, as each may be amended, restated, modified and/or supplemented from time to time, collectively, the “Documents”) and (c) all other obligations and liabilities of each Pledgor to the Pledgee whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due and whether under, pursuant to or evidenced by a note, agreement, guaranty, instrument or otherwise (in each case, irrespective of the genuineness, validity, regularity or enforceability of such Obligations, or of any instrument evidencing any of the Obligations or of any collateral therefor or of the existence or extent of such collateral, and irrespective of the allowability, allowance or disallowance of any or all of such in any case commenced by or against any Pledgor under Title 11, United States Code, including, without limitation, obligations of each Pledgor for post-petition interest, fees, costs and charges that would have accrued or been added to the Obligations but for the commencement of such case).

SECTION 3.Delivery of Pledged Collateral.  All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by the Noteholder pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or

assignment in blank, all in form and substance satisfactory to the Noteholder.  Upon the occurrence and during the continuation of an Event of Default (as defined below), the Noteholder shall have the duty, at any time on five business days’ notice to the appropriate Pledgor or Pledgors, to transfer to or to register in the name of the Noteholder or any of its nominees, any or all of the Pledged Collateral.  In addition, the Noteholder shall have the right at any such time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations. The Noteholder shall file appropriate financing statements.

SECTION 4.Representations and Warranties.  The Pledgor represents and warrants as follows:

(a)Each Pledgor is and will be the sole legal, record and beneficial owner of the Pledged Collateral free and clear of any lien, security interest, option or other charge or encumbrance, except for the security interest created by this Agreement.

(b)The pledge of the Pledged Collateral pursuant to this Agreement creates and will create a valid and perfected first priority security interest in the Pledged Collateral, securing the payment of the Obligations.

SECTION 5.Further Assurances.  At any time and from time to time, at the joint and several expense of the Pledgors, each Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Noteholder may reasonably request, in order to perfect and protect the security interest granted or purported to be granted hereby or to enable the Noteholder to exercise and enforce the rights and remedies hereunder with respect to any Pledged Collateral.

SECTION 6.Voting Rights; Dividends; Etc.

(a)So long as no Event of Default or event which, with the giving of notice or the lapse of time, or both, would become an Event of Default shall have occurred and be continuing:

(i)Each Pledgor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement.

(ii)Each Pledgor shall be entitled to receive and retain any and all dividends and distributions paid in respect of the Pledged Collateral, provided, however, that any and all (A) dividends paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, Pledged Collateral, and (B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution, shall be, and shall be forthwith delivered to the Noteholder to hold as, Pledged Collateral and shall, if received by any Pledgor, be received in trust for the benefit of the Noteholder, be segregated from the other property or funds of the Pledgor, and be forthwith delivered to the Noteholder as Pledged Collateral in the same form as so received (with any necessary endorsement or assignment).

(iii)The Noteholder, shall execute and deliver (or cause to be executed and delivered) to the appropriate Pledgor all such proxies and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and other consensual rights that it is entitled to exercise pursuant to subsection (i) above and to receive the dividends that it is authorized to receive and retain pursuant to subsection (ii) above.

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(b)Upon the occurrence and during the continuance of an Event of Default or an event which, with the giving of notice or the lapse of time, or both, would become an Event of Default:

(i)All rights of the Pledgor to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 6(a)(i) and to receive the dividends payments that it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) shall cease, and all such rights shall thereupon become vested in the Noteholder who shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights at the direction of the Noteholder and to receive and hold as Pledged Collateral such dividends.

(ii)All dividends that are received by any Pledgor contrary to the provisions of subsection (i) of this Section 6(b) shall be received in trust for the benefit of the Noteholder, shall be segregated from other funds of such Pledgor and shall be forthwith paid over to the Noteholder as Pledged Collateral in the same form as so received (with any necessary endorsement).

(c)As used herein, “Event of Default” (i) shall mean an “Event of Default” under and as defined in any Document, and (ii) shall mean the failure of any Pledgor to pay or perform any of its obligations under this Agreement and the continuation of such failure for a period of 5 (five) days.

SECTION 7.Transfers and Other Liens.  No Pledgor will (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral, or (ii) create or permit to exist any lien, security interest, option or other charge or encumbrance upon or with respect to any of the Pledged Collateral, except for the security interest under this Agreement.

SECTION 8.Noteholder Appointed Attorney-in-Fact.  Each Pledgor hereby appoints the Noteholder such Pledgor’s attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor or otherwise, from time to time in the Noteholder’s discretion to take any action and to execute any instrument that the Noteholder may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of such Pledgor under Section 6), including, without limitation, to receive, endorse and collect all instruments made payable to such Pledgor representing any dividend or any part thereof and to give full discharge for the same.

SECTION 9.Noteholder May Perform.  If any Pledgor fails to perform any agreement contained herein, the Noteholder, may itself perform, or cause performance of, such agreement, and the expenses of the Noteholder incurred in connection therewith shall be payable by such Pledgor under Section 11.

SECTION 10.Remedies upon Event of Default.  Subject to the provisions of Section 6, if any Event of Default shall have occurred and be continuing:

(a)The Noteholder may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of New York at the time (the “Code”) (whether or not the Code applies to the Pledged Collateral), and may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker’s board or at any office of the Noteholder or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Noteholder may deem commercially reasonable.  Each Pledgor agrees that, to the extent notice of sale shall be required by law, at least 5 (five) days’ notice to such Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification.  The Noteholder shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given.  The Noteholder may adjourn

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any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b)Any cash held by the Noteholder as Pledged Collateral and all cash proceeds received by the Noteholder in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of the Noteholder, be held by the Noteholder as collateral for, and/or then or at any time thereafter be applied (after payment of any amounts payable to the Noteholder pursuant to Section 11) in whole or in part by the Noteholder against, all or any part of the Obligations in such order as the Noteholder shall be directed by the Noteholder.  Any surplus of such cash or cash proceeds held by the Noteholder and remaining after payment in full of each Pledgor’s obligations in respect of the Obligations shall be paid over to the appropriate Pledgor or to whomsoever may be lawfully entitled to receive such surplus.

SECTION 11.Expenses.  Each Pledgor will upon demand pay to the Noteholder the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that the Noteholder may incur in connection with (i) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (ii) the exercise or enforcement of any of the rights of the Noteholder hereunder or (iii) the failure by any Pledgor to perform or observe any of the provisions hereof.

SECTION 12.Amendments, Etc.  No amendment or waiver of any provision of this Agreement, and no consent to any departure by any Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by each Pledgor and the Pledgee, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 13.Notices.  All notices, request, demands and other communications required or permitted hereunder shall be sent in accordance with the notice provisions set forth in each of the 2004 Securities Purchase Agreement and the 2005 Security Agreement.

SECTION 14.Continuing Security Interest.

(a)This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until the payment in full of all Obligations and each Pledgor’s satisfaction in full of all obligations under each Document (including, without limitation, this Agreement), (ii) be binding upon each Pledgor, its successors and assigns, and (iii) inure to the benefit of, and be enforceable by, the Noteholder and its successors, transferees and assigns.

(b)Upon the payment in full of all Obligations, the security interest granted hereby shall terminate and all rights to the Pledged Collateral shall revert to the respective Pledgor.  Upon any such termination, the Noteholder will, at the Pledgors’ joint and several expense, return to each Pledgor such of such Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof and execute and deliver to each Pledgor such documents as such Pledgor shall reasonably request to evidence such termination.

SECTION 15.Governing Law; Terms.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. ANY ACTION, SUIT OR PROCEEDING INITIATED BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO UNDER OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT IN NEW YORK COUNTY, STATE OF NEW YORK.  TO THE EXTENT IT MAY LEGALLY DO SO, EACH PARTY HERETO SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION OF ANY SUCH COURT, WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY

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CLAIMS OF FORUM NON CONVENIENS OR THAT THE VENUE OF ANY SUCH ACTION, SUIT OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT OR ANY DOCUMENT OR INSTRUMENT REFERRED TO HEREIN MAY NOT BE LITIGATED IN SUCH COURT.

SECTION 16.JOINDER; ETC

(a)It is understood and agreed that any person or entity that desires to become a Pledgor hereunder, or is required to execute a counterpart of this Agreement after the date hereof pursuant to the requirements of any Document, shall become a Pledgor hereunder by (x) executing a Joinder Agreement in form and substance satisfactory to the Pledgee, (y) delivering supplements to such exhibits and annexes to such Documents as the Pledgee shall reasonably request and/or set forth in such joinder agreement and (z) taking all actions as specified in this Agreement as would have been taken by such Pledgor had it been an original party to this Agreement, in each case with all documents required above to be delivered to the Pledgee and with all documents and actions required above to be taken to the reasonable satisfaction of the Pledgee.

(b)For the avoidance of doubt, each Pledgor and the Pledgee hereby acknowledge and agree that this Agreement shall be (x) a “Related Agreement” under, and as defined in, the 2004 Securities Purchase Agreement and (y) an “Ancillary Agreement” under, and as defined in, the 2005 Security Agreement.

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered as of the date first above written.

PLEDGORS:
Time America, Inc., a Nevada corporation
Address for Notices:
8840 East Chaparral Road, Suite 100
Scottsdale, Arizona 85250
Attention: Craig J. Smith, Chief Financial Officer
Facsimile: (480) 967-5444
By:
	Name:
	Title:
Time America, Inc., an Arizona corporation
Address for Notices:
8840 East Chaparral Road, Suite 100
Scottsdale, Arizona 85250
Attention: Craig J. Smith, Chief Financial Officer
Facsimile: (480) 967-5444
By:
	Name:
	Title:
NOTEHOLDER:
Laurus Master Fund, Ltd.,
a Cayman Islands company
Address for Notices:
c/o M&C Corporate Services Limited
P.O. Box 309 GT
Ugland House
South Church Street
George Town
Grand Cayman, Cayman Islands
By:
	Name:
	Title:

6

SCHEDULE A

Attached to and forming a part of that certain
Stock Pledge Agreement dated March 22, 2004, and amended and restated June 23, 2005 by and between

Time America, Inc., a Nevada corporation, the other pledgors party thereto and
Laurus Master Fund, Ltd., a Cayman Island company

Pledged Securities

Pledgor	Class of Security	Certificate No(s) (if any)	Number of Shares (Units)
Time America, Inc., a Nevada corporation	Common Stock of Time America, Inc., an Arizona corporation		9,314,445 Shares
Time America, Inc., an Arizona corporation	None

EX-10.8

Exhibit 10.8

AMENDMENT

This Amendment (this “Amendment”), dated as of June 23, 2005, is entered into by and between TIME AMERICA, INC., a Nevada corporation (the “Company”),and LAURUS MASTER FUND, LTD., a Cayman Islands company (“Laurus”), for the purpose of amending the terms of that certain Secured Convertible Term Note, dated March 22, 2004 (as amended, modified or supplemented from time to time, the ”Term Note”) issued by the Company to Laurus. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Term Note.

WHEREAS, the Company and Laurus have agreed to make certain changes to the Term Note as set forth herein;

NOW, THEREFORE, in consideration of the above, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.Section 3.4C of the Term Note is hereby amended by deleting the text “at any time 35 days after the Closing Date” appearing therein and inserting the text “on any date (x) on or after 35 days after the Closing Date and prior to June 23, 2005 or (y) on or after June 23, 2006” in lieu thereof.

2.Section 4.9 of the Term Note is hereby deleted in its entirety and the following new Section 4.9 is hereby inserted in lieu thereof:

“4.9 Default under Related Agreements, etc..  An Event of Default, under and as defined in any of (i) the Related Agreements, (ii) that certain Security Agreement, dated June 23, 2005, by and among the Borrower, certain subsidiaries of the Borrower and the Holder (as amended, modified or supplemented from time to time, the “2005 Security Agreement”), or (iii) any Ancillary Agreement referred to in the 2005 Security Agreement, as each are amended, modified or supplemented from time to time, shall have occurred and be continuing.”

3.Each amendment set forth herein shall be effective as of the date hereof following the execution and delivery of same by each of the Company and Laurus.

4.Except as specifically set forth in this Amendment, there are no other amendments to the Term Note, and all of the other forms, terms and provisions of the Term Note remain in full force and effect.

5.The Company hereby represents and warrants to Laurus that as of the date hereof all representations and warranties made by Company in connection with the Term Note and the Purchase Agreement, as amended, referred to in the Term Note are true, correct and complete, and all of Company’s and its Subsidiaries’ covenant requirements have been met or otherwise waived in writing by Laurus.

6.This Amendment shall be binding upon the parties hereto and their respective successors and permitted assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and its successors and permitted assigns.  THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.  This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument.

IN WITNESS WHEREOF, each of the Company and Laurus has caused this Amendment to the Term Note to be signed in its name effective as of this 23rd day of June, 2005.

TIME AMERICA, INC., a Nevada Corporation
By:
	Name:
	Title:
LAURUS MASTER FUND, LTD.
By:
Name:
Title:

2

EX-10.9

Exhibit 10.9

GRANT OF SECURITY INTEREST IN PATENTS AND TRADEMARKS

THIS GRANT OF SECURITY INTEREST (“Grant”), effected as of June 23, 2005, is executed by Time America, Inc., a Nevada corporation (the “Grantor”), in favor of Laurus Master Fund, Ltd. (the “Secured Party”).

A.            Pursuant to (i) a Master Security Agreement dated as of March 22, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the “2004 Security Agreement”) among the Grantor, certain other Assignors (as defined in the Master Security Agreement) and the Secured Party, the terms and provisions of which are hereby incorporated herein as fully set forth herein and (ii) a Security Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “2005 Security Agreement” and, together with the 2004 Security Agreement, the “Security Agreements” and each, a “Security Agreement”) among the Grantor, certain other Companies (as defined in the 2005 Security Agreement), and the Secured Party, the terms and provisions of which are hereby incorporated herein as if fully set forth herein, in each case, the Grantor and the other Companies and Assignors, as the case may be, have granted a security interest to the Secured Party in consideration of the Secured Party’s agreement to provide financial accommodations to such Companies and such Assignors.

B.            The Grantor (1) has adopted, used and is using the trademarks reflected in the trademark registrations and trademark applications in the United States Patent and Trademark Office more particularly described on Schedule 1 annexed hereto as part hereof (the “Trademarks”), and (2) has registered or applied for registration in the United States Patent and Trademark Office of the patents more particularly described on Schedule 2 annexed hereto as part hereof (the “Patents”).

C.            The Grantor wishes to confirm its grant to the Secured Party of a security interest in all right, title and interest of the Grantor in and to the Trademarks and Patents, and all proceeds thereof, together with the business as well as the goodwill of the business symbolized by, or related or pertaining to, the Trademarks, and the customer lists and records related to the Trademarks and Patents and all causes of action which may exist by reason of infringement of any of the Trademarks and Patents (collectively, the “T&P Collateral”), to secure the payment, performance and observance of the Obligations (as that term is defined in each Security Agreement).

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged:

1.             The Grantor does hereby further grant to the Secured Party a security interest in the T&P Collateral to secure the full and prompt payment, performance and observance of the Obligations.

2.             The Grantor agrees to perform, so long as either Security Agreement is in effect, all acts deemed necessary or desirable by the Secured Party to permit and assist it, at the Grantor’s expense, in obtaining and enforcing the Trademarks and Patents in any and all countries.  Such acts may include, but are not limited to, execution of documents and assistance or cooperation in legal proceedings.  The Grantor hereby appoints the Secured Party as the Grantor’s attorney-in-fact to execute and file any and all agreements, instruments, documents and papers as the Secured Party may determine to be necessary or desirable to evidence the Secured Party’s security interest in the Trademarks and Patents or any other element of the T&P Collateral, all acts of such attorney-in-fact being hereby ratified and confirmed.

3.             The Grantor acknowledges and affirms that the rights and remedies of the Secured Party with respect to the security interest in the T&P Collateral granted hereby are more fully set forth in the Security Agreements and the rights and remedies set forth herein are without prejudice to, and are in addition to, those set forth in the Security Agreements.  In the event that any provisions of this Grant are deemed to conflict with either Security Agreement, the provisions of such Security Agreement shall govern.

4.             The Grantor hereby authorizes the Secured Party to file all such financing statements or other instruments to the extent required by the Uniform Commercial Code and agrees to execute all such other documents,

agreements and instruments as may be required or deemed necessary by the Secured Party, in each case for purposes of affecting or continuing Secured Party’s security interest in the T&P Collateral.

IN WITNESS WHEREOF, the Grantor has caused this instrument to be executed as of the day and year first above written.

TIME AMERICA, INC., a Nevada corporation
By:
	Name:
	Title:
LAURUS MASTER FUND, LTD.
By:
	Name:
	Title:

SCHEDULE 1 TO GRANT OF SECURITY INTEREST

REGISTERED TRADEMARKS AND TRADEMARK APPLICATIONS

Trademark	Registration or Application Number	Registration or Application Date	Country
NETTIME	2,960,030	4/24/01	U.S.A

SCHEDULE 2 TO GRANT OF SECURITY INTEREST

PATENTS AND PATENT APPLICATIONS

None

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Time America, Inc.

Scottsdale, Arizona

As independent certified public accountants, we hereby consent to the incorporation by reference in the Registration Statement on Form S-2 of our report, dated August 26, 2004, included in the Company’s Form 10-KSB for the year ended June 30, 2004, and to all references to our firm included in this registration statement and the Form 10-KSB filing.

/s/ Semple & Cooper, LLP

Phoenix, Arizona

July 22, 2005