Exhibit 10.10

 

FIRST AMENDMENT TO SECURITY AGREEMENT

 

THIS FIRST AMENDMENT TO SECURITY AGREEMENT (the “Amendment”) is entered into as
of August 30, 2004 between PROSOFTTRAINING, a Nevada corporation (“Debtor”), and
HUNT CAPITAL GROWTH FUND II, L.P. (“Secured Party”).

 

R E C I T A L S:

 

WHEREAS, Debtor and Secured Party entered into that certain Security Agreement
(as amended, the “Security Agreement”) dated as of October 16, 2001 in order to
secure the payment of obligations of Debtor to Secured Party under the
Securities Purchase Agreement dated October 16, 2001 (as amended, the
“Securities Purchase Agreement”) between Debtor and Secured Party and under the
Transaction Agreements (as defined therein);

 

WHEREAS, as of the date hereof, Debtor is entering into a Purchase Agreement
with DKR SoundShore Oasis Holding Fund Ltd. (“DKR Oasis”) and DKR SoundShore
Strategic Holding Fund Ltd. (“DKR Strategic” and, together with DKR Oasis, the
“DKR Parties”) pursuant to which Debtor will borrow $1,350,000 (the “DKR Loan”)
from the DKR Parties, payment of which is secured pursuant to the provisions of
the Security Agreement dated the date hereof (the “SoundShore Security
Agreement”) between the DKR Parties, DKR Oasis as Administrative Agent, and
Debtor; and

 

WHEREAS, Debtor and Secured Party have agreed to amend the Security Agreement
to, among other things, permit the security interests granted by Debtor to the
DKR Parties in the SoundShore Security Agreement.

 

NOW, THEREFORE, in consideration of these premises and other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree, as follows:

 

1. DEFINITIONS. Unless stated otherwise, (a) each term defined in the Security
Agreement has the same meaning when used in this Amendment and (b) all
references to “Sections” and “Exhibits” are references to the Security
Agreement’s sections and exhibits.

 

2. AMENDMENTS. Effective as of the date of this Amendment:

 

(A) The following definitions are alphabetically inserted (as appropriate) into
Section 1.01 of the Security Agreement:

 

“Convertible Note” means the Subordinated Secured Convertible Note dated October
16, 2001 in the stated principal amount of $2,500,000 payable by Debtor to the
order of Secured Party, as amended by the Amendment to Securities Purchase
Agreement dated December 28, 2001, the Exchange Agreement dated June 4, 2004,
the Amendment to Securities Purchase Agreement and Convertible Note dated as of
August 30, 2004 and as the same may from time to time be amended hereafter.

 

“Debtor” means PROSOFTTRAINING, a Nevada corporation.

 

“DKR Parties” means DKR SoundShore Oasis Holding Fund Ltd. and DKR SoundShore
Strategic Holding Fund Ltd.

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“Event of Default” has the meaning set forth in the Convertible Note, as the
same may be amended, extended or modified from time to time.

 

“Intercreditor Agreement” means the Intercreditor Agreement, dated August 30,
2004, among Secured Party and the DKR Parties.

 

“SoundShore Lien” means the security interest in the Debtor’s property held by
the DKR Parties pursuant to the SoundShore Security Agreement.

 

“SoundShore Security Agreement” means the Security Agreement, dated as of August
30, 2004, by and among the Debtor, each of the DKR Parties and DKR SoundShore
Holding Fund, Ltd, as Administrative Agent.

 

(B) Sections or subsections 2.01(l), 2.03, 3.03, 3.06, 4.01, 4.04, 4.09, 4.14,
4.15(b), 4.16(a)(i), 4.16(b)(i), (ii) and (iv), 4.17(a), 4.19, 5.06 and 7.03 of
the Security Agreement are amended to read in their entirety as set forth on
Attachment A hereto.

 

(C) A new Section 7.13 is added to the Security Agreement to read as follows:

 

“7.13. SoundShore Transactions. Notwithstanding any other provision of this
Agreement, Secured Party agrees as follows: (a) Debtor may enter into the
SoundShore Security Agreement and grant the security interests provided for
therein, (b) the DKR Parties may perfect such security interests and (c) to the
extent set forth in the Intercreditor Agreement, the Proceeds of Collateral
shall be applied as set forth therein.”

 

(D) Schedules 1-4 to the Security Agreement are amended to read in their
entirety in the form of Attachment B hereto.

 

3. REPRESENTATIONS AND WARRANTIES, AGREEMENTS REGARDING SUBSIDIARIES. In
connection with the agreements set forth in this Amendment, Debtor represents
and warrants to Secured Party that none of its subsidiaries (other than
ProsoftTraining Europe Ltd. (“Prosoft Europe”)) owns any material assets or
engages in any material activity. Debtor agrees to (a) within thirty (30) days
after the date of this Amendment, deliver to Secured Party (or to the Collateral
Agent under the Intercreditor Agreement dated the date hereof (the
“Intercreditor Agreement”) among Secured Party and the DKR Parties) all
certificates evidencing its ownership of Prosoft Europe, together with stock
power(s) executed in blank and (b) give prompt written notice to Secured Party
of any event or occurrence that results in the foregoing representation and
warranty being false, incorrect or misleading.

 

4. RATIFICATIONS; AGREEMENTS. As a material inducement to Secured Party to
execute and deliver this Amendment, Debtor hereby (A) ratifies and confirms all
provisions of the Security Agreement, as amended by this Amendment, (B) ratifies
and confirms that all guaranties, assurances, and security interests granted,
conveyed, or assigned to Secured Party under the Security Agreement or the other
Transaction Agreements, as they may have been renewed, extended, and amended,
continue to guarantee, assure, and secure full payment and performance of the
present and future Obligations, and (C) agrees to perform such acts and duly
authorize, execute, acknowledge, deliver, file, and record such additional
documents, and certificates as Secured Party may reasonably request in order to
create, perfect, preserve, and protect those guaranties, assurances, and
Security Interests. Debtor agrees to immediately notify Secured Party in writing
in the event that, after the date of this Amendment, it grants any lien or
security interest in any of its assets to or for the benefit of any of the

 

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DKR Parties (whether under the SoundShore Security Agreement or otherwise) or
takes or permits any action to perfect any security interest granted to any of
the DKR Parties as of the date hereof or any subsequent date and, at the request
of Secured Party, will promptly take all actions reasonably requested by Secured
Party (after giving effect to the Intercreditor Agreement) to grant and perfect,
in favor of Secured Party, liens and security interests in any of such assets.

 

[The remainder of this page intentionally left blank; Signature Page follows.]

 

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EXECUTED as of the date first stated above.

 

HUNT CAPITAL GROWTH FUND II, L.P. By:  

HUNT CAPITAL GROWTH, L.P.,

its general partner

By:   HUNT CAPITAL GROUP, L.L.C.,     its general partner     By:  

/s/ J.R. Holland, Jr.

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        J.R. Holland, Jr.         President PROSOFTRAINING By:  

/s/ Robert G. Gwin

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    Robert G. Gwin     Chief Executive Officer

 

Signature Page to

First Amendment to Security Agreement

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ATTACHMENT A

 

1. Section 2.01(l)

 

(l) all shares of stock of the Subsidiaries of the Debtor from time to time
owned or acquired by the Debtor in any manner, and the certificates and all
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed or distributable in respect of or in
exchange for any or all of such shares;

 

2. Section 2.03

 

Section 2.03 Delivery of Collateral. All certificates or instruments
representing or evidencing the Pledged Shares, any Instruments or Chattel Paper
or any other Collateral including, without limitation, any Investment Property,
promptly upon the Debtor gaining any rights therein, shall, after request
therefor by Secured Party, be delivered to and held by Secured Party pursuant
hereto in suitable form for transfer by delivery, or accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Secured Party. After the occurrence and
during the continuation of an Event of Default, Secured Party shall have the
right at any time to exchange certificates or instruments representing or
evidencing any Pledged Collateral in its possession for certificates or
instruments of smaller or larger denominations.

 

3. Section 3.03

 

Section 3.03. Financing Statements. No financing statement, security agreement
or other Lien instrument covering all or any part of the Collateral is on file
in any public office, except as may have been filed in connection with Permitted
Liens, this Agreement or the SoundShore Security Agreement. Except as set forth
in Schedule 4 hereto, the Debtor does not do business, and has not done business
within the past five (5) years, under a trade name or any name other than its
legal name set forth at the beginning of this Agreement.

 

4. Section 3.06

 

Section 3.06. Perfection. Upon (i) the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule 2 attached hereto,
(ii) the Secured Party obtaining (a) possession of the Pledged Shares and all
other Instruments, Chattel Paper and Security Certificates of the Debtor and (b)
“control” over all Deposit Accounts, and (iii) with respect to Intellectual
Property, appropriate filings being made in the United States Patent and
Trademark Office and the United States Copyright Office, the security interest
in favor of the Secured Party created herein will constitute a valid and
perfected Lien upon and security interest in the Collateral, subject to no equal
or prior Liens, except for the SoundShore Lien and purchase money liens existing
on the date hereof.

 

5. Section 4.01

 

Section 4.01. Encumbrances. The Debtor shall not create, permit or suffer to
exist, and shall defend the Collateral against, any Lien or other encumbrance on
the Collateral except for Liens permitted under the Purchase Agreement, and
shall defend the Debtor’s rights in the Collateral and the interest of the
Secured Party in the Collateral against the claims and demands of all Persons
other than the DKR Parties’ claims and demands to the extent arising under the
SoundShore Security Agreement. The Debtor shall do nothing to impair the rights
of the Secured Party in the Collateral.

 

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6. Section 4.04

 

Section 4.04. Further Assurances. At any time and from time to time, upon the
request of the Secured Party, and at the sole expense of the Debtor, the Debtor
shall promptly execute and deliver all such further agreements, documents and
instruments and take such further action as the Secured Party may reasonably
deem necessary or appropriate to preserve and perfect its security interest in
and pledge and collateral assignment of the Collateral and carry out the
provisions and purposes of this Agreement or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any of
the Collateral, and, to the extent any of the Collateral is at any time in the
custody of a Clearing Corporation or of a “custodian bank” or a nominee of
either, as defined in the UCC, or any other Securities Intermediary, then the
Debtor shall cause the Secured Party to obtain “control,” as defined in Article
or Chapter 8 of the UCC, of such Collateral in one of the manners prescribed in
Article or Chapter 8.106 of the UCC. Except as otherwise expressly permitted by
the terms of the Purchase Agreement relating to disposition of assets and except
for Permitted Liens, the Debtor agrees to defend the title to the Collateral and
the Lien thereon of the Secured Party against the claim of any other Person
(other than the DKR Parties to the extent their claims arise under the
SoundShore Security Agreement) and to maintain and preserve such Lien. Without
limiting the generality of the foregoing, the Debtor shall (a) execute and
deliver to the Secured Party such financing statements as the Secured Party may
from time to time require; (b) deliver and pledge to the Secured Party all
Documents (including, without limitation, documents of title) evidencing
Inventory or Equipment and cause the Secured Party to be named as lienholder on
all Documents of title; (c) deliver and pledge to Secured Party all Instruments
and Chattel Paper of the Debtor with any necessary endorsements; and (d) execute
and deliver to the Secured Party such other agreements, documents and
instruments as the Secured Party may require to perfect and maintain the
validity, effectiveness and priority of the Liens intended to be created by the
Transaction Agreements. The Debtor authorizes the Secured Party to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of the Debtor where
permitted by law. A carbon, photographic or other reproduction of this Agreement
or of any financing statement covering the Collateral or any part thereof shall
be sufficient as a financing statement and may be filed as a financing
statement.

 

7. Section 4.09

 

Section 4.09. Legal Changes. The Debtor shall not change its name, identity or
legal structure in any manner that might make any financing statement filed in
connection with this Agreement seriously misleading unless the Debtor shall have
given the Secured Party thirty (30) days prior written notice thereof and shall
have taken all action deemed necessary or desirable by the Secured Party to
protect its Liens and the perfection and priority thereof. The Debtor shall not
change its principal place of business, chief executive office, jurisdiction of
formation, or the place where it keeps its books and records unless it shall
have given the Secured Party thirty (30) days prior written notice thereof and
shall have taken all action deemed necessary or desirable by the Secured Party
to cause its security interest in the Collateral to be perfected with the
priority required by this Agreement.

 

8. Section 4.14

 

Section 4.14. Collection of Accounts. So long as no Event of Default has
occurred and is continuing and except as otherwise provided in this Section 4.14
and in Section 5.01, the Debtor shall have the right to collect and receive
payments on the Accounts. In connection with such collections, the Debtor may
take (and, at the Secured Party’s direction, shall take) such actions as the
Debtor or the Secured Party may deem necessary or advisable to enforce
collection of the Accounts. Upon the request of the Secured Party, the Debtor
shall cause all account debtors and other Persons obligated in respect of the
Accounts to make all payments on the Accounts directly to any collection or
collateral account

 

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established by the Secured Party and the Debtor shall cause all other Proceeds
of Collateral to be deposited directly to such account. Until such Proceeds are
delivered to such account, such Proceeds shall be held in trust by the Debtor
for the benefit of the Secured Party and shall not be commingled with any other
funds or property of the Debtor. All Proceeds of Collateral received by the
Secured Party pursuant to this Section 4.14 will be applied by the Secured Party
to the Obligations at such time and in such order as the Secured Party shall
determine from time to time in its sole judgment, subject to the Intercreditor
Agreement to the extent such agreement is then effective.

 

9. Section 4.15(b)

 

(b) The Debtor shall make federal applications on all of its unpatented but
patentable inventions and all of its registrable but unregistered copyrights and
trademarks.

 

10. Section 4.16(a)(i)

 

(i) The Debtor shall be entitled to exercise any and all voting and other
consensual rights (including, without limitation, the right to give consents,
waivers and notifications in respect of any of the Pledged Collateral)
pertaining to any of the Pledged Collateral or any part thereof; provided;
however, that without the prior written consent of the Secured Party, no vote
shall be cast or consent, waiver or ratification given or action taken which
would (x) be inconsistent with or violate any provision of this Agreement or any
other Transaction Agreement or (y) amend, modify or waive any term, provision or
condition of the certificate of incorporation, by-laws, certificate of formation
or other charter document or other agreement relating to, evidencing, providing
for the issuance of or securing any Collateral; and provided further that the
Debtor shall give the Secured Party at least five (5) Business Days’ prior
written notice in the form of an officer’s certificate of the manner in which it
intends to exercise, or the reasons for refraining from exercising, any voting
or other consensual rights pertaining to the Collateral or any part thereof
which might have a material adverse effect on the value of the Collateral or any
part thereof; and

 

11. Section 4.16(b)(i), (ii) and (iv)

 

(i) The Secured Party may, without notice to the Debtor, transfer or register,
or cause to be transferred or registered, in the name of Secured Party or any of
its nominees any or all of the Collateral described in Section 2.01(i) through
(m) of this Agreement, the proceeds thereof (in cash or otherwise) and all
liens, security, rights, remedies and claims of the Debtor with respect thereto
(collectively, the “Pledged Collateral”) held by the Secured Party hereunder,
and such Secured Party or its nominee may thereafter, after delivery of notice
to the Debtor, exercise all voting and corporate rights at any meeting of any
corporation, partnership or other business entity issuing any of the Pledged
Collateral and any and all rights of conversion, exchange, subscription or any
other rights, privileges or options pertaining to any of the Pledged Collateral
as if it were the absolute owner thereof, including, without limitation, the
right to exchange at its discretion any and all of the Pledged Collateral upon
the merger, consolidation, reorganization, recapitalization or other
readjustment of any corporation, partnership or other business entity issuing
any of such Pledged Collateral or upon the exercise by any such issuer or the
Secured Party of any right, privilege or option pertaining to any of the Pledged
Collateral, and in connection therewith, to deposit and deliver any and all of
the Pledged Collateral with any committee, depositary, transfer agent, registrar
or other designated agency upon such terms and conditions as it may determine,
all without liability except to account for property actually received by it but
the Secured Party shall have no duty to exercise any of the aforesaid rights,
privileges or options, and the Secured Party shall not be responsible for any
failure to do so or delay in so doing.

 

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(ii) All rights of the Debtor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Subsection
4.16(a)(i) and to receive the dividends, interest and other distributions which
it would otherwise be authorized to receive and retain pursuant to Subsection
4.16(a)(ii) shall be suspended until such Event of Default shall no longer
exist, and all such rights shall, until such Event of Default shall no longer
exist, thereupon become vested in the Secured Party which shall thereupon have
the right to exercise such voting and other consensual rights and to receive and
hold as Pledged Collateral such dividends, interest and other distributions.

 

* * *

 

(iv) The Debtor shall execute and deliver (or cause to be executed and
delivered) to Secured Party all such proxies and other instruments as the
Secured Party may reasonably request for the purpose of enabling the Secured
Party to exercise the voting and other rights which it is entitled to exercise
pursuant to this Subsection 4.16(b) and to receive the dividends, interest and
other distributions which it is entitled to receive and retain pursuant to this
Subsection 4.16(b). The foregoing shall not in any way limit the Secured Party’s
power and authority granted pursuant to Section 5.01.

 

12. Section 4.17(a)

 

(a) Except as may be expressly permitted by the terms of the Purchase Agreement,
the Debtor shall not grant any option with respect to, exchange, sell or
otherwise dispose of any of the Collateral, except for the sales of inventory in
the ordinary course of its business, or create or permit to exist any Lien upon
or with respect to any of the Collateral except for Liens permitted under the
Purchase Agreement and the Liens created hereby.

 

13. Section 4.19

 

Section 4.19. Acknowledgment of Pledge. The Debtor shall deliver to Secured
Party promptly after request thereof by Secured Party, one or more agreements
providing the Secured Party with control (within the meaning of Section 9-207(c)
of the UCC) over all Deposit Accounts, Commodities Accounts and Securities
Accounts, such agreements to be in form and substance satisfactory to Secured
Party.

 

14. Section 5.06

 

Section 5.06. Change of Depository. In the event of the termination by any
financial institution in which any Deposit Account is maintained of any
agreement with or for the benefit of the Secured Party, or if any such financial
institution shall fail to comply with any provisions of any such agreement or
any instructions of the Secured Party in accordance with any such agreement or
this Agreement, or if the Secured Party determines in its sole discretion that
the financial condition of any such financial institution has materially
deteriorated, the Debtor agrees to transfer the affected Deposit Account(s) to
another financial institution acceptable to the Secured Party and cause such
substitute financial institution to execute such agreements as the Secured Party
may require, in form and substance reasonably acceptable to the Secured Party,
to ensure that the Secured Party has a perfected, first priority security
interest, subject only to the SoundShore Lien, in the Deposit Account(s) held
with such substitute financial institution. If any affected Deposit Account is a
lockbox account, the Debtor agrees to notify its account debtors promptly to
remit all payments which were being sent to the terminated Deposit Account
directly to the substitute Deposit Account.

 

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15. Section 7.03

 

Section 7.03. Amendment; Entire Agreement. This Agreement embodies the final,
entire agreement among the parties hereto and supersedes any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the subject matter hereof and may not be contradicted or
varied by evidence of prior, contemporaneous or subsequent oral agreements or
discussions of the parties hereto. There are no unwritten oral agreements among
the parties hereto. The provisions of this Agreement may be amended or waived
only by an instrument in writing signed by the parties hereto.

 

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