[EXECUTION COPY]
AMENDMENT NO. 1
dated as of April 25, 1995
to the
SUBORDINATION AGREEMENT
dated as of May 6, 1993,
among
HOWARD INTERNATIONAL CORPORATION,
JOHN HOWARD,
SIGNET BANK/MARYLAND,
and
DATABILITY
TABLE OF CONTENTS
Page
Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Amendments to the Subordination Agreement. . . . . . . . . 2
Section 3. Effectiveness. . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Integration; Confirmation. . . . . . . . . . . . . . . . . 4
Section 5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 4
Section 6. Successors and Assigns . . . . . . . . . . . . . . . . . . 5
Section 7. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 5
AMENDMENT NO. 3
This AMENDMENT NO. 1 (this "Amendment") is dated as of
April 25, 1995 and is among HOWARD INTERNATIONAL CORPORATION and
JOHN HOWARD (each a "Junior Creditor" and, collectively, the
"Junior Creditors"), SIGNET BANK/MARYLAND, a Maryland banking
corporation (the "Bank"), and DATABILITY, INC., a Delaware
corporation (the "Company").
Penril Datacomm Networks, Inc., a Delaware corporation
("Penril"), and the Company entered into an Agreement and Plan of
Merger among Penril, the Company, all of the holders of the
Company's capital stock (the "C/S Holders") and PD Acquisition
Corp., a wholly-owned subsidiary of Penril, dated as of May 1,
1993 pursuant to which (i) all C/S Holders received common stock
of Penril and (ii) PD Acquisition Corp. was merged into the
Company which survived as a direct, wholly-owned subsidiary of
Penril.
To effect the merger, Penril entered into an Amended
and Restated Credit Agreement dated as of May 6, 1993 with the
Bank, as amended by Amendment No. 1 dated as of January 31, 1994
and by Amendment No. 2 dated on June 23, 1994, and as further
amended by a letter agreement dated December 14, 1994 and a
second letter agreement dated January 13, 1995 (the "Credit
Agreement"). Penril is obligated under the Credit Agreement to
use the proceeds of all Working Capital Loans available
thereunder for its and its Restricted Subsidiary's general
working capital requirements and to advance a not insubstantial
portion of the proceeds of Working Capital Loans to its
Restricted Subsidiaries. The Company was and is a Restricted
Subsidiary of Penril. A portion of the loans under the Credit
Agreement were advanced or contributed by Penril to the Company
to enable the Company to repay all of its outstanding
indebtedness to National Westminster Bank, PLC and to reduce the
amount of the Company's trade indebtedness. The Junior Creditors
were shareholders of the Company immediately prior to its
acquisition by Penril, and remain creditors of the Company.
To induce the Bank to enter into the Credit Agreement,
the Company guaranteed to the Bank the full payment and
performance of all of Penril's obligations under the Credit
Agreement pursuant to a Guaranty dated as of May 6, 1993 (the
"Guaranty"), and secured its guaranty with the grant of a
security interest in favor of the Bank in all of the Company's
tangible and intangible personal property pursuant to a Security
Agreement dated as of May 6, 1993 (the "Security Agreement"),
each between the Company and the Bank. Concurrently with the
execution of the Credit Agreement and the Company's Guaranty and
Security Agreement, the Junior Creditors, the Company and the
Bank entered into a Subordination Agreement (the "Subordination
Agreement") pursuant to which the Junior Creditors subordinated
in right of payment all indebtedness from time to time owing to
them by the Company to the prior payment and performance of all
of the Company's obligations in favor of the Bank under the
Guaranty.
By reason of the violation of the covenant in Section
5.6 of the Credit Agreement for its fiscal quarter ended January
31, 1995, Penril is in Default under the Credit Agreement.
Penril has requested the Bank to waive this Default, to modify
Section 5.6 of the Credit Agreement to conform to Penril's
current financial projections, to issue a Standby Letter of
Credit for the account of Penril in the approximate amount of
$412,000 to enable Penril to post an appeal bond relating to
certain litigation involving Penril and to make certain other
changes to the Credit Agreement. The Bank is agreeable thereto,
all on the terms and conditions set forth in the Second Amended
and Restated Credit Agreement dated as of April 25, 1995 (as the
same may be amended, supplemented or modified from time to time
and including any agreement extending the maturity of,
refinancing or otherwise restructuring of all or any portion of
the obligations under such Agreement or any successor agreement,
the "Amended Agreement").
In connection with the Amended Agreement, the Bank is
also agreeable to Penril's request that the Subordination
Agreement be amended so as to allow the Company to make certain
limited payments of principal in respect of subordinated
indebtedness which are now prohibited under the Subordination
Agreement as a result of Penril's Default under the Credit
Agreement, all as set forth in this Amendment. Accordingly, the
parties hereto agree as follows:
Section 1. Definitions. Terms used herein and not
defined which are defined in the Amended Agreement shall have for
the purposes hereof the respective meanings set forth therein.
Section 2. Amendments to the Subordination
Agreement.
(a) The definition of "Senior Debt" in Section 1.1 is
hereby amended to read in full as follows:
"Senior Debt" means (i) all amounts now or
hereafter payable by Penril to the Bank on the Notes,
(ii) all other obligations or liabilities now or
hereafter payable by Penril pursuant to the Amended
Agreement, (iii) all obligations and liabilities now or
hereafter payable by Penril under, arising out of or in
connection with the Loan Documents, (iv) all amounts
now or hereafter payable by the Company pursuant to the
Guaranty or the Security Agreement and (iv) all other
indebtedness, obligations and liabilities of Penril or
the Company to the Bank, now existing or hereafter
arising or incurred, whether or not evidenced by notes
or other instruments, and whether such indebtedness,
obligations and liabilities are direct or indirect,
fixed or contingent, liquidated or unliquidated, due or
to become due, secured or unsecured, joint, several or
joint and several, related or unrelated to the Loans,
similar or dissimilar to the indebtedness arising out
of or in connection with the Amended Agreement or the
Guaranty or of the same or a different class of
indebtedness as the indebtedness arising out of the
Amended Agreement or the Guaranty, including, without
limitation, any overdrafts in any deposit accounts
maintained by Penril or the Company with the Bank, all
obligations of Penril or the Company with respect to
letters of credit, if any, issued by the Bank for the
account of Penril or the Company, any indebtedness of
Penril or the Company that is purchased by or assigned
to the Bank and any indebtedness of Penril or the
Company to any assignee of all or a portion of the
Notes or any other obligation referred to above,
together with all renewals, modifications,
consolidations and extensions thereof.
(b) The first paragraph of Section 2.4 of the
Subordination Agreement is hereby amended to read as follows:
Section 2.4. Payments on Subordinated Debt
Suspended. No payment (including any payment which may
be payable by reason of the payment of any other
indebtedness of the Company which is subordinated to
the payment of the Subordinated Debt) shall be made by
the Company on account of the principal of or interest
on the Subordinated Debt or on account of the purchase
or other acquisition by it of the Subordinated Debt
until the full, final and irrevocable payment of all
Senior Debt. Notwithstanding the foregoing, (i) the
Company may make the scheduled payment in May 1995 in
respect of principal of the Subordinated Debt in an
aggregate amount not to exceed $75,775, (ii) the
Company may make payments in respect of the
Subordinated Debt (on account of principal and/or
interest as may be determined by the holders of the
Subordinated Debt and the Company) on the dates, and in
amounts not exceeding, the respective dates and amounts
specified under the terms of the Subordinated Debt as
in effect on the Effective Date of the Amended
Agreement as the dates and amounts for payment of
interest on the Subordinated Debt and (iii) from and
after the date on which the principal of the Term Loans
and the Acquisition Loan outstanding as of the
Effective Date of the Amended Agreement has been
reduced by $3,000,000, the Company may make payments of
principal and interest in respect of the Subordinated
Debt on the dates, in the amounts and (in respect of
interest) at the rate or rates specified in the
Subordinated Debt; provided, however, that in the event
and during the continuation of any default in the
payment of principal of or interest on any Senior Debt
beyond any applicable grace period with respect thereto
or, in the event that any other event of default with
respect to any Senior Debt shall have occurred and be
continuing which would permit the holders of the Senior
Debt (or a Person or Persons acting on their behalf) to
declare such Senior Debt to become due and payable
prior to the date on which it would otherwise have
become due and payable, then unless and until such
event of default shall have been cured or waived or
shall have ceased to exist and such acceleration shall
have been rescinded or annulled, or in the event any
judicial proceeding shall be pending with respect to
any such default, then no payment otherwise allowed
pursuant to this sentence shall be made by the Company
on account of the principal of or interest on the
Subordinated Debt or on account of the purchase or
other acquisition by it of the Subordinated Debt.
Section 3. Effectiveness. This Amendment shall
become effective as of the date hereof on the Effective Date (as
defined in the Amended Agreement). On the Effective Date, the
Subordination Agreement will be automatically amended as set
forth herein. On and after the Effective Date, the rights and
obligations of the parties hereto shall be governed by the
Subordination Agreement as amended by this Amendment; provided,
that the rights and obligations of the parties hereto with
respect to the period prior to the Effective Date shall continue
to be governed by the terms of the Subordination Agreement.
Section 4. Integration; Confirmation. On and after
the Effective Date, each reference in the Subordination Agreement
to "this Agreement", "this Subordination Agreement", "herein",
"hereunder" or words of similar import, and each reference to any
other document delivered in connection with the Subordination
Agreement to the "Subordination Agreement" shall be deemed to be
a reference to the Subordination Agreement as amended by this
Amendment, all other terms and provisions of the Subordination
Agreement shall continue in full force and effect and unchanged
and are hereby confirmed in all respects.
Section 5. Counterparts. This Amendment may be
signed in any number of counterparts, each of which shall be an
original, all of which taken together shall constitute a single
integrated agreement with the same effect as if the signatures
thereto and hereto were upon the same instrument. Complete sets
of counterparts shall be lodged with the Junior Creditors, the
Company and the Bank.
Section 6. Successors and Assigns. The provisions
of this Amendment shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns, including any successor or assignee arising by operation
of law.
Section 7. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the
State of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date and year first above
written.
DATABILITY, INC.
By_________________________________
Title:
One Palmer Terrace
Carlstadt, New Jersey 07072
Telecopier Number: (201) 438-2688
SIGNET BANK/MARYLAND
By_________________________________
Title:
7700 Wisconsin Avenue, Suite 400
Bethesda, Maryland 20841
Telecopier Number: (301) 652-1175
with a copy to:
Brian D. Murphy
McGuire, Woods, Battle & Boothe,
LLP
One James Center
Richmond, Virginia 23219
Telecopier Number: (804) 775-1061
HOWARD INTERNATIONAL CORPORATION
By_____________________________
Title:
_______________________________
John Howard
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