Pat McDonagh, the chairman and founder of e-learning firm Thirdforce, has restructured the way he offers financial support to the company.

The company told the Stock Exchange yesterday that Mr McDonagh had entered into a new agreement that would see him guaranteeing an overdraft of up to €7.5 million for the company. He will also pay the interest charged to Thirdforce on outstanding loan balances of up to €4 million.

Under the old arrangement, which dated from Thirdforce's acquisition of Electric Paper in 2003, Mr McDonagh was guarantor to a €6 million overdraft.

As part of that structure, he entered into a preference share agreement that would have obligated him, under certain circumstances, to subscribe for preference shares in the company.

These shares could then have been converted into ordinary shares at Mr McDonagh's discretion, provided that they had not been redeemed within three years of his subscription for them.

At the same time, the company retained the right to pass a resolution supported by at least three-quarters of its directors that would "defer" Mr McDonagh's obligation to subscribe for the preference shares.

The company said yesterday that it had agreed by unanimous vote to terminate this agreement on the basis that Mr McDonagh entered into the new arrangement. Mr McDonagh, who owns about 29.5 per cent of Thirdforce, abstained from the vote.

Thirdforce said its independent directors believed the new arrangement with Mr McDonagh was "advantageous" to the company and its other shareholders.

"It has secured Mr McDonagh's continuing support of its banking facilities and interest payments, while reducing the likelihood of the potential dilution of other shareholders in the company through the potential conversion of the preference shares to ordinary equity."

The company said it had consulted with its adviser, Dolmen Securities, and had concluded that the terms of the transaction were "fair and reasonable".

Thirdforce chief executive Brendan O'Sullivan said the modified agreement "more accurately reflects the needs of the company".

The firm has grown substantially over the past three years.

The new financing deal runs until March 2009 in respect of the loan interest payments and the €7.5 million overdraft guarantee. Between 2009 and 2011, Mr McDonagh will guarantee the overdraft up to €5 million.

If Thirdforce's bank calls in the overdraft during the period of Mr McDonagh's guarantee, he will lend the company the shortfall between its own funds and the amount demanded. Any such loan would be free of interest until the end of March, 2009 but would carry interest at "a normal commercial rate" after that date.

The loan could be converted into ordinary shares in Thirdforce after March, 2009.

Thirdforce was created in 2003 when the then Rapid Technology acquired Electric Paper.