8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

August 5, 2005

DPAC TECHNOLOGIES CORP.

(Exact name of registrant as specified in its charter)

California	0-14843	33-0033759
(State or other jurisdiction	(Commission File Number)	I.R.S. Employer
of incorporation)		Identification Number

7321 Lincoln Way, Garden Grove, California 92841

(Address of principal executive office) (Zip Code)

714/  898-0007
Registrant’s telephone number, including area code

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

ý Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 1 – Registrant’s Business and Operations

Item 1.01  Entry into a Material Definitive Agreement.

(a)

On August 5, 2005 the Registrant, QuaTech, Inc. (“QuaTech”) and Development Capital Ventures LP (“DCV”) entered into three material agreements:

1.The first Amendment to the Agreement and Plan of Reorganization between the Registrant and QuaTech, originally entered into on April 26, 2005 (the “Amendment”).

2.A Licensing Agreement (the “License”) among the Registrant, Quatech and DCV that licenses DCV and QuaTech and their successors the rights to manufacture and distribute the Registrant’s Airborne wireless technology.

3.A $500,000 secured, convertible loan (the “Bridge Loan”) bearing interest at 12% per annum from DCV to the Registrant that matures February 3, 2006.

The agreements were announced in a press release dated August 5, 2005 and attached hereto as Exhibit 99.1, and incorporated herein by this reference.

The Registrant and QuaTech entered into an Agreement and Plan of Reorganization on April 26, 2005 which provided for the Registrant’s subsidiary to merge with and into QuaTech, Inc., an Ohio Corporation, in a stock for stock exchange, subject to shareholder approval and certain other conditions (the “Merger”), incorporated herein by this reference.  As a result of certain changes in circumstances since the signing of the agreement, and in order to facilitate the closing of the Merger, the parties entered into the aforementioned agreements on August 5, 2005.  DCV is the holder of 100% of the preferred stock of QuaTech.

The Amendment to the Agreement and Plan of Reorganization provides for the establishment of the final exchange ratio of the Registrant’s common stock to be issued upon the closing of the business combination for each share of QuaTech common and preferred stock, taking into account the number of shares the Registrant will issue under the Bridge Loan if the merger is completed.  The exchange ratio was calculated as the inverse of the ratio determined by multiplying the number of DPAC common shares expected to be outstanding at the closing of the combination, by 150%, and dividing that product by the number of equivalent QuaTech common stock shares expected to be outstanding at the time of the closing of the business combination.  The Amendment also removes certain conditions to the closing of the business combination including the requirement for the Registrant to raise additional capital, the requirement for the Registrant to continue efforts to maintain its Nasdaq listing, the minimum cash balance requirement for the Registrant, and the maximum outstanding borrowing under QuaTech’s credit line.  The completion of the business combination remains conditioned on QuaTech completing a $4 million refinancing of its subordinated debt prior to September 30, 2005.  QuaTech has obtained commitment letters from qualified lenders to complete the refinancing.

The License grants an exclusive, sub-licensable, worldwide, perpetual right and license to DCV and QuaTech as its sub-licensee, to sell, manufacture and distribute the Registrant’s Airborne wireless technology.  The License also provides for QuaTech to hire certain of the Registrant’s employees, to assume liabilities for accrued paid time off for those employees hired, to purchase inventories from the Registrant, and to fill the backlog of firm orders for Airborne products as they exist at August 5, 2005.  QuaTech will be obligated to pay a royalty to DPAC for each unit shipped.  In the event that the shareholders of the Registrant do not approve the Merger, or if the merger with QuaTech is not completed, the License would become a non-exclusive license, and DCV and QuaTech would have the option, but not the obligation, to purchase the License for the fair market value of the License in cash as determined by appraisal or the license terminates.

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The Bridge Loan is a $500,000 original principal amount secured, convertible note bearing interest at 12% per annum that matures February 3, 2006.  Interest payments are made monthly, but no principal is due until maturity.  The loan is secured by all the assets of the Registrant, including its intellectual property.   The Bridge Loan is convertible, at the option of DCV, into 3,289,473 shares of the Registrant’s common stock, and is automatically converted into that number of shares at the closing of the Merger with QuaTech.  As an inducement to make the loan, DCV will receive an additional 1,644,736 shares of the Registrant’s common stock upon the closing of the Merger.   If the Merger with QuaTech is completed, DCV will own approximately 50.2% of the Registrant’s common stock.  As a result of the convertibility of the Bridge Loan, the Registrant is obligated to re-price certain outstanding warrants to purchase 730,794 shares of the Registrant’s common stock to an exercise price of approximately $.10 per share.

Section 2 – Financial Information

Item 2.01   Disposition of Assets

As stated in item 1.01 the Registrant has licensed all its technology to DCV pursuant to the License Agreement. (Item 1.01, which contains the relevant information, is incorporated herein by this reference).

Item 2.03  Creation of a Direct Financial Obligation of a Registrant

On August 5, 2005 the Registrant entered into a $500,000 secured, convertible loan bearing interest at 12% per annum with DCV that matures February 3, 2006 (the “Bridge Loan”).  Interest payments are made monthly, but no principal is due until maturity.  The loan is secured by all the assets of the Registrant, including its intellectual property.   The Bridge Loan is convertible, at the option of DCV, into 3,289,473 shares of the Registrant’s common stock, and is automatically converted into that number of shares at the closing of the Merger.  As an inducement to make the loan, DCV will receive an additional 1,644,736 shares of the Registrant’s common stock upon the closing of the Merger.   If the Merger is completed, DCV will own approximately 50.2% of the Registrant’s common stock.  As a result of the convertibility of the Bridge Loan, the Registrant is obligated to re-price certain outstanding warrants to purchase 730,794 shares of the Registrant’s common stock to an exercise price of approximately $.10 per share.

Section 5 – Corporate Governance and Management

Item 5.01  Changes in Control of Registrant

If the Merger is completed, DCV will beneficially own approximately 50.2% of the Registrant’s common stock, and this will result in a Change of Control, (Item 1.01, which contains the relevant information, is incorporated herein by this reference).

Item 5.02  Departures of Principal Officers

On August 5, 2005, as a result of the License granted to DCV and QuaTech, Michael P. Zachan, the Registrant’s Vice President for Airborne Products, ceased to be employed by the Registrant, Mr. Zachan is now employed by QuaTech.

Section 9 - - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(c)Exhibits

2.4 Agreement and Plan of Reorganization dated April 26, 2005 among the Registrant, DPAC Acquisition Sub, Inc. and QuaTech, Inc., including selected exhibits: Forms of Shareholder and Registration Rights

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	Agreement, Employment Agreement for Steven Runkel and Employment Agreement for Creighton Early. Other exhibits listed in the exhibit have been omitted from this filing but will be filed by the Registrant if requested by the Securities Exchange Commission*
2.4.2	First Amendment to Agreement and Plan of Reorganization dated August 5, 2005
2.5	License Agreement dated August 5, 2005
10.24	Bridge Loan and Escrow Agreement dated July 29, 2005
10.25	Convertible Term Note dated August 5, 2005
10.26	Loan Agreement dated August 5, 2005
10.27	Security Agreement dated August 5, 2005 with attached Riders
99.1	Press Release of Registrant dated August 5, 2005

* Filed as Exhibit 2.4 to the Registrant’s Form 8-K/A filed April 27, 2005

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

DPAC Technologies Corp.

(Registrant)

Date   August 5, 2005

/s/ Creighton K. Early

(Signature)

Creighton K. Early, Chief Executive Officer

(Name and Title)

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Exhibit Index

Exh. No.	Description
2.4	Agreement and Plan of Reorganization dated April 26, 2005 among the Registrant, DPAC Acquisition Sub, Inc. and QuaTech, Inc., including selected exhibits: Forms of Shareholder and Registration Rights Agreement, Employment Agreement for Steven Runkel and Employment Agreement for Creighton Early. Other exhibits listed in the exhibit have been omitted from this filing but will be filed by the Registrant if requested by the Securities Exchange Commission*
2.4.2	First Amendment to Agreement and Plan of Reorganization dated August 5, 2005
2.5	License Agreement dated August 5, 2005
10.24	Bridge Loan and Escrow Agreement dated July 29, 2005
10.25	Convertible Term Note dated August 5, 2005
10.26	Loan Agreement dated August 5, 2005
10.27	Security Agreement dated August 5, 2005 with attached Riders
99.1	Press Release of Registrant dated August 5, 2005

* Filed as Exhibit 2.4 to the Registrant’s Form 8-K/A filed April 27, 2005.

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EX-2.4.2

Exhibit 2.4.2

FIRST AMENDMENT TO

AGREEMENT AND PLAN OF REORGANIZATION

This First Amendment to the Agreement and Plan of Reorganization, dated as of August 5, 2005 (the “Amendment”) is entered into by and among DPAC Technologies Corp., a California corporation (“DPAC”), DPAC Acquisition Sub, Inc., an Ohio corporation (“DPAC Sub”), and QuaTech, Inc., an Ohio corporation (“QuaTech”).

RECITALS

WHEREAS, the parties entered into that certain Agreement and Plan of Reorganization, dated April 26, 2005 (the “Merger Agreement”), whereby DPAC, DPAC Sub and QuaTech agreed to engage in a business combination transaction following which QuaTech will become a wholly-owned subsidiary of DPAC (the “Transaction”);

WHEREAS, since the signing of the Merger Agreement, the circumstances of each of DPAC and QuaTech have changed, and in some cases the occurrence of events took longer than anticipated or became impossible, such that certain closing conditions to the Transaction, as set forth in Article VI of the Merger Agreement, are no longer feasible or applicable;

WHEREAS, QuaTech has commitments from financial institutions (“Commitment Letters”) to obtain approximately$4,000,000 for recapitalization and general corporate purposes, the funding of which shall occur prior to the Effective Date (the “QuaTech Refinancing”);

WHEREAS, the parties have anticipated the possibility that the shares of common stock of DPAC would become delisted from the Nasdaq SmallCap Market, despite DPAC’s efforts to retain their listing on the Nasdaq SmallCap Market;

WHEREAS, in light of the changed circumstances, each party is not willing to proceed with the Transaction unless certain amendments are made.

WHEREAS, as a result of the foregoing changed circumstances and in consideration for this Amendment, Development Capital Ventures, LP (“DCV”) an affiliate of QuaTech  has agreed to provide DPAC a secured short term bridge loan in the principal amount of $500,000  (the “DCV Bridge Loan”) and DCV and DPAC have agreed to enter into a License Agreement dated as of the date hereof,whereby DPAC will grant to DCV an exclusive, worldwide and perpetual right and license to manufacture, develop, market and sell all of DPAC’s Airborne products and technology  which will be exclusively sub-licensed to QuaTech (the “License Agreement”);

WHEREAS, the parties desire to amend the Merger Agreement to reflect the foregoing; and

WHEREAS, the Board of Directors of each of DPAC, DPAC Sub and QuaTech believe that as of the date hereof it is in the best interests of each of their respective companies to proceed with the Transaction, as set forth in the Merger Agreement as amended hereby.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

1.Exchange Rates.  Sections 1.6(a) and (b) of the Merger Agreement are amended and restated in their entirety to read as follows:

“(a)Conversion of QuaTech Common Stock.  At the Effective Time, all shares of QuaTech common stock, par value $0.00001 per share (“QuaTech Common Stock”) issued and outstanding immediately prior to the Effective Time, other than any shares of QuaTech Common Stock to be canceled pursuant to Section 1.6(c), shall be canceled and extinguished, and all of the shares of QuaTech Common Stock theretofore outstanding shall be converted automatically solely into the right to receive a number of registered whole shares of DPAC Common Stock (adjusted appropriately for any stock splits, stock dividends or similar recapitalization occurring prior to the Effective Time including without limitation the Reverse Split), rounded up to the nearest whole number of shares of DPAC Common Stock, at a rate, subject to adjustment, of one whole share of DPAC Common Stock in exchange for each 0.035916864 of one whole share of QuaTech Common Stock (the “Common Exchange Rate”), without payment for any lesser fractions, and all such lesser fractions of one whole shares of QuaTech Common Stock shall be cancelled without further payment therefor, except that a beneficial holder may aggregate such fractions from the person’s total holdings.  At the Closing, QuaTech shall deliver to DPAC a certified list showing the name and address of each record holder of QuaTech Common Stock and the exact number of shares held by each such holder (the “QuaTech Common Shareholder List”).  For avoidance of doubt, the Common Exchange Rate will require an adjustment to take into account the change in the number of outstanding shares of DPAC Common Stock as will result from the Reverse Split.

(b)Conversion of QuaTech Preferred Stock.  At the Effective Time all shares of QuaTech 9% Series A Convertible Preferred Stock, par value $0.00001 per share (“QuaTech Preferred Stock”) issued and outstanding immediately prior to the Effective Time shall be cancelled and extinguished and each share of QuaTech Preferred Stock theretofore outstanding shall be converted automatically solely into the right to receive a number of registered whole shares of DPAC Common Stock at a rate, subject to adjustment, of one whole share of DPAC Common Stock (adjusted appropriately for any stock splits, stock dividends or similar recapitalization occurring prior to the Effective Time including without limitation the Reverse Split), rounded up to the nearest whole number of shares of DPAC Common Stock, in exchange for each 0.035916864 of one whole share (subject to adjustment as provided below) of QuaTech Preferred Stock (the “Preferred Exchange Rate”), without payment for any lesser fractions of one whole share of QuaTech Preferred Stock, and all such lesser fractions shall be cancelled without further payment therefor, except that a beneficial holder may aggregate such fractions from the person’s total holdings.  For avoidance of doubt, the Preferred Exchange Rate will require an adjustment to take into account the change in the number of outstanding shares of DPAC Common Stock as will result from the Reverse Split.

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2.New Securities.  Section 1.6(i), Section 4.3 and 6.2(f) of the Merger Agreement are deleted in their entirety.

3.NASDAQ Listing.  Section 4.4, Section 5.14 and Section 6.1(i) of the Merger Agreement are deleted in their entirety.

4.Minimum Cash Balance.  Section 6.1(e) of the Merger Agreement is deleted in its entirety.

5.Minimum Credit Facility.  Section 6.1(f) of the Merger Agreement is deleted in its entirety; provided, however, that its remains a condition to QuaTech’s obligation to close that DPAC have no outstanding bank or other similar debt owed to any financial institution other than the DCV Bridge Loan and further is a condition to QuaTech’s and DPAC’S respective obligation to close the Merger that the QuaTech Refinancing have occurred on terms consistent with the Commitment Letters and satisfactory to QuaTech.

6.Exchange Ratio.  Section 6.1(g) of the Merger Agreement is deleted in its entirety.

7.QuaTech Warrant.  Section 6.1(h) of the Merger Agreement is deleted in its entirety.

8.DPAC Reconstituted Board.  Section 6.1(j) of the Merger Agreement is amended and restated in its entirety as follows:

“In accordance with Section 5.15 of this Agreement, the DPAC Reconstituted Board shall consist of William Roberts, Steven D. Runkel, Creighton K. Early, Samuel W. Tishler, Mark Chapman, James Bole and Dennis Leibel.”

9.           Section 6.3(i) is added to the Merger Agreement, and it shall read in its entirety as follows:

“(i) By September 30, 2005, QuaTech shall have refinanced its subordinated debt as contemplated in Section 5 of Amendment No.1 to this Agreement.”

10.Understanding of the Parties.  It is expressly agreed and contemplated by the parties, after full opportunity to conduct and review due diligence, that none of the present circumstances of DPAC or QuaTech shall be considered to have caused a Material Adverse Effect; and prior to the Closing QuaTech or DPAC may cause any or all of the following to occur, none of which shall be considered, whether they occur or not, to cause a Material Adverse Effect:  (i) QuaTech may refinance its bank debt; (ii) QuaTech may refinance its subordinated debt; (iii) the QuaTech warrant may be transferred to DCV or other shareholders of QuaTech; (iv) QuaTech and DPAC have entered into the License Agreement and this Amendment of the Merger Agreement, subject to approval of DPAC shareholders; (v) DPAC may cause certain former employees to modify their existing contracts to

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substitute DPAC common stock for future cash payments pursuant to such contracts; (vi) DPAC Common Stock shall be and remain delisted through the Effective Time. (vii) DPAC may issue promissory notes convertible into common stock to its legal counsel for one-half the fees charged from July 1, 2005 work forward and pay the remainder of all fees and costs of counsel in cash as and when due or upon the Effective Times if earlier; and (viii) DPAC and QuaTech may perform and carry out all of the other transactions referred to in this Amendment, including but not limited to the recitals.

11.Effect of Merger Agreement.  Except as specifically amended hereby, the Merger Agreement shall remain in full force and effect.

12.Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of Ohio, without regard to its conflicts of laws principles.

13.Entire Agreement.  This Amendment, together with the Merger Agreement and the License Agreement, constitutes the complete, final and exclusive understanding and agreement of the parties and supersedes any and all prior or contemporaneous negotiations, correspondence, understandings and agreements, whether oral or written, between the parties with respect to the subject matter hereof.

14.Use of Defined Terms.  Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the undersigned have executed and delivered this First Amendment to the Agreement and Plan of Reorganization by their respective duly authorized officers as of the date first written above.

DPAC TECHNOLOGIES CORP.
By:
Name:	Creighton K. Early
Title:	Chief Executive Officer
DPAC ACQUISITION SUB, INC.
By:
Name:	Creighton K. Early
Title:	Chief Executive Officer
QUATECH, INC.
By:
Name:	Steven D. Runkel
Title:	Chief Executive Officer

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EX-2.5

Exhibit 2.5

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (the “Agreement”) is made and entered into as of August 5, 2005 (“Effective Date”) by and among DPAC Technologies Corp., a California corporation (“DPAC”), Development Capital Ventures LP, a Delaware limited partnership (“DCV”) and QuaTech, Inc., an Ohio corporation (“QuaTech”).

BACKGROUND

WHEREAS, DPAC is a technology company that provides embedded wireless networking and connectivity products for machine-to-machine communication applications;

WHEREAS, QuaTech is an industry performance leader in device networking and connectivity solutions;

WHEREAS, DCV is a significant shareholder of QuaTech;

WHEREAS, DCV desires to simultaneously herewith and in partial consideration of the execution and delivery of this Agreement, receive a convertible note issued by DPAC (the “Note”), and DCV shall loan DPAC Five Hundred Thousand ($500,000) pursuant to the terms of the Note;

WHEREAS, DPAC owns certain technology and know-how relating to embedded wireless networking and connectivity products;

WHEREAS, DPAC and QuaTech are parties to that certain Agreement and Plan of Reorganization whereby DPAC would acquire QuaTech by merger, with the shareholders of QuaTech, including DCV, obtaining a controlling interest in DPAC (the “Merger Agreement”);

WHEREAS, DPAC and QuaTech desire to amend the Merger Agreement and simultaneously herewith and in partial consideration of the execution and delivery of this Agreement, are entering into that certain First Amendment to the Agreement and Plan of Reorganization of even date herewith (the “Amendment”);

WHEREAS, in connection with and in furtherance of the Amendment, DPAC desires to grant to DCV an exclusive, worldwide, perpetual sublicenseable right and license to manufacture, have manufactured, develop, market and sell the Products and the Technology; and

WHEREAS, DCV desires to sublicense its rights hereunder to QuaTech.

NOW, THEREFORE, pursuant to the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.DEFINITIONS.

The following terms when used herein shall have the following meanings:

1.1“Intellectual Property Rights” means any and all patents, patent applications, patent registrations, business processes, data rights, copyrights, trade names, trademarks, trade secrets, or any other intellectual property right, whether registered or unregistered, arising or enforceable under U.S. law

or the law of any other jurisdiction or international treaty regime related to the Technology and the Products.

1.2“Know-how” means any and all confidential and proprietary information that is owned or controlled by DPAC as of the Effective Date and during the term of this Agreement, that is necessary or useful for the development, manufacture, use, sale, or offer for sale of the Products and the Technology, including, but not limited to, trade secrets, know-how, techniques, methods, test data and results and designs.

1.3“Products” means the products set forth on Exhibit A attached hereto.

1.4“Technology” means all technology related to the Products including but not limited to: (i) Know-how; (ii) manufacturing processes and drawings; and (iii) software in both source code and object code.  Technology shall also include: (i) all Intellectual Property Rights related to the Technology; and (ii) all upgrades, modifications, enhancements and improvements to the Technology made by or for DPAC after the execution of this Agreement.

2.CONVERTIBLE NOTE.  Simultaneously herewith and in partial consideration of the execution and delivery of this Agreement, DPAC has issued DCV the Note pursuant to the terms contained therein.

3.AMENDMENT OF MERGER AGREEMENT.  Simultaneously herewith and in partial consideration of the execution and delivery of this Agreement, DPAC and QuaTech have entered into the Amendment on terms contained therein.

4.LICENSE.

4.1DPAC hereby grants to DCV, effective upon the amendment of the Merger Agreement and the execution of the Note, an exclusive, sublicensable, worldwide, perpetual right and license to the Technology, including the trade names DPAC Technologies, Airborne and AirborneDirect, to develop, make, have made, offer for sale, sell and create derivative works of the Products and the Technology.  DPAC shall provide DCV with all upgrades, modifications, enhancements and improvements to the Technology upon creation of such upgrades, modifications, enhancements and improvements.  If the exclusive license granted herein is not approved by the shareholders of DPAC, such exclusive license shall convert to a non-exclusive license, but shall continue to be subject to the terms of this Agreement.  Upon any such conversion, DCV shall have the right to terminate this Agreement upon notice to DPAC.

4.2All rights and licenses granted under or pursuant to this Agreement by DPAC to DCV are, and will otherwise be deemed to be, for purposes of section 365(n) of the United States Bankruptcy Code (the “Code”), licenses to rights in “intellectual property” as defined under the Code.  The parties further agree that, in the event of the commencement of bankruptcy proceedings by or against DPAC under the Code, DCV will be entitled, at its option, to retain all of its rights and licenses under this Agreement pursuant to Code Section 365(n).

4.3If DPAC or its affiliates owns or controls any patents filed or issued after the Effective Date claiming new technology based on the Technology or Products, DPAC will notify DCV in order to permit DCV the opportunity to negotiate a license to such patents.

4.4DCV hereby agrees to cause QuaTech to purchase from DPAC, at DPAC’s original cost, the Products contained in DPAC’s inventory required to fulfill and ship all backlog and customer orders for Products until such point that all of DPAC’s useable and salable inventory is reduced to zero.  QuaTech shall purchase the inventory from DPAC as and when needed and shall pay for such inventory

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purchases on terms of net 30 days from date of shipment.  QuaTech shall not purchase Products or inventory from any other source until all of DPAC’s usable and saleable inventory is reduced to zero.

4.5DCV hereby exclusively sublicenses to QuaTech, effective upon the amendment of the Merger Agreement and the execution of the Note, all of DCV’s rights set forth herein.

5.LICENSE FEES.  QuaTech shall pay DPAC the license fees set forth on Exhibit B (the “Fees”).  Any Fees due to DPAC shall be calculated, reported and paid monthly within thirty (30) days following the end of each calendar month in which QuaTech sells and ships to its customers any of the Products or derivatives of the Products.  Each payment shall be accompanied by a report in sufficient detail to permit confirmation of the accuracy of the Fees paid.  Payments shall be submitted to DPAC at an address to be provided by DPAC or by wire transfer to an account designated by DPAC.  All taxes levied on account of the payment of Fees under this Agreement shall be paid by DPAC for its own account, including taxes levied on income to DPAC.  DPAC shall have the right to annually audit the QuaTech reports on royalties due to confirm the accuracy of the Fees paid and QuaTech shall grant DPAC access to all necessary books and records to complete the audit.

6.DPAC EMPLOYEES.  DPAC and QuaTech hereby agree that QuaTech shall hire those certain DPAC employees as are identified on Exhibit C.  Such employees shall be granted full time employee status and be eligible for all standard QuaTech fringe benefits, and such employees shall be granted past service credit for their employment service period at DPAC for purposes of employee benefits at QuaTech.  QuaTech shall assume DPAC’s accrued Paid Time Off obligation and liability for each employee in the amount shown on Exhibit C and shall pay each sales employee any commissions earned since May 31, 2005 under their compensation plan.

7.CONFIDENTIALITY.

7.1“Confidential Information”means any information that one party discloses to the other parties pursuant to this Agreement, including without limitation, any information relating to any research, project, work in process, report, future development, business plan or financial matter relating to such party, its present or future products, services, sales, suppliers, customers, employees, investors or business, whether in oral, written, graphic or electronic form.  Each party shall: (a) hold all Confidential Information received from the other parties in confidence; (b) shall not disclose such Confidential Information to any third party nor allow any third party access to it; and (c) shall not use such Confidential Information for any purpose other than those contemplated by this Agreement without the disclosing party’s consent.  Notwithstanding the foregoing, each party may disclose Confidential Information to its employees and approved consultants and subcontractors who have a need to know such Confidential Information for purposes of conducting such party’s obligations under this Agreement; provided that such employees, consultants and subcontractors are bound by confidentiality obligations at least as restrictive as those set forth in this Section 7.  Each party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own to ensure that its employees, consultants and subcontractors do not disclose or make any unauthorized use of the Confidential Information, but in no event less than reasonable care.

7.2Exceptions.  Confidential Information shall not include information which:  (a) was, at the time of disclosure, in the possession of the receiving party and was not previously acquired from or on behalf of the disclosing party on a confidential basis; (b) was in the public domain prior to disclosure, or became, after disclosure, publicly known through no fault of the receiving party, (c) was developed by or on behalf of the receiving party independent of its receipt of Confidential Information from the disclosing party; (d) was received from a third party who rightfully made such disclosure; or (e) was approved for

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use or release by written authorization from the disclosing party prior to such use or release by the receiving party.

7.3Authorized Disclosures.  Each receiving party shall be permitted to disclose Confidential Information of the disclosing party to extent such disclosure is required by operation of law, governmental regulation or court order; provided the receiving party gives the disclosing party notice of such disclosure prior to such disclosure, and the receiving party uses all reasonable effort to cooperate in securing confidential protection for such information.  The parties acknowledge that DPAC will be required to disclose the existence of this Agreement and the Amendment in its filings with the Securities and Exchange Commission and to issue a press release announcing the Amendment and the license granted herein.

7.4Terms of the Agreement.  None of the parties shall publicize the terms and conditions of this Agreement without the other parties’ prior written consent; provided, however, nothing in this Agreement will prevent any party from making any disclosure that is required under any securities regulations or laws.  The parties may disclose the terms of this Agreement to those third parties who have a need to know for due diligence purposes or similar investigations relating to financing transactions; provided that such disclosures are made under confidentiality obligations substantially as protective as those provided under this Section 7.

8.TERMINATION.

8.1If a party materially breaches this Agreement the other parties will have the right to terminate this Agreement, provided that such party or parties notify the breaching party in writing of such material breach, give the breaching party sixty (60) days to cure such material breach and the material breach is not cured within such sixty (60) day period.

8.2In the event of a termination of the Merger Agreement prior to closing for any reason, DCV and/or QuaTech shall have the option to,within five (5) business days of such termination, initiate the determination of the value of the license of the Products which shall be determined to be the average appraised value, as determined by two (2) third party appraisers, one (1) of which shall be hired and paid by each of DPAC and/or QuaTech (as applicable) and DCV, of the Products and the backlog of customer orders.  Each appraiser shall be instructed to deliver its appraisal report to both DCV and/or QuaTech (as applicable) and DPAC within thirty (30) days of the date of the termination of the Merger Agreement.  Within ten (10) days of the date the last of the two (2) appraisal reports was delivered to the parties, the average appraised value purchase price shall be paid by an initial payment of two hundred fifty thousand dollars ($250,000) in cash and the further payment of royalties under this Agreement at the rates specified herein until such time as the purchase price is paid in full or the expiration of two (2) years, at which time any balance due (i.e. any excess of the average appraised value over the total of all royalties paid under this Agreement) shall be paid in full.  In the event that neither DCV nor QuaTech, individually or jointly, elects to exercise their respective options to have the average appraised value determined, or neither QuaTech nor DCV elects to continue this Agreement and the License after the determination of the average appraised value, this Agreement and the License shall automatically terminate and any existing backlog of customer orders for the Products shall automatically and without cost revert to DPAC.

8.3Upon the Effective Date of the Merger, as defined in the Merger Agreement, and the payoff of the Note, this Agreement shall immediately terminate.

8.4Upon termination of this Agreement, the receiving party agrees to promptly return all originals and copies of Confidential Information received, as well as permanently delete all electronically or otherwise stored Confidential Information from all systems containing such Confidential Information,

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except that one copy may be retained by the receiving party to confirm its obligations under this Agreement.  Notwithstanding the return of Confidential Information, upon the termination of this Agreement, DCV shall maintain a copy of all Technology in order to maintain and support the Products or derivatives of such Products provided to QuaTech customers, and in accordance with its rights set forth in Section 4.2.

9.REPRESENTATIONS AND WARRANTIES.

9.1Binding Agreement.  Each party hereby represents and warrants that this Agreement is a legal and valid obligation binding upon such party and enforceable in accordance with its terms.  The execution, delivery and performance of this Agreement by such party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

9.2Intellectual Property.

(a)DPAC represents and warrants to DCV and QuaTech that:  (i) DPAC is the owner of all right, title and interest in and to the Technology; (ii) it has not granted any license to the Technology, except to DCV pursuant to this Agreement, and is under no obligation to grant any such license; (iii) there are no outstanding liens, encumbrances, agreements or understandings of any kind, whether written, oral or implied, regarding the Technology that are inconsistent with or in conflict with any provision of this Agreement; (iv) no patent or patent application within Technology is the subject of any pending interference, opportunity, cancellation or other protest proceeding; (v) the practice or use of the Technology by DCV and QuaTech as authorized herein will not infringe or misappropriate any third party Intellectual Property rights.

(b)DPAC hereby represents and warrants to DCV and
QuaTech that as of the Effective Date DPAC neither owns nor controls any patents or patent applications that are not included in the definition of Technology and that would be infringed by the practice of the Technology.  The parties agree and acknowledge that if such patents or patent applications owned or controlled by DPAC are subsequently found to have existed prior to the Effective Date, or are filed or granted during the term of this Agreement, the parties shall amend the definition of Technology to include such patents or patent applications.

(c)DCV acknowledges and accepts, without penalty to DPAC, that, prior to the Effective Date, DPAC has entered into certain sales representation agreements and has accepted purchase orders from customers for future shipment of the Products which will be fulfilled by DCV.  Such agreements and purchase orders may permit the sales representative or the customer to terminate their rights and obligations in their relationship with DPAC as a result of the granting of the license to DCV.  DPAC agrees to support DCV and QuaTech in the continuation of these relationships and to provide documents and any other support reasonably requested by DCV and QuaTech for the continuation of these agreements.

10.INDEMNIFICATION.  DPAC shall indemnify, defend and hold harmless DCV and QuaTech, and their respective employees, officers, directors and agents, from and against any and all losses, damages, costs, fees and expenses (including, without limitation, reasonable attorneys’ fees) incurred by either or both of DCV and QuaTech in connection with any claim, suit or proceeding brought against either or both of DCV and QuaTech by a third party to the extent resulting from or arising out of a breach by DPAC of any of its representations and warranties under Section 9.

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11.MISCELLANEOUS

11.1Choice of Law; Jurisdiction and Venue.  This Agreement is made in accordance with and shall be governed by the laws of the State of Ohio, excluding its conflicts of laws rules.  The parties hereby consent to the jurisdiction and venue of the state courts within Summit County, Ohio and federal courts in the State of Ohio in any action arising out of or otherwise related to this Agreement, and agree that such courts shall be the exclusive forum for bringing and resolving any such claims.

11.2Relationship of the Parties.  The relationship between the parties is that of independent contractors, and nothing in this Agreement shall be construed to constitute the parties as principal and agent, employer and employee, partners, joint venturers, co-owners, agents or otherwise as participants in a joint undertaking.  No party has authority to bind the other parties.

11.3Force Majeure.Nonperformance of any party will be excused to the extent that performance is rendered impossible by strike, fire, flood, power outages, governmental acts or orders or restrictions, or any other reason where failure to perform is beyond the reasonable control of and is not caused by the negligence of the non-performing party.

11.4Assignment.  None of the parties shall assign or delegate this Agreement, in whole or in part, without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed; provided, however, that a party may assign this Agreement to a parent, subsidiary, or successor-in-interest to its business (whether by merger, acquisition, consolidation, or sale of substantially all of its shares or assets), provided that the assignee agrees to the terms and conditions herein.  Any permitted assignment will not expand the scope of the license granted herein.  Any attempted assignment or delegation in violation of the preceding will be null and void.  Subject to the foregoing, this Agreement shall be binding on and inure to the benefit of the parties and their respective successors and permitted assigns.

11.5Public Announcements.  If any party desires to, or is required by law to, make a public announcement concerning the Agreement or the subject matter hereof, such party will give reasonable prior advance notice of the proposed text of such announcement to the other parties for their review and approval.

11.6Notices.  All notices and other communications hereunder will be in writing and will be delivered personally, by facsimile transmission (receipt verified), by registered mail (return receipt requested) or by nationally recognized overnight carrier, to the parties at addresses set forth above (or at such other address for a party as will be specified by like notice).  Notice shall be deemed sufficiently given for all purposes upon the earlier of:  (a) the date of actual receipt; (b) if mailed, three (3) days after the date of postmark; or (c) if delivered by overnight courier, the next business day the overnight courier regularly makes deliveries.

11.7Amendment; Waiver.  No amendment, modification or supplement of any provision of the Agreement will be valid or effective unless made in writing and signed by a duly authorized officer of each party.  No provision of the Agreement unless such provision otherwise provides will be waived by any act, omission or knowledge of a party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorized officer of the waiving party.

11.8Severability.  If any provision of the Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of the Agreement.

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11.9Entire Agreement.  This Agreement, together with its Exhibits, the Merger Agreement, the Amendment and the documents executed in connection therewith and the transactions contemplated thereby, constitutes the complete, final and exclusive understanding and agreement of the parties and cancels and supersedes any and all prior or contemporaneous negotiations, correspondence, understandings and agreements, whether oral or written, between the parties respecting the subject matter thereof.

11.10Counterparts; Facsimile.  This Agreement may be executed in one or more counterparts, all of which, when taken together, will constitute one and the same agreement.  A facsimile signature will be deemed as valid as an original signature.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the Effective Date.

DPAC TECHNOLOGIES CORP.	DEVELOPMENT CAPITAL VENTURES, LP
By:	By:
Name:	Name:
Title:	Title:
	QUATECH, INC.
	By:
	Name:
	Title:

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Exhibit A

Products

• Airborne WLAN module and related products

• Airborne Direct Serial Bridge and related products

• Airborne Direct Ethernet Bridge and related products

• Airborne 802.11G module currently under development

• Airborne Vehicle Gateway currently under development

• Airborne Mobile Access Point currently under development

Exhibit B

License Fees

QuaTech shall pay DPAC five dollars ($5.00 U.S.) per radio-only Product or Product-derivative, ten dollars ($10.00) per unit sold of all other Product or Product derivatives, and 10% of any Non-Recurring Engineering Feesfor the Product or Product derivatives sold by QuaTech pursuant to the payment schedule set forth in the Agreement.

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Exhibit C

Employees Hired by QuaTech

Upon the execution of the License Agreement, QuaTech will hire the following employees and assume the obligation for Paid Time Off benefits as indicated for each employee.

Employee Name	Paid Time Off Benefit Assumed
Michael Zachan	$	3,915.00
Gregory Gower	$	2,481.68
Andrew Ross	$	3,469.04
Joseph Nordaby	$	3,631.59
David Purtill	$	6,040.71
Mohit Kapila	$	5,075.99
Kanak Nath	$	6,760.96

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EX-10.24

Exhibit 10.24

BRIDGE LOAN ESCROW AGREEMENT

This Escrow Agreement is made as of this 29th day of July, 2005, by and among DEVELOPMENT CAPITAL VENTURES, LP (the “Lender”), DPAC TECHNOLOGIES CORP. (the “Borrower”), and BUCHANAN INGERSOLL PC (the “Escrow Agent”).

STATEMENT OF FACTS

A.The Borrower and the Lender have been negotiating the terms of that certain Loan Agreement pursuant to which the Lender has agreed to lend to the Borrower the sum of $500,000 (the “Loan Transaction”).

B.The Loan Transaction is expected to close on or about August 5, 2005, and in any event prior to August 21, 2005 (the “Drop Dead Date”).

C.The Borrower and the Lender have agreed that the Lender is to place the sum of $500,000 in escrow pursuant to the terms of this Agreement, which amount is to be distributed to the Borrower at the closing of the Loan Transaction, if such closing takes place prior to the Drop Dead Date, or such funds will be returned to the Lender promptly after the Drop Dead Date if the Closing has not occurred prior to such date.

D.The Escrow Agent has agreed to act as the escrow agent for such purposes upon the terms set forth herein.

NOW, THEREFORE, in consideration of the Statement of Facts and the mutual covenants and agreements contained herein, the parties, intending to be legally bound, covenant and agree as follows:

1.Establishment of Escrow Fund.

Simultaneously with the execution and delivery of this Agreement, the Lender will deposit the sum of Five Hundred Thousand Dollars ($500,000) (the “Escrow Amount”) with the Escrow Agent.  The Escrow Amount, together with interest accrued thereon, is herein referred to as the “Escrow Fund”.

2.Appointment of Escrow Agent.

2.1The Lender and the Borrower appoint the Escrow Agent to serve as escrow agent under the terms of this Agreement, and the Escrow Agent accepts such appointment.

2.2The Escrow Agent agrees to place the Escrow Amount in an interest bearing account in the name of the Escrow Agent at Citizens Bank, located in Pittsburgh, Pennsylvania.  The Escrow Funds shall be invested in one or more “Permitted Investments” as that term is

defined on Exhibit A hereto.  The Escrow Agent is not responsible for monitoring the interest paid on the Escrow Fund nor the deposit insurance thereon.

2.3The Escrow Agent further agrees to carry out the provisions of this Agreement on its part to be performed, but the Borrower and the Lender acknowledge and agree that the duties of Escrow Agent are purely ministerial in nature.

3.Purpose of the Escrow Fund.

The purpose of the Escrow Fund is to provide a source for the funding of the Lender’s obligations under the Loan Transaction.

4.Distribution of the Escrow Fund.

4.1Prior to the Drop Dead Date, the Escrow Agent will disburse the Escrow Fund upon receipt of joint written instructions executed on behalf of both the Borrower and the Lender certifying that the closing of the Loan Transaction is taking place and directing the Escrow Agent as to how to distribute the Escrow Fund (the “Closing Notice”).  If no Closing Notice has been received by the Escrow Agent as of the close of business on the day immediately preceding the Drop Dead Date, then on or promptly after the Drop Dead Date the Escrow Agent will disburse the Escrow Fund to the Lender in accordance with the written instructions of the Lender. The Escrow Agent shall have no discretion in determining when or to whom to release the Escrow Fund.

4.2The Escrow Agent may, at any time, deposit the Escrow Fund with a court of competent jurisdiction and, upon such deposit, the Escrow Agent will be relieved of any further liability or responsibility with respect thereto.

5.Limited Duties of Escrow Agent.

5.1The Escrow Agent will not in any way be bound or affected by a notice of modification or cancellation of this Agreement unless notice thereof is given to the Escrow Agent executed on behalf of both the Borrower and the Lender, nor will the Escrow Agent be bound by any modification of its obligations hereunder unless the same will be consented to by the Escrow Agent in writing.  The Escrow Agent will be entitled to rely upon any judgment, certification, demand or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any facts stated therein, the propriety or validity of the service thereof, or the jurisdiction issuing any judgment.

5.2The Escrow Agent will not be under any duty to give the property held by it hereunder any greater care than it gives its own similar property.

5.3The Escrow Agent may act in reliance upon any instrument or signature believed by it to be genuine, and it may assume that any person purporting to give any notice or make any statement in connection with the provisions hereof has been duly authorized to do so.

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5.4The Escrow Agent may act in reliance upon advice of counsel in reference to any matter connected herewith, and will not be liable for any mistake of fact or error of judgment, or for any act or omission of any kind except as such act or omission constitutes willful misconduct, gross negligence or fraud.

5.5The Escrow Agent will not have any responsibility for the payment of taxes except with funds furnished to the Escrow Agent for that purpose.

5.6This Agreement sets forth exclusively the duties of the Escrow Agent with respect to any and all matters pertinent hereto.  Except as otherwise expressly provided herein, the Escrow Agent will not refer to, and will not be bound by, the provisions of any other agreement.

5.7Except with respect to claims based upon the Escrow Agent’s willful misconduct, gross negligence or fraud, the Borrower will indemnify and hold harmless the Escrow Agent from any claims made against the Escrow Agent by the Lender arising out of or relating to this Agreement, and the Lender will indemnify and hold the Escrow Agent harmless from any claims made against the Escrow Agent by the Borrower arising out of or relating to this Agreement.  The Borrower and the Lender jointly and severally will indemnify and hold the Escrow Agent harmless from any claim made by any third party arising out of or relating to this Agreement, such indemnification to include all costs and expenses incurred by the Escrow Agent, including reasonable attorneys’ fees.

5.8The Escrow Agent will not be required to institute or defend any action involving any matters referred to herein or which affect it or its duties or liability hereunder, unless or until requested to do so by any party to this Agreement and then only upon receiving full indemnity, in character satisfactory to the Escrow Agent, against any and all claims, liabilities and expenses, including reasonable attorneys’ fees, in relation thereto.

5.9Upon termination of this Agreement, the Escrow Agent may request from the Borrower and the Lender such additional assurances, certificates, satisfactions, releases and/or other documents as it may deem appropriate to evidence the termination of this Agreement.

5.10The Lender acknowledges that it is necessary, for federal income tax purposes, for the Escrow Agent to know its employer identification numbers (“EIN”).  The Lender represents that its EIN is 54-1953766.

5.11The Borrower and the Lender acknowledge that the Escrow Agent is merely serving as a depository hereunder and that the Escrow Agent currently is serving and will continue to serve as counsel for the Lender with respect to various matters including, but not limited to, the Loan Transaction.  The Borrower agrees, on its own behalf and for any party affiliated with it, that it will not assert that a conflict of interest is presented by the Escrow Agent serving as legal counsel to the Lender in any current or future matter because of the Escrow Agent’s service hereunder and the Borrower agrees that it will not attempt to disqualify the Escrow Agent from acting as counsel to the Lender because of its service hereunder.

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6.Notices.

All notices or other communications required or permitted hereunder will be in writing and will be deemed given when delivered: (i) personally, (ii) by registered or certified mail (postage prepaid), (iii) by legible facsimile transmission or (iv) by overnight courier (fare prepaid), in all cases addressed as follows:

If to the Borrower, to:	with a copy to:
DPAC Technologies Corp.	Nicholas Yocca, Esq.
7321 Lincoln Corp.	The Yocca Law Firm, LLP
Garden Grove, CA 92841	19900 MacArthur Blvd., Suite #650
Telecopy: (714) 899-7557	Irvine, CA 92612
	Telecopy: (949) 253-0870
If to the Lender, to:	with a copy to:
Development Capital Ventures, LP	Richard D. Rose, Esq.
4443 Brookfield Corporate Drive, Suite 110	Buchanan Ingersoll PC
Chantilly, VA 20151	One Oxford Centre
Telecopy: (703) 961-0154	301 Grant Street, 20th Floor
	Pittsburgh, PA 15219-1410
	Telecopy: (412) 562-1041

If to the Escrow Agent, to:

Thomas G. Buchanan, Esq.
Buchanan Ingersoll PC
One Oxford Centre
301 Grant Street, 20^th Floor
Pittsburgh, PA 15219-1410
Telecopy:  412-562-1041

or to such address as such party may indicate by a notice delivered to the other parties.  Notice will be deemed received the same day (when delivered personally), 5 days after mailing (when sent by registered or certified mail), or the next business day (when sent by facsimile transmission or when delivered by overnight courier).  Any party to this Agreement may change its address to which all communications and notices may be sent hereunder by addressing notices of such change in the manner provided.

7.Miscellaneous.

7.1This Agreement and the rights and the obligations of the parties will be governed by and construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its conflicts of law provisions.

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7.2The parties:  (i) agree that any legal action concerning any and all claims, disputes, or controversies arising out of or relating to this Agreement will only be commenced in Pittsburgh, Pennsylvania and that such location is the most convenient forum for the parties; (ii) consent to the jurisdiction of the state and federal courts located in Allegheny County, Pennsylvania; and (iii) agree to accept service of any pleadings (and such service will be valid), if made by certified or registered mail, return receipt requested, to the respective parties at the addresses set forth in Section 6 of this Agreement.  IN THE EVENT OF ANY COURT PROCEEDING HEREUNDER, THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY.

7.3The parties agree to execute and deliver any and all documents and to take such further action as will be reasonably required to effectuate the provisions of this Agreement.

7.4This Agreement contains the entire understandings of the parties with respect to the subject matter herein contained and will not be modified except by a writing signed by all the parties.  Any and all recitals, statements (including the Statement of Facts), reports, certificates or other documents or instruments referred to or attached to this Agreement are incorporated by reference into this Agreement.  The word “including” means “including without limitation.”

7.5This Agreement will inure to the benefit of and be binding upon the parties and their respective successors and assigns.  The Borrower, the Lender and, except as provided in Section 4.2, the Escrow Agent cannot assign this Agreement, without the consent of all the other parties, which consent cannot be unreasonably withheld, conditioned or delayed.

7.6There will be no presumption against any party on the ground that such party was responsible for preparing this Agreement or any part of it.

7.7This Agreement may be executed in one or more counterparts, each of which when taken together will comprise one instrument.  Delivery of executed signature pages by facsimile transmission will constitute effective and binding execution and delivery.

Signatures on Following Page

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

BUCHANAN INGERSOLL PC		DPAC TECHNOLOGIES CORP.
By:		By:
	Name:		Name:
	Title:		Title:
		DEVELOPMENT CAPITAL VENTURES, LP
		By:		DCC Operating, Inc.
		Its:		General Partner
		By:
			Name:
			Title:

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Exhibit A

Permitted Investments

(1)Direct obligations of, or obligations guaranteed as to principal and interest by, the United States, which mature within 15 months from the date of the investment; or

(2)Repurchase agreements with federally insured institutions, with a maturity of seven days or less.  The securities underlying the repurchase agreements must be direct obligations of, or obligations guaranteed as to principal and interest by, the United States.  The securities must be maintained in a custodial account at a federally insured institution; or

(3)Certificates of deposit with a maturity of one year or less, issued by a federally insured institution; or

(4)A deposit account in a federally insured institution, subject to a withdrawal restriction of one year or less; or

(5)A checking account in a federally insured institution.

EX-10.25

Exhibit 10.25

DPAC TECHNOLOGIES CORP.

CONVERTIBLE TERM NOTE

                  ,               

$500,000.00 August 5, 2005

For value received, DPAC TECHNOLOGIES CORP., a California corporation with an address at 7321 Lincoln Way, Garden Grove, California 92841 (the “Company”), hereby promises to pay to DEVELOPMENT CAPITAL VENTURES, LP, a Small Business Investment Company, licensed by the U.S. Small Business Administration pursuant to the Small Business Investment Act of 1958, as amended (hereinafter referred to as the “Holder”) the principal sum of Five Hundred Thousand Dollars ($500,000.00), with interest from the date hereof on the unpaid balance at a per annum rate of Twelve Percent (12.00%).  The outstanding principal amount of this Note, together with any interest accrued but unpaid thereon (the “Outstanding Amount”), shall be due and payable on February 3, 2006, unless otherwise converted as set forth in Section 3 (the “Maturity Date”).  This Convertible Promissory Note, as the same may be amended or supplemented from time to time is hereinafter referred to as the “Note”.

1.Payments.  Principal and interest shall be payable in lawful money of the United States of America, by wire transfer to a bank account designated by the Holder or by bank check delivered to the principal office of the Holder or at such other place as the Holder may designate from time to time in writing to the Company.  Interest will be calculated based on the actual number of days that principal is outstanding over a year of 360 days.  Interest shall be due and payable monthly, in arrears, commencing on                               ,             , and continuing on the          day of each month thereafter until the Maturity Date, on which date all outstanding principal and accrued interest shall be due and payable in full.

2.Default Rate.  Upon maturity, whether by acceleration, demand or otherwise, and at the Holder’s option upon the occurrence of any Event of Default (as hereinafter defined) and during the continuance thereof, the Outstanding Amount of this Note shall bear interest at a rate per annum (based on the actual number of days that principal is outstanding over a year of 360 days) which shall be six percentage points (6.00%) in excess of the interest rate in effect from time to time under this Note but not more than the maximum rate allowed by law (the “Default Rate”).  The Default Rate shall continue to apply whether or not judgment shall be entered on this Note.  The Default Rate is imposed as liquidated damages for the purpose of defraying the Holder’s expenses incident to the handling of delinquent payments, but are in addition to, and not in lieu of, the Holder’s exercise of any rights and remedies hereunder, under the other Loan Documents or under applicable law, and any fees and expenses of any agents or attorneys which the Holder may employ.  In addition, the Default Rate reflects the increased credit risk to the Holder of carrying a loan that is in default.  The Borrower agrees that Default Rate is reasonable forecasts of just compensation for anticipated and actual harm incurred by the Holder, and that the actual harm incurred by the Holder cannot be estimated with certainty and without difficulty.

3.Conversion.

3.1Upon Merger.  If the Company consummates the merger of the Company and QuaTech, Inc. prior to February 3, 2006 in a manner satisfactory to Lender (the “Qualifying Merger”), then, simultaneously with the effective date of the Qualifying Merger, the Outstanding Amount of this Note shall automatically be converted into 3,289,473 registered shares of the Company’s common stock

as of the effective date of the Qualifying Merger (“Common Stock”).  In addition, Company acknowledges that upon the date of the Qualifying Merger, the Company will give to the Holder a Conversion Incentive (as such term is defined in the Loan Agreement dated the date hereof between Holder and Company).

4.Conversion Procedure.

4.1Notice of Conversion.  Before the Holder shall be entitled to convert this Note into securities pursuant to Section 3, it shall surrender this Note at the office of the Company.  Upon surrender of this Note, the Holder shall indicate the name or names in which the certificate or certificates for shares of Common Stock are to be registered.  The Company shall, as soon as practicable thereafter, issue and deliver at such office to the Holder of this Note a certificate or certificates for the number of shares of Common Stock to which the Holder of this Note shall be entitled.  Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of this Note, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

4.2Delivery of Stock Certificates.  As promptly as practicable after the conversion of this Note, the Company at its expense will issue and deliver to the Holder of this Note a certificate or certificates for the number of full shares of Common Stock, as applicable, issuable upon such conversion.

4.3Mechanics and Effects of Conversion.  No fractional shares shall be issued upon conversion of this Note.  In lieu of the Company issuing any fractional shares to the Holder upon the conversion of this Note, the Company shall pay to the Holder the amount of outstanding principal that is not so converted, such payment to be in the form as provided below.  Upon the conversion of this Note the Holder shall surrender this Note, duly endorsed, at the principal office of the Company.  At its expense, the Company shall, as soon as practicable thereafter, issue and deliver to such Holder at such principal office a certificate or certificates for the number of shares of such Common Stock to which the Holder shall be entitled upon such conversion (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company), together with any other securities and property to which the Holder is entitled upon such conversion under the terms of this Note, including a check payable to the Holder for any cash amounts payable as described above.

5.Events of Default.  An “Event of Default” means the occurrence or existence of one or more of the following events or conditions (whatever the reason for the Event of Default and whether voluntary, involuntary, or effected by operation of law).  If any of the following Events of Default shall occur:

(a)The Company fails to pay when due principal or interest on the Notes.

(b)The Company or any of its subsidiaries shall (i) voluntarily terminate operations or apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of it or of all or a substantial part of its assets, (ii) admit in writing its inability, or be generally unable, to pay its debts as the debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code of the United States (as now or hereafter in effect), (v) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, (vi) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an

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involuntary case under the Federal Bankruptcy Code of the United States or other applicable bankruptcy law or (vii) take any corporate action for the purpose of effecting any of the foregoing;

(c)Without its application, approval or consent, a proceeding shall be commenced, in any court of competent jurisdiction, seeking in respect of the Company or any of its subsidiaries:  the liquidation, reorganization, dissolution, winding-up, or composition or readjustment of debt, the appointment of a trustee, receiver, liquidator or the like of such entity or of all or any substantial part of its assets, or other like relief in respect of such entity under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts; and, if the proceeding is being contested in good faith by such entity, the same shall continue undismissed, or unstayed and in effect for any period of forty-five (45) consecutive days, or an order for relief against such entity shall be entered in any case under the Federal Bankruptcy Code of the United States or other applicable bankruptcy law;

(d)The Company is in default under any of the Loan Documents (as defined in the Loan Agreement).

then, and in any such event and at any time thereafter, if such Event of Default or any other Event of Default shall have not been waived, the Holder may declare by notice to the Company the Outstanding Amounts of the Note to be immediately due and payable, and the same shall forthwith become immediately due and payable without presentment, demand, protest, notice or other formality of any kind, all of which are hereby expressly waived; provided, however, that notwithstanding the above, if there shall occur an Event of Default under clause (b) or (c) above, then the Outstanding Amounts of the Note shall be immediately due and payable without the necessity of any action by the Holders or notice to the Company.

6.Information Rights.  For so long as this Note remains outstanding, the Company shall provide to Holder copies of all financial statements, including Company balance sheets, statements of income and cash flow statements, which are provided to the stockholders of the Company.

7.Modification of Note.  The terms of the Note may be amended, modified, supplemented, changed, waived or altered in any respect upon receipt of the consent in writing from the Holder and of the Company, which amendment, modification, supplement, change, waiver or alteration shall be binding upon and apply to the Holder of the Note.

8.Miscellaneous.

8.1Binding Benefit.  This Note, and the obligations and rights of the parties hereunder, shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

8.2No Waiver.  No delay or omission on the part of the Holder in exercising any right hereunder shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any occasion be deemed a bar to, or waiver of, the same or any other right on any future occasion.

8.3Waivers by the Company.  The undersigned and every endorser or guarantor of this Note, regardless of the time, order or place of signing, waives presentment, demand, protest and notice of every kind and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral available to the Holder, if any, and to the additions or releases of any other parties or persons primarily or secondarily liable.

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8.4Rights of Action; Remedies.  All rights of action with respect to this Note are vested in the Holder, and the Holder may enforce against the Company its right to convert this Note into shares of capital stock of the Company in the manner provided in this Note.  The Company stipulates that the remedies at law of the Holder in the Event of any Default or threatened Event of Default by the Company in the performance of or compliance with any of the terms of this Note are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

8.5Loss or Mutilation.  Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, if requested in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Note, the Company at its expense will execute and deliver, in lieu hereof, a new Note of like tenor.

8.6Governing Law.  All rights and obligations under this Note shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of Delaware, without regard to its principles of conflicts of laws.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first above written.

DPAC TECHNOLOGIES CORP.
By:
	Name:
	Title:

EX-10.26

Exhibit 10.26

LOAN AGREEMENT

THIS LOAN AGREEMENT (the “Agreement”), is entered into as of August 5, 2005, between DPAC TECHNOLOGIES CORP., a California corporation (the “Borrower”), with an address at 7321 Lincoln Way, Garden Grove, California 92841, and DEVELOPMENT CAPITAL VENTURES, LP, a Small Business Investment Company, licensed by the U.S. Small Business Administration pursuant to the Small Business Investment Act of 1958, as amended (the “Lender”), with an address at 4443 Brookfield Corporate Drive, Suite 110, Chantilly, Virginia 20151

The Borrower and the Lender, with the intent to be legally bound, agree as follows:

1.  Loan.  The Lender has made or may make a loan in the principal amount of $500,000.00 (the “Loan”) to the Borrower for the purpose of working capital needs of the Borrower, subject to the terms and conditions and in reliance upon the representations and warranties of the Borrower set forth in this Agreement.  The Loan is or will be evidenced by a promissory note of the Borrower and all renewals, extensions, amendments and restatements thereof (if one or more, collectively, the “Note”) acceptable to the Lender, which shall set forth the interest rate, repayment and other provisions, the terms of which are incorporated into this Agreement by reference.

2.  Security.  The security for repayment of the Loan shall include but not be limited to the collateral, guaranties and other documents heretofore, contemporaneously or hereafter executed and delivered to the Lender (the “Security Documents”), which shall secure repayment of the Loan, the Note and all other loans, advances, debts, liabilities, obligations, covenants and duties owing by the Borrower to the Lender or to any other direct or indirect subsidiary of the Lender of any kind or nature, present or future (including any interest accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, whether or not (i) evidenced by any note, guaranty or other instrument, (ii) arising under any agreement, instrument or document, (iii) for the payment of money, (iv) arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease or guarantee, (v) under any interest or currency swap, future, option or other interest rate protection or similar agreement, (vi) under or by reason of any foreign currency transaction, forward, option or other similar transaction providing for the purchase of one currency in exchange for the sale of another currency, or in any other manner, or (vii) arising out of overdrafts on deposit or other accounts or out of electronic funds transfers (whether by wire transfer or through automated clearing houses or otherwise) or out of the return unpaid of, or other failure of the Lender to receive final payment for, any check, item, instrument, payment order or other deposit or credit to a deposit or other account, or out of the Lender’s non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository or other similar arrangements; and any amendments, extensions, renewals and increases of or to any of the foregoing, and all costs and expenses of the Lender incurred in the documentation, negotiation, modification, enforcement, collection and otherwise in connection with any of the foregoing, including reasonable attorneys’ fees and expenses (hereinafter referred to collectively as the “Obligations”).  Unless expressly provided to the contrary in documentation for any other loan or loans, it is the express intent of the Lender and the Borrower that all Obligations including those included in the Loan be cross-collateralized and cross-defaulted, such that collateral securing any of the Obligations shall secure repayment of all Obligations and a default under any Obligation shall be a default under all Obligations.

This Agreement, the Note, the Security Documents and all other agreements and documents executed and/or delivered pursuant hereto, as each may be amended, modified, extended or renewed from time to time, are collectively referred to as the “Loan Documents.”  Capitalized terms not defined herein shall have the meanings ascribed to them in the Loan Documents.

3.  Representations and Warranties.  The Borrower hereby makes the following representations and warranties, which shall be continuing in nature and remain in full force and effect until the Obligations are paid in full, and which shall be true and correct except as otherwise set forth on the Addendum attached hereto and incorporated herein by reference (the “Addendum”):

3.1.  Existence, Power and Authority.  The Borrower is duly organized, validly existing and in good standing under the laws of the State of its incorporation or organization and has the power and authority to own and operate its assets and to conduct its business as now or proposed to be carried on, and is duly qualified, licensed and in good standing to do business in all jurisdictions where its ownership of property or the nature of its business requires such qualification or licensing.  The Borrower is duly authorized to execute and deliver the Loan Documents, all necessary action to authorize the execution and delivery of the Loan Documents has been properly taken, and the Borrower is and will continue to be duly authorized to borrow under this Agreement and to perform all of the other terms and provisions of the Loan Documents.

3.2.  Financial Statements.  The Borrower has delivered or caused to be delivered to the Lender its most recent balance sheet, income statement and statement of cash flows, (as applicable, the “Historical Financial Statements”).  The Historical Financial Statements are true, complete and accurate in all material respects and fairly present the financial condition, assets and liabilities, whether accrued, absolute, contingent or otherwise and the results of the Borrower’s operations for the period specified therein.  The Historical Financial Statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) consistently applied from period to period, subject in the case of interim statements to normal year-end adjustments and to any comments and notes acceptable to the Lender in its sole discretion.

3.3.  No Material Adverse Change.  Since the date of the most recent Financial Statements (as hereinafter defined), the Borrower has not suffered any damage, destruction or loss, and no event or condition has occurred or exists, which has resulted or could result in a material adverse change in its business, assets, operations, condition (financial or otherwise) or results of operation.

3.4.  Binding Obligations.  The Borrower has full power and authority to enter into the transactions provided for in this Agreement and has been duly authorized to do so by appropriate action of its Board of Directors if the Borrower is a corporation, all its general partners if the Borrower is a partnership or otherwise as may be required by law, charter, other organizational documents or agreements; and the Loan Documents, when executed and delivered by the Borrower, will constitute the legal, valid and binding obligations of the Borrower enforceable in accordance with their terms.

3.5.  No Defaults or Violations.  There does not exist any Event of Default under this Agreement or any default or violation by the Borrower of or under any of the terms, conditions or obligations of:  (i) its partnership agreement if the Borrower is a partnership, its articles or certificate of incorporation, regulations or bylaws if the Borrower is a corporation or its other organizational documents as applicable; (ii) any indenture, mortgage, deed of trust, franchise, permit, contract, agreement, or other instrument to which it is a party or by which it is bound; or (iii) any law, ordinance, regulation, ruling, order, injunction, decree, condition or other requirement applicable to or imposed upon it by any law, the action of any court or any governmental authority or agency; and the consummation of this Agreement and the transactions set forth herein will not result in any such default or violation or Event of Default.

3.6.  No Consent.  No consent of, approval from, qualification of, order of, authorization of or filing with any governmental authority is required in connection with any of the Borrower’s Obligations pursuant to this Agreement or any of the other Loan Documents.

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3.7.  Title to Assets.  The Borrower has good and marketable title to the assets reflected on the most recent Financial Statements, free and clear of all liens and encumbrances, except for (i) current taxes and assessments not yet due and payable, (ii) assets disposed of by the Borrower in the ordinary course of business since the date of the most recent Financial Statements, and (iii) those liens or encumbrances, if any, specified on the Addendum.

3.8.  Litigation.  There are no actions, suits, proceedings or governmental investigations pending or, to the knowledge of the Borrower, threatened against the Borrower, which could result in a material adverse change in its business, assets, operations, condition (financial or otherwise) or results of operations and there is no basis known to the Borrower for any action, suit, proceeding or investigation which could result in such a material adverse change.  All pending and threatened litigation against the Borrower is listed on the Addendum.

3.9.  Tax Returns.  The Borrower has filed all returns and reports that are required to be filed by it in connection with any federal, state or local tax, duty or charge levied, assessed or imposed upon it or its property or withheld by it, including income, unemployment, social security and similar taxes, and all of such taxes have been either paid or adequate reserve or other provision has been made therefor.

3.10.  Employee Benefit Plans.  Each employee benefit plan as to which the Borrower may have any liability complies in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974 (as amended from time to time, “ERISA”), including minimum funding requirements, and (i) no Prohibited Transaction (as defined under ERISA) has occurred with respect to any such plan, (ii) no Reportable Event (as defined under Section 4043 of ERISA) has occurred with respect to any such plan which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Section 4042 of ERISA, (iii) the Borrower has not withdrawn from any such plan or initiated steps to do so, and (iv) no steps have been taken to terminate any such plan.

3.11.  Environmental Matters.  The Borrower is in compliance, in all material respects, with all Environmental Laws (as hereinafter defined), including, without limitation, all Environmental Laws in jurisdictions in which the Borrower owns or operates, or has owned or operated, a facility or site, stores Collateral, arranges or has arranged for disposal or treatment of hazardous substances, solid waste or other waste, accepts or has accepted for transport any hazardous substances, solid waste or other wastes or holds or has held any interest in real property or otherwise.  Except as otherwise disclosed on the Addendum, no litigation or proceeding arising under, relating to or in connection with any Environmental Law is pending or, to the best of the Borrower’s knowledge, threatened against the Borrower, any real property which the Borrower holds or has held an interest or any past or present operation of the Borrower.  No release, threatened release or disposal of hazardous waste, solid waste or other wastes is occurring, or to the best of the Borrower’s knowledge has occurred, on, under or to any real property in which the Borrower holds or has held any interest or performs or has performed any of its operations, in violation of any Environmental Law.  As used in this Section, “litigation or proceeding” means any demand, claim notice, suit, suit in equity, action, administrative action, investigation or inquiry whether brought by a governmental authority or other person, and “Environmental Laws” means all provisions of laws, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by any governmental authority concerning health, safety and protection of, or regulation of the discharge of substances into, the environment.

3.12.  Intellectual Property.  The Borrower owns or is licensed to use all patents, patent rights, trademarks, trade names, service marks, copyrights, intellectual property, technology, know-how and processes necessary for the conduct of its business as currently conducted that are material to the condition (financial or otherwise), business or operations of the Borrower.

3.13.  Regulatory Matters.  No part of the proceeds of the Loan will be used for “purchasing” or “carrying” any “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 in effect or for any purpose which violates the provisions of the Regulations of such Board of Governors.

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3.14.  Solvency.  As of the date hereof and after giving effect to the transactions contemplated by the Loan Documents, (i) the aggregate value of the Borrower’s assets will exceed its liabilities (including contingent, subordinated, unmatured and unliquidated liabilities), (ii) the Borrower will have sufficient cash flow to enable it to pay its debts as they become due, and (iii) the Borrower will not have unreasonably small capital for the business in which it is engaged.

3.15.  Disclosure.  None of the Loan Documents contains or will contain any untrue statement of material fact or omits or will omit to state a material fact necessary in order to make the statements contained in this Agreement or the Loan Documents not misleading.  There is no fact known to the Borrower which materially adversely affects or, so far as the Borrower can now foresee, might materially adversely affect the business, assets, operations, condition (financial or otherwise) or results of operation of the Borrower and which has not otherwise been fully set forth in this Agreement or in the Loan Documents.

3.16. Use of Proceeds.  All proceeds of the Loan shall be used by the Borrower to finance working capital needs of the Borrower.

4.  Affirmative Covenants.  The Borrower agrees that from the date of execution of this Agreement until all Obligations have been paid in full and any commitments of the Lender to the Borrower have been terminated, the Borrower will:

4.1.  Books and Records.  Maintain books and records in accordance with GAAP and give representatives of the Lender (and any Small Business Administration personnel) access thereto at all reasonable times, including permission to examine, copy and make abstracts from any of such books and records and such other information as the Lender may from time to time reasonably request, and the Borrower will make available to the Lender (and any Small Business Administration personnel) for examination copies of any reports, statements and returns which the Borrower may make to or file with any federal, state or local governmental department, bureau or agency.

4.2.  Interim Financial Statements; Certificate of No Default.  Furnish the Lender within ten (10) days after the end of each month,the Borrower’s Financial Statements for such period, in reasonable detail, certified by an authorized officer of the Borrower and prepared in accordance with GAAP consistently applied from period to period.  The Borrower shall also deliver a certificate as to its compliance with applicable financial covenants (containing detailed calculations of all financial covenants) for the period then ended and whether any Event of Default exists, and, if so, the nature thereof and the corrective measures the Borrower proposes to take.  As used in this Agreement, if the Borrower is not a natural person, “Financial Statements” means the Borrower’s consolidated and, if required by the Lender in its sole discretion, consolidating balance sheets, income statements and statements of cash flows for the year, month or quarter together with year-to-date figures and comparative figures for the corresponding periods of the prior year; if the Borrower is a natural person, “Financial Statements” means the Borrower’s personal financial statement and tax returns.

4.3.  Annual Financial Statements.  Furnish the Borrower’s Financial Statements to the Lender within sixty (60) days after the end of each fiscal year.   Those Financial Statements will be prepared, if requested, on an audited basis in accordance with GAAP by an independent certified public accountant selected by the Borrower and satisfactory to the Lender.  Audited Financial Statements shall contain the unqualified opinion of an independent certified public accountant and all accountant examinations shall have been made in accordance with GAAP consistently applied from period to period.

4.4.  Payment of Taxes and Other Charges.  Pay and discharge when due all indebtedness and all taxes, assessments, charges, levies and other liabilities imposed upon the Borrower, its income, profits, property or business, except those which currently are being contested in good faith by appropriate proceedings and for which the Borrower shall have set aside adequate reserves or made other adequate provision with respect thereto acceptable to the Lender in its sole discretion.

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4.5.  Maintenance of Existence, Operation and Assets.  Do all things necessary to (i) maintain, renew and keep in full force and effect its organizational existence and all rights, permits and franchises necessary to enable it to continue its business as currently conducted; (ii) continue in operation in substantially the same manner as at present; (iii) keep its properties in good operating condition and repair; and (iv) make all necessary and proper repairs, renewals, replacements, additions and improvements thereto.

4.6.  Insurance.  Maintain, with financially sound and reputable insurers, insurance with respect to its property and business against such casualties and contingencies, of such types and in such amounts, as is customary for established companies engaged in the same or similar business and similarly situated.  In the event of a conflict between the provisions of this Section and the terms of any Security Documents relating to insurance, the provisions in the Security Documents will control.

4.7.  Compliance with Laws.  Comply with all laws applicable to the Borrower and to the operation of its business (including without limitation any statute, ordinance, rule or regulation relating to employment practices, pension benefits or environmental, occupational and health standards and controls).

4.8.  Financial Covenants.  Comply with all of the financial and other covenants, if any, set forth on the Addendum.

4.9.  Additional Reports.  Provide prompt written notice to the Lender of the occurrence of any of the following (together with a description of the action which the Borrower proposes to take with respect thereto):  (i) any Event of Default or any event, act or condition which, with the passage of time or the giving of notice, or both, would constitute an Event of Default (a “Default”), (ii) any litigation filed by or against the Borrower, (iii) any Reportable Event or Prohibited Transaction with respect to any Employee Benefit Plan(s) (as defined in ERISA) or (iv) any event which might result in a material adverse change in the business, assets, operations, condition (financial or otherwise) or results of operation of the Borrower.

5.  Negative Covenants.  The Borrower covenants and agrees that from the date of this Agreement until all Obligations have been paid in full and any commitments of the Lender to the Borrower have been terminated, except as set forth in the Addendum, the Borrower will not, without the Lender’s prior written consent:

5.1.  Indebtedness.  Create, incur, assume or suffer to exist any indebtedness for borrowed money other than:  (i) the Loan and any subsequent indebtedness to the Lender and (ii) open account trade debt incurred in the ordinary course of business and not past due.

5.2.  Liens and Encumbrances.  Except as provided in Section 3.7, create, assume, incur or permit to exist any mortgage, pledge, encumbrance, security interest, lien or charge of any kind upon any of its property, now owned or hereafter acquired, or acquire or agree to acquire any kind of property subject to any conditional sales or other title retention agreement.

5.3.  Guarantees.  Guarantee, endorse or become contingently liable for the obligations of any person, firm, corporation or other entity, except in connection with the endorsement and deposit of checks in the ordinary course of business for collection.

5.4.  Loans or Advances.  Purchase or hold beneficially any stock, other securities or evidences of indebtedness of, or make or have outstanding, any loans or advances to, or otherwise extend credit to, or make any investment or acquire any interest whatsoever in, any other person, firm, corporation or other entity, except investments disclosed on the Borrower’s Historical Financial Statements or acceptable to the Lender in its sole discretion.

5.5.  Merger or Transfer of Assets.  Liquidate or dissolve, or merge or consolidate with or into any person, firm, corporation or other entity, or sell, lease, transfer or otherwise dispose of all or any substantial part of its property, assets, operations or business, whether now owned or hereafter acquired without the prior written consent of the Lender.

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5.6.  Change in Business, Management or Ownership.  Make or permit any change in its form of organization, the nature of its business as carried on as of the date hereof, in the composition of its current executive management, or in its equity ownership.

5.7.  Dividends.  Declare or pay any dividends on or make any distribution with respect to any class of its equity or ownership interest, or purchase, redeem, retire or otherwise acquire any of its equity.

5.8.   Acquisitions.  Make acquisitions of all or substantially all of the property or assets of any person, firm, corporation or other entity without the prior written consent of the Lender.

5.9.    Management Fees.  Pay or obligate itself to pay, directly or indirectly, any management fee or similar compensation to any person, or to any director, officer, shareholder or employee of such person.

6.  Events of Default.  The occurrence of any of the following will be deemed to be an Event of Default:

6.1.  Covenant Default.  The Borrower shall default in the performance of any of the covenants or agreements contained in this Agreement.

6.2.  Breach of Warranty.  Any Financial Statement, representation, warranty or certificate made or furnished by the Borrower to the Lender in connection with this Agreement shall be false, incorrect or incomplete when made.

6.3.  Other Default.  The occurrence of an Event of Default as defined in the Note or any of the Loan Documents.

Upon the occurrence of an Event of Default, the Lender will have all rights and remedies specified in the Note and the Loan Documents and all rights and remedies (which are cumulative and not exclusive) available under applicable law or in equity.

7.  Conditions.  The Lender’s obligation to make the advance of the Loan is subject to the conditions that as of the date of the advance:

7.1.  No Event of Default.  No Event of Default or event which with the passage of time, the giving of notice or both would constitute an Event of Default shall have occurred and be continuing;

7.2.  Authorization Documents.  The Lender shall have received certified copies of resolutions of the board of directors, the general partners or the members or managers of any partnership, corporation or limited liability company that executes this Agreement, the Note or any of the other Loan Documents; or other proof of authorization satisfactory to the Lender; and

7.3.  Receipt of Loan Documents.  The Lender shall have received the Loan Documents and such other instruments and documents which the Lender may reasonably request in connection with the transactions provided for in this Agreement, which may include an opinion of counsel in form and substance satisfactory to the Lender for any party executing any of the Loan Documents.

7.4.  Receipt of SBA Documents.  The Lender shall have received any documents required by the Small Business Administration, including but not limited to, SBA Form 480 and SBA Form 652D, each in form and content satisfactory to Lender.

8.  Expenses.  The Borrower agrees to pay the Lender, upon the execution of this Agreement, and otherwise on demand, all costs and expenses incurred by the Lender in connection with the preparation, negotiation and delivery of this Agreement and the other Loan Documents, and any modifications thereto, and the collection of all of the Obligations, including but not limited to enforcement actions, relating to the Loan, whether

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through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or relating to this Agreement, including reasonable fees and expenses of counsel (which may include costs of in-house counsel), expenses for auditors, appraisers and environmental consultants, lien searches, recording and filing fees and taxes.

9.  Increased Costs.  On written demand, together with written evidence of the justification therefor, the Borrower agrees to pay the Lender all direct costs incurred and any losses suffered or payments made by the Lender as a consequence of making the Loan by reason of any change in law or regulation, or the interpretation thereof, imposing any reserve, deposit, allocation of capital or similar requirement (including without limitation, Regulation D of the Board of Governors of the Federal Reserve System) on the Lender, its holding company or any of their respective assets.

10.  Miscellaneous.

10.1.  Notices:All notices, demands, requests, consents, approvals and other communications required or permitted hereunder (“Notices”) must be in writing and will be effective upon receipt.  Notices may be given in any manner to which the parties may separately agree, including electronic mail.  Without limiting the foregoing, first-class mail, facsimile transmission and commercial courier service are hereby agreed to as acceptable methods for giving Notices.  Regardless of the manner in which provided, Notices may be sent to a party’s address as set forth above or to such other address as any party may give to the other for such purpose in accordance with this section.

10.2.  Preservation of Rights.  No delay or omission on the Lender’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will the Lender s action or inaction impair any such right or power.  The Lender’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Lender may have under other agreements, at law or in equity.

10.3.  Illegality. If any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, it shall not affect or impair the validity, legality and enforceability of the remaining provisions of this Agreement.

10.4.  Changes in Writing.  No modification, amendment or waiver of, or consent to any departure by the Borrower from, any provision of this Agreement will be effective unless made in a writing signed by the party to be charged, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  No notice to or demand on the Borrower will entitle the Borrower to any other or further notice or demand in the same, similar or other circumstance.

10.5.  Entire Agreement.  This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.

10.6.  Counterparts.  This Agreement may be signed in any number of counterpart copies and by the parties hereto on separate counterparts, but all such copies shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart.  Any party so executing this Agreement by facsimile transmission shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart executed by facsimile transmission.

10.7.  Successors and Assigns.  This Agreement will be binding upon and inure to the benefit of the Borrower and the Lender and their respective heirs, executors, administrators, successors and assigns; provided, however, that the Borrower may not assign this Agreement in whole or in part without the Lender’s prior written consent and the Lender at any time may assign this Agreement in whole or in part.

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10.8.  Interpretation.  In this Agreement, unless the Lender and the Borrower otherwise agree in writing, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; the word “or” shall be deemed to include “and/or”, the words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation”; references to articles, sections (or subdivisions of sections) or exhibits are to those of this Agreement; and references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement.  Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.  Unless otherwise specified in this Agreement, all accounting terms shall be interpreted and all accounting determinations shall be made in accordance with GAAP.  If this Agreement is executed by more than one party as Borrower, the obligations of such persons or entities will be joint and several.

10.9.  No Consequential Damages, Etc.  The Lender will not be responsible for any damages, consequential, incidental, special, punitive or otherwise, that may be incurred or alleged by any person or entity, including the Borrower, as a result of this Agreement, the other Loan Documents, the transactions contemplated hereby or thereby, or the use of the proceeds of the Loan.

10.10.  Assignments and Participations.  At any time, without any notice to the Borrower, the Lender may sell, assign, transfer, negotiate, grant participations in, or otherwise dispose of all or any part of the Lender’s interest in the Loan.  The Borrower hereby authorizes the Lender to provide, without any notice to the Borrower, any information concerning the Borrower, including information pertaining to the Borrower’s financial condition, business operations or general creditworthiness, to any person or entity which may succeed to or participate in all or any part of the Lender’s interest in the Loan.

10.11.  Governing Law and Jurisdiction.  This Agreement has been delivered to and accepted by the Lender and shall be construed in accordance with, and governed in all respects by the laws of the State of Delaware as applied to agreements entered into and to be performed entirely in such state, between residents of such state. Nothing contained in this Agreement will prevent the Lender from bringing any action, enforcing any award or judgment or exercising any rights against the Borrower individually, against any security or against any property of the Borrower within any other county, state or other foreign or domestic jurisdiction.  The Lender and the Borrower agree that the venue provided above is the most convenient forum for both the Lender and the Borrower.  The Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

10.12.  WAIVER OF JURY TRIAL.  THE BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.  THE BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

10.13.Closing Fee.  At closing of the Loan, the Lender shall receive its closing fee in the amount of $10,000.00, payable in immediately available funds or as Lender otherwise directs.

10.14    Conversion Incentive.  As an inducement for the Lender to make the Loan, on the date of the Qualifying Merger (as such term is defined in the Note), the Lender shall receive 1,644,736 registered shares of the Company’s common stock (the “Conversion Incentive”).  The Company acknowledges that the registered shares from the Conversion Incentive are in addition to the 3,289,373 registered shares of the Company’s common stock that Lender will receive upon the conversion of the Note following the consummation of the Qualifying Merger.

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The Borrower acknowledges that it has read and understood all the provisions of this Agreement, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof as a document under seal, as of the date first written above.

WITNESS / ATTEST:	DPAC TECHNOLOGIES CORP.
	By:
Name:	Name:
	Title:
	DEVELOPMENT CAPITAL VENTURES, LP
	By:	DCC OPERATING, INC.,
		its General Partner
	By:
	Name: Donald L. Murfin
	Title: Executive Vice President

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ADDENDUM to that certain Loan Agreement dated August 5, 2005 between DPAC TECHNOLOGIES CORP. as the Borrower and DEVELOPMENT CAPITAL VENUTRES, LP, as the Lender.  Capitalized terms used in this Addendum and not otherwise defined shall have the meanings given them in the Agreement.  Section numbers below refer to the sections of the Agreement.

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EX-10.27

Exhibit 10.27

Security Agreement

THIS SECURITY AGREEMENT (this “Agreement”), dated as of this 5th day of August, 2005, is made by DPAC TECHNOLOGIES CORP. (the “Grantor”), with an address at 7321 Lincoln Way, Garden Grove, California 92841, in favor of DEVELOPMENT CAPITAL VENTURES, LP (the “Lender”), with an address at 4443 Brookfield Corporate Drive, Suite 110, Chantilly, Virginia 20151.

Under the terms hereof, the Lender desires to obtain and the Grantor desires to grant the Lender security for all of the Obligations (as hereinafter defined).

NOW, THEREFORE, the Grantor and the Lender, intending to be legally bound, hereby agree as follows:

1.  Definitions.

(a)  “Collateral” shall include all personal property of the Grantor, including the following, all whether now owned or hereafter acquired or arising and wherever located:  (i) accounts (including health-care-insurance receivables and credit card receivables); (ii) securities entitlements, securities accounts, commodity accounts, commodity contracts and investment property; (iii) deposit accounts; (iv) instruments (including promissory notes); (v) documents (including warehouse receipts); (vi) chattel paper (including electronic chattel paper and tangible chattel paper); (vii) inventory, including raw materials, work in process, or materials used or consumed in Grantor’s business, items held for sale or lease or furnished or to be furnished under contracts of service, sale or lease, goods that are returned, reclaimed orrepossessed; (viii) goods of every nature, including stock-in-trade, goods on consignment, standing timber that is to be cut and removed under a conveyance or contract for sale, the unborn young of animals, crops grown, growing, or to be grown, manufactured homes, computer programs embedded in such goods and farm products; (ix) equipment, including machinery, vehicles and furniture; (x) fixtures; (xi) agricultural liens; (xii) as-extracted collateral; (xiii) commercial tort claims, if any, described on Exhibit “A” hereto; (xiv) letter of credit rights; (xv) general intangibles, of every kind and description, including payment intangibles, software, computer information, source codes, object codes, records and data, all existing and future customer lists, choses in action, claims (including claims for indemnification or breach of warranty), books, records, patents and patent applications, copyrights, trademarks, tradenames, tradestyles, trademark applications, goodwill, blueprints, drawings, designs and plans, trade secrets, contracts, licenses (including the licenses and other intangibles granted to Lender pursuant to a License Agreement dated the date hereof between Grantor and Lender in favor of Lender), license agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies; (xvi) all supporting obligations of all of the foregoing property; (xvii) all property of the Grantor now or hereafter in the Lender’s possession or in transit to or from, or under the custody or control of, the Lender or any affiliate thereof; (xviii) all cash and cash equivalents thereof; and (xix) all cash and noncash proceeds (including insurance proceeds) of all of the foregoing property, all products thereof and all additions and accessions thereto, substitutions therefor and replacements thereof.  The Collateral shall also include any and all other tangible or intangible property that is described as being part of the Collateral pursuant to one or more Riders to Security Agreement that may be attached hereto or delivered in connection herewith, including the Rider to Security Agreement - Copyrights, the Rider to Security Agreement - Patents, the Rider to Security Agreement - Trademarks and the Rider to Security Agreement - Cash Collateral Account.

(b)  “Obligations” shall include all loans, advances, debts, liabilities, obligations, covenants and duties owing by the Grantor to the Lender or to any other direct or indirect subsidiary of Lender, of any kind or nature, present or future (including any interest accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to the Grantor, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, whether or not (i) evidenced by any note, guaranty or other instrument, (ii) arising under any agreement, instrument or document, (iii) for the payment of money, (iv) arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease or guarantee, (v) under any interest or currency swap, future, option or other interest rate protection or similar agreement, (vi) under or by

reason of any foreign currency transaction, forward, option or other similar transaction providing for the purchase of one currency in exchange for the sale of another currency, or in any other manner, (vii) arising out of overdrafts on deposit or other accounts or out of electronic funds transfers (whether by wire transfer or through automated clearing houses or otherwise) or out of the return unpaid of, or other failure of the Lender to receive final payment for, any check, item, instrument, payment order or other deposit or credit to a deposit or other account, or out of the Lender’s non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository or other similar arrangements; and any amendments, extensions, renewals and increases of or to any of the foregoing, and all costs and expenses of the Lender incurred in the documentation, negotiation, modification, enforcement, collection and otherwise in connection with any of the foregoing, including reasonable attorneys’ fees and expenses.

(c) “UCC” means the Uniform Commercial Code, as adopted and enacted and as in effect from time to time in the State whose law governs pursuant to the Section of this Agreement entitled “Governing Law and Jurisdiction.”  Terms used herein which are defined in the UCC and not otherwise defined herein shall have the respective meanings ascribed to such terms in the UCC. To the extent the definition of any category or type of collateral is modified by any amendment, modification or revision to the UCC, such modified definition will apply automatically as of the date of such amendment, modification or revision.

2.  Grant of Security Interest.  To secure the Obligations, the Grantor, as debtor, hereby assigns and grants to the Lender, as secured party, a continuing lien on and security interest in the Collateral.

3.  Change in Name or Locations.  The Grantor hereby agrees that if the location of the Collateral changes from the locations listed on Exhibit “A” hereto and made part hereof, or if the Grantor changes its name, its type of organization, its state of organization (if Grantor is a registered organization), its principal residence (if Grantor is an individual), its chief executive office (if Grantor is a general partnership or non-registered organization) or establishes a name in which it may do business that is not listed as a tradename on Exhibit “A” hereto, the Grantor will immediately notify the Lender in writing of the additions or changes. 

4.  Representations and Warranties.  The Grantor represents, warrants and covenants to the Lender that: (a) all information, including its type of organization, jurisdiction of organization, chief executive office, and (for individuals only) principal residence are as set forth on Exhibit “A” hereto and are true and correct on the date hereof;  (b) the Grantor has good, marketable and indefeasible title to the Collateral, has not made any prior sale, pledge, encumbrance, assignment or other disposition of any of the Collateral, and the Collateral is free from all encumbrances and rights of setoff of any kind except the lien in favor of the Lender created by this Agreement;  (c) except as herein provided, the Grantor will not hereafter without the Lender’s prior written consent sell, pledge, encumber, assign or otherwise dispose of any of the Collateral or permit any right of setoff, lien or security interest to exist thereon except to the Lender; (d) the Grantor will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein;  (e) each account and general intangible, if included in the definition of Collateral, is genuine and enforceable in accordance with its terms and the Grantor will defend the same against all claims, demands, setoffs and counterclaims at any time asserted; and (f) at the time any account or general intangible becomes subject to this Agreement, such account or general intangible will be a good and valid account representing a bona fide sale of goods or services by the Grantor and such goods will have been shipped to the respective account debtors or the services will have been performed for the respective account debtors, and no such account or general intangible will be subject to any claim for credit, allowance or adjustment by any account debtor or any setoff, defense or counterclaim.

5.  Grantor’s Covenants.  The Grantor covenants that it shall:

(a)  from time to time and at all reasonable times allow the Lender, by or through any of its officers, agents, attorneys, or accountants, to examine or inspect the Collateral, and obtain valuations and audits of the Collateral, at the Grantor’s expense, wherever located.  The Grantor shall do, obtain, make, execute and deliver all such additional and further acts, things, deeds, assurances and instruments as the Lender may require to vest in and assure to the Lender its rights hereunder and in or to the Collateral, and the proceeds thereof, including waivers from landlords, warehousemen and mortgagees.  The Grantor agrees that the Lender has the right to notify (on invoices or otherwise) account debtors and other obligors or payors on any Collateral of its assignment to the Lender, and that all payments thereon should be made directly to the Lender, and that the Lender has full power and authority to collect, compromise, endorse, sell or otherwise deal with the Collateral in its own name or that of the Grantor at any time upon an Event of Default;

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(b)  keep the Collateral in good order and repair at all times and immediately notify the Lender of any event causing a material loss or decline in value of the Collateral, whether or not covered by insurance, and the amount of such loss or depreciation;

(c)  only use or permit the Collateral to be used in accordance with all applicable federal, state, county and municipal laws and regulations; and

(d)  have and maintain insurance at all times with respect to all Collateral against risks of fire (including so-called extended coverage), theft, sprinkler leakage, and other risks (including risk of flood if any Collateral is maintained at a location in a flood hazard zone) as the Lender may require, in such form, in such amount, for such period and written by such companies as may be satisfactory to the Lender in its sole discretion.  Each such casualty insurance policy shall contain a standard Lender’s Loss Payable Clause issued in favor of the Lender under which all losses thereunder shall be paid to the Lender as the Lender’s interests may appear.  Such policies shall expressly provide that the requisite insurance cannot be altered or canceled without at least thirty (30) days prior written notice to the Lender and shall insure the Lender notwithstanding the act or neglect of the Grantor.  Upon the Lender’s demand, the Grantor shall furnish the Lender with duplicate original policies of insurance or such other evidence of insurance as the Lender may require.  In the event of failure to provide insurance as herein provided, the Lender may, at its option, obtain such insurance and the Grantor shall pay to the Lender, on demand, the cost thereof.  Proceeds of insurance may be applied by the Lender to reduce the Obligations or to repair or replace Collateral, all in the Lender’s sole discretion.

6.  Negative Pledge; No Transfer.  The Grantor will not sell or offer to sell or otherwise transfer or grant or allow the imposition of a lien or security interest upon the Collateral (except for sales of inventory and collections of accounts in the Grantor’s ordinary course of business), will not allow any third party to gain control of all or any part of the Collateral, and will not use any portion thereof in any manner inconsistent with this Agreement or with the terms and conditions of any policy of insurance thereon.

7.  Covenants for Accounts.  If accounts are included in the definition of Collateral:

(a)  The Grantor will, on the Lender’s demand, make notations on its books and records showing the Lender’s security interest and make available to the Lender shipping and delivery receipts evidencing the shipment of the goods that gave rise to an account, completion certificates or other proof of the satisfactory performance of services that gave rise to an account, a copy of the invoice for each account and copies of any written contract or order from which an account arose.  The Grantor shall promptly notify the Lender if an account becomes evidenced or secured by an instrument or chattel paper and upon the Lender’s request, will promptly deliver any such instrument or chattel paper to the Lender, including any letter of credit delivered to the Grantor to support a shipment of inventory by the Grantor.

(b)  The Grantor will promptly advise the Lender whenever an account debtor refuses to retain or returns any goods from the sale of which an account arose and will comply with any instructions that the Lender may give regarding the sale or other disposition of such returns.  From time to time with such frequency as the Lender may request, the Grantor will report to the Lender all credits given to account debtors on all accounts.

(c)  The Grantor will immediately notify the Lender if any account arises out of contracts with the United States or any department, agency or instrumentality thereof, and will execute any instruments and take any steps required by the Lender so that all monies due and to become due under such contract shall be assigned to the Lender and notice of the assignment given to and acknowledged by the appropriate government agency or authority under the Federal Assignment of Claims Act.

(d)  At any time after the occurrence of an Event of Default, and without notice to the Grantor, the Lender may direct any persons who are indebted to the Grantor on any Collateral consisting of accounts or general intangibles to make payment directly to the Lender of the amounts due.  The Lender is authorized to collect, compromise, endorse and sell any such Collateral in its own name or in the Grantor’s name and to give receipts to such account debtors for any such payments and the account debtors will be protected in making such payments to the Lender.  Upon the Lender’s written request, the Grantor will establish with the Lender and maintain a lockbox account (“Lockbox”) with the Lender and a depository account(s) (“Cash Collateral Account”) with the Lender subject to the provisions of this subparagraph and such other related agreements as

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the Lender may require, and the Grantor shall notify its account debtors to remit payments directly to the Lockbox.  Thereafter, funds collected in the Lockbox shall be transferred to the Cash Collateral Account, and funds in the Cash Collateral Account shall be applied by the Lender, daily, to reduce the outstanding Obligations.

8.  Further Assurances.  By its signature hereon, the Grantor hereby irrevocably authorizes the Lender to execute (on behalf of the Grantor) and file against the Grantor one or more financing, continuation or amendment statements pursuant to the UCC in form satisfactory to the Lender, and the Grantor will pay the cost of preparing and filing the same in all jurisdictions in which such filing is deemed by the Lender to be necessary or desirable in order to perfect, preserve and protect its security interests.  If required by the Lender, the Grantor will execute all documentation necessary for the Lender to obtain and maintain perfection of its security interests in the Collateral.    At the Lender’s request, the Grantor will execute, in form satisfactory to the Lender, a Rider to Security Agreement - Copyrights (if any Collateral consists of registered or unregistered copyrights), a Rider to Security Agreement - Patents (if any Collateral consists of patents or patent applications), a Rider to Security Agreement - Trademarks (if any Collateral consists of trademarks, tradenames, tradestyles or trademark applications).  If any Collateral consists of letter of credit rights, electronic chattel paper, deposit accounts or supporting obligations not maintained with the Lender or one of its affiliates, or any securities entitlement, securities account, commodities account, commodities contract or other investment property, then at the Lender’s request the Grantor will execute, and will cause the depository institution or securities intermediary upon whose books and records the ownership interest of the Grantor in such Collateral appears, to execute such Pledge Agreements, Notification and Control Agreements or other agreements as the Lender deems necessary in order to perfect, prioritize and protect its security interest in such Collateral, in each case in a form satisfactory to the Lender.

9.  Events of Default.  The Grantor shall, at the Lender’s option, be in default under this Agreement upon the happening of any of the following events or conditions (each, an “Event of Default”):  (a) any Event of Default (as defined in any of the Obligations); (b) any default under any of the Obligations that does not have a defined set of “Events of Default” and the lapse of any notice or cure period provided in such Obligations with respect to such default; (c) demand by the Lender under any of the Obligations that have a demand feature; (d) the failure by the Grantor to perform any of its obligations under this Agreement; (e) falsity, inaccuracy or material breach by the Grantor of any written warranty, representation or statement made or furnished to the Lender by or on behalf of the Grantor; (f) an uninsured material loss, theft, damage, or destruction to any of the Collateral, or the entry of any judgment against the Grantor or any lien against or the making of any levy, seizure or attachment of or on the Collateral; (g) the failure of the Lender to have a perfected first priority security interest in the Collateral; (h) any indication or evidence received by the Lender that the Grantor may have directly or indirectly been engaged in any type of activity which, in the Lender’s discretion, might result in the forfeiture of any property of the Grantor to any governmental entity, federal, state or local; or (i) if the Lender otherwise deems itself insecure.

10.  Remedies.  Upon the occurrence of any such Event of Default and at any time thereafter, the Lender may declare all Obligations secured hereby immediately due and payable and shall have, in addition to any remedies provided herein or by any applicable law or in equity, all the remedies of a secured party under the UCC. The Lender’s remedies include, but are not limited to, the right to (a) peaceably by its own means or with judicial assistance enter the Grantor’s premises and take possession of the Collateral without prior notice to the Grantor or the opportunity for a hearing, (b) render the Collateral unusable, (c) dispose of the Collateral on the Grantor’s premises, (d) require the Grantor to assemble the Collateral and make it available to the Lender at a place designated by the Lender, and (e) notify the United States Postal Service to send the Grantor’s mail to the Lender.  Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Lender will give the Grantor reasonable notice of the time and place of any public sale thereof or of the time after which any private sale or any other intended disposition thereof is to be made.  The requirements of commercially reasonable notice shall be met if such notice is sent to the Grantor at least ten (10) days before the time of the intended sale or disposition.  Expenses of retaking, holding, preparing for disposition, disposing or the like shall include the Lender’s reasonable attorneys’ fees and legal expenses, incurred or expended by the Lender to enforce any payment due it under this Agreement either as against the Grantor, or in the prosecution or defense of any action, or concerning any matter growing out of or connection with the subject matter of this Agreement and the Collateral pledged hereunder.  The Grantor waives all relief from all appraisement or exemption laws now in force or hereafter enacted.

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11.  Power of Attorney.  The Grantor does hereby make, constitute and appoint any officer or agent of the Lender as the Grantor’s true and lawful attorney-in-fact, with power to (a) endorse the name of the Grantor or any of the Grantor’s officers or agents upon any notes, checks, drafts, money orders, or other instruments of payment or Collateral that may come into the Lender’s possession in full or part payment of any Obligations; (b) sue for, compromise, settle and release all claims and disputes with respect to, the Collateral; and (c) sign, for the Grantor, such documentation required by the UCC, or supplemental intellectual property security agreements; granting to the Grantor’s said attorney full power to do any and all things necessary to be done in and about the premises as fully and effectually as the Grantor might or could do.  The Grantor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof.  This power of attorney is coupled with an interest, and is irrevocable.

12.  Payment of Expenses.  At its option, the Lender may discharge taxes, liens, security interests or such other encumbrances as may attach to the Collateral, may pay for required insurance on the Collateral and may pay for the maintenance, appraisal or reappraisal, and preservation of the Collateral, as determined by the Lender to be necessary.  The Grantor will reimburse the Lender on demand for any payment so made or any expense incurred by the Lender pursuant to the foregoing authorization, and the Collateral also will secure any advances or payments so made or expenses so incurred by the Lender.

13.  Notices.  All notices, demands, requests, consents, approvals and other communications required or permitted hereunder (“Notices”) must be in writing and will be effective upon receipt.  Notices may be given in any manner to which the parties may separately agree, including electronic mail.  Without limiting the foregoing, first-class mail, facsimile transmission and commercial courier service are hereby agreed to as acceptable methods for giving Notices.  Regardless of the manner in which provided, Notices may be sent to a party’s address as set forth above or to such other address as any party may give to the other for such purpose in accordance with this section.

14.  Preservation of Rights.  No delay or omission on the Lender’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will the Lender’s action or inaction impair any such right or power.  The Lender’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Lender may have under other agreements, at law or in equity.

15.  Illegality.   If any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, it shall not affect or impair the validity, legality and enforceability of the remaining provisions of this Agreement.

16.  Changes in Writing.  No modification, amendment or waiver of, or consent to any departure by the Grantor from, any provision of this Agreement will be effective unless made in a writing signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  No notice to or demand on the Grantor will entitle the Grantor to any other or further notice or demand in the same, similar or other circumstance.

17.  Entire Agreement.  This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.

18.  Counterparts.  This Agreement may be signed in any number of counterpart copies and by the parties hereto on separate counterparts, but all such copies shall constitute one and the same instrument.  Delivery of an executed counterpart of signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart.  Any party so executing this Agreement by facsimile transmission shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart executed by facsimile transmission.

19.  Successors and Assigns.  This Agreement will be binding upon and inure to the benefit of the Grantor and the Lender and their respective heirs, executors, administrators, successors and assigns; provided, however, that the Grantor may not assign this Agreement in whole or in part without the Lender’s prior written consent and the Lender at any time may assign this Agreement in whole or in part.

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20.  Interpretation.  In this Agreement, unless the Lender and the Grantor otherwise agree in writing, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; the word “or” shall be deemed to include “and/or”, the words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation”; references to articles, sections (or subdivisions of sections) or exhibits are to those of this Agreement; and references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement.  Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.  Unless otherwise specified in this Agreement, all accounting terms shall be interpreted and all accounting determinations shall be made in accordance with GAAP.  If this Agreement is executed by more than one Grantor, the obligations of such persons or entities will be joint and several.

21.  Indemnity.  The Grantor agrees to indemnify each of the Lender, each legal entity, if any, who controls the Lender and each of their respective directors, officers and employees (the “Indemnified Parties”) and to hold each Indemnified Party harmless from and against any and all claims, damages, losses, liabilities and expenses (including all fees and charges of internal or external counsel with whom any Indemnified Party may consult and all expenses of litigation and preparation therefor) which any Indemnified Party may incur or which may be asserted against any Indemnified Party by any person, entity or governmental authority (including any person or entity claiming derivatively on behalf of the Grantor), in connection with or arising out of or relating to the matters referred to in this Agreement or the Obligations, whether (a) arising from or incurred in connection with any breach of a representation, warranty or covenant by the Grantor, or (b) arising out of or resulting from any suit, action, claim, proceeding or governmental investigation, pending or threatened, whether based on statute, regulation or order, or tort, or contract or otherwise, before any court or governmental authority; provided, however, that the foregoing indemnity agreement shall not apply to any claims, damages, losses, liabilities and expenses solely attributable to an Indemnified Party’s gross negligence or willful misconduct.  The indemnity agreement contained in this Section shall survive the termination of this Agreement, payment of the Obligations and assignment of any rights hereunder.  The Grantor may participate at its expense in the defense of any such claim.

22.  Governing Law and Jurisdiction.This Agreement has been delivered to and accepted by the Lender and shall be construed in accordance with, and governed in all respects by the laws of the State of Delaware as applied to agreements entered into and to be performed entirely in such state, between residents of such state. Nothing contained in this Agreement will prevent the Lender from bringing any action, enforcing any award or judgment or exercising any rights against the Grantor individually, against any security or against any property of the Grantor within any other county, state or other foreign or domestic jurisdiction.  The Lender and the Grantor agree that the venue provided above is the most convenient forum for both the Lender and the Grantor.  The Grantor waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

23.  WAIVER OF JURY TRIAL.  THE GRANTOR IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.  THE GRANTOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

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The Grantor acknowledges that it has read and understood all the provisions of this Agreement, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof as a document under seal, as of the date first written above.

WITNESS / ATTEST:	DPAC TECHNOLOGIES CORP.
	By:
Name:	Name:
	Title:
	DEVELOPMENT CAPITAL VENTURES, LP
	By: DCC OPERATING, INC.,
	its General Partner
	By:
	Name: Donald L. Murfin
	Title: Executive Vice President

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EXHIBIT “A”

TO SECURITY AGREEMENT

1.Grantor’s form of organization (i.e., corporation, partnership, limited liability company):

2.Grantor’s State of organization, if a registered organization (i.e., corporation, limited partnership or limited liability company):

3.Grantor’s principal residence, if a natural person or general partnership:

4.Address of Grantor’s chief executive office, including the County:

5.Grantor’s EIN, if not a natural person:

6.Grantor’s SSN, if a natural person:

7.Grantor’s organizational ID# (if any exists):

8.Address for books and records, if different:

9.Addresses of other Collateral locations, including Counties, for the past five (5) years:

10.Name and address of landlord or owner if location is not owned by the Grantor:

11.Other names or tradenames now or formerly used by the Grantor:

12.List of all existing Commercial Tort Claims (by case title with court and brief description of claim):

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RIDER TO SECURITY AGREEMENT - PATENTS

THIS RIDER TO SECURITY AGREEMENT (“Rider”) is executed this 5th day of August, 2005, by and between DPAC TECHNOLOGIES CORP. (the “Grantor”) with an address at 7321 Lincoln Way, Garden Grove, California 92841 and DEVELOPMENT CAPITAL VENTURES, LP (the “Lender”), with an address at 4443 Brookfield Corporate Drive, Suite 110, Chantilly, Virginia 20151.  This Rider is incorporated into and made part of that certain Security Agreement (“Security Agreement”) between the Grantor and the Lender dated August 5, 2005, and also into certain other financing documents and security agreements executed by and between the Grantor and the Lender or by and between the Borrower (as defined in the Security Agreement) and the Lender (all such documents including this Rider collectively referred to as “Loan Documents”).  All capitalized terms not otherwise defined in this Rider shall have the same meanings ascribed to such terms in the other Loan Documents.

As collateral security for the Obligations (as defined in the Security Agreement) under the Loan Documents, the Grantor has agreed to grant a security interest in and to assign to the Lender the Patent Collateral (as hereinafter defined).  The Lender desires to have its lien and security interest in such Patent Collateral confirmed by a document identifying such security interest and in such form as may be recorded in the United States Patent and Trademark Office.

NOW, THEREFORE, with the foregoing background deemed incorporated by reference and made part hereof, the parties hereto, intending to be legally bound hereby, covenant and agree as follows:

1.Grant of Security Interest.  In consideration of and pursuant to the terms of the Security Agreement and for other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, and to secure the Obligations, the Grantor does hereby assign and grant to the Lender a lien and security interest in (a) all of the Grantor’s right, title and interest in and to (i) the United States Letters Patent and the inventions described and claimed therein set forth on Schedule A hereto and any future patents (hereinafter referred to collectively as the “Patents”); (ii) the applications for Letters Patent and the inventions described and claimed therein set forth on Schedule A hereto and any United States Letters Patent which may be issued upon any of said applications and any future patent applications (hereinafter referred to collectively as the “Applications”); (iii) any reissue, extension, division or continuation of the Patents or the Applications (such reissues, extensions, divisions and continuations being herein referred to collectively as the “Reissued Patents”); (iv) all future royalties or other fees paid or payment or payments made or to be made to the Grantor in respect of the Patents; and (v) proceeds of any and all of the foregoing (the Patents, Applications, Reissued Patents and Royalties and proceeds being herein referred to collectively as the “Patent Rights”), and (b) all rights, interests, claims and demands that the Grantor has or may have in existing and future profits and damages for past and future infringements of the Patent Rights (such rights, interests, claims and demands being herein called the “Claims”) (the Patent Rights and Claims collectively referred to as the “Patent Collateral”).

2.Representations and Warranties.  The Grantor warrants and represents to the Lender that:  (a) the Grantor is the true and lawful exclusive owner of the Patent Rights set forth on Schedule A, including all rights and interests herein granted; (b) the Patent Collateral is valid and enforceable; (c) the Grantor has full power and authority to execute and deliver this Rider; (d) the Grantor has no notice of any suits or actions commenced or threatened against it, or notice of claims asserted or threatened against it, with reference to the Patent Rights and the interests granted herein; and (e) the Patent Rights and all interests granted herein are so granted free from all liens, charges, claims, options, licenses, pledges and encumbrances of every kind and character.

3.Covenants.  The Grantor further covenants that:  (a) Until all of the Grantor’s liabilities to the Lender have been satisfied in full, it will not enter into any agreement, including without limitation, license agreements, which are inconsistent with the Grantor’s obligations under this Rider; and (b) If the Grantor acquires rights to any new Patent Collateral, the provisions of this Rider shall automatically apply thereto and the Grantor shall give the Lender prompt written notice thereof along with an amended Schedule “A.”

4.Maintenance of Patent Collateral.  The Grantor further covenants that:  until all of the Obligations have been satisfied in full, it will (i) not enter into any agreement, including without limitation, license agreements, which are inconsistent with the Grantor’s undertakings and covenants under this Rider or which restrict or impair the Lender’s rights hereunder and (ii) maintain the Patent Collateral in full force and effect.

5.Negative Pledge.  The Grantor agrees not to sell, assign or further encumber its rights and interest in the Patent Collateral without prior written consent of the Lender.

6.Remedies Upon Default.  (a)  Anything herein contained to the contrary notwithstanding, if and while the Grantor shall be in default hereunder or an Event of Default exists under the Loan Documents, the Grantor hereby covenants and agrees that the Lender, as the holder of a security interest under the Uniform Commercial Code, as now or hereafter in effect in Pennsylvania, may take such action permitted under the Loan Documents or permitted by law, in its exclusive discretion, to foreclose upon the Patent Collateral covered hereby.

(b)For such purposes, and in the event of the Grantor’s default hereunder or an Event of Default under the Loan Documents and while such default or Event of Default exists, the Grantor hereby authorizes and empowers the Lender to make, constitute and appoint any officer or agent of the Lender as the Lender may select, in its exclusive discretion, as the Grantor’s true and lawful attorney-in-fact, with the power to endorse the Grantor’s name on all applications, documents, papers and instruments necessary for the Lender to use the Patent Collateral or to grant or issue any exclusive or non-exclusive license under the Patent Collateral to anyone else, or necessary for the Lender to assign, pledge, convey or otherwise transfer title in or dispose of the Patent Collateral to anyone else.  The Grantor hereby ratifies all that such

2

attorney shall lawfully do or cause to be done by virtue hereof, except for the gross negligence or wilful misconduct of such attorney.  This power of attorney shall be irrevocable for the life of this Rider and the Loan Documents, and until all the Obligations are satisfied in full.

(c)The Grantor expressly acknowledges that this Rider shall be recorded with the Patent and Trademark Office in Washington, DC.  Contemporaneously herewith, the Grantor shall also execute and deliver to the Lender such documents as the Lender shall reasonably require to permanently assign all rights in the Patent Collateral to the Lender, which documents shall be held by the Lender, in escrow, until the occurrence of an Event of Default hereunder or under the Loan Documents.  After such occurrence, the Lender may, at its sole option, record such escrowed documents with the Patent and Trademark Office.

7.Prosecution of Patent Applications.  (a) The Grantor shall, at its own expense, diligently file and prosecute all patent applications relating to the inventions described and claimed in the Patent Collateral in the United States Patent and Trademark Office, and shall pay or cause to be paid in their customary fashion all fees and disbursements in connection therewith, and shall not abandon any such application prior to the exhaustion of all administrative and judicial remedies or disclaim or dedicate any Patent without the prior written consent of the Lender.  The Grantor shall not abandon any Patent Collateral without the prior written consent of the Lender.

(b)Any and all fees, costs and expenses, including reasonable attorneys’ fees and expenses incurred by the Lender in connection with the preparation, modification, enforcement or termination of this Rider and all other documents relating hereto and the consummation of this transaction, the filing and recording of any documents (including all taxes in connection therewith) in public offices, the payment or discharge of any taxes, counsel fees, maintenance fees, encumbrances or costs otherwise incurred in defending or prosecuting any actions or proceedings arising out of or related to the Patent Collateral shall be paid by the Grantor on demand by the Lender.

(c)The Grantor shall have the right to bring suit in the name of the Grantor to enforce the Patent Collateral, in which case the Lender may, at the Lender’s option, be joined as a nominal party to such suit if the Lender shall be satisfied that such joinder is necessary and that the Lender is not thereby incurring any risk of liability by such joinder.  The Grantor shall promptly, upon demand, reimburse and indemnify, defend and hold harmless the Lender for all damages, costs and expenses, including reasonable attorneys’ fees, incurred by the Lender pursuant to this paragraph and all other actions and conduct of the Grantor with respect to the Patent Rights during the term of this Rider.

8.Subject to Security Agreement.  This Rider shall be subject to the terms, provisions, and conditions set forth in the Security Agreement and may not be modified without the written consent of the party against whom enforcement is being sought.

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9.Inconsistent with Security Agreement.  All rights and remedies herein granted to the Lender shall be in addition to any rights and remedies granted to the Lender under the Loan Documents.  In the event of an inconsistency between this Rider and the Security Agreement, the language of the Security Agreement shall control.  The terms and conditions of the Security Agreement are hereby incorporated herein by reference.

10.Termination of Agreement.  Upon payment and performance of all Obligations under the Loan Documents and full satisfaction of all of the Grantor’s liabilities and obligations to the Lender, the Lender shall execute and deliver to the Grantor all documents necessary to terminate the Lender’s security interest in the Patent Collateral.

11.Fees and Expenses.  Any and all reasonable fees, costs and expenses, of whatever kind or nature, including the reasonable attorneys’ fees and legal expenses incurred by the Lender in connection with the preparation of this Rider and all other documents relating hereto and the consummation of this transaction, the filing or recording of any documents (including all taxes in connection therewith) in public offices, the payment or discharge of any taxes, reasonable counsel fees, maintenance fees, encumbrances or costs otherwise incurred in protecting, maintaining, preserving the Patent Collateral, or in defending or prosecuting any actions or proceedings arising out of or related to the Patent Collateral, in each case in accordance with the terms of this Rider, shall be borne and paid by the Grantor on demand by the Lender and until so paid shall be added to the principal amount of the Obligations to the Lender and shall bear interest at the contract rate therefor.

12.Additional Remedies.  Upon the occurrence of an Event of Default under the Loan Documents, the Lender may, without any obligation to do so, complete any obligation of the Grantor hereunder, in the Grantor’s name or in the Lender’s name, but at the Grantor’s expense, and the Grantor hereby agrees to reimburse the Lender in full for all reasonable expenses, including reasonable attorney’s fees, incurred by the Lender in protecting, defending and maintaining the Patent Collateral.

13.Governing Law.  This Agreement has been delivered to and accepted by the Lender and shall be construed in accordance with, and governed in all respects by the laws of the State of Delaware as applied to agreements entered into and to be performed entirely in such state, between residents of such state. Nothing contained in this Agreement will prevent the Lender from bringing any action, enforcing any award or judgment or exercising any rights against the Grantor individually, against any security or against any property of the Grantor within any other county, state or other foreign or domestic jurisdiction.  The Lender and the Grantor agree that the venue provided above is the most convenient forum for both the Lender and the Grantor.  The Grantor waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

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14.Counterparts.  This Rider may be signed in any number of counterpart copies and by the parties hereto on separate counterparts, but all such copies shall constitute one and the same instrument.

5

The Grantor acknowledges that it has read and understood all the provisions of this Agreement, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof as a document under seal, as of the date first written above.

WITNESS / ATTEST:	DPAC TECHNOLOGIES CORP.
	By:
Name:		Name:
		Title:
	DEVELOPMENT CAPITAL
	VENTURES, LP
	By:	DCC OPERATING, INC.,
		its General Partner
	By:
		Name: Donald L. Murfin
		Title: Executive Vice President

6

STATE OF	)
	) ss.:
COUNTY OF	)

On the          day of August in the year 2005 before me, the undersigned, a Notary Public in and for said State, personally appeared                                   , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person(s) upon behalf of which the individual acted, executed the instrument.

Notary Public

STATE OF	)
	) ss.:
COUNTY OF	)

On the          day of August in the year 2005 before me, the undersigned, a Notary Public in and for said State, personally appeared                                   , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person(s) upon behalf of which the individual acted, executed the instrument.

Notary Public

7

SCHEDULE A TO RIDER TO SECURITY AGREEMENT - PATENTS

PATENT REGISTRATION NO.	PATENT
10/653,381	Wireless Connectivity Module

8

PATENT ASSIGNMENT

WHEREAS, DPAC TECHNOLOGIES CORP. (the “Grantor”) is the owner of the entire right, title and interest in and to the United States patents, patent applications and rations listed on Schedule “A” attached hereto and made a part hereof, the inventions described therein and all rights associated therewith (collectively, the “Patent Collateral”), which are registered in the United States Patent and Trademark Office or which are the subject of pending applications in the United States Patent and Trademark Office; and

WHEREAS, DEVELOPMENT CAPITAL VENTURES, LP, having a place of business at 4443 Brookfield Corporate Drive, Suite 110, Chantilly, Virginia 20151, identified as the “Lender” under that certain Rider to Security Agreement - Patents of even date herewith (the “Grantee”) is desirous of acquiring said Patent Collateral;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound hereby, the Grantor, its successors and assigns does hereby transfer, assign and set over unto Grantee, its successors, transferees and assigns, all of its present and future right, title and interest in and to the Patent Collateral and all proceeds thereof and all rights and proceeds associated therewith.

IN WITNESS WHEREOF, the undersigned has caused this Patent Assignment to be executed by its duly authorized officer on this                  day of                               ,           .

WITNESS / ATTEST:	DPAC TECHNOLOGIES CORP.
	By:
		Name:
		Title:

STATE OF	)
	) ss.:
COUNTY OF	)

On the          day of            in the year 2005 before me, the undersigned, a Notary Public in and for said State, personally appeared                         , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person(s) upon behalf of which the individual acted, executed the instrument.

Notary Public

2

RIDER TO SECURITY AGREEMENT - TRADEMARKS

THIS RIDER TO SECURITY AGREEMENT (“Rider”) is executed this 5th day of August, 2005, by and between DPAC TECHNOLOGIES CORP. (the “Grantor”) with an address at 7321 Lincoln Way, Garden Grove, California 92841 and DEVELOPMENT CAPITAL VENTURES, LP (the “Lender”), with an address at 4443 Brookfield Corporate Drive, Suite 110, Chantilly, Virginia 20151.  This Rider is incorporated into and made part of that certain Security Agreement (“Security Agreement”) between the Grantor and the Lender dated August 5, 2005, and also into certain other financing documents and security agreements executed by and between the Grantor and the Lender or by and between the Borrower (as defined in the Security Agreement) and the Lender (all such documents including this Rider collectively referred to as “Loan Documents”).  All capitalized terms not otherwise defined in this Rider shall have the same meanings ascribed to such terms in the other Loan Documents.

The Grantor has adopted, used and is using (or has filed applications for the registration of) the trademarks, service marks and tradenames listed on Schedule “A” attached hereto and made part hereof (all such marks or names hereinafter referred to as the “Trademarks”).

The Lender desires to acquire a lien and security interest on the Trademarks and the registration thereof, together with all the goodwill of the Grantor associated therewith and represented thereby, as security for all of the Obligations (as defined in the Security Agreement) to the Lender, and the Lender desires to have its security interest in such Trademarks confirmed by a document identifying same and in such form that it may be recorded in the United States Patent and Trademark Office.

NOW, THEREFORE, with the foregoing background deemed incorporated by reference and made part hereof, the parties hereto, intending to be legally bound hereby, covenant and agree as follows:

1.Grant of Security Interest.  In consideration of and pursuant to the terms of the Loan Documents, and for other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, and to secure the Grantor’s present and future liabilities to the Lender, the Grantor grants a lien and security interest to the Lender in all its present and future right, title and interest in and to the Trademarks, together with all the goodwill of the Grantor associated with and represented by the Trademarks, and the registration thereof and the right (but not the obligation) to sue for past, present and future infringements, and the proceeds thereof, including, without limitation, license royalties and proceeds of infringement suits.

2.Maintenance of Trademarks.  The Grantor hereby covenants and agrees to maintain the Trademarks in full force and effect until all of the Obligations to the Lender are satisfied in full.

3.Representations and Warranties.  The Grantor represents, warrants and covenants that: (a) the Trademarks are subsisting and have not been adjudged invalid or unenforceable; (b) each of the Trademarks is valid and enforceable; (c) the Grantor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of the Trademarks, and each of the Trademarks is free and clear of any liens, charges and encumbrances, including, without limitation, pledges, assignments, licenses and covenants by the Grantor not to sue third persons; (d) the Grantor has the unqualified right to enter into this Rider and perform its terms; (e) the Grantor has used, and will continue to use for the duration of this Rider, proper notice, as required by 15 U.S.C. §§ 1051-1127 in connection with its use of the Trademarks; and (f) the Grantor has used, and will continue to use for the duration of this Rider, consistent standards of quality in products leased or sold under the Trademarks and hereby grants to the Lender and its employees and agents the right to visit the Grantor’s locations which lease, sell or store products under any of the Trademarks and to inspect the products and quality control records relating thereto at reasonable times during regular business hours to ensure the Grantor’s compliance with this paragraph 3(f).

4.Covenants.  The Grantor further covenants that:  (a)  until all of the Obligations have been satisfied in full, the Grantor will not enter into any agreement, including, without limitation, license agreements, which are inconsistent with the Grantor’s obligations under this Rider; and (b) if the Grantor acquires rights to any new Trademarks, the provisions of this Rider shall automatically apply thereto and the Grantor shall give the Lender prompt written notice thereof along with an amended Schedule “A.”

5.Exclusive Use of Trademarks.  So long as this Rider is in effect and so long as the Grantor has not received notice from the Lender that an Event of Default has occurred under the Loan Documents and that the Lender has elected to exercise its rights hereunder, the Grantor shall continue to have the exclusive right to use the Trademarks and the Lender shall have no right to use the Trademarks or issue any exclusive or non-exclusive license with respect thereto, or assign, pledge or otherwise transfer title in the Trademarks to anyone else.

6.Negative Pledge.  The Grantor agrees not to sell, assign or further encumber its rights and interest in the Trademarks without prior written consent of the Lender.

7.Remedies Upon Default.  (a)  Anything herein contained to the contrary notwithstanding, if and while the Grantor shall be in default hereunder or an Event of Default exists under the Loan Documents, the Grantor hereby covenants and agrees that the Lender, as the holder of a security interest under the Uniform Commercial Code, as now or hereafter in effect in Pennsylvania, may take such action permitted under the Loan Documents or permitted by law, in its exclusive discretion, to foreclose upon the Trademarks covered hereby.

(b)For such purposes, and in the event of the Grantor’s default hereunder or an Event of Default under the Loan Documents and while such default or Event of Default exists, the Grantor hereby authorizes and empowers the Lender to make, constitute and appoint any officer or agent of the Lender as the Lender may select, in its exclusive discretion, as the

2

Grantor’s true and lawful attorney-in-fact, with the power to endorse the Grantor’s name on all applications, documents, papers and instruments necessary for the Lender to use the Trademarks or to grant or issue any exclusive or non-exclusive license under the Trademarks to anyone else, or necessary for the Lender to assign, pledge, convey or otherwise transfer title in or dispose of the Trademarks to anyone else.  The Grantor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof, except for the gross negligence or wilful misconduct of such attorney.  This power of attorney shall be irrevocable for the life of this Rider and the Loan Documents, and until all the Obligations are satisfied in full.

(c)The Grantor expressly acknowledges that this Rider shall be recorded with the Patent and Trademark Office in Washington, DC.  Contemporaneously herewith, the Grantor shall also execute and deliver to the Lender such documents as the Lender shall reasonably require to permanently assign all rights in the Trademarks to the Lender, which documents shall be held by the Lender, in escrow, until the occurrence of an Event of Default hereunder or under the Loan Documents.  After such occurrence, the Lender may, at its sole option, record such escrowed documents with the Patent and Trademark Office.

8.Subject to Security Agreement.  This Rider shall be subject to the terms, provisions, and conditions set forth in the Security Agreement and may not be modified without the written consent of the party against whom enforcement is being sought.

9.Inconsistent with Security Agreement.  All rights and remedies herein granted to the Lender shall be in addition to any rights and remedies granted to the Lender under the Loan Documents.  In the event of an inconsistency between this Rider and the Security Agreement, the language of the Security Agreement shall control.  The terms and conditions of the Security Agreement are hereby incorporated herein by reference.

10.Termination of Agreement.  Upon payment and performance of all Obligations under the Loan Documents and full satisfaction of all of the Grantor’s liabilities and obligations to the Lender, the Lender shall execute and deliver to the Grantor all documents necessary to terminate the Lender’s security interest in the Trademarks.

11.Fees and Expenses.  Any and all reasonable fees, costs and expenses, of whatever kind or nature, including the reasonable attorneys’ fees and legal expenses incurred by the Lender in connection with the preparation of this Rider and all other documents relating hereto and the consummation of this transaction, the filing or recording of any documents (including all taxes in connection therewith) in public offices, the payment or discharge of any taxes, reasonable counsel fees, maintenance fees, encumbrances or costs otherwise incurred in protecting, maintaining, preserving the Trademarks, or in defending or prosecuting any actions or proceedings arising out of or related to the Trademarks, in each case in accordance with the terms of this Rider, shall be borne and paid by the Grantor on demand by the Lender and until so paid shall be added to the principal amount of the Obligations to the Lender and shall bear interest at the contract rate therefor.

3

12.Prosecution of Trademark Applications.  (a)  Subject to the terms of the Security Agreement, the Grantor shall have the duty to prosecute diligently any trademark application with respect to the Trademarks pending as of the date of this Rider or thereafter, until the Obligations shall have been satisfied in full, to preserve and maintain all rights in the Trademarks, and upon reasonable request of the Lender, the Grantor shall make federal application on registrable but unregistered trademarks belonging to the Grantor.  Any reasonable expenses incurred in connection with such applications shall be borne by the Grantor.  The Grantor shall not abandon any Trademark without the written consent of the Lender.

(b)The Grantor shall have the right to bring suit in its own name to enforce the Trademarks, in which event the Lender may, if the Grantor deems it necessary or after an Event of Default under the Loan Documents, be joined as a nominal party to such suit if the Lender shall have been satisfied that it is not thereby incurring any risk of liability because of such joinder.  The Grantor shall promptly, upon demand, reimburse and indemnify the Lender for all damages, reasonable costs and reasonable expenses, including attorneys’ fees, incurred by the Lender in the fulfillment of the provisions of this paragraph.

13.Additional Remedies.  Upon the occurrence of an Event of Default under the Loan Documents, the Lender may, without any obligation to do so, complete any obligation of the Grantor hereunder, in the Grantor’s name or in the Lender’s name, but at the Grantor’s expense, and the Grantor hereby agrees to reimburse the Lender in full for all reasonable expenses, including reasonable attorneys’ fees, incurred by the Lender in protecting, defending and maintaining the Trademarks.

14.Governing Law.  This Agreement has been delivered to and accepted by the Lender and shall be construed in accordance with, and governed in all respects by the laws of the State of Delaware as applied to agreements entered into and to be performed entirely in such state, between residents of such state. Nothing contained in this Agreement will prevent the Lender from bringing any action, enforcing any award or judgment or exercising any rights against the Grantor individually, against any security or against any property of the Grantor within any other county, state or other foreign or domestic jurisdiction.  The Lender and the Grantor agree that the venue provided above is the most convenient forum for both the Lender and the Grantor.  The Grantor waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

15.Counterparts.  This Rider may be signed in any number of counterpart copies and by the parties hereto on separate counterparts, but all such copies shall constitute one and the same instrument.

4

The Grantor acknowledges that it has read and understood all the provisions of this Agreement, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof as a document under seal, as of the date first written above.

WITNESS / ATTEST:	DPAC TECHNOLOGIES CORP.
	By:
Name:		Name:
		Title:
	DEVELOPMENT CAPITAL
	VENTURES, LP
	By:	DCC OPERATING, INC.,
		its General Partner
	By:
		Name: Donald L. Murfin
		Title: Executive Vice President

5

STATE OF	)
	) ss.:
COUNTY OF	)

On the          day of August in the year 2005 before me, the undersigned, a Notary Public in and for said State, personally appeared                                   , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person(s) upon behalf of which the individual acted, executed the instrument.

Notary Public

STATE OF	)
	) ss.:
COUNTY OF	)

On the          day of August in the year 2005 before me, the undersigned, a Notary Public in and for said State, personally appeared                                   , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person(s) upon behalf of which the individual acted, executed the instrument.

Notary Public

6

SCHEDULE A TO RIDER TO SECURITY AGREEMENT - TRADEMARKS

	APPLICATION OR		REGISTRATION OR
TRADEMARK	REGISTRATION NO.	COUNTRY	FILING DATE
Airborne	78/259,260	U.S.	August 17, 2005
Airborne Direct	78/304,711	U.S.	February 28, 2005

TRADEMARK ASSIGNMENT

WHEREAS, DPAC TECHNOLOGIES CORP. (the “Grantor”) is the owner of the entire right, title and interest in and to the United States trademarks, tradenames and registrations listed on Schedule “A” attached hereto and made a part hereof (the “Trademarks”), which are registered in the United States Patent and Trademark Office; and

WHEREAS, DEVELOPMENT CAPITAL VENTURES, LP, having a place of business at 4443 Brookfield Corporate Drive, Suite 110, Chantilly, Virginia 20151, identified as the “Lender” under that certain Rider to Security Agreement - Trademarks of even date herewith (the “Grantee”) is desirous of acquiring said Trademarks;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound hereby, the Grantor, its successors and assigns does hereby transfer, assign and set over unto Grantee, its successors, transferees and assigns all of its present and future right, title and interest in and to the Trademarks and all proceeds thereof and all goodwill associated therewith.

IN WITNESS WHEREOF, the undersigned has caused this Trademark Assignment to be executed by its duly authorized officer on this                  day of                                     ,           .

WITNESS / ATTEST:	DPAC TECHNOLOGIES CORP.
	By:
		Name:
		Title:

STATE OF	)
	) ss.:
COUNTY OF	)

On the          day of            in the year 2005 before me, the undersigned, a Notary Public in and for said State, personally appeared                         , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person(s) upon behalf of which the individual acted, executed the instrument.

Notary Public

2

RIDER TO SECURITY AGREEMENT - COPYRIGHTS

THIS RIDER TO SECURITY AGREEMENT (“Rider”) is executed this 5th day of August, 2005, by and between DPAC TECHNOLOGIES CORP. (the “Grantor”) with an address at 7321 Lincoln Way, Garden Grove, California 92841 and DEVELOPMENT CAPITAL VENTURES, LP (the “Lender”), with an address at 4443 Brookfield Corporate Drive, Suite 110, Chantilly, Virginia 20151.  This Rider is incorporated into and made part of that certain Security Agreement (“Security Agreement”) between the Grantor and the Lender dated August 5, 2005, and also into certain other financing documents and security agreements executed by and between the Grantor and the Lender or by and between the Borrower (as defined in the Security Agreement) and the Lender (all such documents including this Rider collectively referred to as “Loan Documents”).  All capitalized terms not otherwise defined in this Rider shall have the same meanings ascribed to such terms in the other Loan Documents.

The Grantor has filed applications for the registration of the copyrights listed on Schedule A attached hereto and made part hereof (all such copyrights hereinafter referred to as the “Copyrights”).

The Grantor desires to grant a security interest in and to the Copyrights and the registration thereof, as security for the Grantor’s Obligations referred to and described in the Loan Documents, and the Lender desires to have its security interest in such Copyrights confirmed by a document identifying same and in such form that it may be recorded in the Library of Congress, Copyright Office.

NOW, THEREFORE, with the foregoing background deemed incorporated by reference and made part hereof, the parties hereto, intending to be legally bound hereby, covenant and agree as follows:

1.Grant of Security Interest.  In consideration of and pursuant to the terms of the Loan Documents, and for other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, and to secure the Grantor’s present and future Obligations, the Grantor grants to the Lender a lien and security interest in all of Grantor’s present and future right, title and interest in and to the Copyrights, and the registration thereof and the right (but not the obligation) to sue for past, present and future infringements, and the proceeds thereof, including, without limitation, license royalties and proceeds of infringement suits.

2.[Blank].

3.Representations and Warranties.  The Grantor represents, warrants and covenants that:  (a) the Copyrights are subsisting and have not been adjudged invalid or unenforceable; (b) to the best of Grantor’s knowledge each of the registered Copyrights is valid and enforceable; (c) except as otherwise provided in or resulting from the Loan Documents, the Grantor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of the Copyrights, and each of the Copyrights is free and clear of any liens, charges, and encumbrances, including, without limitation, pledges, assignments, licenses and covenants by

the Grantor not to sue third persons; and (d) the Grantor has the unqualified right to enter into this Rider and perform its terms.

4.Covenants.  The Grantor covenants that:  (a) until all of the Obligations have been satisfied in full, it will not enter into any agreement which is inconsistent with the Grantor’s obligations under this Rider; (b) if the Grantor registers any new Copyrights, the provisions of this Rider shall automatically apply thereto and the Grantor shall give the Lender prompt written notice thereof along with an amended Schedule A and (c) the Grantor has no notice of any actions or suits commenced or threatened against it, or notice of claims asserted or threatened against it, with respect to the Copyrights.

5.Exclusive Ownership of Copyrights.  So long as this Rider is in effect and so long as the Grantor has not received notice from the Lender that an Event of Default has occurred under the Loan Documents and that the Lender has elected to exercise its rights to assignment hereunder, the Grantor shall continue to have the exclusive ownership of the Copyrights, including the licensing thereof, and the Lender shall have no ownership or other right to use the Copyrights or issue any exclusive or non-exclusive license with respect thereto, or assign, pledge or otherwise transfer title in the Copyrights to anyone else.

6.Negative Pledge.  Notwithstanding anything to the contrary in this Agreement, the Grantor agrees not to sell or assign its rights and interest in the Copyrights without the prior written consent of the Lender, which consent shall not be unreasonably withheld or delayed.

7.Remedies Upon Default.  (a)  Anything herein contained to the contrary notwithstanding, if and while the Grantor shall be in default hereunder or an Event of Default exists under the Loan Documents, the Grantor hereby covenants and agrees that the Lender as the holder of a security interest under the Uniform Commercial Code, as now or hereafter in effect in Pennsylvania, may take such action permitted under the Loan Documents or permitted by law, in its exclusive discretion, to foreclose upon the Copyrights covered hereby.

(b)  For such purposes, and in the event of an Event of Default under the Loan Documents and while such Event of Default exists, the Grantor hereby authorizes and empowers the Lender to make, constitute and appoint any officer or agent of the Lender as the Lender may select, in its exclusive discretion, as the Grantor’s true and lawful attorney-in-fact, with the power to endorse the Grantor’s name on all applications, documents, papers and instruments necessary for the Lender to use the Copyrights or to grant or issue any exclusive or non-exclusive license under the Copyrights to anyone else, or necessary for the Lender to assign, pledge, convey or otherwise transfer title in or dispose of the Copyrights to anyone else.  The Grantor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof, except for the gross negligence or willful misconduct of such attorney.  This power of attorney shall be irrevocable for the life of this Rider and the Loan Documents, and until all the Obligations (as defined in the Security Agreement) are satisfied in full.

(c)  The Grantor expressly acknowledges that a Notice of Security Interest (i.e. this Rider) or equivalent document shall be recorded with the Library of Congress, Copyright Office

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in Washington, D.C. Upon the occurrence of an Event of Default, the Grantor shall also execute and deliver to the Lender such documents as the Lender shall reasonably request to permanently assign all rights in the Copyrights to the Lender.  After such occurrence, the Lender may, at its sole option, record any such documents with the Copyright Office.

8.Subject to Loan Agreement.  This Rider shall be subject to the terms, provisions, and conditions set forth in the Loan Agreement and may not be modified without the written consent of the party against whom enforcement is being sought.

9.Inconsistent with Loan Agreement.  All rights and remedies herein granted to the Lender shall be in addition to any rights and remedies granted to the Lender under the Loan Documents.  In the event of an inconsistency between this Rider and the Loan Agreement, the language of the Loan Agreement shall control.  The terms and conditions of the Loan Agreement are hereby incorporated herein by reference.

10.Re-Vesting of and/or Termination of any Interest in Copyrights.  Upon payment and performance of all Obligations under the Loan Documents and full satisfaction of all of the Grantor’s liabilities and obligations to the Lender, the Lender shall immediately execute and deliver to the Grantor all documents and take all actions necessary to re-vest all rights in and to the Copyrights in the Grantor and/or terminate any interest of the Lender therein.

11.[Blank]

12.Prosecution of Copyright Applications.  The Grantor shall have the exclusive right, in its sole discretion, to bring suit in its own name to enforce the Copyrights.

13.Additional Remedies.  Upon the occurrence of an Event of Default under the Loan Documents, the Lender may, without any obligation to do so, complete any obligation of the Grantor hereunder, in the Grantor’s name or in the Lender’s name, but at the Grantor’s expense, and the Grantor hereby agrees to reimburse the Lender in full for all reasonable expenses, including reasonable attorney’s fees, incurred by the Lender in protecting, defending and maintaining the Copyrights.

14.Governing Law.  This Agreement has been delivered to and accepted by the Lender and shall be construed in accordance with, and governed in all respects by the laws of the State of Delaware as applied to agreements entered into and to be performed entirely in such state, between residents of such state. Nothing contained in this Agreement will prevent the Lender from bringing any action, enforcing any award or judgment or exercising any rights against the Grantor individually, against any security or against any property of the Grantor within any other county, state or other foreign or domestic jurisdiction.  The Lender and the Grantor agree that the venue provided above is the most convenient forum for both the Lender and the Grantor.  The Grantor waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

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The Grantor acknowledges that it has read and understood all the provisions of this Agreement, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof as a document under seal, as of the date first written above.

WITNESS / ATTEST:	DPAC TECHNOLOGIES CORP.
	By:
Name:		Name:
		Title:
	DEVELOPMENT CAPITAL
	VENTURES, LP
	By:	DCC OPERATING, INC.,
		its General Partner
	By:
		Name: Donald L. Murfin
		Title: Executive Vice President

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STATE OF	)
	) ss.:
COUNTY OF	)

On the          day of August in the year 2005 before me, the undersigned, a Notary Public in and for said State, personally appeared                                   , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person(s) upon behalf of which the individual acted, executed the instrument.

Notary Public

STATE OF	)
	) ss.:
COUNTY OF	)

On the          day of August in the year 2005 before me, the undersigned, a Notary Public in and for said State, personally appeared                                   , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is(are) subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person(s) upon behalf of which the individual acted, executed the instrument.

Notary Public

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SCHEDULE A TO RIDER TO SECURITY AGREEMENT - COPYRIGHTS

Registered Copyrights

Registration No. Title of Work Registration Date Country

Unregistered Copyrights

Title of Work	Description
Airborne WLn Module Firmware
AirborneDirect/Serial Firmware
AirborneDirect/Ethernet Firmware
Airborne Evaluation Utility Software
Airborne OEM Configuration Tool Software
Airborne Transportation Bridge Firmware
VCOMM Utility Software

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

DPAC Receives Bridge Financing, Amends QuaTech Merger Agreement and Enters into License Agreement

•License provides QuaTech exclusive right to worldwide sale and distribution of Airborne^TM Products.

•Merger Amendment removes most conditions to close except for shareholder and government approvals and consents.

•Development Capital Ventures LP provides $500,000 bridge financing

•DPAC expects to file S-4 registration statement and seek shareholder approval.

Garden Grove, CA – August 5, 2005 – DPAC Technologies Corp. (Pink Sheets: DPAC), Development Capital Ventures LP (“DCV”) and QuaTech, Inc. (www.quatech.com) today announced that DCV has provided DPAC with a $500,000 secured, convertible loan.  DCV holds 100% of the preferred stock of QuaTech.  Simultaneously, DPAC has made QuaTech, through a license with DCV, the exclusive world wide licensee for Airborne^TM wireless products and the parties have amended their previously announced definitive merger agreement to remove certain conditions to close the transaction and to fix the exchange ratio between the parties.

The DCV loan carries an annual interest rate of 12%, is secured by all the assets of DPAC and is due in full at the end of six months, or February 3, 2006.  The note is convertible at DCV’s option into 3,289,473 shares of DPAC common stock.  The note automatically converts into DPAC common stock upon the closure of the merger with QuaTech.  An additional 1,644,736 shares of DPAC common stock are issuable upon the closure of the merger with QuaTech and the conversion of the note to common stock.

DPAC intends to move forward to complete the merger with QuaTech as soon as possible.  To facilitate the closing of the merger, the amendment to the merger agreement provides for the removal of certain conditions to closing the merger, including provisions related to additional financing terms, minimum cash and working capital requirements and Nasdaq listing efforts.  The amendment also fixes the final exchange ratio for the issuance of DPAC shares such that DPAC’s current shareholders will own approximately 34% of the post merger company, while QuaTech shareholders, including DCV, will own approximately 66% of the combined company.  DCV will own approximately 50% of the post merger company.  The parties intend to file an S-4 registration statement with the SEC within the next several weeks.  Upon the

registration statement being declared effective by the SEC, the documents will be mailed to shareholders to seek shareholder approval of the merger, along with other related proposals related to the merger.

The license agreement is effective August 5, 2005 and, pending our anticipated merger, provides QuaTech, as the sub-licensee of DCV, the exclusive worldwide right to sell, distribute and manufacture DPAC’s Airborne^TM wireless products, to create and develop additional wireless products using DPAC’s technology and to use the DPAC and Airborne^TM names in exchange for a royalty to DPAC on each unit sold.  Also on August 5, 2005, in conjunction with the license, QuaTech will hire certain existing DPAC sales and engineering and management employees.  DPAC will retain three employees, including CEO Kim Early and CFO Steve Vukadinovich, who will oversee the process of seeking shareholder approval and completion of the merger.

Kim Early, DPAC’s Chief Executive Officer, commented, “DPAC has encountered a number of challenges over the past several months with respect to the sufficiency of our financial resources and our Nasdaq listing status, among others.  This bridge loan, license agreement and accompanying amendment to the merger agreement demonstrates the commitment of DPAC, DCV and QuaTech to address those challenges and complete the merger.”  “We believe these actions best serve all the constituencies of DPAC and enable us to move forward quickly and aggressively to focus on completing the merger and growing the combined business,” concluded Mr. Early.

About DPAC Technologies

Located in Garden Grove, California, DPAC Technologies provides embedded wireless networking and connectivity products for machine-to-machine communication applications. DPAC’s wireless products are used by major OEMs in the transportation, instrumentation and industrial control, homeland security, medical diagnostics and logistics markets to provide remote data collection and control. The Company’s web site address is www.dpactech.com.  Information concerning DPAC is filed by DPAC with the SEC and is available on the SEC website, www.sec.gov.

About QuaTech

QuaTech, a privately-held company, is an industry performance leader in device networking and connectivity solutions. Through design, manufacturing and support, QuaTech maintains the highest levels of reliability and performance. Satisfied customers include OEMs, VARs and System Integrators, as well as end-users in many industries, including banking, retail/POS, access control, building automation and security, and energy management. QuaTech is a leading supplier of data connectivity products to financial institutions, serving five of the top 10 U.S. banks. Founded in 1983 and headquartered in Hudson, Ohio, QuaTech sells and supports its solutions both directly and through a global network of resellers and distributors. www.quatech.com

Products & Services for the Integration Age

About Development Capital Ventures, LP

Headquartered in Chantilly, Virginia, Development Capital Ventures is a Small Business Investment Company licensed and regulated by the Small Business Administration under the Small Business Act of 1958 as amended. Development Capital Ventures provides financing to manufacturing, distribution, and business-to-business service companies.

Forward-Looking Statements

This press release includes forward-looking statements.  You can identify these statements by their forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “guidance,” “estimate,” “intend,” predict,” and “continue” or similar words or any connection with any discussion of future events or circumstances or of management’s current estimates or beliefs.  Forward-looking statements are subject to risks and uncertainties, and therefore results may differ materially from those set forth in those statements.  A transaction as contemplated would require approvals of the Boards of Directors and shareholders of both parties and numerous other conditions.  Full details of such a transaction will be provided to DPAC shareholders and filed with the SEC by DPAC as and when appropriate. There is no assurance possible, and none is intended, that the transaction will be completed at all or on the terms described. The transaction is and shall continue to be subject to certain conditions and contingencies until the transaction is completed. DPAC Technologies Corp. will provide further detailed information to its shareholder as and when required to solicit their consent. The transaction’s costs and diversion of management attention could negatively impact results.  Delisting of our shares could have adverse effects on the liquidity of trading in the common stock and the price per share.  Other factors that affect DPAC’s business and its ability to conclude a merger transaction include, but are not limited to, that our Airborne™ products are new, that we sell to original equipment manufacturers for new product introductions by them, and that all of these are subject to risks and uncertainties regarding new product introductions such as uncertainty of market acceptance. The parties need additional financing to complete the transactions as envisioned. Such financing may not be available on favorable terms.  Also, there can be no assurance that such transaction will be completed or, if completed, that it will be successful.  The transaction would involve a change of control, in that it is likely that voting control of DPAC would be transferred to a former principal shareholder of QuaTech. Other factors that affect DPAC’s business include, but are not limited to, the degree of market acceptance of our existing and planned wireless connectivity products, future business opportunities with these products, protection of licensed technology or proprietary rights, risks of litigation, our need for additional financing in order to realize our opportunities, other challenges related to completing our proposed merger with QuaTech, Inc., further challenges in subsequently combining our operations with QuaTech, Inc.’s own, and general market and economic conditions. More information about the risks and challenges faced by DPAC Technologies Corp. is contained in the Securities and Exchange Commission filings made by the Company on Form 10-K, 10-Q and 8-K. DPAC Technologies Corp. specifically disclaims any obligation to update or revise any forward-looking statements whether as a result of new information, future developments or otherwise.

Additional Information:

This news release is neither a solicitation of any proxies nor an offer of any securities of any kind whatsoever.  No securities mentioned herein have been registered or authorized or approved by any federal or state securities regulator or commission.

Contact:

AT DPAC TECHNOLOGIES:
Stephen Vukadinovich	Kim Early
Chief Financial Officer	Chief Executive Officer
(714) 898-0007	(714) 898-0007
Or Steve.Vukadinovich@dpactech.com	Or Kim.Early@dpactech.com