-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CqCgT3s7DDx695ZdSihU7uz6uOPc9CHEQf1YhMNZbPcCVvMkFEuEVbD/G0grPSnq EZTVn43PIabECnYLTXZogQ== 0001157523-05-002284.txt : 20050308 0001157523-05-002284.hdr.sgml : 20050308 20050308130750 ACCESSION NUMBER: 0001157523-05-002284 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050307 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050308 DATE AS OF CHANGE: 20050308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DPAC TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000784770 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 330033759 STATE OF INCORPORATION: CA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14843 FILM NUMBER: 05666127 BUSINESS ADDRESS: STREET 1: 7321 LINCOLN WAY CITY: GARDEN GROVE STATE: CA ZIP: 92641 BUSINESS PHONE: 7148980007 MAIL ADDRESS: STREET 1: 7321 LINCOLN WAY CITY: GARDEN GROVE STATE: CA ZIP: 92641 FORMER COMPANY: FORMER CONFORMED NAME: DENSE PAC MICROSYSTEMS INC DATE OF NAME CHANGE: 19920703 8-K 1 a4837980.txt DPAC TECHNOLOGIES 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): March 7, 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 offices) (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): [x] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [x] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] 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. After the close of business on March 7, 2005, the Registrant entered into the agreement with QuaTech, Inc., attached hereto as Exhibit 2.3 and incorporated herein by this reference. Presently, the Registrant does not possess any direct or indirect interest in QuaTech, Inc., and QuaTech, Inc. does not possess any direct or indirect interest in the Registrant. The Registrant's news release filed as Exhibit 99.1 hereto is incorporated into this Item by this reference. THE REGISTRANT AND QUATECH, INC HAVE NOT SIGNED A DEFINITIVE AGREEMENT. Under the agreement with QuaTech, Inc., we are committed to working toward a definitive agreement directly with QuaTech, Inc. Unless a definitive agreement is reached by April 21, 2005, the parties will cease to have any obligation to each other to continue with the announced negotiations. The agreement envisions that we would issue shares of our authorized and previously unissued Common Stock in exchange for all the equity securities of QuaTech, Inc. The amount of shares we issue in the aggregate would be one and one half times the sum of the amount of Common Stock we currently have outstanding plus the amount then issuable on a net-exercise basis under currently outstanding options or warrants (based on a given price per share to be determined). The envisioned transactions would result in, among other things, an increase in shares outstanding and dilution of the ownership percentages of the Registrant's current shareholders. The agreement envisions soliciting proxies from the Registrant's shareholders in accordance with the proxy rules promulgated under Section 14(a) of the Securities Exchange Act. The transaction would result in a change of control of the Registrant and the issuance of a large additional number of shares available for future sale. The agreement also contemplates that we would effect a reverse stock split of the Common Stock in a ratio yet to be determined, and generally use our best efforts, in order to help to maintain the listing of our Common Stock on the Nasdaq Small Cap Market. The number of shares issuable to Quatech, Inc. shareholders in the transaction shall be appropriately adjusted to maintain the same relationship with the new common stock as they have with the current common stock, which is described in the agreement and hereinabove. Section 8- Other Events Item 8.01 Other Events After the close of business on March 7, 2005, the Registrant entered into the agreement with QuaTech, Inc., attached hereto as Exhibit 2.3 and incorporated herein by this reference. Before the opening of business on March 8, 2005, the Registrant and QuaTech, Inc. mutually issued the news release, attached hereto as Exhibit 99.1 and incorporated herein by this reference. Section 9 - Financial Statements and Exhibits. Item 9.01 Financial Statements and Exhibits. (c) Exhibits Exh. No. Description - -------- ---------------------- 2.3 Agreement dated March 7, 2005 between the Registrant and QuaTech, Inc. 99.1 News Release dated March 8, 2005 issued by the Registrant and QuaTech, Inc. 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 March 7, 2005 ----------------------- /s/ Creighton K. Early ---------------------------- (Signature) Creighton K. Early, Chief Executive Officer ---------------------------------------------- (Name and Title) Exhibit Index Exh. No. Description - ---------- ---------------------- 2.3 Agreement dated March 7, 2005 between the Registrant and QuaTech, Inc. 99.1 News Release dated March 8, 2005 issued by the Registrant and QuaTech, Inc. EX-2.3 2 a4837980ex23.txt EXHIBIT 2.3 Exhibit 2.3 (on DPAC Letterhead) March 7, 2005 Mr. Steven D. Runkel Chief Executive Officer and President QuaTech, Inc. 5675 Hudson Industrial Parkway Hudson, Ohio 44236 Dear Steve: By way of this letter, DPAC Technologies Corp., a California corporation headquartered in Orange County, California ("DPAC") is expressing interest in acquiring all of the shares and options of QuaTech, Inc., an Ohio corporation headquartered in Hudson, Ohio ("QuaTech"). The parties anticipate that the proposed acquisition would close on or before July 15th, subject to the various approvals and other conditions described herein. The structure of the transaction will be based on advice from our respective financial advisors, attorneys and accountants but will have the effects set forth below. Both parties herein envision the transaction would be based on the following terms: 1. Acquisition. DPAC would acquire all QuaTech shares, warrants and options for an aggregate number of common shares of DPAC equal to one and one-half (1.5) times the sum of (a) the number of shares of Common Stock of DPAC outstanding at the effective time plus (b) a number of shares that would be issuable upon a "net exercise" of all in-the-money options and warrants of DPAC, based on a market price per DPAC common share at which any new equity financing, as required in Section 4h.(i) below, is obtained. Provided, however, shares issued or reserved and issuable in connection with borrowing or sales of New Securities as contemplated by Section 4h.(i) below, shall be eliminated from both party's outstanding or issuable shares before calculating the foregoing. 2. Due Diligence. Each party will complete a due diligence review within thirty (30) days after execution of this letter for the purpose of verifying each other's financial condition and prospects. Each party agrees for itself that it will schedule a due diligence review team to begin as soon as practicable after execution of this letter, and the party also will make its own books and records and facilities reasonably available to the other, and will make available upon reasonable notice its board members and executives as well as such data as is reasonably requested of them by the other party or its agents or representatives. 3. Preservation of Assets and Business. From the date of this letter until the completion of the due diligence review, set forth in Section 2 above, both DPAC and QuaTech will use reasonable efforts to preserve and maintain the assets and business of the Companies as presently conducted. DPAC will use best efforts to maintain its common shares' Nasdaq Small Cap listing. 4. Definitive Agreement. Concurrent with the due diligence, the Parties will prepare and negotiate an appropriate Agreement and Plan of Merger ("Definitive Agreement") between DPAC and QuaTech. The Definitive Agreement will provide that consummation of the transaction is subject to customary terms and conditions for such transactions and include provisions concerning the following matters: a. Representations, warranties, and covenants of the parties as are normal and appropriate for a transaction of the type contemplated herein with the representations, warranties and covenants expiring upon the closing (the "Closing") of the Definitive Agreement. b. Reasonable assurances/verification that prior to consummation of a transaction, both businesses shall have been conducted in all aspects in the ordinary course and consistent with past practices consistently applied. c. Shareholder Agreements between DPAC and Development Capital Ventures, LP, HillStreet Fund, L.P., William Roberts and Steve Runkel committing to vote for and cooperate in the closing of the transaction. d. DPAC and QuaTech shall have received all permits, authorizations, regulatory approvals and third party consents legally required for the consummation of the transactions, and all applicable legal requirements shall have been satisfied. e. The Board of Directors and shareholders of QuaTech, and the Board of Directors and shareholders of DPAC, shall have approved the Definitive Agreement in accordance with applicable law. f. Each party will be responsible for its own legal, accounting, and transaction costs. g. DPAC will form a subsidiary to merge with QuaTech, and the transaction will be structured as a tax-free reorganization pursuant to Internal Revenue Code Section 368, and, if practicable and consistent with reorganization treatment under Section 368, QuaTech's corporate existence will be preserved in the merger. 2 h. Closing conditions shall include that (i) DPAC, or QuaTech at the direction of DPAC, shall have obtained, prior to or as of the Closing, not less than $3,000,000 nor more than $5,000,000, in the aggregate, of net proceeds from the sale of new debt or equity securities (the "New Securities") on terms reasonably satisfactory to each of DPAC and QuaTech, (ii) DPAC and QuaTech shall have minimum unrestricted cash balances and working capital balances as of closing which will be determined by the parties, (iii) QuaTech shall have paid and discharged its mezzanine loan at Closing out of available transaction funds of the combined company, (iv) holders of QuaTech warrants shall have agreed to convert such warrants into common stock of DPAC upon consummation of the merger as if such warrants were converted to common stock of QuaTech immediately prior to the Closing, (v) the holder of QuaTech's preferred stock shall have agreed to convert such preferred stock into common stock of DPAC upon consummation of the merger as if such shares of preferred stock were converted into common stock of QuaTech immediately prior to the Closing, (vi) each of the parties shall have obtained all necessary consents, and (vii) neither of the parties shall have suffered a material adverse change in its financial condition or business prospects. i. As of the Closing, the board of directors of DPAC shall consist of seven individuals including, William Roberts, Steve Runkel, Kim Early and four independent directors. As of the Closing, Steve Runkel shall be employed as the CEO of DPAC, and Kim Early shall continue as a full-time employee of DPAC and shall be the Chairman of the Board and a director of DPAC. Kim Early's responsibilities shall be finding, planning and, if approved by DPAC's Board of Directors, executing DPAC's future acquisitions of complementary product lines and businesses, and he shall report to the Board of Directors of DPAC. j. Key management personnel, to be determined, shall execute satisfactory Employment Agreements effective prior to or at Closing. k. A customary mutual Break-Up Fee provision shall be included. l. DPAC will concurrently with the Merger effect a reverse stock split in a ratio to be mutually agreed upon. m. DPAC will enter into a registration rights agreement with Development Capital Ventures, LP, HillStreet Fund, L.P., and William Roberts, as QuaTech shareholders receiving shares of DPAC common stock (which may be deemed to hold control shares) in connection with the transactions contemplated by the Definitive Agreement that provides such QuaTech shareholders certain customary demand rights related to the resale of such shares. 5. Confidentiality. Other than planned public announcements subject to Section 6, with respect to information concerning or relevant to the other party and its business and the transaction contemplated herein, including the identities of the parties and the fact that the parties are in negotiations, each party agrees on behalf of itself that it will hold such information in strict confidence and will not disclose any of such information other than to its own directors, officers, employees, agents and representatives who need to know such information for the purpose of evaluating the transaction, who shall be informed by the party of the confidential nature of such information and be directed by and agree with the party to treat such information confidentially. Provided, however, that this paragraph does not apply to the use or disclosure of information which (a) was known to the receiving party before receipt thereof from the disclosing party; (b) is learned by the receiving party not from the disclosing party or its representatives but from another person entitled to disclose it; (c) becomes known publicly other than through the party receiving the disclosure; or (d) is required by law or court order to be disclosed by the party receiving the disclosure. 3 6. Public Announcement. Any announcement of the transactions contemplated hereby by either party must be approved in writing as to content and timing in advance by the other party; provided, however, either party may make any announcements as required by law. 7. Exclusive Negotiations. Each party, by execution of this letter, agrees and commits that neither party, nor any affiliate, employee, director, principal or representative thereof will negotiate, solicit, seek, retain, consider, accept or enter into any commitment to consider or accept, nor will they assent to, any offer from any party other than the other party hereto or its affiliates with respect to any transaction having the effect of transferring control of the party, or the goodwill or (other than in the ordinary course of business) assets or any portion of such party, to any party other than the other party hereto or the shareholders of that party. The obligations set forth in this paragraph shall be in full force and effective during the forty-five (45) day period beginning on the date on which this letter is executed by QuaTech and shall expire at the close of business on the forty-fifth (45th) day after the date on which this letter is executed by QuaTech. 8. Unique Agreement. The parties agree that the provisions of Sections 5, 6, and 7 of this letter grant rights to QuaTech and DPAC which are of a unique and special nature. The parties further agree that any violation by QuaTech of Sections 5, 6 or 7 or by DPAC of Sections 5, 6, or 7 of this letter will result in immediate and irreparable harm to DPAC on one hand or QuaTech on the other hand and that in the event of any actual or threatened breach or violation of any of said provisions, the non-breaching party will be entitled as a matter of right to an injunction or a decree of specific performance from any equity court of competent jurisdiction. The breaching party hereby waives the right to assert the defense that such breach or violation can be compensated adequately with damages in an action at law. Nothing in this letter will be construed as prohibiting the non-breaching party from pursuing, or limiting the availability of, any other remedies at law or in equity available to it for such breach or violation or threatened breach or violation. 4 This letter does not constitute a contract to purchase, but only expresses the serious intent of DPAC and QuaTech to enter into a transaction that would include, as major points, the provisions set forth herein. Unless a Definitive Agreement shall have been negotiated and executed by both parties by April 8, 2005, neither DPAC nor QuaTech shall be under any obligation, except for the agreements contained in Sections 5, 6, 7, and 8 hereof which shall be binding upon the parties in accordance with their terms, regardless of any negotiations or understandings arising subsequent to the date of this letter, unless otherwise mutually agreed to in writing. If the Board of Directors of QuaTech desires to proceed as outlined herein, kindly so indicate by returning a duly executed copy of this letter to DPAC by fax to (714) 899-7574 not later than 8:00 pm EST today, March 7, 2005. Sincerely, DPAC Technologies Corp. By: /s/ Kim Early _________________________ Kim Early Chief Executive Officer Accepted and agreed to by the Board of Directors of QuaTech, Inc.: Date: March 7, 2005 By: /s/ Steven D. Runkel __________________________ Steven D. Runkel Chief Executive Officer 5 EX-99.1 3 a4837980ex991.txt EXHIBIT 99.1 Exhibit 99.1 DPAC and QuaTech to Combine to Create a Provider of M2M Device Connectivity Products GARDEN GROVE, Calif. & Hudson, Ohio--(BUSINESS WIRE)--March 8, 2005--DPAC Technologies Corp. (Nasdaq:DPAC) and QuaTech, Inc. (www.quatech.com) announced today that they have entered into a non-binding letter of intent that sets forth the terms of a proposed merger on a stock-for-stock basis. Following the transaction, QuaTech will be a wholly-owned subsidiary of DPAC; and in the merger, DPAC will exchange newly issued shares of common stock of DPAC for privately-held QuaTech's shares. The merged company will focus on accelerating the development of connectivity solutions for the rapidly expanding machine-to-machine communications (M2M) market. The benefits of the merger should include the following: -- Broader Technology, Product and Brand Portfolio - The merger will combine the innovative new technologies and product lines and established brands of the companies, enabling the new company to offer a broader array of products addressing the M2M connectivity market. -- Cross Selling to Sales Channel - DPAC's innovative wireless solutions for OEM products will gain access to QuaTech's distribution channels for its device connectivity products and packaged product development expertise, while QuaTech's product lines will leverage the wireless expertise and direct sales and sales channels provided by DPAC. Under the letter of intent, QuaTech's shareholders and stakeholders would receive DPAC shares in an amount equal to 150 percent of the amount of DPAC's partially diluted shares (those shares currently outstanding plus those issued or issuable under outstanding options and warrants on a net exercise basis) on a record date and on terms to be determined. The merged company will have a new seven-member board with three inside directors and four independent members. The merged company management will be led by Kim Early, current DPAC CEO, as Chairman, and Steven Runkel, current QuaTech CEO, as Chief Executive Officer. Steven Runkel, QuaTech's CEO, said, "We believe that the merger with DPAC is the right vehicle for achieving the growth objectives of our management and shareholders. "The two companies share a common vision of the market opportunity and a desire to leverage our respective product lines for the benefit of our customers." Kim Early, DPAC's CEO, said "The merger of QuaTech and DPAC will significantly enhance our shareholder value as we gain competitive strength and enhanced growth potential in the machine to machine market. I'm very much looking forward to working together with Steve and our combined management teams to build upon our leadership positions in machine to machine connectivity." The companies expect to enter into a definitive agreement and to secure the appropriate financing over the next six to eight weeks. The consummation of the merger, as contemplated by the definitive agreement, would then be subject to various conditions, including the approval of DPAC shareholders and QuaTech shareholders, as well as satisfaction of certain other requirements and the absence of material adverse changes. 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 direct and through a global network of resellers and distributors. www.quatech.com Based on its 2004 unaudited financial information, in its last full fiscal year, QuaTech revenues were approximately $10,000,000, and QuaTech had a net after tax profit. 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. The transaction is subject to continuing negotiation. 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 negotiated and completed at all or on the terms described. The transaction is and shall continue to be subject to numerous 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. Other factors that affect DPAC's business and its ability to conclude a merger transaction include, but are not limited to, that our Airborne(TM) 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 in a change of control, in that it is likely that voting control of DPAC may be given to former shareholders of QuaTech, and if the principal former shareholders of QuaTech were to act in concert, they might be able to elect a majority of DPAC's Board of Directors. More information about the risks and challenges faced by DPAC Technologies Corp. is contained in the Securities and Exchange Commission (SEC) filings made by the Company on Forms 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: DPAC and QUATECH strongly urge their respective shareholders to read the relevant documents related to this transaction as and when filed by DPAC with the SEC, because they shall contain important information all the shareholders should consider. All DPAC's SEC filings are made available free of charge at the SEC website (www.sec.gov). Such documents, when filed, also are made available free of charge by DPAC. DPAC has filed a Form 8-K containing the current agreement between DPAC and QUATECH. After DPAC and QUATECH, INC. sign a definitive agreement, DPAC shall file further statements and reports with the Securities and Exchange Commission. 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: DPAC TECHNOLOGIES Stephen Vukadinovich, 714-898-0007 Steve.Vukadinovich@dpactech.com or Kim Early, 714-898-0007 Kim.Early@dpactech.com -----END PRIVACY-ENHANCED MESSAGE-----