UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934
(Amendment No. ________)
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
x
Preliminary Information Statement.
¨
Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2)).
¨
Definitive Information Statement.
DPAC TECHNOLOGIES CORP.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
¨
No fee required.
x
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4)
Proposed maximum aggregate value of transaction:
$10,500,000 based on cash payment for assets purchased
(5)
Total fee paid:
$2,100.00
¨
Fee paid previously with preliminary materials.
¨
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)
Amount Previously Paid:
(2)
Form, Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date Filed:
By
Order of the Board of Directors |
||||||
/s/
Steven D. Runkel Steven D. Runkel, President and Chief Executive Officer Hudson, Ohio |
||||||
[_________ __, 2011] |
QUESTIONS AND
ANSWERS ABOUT THE ASSET SALE AND DISSOLUTION |
1 | |||||
INFORMATION
STATEMENT RELATING TO ACTIONS APPROVED BY WRITTEN CONSENT OF THE SHAREHOLDERS |
9 | |||||
CAUTION
REGARDING FORWARD-LOOKING STATEMENTS |
10 | |||||
SUMMARY TERM
SHEET |
11 | |||||
ACTION NO. 1
THE ASSET SALE |
15 | |||||
General
|
15 | |||||
Summary of
DPAC and Quatech |
15 | |||||
Background of
the Asset Sale and the Dissolution of DPAC |
16 | |||||
Recommendations of the Committee and the DPAC Board and Reasons for Recommending Approval of the Asset Purchase Agreement and the Plan of
Dissolution to the Consenting Shareholders |
19 | |||||
Fairness
Opinion of Western Reserve Partners LLC |
21 | |||||
Principal
Provisions of the Asset Purchase Agreement |
26 | |||||
Interests of
Certain Persons in the Asset Sale and the Plan of Dissolution |
30 | |||||
Voting and
Support Agreement |
32 | |||||
Absence of
Appraisal Rights |
32 | |||||
Certain
Federal Income Tax Consequences of the Asset Sale |
33 | |||||
State Income
Tax Consequences of the Asset Sale |
33 | |||||
Required Vote
|
33 | |||||
Regulatory
Approvals |
33 | |||||
ACTION NO. 2
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION |
34 | |||||
General
|
34 | |||||
Background
and Reasons for the Plan of Dissolution |
34 | |||||
Availability
of Proceeds for Distribution |
35 | |||||
Default
Allocation of Proceeds |
35 | |||||
Allocation
Agreement |
37 | |||||
Risks
Associated with the Plan of Dissolution |
37 | |||||
Liquidating
Distributions; Nature; Amount; Timing |
40 | |||||
Plan of
Dissolution Expenses and Indemnification |
42 | |||||
Interests of
Certain Persons in the Asset Sale and the Plan of Dissolution |
43 | |||||
Principal
Provisions of the Plan of Dissolution |
43 | |||||
Sales of
DPACs Assets |
43 | |||||
Conduct of
DPAC Following Adoption of the Plan of Dissolution |
44 | |||||
Contingent
Liabilities; Contingency Reserve |
44 | |||||
Listing and
Trading of the Common Stock |
44 | |||||
Regulatory
Approvals |
44 | |||||
Absence of
Appraisal Rights |
45 | |||||
Certain
Income Tax Consequences of the Plan of Dissolution |
45 | |||||
Required Vote
|
46 | |||||
FINANCIAL
INFORMATION |
46 | |||||
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
47 | |||||
WHERE YOU CAN
FIND MORE INFORMATION |
48 | |||||
DELIVERY OF
INFORMATION STATEMENT TO SHAREHOLDERS SHARING AN ADDRESS |
||||||
ANNEXES |
||||||
Annex A
Asset Purchase Agreement |
A-1 | |||||
Annex B
Plan of Complete Liquidation and Dissolution |
B-1 | |||||
Annex C
Fairness Opinion |
C-1 |
|
The execution and delivery of the Asset Purchase Agreement (the Asset Purchase Agreement), attached as Annex A to this Information Statement, and the sale of substantially all of the assets of our subsidiary, Quatech, Inc., an Ohio corporation (Quatech), to Q-Tech Acquisition, LLC (the Buyer), a Delaware limited liability company and a wholly owned subsidiary of B&B Electronics Manufacturing Company, a Delaware corporation (B&B), for $10.5 million in cash, which amount is subject to adjustment based on a working capital adjustment in the Asset Purchase Agreement (which any such adjustments will only be made if and only to the extent that the working capital at closing is at least $70,000 more or less than the working capital target) and an escrow amount of not more than $900,000 (the Asset Sale), and the change of the corporate name of DPAC after the closing under the Asset Purchase Agreement to DT Sale Corp. |
|
The Plan of Complete Liquidation and Dissolution of DPAC, substantially in the form of Annex B attached to this Information Statement, including the dissolution of DPAC contemplated thereby (the Plan of Dissolution). |
|
that DCV, our majority shareholder, and certain of our other shareholders agreed to take considerably less (currently estimated at approximately $0.012 per share on an as converted, fully diluted basis) than the amount to which they would otherwise be entitled in terms of liquidating distributions and other contractual rights in connection with the Dissolution to support the distribution to the Nonaffiliated Shareholders on the basis of $0.05 per share; |
|
that DPAC and Quatech are and have been in default since September 30, 2009 on certain of their borrowing arrangements with Canal and Fifth Third, that the repayment dates with respect to each such borrowing arrangement are quickly approaching, and that such lenders may exercise their rights to accelerate the debt or pursue other available remedies; |
|
that Fifth Third and the State of Ohio agreed to enter into consent and forbearance agreements with DPAC and Quatech pursuant to which each waived any events of default that would otherwise result from the Asset Purchase Agreement and agreed not to exercise any of their rights under the loan agreements in place with DPAC or Quatech until the closing has occurred or the Asset Purchase Agreement has terminated; and that Canal acknowledged and reaffirmed the subordination of its lender rights to the rights of Fifth Third; |
|
that DPAC had explored alternative financing options, such as finding potential refinancing opportunities for its existing debt, and conducted a market search for potential acquirers; |
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that the DPAC Board believes that all realistic potential acquirers of DPAC, or Quatech, whether in the form of a merger, acquisition of shares or asset purchase, had been contacted which had resulted in no indications of interest in a transaction; |
|
that it was highly unlikely that other acquisition or merger opportunities providing the benefit of an all cash purchase price at the level proposed by Buyer would be or become available to DPAC; |
|
that the Asset Sale would maximize the amount of cash available for DPAC, and consequently maximize the value of the enterprise to its creditors and shareholders, particularly the Nonaffiliated Shareholders, and provide the Nonaffiliated Shareholders with liquidating distributions of $0.05 per share, an amount that (a) the DPAC Board viewed as in the best interests of DPAC and its shareholders in light of DPACs historical and projected financial performance and historical trading prices of DPACs stock, and (b) is significantly in excess of the $0.003 per share that our common shareholders would be expected to receive if we were to dissolve DPAC and make distributions to our shareholders based solely on the liquidation preferences |
of the Series A Preferred Stock and the number of shares of Common Stock issued as of July 25, 2011, and distribute any remaining assets pro rata to the holders of Common Stock; |
|
that, notwithstanding that the Asset Purchase Agreement does not permit DPAC or Quatech to terminate the Asset Purchase Agreement or the Asset Sale, DPACs pre-signing market check efforts to locate potential acquirers at or above the value proposed by Buyer and B&B gives strong support to the DPAC Boards belief that no other viable acquisition partners exist; |
|
that DPACs majority shareholder, DCV, has agreed to approve the Asset Sale, and has, along with certain other affiliates of DPAC, consented to the Asset Sale and the Dissolution in writing and entered into a voting and support agreement with Buyer; |
|
that DPACs efforts to reduce costs internally by headcount reductions and salary reductions had resulted in all of the cost savings that could reasonably be expected to result; |
|
that the value of DPACs assets, particularly its existing customer relationships, could decline over time in the absence of additional expenditures by DPAC and Quatech to support them, and that the Asset Sale and Plan of Dissolution represent the best opportunity to monetize the value of DPACs assets at their present value; and |
|
that Western Reserve, DPACs financial advisor, rendered an opinion that the purchase price under the Asset Purchase Agreement for the Purchased Assets is fair, from a financial point of view, to DPAC, which opinion is described below under the section entitled Fairness Opinion of Western Reserve Partners LLC. |
|
The Committee consists solely of directors who are not officers or controlling shareholders of the Company and who do not otherwise have a conflict of interest or lack independence with respect to the Asset Sale; |
|
The members of the Committee will only benefit from the Asset Sale to the extent that the stock options they hold will permit them to receive distributions under the Allocation Agreement; and |
|
The Committee has been involved in the deliberations since the initial discussion regarding a proposed transaction with the Buyer in December 2010, until the execution of the Asset Purchase Agreement, and was provided with full access to DPACs management and documentation in connection with the due diligence conducted by its advisors. |
|
determined that the Asset Purchase Agreement, and the transactions contemplated thereby, are in the best interests of DPAC and its shareholders, |
|
approved the Asset Purchase Agreement and the transactions contemplated thereby, in accordance with the requirements of the California General Corporation Law, |
|
determined that the Dissolution, as contemplated by the Plan of Dissolution, was in the best interests of DPAC and its shareholders, and |
|
recommended that the Consenting Shareholders approve the transactions contemplated by the Asset Purchase Agreement (which such approval constitutes the approval by the outstanding shares required under Section 152 of the California General Corporation Law) and approve the Dissolution and the Plan of Dissolution (which approval constitutes the vote of shareholders holding shares representing more than 50 percent of the voting power of DPAC). |
|
the most recent draft of the Asset Purchase Agreement, dated July 25, 2011, which Western Reserve believed to be in substantially final form; |
|
SEC filings related to DPAC, including its Annual Reports on Form 10-K for the fiscal years ended December 31, 2010, December 31, 2009 and December 31, 2008 and its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2011; |
|
certain other internal information, primarily financial in nature, including projections, concerning the business and operations of Quatech, as furnished to Western Reserve by Quatech for purposes of its analysis; |
|
publicly available information concerning the Company, its industry and end-markets, including industry websites and trade associations; |
|
publicly available information concerning certain other companies that Western Reserve believed to be comparable to Quatech and the trading markets for certain of such other companies securities; |
|
publicly available information concerning the nature and terms of certain transactions that Western Reserve considered relevant to the Transaction; |
|
interviews with members of the Companys management during a visit to Quatechs Hudson, Ohio facility and via telephone to discuss Quatechs business and prospects and other matters Western Reserve deemed relevant; |
|
results of a 30-day go shop marketing process through which Western Reserve solicited additional acquisition proposals for Quatech; none were received; |
|
Western Reserves assessment of general economic, market and financial conditions and its experience in connection with similar transactions and securities valuation generally; and |
|
other information Western Reserve judged necessary or appropriate to render its opinion. |
|
Digi International Inc. |
|
Laird PLC |
|
Numerex Corp. |
|
RF Industries Ltd. |
|
RF Monolithics Inc. |
|
Sierra Wireless Inc. |
|
Telular Corp. |
Revenue Multiples |
EBITDA Multiples |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
LTM | 2011E | LTM | 2011E | ||||||||||||||||||||
Mean
Comparable Multiple |
1.22x | 0.91x | 10.5x | 8.2x | |||||||||||||||||||
Median
Comparable Multiple |
1.14 | 0.98 | 10.5x | 8.3x | |||||||||||||||||||
Revenue |
EBITDA |
||||||||||||||||||||||
LTM | 2011E | LTM | 2011E | ||||||||||||||||||||
Selected
Multiple |
1.10x | 1.00x | 10.5x | 8.0x | |||||||||||||||||||
Quatech
Results1 |
$ | 8,346 | $ | 9,900 | $ | 844 | $ | 1,554 | |||||||||||||||
Implied
Enterprise Value |
$ | 9,181 | $ | 9,900 | $ | 8,858 | $ | 12,432 | |||||||||||||||
Less: Quatech
Net Debt |
$ | (4,899 | ) | $ | (4,845 | ) | $ | (4,899 | ) | $ | (4,845 | ) | |||||||||||
Implied
Equity Value |
$ | 4,282 | $ | 5,055 | $ | 3,959 | $ | 7,587 | |||||||||||||||
Liquidity/Going Concern Discount |
(15.0%) | (15.0%) | (15.0%) | (15.0%) | |||||||||||||||||||
Discounted
Equity Value |
$ | 3,640 | $ | 4,296 | $ | 3,365 | $ | 6,449 | |||||||||||||||
Plus: Quatech
Net Debt |
$ | 4,899 | $ | 4,845 | $ | 4,899 | $ | 4,845 | |||||||||||||||
Adjusted
Enterprise Value |
$ | 8,538 | $ | 9,142 | $ | 8,264 | $ | 11,294 | |||||||||||||||
Midpoint of
Valuation Range |
$8,840 |
$9,779 |
|||||||||||||||||||||
Selected
Valuation Range |
$8,800 |
|
$9,800 |
||||||||||||||||||||
Close |
Target |
Acquirer |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Mar
2011 |
Motorola Israel, Ltd. (m2m Modules Division) |
Telit
Communications PLC |
||||||||
Dec
2010 |
SmartOptics AS |
Ignis
ASA |
||||||||
Dec
2010 |
Enfora, Inc. |
Novatel Wireless Inc. |
||||||||
Nov
2010 |
Microtune, Inc. |
Zoran
Corporation |
||||||||
Oct
2010 |
Summit Instruments, Inc. |
Spectrum Control, Inc. |
||||||||
Aug
2010 |
EF Johnson Technologies, Inc. |
Francisco Partners Management LLC |
||||||||
Jul
2010 |
Cinterion Wireless Modules GmbH |
Gemalto NV |
Revenue Multiples |
EBITDAMultiples |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
MeanComparable Multiple |
1.00x |
N/A |
|||||||||||||||||||||
Median
Comparable Multiple |
1.12x |
N/A |
|||||||||||||||||||||
LTMRevenue |
LTMEBITDA |
||||||||||||||||||||||
Selected
MultipleRange |
1.00x | 1.15x | | | |||||||||||||||||||
QuatechResults |
$ | 8,346 | $ | 8,346 | | | |||||||||||||||||
Implied
EnterpriseValue |
$ | 8,346 | $ | 9,598 | | | |||||||||||||||||
SelectedValuation Range |
$8,300 |
|
$9,600 |
|
maximum secured senior transaction financing of approximately $1.6 million, or approximately 1.0x Quatechs 2011E EBITDA, which is supported by reasonable advance rate assumptions applied to Quatechs working capital asset base; |
|
additional mezzanine financing in the amount of $1.6 million, or approximately 1.0x Quatechs 2011E EBITDA, incorporating both current pay and warrant features to effect market returns of 25.0% to 30.0%; |
|
control equity investor returns of 40.0% to 50.0%, commensurate with the historical financial performance of Quatech and risks associated with achieving the financial projections; and |
|
projected sale of Quatech at the end of 2016 at an EBITDA exit multiple range of 5.5x to 6.5x. |
|
all cash, cash equivalents and investments; |
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all of the Sellers accounts receivable, advance payments, deposits, prepaid items (other than prepaid items under the Sellers insurance policies) and expenses, deferred charges, rights of offset and credits and claims for refund; |
|
all of the Sellers intellectual property rights, including those related to trademarks, patents, copyrights, software and other proprietary rights and any licenses thereto; |
|
all of the Sellers rights under contracts, agreements and purchase and sale orders, including customer contracts and leases of real property and personal property; |
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all of the Sellers inventory including its finished goods, raw materials, work-in-process inventories, packaging materials, products, supplies and other items of tangible property; |
|
all of the Sellers vehicles, tools, parts and supplies, machinery and equipment, furniture, fixtures, office equipment and supplies, computer hardware and software; |
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all of the Sellers books, records, manuals, documents, books of account, correspondence, sales and credit reports, customer lists, literature, brochures, advertising or promotional material and the like; and |
|
any governmental licenses, permits and approvals to the extent their transfer is permitted by applicable law. |
|
all the current liabilities of Quatech at the date of the Asset Purchase Agreement to the extent shown on the balance sheet of December 31, 2010, and any current liabilities as of the closing that were incurred in the ordinary course of business between the date of the Asset Purchase Agreement and the closing date, |
|
liabilities arising under the contracts to assumed by Buyer, which by their terms are required to be performed, paid or otherwise discharged following the closing date; |
|
liabilities for real property, personal property and similar taxes that would apply to the Purchased Assets after the closing; and |
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liabilities for product warranties provided prior to the closing to our customers in the ordinary course of business. |
|
to use all available cash to pay off account payables that have been otherwise been included in the calculation of the working capital adjustment; |
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to carry on its business in the ordinary course in substantially the same manner as it has been conducted; |
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to preserve its business organization and not amend its organizational documents; |
|
not to adopt a plan of liquidation or dissolution, other than the Plan of Dissolution described in this Information Statement; |
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not to purchase or redeem any shares of its capital stock, or grant or issue any right to purchase any such shares; |
|
not to pay, cancel, incur, waive or settle any material debt, claim, action, liability or obligation, except in the ordinary course of business; |
|
not to sell, assign, license, transfer, convey, lease or otherwise dispose of any of their assets or allow the assets to become subject to any additional lien or encumbrance; |
|
to maintain books and records in accordance with past practice; |
|
to keep in force applicable insurance policies at appropriate coverage levels; |
|
not to make capital expenditures in excess of $25,000 singly, or $50,000 in the aggregate; and |
|
not take or permit any action that would cause certain changes, events or conditions to occur. |
|
no law, restraining order or injunction will be in effect, and no inquiry or litigation will be asserted, pending or threatened that would have the effect of restringing or prohibiting the Asset Sale; |
|
each of the representations and warranties of the Sellers in the Asset Purchase Agreement are required to be true and correct in all material respects as of the signing date and true and correct in all material respects as of the closing date (except for representations and warranties that are expressly subject to a materiality component, which must be true and correct in all respects as of the closing date); |
|
DPAC and Quatech must have materially performed all obligations required to be performed under the Asset Purchase Agreement prior to the closing date; |
|
no action, event or condition has occurred that has had or would reasonably be expected to have a material adverse effect on the Sellers; |
|
the Sellers will have obtained all required consents, which include the consent of the landlord of our Hudson, Ohio facility and certain contracts to be assigned to Buyer; |
|
all liens on the Purchased Assets shall have been fully released; and |
|
the Sellers will have delivered to Buyer and B&B all certificates, instruments of transfer and other documents and deliverables necessary to effect the transfer of the Purchased Assets to Buyer. |
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no law, restraining order or injunction will be in effect, and no inquiry or litigation will be asserted, pending or threatened that would have the effect of restringing or prohibiting the Asset Sale; |
|
each of the representations and warranties of Buyer and B&B in the Asset Purchase Agreement are required to be true and correct in all material respects as of the signing date and true and correct in all material respects as of the closing date (except for representations and warranties that are expressly subject to a materiality component, which must be true and correct in all respects as of the closing date); and |
|
Buyer and B&B must have materially performed all obligations required to be performed under the Asset Purchase Agreement prior to the closing date. |
|
by the mutual written consent of Buyer and Quatech; |
|
by either Buyer or Quatech if the closing has not occurred on or before October 31, 2011 (unless the party seeking to terminate the Asset Purchase Agreement has failed to fulfill any obligation under the Asset Purchase Agreement which is the cause for the closing not to have occurred); |
|
by Buyer if there has been a material breach of any representation, warranty, covenant or agreement made by the Sellers; or |
|
by Quatech if there has been a material breach of any representation, warranty, covenant or agreement made by Buyer. |
|
any breach of or inaccuracy in any representation or warranty made by the Sellers; |
|
any breach of any covenant of the Sellers; and |
|
any of the liabilities of the Sellers that are not assumed by Buyer at the closing. |
|
any breach of or inaccuracy in any representation or warranty made by Buyer; |
|
any breach of any covenant of Buyer; and |
|
any of the liabilities that are assumed by Buyer at the closing. |
Proceeds from
Asset Sale |
$ | 10,500 | ||||
Escrow amount
|
($ | 900 | ) | |||
Net
proceeds |
$ | 9,600 | ||||
Estimated
costs and fees: |
||||||
Western
Reserve (Investment Banking Services) |
$ | 225 | ||||
Legal costs
|
$ | 100 | ||||
Steven Runkel
Severance |
$ | 98 | ||||
Stephen
Vukadinovich Severance |
$ | 108 | ||||
Information
Statement, Printing, mailing, redemption, filling costs |
$ | 56 | ||||
Directors
& Officers liability insurance |
$ | 39 | ||||
Board fees
|
$ | 45 | ||||
Total costs
and fees |
$ | 671 |
Payment of
Secured Loans: |
||||||
Fifth Third
Bank, N.A. |
$ | 1,500 | ||||
Canal
Mezzanine Partners, L.P. |
$ | 1,555 | ||||
State of Ohio
Development Fund |
$ | 2,070 | ||||
$ | 5,125 | |||||
Contingency
Reserve |
$ | 200 | ||||
Retention and
other wind down costs |
$ | 225 | ||||
Estimate of
cash assets legally available for distribution: |
$ | 3,379 | ||||
Estimated
Distribution to equity holders: |
||||||
Distribution
to holders of Series A Preferred Stock (aggregate) |
$ | 3,000 | ||||
Distribution
to holders of Common Stock (aggregate) |
$ | 379 | ||||
Effective
distribution per share of Common Stock (1) |
$ | 0.003 |
Years |
|
Date |
|
Max of High Sale |
|
Min of Low Sale |
|
Average of Closing Sale |
|
Average of Volume |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2008 |
Qtr1 | $ | 0.060 | $ | 0.010 | $ | 0.025 | 27,859 | ||||||||||||||
Qtr2 | $ | 0.050 | $ | 0.020 | $ | 0.034 | 13,119 | |||||||||||||||
Qtr3 | $ | 0.060 | $ | 0.030 | $ | 0.036 | 11,947 | |||||||||||||||
Qtr4 | $ | 0.050 | $ | 0.010 | $ | 0.021 | 18,631 | |||||||||||||||
2009 |
Qtr1 | $ | 0.030 | $ | 0.010 | $ | 0.019 | 8,259 | ||||||||||||||
Qtr2 | $ | 0.040 | $ | 0.010 | $ | 0.022 | 9,084 | |||||||||||||||
Qtr3 | $ | 0.030 | $ | 0.010 | $ | 0.020 | 7,598 | |||||||||||||||
Qtr4 | $ | 0.050 | $ | 0.010 | $ | 0.025 | 38,189 | |||||||||||||||
2010 |
Qtr1 | $ | 0.020 | $ | 0.000 | $ | 0.016 | 17,566 | ||||||||||||||
Qtr2 | $ | 0.017 | $ | 0.000 | $ | 0.011 | 16,224 | |||||||||||||||
Qtr3 | $ | 0.024 | $ | 0.000 | $ | 0.013 | 12,240 | |||||||||||||||
Qtr4 | $ | 0.040 | $ | 0.015 | $ | 0.021 | 33,390 | |||||||||||||||
2011 |
Qtr1 | $ | 0.070 | $ | 0.015 | $ | 0.046 | 39,650 | ||||||||||||||
Qtr2 | $ | 0.100 | $ | 0.045 | $ | 0.050 | 7,929 |
|
the acknowledgement by our chief executive officer and chief financial officer that certain amounts of severance they would otherwise receive prior to any distributions to shareholders will be delayed and possibly reduced; |
|
the confirmation by Canal and Hillstreet of the total amounts they are eligible to receive in connection with the termination of the Canal Warrants and the Hillstreet Warrants, which is equal to $0.017 per share and $0.026 per share for Canal and Hillstreet, respectively (assuming the warrants were converted into shares of Common Stock); |
|
the allocation of any liquidating distributions made by us after the closing under the Asset Purchase Agreement among the parties to the Allocation Agreement, which will be shared pari passu with all such parties, up to the maximum amounts established in the Allocation Agreement; |
|
the confirmation that distributions that we make will include an allocation for the benefit of holders of stock options that are outstanding as of the closing, net of the exercise prices payable thereunder; |
|
the confirmation of the parties to the Allocation Agreement that they waive the rights they would otherwise have to participate pro rata in distributions, and the acknowledgement that the effect of the distribution intended to be made to the Nonaffiliated Shareholders will be to reduce the amount they will receive, in some cases significantly; |
|
the waiver of the parties to the Allocation Agreement of any right of contribution under California law or otherwise from the Nonaffiliated Shareholders in the event that any party to the Allocation Agreement is required to return any distribution to DPAC because such distribution was improper under California law. |
Proceeds from
Asset Sale (1) |
$ | 10,500 | ||||
Escrow amount
(2) |
($ | 900 | ) | |||
Net
proceeds |
$ | 9,600 | ||||
Estimated
costs and fees: |
||||||
Western
Reserve (Investment Banking Services) |
$ | 225 | ||||
Legal costs
|
$ | 100 | ||||
Steven Runkel
Severance |
$ | 98 | ||||
Stephen
Vukadinovich Severance |
$ | 108 | ||||
Information
Statement, Printing, mailing, redemption, filling costs |
$ | 56 | ||||
Directors
& Officers liability insurance |
$ | 39 | ||||
Board fees
|
$ | 45 | ||||
Total costs
and fees |
$ | 671 | ||||
Payment of
Secured Loans: (3) |
||||||
Fifth Third
Bank, N.A. |
$ | 1,500 | ||||
Canal
Mezzanine Partners, L.P. |
$ | 1,555 | ||||
State of Ohio
Development Fund |
$ | 2,070 | ||||
$ | 5,125 | |||||
Contingency
Reserve |
$ | 200 | ||||
Retention and
other wind down costs |
$ | 225 | ||||
Estimate of
cash assets legally available for distribution: |
$ | 3,379 | ||||
Estimated
Distribution Nonaffiliated Shareholders (aggregate) (4) |
$ | 1,711 |
Estimated
Distributions Parties to Allocation Agreement: |
||||||
Development
Capital Ventures, L.P. (5) |
$ | 932 | ||||
William
Roberts (5)(6) |
$ | 229 | ||||
James Bole
(5)(6) |
$ | 44 | ||||
Steven Runkel
(5)(7) |
$ | 32 | ||||
The Hillstreet
Fund, L.P. |
$ | 141 | ||||
Canal
Mezzanine Partners, L.P. |
$ | 120 | ||||
Employee Stock
Options (aggregate) (8) |
$ | 116 | ||||
Board and
Management Stock Options (aggregate) |
$ | 54 | ||||
Total
Estimated Distributions Parties to Allocation Agreement |
1,668 | |||||
Total
Estimated Distributions |
3,379 | |||||
Estimated
Distribution to equity holders: |
||||||
Distribution
to holders of Series A Preferred Stock (aggregate) |
$ | 3,000 | ||||
Distribution
to holders of Common Stock (aggregate) |
$ | 379 | ||||
Effective
distribution per share of Common Stock (1) |
$ | 0.003 |
(1) |
Assumes that no negative or positive working capital adjustment is estimated to exist as of the closing. |
(2) |
Assumes that no negative working capital adjustment is estimated to exist as of the closing. |
(3) |
Assumes a closing under the Asset Purchase Agreement of August 31, 2011. |
(4) |
Calculated as approximately 34,228,000 shares of Common Stock held by Nonaffiliated Shareholders at $0.05 per share. |
(5) |
Distribution amounts calculated without regard to allocation among Series A Preferred Stock and/or Common Stock. |
(6) |
Board member. |
(7) |
Named Executive Officer. |
(8) |
Options outstanding other than options held by Board and management, calculated as $0.05 per share, minus applicable exercise price. |
|
Consummation of the Asset Sale and Cessation of Business. If the Asset Sale contemplated by the Asset Purchase Agreement is consummated, DPAC will proceed to sell off the remainder of its business assets (if any), and then continue with its winding up pursuant to the Plan of Dissolution and not engage in any further business activities except for those related to managing, completing and winding up of its business and affairs. |
|
Employees and Consultants. For the purpose of effecting the liquidation of its remaining assets, DPAC may retain or hire certain employees and consultants that the DPAC Board deems necessary or advisable to supervise the liquidation. |
|
Expenses. The DPAC Board will provide, from DPACs assets, reasonable funds for payment of the expenses of the Dissolution, including filing fees and other expenses related to the liquidation process. |
|
Payment of Claims. DPAC will satisfy, or adequately provide satisfaction of, all legally enforceable debts and liabilities of it and Quatech in an orderly matter. |
|
Indemnification of Board and Officers. DPAC may reserve sufficient assets and/or obtain and maintain such insurance as shall be necessary for continued indemnification of the members of the DPAC Board, officers and agents, and other parties whom DPAC agreed to indemnify. |
|
Distributions to Shareholders. After paying or adequately providing for the expenses of liquidation and debts and liabilities and reserving assets for indemnification and insurance, the Plan of Dissolution authorizes DPAC to make the liquidating distribution to the Nonaffiliated Shareholders described in this Information Statement and the other distributions to the parties to the Allocation Agreement from the proceeds of the Asset Sale and any retained assets. Any remaining assets (such as the Escrow Amount, if ultimately received by DPAC after the post-closing period has elapsed without claims for indemnification from Buyer and B&B) will thereafter be distributed to the parties to the Allocation Agreement in accordance therewith. |
|
Liquidating Trust. If deemed advisable, the DPAC Board may cause DPAC to create a liquidating trust and to distribute beneficial interests in the liquidating trust to DPACs shareholders as of the time of establishment of such liquidating trust as part of the liquidation process. The liquidating trust will be constituted pursuant a liquidating trust agreement in a form approved by the DPAC Board. |
|
Abandonment; Amendment. The DPAC Board may amend or abandon implementation of the Plan of Dissolution without the further approval of DPACs shareholders, to the extent permitted by the California General Corporation Law. |
|
Certificate of Dissolution; other certificates. The DPAC Board will determine in its sole discretion the timing of the filing of appropriate certificates of dissolution and other certificates required under applicable law. |
Name of Beneficial Owner |
Amount and Nature of Beneficial Ownership |
Percentage of Class (1) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Development
Capital Ventures, L.P. 7500 Iron Bar Lane, Suite 209 Fort Mill, SC 29708-6908 |
167,876,205 | (2) | 78.4 | % | ||||||
Current
directors and executive officers: |
||||||||||
Steven D. Runkel
|
4,727,764 | (3) | 3.2 | % | ||||||
William Roberts
|
11,835,439 | (4) | 7.9 | % | ||||||
James Bole
|
2,887,911 | (5) | 1.9 | % | ||||||
Mark Chapman
|
666,667 | (6) | * | |||||||
Dennis Leibel
|
800,000 | (6) | * | |||||||
Sam Tishler
|
867,667 | (6) | * | |||||||
Stephen
Vukadinovich |
569,250 | (6) | * | |||||||
All executive
officers and directors as a group (seven persons) |
22,454,198 | 14.3 | % | |||||||
*Less than 1% of
the shares outstanding. |
(1) |
Shares of Common Stock, which were not outstanding but which could be acquired upon exercise of a warrant or option or conversion of shares of our Series A Preferred Stock within 60 days from the date of this filing, are considered outstanding for the purpose of computing the percentage of outstanding shares beneficially owned by each person. However, such shares are not considered to be outstanding for any other purpose. |
(2) |
Includes 31,035,258 shares of Common Stock for the issuance of accrued dividends and the equivalent of 67,647,059 shares of Common Stock for the potential conversion of 28,750 shares of Class A Preferred Shares. |
(3) |
Includes 2,645,748 shares subject to options that are exercisable within 60 days. |
(4) |
Includes 927,404 shares of Common Stock for the issuance of accrued stock dividends, 666,667 shares subject to options that are exercisable within 60 days and 1,764,706 shares for the potential conversion of 750 shares of Class A Preferred Shares. |
(5) |
Includes 618,268 shares of Common Stock for the issuance of accrued stock dividends, 666,667 shares subject to options that are exercisable within 60 days and 1,176,471 shares for the potential conversion of 500 shares of Class A Preferred Shares. |
(6) |
Consists only of shares subject to options that are exercisable within 60 days. |
* |
Represents less than 1% of the outstanding shares. |
|
Annual Report on Form 10-K for the year ended December 31, 2010; |
|
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011; and |
|
Current Reports on Form 8-K filed on June 24, 2011, August 3, 2011, and [__________]. |
Page |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|
ARTICLE
I |
THE TRANSACTION |
1 | ||||||||
1.1. |
Purchase and Sale of Acquired Assets; Assumed Liabilities |
1 | ||||||||
1.2. |
Purchase Price Payment |
4 | ||||||||
1.3. |
Closing Statement; Adjustment to Aggregate Purchase Price |
5 | ||||||||
ARTICLE
II |
CLOSING |
7 | ||||||||
2.1. |
Closing Date |
7 | ||||||||
2.2. |
Closing Deliveries |
7 | ||||||||
ARTICLE
III |
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT |
8 | ||||||||
3.1. |
Organization |
8 | ||||||||
3.2. |
Authority |
8 | ||||||||
3.3. |
No
Conflict; Consents |
9 | ||||||||
3.4. |
Capitalization |
9 | ||||||||
3.5. |
Subsidiaries |
10 | ||||||||
3.6. |
Financial Statements; Undisclosed Liabilities |
10 | ||||||||
3.7. |
Absence of Certain Changes or Events |
10 | ||||||||
3.8. |
Condition and Sufficiency of Acquired Assets |
11 | ||||||||
3.9. |
Real Property |
11 | ||||||||
3.10. |
Leases; Leased Real Property |
11 | ||||||||
3.11. |
Working Capital Assets |
12 | ||||||||
3.12. |
Intellectual Property |
13 | ||||||||
3.13. |
Contracts |
14 | ||||||||
3.14. |
Litigation |
14 | ||||||||
3.15. |
Compliance with Laws; Permits |
14 | ||||||||
3.16. |
Environmental Matters |
14 | ||||||||
3.17. |
Employee Benefit Matters |
15 | ||||||||
3.18. |
Taxes |
16 | ||||||||
3.19. |
Consents |
17 | ||||||||
3.20. |
Employee Relations |
17 | ||||||||
3.21. |
Transactions with Related Parties |
18 | ||||||||
3.22. |
Insurance |
18 | ||||||||
3.23. |
Brokers |
18 | ||||||||
3.24. |
Compensation Arrangements |
19 | ||||||||
3.25. |
Relationship with Significant Customers and Suppliers |
19 | ||||||||
3.26. |
Products |
19 | ||||||||
3.27. |
Information Statement |
19 | ||||||||
3.28. |
Fairness Opinion |
19 | ||||||||
3.29. |
Consent and Forbearance of Lenders |
20 | ||||||||
3.30. |
Disclosure |
20 |
Page | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
ARTICLE
IV |
REPRESENTATIONS AND WARRANTIES OF BUYER |
20 | ||||||||
4.1. |
Organization |
20 | ||||||||
4.2. |
Power and Authority |
20 | ||||||||
4.3. |
No
Conflict |
20 | ||||||||
4.4. |
Consents |
21 | ||||||||
4.5. |
Brokers |
21 | ||||||||
4.6. |
Financial Resources |
21 | ||||||||
4.7. |
Information |
21 | ||||||||
ARTICLE
V |
COVENANTS |
21 | ||||||||
5.1. |
Cooperation by Parent and Seller |
21 | ||||||||
5.2. |
Conduct of the Business Pending Closing |
21 | ||||||||
5.3. |
Access |
22 | ||||||||
5.4. |
Name Change |
22 | ||||||||
5.5. |
Notification and Cure |
22 | ||||||||
5.6. |
Insurance |
22 | ||||||||
5.7. |
Exclusivity |
22 | ||||||||
5.8. |
Confidentiality |
23 | ||||||||
5.9. |
Non-Compete |
23 | ||||||||
5.10. |
Further Assurances |
24 | ||||||||
5.11. |
Employee Matters |
24 | ||||||||
5.12. |
Escrow Agreement |
25 | ||||||||
5.13. |
Release of Encumbrances |
25 | ||||||||
5.14. |
Information Statement; Stockholder Approval |
25 | ||||||||
5.15. |
Use of Proceeds and Distributions to Parents Stockholders |
26 | ||||||||
5.16. |
Retention of and Access to Records |
26 | ||||||||
ARTICLE
VI |
CONDITIONS TO BUYERS OBLIGATIONS |
26 | ||||||||
6.1. |
Representations and Warranties True and Correct |
26 | ||||||||
6.2. |
Covenants and Agreements Performed |
26 | ||||||||
6.3. |
Seller Closing Certificate |
26 | ||||||||
6.4. |
Seller Secretarys Certificate |
26 | ||||||||
6.5. |
No
Prohibition or Proceedings |
27 | ||||||||
6.6. |
Consents and Approvals |
27 | ||||||||
6.7. |
FIRPTA Certificates |
27 | ||||||||
6.8. |
Information Statement |
27 | ||||||||
6.9. |
Material Adverse Effect |
27 | ||||||||
6.10. |
Closing Deliverables |
27 | ||||||||
6.11. |
Fairness Opinion and Consent and Forbearance Agreements |
27 |
Page | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
ARTICLE
VII |
CONDITIONS TO SELLERS AND PARENTS OBLIGATIONS |
27 | ||||||||
7.1. |
Representations and Warranties True and Correct |
27 | ||||||||
7.2. |
Covenants and Agreements Performed |
28 | ||||||||
7.3. |
Buyer Closing Certificate |
28 | ||||||||
7.4. |
No
Prohibition or Proceedings |
28 | ||||||||
ARTICLE
VIII |
TERMINATION PRIOR TO CLOSING |
28 | ||||||||
8.1. |
Termination |
28 | ||||||||
8.2. |
Effect on Obligations |
28 | ||||||||
ARTICLE
IX |
TAX MATTERS |
28 | ||||||||
9.1. |
Allocation |
28 | ||||||||
9.2. |
Transfer Taxes |
29 | ||||||||
9.3. |
Clearance Certificates |
29 | ||||||||
9.4. |
FIRPTA Certificates |
29 | ||||||||
ARTICLE
X |
SURVIVAL AND INDEMNIFICATION |
29 | ||||||||
10.1. |
Survival |
29 | ||||||||
10.2. |
General Indemnification |
29 | ||||||||
10.3. |
Sole Remedy |
31 | ||||||||
10.4. |
Tax Treatment |
32 | ||||||||
ARTICLE
XI |
MISCELLANEOUS |
32 | ||||||||
11.1. |
Interpretive Provisions |
32 | ||||||||
11.2. |
Entire Agreement |
32 | ||||||||
11.3. |
Successors and Assigns |
32 | ||||||||
11.4. |
Headings |
32 | ||||||||
11.5. |
Modification and Waiver |
32 | ||||||||
11.6. |
Expenses |
32 | ||||||||
11.7. |
Notices |
33 | ||||||||
11.8. |
Governing Law; Consent to Jurisdiction |
33 | ||||||||
11.9. |
Public Announcements |
34 | ||||||||
11.10. |
No
Third Party Beneficiaries |
34 | ||||||||
11.11. |
Guarantee of Buyers Pre-Closing Obligations |
34 | ||||||||
11.12. |
No
Successor or Transferee Liability |
34 | ||||||||
11.13. |
Counterparts |
34 | ||||||||
ARTICLE
XII |
CERTAIN DEFINITIONS |
34 |
Exhibits |
||||||
1.2 |
Form
of Escrow Agreement |
|||||
2.2.A |
Form
of Bill of Sale |
|||||
2.2.B |
Form
of Assumption and Assignment Agreement |
|||||
5.11.A |
Form
of Employment Agreement: Steven Runkel |
|||||
5.11.B |
Form
of Consulting and Services Agreements: Stephen Vukadinovich and Denise Calvert |
Schedules |
|||||||
1.1(b) |
Excluded Assets |
||||||
1.2(b) |
Estimated Working Capital |
||||||
2.2 |
Third
Party Consents |
||||||
Disclosure Schedules |
|||||||
3.1 |
Organization |
||||||
3.3 |
No
Conflict; Consents |
||||||
3.4 |
Capitalization |
||||||
3.5 |
Subsidiaries |
||||||
3.6 |
Financial Statements; Undisclosed Liabilities |
||||||
3.7 |
Absence of Certain Changes or Events |
||||||
3.8 |
Condition and Sufficiency of Acquired Assets |
||||||
3.10 |
Leases; Leased Real Property |
||||||
3.11 |
Working Capital Assets |
||||||
3.12 |
Intellectual Property |
||||||
3.13 |
Contracts |
||||||
3.14 |
Litigation |
||||||
3.15 |
Compliance with Laws; Permits |
||||||
3.16 |
Environmental Matters |
||||||
3.17 |
Employee Benefit Matters |
||||||
3.18 |
Taxes |
||||||
3.19 |
Consents |
||||||
3.20 |
Employee Relations |
||||||
3.22 |
Insurance |
||||||
3.24 |
Compensation Arrangements |
||||||
3.25 |
Relationship with Significant Customers and Suppliers |
||||||
3.26 |
Products |
||||||
5.11 |
Assumed Benefit Contracts |
||||||
9.1 |
Preliminary Tax Allocation |
QUATECH, INC. |
||||||
By: /s/ Steven D. Runkel Name: Steven D. Runkel Title: President & Chief Executive Officer |
||||||
DPAC
TECHNOLOGIES CORP. |
||||||
By: /s/ Steven D. Runkel Name: Steven D. Runkel Title: President & Chief Executive Officer |
||||||
Q-TECH ACQUISITION, LLC |
||||||
By: /s/ Sean Harrigan Name: Sean Harrigan Title: President & Chief Executive Officer |
||||||
B&B ELECTRONICS MANUFACTURING COMPANY |
||||||
By: /s/ Sean Harrigan Name: Sean Harrigan Title: President & Chief Executive Officer |
DPAC Technologies Corp. |
||||||
By:
/s/ Steven D. Runkel Name: Steven D. Runkel Title: Chief Executive Officer |
||||||
Quatech, Inc. |
||||||
By:
/s/ Steven D. Runkel Name: Steven D. Runkel Title: Chief Executive Officer |
U.S. Small Business Administration as Receiver for Development Capital Ventures, L.P. |
||||||
By:
/s/ Thomas G. Morris Name: Thomas G. Morris Title: Director, Office of Liquidation |
||||||
Canal Mezzanine Partners, L.P. |
||||||
By:
Canal Mezzanine Management, LLC Its: General Partner |
||||||
By:
Canal Holdings, LLC Its: Managing Member |
||||||
By:
/s/ Kevin Coyne Name: Kevin Coyne Title: President |
||||||
The HillStreet Fund, L.P. |
||||||
By:
HillStreet Capital Inc. Its: Investment Manager |
||||||
By:
/s/ Chris Meininger Name: Chris Meininger Title: President |
Management Shareholder: |
||||||
Name: Steven D. Runkel |
||||||
Signature: /s/ Steven D. Runkel |
||||||
Management Shareholder: |
||||||
Name: William Roberts |
||||||
Signature: /s/ William Roberts |
||||||
Management Shareholder: |
||||||
Name: James Bole |
||||||
Signature: /s/ James Bole |
||||||
Officer Employee: |
||||||
Name: Stephen Vukadinovich |
||||||
Signature: /s/ Stephen Vukadinovich |
HOLDER: |
||||||
[NAME OF HOLDER] |
||||||
By: Name: Title: |
||||||
COMPANY: |
||||||
DPAC Technologies Corp. |
||||||
By: Name: Steven D. Runkel Title: Chief Executive Officer |
Name |
Payment in respect of |
Maximum Distribution Amount |
Percentage Allocation of Distribution (up to Maximum Distribution Amount) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Development
Capital Ventures, L.P. |
Series A Preferred and Common |
$ | 1,534,352 | 50.32 | % | |||||||||
Canal
Mezzanine Partners, L.P. |
Canal
Warrant Documents |
$ | 145,000 | 4.76 | % | |||||||||
The Hillstreet
Fund, L.P. |
Hillstreet Warrant Documents |
$ | 170,000 | 5.58 | % | |||||||||
William
Roberts |
Series A Preferred and Common Stock |
$ | 414,617 | 13.60 | % | |||||||||
William
Roberts |
Stock
Options Board |
$ | 7,450 | 0.24 | % | |||||||||
James
Bole |
Series A Preferred and Common Stock |
$ | 80,489 | 2.64 | % | |||||||||
James
Bole |
Stock
Options Board |
$ | 7,450 | 0.24 | % | |||||||||
Steven
Runkel |
Common Stock |
$ | 59,326 | 1.95 | % | |||||||||
Steven
Runkel |
Stock
Options Board |
$ | 53,984 | 1.77 | % | |||||||||
Steven
Runkel |
Severance |
$ | 180,000 | 5.90 | % | |||||||||
Sam
Tishler |
Stock
Options Board |
$ | 7,450 | 0.24 | % | |||||||||
Dennis
Leibel |
Stock
Options Board |
$ | 8,450 | 0.28 | % | |||||||||
Mark
Chapman |
Stock
Options Board |
$ | 7,450 | 0.24 | % | |||||||||
Stephen
Vukadinovich |
Severance |
$ | 173,900 | 5.70 | % | |||||||||
Optionholders |
Stock
Options |
$ | 199,091 | 6.53 | % | |||||||||
$ | 3,049,009 | 100.00 | % |