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): February 28, 2006

DPAC TECHNOLOGIES CORP.

(Exact name of registrant as specified in its charter)

California	Commission File No. 0-14843	33-0033759
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5675 Hudson Industrial Parkway Hudson, Ohio	44236
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code:

(800) 553-1170

7321 Lincoln Way, Garden Grove, California 92841

(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:

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

¨ 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))

Introduction

On February 28, 2006 DPAC Technologies Corp. a California corporation (the “Company”) completed the previously announced merger (the “Merger”) of its wholly owned subsidiary, DPAC Acquisition Sub, Inc., an Ohio corporation with and into QuaTech, Inc., an Ohio corporation (“QuaTech”). By operation of the Merger, QuaTech became a wholly-owned subsidiary of the Company and former shareholders of QuaTech were issued in the aggregate 64,095,857 shares of common stock of the Company. By nature of the fact that QuaTech is now a subsidiary of the Company, on a consolidated basis the Company and its subsidiary are parties to certain agreements and financings referred to below. Also, in association with the Merger, the Company entered into certain additional financing and other agreements and issued additional securities all as described below. The former shareholders of QuaTech collectively now hold approximately 74.5% of the issued and outstanding shares of Company common Stock. As contemplated by the Merger, the members of the Board of Directors and Officers of the Company have changed. Thus the Merger has resulted in a change of control of the Company and, for accounting purposes, QuaTech is considered to be the acquiring entity and QuaTech’s fiscal year end of December 31 will be the Company’s fiscal year end going forward. The Company’s press release issued February 28, 2006 is filed herewith as Exhibit 99.1 and is incorporated herein by reference.

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

(1) On February 28, 2006, the Company entered into an employment agreement (the “Runkel Agreement”) with Steven D. Runkel pursuant to which Mr. Runkel became the Chief Executive Officer of the Company. (See Item 5.02 below.) The Runkel Agreement has a term that began on February 28, 2006 and runs until the earliest of (i) December 31, 2006; (ii) the termination of Mr. Runkel’s employment by the Company for cause; (iii) 30 days after written notice by Mr. Runkel that he intends to terminate his employment; and (iv) Mr. Runkel’s death. Pursuant to the Runkel Agreement, Mr. Runkel will receive a base salary of $210,000 per year, an auto allowance of $750 per month and be eligible to participate in any incentive compensation program of the Company and all other benefit programs generally applicable to the Company’s senior executives. If DPAC terminates Mr. Runkel’s employment for any reason other than for “cause” or if Mr. Runkel terminates his employment for “good reason”, as those terms are defined in the Runkel Agreement prior to the expiration of the term of the agreement, Mr. Runkel will be entitled to a severance equal to the continuation of his base salary and auto allowance for twelve months from the termination of his employment. In addition, upon such an event, all unvested stock options to purchase Company common stock held by Mr. Runkel, if any, shall become fully vested and may be exercised by him for two years form the date of his termination. A copy of the Runkel Agreement is being filed herewith as Exhibit 10.1.

(2) On February 28, 2006, the Company and QuaTech entered into a certain Joinder Agreement and Third Amendment to Subordinated Loan and Security Agreement with The HillStreet Fund, L.P. (“HillStreet”). The original Subordinated Loan and Security Agreement was entered into On July 28, 2000 by and between QuaTech and HillStreet and was amended two times prior to the third amendment. The Subordinated Loan and Security Agreement as amended is hereinafter referred to as the “HillStreet Loan Agreement”. Pursuant to the HillStreet Loan Agreement, each of the Company and QuaTech, as co-borrowers, has borrowed $1,500,000 (the “HillStreet Debt”) which is to be repaid with interest at the rate of 15% per year on or before August 31, 2007. The HillStreet Debt may be prepaid at any time without penalty. Upon payment of the HillStreet Debt, the Company and QuaTech must also pay HillStreet a success fee of $500,000. The HillStreet Debt is secured by all the assets of the Company and QuaTech which security interest is subordinated to the interest of National City Bank (See Section (3) of this Item 1.01 below) and is pari passu to the security interest of the State of Ohio. (See Section (4) of this Item 1.01 below.) In connection with the HillStreet Loan Agreement, the Company issued a warrant to purchase 5,443,457 shares of common stock of the Company. (See Item 3.02 below.) A copy of the HillStreet Loan Agreement is being filed herewith as Exhibits 10.2, 10.3, 10.4 and 10.5.

(3) On February 28, 2006, QuaTech entered into a certain Fifth Amendment to Credit Agreement with National City Bank (“National City”) The original Credit Agreement with National City was entered into on July 28, 2000 and was amended four times prior to the fifth amendment. The Credit Agreement as amended is hereinafter referred to as the “National City Credit Agreement.” Pursuant to the National City Credit Agreement, QuaTech has borrowed $600,000 as a term loan and has access to a revolving commitment of up to $2,000,000. The term loan is payable in 18 consecutive monthly installments of principal beginning on March 5, 2006 in the amount of $16,667.00 for the first 17 installments and the unpaid balance payable as the 18th installment. The revolving commitment allows QuaTech to borrow and repay based upon working capital needs. The amount of available borrowing under the revolving commitment is based upon a borrowing base of QuaTech’s eligible accounts receivable and inventory. The interest rate on the term loan is the prime rate plus 2% and is payable monthly. Interest accrues on the revolving credit at a rate that may fluctuate from 0.5% to 4% above the prime rate depending upon the Senior Debt to EBITA ratio of QuaTech as determined by the terms of the National City Credit Agreement. Currently, QuaTech is charged a rate of 1% over the prime rate on the revolving commitment. National City is secured by all of the assets of QuaTech and Steven D. Runkel (the CEO and a director of the Company) and William Roberts (a director of the Company) have personally guaranteed QuaTech’s indebtedness to National City under the term loan. A copy of the National City Credit Agreement is being filed herewith as Exhibits 10.6, 10.7, 10.8, 10.9, 10.10 and 10.11.

(4) On January 27, 2006 QuaTech entered into a Loan Agreement with the Director of Development of the State of Ohio (the “State of Ohio Loan Agreement”) pursuant to which QuaTech may borrow up to $2,500,000 (the “State of Ohio Debt”) for certain eligible project financing. The State of Ohio Debt accrues interest at the rate of 8.0% per year. Payments of interest only are due and payable monthly from March 2006 through February 2007. Thereafter, QuaTech is obligated to make 48 consecutive monthly payments of interest and principal totaling $12,206.46 per month with the balance due on February 1, 2011. On February 1, 2011 QuaTech must also pay the State of Ohio a participation fee equal to the lesser of 10% of the maximum principal amount borrowed or $250,000. The State of Ohio Debt is secured by all the assets of QuaTech which security interest is subordinated to the interest of National City Bank (see Section (3) of this Item 1.01 above) and is pari passu to the security interest of HillStreet as to the QuaTech assets (see Section (2) of this Item 1.01 above). A Copy of the State of Ohio Loan Agreement is being filed herewith as Exhibit 10.12.

ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

See the introduction that precedes Item 1.01 which is incorporated herein by reference. There was no material relationship between the shareholders of QuaTech and the Company prior to the transaction except that Development Capital Ventures LP (“DCV”), the holder of 100% of QuaTech’s Series A Preferred Stock prior to the Merger, made a bridge loan to the Company in the principal amount of $500,000 on August 5, 2005 (the “Bridge Loan”) which converted into 4,934,209 shares of Company Common Stock as a result of the consummation of the Merger (see Item 3.02 following). DCV also received 29,843,286 shares of Company common stock by operation of the Merger in exchange for its Series A Preferred Stock of QuaTech. DCV now holds approximately 54.3% of the issued and outstanding Company common stock. The Agreement and Plan of Reorganization as amended, historical financial statements of QuaTech and unaudited pro forma condensed consolidated financial information were filed with the Company’s Registration Statement on Form S-4 (Registration No. 333-129532) and are incorporated by reference in Item 9.01 of this For 8-K. QuaTech’s financial statements for the year ended December 31, 2005 as well as pro forma financial information through December 31, 2005 will be filed by amendment to this Form 8-K.

ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.

(1) Upon the consummation of the Merger on February 28, 2006, the DCV Bridge Loan was converted into 4,934,209 shares of Company Common Stock which were issued to DCV. The Company has no further obligation to repay the Bridge Loan. No additional consideration was paid by DCV. The Company has provided DCV with certain registration rights with respect to such shares pursuant to the terms of a certain Shareholder and Registration Rights Agreement, dated May 11, 2005 by and among the Company, DCV and others which agreement was filed with the Company’s Registration Statement on Form S-4 (Registration No. 333-129532) and are incorporated by reference into Item 9.01 of this Form 8-K.

(2) Upon the consummation of the HillStreet Debt on February 28, 2006, and in partial consideration for funding the HillStreet Debt, the Company issued to HillStreet a warrant to purchase 5,443,457 of Company common stock at an exercise price of $0.00001 per share. The warrant expires on February 28, 2016. At any time upon the first to occur of February 28, 2008 or certain specified capital transaction involving the Company, HillStreet has the right to put the warrant or any Company common stock issued in exercise of the warrant to the Company at a price equal to greatest of (i) the fair market value as established by a capital transaction or public offering; (ii) six times the Company’s EBITA for the trailing 12 month period; and (iii) an appraised value. The Company has provided HillStreet with certain registration rights with respect to the shares of Company common stock underlying the warrant pursuant to the terms of a certain Registration Rights Agreement, dated February 28, 2006 which is being filed herewith as Exhibit 4.1. The HillStreet Warrant was issued pursuant to a certain Warrant Agreement, dated February 28, 2006, by and between the Company and HillStreet which is being filed herewith as Exhibit 4.2.

(3) Upon the consummation of the Merger on February 28, 2006, the Company issued to B. Riley & Company 312,500 shares of Company common stock as partial payment of the transaction fee paid to B. Riley for its financial advisory service to the Company regarding the Merger. Such shares were valued based upon the last recorded traded price of Company Common stock on February 28, 2006 of $0.16 per share.

ITEM 4.01. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

Prior to the Merger, QuaTech had engaged Bober, Markey, Fedorovich & Company (“Bober Markey”) as the independent registered public accounting firm to audit the financial statements of QuaTech for the fiscal year ended December 31, 2004. (As explained in the paragraph below, QuaTech is the acquiror for accounting purposes, and QuaTech’s historical financial statements will be included in Company financial statements.) QuaTech dismissed Bober Markey on January 24, 2006. Bober Markey’s report on QuaTech’s financial statements for the fiscal ended December 31, 2004 did not contain an adverse opinion or disclaimer of opinion, nor was such report qualified or modified as to uncertainty, audit scope or accounting principles. During each of QuaTech’s two most recent fiscal years and through the date of this report, there were: (i) no disagreements with Bober Markey on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or subject matter in connection with their report on our financial statements for such years; and (ii) no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K. QuaTech has provided Bober Markey with a copy of the foregoing disclosures, and has requested that Bober Markey furnish the Company with a letter addressed to the SEC indicating whether it agrees with the disclosure herein. Such letter is filed as Exhibit 16.1 to this Form 8-K.

Prior to the Merger, and after the dismissal of Bober Markey, QuaTech engaged the firm of Hausser + Taylor LLC to audit its financial statements for the year ended December 31, 2005. The Merger is accounted for as a “reverse acquisition” and QuaTech is treated as the acquiring company for accounting purposes despite the fact that the Company remains as a legal entity and parent of QuaTech as a matter of legal structure. As the acquiring entity for accounting purposes, in all future financial statements QuaTech’s historical financial statements will become the historical financial statements that are reported by the Company for comparison to the reporting period’s consolidated financial statements incorporating both QuaTech and DPAC. As a result, Hausser + Taylor LLC will be the independent accountant to the Company for the purpose of auditing the year ended December 31, 2005. See also Item 5.03 below.

ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT.

See Items 2.01 and 3.02 above which are incorporated herein by reference. As a result of the Merger and the issuance of the shares to DCV upon conversion of the Bridge Loan, as of February 28, 2006, the shareholders of QuaTech collectively now hold approximately 74.5% of the issued and outstanding shares Company Common Stock. DCV now holds approximately 54.3% of the issued and outstanding Company common stock. One other former QuaTech shareholder, William Roberts, owns approximately 8.4% of the issued and outstanding common stock of the Company. HillStreet has a warrant to purchase approximately 5% of the issued and outstanding common stock. No other person is known to own more than 5% of the issued and outstanding shares of Company common stock.

ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS

On February 28, 2006, immediately after the effective time of the Merger, the following directors resigned from there positions as directors and as members of the committees listed by their names below:

Name	Former committee positions
Richard J. Dadamo
Gordon M. Watson	Compensation Committee, Independent Directors Committee
Richard H. Wheaton	Audit Committee, Compensation Committee, Independent Directors Committee
John W. Hohener	Audit Committee, Independent Directors Committee

Each of the above former directors resigned to comply with the provisions of the Merger Agreement. There were no disagreements with any of these individuals that the Company believes caused, in whole or in part, the director’s resignation

On February 28, 2006, Creighton K. Early resigned as the Chief Executive Officer of the Company as required by the Merger Agreement. Mr. Early will continue to serve as a director of the Company.

On February 28, 2006 Steven D. Runkel became the Chief Executive Officer of the Company. See the discussion is Section (1) of Item 1.01 above which is incorporated herein by reference. For the past 5 years Mr. Runkel has served as the CEO of QuaTech. He is 44 years old. There are no family relationships between Mr. Runkel and any director, or executive officer of the Company.

On February 28, 2006 as contemplated by the Merger Agreement the following individuals were appointed to the Board of Directors of the Company. At this time they are expected to serve on the committees, if any, indicated next to their name below:

Name	Expected committee positions
Steven D. Runkel
William Roberts	Compensation Committee
James Bole	Compensation Committee
Mark Chapman	Audit Committee
Dennis R. Leibel	Audit Committee

ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.

As a result of accounting for the Merger as a “reverse acquisition” the Company determined on February 28, 2006 that its fiscal year end will change from February 28 to December 31.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial statements of the business acquired

To be filed by amendment.

(b) Pro forma financial information

To be filed by amendment.

(d) Exhibits

Exhibit No.	Description
4.1	Registration Rights Agreement, between DPAC Technologies Corp. and the HillStreet Fund, LP, dated as of February 28, 2006.
4.2	Warrant to Purchase Common Stock of DPAC Technologies Corp., issued to The HillStreet Fund, LP, dated as of February 28, 2006.
10.1	Employment Agreement, between Steven D. Runkel and DPAC Technologies Corp., effective as of February 28, 2006.
10.2	Subordinated Loan and Security Agreement, between WR Acquisition, Inc., as Borrower, and The HillStreet Fund, L.P., as Lender, dated as of July 28, 2000 (the “HillStreet Loan Agreement”).
10.3	First Amendment to the HillStreet Loan Agreement, dated as of August 5, 2005.
10.4	Second Amendment to the HillStreet Loan Agreement, dated as of January 27, 2006.
10.5	Third Amendment to the HillStreet Loan Agreement, dated as of February 28, 2006.
10.6	Credit Agreement, between WR Acquisition, Inc., as Borrower, and National City Bank, as Lender, dated as of July 28, 2000 (the “National City Credit Agreement”).
10.7	First Amendment to the National City Credit Agreement, dated as of March 25, 2002.
10.8	Second Amendment to the National City Credit Agreement, dated as of September 4, 2002.
10.9	Third Amendment to the National City Credit Agreement, dated as of November 25, 2003.
10.10	Fourth Amendment to the National City Credit Agreement, dated as of July 21, 2005.
10.11	Fifth Amendment to the National City Credit Agreement, dated as of February 28, 2006.
10.12	Loan Agreement, between QuaTech, Inc., as Borrower, and the Director of Development of the State of Ohio, as Lender, dated as of January 27, 2006.
16.1	Letter from Bober, Markey, Fedorovich & Company, dated March 6, 2006.
99.1	Press release of DPAC Technologies Corp., dated February 28, 2006.

SIGNATURE

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 thereunto duly authorized.

	DPAC Technologies Corp.
Date: March 6, 2006	By	/s/ Steven D. Runkel
	Name:	Steven D. Runkel
	Title:	Chief Executive Officer

Exhibit Index

Exhibit No.	Description
4.1	Registration Rights Agreement, between DPAC Technologies Corp. and the HillStreet Fund, LP, dated as of February 28, 2006.
4.2	Warrant to Purchase Common Stock of DPAC Technologies Corp., issued to The HillStreet Fund, LP, dated as of February 28, 2006.
10.1	Employment Agreement, between Steven D. Runkel and DPAC Technologies Corp., effective as of February 28, 2006.
10.2	Subordinated Loan and Security Agreement, between WR Acquisition, Inc., as Borrower, and The HillStreet Fund, L.P., as Lender, dated as of July 28, 2000 (the “HillStreet Loan Agreement”).
10.3	First Amendment to the HillStreet Loan Agreement, dated as of August 5, 2005.
10.4	Second Amendment to the HillStreet Loan Agreement, dated as of January 27, 2006.
10.5	Third Amendment to the HillStreet Loan Agreement, dated as of February 28, 2006.
10.6	Credit Agreement, between WR Acquisition, Inc., as Borrower, and National City Bank, as Lender, dated as of July 28, 2000 (the “National City Credit Agreement”).
10.7	First Amendment to the National City Credit Agreement, dated as of March 25, 2002.
10.8	Second Amendment to the National City Credit Agreement, dated as of September 4, 2002.
10.9	Third Amendment to the National City Credit Agreement, dated as of November 25, 2003.
10.10	Fourth Amendment to the National City Credit Agreement, dated as of July 21, 2005.
10.11	Fifth Amendment to the National City Credit Agreement, dated as of February 28, 2006.
10.12	Loan Agreement, between QuaTech, Inc., as Borrower, and the Director of Development of the State of Ohio, as Lender, dated as of January 27, 2006.
16.1	Letter from Bober, Markey, Fedorovich & Company, dated March 6, 2006.
99.1	Press release of DPAC Technologies Corp., dated February 28, 2006.

EX-4.1

Exhibit 4.1

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (“Agreement”) is made and entered into as of February 28, 2006 by and between DPAC TECHNOLOGIES CORP., a California corporation (the “Company”), and The HillStreet Fund, L.P., a Delaware limited partnership (the “Shareholder”).

R E C I T A L S

WHEREAS, the parties hereto have contemporaneously entered into a certain Warrant Agreement if even date herewith (“Warrant Agreement”) whereby the Shareholder is acquiring warrants to acquire 5,443,457 shares of the Company’s Common Stock, which rights are more fully described in the Warrant Agreement.

WHEREAS, the Company has agreed to provide Shareholder with the registration rights set forth herein , and the execution and delivery of this Agreement is a condition to closing the Warrant Agreement.

A G R E E M E N T

NOW, THEREFORE, in consideration of the foregoing, for good and valuable considerations, receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

1. Definitions. As used herein:

1.1 The term “Advice” is defined in Section 2.9.

1.2 The term “Blocking Right” is dated in Section 2.1.

1.3 The term ““Commission” means the Securities and Exchange Commission.

1.4 The term “Exchange Act” means the Securities Exchange Act of 1934, as amended.

1.5 The term “Holder” means any of the following persons owning or having the right to acquire Registrable Shares or any permitted assignee of rights under this Agreement: HillStreet Fund, L.P..

1.6 The term “Prior Registration Rights Agreement” means that certain “Shareholder and Registration Rights Agreement, dated May 11, 2005, among the Company and the Similar Holders.

1.7 The term “Public Offering” means and includes the closing, after the date hereof, of an underwritten public offering pursuant to an effective

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registration statement under the Securities Act, covering the offer and sale of securities to the general public for the account of the Company, for avoidance of doubt.

1.8 The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act (as defined below) and the applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.

1.9 For the purposes hereof, the term “Registrable Shares” means and includes (1) the shares of Common Stock issuable or issued upon the exercise of Shareholder’s rights under the Warrant Agreement; (2) any other shares of Common Stock acquired or owned by Holder ; and (3) Common Stock issued as (or issued upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for. or in replacement of, Registrable Securities held by Holder.

1.10 The term “Securities Act” means the Securities Act of 1933, as amended.

1.11 The term “Similar Holders” refers to Development Capital Ventures, LP; William Roberts and Steve Runkel in their capacity as “Holders” pursuant to the Prior Registration Rights Agreement.

2. Registration Rights.

2.1 Demand Registration.

Subject to Sections 2.6, 2.7 and 2.8, if at any time after the Effective Time, the Company shall receive a written request from the Holder that the Company file with the Commission a registration statement under the Securities Act covering the registration for offer and sale of outstanding Registrable Securities held by such Holder, then the Company shall promptly notify in writing all Similar Holders of such request. Within 20 days after such notice has been given by the Company, any Similar Holder may give written notice to the Company of its election to include its Registrable Securities in the registration. As soon as practicable after the expiration of such 20-day period, the Company shall use its reasonable best efforts to cause the registration of all Registrable Securities with respect to which registration has been so requested. If the Holder intends to distribute the Registrable Shares covered by its request by means of an underwriting, it shall so advise the Company as part of its request and the Company shall include such information in the written notice referred to above. The underwriter shall be selected by the Holder and shall be reasonably acceptable to the Company. In such event, the right of any Similar Holder to include his or her Registrable Shares in such registration shall be conditioned upon such Similar Holder’s participation in such underwriting and the inclusion of such Similar Holder’s Registrable Shares in

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the underwriting to the extent provided herein. All Holder and Similar Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriters selected for such underwriting. Notwithstanding the foregoing, if the underwriter advises the Holder in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders and Similar Holders of Registrable Shares which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Shares that may be included in the underwriting shall be allocated among all Holders and Similar Holders thereof, in proportion (as nearly as practicable) to the amount of Registrable Shares of the Company owned by each Holder and Similar Holder.

Notwithstanding the provisions set forth above in this Section 2.1, the Company shall not be obligated to effect any registration pursuant to this Section within 180 days after a Public Offering. In addition, the Company may postpone for up to 90 days the filing or effectiveness of a registration statement pursuant to a request under this Section if the Board of Directors (with the concurrence of the managing underwriters, if any) determines in good faith that such registration would be reasonably expected to have a material adverse effect on any proposal or plan by the Company to engage in any acquisition or sale of assets, merger, consolidation, tender offer, financing or similar transaction (a “Blocking Right”). The Company may not assert a Blocking Right more than once in any twelve month period. In the event of any postponement described in this subsection the requesting Shareholders shall, upon written notice to the Company by a majority of requesting Shareholders, be entitled to withdraw such request and, if such request is withdrawn, such request shall not count as a request for registration pursuant to this Section.

2.2 Piggyback Registration.

Subject to Sections 2.6 and 2.7, if at any time the Company proposes to register any of its securities under the Securities Act, either for its own account or for the account of others holders of Common Stock who are not the Shareholder, in connection with the public offering of such securities solely for cash, on a registration form that would also permit the registration of Registrable Securities, the Company shall promptly give each Holder written notice of such proposal. Upon the written request of any Holder given within 20 days after any such notice is given, subject to Sections 2.6 and 2.7, the Company shall use its commercially reasonable best efforts to cause to be included in such registration all Registrable Securities with respect to which registration has been so requested. The piggyback registration rights granted pursuant to this Section 2.2 shall not confer the right to include Registrable Securities in the Company’s Registration Statement on Form S-3 No. 333-116758 filed with the Securities and Exchange Commission on June 23, 2004 and subsequently amended on July 12, 2004 and July 13, 2004, or in any successor replacement registration statement thereto.

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2.3 Registration Obligations of the Company.

Whenever required under this Agreement to use commercially reasonable best efforts to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) prepare and file with the Commission a registration statement covering such Registrable Securities and use reasonable efforts to cause such registration statement to be declared effective by the Commission as expeditiously as possible and to keep such registration effective until the date when all Registrable Securities covered by the registration statement have been sold; provided, that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish to each Requesting Holder and the underwriters, if any, copies of all such documents proposed to be filed (excluding exhibits, unless any such Person shall specifically request exhibits in writing), which documents will be subject to the review of such Shareholders and underwriters, and the Company will not file such registration statement or any amendment thereto or any prospectus or any supplement thereto with the Commission if (A) a majority of requesting Shareholders reasonably object to such filing (unless such registration is pursuant to Section 3 and is in connection with a Public Offering) or (B) information in such registration statement or prospectus concerning a particular Holder has changed or is otherwise inaccurate and such Holder or the underwriters, if any, shall reasonably and promptly object;

(b) prepare and file with the Commission such amendments and post-effective amendments to such registration statement as may be necessary to keep such registration statement effective during the period referred to in subsection (a) above, and cause the prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed with the Commission pursuant to Rule 424 under the Securities Act;

(c) furnish to the requesting Shareholders and to each underwriter, if any, such reasonable numbers of copies of such registration statement, each amendment thereto, the prospectus included in such registration statement (including each preliminary prospectus), each supplement thereto and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;

(d) use its best efforts to register and qualify the Registrable Securities under such other securities laws of such United States jurisdictions as shall be reasonably requested by a majority of requesting Shareholders or any underwriters or, in the alternative, to obtain exemptions from the registration requirements of such securities laws, and do any and

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all other acts and things which may be reasonably necessary or advisable to enable the requesting Shareholders and underwriters to consummate the disposition of the Registrable Securities owned by such Shareholders and underwriters in such jurisdictions; provided, that the Company shall not be required in connection therewith or as a condition thereto to qualify to transact business, subject itself to taxation or to file a general consent to service of process in any such jurisdiction;

(e) promptly after becoming aware thereof, notify each requesting Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading and, at the request of any such Holder, the Company will promptly prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;

(f) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and to take commercially reasonable efforts to attract at least two market makers to register as such with respect to such Registrable Securities with the NASD;

(g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;

(h) enter into such customary agreements (including underwriting agreements in customary form for a primary offering) and take all such other actions as a majority of requesting Shareholders or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities;

(i) subject to compliance with such confidentiality requirements as the Company may reasonably impose, and subject to the requirements of federal and state securities laws, the rules of the NASD and the rules of any securities exchange on which the Company’s securities are traded, make available for inspection by any requesting Holder, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such Holder or underwriter, provided, however, that the requesting Shareholders shall employ only one counsel, all pertinent financial and other records and pertinent corporate documents of the Company, and cause the officers, directors, employees and independent accountants of the Company to supply all information reasonably requested by any such Holder,

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underwriter, attorney, accountant or agent in connection with such registration statement;

(j) promptly notify the Holder and the underwriters, if any, of the following events and (if requested by any such Person) confirm such notification in writing: (i) the filing of the prospectus or any prospectus supplement and the registration statement and any amendment or post-effective amendment thereto and, with respect to the registration statement or any post-effective amendment thereto, the declaration of the effectiveness of such documents; (ii) any requests by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information; (iii) the issuance or written threat of issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose; and (iv) the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threat of initiation of any proceeding for such purpose;

(k) make reasonable efforts to prevent the entry of any order suspending the effectiveness of the registration statement and obtain at the earliest possible moment the withdrawal of any such order, if entered;

(l) if reasonably requested by any underwriter or a requesting Holder in connection with any underwritten offering, promptly incorporate in a prospectus supplement or post-effective amendment such information as such underwriter or a majority of requesting Shareholders agree should be included therein relating to the sale of the Registrable Securities, including without limitation information with respect to the number of Registrable Securities being sold to such underwriter, the purchase price being paid therefore by such underwriter and any other terms of the underwritten (or best efforts underwritten) offering of the Registrable Securities to be sold in such offering, and make all required filings of such prospectus supplement or post-effective amendment promptly after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment;

(m) upon the filing of any document which is to be incorporated by reference into the registration statement or the prospectus (after the initial filing of the registration statement with the Commission), (i) promptly provide copies of such document to counsel for the requesting Shareholders and counsel for the underwriters, if any, and (ii) make representatives of the Company available for discussion of such document;

(n) cooperate with the requesting Shareholders and the underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing

6

any restrictive legends, and enable such Registrable Securities to be in such lots and registered in such names as the underwriters may request at least two business days prior to any delivery of Registrable Securities to the underwriters;

(o) if necessary, provide a CUSIP number for all Registrable Securities not later than the effective date of the registration statement; and

(p) prior to the effectiveness of the registration statement and any post-effective amendment thereto and at each closing of an underwritten offering, do the following insofar as the requesting Shareholders are concerned or affected: (i) make such representations and warranties to such Shareholders and the underwriters, if any, with respect to the Registrable Securities and the registration statement as are customarily made by issuers to holders and underwriters in primary underwritten offerings; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions shall be reasonably satisfactory to the underwriters, if any, and to a Majority of requesting Shareholders) addressed to each such Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Shareholders and underwriters or their counsel; (iii) obtain “cold comfort” letters and updates thereof from the Company’s independent certified public accountants addressed to such Shareholders or underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in cold comfort letters by accountants and underwriters in connection with primary underwritten offerings; and (iv) deliver such documents and certificates as may be reasonably requested by a Majority of requesting Shareholders or by the underwriters, if any, to evidence compliance with clause (i) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company.

2.4 Suspension of Disposition of Registrable Securities.

Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.3(e), such Holder will forthwith discontinue disposition of Registrable Securities until such Holder’s receipt of copies of a supplemented or amended prospectus contemplated by Section 2.3(e), or until it is advised in writing (an “Advice”) by the Company that the use of the prospectus may be resumed and has received copies of any additional or supplemental filings which are incorporated by reference in the prospectus and, if so directed by the Company, such Holder will deliver to the Company (at the expense of the Company) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. If the Company shall give any such notice, the time periods specified in Section 2.3(a) shall be

7

extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 2.3(e) to and including the date when each selling Holder shall have received the copies of the supplemented or amended prospectus contemplated by Section 2.3(e) or the Advice.

2.5 Expenses of Registration.

Whether or not any registration statement prepared and filed pursuant to this Agreement is declared effective by the Commission, the Company shall pay or incur all expenses incurred in connection with a registration pursuant to the terms hereof (excluding underwriting fees, discounts and commissions attributable to the sale of Registrable Securities), including without limitation all registration, qualification, application, filing, listing, transfer agent and registrar fees, printing, messenger, telephone and delivery fees and expenses, accounting fees and disbursements (including the expenses of any audit, review and/or “cold comfort” letters), fees and disbursements of counsel for the Company, and in each demand registration, to a maximum of $15,000, the fees and costs of one counsel representing the Holder.

2.6 Conditions Precedent to Participation in Registration.

No Holder shall participate in any registration hereunder unless:

(a) such Holder timely furnishes to the Company and/or the underwriters managing such registration, if any, all such information regarding such Holder, the Registrable Securities held by it and its intended method of disposing of such Registrable Securities as the Company or such underwriters may reasonably request;

(b) such Holder agrees, and each Holder hereby does agree, to notify the Company and/or any underwriters managing such registration of the occurrence of any event which causes the prospectus prepared in connection with any such registration to contain an untrue statement of a material fact or omit to state a fact necessary to make the statements therein not misleading promptly after such Holder obtains knowledge of such occurrence; and

(c) in the case of an underwritten registration, such Holder agrees to (i) sell such Holder’s Registrable Securities on the basis of any underwriting arrangements approved by the persons(s) entitled hereunder to approve such arrangements and (ii) complete, execute and deliver all questionnaires, powers of attorney, indemnities, lock-up agreement, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and consistent with this Agreement.

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2.7 Selection of Underwriters; Priorities.

(a) The Holder shall have the right to select the investment banker(s) and manager(s) to administer any offering to which Section 2.1 is applicable, subject to the written consent of a majority in interest of requesting Similar Holders, which consent may be withheld in such requesting Similar Holder’s sole and absolute discretion; a majority of requesting Similar Holders shall have the right to select the investment banker(s) and manager(s) to administer an offering to be effected pursuant to Section 2.2 on Form S-1 or S-3 if no such securities are being sold for the account of the Company.

(b) In the case of a registration under Section 2.1 which is an underwritten offering, if the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and other securities requested to be included exceeds the number of Registrable Securities and other securities which can be sold at the desired price in such offering, the Company will include in such registration, to the extent of the amount which the Company is advised can be sold at such price: (i) first, the Registrable Securities requested to be included, pro rata among the Shareholders thereof on the basis of the number of Registrable Securities requested to be registered by each such Holder; (ii) second, securities held by persons having piggyback registration rights and securities proposed to be sold by the Company, pro rata based on the estimated gross proceeds from the sale thereof; and (iii) third, all other securities requested to be included in such registration.

(c) In the case of a registration under Section 2.2 which is an underwritten offering, if the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold at the desired price in such offering, the Company will include in such registration, to the extent of the amount which the Company is advised can be sold at such price:

(i) if such registration is commenced upon the demand of Persons having demand registration rights, the Company will include in such registration, (A) first, securities held by the Persons having such demand registration rights, (B) second, securities proposed to be sold by the Company, Registrable Securities, and securities proposed to be sold by other Persons having piggyback registration rights pro rata based on the estimated gross proceeds from the sale thereof and (C) third, all other securities requested to be included in such registration; and

(ii) if such registration is commenced by the Company on its own account and not in response to Persons having demand registration rights, (A) first, the securities which the Company proposes to sell, (B) second, Registrable Securities and securities proposed to be sold by other Persons having piggyback registration

9

rights, pro rata based on the estimated gross proceeds from the sale thereof, (C) third, all other securities requested to be included in such registration.

2.8 Termination of the Company’s Obligations.

Except as set forth below, the Company shall have no further obligations under Section 2.1 after the Company has effected (a) two (2) registrations on Form S-1 or Form S-2 (or any successor forms) pursuant to a demand made pursuant to Section 2.1, or (b) all Registrable Securities covered thereby have been sold either pursuant thereto or pursuant to Rule 144, or (c) when all of a Holder’s Registrable Shares may be sold within one day’s then normal trading volume under Rule 144(k), or (d) the close of business on December 31, 2010, whichever is earliest. The Company’s obligation to effect registrations pursuant to Section 2.2 and registrations under Section 2.1 to be done on Form S-3 so long as the Company is eligible to use such Form (or any successor form) shall continue for so long as any Registrable Securities remain unregistered. The Company shall have no further obligations under Section 2.1 or Section 2.2 of this Agreement upon the fifth anniversary of the Effective Time.

2.9 Indemnification.

2.9.1 Indemnification of Shareholders. Pursuant to the Company’s registration of the Registrable Shares under the Securities Act, the Company will indemnify and hold harmless each Holder and each underwriter of the Registrable Shares so registered and each person, if any, who controls such Holder or any such underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities (or any action in respect thereof), joint or several, to which they or any of them become subject under the Securities Act or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse each such Holder, each such underwriter and each such controlling person, if any, for any legal or other expenses reasonably incurred by them or any of them, as such expenses are incurred, in connection with investigating or defending any actions whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions (i) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the registration statement or prospectus as from time to time amended or supplemented by the Company); (ii) arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading; or (iii) any violation by the Company of the Securities Act, the Exchange Act, a state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law; provided, however, that the indemnity contained in this Section 2.9 will not apply where such untrue statement or omission was made in such registration statement, preliminary or amended, preliminary prospectus or prospectus in

10

reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such Holder of Registrable Shares, any such underwriter or any such controlling person expressly for use therein. Promptly after receipt by any Holder of Registrable Shares, any underwriter or any controlling person of notice of the commencement of any action in respect of which indemnity may be sought against the Company, such Holder of Registrable Shares, or such underwriter or such controlling person, as the case may be, will notify the Company in writing of the commencement thereof, and, subject to the provisions hereinafter stated, the Company shall assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to such Holder of Registrable Shares, such underwriter or such controlling person, as the case may be), and the payment of expenses insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the Company. Such Holder of Registrable Shares, any such underwriter or any such controlling person shall have the right to employ separate counsel in any such action and to participate in the defense thereof in the event the representation of such Holder, underwriter or controlling person by counsel retained by or on the behalf of the Company would be inappropriate due to conflicts of interest between any such person and any other party represented by such counsel in such proceeding or action, in which case the Company shall pay, as incurred, the fees and expenses of such separate counsel. The Company shall not be liable to indemnify any person under this Section 2.9 for any settlement of any such action effected without the Company’s consent (which consent shall not be unreasonably withheld). The Company shall not, except with the approval of each party being indemnified under this Section 2.9 (which approval will not be unreasonably withheld), consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation.

2.9.2 Indemnification of the Company. In the event that the Company registers any of the Registrable Shares under the Securities Act, each Holder of the Registrable Shares so registered will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each underwriter of the Registrable Shares so registered and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities (or any action in respect thereof), joint or several, to which they or any of them may become subject under the Securities Act or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse the Company and each such director, officer, underwriter or controlling person for any legal or other expenses reasonably incurred by them or any of them, as such expenses are incurred, in connection with investigating or defending any actions whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the

11

registration statement or prospectus as from time to time amended or supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such Holder, expressly for use therein; provided, however, that such Holder’s obligations hereunder shall be limited to an amount equal to the proceeds to such Holder of the Registrable Shares sold in such registration. Promptly after receipt of notice of the commencement of any action in respect of which indemnity may be sought against such Holder of Registrable Shares, the Company will notify such Holder of Registrable Shares in writing of the commencement thereof, and such Holder of Registrable Shares shall, subject to the provisions hereinafter stated, assume the defense of such action (including the employment of counsel, who shall be counsel satisfactory to the Company) and the payment of expenses insofar as such action shall relate to the alleged liability in respect of which indemnity may be sought against such Holder of Registrable Shares. The Company and each such director, officer, underwriter or controlling person shall have the right to employ separate counsel in any such action and to participate in the defense thereof in the event the representation of the Company, any of its officers or directors or any underwriter or controlling person by counsel retained by or on the behalf of such Holder would be inappropriate due to conflicts of interest between any such person and any other party represented by such counsel in such proceeding or action, in which case such Holder shall pay, as incurred, the fees and expenses of such separate counsel. Notwithstanding the two preceding sentences, if the action is one in which the Company may be obligated to indemnify any Holder of Registrable Shares pursuant to Section 2.9, the Company shall have the right to assume the defense of such action, subject to the right of such holders to participate therein as permitted by Section 2.9. Such Holder shall not be liable to indemnify any person for any settlement of any such action effected without such Holder’s consent (which consent shall not be unreasonably withheld). Such Holder shall not, except with the approval of the Company (which approval shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to the party being so indemnified of a release from all liability in respect to such claim or litigation.

2.10 Contribution.

If the indemnification provided for in Section 2.9. is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or

12

omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

2.11 Exchange Act Registration.

With a view to making available to the Shareholders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

2.11.1.  Use its best efforts to make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the Effective Time;

2.11.2.  Take such reasonable actions, including the registration of its common stock under Section 12 of the Exchange Act, as are necessary to enable the Shareholders to use Rule 144 for the sale of their Registrable Shares, such action to be taken as soon as practicable after the Effective Time;

2.11.3.  File on a timely basis with the SEC all information that the SEC may require under either of Section 13 or Section 15(d) of the Exchange Act and, so long as it is required to file such information, take all action that may be required as a condition to the availability of Form S-3 or Rule 144 under the Securities Act (or any successor exemptive rule hereinafter in effect) with respect to the Company’s common stock; and

2.11.4.  Furnish to any Holder forthwith upon request (a) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, (b) a copy of the most recent annual or quarterly report of the Company as filed with the SEC, and (c) any other reports and documents that a Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing a Holder to sell any such Registrable Shares without registration.

2.12 Market Stand-Off Agreement.

Provided that all Shareholders are treated equally and all officers and directors of the Company are also so bound, no Holder shall, to the extent

13

requested by any managing underwriter of the Company, sell or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any Registrable Shares during a period (the “Stand-Off Period”) equal to one hundred twenty (120) days following the effective date of a registration statement of any secondary offering of the Company under the Securities Act (or in each case such shorter period as the Company or managing underwriter may authorize) and except in each case, for securities sold as part of the offering covered by such registration statement in accordance with the provisions of this Agreement. In order to enforce the foregoing covenant, the Company may impose stock transfer restrictions with respect to the Registrable Shares of each Holder until the end of the Stand-Off Period. Notwithstanding the foregoing, the obligations described in this Section 2.9. shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the future, or a registration relating solely to an SEC Rule 145 transaction on Form S-4 or similar forms which may be promulgated in the future.

3. Shareholder Obligations.

3.1. Representations and Warranties of the Shareholder. The Shareholder hereby represents and warrants to the Company as follows:

3.1.1.  Authority; No Violation. The Shareholder has all necessary power and authority to enter into and perform all of such Shareholder’s obligations hereunder. The execution, delivery and performance of this Agreement by the Shareholder will not violate any other agreement to which such Shareholder is a party, including any voting agreement, shareholders’ agreement, trust agreement or voting trust. This Agreement has been duly and validly executed and delivered by the Shareholder (and the Shareholder’s spouse, if the Shares (as defined below) constitute community property) and constitutes a valid and binding agreement of the Shareholder and such spouse, enforceable against the Shareholder and the Shareholder’s spouse, as the case may be, in accordance with its terms.

3.1.2.  No Conflicts. Neither the execution and delivery of this Agreement nor the consummation by the Shareholder of the transactions contemplated hereby will conflict with or constitute a violation of or default under any contract, commitment, agreement, arrangement or restriction of any kind to which such Shareholder is a party or by which the Shareholder is bound.

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3. Covenant Not to Enter Into Other Registration Rights Agreements.

Until the termination of the Company’s obligations under Section 2.8 hereof, the Company will not agree to, and will not, grant registration rights of any type, whether demand, piggyback or other, to any other person without the express written consent of the Holder.

4. Miscellaneous.

4.1. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof.

4.2. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors, assigns, heirs, executors, administrators and other legal representatives. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

4.3. Assignment. This Agreement shall not be assigned without the prior written consent of the other party hereto.

4.4. Modifications. This Agreement shall not be amended, altered or modified in any manner whatsoever, except by a written instrument executed by the parties hereto.

4.5. Severability. If any provision of this Agreement or the application of such provision to any person or circumstances shall be held invalid or unenforceable by a court of competent jurisdiction, such provision or application shall be unenforceable only to the extent of such invalidity or unenforceability, and the remainder of the provision held invalid or unenforceable and the application of such provision to persons or circumstances, other than the party as to which it is held invalid, and the remainder of this Agreement, shall not be affected.

4.6. Governing Law. This Agreement shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Ohio without regard to the conflicts of law principles thereof.

4.7. Attorneys’ Fees. The prevailing party or parties in any litigation, arbitration, mediation, bankruptcy, insolvency or other proceeding (“Proceeding”) relating to the enforcement or interpretation of this Agreement may recover from the unsuccessful party or parties all fees and disbursements of counsel (including expert witness and other consultants’ fees and costs) relating to or arising out of (a) the Proceeding (whether or not the Proceeding proceeds to judgment) and (b) any post-judgment or post-award proceeding including, without limitation, one to enforce or collect any judgment or award resulting from the Proceeding. All such

15

judgments and awards shall contain a specific provision for the recovery of all such subsequently incurred costs, expenses, fees and disbursements of counsel.

4.8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect.

4.9. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.

4.10. Notices. Any notices or other communications required or permitted hereunder shall be in writing and shall be deemed duly given upon (a) transmitter’s confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by a standard overnight carrier, or (c) the expiration of five (5) business days after the day when mailed by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address as the parties hereto shall specify by like notice):

If to the Company or Merger Sub to: DPAC TECHNOLOGIES CORP. 5675 Hudson Industrial Parkway Hudson, OH 44236 Attention:, CEO Phone: (800) 553-1170 Facsimile: (330) 434-1409   With a copy to: Buchanan Ingersoll, PC 301 Grant Street, 20th Floor Pittsburgh, PA 15234 Attention Richard D. Rose, Esq Phone (412) 562-8425 Facsimile: (412) 562-1041

If to the Shareholder, to the address noted on the signature page hereto and to any counsel identified in like written notice from Shareholder to the Company. Each of the parties hereto shall be entitled to specify another address by giving notice as aforesaid to each of the other parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first above written.

[Signature page follows.]

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DPAC TECHNOLOGIES CORP.
By:	/s/ Steven D. Runkel
	Steven D. Runkel, Chief Executive Officer and President
THE HILLSTREET FUND, L.P.
By:	HillStreet Capital, Inc., its Investment Manager
By:	/s/ John P. Vota, II
	John P. Vota, II Executive Vice President

17

SHAREHOLDERS	ADDRESS FOR NOTICES
The HillStreet Fund, L.P.	The HillStreet Fund, L.P. 300 Main Street Cincinnati, Ohio 45202 Attention John Vota II
	with a copy to:
	Keating Muething & Klekamp PLL One East Fourth Street 14th Floor Cincinnati, Ohio 45202 Attention Timothy B. Matthews, Esq.

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EX-4.2

Exhibit 4.2

Neither this Warrant, nor the shares of capital stock for which it is exercisable, have been registered under the Securities Act of 1933 or any applicable state securities laws, and no transfer or assignment of this Warrant or the shares issuable upon its exercise may be made in the absence of an effective registration statement under such laws or the availability of exemptions from the registration provisions thereof in respect of such transfer or assignment in the opinion of counsel satisfactory to the Company.

Warrant Certificate No.          Warrants for 5,443,457 Shares

Original Issue Date: February 28, 2006

WARRANT TO PURCHASE COMMON STOCK

OF

DPAC TECHNOLOGIES CORP.

This certifies that THE HILLSTREET FUND, L.P., a Delaware limited partnership, or its registered assigns (“Holder”), is entitled, subject to the terms set forth below, at any time on or after the date hereof, prior to the Expiration Date (as defined in the Warrant Agreement) to purchase from DPAC Technologies Corp., a California corporation (the “Company”), up to Five Million Four Hundred Forty-Three Thousand Four Hundred Fifty-Seven (5,443,457) fully paid and non-assessable shares of the Company’s common stock (“Common Stock”), which stock constitutes five percent (5%) of the common equity of the Company or a fully diluted basis, including all convertible stock options and warrants upon surrender hereof, at the principal office of the Company, with the subscription form annexed hereto duly executed, and simultaneous payment therefor, at the purchase price of $0.00001 per share of Common Stock (the “Exercise Price”). The number and character of such shares of Common Stock are subject to adjustment as provided below.

1. The Warrants. This Warrant is issued to Holder in connection with a certain Warrant Agreement dated as of February 28, 2006, between the Company and Holder (the “Warrant Agreement”). The term “Warrants” as used herein shall include all Warrants issued in connection with the Warrant Agreement and also any warrants delivered in substitution or exchange therefor as provided herein. This Warrant does not entitle the Holder to any rights as a stockholder of the Company except as set forth herein or in the Warrant Agreement.

2. Exercise.

2.1 Full Exercise. Subject to compliance with the provisions hereof, this Warrant may be exercised by the Holder, in whole or in part, at any time on or prior to the Expiration Date, at any time or from time to time, on any business day, by surrendering the Warrant at the principal office of the Company, 5675 Hudson Industrial Parkway, Hudson, OH 44236, with the form of Election to Exercise in substantially the form of Exhibit A fully executed, together with payment in cash or immediately available funds of the sum obtained by multiplying: (a) the number of shares of Common Stock for which the Warrant is being

Warrant (DPAC)

exercised; by (b) the Exercise Price, provided, however, that all or part of such payment may be made by the surrender by such Holder to the Company, at the aforesaid office or agency, of any instrument evidencing indebtedness of the Company. All indebtedness so surrendered shall be credited against such Exercise Price in an amount equal to the outstanding principal amount thereof plus accrued but unpaid interest to the date of surrender.

2.2 Partial Exercise. This Warrant may be exercised for less than the full number of shares of Common Stock or any fraction thereof called for hereby, at any time or from time to time, on or prior to the Expiration Date, in the manner set forth in Section 2.1. Upon any partial exercise, the number of shares receivable upon the exercise of this Warrant as a whole, and the sum payable upon the exercise of this Warrant as a whole, shall be proportionately reduced. Upon such partial exercise, this Warrant shall be surrendered and a new Warrant of the same tenor and for the purchase of the number of such shares not purchased upon such exercise shall be issued by the Company to the registered Holder hereof within five (5) days after such exercise.

2.3 Delivery of Certificates. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the Holder of such shares of record as of the close of business on such date. As soon as practicable on or after such date, but in any event within five (5) days after payment of the Exercise Price pursuant to this Section 2, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares of Common Stock issuable upon such exercise.

2.4 Net Issue Exercise. Notwithstanding any provisions herein to the contrary, in lieu of exercising this Warrant for cash, the Holder may elect to receive Warrant Stock equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company, together with the form of Election to Exercise attached hereto fully executed, in which event the Company shall issue to the Holder that number of Shares of Warrant Stock computed using the following formula:

	X = Y x (A-B) / A
Where	Y = the aggregate number of Shares of Warrant Stock purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the number of Shares of Warrant Stock for which this Warrant is being exercised (at the date of such calculation)
	A = Market Price of one Share of Common Stock (at the date of such calculation)
	B = Exercise Price.

For the purposes of this Section 2.4, “Market Price” shall mean, if the Warrant Stock is traded on a national securities exchange, the NASDAQ National Market System or the over-the-counter market, the last reported price on the date of valuation at which the Warrant Stock has

Warrant (DPAC)

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traded on the NASDAQ National Market System or the average of the bid and asked prices on the over-the-counter market on the date of valuation or, if no sale took place on such date, the last date on which a sale took place. If the Warrant Stock is not so traded, “Market Price” shall be the value of one share of Warrant Stock as determined by agreement of the parties hereto, or if the parties hereto cannot reach agreement, then such value shall be equal to the Appraised Value (as defined in the Warrant Agreement). Each such appraisal shall be at the Company’s expense.

3. Payment of Taxes. All shares of Common Stock issued upon the exercise of a Warrant shall be validly issued, fully paid and non-assessable and free of any security interest or other adverse claims or encumbrances and free of claims of pre-emptive rights. The Company shall pay all issuance taxes and similar governmental charges that may be imposed in respect of the issue or delivery thereof, but in no event shall the Company pay a tax on or measured by the net income or gain attributed to such exercise. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer of a Warrant or any transfer involved in the issue of any certificate for shares of Common Stock in any name other than that of the registered Holder of the Warrant surrendered in connection with the purchase of such shares, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the Company’s reasonable satisfaction that no tax or other charge is due.

4. Unregistered Securities. The Holder acknowledges that, in taking unregistered Warrants, it must continue to bear the economic risk of its investment for an indefinite period of time because of the fact that such Warrants have not been registered under the Securities Act of 1933 and further realizes that such Warrants cannot be sold unless they are subsequently registered under the Securities Act or 1933 or an exception or exemption from such registration is available. The Holder also acknowledges that appropriate legends reflecting the status of the Warrants under the Securities Act of 1933 may be placed on the face of the Warrant certificates at the time of their transfer and delivery to the Holder hereof. The transfer of this Warrant and the shares issuable upon exercise of this Warrant is subject to the terms of this Warrant and the terms and provisions of the Warrant Agreement.

5. Exchanges. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company together with the form of transfer authorization attached hereto as Exhibit B duly executed, for new Warrants for the same aggregate number of shares of Warrant Stock, each new Warrant to represent the right to purchase such number of shares as the Holder shall designate at the time of such exchange.

6. Adjustments.

6.1 Adjustment in Case of Other Stock or Securities. If any shares of stock or other securities (or any stock or other securities convertible into or exchangeable for any such stock or securities) shall be issued or sold by the Company at a price per share below Market Price, whether for cash or in exchange for consideration other than cash, or any other event shall occur that shall have the effect of diluting or enhancing such rights, then and in each such case the number of shares or other securities issuable upon exercise of this Warrant and the Exercise Price shall forthwith be adjusted, so as to protect the Holder of the Warrants against the effect of

Warrant (DPAC)

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such dilution or enhancement. The number of shares of Warrant Stock referred to in this subparagraph shall be proportionately adjusted to reflect any reclassification, subdivision or combination of Common Stock or any distribution or dividends on the Common Stock payable in Common Stock.

In the event the Company shall from time to time after the date hereof propose to issue, sell or grant options or rights to purchase shares of stock or other securities in a transaction where any of the stockholders have preemptive rights to acquire such options, rights, stock or securities, the Holders hereof shall also have a preemptive right, on the same terms and conditions as applicable to such shareholders to subscribe for, and purchase, a percentage of the options, rights, stock or securities so offered equal to the ratio which the number of shares of Warrant Stock into which the Warrants held by the Holder may be exercised bears to the total number of issued outstanding shares of Common Stock, computed on a fully-diluted basis.

6.2 Reorganization, Consolidation, Merger. In the event of any reorganization of the Company (or any other corporation the stock or other securities of which are at the time receivable on the exercise of this Warrant), or the Company (or any such other corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation, then and in each such case the Holder of this Warrant, upon the exercise hereof as provided in Section 2, at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which such Holder would have been entitled upon such consummation if such Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Section 6. In each such case the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation; provided, however, that if such reorganization, consolidation or merger is with any entity affiliated with the Company or any of its officers or directors, it may not result in the elimination of all or substantially all of the rights to voting interests of the Holder in the surviving corporation.

6.3 Other Adjustments. In case at any time conditions arise by reason of action taken by the Company which, in the opinion of its Board of Directors (recognizing the fiduciary duty, hereby assumed and acknowledged, of the Board of Directors to the Holders of the Warrants) or in the reasonable opinion of the Holders of Warrants representing a majority of the shares of Warrant Stock issuable upon exercise of such Warrants, are not adequately covered by the other provisions of this Section 6 and which might materially and adversely affect the exercise rights of the Holders of the Warrants, then the Board of Directors of the Company shall appoint a firm of independent certified public accountants of recognized national standing (other than the accountants then auditing the books of the Company) to determine the adjustment, if any, on a basis consistent with the standards established in the other provisions of this Section 6, necessary with respect to the purchase price or adjusted purchase price, as so to preserve, without dilution, the exercise rights of the Holders of the Warrants. Upon receipt of such opinion, the Board of Directors of the Company shall forthwith make the adjustments described in such report.

Warrant (DPAC)

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6.4 No Dilution or Impairment. The Company will not, by amendment or restatement of its certificate of incorporation or by-laws or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrants, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Holders of the Warrants against dilution or other impairment. Without limiting the generality of the foregoing, the Company: (a) shall take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares upon the exercise of all Warrants at the time outstanding; and (b) shall take no action to amend or restate its certificate of incorporation or by-laws which would change to the detriment of the Holders of Warrant Stock (whether or not any Warrant Stock be at the time outstanding) the dividend or voting rights of the Company’s Common Stock.

6.5 Accountants’ Certificate as to Adjustments. In each case of an adjustment in the shares of Warrant Stock or other stock, securities or property receivable on the exercise of the Warrants and at any other time requested by the Holder, the Company at its expense shall cause a firm of independent certified public accountants of recognized standing selected by the Company (who may be the accountants then auditing the books of the Company except in the circumstances set forth in Section 6.3 above) to compute such adjustment in accordance with the terms of the Warrants and prepare a certificate setting forth the adjustment, if any, necessary as a result of such issuance and showing in detail the facts upon which such adjustment is based, including a statement of: (a) the consideration received or to be received by the Company for any additional shares of Warrant Stock issued or sold or deemed to have been sold; and (b) the number of shares of Warrant Stock outstanding or deemed to be outstanding. The Company will forthwith mail a copy of each certificate to each Holder of a Warrant at the time outstanding.

6.6 Notices of Record Date. If and when the Company shall establish a record date for the Holders of its Stock (or such other securities at the time receivable upon the exercise of the Warrants) for the purpose:

(a) of determining the Holders entitled to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any securities, or to receive any other right; or

(b) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, except for mergers into the Company of subsidiaries whose assets are less than fifteen percent (15%) of the total assets of the Company and its consolidated subsidiaries, or any conveyance of all or substantially all of the assets of the Company to another corporation; or

(c) of any voluntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company will mail or cause to be mailed, to each Holder of a Warrant at the time outstanding a notice specifying, as the case may be, the record date established with respect to such dividend, distribution, voting or other right, and stating the

Warrant (DPAC)

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amount and character of such dividend, distribution, voting or other right, or the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any, to be fixed as of which the Holders of record of Stock (or such other securities at the time receivable upon the exercise of the Warrants) shall be entitled to vote upon or exchange their shares of Stock (or such other securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed at least thirty (30) days prior to the dates therein specified. The rights to notice provided in this Section 6.6 are in addition to the rights provided elsewhere herein or in the Warrant Agreement.

7. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it in the exercise of reasonable discretion, of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of loss, theft or destruction, of indemnity satisfactory to it in the exercise of reasonable discretion, and, in the case of mutilation, upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof a new Warrant of like tenor.

8. Reservation of Common Stock. The Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants and the issuance of all shares of Warrant Stock.

9. Transfers. This Warrant, but not the Warrant Stock, and all rights hereunder are transferable on the books of the Company by any Holder hereof in person or by duly authorized attorney upon surrender of this Warrant at the principal office of the Company, together with the form of transfer authorization attached hereto as Exhibit B duly executed, provided that all conditions set forth below have been met. Absent any such transfer, the Company may deem and treat the Holder of this Warrant at any time as the absolute owner hereof for all purposes and shall not be affected by any notice to the contrary.

9.1 Notice of Proposed Transfers. The Holder of this Warrant, by acceptance hereof, agrees prior to any transfer of Warrants or Warrant Stock issued or issuable upon exercise hereof to give written notice to the Company expressing such Holder’s intention to effect such transfer and describing briefly the manner of the proposed transfer of such Warrants or Warrant Stock and designating the counsel for the Holder giving such notice.

9.2 Opinion of Counsel. If in the opinion of counsel to the Company, the proposed transfer of the Warrants or Warrant Stock issued or issuable upon the exercise hereof may be effected without registration under the Securities Act of 1933, as amended, as then in force (or any similar Federal statute then in force) or applicable state securities laws, the Company, as promptly as practicable, shall notify the Holder of such Warrants or Warrant Stock of such opinion, whereupon such Holder shall be entitled, but only in accordance with the terms of the notice delivered by such Holder to the Company, to transfer such Warrants or Warrant Stock.

10. Definitions. For purposes of this Warrant, capitalized terms used herein shall have the meanings assigned to them in the Warrant Agreement, unless otherwise defined herein.

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11. Warrant Agreement. The terms of the Warrant Agreement are incorporated by reference in this Warrant as fully as if the same were set forth herein, shall be considered an integral part of this Warrant and shall entitle the parties hereto to all rights and benefits accruing thereunder.

12. Information. The Company shall furnish each Holder of Warrants with copies of all reports, proxy statements, and similar materials that it furnishes to Holders of its Stock. In addition, it shall furnish to each such Holder of Warrants copies of all reports filed by it with the Securities and Exchange Commission.

13. Notices. All notices and other communications under this Warrant shall be made in accordance with the Warrant Agreement at such addresses provided pursuant thereto.

14. Change, Waiver. Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated orally but only by an instrument in writing signed by the party against which enforcement by the change, waiver, discharge or termination is sought.

15. Headings. The headings in this Warrant are for purposes of convenience of reference only and shall not be deemed to constitute a part hereof.

16. Governing Law. This Warrant is delivered in the State of Ohio and shall be construed and enforced in accordance with and governed by the internal substantive laws of such State.

February 28, 2006	DPAC TECHNOLOGIES CORP.
	By:	/s/ Steven D. Runkel
	Name:	Steven D. Runkel
	Title:	Chief Executive Officer

Warrant (DPAC)

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EXHIBIT A

WARRANT EXERCISE NOTICE

(Subscription Form to Be Executed Upon Exercise of Warrant)

The undersigned registered Holder or assignee of such registered Holder of the within Warrant, hereby (1) subscribes for                      (            ) shares which the undersigned is entitled to purchase under the terms of the within Warrant, (2) makes payment of the Exercise Price called for by the within Warrant, and (3) directs that the shares issuable upon exercise of said Warrant be issued as follows:

Name:

Address:

Signature: 

Dated:

Exhibits to Warrant (DPAC)

EXHIBIT B

ASSIGNMENT OF WARRANT

(To be executed by the registered Holder

to enact a transfer of the within Warrant)

FOR VALUE RECEIVED,                                          hereby sells, assigns, and transfers unto                                          of                                          (“Transferee”), the right to purchase shares evidenced by the within Warrant, and does hereby irrevocably constitute and appoint                                          to transfer such right on the books of Company, with full power of substitution.

Dated: 

(Signature)

WITNESS:

Exhibits to Warrant (DPAC)

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is made and entered into by and between DPAC Technologies Corp., a California corporation (the “Company”) and Steven D. Runkel, an individual (“Executive”), effective as of the Effective Date as defined in the Agreement and Plan of Reorganization dated April 26, 2005 (“Merger Agreement”) among the Company, Quatech, Inc. and Acquisition Sub, as defined in the Merger Agreement.

In consideration of the mutual covenants and agreements set forth herein, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

EMPLOYMENT

The Company hereby employs Executive and Executive accepts employment with the Company upon the terms and conditions herein set forth.

1.1 Employment. The Company hereby employs Executive, and Executive agrees to serve, as the Chief Executive Officer of the Company, reporting to the Board of Directors of the Company, commencing on the Effective Date and thereafter during the term of this Agreement. In the event the Effective Date does not occur and the Merger Agreement is terminated, this Agreement shall be null and void and of no force or effect whatsoever. Executive agrees to perform such usual and customary duties of such office as may be delegated to Executive from time to time by the Board of Directors of the Company. Executive agrees to devote substantially Executive’s full business time and attention and best efforts to the affairs of the Company during the term of this Agreement.

1.2 Term. The term of employment of Executive hereunder will be for the period commencing on the date of this Agreement and ending on the earliest of:

(a) December 31, 2006;

(b) The date of termination of Executive’s employment in accordance with Article IV of this Agreement; or

(c) The date of Executive’s death.

ARTICLE II

COMPENSATION

2.1 Base Salary. Effective on and after the Effective Date and thereafter during the employment of Executive, the Company shall pay Executive a base salary at the rate of $210,000 per year.

2.2 Auto Allowance. Executive shall receive an automobile allowance of $750 per month.

2.3 Annual Incentive Compensation Program. Executive shall be eligible to participate in any and every annual incentive compensation program of the Company, at a level commensurate with other Company senior executives, as established by the Board of Directors of the Company from time to time.

2.4 Reimbursement of Expenses. Executive shall be entitled to receive prompt reimbursement of all reasonable expenses incurred by Executive in performing services hereunder, including all expenses of travel, mobile phones, business entertainment and living expenses while away from home on business at the request of, or in the service of, the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

2.5 Benefits. Executive shall be entitled to participate in or be covered by, as the case may be, all health, insurance, pension, disability insurance, physical exam and other employee plans and benefits established by the Company (collectively referred to herein as the “Benefit Plans”) on the same terms as are generally applicable to other senior executives of the Company, subject to meeting applicable eligibility requirements.

2.6 Vacations and Holidays. During Executive’s employment with the Company, Executive shall be entitled to an annual vacation leave at full pay, such vacation to be four weeks in each year of the term hereof or such greater vacation benefits as may be provided for by the Company’s vacation policies applicable to senior executives, as established by the Board of Directors of the Company from time to time. Executive shall be entitled to such holidays as are established by the Company for all employees.

ARTICLE III

NON-COMPETITION, CONFIDENTIALITY AND NONDISCLOSURE

3.1 Confidentiality Agreement. Concurrently with the execution of this Agreement, Executive will execute and deliver Company’s standard Employee Assignment of Inventions and Non-Disclosure Agreement, and be bound by the terms thereof. As a condition of Executive’s employment hereof, Executive agrees that all references to “Company” in the Employee Invention and Non-Disclosure Agreement shall be deemed to include the Company as well as Quatech, Inc. and any other subsidiary, direct or indirect, of the Company.

3.2 No Violation of Other Agreements. Executive represents that Executive’s performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement to (i) not compete or interfere with the business of a former employer (which term for purposes of this Section 3.3 shall also include persons, firms, corporations and other entities for which Executive has acted as an independent contractor or consultant), (ii) not solicit employees, customers or vendors of any former employer, or (iii) keep in confidence proprietary information acquired by Executive in confidence or in trust prior to Executive’s employment with the Company. Executive represents and warrants to and covenants with the Company that Executive will not bring to the Company any materials or documents of a former employer containing confidential or proprietary information that is not generally available to the public, unless Executive shall have obtained express written authorization from any such former employer for their possession and use.

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ARTICLE IV

TERMINATION

4.1 Definitions. For purposes of this Article IV, the following definitions shall apply to the terms set forth below:

(a) Cause. “Cause” shall be defined as follows:

(i) Executive’s conviction of, or guilty plea to, any felony (whether or not involving the Company) which constitutes a crime of moral turpitude or which is punishable by imprisonment in a state or federal correctional facility;

(ii) Actions by Executive during the term of this Agreement involving willful malfeasance or gross negligence in the performance of Executive’s duties hereunder;

(iii) Executive’s commission of an act of fraud, whether prior or subsequent to the date hereof, upon the Company;

(iv) Executive’s willful failure or refusal to perform Executive’s duties as required by this Agreement; and

(v) Executive’s willful violation of any reasonable rule or regulation of the Board of Directors applicable to all senior executives if such violation is not cured promptly following notice to Executive.

For purposes of items (i) through (v) above, a conviction or the commission or omission of any act of Executive described therein shall not be deemed to constitute “Cause” unless a majority of the Board of Directors affirmatively votes to deem it to be material and to constitute “Cause” for purposes hereof, following five (5) business days’ notice to Executive of a meeting of the Board of Directors and an open discussion and presentation by Executive explaining such conviction, act or omission.

(b) Good Reason. “Good Reason” shall mean the relocation of Executive without Executive’s written consent.

4.2 Termination by Company. The Company may terminate Executive’s employment hereunder immediately for Cause. Subject to the other provisions contained in this Agreement, the Company may terminate this Agreement for any reason other than Cause upon thirty (30) days’ written notice to Executive.

4.3 Termination by Executive. Executive may terminate this Agreement and Executive’s employment hereunder upon thirty (30) days’ written notice to the Company.

4.4 Benefits Received Upon Termination.

(a) If Executive’s employment is terminated by the Company for Cause, or if this Agreement is terminated by Executive for any reason under circumstances not constituting Good Reason, then the Company shall pay Executive Executive’s Base Salary through the effective date of such termination plus credit for any vacation earned but not taken. Thereafter, the Company shall

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have no further obligations to Executive under this Agreement; provided, however, that the Company will continue to honor any obligations that may have vested or been accrued and not forfeited on termination pursuant to and under the existing Company Benefit Plans or any other agreements or arrangements applicable to Executive.

(b) If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason the Company shall:

(i) pay Executive, within two (2) business days following the date of termination, any unpaid portion of Executive’s Base Salary and Auto Allowance through the date of termination, plus an additional 30 days from the date of termination, in lieu of the required notification period, plus credit for any vacation earned but not taken; and

(ii) as severance pay Executive’s Base Salary plus Auto Allowance in effect as of the date of termination, such payments to be made in accordance with the Company’s usual payroll periods for the twelve (12) months immediately following the termination of employment under this Agreement, subject to withholding in accordance with the Company’s usual payroll practices; and

(iii) if Executive holds unvested restricted stock or unvested stock options, accelerate the vesting of all of Executive’s stock or stock options at and from the date of Executive’s termination , so that all restrictions on restricted stock shall lapse immediately and all unvested stock options will vest immediately; and

(iv) if Executive holds unexercised stock options on the date of termination, amend the options to permit all vested options, including those vested as a result of the preceding clause, to be exercised for two years from and after the date of Executive’s termination.

(c) Termination Because of Employee Death or Disability. Should Executive die or become disabled, as defined under the written insurance policies and procedures that may from time to time be obtained by the Company and its employment policies, the Company, or its insurer, shall pay Executive or the personal representative thereof the amount of twelve (12) months of Executive’s Base Salary, such payments to be made in accordance with the Company’s usual payroll periods for twelve (12) months following the termination of employment under this Agreement, subject to withholding in accordance with the Company’s usual payroll practices, in addition to any other compensation under this Agreement.

4.5 Effect of Termination. Upon any termination of this Agreement, for any reason, Executive shall be deemed to have immediately resigned in all capacities as an officer of the Company and as an officer or director of all subsidiaries of the Company, if applicable, without the giving of any notice or the taking of any other action; provided, however, that termination under this Agreement shall not alter any rights of Executive expressly granted under any other written agreement approved and adopted by the Board of Directors of the Company.

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ARTICLE V

ASSUMPTION OF OBLIGATIONS BY SUCCESSOR TO COMPANY

5.1 Assumption of Obligations. The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, to assume expressly, absolutely and unconditionally and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement. As used in this Agreement, “Company” shall mean the Company as herein before defined and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Article V or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

5.2 Beneficial Interests. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts are still payable to him or her hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s personal representative, devisee, legatee, or other designee or, if there be no such designee, to Executive’s estate.

ARTICLE VI

GENERAL PROVISIONS

6.1 Notice. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, as follows:

If to the Company:
	DPAC Technologies Corp.
	7321 Lincoln Way
	Garden Grove, California 92841
	Attention: Chairman of the Board of Directors
	Facsimile No. (714) 897-1772
With a Copy to:
	The Yocca Law Firm, LLP
	19900 MacArthur Blvd., Suite 650
	Irvine, California 92612
	Attention: Nicholas J. Yocca
	Facsimile No. (949) 253-0870
If to Executive:	Steven D. Runkel
	938 Summit Drive
	Wexford, Pennsylvania 15090

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or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

6.2 No Waivers. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to specifically in a writing signed by Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

6.3 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio.

6.4 Severability or Partial Invalidity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

6.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

6.6 Legal Fees and Expenses. Should any party institute any action or proceeding to enforce this Agreement or any provision hereof, or for damages by reason of any alleged breach of this Agreement or of any provision hereof, or for a declaration of rights hereunder, the prevailing party in any such action or proceeding shall be entitled to receive from the other party all costs and expenses, including reasonable attorneys’ fees, incurred by the prevailing party in connection with such action or proceeding.

6.7 Entire Agreement. This Agreement constitutes the entire agreement of the parties and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations between the parties with respect to the subject matter hereof. This Agreement is intended by the parties as the final expression of their agreement with respect to such terms as are included in this Agreement and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement constitutes the complete and exclusive statement of its terms and that no extrinsic evidence may be introduced in any judicial proceeding involving this Agreement.

6.8 Assignment. This Agreement and the rights, duties and obligations hereunder may not be assigned or delegated by Executive without the prior written consent of the Company and any such attempted assignment and delegation shall be void and be of no effect. The Company may assign or delegate its rights, duties and obligations hereunder to any person or entity; provided that such person or entity assumes the Company’s obligations under this Agreement in accordance with Section 5.1.

6.9 Indemnification. To the extent permitted by law, applicable statutes and the Articles of Incorporation, Bylaws or resolutions of the Company in effect from time to time, the Company shall indemnify Executive against liability or loss arising out of Executive’s actual or asserted misfeasance or nonfeasance in the performance of Executive’s duties under this Agreement or out of

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any actual or asserted wrongful act against or by the Company including but not limited to judgments, fines, settlements and expenses incurred in the defense of actions, proceedings and appeals therefrom. The Company shall endeavor to obtain Directors and Officers’ Liability Insurance to indemnify and insure the Company and Executive from and against the aforesaid liabilities, subject to exclusions in the insurance contract. The provisions of this paragraph shall apply to the estate, executor, administrator, heirs, legatees or devisees of Executive.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the this 28th day of February, 2006.

“Executive”
/s/ Steven D. Runkel
Steven D. Runkel
“Company”
DPAC Technologies Corp.
By:	Creighton K. Early
	Creighton K. Early

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EX-10.2

Exhibit 10.2

SUBORDINATED

LOAN AND SECURITY AGREEMENT

AMONG

THE HILLSTREET FUND, L.P.

Lender

AND

WR ACQUISITION, INC.

Borrower

Dated As of July 28, 2000

TABLE OF CONTENTS

		Page
ARTICLE 1.
INTERPRETATION
1.1	Definitions	1
1.2	Rules of Construction	12
ARTICLE 2.
LOAN TERMS AND AMOUNTS
2.1	Loan Commitment	12
2.2	Promissory Subordinated Note	13
2.3	Fees	13
2.4	Interest on Overdue Payments; Default Rate	14
2.5	Prepayments	14
2.6	Time and Place of Payments	14
2.7	Application of Funds	15
2.8	Use of Proceeds	15
2.9	Payments to be Free of Deductions	15
ARTICLE 3.
SECURITY INTERESTS
3.1	Grant of Security Interest	16
3.2	Additional Collateral	16
3.3	Additional Security for the Loan	16
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
4.1	Organization, Authority and Qualification	16
4.2	No Legal Bar	18
4.3	No Litigation	18
4.4	Financial Condition	18
4.5	No Change	18
4.6	No Default	18
4.7	Conditions Precedent	18
4.8	Ownership of Property; Liens	19
4.9	Intellectual Property	19
4.10	Compliance with Laws	19
4.11	Taxes	19
4.12	Environmental Matters	19
4.13	Place of Business	19

SUBORDINATED LOAN AND SECURITY AGREEMENT

WR ACQUISITION, INC.

4.14	General Collateral Representation	20
4.15	Accounts	21
4.16	Equipment	21
4.17	ERISA	21
4.18	Undisclosed Liabilities	21
4.19	Disclosure	21
4.20	Solvency	22
4.21	Survival of Representations and Warranties	22
ARTICLE 5.
AFFIRMATIVE COVENANTS
5.1	Financial Statements	22
5.2	Conduct of Business and Maintenance of Existence	23
5.3	Maintenance of Property; Insurance	24
5.4	Liability Insurance	24
5.5	Inspection of Property; Books and Records	24
5.6	Notices	25
5.7	Environmental Laws	25
5.8	Inventory	25
5.9	Equipment	26
5.10	Collateral	26
5.11	Employee Benefit Plans	26
5.12	Further Documents	26
5.13	Life Insurance	27
5.14	Trademarks, Copyrights and Other Intellectual Property	27
5.15	Other Information	27
5.16	Board of Directors	27
ARTICLE 6.
NEGATIVE COVENANTS
6.1	Limitations on Restricted Payments	27
6.2	Limitations on Indebtedness	28
6.3	Limitation on Guarantee Obligations	29
6.4	Limitation on Fundamental Changes	29
6.5	Limitation on Dispositions of Assets	29
6.6	Limitation on Investments, Loans and Advances	29
6.7	Limitation on Payments and Modifications of Debt Instruments	30
6.8	Limitation on Creation or Acquisition of Subsidiaries	30
6.9	Corporate Documents	30
6.10	Dividends and Similar Transactions	30
6.11	Limitations on Management Fees	30

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6.12	Management Compensation	30
6.13	Changes Relating to Indebtedness	31
ARTICLE 7.
FINANCIAL COVENANTS
7.1	Limitations on Capital Expenditures	31
7.2	Minimum EBITDA	31
7.3	Senior Loan Agreement Covenants. Borrower shall comply with the covenants set forth in Section 3B of the Senior Loan Agreement, each of which is incorporated herein by reference	32
ARTICLE 8.
CONDITIONS PRECEDENT
8.1	Conditions Precedent to Initial Loan	32
ARTICLE 9.
EVENTS OF DEFAULT
9.1	Payments	35
9.2	Representations and Warranties	36
9.3	Covenants	36
9.4	Effectiveness of Loan Documents	36
9.5	Cross-Default to Other Indebtedness	36
9.6	Change of Control	36
9.7	Commencement of Bankruptcy or Reorganization Proceeding	36
9.8	Material Judgments	37
9.9	Remedies	37
9.10	Set-off	38
9.11	Rights Cumulative; Waiver	38
ARTICLE 10.
COLLECTION OF COLLATERAL AND NOTICE OF ASSIGNMENT
10.1	Notification of Debtors; Grant of Powers	39
10.2	Disclaimer of Liability	39

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ARTICLE 11.
MISCELLANEOUS
11.1	Amendments and Waivers	40
11.2	No Waiver; Cumulative Remedies	40
11.3	Notices	40
11.4	Power of Attorney	41
11.5	Successors and Assigns	41
11.6	Assignment; Participation	41
11.7	Expenses	42
11.8	Post-Closing Expenses and Collection	42
11.9	Counterparts	42
11.10	Governing Law; Jurisdiction and Venue	42
11.11	Waiver of Jury Trial	43
11.12	Other Waivers	43

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EXHIBITS

Exhibit A	Form of Assignment of Purchase Contract
Exhibit B	Form of Compliance Certificate
Exhibit C	Form of Mortgage
Exhibit D	Form of Warrant
Exhibit E	Form of Warrant Agreement
Exhibit F	Form of Subordinated Term Promissory Note

SCHEDULES

Schedule 1.1	Equipment Liens
Schedule 3.1	Description of Mortgaged Property
Schedule 4.1(b)	Authorized Capital Stock; Outstanding Warrants or Options
Schedule 4.1(c)	Subsidiaries; Foreign Qualifications
Schedule 4.9	Intellectual Property
Schedule 4.11	Filed Tax Returns; Tax Liens
Schedule 4.12	Environmental Matters
Schedule 4.14	UCC Filing Offices
Schedule 4.17	Employee Benefit Plans
Schedule 4.7, 6.12, 6.13	Management Compensation

SUBORDINATED LOAN AND SECURITY AGREEMENT

WR ACQUISITION, INC.

SUBORDINATED LOAN AND SECURITY AGREEMENT

THIS SUBORDINATED LOAN AND SECURITY AGREEMENT is made as of the 28th day of July, 2000, by and between WR ACQUISITION, INC., an Ohio corporation (“Borrower”), and THE HILLSTREET FUND, L.P., a Delaware limited partnership, its permitted successors and assigns (“Lender”).

NOW, THEREFORE, in consideration of the respective undertakings stated herein, the parties agree as follows:

ARTICLE 1

INTERPRETATION

Section 1.1 Definitions. The following capitalized terms are defined as follows:

“Account” or “Accounts” shall have the same meaning as defined in the UCC.

“Account Debtor” shall have the same meaning as defined in the UCC.

“Acquisition Transaction” means the acquisition by Borrower of all or substantially all of the assets of the Seller pursuant to the Purchase Agreement.

“Affiliate” means any Person which directly or indirectly controls, or is controlled by, or is under common control with, any Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. The term “Affiliate” does not include the Lender.

“Agreement” or “this Agreement” means this Subordinated Loan and Security Agreement (including all Exhibits and Schedules annexed hereto) as originally executed, or if supplemented, amended, or restated from time to time, as so supplemented, amended, or restated.

“Assignment of Life Insurance” means a collateral assignment, on terms acceptable to Lender, of the Life Insurance.

“Assignment of Purchase Contract” means a Collateral Assignment of Purchase Contract between Borrower and Lender in the form of Exhibit A hereto, covering all of Borrower’s rights in and under the Purchase Agreement.

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“Building” shall mean any building, structure or improvement now or hereafter located on the Mortgaged Property,

“Business Day” means any day on which commercial banking institutions are open for business in Cincinnati, Ohio, other than a Saturday, Sunday or a legal holiday.

“Capital Expenditures” means any amounts paid or incurred in connection with the purchase of plant, machinery, Equipment or similar expenditures (including any lease of any of the foregoing) which are required to be capitalized and depreciated in accordance with GAAP.

“Capital Leases” means capital leases, conditional sales contracts and other title retention documents relating to the acquisition of capital assets (as classified in accordance with GAAP).

“Capital Stock” means any and all equity interests and participations in any entity including, without limitation, corporate stock, whether common or preferred, subscription rights, warrants, convertible securities and other forms of equity interests such as partnership interests and interests in limited liability companies.

“Change of Control” means the time at which (i) any Person (including a Person’s Affiliates and associates) or group (as that term is understood under Section 13(d) of the Exchange Act and the rules and regulations thereunder), other than the existing shareholders of Borrower or a group controlled by the existing shareholders of Borrower, has become the beneficial owner of a percentage (based on voting power, in the event different classes of stock shall have different voting powers) of the voting stock of Borrower equal to at least twenty-five percent (25%), (ii) there shall be consummated any consolidation or merger of Borrower pursuant to which Borrower’s Capital Stock would be converted into cash, securities or other property, other than a merger or consolidation of Borrower in which the holders of the common stock of Borrower, or any Capital Stock convertible into common stock, immediately prior to the merger have the same proportionate ownership, directly or indirectly, of common stock or any Capital Stock convertible into common stock, of the surviving corporation immediately after the merger as they had of Borrower’s common stock immediately prior to such merger, or (iii) all or substantially all of Borrower’s assets shall be sold, leased, conveyed or otherwise disposed of as an entirety or substantially as an entirety to any Person (including an Affiliate or associate of Borrower) in one or a series of transactions, or (iv) Steven Runkel shall cease to perform his duties as a senior executive manager of Borrower and within ninety (90) days of such cessation a replacement senior executive manager reasonably acceptable to Lender has not been employed by Borrower.

“Closing Date” means the Business Day on which all conditions precedent specified in Article 7 hereof shall have been satisfied in full.

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“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means all property of Borrower, whether now owned by Borrower or hereafter acquired or existing, and wherever located including, without limitation:

(a) the Mortgaged Property;

(b) all Accounts;

(c) all Inventory;

(d) all Equipment;

(e) all General Intangibles;

(f) all Investment Property;

(g) all Instruments and Documents;

(h) all Related Collateral;

(i) all accessions to and additions to, substitutions for, replacements, products; and

(j) products and proceeds of any and all of the foregoing.

The term “Collateral” shall also refer to any other property in which Lender is granted a Lien to secure any of the Obligations pursuant to an agreement supplemental hereto or otherwise (whether or not such agreement makes reference to this Agreement or the Obligations of Borrower hereunder).

“Compliance Certificate” means the report required by Section 5.1(e) hereof, including schedules furnished by Borrower in the form of Exhibit B hereto.

“Computation Date” means the last day of each of March, June, September and December.

“Consolidated” means, with respect to any accounting matter or amount, such matter or amount computed on a consolidated basis for Borrower and its Subsidiaries, if any, in accordance with GAAP.

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“Contractual Obligation” means, with respect to any Person, any provision or requirement of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Copyrights” means all present and future copyrights, registrations therefor, reversions thereof, and renewals and extensions of copyrights in all works of authorship (including software source code and documentation) in which Borrower or a Subsidiary of Borrower has any interest.

“Default” means any of the events set forth in Article 9 which with giving of notice, the lapse of time, or both, would constitute an Event of Default.

“Default Rate” means four percentage points (4.0%) in excess of the otherwise applicable interest rate on the Loan (but in no event more than the rate permitted by applicable law).

“ Disinterested Directors” means the members of the board of directors of Borrower other than directors owning Preferred Stock or controlled by or appointed by a Person owning Preferred Stock.

“EBITDA” means for any period, and calculated on a Consolidated Basis, without duplication, Net Income; plus (i) for such period, any interest Expense deducted in the determination of Net Income; plus (ii) any income, ad valorem, and franchise taxes paid in cash and included in the determination of Net Income; plus (iii) amortization and depreciation deducted in determining Net Income for such period.

“Employee Benefit Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA, other than a multiemployer plan.

“Environmental Indemnity Agreement” means the Environmental Indemnity Agreement of even date herewith between Borrower and Lender.

“Environmental Laws” means all federal, state and local laws, rules, regulations, ordinances, permits, orders, writs, judgments, injunctions, decrees, determinations, awards and consent decrees relating to hazardous substances and environmental matters applicable to Borrower’s business and facilities (whether or not owned by it), including, without limitation, the Resource Conservation and Recovery Act of 1976 (“RCRA”); the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”); the Toxic Substance Control Act; the Clean Water Act; and the Clean Air Act, all as amended from time to time; state and federal superfund and environmental cleanup programs; and U.S. Department of Transportation hazardous materials transportation regulations.

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“Equipment” shall have the meaning as defined in the UCC.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means, in relation to any Person, any trade or business (whether or not incorporated) which is a member of a group of which that Person is a member and is under common control within the meaning of the regulations promulgated under Section 414 of the Code.

“Event of Default” has the meaning set forth in Article 9 hereof.

“Financial Statements” has the meaning set forth in Section 4.4 hereof.

“GAAP” means generally accepted accounting principles in the United States, as in effect from time to time.

“General Intangibles” shall have the meaning as defined in the UCC.

“Guarantee Obligation” means, with respect to any Person, any direct or indirect liability, contingent or otherwise, with respect to any Indebtedness, lease or other obligation of another if the primary purpose or intent thereof in incurring the Guarantee Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, The amount of any Guarantee Obligation shall be deemed to be the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, or if not stated or determinable, the maximum reasonably anticipated liability in respect thereof.

“Head Office” means the head office of Lender located at 300 Main Street, Cincinnati, Ohio 45202.

“HillStreet” means The HillStreet Fund, L.P., a Delaware limited partnership.

“Indebtedness” means, without duplication all liabilities of a Person as determined under GAAP and all obligations which such Person has guaranteed or endorsed or is otherwise secondarily or jointly liable for, and shall include, without limitation, (a) all obligations for borrowed money or purchased assets, (b) obligations secured by assets whether or not any personal liability exists, (c) the capitalized amount of any capital or finance lease obligations, (d) the unfunded portion of pension or benefit plans or other similar liabilities, (e) obligations as a general partner, (f) contingent obligations pursuant to guaranties, including but not limited to all Guarantee Obligations, endorsements, letters of credit and other secondary liabilities, and (g) obligations for deposits.

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“Indebtedness for Borrowed Money” means (a) all liabilities for borrowed money, (i) for the deferred purchase price of property or services, and (ii) under leases which are or should be, under GAAP, recorded as Capital Leases, in each case in respect of which a Person is directly or indirectly, absolutely or contingently liable as obligor, guarantor, endorser or otherwise, or in respect of which such Person otherwise assures a creditor against loss, and (b) all liabilities of the type described in clause (a) above which are secured by (or for which the holder has an existing right, contingent or otherwise, to be secured by) any Lien upon property owned by such Person, whether or not such Person has assumed or become liable for the payment thereof.

“Instruments and Documents” means all “instruments,” “documents,” “deposit accounts,” and “chattel paper,” as defined in Section 9-105 of the UCC, all securities, and includes (without limitation) all warehouse receipts and other documents of title, policies and certificates of insurance, checking, savings, and other bank accounts, certificates of deposit, checks, notes, drafts, bills, and acceptances, now or hereafter acquired, to the extent not included in Accounts or Investment Property.

“Intellectual Property Security Agreement” means the Security Agreement of even date herewith between Borrower and Lender.

“Intercreditor Agreement” means that Unconditional and Continuing Subordination Agreement dated as of the Closing Date among Lender and Senior Lender, in form and substance satisfactory to Lender, as amended from time to time.

“Interest Payment Dates” shall mean the last Business Day of each month.

“Inventory” shall have the meaning as defined in the UCC.

“Investment Property” means all now owned or hereafter acquired securities, financial assets, securities entitlements and investment property of Borrower, as such terms are defined in Article 9 of the UCC.

“Lien” means any mortgage, pledge, hypothecation, assignment, security interest, lien, charge or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of any Financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing).

“Life Insurance” means one or more policies of life insurance and any substitute or replacement policies thereof, owned by Borrower (i) on the life of C. F. Chen in the aggregate face amount of not less than One Million and 00/100 Dollars ($1,000,000.00), (ii) on the life of Steven

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Runkel in the aggregate face amount of not less than One Million and 00/100 Dollars ($1,000,000.00), which such policies shall be free of any policy loans and encumbrances whatsoever, except the lien in favor of the Lender hereunder.

“Loan Documents” means this Agreement, the Subordinated Note, the Security Documents, the Intercreditor Agreement, and all other documents, instruments, financing statements, certificates and other agreements executed in connection with the Loan.

“Loan Year” means each period of twelve (12) consecutive months, commencing on the Closing Date and on each anniversary thereof.

“Loan” means the term loan to be made to Borrower by Lender pursuant to Article 2 hereof.

“Material Adverse Effect” means a material adverse effect on the business, operations, property, Collateral or condition (financial or otherwise) of Borrower.

“Mortgage” means one or more real estate mortgages or deeds of trust granted from time to time by Borrower to Lender, granting a second lien to Lender to secure the Loan, substantially in the form of Exhibit C hereto, and as they may be amended or supplemented from time to time.

“Mortgaged Property” means land, Buildings, fixtures and related personal property located in the City of Akron, County of Summit, and acquired by Borrower pursuant to the Agreement of Sale dated as of April 4, 2000 between Chen & Chen Associates, an Ohio general partnership and Borrower which property is more particularly described on Exhibit A to the Mortgage.

“Net Income” means the Consolidated net income of Borrower determined in accordance with GAAP.

“Obligations” means, without limitation, the Loan and all other debts, obligations, or liabilities of every kind and description of Borrower to the Lender, now due or to become due, direct or indirect, absolute or contingent, presently existing or hereafter arising, joint or several, secured or unsecured, whether for payment or performance, regardless of how the same arise or by what instrument, agreement or book account they may be evidenced, or whether evidenced by any instrument, agreement or book account including, without limitation, all loans (including any loan by renewal or extension), all overdrafts, all guarantees, all bankers acceptances, all agreements, all letters of credit issued by the Lender for Borrower and the applications relating thereto, all indebtedness of Borrower to the Lender, all undertakings to take or refrain from taking any action

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and all indebtedness, liabilities and obligations owing from Borrower to others which the Lender may obtain by purchase, negotiation, discount, assignment or otherwise. Obligations shall also include all interest and other charges chargeable to Borrower or due from Borrower to the Lender from time to time and all costs and expenses referred to in Section 11.8.

“Permitted Liens” means the liens and interests in favor of the Lender granted in connection herewith and

(a) liens under the Senior Loan Documents in an amount not to exceed $2,830,000.00 in the aggregate;

(b) liens against Borrower to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue;

(c) deposits or pledges made by Borrower in connection with, or to secure payment of workmen’s compensation, unemployment insurance, old age pensions or other social security obligations;

(d) liens against Borrower on properties other than the real property Collateral in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which Borrower shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review;

(e) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties of Borrower in existence less than ninety (90) days from the date of creation thereof in respect of obligations not overdue;

(f) encumbrances on real estate of Borrower consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord’s or lessor’s liens under leases to which Borrower is a party, and other minor liens or encumbrances none of which in the opinion of Borrower interferes materially with the use of the property affected in the ordinary conduct of the business of Borrower, which defects do not individually or in the aggregate have a Materially Adverse Effect;

(g) liens and encumbrances on the real property Collateral of Borrower as and to the extent permitted by the mortgage applicable thereto;

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“Person” means an individual, partnership, limited liability company, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

“Preferred Stock” means the 9% Series A Convertible Preferred Stock of Borrower in an aggregate amount of $1,300,000.00 issued to and owned by Development Capital Ventures, L.P.

“Principal Office” means the principal office of Borrower at 662 Wolf Ledges Parkway, Akron, Ohio.

“Principal Payment Dates” shall mean the last day of each February, May, August and November, beginning August 31, 2006.

“Purchase Agreement” means the Asset Purchase Agreement dated as of April 4, 2000 by and between Borrower, Seller and the Stockholders named therein amended, restated or otherwise modified from time to time.

“Real Estate” means all real property owned by Borrower and all real property hereafter acquired by Borrower, together with all fixtures, rights of way, privileges, liberties, tenements, hereditaments, and appurtenances belonging or in any way appertaining thereto, all easements now or hereafter benefitting such real property and all royalties and rights appertaining to the use and enjoyment of such real property, together with all of the Buildings, structures, and other improvements thereto.

“Related Collateral” means all goodwill of Borrower; cash; deposit accounts; claims under insurance policies (whether or not proceeds of other Collateral); rights of set off; rights under judgments; tort claims and choses in action; computer programs and software, books and records (including, without limitation, all electronically recorded data); contract rights; and all contracts and agreements to or of which they are parties or beneficiaries, whether any of the foregoing be now existing or hereafter arising, now or hereafter received by or belonging to Borrower.

“Requirements of Law” means, with respect to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

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“Reference Period” means, with respect to any particular Computation Date, the period of four (4) consecutive fiscal quarters of Borrower ending on such Computation Date. The fiscal quarters of Borrower end on the last day of March, June, September and December.

“Responsible Officer” means any authorized officer of Borrower.

“Restricted Payment” means: (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Borrower or any Subsidiary now or hereafter outstanding other than dividends on Preferred Stock; (b) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Borrower or any Subsidiary now or hereafter outstanding other than redemption of the Preferred Stock subsequent to (i) repayment of all the Obligations and (ii) the seventh anniversary of the issuance of the Preferred Stock; (c) any payment or prepayment of principal of, premium, if any, or interest on, redemption, conversion, exchange, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any indebtedness other than the Senior Debt and the Preferred Stock; provided, however, that (i) payments of principal with respect to the Senior Debt in any twelve month period shall not exceed $400,000 except to provide for the last payment of principal on the Term Loan A (as such term is defined in the Senior Loan Agreement) and (ii) payment of dividends with respect to the Preferred Stock shall accrue but not be payable during the first and second Loan Year and thereafter at the discretion of the Disinterested Directors; and (d) any payment made to retire, or to obtain the surrender of, any outstanding warrants, other than the Warrants, options or other rights to acquire shares of any class of Capital Stock of Borrower or any Subsidiary now or hereafter outstanding.

“Security Documents” means all of the documents and instruments evidencing the collateral security of the Lender, including without limitation, all UCC Financing Statements with respect to the Collateral, the Mortgage, the Intellectual Property Security Agreement, the Environmental Indemnity Agreement, the Assignment of Life Insurance and the Assignment of Purchase Contract.

“Seller” means Qua Tech, Inc., an Ohio corporation.

“Senior Debt” means that portion of the principal amount owing to the Senior Lender under the Senior Loan Documents from time to time, together with all interest, fees and other amounts payable on or with respect thereto, not to exceed Two Million Three Hundred Thousand and 00/100 Dollars ($2,300,000.00) in the aggregate, and any refinance, replacement, amendment or modification thereof in accordance with the Intercreditor Agreement.

“Senior Lender” means National City Bank, a national banking association having a banking office at 1 Cascade Plaza, Akron, Ohio 44308.

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“Senior Loan Agreement” means that certain Credit Agreement of even date herewith among Borrower and Senior Lender, as the same may be amended, supplemented, replaced or refinanced from time to time in compliance with terms of the Intercreditor Agreement.

“Senior Loan Documents” means the Senior Loan Agreement, and all other documents which create, evidence or secure the Senior Debt from time to time as any of the same may be amended, supplemented, replaced or refinanced from time to time in compliance with the terms of the Intercreditor Agreement.

“Senior Loans” means the loans made to Borrower pursuant to the terms of the Senior Loan Agreement.

“Shareholders Agreement” means the Shareholders Agreement dated July 28, 2000 by and among Borrower and the Shareholders of Borrower named therein.

“Subordinated Note” means the Subordinated Term Promissory Subordinated Note referred to in Section 2.2 hereof to evidence the Loan.

“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company, or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership, limited liability company, or other entity are at the time owned, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to any Subsidiary or all Subsidiaries of Borrower (including Borrower), whether now in existence or hereafter organized.

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code in each case in effect in the jurisdiction where the Collateral is located.

“UCC Financing Statements” mean the UCC financing statements naming Borrower as debtor, and Lender as secured party or creditor, which UCC financing statements describe all or some portion of the Collateral and which together perfect Lender’s security interest in the Collateral.

“Warrant” or “Warrants” means one or more of the warrants in substantially the form as of Exhibit D, to be issued by Borrower to HillStreet pursuant to the Warrant Agreement.

“Warrant Agreement” means the warrant agreement dated as of the Closing Date between Borrower and HillStreet in substantially the form as Exhibit E.

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Section 1.2 Rules of Construction.

(a) Use of Capitalized Terms. For purposes of this Agreement, unless the context otherwise requires, the capitalized terms used in this Agreement shall have the meanings herein assigned to them, and such definitions shall be applicable to both singular and plural forms of such terms. In addition, all terms defined in the Uniform Commercial Code shall have the meanings given therein unless otherwise defined herein.

(b) Construction. All references in this Agreement to the single number and neuter gender shall be deemed to mean and include the plural number and all genders, and vice versa, unless the context shall otherwise require.

(c) Headings. The underlined headings contained herein are for convenience only and shall not affect the interpretation of this Agreement.

(d) Entire Agreement. This Agreement and the other Loan Documents shall constitute the entire agreement of the parties with respect to the subject matter hereof.

(e) Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

(f) Governing Law. This Agreement and the Subordinated Note and the rights and obligations of the parties under this Agreement and the Subordinated Note shall be governed by, and construed and interpreted in accordance with, the law of the State of Ohio.

(g) Accounting Terms and Determinations. Unless otherwise defined or specified herein, all accounting terms used in this Loan Agreement shall be construed in accordance with GAAP.

ARTICLE 2.

LOAN TERMS AND AMOUNTS

Section 2.1 Loan Commitment. Subject to the terms and conditions of this Agreement, the Lender hereby agrees to make a term loan to Borrower in the amount of Three Million and 00/100 Dollars ($3,000,000.00) (the “Loan”).

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Section 2.2 Promissory Subordinated Note. The absolute and unconditional obligation of the Borrower to repay to Lender the principal of the Loan and the interest thereon shall be evidenced by a subordinated term promissory note executed by the Borrower in substantially the form of Exhibit F (the “Subordinated Note”). The Subordinated Note shall include the following terms:

(a) Term. The Subordinated Note shall be dated as of the Closing Date and shall mature and be due and payable in full on July 31, 2007.

(b) Interest Rate. Except as provided in Section 2.4 hereof, the Subordinated Note shall bear interest (computed on the basis of the actual number of days elapsed over a 360-day year) on the daily outstanding principal balance thereunder at a rate per annum equal to fifteen percent (15%).

(c) Interest Payment Dates. Interest on the Subordinated Note shall be payable in arrears monthly on each Interest Payment Date commencing August 30, 2000, and ending on the date the Loan is due (whether by maturity, acceleration or otherwise).

(d) Principal Payments. Prior to August 31, 2005, provided that Lender has not accelerated the Loan pursuant to Section 9.9 hereof, Borrower shall not be obligated to make any payment of principal on the Loan. Beginning August 31, 2005, quarterly installments of principal on the Subordinated Note shall be payable on each Principal Payment Date in an amount equal to Three Hundred Sixty Two Thousand Five Hundred and 00/100 Dollars ($375,000.00), and on the date the Loan is due (whether by maturity, acceleration or otherwise), in an amount sufficient to pay in full the entire unpaid principal and accrued interest.

Section 2.3 Fees.

(a) Closing Fees. At Closing, the Lender shall receive its closing fee in the amount of One Hundred Thirty-Five Thousand and 00/100 Dollars ($135,000.00) less any deposits made by Borrower, payable in immediately available funds or as Lender otherwise directs.

(b) Other Fees. The Borrower shall, promptly upon request, reimburse the Lender for all reasonable loan administration, travel and related out-of-pocket expenses, including reasonable attorney fees and expenses for the term of the Loan and the equity participation of Lender contemplated hereunder.

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Section 2.4 Interest on Overdue Payments; Default Rate. If any payment of interest or principal is not paid when due, or upon the occurrence of an Event of Default, the Lender, at its option, may charge and collect from the Borrower interest at the Default Rate.

Section 2.5 Prepayments.

(a) Permitted Prepayments - Prepayment from Life Insurance. In the event Borrower receives proceeds from payment of the Life Insurance, the proceeds shall be applied in the manner set forth in Section 2.7 hereof.

(b) Optional Prepayment. Except as provided for in Section 2.5(c) hereto, Borrower shall have no right to prepay the Loan during the first three Loan Years. If Borrower shall prepay the Loan in whole or in part after the third Loan Year, Borrower shall pay to Lender, as liquidated damages and compensation for the costs of being prepared to make funds available to Borrower under this Agreement, and not as a penalty, an amount determined by multiplying (x) the amount of the prepayment times (y) (i) five percent (5%) if such prepayment occurs during the fourth Loan Year, four percent (4%) if such prepayment occurs during the fifth Loan Year, and three percent (3%) if such prepayment occurs during the sixth Loan Year (the “Prepayment Fee”) (a prepayment in the seventh Loan Year may be made without premium or penalty); provided, however, that if such prepayment occurs as a result of any event described in Section 2.5(a) or 2.5(c) hereof, no Prepayment Fee shall be required.

(c) Notwithstanding the provisions of Section 2.5(b) above, Borrower shall have the right to prepay the Loan at any time, without a Prepayment Fee, in connection with (i) any consolidation or merger of Borrower pursuant to which Borrower’s Capital Stock would be converted into cash, securities or other property, other than a merger or consolidation of Borrower in which the holders of the common stock of Borrower, or any Capital Stock convertible into common stock, immediately prior to the merger have the same proportionate ownership, directly or indirectly, of common stock or any Capital Stock convertible into common stock, of the surviving corporation immediately after the merger as they had of Borrower’s common stock immediately prior to such merger, or (ii) the sale, lease, conveyance or other disposition of all or substantially all of Borrower’s assets as an entirety or substantially as an entirety, to any Person, other than an Affiliate or associate of Borrower, in one or a series of transactions.

Section 2.6 Time and Place of Payments. Notwithstanding anything in this Agreement or any of the other Loan Documents to the contrary, each payment payable by the Borrower to the Lender under this Agreement or any of the other Loan Documents, shall be made directly to the

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Lender, at Lender’s Head Office, not later than 12:00 p.m. local time, on the due date of each such payment in immediately available and freely transferable funds.

Section 2.7 Application of Funds. Unless otherwise provided in this Article 2, the funds received by the Lender shall be applied toward the Obligations as follows:

(a) First, to the payment of all fees, charges and other sums (with the exception of principal and interest) due and payable to the Lender under the Subordinated Note, this Agreement or the other Loan Documents at such time including, without limitation, all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Lender in or incidental to the collection of the Obligations hereunder or the exercise, protection, or enforcement by the Lender of all or any of the rights, remedies, powers and privileges of the Lender under this Agreement, the Subordinated Note, or any of the other Loan Documents and in and towards the provision of adequate indemnity to the Lender against all taxes or Liens which by law shall have, or may have priority over the rights of the Lender in and to such funds;

(b) Second, to the payment of the interest that is due and payable on the principal of the Subordinated Note at the time of such payment;

(c) Third, to the payment of principal then due on the Subordinated Note; and

(d) Fourth, the surplus remaining (if any) to the Borrower or such other Person or Persons as may be determined by Borrower or any court of competent jurisdiction.

Section 2.8 Use of Proceeds. Borrower represents, warrants and covenants to the Lender that all proceeds of the Loan shall be used by the Borrower to finance in part the Acquisition Transaction and the reasonable costs related thereto.

Section 2.9 Payments to be Free of Deductions. Each payment payable by the Borrower to the Lender under this Agreement, the Subordinated Note, or any of the other Loan Documents shall be made in accordance with Section 2.6 hereof, without set-off or counterclaim and free and clear of and without any deduction of any kind for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature now or hereafter imposed or levied by any political subdivision or any taxing or other authority therein, unless the Borrower is compelled by law to make any such deduction or withholding.

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ARTICLE 3.

SECURITY INTERESTS

Section 3.1 Grant of Security Interest. To secure the payment and performance of all of the Obligations, the Borrower hereby grants to the Lender a continuing security interest in and assigns to the Lender all of the Collateral. To secure further such liabilities and Obligations, Borrower has granted to Lender a lien upon the real property described on Schedule 3.1, by executing and delivering to Lender a Mortgage subject only to the prior liens in favor of the Senior Lender as provided herein and in the Intercreditor Agreement. The Collateral shall also include the property and rights subject to the Assignment of Life Insurance with respect to the Life Insurance in a form reasonably satisfactory to the Lender.

Section 3.2 Additional Collateral. Subject to the prior Liens of Senior Lender, immediately upon Borrower’s receipt of that portion of the Collateral which is evidenced or secured by an agreement, letter of credit, instrument and/or documents including, without limitation, promissory notes, documents of title, warehouse receipts and trade acceptances (the “Additional Collateral”), Borrower shall deliver the original thereof to Lender, together with appropriate endorsements, the documents required to draw thereunder (as may be relevant to letters of credit) and/or other specific evidence (in form and substance acceptable to Lender) of assignment thereof to Lender.

Section 3.3 Additional Security for the Loan. As additional collateral security for the Obligations, Borrower shall deliver to Lender the Intellectual Property Security Agreement, and any other instrument required to perfect a security interest in any of the Collateral, which Agreements constitute part of the Security Documents hereunder.

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES

In order to induce the Lender to enter into this Agreement, Borrower hereby represents and warrants to the Lender on the date hereof that:

Section 4.1 Organization, Authority and Qualification.

(a) Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio, and has all requisite power and authority to own and operate its properties and to carry on its business as now conducted. The execution,

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delivery and performance of this Agreement and the Subordinated Note have been duly authorized by all necessary company actions; there is no prohibition, either in law, in its charter documents, operating agreement, or bylaws, if any, or in any order, writ, injunction or decree of any court or arbitrator presently in effect having applicability to Borrower which in any way prohibits or would be violated by the execution and performance of this Agreement and the Subordinated Note in any respect; this Agreement and the Subordinated Note are and will be valid, binding and enforceable obligations of the Borrower; and the Borrower has adequate power and authority and has full legal right to enter into this Agreement and each of the other Loan Documents, and to perform, observe and comply with all of its agreements and obligations under each of such documents, including, without limitation the borrowings contemplated hereby. Borrower is, and will be after giving effect to the Acquisition Transaction, duly qualified or licensed and in good standing and duly authorized to do business in each jurisdiction in which the character of the properties owned or leased or the nature of the activities conducted makes such qualification or licensing necessary and in which the failure to be so qualified would have a materially adverse effect on the conduct of the business of Borrower.

(b) The authorized Capital Stock of Borrower is as set forth on Schedule 4.1(b) hereto. Except for the Warrants, or as described on Schedule 4.1(b) hereto, there are no outstanding options, rights or warrants issued by Borrower for the acquisition of the Capital Stock of Borrower, nor any outstanding securities or obligations convertible into Capital Stock.

(c) Borrower has no Subsidiaries except as set forth on Schedule 4.1(c) hereto. The Capital Stock of each Subsidiary is owned by Borrower free and clear of all Liens other than securities laws restrictions, the pledge pursuant to the Senior Loan Documents and those in favor of Lender. Each Subsidiary (i) is duly organized, validly existing and in good standing under the laws of the state of its incorporation, and (ii) has full corporate power and authority and full legal right to own or to hold under lease its Property and to carry on its business. Each Subsidiary is qualified and licensed in each jurisdiction wherein the character of the Property owned or held under lease by it, or the nature of its business makes such qualification necessary or advisable. Each Subsidiary is currently qualified in good standing as a foreign corporation in each jurisdiction set forth on Schedule 4.1(c).

(d) Borrower does not own or hold of record (whether directly or indirectly) any shares of any class in the capital of any corporation, nor does Borrower own or hold (whether directly or indirectly) any legal and/or beneficial equity interest in any partnership, business trust or joint venture or in any other unincorporated trade or business enterprise.

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Section 4.2 No Legal Bar. The execution, delivery and performance of this Agreement, the Subordinated Note and the other Loan Documents and the consummation of the transactions contemplated thereby, will not in any material respect violate any Requirements of Law or any Contractual Obligation of Borrower.

Section 4.3 No Litigation. No litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or threatened by or against Borrower or against any of its properties or revenues, existing or future, (a) with respect to this Agreement, the Subordinated Note, any of the other Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which, if adversely determined, would have a Material Adverse Effect.

Section 4.4 Financial Condition. Attached to Schedule 4.4 are complete and correct copies of (i) the balance sheets of the Seller as of December 31, 1999 and 1998 and the related statements of operations, retained earnings and cash flows for the two-year period ended December 31, 1999, together with the related notes and schedules (the “Year-End Financial Statements”), (ii) the balance sheet of the Seller as of February 29, 2000, together with any related statements and notes, and (iii) the balance sheet and income statement of the Seller as of June 30, 2000, together with any related statements and notes (the “Interim Financial Statements”). The Year-End Financial Statements and the Interim Financial Statements are herein collectively called the “Financial Statements”. The Financial Statements have been prepared from the books and records of the Seller in conformity with generally accepted accounting principles applied on a basis consistent with preceding years and throughout the periods involved (“GAAP”) (except as disclosed therein or on Schedule 4.4 hereto), and present fairly in all material respects the financial position and results of operations of the Seller as of the dates of such statements and for the periods covered thereby. The books of account of the Seller have been kept accurately in all material respects in the ordinary course of business, the transactions entered therein represent bona fide transactions, and the revenues, expenses, assets and liabilities of the Seller have been properly recorded therein in all material respects.

Section 4.5 No Change. There has been no development or event which has had or would reasonably be expected to have a Material Adverse Effect.

Section 4.6 No Default. Borrower is not in default under or with respect to any of its Contractual Obligations, except where the default would not have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

Section 4.7 Conditions Precedent. Prior to the funding of the initial Loan to Borrower under this Agreement, all conditions precedent listed in Article 8 hereof will have been satisfied.

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Section 4.8 Ownership of Property; Liens. Borrower has good and marketable title to all its property as listed on the Financial Statements or acquired pursuant to the Purchase Agreement, and none of such property is subject to any Lien except Permitted Liens.

Section 4.9 Intellectual Property. Borrower possess all licenses, patents, permits, trademarks, trade names, copyrights, technology, know-how and processes necessary for the conduct of its businesses as currently conducted, taking into consideration consummation of the Acquisition Transaction, and all such licenses, patents, permits, trademarks, trade names, and copyrights are listed on Schedule 4.9 attached hereto and made a part hereof. Except as set forth on Schedule 4.9, no claim has been asserted and is pending by any Person challenging or questioning the use of any such property or rights or the validity or effectiveness of any such property or rights, nor is there any known basis for any such claim. Except as set forth on Schedule 4.9, the use of such property and rights by the Borrower does not infringe on the rights of any Person.

Section 4.10 Compliance with Laws. Borrower is in compliance with all Requirements of Law, including all Environmental Laws applicable to it, except, in each case, where the failure to comply would not have a Material Adverse Effect.

Section 4.11 Taxes. With respect to Borrower and any Subsidiary, except as set forth on Schedule 4.11, Borrower has filed or caused to be filed all tax returns which are required to be filed and have paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its properties and all other taxes, fees or other charges imposed on it or any of its property by any governmental authority (other than any taxes, fees or other charges the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge.

Section 4.12 Environmental Matters. Except as set forth on Schedule 4.12 hereto, to the Borrower’s knowledge, Borrower is in compliance with, and has no liability to any Person in respect of, all Environmental Laws except for such non-compliance or liabilities that would not have a Material Adverse Effect.

Section 4.13 Place of Business. The Borrower maintains places of business and owns Collateral only at the Principal Office. Borrower maintains its books of account and records, including all records concerning the Collateral, only at the Principal Offices.

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Section 4.14 General Collateral Representation. Subject in each case, to the liens of the Senior Lender:

(a) The Borrower is the sole owner of and has good and marketable title to the Collateral, free from all Liens, other than the Permitted Liens, and has full right and power to grant the Lender a security interest therein. All information which has been furnished to the Lender concerning the Collateral was complete, accurate and correct in all material respects when furnished, and all information which may be furnished to the Lender in the future concerning the Collateral will be complete, accurate and correct in all material respects when furnished.

(b) No security agreement, financing statement, equivalent security or Lien instrument or continuation statement covering all or any part of the Collateral is on file or of record in any public office, except such as may have been filed (i) by Borrower in favor of Senior Lender pursuant to the Senior Loan Agreement, (ii) by Borrower in favor of Lender pursuant to this Agreement, or (iii) in respect of the items of Collateral subject to the Permitted Liens.

(c) The provisions of this Agreement are sufficient to create in favor of the Lender, as of the Closing Date, a valid and continuing lien on, and security interest in, the types of the Collateral hereunder in which a security interest may be created under Article 9 of the UCC. Financing Statements on Form UCC-1 have been duly executed on behalf of Borrower and the description of such Collateral set forth therein is sufficient to perfect security interests in such Collateral in which a security interest may be perfected by the filing of Financing Statements under the UCC. When such Financing Statements are duly filed in the filing offices listed on Schedule 4.14 hereto, and the requisite filing fees are paid, such filings will be sufficient to perfect security interests in such of the Collateral described in the Financing Statements as can be perfected by filing, which perfected security interests will be prior to all other Liens in favor of others and rights of others (except for Permitted Liens), and as against any owner of real estate where any of the Equipment is located and as against any purchaser of such real property and any present or future creditor obtaining a Lien on such real estate. All action necessary to protect and perfect a security interest in each item of the Collateral has been or will be duly taken, or in the case of Equipment covered by certificates of title will be taken within ninety (90) days of the Closing Date.

(d) Upon delivery to Lender and the filing with the U.S. Patent and Trademark Office of the Assignment of Trademarks and delivery to the Lender and the payment of the requisite filing fees, the Lender shall have a perfected security interest in the intellectual property listed on Schedule 4.10 and the other Collateral of a type described in such assignments, which perfected security interest will be prior to all other Liens in favor of others.

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Section 4.15 Accounts. As to each and every Account of Borrower, Borrower has full right and power to grant the Lender a security interest therein and the security interest granted in such Account to the Lender in Article 3 hereof, when perfected, will be a valid second security interest, subordinate only to Permitted Liens, the liens granted under the Senior Loan Documents, which will inure to the benefit of the Lender without further action, subject to Permitted Liens and the provisions of Section 4.14(c) hereof.

Section 4.16 Equipment. All Equipment is located at Borrower’s Principal Offices. No Equipment is now stored with a bailee, warehouseman or similar party. All Equipment necessary for the conduct of Borrower’s business or reflected on the Financial Statements is currently usable or currently saleable in the normal course of Borrower’s business.

Section 4.17 ER1SA. Schedule 4.17 contains a list of all Employee Benefit Plans maintained by Borrower. Borrower and its ERISA Affiliates are in compliance with any applicable provisions of ERISA and the regulations thereunder, and the Code, with respect to all such Employee Benefit Plans.

Section 4.18 Undisclosed Liabilities. Borrower has no material obligation or liability (whether accrued, absolute, contingent, unliquidated, or otherwise, whether due or to become due) arising out of transactions entered into at or prior to the Closing Date, or any action or inaction at or prior to the Closing Date, except (a) liabilities reflected on the Financial Statements; (b) liabilities incurred in the ordinary course of business (none of which are liabilities for breach of contract, breach of warranty, torts, infringements, claims or lawsuits); (c) liabilities or obligations disclosed in the Schedules hereto; and (d) liabilities or obligations incurred pursuant to the Loan Documents, the Purchase Agreement and the agreements, documents and instruments contemplated thereby and the Senior Loan Agreement and the other Senior Loan Documents.

Section 4.19 Disclosure.

(a) All factual information furnished by or on behalf of Borrower in writing to Lender on or before the Closing Date (including all information contained in the Loan Documents) for purposes of or in connection with this Agreement or any transaction contemplated hereby is true and complete in all material respects on the date as of which such information is dated or certified and does not contain any untrue statement of a material fact or omits to state any material fact, it being understood and agreed that for purposes of this clause (a), such factual information shall not include projections and pro forma financial information.

(b) The projections and pro forma financial information contained in the factual information referred to in clause (a) above (including the pro forma consolidated financial

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statements delivered hereunder) were or are based on good faith estimates and assumptions believed to be reasonable at the time made, it being recognized by Lender that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ significantly from the projected results.

Section 4.20 Solvency. Borrower is solvent and will continue to be solvent after consummation of the Acquisition Transaction, and creation of the Obligations hereunder and under the Senior Loan Documents, the security interests of Lender and Senior Lender and the other transactions contemplated hereby and by the Senior Loan Documents. Borrower is able to pay its debts as they mature and has sufficient capital to carry on its business.

Section 4.21 Survival of Representations and Warranties. The foregoing representations and warranties are made by the Borrower with the knowledge and intention that the Lender will rely thereon, and shall survive the execution and delivery of this Agreement and the making of the Loan hereunder.

ARTICLE 5.

AFFIRMATIVE COVENANTS

So long as the Subordinated Note remains outstanding and unpaid or any other Obligation is owing to the Lender, the Borrower agree as follows:

Section 5.1 Financial Statements.

(a) Year End Report. (i) As soon as available, but in any event within ninety (90) days after the end of each fiscal year of Borrower. Borrower shall deliver to the Lender copies of the Consolidated audited financial statements of Borrower and any Subsidiary, including the balance sheets, as at the end of such year and the related statements of income, cash flow and retained earnings for such year, in each case containing in comparative form the figures for the previous year. The Consolidated audited financial statements of Borrower shall be accompanied by an audit opinion of independent certified public accountants of nationally or regionally recognized standing, stating that such financial statements fairly present the respective financial positions of Borrower and any Subsidiary and the results of operations and changes in cash flows for the fiscal year then ended in conformity with GAAP, and (ii) as soon as available, but in any event thirty (30) days prior to the last day of each fiscal year of Borrower, Borrower shall deliver Consolidated and consolidating

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financial projections and a management-prepared budget for Borrower prepared on a monthly basis for the next year.

(b) Quarterly Reports. As soon as available, but in any event not later than thirty (30) days after the end of each quarter, the Borrower shall deliver to the Lender copies of the Consolidated balance sheets of Borrower and any Subsidiary as of the end of such quarter and the related unaudited statements of income, cash flow and retained earnings for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer of Borrower and prepared in accordance with GAAP applied on a basis consistent with the preceding years’ statements (subject to normal year-end audit adjustments).

(c) Monthly Reports. As soon as available, but in any event not later than fifteen (15) days after the end of each month, the Borrower shall deliver to the Lender copses of the Consolidated balance sheets of Borrower and any Subsidiary as of the end of such month and the related unaudited statements of income, cash flow and retained earnings for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer of Borrower and prepared in accordance with GAAP applied on a basis consistent with the preceding years’ statements (subject to normal year-end audit adjustments).

(d) Reports to Management. Simultaneously with the delivery of the financial statements described in Sections 5.1(a), 5.1(b) and 5.1(c), the Borrower shall also deliver to Lender copies of reports to management and management letters prepared by the accountants to the Borrower, each certified as true and correct by a Responsible Officer.

(e) Compliance Certificates. Simultaneously with the delivery of the financial statements described in Section 5.1(b), the Borrower shall furnish to the Lender a Compliance Certificate executed by a Responsible Officer of Borrower (i) setting forth in reasonable detail the calculations supporting and used to determine Borrower’s compliance with the financial covenants contained in Article 7 hereof, along with supporting schedules; and (ii) stating that such Responsible Officer has obtained no knowledge of any Default or Event of Default, except as specified in such Compliance Certificate.

(f) Borrower shall promptly furnish to Lender copies of all material reports and notices delivered to Senior Lender pursuant to the Senior Loan Documents or to the shareholders of Borrower pursuant to the Shareholders Agreement.

Section 5.2 Conduct of Business and Maintenance of Existence. Borrower shall continue to engage in business of the same general type in all material respects as now conducted by it and

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preserve, renew and keep in full force and effect its existence and take all reasonable action to maintain all rights, privileges and franchises necessary for the normal conduct of its business. Borrower shall comply with all Contractual Obligations and Requirements of Law.

Section 5.3 Maintenance of Property; Insurance. Borrower shall keep all property useful and necessary in its business in good working order and condition; maintain all workers’ compensation insurance required by law; maintain with financially sound and reputable insurance companies insurance on all of its real and personal property in amounts consistent with past practices of Borrower (in amounts sufficient to insure one hundred percent (100%) of the actual replacement costs thereof) (subject to normal deductibles and/or self-insured retentions in amounts not in excess of the amounts in place as of the date of this Agreement) and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business, or, in case of an Event of Default, as the Lender may reasonably specify from time to time, that Lender may reasonably request from time to time, and furnish to the Lender, promptly after written request, any information as to the insurance carried, If Borrower fails to do so, the Lender may obtain such insurance and charge the cost thereof to the Borrower’s account and add it to the Obligations. The Borrower agrees that, if any loss should occur, the proceeds of all such insurance policies may be applied to the payment of all or any part of the Obligations, as the Lender may direct. Lender shall be named an additional named insured, lender loss payee and mortgagee on such insurance policies, as the case may be, to the extent that such policies insure the Collateral, In the event of any casualty for which the proceeds of insurance are less than Twenty Five Thousand and 00/100 Dollars ($25,000.00), however, the Borrower shall be entitled to retain such proceeds for the purpose of repairing or replacing the insured property, provided that the Borrower promptly execute and deliver to the Lender such documents, instruments, financing statements or other agreements as may be necessary to perfect the security interest of the Lender in all such property. All policies shall provide for at least thirty (30) days’ written notice of cancellation to the Lender, except premium nonpayment cancellation which shall be ten (10) days’ written notice.

Section 5.4 Liability Insurance. Borrower shall, at all times, maintain in full force and effect such liability insurance with respect to its activities and other insurance as may be reasonably required by the Lender, such insurance to be provided by insurer(s) reasonably acceptable to the Lender; and, if requested by the Lender, such insurance shall name the Lender as an additional insured.

Section 5.5 Inspection of Property; Books and Records. Borrower shall maintain in all material respects complete and accurate books of accounts and records in which full, true and correct entries in conformity with GAAP and all Requirements of Law in all material respects shall be made of all dealings and transactions in relation to the Collateral and the operations of the Borrower; and grant to the Lender, or its representatives, full and complete access to the Collateral and all books of account, records, correspondence and other papers relating to the Collateral during normal

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business hours and Borrower grant to Lender the right to inspect, examine, verify and make abstracts from the copies of such books of account, records, correspondence and other papers, and to investigate during normal business hours such other records, activities and business of the Borrower as they may deem reasonably necessary or appropriate at the time.

Section 5.6 Notices. Borrower shall promptly give notice to the Lender of:

(a) the occurrence of any Default or Event of Default;

(b) any (i) default or event of default under any Contractual Obligation relating to any Indebtedness of Borrower, and any (ii) litigation, Investigation or proceeding which may exist at any time between Borrower and any governmental authority, which in either case, if not cured or if adversely determined, as the case may be, would reasonably be expected to have a Material Adverse Effect;

(c) the commencement, existence or written threat of any action or proceeding by or before any governmental or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic, against or affecting Borrower, which action or proceeding, as the case may be, would reasonably be expected to have a Material Adverse Effect; and

(d) any change in the business, operations, property, condition (financial or otherwise) of Borrower which would reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower propose to take with respect thereto.

Section 5.7 Environmental Laws. Borrower shall comply in all material respects with all Environmental Laws and obtain and comply with and maintain in all material respects any and all licenses, approvals, registrations or permits required by any Environmental Law.

Section 5.8 Inventory. With respect to the Inventory, Borrower shall:

(a) sell or dispose of the Inventory only to buyers in the ordinary course of business and consistent with past practices of Seller (which may include disposing of obsolete inventory or Inventory of de minimus value in the ordinary course of business and in accordance with past practices of such Borrower); and

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(b) promptly notify the Lender of any change in location of any of the Inventory and, prior to any such change, execute and deliver to the Lender such UCC financing statements satisfactory to the Lender as the Lender may request.

Section 5.9 Equipment. Borrower shall:

(a) keep and maintain the Equipment in good operating condition and repair, excluding normal wear and tear, and shall make all necessary replacements thereof so that the value, utility and operating efficiency thereof shall at all times be maintained and preserved in materially the same condition as on the Closing Date, except to the extent items of Equipment become obsolete in the ordinary course of business, and not permit any such items to become a fixture to real estate or accession to other personal property; and

(b) upon an Event of Default or as reasonably requested by Lender, immediately on demand thereof by Lender, deliver to Lender any and all evidence of ownership of any of the Equipment (including, without limitation, certificates of title and applications for the title).

Section 5.10 Collateral. Borrower shall maintain the Collateral, as the same is constituted from time to time, free and clear of all Liens, except Permitted Liens, and defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein and pay all costs and expenses (including reasonable attorney’s fees) incurred in connection with such defense.

Section 5.11 Employee Benefit Plans. Borrower will and will cause each of its ERISA Affiliates to (a) comply in all material respects with all requirements imposed by ERISA and the Code applicable from time to time to any Employee Benefit Plans of Borrower or any ERISA Affiliates; (b) make full payment when due of all amounts which under the provisions of such Employee Benefit Plans or under applicable law, are required to be paid as contributions thereto; (c) file on a timely basis all reports, notices and other filings required by any governmental agency with respect to any such Employee Benefit Plans; (d) furnish to all participants, beneficiaries, and employees under any such Employee Benefit Plan, within the periods prescribed by law, all reports, notices and other information to which they are entitled under applicable law, and (e) take no action which would cause any such Employee Benefit Plan to fail to meet any qualification requirement imposed by the Code.

Section 5.12 Further Documents. Borrower shall, at or prior to the Closing Date:

(a) cause Lender’s Lien to be noted on each document of ownership or title as to which evidence of Lender’s Lien is necessary or, in Lender’s or Lender’s counsel’s opinion,

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advisable to be shown in order to perfect Lender’s Lien on the Collateral covered by such document; and if reasonably practicable

(b) execute and deliver such financing statements, documents and instruments, and perform all other acts as the Lender deems reasonably necessary or desirable, to carry out and perform the intent and purpose of this Agreement, and pay, upon demand, all expenses (including reasonable attorney’s fees) incurred by the Lender in connection therewith.

Section 5.13 Life Insurance. Within 30 days of the Closing Date, Borrower shall obtain the Life Insurance and assign the same to Lender as collateral security hereunder pursuant to an Assignment of Life Insurance acceptable to Lender, and keep and maintain the Life Insurance in accordance with the terms hereof until all of the Obligations are satisfied and this Agreement is terminated.

Section 5.14 Trademarks, Copyrights and Other Intellectual Property. Promptly upon the filing by Borrower or any Subsidiary of any application for letters patent or the registration of any trademarks, trade names or copyrights, Borrower shall notify Lender in writing and furnish such documentation as Lender may request to perfect Lender’s security interest in such property.

Section 5.15 Other Information. Borrower shall furnish to the Lender such other financial and business information and reports in form and substance satisfactory to the Lender as and when the Lender may from time to time reasonably request.

Section 5.16 Board of Directors. For so long as (a) the Obligations, or (b) the Warrant or Capital Stock issued upon the exercise thereof remain outstanding and owned or held by Lender, Lender shall be entitled to designate one (1) Person as a member of the Board of Directors of Borrower and to attend the meetings of any committee thereof and Lender shall be entitled to receive at least ten (10) days’ prior written notice of all such meetings. Borrower shall promptly reimburse such member of the Board of Directors for all reasonable out-of-pocket expenses incurred in attending such meetings and legal expenses incurred in fulfilling the fiduciary or other duties and responsibilities of such member.

ARTICLE 6.

NEGATIVE COVENANTS

The Borrower covenant and agree with the Lender and warrants that, as long as the Loan or Warrant shall remain unpaid or unexercised, as the case may be:

Section 6.1 Limitations on Restricted Payments. Without the prior written consent of Lender, the Borrower shall not, at any time, enter into, participate in, or make any Restricted Payment.

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Section 6.2 Limitations on Indebtedness. The Borrower will not at any time create, incur or assume, or become or be liable (directly or indirectly) in respect of, any Indebtedness, other than:

(a) the Obligations incurred pursuant to this Agreement;

(b) the obligations incurred relative to the Senior Loan Documents and the Preferred Stock or permitted by the Senior Loan Documents;

(c) Guarantee Obligations permitted under Section 6.3 hereof;

(d) current liabilities of Borrower incurred in the ordinary course of business (i) not incurred through the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services;

(e) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, worker’s compensation, materials and supplies to the extent any of the foregoing shall not otherwise be payable in accordance herewith;

(f) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which Borrower shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review;

(g) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business;

(h) Indebtedness in respect of performance, surety, statutory, insurance, appeal or similar bonds obtained in the ordinary course of business;

(i) except to the extent prohibited by Section 6.6, Indebtedness of the Borrower incurred to refinance or replace Indebtedness of such Person permitted hereunder; provided, that (i) the principal amount (or committed principal amount) of such refinancing Indebtedness shall not exceed the outstanding principal amount (or committed principal amount) of the Indebtedness being refinanced, (ii) the terms of such refinancing are not more

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onerous taken as a whole to such Person than the terms of the Indebtedness being refinanced, and (iii) the Lender shall have consented to the incurrence of such refinancing Indebtedness; and

(j) Indebtedness pursuant to the Purchase Agreement.

Section 6.3 Limitation on Guarantee Obligations. The Borrower shall not create, incur, assume or suffer to exist any Guarantee Obligation except in the ordinary course or for (i) product warranties; and (ii) return or replacement guaranties and similar assurances made by Borrower with respect to products sold to customers in the ordinary course of business and in accordance with the past practices of such Borrower.

Section 6.4 Limitation on Fundamental Changes. Borrower shall not merge, consolidate or amalgamate, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or make any material change in its business or its present method of conducting business as contemplated by the Acquisition Transaction.

Section 6.5 Limitation on Dispositions of Assets. Without the prior written consent of Lender, which shall not be unreasonably withheld, Borrower shall not convey, sell, lease, license, assign, transfer or otherwise dispose of a substantial part (more than ten percent (10%) in the aggregate during the term hereof) of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, except for the sale of Inventory and obsolete Equipment or the disposal of de minimus amounts of Equipment and Inventory in the ordinary course of business and except for dispositions permitted under the definition of Restricted Payments.

Section 6.6 Limitation on Investments, Loans and Advances. Borrower shall not make or permit to exist any advances or loans to, or guarantee or become contingently liable, directly or indirectly, in connection with the obligations, leases, stock or dividends of, or own, purchase or make any commitment to purchase any stock, bonds, notes, debentures or other securities of, or any interest in, or make any capital contributions to (all of which are sometimes collectively referred to herein as “Investments”) any Person except for (a) purchases of direct obligations of the federal government, (b) deposits in commercial banks, (c) commercial paper of any U.S. corporation having the highest ratings then given by the Moody’s Investors Services, Inc. or Standard & Poor’s Corporation, (d) endorsement of negotiable instruments for collection in the ordinary course of business, (e) advances to employees for business travel and other expenses incurred in the ordinary course of business, (f) any extension of trade credit in the ordinary course of business and investments in customer accounts for Inventory sold or services rendered in the ordinary course of business, (g) any investments in cash equivalents, (h) investments received in connection with the bankruptcy of suppliers and customers or received pursuant to a plan of reorganization, in each case,

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in settlement of delinquent obligations or disputes; and (i) transactions contemplated by, or required of Borrower, under the Purchase Agreement, Warrant Agreement or the Warrant.

Section 6.7 Limitation on Payments and Modifications of Debt Instruments. The Borrower shall not:

(a) make any optional payment or prepayment on any Indebtedness for Borrowed Money (other than Obligations under this Agreement and prepayments of accounts payable in the ordinary course of business to obtain discounts by the terms of payment); and

(b) amend, modify or change or consent or agree to any amendment, modification or change to any of the terms relating to the payment or prepayment of principal of or interest on, any such Indebtedness for Borrowed Money, or any capital or finance lease obligations, without the consent of Lender.

Section 6.8 Limitation on Creation or Acquisition of Subsidiaries. Borrower will not create or form any new Subsidiary.

Section 6.9 Corporate Documents. Borrower shall not make any material change, amendment or modification to its Articles of Incorporation or By-Laws without the prior written consent of Lender.

Section 6.10 Dividends and Similar Transactions. Except as otherwise permitted under Section 6.1, Borrower shall not declare or pay any dividends or make any other payments on its capital stock; issue, redeem, repurchase or retire any of its capital stock; grant or issue any warrant, right or option pertaining thereto (except for stock options granted by Borrower to management employees not to exceed, in the aggregate, ten percent (10%) of the outstanding Capital Stock of Borrower on a fully-diluted basis at a price not less than the greater of fair market value at the time of issuance or as of the date hereof) or other security convertible into any of the foregoing except for such grants and issuances of Capital Stock or other securities convertible into Capital Stock in compliance with the terms of Warrant Agreement and Warrant; or make any distribution to its stockholders.

Section 6.11 Limitations on Management Fees. Neither Borrower nor any Subsidiary shall 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.

Section 6.12 Management Compensation. Neither Borrower nor any Subsidiary shall pay or enter into an agreement to pay any management employee of Borrower yearly Compensation in excess of the amounts set forth on Schedule 6.12. As used herein, “Compensation” shall mean all

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forms of direct and indirect remuneration and include, without limitation, salaries, commissions, bonuses, securities, property, insurance benefits, personal benefits and contingent forms of remuneration.

Section 6.13 Changes Relating to Indebtedness. Without the consent of Lender, such consent not to be unreasonably withheld, Borrower will not, and will not permit any of its Subsidiaries to change or amend the terms of (i) the Senior Debt if such change or amendment would have the effect of (a) increasing the rate of or changing the due dates of payment of interest payable with respect to any liability of the Borrower under the Senior Debt, or the amount of any fees payable under the Senior Debt, or require the Borrower to pay any additional fees under or with respect to the Senior Debt (other than ordinary and customary fees in connection with giving effect to amendments and waivers otherwise permitted by this Agreement), (b) shortening the maturity of or requiring the earlier payment of the Senior Debt, (c) imposing any additional prepayment obligations on the Borrower with respect to the Senior Debt, (d) increasing the aggregate principal amount of the Senior Debt, or (e) permitting the incurrence of additional indebtedness, or (ii) the Shareholders Agreement.

ARTICLE 7.

FINANCIAL COVENANTS

Section 7.1 Limitations on Capital Expenditures. The Borrowers shall not, without first obtaining the written consent of the Lender, make Capital Expenditures from the date hereof through the end of its first fiscal year or during any subsequent fiscal year in an aggregate amount greater than the amounts specified below:

Closing through end of first fiscal year:	$	65,000
Second full fiscal year:	$	135,000
Third full fiscal year: (and each full fiscal year thereafter)	$	20,000

Section 7.2 Minimum EBITDA. On each time period set forth below, the Borrower shall not permit its Consolidated EBITDA to be less than the minimum amount set forth below:

TIME PERIOD	MINIMUM EBITDA
The Closing Date up to and including September 30, 2000	$	250,000.00
October 1, 2000 up to and including December 31, 2000	$	375,000.00
any period of twelve (12) consecutive months thereafter	$	1,500,000.00

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Section 7.3 Senior Loan Agreement Covenants. Borrower shall comply with the covenants set forth in Section 3B of the Senior Loan Agreement, each of which is incorporated herein by reference.

ARTICLE 8.

CONDITIONS PRECEDENT

Section 8.1 Conditions Precedent to Initial Loan. The obligation of Lender to make the initial Loan to Borrower under this Agreement on the Closing Date is subject to the satisfaction of the following conditions precedent (in form, substance and action as is satisfactory to Lender, in its sole discretion):

(a) Certified Copies of Charter Documents. Lender shall have received from Borrower a copy, certified by a duly authorized officer of Borrower to be true and complete on and as of the Closing Date, of the charter or other organization documents and by-laws of Borrower as in effect on the Closing Date (together with all, if any, amendments thereto); and (ii) the charter or other organization documents of Borrower certified by the applicable Secretary of State;

(b) Proof of Appropriate Action. Lender shall have received from Borrower a copy, certified by a duly authorized officer of Borrower to be true and complete on and as of the Closing Date, of the records of all action taken by Borrower to authorize the Acquisition Transaction and the execution and delivery of this Agreement and any other agreements entered into on the Closing Date and to which it is a party or is to become a party as contemplated or required by this Agreement, and its performance of all of its agreements and obligations under each of such documents;

(c) Incumbency Certificates. Lender shall have received from Borrower an incumbency certificate, dated the Closing Date, signed by a duly authorized officer of Borrower and giving the name and bearing a specimen signature of each individual who shall

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be authorized (i) to sign, in the name and on behalf of Borrower this Agreement and each of the other Loan Documents to which such person is or is to become a party on the Closing Date, and (ii) to give notices and to take other action on behalf of Borrower under such documents;

(d) Representations and Warranties. Each of the representations and warranties made by and on behalf of the Borrower to the Lender in this Agreement and in the other Loan Documents shall be true and correct when made, shall, for all purposes of this Agreement, be deemed to be repeated on and as of the Closing Date, and shall be true and correct in all material respects on and as of such date;

(e) Loan Documents, Etc. The Subordinated Note and each of the other Loan Documents and Warrant and Warrant Agreement, shall have been duly and properly authorized, executed and delivered to the Lender by the respective party or parties thereto and shall be in full force and effect on and as of the Closing Date;

(f) Acquisition Transactions. Lender shall have received from Borrower certified copies of documents relative to the Acquisition Transaction, including, without limitation, the Purchase Agreement and all schedules thereto, as Lender may request and such documents shall be in form and substance satisfactory to Lender;

(g) Intercreditor Agreement. Lender shall have received the Intercreditor Agreement in form and substance satisfactory to Lender;

(h) Equity Contribution. Borrower shall have received (i) an equity contribution from Development Capital Ventures, L.P. satisfactory to Lender, in the aggregate amount of not less than One Million Three Hundred and 00/100 Dollars ($1,300,000.00) (ii) an equity contribution from William J. Roberts and other investors satisfactory to Lender in an aggregate amount of not less than Five Hundred Thousand and 00/100 Dollars ($500,000.00), and evidence of such contributions shall have been delivered to Lender.

(i) Insurance. Lender shall have received evidence that Borrower’s properties and assets are fully insured in such amounts, against such risks, and with such insurers as may be reasonably satisfactory to Lender, with loss payable to Lender, together with the policies (containing a standard mortgagee clause, if appropriate) or certificates evidencing such insurance;

(j) Performance, Etc. Borrower shall have duly and properly performed, complied with and observed its covenants, agreements and obligations contained in each of

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the Loan Documents. No event shall have occurred on or prior to the Closing Date, and no condition shall exist on the Closing Date, which constitutes a Default or an Event of Default;

(k) Legal Opinion. The Lender shall have received a written legal opinion of counsel to Borrower, addressed to the Lender, dated the Closing Date, which shall be acceptable to the Lender;

(l) Mortgage and Title Insurance. The following documents each of which shall be executed (and, where appropriate, acknowledged) by Persons satisfactory to the Lender:

(i) the Mortgage, duly executed and delivered by Borrower (and where appropriate by the trustee thereunder) in recordable form (in such number of copies as the Lender shall have requested), together with such Uniform Commercial Code financing statements as may be needed in order to perfect the security interests granted by the Mortgage in any fixtures and other property therein described which may be subject to the Uniform Commercial Code, in each case appropriately completed and duly executed and in proper form for filing in all offices in which required;

(ii) with respect to the Real Estate covered by the Mortgage, an ALTA Standard Form title insurance policy issued by Chicago Title Insurance Company, (the “Title Company”), in an amount equal to Six Hundred Thousand and 00/100 Dollars ($600,000.00), insuring the validity and priority of the Liens created under the Mortgage, subject only to the encumbrances permitted by the Mortgage and which shall not contain exceptions for mechanics liens, persons in occupancy or matters which would be shown by a survey (Lender hereby agrees that the survey exception can be deleted after the Closing Date), shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to Lender in its reasonable discretion, and shall contain such endorsements and affirmative insurance as the Lender, in its discretion, may require.

Borrower shall have paid to the Title Company all expenses and premiums of the Title Company in connection with the issuance of such policies. In addition, Borrower shall have paid to the Title Company or the Lender’ an amount equal to all mortgage and mortgage recording taxes, intangibles taxes, stamp taxes and other taxes payable in connection with the execution and delivery of the Mortgage and the obligations secured thereby and the recording of the Mortgage in the appropriate land offices.

(m) Consents. The Lender shall have received from the Borrower copies of all consents necessary for the completion of the transactions contemplated by this Agreement.

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the Subordinated Note, each of the Loan Documents, and all Instruments and Documents incidental thereto;

(n) Financial Statements. The Lender shall have received from the Borrower the Financial Statements of Seller, Borrower and any Subsidiary and such other Financial Statements requested by Lender and Lender shall be satisfied with the results of all entities reflected therein;

(o) Legality of Transactions. It shall not be unlawful (a) for the Lender to perform any of its agreements or obligations under any of the Loan Documents to which the Lender is a party on the date of such Loan, or (b) for the Borrower and any Subsidiary to perform any of its respective agreements or obligations under any of the Loan Documents or the Acquisition Transaction to which they are a party on such date;

(p) Officer’s Certificate. Lender shall have received from Borrower a certificate dated as of the Closing Date, signed by a duly authorized officer on behalf of Borrower and certifying that all of the representations and warranties made by and on behalf of Borrower to Lender in this Agreement and in the other Loan Documents were true and correct in all material respects when made, and remain true and correct in all material respects on and as of the Closing Date;

(q) Due Diligence. Lender shall have conducted and completed due diligence on Borrower, Seller and the Acquisition Transaction to Lender’s full satisfaction;

(r) Post-Closing Availability. After giving effect to the consummation of the transactions contemplated hereby, by the Senior Loan Documents and by the Acquisition Transaction (including the payment of any fees and expenses associated therewith), the difference, as of the Closing Date, between (i) the lesser of (A) the Borrowing Base and (B) the Revolving Credit Commitment and (ii) the aggregate outstanding principal amount of the Revolving Loans as such terms are defined in the Senior Loan Agreement, shall be at least [Four Hundred Sixty Thousand and 00/100 Dollars ($460,000.00)]; and

ARTICLE 9.

EVENTS OF DEFAULT

Section 9.1 Payments. Failure by the Borrower to pay any Obligation within three (3) business days of when due and payable.

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Section 9.2 Representations and Warranties. Any representation or warranty made by the Borrower, or a Subsidiary, or any officer of Borrower, in this Agreement or in any Loan Document, including any certificate, document or financial or other statement furnished by Borrower at any time in connection herewith or therewith shall prove to have been untrue in any material respect.

Section 9.3 Covenants. Default by Borrower or any Subsidiary in the observance or performance of any covenant or agreement contained herein or in any Loan Document and, if such default is capable of being cured, and if such correction is being sought diligently, such default is not corrected within 30 days.

Section 9.4 Effectiveness of Loan Documents. Any Loan Document shall cease to be legal, valid, binding or enforceable in accordance with the terms thereof in any material respect, or any of the Liens intended to be created by any Loan Document ceases to be or are not valid and perfected liens having the priority contemplated thereby.

Section 9.5 Cross-Default to Other Indebtedness. Borrower shall default in any payment of principal of or interest on any of its Indebtedness in excess of Fifty Thousand and 00/100 Dollars ($50,000.00) (other than any such default in respect of the Subordinated Note) or in the payment of any Guarantee Obligation relating to Indebtedness in excess of Twenty-Five Thousand and 00/100 Dollars ($25,000.00), beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created or default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice or the passage of time or both, if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable.

Section 9.6 Change of Control. Any Change of Control shall occur.

Section 9.7 Commencement of Bankruptcy or Reorganization Proceeding.

(a) Borrower shall commence any case, proceeding or other action (i) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, wind-up, liquidation, dissolution, composition or

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other relief with respect to it or its debts, or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets; or

(b) There shall be commenced against Borrower any such case, proceeding or other action which results in the entry of an order for relief or any such adjudication or appointment or remains undismissed, undischarged or unbonded for a period of sixty (60) days; or

(c) There shall be commenced against Borrower any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or

(d) Borrower shall suspend the operation of its business or take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth above in this Section 9.7; or

(e) Borrower shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due.

Section 9.8 Material Judgments. One or more judgments or decrees shall be entered against Borrower or any Subsidiary involving in the aggregate a liability (not covered by insurance) of Fifty thousand and 00/100 Dollars ($50,000,00) or more and all such judgments or decrees shall not have been vacated, satisfied, discharged or bonded pending appeal within thirty (30) days from the entry thereof.

Section 9.9 Remedies. Upon the occurrence of an Event of Default described in this Article 9, the Lender, at its option, may:

(a) declare the Obligations of the Borrower immediately due and payable, without presentment, notice, protest or demand of any kind for the payment of all or any part of the Obligations (all of which are expressly waived by the Borrower) and exercise all of its rights and remedies against the Borrower and any Subsidiary and any Collateral provided herein or in any other agreement among the Borrower and the Lender or any other party; and

(b) exercise all rights granted to a secured party under the Uniform Commercial Code or otherwise.

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Upon the occurrence of an Event of Default, the Lender may take possession of the Collateral, or any part thereof, and Borrower hereby grants the Lender authority to enter upon any premises on which the Collateral may be situated, and remove the Collateral from such premises or use such premises, together with the materials, supplies, books and records of the Borrower, to maintain possession and/or the condition of the Collateral and to prepare the Collateral for sale. The Borrower shall, upon demand by the Lender, assemble the Collateral and make it available at a place designated by the Lender which is reasonably convenient to all parties. 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 Borrower reasonable notice of the time and place of any public sale thereof or of the time after which any private sales or other intended disposition thereof is to be made. The requirement of reasonable notice shall be met if such notice is mailed, postage prepaid, to the address of the Borrower set forth in Section 11.3 hereof at least ten (10) days prior to the time of such sale or disposition.

Section 9.10 Set-off. The Lender shall have the right, without prior notice to the Borrower, as provided by applicable law, any such notice being expressly waived to the extent permitted by applicable law, to set-off and apply against any of the Obligations, whether matured or unmatured, any amount owing from the Lender to the Borrower at, or at any time after, the happening of any Event of Default, and such right of set-off may be exercised by the Lender against the Borrower or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, custodian or execution, judgment or attachment creditor of Borrower, or against anyone else claiming through or against Borrower or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receivers, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off shall not have been exercised by the Lender prior to the making, filing or issuance, or service upon the Lender of, or of notice of, any such petition, assignment for the benefit of creditors, appointment or application for the appointment of a receiver, or issuance of execution, subpoena, order or warrant. The Lender agrees promptly to notify the Borrower after any such set-off and application made by the Lender; provided, that the failure to give such notice shall not affect the validity of such set-off and application.

Section 9.11 Rights Cumulative; Waiver. The rights, options and remedies of the Lender shall be cumulative and no failure or delay by the Lender in exercising any right, option or remedy shall be deemed a waiver thereof or of any other right, option or remedy, or waiver of any Event of Default hereunder, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The Lender shall not be deemed to have waived any of the Lender’s rights hereunder or under any other agreement, instrument or paper signed by Borrower unless such waiver shall be in writing and signed by the Lender

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ARTICLE 10.

COLLECTION OF COLLATERAL AND NOTICE OF ASSIGNMENT

Section 10.1 Notification of Debtors; Grant of Powers. Lender shall have the right at any time after the occurrence of an Event of Default to notify Account Debtors of its security interest in the Accounts and to require payments to be made directly to the Lender at such address or in such manner as the Lender may deem appropriate. Upon request of the Lender at any time after the occurrence of an Event of Default, the Borrower will so notify the Account Debtors and will indicate on all billings to the Account Debtors that the Accounts are payable to the Lender. To facilitate direct collection, Borrower hereby appoints the Lender and any officer or employee of the Lender as the Lender may from time to time designate, as attorney-in-fact for Borrower if after the occurrence of an Event of Default to (a) receive, open and dispose of all mail addressed to Borrower and take therefrom any payments on or proceeds of Accounts, (b) take over the Borrower’s post office boxes or make other arrangements, in which the Borrower shall cooperate, to receive the Borrower’s mail, including notifying the post office authorities to change the address for delivery of mail addressed to Borrower to such address as the Lender shall designate, (c) endorse the name of Borrower in favor of the Lender upon any and all checks, drafts, money orders, notes, acceptances or other evidences or payment or Collateral that may come into the Lender’s possession, (d) sign and endorse the name of Borrower on any invoice or bill of lading relating to any of the Accounts, on verifications of Accounts sent to any Account Debtor, to drafts against Account Debtors, to assignments of Accounts and to notices to Debtors, and (e) do all acts and things necessary to carry out this Agreement, including signing the name of the Borrower on any instruments required by law in connection with the transactions contemplated hereby and on Financing Statements as permitted by the Uniform Commercial Code. The Borrower hereby ratifies and approves all acts of such attorneys-in-fact, and neither the Lender nor any other such attorney-in-fact shall be liable for any acts of commission or omission, or for any error of judgment or mistake of fact or law, excluding acts of the Lender or such attorney-in-fact that are willful, malicious or grossly negligent. This power, being coupled with an interest, is irrevocable if after the occurrence of an Event of Default so long as any of the Obligations remain unsatisfied.

Section 10.2 Disclaimer of Liability. The Lender shall not, under any circumstances, be liable for any error or omission or delay of any kind occurring in the settlement, collection or payment of any Accounts or any instruments received in payment thereof or for any damage resulting therefrom, unless caused by the Lender’s willful, malicious or grossly negligent acts. Lender may, without notice to or consent from the Borrower, sue upon or otherwise collect, extend the time of payment of, or compromise or settle for cash, credit or otherwise upon any terms, any of the Accounts or any securities, instruments or insurance applicable thereto and/or release the obligor thereon. Lender is authorized to accept the return of the goods represented by any of the Accounts, without notice to or consent by the Borrower, or without discharging or in any way

SUBORDINATED LOAN AND SECURITY AGREEMENT

WR ACQUISITION, INC.

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affecting the Obligations hereunder. The Lender shall not be liable for or prejudiced by any loss, depreciation or other damage to Accounts or other Collateral unless caused by the Lender’s willful, malicious or grossly negligent act, and the Lender shall have no duty to take any action to preserve or collect any Account or other Collateral.

ARTICLE 11.

MISCELLANEOUS

Section 11.1 Amendments and Waivers. The Borrower and the Lender may amend this Agreement, the Subordinated Note, or the other Loan Documents to which they are parties, and the Lender may waive future compliance by the Borrower with any provision of this Agreement, the Subordinated Note, or such other Loan Documents, but no such amendment or waiver shall be effective unless in a written instrument executed by an authorized officer of the Lender and Borrower and provided any such amendment does not violate the terms of the Intercreditor Agreement.

Section 11.2 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

Section 11.3 Notices. All notices, consents, requests and demands to or upon the respective parties hereto shall be in writing and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or when deposited in the mail, postage prepaid, or, in the case of facsimile, telex or telegraphic notice, when sent, addressed as follows:

If to the Lender:	The HillStreet Fund, L.P.
	300 Main Street
	Cincinnati, Ohio 45202
	Telephone: (513) 412-3682
	Facsimile:  (513) 412-3680
	Attention:   John P. Vota

SUBORDINATED LOAN AND SECURITY AGREEMENT

WR ACQUISITION, INC.

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With a copy to:	Keating, Muething & Klekamp, P.L.L.
	1400 Provident Tower
	Cincinnati, Ohio 45202
	Telephone: (513) 579-6595
	Facsimile:  (513) 579-6457
	Attention:   Timothy B. Matthews, Esq.,
If to the Borrower:	WR Acquisition, Inc.
	662 Wolf Ledges Parkway
	Akron, Ohio 44311
	Attention: Steven Runkle
With a copy to:	Richard D. Rose, Esq
	Buchanan Ingersoll
	301 Grant Street
	One Oxford Center
	Pittsburgh, PA 15219

Notices of changes of address shall be given in the same manner.

Section 11.4 Power of Attorney. Borrower acknowledges and agrees that its appointment of Lender as its attorney and agent-in-fact after the occurrence of an Event of Default for the purposes specified in this Agreement is an appointment coupled with an interest and shall be irrevocable until all of the Obligations are satisfied and this Agreement is terminated.

Section 11.5 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lender and its respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Lender, such consent not to be unreasonably withheld or delayed.

Section 11.6 Assignment; Participation. Lender may assign, or sell a participation interest in, its rights and obligations under this Agreement, the Subordinated Note and the other Loan Documents only with the prior written consent of Borrower, such consent not to be unreasonably withheld or delayed. In the case of an assignment, upon receipt of notice of such assignment, Borrower shall deliver such documents necessary to evidence or perfect such assignment. Any such assignee shall be deemed a party hereto, and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such agreement, such assignee shall have the rights and obligations of a Lender hereunder.

SUBORDINATED LOAN AND SECURITY AGREEMENT

WR ACQUISITION, INC.

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Section 11.7 Expenses. Borrower shall be responsible for payment of Lender’s reasonable out-of-pocket costs and expenses incurred in connection with the preparation and negotiation of this Agreement and the making of the Loan hereunder, including the reasonable fees and expenses of the Lender’s counsel, and for all UCC search, filing, recording and other costs connected with the perfection of the Lender’s security interest in the Collateral, (excluding any stamp, excise, or mortgage tax, levy or other taxes payable in connection with the consummation of the transactions contemplated hereby), whether or not the transactions contemplated hereby are consummated.

Section 11.8 Post-Closing Expenses and Collection. All costs and expenses incurred by the Lender after the closing of the transactions contemplated by this Agreement, in the administration of the Loan, Warrant Agreement or Warrant, and to obtain, enforce or preserve the security interests granted by this Agreement and to collect the Obligations, all reasonable costs to maintain and preserve the Collateral and all reasonable attorneys’ fees and legal expenses incurred in obtaining or enforcing payment of any of the Obligations or foreclosing the Lender’s security interest in any of the Collateral, whether through judicial proceedings or otherwise, or in enforcing or protecting its right’s and interests under this Agreement or under any other instrument or document delivered pursuant hereto, or in protecting the rights of any holder or holders with respect thereto, or in defending or prosecuting any actions or proceedings arising out of or relating to this Agreement, shall be paid by the Borrower to the Lender, upon demand, or, at the Lender’s election, charged to the Borrower’s account and added to the Obligations, and the Lender may take judgment against the Borrower for all such costs, expense and fees in addition to all other amounts due from the Borrower hereunder.

Section 11.9 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

Section 11.10 Governing Law; Jurisdiction and Venue. THE LENDER ACCEPTS THIS AGREEMENT AT CINCINNATI, OHIO BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN BORROWER, LENDER, OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE SUBSTANTIVE INTERNAL LAWS AND STATUTES OF LIMITATION (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF OHIO.

The Lender and Borrower hereby designate all courts of record sitting in Cincinnati, Ohio, both state and federal, as forums where any action, suit or proceeding in respect of or arising out of

SUBORDINATED LOAN AND SECURITY AGREEMENT

WR ACQUISITION, INC.

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this Agreement, the Subordinated Note, Loan Documents, or the transactions contemplated by this Agreement shall be prosecuted as to all parties, its successors and assigns, and by the foregoing designations the Lender and Borrower consent to the jurisdiction and venue of such courts. Borrower WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY OTHER STATE TO OBJECT TO JURISDICTION WITHIN THE STATE OF OHIO FOR THE PURPOSES OF LITIGATION TO ENFORCE SUCH OBLIGATIONS OF SUCH BORROWER.

Section 11.11 Waiver of Jury Trial. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE LENDER TO EXTEND CREDIT TO BORROWER, AND AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL, BORROWER HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO THIS AGREEMENT OR ARISING IN ANY WAY FROM THE OBLIGATIONS.

Section 11.12 Other Waivers. Borrower waives notice of nonpayment, demand, notice of demand, presentment, protest and notice of protest with respect to the Obligations, or notice of acceptance hereof, notice of Loan made, credit extended, Collateral received or delivered, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein.

Remainder of page intentionally left blank Signature pages follow

SUBORDINATED LOAN AND SECURITY AGREEMENT

WR ACQUISITION, INC.

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IN WITNESS WHEREOF, the parties have duly executed this Subordinated Loan and Security Agreement by their duly authorized officers as of the date first above written.

BORROWER:
WR ACQUISITION, INC.
By:	/s/ William J. Roberts
Name:	William J. Roberts
Title:	President

LENDER:
THE HILLSTREET FUND, L.P.
By:	HillStreet Capital, Inc.
Its:	Investment Manager

By:	/s/ John P. Vota
Name:	John P. Vota
Title:	EVP

SUBORDINATED LOAN AND SECURITY AGREEMENT

WR ACQUISITION, INC.

EX-10.3

Exhibit 10.3

FIRST AMENDMENT TO

SUBORDINATED LOAN AND SECURITY AGREEMENT AND FIRST AMENDMENT

TO WARRANT AGREEMENT

This First Amendment to the Subordinated Loan and Security Agreement and First Amendment to Warrant Agreement (the “Amendment”) is entered into as of this 5th day of August, 2005, by and between QuaTech, Inc. (f/k/a WR Acquisition, Inc.), an Ohio corporation (“Borrower”), and The HillStreet Fund, L.P., a Delaware limited partnership, its permitted successors and assigns (“Lender”).

RECITALS

WHEREAS, the parties entered into that certain Subordinated Loan and Security Agreement as of July 28, 2000 (the “Loan Agreement”), whereby Lender made a term loan to Borrower in the amount of $3,000,000.

WHEREAS, the Loan Agreement provides for the repayment of principal pursuant to an amortization schedule beginning on August 31, 2005.

WHEREAS, in connection with the Loan Agreement, the parties entered into that certain Warrant Agreement as of July 28, 2000 (the “Warrant Agreement”), whereby Borrower issued Lender a warrant to purchase up to 430,814 shares of common stock of Borrower (the “Warrant”).

WHEREAS, the Warrant Agreement provides that Lender shall have the right to “put” the Warrant (or shares of Borrower common stock acquired by the exercise of the Warrant) to Borrower at any time on or after the earlier to occur of July 28, 2005 or the commencement of any Capital Transaction (as defined in the Warrant Agreement) (the “Put Exercise Date”).

WHEREAS, (i) Borrower is currently working to consummating a business combination transaction with DPAC Technologies Corp. (“DPAC”) whereby Borrower would become a wholly-owned subsidiary of DPAC (the “DPAC Transaction”) and (ii) Development Capital Ventures, LP (“DCV”), an affiliate of Borrower, has agreed to provide DPAC a secured short term bridge loan and DCV and DPAC have agreed to enter into a License Agreement 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 (the “DPAC Technology”) which will be exclusively sub-licensed to Borrower (the “License Agreement”).

WHEREAS, Lender is willing to extend the commencement of the repayment of principal under the Loan Agreement and to extend the Put Exercise Date under the Warrant Agreement in exchange for the consideration set forth herein so as to allow QuaTech additional time to complete the DPAC Transaction.

WHEREAS, the parties desire to hereby amend the Loan Agreement and the Warrant Agreement to reflect the foregoing.

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. Repayment of Loan Principal.

1.1. The definition of Principal Payment Dates contained in Section 1.1 of the Loan Agreement is amended and restated in its entirety to read as follows:

“ ‘Principal Payment Dates’ shall have the meaning so ascribed in Section 2.2(e).”

1.2. Section 2.2(d) of the Loan Agreement is amended and restated in its entirety to read as follows:

“(d) Principal Payments. Prior to November 30, 2005, provided that Lender has not accelerated the Loan pursuant to Section 9.9 hereof, Borrower shall not be obligated to make any payment of principal on the Loan. Beginning November 30, 2005, quarterly installments of principal on the Subordinated Note shall be payable on each Principal Payment Date as set forth in subsection (e) below, and on the date the Loan is due (whether by maturity, acceleration or otherwise), in an amount equal to pay in full the entire unpaid principal and accrued interest.”

1.3. A new Section 2.2(e) is added following Section 2.2(d) as follows:

“(e) Amortization. Pursuant to subsection (d) above, payments shall be made on each of the following dates (each a “Principal Payment Date”) in the amount set forth opposite such date.

Principal Repayment Date	Amount
November 30, 2005	$	375,000.00
February 28, 2006	$	375,000.00
May 31, 2006	$	375,000.00
August 31, 2006	$	375,000.00
November 30, 2006	$	375,000.00
February 28, 2007	$	375,000.00
May 31, 2007	$	750,000.00	”

1.4. Notwithstanding anything to the contrary in the Loan Agreement, all Obligations under the Loan Agreement, as hereby amended, shall become immediately due and payable in full upon the earlier to occur of (i) the consummation of the DPAC Transaction or (ii) the acquisition by Borrower of the DPAC Technology in fee simple. By way of clarification, the acceleration provided for in the preceding sentence shall not be triggered by Borrower simply becoming a licensee directly or indirectly under the License Agreement.

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2. Amendment Fee. On the date of this Amendment, Borrower shall pay to Lender a fee in the amount of Fifty Thousand Dollars ($50,000.00); such fee shall be paid in cash or via wire transfer of immediately available funds to an account designated by Lender.

3. Extension of Lender’s Put Right. The definition of Put Exercise Date contained in Section 1 of the Warrant Agreement is amended and restated in its entirety to read as follows:

“ ‘Put Exercise Date’ shall mean the earlier to occur of (a) November 30, 2005 or (b) the consummation of any Capital Transaction.”

4. Miscellaneous.

4.1. Effect of Agreements. Except as specifically amended hereby, the Loan Agreement and the Warrant Agreement shall remain in full force and effect.

4.2. 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.

4.3. Entire Agreement. This Amendment, together with the Loan Agreement, Warrant Agreement and that certain Warrant Purchase Agreement by and among Lender, Borrower and DCV dated May 31, 2005, as amended from time to time, 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.

4.4. Use of Defined Terms. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Loan Agreement or the Warrant Agreement, as the case may be.

[Remainder of page intentionally left blank]

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

QUATECH, INC.
By:	/s/ Steven D. Runkel
Name:	Steven D. Runkel
Title:	Chief Executive Officer

THE HILLSTREET FUND, L.P.
By:	HillStreet Capital, Inc.
Its:	Investment Manager
	By:	/s/ John P. Vota
	Name:	John P. Vota
	Title:	Executive Vice President

4

EX-10.4

Exhibit 10.4

SECOND AMENDMENT TO

SUBORDINATED LOAN AND SECURITY AGREEMENT

AND SECOND AMENDMENT TO WARRANT AGREEMENT

This Second Amendment to the Subordinated Loan and Security Agreement and Second Amendment to Warrant Agreement (the “Amendment”) is entered into as of this 27^th day of January, 2006 by and between QuaTech, Inc. (f/k/a WR Acquisition, Inc.), an Ohio corporation (“Borrower”), and The HillStreet Fund, L.P., a Delaware limited partnership, its permitted successors and assigns (“Lender”).

RECITALS

WHEREAS, the parties entered into that certain Subordinated Loan and Security Agreement as of July 28, 2000 (the “Loan Agreement”), whereby Lender made a term loan to Borrower in the amount of $3,000,000.

WHEREAS, the Loan Agreement provides for the repayment of principal pursuant to an amortization schedule beginning on August 31, 2005.

WHEREAS, in connection with the Loan Agreement, the parties entered into that certain Warrant Agreement as of July 28, 2000 (the “Warrant Agreement”), whereby Borrower issued Lender a warrant to purchase up to 430,814 shares of common stock of Borrower (the “Warrant”).

WHEREAS, the Warrant Agreement provides that Lender shall have the right to “put” the Warrant (or shares of Borrower common stock acquired by the exercise of the Warrant) to Borrower at any time on or after the earlier to occur of July 28, 2005 or the commencement of any Capital Transaction (as defined in the Warrant Agreement) (the “Put Exercise Date”).

WHEREAS, the parties entered into that First Amendment to Subordinated Loan and Security Agreement and First Amendment to Warrant Agreement, dated as of August 5, 2005, to amend and restate each of the repayment amortization schedule under the Loan Agreement and the Put Exercise Date under the Warrant Agreement.

WHEREAS, (i) Borrower is currently working to consummate a business combination transaction with DPAC Technologies Corp. (“DPAC”) whereby Borrower would become a wholly-owned subsidiary of DPAC (the “DPAC Transaction”) and (ii) Development Capital Ventures, LP (“DCV”), an affiliate of Borrower, has agreed to provide DPAC a secured short term bridge loan and DCV and DPAC have agreed to enter into a License Agreement 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 (the “DPAC Technology”) which will be exclusively sub-licensed to Borrower (the “License Agreement”).

WHEREAS, Lender is willing to extend the commencement of the repayment of principal on the Loan under the Loan Agreement and to extend the Put Exercise Date under the Warrant Agreement in exchange for the consideration set forth herein so as to allow QuaTech additional time to complete the DPAC Transaction.

WHEREAS, the parties desire to hereby amend the Loan Agreement and the Warrant Agreement to reflect the foregoing.

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. Repayment of Loan Principal; Amendment Fee.

1.1 Section 2.2(d) of the Loan Agreement is amended and restated in its entirety to read as follows:

“(d) Principal Payments. Provided that Lender has not accelerated the Loan pursuant to Section 9.9 hereof, Borrower is obligated to make repayments of principal on the Loan in accordance with Section 2.2(e) of this Agreement. Quarterly installments of principal on the Loan shall be payable on each Principal Payment Date as set forth in subsection (e) below, and on the date the Loan is due (whether by maturity, acceleration or otherwise), in an amount equal to pay in full the entire unpaid principal and accrued interest.”

1.2 Section 2.2(e) of the Loan Agreement is amended and restated in its entirety to read as follows:

“(e) Amortization.

(i) Pursuant to subsection (d) above, Borrower shall pay an “Amendment Fee” in the amount set forth below per month for up to four (4) consecutive months, the first payment of which shall be made on the date hereof. The Amendment Fee shall be due on the last business day of each month thereafter, until the earlier of: (A) the month in which the Borrower ceases to pay the Amendment Fee to Lender, at which time Borrower shall commence the repayment of the loan principal pursuant to subparagraph (ii) below, or (B) March 31, 2006. The Amendment Fee shall be as follows:

Payable on the date hereof	$	5,000
January 31, 2006	$	7,500
February 28, 2006	$	10,000
March 31, 2006	$	15,000

(ii) Pursuant to subsection (d) above, repayments of principal on the Loan shall commence in the month following the month in which the last Amendment Fee was paid, and shall be made every third month thereafter. All payments shall be made on the last day of the month in which a payment is due (each a “Principal Payment Date”). Borrower shall make a payment of $375,000 on each of the

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first six (6) Principal Payment Dates. Borrower’s seventh and final payment shall be in the amount of $750,000.”

1.3 Notwithstanding anything to the contrary in the Loan Agreement, all Obligations under the Loan Agreement, as hereby amended, shall become immediately due and payable in full upon the earlier to occur of (i) the consummation of the DPAC Transaction or (ii) the acquisition by Borrower of the DPAC Technology in fee simple. By way of clarification, the acceleration provided for in the preceding sentence shall not be triggered by Borrower simply becoming a licensee directly or indirectly under the License Agreement.

1.4 The Amendment Fee shall be paid in cash or via wire transfer of immediately available funds to an account designated by Lender.

2. Extension of Lender’s Put Right.

The definition of Put Exercise Date contained in Section 1 of the Warrant Agreement is amended and restated in its entirety to read as follows:

“ ‘Put Exercise Date’ shall mean the earlier to occur of (a) the first Principal Payment Date, as defined in that certain Subordinated Loan and Security Agreement as of July 28, 2000, by and between the Company and The HillStreet Fund, L.P., as amended, or (b) the consummation of any Capital Transaction.”

3. State of Ohio Loan.

3.1 The Lender agrees to enter into an Intercreditor Agreement, substantially in the form attached hereto as Exhibit A (the “Intercreditor Agreement”), for the purpose of subordinating the priority of the any lien under this Agreement so that any lien arising from indebtedness owed by the Borrower to the State of Ohio pursuant to that certain Loan Agreement by and between the Borrower and the Director of Development of the State of Ohio, dated as of January 27, 2006 will be pari passu with any lien arising under this Loan. The Intercreditor Agreement will not affect the subordination of Lender’s indebtedness to the indebtedness owed by the Borrower to National City Bank.

3.2 Lender shall have the right to approve the terms and conditions of an escrow agreement into which the proceeds from the State of Ohio loan shall be deposited pending the completion of the DPAC Transaction or the acquisition by Borrower of the DPAC Technology in fee simple. Lender shall further have the right to approve the terms and conditions of any use of such proceeds if, prior to such use, all Obligations to the Lender Loan are not paid in full. Borrower acknowledges that the Lender’s willingness to enter into this Second Amendment is predicated upon the anticipated payment in full of all Obligations due to Lender as a result of either the completion of the DPAC Transaction or the acquisition by Borrower of the DPAC Technology in fee simple. Accordingly, Lender shall have the right to withhold any approval requested under this Section, in its sole and absolute discretion.

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4. Miscellaneous.

4.1 Effect of Agreements. Except as specifically amended hereby, the Loan Agreement and the Warrant Agreement shall remain in full force and effect.

4.2 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.

4.3 Entire Agreement. This Amendment, together with the Loan Agreement, Warrant Agreement and that certain Warrant Purchase Agreement by and among Lender, Borrower and DCV dated May 31, 2005, each as amended from time to time, 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.

4.4 Use of Defined Terms. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Loan Agreement or the Warrant Agreement, as the case may be.

4.5 Fees and Expenses. As a condition to the effectiveness of this Second Amendment and each Amendment Fee payable under Section 1.2 above, Borrower agrees to pay all out-of-pocket costs incurred by Lender in connection with the administration of the Loan and the negotiation and preparation of this Second Amendment, and any other related expenses, including all legal fees and disbursements incurred by Lender’s counsel and any past due amounts outstanding.

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Second Amendment to Subordinated Loan and Security Agreement by their respective duly authorized officers as of the date first written above,

QUATECH, INC.
By:	/s/ Steven D. Runkel
Name:	Steven D. Runkel
Title:	Chief Executive Officer

THE HILLSTREET FUND, L.P.
By:	HillStreet Capital, Inc.
Its:	Investment Manager

By:	/s/ John P. Vota
Name:	John P. Vota
Title:	Executive Vice President

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EXHIBIT A

Intercreditor Agreement

EX-10.5

Exhibit 10.5

JOINDER AGREEMENT AND THIRD AMENDMENT TO

SUBORDINATED LOAN AND SECURITY AGREEMENT

This Joinder Agreement and Third Amendment to the Subordinated Loan and Security Agreement (the “Amendment”) is entered into as of this 28^th day of February, 2006 by and between QUATECH, INC. (f/k/a WR Acquisition, Inc.), an Ohio corporation (“QuaTech”) and DPAC TECHNOLOGIES CORP., a California corporation (“DPAC” and collectively with QuaTech, the “Borrowers” and each individually a “Borrower”), and THE HILLSTREET FUND, L.P., a Delaware limited partnership, its permitted successors and assigns (“Lender”).

RECITALS

WHEREAS, Lender and QuaTech are parties to that certain Subordinated Loan and Security Agreement as of July 28, 2000, as amended by a First Amendment to Subordinated Loan and Security Agreement and First Amendment to Warrant Agreement dated August 15, 2005, and as further amended by a Second Amendment to Loan and Security Agreement and Second Amendment to Warrant Agreement dated November 30, 2005 (collectively, and as amended by this Third Amendment, the “Loan Agreement”); and

WHEREAS, contemporaneously with the closing of the Third Amendment, Borrowers desire to complete the DPAC Transaction, as hereinafter defined, whereby QuaTech will become a wholly-owned subsidiary of DPAC; and

WHEREAS, as a condition of Lender’s consent to the DPAC Transaction, Lender has required that DPAC be joined as a Borrower under the Loan Documents; and

WHEREAS, the parties desire to hereby amend the Loan Agreement to reflect the foregoing;

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. Capitalized Terms. All capitalized terms used herein shall have the meanings assigned to them in the Loan Agreement unless the context hereof requires otherwise. Any capitalized terms defined herein shall be deemed incorporated in Section 1.1 of the Loan Agreement.

2. Joinder Agreement. As of the Third Amendment Closing Date, DPAC:

(a) adopts the Loan Agreement, shall be bound by all of the terms, conditions and provisions thereof as if it was an original party thereto, including without limitation, the affirmative and negative covenants in Articles 5 and 6 of the Loan Agreement, assumes all of the duties and obligations of a Borrower under the Loan Agreement, and confirms the representations and warranties set forth in Article 4 of the Loan Agreement on and as of the date

Third Amendment to Subordinated Loan and Security Agreement

hereof as if fully set forth herein (as modified by any disclosures reflected in the amended disclosure Schedules attached hereto);

(b) shall be considered, and deemed to be, for all purposes, a “Borrower” under the Loan Agreement as if DPAC had signed the Loan Agreement at the time originally executed and delivered to Lender and hereby, jointly and severally, promises to pay or perform all of the Obligations of a Borrower under the Loan Agreement and the other Loan Documents in accordance with their respective terms, and agrees to execute and deliver to Lender additional Loan Documents, upon the request of Lender;

(c) hereby grants, pledges and collaterally assigns to Lender, to secure the prompt repayment of the Note and the Obligations, a continuing security interest in and assigns to the Lender all of DPAC’s Collateral owned by DPAC;

(d) shall execute and deliver to Lender, a Pledge Agreement with respect to all Pledged Stock as additional collateral for the Loan, together with the certificates evidencing the Pledged Stock and undated stock powers executed in blank; and

(e) shall be considered and deemed to be, for all purposes a Borrower and Indemnitor under the Environmental Indemnity Agreement dated July 28, 2000 and agrees to be bound by the terms thereby as the same relates to any Property.

3. Exhibits and Schedules. As of the Third Amendment Closing Date, the Loan Agreement is amended to add Exhibit G – Form of Pledge Agreement, in the form of Exhibit G to this Third Amendment.

4. Schedules to Loan Agreement. As of the Third Amendment Closing Date, the Schedules to the Loan Agreement are hereby amended as set forth on the corresponding Schedules to this Third Amendment.

5. Definitions.

(a) As of the Third Amendment Closing Date, the following definitions contained in Section 1.1 of the Loan Agreement are amended in their entirety to read thereafter as follows:

“Change of Control” means the time at which (i) any Person (including a Person’s Affiliates and associates) or group (as that term is understood under Section 13(d) of the Exchange Act and the rules and regulations thereunder), other than the existing shareholders of DPAC or a group controlled by the existing shareholders of DPAC, has become the beneficial owner of a percentage (based on voting power, in the event different classes of stock shall have different voting powers) of the voting stock of DPAC equal to at least twenty-five percent (25%), (ii) there shall be consummated any consolidation or merger of DPAC pursuant to which DPAC’s Capital Stock would be converted into cash, securities or other property, other than a merger or consolidation of DPAC in which the holders of the common stock of DPAC, or any Capital Stock convertible into common stock, immediately prior to the merger have the same proportionate ownership, directly or indirectly, of common stock or any Capital Stock

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convertible into common stock, of the surviving corporation immediately after the merger as they had of DPAC’s common stock immediately prior to such merger, or (iii) all or substantially all of DPAC’s assets shall be sold, leased, conveyed or otherwise disposed of as an entirety or substantially as an entirety to any Person (including an Affiliate or associate of DPAC) in one or a series of transactions, or (iv) Steven Runkel shall cease to perform his duties as a senior executive manager of DPAC and within ninety (90) days of such cessation a replacement senior executive manager reasonably acceptable to Lender has not been employed by DPAC.

“Life Insurance” means one or more policies of life insurance and any substitute or replacement policies thereof, owned by Borrower on the life of Steven Runkel in the aggregate face amount of not less than Two Million and 00/100 Dollars ($2,000,000.00), which such policy shall be free of any policy loans and encumbrances whatsoever, except the lien in favor of the Lender hereunder.

“Permitted Liens” means the liens and interests in favor of the Lender granted in connection herewith and

(a) liens under the Senior Loan Documents in an amount not to exceed $2,600,000.00 in the aggregate;

(b) liens under the State of Ohio Loan Documents in an amount not to exceed $2,500,000 in the aggregate, provided that such liens are pari passu with Lender’s liens;

(c) liens against Borrowers to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue;

(d) deposits or pledges made by Borrowers in connection with, or to secure payment of workmen’s compensation, unemployment insurance, old age pensions or other social security obligations;

(e) liens against Borrowers on properties other than the real property Collateral in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which Borrowers shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review;

(f) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties of either Borrower in existence less than ninety (90) days from the date of creation thereof in respect of obligations not overdue;

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(g) encumbrances on real estate of either Borrower consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities either in the title thereto, landlord’s or lessor’s liens under leases to which Borrower is a party, and other minor liens or encumbrances none of which in the opinion of Borrowers interferes materially with the use of the property affected in the ordinary conduct of the business of either Borrower, which defects do not individually or in the aggregate have a Materially Adverse Effect;

(h) liens and encumbrances on the real property Collateral of either Borrower as and to the extent permitted by the mortgage applicable thereto in any one (1) year period; and

(i) liens and encumbrances created by Capital Leases or purchase money security interests in an amount not to exceed $100,000 in the aggregate.

“Principal Office” means (i) with respect to QuaTech, 5675 Hudson Industrial Parkway, Hudson, Ohio 44236, and (ii) with respect to DPAC, 7321 Lincoln Way, Garden Grove, California 92841

“Restricted Payment” means: (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Borrower or any Subsidiary now or hereafter outstanding other than dividends on Preferred Stock; (b) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Borrower or any Subsidiary now or hereafter outstanding; (c) any payment or prepayment of principal of, premium, if any, or interest on, redemption, conversion, exchange, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any indebtedness other than the Senior Debt and the State of Ohio Loan; provided, however, that with respect to the Senior Debt and the State of Ohio Loan, any payments other than scheduled payments and required reductions of principal; and (d) any payment made to retire, or to obtain the surrender of, any outstanding warrants, other than the Warrants, options or other rights to acquire shares of any class of Capital Stock of a Borrower or any Subsidiary now or hereafter outstanding.

“Security Documents” means all of the documents and instruments evidencing the collateral security of the Lender, including without limitation, all UCC Financing Statements with respect to the Collateral, all Mortgages, all Intellectual Property Security Agreements, all Pledge Agreements, all Environmental Indemnity Agreements, and the Assignment of Life Insurance.

“Senior Debt” means that portion of the principal amount owing to the Senior Lender under the Senior Loan Documents from time to time, together with all interest, fees and other amounts payable on or with respect thereto, not to exceed Two Million Six Hundred Thousand Dollars ($2,600,000) in the aggregate and consisting of a $2,000,000 revolving line of credit and a $600,000 term loan, and any refinance, replacement, amendment or modification thereof in accordance with the Intercreditor Agreement.

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“Subordinated Note” means the Subordinated Term Promissory Note referred to in Section 2.2 hereof to evidence the Loan, together with any amendments, modifications, or restatements issued in substitution thereof.

“Warrant” or “Warrants” means one or more of the warrants in substantially the form as of Exhibit D, to be issued by DPAC to HillStreet pursuant to the Warrant Agreement

“Warrant Agreement” means the warrant agreement dated as of the Closing Date between DPAC and HillStreet in substantially the form as Exhibit E,

(b) As of the Third Amendment Closing Date, Section 1.1 of the Loan Agreement is hereby amended to add the following definitions to read thereafter as follows:

“Borrowers” shall mean collectively, QuaTech and DPAC, and each individually a “Borrower.”

“DCV” means Development Capital Ventures, LP, a Small Business Investment Company licensed by the US Small Business Administration.

“DPAC” means DPAC Technologies Corp., a California corporation.

“DPAC Transaction” means that certain transaction effective as of the Third Amendment Closing Date whereby QuaTech and DPAC are to consummate a business transaction where DPAC Acquisition Sub, Inc., an Ohio corporation and wholly-owned subsidiary of DPAC merges with and into QuaTech.

“Maturity Date” shall mean August 31, 2007.

“Pledge Agreement” means a stock pledge agreement or agreements with respect to Pledged Stock substantially in the form of Exhibit G hereto.

“Pledged Stock” means one hundred percent (100%) of the Capital Stock of QuaTech.

“QuaTech” means QuaTech, Inc. (f/k/a WR Acquisition, Inc.), an Ohio corporation, and successor by merger to DPAC Acquisition Sub, Inc., an Ohio corporation, a wholly-owned subsidiary of DPAC.

“State of Ohio Debt” means that portion of the principal amount owing to the State of Ohio under the State of Ohio Loan Documents from time to time, together with all interest, fees and other amounts payable on or with respect thereto, not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate, and any refinance, replacement, amendment or modification thereof in accordance with the applicable Intercreditor Agreement.

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“State of Ohio Loan” means the indebtedness owed by a Borrower to the State of Ohio pursuant to that certain Loan Agreement by and between QuaTech and the Director of Development of the State of Ohio, dated as of January 27, 2006.

“State of Ohio Loan Documents” means all documents evidencing the State of Ohio Loan, including any amendments, modifications, restatements and notices to any Borrower thereunder.

“Termination Date” means the earlier of (i) the Maturity Date; or (ii) the date upon which the entire principal of the Note shall become due pursuant to the provisions hereof (whether as a result of acceleration or otherwise), or (iii) the date upon which the entire principal and interest of the Note shall be paid in full.

“Third Amendment Closing Date” shall mean February 28, 2006.

6. Rules of Construction. As of the Third Amendment Closing Date, Section 1.2 of the Loan Agreement is hereby amended to add a new Section 1.2(h) to read in its entirety as follows:

“Section 1.2(h) Borrower References. References to Borrower shall be construed to be mean both Borrowers, jointly and severally, in respect of their obligations to Lender under this Agreement.”

7. Promissory Subordinated Note.

(a) Term. As of the Third Amendment Closing Date, Section 2.2(a) of the Loan Agreement is hereby amended in its entirety to read thereafter as follows:

“Section 2.2(a) Term. The Subordinated Note shall be dated as of the Third Amendment Closing Date and shall mature and be due and payable in full on the Termination Date.”

(b) Principal Payments. As of the Third Amendment Closing Date, Section 2.2(d) of the Loan Agreement is amended in its entirety to read thereafter as follows:

“Section 2.2(d) Principal Payments. Provided that Lender has not accelerated the Loan pursuant to Section 9.9 hereof, Borrowers are not obligated to make repayments of principal on the Loan until the Maturity Date, at which time the entire outstanding balances of principal and interest are due.”

(c) Amortization. As of the Third Amendment Closing Date, Section 2.2(e) of the Loan Agreement is deleted in its entirety thereafter.

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8. Success Fee. As of the Third Amendment Closing Date, Section 2.3 of the Loan Agreement is hereby amended to add a new Section 2.3(c) to read in its entirety thereafter as follows:

“Section 2.3(c) Success Fee. Borrowers shall pay to Lender a success fee in immediately available funds on the Termination Date, whether by prepayment, acceleration or at maturity, in the amount of Five Hundred Thousand Dollars ($500,000).”

9. Use of Proceeds. As of the Third Amendment Closing Date, Section 2.8 is hereby amended in its entirety to read thereafter as follows:

“Section 2.8 Use of Proceeds. Borrowers represent and warrant that all proceeds of the Loan shall be used by Borrowers for refinancing debt, growth and working capital.”

10. Prepayments. As of the Third Amendment Closing Date:

(a) Section 2.5(b) of the Loan Agreement is hereby amended in its entirety to read thereafter as follows:

“Section 2.5(b) Optional Prepayment. Borrowers may prepay the Loan in whole or in part at any time.”

(b) Section 2.5(c) of the Loan Agreement is hereby deleted thereafter in its entirety.

11. Failure to Pay by Maturity. As of the Third Amendment Closing Date, Article 2 of the Loan Agreement is hereby amended to add a new Section 2.10 to read in its entirety thereafter as follows:

“Section 2.10 Failure to Pay by Maturity. If, as of the Maturity Date, the indebtedness evidenced by the Note has not been paid in full, interest shall continue to accrue as provided herein and Borrowers shall (i) pay, on the first day of the month following the Maturity Date and on the first day of each month thereafter until the principal and interest has been repaid in full, a monthly fee in the amount of Twenty Five Thousand Dollars ($25,000), and (ii) issue to Lender warrants to purchase one percent (1%) of the common stock of DPAC, which warrants may be exercised for a purchase price per share equal to $0.00001, and which warrants shall be issued in the same form as Exhibit D.

12. Representations and Warranties; Affirmative Covenants; Negative Covenants. As of the Third Amendment Closing Date, Articles 4, 5 and 6 of the Loan Agreement are hereby amended in their entirety to read as set forth in Addendum A attached to this Third Amendment.

13. Financial Covenants. As of the Third Amendment Closing Date, Article 7 of the Loan Agreement is hereby amended thereafter as follows:

(a) Limitations on Capital Expenditures. Section 7.1 of the Loan Agreement shall read as follows:

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“Section 7.1 Limitations on Capital Expenditures. Borrowers shall not, without first obtaining the written consent of the Lender, make Consolidated Capital Expenditures during any fiscal year in an aggregate amount greater than the amounts specified below:

Time Period	Maximum Capital Expenditures
From the Third Amendment Closing Date until the end of the current fiscal year	$	200,000
For the following fiscal year	$	200,000	”

(b) Minimum EBITDA. Section 7.2 of the Loan Agreement shall read as follows:

“Section 7.2 Minimum EBITDA. Borrowers shall not permit their Consolidated EBITDA for their fiscal quarters ending on the dates below to be less than the dollar amount set forth below opposite such date.

Dates	Minimum EBITDA
June 30, 2006, September 30, 2006, and December 31,2006	$	250,000
March 31, 2007 and thereafter	$	350,000	”

14. Reaffirmation of Covenants, Warranties and Representations. Each Borrower hereby agrees and covenants that all representations and warranties in the Loan Agreement, including without limitation, all of those warranties and representations set forth in Article 5, are true and accurate as of the date hereof. Each Borrower further reaffirms all covenants set forth in Article 6 and financial covenants set forth in Article 7 and negative covenants set forth in Article 8 thereof, as if fully set forth herein, except to the extent modified by this First Amendment.

15. Conditions Precedent to Closing of Third Amendment. On or prior to the Third Amendment Closing Date, each of the following conditions precedent shall have been satisfied:

(a) Proof of Corporate Authority. Lender shall have received from each Borrower copies, certified by a duly authorized officer to be true and complete on and as of the Third Amendment Closing Date, of records of all action taken by Borrowers to authorize (i) the execution and delivery of this Third Amendment and all other certificates, documents and instruments to which it is or is to become a party as contemplated or required by this Third Amendment, and (ii) their performance of all of its obligations under each of such documents

(b) Loan Documents. (i) Each of the Loan Documents shall have been duly and properly authorized, executed and delivered by each Borrower, as applicable, and shall be in full force and effect on and as of the Third Amendment Closing Date; (ii) executed originals of the Note shall have been delivered to Lender, and (iii) executed originals or (as the case may be)

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executed counterparts of each of any other Loan Documents required by Lender shall have been delivered to Lender, including without limitation, a Pledge Agreement from DPAC with respect to the Pledged Stock.

(c) Legal Opinion. Lender shall have received a written legal opinion of counsel to Borrowers, addressed to Lender, dated as of the Third Amendment Closing Date, which shall be acceptable to Lender.

(d) Documents. Each of the documents to be executed and delivered at the Third Amendment Closing and all other certificates, documents and instruments to be executed in connection herewith shall have been duly and properly authorized, executed and delivered by Borrowers and shall be in full Force and effect on and as of the Third Amendment Closing Date.

(e) DPAC Transaction. Borrowers shall be prepared to close, simultaneously with the closing of this Third Amendment, the DPAC Transaction on terms reasonably acceptable to Lender.

(f) Senior Debt Availability. Lender shall be satisfied that: (i) the principal amount of the Revolving Loans of the Senior Debt outstanding on the Third Amendment Closing Date shall not be more than One Million Dollars ($1,000,000) and (ii) after giving effect to the consummation of the transactions contemplated hereby, by the Senior Loan Documents and by the DPAC Transaction (including the payment of any fees and expenses associated therewith), the difference, as of the Third Amendment Closing Date, between (i) the lesser of (A) the Borrowing Base and (B) the Revolving Credit Commitment and (ii) the aggregate outstanding principal amount of the Revolving Loans as such terms are defined in the Senior Loan Agreement, shall be at least Five Hundred Thousand Dollars ($500,000).

(g) State of Ohio Loan. Lender shall have received certified copies of all of the State of Ohio Loan Documents, including any amendments to the applicable Intercreditor Agreement in form and substance satisfactory to Lender.

(h) Due Diligence. Lender shall have conducted and completed due diligence on Borrowers and the DPAC Transaction to Lender’s full satisfaction, including, review of and satisfaction with a schedule of closing fees and expenses, schedules of post transaction expenses and sources and uses of funds, all material agreements, the Registration Statement of DPAC on Form S-4, all documents evidencing the DPAC Transaction, the Senior Loan Documents, the Ohio Loan Documents, all non-compete agreements, all employment agreements, all severance agreements, all tax audits, litigation, and any other matter Lender and/or Lender’s counsel may deem necessary.

(i) Legality of Transactions. No change in applicable law shall have occurred as a consequence of which it shall have become and continue to be unlawful (i) for Lender to perform any of its agreements or obligations under any of the Loan Documents, or (ii) for either Borrower to perform any of its agreements or obligations under any of the Loan Documents.

(j) Performance, Etc. Except as set forth herein, Borrowers shall have duly and properly performed, complied with and observed each of its covenants, agreements and obligations contained in each of the Loan Documents. Except as set forth herein, no event shall

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have occurred on or prior to the Third Amendment Closing Date, and no condition shall exist on the Third Amendment Closing Date, which constitutes a Default or an Event of Default.

(k) Proceedings and Documents. All corporate, governmental and other proceedings in connection with the transactions contemplated on the Third Amendment Closing Date, each of the other Loan Documents and all instruments and documents incidental thereto shall be in form and substance reasonably satisfactory to Lender.

(l) Changes; None Adverse. Since the date of the most recent balance sheets of QuaTech delivered to Lender, no changes shall have occurred in the assets, liabilities, financial condition, business, operations or prospects of which, individually or in the aggregate, are material to QuaTech and Lender shall have completed such review of the status of all current and pending legal issues as Lender shall deem necessary or appropriate.

(m) Legal Fees. Borrowers shall have reimbursed Lender for all out-of-pocket costs incurred by Lender in connection with the administration of the Loan and the negotiation and preparation of this Third Amendment, and any other related expenses, including all legal fees and disbursements incurred by Lender’s counsel and any past due amounts outstanding.

(n) Payment of Closing Fee. Borrowers shall have paid to Lender the closing fee separately agreed to between Lender and Borrowers as set forth in Lender’s February 7, 2006 commitment letter.

16. Miscellaneous.

(a) Change of Control Waiver. Provided that Borrowers have satisfied all the conditions precedent to this Third Amendment as set forth in Paragraph 15 of this Third Amendment, Lender hereby consents to waive the application of Sections 6.4, 6.10 and 9.6 of the Loan Agreement solely as they relate to the Change of Control and other defaults which will be caused by the DPAC Transaction. This waiver applies only to Sections 6.4, 6.10 and 9.6 of the Loan Agreement for the Events of Default caused by the DPAC Transaction only to the extent as such Events of Default exist on the Third Amendment Closing Date and as are referenced in this Paragraph 16(a), and such waiver does not otherwise modify or waive any other covenant or agreement contained in the Loan Agreement, except as modified by this Third Amendment.

(b) Effect of Agreements. Except as specifically amended hereby, the Loan Agreement and the other Loan Documents shall remain in full force and effect.

(c) 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.

(d) Entire Agreement. This Amendment, together with the Loan Agreement, each as amended from time to time, 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.

[Signature page follows. Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Third Amendment to Subordinated Loan and Security Agreement by their respective duly authorized officers as of the date first written above.

QUATECH, INC.
By:	/s/ Steven D. Runkel
Name:	Steven D. Runkel
Title:	Chief Executive Officer
DPAC TECHNOLOGIES CORP.
By:	/s/ Steven D. Runkel
Name:	Steven D. Runkel
Title:	CEO
THE HILLSTREET FUND, L.P.
BY:	HILLSTREET CAPITAL, INC.
ITS:	INVESTMENT MANAGER
By:	/s/ John P. Vota, II
Name:	John P. Vota, II
Title:	Executive Vice President

Third Amendment to Subordinated Loan and Security Agreement

ADDENDUM A TO

JOINDER AGREEMENT AND THIRD AMENDMENT TO

SUBORDINATED LOAN AND SECURITY AGREEMENT

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

In order to induce the Lender to enter into this Agreement, Borrower hereby represents and warrants to the Lender on the date hereof that:

Section 4.1 Organization, Authority and Qualification.

(a) Quatech is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio, and has all requisite power and authority to own and operate its properties and to carry on its business as now conducted. DPAC is a corporation duly organized, validly existing and in good standing under the laws of the State of California. The execution, delivery and performance of this Agreement and the Subordinated Note have been duly authorized by all necessary company actions; there is no prohibition, either in law, in its charter documents, operating agreement, or bylaws, if any, or in any order, writ, injunction or decree of any court or arbitrator presently in effect having applicability to Borrowers which in any way prohibits or would be violated by the execution and performance of this Agreement and the Subordinated Note in any respect; this Agreement and the Subordinated Note are and will be valid, binding and enforceable obligations of the Borrowers; and the Borrowers have adequate power and authority and has full legal right to enter into this Agreement and each of the other Loan Documents, and to perform, observe and comply with all of its agreements and obligations under each of such documents, including, without limitation the borrowings contemplated hereby. Borrowers are, and will be after giving effect to the DPAC Transaction, duly qualified or licensed and in good standing and duly authorized to do business in each jurisdiction in which the character of the properties owned or leased or the nature of the activities conducted makes such qualification or licensing necessary and in which the failure to be so qualified would have a materially adverse effect on the conduct of the business of Borrowers.

(b) The authorized Capital Stock of DPAC is as set forth on Schedule 4.1(b) hereto. Except as described on Schedule 4.1(b) hereto, there are no outstanding options, rights or warrants issued by DPAC for the acquisition of the Capital Stock of either DPAC, nor any outstanding securities or obligations convertible into Capital Stock. After

giving effect to the DPAC Transaction, all of the capital stock of Quatech will be owned by DPAC.

(c) Neither Borrower has any Subsidiaries except as set forth on Schedule 4.1(c) hereto. The Capital Stock of each Subsidiary is owned by a Borrower free and clear of all Liens other than securities laws restrictions, the pledge pursuant to the Senior Loan Documents and those in favor of Lender. Each Subsidiary (i) is duly organized, validly existing and in good standing under the laws of the state of its incorporation, and (ii) has full corporate power and authority and full legal right to own or to hold under lease its Property and to carry on its business. Each Subsidiary is qualified and licensed in each jurisdiction wherein the character of the Property owned or held under lease by it, or the nature of its business makes such qualification necessary or advisable.

(d) Except as listed on Schedule 4.1(c), neither Borrower owns or holds of record (whether directly or indirectly) any shares of any class in the capital of any corporation, nor does either Borrower own or hold (whether directly or indirectly) any legal and/or beneficial equity interest in any partnership, business trust or joint venture or in any other unincorporated trade or business enterprise.

Section 4.2 No Legal Bar. The execution, delivery and performance of this Agreement, the Subordinated Note and the other Loan Documents and the consummation of the transactions contemplated thereby, will not in any material respect violate any Requirements of Law or any Contractual Obligation of a Borrower.

Section 4.3 No Litigation. No litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or threatened by or against either Borrower or against any of its respective properties or revenues, existing or future, (a) with respect to this Agreement, the Subordinated Note, any of the other Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which, if adversely determined, would have a Material Adverse Effect.

Section 4.4 Financial Condition. The Registration Statements on Form S-4, as amended, (Registration No. 333-129532) contains financial statements for each Borrower as well as Form 10-Q filed by DPAC for the quarter ended November 30, 2005, The financial statements contained in such filings are the “Financial Statements.” The Financial Statements have been prepared in conformity with generally accepted accounting principles applied on a basis consistent with preceding years and throughout the periods involved (“GAAP”) and present fairly in all material respects the financial position and results of operations of each Borrower as of the dates of such statements and for the periods covered thereby. The books of account of each Borrower have been kept accurately in all material respects in the ordinary course of business, the transactions entered therein represent bona fide transactions, and the revenues, expenses, assets and liabilities of each Borrower have been properly recorded therein in all material respects.

Section 4.5 No Change. There has been no development or event which has had or would reasonably be expected to have a Material Adverse Effect since November 30, 2005.

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Section 4.6 No Default. Neither Borrower is in default under or with respect to any of its Contractual Obligations, except where the default would not have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

Section 4.7 Ownership of Property; Liens. Each Borrower has good and marketable title to all its property as listed on the Financial Statements and none of such property is subject to any Lien except Permitted Liens.

Section 4.8 Intellectual Property. Each Borrower possess all licenses, patents, permits, trademarks, trade names, copyrights, technology, know how and processes necessary for the conduct of its businesses as currently conducted, taking into consideration consummation of the DPAC Transaction, and all such licenses, patents, permits, trademarks, trade names, and copyrights are listed on Schedule 4.8 attached hereto and made a part hereof. No claim has been asserted and is pending by any Person challenging or questioning the use of any such property or rights or the validity or effectiveness of any such property or rights, nor is there any known basis for any such claim. The use of such property and rights by each Borrower does not infringe on the rights of any Person.

Section 4.9 Compliance with Laws. Each Borrower is in compliance with all Requirements of Law, including all Environmental Laws applicable to it, except, in each case, where the failure to comply would not have a Material Adverse Effect.

Section 4.10 Taxes. Each Borrower has filed or caused to be filed all tax returns which are required to be filed and have paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its properties and all other taxes, fees or other charges imposed on it or any of its property by any governmental authority (other than any taxes, fees or other charges the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of such Borrower); no tax Lien has been filed, and, to the knowledge of each Borrower, no claim is being asserted, with respect to any such tax, fee or other charge.

Section 4.11 Environmental Matters. To each Borrower’s knowledge, each Borrower is in compliance with, and has no liability to any Person in respect of, all Environmental Laws except for such non-compliance or liabilities that would not have a Material Adverse Effect.

Section 4.12 Place of Business. Each Borrower maintains a place of business and owns Collateral at its Principal Office. Each Borrower maintains its books of account and records, including all records concerning the Collateral, only at its Principal Office. Schedule 4.12 is a complete listing of the current location of all Collateral. Such locations may change from time to time.

Section 4.13 General Collateral Representation. Subject, in each case, to the liens of the Senior Lender:

(a) The Borrowers are the sole owners of and have good and marketable title to the Collateral, free from all Liens, other than the Permitted Liens, and have full right and power to grant the Lender a security interest therein. All information which has been furnished to the Lender concerning the Collateral was complete, accurate and correct in

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all material respects when furnished, and all information which may be furnished to the Lender in the future concerning the Collateral will be complete, accurate and correct in all material respects when furnished.

(b) No security agreement, financing statement, equivalent security or Lien instrument or continuation statement covering all or any part of the Collateral is on file or of record in any public office, except such as may have been filed (i) by Borrower in favor of Senior Lender pursuant to the Senior Loan Agreement, (ii) by Borrower in favor of the State of Ohio pursuant to the State of Ohio Debt, (iii) by Borrower in favor of Lender pursuant to this Agreement, or (iv) in respect of the items of Collateral subject to the Permitted Liens.

(c) The provisions of this Agreement are sufficient to create in favor of the Lender, as of the Closing Date, a valid and continuing lien on, and security interest in, the types of the Collateral hereunder in which a security interest may be created under Article 9 of the UCC. Financing Statements on Form UCC-1 have been duly executed on behalf of each Borrower and the description of such Collateral set forth therein is sufficient to perfect security interests in such Collateral in which a security interest may be perfected by the filing of Financing Statements under the UCC. When such Financing Statements are duly filed in the filing offices listed on Schedule 4.13 hereto, and the requisite filing fees are paid, such filings will be sufficient to perfect security interests in such of the Collateral described in the Financing Statements as can be perfected by filing, which perfected security interests will be prior to all other Liens in favor of others and rights of others (except for Permitted Liens), and as against any owner of real estate where any of the Equipment is located and as against any purchaser of such real property and any present or future creditor obtaining a Lien on such real estate. All action necessary to protect and perfect a security interest in each item of the Collateral has been or will be duly taken, or in the case of Equipment covered by certificates of title will be taken within ninety (90) days of the Closing Date.

(d) Upon delivery to Lender and the filing with the U.S. Patent and Trademark Office of the Assignment of Trademarks and delivery to the Lender and the payment of the requisite filing fees, the Lender shall have a perfected security interest in the intellectual property listed on Schedule 4.8 and the other Collateral of a type described in such assignments, which perfected security interest will be prior to all other Liens in favor of others.

Section 4.14 Accounts. As to each and every Account of Borrowers, a Borrower has full right and power to grant the Lender a security interest therein and the security interest granted in such Account to the Lender in Article 3 hereof, when perfected, will be a valid second security interest, subordinate only to Permitted Liens, the liens granted under the Senior Loan Documents, which will inure to the benefit of the Lender without further action, subject to Permitted Liens and the provisions of Section 4.13(c) hereof.

Section 4.15 Equipment. All Equipment is located at a Borrower’s Principal Offices, except for de minimus equipment held at the location of customers or resellers from time to time. No Equipment is now stored with a bailee (except as set forth in the preceding sentence),

- 4 -

warehouseman or similar party. All Equipment necessary for the conduct of a Borrower’s business or reflected on the Financial Statements is currently usable or currently saleable in the normal course of Borrower’s business.

Section 4.16 ERISA. Schedule 4.16 contains a list of all Employee Benefit Plans maintained by each Borrower. Borrowers and their ERISA Affiliates are in compliance with any applicable provisions of ERISA and the regulations thereunder, and the Code, with respect to all such Employee Benefit Plans.

Section 4.17 Undisclosed Liabilities. No Borrower has any material obligation or liability (whether accrued, absolute, contingent, unliquidated, or otherwise, whether due or to become due) arising out of transactions entered into at or prior to the Closing Date, or any action or inaction at or prior to the Closing Date, except liabilities reflected on the Financial Statements; liabilities incurred in the ordinary course of business (none of which are liabilities for breach of contract, breach of warranty, torts, infringements, claims or lawsuits); liabilities or obligations disclosed in the Schedules hereto; and liabilities or obligations incurred pursuant to the Loan Documents, the Purchase Agreement and the agreements, documents and instruments contemplated thereby and the Senior Loan Agreement and the other Senior Loan Documents and the Ohio Loan and State of Ohio Loan Documents.

Section 4.18 Disclosure.

(a) All factual information furnished by or on behalf of each Borrower in writing to Lender on or before the Closing Date (including all information contained in the Loan Documents) for purposes of or in connection with this Agreement or any transaction contemplated hereby is true and complete in all material respects on the date as of which such information is dated or certified and does not contain any untrue statement of a material fact or omits to state any material fact, it being understood and agreed that for purposes of this clause (a), such factual information shall not include projections and pro forma financial information.

(b) The projections and pro forma financial information contained in the factual information referred to in clause (a) above (including the pro forma consolidated financial statements delivered hereunder) were or are based on good faith estimates and assumptions believed to be reasonable at the time made, it being recognized by Lender that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ significantly from the projected results.

Section 4.19 Solvency. Each Borrower will be solvent after consummation of the DPAC Transaction, and creation of the Obligations hereunder and under the Senior Loan Documents, the security interests of Lender, Senior Lender and the State of Ohio and the other transactions contemplated hereby and by the Senior Loan Documents. Borrowers are able to pay their debts as they mature and have sufficient capital to carry on their business.

Section 4.20 Survival of Representations and Warranties. The foregoing representations and warranties are made by the Borrowers with the knowledge and intention that

- 5 -

the Lender will rely thereon, and shall survive the execution and delivery of this Agreement and the making of the Loan hereunder.

ARTICLE 5

AFFIRMATIVE COVENANTS

So long as the Subordinated Note remains outstanding and unpaid or any other Obligation is owing to the Lender, the Borrowers agree as follows:

Section 5.1 Financial Statements.

(a) SEC Filings. Within two (2) business days of filing with the SEC, DPAC shall deliver to Lender all financial statements, reports and other filings made by DPAC with the SEC.

(b) Reports to Management. Simultaneously with the delivery of the financial statements described in Section 5.1, the Borrower shall also deliver to Lender copies of reports to management and management letters prepared by the accountants to the Borrower, each certified as true and correct by a Responsible Officer.

(c) Compliance Certificates. Simultaneously with the delivery of the financial statements described in Section 5.1, the Borrowers shall furnish to the Lender a Compliance Certificate executed by a Responsible Officer of each Borrower (i) setting forth in reasonable detail the calculations supporting and used to determine Borrower’s compliance with the financial covenants contained in Article 7 hereof, along with supporting schedules; and (ii) stating that such Responsible Officer has obtained no knowledge of any Default or Event of Default, except as specified in such Compliance Certificate.

Section 5.2 Conduct of Business and Maintenance of Existence. Borrowers shall continue to engage in business of the same general type in all material respects as now conducted by their and preserve, renew and keep in full force and effect their existence and take all reasonable action to maintain all rights, privileges and franchises necessary for the normal conduct of their business. Borrowers shall comply with all Contractual Obligations and Requirements of Law.

Section 5.3 Maintenance of Property; Insurance. Borrowers shall keep all property useful and necessary in their business in good working order and condition; maintain all workers’ compensation insurance required by law; maintain with financially sound and reputable insurance companies insurance on all of their real and personal property in amounts consistent with past practices of Borrowers (in amounts sufficient to insure one hundred percent (100%) of the actual replacement costs thereof) (subject to normal deductibles and/or self-insured retentions in amounts not in excess of the amounts in place as of the date of this Agreement) and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business, or, in case of an Event of Default, as the Lender may reasonably specify from time to time, that Lender may reasonably request from time to time, and furnish to

- 6 -

the Lender, promptly after written request, any information as to the insurance carried. If Borrowers fail to do so, the Lender may obtain such insurance and charge the cost thereof to the Borrowers’ account and add it to the Obligations. The Borrowers agree that, if any loss should occur, the proceeds of all such insurance policies may be applied to the payment of all or any part of the Obligations, as the Lender may direct. Lender shall be named an additional named insured, lender loss payee and mortgagee on such insurance policies, as the case may be, to the extent that such policies insure the Collateral. In the event of any casualty for which the proceeds of insurance are less than Twenty Five Thousand and 00/100 Dollars ($25,000.00), however, the Borrowers shall be entitled to retain such proceeds for the purpose of repairing or replacing the insured property, provided that the Borrowers promptly execute and deliver to the Lender such documents, instruments, financing statements or other agreements as may be necessary to perfect the security interest of the Lender in all such property. All policies shall provide for at least thirty (30) days’ written notice of cancellation to the Lender, except premium nonpayment cancellation which shall be ten (10) days’ written notice.

Section 5.4 Liability Insurance. Borrowers shall, at all times, maintain in full force and effect such liability insurance with respect to their activities and other insurance as may be reasonably required by the Lender, such insurance to be provided by insurer(s) reasonably acceptable to the Lender; and, if requested by the Lender, such insurance shall name the Lender as an additional insured.

Section 5.5 Inspection of Property; Books and Records. DPAC, on a consolidated basis, shall maintain in all material respects complete and accurate books of accounts and records in which full, true and correct entries in conformity with GAAP and all Requirements of Law in all material respects shall be made of all dealings and transactions in relation to the Collateral and the operations of DPAC; and grant to the Lender, or its representatives, full and complete access to the Collateral and all books of account, records, correspondence and other papers relating to the Collateral during normal business hours and Borrowers grant to Lender the right to inspect, examine, verify and make abstracts from the copies of such books of account, records, correspondence and other papers, and to investigate during normal business hours such other records, activities and business of the Borrowers as they may deem reasonably necessary or appropriate at the time.

Section 5.6 Notices. Borrowers shall promptly give notice to the Lender of:

(a) the occurrence of any Default or Event of Default;

(b) any default or event of default under any Contractual Obligation relating to any Indebtedness of Borrowers, and any litigation, investigation or proceeding which may exist at any time between Borrower and any governmental authority, which in either case, if not cured or if adversely determined, as the case may be, would reasonably be expected to have a Material Adverse Effect;

(c) the commencement, existence or written threat of any action or proceeding by or before any governmental or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic, against or affecting

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Borrower, which action or proceeding, as the case may be, would reasonably be expected to have a Material Adverse Effect; and

(d) any change in the business, operations, property or condition (financial or otherwise) of Borrowers which would reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of Borrowers setting forth details of the occurrence referred to therein and stating what action the Borrower propose to take with respect thereto.

Section 5.7 Environmental Laws. Borrowers shall comply in all material respects with all Environmental Laws and obtain and comply with and maintain in all material respects any and all licenses, approvals, registrations or permits required by any Environmental Law.

Section 5.8 Inventory. With respect to the Inventory, Borrowers shall:

(a) sell or dispose of the Inventory only to buyers in the ordinary course of business and consistent with past practices of Seller (which may include disposing of obsolete inventory or Inventory of de minimus value in the ordinary course of business and in accordance with past practices of such Borrowers); and

(b) provide Lender with a list of the locations of all Inventory on a monthly basis,

Section 5.9 Equipment. Borrowers shall:

(a) keep and maintain the Equipment in good operating condition and repair, excluding normal wear and tear, and shall make all necessary replacements thereof so that the value, utility and operating efficiency thereof shall at all times be maintained and preserved in materially the same condition as on the Closing Date, except to the extent items of Equipment become obsolete in the ordinary course of business, and not permit any such items to become a fixture to real estate or accession to other personal property; and

(b) upon an Event of Default or as reasonably requested by Lender, immediately on demand thereof by Lender, deliver to Lender any and all evidence of ownership of any of the Equipment (including, without limitation, certificates of title and applications for the title).

Section 5.10 Collateral. Borrowers shall maintain the Collateral, as the same is constituted from time to time, free and clear of all Liens, except Permitted Liens, and defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein and pay all costs and expenses (including reasonable attorney’s fees) incurred in connection with such defense.

Section 5.11 Employee Benefit Plans. Borrowers will and will cause each of their ERISA Affiliates to comply in all material respects with all requirements imposed by ERISA

- 8 -

and the Code applicable from time to time to any Employee Benefit Plans of a Borrower or any ERISA Affiliates; make full payment when due of all amounts which under the provisions of such Employee Benefit Plans or under applicable law, are required to be paid as contributions thereto; file on a timely basis all reports, notices and other filings required by any governmental agency with respect to any such Employee Benefit Plans; furnish to all participants, beneficiaries, and employees under any such Employee Benefit Plan, within the periods prescribed by law, all reports, notices and other information to which they are entitled under applicable law, and take no action which would cause any such Employee Benefit Plan to fail to meet any qualification requirement imposed by the Code.

Section 5.12 Further Documents. Borrowers shall, at or prior to the Closing Date:

(a) cause Lender’s Lien to be noted on each document of ownership or title as to which evidence of Lender’s Lien is necessary or, in Lender’s or Lender’s counsel’s opinion, advisable to be shown in order to perfect Lender’s Lien on the Collateral covered by such document; and if reasonably practicable

(b) execute and deliver such financing statements, documents and instruments, and perform all other acts as the Lender deems reasonably necessary or desirable, to carry out and perform the intent and purpose of this Agreement, and pay, upon demand, all expenses (including reasonable attorney’s fees) incurred by the Lender in connection therewith.

Section 5.13 Life Insurance. Borrowers shall keep and maintain the Life Insurance in accordance with the terms hereof until all of the Obligations are satisfied and this Agreement is terminated.

Section 5.14 Trademarks, Copyrights and Other Intellectual Property. Promptly upon the filing by Borrowers or any Subsidiary of any application for letters patent or the registration of any trademarks, trade names or copyrights, Borrowers shall notify Lender in writing and furnish such documentation as Lender may request to perfect Lender’s security interest in such property.

Section 5.15 Other Information. Borrowers shall furnish to the Lender such other financial and business information and reports in form and substance satisfactory to the Lender as and when the Lender may from time to time reasonably request.

Section 5.16 Board of Directors. For so long as the Obligations, or the Warrant or Capital Stock issued upon the exercise thereof remain outstanding and owned or held by Lender, Lender shall be entitled to nominate one (1) individual to attend any meetings of the board of directors of either Borrower and the meetings of any committee thereof as an observer and Lender shall be entitled to receive at lease ten (10) days’ prior written notice of all such meetings. Borrowers shall promptly reimburse such individual for all reasonable out-of-pocket expenses incurred in attending such meetings.

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ARTICLE 6

NEGATIVE COVENANTS

The Borrowers covenant and agree with the Lender and warrant that, as long as the Loan shall remain unpaid:

Section 6.1 Limitations on Restricted Payments. Without the prior written consent of Lender, the Borrowers shall not, at any time, enter into, participate in, or make any Restricted Payment.

Section 6.2 Limitations on Indebtedness. Borrowers will not at any time create, incur or assume, or become or be liable (directly or indirectly) in respect of, any Indebtedness, other than:

(a) the Obligations incurred pursuant to this Agreement;

(b) the obligations incurred relative to the Senior Loan Documents and the State of Ohio Loan Documents or permitted by the Senior Loan Documents or the State of Ohio Loan Documents;

(c) Guarantee Obligations permitted under Section 6.3 hereof;

(d) current liabilities of Borrowers incurred in the ordinary course of business not incurred through the borrowing of money, or the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services;

(e) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, worker’s compensation, materials and supplies to the extent any of the foregoing shall not otherwise be payable in accordance herewith;

(f) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which Borrowers shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review;

(g) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business;

(h) Indebtedness in respect of performance, surety, statutory, insurance, appeal or similar bonds obtained in the ordinary course of business;

(i) except to the extent prohibited by Section 6.6, Indebtedness of the Borrowers incurred to refinance or replace Indebtedness of such Person permitted hereunder; provided, that the principal amount (or committed principal amount) of such refinancing Indebtedness shall not exceed the outstanding principal amount (or

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committed principal amount) of the Indebtedness being refinanced, the terms of such refinancing are not more onerous taken as a whole to such Person than the terms of the Indebtedness being refinanced, and the Lender shall have consented to the incurrence of such refinancing Indebtedness; and

(j) Indebtedness pursuant to capital leases or purchase money financing agreements not exceeding $100,000 in the aggregate.

Section 6.3 Limitation on Guarantee Obligations. The Borrowers shall not create, incur, assume or suffer to exist any Guarantee Obligation except in the ordinary course or for (i) product warranties; and (ii) return or replacement guaranties and similar assurances made by Borrowers with respect to products sold to customers in the ordinary course of business and in accordance with the past practices of such Borrower.

Section 6.4 Limitation on Fundamental Changes. Borrowers shall not merge, consolidate or amalgamate, or liquidate, wind up or dissolve themselves (or suffer any liquidation or dissolution), or make any material change in their businesses or their present method of conducting business.

Section 6.5 Limitation on Dispositions of Assets. Without the prior written consent of Lender, which shall not be unreasonably withheld, Borrowers shall not convey, sell, lease, license, assign, transfer or otherwise dispose of a substantial part (more than ten percent (10%) in the aggregate during the term hereof) of their property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, except for the sale of Inventory and obsolete Equipment or the disposal of de minimus amounts of Equipment and Inventory in the ordinary course of business and except for dispositions permitted under the definition of Restricted Payments.

Section 6.6 Limitation on Investments, Loans and Advances. Borrowers shall not make or permit to exist any advances or loans to, or guarantee or become contingently liable, directly or indirectly, in connection with the obligations, leases, stock or dividends of, or own, purchase or make any commitment to purchase any stock, bonds, notes, debentures or other securities of, or any interest in, or make any capital contributions to (all of which are sometimes collectively referred to herein as “Investments”) any Person except for (a) purchases of direct obligations of the federal government, (b) deposits in commercial banks, (c) commercial paper of any U.S. corporation having the highest ratings then given by the Moody’s Investors Services, Inc. or Standard & Poor’s Corporation, (d) endorsement of negotiable instruments for collection in the ordinary course of business, (e) advances to employees for business travel and other expenses incurred in the ordinary course of business, (f) any extension of trade credit in the ordinary course of business and investments in customer accounts for Inventory sold or services rendered in the ordinary course of business, (g) any investments in cash equivalents, (h) investments received in connection with the bankruptcy of suppliers and customers or received pursuant to a plan of reorganization, in each case, in settlement of delinquent obligations or disputes; and (i) transactions contemplated by, or required of DPAC under the Warrant Agreement or the Warrant.

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Section 6.7 Limitation on Payments and Modifications of Debt Instruments. The Borrowers shall not:

(a) make any optional payment or prepayment on any Indebtedness for Borrowed Money (other than Obligations under this Agreement and prepayments of accounts payable in the ordinary course of business to obtain discounts by the terms of payment); and

(b) amend, modify or change or consent or agree to any amendment, modification or change to any of the terms relating to the payment or prepayment of principal of or interest on, any such Indebtedness for Borrowed Money, or any capital or finance lease obligations, without the consent of Lender.

Section 6.8 Limitation on Creation or Acquisition of Subsidiaries. Borrowers will not create or form any new Subsidiary.

Section 6.9 Corporate Documents. Borrowers shall not make any material change, amendment or modification to their respective Articles of Incorporation or By-Laws without the prior written consent of Lender which consent shall not be unreasonably withheld or delayed.

Section 6.10 Changes Relating to Indebtedness. Without the consent of Lender, such consent not to be unreasonably withheld, Borrowers will not, and will not permit any of their Subsidiaries to change or amend the terms of the Senior Debt or State of Ohio Loan if such change or amendment would have the effect of (a) increasing the rate of or changing the due dates of payment of interest payable with respect to any liability of the Borrowers under the Senior Debt or State of Ohio Loan, or the amount of any fees payable under the Senior Debt or State of Ohio Loan, or require the Borrowers to pay any additional fees under or with respect to the Senior Debt or State of Ohio Loan (other than ordinary and customary fees in connection with giving effect to amendments and waivers otherwise permitted by this Agreement), (b) shortening the maturity of or requiring the earlier payment of the Senior Debt or the State of Ohio Loan, (c) imposing any additional prepayment obligations on the Borrower with respect to the Senior Debt or the State of Ohio Loan, (d) increasing the aggregate principal amount of the Senior Debt or the State of Ohio Loan, or (e) permitting the incurrence of additional indebtedness.

Section 6.11 Limitations on Management Fees. Neither Borrower nor any Subsidiary shall 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, except for reasonable directors’ fees for attendance at Board meetings or Board Committee meetings.

Section 6.12 Management Compensation. Borrower shall not pay to Steven Runkel compensation in excess of that described in his current employment agreement, as the same may be adjusted by the compensation committee of the Board of Directors of DPAC at any renewal thereof.

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EX-10.6

Exhibit 10.6

CREDIT AGREEMENT

between

WR ACQUISITION, INC.

and

NATIONAL CITY BANK

July 28, 2000

$850,000 Term Loan A

$480,000 Term Loan B

$1,500,000 Revolving Commitment

1A.	CROSS-REFERENCE	1
1B.	SUMMARY	1
2A.	TERM LOAN A	1
	2A.01 TERM NOTE A	1
	2A.02 AMORTIZATION OF TERM LOAN A	1
	2A.03 INTEREST ON TERM LOAN A	1
	2A.04 PREPAYMENTS OF TERM LOAN A	2
	2A.05 LOAN FEE	2
	2A.06 MANDATORY PREPAYMENTS	2
2B.	TERM LOAN B	2
	2B.01 TERM NOTE B	2
	2B.02 AMORTIZATION OF TERM LOAN B	3
	2B.03 INTEREST ON TERM LOAN B	3
	2B.04 PREPAYMENTS OF TERM LOAN B	3
	2B.05 LOAN FEE	3
2C.	REVOLVING COMMITMENT	4
	2C.01 AMOUNT	4
	2C.02 TERM	4
	2C.03 OPTIONAL REDUCTIONS	4
	2C.04 COMMITMENT FEE	4
	2C.05 ANNUAL LOAN FEE	4
	2C.06 EXTENSION OF REVOLVING COMMITMENT	4
	2C.07 BORROWING BASE	5
	2C.08 BORROWING BASE MAINTENANCE	5
2D.	REVOLVING LOANS	5
	2D.01 REVOLVING NOTE	5
	2D.02 CREDIT REQUESTS	6
	2D.03 CONDITION: NO DEFAULT	6
	2D.04 CONDITION: PURPOSE	6
	2D.05 AMOUNT	6
	2D.06 MATURITIES	6
	2D.07 INTEREST: REVOLVING LOANS	6
	2D.08 DISBURSEMENT	7
	2D.09 PREPAYMENTS	7
3A.	INFORMATION	7
	3A.01 FINANCIAL STATEMENTS	7
	3A.02 NOTICE	9
3B.	GENERAL FINANCIAL STANDARDS	9
	3B.01 LEVERAGE	9
	3B.02 PRETAX DEBT SERVICE COVERAGE	9
	3B.03 DEBT TO EBITDA RATIO	10
3C.	AFFIRMATIVE COVENANTS	10
	3C.01 TAXES	10
	3C.02 FINANCIAL RECORDS	11
	3C.03 VISITATION	11
	3C.04 INSURANCE	11
	3C.05 CORPORATE EXISTENCE	11
	3C.06 COMPLIANCE WITH LAW	11
	3C.07 PROPERTIES	12
3D.	NEGATIVE COVENANTS	12

	3D.01 EQUITY TRANSACTIONS	12
	3D.02 CREDIT EXTENSIONS	13
	3D.03 BORROWINGS	13
	3D.04 LIENS, LEASES	14
	3D.05 FIXED ASSETS	15
	3D.06 DIVIDENDS	15
	3D.07 SUBORDINATED NOTES	15
4A.	CLOSING	15
	4A.01 SUBJECT NOTES	15
	4A.02 RESOLUTIONS/INCUMBENCY	15
	4A.03 LEGAL OPINION	15
	4A.04 INTENTIONALLY LEFT BLANK	16 16
	4A.05 SECURITY AGREEMENTS
	4A.06 MORTGAGES AND RELATED REAL ESTATE DOCUMENTS	16
	4A.07 DOCUMENTATION FEE	16
	4A.08 ACQUISITION	16 16
	4A.09 LIEN WAIVERS
	4A.10 OTHER DOCUMENTS	16
4B.	WARRANTIES	17
	4B.01 EXISTENCE	17
	4B.02 GOVERNMENTAL RESTRICTIONS	17
	4B.03 CORPORATE AUTHORITY	17
	4B.04 LITIGATION	18
	4B.05 TAXES	18
	4B.06 TITLE	18
	4B.07 LAWFUL OPERATIONS	18
	4B.08 INSURANCE	18
	4B.09 DEFAULTS	18
5A.	EVENTS OF DEFAULT	18
	5A.01 PAYMENTS	18
	5A.02 WARRANTIES	19
	5A.03 COVENANTS WITHOUT GRACE	19
	5A.04 COVENANTS WITH GRACE	19
	5A.05 CROSS-DEFAULT	19
	5A.06 BORROWER’S SOLVENCY	19
5B.	EFFECTS OF DEFAULT	20
	5B.01 OPTIONAL DEFAULTS	20
	5B.02 AUTOMATIC DEFAULTS	20
	5B.03 OFFSETS	20
6A.	INDEMNITY: STAMP TAXES	20
6B.	INDEMNITY: FUNDING COSTS	20
6C.	CREDIT REQUESTS	21
6D.	INDEMNITY: UNFRIENDLY TAKEOVERS	21
6E.	INDEMNITY: CAPITAL REQUIREMENTS	21
6F.	INDEMNITY: COLLECTION COSTS	21
6G.	CERTIFICATE FOR INDEMNIFICATION	21
7.	BANK’S PURPOSE	22
8.	INTERPRETATION	22
	8.01 WAIVERS	22

2

	8.02 CUMULATIVE PROVISIONS	22
	8.03 BINDING EFFECT	22
	8.04 SURVIVAL OF PROVISIONS	22
	8.05 IMMEDIATE U.S. FUNDS	22
	8.06 CAPTIONS	22
	8.07 SUBSECTIONS	22
	8.08 ILLEGALITY	23
	8.09 OHIO LAW	23
	8.10 INTEREST/FEE COMPUTATIONS	23
	8.11 NOTICE	23
	8.12 ACCOUNTING TERMS	23
	8.13 ENTIRE AGREEMENT	23
	8.14 WAIVER OF JURY TRIAL	23
	8.15 LATE CHARGE; APPLICATION OF PAYMENTS	23
	8.16 SHARING OF INFORMATION	24
9.	DEFINITIONS	24
	Account Officer	24
	Accumulated Funding Deficiency	24
	Affiliate	24
	Agreement	24
	Asset Purchase Agreement	24
	Bank	24
	Banking Day	24
	Borrower	24
	Borrowing Base	24
	Borrowing Base Report	24
	Compensation	25
	Credit Request	25
	Current Assets	25
	Current Liabilities	25
	Current Portion of Long Term Debt	25
	Debt	25
	Default Under ERISA	25
	Default Under This Agreement	25
	Distribution	25
	Eligible Inventory	25
	Eligible Receivable	26
	Environmental Law	27
	ERISA	27
	ERISA Regulator	27
	Export-Import Bank	27
	Event of Default	27
	Expiration Date	27
	Federal Funds Rate	27
	Foreign Eligible Receivable	27
	Funded Indebtedness	28
	GAAP	28
	Guarantor	28
	Insider	28

3

	Insolvency Action	28
	Inventory	29
	Material	29
	Maturity	29
	Most Recent 4A. 04 Financial Statements	29
	Net Income	29
	Net Worth	29
	Pension Plan	29
	Prime Rate	29
	Receivable	29
	Reference Rate	29
	Related Writing	30
	Reportable Event	30
	Revolving Commitment	30
	Revolving Loan	30
	Revolving Note	30
	Subject Indebtedness	30
	Subject Loan	30
	Subject Note	30
	Subordinated	30
	Subsidiary	30
	Supplemental Schedule	30
	Target	30
	Term Loan A	30
	Term Loan B	30
	Term Note A	31
	Term Note B	31
	Total Liabilities	31
plurals		31
Signatures and Address		31

EXHIBIT A:	Supplemental Schedule (4B.)
EXHIBIT B:	Term Note A (2A; 4A.01)
EXHIBIT C:	Term Note B (2B; 4A.01)
EXHIBIT D:	Revolving Note (2D.01; 4A.01)
EXHIBIT E:	Extension Agreement (2C.06)

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CREDIT AGREEMENT

Agreement (this Agreement) made as of July 28, 2000 by and between WR ACQUISITION, INC. (Borrower) and NATIONAL CITY BANK (Bank):

1A CROSS-REFERENCE — Certain terms are defined in section 9.

1B. SUMMARY — This Agreement

(a) provides that concurrently with the execution and delivery of this Agreement Bank shall grant Borrower Term Loan A described in section 2A and Term Loan B described in section 2B,

(b) sets forth the terms and conditions upon which Borrower may, so long as the Revolving Commitment remains in effect, obtain the Revolving Loans described in sections 2C and 2D, PROVIDED that the aggregate unpaid principal balance of the Revolving Loans at any one time outstanding shall never exceed the amount of the Revolving Commitment then in effect, and

(c) sets forth the covenants and warranties made by the parties to induce each other to enter into this Agreement and other Material provisions.

2A. TERM LOAN A — Concurrently with the execution and delivery of this Agreement Bank shall lend Borrower Eight Hundred Fifty Thousand and 00/100ths Dollars ($850,000) (“Term Loan A”) and disburse the proceeds to the credit of Borrower’s general checking account with Bank in the absence of written instructions from Borrower to the contrary.

2A.01 TERM NOTE A — Concurrently with the execution and delivery of this Agreement Borrower shall evidence Term Loan A by executing and delivering to Bank Borrower’s note being in the form and substance of Exhibit B to this Agreement.

2A.02 AMORTIZATION OF TERM LOAN A — The principal of Term Loan A shall be payable in twenty-four (24) consecutive monthly installments of principal commencing                    , 2000, all but the last installment to be in the principal sum of Twenty-Three Thousand Six Hundred Eleven and 11/100ths Dollars ($23,611.11) each and the last to be in the amount of the remaining outstanding principal of Term Loan A.

2A.03 INTEREST ON TERM LOAN A — The principal of and overdue interest on Term Loan A shall bear interest (subject to the provisions of subsection 8.10 and those in Exhibit B) at a fluctuating rate (the Fluctuating Rate) equal to the Reference Rate from time to time in effect plus two percent (2.00%), with each change in the Reference Rate immediately and automatically changing the Fluctuating Rate if and to the extent it is thereafter applicable to Term Loan A,

EXCEPT that after Maturity (whether occurring by lapse of time or by acceleration) the principal of and overdue interest on Term Loan A shall bear interest at a fluctuating rate

per annum equal to the Reference Rate from time to time in effect plus four percent (4%) per annum, with each change in the Reference Rate immediately and automatically changing the aforesaid fluctuating rate. Interest on Term Loan A shall be payable in arrears on the first day of each month commencing                      1, 2000, and at Maturity.

2A.04 PREPAYMENTS OF TERM LOAN A — Borrower shall have the right at all times to prepay Term Loan A in whole or in part, subject to the following:

(a) Borrower shall give Bank an appropriate notice not later than 12:00 noon on the Banking Day next preceding any such prepayment, which notice, if not originally given in writing, shall be promptly confirmed in writing.

(b) Each prepayment of Term Loan A shall aggregate Ten Thousand Dollars ($10,000) or any greater amount that is a multiple of Ten Thousand Dollars ($10,000) or an amount equal to the aggregate unpaid principal balance of Term Loan A and shall be applied to the principal installments in the inverse order of their respective maturities.

(c) Each prepayment of Term Loan A may be made without penalty or premium.

(d) Concurrently with each prepayment Borrower shall prepay the unpaid interest accrued on the principal being prepaid.

2A.05 LOAN FEE — Borrower agrees to pay Bank, upon the execution of this Agreement, a loan fee for Term Loan A in the amount of Eight Thousand Five Hundred Dollars ($8,500).

2A.06 MANDATORY PREPAYMENTS — Whenever Borrower’s Net Income for the previous three (3) months plus depreciation expense for the previous three (3) months plus amortization expense for the previous three (3) months minus all principal payments on Debt for the previous three (3) months shall be in excess of One Thousand Dollars ($1,000) (as measured on a quarterly basis beginning December 31, 2000), Borrower shall make a principal payment in an amount equal to seventy-five percent (75%) of the excess, which principal payment shall be applied to the principal installments of Term Loan A in the inverse order of their respective due dates. Concurrently therewith Borrower shall prepay the unpaid interest accrued on the principal being prepaid.

2B. TERM LOAN B — Concurrently with the execution and delivery of this Agreement Bank shall lend Borrower Four Hundred Eighty Thousand and 00/100ths Dollars ($480,000) (“Term Loan B”) and disburse the proceeds to the credit of Borrower’s general checking account with Bank in the absence of written instructions from Borrower to the contrary.

2B. 01 TERM NOTE B — Concurrently with the execution and delivery of this Agreement Borrower shall evidence Term Loan B by executing and delivering to Bank Borrower’s note in the form and substance of Exhibit C to this Agreement.

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2B.02 AMORTIZATION OF TERM LOAN B — The principal of Term Loan B shall be payable in sixty (60) consecutive monthly installments of principal commencing                             , 2000, in the amounts listed as follows:

Payments 1 - 12	$	1,200
Payments 13 - 24	$	1,300
Payments 25 - 36	$	1,500
Payments 37 - 48	$	1,600
Payments 49 - 59	$	1,800

and the last to be in the amount of the remaining outstanding principal of Term Loan B.

2B.03 INTEREST ON TERM LOAN B — The principal of and overdue interest on Term Loan B shall bear interest (subject to the provisions of subsection 8.10 and those in Exhibit C) at a fluctuating rate (the Fluctuating Rate) equal to the Reference Rate from time to time in effect plus one percent (1.00%), with each change in the Reference Rate immediately and automatically changing the Fluctuating Rate if and to the extent it is thereafter applicable to Term Loan B,

EXCEPT that after Maturity (whether occurring by lapse of time or by acceleration) the principal of and overdue interest on Term Loan B shall bear interest at a fluctuating rate per annum equal to the Reference Rate from time to time in effect plus three percent (3%) per annum, with each change in the Reference Rate immediately and automatically changing the aforesaid fluctuating rate. Interest on Term Loan B shall be payable in arrears on the first day of each month commencing                      1, 2000, and at Maturity.

2B.04 PREPAYMENTS OF TERM LOAN B — Borrower shall have the right at all times to prepay Term Loan B in whole or in part, subject to the following:

(a) Borrower shall give Bank an appropriate notice not later than 12:00 noon on the Banking Day next preceding any such prepayment, which notice, if not originally given in writing, shall be promptly confirmed in writing.

(b) Each prepayment of Term Loan A shall aggregate Ten Thousand Dollars ($10,000) or any greater amount that is a multiple of Ten Thousand Dollars ($10,000) or an amount equal to the aggregate unpaid principal balance of Term Loan A and shall be applied to the principal installments in the inverse order of their respective maturities.

(c) Each prepayment of Term Loan B may be made without penalty or premium,

(d) Concurrently with each prepayment Borrower shall prepay the unpaid interest accrued on the principal being prepaid.

2B.05 LOAN FEE — Borrower agrees to pay Bank, upon the execution of this Agreement, a loan fee for Term Loan B in the amount of Four Thousand Eight Hundred Dollars ($4,800).

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2C. REVOLVING COMMITMENT — The basic terms of the Revolving Commitment and the compensation therefor are as follows:

2C.01 AMOUNT — The amount of the Revolving Commitment is One Million Five Hundred Thousand Dollars ($1,500,000), but that amount may be reduced from time to time pursuant to subsection 2C.03 and the Revolving Commitment may be terminated pursuant to section 5B.

2C.02 TERM — The Revolving Commitment shall become effective as of the date of this Agreement and shall remain in effect on a revolving basis until                                 , 2003 (the “Expiration Date”) EXCEPT that a later Expiration Date may be established from time to time pursuant to subsection 2C.06 and EXCEPT that the Revolving Commitment shall end in any event upon any earlier reduction thereof to zero pursuant to subsection 2C.03 or any earlier termination pursuant to section 5B.

2C.03 OPTIONAL REDUCTIONS — Borrower shall have the right, at all times and without the payment of any premium, to permanently reduce the amount of the Revolving Commitment by giving Bank one Banking Day’s prior written notice of the amount of each such reduction and the effective date thereof subject, however, to the following:

(a) Concurrently with each reduction Borrower shall prepay such part, if any, of the principal of the Revolving Loans then outstanding as may be in excess of the amount of the Revolving Commitment as so reduced. Subsection 2D.09 and section 6B shall apply to each such prepayment.

2C.04 COMMITMENT FEE — Borrower agrees to pay Bank a commitment fee

(a) based on the average daily difference between the amount of the Revolving Commitment from time to time in effect and the aggregate unpaid principal balance of the Revolving Loans then outstanding,

(b) computed at the rate of one-quarter of one percent (1/4%) per annum so long as the Revolving Commitment remains in effect and

(c) payable in arrears on                                 , 2000 and quarter-annually thereafter and at the end of the Revolving Commitment.

2C.05 ANNUAL LOAN FEE — Borrower agrees to pay Bank, annually in advance commencing the date of this Agreement, a loan fee of Five Thousand Dollars ($5,000).

2C.06 EXTENSION OF REVOLVING COMMITMENT — Whenever Borrower furnishes its audited financial statements to Bank pursuant to clause (b) of subsection 3A.01, commencing with the year ending December 31, 2000, Borrower may request that the Revolving Commitment be extended one year to the                              next following the Expiration Date then in effect. Bank agrees to give consideration to each such request; but in no event shall Bank be committed to extend the Revolving Commitment, nor shall Bank’s Revolving Commitment be so extended, unless and until

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both Borrower and Bank shall have executed and delivered an extension agreement substantially the form of Exhibit E with the blanks appropriately filled.

2C.07 BORROWING BASE — The Borrowing Base at any given time shall be the aggregate of

(a) an amount equal to eighty percent (80%) of the net book value (after deducting any discount or other incentive for early payment but without deducting any valuation reserve) of the Eligible Receivables, plus

(b) an amount equal to ninety percent (90%) of the net book value (after deducting any discount or other incentive for early payment but without deducting any valuation reserve) of the Foreign Eligible Receivables, plus

(c) an amount equal to the lesser of either

(1) fifty percent (50%) of the Eligible Inventory or

(2) Five Hundred Thousand Dollars ($500,000),

all as reasonably determined by Bank either on the basis of the then most recent Borrowing Base Report furnished by Borrower to Bank pursuant to subsection 3A.01 or on the basis of the then most recent field audit (if any) made or other information received by Bank. Prior to December 31, 2000, however, there shall be no $500,000 inventory cap.

2C.08 BORROWING BASE MAINTENANCE — Whenever Borrower shall furnish to Bank a Borrowing Base Report showing that the sum of the aggregate unpaid principal balance of the Revolving Loans then outstanding exceeds the amount of Borrower’s Borrowing Base as shown in that report, Borrower shall make a payment to Bank in an amount equal to that excess for application to the principal of the Revolving Loans.

2D.REVOLVING LOANS — Bank agrees that so long as the Revolving Commitment remains in effect Bank will, subject to the conditions of this Agreement, grant Borrower such Revolving Loans as Borrower may from time to time request.

2D.01 REVOLVING NOTE — The Revolving Loans shall be evidenced at all times by a Revolving Note executed and delivered by Borrower, payable to the order of Bank in a principal amount equal to the dollar amount of the Revolving Commitment as in effect at the execution and delivery of the Revolving Note and being in the form and substance of Exhibit D with the blanks appropriately filled.

(a) Whenever Borrower obtains a Revolving Loan, Bank shall endorse an appropriate entry on the Revolving Note or make an appropriate entry in a loan account in Bank’s books and records. Each entry shall be prima facie evidence of the data entered; but such entries shall not be a condition to Borrower’s obligation to pay.

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(b) No holder of any Revolving Note shall transfer a Revolving Note, or seek a judgment or file a proof of claim based on a Revolving Note, without in each case first endorsing the Revolving Note to reflect the true amount owing thereon.

2D.02 CREDIT REQUESTS — Whenever Borrower desires to borrow pursuant to this Agreement, Borrower shall give Bank an appropriate notice (a Credit Request) with such information as Bank may reasonably request. The Credit Request shall be irrevocable and shall (EXCEPT in the case of any obtained at the execution and delivery of this Agreement) be given to Bank not later than 12:00 noon Cleveland time on the Banking Day the proceeds of any requested Revolving Loan are to be disbursed to Borrower. Each request by Borrower for a Revolving Loan shall be made either in writing or by telephone, PROVIDED that any telephone request shall be promptly confirmed in writing and Borrower shall assume the risk of misunderstanding.

2D.03 CONDITION: NO DEFAULT — Borrower shall not be entitled to obtain any Revolving Loan if

(a) any Default Under This Agreement shall then exist or would thereupon begin to exist or

(b) any representation or warranty made in subsections 4B.01 through 4B.08 (both inclusive) shall have ceased to be true and complete in any Material respect except for such changes, if any, as shall have been fully disclosed in the applicable Credit Request and as may be waived by Bank in the reasonable exercise of its discretion, or

(c) there shall have occurred any Material adverse change in Borrower’s financial condition, properties or business since the date of Borrower’s Most Recent 4A.04 Financial Statements.

Each Credit Request, both when made and when honored, shall of itself constitute a continuing representation and warranty by Borrower that Borrower is entitled to obtain, and Bank is obligated to make, the requested Revolving Loan.

2D.04 CONDITION: PURPOSE — Borrower shall not use the proceeds of any Revolving Loan for the purpose of financing the acquisition of any corporation or other business entity if the acquisition is publicly opposed by the latter’s management and if Bank deems that its participation in the financing would involve it in a conflict of interest.

2D.05 AMOUNT — No Revolving Loan shall be made if, after giving effect thereto, the aggregate unpaid principal balance of the Revolving Loans would exceed the amount of the Revolving Commitment then in effect.

2D.06 MATURITIES — The stated Maturity of each Revolving Loan shall be the Expiration Date.

2D.07 INTEREST: REVOLVING LOANS — The principal of and overdue interest on the Revolving Loans shall bear interest payable in arrears on the first day of each

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January, April, July and October and at Maturity and computed (in accordance with subsection 8.10)

(a) prior to Maturity, at a fluctuating rate equal to the Reference Rate from time to time in effect plus the applicable RR margin (if any) and

(b) after Maturity (whether occurring by lapse of time or by acceleration), at a fluctuating rate equal to the Reference Rate from time to time in effect plus the applicable RR margin (if any) plus two percent (2%) per annum,

with each change in the Reference Rate automatically and immediately changing the rate thereafter applicable to the Revolving Loans; PROVIDED, that in no event shall the rate applicable to the Revolving Loans after the Maturity thereof be less than the rate applicable thereto immediately after Maturity. RR margin as used in this subsection means one percent (1.00%) per annum.

2D.08 DISBURSEMENT — Bank shall disburse the proceeds of each Revolving Loan to Borrower’s general checking account with Bank in the absence of written instructions from Borrower to the contrary.

2D.09 PREPAYMENTS — Borrower may from time to time prepay the principal of the Revolving Loans in whole or in part, subject to the following:

(a) Each prepayment of the Revolving Loans may be made without penalty or premium.

(b) No prepayment shall of itself reduce the Revolving Commitment.

(c) Concurrently with each prepayment, Borrower shall prepay the interest accrued on the prepaid principal.

3A. INFORMATION — Borrower agrees that so long as the Revolving Commitment remains in effect and thereafter until the Subject Indebtedness shall have been paid in full, Borrower will perform and observe each of the following:

3A.01 FINANCIAL STATEMENTS — Borrower will furnish to Bank

(a) within (30) days after the end of each month while this Agreement is in effect, Borrower’s balance sheet as at the end of the month and its statements of cash flow, income and surplus reconciliation for Borrower’s current fiscal year to date, all prepared (but unaudited) on a comparative basis with the prior year, in accordance with GAAP (EXCEPT as disclosed therein) and in form and detail satisfactory to Bank,

(b) as soon as available (and in any event within ninety (90) days after the end of each of Borrower’s fiscal years), a complete copy of an annual audit report (including, without limitation, all financial statements therein and notes thereto) of Borrower for that year which shall be

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(1) prepared on a comparative basis with the prior year, in accordance with GAAP (EXCEPT as disclosed therein) and in form and detail satisfactory to Bank,

(2) certified (without qualification as to GAAP) by independent public accountants selected by Borrower and satisfactory to Bank,

(3) accompanied by a copy of any management report, letter or similar writing furnished to Borrower by the accountants in respect of Borrower’s systems, operations, financial condition or properties, and

(4) either (A) a written statement of the accountants that in making the examination necessary for their report or opinion they obtained no knowledge of the occurrence of any Default Under This Agreement or (B) if they know of any, their written disclosure of its nature and status, PROVIDED, that the accountants shall not be liable directly or indirectly to anyone for any failure to obtain knowledge of any Default Under This Agreement,

(c) concurrently with the delivery of any financial statement to Bank pursuant to clause (a) or (b), a certificate by Borrower’s chief financial officer

(1) certifying that to the best of the officer’s knowledge and belief, (A) those financial statements fairly present in all Material respects Borrower’s financial condition and the results of its operations in accordance with GAAP subject, in the case of interim financial statements, to routine year-end audit adjustments and (B) no Default Under This Agreement then exists or if any does, a brief description of the default and Borrower’s intentions in respect thereof, and

(2) setting forth calculations indicating whether or not Borrower is in compliance with the general financial standards of section 3B,

(d) promptly when filed (in final form) or sent, a copy of

(1) each registration statement, Form 10-K annual report, Form 10-Q quarterly report, Form 8-K current report or similar document filed by Borrower with the Securities and Exchange Commission (or any similar federal agency having regulatory jurisdiction over the securities of either),

(2) each proxy statement or annual report, if any, sent by Borrower to the holders of any of its securities (or any trustee under any indenture which secures any of its securities or pursuant to which such securities are issued), and

(e) within thirty (30) days after the end of each month (and at such other times as Borrower may deem advisable), a Borrowing Base Report being in form and detail satisfactory to Bank, setting forth Borrower’s Borrowing Base as at the end of that month and certified by an appropriate officer of Borrower to be true and

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complete to the best of the officer’s knowledge and belief, it being agreed that Borrower at its option may furnish other such reports at other times,

(f) forthwith upon Bank’s written request, such other information in writing about Borrower’s financial condition, properties and operations and about its Pension Plans, if any, as Bank may from time to time reasonably request.

3A.02 NOTICE — Borrower will cause its chief financial officer, or in his absence another officer designated by Borrower, to give Bank prompt written notice whenever any officer of Borrower

(a) reasonably believes (or receives notice from any governmental agency alleging) that any Reportable Event has occurred in respect of any Pension Plan or that Borrower has become in Material non-compliance with any law or governmental order referred to in subsection 3C.06 if non-compliance therewith would materially and adversely affect Borrower’s financial condition or its properties,

(b) receives from the Internal Revenue Service or any other federal, state or local taxing authority any allegation of any default by Borrower in the payment of any tax that is Material in amount or notice of any assessment in respect thereof,

(c) learns there has been brought against Borrower before any court, administrative agency or arbitrator any litigation or proceeding which, if successful, might have a Material, adverse effect on Borrower,

(d) reasonably believes that any Default Under This Agreement shall have occurred or

(e) reasonably believes that there has occurred or begun to exist any other event, condition or thing that likely may have a Material, adverse effect on Borrower’s financial condition, operations or properties.

3B. GENERAL FINANCIAL STANDARDS — Borrower agrees that so long as the Revolving Commitment remains in effect and thereafter until the Subject Indebtedness shall have been paid in full, Borrower will perform and observe each of the following:

3B.01 LEVERAGE — Borrower will not suffer or permit the ratio of its Total Liabilities (other than Subordinated indebtedness, if any) to the sum of its Net Worth plus its Subordinated indebtedness, if any, at any time to exceed one and one-fourth to one (1.25:1), such ratio to be tested annually beginning December 31, 2000.

3B.02 PRETAX DEBT SERVICE COVERAGE — Borrower will not, during fiscal year 2000, suffer or permit the ratio of the aggregate of

(a) its Net Income for that year plus

(b) its depreciation expense for that year

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(c) its amortization expense for that year plus

(d) its interest expense for that year

to its Total principal and interest debt payments Liabilities for that year to be less than one and two-tenths to one (1.20:1), such ratio to be tested for the five (5) months ending December 31, 2000. Commencing with fiscal year 2001, Borrower will not suffer or permit the ratio of the aggregate of

(a) its Net Income for that year plus

(b) its depreciation expense for that year plus

(c) its amortization expense for that year plus

(d) its interest expense for that year

to its Current Portion of Long Term Debt (prior year) plus its interest expense for that year to be less than one and two-tenths to one (1.20:1), such ratio to be tested for the year ending December 31, 2001 and for each year ending every December 31 thereafter.

3B.03 DEBT TO EBITDA RATIO — Borrower will not, as of the end of any fiscal year commencing with the present year, suffer or permit the ratio of the aggregate of the Total Liabilities of the Borrower to

(a) the Net Income of the Borrower for that year plus

(b) the aggregate interest expense of the Borrower for that year plus

(c) the aggregate federal, state and local income taxes of the Borrower for that year plus

(d) the aggregate depreciation expense of the Borrower for that year plus

(e) the aggregate amortization expense of the Borrower for that year

to be greater than nine and one-quarter to one (9.25:1) for the five month period ending December 31, 2000, three and one-half to one (3.50:1) for the fiscal year ending December 31, 2001, and two and nine-tenths to one (2.90:1) for all fiscal years thereafter.

3C. AFFIRMATIVE COVENANTS — Borrower agrees that so long as the Revolving Commitment remains in effect and thereafter until the Subject Indebtedness shall have been paid in full, Borrower will perform and observe each of the following:

3C.01 TAXES — Borrower will pay in full

(a) prior in each case to the date when penalties for the nonpayment thereof would attach, all taxes, assessments and governmental charges and levies for which it may be or become subject and

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(b) prior in each case to the date the claim would become delinquent for nonpayment, all other lawful claims (whatever their kind or nature) which, if unpaid, might become a lien or charge upon its property;

PROVIDED, that no item need be paid so long as and to the extent that it is contested in good faith and by timely and appropriate proceedings which are effective to stay enforcement thereof.

3C.02 FINANCIAL RECORDS — Borrower will at all times keep true and complete financial records in accordance with GAAP and, without limiting the generality of the foregoing, make appropriate accruals to reserves for estimated and contingent losses and liabilities.

3C.03 VISITATION — Borrower will permit Bank at all reasonable times and upon reasonable notice

(a) to visit and inspect Borrower’s properties and examine its records at Bank’s expense and to make copies of and extracts from such records, and

(b) to consult with Borrower’s directors, officers, employees, accountants, actuaries, trustees and plan administrators in respect of its financial condition, properties and operations and the financial condition of its Pension Plans, each of which parties is hereby authorized to make such information available to Bank to the same extent that it would to Borrower.

3C.04 INSURANCE — Borrower will

(a) keep itself and all of its insurable properties insured at all times to such extent, with such deductibles, by such insurers and against such hazards and liabilities as is generally and prudently done by like businesses, EXCEPT that if a more specific standard is provided in any Related Writing, the more specific standard shall prevail, and

(b) forthwith upon Bank’s written request, furnish to Bank such information about Borrower’s insurance as Bank may from time to time reasonably request, which information shall be prepared in form and detail reasonably satisfactory to Bank and certified by an officer of Borrower.

3C.05 CORPORATE EXISTENCE — Borrower will at all times maintain its corporate existence, rights and franchises.

3C.06 COMPLIANCE WITH LAW — Borrower will comply with all material laws (whether federal, state or local and whether statutory, administrative or judicial or other) and with every lawful governmental order (whether administrative or judicial) and will, without limiting the generality of the foregoing,

(a) use and operate all of its facilities and properties in Material compliance with all Environmental Laws and handle all hazardous materials in Material compliance therewith; keep in full effect each permit, approval, certification,

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license or other authorization required by any Environmental Law for the conduct of any Material portion of its business; and comply in all other Material respects with all Environmental Laws;

(b) make a full and timely payment of premiums required by ERISA and perform and observe all such further and other requirements of ERISA such that no Default Under ERISA shall occur or begin to exist; and

(c) comply with all Material requirements of all occupational health and safety Laws;

PROVIDED, that this subsection shall not apply to any of the foregoing

(i) if and to the extent that the same shall be contested in good faith by timely and appropriate proceedings which are effective to stay enforcement thereof and against which appropriate reserves shall have been established or

(ii) in any other case if non-compliance therewith would not Materially and adversely affect Borrower’s financial condition, properties or business.

3C.07 PROPERTIES — Borrower will maintain all fixed assets necessary to its continuing operations in good working order and condition, ordinary wear and tear excepted.

3D. NEGATIVE COVENANTS — Borrower agrees that so long as the Revolving Commitment remains in effect and thereafter until the Subject Indebtedness shall have been paid in full, Borrower will perform and observe each of the following:

3D.01 EQUITY TRANSACTIONS — Borrower will not

(a) be a party to any merger or consolidation,

(b) purchase or otherwise acquire all or substantially all of the assets and business of any corporation or other business enterprise,

(c) create, acquire or hold any Subsidiary, or be or become a party to any joint venture or partnership, or make or keep any investment in any stocks or other equity securities of any kind other than any investment fully disclosed in Borrower’s Most Recent 4A.04 Financial Statements or in the Supplemental Schedule or

(d) lease as lessor, sell, sell-leaseback or otherwise transfer (whether in one transaction or a series of transactions) all or any substantial part of its fixed assets EXCEPT chattels that shall have become obsolete or no longer useful in its present business;

PROVIDED, that if no Default Under This Agreement shall then exist and if none would thereupon begin to exist, this subsection shall not apply to any transaction referred to in clause (a) or (b) if (1) after giving effect thereto, the nature of Borrower’s business shall

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not be materially different from that at the date of this Agreement and (2) there shall have been executed and delivered to Bank an assumption agreement (to be in form and substance satisfactory to Bank) by the surviving corporation (if not Borrower) in the case of any merger, by the resulting corporation in the case of any consolidation and by the transferee (if not Borrower) in any transfer of any kind of assets.

3D.02 CREDIT EXTENSIONS — Borrower will not

(a) make or keep any investment in any notes, bonds or other obligations of any kind for the payment of money or make or have outstanding at any time any advance or loan to anyone or

(b) be or become a Guarantor of any kind;

PROVIDED, that this subsection shall not apply to

(i) any existing or future advance made to an officer or employee of Borrower solely for the purpose of paying ordinary and necessary business expenses of Borrower,

(ii) any existing or future investment in direct obligations of the United States of America or any agency thereof, or in certificates of deposit issued by Bank, or in any other money-market investment if it carries the highest quality rating of any nationally-recognized rating agency, PROVIDED, that no such investment shall mature more than ninety (90) days after the date when made,

(iii) any existing investment, advance, loan or Guaranty fully disclosed in Borrower’s Most Recent 4A.04 Financial Statements or in the Supplemental Schedule,

(iv) any existing or future Guaranty of any direct or contingent obligation owing to Bank or

(v) any endorsement of a check or other medium of payment for deposit or collection, or any similar transaction in the normal course of business.

3D.03 BORROWINGS — Borrower will not create, assume or have outstanding at any time any indebtedness for borrowed money or any Funded Indebtedness of any kind; PROVIDED, that this subsection shall not apply to

(i) the Subject Indebtedness or any other Debt owing to Bank,

(ii) any Subordinated indebtedness,

(iii) any existing or future indebtedness secured by a purchase money security interest permitted by subsection 3D.04 or incurred under a lease permitted by subsection 3D.04 or

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(iv) any existing indebtedness fully disclosed in Borrower’s Most Recent 4A.04 Financial Statements or in the Supplemental Schedule or any renewal or extension thereof in whole or in part.

3D.04 LIENS, LEASES — Borrower will not

(a) lease any property as lessee or acquire or hold any property subject to any land contract, Inventory consignment or other title retention contract,

(b) sell or otherwise transfer any Receivables, whether with or without recourse or

(c) suffer or permit any property now owned or hereafter acquired by it to be or become encumbered by any mortgage, security interest, lien or financing statement;

PROVIDED, that this subsection shall not apply to

(i) any tax lien, or any lien securing workers’ compensation or unemployment insurance obligations, or any mechanic’s, carrier’s or landlord’s lien, or any lien arising under ERISA, or any security interest arising under article four (bank deposits and collections) or five (letters of credit) of the Uniform Commercial Code, or any similar security interest or other lien, EXCEPT that this clause (i) shall apply only to security interests and other liens arising by operation of law (whether statutory or common law) and in the ordinary course of business and shall not apply to any security interest or other lien that secures any indebtedness for borrowed money or any Guaranty thereof or any obligation that is in Material default in any manner (other than any default contested in good faith by timely and appropriate proceedings effective to stay enforcement of the security interest or other lien in question),

(ii) zoning or deed restrictions, public utility easements, minor title irregularities and similar matters having no adverse effect as a practical matter on the ownership or use of any of the property in question,

(iii) any lien securing or given in lieu of surety, stay, appeal or performance bonds, or securing performance of contracts or bids (other than contracts for the payment of money borrowed), or deposits required by law or governmental regulations or by any court order, decree, judgment or rule or as a condition to the transaction of business or the exercise of any right, privilege or license, EXCEPT that this clause (iii) shall not apply to any lien or deposit securing an obligation that is in Material default in any manner (other than any default contested in good faith by timely and appropriate proceedings effective to stay enforcement of the security interest or other lien in question),

(iv) any mortgage, security interest or other lien securing only Borrower’s Debt to Bank,

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(v) any mortgage, security interest or other lien (each, a “purchase money security interest”) which is created or assumed in purchasing, constructing or improving any real property or equipment or to which any such property is subject when purchased, PROVIDED, that (A) the purchase money security interest shall be confined to the aforesaid property, (B) the indebtedness secured thereby does not exceed the total cost of the purchase, construction or improvement and (C) any such indebtedness, if repaid in whole or in part, cannot be reborrowed,

(vi) any lease other than any capitalized lease (it being agreed that a capitalized lease is a lien rather than a lease for the purposes of this Agreement) so long as the aggregate annual rentals of all such leases do not exceed Fifty Thousand Dollars ($50,000),

(vii) any mortgage, security interest or other lien which (together with the indebtedness secured thereby) is fully disclosed in Borrower’s Most Recent 4A.04 Financial Statements or in the Supplemental Schedule or

(viii) any financing statement perfecting a security interest that would be permissible under this subsection.

3D.05 FIXED ASSETS — Borrower will not invest (net after trade-ins, if any) in fixed assets and leasehold improvements during any fiscal year (commencing with the present year) more than One Hundred Thousand Dollars ($100,000) plus its allowable obsolescence, amortization and depreciation charges for that year.

3D.06 DIVIDENDS — Borrower will not make or commit itself to make any Distribution to its shareholders at any time if any Default Under This Agreement shall then exist or would thereupon occur, nor will Borrower at any time make any Distribution other than any dividend payable solely in cash.

3D.07 SUBORDINATED NOTES — Borrower will not assent to any amendment or modification of the subordination provisions in any Subordinated notes of Borrower.

4A. CLOSING — Prior to or at the execution and delivery of this Agreement Borrower shall have complied or caused compliance with each of the following:

4A.01 SUBJECT NOTES — Borrower shall execute and deliver to Bank a Term Note A in accordance with section 2A, a Term Note B in accordance with section 2B and a Revolving Note in accordance with subsection 2D.01.

4A.02 RESOLUTIONS/INCUMBENCY — Borrower’s secretary or assistant secretary shall have certified to Bank (a) a copy of resolutions duly adopted by Borrower’s board of directors in respect of this Agreement and (b) the names and true signatures of officers authorized to execute and deliver this Agreement and Related Writings on behalf of Borrower.

4A.03 LEGAL OPINION — Borrower’s counsel shall have rendered to Bank their written opinion in respect of the matters referred to in subsections 4B.01, 4B.02, 4B.03

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and 4B.04 and in respect of the perfection (but not priority) of each mortgage, security interest or other lien referred to in this section 4A, which opinion shall be in such form and substance (and may be subject only to such qualifications and exceptions, if any) as shall be reasonably satisfactory to Bank.

4A.04 Intentionally left blank —

4A.05 SECURITY AGREEMENTS — Borrower shall have executed and delivered to Bank security agreements being in form and substance satisfactory to Bank and granting Bank security interests in and to all of Borrower’s existing and future equipment and in all of Borrower’s Inventory and Receivables as security for Borrower’s Debt to Bank. Borrower shall have joined with Bank in executing and filing such financing statements and other documents and in making and doing such further and other acts and things as Bank may deem necessary for the evidence, perfection or other protection of Bank’s security interests.

4A.06 MORTGAGES AND RELATED REAL ESTATE DOCUMENTS — Borrower shall have executed and delivered to Bank as security for Borrower’s Debt to Bank a mortgage or mortgages being in form and substance satisfactory to Bank and constituting the first mortgage lien on real properties having a post office address of 662 Wolf Ledges Parkway, Akron, Ohio. Borrower shall have furnished to Bank in respect of those properties, at Borrower’s expense, (a) a mortgagee’s policy of title insurance issued in such amount as Bank may reasonably require by an insurer satisfactory to Bank, (b) a professional environmental assessment, (c) a survey by a registered surveyor and (d) an appraisal by an appraiser satisfactory to Bank.

4A.07 DOCUMENTATION FEE — Borrower shall have paid Bank a documentation fee of Ten Thousand Dollars ($10,000).

4A.08 ACQUISITION — Borrower shall have acquired certain of Target’s assets pursuant to the Asset Purchase Agreement. Borrower will change its name to Target’s name within three (3) months of the date of this Agreement.

4A.09 LIEN WAIVERS — Borrower shall provide Bank with duly executed written lien waivers in favor of Bank from each lessor, bailee, warehouseman, materialman, mortgagee or similarly situated person or entity who may, with respect to any location at which any of the collateral for the Subject Indebtedness is to be located or stored, by operation of law or otherwise, have any lien or like interest in or upon such collateral.

4A.10 OTHER DOCUMENTS — Borrower shall execute or deliver to Bank such other agreements, instruments and documents, including, without limitation, those listed below, which Bank may require to be executed and/or delivered in connection herewith (all of which shall be in form and substance acceptable to Bank and its counsel):

(a) Evidence that the Borrower possesses insurance satisfying the requirements of Section 3C.04 hereof. Insurance certificates respecting the same shall be delivered to Bank and shall name Bank as lender loss payee. In addition, the certificates shall contain a statement that Bank will be provided with thirty (30) days written notice prior to any cancellation, termination or expiration of such insurance coverage and such statement may not provide that the issuing company will merely “endeavor to” provide such notice nor may such statement contain

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limitation of liability language for the issuing company or its representatives in the event of their failure to provide such notice;

(b) Certificates of good standing for Borrower issued by the Secretary of State of its state of incorporation and the Secretary of State of each other jurisdiction in which it is required by reason of its business, the ownership of properties or the location of employees;

(c) a copy of the articles/certificate of incorporation or other charter document of Borrower certified by the Secretary of State of its state of incorporation;

(d) A disbursement authorization, in form and substance acceptable to Bank, directing the disbursement of the proceeds of the Revolving Loans; and

(e) a subordination agreement from The Hillstreet Fund, L.P. respecting Subordinated debt in principal amount of $3,000,000.

4B. WARRANTIES — Subject only to such additions and exceptions, if any, as may be set forth in the Supplemental Schedule or in Borrower’s Most Recent 4A.04 Financial Statements, Borrower represents and warrants as follows:

4B.01 EXISTENCE — Borrower is a duly organized and validly existing Ohio corporation in good standing. Borrower is duly qualified to transact business in each state or other jurisdiction in which it owns or leases any real property or in which the nature of the business conducted makes such qualification necessary or, if not so qualified, such failure to qualify will have no Material adverse effect upon Borrower’s financial condition and its ability to transact business. Borrower has no subsidiaries.

4B.02 GOVERNMENTAL RESTRICTIONS — No registration with or approval of any governmental agency of any kind is required on the part of Borrower for the due execution and delivery or for the enforceability of this Agreement or any Related Writing other than the filing or recording of documents with public officials, the noting of title certificates and similar acts and things related to the perfection of the mortgages, security interests and other liens referred to in section 4A.

4B.03 CORPORATE AUTHORITY — Borrower has requisite corporate power and authority to enter into this Agreement and to obtain and secure the Subject Loans in accordance with this Agreement. The officer executing and delivering this Agreement on behalf of Borrower has been duly authorized to do so and to execute and deliver Subject Notes and other Related Writings in accordance with section 4A. Neither the execution and delivery of this Agreement or any Related Writing by Borrower nor its performance and observance of the respective provisions thereof will violate any existing provision in its articles of incorporation, regulations or by-laws or any applicable law or violate or otherwise constitute a default under any contract or other obligation now existing and binding upon it. Upon the execution and delivery thereof, this Agreement and the aforesaid Related Writings will each become a valid and binding obligation enforceable against Borrower according to their respective tenors subject, however, to any applicable insolvency or bankruptcy law of general applicability and general principles of equity.

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4B.04 LITIGATION — No litigation or proceeding is pending against Borrower before any court, administrative agency or arbitrator which might, if successful, have a Material adverse effect on Borrower.

4B.05 TAXES — Borrower has filed all federal, state and local tax returns which are required to be filed by it and paid all taxes due as shown thereon (EXCEPT to the extent, if any, permitted by subsection 3C.01). The Internal Revenue Service has not alleged any Material default by Borrower in the payment of any tax Material in amount or threatened to make any assessment in respect thereof which has not been reflected in Borrower’s Most Recent 4A.04 Financial Statements.

4B.06 TITLE — Borrower has good and marketable title to all assets reflected in its Most Recent 4A.04 Financial Statements EXCEPT for changes resulting from transactions in the ordinary course of business. All such assets are clear of any mortgage, security interest or other lien of any kind other than any permitted by subsection 3D.04.

4B.07 LAWFUL OPERATIONS — Borrower’s operations have at all relevant times been and continue to be in Material compliance with all requirements imposed by law, whether federal, state or local, whether statutory, regulatory or other, including (without limitation) ERISA, all Environmental Laws, and occupational safety and health laws and all zoning ordinances. Without limiting the generality of the foregoing,

(a) To the Borrower’s knowledge no condition exists at, on or under any facility or other property now or previously owned by Borrower which would give rise to any Material liability under any Environmental Law; and Borrower has not received any notice from any governmental agency, court or anyone else that it is a potentially responsible party for the clean-up of any environmental waste site, is in violation of any environmental permit or law or has been placed on any registry of solid or hazardous waste disposal site;

(b) No Material Accumulated Funding Deficiency exists in respect of any of Borrower’s Pension Plans; and no Reportable Event has occurred in respect of any such plan which is continuing and which constitutes grounds either for termination of the plan or for court appointment of a trustee for the administration thereof.

4B.08 INSURANCE — Borrower’s insurance coverage complies with the standards set forth in subsection 3C.04 and those set forth in the Related Writings referred to in subsections 4A.05 and 4A.06.

4B.09 DEFAULTS — To the Borrower’s knowledge no Default Under This Agreement exists, nor will any exist immediately after the execution and delivery of this Agreement

5A. EVENTS OF DEFAULT — Each of the following shall constitute an Event of Default hereunder:

5A.01 PAYMENTS — If any principal included in the Subject Indebtedness shall not be paid in full when the same becomes payable and shall remain unpaid for ten (10) consecutive days thereafter; or if any Subject Indebtedness (EXCEPT principal) or any of

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Borrower’s other Debt to Bank (EXCEPT any payable on demand) shall not be paid in full when the same becomes payable and shall remain unpaid for ten (10) consecutive days thereafter; or if such of Borrower’s Debt, if any, to Bank, as may be payable on demand shall not be paid in full within ten (10) days after any actual demand for payment,

5A.02 WARRANTIES — If any representation, warranty or statement made in this Agreement or in any Related Writing referred to in section 4A shall be false or erroneous in any Material respect when such representation or warranty was made; or if any representation, warranty or statement hereafter made by or on behalf of Borrower in any Related Writing not referred to in section 4A shall be false or erroneous in any Material respect when such representation or warranty was made.

5A.03 COVENANTS WITHOUT GRACE — If Borrower shall fail or omit to perform or observe any provisions in subsection 3A.02.

5A.04 COVENANTS WITH GRACE — If anyone (other than Bank and its agents) shall fail or omit to perform and observe any agreement (other than those referred to in subsection 5A.01 or 5A.03) contained in this Agreement or any Related Writing that is on its part to be complied with, and that failure or omission shall not have been fully corrected within thirty (30) days after the giving of written notice to Borrower by Bank that it is to be remedied.

5A.05 CROSS-DEFAULT — If any of Borrower’s indebtedness for borrowed money (regardless of maturity) or any of its Funded Indebtedness shall be or become “in default” (as defined below). In this subsection, in default means that (a) there shall have occurred (or shall exist) in respect of the indebtedness in question (either as in effect at the date of this Agreement or as in effect at the time in question) any event, condition or other thing which constitutes, or which with the giving of notice or the lapse of any applicable grace period or both would constitute, a default which accelerates (or permits any creditor or creditors or representative or creditors to accelerate) the maturity of any such indebtedness; or (b) any such indebtedness (other than any payable on demand) shall not have been paid in full at its stated maturity; or (c) any such indebtedness payable on demand shall not have been paid in full within ten (10) Banking Days after any actual demand for payment.

5A.06 BORROWER’S SOLVENCY — If (a) Borrower shall discontinue operations, or (b) Borrower shall commence any Insolvency Action of any kind or admit (by answer, default or otherwise) the Material allegations of, or consent to any relief requested in, any Insolvency Action of any kind commenced against Borrower by its creditors or any thereof, or (c) any creditor or creditors shall commence against Borrower any Insolvency Action of any kind which shall remain in effect (neither dismissed nor stayed) for thirty (30) consecutive days.

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5B. EFFECTS OF DEFAULT — Notwithstanding any contrary provision or inference in this Agreement or in any Related Writing:

5B.01 OPTIONAL DEFAULTS — If any Event of Default referred to in subsection 5A.01 through 5A.07, both inclusive, shall occur and be continuing, Bank shall have the right in its discretion, by giving written notice to Borrower,

(a) to terminate the Revolving Commitment and Bank shall have no obligation thereafter to grant any Revolving Loan to Borrower, and

(b) to accelerate the maturity of all of Borrower’s Debt to Bank (other than Debt, if any, already due and payable), and all such Debt shall thereupon become and thereafter be immediately due and payable in full without any presentment or demand and without any further or other notice of any kind, all of which are hereby waived by Borrower.

5B.02 AUTOMATIC DEFAULTS — If any Event of Default referred to in subsection 5A.07 shall occur,

(a) the Revolving Commitment shall automatically and immediately terminate and Bank shall have no obligation thereafter to grant any Revolving Loan to Borrower, and

(b) all of Borrower’s Debt to Bank (other than Debt, if any, already due and payable) shall thereupon become and thereafter be immediately due and payable in full, all without any presentment, demand or notice of any kind, which are hereby waived by Borrower.

5B.03 OFFSETS — If there shall occur or exist any Default Under This Agreement referred to in subsection 5A.06, then, so long as that Default Under This Agreement exists, Bank shall have the right at any time to set off against and to appropriate and apply toward the payment of the Subject Indebtedness then owing to it, whether or not the same shall then have matured, any and all deposit balances then owing by Bank to or for the credit or account of Borrower, all without notice to or demand upon Borrower, all such notices and demands being hereby expressly waived.

6A. INDEMNITY: STAMP TAXES — Borrower will pay all stamp taxes and similar taxes, if any, including interest and penalties, if any, payable in respect of the issuance of the Subject Indebtedness.

6B. INDEMNITY: FUNDING COSTS — Borrower agrees to indemnify Bank against any loss relating in any way to its funding of a Cost of Funds Rate for any Subject Loan if the Subject Loan is paid before the end of the applicable Contract Period (whether a prepayment or a payment following any acceleration of maturity) and to pay Bank, as liquidated damages for any such loss, an amount based on the principal amount paid and computed for the period from the date of payment to the original due date of that installment, at a rate equal to the excess, if any, of the interest rate theretofore applicable over the Reinvestment Rate, all as determined by Bank in its reasonable discretion. “Reinvestment Rate” means, when used with respect to any period, a per annum rate of interest equal to the “bond equivalent yield” for the most actively traded issues of U.S. Treasury Bills, U.S. Treasury Notes, or U.S. Treasury Bonds for a term similar to the period in question.

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6C. CREDIT REQUESTS — Whenever Borrower shall revoke any Credit Request for a Cost of Funds Loan, or shall for any other reason fail to borrow pursuant thereto or otherwise comply therewith, or shall fail to honor any prepayment notice, then, in each case on Bank’s demand, Borrower shall pay Bank such amount as will compensate it for any loss, cost or expense incurred by it by reason of its liquidation or reemployment of deposits or other funds.

6D. INDEMNITY: UNFRIENDLY TAKEOVERS — Borrower agrees to indemnify Bank and hold Bank harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind (including, without limitation, the reasonable fees and disbursements of counsel in connection with any investigative, administrative or judicial proceeding, whether or not Bank shall be designated a party thereto) which may be incurred by Bank relating to or arising out of any actual or proposed use of proceeds of the Subject Loans in connection with the financing of an acquisition of any corporation or other business entity, PROVIDED that Bank shall have no right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction.

6E. INDEMNITY: CAPITAL REQUIREMENTS — If

(a) at any time any governmental authority shall require National City Corporation or Bank, whether or not the requirement has the force of law, to maintain, as support for the Revolving Commitment, capital in a specified minimum amount that either is not required or is greater than that required at the date of this Agreement, whether the requirement is implemented pursuant to the “risk-based capital guidelines” (published at 12 CFR 3 in respect of “national banking associations”, 12 CFR 208 in respect of “state member banks” and 12 CFR 225 in respect of “bank holding companies”) or otherwise, and

(b) as a result thereof the rate of return on capital of National City Corporation or Bank or both (taking into account their then policies as to capital adequacy and assuming full utilization of their capital) shall be directly or indirectly reduced by reason of any new or added capital thereby allocable to the Revolving Commitment,

then and in each such case Borrower shall, on Bank’s demand, pay Bank as an additional fee such amounts as will in Bank’s reasonable opinion reimburse National City Corporation and Bank for any such reduced rate of return.

6F. INDEMNITY: COLLECTION COSTS — If any Event of Default shall occur and shall be continuing, Borrower will pay Bank such further amounts, to the extent permitted by law, as shall cover Bank’s costs and expenses (including, without limitation, the reasonable fees, interdepartmental charges and disbursements of its counsel) incurred in collecting the Subject Indebtedness or in otherwise enforcing its rights and remedies in respect thereof.

6G. CERTIFICATE FOR INDEMNIFICATION — Each demand by Bank for payment pursuant to section 6A, 6B, 6C, 6D, 6E or 6F shall be accompanied by a certificate setting forth the reason for the payment, the amount to be paid, and the computations and assumptions in determining the amount, which certificate shall be presumed to be correct in the absence of manifest error. In determining the amount of any such payment, Bank may use reasonable averaging and attribution methods.

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7. BANK’S PURPOSE — Bank represents and warrants to Borrower that Bank is familiar with the Securities Act of 1933 as amended and the rules and regulations thereunder and is not entering into this Agreement with any intention of violating that Act or any rule or regulation thereunder, it being understood, however, that Bank shall at all times retain full control of the disposition of its assets.

8. INTERPRETATION — This Agreement and the Related Writings shall be governed by the following provisions:

8.01 WAIVERS — Bank may from time to time in its discretion grant Borrower waivers and consents in respect of this Agreement or any Related Writing or assent to amendments thereof, but no such waiver or consent shall be binding upon Bank unless specifically granted by Bank in writing, which writing shall be strictly construed. Without limiting the generality of the foregoing, Borrower agrees that no course of dealing in respect of, nor any omission or delay in the exercise of, any right, power or privilege by Bank shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any further or other exercise thereof or of any other, as each such right, power or privilege may be exercised either independently or concurrently with others and as often and in such order as Bank may deem expedient.

8.02 CUMULATIVE PROVISIONS — Each right, power or privilege specified or referred to in this Agreement or any Related Writing is in addition to and not in limitation of any other rights, powers and privileges that Bank may otherwise have or acquire by operation of law, by other contract or otherwise.

8.03 BINDING EFFECT — The provisions of this Agreement and the Related Writings shall bind and benefit Borrower and Bank and their respective successors and assigns, including each subsequent holder, if any, of the Subject Notes or any thereof; PROVIDED, that no person or entity other than Borrower may obtain Subject Loans; and PROVIDED, further, that neither any holder of any Subject Note or assignee of any Subject Loan, whether in whole or in part, shall thereby become obligated thereafter to grant to Borrower any Subject Loan.

8.04 SURVIVAL OF PROVISIONS — All representations and warranties made in or pursuant to this Agreement or any Related Writing shall survive the execution and delivery of this Agreement and the Subject Notes. The provisions of section 6 shall survive the payment of the Subject Indebtedness.

8.05 IMMEDIATE U.S. FUNDS — Any reference to money is a reference to lawful money of the United States of America which, if in the form of credits, shall be in immediately available funds.

8.06 CAPTIONS — The several captions to different sections and subsections of this Agreement are inserted for convenience only and shall be ignored in interpreting the provisions thereof.

8.07 SUBSECTIONS — Each reference to a section includes a reference to all subsections thereof (i.e., those having the same character or characters to the left of the decimal point) EXCEPT where the context clearly does not so permit.

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8.08 ILLEGALITY — If any provision in this Agreement or any Related Writing shall for any reason be or become illegal, void or unenforceable, that illegality, voidness or unenforceability shall not affect any other provision.

8.09 OHIO LAW — This Agreement and the Related Writings and the respective rights and obligations of the parties hereto shall be construed in accordance with and governed by internal Ohio law.

8.10 INTEREST/FEE COMPUTATIONS — All interest and all fees for any given period shall accrue on the first day thereof but not on the last day thereof and in each case shall be computed on the basis of a 360-day year and the actual number of days elapsed. In no event shall interest accrue at a higher rate than the maximum rate, if any, permitted by law.

8.11 NOTICE — A notice to or request of Borrower shall be deemed to have been given or made under this Agreement or any Related Writing either upon the delivery of a writing to that effect (either in person or by transmission of a telecopy) to an officer of Borrower or five (5) days after a writing to that effect shall have been deposited in the United States mail and sent, with postage prepaid, by registered or certified mail, properly addressed to Borrower (Attention: chief financial officer). No other method of actually giving actual notice to or making a request of Borrower is hereby precluded. Every notice required to be given to Bank pursuant to this Agreement or any Related Writing shall be delivered (either in person or by transmission of a telecopy) to an Account Officer of Bank. A notice or request by mail is properly addressed to a party when addressed to it at the address set forth opposite its signature below or at such other address as that party may furnish to each of the others in writing for that purpose. A telecopy is transmitted to a party when transmitted to the telecopy number set forth opposite that party’s signature below (or at such other telecopy number as that party may furnish to the other in writing for that purpose).

8.12 ACCOUNTING TERMS — Any accounting term used in this Agreement shall have the meaning ascribed thereto by GAAP subject, however, to such modification, if any, as may be provided by section 9 or elsewhere in this Agreement.

8.13 ENTIRE AGREEMENT — This Agreement and the Related Writings referred to in or otherwise contemplated by this Agreement set forth the entire agreement of the parties as to the transactions contemplated by this Agreement.

8.14 WAIVER OF JURY TRIAL — The parties acknowledge and agree that any controversy that may arise under this Agreement and the Related Writings would involve difficult and complex issues and therefore agree that any law suit growing out of or incidental to any such controversy will be tried in a court of competent jurisdiction by a judge sitting without a jury.

8.15 LATE CHARGE; APPLICATION OF PAYMENTS — If Borrower fails to pay any amount due hereunder, or any fee in connection herewith, in full within ten (10) days after its due date, Borrower will, in each case, incur and shall pay a late charge equal to the greater of twenty dollars ($20.00) or five percent (5%) of the unpaid

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amount. The payment of a late charge will not cure or constitute a waiver of any Event of Default under this Agreement. Except as otherwise agreed in writing, payments will be applied first to accrued but unpaid interest and fees, in that order, on an invoice by invoice basis in the order of their respective due dates, until paid in full, then to late charges and then to principal.

8.16 SHARING OF INFORMATION — Bank shall have the right to furnish to its Affiliates, and to such other persons or entities as Bank shall deem advisable for the conduct of its business, information concerning the business, financial condition, and property of Borrower, the amount of the Debt of Borrower, and the terms, conditions, and other provisions applicable to the respective parts thereof.

9. DEFINITIONS — As used in this Agreement and in the Related Writings, EXCEPT where the context clearly requires otherwise,

Account Officer means that officer who at the time in question is designated by Bank as the officer having primary responsibility for giving consideration to Borrower’s requests for credit or, in that officer’s absence, that officer’s immediate superior or any other officer who reports directly to that superior officer;

Accumulated Funding Deficiency shall have the meaning ascribed thereto in section 302(a)(2) of ERISA;

Affiliate means, when used with reference to any person or entity (the subject), a person or entity that is in control of, under the control of, or under common control with, the subject, the term control meaning the possession, directly or indirectly, of the power to direct the management or policies of a person or entity, whether through the ownership of voting securities, by contract, or otherwise;

Agreement means this Agreement and includes each amendment, if any, to this Agreement;

Asset Purchase Agreement means the agreement dated April 4, 2000 between Borrower and Target and Target’s shareholders pursuant to which Borrower has agreed to acquire certain of Target’s assets;

Bank means National City Bank, a national banking association headquartered in Cleveland, Ohio;

Banking Day means any day other than a Saturday or a Sunday or a public holiday or other day on which banking institutions in Cleveland, Ohio, are generally closed and do not conduct a general banking business;

Borrower means WR ACQUISITION, INC., an Ohio corporation;

Borrowing Base is defined in subsection 2C.07;

Borrowing Base Report means a report furnished by Borrower pursuant to clause (e) of subsection 3A.01;

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Compensation includes all considerations (including without limitation, deferred Compensation and disbursements to trusts), whatever the form or kind, for services rendered;

Credit Request means a request made pursuant to subsection 2D.02;

Current Assets means the net book value of all such assets (after deducting applicable reserves, if any, and without consideration to any reappraisal or write-up of assets) as determined in accordance with GAAP;

Current Liabilities means all such liabilities as determined in accordance with GAAP and includes (without limitation) all accrued taxes and all principal of any Funded Indebtedness maturing within twelve months of the date of determination;

Current Portion of Long Term Debt means all principal payments due in the next twelve (12) months from Borrower on any of Borrower’s Total Liabilities;

Debt means, collectively, all liabilities of the party or parties in question to Bank, whether owing by one such party alone or with one or more others in a joint, several, or joint and several capacity, whether now owing or hereafter arising, whether owing absolutely or contingently, whether created by loan, overdraft, Guaranty of payment or other contract or by quasi-contract or tort, statute or other operation of law or otherwise, whether incurred directly to Bank or acquired by purchase, pledge or otherwise, and whether participated to or from Bank in whole or in part; and in the case of Borrower includes, without limitation, the Subject Indebtedness;

Default Under ERISA means (a) the occurrence or existence of a Material Accumulated Funding Deficiency in respect of any of Borrower’s Pension Plans, (b) any failure by Borrower to make a full and timely payment of premiums required by ERISA for insurance against any employer’s liability in respect of any such plan, (c) any Material breach of a fiduciary duty by Borrower or any trustee in respect of any such plan or (d) the existence of any action for the forceable termination of any such plan;

Default Under This Agreement means an event, condition or thing which constitutes (or which with the lapse of any applicable grace period or the giving of notice or both would constitute) an Event of Default referred to in section 5A and which has not been appropriately waived in writing in accordance with this Agreement or corrected to Bank’s full satisfaction;

Distribution means a payment made, liability incurred or other consideration (other than any stock dividend or stock split payable solely in capital stock of Borrower) given by Borrower for the purchase, acquisition, redemption or retirement of any capital stock of Borrower or as a dividend, return of capital or other Distribution in respect of Borrower’s capital stock and Distribute means to make a Distribution;

Eligible Inventory means, collectively, all of Borrower’s Inventory EXCEPT the following:

(a) any finished goods which have been returned to Borrower after sale or lease thereof or which are defective, unmerchantable, or obsolete in Bank’s good faith and commercially reasonable judgment,

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(b) any Inventory not located in the United States of America or in Canada, unless the Inventory is in undelayed transit to the United States of America,

(c) any work-in-process,

(d) any Inventory covered by a negotiable warehouse receipt or other negotiable document of title issued by a bailee, warehouseman, or similar party,

(e) any Inventory subject to any consignment, lease or other title retention contract and

(f) any Inventory subject to any security interest or financing statement securing any indebtedness other than Borrower’s Debt to Bank or subject to any non-consensual lien securing any delinquent obligation;

Eligible Receivable means a Receivable owing to Borrower EXCEPT the following:

(a) any Receivable (other than an installment Receivable) which remains unpaid for more than ninety (90) days after its due date or for more than ninety (90) days after the date first invoiced to the account debtor, whichever first elapses,

(b) any installment Receivable if any installment thereof shall not have been paid in full within sixty (60) days after its due date,

(c) any Receivable if the account debtor then owes other Receivables to Borrower and if more than ten percent (10%), by amount, of the Receivables then owing by that debtor are excepted under clauses (a) and (b) above,

(d) any Receivable the payment of which by the account debtor is not, or does not remain, unconditional,

(e) any Receivable if and to the extent that the account debtor has asserted a defense or offset of any kind against the payment thereof,

(f) any Receivable which according to its terms may be paid by the account debtor by an offset of any claim of the latter against the account creditor,

(g) any Receivable which arises other than from a sale or lease of Inventory in the ordinary course of business or other than from the rendering of services in the ordinary course of business,

(h) any Receivable the account debtor of which is an Affiliate or a director, officer, employee or agent of Borrower or of any Affiliate,

26

(i) any Receivable the account debtor of which is insolvent or is the debtor in an Insolvency Action or who at the time in question is in default in any way on an existing obligation to Borrower,

(j) any Receivable the account debtor of which is not a resident or citizen of the United States of America or Canada or is not subject to service of legal process in the United States of America or Canada,

(k) any Receivable subject to any security interest or financing statement securing any indebtedness other than Borrower’s Debt to Bank or subject to any non-consensual lien securing any delinquent obligation, or

(l) any Receivable the collection of which Bank, in the exercise of its reasonable judgment, for any other reason determines to have become impaired;

Environmental Law means the Comprehensive Environmental Response, Compensation, and Liability Act (42 USC 9601 et seq.), the Hazardous Material Transportation Act (49 USC 1801 et seq.), the Resource Conservation and Recovery Act (42 USC 6901 et. seq.), the Federal Water Pollution Control Act (33 USC 1251 et seq.), the Toxic Substances Control Act (15 USC 2601 et seq.) and the Occupational Safety and Health Act (29 USC 651 et seq.), as such laws have been or hereafter may be amended, and any and all analogous future federal, or present or future state or local, statutes and the regulations promulgated pursuant thereto;

ERISA means the Employee Retirement Income Security Act of 1974 (P.L. 93-406) as amended from time to time and in the event of any amendment affecting any section thereof referred to in this Agreement, that reference shall be a reference to that section as amended, supplemented, replaced or otherwise modified;

ERISA Regulator means any governmental agency (such as the Department of Labor, the Internal Revenue Service and the Pension Benefit Guaranty Corporation) having any regulatory authority over any of Borrower’s Pension Plans;

Export-Import Bank means the Export-Import Bank of the United States;

Event of Default is defined in section 5A;

Expiration Date means the date referred to as such in subsection 2C.02, EXCEPT that in the event of any extension pursuant to subsection 2C.05, “Expiration Date” shall mean the latest date to which the Revolving Commitment shall have been so extended;

Federal Funds Rate means a fluctuating interest rate per annum, as in effect at the time in question, that is the rate determined by Bank to be the opening Federal Funds Rate per annum paid or payable by it on the day in question in its regional federal funds market for overnight borrowings from other banking institutions;

Foreign Eligible Receivable means a Receivable that satisfies the definition of an Eligible Receivable herein except for subsection (j) of such definition, and which is fully insured by the Export-Import Bank;

27

Funded Indebtedness means indebtedness of the person or entity in question which matures or which (including each renewal or extension, if any, in whole or in part) remains unpaid for more than twelve months after the date originally incurred and includes, without limitation (a) any indebtedness (regardless of its maturity) if it is renewable or refundable in whole or in part solely at the option of that person or entity (in the absence of default) to a date more than one year after the date of determination, (b) any capitalized lease, (c) any Guaranty of Funded Indebtedness owing by another person or entity and (d) any Funded Indebtedness secured by a security interest, mortgage or other lien encumbering any property owned or being acquired by the person or entity in question even if the full faith and credit of that person or entity is not pledged to the payment thereof; PROVIDED, that in the case of any indebtedness payable in installments or evidenced by serial notes or calling for sinking fund payments, those payments maturing within twelve months after the date of determination shall be considered current indebtedness rather than Funded Indebtedness for the purposes of section 3B but shall be considered Funded Indebtedness for all other purposes;

GAAP means generally accepted accounting principles applied in a manner consistent with those used in Borrower’s latest fiscal year-end financial statements referred to in subsection 4A.04;

Guarantor means one who pledges his credit or property in any manner for the payment or other performance of the indebtedness, contract or other obligation of another and includes (without limitation) any Guarantor (whether of collection or payment), any obligor in respect of a standby letter of credit or surety bond issued for the obligor’s account, any surety, any co-maker, any endorser, and anyone who agrees conditionally or otherwise to make any loan, purchase or investment in order thereby to enable another to prevent or correct a default of any kind; and Guaranty means the obligation of a Guarantor;

Insider, as applied to Subordinated indebtedness, refers to Subordinated indebtedness which at the time in question is owing to any person who is a director or officer of Borrower or who is the record and beneficial owner of ten percent (10%) or more of Borrower’s capital stock or who is a member of the immediate family of any such director, officer or stockholder;

Insolvency Action means either (a) a pleading of any kind filed by the person, corporation or entity (an “insolvent”) in question to seek relief from the insolvent’s creditors, or filed by the insolvent’s creditors or any thereof to seek relief of any kind against that insolvent, in any court or other tribunal pursuant to any law (whether federal, state or other) relating generally to the rights of creditors or the relief of debtors or both, or (b) any other action of any kind commenced by an insolvent or the insolvent’s creditors or any thereof for the purpose of marshalling the insolvent’s assets and liabilities for the benefit of the insolvent’s creditors; and “Insolvency Action” includes (without limitation) a petition commencing a case pursuant to any chapter of the federal bankruptcy code, any application for the appointment of a receiver, trustee, liquidator or custodian for the insolvent or any substantial part of the insolvent’s assets, and any assignment by an insolvent for the general benefit of the insolvent’s creditors;

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Inventory means, collectively, all goods which at the time in question are owned by Borrower and are held for sale or lease, or furnished (or to be furnished) by Borrower to another party under a contract of service or sale, or used or consumed (or to be used or consumed) in Borrower’s business and includes, without limitation, all raw materials, work in process, finished goods, supplies, parts and packing materials but excludes leases which are included among Receivables;

Material means when taken as a whole, wilt not adversely impact the business, operations, properties or financial condition of Borrower;

Maturity means the date on which the Subject Indebtedness (or portion thereof) in question is scheduled for payment in accordance with this Agreement (without the benefit of any grace period) EXCEPT that in the event of any acceleration of Maturity pursuant to section 5B, Maturity means the date as of which the sum becomes immediately payable in full in accordance with subsection 5B;

Most Recent 4A.04 Financial Statements means Borrower’s most recent financial statements that are referred to in subsection 4A.04;

Net Income means Net Income as determined in accordance with GAAP, after taxes and after extraordinary items, but without giving effect to any gain resulting from any reappraisal or write-up of any asset;

Net Worth means the excess (as determined in accordance with GAAP) of the net book value (after deducting all applicable valuation reserves and without any consideration to any re-appraisal or write-up of assets) of Borrower’s tangible assets (i.e., all assets other than intangibles such as patents, costs of businesses over net assets acquired, good will and treasury shares) over Borrower’s Total Liabilities;

Pension Plan means a defined benefit plan (as defined in section 3(35) of ERISA) of Borrower and includes, without limitation, any such plan that is a multi-employer plan (as defined in section 3(37) of ERISA) applicable to any of Borrower’s employees;

Prime Rate means the fluctuating rate of interest which is publicly announced from time to time by Bank at its principal place of business as being its “Prime Rate” or “base rate” thereafter in effect, with each change in the Prime Rate automatically, immediately and without notice changing the fluctuating interest rate thereafter applicable hereunder, it being agreed that the Prime Rate is not necessarily the lowest rate of interest then available from Bank on fluctuating rate loans;

Receivable means a claim for money due or to become due, whether classified as an account, instrument, chattel paper, general intangible, incorporeal hereditament or otherwise, and any proceeds of the foregoing;

Reference Rate means, on any given date, either the Prime Rate in effect for that day or a rate equal to one percent (1%) per annum plus the Federal Funds Rate in effect for that day, whichever rate shall be the higher for that day;

29

Related Writing means any note, mortgage, security agreement, other lien instrument, financial statement, audit report, notice, legal opinion, Credit Request, officer’s certificate or other writing of any kind which is delivered to Bank and which is relevant in any manner to this Agreement or any Related Writing and includes, without limitation, the Subject Notes and the other writings referred to in sections 3A and 4A;

Reportable Event has the meaning ascribed thereto by ERISA;

Revolving Commitment means Bank’s commitment to extend credit to Borrower pursuant to sections 2C and 2D of this Agreement and upon the terms, subject to the conditions of this Agreement and in accordance with the other provisions of this Agreement;

Revolving Loan means a loan obtained by Borrower pursuant to subsections 2C and 2D of this Agreement and evidenced by a Revolving Note;

Revolving Note means a note executed and delivered by Borrower and being in the form and substance of Exhibit D with the blanks appropriately filled;

Subject Indebtedness means, collectively, the principal of and interest on the Subject Loans and all fees and other liabilities, if any, incurred by Borrower to Bank pursuant to this Agreement or any Related Writing;

Subject Loan means a loan obtained by Borrower pursuant to this Agreement;

Subject Note means a note executed and delivered by Borrower and being in the form and substance of Exhibit B, C or D with the blanks appropriately filled;

Subordinated, as applied to any liability of Borrower, means a liability which at the time in question is Subordinated (by written instrument in form and substance satisfactory to Bank) in favor of the prior payment in full of Borrower’s Debt to Bank;

Subsidiary means a corporation or other business entity if shares constituting a majority of its outstanding capital stock (or other form of ownership) or constituting a majority of the voting power in any election of directors (or shares constituting both majorities) are (or upon the exercise of any outstanding warrants, options or other rights would be) owned directly or indirectly at the time in question by the corporation in question or another “Subsidiary” of that corporation or any combination of the foregoing;

Supplemental Schedule means the schedule incorporated into this Agreement as Exhibit A;

Target means QUATECH, INC., an Ohio corporation;

Term Loan A means a loan obtained by Borrower pursuant to section 2A of this Agreement;

Term Loan B means a loan obtained by Borrower pursuant to section 2B of this Agreement;

30

Term Note A means a note executed and delivered by Borrower and being in the form and substance of Exhibit B with the blanks appropriately filled;

Term Note B means a note executed and delivered by Borrower and being in the form and substance of Exhibit C with the blanks appropriately filled;

Total Liabilities means the aggregate (without duplication) of all liabilities of the corporation or corporations in question and includes, without limitation, (a) any indebtedness which is secured by any mortgage, security interest or other lien on any of their property even if the full faith and credit of none of them is pledged to the payment thereof, (b) any indebtedness for borrowed money or Funded Indebtedness of any kind if any such corporation or corporations is a Guarantor thereof and (c) any Subordinated indebtedness; PROVIDED, that there shall be excluded any liability under a reimbursement agreement relating to a letter of credit issued to finance the importation or exportation of goods;

the foregoing definitions shall be applicable to the respective plurals of the foregoing defined terms.

Address: 662 Wolf Ledges Parkway Akron, Ohio 44311	WR ACQUISITION, INC.
Telecopy: 330-434-1409	By:	/s/ William J. Roberts
	Printed Name: William J. Roberts
	Title:	President
Address: 1 Cascade Plaza Akron, Ohio 44308	NATIONAL CITY BANK
Telecopy: 330-375-8436	By:	/s/ Maurus Kosco
	Printed Name: Maurus Kosco
	Title:	Vice President

31

SUPPLEMENTAL SCHEDULE

There is no item which Borrower must disclose in this Supplemental Schedule in order to be in full compliance with subsections 3D.01, 3D.02, 3D.03 and 3D.04, nor is there any addition or exception to the representations and warranties in section 4B.

EXHIBIT A

TERM NOTE A

$850,000                Cleveland, Ohio                     , 2000

FOR VALUE RECEIVED, the undersigned, , a(n)                      corporation, promises to pay to the order of NATIONAL CITY BANK, at the payee’s main office in Cleveland, Ohio, the principal sum of

EIGHT HUNDRED FIFTY THOUSAND AND 00/100THS DOLLARS

in accordance with subsection 2A.02 of the Credit Agreement referred to below and to pay interest on the unpaid principal balance in accordance with subsection 2A.03 of the Credit Agreement referred to below.

This note is issued pursuant to a certain Agreement (the “Credit Agreement”) made as of                     , 2000 by and between the payee and the undersigned, which Credit Agreement contains provisions governing the acceleration of the Maturity of this note upon the happening of certain events, rights of the undersigned to prepay this note and other provisions to which this note is subject.

Borrower hereby authorizes any attorney at law at any time or times to appear in any state or federal court of record in the United States of America after the indebtedness represented by this note shall have become due, whether by lapse of time or by acceleration of Maturity, to waive the issuance and service of process, to present this note (together with any endorsement or endorsements thereon) to the court, to admit the Maturity thereof and the nonpayment thereof when due, to confess judgment against Borrower in favor of the holder of this note for the full amount then appearing due, together with interest and costs of suit, and thereupon to release all errors and waive all rights of appeal and stay of execution. The foregoing warrant of attorney shall survive any judgment, it being understood that should any judgment against Borrower be vacated for any reason, the holder of this note may nevertheless utilize the foregoing warrant of attorney in thereafter obtaining additional judgment or judgments against Borrower.

Address: 662 Wolf Ledges Parkway Akron, Ohio 44311	WR ACQUISITION, INC.
Telecopy:	By:
	Printed Name:
	Title:

WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

EXHIBIT B

TERM NOTE B

$480,000                Cleveland, Ohio                     , 2000

FOR VALUE RECEIVED, the undersigned, WR ACQUISITION, INC., a(n)                      corporation, promises to pay to the order of NATIONAL CITY BANK, at the payee’s main office in Cleveland, Ohio, the principal sum of

FOUR HUNDRED EIGHTY THOUSAND AND 00/100THS DOLLARS

in accordance with subsection 2B.02 of the Credit Agreement referred to below and to pay interest on the unpaid principal balance in accordance with subsection 2B.03 of the Credit Agreement referred to below.

This note is issued pursuant to a certain Agreement (the “Credit Agreement”) made as of                     , 2000 by and between the payee and the undersigned, which Credit Agreement contains provisions governing the acceleration of the Maturity of this note upon the happening of certain events, rights of the undersigned to prepay this note and other provisions to which this note is subject.

Borrower hereby authorizes any attorney at law at any time or times to appear in any state or federal court of record in the United States of America after the indebtedness represented by this note shall have become due, whether by lapse of time or by acceleration of Maturity, to waive the issuance and service of process, to present this note (together with any endorsement or endorsements thereon) to the court, to admit the Maturity thereof and the nonpayment thereof when due, to confess judgment against Borrower in favor of the holder of this note for the full amount then appearing due, together with interest and costs of suit, and thereupon to release all errors and waive all rights of appeal and stay of execution. The foregoing warrant of attorney shall survive any judgment, it being understood that should any judgment against Borrower be vacated for any reason, the holder of this note may nevertheless utilize the foregoing warrant of attorney in thereafter obtaining additional judgment or judgments against Borrower.

Address: 662 Wolf Ledges Parkway Akron, Ohio 44311	WR ACQUISITION, INC.
Telecopy:	By:
	Printed Name:
	Title:

WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

EXHIBIT C

REVOLVING NOTE

$1,500,000                Cleveland, Ohio                     , 2000

FOR VALUE RECEIVED, the undersigned, WR ACQUISITION, INC., (Borrower), a                      corporation, promises to pay to the order of NATIONAL CITY BANK, at the payee’s main office in Cleveland, Ohio, the principal sum of

ONE MILLION FIVE HUNDRED THOUSAND DOLLARS

(or, if less, the aggregate unpaid principal balance from time to time shown on the reverse side), together with interest computed thereon in accordance with the Credit Agreement referred to below, which principal and interest is payable in accordance with the provisions in the Credit Agreement.

This note is issued pursuant to a certain Agreement (the “Credit Agreement”) made as of                     , 2000 by and between the payee and Borrower. The Credit Agreement contains definitions applicable to this note, provisions governing the making of loans, the acceleration of the maturity thereof, rights of prepayment and other provisions applicable to this note. Each endorsement, if any, on the reverse side of this note (or any allonge thereto) shall be prima facie evidence of the data so endorsed.

Borrower hereby authorizes any attorney at law at any time or times to appear in any state or federal court of record in the United States of America after the indebtedness represented by this note shall have become due, whether by lapse of time or by acceleration of maturity, to waive the issuance and service of process, to present this note (together with any endorsement or endorsements thereon) to the court, to admit the maturity thereof and the nonpayment thereof when due, to confess judgment against Borrower in favor of the holder of this note for the full amount then appearing due, together with interest and costs of suit, and thereupon to release all errors and waive all rights of appeal and stay of execution. The foregoing warrant of attorney shall survive any judgment, it being understood that should any judgment against Borrower be vacated for any reason, the holder of this note may nevertheless utilize the foregoing warrant of attorney in thereafter obtaining additional judgment or judgments against Borrower.

Address: 662 Wolf Ledges Parkway Akron, Ohio 44311	WR ACQUISITION, INC.
Telecopy	By:
	Printed Name:
	Title:

WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

EXHIBIT D

EXTENSION AGREEMENT

This extension agreement made as of                     , 2000 by and between WR ACQUISITION, INC. (Borrower) and National City Bank (Bank):

Whereas, the parties have executed and delivered a certain credit agreement dated                     , 2000 which provides for, among other things, a Revolving Commitment aggregating $1,500,000 and available to Borrower, upon certain terms and conditions until                     , 2000 (the Expiration Date now in effect) subject to any earlier reduction or termination pursuant to the credit agreement.

In consideration of the premises above and agreements below and for other valuable consideration, the parties agree that subsection 2C.02 of the credit agreement (captioned “TERM”) is hereby amended by deleting the date                     , 2000 and by substituting therefor the date “                    , 2000”, which latter date shall be the Expiration Date hereafter in effect.

In all other respects the credit agreement shall remain in full effect.

WR ACQUISITION, INC.

By

NATIONAL CITY BANK

By

EXHIBIT E

EX-10.7

Exhibit 10.7

FIRST AMENDMENT

TO

CREDIT AGREEMENT

This First Amendment to Credit Agreement (this “Amendment”), dated as of March 25, 2002, is entered into by and between WR ACQUISITION, INC. (“Borrower”) and NATIONAL CITY BANK (“Bank”).

WITNESSETH:

WHEREAS, the parties have entered into a Credit Agreement dated July 28, 2000, (the “Credit Agreement”; all terms used in the Credit Agreement being used herein with the same meaning); and

WHEREAS, the parties desire to amend certain provisions of the Credit Agreement to change the Debt to EBITDA ratio covenant to a Senior Debt to EBITDA ratio covenant; and

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parries agree as follows:

SECTION I - Amendments to Credit Agreement

A. Subsection 3B.03 of the Credit Agreement is hereby amended in its entirety to read as follows:

3B.03 SENIOR DEBT TO EBITDA RATIO — Borrower will not, as of the end of any fiscal year commencing with the fiscal year ending December 31, 2001, suffer or permit the ratio of the aggregate of Senior Debt of the Borrower to

(a) the Net Income of the Borrower for that year plus

(b) the aggregate interest expense of the Borrower for that year plus

(c) the aggregate federal, state and local income taxes of the Borrower for that year plus

(d) the aggregate depreciation expense of the Borrower for that year plus

(e) the aggregate amortization expense of the Borrower for that year to be greater than two and two-tenths to one (2.20:1).

B. The following new definition is hereby added to section 9 of the Credit Agreement:

Senior Debt means Debt minus Subordinated Debt.

SECTION II - Conditions Precedent

It is a condition precedent to the effectiveness of this Amendment that, prior to or on the date hereof, the following items shall have been delivered to Bank (in form and substance acceptable to Bank):

(A) a Certificate, dated as of the date hereof, of the secretary of Borrower certifying (1) that Borrower’s Articles of Incorporation and Code of Regulations have not been amended since the execution of the Credit Agreement (or certifying that true, correct and complete copies of any amendments are attached), (2) that copies of resolutions of the Board of Directors of Borrower are attached with respect to the approval of this Amendment and of the matters contemplated hereby and authorizing the execution, delivery and performance by Borrower of this Amendment and each other document to be delivered pursuant hereto and (3) as to the incumbency and signatures of the officers of Borrower signing this Amendment and each other document to be delivered pursuant hereto; and

(B) such other documents as Bank may request to implement this Amendment and the transactions contemplated hereby.

If Bank shall consummate the transaction contemplated hereby prior to the fulfillment of any of the conditions precedent set forth above, the consummation of such transaction shall constitute only an extension of time for the fulfillment of such conditions and not a waiver thereof.

SECTION III - Representations and Warranties

Borrower hereby represents and warrants to Bank that:

(A) none of the representations and warranties made in subsections 4B.01 through 4B.09 of the Credit Agreement has ceased to be true and complete in any material respect as of the date hereof; and

(B) as of the date hereof no “Default Under This Agreement” has occurred that is continuing.

SECTION IV - Acknowledgments Concerning Outstanding Loans

Borrower acknowledges and agrees that, as of the date hereof, all of Borrower’s outstanding loan obligations to Bank are owed without any offset, defense, claim or counterclaim of any nature whatsoever. Borrower authorizes Bank to share all credit and financial information relating to Borrower with Bank’s parent company and with any subsidiary or affiliate company of Bank or of Bank’s parent company.

2

SECTION V - References

On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, or words of like import referring to the Credit Agreement, and each reference in the Subject Notes or other Related Writings to the “Credit Agreement”, “thereof”, or words of like import referring to the Credit Agreement shall mean and refer to the Credit Agreement as amended hereby. The Credit Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Bank under the Credit Agreement or constitute a waiver of any provision of the Credit Agreement except as specifically set forth herein.

SECTION VI - Governing Law

This Amendment, and the respective rights and obligations of the parties hereto, shall be construed in accordance with and governed by Ohio law.

IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment to be executed by their authorized officers as of the date and year first above written.

NATIONAL CITY BANK		WR ACQUISITION, INC.
By:	/s/ Maurus Kosco	By:	/s/ William J. Roberts
Printed Name: Maurus Kosco		Printed Name: William J. Roberts
Title:	Vice President	Title:	Chairman

3

EX-10.8

Exhibit 10.8

SECOND AMENDMENT

TO

CREDIT AGREEMENT

This Second Amendment to Credit Agreement (this “Amendment”), dated as of September 4, 2002, is entered into by and between WR ACQUISITION, INC. (“Borrower”) and NATIONAL CITY BANK (“Bank”).

WITNESSETH:

WHEREAS, the parties have entered into a Credit Agreement dated July 28, 2002 [as amended by a certain First Amendment to Credit Agreement dated as of March 22, 2001 (the “First Amendment”)] (as amended, the “Credit Agreement”; all terms used in the Credit Agreement being used herein with the same meaning); and

WHEREAS, the parties desire to amend certain provisions of the Credit Agreement to increase the amount of the Revolving Commitment from one million five hundred thousand and 00/100ths dollars ($1,500,000) to two million and 00/100ths dollars ($2,000,000); and

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

SECTION I - Amendments to Credit Agreement

A. Subsection 2C.01 of the Credit Agreement is hereby amended in its entirety to read as follows:

2C.01 AMOUNT — The amount of the Revolving Commitment is two million dollars ($2,000,000), but that amount may be reduced from time to time pursuant to subsection 2C.03 and the Revolving Commitment may be terminated pursuant to section 5B.

B. Subsection 2C.02 of the Credit Agreement is hereby amended in its entirety to read as follows:

2C.02 TERM — The Revolving Commitment shall become effective as of the date of this Agreement and shall remain in effect on a revolving basis until August 1, 2004 (the “Expiration Date”) EXCEPT that a later Expiration Date may be established from time to time pursuant to subsection 2C.06 and EXCEPT that the Revolving Commitment shall end in any event upon any earlier reduction thereof to zero pursuant to subsection 2C.03 or any earlier termination pursuant to section 5B.

SECTION II - Conditions Precedent

It is a condition precedent to the effectiveness of this Amendment that, prior to or on the date hereof, the following items shall have been delivered to Bank (in form and substance acceptable to Bank):

(A) an Amended and Restated Note (“Amended Note”) in favor of Bank, in the form of Exhibit A to this Amendment, with all blanks appropriately completed, duly executed by Borrower;

(B) a Certificate, dated as of the date hereof, of the secretary of Borrower certifying (1) that Borrower’s Articles of Incorporation and Code of Regulations have not been amended since the execution of the Credit Agreement (or certifying that true, correct and complete copies of any amendments are attached), (2) that copies of resolutions of the Board of Directors of Borrower are attached with respect to the approval of this Amendment and of the matters contemplated hereby and authorizing the execution, delivery and performance by Borrower of this Amendment and each other document to be delivered pursuant hereto and (3) as to the incumbency and signatures of the officers of Borrower signing this Amendment and each other document to be delivered pursuant hereto;

(C) an Acknowledgment of Receipt of a copy of, and Consent and Agreement to the terms of, this Amendment and the Amended Note by Hillstreet Fund, L.P. with respect to a certain Unconditional and Continuing Subordination executed and delivered to Bank by such entity and dated July 28, 2000; and

(D) such other documents as Bank may request to implement this Amendment and the transactions contemplated hereby.

If Bank shall consummate the transaction contemplated hereby prior to the fulfillment of any of the conditions precedent set forth above, the consummation of such transaction shall constitute only an extension of time for the fulfillment of such conditions and not a waiver thereof. Upon receipt of the properly completed and executed Amended Note, Bank agrees to return to Borrower the previously executed note respecting the Revolving Commitment and the same shall be marked “Replaced” or “Substituted” or with words of like meaning.

SECTION III - Representations and Warranties

Borrower hereby represents and warrants to Bank that:

(A) none of the representations and warranties made in subsections 4B.01 through 4B.09 of the Credit Agreement has ceased to be true and complete in any material respect as of the date hereof, and

(B) as of the date hereof no “Default Under This Agreement” has occurred that is continuing.

-2-

SECTION IV - Acknowledgments Concerning Outstanding Loans

Borrower acknowledges and agrees that, as of the date hereof, all of Borrower’s outstanding loan obligations to Bank are owed without any offset, defense, claim or counterclaim of any nature whatsoever. Borrower authorizes Bank to share all credit and financial information relating to Borrower with Bank’s parent company and with any subsidiary or affiliate company of Bank or of Bank’s parent company.

SECTION V - References

On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, or words of like import referring to the Credit Agreement, and each reference in the Subject Notes or other Related Writings to the “Credit Agreement”, “thereof”, or words of like import referring to the Credit Agreement shall mean and refer to the Credit Agreement as amended hereby. The Credit Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Bank under the Credit Agreement or constitute a waiver of any provision of the Credit Agreement except as specifically set forth herein. From and after the date of this Amendment references in the Credit Agreement to Exhibit D shall be deemed to be references to the form of the Amended Note attached hereto as Exhibit A.

SECTION VI - Governing Law

This Amendment, and the respective rights and obligations of the parties hereto, shall be construed in accordance with and governed by Ohio law.

IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment to be executed by their authorized officers as of the date and year first above written.

NATIONAL CITY BANK		WR ACQUISITION, INC.
By:	/s/ Maurus Kosco	By:	/s/ Steven D. Runkel
Printed Name: Maurus Kosco		Printed Name: Steven D. Runkel
Title:                Vice President		Title:                President, CEO

-3-

EX-10.9

Exhibit 10.9

THIRD AMENDMENT

TO

CREDIT AGREEMENT

This Third Amendment to Credit Agreement (this “Amendment”), dated as of November 25, 2003, is entered into by and between QUATECH, INC. (FKA WR ACQUISITION, INC.) (“Borrower”) and NATIONAL CITY BANK (“Bank”)

WITNESSETH:

WHEREAS, the parties have entered into a Credit Agreement dated July 28, 2000 as amended by a certain First Amendment to Credit Agreement dated as of March 25, 2002 and a Second Amendment to Credit Agreement dated as of September 4, 2002 (as amended, the “Credit Agreement”; all terms used in the Credit Agreement being used herein with the same meaning); and

WHEREAS, the parties desire to amend certain provisions of the Credit Agreement to, (a) recognize the name change of Borrower; (b) extend the Expiration Date of the Revolving Commitment to August 1, 2005; (c) eliminate the annual loan fee for the Revolving Commitment; (d) change the interest rate for the Revolving Commitment to grid pricing; and (e) establish a $150,000 letter of credit authorization and sublimit under the Revolving Commitment; and

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

SECTION I - Amendments to Credit Agreement

A. The name of the Borrower has been changed from WR Acquisition, Inc. to Quatech, Inc.

B. The following subsections of the Credit Agreement are hereby amended:

1. Subsection 1B. is hereby deleted in its entirety and replaced with the following:

1B. SUMMARY — This Agreement

(a) provides that concurrently with the execution and delivery of this Agreement Bank shall grant Borrower the Term Loan A described in section 2A and the Term Loan B described in section 2B,

(b) sets forth the terms and conditions upon which Borrower may, so long as the Revolving Commitment remains in effect, obtain the Revolving Loans described in sections 2C and 2D and the Subject LCs described in section 2E, PROVIDED that the aggregate unpaid principal balance of the Revolving Loans at any one time outstanding plus the undrawn balance of outstanding Subject LCs shall never exceed the lesser of

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either the amount of the Revolving Commitment then in effect or the amount of the Borrowing Base then in effect, and

(c) sets forth the covenants and warranties made by the parties to induce each other to enter into this Agreement and other Material provisions.

2. Subsection 2C.02 is hereby deleted in its entirety and replaced with the following:

2C.02 TERM — The Revolving Commitment shall become effective as of the date of this Agreement and shall remain in effect on a revolving basis until August 1, 2005 (the “Expiration Date”) EXCEPT that a later Expiration Date may be established from time to time pursuant to subsection 2C.06 and EXCEPT that the Revolving Commitment shall end in any event upon any earlier reduction thereof to zero pursuant to subsection 2C.03 or any earlier termination pursuant to section 5B.

3. Subsections 2D.02, 2D.03, 2D.04 and 2D.05 are hereby deleted in their entirety and replaced with the following:

2D.02 CREDIT REQUESTS — Whenever Borrower desires to borrow pursuant to this Agreement or to have a Subject LC issued, Borrower shall give Bank an appropriate notice (a Credit Request) with such information as Bank may reasonably request. The Credit Request shall be irrevocable and shall (EXCEPT in the case of any obtained at the execution and delivery of this Agreement) be given to Bank not later than 12:00 noon Cleveland time on the Banking Day the proceeds of any requested Revolving Loan are to be disbursed to Borrower and not later than 12:00 noon Cleveland time on the Banking Day prior to the Banking Day a Subject LC is to be issued. Each request by Borrower for a Revolving Loan or Subject LC shall be made either in writing or by telephone, PROVIDED that any telephone request shall be promptly confirmed in writing and Borrower shall assume the risk of misunderstanding.

2D.03 CONDITION: NO DEFAULT — Borrower shall not be entitled to obtain any Revolving Loan or have any Subject LC issued if

(a) any Default Under This Agreement shall then exist or would thereupon begin to exist or

(b) any representation or warranty made in subsections 4B.01 through 4B.08 (both inclusive) shall have ceased to be true and complete in any Material respect except for such changes, if any, as shall have been fully disclosed in the applicable Credit Request and as may be waived by Bank in the reasonable exercise of its discretion, or

(c) there shall have occurred any Material adverse change in Borrower’s financial condition, properties or business since the date of Borrower’s Most Recent 4A.04 Financial Statements.

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Each Credit Request, both when made and when honored, shall of itself constitute a continuing representation and warranty by Borrower that Borrower is entitled to obtain, and Bank is obligated to make or issue, the requested Revolving Loan or Subject LC.

2D.04 CONDITION: PURPOSE — Borrower shall not use the proceeds of any Revolving Loan or Subject LC for the purpose of financing the acquisition of any corporation or other business entity if the acquisition is publicly opposed by the latter’s management and if Bank deems that its participation in the financing would involve it in a conflict of interest.

2D.05 AMOUNT — No Revolving Loan shall be made if, after giving effect thereto, the aggregate unpaid principal balance of the Revolving Loans plus the aggregate undrawn balance of the outstanding Subject LCs would exceed either the amount of the Revolving Commitment then in effect or the amount of the Borrowing Base then in effect, whichever shall then be the lesser.

4. Commencing upon Bank’s receipt of Borrower’s 2003 fiscal year end annual financial statements (and effective no later than thirty (30) days following such receipt), subsection 2D.07 shall be deleted in its entirety and replaced with the following:

2D.07 INTEREST: REVOLVING LOANS — The principal of and overdue interest on the Revolving Loans shall bear interest payable in arrears on the first day of each January, April, July and October and at Maturity and computed (in accordance with subsection 8.10)

(a) prior to Maturity, at a fluctuating rate equal to the Reference Rate from time to time in effect plus the applicable RR margin (if any) and

(b) after Maturity (whether occurring by lapse of time or by acceleration), at a fluctuating rate equal to the Reference Rate from time to time in effect plus the applicable RR margin (if any) plus two percent (2%) per annum,

with each change in the Reference Rate automatically and immediately changing the rate thereafter applicable to the Revolving Loans; PROVIDED, that in no event shall the rate applicable to the Revolving Loans after the Maturity thereof be less than the rate applicable thereto immediately after Maturity. RR margin as used in this subsection means the following (as dependent upon the Senior Debt to EBITDA ratio calculated pursuant to subsection 3B.03 of this Agreement):

Senior Debt to EBITDA Ratio	RR Margin
< 1.50x	.50	%
> 1.50x but < 2.00x	.75	%
> 2.00x but < 2.50x	1.00	%*
> 2.50x	2.00	%

The initial applicable RR margin is indicated with an asterisk (*) and shall remain in effect until Bank’s receipt of Borrowers subsequent fiscal year end financial statements

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C. The following sections are hereby added to the Credit Agreement:

2E. LETTERS OF CREDIT — Bank agrees that so long as the Revolving Commitment remains in effect Bank will issue such letters of credit (each, a Subject LC) for Borrower’s account as Borrower may from time to time request subject, however, to the conditions of this Agreement.

2E.01 MAXIMUM — Bank shall not issue any Subject LC if, after giving effect thereto,

(a) the aggregate undrawn balance of all then outstanding Subject LCs would exceed one hundred fifty thousand and no/l00ths dollars ($150,000) or

(b) the sum of the aggregate outstanding Revolving Loans plus the aggregate undrawn balance of all then outstanding Subject LCs would exceed the lesser of the Revolving Commitment as then in effect or the Borrowing Base as then in effect.

2E.02 TERM — No Subject LC shall permit any draft to be drawn thereunder on a date (the “last draw date”) that is more than one hundred eighty (180) days after the date of its issue, nor shall any Subject LC permit the last draw date to be later than the third (3rd) Banking Day next preceding the Expiration Date.

2E.03 FORM — Each Subject LC shall

(a) be issued in such form as Bank may reasonably require,

(b) be a commercial letter of credit used solely for the importation of goods in the ordinary course of Borrower’s business, and

(c) be denominated in United States dollars.

2E.04 COMMISSION — Borrower shall pay Bank at the issuance of each Subject LC a non-refundable commission equal to two percent (2.0%) per annum of the face amount thereof, plus any other standard fees for issuance, amendment, registration or draws or any similar act generally charged by Bank in respect of letters of credit issued by it.

2E.05 REIMBURSEMENT — Borrower agrees to reimburse Bank for each draft or other item paid by Bank pursuant to or otherwise in respect of any Subject LC.

2E.06 SUBJECT LOAN BACK-UP — In the event of a draw under any Subject LC, Bank is irrevocably authorized to prepare, to sign Borrower’s name to, and to deliver on Borrower’s behalf an appropriate Credit Request requesting a Revolving Loan in an amount equal to the reimbursement amount plus any interest thereon. Bank will make the requested Revolving Loan even if any Default Under This Agreement shall then exist under the Credit Agreement and even if Borrower for any other reason would then

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not be entitled to obtain any Subject Loan. Bank shall disburse all such loan proceeds directly to Bank to satisfy Borrower’s reimbursement liability.

2E.07 UNCONDITIONAL OBLIGATION — The obligation of Bank to make, and of Borrower to pay, the Revolving Loans made pursuant to the preceding section shall be absolute and unconditional and shall be performed under all circumstances, including (without limitation)

(a) any lack of validity or enforceability of the Subject LC in question,

(b) the existence of any claim, offset, defense or other right that Borrower may have against the beneficiary of such Subject LC or any of its successors in interest,

(c) the existence of any claim, offset, defense or other right that Bank may have against Borrower or any of its Affiliates or against the beneficiary of such Subject LC or any of their successors in interest,

(d) the existence of any fraud or misrepresentation in the presentment of any draft or other item drawn and paid under such Subject LC or

(e) any payment of any draft or other item by Bank which does not strictly comply with the terms of such Subject LC provided such payment shall not have constituted gross negligence or willful misconduct.

5B.04 SUBJECT LCs — If the Maturity of the Subject Indebtedness shall be accelerated pursuant to subsection 5B.01 or 5B.02, Borrower shall immediately deposit with Bank, as security for Borrower’s obligation to reimburse Bank for any then outstanding Subject LCs, cash or acceptable marketable securities having a fair cash value equal to the sum of the aggregate undrawn balance of any then outstanding Subject LCs.

D. The following definition is hereby added to the Credit Agreement:

Subject LC means a letter of credit issued by Bank for Borrower’s account in accordance with section 2E;

E. Subsection 2C.05 (“ANNUAL LOAN FEE”) of the Credit Agreement is hereby deleted in its entirety.

SECTION II - Conditions Precedent

It is a condition precedent to the effectiveness of this Amendment that, prior to or on the date hereof, the following items shall have been delivered to Bank (in form and substance acceptable to Bank):

(A) a Certificate, dated as of the date hereof, of the secretary of Borrower certifying (1) that Borrower’s Articles of Incorporation and Code of Regulations have not been amended since the

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execution of the Credit Agreement (or certifying that true, correct and complete copies of any amendments are attached), (2) that copies of resolutions of the Board of Directors of Borrower are attached with respect to the approval of this Amendment and of the matters contemplated hereby and authorizing the execution, delivery and performance by Borrower of this Amendment and each other document to be delivered pursuant hereto and (3) as to the incumbency and signatures of the officers of Borrower signing this Amendment and each other document to be delivered pursuant hereto;

(B) an Acknowledgment of Receipt of a copy of, and Consent and Agreement to the terms of, this Amendment by Hillstreet Fund, L.P. with respect to a certain Unconditional and Continuing Subordination executed and delivered to Bank by such entity and dated July 28, 2000; and

(C) such other documents as Bank may request to implement this Amendment and the transactions contemplated hereby.

SECTION III - Representations and Warranties

Borrower hereby represents and warrants to Bank that:

(A) none of the representations and warranties made in subsections 4B.01 through 4B.09 of the Credit Agreement has ceased to be true and complete in any material respect as of the date hereof; and

(B) as of the date hereof no “Default Under This Agreement” has occurred that is continuing.

SECTION IV - Acknowledgments Concerning Outstanding Loans

Borrower acknowledges and agrees that, as of the date hereof, all of Borrower’s outstanding loan obligations to Bank are owed without any offset, defense, claim or counterclaim of any nature whatsoever. Borrower authorizes Bank to share all credit and financial information relating to Borrower with Bank’s parent company and with any subsidiary or affiliate company of Bank or of Bank’s parent company.

SECTION V - References

On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, or words of like import referring to the Credit Agreement, and each reference in the Subject Notes or other Related Writings to the “Credit Agreement”, “thereof”, or words of like import referring to the Credit Agreement shall mean and refer to the Credit Agreement as amended hereby. The Credit Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Bank under the Credit Agreement or constitute a waiver of any provision of the Credit Agreement except as specifically set forth herein

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SECTION VI - Governing Law

This Amendment, and the respective rights and obligations of the parties hereto, shall be construed in accordance with and governed by Ohio law.

IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment to be executed by their authorized officers as of the date and year first above written.

NATIONAL CITY BANK		QUATECH, INC.
By:	/s/ Maurus Kosco	By:	/s/ William J. Roberts
Printed Name:	Maurus Kosco	Printed Name: William J. Roberts
Title:	Vice President	Title:                 Chairman

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EX-10.10

Exhibit 10.10

FOURTH AMENDMENT

TO

CREDIT AGREEMENT

This Fourth Amendment to Credit Agreement (this “Amendment”), dated as of July 21, 2005, is entered into by and between QUATECH, INC. (FKA WR ACQUISITION, INC.) (“Borrower”) and NATIONAL CITY BANK (“Bank”).

WITNESSETH:

WHEREAS, the parties have entered into a Credit Agreement dated July 28, 2000 as amended by a certain First Amendment to Credit Agreement dated as of March 25, 2002, a Second Amendment to Credit Agreement dated as of September 4, 2002, and a Third Amendment to Credit Agreement dated November 25, 2003 (as amended, the “Credit Agreement”; all terms used in the Credit Agreement being used herein with the same meaning); and

WHEREAS, the parties desire to amend certain provisions of the Credit Agreement to extend the Expiration Date of the Revolving Commitment to August 1, 2006; and

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows;

SECTION I - Amendment to Credit Agreement

Subsection 2C.02 is hereby deleted in its entirety and replaced with the following :

2C.02 TERM — The Revolving Commitment shall become effective as of the date of this Agreement and shall remain in effect on a revolving basis until August 1, 2006 (the “Expiration Date”) EXCEPT that a later Expiration Date may be established from time to time pursuant to subsection 2C.06 and EXCEPT that the Revolving Commitment shall end in any event upon any earlier reduction thereof to zero pursuant to subsection 2C.03 or any earlier termination pursuant to section 5B.

SECTION II - Conditions Precedent

It is a condition, precedent to the effectiveness of this Amendment that, prior to or on the date hereof, the following items shall have been delivered to Bank (in form and substance acceptable to Bank):

(A) a Certificate, dated as of the date hereof, of the secretary of Borrower certifying (1) that Borrower’s Articles of Incorporation and Code of Regulations have not been amended since the execution of the Credit Agreement (or certifying that true, correct and complete copies of any amendments are attached), (2) that copies of resolutions of the Board of Directors of Borrower are attached with respect to the approval of this Amendment and of the matters contemplated hereby and authorizing the execution, delivery and performance by Borrower of this Amendment and each other document to be delivered pursuant hereto and (3) as to the

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incumbency and signatures of the officers of Borrower signing this Amendment and each other document to be delivered pursuant hereto;

(B) an Acknowledgment of Receipt of a copy of, and Consent and Agreement to the terms of, this Amendment by Hillstreet Fund, L.P, with respect to a certain Unconditional and Continuing Subordination executed and delivered to Bank by such entity and dated July 28, 2000; and

(C) such other documents as Bank may request to implement this Amendment and the transaction contemplated hereby.

SECTION III - Representations and Warranties

Borrower hereby represents and warrants to Bank that:

(A) none of the representations and warranties made in subsections 4B.01 through 4B.09 of the Credit Agreement has ceased to be true and complete in any material respect as of the date hereof; and

(B) as of the date hereof no “Default Under This Agreement” has occurred that is continuing.

SECTION IV - Acknowledgments Concerning Outstanding Loans

Borrower acknowledges and agrees that, as of the date hereof, all of Borrower’s outstanding loan obligations to Bank are owed without any offset, defense, claim or counterclaim of any nature whatsoever. Borrower authorizes Bank to share all credit and financial information relating to Borrower with Bank’s parent company and with any subsidiary or affiliate company of Bank or of Bank’s parent company.

SECTION V - References

On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, or words of like import referring to the Credit Agreement, and each reference in the Subject Notes or other Related Writings to the “Credit Agreement”, “thereof”, or words of like import referring to the Credit Agreement shall mean and refer to the Credit Agreement as amended hereby. The Credit Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Bank under the Credit Agreement or constitute a waiver of any provision of the Credit Agreement except as specifically set forth herein.

SECTION VI - Governing Law

This Amendment, and the respective rights and obligations of the parties hereto, shall be construed in accordance with and governed by Ohio law.

IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment to be executed by their authorized officers as of the date and year first above written.

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NATIONAL CITY BANK		QUATECH, INC.
By:	/s/ Maurus Kosco	By:	/s/ Steven D. Runkel
Printed Name:	Maurus Kosco	Printed Name: Steven D. Runkel
Title:	Vice President	Title:                CEO

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EX-10.11

Exhibit 10.11

FIFTH AMENDMENT

TO

CREDIT AGREEMENT

This Fifth Amendment to Credit Agreement (this “Amendment”), dated as of February 28, 2006, is entered into by and between QUATECH, INC. (FKA WR ACQUISITION, INC.) (“Borrower”) and NATIONAL CITY BANK (“Bank”).

WITNESSETH:

WHEREAS, the parties have entered into a Credit Agreement dated July 28, 2000, as amended by a certain First Amendment to Credit Agreement dated as of March 25, 2002, a Second Amendment to Credit Agreement dated as of September 4, 2002, a Third Amendment to Credit Agreement dated Nov 25, 2003, and a Fourth Amendment to Credit Agreement dated July 21, 2005 (as amended, the “Credit Agreement”; all terms used in the Credit Agreement being used herein with the same meaning); and

WHEREAS, the parties desire to amend certain provisions of the Credit Agreement;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

SECTION I - Amendments to Credit Agreement

A. Subsection 2C.02 of the Credit Agreement is hereby amended in its entirety to read as follows:

2C.02 TERM — The Revolving Commitment shall become effective as of the date of this Agreement and shall remain in effect on a revolving basis until August 1, 2007 (the “Expiration Date”) EXCEPT that a later Expiration Date may be established from time to time pursuant to subsection 2C.06 and EXCEPT that the Revolving Commitment shall end in any event upon any earlier reduction thereof to zero pursuant to subsection 2C.03 or any earlier termination pursuant to section 5B.

B. Subsection 2D.07 of the Credit Agreement is hereby amended in its entirety to read as follows:

2D.07 INTEREST: REVOLVING LOANS — The principal of and overdue interest on the Revolving Loans shall bear interest payable in arrears on the first day of each January, April, July and October and at Maturity and computed (in accordance with subsection 8.10)

(a) prior to Maturity, at a fluctuating rate equal to the Reference Rate from time to time in effect plus the applicable RR margin (if any) and

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(b) after Maturity (whether occurring by lapse of time or by acceleration), at a fluctuating rate equal to the Reference Rate from time to time in effect plus the applicable RR margin (if any) plus two percent (2%) per annum,

with each change in the Reference Rate automatically and immediately changing the rate thereafter applicable to the Revolving Loans; PROVIDED, that in no event shall the rate applicable to the Revolving Loans after the Maturity thereof be less than the rate applicable thereto immediately after Maturity. RR margin as used in this subsection means the following (as dependent upon the Senior Debt to EBITDA ratio calculated pursuant to subsection 3B.02 of this Agreement):

Senior Debt to EBITDA Ratio	RR Margin
< 1.50x	.50	%
> 1.50x but < 2.00x	.75	%
> 2.00x but < 2.50x	1.00	%*
> 2.50x but < 3.00x	1.25	%
> 3.00x	Default Rate

The initial applicable RR margin is indicated with an asterisk (*) and shall remain in effect until Bank’s receipt of Borrower’s subsequent fiscal year end financial statements.

C. Section 3B of the Credit Agreement is hereby amended in its entirety to read as follows:

3B.01 DEBT SERVICE COVERAGE — Borrower will not, as of the end of any fiscal quarter of Borrower (commencing with the quarter ending December 31, 2005), suffer or permit the ratio of the aggregate of

(a) its Net Income for that quarter and the three preceding quarters plus

(b) its interest expense for that quarter and the three preceding quarters plus

(c) its federal, state and local income taxes, if any, for that quarter and the three preceding quarters plus

(d) its depreciation and amortization expense for that quarter and the three preceding quarters

to

(a) its interest expense for that quarter and the three preceding quarters plus

(b) its dividends paid to DVC for that quarter and the three preceding quarters plus

(c) its current portion of long term debt for that quarter and the three preceding quarters

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to be less than one to one (1.00:1.00) for the fiscal quarter ending December 31, 2005 and all fiscal quarters ending in 2006, and one and one-tenth to one (1.10:1.00) for the fiscal quarter ending March 31, 2007 and each fiscal quarter thereafter.

3B.02 SENIOR DEBT TO EBITDA RATIO — Borrower will not, as of the end of any fiscal quarter (commencing with the quarter ending December 31, 2005), suffer or permit the ratio of the aggregate of Senior Debt of the Borrower to

(a) the Net Income of the Borrower for that quarter and the three preceding quarters plus

(b) the aggregate interest expense of the Borrower for that quarter and the three preceding quarters plus

(c) the aggregate federal, state and local income taxes of the Borrower for that quarter and the three preceding quarters plus

(d) the aggregate depreciation expense of the Borrower for that quarter and the three preceding quarters plus

(e) the aggregate amortization expense of the Borrower for that quarter and the three preceding quarters

to be greater than three to one (3.00:1.0) for the quarters ending December 31, 2005, March 31, 2006, June 30, 2006, and September 30, 2006, two and one-half to one (2.50:1.0) for the quarters ending December 31, 2006, March 31, 2007, and June 30, 2007, and two and one-fourth to one (2.25:1.0) for the quarter ending September 30, 2007 and all quarters thereafter.

D. Subsection 3D.06 of the Credit Agreement is hereby amended in its entirety to read as follows:

3D.06 DIVIDENDS – Borrower will not make or commit itself to make any Distribution to its shareholders at any time if any Default Under This Agreement shall then exist or would thereupon occur, nor will Borrower at any time make any Distribution other than any dividend payable solely in cash (except for Dividends previously committed to DCV Capital).

E. The following section shall be added to the Credit Agreement:

2F. TERM LOAN C — Bank shall lend Borrower Six Hundred Thousand and 00/100ths Dollars ($600,000.00) (“Term Loan C”) and disburse the proceeds to the credit of Borrower’s general checking account with Bank in the absence of written instructions from Borrower to the contrary.

2F.01 TERM NOTE C — Borrower shall evidence Term Loan C by executing and delivering to Bank Borrower’s note being in the form and substance of Exhibit E to this Agreement.

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2F.02 AMORTIZATION OF TERM LOAN C — The principal of Term Loan C shall be payable in eighteen (18) consecutive monthly installments of principal commencing March 5, 2006, all but the last installment to be in the principal sum of Sixteen Thousand Six Hundred Sixty-Seven and 00/l00ths Dollars ($16,667.00) each and the last to be in the amount of the remaining outstanding principal of Term Loan C.

2F.03 INTEREST ON TERM LOAN C — The principal of and overdue interest on Term Loan C shall bear interest (subject to the provisions of subsection 8.10 and those in Exhibit B) at a fluctuating rate (the “Fluctuating Rate”) equal to the Reference Rate from time to time in effect plus two percent (2.00%), with each change in the Reference Rate immediately and automatically changing the Fluctuating Rate if and to the extent it is thereafter applicable to Term Loan C.

EXCEPT that after Maturity (whether occurring by lapse of time or by acceleration) the principal of and overdue interest on Term Loan C shall bear interest at a Fluctuating Rate per annum equal to the Reference Rate from time to time in effect plus four percent (4%) per annum, with each change in the Reference Rate immediately and automatically changing the aforesaid Fluctuating Rate.

Interest on Term Loan C shall be payable in arrears on the 5^th day of each month commencing March 5, 2006, and at Maturity.

2F.04 PREPAYMENTS OF TERM LOAN C — Borrower shall have the right at all times to prepay Term Loan C in whole or in part, subject to the following:

(a) Borrower shall give Bank an appropriate note not later than 12:00 noon on the Banking Day next preceding any such prepayment, which notice, if not originally given in writing, shall be promptly confirmed in writing.

(b) Each prepayment of Term Loan C shall aggregate Ten Thousand Dollars ($10,000) or any greater amount that is a multiple of Ten Thousand Dollars ($10,000) or an amount equal to the aggregate unpaid principal balance of Term Loan C and shall be applied to the principal installments in the inverse order of their respective maturities.

(c) Each prepayment of Term Loan C may be made without penalty or premium.

(d) Concurrently with each prepayment Borrower shall prepay the unpaid interest accrued on the principal being prepaid.

2F.05 LOAN FEE — Borrower agrees to pay Bank, upon the execution of this Agreement, a loan fee for Term Loan C in the amount of Seven Thousand Five Hundred Dollars ($7,500), and, if Term Loan C remains outstanding for ninety (90) days, another $7,500, at that time.

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2F.06 MANDATORY PREPAYMENTS — Whenever Borrower’s Net Income for the previous three (3) months plus depreciation expense for the previous three (3) months plus amortization expense for the previous three (3) months minus all principal payments on Debt for the previous three (3) months shall be in excess of One Thousand Dollars ($1,000) (as measured on a quarterly basis beginning March 31, 2006), Borrower shall make a principal payment in an amount equal to fifty percent (50%) of the excess, which principal payment shall be applied to the principal installments of Term Loan C in the inverse order of their respective due dates. Concurrently therewith Borrower shall prepay the unpaid interest accrued on the principal being prepaid.

SECTION II - Conditions Precedent

It is a condition precedent to the effectiveness of this Amendment that, prior to or on the date hereof, the following items shall have been delivered to Bank (in form and substance acceptable to Bank):

(A) Term Note C, duly executed by Borrower;

(B) a Certificate, dated as of the date hereof, of the secretary of Borrower certifying (1) that Borrower’s Articles of Incorporation and Code of Regulations have not been amended since the execution of the Credit Agreement (or certifying that true, correct and complete copies of any amendments are attached), (2) that copies of resolutions of the Board of Directors of Borrower are attached with respect to the approval of this Amendment and of the matters contemplated hereby and authorizing the execution, delivery and performance by Borrower of this Amendment and each other document to be delivered pursuant hereto and (3) as to the incumbency and signatures of the officers of Borrower signing this Amendment and each other document to be delivered pursuant hereto;

(C) an Acknowledgment of Receipt of a copy of, and Consent and Agreement to the terms of, this Amendment by Hillstreet Fund, L.P. with respect to a certain Unconditional and Continuing Subordination executed and delivered to Bank by such entity and dated July 28, 2000; and

(D) such other documents as Bank may request to implement this Amendment and the transactions contemplated hereby.

SECTION III - Representations and Warranties

Borrower hereby represents and warrants to Bank that:

(A) none of the representations and warranties made in subsections 4B.01 through 4B.09 of the Credit Agreement has ceased to be true and complete in any material respect as of the date hereof; and

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(B) as of the date hereof no “Default Under This Agreement” has occurred that is continuing.

SECTION IV - Acknowledgments Concerning Outstanding Loans

Borrower acknowledges and agrees that, as of the date hereof, all of Borrower’s outstanding loan obligations to Bank are owed without any offset, defense, claim or counterclaim of any nature whatsoever. Borrower authorizes Bank to share all credit and financial information relating to Borrower with Bank’s parent company and with any subsidiary or affiliate company of Bank or of Bank’s parent company.

SECTION V - References

On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof, or words of like import referring to the Credit Agreement, and each reference in the Subject Notes or other Related Writings to the “Credit Agreement”, “thereof”, or words of like import referring to the Credit Agreement shall mean and refer to the Credit Agreement as amended hereby. The Credit Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Bank under the Credit Agreement or constitute a waiver of any provision of the Credit Agreement except as specifically set forth herein.

SECTION VI - Governing Law

This Amendment, and the respective rights and obligations of the parties hereto, shall be construed in accordance with and governed by Ohio law.

IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment to be executed by their authorized officers as of the date and year first above written.

NATIONAL CITY BANK		QUATECH, INC.
By:	/s/ Maurus Kosco	By:	/s/ Steven Runkel
Printed Name: Maurus Kosco		Printed Name: Steven Runkel
Title:	Vice President	Title:	CEO

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EX-10.12

Exhibit 10.12

LOAN AGREEMENT

between

THE DIRECTOR OF DEVELOPMENT

OF THE STATE OF OHIO

and

QUATECH, INC.

Dated

as of

January 27, 2006

TABLE OF CONTENTS

(The Table of Contents is not a part of this Agreement

and is only for convenience of reference.)

		Page
Preambles		1
	ARTICLE I Definitions
Section 1.1	Use of Defined Terms	1
Section 1.2	Definitions	1
Section 1.3	Certain Words and References	7
	ARTICLE II Determinations and Representations
Section 2.1	Determinations of the Director	8
Section 2.2	Representations and Warranties of the Company	8
	ARTICLE III Loan; Provision of Project; Conditions to Disbursement
Section 3.1	Loan and Repayment	11
Section 3.2	Provision of Project	12
Section 3.3	Plans and Specifications; Inspections	13
Section 3.4	Company Required to Pay Costs in Event Proceeds Insufficient	13
Section 3.5	Completion Date	13
Section 3.6	Conditions to Disbursement	14
Section 3.7	Postponement of Disbursement Date	17
Section 3.8	Payment of Costs; Indemnification	17
Section 3.9	Provisions Regarding Merger Agreement and License Agreement, Mandatory Prepayment of Loan	19
	ARTICLE IV Additional Covenants and Agreements
Section 4.1	Employment Statement; Job Creation; Initial Public Offering; Primary Operations	19

Section 4.2	Affirmative Covenants of the Company	20
Section 4.3	Negative Covenants of the Company	24
	ARTICLE V Events of Default and Remedies; Termination
Section 5.1	Events of Default	26
Section 5.2	Remedies on Default	27
Section 5.3	No Remedy Exclusive	28
Section 5.4	Agreement to Pay Expenses and Attorneys’ Fees	28
Section 5.5	No Waiver	28
	ARTICLE VI Miscellaneous
Section 6.1	Term of Agreement	29
Section 6.2	Notices	29
Section 6.3	Extent of Covenants of the Director; No Personal Liability	29
Section 6.4	Binding Effect	29
Section 6.5	Amendments and Supplements	29
Section 6.6	Execution Counterparts	29
Section 6.7	Severability	29
Section 6.8	Captions; Entire Agreement	29
Section 6.9	Interpretation	30
Section 6.10	Waiver of Jury Trial	30
Section 6.11	Governing Law	30
Signatures		31

Exhibit A - FORM OF NOTE

Exhibit B - FORM OF DISBURSEMENT REQUEST

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LOAN AGREEMENT

THIS LOAN AGREEMENT is made and entered into as of January 27, 2006 by and between the Director of Development (the “Director”) of the State of Ohio (the “State”), acting on behalf of the State, and QuaTech, Inc., an Ohio corporation (the “Company”), under the circumstances summarized in the following recitals (the capitalized terms used in the recitals being used therein as defined in Article I hereof):

A. Pursuant to the Act, the Director is authorized, among other things, to make loans to assist in the financing of an Eligible Innovation Project.

B. The Company has requested that the Director provide the financial assistance for the Project hereinafter described.

C. The Director has determined that the Project constitutes an Eligible Innovation Project and that the financial assistance to be provided pursuant to this Agreement is appropriate under the Act and will be in furtherance and in implementation of the public policy set forth in the Act.

D. The financial assistance to be provided pursuant to this Agreement has been reviewed and approved by the Development Financing Advisory Council and the Controlling Board, pursuant to the Act.

NOW, THEREFORE, in consideration of the premises and the representations and agreements hereinafter contained, the Director and the Company agree as follows:

ARTICLE I

Definitions

Section 1.1. Use of Defined Terms. In addition to the words and terms elsewhere defined in this Agreement or by reference to the Security Documents or other instruments, the words and terms set forth in Section 1.2 hereof shall have the meanings therein set forth unless the context or use expressly indicates different meaning or intent. Such definitions shall be equally applicable to both the singular and plural forms of any of the words and terms therein defined.

Section 1.2. Definitions. As used herein:

“Act” means Chapter 166, Ohio Revised Code, as from time to time enacted and amended.

“Agreement” means this Loan Agreement, as the same may be amended, modified, supplemented, restated or replaced from time to time.

“Allowable Innovation Costs” means “allowable innovation costs” of the Project within the meaning of the Act.

“Application” means the Application of the Company submitted to the Director requesting assistance under the Act.

“Business Day” means a day (other than a Saturday or Sunday) on which banks generally are open in Columbus, Ohio for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system.

“City” means the city of Hudson, Ohio.

“Closing Date” means January 27, 2006, the date of execution and delivery of the Loan Documents.

“Collateral” shall have the same meaning as defined in the Security Agreement.

“Commitment” means the Commitment Letter between the Director and the Company dated October 4, 2005.

“Completion Date” means the date of completion of the Project, as certified by the Company pursuant to Section 3.5 hereof.

“Controlling Board” means the Controlling Board of the State.

“Corrective Work” means all activities of removal, response, investigation, testing, analysis, remediation (including, but not limited to disposal of Hazardous Substances) taken pursuant to Environmental Requirements (i) to prevent, abate, or correct a Release or threatened Release of Hazardous Substances at, about, affecting, or affected by the Project or the Project Site or (ii) to comply with any and all Environmental Requirements applicable to the Project or the Project Site or areas at, about, affecting, or affected by the Project or the Project Site.

“Development Financing Advisory Council” means the Development Financing Advisory Council of the State.

“Disbursement Date” means each date proceeds of the Loan are disbursed to, or for the benefit of, the Company in accordance with the terms of this Agreement; the final Disbursement Date shall not be later than April 30, 2006; and there shall not be more than three Disbursement Dates.

“Disbursement Request” means each Disbursement Request in the form of Exhibit B attached hereto.

“Eligible Innovation Project” means an “eligible innovation project” within the meaning of the Act and, with respect to the Loan, means the Project.

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“Environmental Activity” means any actual or threatened storage, holding, existence, Release, emission, discharge, transportation or disposal of any Hazardous Substance from, under, into or on the Project Site or otherwise relating to the Project Site or any Use of the Project Site which is regulated by or for which standards of conduct or liability are imposed by any Environmental Requirements.

“Environmental Laws” means the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. §9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §1802 et seq., the Toxic Substances Control Act, 15 U.S.C. §2601 et seq., the Federal Water Pollution Control Act, 33 U.S.C. §1251 et seq., the Clean Water Act, 33 U.S.C. §1321 et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., regulations promulgated thereunder, and any other federal, state, county, municipal, local or other statue, law, ordinance or regulation which may relate to or deal with human health or the environment. References to sections or titles of any Environmental Law shall be construed to also refer to successor sections or titles.

“Environmental Requirements” means all present and future laws, including but not limited to Environmental Laws, authorizations, judgments, decrees, concessions, grants, orders, franchises, agreements and other restrictions and requirements (whether or not arising under statutes or regulations) relating to any Hazardous Substances or Environmental Activity.

“ERISA” means the Employee Retirement Income Security Act of 1974, and any successor statute of similar import, together with all rules and regulations thereunder, as amended, reformed or otherwise modified from time to time. References to sections or titles of ERISA shall be construed to also refer to successor sections or titles.

“Escrow Agreement” means the “Escrow Agreement” as defined in the License Agreement, as the same may be amended, modified, supplemented, restated or replaced from time to time, and being in form and substance satisfactory to the Director.

“Event of Default” means any of the events described as an event of default in Section 5.1 hereof.

“Governing Instruments” means the articles of incorporation and code of regulations of the Company.

“Governmental Authority” means, collectively, the United States of America, the State, any political subdivision thereof, any municipality, and any agency, department, commission, board or bureau of any of the foregoing having jurisdiction over the Project and/or the Project Site.

“Hazardous Substances” means:

(a) any “hazardous substance” as defined in §101(14) of CERCLA (42 U.S.C. §9601(14)) or regulations promulgated thereunder;

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(b) any “solid waste”, “hazardous waste”, “infectious waste”, “pollutant”, or “hazardous air pollutant”, as such terms are defined in any Environmental Law at such time;

(c) asbestos, urea-formaldehyde, polychlorinated biphenyls, source, special nuclear or by-product material, chemical waste, radioactive material, explosives, known carcinogens, petroleum products and by-products and other dangerous, toxic or hazardous pollutants, contaminants, chemicals, material or substances listed or identified in, or regulated by, any Environmental Law; and

(d) any additional substances or materials which at such time are classified or considered to be hazardous or toxic under any Environmental Law.

“Intercreditor Agreement” means, as the context requires, (i) the Unconditional and Continuing Subordination among the Company, the Director and the Senior Lender, dated as of January 27, 2006, and (ii) the Intercreditor Agreement among the Company, the Director and the Subordinate Lender, dated as of January 27, 2006, as each may be amended, modified, supplemented, restated or replaced from time to time.

“License” means the exclusive, sublicensable, worldwide, perpetual right and license to the Technology to develop, make, have made, offer for sale, sell and cerate derivative works of the Products and the Technology granted by Licensor to the Company pursuant to the License Agreement.

“License Agreement” means the License Agreement dated August 5, 2005 by and among the Licensor, the Company and Development Capital Ventures LP, a Delaware limited partnership (“DCV”), as amended by a First Amendment to License Agreement dated October 20, 2005 among the Licensor, the Company and DCV.

“Licensor” means DPAC Technologies Corp., a California corporation, and its successors and assigns.

“Licensor Consent” means the Licensor Consent among the Licensor, the Director and the Company, dated as of January 27, 2006.

“Loan” means the loan by the Director to the Company in the total sum of the Loan Amount, to be disbursed pursuant to the terms hereof.

“Loan Amount” means the lesser of (i) $2,500,000 and (ii) 75% of the Allowable Innovation Costs of the Project, as determined by the Director in the Director’s sole discretion pursuant to this Agreement.

“Loan Approval Documents” means, with respect to the Loan, the Recommendation of the Director to the Development Financing Advisory Council dated July 25, 2005, the Resolution

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“Loan Approval Documents” means, with respect to the Loan, the Recommendation of the Director to the Development Financing Advisory Council dated July 25, 2005, the Resolution of the Development Financing Advisory Council dated July 25, 2005, the Approval of the Controlling Board dated August 29, 2005, and the Commitment.

“Loan Documents” means all documents, instruments and agreements delivered to or required by the Director to evidence or secure the Loan, including this Agreement, as required by the Commitment and this Agreement, as the same may be amended, modified, supplemented, restated or replaced from time to time.

“Loss” is defined in Section 3.8(c)(vii) hereof.

“Market Conditions” means those conditions determined by the Director, with advice from the Federal Reserve Bank of Cleveland. The Director shall consider the following:

(i) two consecutive quarters of decline in the relevant industry and marketplace in the State as a whole, or when possible by relevant manufacturing sector. Employment figures will be those reported by the Department of Job and Family Services of the State;

(ii) a decline, as a whole or by relevant sector, in 12 of the last 36 months as detailed in the Federal Reserve’s National Industrial Production Index; and

(iii) a decline within the relevant sector of Standard & Poor’s “Industrial Outlook”.

“Merger Agreement” means the Agreement and Plan of Reorganization dated April 26, 2005 by and between the Company and the Licensor, as amended by (i) a First Amendment to Agreement and Plan of Reorganization dated August 5, 2005, (ii) a Second Amendment to Agreement and Plan of Reorganization dated October 20, 2005, and (iii) a Third Amendment to Agreement and Plan of Reorganization dated December 12,2005, whereby the Licensor would acquire the Company by merger, with the shareholders of the Company obtaining a controlling interest in the Licensor.

“Note” means the promissory note, in the form attached hereto as Exhibit A, evidencing the obligation of the Company to repay the Loan, as the same may be amended, modified, supplemented, restated or replaced from time to time.

“Notice Address” means:

(a)	As to the Director:	Ohio Department of Development
		Attn: Loan Servicing
		77 South High Street, 28th Floor
		P.O. Box 1001
		Columbus, OH 43216-1001

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(b)	As to the Company:	QuaTech, Inc.
		Attn: President and Chief Executive Officer
		5675 Hudson Industrial Parkway
		Hudson, OH 44236-5012

or such additional or different address, notice of which is given under Section 6.2 hereof.

“PBGC” means the Pension Benefit Guaranty Corporation established pursuant Subtitle A of Title IV of ERISA.

“Plan” means any employee benefit plan or other plan maintained for employees which is covered by Title I of ERISA.

“Plans and Specifications” means the plans and specifications or other appropriate documents describing the Project prepared by or at the direction of the Company.

“Products” shall have same meaning as defined in the License Agreement.

“Prohibited Transaction” means a transaction described in Section 406 of ERISA which is not subject of an exemption pursuant to Section 408 of ERISA.

“Project” means the (i) acquisition of wireless connectivity technology developed by Licensor pursuant to the License granted pursuant to the License Agreement, which will enable the Company to enter the machine-to-machine (M2M) wireless connectivity market, and (ii) payment of technology acquisition costs in connection therewith, costs of which can and will be capitalized in accordance with generally accepted account principles, together constituting an Eligible Innovation Project.

“Project Purposes” means Provision of the Project and the operation of the Company’s business in connection therewith.

“Project Site” means the Company’s place of business located at 5675 Hudson Industrial Parkway, Hudson, Ohio 44236-5012.

“Provision” means, as applicable, the acquiring, constructing, reconstructing, rehabilitating, renovating, enlarging, installing, improving, equipping or furnishing of the Project.

“Release” means spilling, leaking, pumping, paving, emitting, emptying, discharging, injecting, escaping, contaminating, leaching, disposing, releasing or dumping of any Hazardous Substance into the environment.

“Reportable Event” shall have the meaning given such term in Section 4043(b) of ERISA.

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“Required Contribution” means $850,000 to be provided by the Company in cash to pay a portion of the Allowable Innovation Costs of the Project.

“Security Agreement” means the Security Agreement between the Director and the Company, of even date herewith, as the same may be amended, modified, supplemented, restated or replaced from time to time.

“Security Documents” means, collectively, the Security Agreement and the UCC Financing Statement, as the same may be amended, modified, supplemented, restated or replaced from time to time.

“Senior Lender” means National City Bank.

“Senior Lender Loan” means the loans in the aggregate maximum principal amount of $3,500,000 by the Senior Lender to the Company pursuant to the Senior Lender Loan Documents.

“Senior Lender Loan Documents” means all documents, instruments and agreements evidencing or securing the Senior Lender Loan, as the same may be amended, modified, supplemented, restated or replaced from time to time with the prior written consent of the Director.

“State” means the State of Ohio.

“Subordinate Lender” means The Hill Street Fund, L.P. a Delaware limited partnership.

“Subordinate Lender Loan” means, collectively, the loans in the maximum principal amount of $1,700,000 by the Subordinate Lender to the Company pursuant to the Subordinate Lender Loan Documents.

“Subordinate Lender Loan Documents” means all documents, instruments and agreements evidencing or securing the Subordinate Lender Loan, as the same may be amended, modified, supplemented, restated or replaced from time to time with the prior written consent of the Director.

“Technology” shall have same meaning as defined in the License Agreement.

“UCC Financing Statement” means a financing statement under Article 9 of the Ohio Uniform Commercial Code providing notice of the Director’s security interest in the Collateral.

“Use” means the use, ownership, development, construction, renovation, maintenance, management, operation or occupancy of real property, including the Project Site.

Section 1.3. Certain Words and References. Any reference herein to the Director shall include those succeeding to the Director’s functions, duties or responsibilities pursuant to or by operation of law or lawfully performing such functions. References to sections or provisions of the Constitution of the State or

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to the Act or to sections, provisions, chapters or titles of the Ohio Revised Code or the United States Code shall be construed to also refer to successor sections, provisions, chapters or titles.

The terms “hereof,” “hereby,” “herein,” “hereto,” “hereunder” and similar terms refer to this Agreement; and the term “heretofore” means before, and the term “hereafter” means after, the Closing Date. Words of the masculine gender include the feminine and the neuter, and when the sense so indicates, words of the neuter gender may refer to any gender.

ARTICLE II

Determinations and Representations

Section 2.1. Determinations of the Director. Pursuant to the Act and on the basis of the representations and other information provided by the Company, the Director has heretofore made certain determinations, as set forth in the Loan Approval Documents, which are hereby confirmed, and the Director hereby determines that the financial assistance to be provided by the State pursuant to this Agreement will conform to the requirements of the Act, including Sections 166.12 to 166.16 thereof, and will further and implement the purposes of the Act by creating new jobs or preserving existing jobs and employment opportunities and improving the economic welfare of the people of the State.

Section 2.2. Representations and Warranties of the Company. The Company hereby represents and warrants that:

(a) It is a corporation for profit duly incorporated, organized validly existing and in good standing under the laws of the State, and has all requisite power to conduct its business as now conducted and to own, hold and lease its assets and properties.

(b) It has full power and authority to execute, deliver and perform the Loan Documents and to enter into and carry out the transactions contemplated thereby. Such execution, delivery and performance do not, and will not, violate any provision of law applicable to the Company or the Governing Instruments of the Company and do not, and will not, conflict with or result in a default under any agreement or instrument to which the Company is a party or by which it or any of its property or assets is or may be bound. The Loan Documents have, by proper action, been duly authorized, executed and delivered and constitute legal, valid and binding obligations of the Company.

(c) The provision of financial assistance pursuant to the Loan Approval Documents and this Agreement induced the Company to provide the Project, thereby creating new jobs or preserving existing jobs and employment opportunities and improving the economic welfare of the people of the State.

(d) The Provision of the Project will be completed and the Project and the Company’s business will be operated and maintained in such manner as to conform with all applicable

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Environmental Laws and zoning, planning, building and other applicable governmental regulations imposed by any Governmental Authority and as to be consistent with the purposes of the Act.

(e) It presently intends that the Project will be used and operated in a manner consistent with the Project Purposes until the date on which the Loan has been fully repaid, and the Company knows of no reason why the Project will not be so operated.

(f) There are no actions, suits or proceedings pending or threatened against or affecting the Company or the Project which, if adversely determined, would individually or in the aggregate materially impair the ability of the Company to perform any of its obligations under the Loan Documents or adversely affect the financial condition of the Company.

(g) It is not in default under any of the Loan Documents or in the payment of any indebtedness for borrowed money or under any agreement or instrument evidencing any such indebtedness, and no event has occurred which by notice, the passage of time or otherwise would constitute any such event of default.

(h) The Project Site is zoned by the City under a zoning ordinance which permits the Provision of the Project thereon in accordance with the Plans and Specifications and the operation of the Company’s business; and all utilities, including water, storm and sanitary sewer, gas, electric and telephone, and rights of access to public ways shall be available or will be provided to the Project Site in sufficient locations and capacities to meet the requirements of operating the Project and the Company’s business and of any applicable Governmental Authority.

(i) It has made no contract or arrangement of any kind, other than the Loan Documents the Senior Lender Loan Documents and the Subordinate Lender Loan Documents, which has given rise to, or the performance of which by the other party thereto would give rise to, a lien or claim of lien on the Project or other collateral covered by the Loan Documents.

(j) No representation or warranty of the Company contained in any of the Loan Approval Documents or the Loan Documents, and no statement contained in any certificate, schedule, list, financial statement or other instrument furnished to the Director or the Lender by or on behalf of the Company (including, without limitation, the Application) contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

(k) The financial statements of the Company heretofore delivered to the Director are true and correct, in all respects, have been prepared in accordance with generally accepted accounting principles consistently applied, and fairly present the financial condition and the results of operation of the Company as of the dates thereof. No materially adverse change

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has occurred in the financial condition of the Company reflected therein since the respective dates thereof.

(l) All proceeds of the Loan shall be used for the payment of Allowable Innovation Costs relating to Provision of the Project. No part of any such proceeds shall be knowingly paid to or retained by the Company or any member, owner, manager, partner, officer, shareholder, director or employee of the Company as a fee, kick-back or consideration of any type.

(m) It is (or upon the acquisition of the Project, will be) the owner of the Project, subject in all cases to no lien, charge, easement, condition, restriction or encumbrance except as created by the Loan Documents, or shown as Permitted Encumbrances under the Security Documents.

(n)    (i)     It is and has been at all times in compliance with all applicable Environmental Requirements relating to the Project Site and the Use of the Project Site and the Company has not engaged in any Environmental Activity in violation of any applicable Environmental Requirements, nor has any Environmental Activity otherwise occurred, in violation of any applicable Environmental Requirements.

(ii) No investigations, inquiries, orders, hearings, actions or other proceedings by or before any court or Governmental Authority are pending or threatened in connection with any Environmental Activity or alleged Environmental Activity conducted upon the Project Site.

(iii) No claims at any time have been made or threatened against the Company or the Project Site relating to damage, contribution, cost recovery, compensation, penalty, loss or injury resulting from any Environmental Activity or Hazardous Substance.

(iv) It has no liability, absolute or contingent, in connection with any Environmental Activity.

(v) No Hazardous Substances have been integrated into the Project Site or any component thereof in such manner or quantity as may reasonably be expected to or in fact would pose a threat to human health.

(vi) To the Company’s knowledge, no occurrence or condition on any real property adjoining the Project Site exists which could cause the Project Site or any part thereof to be subject to any restrictions on ownership, occupancy, transferability or operation under any Environmental Requirement.

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(vii) It has not engaged in any Environmental Activity and no Environmental Activity has otherwise occurred, and no notice, order, directive, complaint or other written communication has been made or issued by a governmental agency or other person alleging the occurrence of Environmental Activity in, on or about the Project Site in violation of any Environmental Requirements.

(viii) None of the Project Site has been used for the disposal of Hazardous Substances.

(ix) None of its business operations conducted on the Project Site have contaminated lands, waters or other property of others with Hazardous Substances.

(x) No underground or above ground storage tank (regardless of contents) is now located on, at or beneath the Project Site.

(xi) The Project Site is not subject to any claim which might give rise to a lien in favor of any Governmental Authority as a result of any Release or threatened Release of any Hazardous Substance or Environmental Activity.

(o) It shall provide the Required Contribution by the Completion Date in accordance with the terms hereof.

(p) The License is fully assignable and otherwise transferable by Company with the consent or approval of the licensor thereof; and pursuant to the Licensor Consent, (i) the Company has the full right and power to grant to the Director a security interest therein pursuant to the Security Agreement, and (ii) in connection with any enforcement by the Director of its security interest in the License, the Director shall have all rights and remedies of a secured lender, including the right to foreclose upon and sell the Company’s interests in the License.

ARTICLE III

Loan; Provision of Project; Conditions to Disbursement

Section 3.1. Loan and Repayment. (a) On the terms and conditions of this Agreement and the Commitment, the Director shall lend to the Company the Loan Amount to assist in the financing of the Project. The Loan shall be evidenced by this Agreement and the Note and secured by the Security Documents and the other Loan Documents, as applicable. Those instruments shall be executed and delivered by the Company to the Director on the Closing Date.

(b) The terms of repayment of the Loan shall be as set forth in the Note and the Company shall make all payments required to be made under the Note as and when due.

(c) In addition to all payments required under the Note, the Company shall also pay a loan participation fee to the Director equal to 10% of the amount of the Loan actually funded, payable at the

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maturity of the Loan, whether at scheduled maturity, by acceleration or otherwise; provided, however, if the Loan is prepaid prior to the maturity of the term of the Loan, the loan participation fee shall be paid to the Director at the time of such prepayment.

(d) The Loan shall be disbursed only from, and only to the extent that on each Disbursement Date funds not heretofore committed are available to make the Loan from moneys in, the “Innovation Ohio Loan Fund” created by the Act and as defined in the Act.

(e) The proceeds of the Loan shall be available for disbursement until the final Disbursement Date or such later date as may be agreed to in writing by the Director and the Company in accordance with Section 3.7, and thereafter, the Director shall have no obligation to make or approve any further disbursements of the proceeds of the Loan.

(f) The conditions precedent that must be satisfied before any disbursement of proceeds of the Loan are set forth in Section 3.6. The Company shall be entitled to request disbursements of the proceeds of the Loan not more frequently than twice in any 30 day period. In connection with each proposed disbursement of proceeds of the Loan in accordance with the requirements set forth in Section 3.6, the Company shall provide to the Director a Disbursement Request setting forth in reasonable detail the Allowable Innovation Costs of the Project to be paid with the proceeds of the disbursement. The Director shall promptly review each Disbursement Request and then return a copy of the Disbursement Request to the Company showing whether or not such Disbursement Request has been approved. The Director shall use its best efforts to respond to each Disbursement Request within seven Business Days after receipt of the Disbursement Request. If any Disbursement Request is not approved, such return copy shall state the reasons for such non-approval and the Company shall have the opportunity to submit a revised Disbursement Request. If the Disbursement Request is approved, the Director shall cause disbursement of such requested and approved amount of the proceeds of the Loan to, or at the direction of, the Company as set forth in the Disbursement Request. The Company acknowledges that such disbursement process make take up to several weeks to be completed with respect to each disbursement of proceeds of the Loan.

(g) Each payment of Allowable Innovation Costs of the Project shall funded 75% with proceeds of the Loan and 25% with the Required Contribution.

Section 3.2. Provision of Project. The Company (a) has commenced or shall promptly hereafter commence the Provision of the Project; (b) shall pay all expenses incurred in such Provision from funds made available therefor in accordance with this Agreement, the Required Contribution or otherwise; and (c) shall demand, sue for, levy and recover all sums of money and debts which may be due and payable under the terms of any contract, order, receipt, guaranty, warranty, writing or instruction in connection with the Provision of the Project and will enforce the terms of any contract, agreement, obligation, bond or other performance security with respect thereto. The Company confirms its agreement in the Commitment that, to the extent applicable, all wages paid to laborers and mechanics employed on the Provision of the Project shall be paid at not less than the prevailing rates of wages for laborers and mechanics for the class of work called for by the Project, which wages shall be determined in accordance with the requirements of Chapter

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4115, Ohio Revised Code, for determination of prevailing wage rates; provided that if the Company undertakes, as part of the Project, work to be performed by its regular bargaining unit employees who are covered under a collective bargaining agreement which was in existence prior to the date of the Commitment, the rate of pay provided under the applicable collective bargaining agreement may be paid to such employees.

Section 3.3. Plans and Specifications; Inspections. At the Director’s option, the Director may designate an employee or officer of the State or may retain, at the Company’s expense, an architect, engineer, appraiser or other consultant for the purpose of approving the Plans and Specifications, verifying costs and performing inspections of the Project as Provision of the Project progresses or reviewing any construction contracts and payment or performance bonds or other forms of assurance of completion of the Project. Such inspections, reviews or approvals shall not impose any responsibility or liability of any nature upon the Director, the State or officers, employees, agents, representatives or designees of the Director or the State, or, without limitation, make or cause to be made any warranty or representation as to the adequacy or safety of the structures or any of their component parts or any other physical condition or feature pertaining to the Project and the Project Site. The Company shall, at the request of the Director, make periodic reports (including, if required, submission of updated certifications regarding the Allowable Innovation Costs of the Project) to the Director concerning the status of completion and the expenditures for costs in respect thereof.

The Company may revise the Plans and Specifications from time to time; provided that no revision shall be made (a) which would change the Project Purposes to purposes other than those permitted by the Act; (b) without obtaining, to the extent required by law, the approval of any applicable Governmental Authority; and (c) without the prior written approval of the Director if such revision would change the amounts set forth in the most recently furnished certification regarding the Allowable Innovation Costs of the Project. In any event, all revisions to the Plans and Specifications shall be promptly filed with the Director.

Section 3.4. Company Required to Pay Costs in Event Proceeds Insufficient. In the event that the proceeds of the Loan and the Required Contribution are not sufficient to pay all costs of the Project, the Company shall, nonetheless and irrespective of the cause of such deficiency, complete the Project in accordance with the Plans and Specifications and pay all costs of such completion in full from its own funds.

Section 3.5. Completion Date. The Completion Date shall occur not later than April 30,2006 and shall be evidenced to the Director by a certificate of the Company stating (a) the Completion Date, (b) that all licenses, permits and approvals for the Project required by any Governmental Authority have been procured and/or obtained, (c) that all improvements and additions reflected in the Plans and Specifications have been made and the Provision of the Project has been completed, (d) that all costs of providing the Project have been paid, and (e) the date as of which operation of the Project shall commence.

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Section 3.6. Conditions to Disbursement.

(a) Initial Disbursement of Loan Proceeds. Prior to the Director authorizing the initial disbursement of any proceeds of the Loan pursuant to the terms of this Agreement, the License shall be in form and substance satisfactory to the Director and the Director shall have received the following:

(i) the executed Note;

(ii) evidence of the liability and property insurance required by the Security Documents (on ACORD form 27);

(iii) determination of prevailing wage by the Wage and Hour Bureau of the Department of Commerce of the State, if applicable;

(iv) the duly executed Security Documents, Intercreditor Agreement, Licensor Consent and all other Loan Documents;

(v) the Company’s Certificate of Corporate Good Standing issued by the Secretary of State of the State, dated within 10 days of the date of this Agreement;

(vi) certified copy of the resolutions of the board of directors of the Company authorizing execution, delivery and performance of all Loan Documents;

(vii) the UCC Financing Statement to evidence and perfect the security interests created by the Security Documents;

(viii) certificate of incumbency as to the Company;

(ix) copies, certified by the Company to be true, correct and complete, of the Governing Instruments of the Company;

(x) an opinion of the Company’s legal counsel which sets forth substantially the following:

(A) that the Company is a corporation duly incorporated, organized and validly existing under the laws of, and in good standing with, the State;

(B) that the Company has full power and authority to own its properties and conduct its business;

(C) that the execution and delivery of the Loan Documents by the Company, and the performance of its obligations thereunder, do not conflict with the Governing Instruments of the Company;

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(D) that the Loan Documents have been duly authorized, executed and delivered by the Company and are valid and binding instruments, enforceable against the Company in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency or other laws or equitable principles affecting the enforcement of creditor’s rights generally;

(E) that the execution and delivery by the Company of the Loan Documents and the performance of its obligations thereunder neither is prohibited by, nor subjects the Company to a fine, penalty or other similar sanction under, any statute or regulation of any Governmental Authority;

(F) that there are no actions, suits or proceedings, at law or in equity, or before or by any court, public board or body, pending or, to the knowledge of counsel, threatened affecting the Company or the Project which, if adversely determined, would individually or in the aggregate materially impair the ability of the Company to perform any of its obligations under the Loan Documents or would materially adversely affect the financial condition of the Company;

(G) that the execution of the Loan Documents and consummation of the transactions contemplated in this Agreement will not result in a breach or violation or default under any judgment, decree, loan, mortgage, agreement, indenture or other instrument applicable to the Company;

(xi) copies of all licenses and permits required by any Governmental Authority in connection with the Project and the operation thereof;

(xii) evidence satisfactory to the Director that the Project Site is not located in a an area identified by the Federal Emergency Management Agency as an area having special flood hazards, or if the Project Site is located in such an area, that appropriate flood insurance or other satisfactory measures have been taken to protect the Project Site and the Project from flood damage;

(xiii) a copy of the Plans and Specifications, if requested by the Director;

(xiv) UCC security interest, judgment and tax lien searches regarding the Company from all appropriate jurisdictions;

(xv) landlord waiver agreement regarding the Project Site;

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(xvi)  certified list of all contractors and subcontractors (names and addresses) who worked on the Project, if applicable;

(xvii)  copy of the Senior Loan Documents and the Subordinate Lender Loan Documents;

(xviii)  copy of the fully executed Escrow Agreement; and

(xix)  such other certifications, documents or opinions as the Director may reasonably request.

(b) Each Disbursement of Loan Proceeds. Subject to the other terms hereof, the disbursement of proceeds of the Loan shall be made on each Disbursement Date, provided the affirmations set forth in subsection (d) below are true, accurate and complete and the Director shall have received the following on or before each such Disbursement Date:

(i) a Disbursement Request, duly completed and executed by the Company, indicating the nature of each Allowable Innovation Cost incurred and the amount thereof;

(ii) a written status report by the Company with respect to the Provision of the Project;

(iii) evidence of the payment of the Required Contribution;

(iv) such other certifications, documents or opinions as the Director may reasonably request; and

(v) in connection with the final Disbursement Date, the following additional items:

(1) the items required by Section 3.5 hereof;

(2) if applicable, certificate of compliance issued by the Wage and Hour Bureau of the Department of Commerce of the State, certifying as to full compliance with Chapter 4115, Ohio Revised Code; and

(3) list of all contractors and subcontractors (names and addresses) who worked on the Project, if applicable.

(c) If the items described in subsection 3.6(b) received by the Director are deemed by it to be satisfactory in form, substance and execution and if the Director shall have approved the disbursement of proceeds of the Loan as set forth in the Disbursement Request, the Director shall cause proceeds of the Loan to be disbursed as set forth in Section 3.1.

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(d) Each Disbursement Request shall be deemed an affirmation by the Company that (i) the undisbursed portion of the Loan, after the requested disbursement, together with the undisbursed portion of the Required Contribution, will be sufficient to complete the Project, (ii) the portion of the Project which is described in the Disbursement Request has been delivered and accepted by the Company, (iii) the representations and warranties of Company set forth in Loan Documents remain true and correct as of the date of the disbursement of proceeds of the Loan in accordance with such Disbursement Request, (iv) no Event of Default shall have occurred as of the date of the disbursement of proceeds of the Loan in accordance with such Disbursement Request, (v) each item for which payment is requested hereunder is an Allowable Innovation Cost, properly payable out of the proceeds of the Loan in accordance with the terms and conditions of the Loan Agreement and the other Loan Documents; (vi) none of the items for which payment is requested had formed the basis for any payment heretofore made from the proceeds of the Loan; and (vii) each item for which payment is requested is necessary in connection with the Project.

Section 3.7. Postponement of Disbursement Date. At the written request of the Company setting forth the reasons therefor and received at least 20 days prior to the final Disbursement Date, the Director may, but shall be under no obligation to, postpone the final Disbursement Date to a later date. No such postponement shall be deemed to have been granted unless stated in a writing signed by the Director specifying the length of the extension given. If for any reason the Loan shall not have been fully disbursed on or before the final Disbursement Date or such subsequent date as the Director shall have specified in writing pursuant to the preceding sentence, the Director shall not have any obligation to approve or permit any further disbursement of proceeds of the Loan. For purposes of this Section, time is of the essence.

Section 3.8. Payment of Costs; Indemnification.

(a) The Company shall pay all costs incident to the Loan, including recording and title fees, title examination and insurance fees, escrow fees and all costs and expenses incurred by the Director.

(b) The Company shall, at its sole cost and expense, defend, indemnify and hold the Director and any officials, employees, agents and representatives of the Director and the State, its and their successors and assigns, harmless from and against, and shall reimburse the Director and any officials, employees, agents and representatives of the Director and the State, its and their successors and assigns for, any and all loss, cost, claim, liability, damage, judgment, penalty, injunctive relief, action or cause of action arising in connection with or as the result of:

(i) any past, present or future existence, use, handling, storage, transportation, manufacture, Release, threat of Release, or disposal of any Hazardous Substance in, on or under the Project or the Project Site;

(ii) the occurrence of any Environmental Activity in violation of any Environmental Requirement, or any failure of the Company or any operator of the Project or

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Project Site to comply with all applicable Environmental Requirements relating to the Project or the Project Site or the Use of the Project or the Project Site;

(iii) any investigation, inquiry, order, hearing, action or other proceeding by or before any Governmental Authority in connection with any Environmental Activity occurring or allegedly occurring on or about the Project or the Project Site;

(iv) any failure of any representation and/or warranty set forth herein or in any other Loan Document to be correct in all respects;

(v) any failure of the Company to perform any covenant set forth herein or in any other Loan Document;

(vi) any claim, demand or cause of action, or any action or other proceedings, whether meritorious or not, brought or asserted against the Director and/or any officials, employees, agents and representatives of the Director and the State, its and their successors and assigns, which directly or indirectly relates to, arises from or is based on any of the matters described in clauses (i) through (v) of this Section 3.8 (c) or any allegation of any such matters; or

(vii) the execution and delivery of this Agreement or any other Loan Documents and the transactions contemplated thereby, and the preparation of documents relating to the disbursement of the Loan, including all aforementioned costs and expenses, regardless of whether or not the disbursement of the Loan shall actually occur; and

(viii)  the enforcement of this Agreement or the assertion by the Company of any defense to its obligations hereunder. This indemnity and hold harmless provision shall apply to all of clauses (i) through (viii) of this Section 3.8(c) whether such events, acts or omissions are foreseeable or unforeseeable, regardless of the source, the time of occurrence or the time of discovery, and whether any of such matters arise before or after foreclosure of the Security Documents or other taking of title to all or any portion of the Project Site and/or the Project by the Director, its successors and/or assigns (all of this preceding sentence hereinafter collectively referred to as a “Loss”). The foregoing indemnification against Loss includes, without limitation, indemnification against all costs in law or in equity of removal, response, investigation, or remediation of any kind, and disposal of such Hazardous Substances, all costs of determining whether the Project or the Project Site is in compliance with, and of causing the Project or the Project Site to be in compliance with, all applicable Environmental Requirements, all reasonable costs incurred to take precautions to protect against the Release of Hazardous Substances on, in, under or affecting the Project and the Project Site, all reasonable costs associated with any Corrective Work, all reasonable costs associated with claims for damages to persons, property, or natural resources, any reasonable loss to the Director from

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the diminution in the value of the Project or the Project Site, and the Director’s attorneys’ and consultants’ fees, court costs and expenses incurred in connection with any thereof.

(d) The provisions of this Section 3.8 shall survive the termination of this Agreement.

Section 3.9. Provisions Regarding Merger Agreement and License Agreement; Mandatory Prepayment of Loan. (a) The Company shall not amend, supplement or otherwise modify the Merger Agreement, the License Agreement or the Escrow Agreement without the prior written consent of the Director, which consent shall not unreasonably withheld or delayed.

(b) The Company shall furnish to the Director a copy of each notice it gives or receives with respect to the Merger Agreement, the License Agreement or the Escrow Agreement within two Business Days of such event.

(c) The Company shall (x) give written notice to the Director within one Business Day after the occurrence of any of the following events, and (y) make a mandatory prepayment of the State Loan and all other amounts payable under the Loan Documents, including the loan participation fee described in Section 3.1(c), within 10 days after the occurrence of any of the following events:

(i) the Company exercises its option under Section 5.3 of the License Agreement to convert the License from an exclusive license to a non-exclusive license;

(ii) (A) the Merger Agreement is terminated prior to consummation of the merger of Licensor and QuaTech, and (B) the License Agreement shall not have been approved by the requisite vote of the Licensor’s shareholders as set forth in the Merger Agreement; or

(iii) the License is converted from an exclusive license to a non-exclusive license for any other reason.

ARTICLE IV

Additional Covenants and Agreements

Section 4.1. Employment Statement; Job Creation; Initial Public Offering; Primary Operations. (a) The Company shall furnish to the Director upon request, but in any event not less frequently than concurrently with the annual financial statements to be furnished pursuant to Section 4.2(e)(ii) hereof, throughout the term of the Loan a statement certifying (a) the number of employees of the Company as of the date of the Application; (b) the then current number of employees of the Company; (c) the number of any and all employees of the Company laid off or terminated from the Project since the Closing Date; (d) the current number of women and minority employees of the Company; and (e) such other employment, economic and statistical data concerning the Company as may be reasonably requested by the Director.

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(b) The Company has represented that the Loan will permit the Company to retain an estimated 35 and create an estimated 22 jobs and employment opportunities in the City during the three-year period after the Completion Date. If the Company fails, for reasons other than Market Conditions, to retain at least 90% of the 35, and create at least 90% of the 22, jobs and employment opportunities, the interest rate on the outstanding balance of the Loan shall, at the option of the Director, increase to the maximum rate allowed by law.

(c) The Loan and all other amounts payable by the Company under the Loan Documents shall be due and payable in full if the Company shall undertake and complete an initial public offering of its securities during the term of the Loan. The Director acknowledges that the Company has informed the Director that the Company has entered into an agreement pursuant to which the Company may become a subsidiary of public company, but the prepayment requirement set forth in the foregoing sentence would not be applicable to this proposed transaction if consummated.

(d) The Company will maintain its primary operations and chief executive office in the State during the term of the Loan, and if such operations and office are not so maintained, the Loan and all other amounts payable by the Company under the Loan Documents shall be due and payable in full.

Section 4.2. Affirmative Covenants of the Company. Throughout the term of this Agreement, the Company shall:

(a) Taxes and Assessments. Pay and discharge promptly, or cause to be paid and discharged promptly, when due and payable, all taxes, assessments and governmental charges, levies or claims imposed upon it, its income or any of its property, or upon any part thereof, as well as all claims of any kind (including claims for labor, materials and supplies) which, if unpaid, might by law become a lien or charge upon its property.

Notwithstanding the preceding paragraph, the Company may, at the Company’s expense and after prior notice to the Director, by appropriate proceedings diligently prosecuted, contest in good faith the validity or amount of any such taxes, assessments, governmental charges, levies and claims and during the period of contest, and after notice to the Director, may permit the items so contested to remain unpaid. However, if at any time the Director shall notify the Company that, in the opinion of legal counsel satisfactory to the Director, by nonpayment of any such items the lien created by the Security Documents as to any part of the Project and/or any Collateral will be materially affected or the Project or any Collateral or any part thereof will be subject to imminent loss or forfeiture, the Company shall promptly pay such taxes, assessments, charges, levies or claims.

(b) Maintain Existence. Do or cause to be done all things necessary to preserve and keep in full force and effect its existence and its material rights and franchises; provided, however, the Director acknowledges that the Company has informed the Director that the Company has entered into an agreement pursuant to which the Company may become a subsidiary of

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public company by merger and the restrictions set forth in this subsection would not be applicable to this proposed transaction if consummated.

(c) Maintain Property. Maintain and keep its property in good repair, working order and condition, and from time to time make all repairs, renewals and replacements which, in the opinion of the Company, are necessary and proper so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, subject to the terms of the Security Documents, that nothing in this subsection (c) shall prevent the Company from selling or otherwise disposing of any property whenever, in the good faith judgment of the Company, such property is obsolete, worn out, without economic value or unnecessary for the conduct of the business of the Company.

(d) Maintain Insurance. Keep all of its insurable property insured against loss or damage by fire and other risks, maintain public liability insurance against claims for personal injury, death, or property damage suffered by others upon, in or about any premises occupied by the Company; and maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it maybe engaged in business. All insurance for which provision has been made in this subsection (d) shall be maintained against such risks and in at least such amounts as set forth in the Security Documents, and all insurance herein provided for shall be effected and maintained in force under a policy or policies issued by insurers of recognized responsibility, except that it may effect worker’s compensation or similar insurance in respect of operations in any state or other jurisdiction either through an insurance fund operated by such state or other jurisdiction or by causing to be maintained a system or systems of self-insurance which is in accordance with applicable law.

(e) Furnish Information. Furnish to the Director:

(i) Quarterly Reports. Within 60 days after the end of each quarterly period of each fiscal year of the Company, a copy of its internally prepared financial statements, including the balance sheet of the Company as at the end of such quarterly period, together with related statements of income, retained earnings and cash flows for such quarterly period and for the period from the beginning of such fiscal year to the end of such quarter, setting forth in comparative form the corresponding figures as at the end of or for the corresponding quarter of the previous fiscal year, all in reasonable detail, prepared in accordance with generally accepted accounting principles applied on a consistent basis, subject to usual year-end audit adjustments and except for the absence of footnotes.

(ii) Annual Reports. Within 120 days after the end of each fiscal year of the Company, a copy of its audited financial statements, including the balance sheet of the Company as at the end of such fiscal year, together with related statements of

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income, retained earnings and cash flows for such fiscal year, setting forth in comparative form the corresponding figures as at the end of or for the previous fiscal year, all in reasonable detail and all examined by and accompanied by a opinion of its independent certified public accountants to the effect that such financial statements were prepared in accordance with the generally accepted accounting principles consistently applied, and present fairly the Company’s financial position at the close of such periods and the results of its operations for such periods.

(iii) Certificate; No Default. With each of the financial reports required to be furnished under this Section, a certificate of the Company’s chief executive officer or chief financial officer stating that (a) no Event of Default has occurred and is continuing and no event or circumstance which would constitute an Event of Default, but for the requirement that notice be given, time elapse or otherwise, has occurred and is continuing, or, if such an Event of Default or such event or circumstance has occurred and is continuing, a statement as to the nature thereof and the action which the Company proposes to take with respect thereto, and that (b) no action, suit or proceeding by it or against it at law or in equity, or before any governmental instrumentality or agency, is pending or threatened, which, if adversely determined, would materially impair the right or ability of the Company to carry on the business which is contemplated in connection with the Project or would materially impair the right or ability of the Company to perform the transactions contemplated by this Agreement, the other Loan Documents or would materially and adversely affect its business, operations, properties, assets or condition, all as of the date of such certificate, except as disclosed in such certificate.

(iv) Other Information. Such other information respecting the business, properties or the condition or operations, financial or otherwise, of the Company as the Director may reasonably request.

(f) Deliver Notice. Forthwith upon learning of any of the following, deliver written notice thereof to the Director, describing the same and the steps being taken by the Company with respect thereto:

(i) the occurrence of an Event of Default or an event or circumstance which would constitute an Event of Default, but for the requirement that notice be given, elapse of time or otherwise; or

(ii) any action, suit or proceeding by it or against it at law or in equity, or before any governmental instrumentality or agency, instituted or threatened which, if adversely determined, would materially impair the right or ability of the Company to carry on the business which is contemplated in connection with the Project or would materially impair the right or ability of the Company to perform the transactions

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contemplated by the Loan Documents, or would materially and adversely affect its business, operations, properties, assets or condition; or

(iii) the occurrence of a Reportable Event under, or the institution of steps by the Company to withdraw from, or the institution of any steps to terminate, any Plan as to which the Company may have liability; or

(iv) any material communication affecting the Project or the License, and the Company will promptly respond fully to any inquiry of the Director made with respect thereto.

(g) Inspection Rights. Permit the Director, or any agents or representatives thereof, to examine and make copies of and abstract from the records and books of account of, and visit the properties of, the Company and discuss the general business affairs of the Company with any of its officers.

(h) Purchases. Use its best efforts to purchase goods and services from persons and business entities located in this State.

(i) Environmental Matters.

(i) Comply with all Environmental Requirements relating to the Project and the Project Site or to the Use of the Project and the Project Site.

(ii) Notify the Director, within 15 days, if it commences to contest the assertion of any Governmental Authority or any third party of any obligation or liability affecting it or the Project, the Project Site or any part thereof regarding an Environmental Activity or an Environmental Requirement, and, if requested by the Director, shall give the Director monthly reports thereafter during the period of such contest. If the Company contests the assertion of any such obligation or liability, such contest shall be diligently prosecuted until a final judgment is obtained. If such contest is unsuccessful, the Company shall promptly commence Corrective Work. If the Company is not contesting the assertion of any such obligation or liability, the Company shall commence Corrective Work promptly after the Company obtains actual knowledge of any Hazardous Substances on, in or affecting the Project or the Project Site.

(iii) Notify the Director prior to the commencement of any Corrective Work, and shall promptly submit to the Director, for the Director’s review, reasonably detailed plans for any such Corrective Work. If the Director, based upon the proper advice and judgment of the Director’s experts, reasonably rejects such plans, the Company shall promptly submit revised plans to the Director. The Director shall have no liability to the Company or any third party for accepting or rejecting such

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plans. After the commencement of Corrective Work, the Company shall, if requested by the Director, give the Director monthly reports during the performance of such Corrective Work.

Section 4.3. Negative Covenants of the Company. Throughout the term of this Agreement, the Company shall not:

(a) Maintain Existence. Sell, transfer or otherwise dispose of all, or substantially all, of its assets, consolidate with or merge into any other entity, or permit one or more entities to consolidate with or merge into it; provided, however, that the Company may, without violating the agreement contained in this subsection (a), consolidate with or merge into another entity, or permit one or more other entities to consolidate with or merge into it, or sell, transfer or otherwise dispose of all, or substantially all, of its assets and thereafter dissolve if: (i) the prior written consent of the Director is obtained; (ii) the surviving, resulting or transferee entity, as the case may be, assumes in writing all of the obligations of the Company hereunder (if such surviving, resulting or transferee entity is other than the Company); and (iii) the surviving, resulting or transferee entity, as the case may be, is an entity duly organized and validly existing under the laws of the State or duly qualified to do business therein, and has a net worth of not less than that of the Company immediately prior to such disposition, consolidation or merger, transfer or change of form; provided further, the Director acknowledges that the Company has informed the Director that the Company has entered into an agreement pursuant to which the Company may become a subsidiary of public company by merger and the restrictions set forth in this subsection would not be applicable to this proposed transaction if consummated.

(b) ERISA. Voluntarily terminate any Plan maintained for employees of the Company, so as to result in any material liability of the Company to the PBGC, enter into any Prohibited Transaction involving any Plan which results in any material liability of the Company to the PBGC, cause any occurrence of any Reportable Event which results in any material liability of the Company to the PBGC, or allow or suffer to exist any other event or condition which results in any material liability of the Company to the PBGC.

(c) Agreements. Enter into any agreement containing any provision which would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered or to be delivered by it hereunder or in connection herewith.

(d) Assignment or Lease. In whole or in part, assign this Agreement or lease, license or grant the right to or use the Project to others without the prior written consent of the Director.

(e) Encumbered Assets. Pledge, assign, hypothecate or in any manner encumber any of its assets excepting, however, the Loan Documents and the Permitted Encumbrances set forth in the Security Agreement.

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(f) Removal of Assets. Remove, transfer or transport any of the Company’s assets from the Project Site other than the operation of motor vehicles, the shipment of goods in the ordinary course of business or the transfer of certain computer equipment to the offices of an affiliate in California.

(g) Environmental Matters. Produce, treat, store, generate, dispose of or Release any Hazardous Substance in violation of any Environmental Requirement.

(h) Suspension of Operation. Suspend or discontinue operation of its business.

(i) Leasebacks. Enter into any arrangements, directly or indirectly, with any person whereby the Company shall sell or transfer any property, whether now owned or hereafter acquired, used or useful in the Company’s business, in connection with the rental or lease or the property so sold or transferred or of other property which the Company intends to use for substantially the same purpose or purposes as the property so sold or transferred.

(j) Change of Business. Enter into any business which is substantially different from that presently conducted by the Company without the written consent of the Director.

(k) Zoning Changes. Initiate, approve or acquiesce to any change in or modification to the zoning in effect for the Project Site or any portion thereof without the prior written consent of the Director. The Company shall promptly notify the Director of any such proposed change or modification stating in reasonable detail the anticipated or proposed change and the manner in which such change would affect the Company’s use and enjoyment of the Project Site, or any part thereof. The Director shall have the right to participate in any and all proceedings, judicial, administrative or otherwise, with respect to or in any way affecting the Project Site, including, without limitation, zoning, environmental and other matters.

(l) Modification of Senior and Subordinate Lender Loan Documents. Enter into any modification, amendment or alteration of the Senior Lender Loan Documents or the Subordinate Lender Loan Documents which changes the amount of the Senior Lender Loan or the Subordinate Lender Loan or which changes the payment schedule for the Senior Lender Loan or the Subordinate Lender Loan without the prior written consent of the Director.

(m) Distributions. Without the prior written consent of the Director, make or pay any cash dividends or distributions to its shareholders in excess of $117,000 in any year, or redeem, repurchase or otherwise acquire any of its outstanding equity securities.

(n) Shareholder Loans. Pay, or otherwise make a distribution as satisfaction for, interest on any loan made to the Company by an officer, director or holder of 5% or more of the Company’s equity securities (present or future) unless all amounts due as payments of principal and interest on this Loan have been paid. Payments of principal on loans made to

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the Company by an officer, director or holder of 5% or more of the Company’s equity securities (present or future) shall not be made unless the outstanding balance of such loans after any such payment of principal is greater than 25% of the outstanding balance of this Loan. The Company shall not make loans to any officer, director or holder of the Company’s equity securities (present or future).

ARTICLE V

Events of Default and Remedies; Termination

Section 5.1. Events of Default. Each of the following shall be an “Event of Default”:

(a) the Company shall fail to pay when due any amount payable pursuant to this Agreement or under the Note; or

(b) the Company shall fail to observe and perform any agreement, term or condition contained in this Agreement other than as required pursuant to subsection (a) above, and such failure continues for a period of 30 days after the Company has knowledge thereof; provided, however, that such 30 day cure period shall not apply to (i) any failure which in the good faith opinion of the Director is incapable of cure, (ii) any failure which has previously occurred, or (iii) any failure to maintain and keep in effect any insurance required by the Loan Documents; or

(c) any representation or warranty made by the Company (or any of its officers) herein or in any other Loan Documents, Loan Approval Documents or in connection herewith or therewith shall prove to have been incorrect in any material respect when made; or

(d) the Company shall fail to pay any indebtedness of the Company, including the Senior Lender Loan and the Subordinate Lender Loan, or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, by acceleration, on demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness; or any other default under any agreement or instrument relating to any such indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such indebtedness; or any such indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or

(e) the Company commences a voluntary case concerning it under Title 11 of the United States Code entitled “Bankruptcy” as now or hereafter in effect, or any successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced against the Company under the Bankruptcy Code and relief is ordered against the Company, or the petition is controverted

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but is not dismissed within 60 days after the commencement of the case; or the Company is not generally paying its debts as such debts become due; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Company; or the Company commences any other proceeding under any reorganization, arrangement, readjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect; or there is commenced against the Company any such proceeding which remains undismissed for a period of 60 days; or the Company is adjudicated insolvent or bankrupt; or the Company fails to controvert in a timely manner any such case under the Bankruptcy Code or any such proceeding or any order of relief or other order approving any such case or proceeding or in the appointment of any custodian or the like of or for it or any substantial part of its property or suffers any such appointment to continue undischarged or unstayed for a period of 60 days; or the Company makes a general assignment for the benefit of creditors; or any action is taken by the Company for the purpose of effecting any of the foregoing; or a receiver or trustee or any other officer or representative of the court or of creditors, or any court, governmental officer or agency, shall under color of legal authority, take and hold possession of any substantial part of the property or assets of the Company for a period in excess of 60 days; or

(f) a judgment or order for the payment of money in excess of $10,000 shall be rendered against the Company and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(g) the Company fails to meet its minimum funding requirements under Section 301 et seq. of ERISA, with respect to any of its Plans; or

(h) any default (other than set forth above) under any other Loan Document shall have occurred and be continuing.

Section 5.2. Remedies on Default. Whenever an Event of Default shall have occurred and be continuing, any one or more of the following remedial steps may be taken:

(a) if none of the proceeds of the Loan has been disbursed, the Director may terminate any and all of the Director’s obligations under this Agreement and the Commitment;

(b) if Loan has not been fully disbursed, the Director may terminate any and all of the Director’s obligations under this Agreement and the Commitment to approve or permit any further disbursements of proceeds of the Loan;

(c) the Director may declare all payments under the Note to be immediately due and payable, whereupon the same shall become immediately due and payable;

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(d) the Director may exercise any or all or any combination of the remedies specified in any Loan Document;

(e) the Director may have access to, inspect, examine and make copies of the books and records, accounts and financial data of the Company; or

(f) the Director may pursue all remedies now or hereafter existing at law or in equity to collect all amounts then due and thereafter to become due under this Agreement, the Security Documents, the Note or any other Loan Documents, or to enforce the performance and observance of any other obligation or agreement of the Company under the Loan Documents.

Section 5.3. No Remedy Exclusive. No remedy conferred upon or reserved to the Director by this Agreement is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement, each other Loan Document, or now or hereafter existing at law, in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Director to exercise any remedy reserved to the Director in this Article, it shall not be necessary to give any notice, other than such notice as may be expressly provided for herein or required by law.

Section 5.4. Agreement to Pay Expenses and Attorneys’ Fees. If an Event of Default shall occur and the Director shall incur expenses, including reasonable attorney’s fees, in connection with the enforcement of this Agreement or any other Loan Document, or the collection of sums due thereunder, the Company shall reimburse the Director for the expenses so incurred upon demand If any such expenses are not so reimbursed, the amount thereof, together with interest thereon from the date of demand for payment at the Interest Rate for Advances (as defined in the Security Documents), shall constitute additional indebtedness secured by the Security Documents, and in any action brought to collect such indebtedness or to foreclose or enforce the Security Documents, the Director shall be entitled to seek the recovery of such expenses in such action.

Section 5.5. No Waiver. No failure by the Director to insist upon the strict performance by the Company of any provision hereof shall constitute a waiver of the Director’s right to strict performance and no express waiver shall be deemed to apply to any other existing or subsequent right to remedy the failure by the Company to observe or comply with any provision hereof.

28

ARTICLE VI

Miscellaneous

Section 6.1. Term of Agreement. This Agreement shall be and remain in full force and effect from the date of its delivery until (a) the termination of this Agreement pursuant to Section 5.2(a) hereof or (b) such time as the Loan shall have been fully repaid and all other sums payable by the Company under this Agreement, the Security Documents, the Note and the other Loan Documents shall have been paid.

Section 6.2. Notices. All notices, certificates, requests or other communications hereunder shall be in writing and shall be deemed to be sufficiently given when mailed by registered or certified mail, postage prepaid, and addressed to the appropriate Notice Address. The Company or the Director may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 6.3. Extent of Covenants of the Director; No Personal Liability. All covenants, obligations and agreements of the Director contained in this Agreement and all other Loan Documents shall be effective to the extent authorized and permitted by applicable law. No such covenant, obligation or agreement shall be deemed to be a covenant, obligation or agreement of any present or future Director in other than such Director’s official capacity acting pursuant to the Act.

Section 6.4. Binding Effect. This Agreement shall inure to the benefit of and shall be binding in accordance with its terms upon the Director, the Company and their respective successors and assigns; provided, however, the Company may not assign this Agreement or any of the Loan Documents without the prior written consent of the Director.

Section 6.5. Amendments and Supplements. This Agreement may not be amended or supplemented except by an instrument in writing executed by the Director and the Company.

Section 6.6. Execution Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be regarded as an original and all of which shall constitute but one and the same instrument.

Section 6.7. Severability. If any provision of this Agreement, or any covenant, obligation or agreement contained herein, is determined by a court to be invalid or unenforceable, such determination shall not affect any other provision, covenant, obligation or agreement, each of which shall be construed and enforced as if such invalid or unenforceable provision were not contained herein. Such invalidity or unenforceability shall not affect any valid and enforceable application thereof, and each such provision, covenant, obligation or agreement, shall be deemed to be effective, operative, made, entered into or taken in the manner and to the full extent permitted by law.

Section 6.8. Captions; Entire Agreement. The captions and headings in this Agreement shall be solely for convenience of reference and shall in no way define, limit or describe the scope or intent of any

29

provisions or sections of this Agreement. All exhibits and schedules to this Agreement shall be annexed hereto and shall be deemed to be part of this Agreement. This Agreement and the exhibits and schedules attached hereto and the Loan Documents embody the entire agreement and understanding between the Director and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

Section 6.9. Interpretation This Agreement shall be deemed to have been prepared jointly by the parties hereto and any uncertainty or ambiguity existing herein shall not be interpreted against any party but shall be interpreted according to the rules for the interpretation of arm’s length agreements.

Section 6.10. WAIVER OF JURY TRIAL. THE COMPANY AND THE DIRECTOR, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, THE NOTE, THE SECURITY DOCUMENTS, OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY OF THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT THE DIRECTOR’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN THE NOTE, IN ANY LOAN DOCUMENT OR ANY RELATED INSTRUMENT OR AGREEMENT. NEITHER THE COMPANY NOR THE DIRECTOR SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE COMPANY OR THE DIRECTOR EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.

Section 6.11. Governing Law. This Agreement shall be deemed to be a contract made under the laws of the State and for all purposes shall be governed by and construed in accordance with the laws of the State.

[Signatures on next page]

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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date hereinbefore written.

DIRECTOR OF DEVELOPMENT OF THE STATE OF OHIO, ACTING ON BEHALF OF THE STATE OF OHIO
By:	/s/ John W. Barron
Name:	John W. Barron
Title:	Chief Legal Counsel

COMPANY:
QuaTech, Inc. an Ohio corporation
By:	/s/ Steven D. Runkel
Name:	Steven D. Runkel
Title:	CEO

31

EXHIBIT A

(to Loan Agreement between the Director of Development of the State of Ohio and QuaTech, Inc.,

dated as of January 27, 2006)

Form of Note

COGNOVIT PROMISSORY NOTE

$2,500,000.00 January 27, 2006

For value received, QuaTech, Inc., an Ohio corporation (the “Company”), promises to pay to the order of the Director of Development of the State of Ohio (the “Director”), at 77 South High Street, P.O. Box 1001, Columbus, Ohio 43216-1001, or at such other address as may be designated in writing by the Director, the principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000), or such lesser amount as shall have disbursed pursuant to the Loan Agreement (hereinafter defined), with interest on the amount of principal from time to time outstanding from each Disbursement Date as specified under and defined in the Loan Agreement between the Director and the Company dated as of January 27, 2006 (the “Loan Agreement”), at the rate of eight percent (8.0%) per annum until paid, subject to adjustment as set forth in the Loan Agreement.

The principal of and interest on this Note shall be paid as follows:

(i) accrued interest under this Note shall be payable in consecutive monthly installments, which shall be due and payable on the first day of each month, commencing on March 1, 2006, and continuing thereafter through and including February 1, 2007; and

(ii) thereafter, principal of and interest on this Note shall be paid in 48 consecutive monthly installments in the amount of $12,206.46, which shall be due and payable on the first day of each month, commencing on March 1, 2007, and continuing thereafter until February 1, 2011, at which time the unpaid principal balance (anticipated to be $2,000,000), together with all accrued interest, shall be due and payable in full.

In addition to the payment of principal and interest, the Company promises to pay to the order of the Director:

(a) a service fee at the rate of 1% per annum of the principal balance outstanding from time to time under this Note during the entire term of this Note, which shall be due and payable monthly on the same date as interest and principal and interest payments are due hereunder; and

(b) upon maturity (whether at scheduled maturity, by acceleration or otherwise), a loan participation fee equal to 10% of the total amount of the loan evidenced by this Note which was actually funded; provided, however, if the loan is prepaid in full prior to the end of the term of this Note, the loan participation fee shall be paid to the Director at the time of such prepayment.

This Note does not of itself constitute a commitment by the Director to make any disbursement of the Loan (as defined in the Loan Agreement) to the Company. The conditions for making such a disbursement are set forth in the Loan Agreement. The disbursements made

Company shall not exceed the face amount of this Note and the total amount of such disbursement is limited by and subject to the conditions for making disbursement of the Loan as set forth in the Loan Agreement.

The annual rate of interest stated herein shall apply to a 360-day period, and amounts of interest due hereunder shall be computed upon the basis of 30-day months. Installments of principal, interest and monthly service fee shall be applied first to monthly service fee, then interest as provided herein and the balance to principal due hereunder.

The Company may prepay all or any portion of the principal sum hereof at any time without penalty. All such prepayments shall be applied to the payment of the principal installments due hereon in the inverse order of their maturity, and shall be accompanied by the payment of accrued interest and monthly service fee on the amount of the prepayment to the date thereof.

The payment of this Note and all interest and monthly service fees hereon is secured by a Security Agreement and a UCC Financing Statement (collectively, the “Security Documents”). The covenants, conditions and agreements contained in the Security Documents and the Loan Agreement are hereby made a part of this Note.

The Company, each endorser and any other party liable on this Note severally waives demand, presentment, notice of dishonor and protest.

If default be made in the payment of any installment of principal, interest and/or monthly service fee under this Note when any such payment shall have become due and payable, or if an “Event of Default,” as defined in the Loan Agreement or the Security Documents, shall have occurred and be subsisting, then, at the option of the Director, the entire principal sum payable hereunder and all interest and monthly service fees accrued thereon shall become due and payable at once, without demand or notice.

For the period during which a default shall exist in the payment of any amount due and payable hereunder (the “Amount Due”), whether by acceleration or otherwise, a late charge equal to five percent (5%) of the Amount Due shall be assessed for each month during which the default exists and paid by the Company to the Director.

THE COMPANY AND THE DIRECTOR, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE, THE LOAN AGREEMENT, THE SECURITY DOCUMENTS, OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF EITHER OF THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT THE DIRECTOR’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN, IN THE LOAN AGREEMENT, THE SECURITY DOCUMENTS OR ANY RELATED INSTRUMENT OR

2

AGREEMENT. NEITHER THE COMPANY NOR THE DIRECTOR SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE COMPANY OR THE DIRECTOR EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.

The Company hereby irrevocably authorizes any attorney-at-law, including any attorney-at-law employed or retained by the Director, to appear for it in any action on this Note at any time after the same becomes due as herein provided, in any court of record situated in _____________ County, Ohio (which the Company acknowledges to be the place where this Note was signed), or in the county where the Company then resides or can be found, to waive the issuing and service of process, and confess a judgment in favor of the Director or other holder of this Note against the Company for the amount that may then be due, with interest at the rate provided for herein, together with the costs of suit, and to waive and release all errors in said proceedings and the right to appeal from the judgment rendered. The Company consents to the jurisdiction and venue of such court. The Company waives any conflict of interest that any attorney-at-law employed or retained by the Director may have in confessing judgment hereunder and consents to the payment of a legal fee to any attorney-at-law confessing judgment hereunder.

This Note was executed in _____________, Ohio, and shall be construed in accordance with the laws of Ohio.

WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

QuaTech, Inc.,

an Ohio corporation,

By:

Name:

Title:

3

EXHIBIT B

(to Loan Agreement between the Director of Development of the State of Ohio and QuaTech, Inc.,

dated as of January 27, 2006)

Form of Disbursement Request

Director of Development of the State of Ohio

$2,500,000 Chapter 166 Innovation Ohio Fund Loan to

QuaTech, Inc.

Disbursement Request No. _______

Requesting Disbursement of Loan Proceeds

(Capitalized terms not otherwise defined herein shall have the meanings ascribed in the Loan Agreement defined below)

Pursuant to the Loan Agreement (“Loan Agreement”) between the Director of Development of the State of Ohio (the “Director”), and QuaTech, Inc., an Ohio corporation (the “Company”), dated as of January 27, 2006, the Company hereby requests the Director to disburse proceeds of the Loan on ___________ [date] to ______________ [the Company or other party] in the aggregate amount of $____________ to pay for Allowable Innovation Costs in connection with the Project, such amount being set forth in Item 6(a) below and determined as set forth below. Schedule A attached hereto sets forth in reasonable detail the Allowable Innovation Costs of the Project to be paid with the proceeds of the requested disbursement.

1.      Total Allowable Innovation Costs of the Project:	$	3,350,000
2.      Sources for Payment of Allowable Innovation Costs:
(a)    Loan:	$	2,500,000
(b)    Required Contribution:	$	850,000
(c)    Total Sources for Payment of
Allowable Innovation Costs (sum of 2(a) and (b))	$	3,350,000
3.      Sources of Total Allowable Innovation Costs Previously Paid:
(a)    Loan:	$
(b)    Required Contribution:	$
(c)    Total Allowable Innovation Costs Previously Paid:	$
(sum of 3(a) and (b))
4.      Allowable Innovation Costs Incurred Since Last Request:	$
(provide details on Schedule A)
5.      Total Allowable Innovation Costs Incurred to Date:	$
(sum of Items 3(c) and 4)

6.      Source of Payment for Unpaid Allowable Innovation Costs (Item 4):
(a)    Loan (75%):	$
(b)    Required Contribution (25%)	$
(this requested disbursement of proceeds of the Loan cannot exceed 75% of the amount of Item 4, and the sum of this requested disbursement of proceeds of the Loan and the amount of previously disbursed proceeds of the Loan set forth in Item 3(a) cannot exceed 75% of the amount of Item 5)

7. By its submission of this Disbursement Request, the undersigned hereby certifies to the Director that the Allowable Innovation Costs to be paid from the requested disbursement are capitalizable under generally accepted accounting principles and will be so capitalized.

Dated: ____________________, 2006	QuaTech, Inc., an Ohio corporation
	By:
	Name:
	Title:

The Director (check one) ¨ approves this Disbursement Request / ¨ does not approve this Disbursement Request for the reasons set forth below.

DIRECTOR:

Director of Development of the State of Ohio, acting for and on behalf of the State of Ohio

By:

Name:

Title:

Reasons for not approving this Disbursement Request (if applicable):

2

EX-16.1

Exhibit 16.1

[Letterhead of Bober, Markey, Fedorovich & Company]

Certified Public Accountants/ Business Advisors
A Professional Corporation	411 Wolf Ledger parkway
	Suite 400 Akron, Ohio 44311-1040 330 762.9765 Fax 330 762.3108 www.bobermarkey.com

March 6, 2006

Office of the Chief Accountant

PCAOB Letter File

Securities and Exchange Commission

100 F Street, N E

Washington, D.C. 20549-6561

Ladies and Gentlemen:

We have read item 4.01 of Form 8-K dated March 6, 2006 of DPAC Technologies Corp. and are in agreement with the statements contained therein.

Respectfully,

/s/ Bober, Markey, Fedorovich & Company

Bober, Markey, Fedorovich & Company

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

DPAC Completes QuaTech Transaction

GARDEN GROVE, Calif.— Feb. 28, 2006—DPAC Technologies Corp. (OTCBB:DPAC - News) and QuaTech, Inc. today announced the completion of the merger approved on February 23rd at DPAC’s annual shareholders meeting and at QuaTech’s special shareholders meeting. As a result of the merger, QuaTech has now become a wholly-owned subsidiary of DPAC. DPAC issued 64.1 million new shares of common stock to the shareholders of QuaTech in the merger. In addition, DPAC’s $500,000 Bridge Loan from Development Capital Ventures was cancelled in exchange for 4.9 million shares of DPAC common stock. DPAC shares will continue to trade under the symbol DPAC.OB.

In accordance with the terms of the merger agreement, Steve Runkel now becomes the CEO of DPAC and a newly reconstituted Board of Directors has been appointed. Kim Early, DPAC’s former CEO, will serve as the Chairman of the Board of Directors of DPAC. DPAC’s fiscal year end was changed to December 31 as a result of the merger. As required by SEC regulations, the newly combined companies will file pro forma financial statements reflecting the merger within 75 days.

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 web site, www.sec.gov.

About QuaTech

QuaTech, a wholly-owned subsidiary of DPAC, 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

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. 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 S-4, 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.

Contact:

DPAC Technologies Corp.

Stephen Vukadinovich, Chief Financial Officer

714-898-0007

Stephen.Vukadinovich@dpactech.com

or

Steve Runkel, Chief Executive Officer

330-655-9000

Steve.Runkel@Quatech.com