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): October 10, 2008

DPAC Technologies Corp.
(Exact name of registrant as specified in its charter)

California	0-14843	33-0033759
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5675 Hudson Industrial Parkway, Hudson, Ohio	16056
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (800) 553-1170

Not Applicable

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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

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

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

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

Item 1.01. Entry into a Material Definitive Agreement.

Amendment to Senior Subordinated Note and Warrant Purchase Agreement

(1) Effective on October 10, 2008, DPAC Technologies Corp., a California corporation (the “Company”) and its wholly owned subsidiary, QuaTech, Inc., an Ohio corporation (“QuaTech”) entered into Amendment No. 1 to Senior Subordinated Note and Warrant Purchase Agreement and Amendment No. 1 to Security Agreement (the “Amendment”) to the Senior Subordinated Note and Warrant Purchase Agreement dated January 31, 2008 among the Company, QuaTech and Canal Mezzanine Partners, L.P. (“Canal”) (the “Canal Purchase Agreement”) and the Security Agreement dated January 31, 2008 among the Company, QuaTech and Canal (the “Canal Security Agreement”). The material terms of the Canal Purchase Agreement and Canal Security Agreement were previously reported in the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on February 5, 2008 (the “February 5, 2008 Current Report”). Pursuant to the Canal Amendment, the Company and QuaTech have issued and sold to Canal an additional Senior Subordinated Note (the “Second Canal Note”) for $250,000, due on January 31, 2009, and the Company has issued and sold to Canal a warrant to purchase the common stock of the Company in an amount representing 0.75% of the Company’s fully diluted common stock on the date of exercise (the “Second Canal Warrant”). The Second Canal Note bears interest at 13% annually, payable monthly in arrears, and may be prepaid under certain circumstances. Additionally, to the extent that the Company and Canal have not refinanced the Second Canal Note prior to its maturity on January 31, 2009, the maturity date may be extended by the Company until January 31, 2013 upon payment of an extension fee of $25,000 to Canal.

The Second Canal Note is governed by the Canal Purchase Agreement, as amended by the Amendment, which contains various covenants that, among other restrictions, limit the Company’s and QuaTech’s ability to incur indebtedness, grant certain liens, make certain loans, prepayments, acquisitions, expenditures, and investments, issue or dispose of certain securities, create subsidiaries, merge or consolidate, or engage in certain asset dispositions, including a sale of all or substantially all of the assets. The Canal Purchase Agreement also contains covenants that require the Company and QuaTech to maintain specified financial ratios and deliver certain financial statements to Canal. The obligations under the Second Canal Note are, as a result of the Amendment, secured under the Canal Security Agreement. The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Amendment and the Second Canal Note, a copy of each of which are attached hereto as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K, and by reference to the Canal Purchase Agreement and Canal Security Agreement, each previously filed as Exhibits 10.6 and 10.8 to the February 5, 2008 Current Report, which are hereby incorporated by reference into this Item 1.01.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information described above under “Item 1.01 Entry into a Material Definitive Agreement” is incorporated herein by reference. The Company and QuaTech have issued and sold a $250,000 Senior Subordinated Note to Canal, under the terms of the Amendment and the Canal Purchase Agreement and such related documents described in Item 1.01.

Item 3.02. Unregistered Sales of Equity Securities.

(1) In connection with the Amendment, on October 10, 2008, the Company issued to Canal the Second Canal Warrant, which entitles Canal to purchase the common stock of the Company in an amount representing 0.75% of the Company’s fully diluted common stock on the date of exercise, at an aggregate exercise price of $1. The Second Canal Warrant may be exercised at any time after January 31, 2008 if the Second Canal Note has not been repaid by such time, and expires, if not previously exercised, upon a repayment of the Second Canal Note. The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Second Canal Warrant, a copy of which is attached hereto as Exhibit 4.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 3.02.

The issuance of the Second Canal Warrant by the Company was exempt from registration under the Securities Act of 1933 under Section 4(2) thereof as a private placement to an accredited investor (as defined in Regulation D).

Item 9.01. Financial Statements and Exhibits.

Exhibit 4.1	Warrant to Purchase Common Stock of DPAC Technologies Corp., issued to Canal Mezzanine Partners, L.P., dated as of October 10, 2008.
Exhibit 10.1	Amendment No. 1 to Senior Subordinated Note and Warrant Purchase Agreement and Amendment No. 1 to Security Agreement, by and among DPAC Technologies Corp., QuaTech, Inc. and Canal Mezzanine Partners L.P., dated October 10, 2008.
Exhibit 10.2	Senior Subordinated Note made by DPAC Technologies Corp. and QuaTech, Inc. in favor of Canal Mezzanine Partners L.P., dated October 10, 2008.

SIGNATURES

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

DPAC TECHNOLOGIES CORP.
(Registrant)

Date: October 16, 2008

By:  /s/ Steven D. Runkel                                  
Steven D. Runkel
Chief Executive Officer and President

Exhibit Index

Exhibit 4.1	Warrant to Purchase Common Stock of DPAC Technologies Corp., issued to Canal Mezzanine Partners, L.P., dated as of October 10, 2008.
Exhibit 10.1	Amendment No. 1 to Senior Subordinated Note and Warrant Purchase Agreement and Amendment No. 1 to Security Agreement, by and among DPAC Technologies Corp., QuaTech, Inc. and Canal Mezzanine Partners L.P., dated October 10, 2008.
Exhibit 10.2	Senior Subordinated Note made by DPAC Technologies Corp. and QuaTech, Inc. in favor of Canal Mezzanine Partners L.P., dated October 10, 2008.

EX-4.1

Exhibit 4.1

EXECUTION COPY

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL THAT SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.

DPAC Technologies Corp.
Warrant Certificate
Common Stock Purchase Warrant
of
Canal Mezzanine Partners, L.P.

Dated as of October 10, 2008

Warrant Certificate

Dated as of October 10, 2008

This Warrant Certificate certifies that, for value received, Canal Mezzanine Partners, L.P. (together with its successors and assigns, the “Holder”), is entitled to purchase from DPAC Technologies Corp., a California corporation (together with its successors and assigns, the “Company”), that number of shares of common stock of the Company that will equal seventy five one hundredths percent (0.75%) of the Fully Diluted Shares of the Company on the date of exercise, at an aggregate exercise price of One Dollar ($1) (the “Warrant Purchase Price”) (such number of shares of common stock purchasable hereunder being subject to adjustment as provided herein), and to exercise the other rights, powers and privileges hereinafter provided, all on the terms and subject to the conditions hereinafter set forth. This Warrant Certificate is being issued by the Company pursuant to the Senior Subordinated Note and Warrant Purchase Agreement dated as of January 31, 2008 by and between the Company, as seller, Quatech, Inc., an Ohio corporation and wholly owned subsidiary of the Company, and the Holder, as purchaser (as amended from time to time, the “Purchase Agreement”). Reference is hereby made to the Purchase Agreement and that certain Registration Rights Agreement, dated of January 31, 2008, by and among the Company and the Holder (as amended, modified and supplemented from time to time, the “Registration Rights Agreement”), for a description of, among other things, certain terms relating to the Warrant and the Warrant Shares and certain rights of the Holder hereof and thereof, including, without limitation, the rights of the Holder to require the registration of the Warrant Shares. The Holder is entitled to the applicable benefits of the Purchase Agreement, the Registration Rights Agreement and the other Related Documents and may enforce the applicable agreements contained therein, all in accordance with the terms thereof, notwithstanding any payment or prepayment or redemption or acquisition of any of the other Securities issued pursuant to the Purchase Agreement.

Section 1. Definitions. All capitalized terms not otherwise defined herein shall have the definitions set forth in the Glossary of Defined Terms attached to the Purchase Agreement, which definitions are, to the extent applicable, incorporated in this Warrant Certificate by reference.

Section 2. Exercise of Warrant.

2.1 Warrant Exercise. The Warrant shall be exercisable either as to some or as to all of the Warrant Shares at any time after January 31, 2008 if that certain Senior Subordinated due January 31, 2009 in the principal amount of $250,000 (the “Note”) is not repaid in full on or before the Maturity Date (as defined in the Note), or from time to time, after the date hereof; provided, that if any exercise of this Warrant by the Holder is a partial exercise, any calculation of Fully Diluted Shares upon a subsequent exercise by the Holder shall not be deemed to include the Warrant Shares issued to the Holder as a result of the previous partial exercise(s). Upon a partial exercise of the Warrant by the Holder, the Warrant Purchase Price shall be pro-rated to reflect the proportionate amount of Warrant Shares being exercised upon such partial exercise in relation to the full amount of Warrant Shares exerciseable for hereunder.

2.2 Manner of Exercise. To exercise this Warrant, the Holder shall deliver to the Company: (a) this Warrant Certificate, (b) a notice of exercise (substantially in the form attached hereto) (the “Notice of Exercise”) specifying the Warrant Shares to be purchased, executed by a duly authorized officer of the Holder (or its attorney), and (c) an amount equal to the Warrant Purchase Price for all Warrant Shares as to which this Warrant is then being exercised.

2.3 Effectiveness of Exercise. The exercise of the Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant Certificate, the Notice of Exercise and the Warrant Purchase Price shall have been delivered and immediately prior to the close of business on such Business Day the Holder shall be deemed to have become the holder of record of the Warrant Shares.

2.4 Delivery of Certificates. As soon as practicable after the exercise of the Warrant, and in any event within five (5) Business Days thereafter, the Company, at its expense (including any applicable issue Taxes), will cause to be issued in the name of and delivered to the Holder a certificate or certificates representing the number of Warrant Shares to which the Holder shall be entitled upon such exercise. If the exercise of the Warrant is for less than all of the Warrant Shares, the Company shall issue a new Warrant Certificate of like tenor for the balance of the Warrant Shares issuable upon exercise of the Warrant.

2.5 Certain Adjustments.

(a) Reorganization Event. Upon the occurrence of each Reorganization Event, there shall thereafter be issuable upon the exercise of the Warrant (in lieu of the Warrant Shares), as appropriate, the number of shares of common stock, other securities or property to which the Holder would have been entitled had the Holder exercised the Warrant immediately prior to such Reorganization Event. Prior to and as a condition of the consummation of each Reorganization Event, the Company shall cause effective provisions to be made to effect the purposes of this paragraph, including, if appropriate, an agreement among the Company, any successor to the Company and the Holder. Adjustments for events subsequent to the effective date of such Reorganization Event shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. In any such event, effective provisions shall be made in the Charter Documents of the resulting or surviving Person, in any contract of sale, conveyance, lease or transfer, or otherwise so that the provisions set forth herein for the protection of the rights of the Holder shall thereafter continue to be applicable; and any such resulting or surviving Person shall expressly assume the obligation to deliver, upon exercise, such shares of stock, other securities, or other property. The provisions of this Section 2.5(a) shall similarly apply to successive Reorganization Events.

(b) Other Event. In case any event shall occur as to which the other provisions of this Section 2.5 are not strictly applicable but the failure to make any adjustment would not fairly protect the purchase rights represented by the Warrant in accordance with the essential intent and principles hereof, then the Holder may require in writing within ninety (90) days after the occurrence of such event that the Company examine the propriety of an adjustment to the number of Warrant Shares issuable upon exercise of the Warrant. Unless the Company and the Holder shall have mutually agreed upon an adjustment, or that no adjustment is required, within thirty (30) days after the receipt of such request, the Company shall appoint a firm of independent certified public accountants of recognized national standing (which may be the Company’s then current accountants), to give an opinion regarding an adjustment, if any, necessary to preserve the purchase rights represented by the Warrant. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Holder and shall make the adjustments, if any, described therein. The Company shall pay the cost and expense of such opinion.

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Section 3. Preemptive Rights. At any time after the Holder partially or completely exercises the Warrant and until the termination of its rights under this Section 3, the Holder shall have the right to participate in any Preemption Offering upon the terms and subject to the conditions set forth in this Section 3.

3.1 Notice of Preemption Offering. The Company shall give the Holder at least thirty (30) days prior written notice of each Preemption Offering. Such notice shall set forth: (i) the proposed commencement date for such Preemption Offering; (ii) the number and description of the securities to be offered in the Preemption Offering; (iii) the purchase price for such securities and (iv) other material terms of the Preemption Offering.

3.2 Participation by Holder. The Holder may, in the sole exercise of its discretion, elect to participate in the Preemption Offering by giving written notice to the Company of its election to participate at least five (5) Business Days prior to the proposed commencement date of the Preemption Offering. If it elects to participate in the Preemption Offering, the Holder shall have the right to purchase, upon the same terms and conditions as those in such Preemption Offering, securities of each type issued in the Preemption Offering in a maximum number or amount equal to the Holder’s Prorata Share of the total number or amount of each such type of security offered.

3.3 Unsold Securities. The Company may, for a period of not more than ninety (90) days after the commencement date of any Preemption Offering, offer and sell the securities subject to the Preemption Offering that were not sold to the Holder upon the terms and subject to the conditions of the Preemption Offering.

3.4 Termination of Preemptive Rights. The rights of the Holder under this Section 3 shall survive the partial and complete exercise of the Warrant and shall terminate upon the earliest to occur of the following events: (i) a Qualified Public Offering; or (ii) when the Holder ceases to own Holder’s Shares.

Section 4. Restrictions on Transfer.

4.1 Restrictive Legends. Except as otherwise permitted herein, this Warrant Certificate, each Warrant Certificate issued in exchange or substitution for any Warrant Certificate, each Warrant Certificate issued upon the registration of Transfer of any Warrant, each certificate representing the Warrant Shares and each certificate issued upon the registration of Transfer of any Warrant Shares, shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL THAT SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.”

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4.2 Notice of Proposed Transfer; Opinion of Counsel. Except with respect to a Transfer by the Holder to any Affiliate or equity owner of Holder, prior to any Transfer of any Restricted Securities, the Holder will give written notice to the Company of its intention to effect such Transfer. Each such notice (i) shall describe the manner and circumstances of the proposed Transfer in sufficient detail to enable counsel to render the opinion referred to below, and (ii) shall designate counsel for the Holder. The Holder will submit a copy of such notice to its counsel and the Company will promptly submit a copy of the notice to its counsel. The following provisions shall then apply:

(a) If in the opinion of counsel to the Company the proposed Transfer may be effected without registration under the Securities Act, the Company will promptly notify the Holder and the Holder shall thereupon be entitled to Transfer such Restricted Securities in accordance with the terms of the notice delivered to the Company. Each Warrant Certificate or certificate for Warrant Shares, if any, issued upon or in connection with such Transfer shall bear the applicable restrictive legend set forth above, unless in the opinion of such counsel, such legend is no longer required. If counsel for the Company (after having been furnished with the information required by this Section 4) shall fail to deliver an opinion to the Company, or the Company shall fail to notify the Holder as aforesaid, within thirty (30) days after receipt of notice of the Holder’s intention to effect a Transfer, then the opinion of counsel for the Holder shall be sufficient to authorize the proposed Transfer and the opinion of counsel for the Company shall not be required in connection with such proposed Transfer.

(b) If, in the opinion of counsel to the Company, the proposed Transfer may not be effected without registration under the Securities Act, the Company will promptly so notify the Holder and the Holder shall not be entitled to effect the proposed Transfer until receipt of a further notice from the Company under clause (i) above or until registration under the Securities Act has become effective.

Section 5. Availability of Information. To the extent applicable, the Company will comply with the reporting requirements of Sections 13 and 15(d) of the Securities Exchange Act and all other public information reporting requirements of the Commission (including the requirements of Rule 144 promulgated under the Securities Act) from time to time in effect. The Company will cooperate with the Holder at the Holder’s expense to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the Transfer of any Restricted Securities or the Transfer of Restricted Securities by Affiliates of the Company.

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Section 6. Reservation of Shares. The Company shall at all times reserve and keep available out of its authorized but unissued shares of common stock, solely for issuance and delivery upon the exercise of the Warrant and free from preemptive rights, a sufficient number of shares of common stock to cover the Warrant Shares issuable upon the exercise of the Warrant. All such shares of common stock shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and non-assessable.

Section 7. Ownership; Registration of Transfer; Exchange and Substitution of Warrant.

7.1 Ownership of Warrant. Until due presentment for Transfer, the Company may treat the Person in whose name this Warrant Certificate is registered on the register kept at the Company’s principal office as the owner and holder hereof for all purposes, notwithstanding any notice to the contrary, provided that when the Warrant has been properly Transferred (whether in whole or in part), the Company shall treat such transferee as the owner of the Warrant for all purposes, notwithstanding any notice to the contrary. Subject to the foregoing provisions and to the Transfer restrictions set forth herein, the Warrant, if properly Transferred, may be exercised by the transferee(s) without first having a new Warrant Certificate issued.

7.2 Registration of Transfers. Subject to the terms of this Warrant Certificate, the Company shall register the Transfer of the Warrant permitted under the terms hereof upon records to be maintained by the Company for that purpose upon surrender of this Warrant Certificate to the Company at the Company’s principal office, together with the Form of Assignment attached hereto duly completed and executed. Upon any such registration of Transfer, a new Warrant Certificate in substantially the form of this Warrant Certificate, shall be issued to the transferee(s).

7.3 Replacement of Warrant Certificate. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Certificate and of an indemnification or surety bond reasonably satisfactory to the Company, or, in the case of mutilation, upon surrender of this Warrant Certificate for cancellation at the Company’s principal office, the Company at its expense will promptly execute and deliver, in lieu thereof, a new Warrant Certificate of like tenor.

7.4 Expenses. The Company will pay all expenses, Taxes (other than transfer and income Taxes) and other charges in connection with the preparation, issuance and delivery from time to time of this Warrant Certificate or the Warrant Shares.

7.5 Anti-Dilution Provisions. If the Company, after the date upon which this Warrant Certificate has been issued, issues any warrants, options or other rights to subscribe for, purchase or otherwise acquire any common stock or any Convertible Securities, either immediately or upon the arrival of a specified date or the happening of a specified event, or Convertible Securities or other securities containing provisions protecting the holder or holders thereof against dilution in any manner more favorable to such holder or holders thereof than those set forth in this Warrant, such provisions (or any more favorable portion thereof) shall be deemed to be incorporated herein as if fully set forth in this Warrant and, to the extent inconsistent with any provision of this Warrant, shall be deemed to be substituted therefor.

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7.6 Dividends. The Holder shall be entitled to receive, simultaneously with the shareholders of the Company, any and all dividends paid in cash or other property (other than common stock) by the Company on its common stock equal to the amount of any such dividend(s) that otherwise would be payable on the shares of common stock issuable upon exercise of this Warrant as if this Warrant had been exercised in full.

Section 8. Other Rights of Holder. The Warrant Shares shall be subject to the terms and conditions of the Co-Sale Agreement and the Registration Rights Agreement. Nothing contained in this Warrant Certificate shall be construed as conferring upon the Holder any rights as an equityholder of the Company prior to the exercise of the Warrant or as imposing any obligation on the Holder to purchase any shares of common stock of the Company.

Section 9. Repayment in Full of the Note. Upon the repayment in full of the Note on or before the Maturity Date (as defined in the Note) this Warrant Certificate shall be null and void.

Section 10. Miscellaneous. The provisions of Section 12 of the Purchase Agreement are applicable to this Warrant Certificate and are incorporated by reference in this Warrant Certificate.

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IN WITNESS WHEREOF, the undersigned has executed and delivered this Warrant Certificate effective as of the date first written above.

DPAC TECHNOLOGIES CORP. a California corporation
By:	/s/ Steven D. Runkel
	Steven D. Runkel, Chief Executive
	Officer and President

Signature Page to
Warrant Certificate

NOTICE OF EXERCISE

The undersigned hereby elects to exercise the Warrant evidenced by this Warrant Certificate, and requests that certificates for                      Warrant Shares be issued in the name of and delivered to                                         , whose address is                                                              .

Name of

Holder (Print):

Dated:

By:

Title:

FORM OF ASSIGNMENT

FOR VALUED RECEIVED,                                          hereby sells, assigns and transfers to                                          (“Transferee”) all/a portion of the rights of the undersigned in and to the Warrant and the Warrant Certificate, and sells, assigns and transfers to Transferee                     of the Warrant Shares issuable upon exercise of said Warrant.

Name of

Holder (Print):

Dated:

By:

Title:

EX-10.1

EXHIBIT 10.1

EXECUTION COPY

AMENDMENT NO. 1
TO SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
AND
AMENDMENT NO. 1 TO SECURITY AGREEMENT

THIS AMENDMENT NO. 1 TO SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AND AMENDMENT NO. 1 TO SECURITY AGREEMENT (this “Amendment”), is made as of October 10, 2008, by and among QuaTech, Inc., an Ohio corporation (the “QuaTech”), DPAC Technologies Corp., a California corporation (“DPAC” and together with QuaTech, the “Companies”) and Canal Mezzanine Partners, L.P., a Delaware limited partnership (the “Purchaser”).

WITNESSETH:

WHEREAS, the Companies and the Purchaser have entered into that certain Senior Subordinated Note and Warrant Agreement, dated as of January 31, 2008 (as may be amended, supplemented or otherwise modified from time to time, the “Purchase Agreement”), pursuant to which the Purchaser have made certain financial accommodations available to the Companies;

WHEREAS, the Companies have requested, and the Purchaser has agreed, subject to the terms of this Amendment, to purchase a $250,000 senior subordinated note issued by the Companies;

WHEREAS, the Companies and the Purchaser desire to amend the Purchase Agreement as set forth herein;

NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Companies and the Purchaser do hereby agree as follows:

SECTION 1. DEFINED TERMS.

Each defined term used herein and not otherwise defined herein shall have the meaning ascribed to such term in the Purchase Agreement.

SECTION 2. AMENDMENT TO THE PURCHASE AGREEMENT.

The Companies and the Purchaser hereby agree that the Purchase Agreement shall be amended, effective upon the satisfaction of the conditions precedent set forth in this Amendment, as follows:

2.1 Amendment to Recitals. Subpart (A) of the Recitals to the Purchase Agreement shall be amended in its entirety to read as follows:

A. Purchase and Sale.

Upon the terms and subject to the conditions set forth in this Purchase Agreement, the Companies shall issue and sell to the Purchaser (i) a Senior Subordinated Note in the aggregate principal amount of $1,200,000 due January 31, 2013 (the “Initial Note”), (ii) a Senior Subordinated Note in the aggregate principal amount of $250,000 due January 31, 2009 (the “New Note” and together with the Initial Note, the “Note”) and (iii) in the case of DPAC, a warrant to purchase the common stock of DPAC representing 3% of the Fully Diluted Common Stock of DPAC on the date of exercise (the “Common Stock Warrant” and together with the Note, and where applicable, the Warrant Shares, the “Securities”).

2.2 Amendment to Exhibit A. Exhibit A to the Purchase Agreement shall be amended by amending the definition of “Note,” “Warrant Certificate” and “Warrant” contained therein in their entireties to read as follows:

“Note” means together (i) the Senior Subordinated Note due January 31, 2013 in the principal amount of $1,200,000 issued and sold to the Purchaser by the Companies pursuant to the terms of the Purchase Agreement, and (ii) the Senior Subordinated Note due January 31, 2009 in the principal amount of $250,000 issued and sold to the Purchaser by the Companies pursuant to the terms of the Purchase Agreement, in each case as amended, modified or restated from time to time, and all notes issued in exchange or substitution therefor.

“Warrant Certificate” shall mean any certificate representing a Warrant.

“Warrant” means together the Warrant issued on the Closing Date and the Warrant issued on October 10, 2008, each purchased from DPAC by Purchaser pursuant to the Purchase Agreement.

SECTION 3. AMENDMENT TO SECURITY AGREEMENT

Upon the Satisfaction of the conditions to this Amendment, the Security Agreement shall be amended by amending the definition of “Secured Obligations” in its entirety to read as follows:

“Secured Obligations” means (a) all principal, interest and other amounts due and payable under the Note Purchase Agreement, the Related Documents and the Note (as defined in the Note Purchase Agreement (as amended), (b) all costs and expenses incurred by Secured Party in the realization upon the Collateral, including without limitation reasonable attorneys’ fees and legal expenses, and (c) each and every liability owed by any Debtor to Secured Party however created, direct or contingent, due or to become due, whether now existing or hereafter arising, including without limitation the Success Fee.

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SECTION 4. REPRESENTATIONS AND WARRANTIES.

Each of the Companies hereby represents and warrants to the Purchaser as follows:

4.1 The Amendment. This Amendment has been duly and validly executed by an authorized executive officer of each of the Companies and constitutes the legal, valid and binding obligation of each of the Companies enforceable against each of the Companies in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally, and to general principles of equity.

4.2 Purchase Agreement. Each of the Purchase Agreement, as amended by this Amendment, the Note, the Security Agreement, the Warrant and the other Related Documents remains in full force and effect and remains the valid and binding obligation of each of the Companies party thereto enforceable against each of the Companies party thereto in accordance with its terms. Each of the Companies hereby ratifies and confirms the Purchase Agreement as amended by this Amendment and each of the other Related Documents. The representations and warranties contained in the Purchase Agreement are in all material respects correct on and as of the date hereof as if made on such date (except as a result of transactions permitted under the Purchase Agreement or as otherwise set forth in the revised Schedule of Exceptions delivered by the Companies contemporaneously herewith) and no Default or Event of Default exists, in each case after giving effect to this Amendment.

4.3 Nonwaiver. The execution, delivery, performance and effectiveness of this Amendment shall not operate nor be deemed to be nor construed as a waiver (i) of any right, power or remedy of the Purchaser under the Purchase Agreement or any of the other Related Documents, nor (ii) of any term, provision, representation, warranty or covenant contained in the Purchase Agreement or any of the other Related Documents. Further, none of the provisions of this Amendment shall constitute, be deemed to be or construed as, a waiver of any Default or Event of Default under the Purchase Agreement, as amended by this Amendment, or any of the other Related Documents.

4.4 Reference to and Effect on the Purchase Agreement. Upon the effectiveness of this Amendment, each reference in the Purchase Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import shall mean and be a reference to the Purchase Agreement, as amended hereby, and each reference to the Purchase Agreement in any of the other Related Documents shall mean and be a reference to the Purchase Agreement, as amended hereby.

4.5 Claims and Defenses. To the knowledge of each Company, as of the date of this Amendment, no Company has any defenses, claims, counterclaims or setoffs with respect to the Purchase Agreement or any other of the Related Documents or its Obligations under any Related Documents or with respect to any actions of the Purchaser or any of its officers, directors, shareholders, employees, agents or attorneys, and each of the Companies irrevocably and absolutely waives any such known defenses, claims, counterclaims and setoffs and releases the Purchaser and each of its officers, directors, shareholders, employees, agents and attorneys from the same.

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SECTION 5. CONDITION PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT.

In addition to all of the other conditions and agreements set forth herein, the effectiveness of this Amendment is subject to the following condition precedent:

5.1 Amendment to Purchase Agreement. The Purchaser shall have received a counterpart of this Amendment No. 1 to Senior Subordinated Note and Warrant Purchase Agreement and Amendment No. 1 to Security Agreement, executed and delivered by a duly authorized officer of each of the Companies and the Purchaser.

5.2 Executed Note and Warrant. The Purchaser shall have received an original $250,000 Senior Subordinated Note and Warrant Agreement and an original Warrant, in each case executed and delivered by a duly authorized officer of each of the Companies.

5.3 Consent Under Senior Loan Agreement. The Purchaser shall have received executed copies of a consent under the Senior Loan Agreement pursuant to which the Senior Lender consents to this Amendment, which consent shall be in form and substance satisfactory to the Purchaser.

5.4 Amendment to Subordination Agreement. The Purchaser shall have received a fully executed copy of an amendment to the subordination agreement with respect to the Senior Loan Agreement, which amendment shall be in form and substance satisfactory to the Purchaser.

5.5 Authorizing Resolutions. The Purchaser shall have received a copy of resolutions of the board of directors of each of the Companies authorizing the execution and delivery of this Amendment and the Note and with respect to DPAC, the Warrant, each in form and substance satisfactory to the Purchaser.

5.6 Amendment Fee. The Purchaser shall have received a $3,000 amendment fee in immediately available funds.

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SECTION 6. MISCELLANEOUS

6.1 Governing Law. This Amendment shall be governed by and construed in accordance with the law of the State of Ohio, without regard to principles of conflict of law.

6.2 Costs and Expenses. The Companies hereby acknowledge and agree to reimburse (on a joint and several basis) the Purchaser for all costs and expenses incurred by or on behalf of the Purchaser in connection with the documentation and negotiation of Amendment including, without limitation, reasonable legal fees and expenses of counsel to the Purchaser.

6.3 Severability. In the event any provision of this Amendment should be invalid, the validity of the other provisions hereof and of the Purchase Agreement shall not be affected thereby.

6.4 Counterparts. This Amendment may be executed in one or more counterparts, each of which, when taken together, shall constitute but one and the same agreement.

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IN WITNESS WHEREOF, each of the Companies has caused this Amendment No. 1 to Senior Subordinated Note and Warrant Purchase Agreement to be duly executed and delivered by its duly authorized officer as of the date first above written.

COMPANIES:

DPAC TECHNOLOGIES CORP.
a California corporation
By:	/s/ Steve Runkel
	Steve Runkel, Chief Executive Officer
QUATECH, INC.
an Ohio corporation
By:	/s/ Steve Runkel
	Steve Runkel, Chief Executive Officer

S-1

Accepted as of October 10, 2008.
CANAL MEZZANINE PARTNERS, L.P.
a Delaware limited partnership
By:	Canal Mezzanine Management, LLC,
	an Ohio limited liability company
Title:	General Partner
By:	Canal Holdings, LLC
	an Ohio limited liability company
Title:	Managing Member

By:	/s/ Shawn M. Wynne
Name:	Shawn M. Wynne
Title:	Authorized Signer

S-2

EX-10.2

EXHIBIT 10.2

EXECUTION COPY

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

Senior Subordinated Note
due January 31, 2009 (except as provided herein)

Makers Corp.	QuaTech, Inc. and DPAC Technologies
Payee	Canal Mezzanine Partners, L.P.
Principal Amount	$250,000
Stated Interest Rate	13% per annum
Default Interest Rate	16% per annum
Date of Note	October 10, 2008
Made At	Hudson, Ohio
Maturity Date	January 31, 2009 (except as provided herein)
Payment Dates	Interest : Last day of each month beginning October 31, 2008
	Principal: January 31, 2009 (except as provided herein)

This is the Senior Subordinated Note due January 31, 2009 (the “Note”) provided for in the Senior Subordinated Note and Warrant Purchase Agreement dated as of January 31, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”) by and between the Payee, as purchaser, and the Makers, as sellers.

This Note is one of the Related Documents referred to in the Purchase Agreement.

FOR VALUE RECEIVED, the Makers hereby promises to pay to the order of the Payee the Principal Amount of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000), together with Interest, Prepayment Premium, if any, and Assessments (each as defined herein or in the Purchase Agreement), upon the terms and subject to the conditions set forth in this Note.

Section 1. Definitions and Miscellaneous Provisions

Any capitalized term used but not otherwise defined in this Note shall have the definition given such term as set forth in the Purchase Agreement, which definition is, to the extent applicable, incorporated herein by reference. The provisions of Section 12 of the Purchase Agreement are applicable to this Note and are incorporated herein by reference.

Section 2. Maturity and Pay Off

The unpaid Principal Amount of this Note, together with all accrued but unpaid Interest and Assessments, shall be due and payable in full on the Maturity Date, provided that if such unpaid Principal and Interest shall not have been refinanced pursuant to a transaction with Payee or any affiliate thereof, or otherwise repaid, on or before the Maturity Date (a “Refinancing”), then such Principal Amount shall become due and payable in full on the Maturity Date set forth in the Initial Note (January 31, 2013) and the Makers shall pay to the Payee a $250,000 extension fee on the January 31, 2008 (such fee shall be the joint and several liability of each of the Makers). Payment of the Principal Amount and all accrued but unpaid Interest and Assessments may be Accelerated upon the occurrence of an Event of Default as provided for in this Note. Upon request of the Makers, the Payee will furnish to the Makers a letter setting forth the amount of Principal Amount, Interest, Prepayment Premium and Assessments required to pay this Note in full as of a specified Pay Off Date.

Section 3. Interest

Interest shall accrue on the unpaid Principal Amount from the date of this Note through and including the Pay Off Date at the applicable interest rate (“Interest”). All accrued but unpaid Interest shall be paid monthly in arrears on each Payment Date specified above, commencing October 31, 2008.

At all times that the Default Interest Rate is not in effect, the interest rate on this Note shall be a fixed rate per annum equal to the Stated Interest Rate. Upon the occurrence of an Event of Default, this Note shall accrue interest at a rate per annum equal to the Default Interest Rate unless the Payee elects, in the sole exercise of its discretion, to waive imposition of the Default Interest Rate by giving written notice of such election to the Makers (a “Default Rate Waiver”). Absent a Default Rate Waiver, the interest rate on this Note shall be a fixed rate per annum equal to the Default Interest Rate, and the Default Interest Rate shall continue to be the interest rate on this Note until the Event of Default has been remedied or waived and no other Default or Event of Default is continuing, unremedied or unwaived, provided that the Note has not been Accelerated.

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Notwithstanding any provision of this Note to the contrary: (i) in no event shall the interest rate on this Note be a rate per annum in excess of the maximum interest rate permissible under Applicable Law (including any applicable interest rate ceiling imposed by United States Small Business Administration regulations as applicable), and (ii) to the extent that Interest (or other amounts paid with respect to this Note that are deemed to be Interest under Applicable Law) results in Interest payments in excess of those permitted under Applicable Law, such excess payments shall be applied first to the payment of the unpaid Principal Amount, second to the payment of any other amounts due from the Makers to the Payee, and third, if no other obligations are owing to the Payee, then refunded to the Makers. The Makers agree that if such excess payments are applied in the manner provided for in this paragraph, then to the fullest extent permitted by Applicable Law, Payee shall not be subject to any penalty provided for by any Applicable Law relating to charging or collecting Interest in excess of that permitted by Applicable Law.

Interest shall accrue based upon: (i) the actual number of days elapsed over each month, including any additional days elapsed because the scheduled Payment Date fell on a day other than a Business Day; (ii) months consisting of thirty (30) days each; (iii) quarters consisting of three (3) 30-day months, and (iv) monthly compounding of any Interest or Assessment accrued but unpaid as of each Payment Date.

Section 4. Principal Amount

The Principal Amount shall be paid in full on the Maturity Date Date (except as set forth in Section 2 above).

Section 5. Prepayments

The Makers may prepay the Principal Amount in whole at any time; provided that (i) the Makers deliver irrevocable written notice to the Payee at least thirty (30) days prior to such prepayment, which notice shall include written confirmation from the Makers that such prepayment is permissible under the Senior Loan Agreement and (ii) each partial prepayment of Principal Amount shall be equal to $100,000 or an integral multiple thereof.

If the Principal Amount is paid on or prior to the Maturity Date of Note, the Makers shall pay all accrued but unpaid Interest.

If notice of prepayment is given, the Principal Amount to be prepaid as stated in the notice, together with Interest accrued thereon through the date of prepayment with respect to the Principal Amount prepaid and all unpaid Assessments shall become due and payable on the date specified in the notice.

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Section 6. Late Payments

A payment of Principal Amount, Interest or Assessment shall be deemed to be a Payment Default if such payment is not received prior to 2:00 p.m., Hudson, Ohio time on the fifth day after such payment is due. The Payee may, in the sole exercise of its discretion, by written notice to the Makers, assess a fee of $500 for each Payment Date with respect to which there is a late payment to reimburse the Payee for the cost of processing such late payment. Such late fee shall be deemed to be an Assessment for purposes of this Note. The Payee may not assess a late fee with respect to any Payment Date after payment of this Note is Accelerated.

Section 7. Payments

Unless otherwise agreed by the Payee, all payments in connection with this Note shall be made by wire transfer of immediately available funds to the account of the Payee at or before 2:00 p.m. Hudson, Ohio time on each Payment Date. Any wire transfer received by the Payee after 2:00 p.m. Hudson, Ohio time shall be deemed to have been received by the Payee prior to such time on the next Business Day.

Unless otherwise specified in writing by the Payee to the Makers, all such payments shall be wired as follows:

Morgan Bank, N.A.
10 West Streetsboro Street
Hudson, Ohio 44236

ABA # 041202702
Account # 128075483

In the event that any scheduled Payment Date falls on a day other than a Business Day, the Payment Date shall be deemed to be the following Business Day, and such additional days shall be deemed to have elapsed for purposes of computing Interest payable on such Payment Date.

Section 8. Events of Default

(a) Enumeration of Defaults. The occurrence of each of the following events shall be an “Event of Default” for the purposes of this Note. An Event of Default shall be deemed to continue until waived by written notice by the Payee to the Makers or remedied by action of the Makers.

(b) Payment Default. The Makers default in the payment when due of any Principal Amount, Interest or Assessment, and such default is not remedied (including the payment of any Assessment) within the grace period provided for in Section 6 of this Note (a “Payment Default”). A Payment Default shall be deemed to have occurred notwithstanding the fact that the Payment Default results from compliance with or enforcement of the Subordination Agreement.

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(c) Covenant Default. The Makers fail to observe or perform any affirmative covenant, negative covenant (other than those described in clause 8(e) below), reporting requirement or any other agreement set forth in the Purchase Agreement or the Related Documents and such default is either (i) not remedied within thirty (30) days after written notice of such default by the Payee or the Makers, or (ii) is the third instance of a default under applicable subsection of the Purchase Agreement or the Related Documents.

(d) Warranty Default. Any representation or warranty made by the Makers in the Purchase Agreement or the Related Documents proves to have been untrue, incomplete or misleading in any material respect when made or when deemed to have been made and such breach is not remedied (if it is capable of being remedied) within thirty (30) days after written notice of such default by the Payee or the Makers.

(e) Financial Test Default; Certain Negative Covenants. (i) As of any applicable date of determination, the Makers fail to satisfy any of the Financial Tests, or (ii) the Makers fails to observe or perform any of the negative covenants set forth in Sections 8.1 through 8.11 of the Purchase Agreement.

(f) Cross Default. The holder of any Indebtedness accelerates the payment of such Indebtedness for any reason or the Makers default in the payment of any Indebtedness with an unpaid principal amount in excess of $50,000, and such default remains unremedied beyond the applicable grace period therefor, regardless of whether (i) such default is waived by the obligee, (ii) payment of any Indebtedness of the Makers is accelerated, (iii) the right of the Makers to borrow money is suspended as a result of any such default, or (iv) any action to enforce payment of any Indebtedness is commenced against the Makers or with respect to any collateral securing such Indebtedness.

(g) Subordination Default. Any document with respect to the Senior Indebtedness is amended or modified in violation of the Subordination Agreement, a blocking period provided for in the Subordination Agreement is commenced, payment of any amount due under this Note is prevented due to compliance with or enforcement of the Subordination Agreement, any amounts previously paid to the Payee must be repaid or held in trust by the Payee due to compliance with or enforcement of the Subordination Agreement, or the Makers obtain forbearance with respect to the payment of any principal or interest due under the Senior Indebtedness.

(h) Insolvency Default. The Makers: (i) discontinue the conduct of their business; (ii) apply for or consents to the imposition of any Insolvency Relief; (iii) voluntarily commence or consent to the commencement of an Insolvency Proceeding; (iv) file an answer admitting the material allegations of any involuntary commencement of an Insolvency Proceeding; (v) make a general assignment for the benefit of its creditors; (vi) are unable or admits in writing their inability to pay their debts as they become due; or (vii) have an Insolvency Order entered against such Makers and such Insolvency Order is not dismissed within thirty (30) days of its entry (each, an “Insolvency Default”).

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(i) Fraudulent Conveyance Default. The Makers: (i) conceal, remove or permit to be concealed or removed all or any part of their property with the intent to hinder, delay or defraud any of their creditors; (ii) make or permit any conveyance of their material properties that would be deemed fraudulent to creditors under any Insolvency Law or other Applicable Law; or (iii) have, while such Makers are insolvent, cause or permit any of their creditors to obtain a Lien on any of their property by legal proceedings or otherwise which is not vacated within thirty (30) days.

(j) Judgments. A final, nonappealable judgment or judgments is or are entered against the Makers in the aggregate amount of $50,000 or more on a claim or claims not covered by insurance.

(k) Material Adverse Change. In the reasonable judgment of the Payee, any material adverse change occurs in the financial condition or results of operations of the Makers or the Makers’ ability to perform its obligations under this Note, the Purchase Agreement or the Related Documents.

(l) Change in Control. A Change in Control of the Makers occurs.

(m) Failure of Enforceability. (i) The Makers shall contest or challenge the validity or enforceability of this Note, the Purchase Agreement or the Related Documents or (ii) this Note, the Purchase Agreement or the Related Documents shall be declared in whole or in part invalid, void or unenforceable which declaration would, individually or in the aggregate, materially reduce the principal benefits of any breach of, or security provided by, this Note, the Purchase Agreement or any Related Document to the Payee, or make the remedies generally afforded thereby inadequate for the practical realization thereof.

Section 9. Remedies and Acceleration

(a) Remedies. Upon the occurrence of an Event of Default, the Payee shall have (i) all rights and remedies granted to it under this Note, the Purchase Agreement and the Related Documents, and (ii) all rights of a creditor under Applicable Law (including the UCC). All such rights and remedies and the exercise thereof shall be cumulative. No exercise of any such rights and remedies shall be deemed to be exclusive or constitute an election of remedies.

(b) Purchase of Senior Indebtedness. If an event of default shall have occurred and be continuing in respect of any Senior Indebtedness of the Makers, the Payee shall have the option (but not the obligation), at any time, to purchase all, but not less than all, of such Senior Indebtedness for an amount equal to the then outstanding principal amount, plus accrued but unpaid interest with respect thereto as of the date of such purchase, plus any unpaid fees and expenses then owing with respect thereto. The purchase price so paid by the Payee shall constitute an additional advance hereunder and shall be subject to the terms and conditions of this Note, the Purchase Agreement and the Related Documents.

(c) Acceleration of Payment. Upon the occurrence of an Insolvency Default, payment of this Note shall be Accelerated automatically and without notice. Upon the occurrence and during the continuation of any other Event of Default, the Payee may, in the sole exercise of its discretion, elect to cause payment of this Note to be Accelerated by giving written notice of such election to the Makers. Once payment of this Note has been Accelerated, such Acceleration may be revoked only by the Payee, in the sole exercise of its discretion, by giving written notice of revocation to the Makers.

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(d) Waiver of Default. No Default or Event of Default may be waived or shall be deemed to have been waived except by written notice by the Payee to the Makers, and any such waiver shall be applicable only to the specific Defaults or Events of Default expressly identified in such notice and shall not be deemed to apply to any other or subsequent Default or Event of Default. The Payee may grant or withhold any such waiver in the sole exercise of its discretion, and may condition such waiver upon the payment by the Makers of a premium, the grant of additional security interests or the acceptance of other terms and conditions under this Note or the Purchase Agreement. No course of dealing by the Payee, or the failure, forbearance or delay by the Payee in exercising any of its rights or remedies under this Note, the Purchase Agreement or any Related Document shall operate as a waiver of any Default or Event of Default or of any right of the Payee under this Note.

Section 10. Waivers

To the fullest extent permitted by Applicable Law, each Maker waives with respect to this Note: presentment; demand and protest; and notice of presentment, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal; and diligence in collection. Each Maker agrees that the Payee may release all or any part of the Collateral securing the payment of this Note; any guarantor or surety with respect to this Note, or any other Maker from its obligation with respect to this Note, all without notice to such Maker and without affecting in any way the obligation of such Maker under this Note.

Section 11. Security for Payment

Payment of this Note is secured under the terms and subject to the conditions of certain of the Related Documents. Nothing in this Note shall be deemed to preclude the Payee from obtaining other or additional security for the payment of this Note, to require the Payee to elect remedies or proceed against any Collateral or guaranty before Accelerating payment of this Note or to take any legal or other action to collect payment of this Note.

Section 12. Subordination Agreement

It is anticipated that the Payee and the Senior Lender will enter into a Subordination Agreement in connection with the Senior Loan Agreement, pursuant to which certain of the Payee’s rights under this Note and the Related Documents will be subordinated to the Senior Lender. Nothing in this Note, the Purchase Agreement or the Subordination Agreement shall grant to the Makers any rights as a beneficiary under the Subordination Agreement nor any right to enforce any provision of such agreement.

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Section 13. Collection and Assessment for Costs

The Makers shall reimburse the Payee for all reasonable costs and expenses (including reasonable legal fees and disbursements) incurred by the Payee in connection with the collection or attempted collection of the payment of this Note through legal proceedings or otherwise following an Event of Default. All such amounts shall be deemed to be Assessments for purposes of this Note.

Section 14. Amendment

This Note may not be amended, restated, supplemented or otherwise modified except by an express written agreement executed and delivered by each Maker and the Payee. Compliance with the covenants and other provisions of this Note may not be waived or modified except by an express written consent signed and delivered by the Payee.

Section 15. Governing Law

This Note was negotiated in the State of Ohio and accepted by the Payee in the State of Ohio, and the purchase price for the Note shall be disbursed from the State of Ohio. Each Maker agrees that the State of Ohio has a substantial relationship to the transactions evidenced hereby and further agrees that this Note shall be governed by and construed in accordance with the laws of the State of Ohio, without regard to conflicts of laws principles.

Section 16. Waiver of Jury Trial

The Payee and each Maker, after consulting or having had the opportunity to consult with legal counsel, knowingly, voluntarily and intentionally waive any right any of them may have to a trial by jury in any Litigation. Neither the Payee nor any Maker shall seek to consolidate, by counterclaim or otherwise, any Litigation in which a jury trial has been waived with any other Litigation in which a jury trial cannot be or has not been waived.

Section 17. Consent to Jurisdiction, Venue and Service of Process

The Payee and the Makers, each after having consulted or having had the opportunity to consult with legal counsel, hereby knowingly, voluntarily, intentionally, and irrevocably: (i) consents to the jurisdiction of the Common Pleas Court of Summit County, Ohio and the United States District Court for the Northern District of Ohio, Eastern Division with respect to any Litigation; (ii) waives any objections to the venue of any Litigation in either such court; (iii) agrees not to commence any Litigation except in either of such courts and agrees not to contest the removal of any Litigation commenced in any other court to either of such courts; (iv) agrees not to seek to remove, by consolidation or otherwise, any Litigation commenced in either of such courts to any other court; and (v) waives personal service of process in connection with any Litigation and consents to service of process by registered or certified mail, postage prepaid, addressed as provided in the Purchase Agreement.

Section 18. Confession of Judgment

Each Maker hereby authorizes any attorney at law to appear in any court of record of the State of Ohio or any other state in the United States of America at any time after this Note becomes due, whether by acceleration or otherwise, and to waive the issuing and service of process and confess a judgment in favor of the legal holder hereof against such Maker, or either or any one or more of them, for the amount then appearing due upon this Note, together with costs of suit and to release all errors and waive all right of appeal.

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IN WITNESS WHEREOF, this Note has been executed and delivered by and on behalf each Maker, effective as of the Date of Note set forth above.

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 THE CREDITOR’S PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

Maker: QUATECH, INC.
By:	/s/ Steve Runkel
	Steve Runkel,
	Chief Executive Officer
Maker: DPAC TECHNOLOGIES CORP.
By:	/s/ Steve Runkel
	Steve Runkel,
	Chief Executive Officer

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