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 22,
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”).
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:
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
February 15, 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 February 15,
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.
“
Success Fee ” means a fee equal to 7.0 times EBITDA
for the twelve-month period ended immediately prior to the Success
Fee Triggering Event minus Indebtedness plus Cash, times
6.0%.
“
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 22, 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
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