Exhibit 10.25


 


DPAC TECHNOLOGIES CORP.


CONVERTIBLE TERM NOTE


 


                  ,
              


	
  $500,000.00

  	
  August 5, 2005

  



 


For
value received, DPAC
TECHNOLOGIES CORP., a
California corporation with an address at 7321 Lincoln Way, Garden Grove,
California 92841 (the “Company”),
hereby promises to pay to DEVELOPMENT
CAPITAL VENTURES, LP, a
Small Business Investment Company, licensed by the U.S. Small Business
Administration pursuant to the Small Business Investment Act of 1958, as
amended (hereinafter referred to as the “Holder”)
the principal sum of Five Hundred Thousand Dollars ($500,000.00), with interest
from the date hereof on the unpaid balance at a per annum rate of Twelve
Percent (12.00%).  The outstanding
principal amount of this Note, together with any interest accrued but unpaid
thereon (the “Outstanding Amount”),
shall be due and payable on February 3, 2006, unless otherwise converted
as set forth in Section 3 (the “Maturity
Date”).  This Convertible
Promissory Note, as the same may be amended or supplemented from time to time
is hereinafter referred to as the “Note”.


 


1.                                       Payments.  Principal and interest shall be payable in
lawful money of the United States of America, by wire transfer to a bank
account designated by the Holder or by bank check delivered to the principal
office of the Holder or at such other place as the Holder may designate from
time to time in writing to the Company. 
Interest will be calculated based on the actual number of days that principal
is outstanding over a year of 360 days. 
Interest shall be due and payable monthly, in arrears, commencing on                               ,
            , and
continuing on the          day of each
month thereafter until the Maturity Date, on which date all outstanding
principal and accrued interest shall be due and payable in full.


 


2.                                       Default
Rate.  Upon maturity, whether by
acceleration, demand or otherwise, and at the Holder’s option upon the
occurrence of any Event of Default (as hereinafter defined) and during the
continuance thereof, the Outstanding Amount of this Note shall bear interest at
a rate per annum (based on the actual number of days that principal is
outstanding over a year of 360 days) which shall be six percentage points
(6.00%) in excess of the interest rate in effect from time to time under this
Note but not more than the maximum rate allowed by law (the “Default Rate”).  The
Default Rate shall continue to apply whether or not judgment shall be entered
on this Note.  The Default Rate is
imposed as liquidated damages for the purpose of defraying the Holder’s
expenses incident to the handling of delinquent payments, but are in addition
to, and not in lieu of, the Holder’s exercise of any rights and remedies
hereunder, under the other Loan Documents or under applicable law, and any fees
and expenses of any agents or attorneys which the Holder may employ.  In addition, the Default Rate reflects the
increased credit risk to the Holder of carrying a loan that is in default.  The Borrower agrees that Default Rate is
reasonable forecasts of just compensation for anticipated and actual harm
incurred by the Holder, and that the actual harm incurred by the Holder cannot
be estimated with certainty and without difficulty.


 


3.                                       Conversion.


 


3.1                                 Upon
Merger.  If the Company consummates the
merger of the Company and QuaTech, Inc. prior to February 3, 2006 in
a manner satisfactory to Lender (the “Qualifying Merger”),
then, simultaneously with the effective date of the Qualifying Merger, the
Outstanding Amount of this Note shall automatically be converted into 3,289,473
registered shares of the Company’s common stock


 





















 


as of the effective date
of the Qualifying Merger (“Common Stock”).  In addition, Company acknowledges that upon
the date of the Qualifying Merger, the Company will give to the Holder a
Conversion Incentive (as such term is defined in the Loan Agreement dated the
date hereof between Holder and Company).


 


4.                                       Conversion
Procedure.


 


4.1                                 Notice
of Conversion.  Before the Holder
shall be entitled to convert this Note into securities pursuant to Section 3,
it shall surrender this Note at the office of the Company.  Upon surrender of this Note, the Holder shall
indicate the name or names in which the certificate or certificates for shares
of Common Stock are to be registered. 
The Company shall, as soon as practicable thereafter, issue and deliver
at such office to the Holder of this Note a certificate or certificates for the
number of shares of Common Stock to which the Holder of this Note shall be
entitled.  Such conversion shall be deemed
to have been made immediately prior to the close of business on the date of
such surrender of this Note, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock as of
such date.


 


4.2                                 Delivery
of Stock Certificates.  As promptly
as practicable after the conversion of this Note, the Company at its expense
will issue and deliver to the Holder of this Note a certificate or certificates
for the number of full shares of Common Stock, as applicable, issuable upon
such conversion.


 


4.3                                 Mechanics
and Effects of Conversion.  No
fractional shares shall be issued upon conversion of this Note.  In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Note, the Company shall pay to
the Holder the amount of outstanding principal that is not so converted, such
payment to be in the form as provided below. 
Upon the conversion of this Note the Holder shall surrender this Note,
duly endorsed, at the principal office of the Company.  At its expense, the Company shall, as soon as
practicable thereafter, issue and deliver to such Holder at such principal office
a certificate or certificates for the number of shares of such Common Stock to
which the Holder shall be entitled upon such conversion (bearing such legends
as are required by applicable state and federal securities laws in the opinion
of counsel to the Company), together with any other securities and property to
which the Holder is entitled upon such conversion under the terms of this Note,
including a check payable to the Holder for any cash amounts payable as
described above.


 


5.                                       Events
of Default.  An “Event of
Default” means the occurrence or existence of one or more of the
following events or conditions (whatever the reason for the Event of Default
and whether voluntary, involuntary, or effected by operation of law).  If any of the following Events of Default
shall occur:


 


(a)                                  The Company fails to
pay when due principal or interest on the Notes.


 


(b)                                 The
Company or any of its subsidiaries shall (i) voluntarily terminate
operations or apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of it or of all or
a substantial part of its assets, (ii) admit in writing its inability, or
be generally unable, to pay its debts as the debts become due, (iii) make
a general assignment for the benefit of its creditors, (iv) commence a voluntary
case under the Federal Bankruptcy Code of the United States (as now or
hereafter in effect), (v) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, (vi) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed against
it in an


 


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involuntary case under
the Federal Bankruptcy Code of the United States or other applicable bankruptcy
law or (vii) take any corporate action for the purpose of effecting any of
the foregoing;


 


(c)                                  Without
its application, approval or consent, a proceeding shall be commenced, in any
court of competent jurisdiction, seeking in respect of the Company or any of
its subsidiaries:  the liquidation,
reorganization, dissolution, winding-up, or composition or readjustment of
debt, the appointment of a trustee, receiver, liquidator or the like of such
entity or of all or any substantial part of its assets, or other like relief in
respect of such entity under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts; and, if the
proceeding is being contested in good faith by such entity, the same shall
continue undismissed, or unstayed and in effect for any period of forty-five
(45) consecutive days, or an order for relief against such entity shall be
entered in any case under the Federal Bankruptcy Code of the United States or
other applicable bankruptcy law;


 


(d)                                 The
Company is in default under any of the Loan Documents (as defined in the Loan
Agreement).


 


then, and in any such
event and at any time thereafter, if such Event of Default or any other Event
of Default shall have not been waived, the Holder may declare by notice to the
Company the Outstanding Amounts of the Note to be immediately due and payable,
and the same shall forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality of any kind, all of
which are hereby expressly waived; provided,  however, that notwithstanding the above, if there shall
occur an Event of Default under clause (b) or (c) above, then the
Outstanding Amounts of the Note shall be immediately due and payable without
the necessity of any action by the Holders or notice to the Company.


 


6.                                       Information
Rights.  For so long as this Note
remains outstanding, the Company shall provide to Holder copies of all
financial statements, including Company balance sheets, statements of income
and cash flow statements, which are provided to the stockholders of the
Company.


 


7.                                       Modification
of Note.  The terms of the Note may
be amended, modified, supplemented, changed, waived or altered in any respect
upon receipt of the consent in writing from the Holder and of the Company,
which amendment, modification, supplement, change, waiver or alteration shall
be binding upon and apply to the Holder of the Note.


 


8.                                       Miscellaneous.


 


8.1                                 Binding
Benefit.  This Note, and the
obligations and rights of the parties hereunder, shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.


 


8.2                                 No
Waiver.  No delay or omission on the
part of the Holder in exercising any right hereunder shall operate as a waiver
of such right or of any other right of the Holder, nor shall any delay,
omission or waiver on any occasion be deemed a bar to, or waiver of, the same
or any other right on any future occasion.


 


8.3                                 Waivers
by the Company.  The undersigned and
every endorser or guarantor of this Note, regardless of the time, order or
place of signing, waives presentment, demand, protest and notice of every kind
and assents to any one or more extensions or postponements of the time of
payment or any other indulgences, to any substitutions, exchanges or releases
of collateral available to the Holder, if any, and to the additions or releases
of any other parties or persons primarily or secondarily liable.


 


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8.4                                 Rights
of Action; Remedies.  All rights of
action with respect to this Note are vested in the Holder, and the Holder may
enforce against the Company its right to convert this Note into shares of
capital stock of the Company in the manner provided in this Note.  The Company stipulates that the remedies at
law of the Holder in the Event of any Default or threatened Event of Default by
the Company in the performance of or compliance with any of the terms of this
Note are not and will not be adequate, and that such terms may be specifically
enforced by a decree for the specific performance of any agreement contained
herein or by an injunction against a violation of any of the terms hereof or
otherwise.


 


8.5                                 Loss
or Mutilation.  Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note and, if requested in the case of any such loss, theft
or destruction, upon delivery of an indemnity agreement or security reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Note, the Company at its expense will
execute and deliver, in lieu hereof, a new Note of like tenor.


 


8.6                                 Governing
Law.  All rights and obligations
under this Note shall be governed by, and construed and enforced in accordance
with, the substantive laws of the State of Delaware, without regard to its
principles of conflicts of laws.


 


[SIGNATURE PAGE FOLLOWS]


 


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IN
WITNESS WHEREOF, the undersigned has executed this Note as of the date first
above written.


 


	
   

  	
  DPAC
  TECHNOLOGIES CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: