Exhibit 10.26


 


LOAN AGREEMENT


 


THIS LOAN AGREEMENT (the “Agreement”), is entered into as
of August 5, 2005, between DPAC TECHNOLOGIES CORP., a California
corporation (the “Borrower”), with an address at
7321 Lincoln Way, Garden Grove, California 92841, and 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 (the “Lender”),
with an address at 4443 Brookfield Corporate Drive, Suite 110, Chantilly,
Virginia 20151


 


The
Borrower and the Lender, with the intent to be legally bound, agree as follows:


 


1.  Loan.  The Lender has made or may make a loan in the
principal amount of $500,000.00 (the “Loan”) to the
Borrower for the purpose of working capital needs of the Borrower, subject to
the terms and conditions and in reliance upon the representations and
warranties of the Borrower set forth in this Agreement.  The Loan is or will be evidenced by a
promissory note of the Borrower and all renewals, extensions, amendments and
restatements thereof (if one or more, collectively, the “Note”)
acceptable to the Lender, which shall set forth the interest rate, repayment
and other provisions, the terms of which are incorporated into this Agreement
by reference.


 


2.  Security.  The
security for repayment of the Loan shall include but not be limited to the
collateral, guaranties and other documents heretofore, contemporaneously or
hereafter executed and delivered to the Lender (the “Security
Documents”), which shall secure repayment of the Loan, the Note and
all other loans, advances, debts, liabilities, obligations, covenants and
duties owing by the Borrower to the Lender or to any other direct or indirect
subsidiary of the Lender of any kind or nature, present or future (including
any interest accruing thereon after maturity, or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding relating to the Borrower, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding), whether direct or
indirect (including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, whether or not (i) evidenced by any note, guaranty or other
instrument, (ii) arising under any agreement, instrument or document, (iii) for
the payment of money, (iv) arising by reason of an extension of credit,
opening of a letter of credit, loan, equipment lease or guarantee, (v) under
any interest or currency swap, future, option or other interest rate protection
or similar agreement, (vi) under or by reason of any foreign currency
transaction, forward, option or other similar transaction providing for the
purchase of one currency in exchange for the sale of another currency, or in
any other manner, or (vii) arising out of overdrafts on deposit or other
accounts or out of electronic funds transfers (whether by wire transfer or
through automated clearing houses or otherwise) or out of the return unpaid of,
or other failure of the Lender to receive final payment for, any check, item,
instrument, payment order or other deposit or credit to a deposit or other
account, or out of the Lender’s non-receipt of or inability to collect funds or
otherwise not being made whole in connection with depository or other similar
arrangements; and any amendments, extensions, renewals and increases of or to
any of the foregoing, and all costs and expenses of the Lender incurred in the
documentation, negotiation, modification, enforcement, collection and otherwise
in connection with any of the foregoing, including reasonable attorneys’ fees
and expenses (hereinafter referred to collectively as the “Obligations”).  Unless expressly provided to the contrary in
documentation for any other loan or loans, it is the express intent of the
Lender and the Borrower that all Obligations including those included in the
Loan be cross-collateralized and cross-defaulted, such that collateral securing
any of the Obligations shall secure repayment of all Obligations and a default
under any Obligation shall be a default under all Obligations.


 





















 


This
Agreement, the Note, the Security Documents and all other agreements and
documents executed and/or delivered pursuant hereto, as each may be amended,
modified, extended or renewed from time to time, are collectively referred to
as the “Loan Documents.” 
Capitalized terms not defined herein shall have the meanings
ascribed to them in the Loan Documents.


 


3.  Representations
and Warranties.  The Borrower hereby makes the
following representations and warranties, which shall be continuing in nature
and remain in full force and effect until the Obligations are paid in full, and
which shall be true and correct except as otherwise set forth on the Addendum
attached hereto and incorporated herein by reference (the “Addendum”):


 


3.1.  Existence, Power and Authority.  The
Borrower is duly organized, validly existing and in good standing under the
laws of the State of its incorporation or organization and has the power and
authority to own and operate its assets and to conduct its business as now or
proposed to be carried on, and is duly qualified, licensed and in good standing
to do business in all jurisdictions where its ownership of property or the
nature of its business requires such qualification or licensing.  The Borrower is duly authorized to execute
and deliver the Loan Documents, all necessary action to authorize the execution
and delivery of the Loan Documents has been properly taken, and the Borrower is
and will continue to be duly authorized to borrow under this Agreement and to
perform all of the other terms and provisions of the Loan Documents.


 


3.2.  Financial Statements.  The
Borrower has delivered or caused to be delivered to the Lender its most recent
balance sheet, income statement and statement of cash flows, (as applicable,
the “Historical Financial Statements”).  The Historical Financial Statements are true,
complete and accurate in all material respects and fairly present the financial
condition, assets and liabilities, whether accrued, absolute, contingent or
otherwise and the results of the Borrower’s operations for the period specified
therein.  The Historical Financial
Statements have been prepared in accordance with generally accepted accounting
principles (“GAAP”) consistently applied from
period to period, subject in the case of interim statements to normal year-end
adjustments and to any comments and notes acceptable to the Lender in its sole
discretion.


 


3.3.  No Material Adverse Change.  Since
the date of the most recent Financial Statements (as hereinafter defined), the
Borrower has not suffered any damage, destruction or loss, and no event or
condition has occurred or exists, which has resulted or could result in a
material adverse change in its business, assets, operations, condition
(financial or otherwise) or results of operation.


 


3.4.  Binding Obligations.  The
Borrower has full power and authority to enter into the transactions provided
for in this Agreement and has been duly authorized to do so by appropriate
action of its Board of Directors if the Borrower is a corporation, all its
general partners if the Borrower is a partnership or otherwise as may be
required by law, charter, other organizational documents or agreements; and the
Loan Documents, when executed and delivered by the Borrower, will constitute
the legal, valid and binding obligations of the Borrower enforceable in
accordance with their terms.


 


3.5.  No Defaults or Violations.  There
does not exist any Event of Default under this Agreement or any default or
violation by the Borrower of or under any of the terms, conditions or
obligations of:  (i) its partnership
agreement if the Borrower is a partnership, its articles or certificate of
incorporation, regulations or bylaws if the Borrower is a corporation or its
other organizational documents as applicable; (ii) any indenture,
mortgage, deed of trust, franchise, permit, contract, agreement, or other
instrument to which it is a party or by which it is bound; or (iii) any
law, ordinance, regulation, ruling, order, injunction, decree, condition or
other requirement applicable to or imposed upon it by any law, the action of
any court or any governmental authority or agency; and the consummation of this
Agreement and the transactions set forth herein will not result in any such
default or violation or Event of Default.


 


3.6.  No Consent.  No consent of, approval from, qualification
of, order of, authorization of or filing with any governmental authority is
required in connection with any of the Borrower’s Obligations pursuant to this
Agreement or any of the other Loan Documents.


 


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3.7.  Title to Assets.  The
Borrower has good and marketable title to the assets reflected on the most
recent Financial Statements, free and clear of all liens and encumbrances,
except for (i) current taxes and assessments not yet due and payable, (ii) assets
disposed of by the Borrower in the ordinary course of business since the date
of the most recent Financial Statements, and (iii) those liens or
encumbrances, if any, specified on the Addendum.


 


3.8.  Litigation.  There
are no actions, suits, proceedings or governmental investigations pending or, to
the knowledge of the Borrower, threatened against the Borrower, which could
result in a material adverse change in its business, assets, operations,
condition (financial or otherwise) or results of operations and there is no
basis known to the Borrower for any action, suit, proceeding or investigation
which could result in such a material adverse change.  All pending and threatened litigation against
the Borrower is listed on the Addendum.


 


3.9.  Tax Returns.  The
Borrower has filed all returns and reports that are required to be filed by it
in connection with any federal, state or local tax, duty or charge levied,
assessed or imposed upon it or its property or withheld by it, including
income, unemployment, social security and similar taxes, and all of such taxes
have been either paid or adequate reserve or other provision has been made
therefor.


 


3.10.  Employee Benefit Plans.  Each employee benefit plan as to which the
Borrower may have any liability complies in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974
(as amended from time to time, “ERISA”),
including minimum funding requirements, and (i) no Prohibited Transaction
(as defined under ERISA) has occurred with respect to any such plan, (ii) no
Reportable Event (as defined under Section 4043 of ERISA) has occurred
with respect to any such plan which would cause the Pension Benefit Guaranty
Corporation to institute proceedings under Section 4042 of ERISA, (iii) the
Borrower has not withdrawn from any such plan or initiated steps to do so, and (iv) no
steps have been taken to terminate any such plan.


 


3.11.  Environmental Matters.  The Borrower is in compliance, in all
material respects, with all Environmental Laws (as hereinafter defined), including,
without limitation, all Environmental Laws in jurisdictions in which the
Borrower owns or operates, or has owned or operated, a facility or site, stores
Collateral, arranges or has arranged for disposal or treatment of hazardous
substances, solid waste or other waste, accepts or has accepted for transport
any hazardous substances, solid waste or other wastes or holds or has held any
interest in real property or otherwise. 
Except as otherwise disclosed on the Addendum, no litigation or
proceeding arising under, relating to or in connection with any Environmental
Law is pending or, to the best of the Borrower’s knowledge, threatened against
the Borrower, any real property which the Borrower holds or has held an
interest or any past or present operation of the Borrower.  No release, threatened release or disposal of
hazardous waste, solid waste or other wastes is occurring, or to the best of
the Borrower’s knowledge has occurred, on, under or to any real property in
which the Borrower holds or has held any interest or performs or has performed
any of its operations, in violation of any Environmental Law.  As used in this Section, “litigation
or proceeding” means any demand, claim notice, suit, suit in equity,
action, administrative action, investigation or inquiry whether brought by a
governmental authority or other person, and “Environmental
Laws” means all provisions of laws, statutes, ordinances, rules,
regulations, permits, licenses, judgments, writs, injunctions, decrees, orders,
awards and standards promulgated by any governmental authority concerning
health, safety and protection of, or regulation of the discharge of substances
into, the environment.


 


3.12.  Intellectual Property.  The Borrower owns or is licensed to use all
patents, patent rights, trademarks, trade names, service marks, copyrights,
intellectual property, technology, know-how and processes necessary for the
conduct of its business as currently conducted that are material to the
condition (financial or otherwise), business or operations of the Borrower.


 


3.13.  Regulatory Matters.  No part of the proceeds of the Loan will be
used for “purchasing” or “carrying” any “margin stock” within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time in effect
or for any purpose which violates the provisions of the Regulations of such
Board of Governors.


 


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3.14.  Solvency.  As of the date hereof and after giving effect
to the transactions contemplated by the Loan Documents, (i) the aggregate
value of the Borrower’s assets will exceed its liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities), (ii) the
Borrower will have sufficient cash flow to enable it to pay its debts as they
become due, and (iii) the Borrower will not have unreasonably small
capital for the business in which it is engaged.


 


3.15.  Disclosure.  None of the Loan Documents contains or will
contain any untrue statement of material fact or omits or will omit to state a
material fact necessary in order to make the statements contained in this
Agreement or the Loan Documents not misleading. 
There is no fact known to the Borrower which materially adversely affects
or, so far as the Borrower can now foresee, might materially adversely affect
the business, assets, operations, condition (financial or otherwise) or results
of operation of the Borrower and which has not otherwise been fully set forth
in this Agreement or in the Loan Documents.


 


3.16. Use
of Proceeds.  All
proceeds of the Loan shall be used by the Borrower to finance working capital
needs of the Borrower.


 


4.  Affirmative
Covenants.  The Borrower agrees that from the
date of execution of this Agreement until all Obligations have been paid in
full and any commitments of the Lender to the Borrower have been terminated,
the Borrower will:


 


4.1.  Books and Records.  Maintain books and records in accordance with
GAAP and give representatives of the Lender (and any Small Business
Administration personnel) access thereto at all reasonable times, including
permission to examine, copy and make abstracts from any of such books and
records and such other information as the Lender may from time to time reasonably
request, and the Borrower will make available to the Lender (and any Small
Business Administration personnel) for examination copies of any reports,
statements and returns which the Borrower may make to or file with any federal,
state or local governmental department, bureau or agency.


 


4.2.  Interim Financial Statements; Certificate of No
Default.  Furnish the
Lender within ten (10) days after the end of each month, the Borrower’s Financial Statements
for such period, in reasonable detail, certified by an authorized officer of
the Borrower and prepared in accordance with GAAP consistently applied from
period to period.  The Borrower shall
also deliver a certificate as to its compliance with applicable financial covenants
(containing detailed calculations of all financial covenants) for the period
then ended and whether any Event of Default exists, and, if so, the nature
thereof and the corrective measures the Borrower proposes to take.  As used in this Agreement, if the Borrower is
not a natural person, “Financial Statements”
means the Borrower’s consolidated and, if required by the Lender in its sole
discretion, consolidating balance sheets, income statements and statements of
cash flows for the year, month or quarter together with year-to-date figures
and comparative figures for the corresponding periods of the prior year; if the
Borrower is a natural person, “Financial Statements”
means the Borrower’s personal financial statement and tax returns.


 


4.3.  Annual Financial Statements.  Furnish the Borrower’s Financial Statements
to the Lender within sixty (60) days after the end of each fiscal year.   Those Financial Statements will be prepared,
if requested, on an audited basis in accordance with GAAP by an independent certified
public accountant selected by the Borrower and satisfactory to the Lender.  Audited Financial Statements shall contain
the unqualified opinion of an independent certified public accountant and all
accountant examinations shall have been made in accordance with GAAP
consistently applied from period to period.


 


4.4.  Payment of Taxes and Other Charges.  Pay and discharge when due all indebtedness
and all taxes, assessments, charges, levies and other liabilities imposed upon
the Borrower, its income, profits, property or business, except those which
currently are being contested in good faith by appropriate proceedings and for
which the Borrower shall have set aside adequate reserves or made other
adequate provision with respect thereto acceptable to the Lender in its sole
discretion.


 


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4.5.  Maintenance of Existence, Operation and Assets.  Do all things necessary to (i) maintain,
renew and keep in full force and effect its organizational existence and all
rights, permits and franchises necessary to enable it to continue its business
as currently conducted; (ii) continue in operation in substantially the
same manner as at present; (iii) keep its properties in good operating
condition and repair; and (iv) make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto.


 


4.6.  Insurance.  Maintain, with financially sound and
reputable insurers, insurance with respect to its property and business against
such casualties and contingencies, of such types and in such amounts, as is
customary for established companies engaged in the same or similar business and
similarly situated.  In the event of a
conflict between the provisions of this Section and the terms of any
Security Documents relating to insurance, the provisions in the Security
Documents will control.


 


4.7.  Compliance with Laws.  Comply with all laws applicable to the
Borrower and to the operation of its business (including without limitation any
statute, ordinance, rule or regulation relating to employment practices,
pension benefits or environmental, occupational and health standards and
controls).


 


4.8.  Financial Covenants.  Comply with all of the financial and other
covenants, if any, set forth on the Addendum.


 


4.9.  Additional Reports.  Provide prompt written notice to the Lender
of the occurrence of any of the following (together with a description of the
action which the Borrower proposes to take with respect thereto):  (i) any Event of Default or any event,
act or condition which, with the passage of time or the giving of notice, or
both, would constitute an Event of Default (a “Default”), (ii) any
litigation filed by or against the Borrower, (iii) any Reportable Event or
Prohibited Transaction with respect to any Employee Benefit Plan(s) (as defined
in ERISA) or (iv) any event which might result in a material adverse
change in the business, assets, operations, condition (financial or otherwise)
or results of operation of the Borrower.


 


5.  Negative
Covenants.  The Borrower covenants and agrees
that from the date of this Agreement until all Obligations have been paid in
full and any commitments of the Lender to the Borrower have been terminated,
except as set forth in the Addendum, the Borrower will not, without the Lender’s
prior written consent:


 


5.1.  Indebtedness.  Create, incur, assume or suffer to exist any
indebtedness for borrowed money other than: 
(i) the Loan and any subsequent indebtedness to the Lender and (ii) open
account trade debt incurred in the ordinary course of business and not past due.


 


5.2.  Liens and Encumbrances.  Except as provided in Section 3.7,
create, assume, incur or permit to exist any mortgage, pledge, encumbrance,
security interest, lien or charge of any kind upon any of its property, now
owned or hereafter acquired, or acquire or agree to acquire any kind of
property subject to any conditional sales or other title retention agreement.


 


5.3.  Guarantees.  Guarantee, endorse or become contingently
liable for the obligations of any person, firm, corporation or other entity,
except in connection with the endorsement and deposit of checks in the ordinary
course of business for collection.


 


5.4.  Loans or Advances.  Purchase or hold beneficially any stock,
other securities or evidences of indebtedness of, or make or have outstanding,
any loans or advances to, or otherwise extend credit to, or make any investment
or acquire any interest whatsoever in, any other person, firm, corporation or
other entity, except investments disclosed on the Borrower’s Historical
Financial Statements or acceptable to the Lender in its sole discretion.


 


5.5.  Merger or Transfer of Assets.  Liquidate or dissolve, or merge or
consolidate with or into any person, firm, corporation or other entity, or
sell, lease, transfer or otherwise dispose of all or any substantial part of
its property, assets, operations or business, whether now owned or hereafter
acquired without the prior written consent of the Lender.


 


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5.6.  Change in Business,
Management or Ownership. 
Make or permit any change in its form of organization, the nature of its
business as carried on as of the date hereof, in the composition of its current
executive management, or in its equity ownership.


 


5.7.  Dividends.  Declare or pay any dividends on or make any
distribution with respect to any class of its equity or ownership interest, or
purchase, redeem, retire or otherwise acquire any of its equity.


 


5.8.   Acquisitions.  Make acquisitions of all or
substantially all of the property or assets of any person, firm, corporation or
other entity without the prior written consent of the Lender.


 


5.9.    Management Fees.  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.


 


6.  Events
of Default.  The occurrence of any of the
following will be deemed to be an Event of Default:


 


6.1.  Covenant Default.  The Borrower shall default in the performance
of any of the covenants or agreements contained in this Agreement.


 


6.2.  Breach of Warranty.  Any Financial Statement, representation,
warranty or certificate made or furnished by the Borrower to the Lender in
connection with this Agreement shall be false, incorrect or incomplete when
made.


 


6.3.  Other Default.  The occurrence of an Event of Default as
defined in the Note or any of the Loan Documents.


 


Upon the occurrence of an Event of Default, the Lender will have all
rights and remedies specified in the Note and the Loan Documents and all rights
and remedies (which are cumulative and not exclusive) available under
applicable law or in equity.


 


7.  Conditions.  The
Lender’s obligation to make the advance of the Loan is subject to the
conditions that as of the date of the advance:


 


7.1.  No Event of Default.  No Event of Default or event which with the
passage of time, the giving of notice or both would constitute an Event of
Default shall have occurred and be continuing;


 


7.2.  Authorization Documents.  The Lender shall have received certified
copies of resolutions of the board of directors, the general partners or the
members or managers of any partnership, corporation or limited liability
company that executes this Agreement, the Note or any of the other Loan
Documents; or other proof of authorization satisfactory to the Lender; and


 


7.3.  Receipt of Loan Documents.  The Lender shall have received the Loan
Documents and such other instruments and documents which the Lender may
reasonably request in connection with the transactions provided for in this
Agreement, which may include an opinion of counsel in form and substance
satisfactory to the Lender for any party executing any of the Loan Documents.


 


7.4.  Receipt of SBA Documents.  The Lender shall have
received any documents required by the Small Business Administration, including
but not limited to, SBA Form 480 and SBA Form 652D, each in form and
content satisfactory to Lender.


 


8.  Expenses.  The
Borrower agrees to pay the Lender, upon the execution of this Agreement, and
otherwise on demand, all costs and expenses incurred by the Lender in
connection with the preparation, negotiation and delivery of this Agreement and
the other Loan Documents, and any modifications thereto, and the collection of
all of the Obligations, including but not limited to enforcement actions,
relating to the Loan, whether


 


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through judicial
proceedings or otherwise, or in defending or prosecuting any actions or
proceedings arising out of or relating to this Agreement, including reasonable
fees and expenses of counsel (which may include costs of in-house counsel),
expenses for auditors, appraisers and environmental consultants, lien searches,
recording and filing fees and taxes.


 


9.  Increased Costs.  On written demand, together with written
evidence of the justification therefor, the Borrower agrees to pay the Lender
all direct costs incurred and any losses suffered or payments made by the
Lender as a consequence of making the Loan by reason of any change in law or
regulation, or the interpretation thereof, imposing any reserve, deposit,
allocation of capital or similar requirement (including without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) on the
Lender, its holding company or any of their respective assets.


 


10.  Miscellaneous.


 


10.1.  Notices:                   All notices,
demands, requests, consents, approvals and other communications required or
permitted hereunder (“Notices”) must
be in writing and will be effective upon receipt.  Notices may be given in any manner to which
the parties may separately agree, including electronic mail.  Without limiting the foregoing, first-class
mail, facsimile transmission and commercial courier service are hereby agreed
to as acceptable methods for giving Notices. 
Regardless of the manner in which provided, Notices may be sent to a
party’s address as set forth above or to such other address as any party may
give to the other for such purpose in accordance with this section.


 


10.2.  Preservation
of Rights.  No delay or omission on the Lender’s
part to exercise any right or power arising hereunder will impair any such
right or power or be considered a waiver of any such right or power, nor will
the Lender s action or inaction impair any such right or power.  The Lender’s rights and remedies hereunder
are cumulative and not exclusive of any other rights or remedies which the
Lender may have under other agreements, at law or in equity.


 


10.3.  Illegality. If any
provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, it shall not affect or impair the validity,
legality and enforceability of the remaining provisions of this Agreement.


 


10.4.  Changes in Writing.  No modification, amendment or waiver of, or
consent to any departure by the Borrower from, any provision of this Agreement
will be effective unless made in a writing signed by the party to be charged,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. 
No notice to or demand on the Borrower will entitle the Borrower to any
other or further notice or demand in the same, similar or other circumstance.


 


10.5.  Entire Agreement.  This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.


 


10.6.  Counterparts.  This Agreement may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed
counterpart.  Any party so executing this
Agreement by facsimile transmission shall promptly deliver a manually executed
counterpart, provided that any failure to do so shall not affect the validity
of the counterpart executed by facsimile transmission.


 


10.7.  Successors and Assigns.  This Agreement will be binding upon and inure
to the benefit of the Borrower and the Lender and their respective heirs,
executors, administrators, successors and assigns; provided, however,
that the Borrower may not assign this Agreement in whole or in part without the
Lender’s prior written consent and the Lender at any time may assign this
Agreement in whole or in part.


 


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10.8.  Interpretation.  In this Agreement, unless the Lender and the
Borrower otherwise agree in writing, the singular includes the plural and the
plural the singular; words importing any gender include the other genders;
references to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute referred to; the
word “or” shall be deemed to include “and/or”, the words “including”, “includes”
and “include” shall be deemed to be followed by the words “without limitation”;
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement.  Section headings in this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose. 
Unless otherwise specified in this Agreement, all accounting terms shall
be interpreted and all accounting determinations shall be made in accordance
with GAAP.  If this Agreement is executed
by more than one party as Borrower, the obligations of such persons or entities
will be joint and several.


 


10.9.  No Consequential Damages, Etc.  The Lender will not be responsible for any
damages, consequential, incidental, special, punitive or otherwise, that may be
incurred or alleged by any person or entity, including the Borrower, as a
result of this Agreement, the other Loan Documents, the transactions
contemplated hereby or thereby, or the use of the proceeds of the Loan.


 


10.10.  Assignments and Participations.  At any time, without any notice to the
Borrower, the Lender may sell, assign, transfer, negotiate, grant
participations in, or otherwise dispose of all or any part of the Lender’s
interest in the Loan.  The Borrower
hereby authorizes the Lender to provide, without any notice to the Borrower,
any information concerning the Borrower, including information pertaining to
the Borrower’s financial condition, business operations or general
creditworthiness, to any person or entity which may succeed to or participate
in all or any part of the Lender’s interest in the Loan.


 


10.11.  Governing Law and Jurisdiction.  This Agreement has been delivered to and
accepted by the Lender and shall be construed in accordance with, and governed
in all respects by the laws of the State of Delaware as applied to agreements
entered into and to be performed entirely in such state, between residents of
such state. Nothing contained in this Agreement will prevent the Lender from
bringing any action, enforcing any award or judgment or exercising any rights
against the Borrower individually, against any security or against any property
of the Borrower within any other county, state or other foreign or domestic
jurisdiction.  The Lender and the
Borrower agree that the venue provided above is the most convenient forum for
both the Lender and the Borrower.  The
Borrower waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Agreement.


 


10.12.  WAIVER OF JURY TRIAL.  THE BORROWER IRREVOCABLY
WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY OF SUCH DOCUMENTS.  THE BORROWER ACKNOWLEDGES
THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.


 


10.13.              Closing Fee.  At closing of the Loan, the Lender shall
receive its closing fee in the amount of $10,000.00, payable in immediately
available funds or as Lender otherwise directs.


 


10.14    Conversion Incentive.  As an inducement for the
Lender to make the Loan, on the date of the Qualifying Merger (as such term is
defined in the Note), the Lender shall receive 1,644,736 registered shares of
the Company’s common stock (the “Conversion Incentive”).  The Company acknowledges that the registered
shares from the Conversion Incentive are in addition to the 3,289,373
registered shares of the Company’s common stock that Lender will receive upon
the conversion of the Note following the consummation of the Qualifying Merger.


 


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The
Borrower acknowledges that it has read and understood all the provisions of
this Agreement, including the waiver of jury trial, and has been advised by
counsel as necessary or appropriate.


 


WITNESS
the due execution hereof as a document under seal, as of the date first written
above.


 


	
  WITNESS /
  ATTEST:

  	
   

  	
  DPAC
  TECHNOLOGIES CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DEVELOPMENT
  CAPITAL VENTURES, LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  DCC OPERATING,
  INC.,

  
	
   

  	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Donald L.
  Murfin

  	
   

  
	
   

  	
   

  	
  Title: Executive
  Vice President

  
						



 


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ADDENDUM to
that certain Loan Agreement dated August 5, 2005 between DPAC TECHNOLOGIES CORP. as the Borrower and DEVELOPMENT CAPITAL VENUTRES, LP, as the Lender.  Capitalized terms used in this Addendum and
not otherwise defined shall have the meanings given them in the Agreement.  Section numbers below refer to the
sections of the Agreement.


 


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