Document:

Security Agreement

 Exhibit 10.3 
 SECURITY AGREEMENT 
 As of January 30, 2008, Company and Bank (as herein defined), in
consideration of the premises, and the covenants and agreements contained herein, hereby mutually agree as follows: 
  

	1.	DEFINITIONS 

 “Account”, “Chattel Paper”,
“Commercial Tort Claim”, “Consumer Goods”, “Deposit Account”, “Document”, “Farm Products”, “General Intangible”, “Goods”, “Health Care Receivable”,
“Instrument”, “Investment Property”, “Letter of Credit Rights”, “Payment Intangible”, and “Proceeds”, have the meanings as set forth in Ohio Revised Code Chapter 1309, including any amendments
thereof and any substitutions therefore, which definitions are hereby incorporated by reference as though fully rewritten herein. 
 “Account
Debtor” means the Person who is obligated on an Account Receivable. 
 “Account Receivable” means: 
  

	 	(a)	any Account, account receivable, Health Care Receivable, Payment Intangible, and to the extent evidencing the right to payment of a monetary obligation, any Chattel Paper, Document,
or Instrument owned, acquired, or received by a Person, 

  

	 	(b)	any other indebtedness owed to or receivable owned, acquired, or received by a Person of whatever kind and however evidenced, and 

  

	 	(c)	any right, title, and interest in a Person’s Goods that were sold, leased, or furnished by that Person and gave rise to either (a) or (b) above, or both of them. This
includes, without limitation, 

  

	 	(1)	any rights of stoppage in transit of a Person’s sold, leased, or furnished Goods, 

  

	 	(2)	any rights to reclaim a Person’s sold, leased, or furnished Goods, and 

  

	 	(3)	any rights a Person has in such sold, leased, or furnished Goods that have been returned to or repossessed by that Person. 

 “Accounts Receivable Collection Account” means a commercial Deposit Account which may be maintained by Company with Bank, without liability by Bank to pay
interest thereon, from which account Bank shall have the exclusive right to withdraw funds until all Obligations are paid, performed, and observed in full. 
 “Bank” means FIFTH THIRD BANK, an Ohio banking corporation whose principal office is located at 121 South Main Street, Akron, Ohio 44308. 
 “Borrowers” means Quatech, Inc. and DPAC Technologies Corp. 
 “Cash Security” means all cash, Instruments, Deposit Accounts,
and other cash equivalents, whether matured or unmatured, whether collected or in the process of collection, upon which Company presently has or may hereafter have any claim, that are presently or may hereafter be existing or maintained with, issued
by, drawn upon, or in the possession of Bank. 
 “Collateral” means all of the Company’s personal property assets, including, without
limitation: 
  

	 	(a)	all of Company’s Accounts Receivable, whether now owned or hereafter acquired or received by Company, 

  

	 	(b)	all of Company’s Inventory, whether now owned or hereafter acquired by Company, 

	 	(c)	all of Company’s Equipment, whether now owned or hereafter acquired by Company, including but not limited to the vehicles listed on attached Exhibit A,

  

	 	(d)	all of Company’s Cash Security, 

  

	 	(e)	all of Company’s General Intangibles and other personal property and rights, whether now owned or hereafter acquired by Company, including but not limited to Deposit Accounts,
Instruments (including promissory notes), Chattel Paper, Documents, Investment Property, Letter of Credit Rights, Commercial Tort Claims, trademarks, tradenames, patents, copyrights, tax refunds, choses in action and contract rights, and

  

	 	(f)	all of the Proceeds, products, profits, and rents of Company’s Accounts Receivable, Inventory, Equipment, Cash Security, General Intangibles, and other Collateral, and all
books and records, including computer software, used in connection with any of the Collateral. 

 “Company” means QUATECH, INC.,
a corporation organized under the laws of the State of Ohio. 
 “Company’s Headquarters” means the location of: 
  

	 	(a)	Company’s place of business, if there is only one such place of business, or 

  

	 	(b)	if there is more than one place of business, the place (1) from which Company manages the main part of its business operations, and (2) where Persons dealing with Company
would normally look for credit information. 

 “Equipment” means: 
  

	 	(a)	any equipment, including without limitation, machinery, office furniture and furnishings, tools, dies, jigs, and molds and any warranty and other claims against the vendor or
supplier of such equipment, 

  

	 	(b)	all Goods that are used or bought for use primarily in a Person’s business, 

  

	 	(c)	all Goods that are not Consumer Goods, Farm Products, or Inventory, and 

  

	 	(d)	all substitutes or replacements for, and all parts, accessories, additions, attachments, or accessions to the foregoing. 

 “Event of Default” means the occurrence of any of the events set forth in Section 7 of the Security Agreement. 
 “Inventory” means: 
  

	 	(a)	any inventory, 

  

	 	(b)	all Goods that are raw materials, 

  

	 	(c)	all Goods that are work in process, 

  

	 	(d)	all Goods that are materials used or consumed in the ordinary course of a Person’s business, 

  

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	 	(e)	all Goods that are, in the ordinary course of a Person’s business, held for sale or lease or furnished or to be furnished under contracts of service, and

  

	 	(f)	all substitutes and replacements for, and parts, accessories, additions, attachments, or accessions to (a) to (e) above. 

 “Loan Agreement” means the Credit Agreement by and among the Borrowers and the Bank, dated of even date herewith, and including any partial or total amendment,
renewal, restatement, extension, or substitution of any such agreement. 
 “Obligations” means any of the following obligations, whether direct or
indirect, absolute or contingent, secured or unsecured, matured or unmatured, originally contracted with Bank or another Person, and now or hereafter owing to or acquired in any manner partially or totally by Bank or in which Bank may have acquired
a participation, contracted by Company alone or jointly or severally with another Person: 
  

	 	(a)	any and all indebtedness, obligations, liabilities, contracts, indentures, agreements, warranties, covenants, guaranties, representations, provisions, terms, and conditions of
whatever kind, now existing or hereafter arising, and however evidenced, that are now or hereafter owed, incurred, or executed by Company to, in favor of, or with Bank (including, without limitation, those as are set forth or contained in, referred
to, evidenced by, or executed with reference to, the Security Agreement, the Loan Agreement, the Promissory Note, any other loan agreements, interest rate hedge agreements, letter agreements, letter of credit agreements, advance agreements,
indemnity agreements, guaranties, lines of credit, mortgage deeds, security agreements, assignments, pledge agreements, hypothecation agreements, Instruments, and acceptance financing agreements), and including any partial or total extension,
restatement, renewal, amendment, and substitution thereof or therefore; 

  

	 	(b)	any and all claims of whatever kind of Bank against Company, now existing or hereafter arising, including, without limitation, any arising out of or in any way connected with
warranties made by Company to Bank in connection with any Instrument deposited with or purchased by Bank; 

  

	 	(c)	any and all of Bank’s Related Expenses. 

 “Organization”
and “Person” have the meanings as set forth in Ohio Revised Code Section 1301.01, including any amendments thereof and any substitutions therefore, which definitions are hereby incorporated by reference as though fully rewritten
herein. 
 “Permitted Purchase Money Liens” means purchase money security interests incurred by the Company to an obligor other than the Bank,
provided that (A) they are confined to the property acquired, (B) the indebtedness secured thereby does not exceed the total cost of the purchase, construction, or improvement of the subject asset, (C) any such indebtedness, if repaid
in whole or in part, cannot be reborrowed, D) the Bank has been given the right of first refusal to finance such transaction, and (E) the aggregate dollar amount of all such security interests at any time outstanding shall not exceed
$ 100,000.00. 
 “Potential Default” shall mean any condition, action, or failure to act, which, with the passage of time, service of notice,
or both, will constitute an Event of Default under this Security Agreement or under the Loan Agreement. 
 “Promissory Note” means, collectively,
the note issued under the Loan Agreement, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions of or for any of such notes. 
  

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 “Related Expenses” means any and all reasonable out of pocket costs, liabilities, and expenses (including,
without limitation, losses, damages, penalties, claims, actions, reasonable attorney’s fees, legal expenses, judgments, suits, and disbursements) incurred by, imposed upon, or asserted against, Bank in any attempt by Bank: 
  

	 	(a)	to obtain, preserve, perfect, or enforce the security interest evidenced by (i) the Security Agreement, or (ii) any other pledge agreement, mortgage deed, hypothecation
agreement, guaranty, security agreement, assignment, or security instrument executed or given by Company to or in favor of Bank, 

  

	 	(b)	to obtain payment, performance, and observance of any and all of the Obligations, 

  

	 	(c)	to maintain, insure, collect, preserve, or upon any Event of Default, repossess and dispose of any of the Collateral, or 

  

	 	(d)	incidental or related to (a) through (c) above, including, without limitation, interest thereupon from the date incurred, imposed, or asserted until paid at the rate
payable upon the Promissory Note, but in no event greater than the highest rate permitted by law. 

 “Security Agreement” means this
agreement between Company and Bank, and including any partial or total amendment, renewal, restatement, extension, or substitution of or for such agreement. 
  

	2.	SECURITY INTEREST IN COLLATERAL 

 In consideration of and as
security for the full and complete payment, performance, and observance of all Obligations, Company does hereby (a) grant to Bank a security interest in the Collateral, and (b) collaterally assign to Bank all of its right, title, and
interest (including, without limitation, all rights to payment) arising under or with respect to all of Company’s Accounts Receivable, whether now owned or hereafter acquired or received by Company, but not including any duty, obligation, or
liability of Company with respect thereto; provided, however, the Bank’s lien on any Collateral that is subject to a Permitted Purchase Money Lien shall not take effect until such Permitted Purchase Money Lien is no longer in effect if the
documents relating to such Permitted Purchase Money Lien prohibit any other liens on such Collateral. 
 Company agrees to execute such financing statements
and to take whatever other actions are reasonably requested by Bank to perfect and continue Bank’s security interest in the Collateral. Upon request of Bank, Company will deliver to Bank any and all of the documents evidencing or constituting
the Collateral, and Company will note Bank’s interest upon any and all chattel paper if not delivered to Bank for possession by Bank. Company hereby appoints Bank as its irrevocable attorney-in-fact for the purpose of executing or filing any
documents necessary to grant, perfect, or continue the security interest granted in this Agreement. Bank may at any time, and without further authorization from Company, file an original, carbon, photographic, or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Company will reimburse Bank for all reasonable expenses for the perfection and the continuation of the perfection of Bank’s security interest in the Collateral. Company promptly
will notify Bank before any change in Company’s name including any change to the assumed business names of Company. This is a continuing Security Agreement and will continue in effect even though all or any part of the Indebtedness is paid in
full and even though for a period of time Company may not be indebted to Bank. 
  

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	3.	WARRANTIES 

 Company represents and warrants to Bank (which
representations and warranties shall survive the execution and the delivery of the Promissory Note, and the extension of credit) that: 
  

	 	(a)	The execution, delivery, and performance hereof are within Company’s corporate powers, have been duly authorized, and are not in contravention of law or the terms of
Company’s articles of incorporation, regulations, or of any indenture, agreement, or undertaking to which Company is party or by which it is or may be bound; 

  

	 	(b)	Except for any security interest granted to or in favor of Bank, any Permitted Purchase Money Lien, or any lien permitted by the Loan Agreement, Company is, and as to Collateral to
be acquired after the date hereof will be, the owner of the Collateral free from any claim, lien, encumbrance, or security interest of any type, and Company agrees that it will defend, at its sole expense, the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein; 

  

	 	(c)	Subject to any limitation stated herein or in connection herewith, all information furnished to Bank concerning Company or the Collateral, is or will be at the time such information
is furnished, complete, accurate, and correct in all material respects; 

  

	 	(d)	Company is the lawful owner of and has full and unqualified right to transfer a security interest in all of the Collateral to Bank. Such Collateral is not and will not, so long as
Company has any Obligations to Bank, be subject to any financing statement, encumbrance, claim, lien, or security interest of any type except any granted to or in favor of Bank, except for any Permitted Purchase Money Lien or any lien permitted by
the Loan Agreement; 

  

	 	(e)	Company’s Headquarters is 5765 Hudson Industrial Parkway, Hudson Ohio 44236; 

  

	 	(f)	Company’s state of formation and registration number are: Ohio—Registration Number 1145301. 

  

	4.	COVENANTS 

 Company undertakes, covenants, and agrees that, until
the full and complete payment, performance, and observance of all Obligations, Company: 
  

	 	(a)	shall promptly provide Bank with prior written notification of: 

  

	 	(1)	any change in Company’s name, and 

  

	 	(2)	any change in Company’s Headquarters; 

  

	 	(b)	shall at all reasonable times upon reasonable notice (except that no notice is required upon the occurrence of and during the continuance of an Event of Default or Potential
Default) allow Bank by or through any of its officers, agents, employees, attorneys, or accountants to: 

  

	 	(1)	examine, inspect, and make extracts from Company’s books and other records, 

  

	 	(2)	examine and inspect Company’s Inventory and Equipment wherever located, and 

  

	 	(3)	arrange for verification of Company’s Accounts Receivable, under reasonable procedures in conjunction with the Company, except upon the occurrence of and during the continuance
of an Event of Default or Potential Default the Bank may contact Account Debtors directly; 

  

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	 	(c)	shall promptly furnish to Bank upon request: 

  

	 	(1)	additional information and statements with respect to the Collateral, 

  

	 	(2)	Company’s Instruments, Chattel Paper, Documents, and any other writings relating to or evidencing any of Company’s Accounts Receivable (including, without limitation,
computer printouts or typewritten reports listing the current mailing address of all present Account Debtors), and 

  

	 	(3)	any other writings and information Bank may reasonably request; 

  

	 	(d)	shall upon the request of Bank promptly take such action and promptly make, execute, and deliver all such additional and further items, deeds, assurances, and instruments as Bank
may require, including, without limitation, financing statements, so as to completely vest in and ensure to Bank its rights hereunder and in and to the Collateral; 

  

	 	(e)	if any of Company’s Accounts Receivable arise out of contracts with or orders from the United States or any of its departments, agencies, or instrumentalities, shall, upon the
request of the Bank, thereafter immediately notify Bank in writing of same and shall execute any writing or take any action required by Bank with reference to the Federal Assignment of Claims Act; 

  

	 	(f)	hereby authorizes Bank or Bank’s designated agent (but without obligation by Bank to do so) to incur Related Expenses (whether prior to, upon, or subsequent to any Event of
Default), and Company shall promptly repay, reimburse, and indemnify Bank for any and all Related Expenses; provided, however, that Bank shall give Company reasonable notice that it intends to incur any such Related Expenses (except that no notice
is required upon the occurrence of and during the continuance of an Event of Default or Potential Default); 

  

	 	(g)	shall not grant any consensual or permit to exist any non-consensual mortgage, encumbrance, security interest, or other lien upon any Collateral except any granted to or in favor of
Bank or as otherwise expressly permitted by this Agreement, the Loan Agreement, or the Bank in writing; 

  

	 	(h)	shall not sell, lease, transfer, assign, encumber or otherwise dispose of any Collateral in excess of $ 100,000.00 in any fiscal year, except in the ordinary course of business; if
any such permitted sale involves a titled piece of equipment, absent the occurrence and during the continuance of any Event of Default, the Bank agrees to release its lien on such Equipment and return to the Company the title of any such titled
Equipment. 

  

	 	(i)	shall not permit uninsured loss, damage, theft or destruction of any Collateral in excess of $ 100,000.00 in any fiscal year, nor permit levy, seizure, or attachment to, of, or
upon any of the Collateral or any attempt to accomplish the foregoing; and 

  

	 	(j)	shall not use any Collateral in material violation of any applicable statute, ordinance, or regulation. 

  

	 	(k)	to the extent that any of the Collateral consists of vehicles or other titled property, shall deliver original certificate(s) of title for such Collateral, properly endorsed to show
the Bank’s lien, and shall take whatever action the Bank requests necessary to permit the Bank to perfect its security interest in any vehicle titled outside the state of Ohio. 

  

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	5.	COLLECTIONS AND RECEIPT OF PROCEEDS 

  

	 	(a)	Upon the occurrence and during the continuance of any Event of Default, after written notification thereof to Company, Bank, or Bank’s designated agent, shall have the right
and power (as Company’s hereby constituted and appointed attorney-in-fact), which, being coupled with an interest, shall remain irrevocable until all Obligations are fully and completely paid, performed, and observed, at any time to:

  

	 	(1)	notify the Account Debtors on any or all of Company’s Accounts Receivable of the Bank’s security interest in and assignment of those Accounts Receivable upon which the
respective Account Debtors are liable, and to request from such Account Debtors, in Bank’s name or in Company’s name, information concerning the Accounts Receivable and amounts owing thereon, 

  

	 	(2)	notify purchasers of any or all of Company’s Inventory of Bank’s security interest therein, and to request from such Persons, at any time, in Bank’s name or in
Company’s name, information concerning Company’s Inventory and the amounts owing thereon by such purchasers, 

  

	 	(3)	notify and require the Account Debtors on any or all of Company’s Accounts Receivable to make payment upon such Accounts Receivable directly to Bank, 

 

	 	(4)	notify and require purchasers of Company’s Inventory to make payment of their indebtedness directly to Bank, 

  

	 	(5)	receive, retain, acquire, take, endorse, assign, deliver, accept, and deposit, in Bank’s name or Company’s name, any and all of Company’s cash, Instruments, Chattel
Paper, Documents, Proceeds of Accounts Receivable, Proceeds of Inventory, collections of Accounts Receivable, and any other writings relating to any of the Collateral theretofore collected, received or retained by Company pursuant to Subsection 5(b)
below or thereafter collected, received, or retained by Company, 

  

	 	(6)	require Company to open and maintain an Accounts Receivable Collection Account, 

  

	 	(7)	cause all remittances representing all collections and all Proceeds of Company’s Accounts Receivable and Inventory to be mailed to a lock box in Cleveland, Ohio, to which Bank
shall have access for the processing of such items in accordance with the provisions, terms, and conditions of Bank’s customary lock box agreement. And 

  

	 	(8)	take such other action with respect to any or all of the Collateral, in such manner and at such times, as Bank may deem advisable, including, without limitation, the following:
collection, legal proceedings, compromises, settlements, adjustments, extensions, postponements, exchanges, releases, and sales. 

 Bank may, in its sole discretion, at any time and from time to time, apply all or any portion of the collected balance in the Accounts Receivable Collections Account (allowing two (2) days for collection and clearance of remittances)
as a credit against Company’s outstanding obligations. If any remittance shall be dishonored, or if, upon final payment, any claim with respect thereto shall be made against Bank on its warranties of collection, Bank may charge the amount of
such item against the Accounts Receivable Collections Account or any other Deposit Account maintained by Company with Bank, and, in any event, retain same and Company’s interest therein as additional 

  

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security for the Obligations. Bank may, in its sole discretion, at any time and from time to time, release funds from the Accounts Receivable Collections
Account to Company for use in Company’s business. Company may withdraw the balance in the Accounts Receivable Collections Account upon termination of the Security Agreement in accordance with Subsection 9(d). 
  

	 	(b)	With respect to Company’s Instruments, Documents, and Chattel Paper, upon the occurrence and during the continuance of any Event of Default, after written request from Bank,
Company shall immediately deliver or cause to be delivered to Bank all of Company’s Instruments, Chattel Paper, and Documents, appropriately endorsed either, at Bank’s option, (i) to Bank’s order, without limitation or
qualification, or (ii) for deposit in the Accounts Receivable Collection Account. Bank, or Bank’s designated agent, is hereby constituted and appointed Company’s attorney-in-fact with authority and power to so endorse any and all
Instruments, Documents, and Chattel Paper upon Company’s failure to do so. Such authority and power, being coupled with an interest, shall be (i) irrevocable until all Obligations are paid, performed, and observed in full,
(ii) exercisable by Bank at any time and without any request upon Company by Bank to so endorse, and (iii) exercisable in Bank’s name or Company’s name. Company hereby waives presentment, demand, notice of dishonor, protest,
notice of protest, and any and all other similar notices with respect thereto, regardless of the form of any endorsement thereof. Bank shall not be bound or obligated to take any action to preserve any rights in the foregoing against any prior
parties thereto. 

  

	 	(c)	Except as otherwise provided in Subsections 5(a) or 5(b), Company is authorized (1) to collect and enforce, by all lawful means, all of Company’s Accounts Receivable, and
(2) to receive and retain, by all lawful means, any and all Proceeds of all of Company’s Accounts Receivable and Inventory. The lawful collection and enforcement of all of Company’s Accounts Receivable and the lawful receipt and
retention by Company of all Proceeds of all of Company’s Accounts Receivable and Inventory shall be as Bank’s agent. 

  

	6.	INSURANCE AND USE OF INVENTORY AND EQUIPMENT 

  

	 	(a)	Until any Event of Default: 

  

	 	(1)	Company may retain possession of and use its Equipment and Inventory in any lawful manner not inconsistent with any applicable terms, conditions, and provisions of:

  

	 	(i)	the Security Agreement, and 

  

	 	(ii)	any insurance policy thereon. 

  

	 	(2)	Company may sell or lease its Inventory in the ordinary course of business; provided, however, that a sale or lease in the ordinary course of business does not include a transfer in
partial or total satisfaction of a debt, except for transfers in satisfaction of partial or total purchase money prepayments by a buyer in the ordinary course of Company’s business. 

  

	 	(3)	Company may use and consume any raw materials or supplies, the use and consumption of which are necessary in order to carry on Company’s business. 

 (b) Company shall obtain, and at all times maintain, insurance upon its Inventory and Equipment in such form, written by such companies, in such amounts,
for such period, and against such risks as may be reasonably acceptable to Bank, with provisions reasonably satisfactory to Bank for payment of all losses thereunder to Bank and Company as their interests may appear (loss payable endorsement in
favor of Bank), and, if required by Bank, Company will deliver copies of the policies with Bank. Any such policies of insurance shall provide for no less than thirty (30) days’ prior written 

  

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cancellation notice to Bank. Company shall promptly provide notice to the Bank of any loss or damage to the Collateral in excess of $ 25,000.00. Company
shall use any sums payable under the insurance polices for loss or damage to the Collateral for the purpose of replacing, repairing, or restoring the Collateral. Notwithstanding the foregoing, in the event that there is any loss or damage to the
Collateral, upon written notice from Company to Bank, the Company will have the right to apply the proceeds of insurance to the restoration or repair of the Collateral only as long as: 
  

	 	•	 	 at the time of such loss or damage and during the 60 day period described below there has neither occurred and is continuing any Event of Default or any Potential
Default hereunder or under the Loan Agreement or the Promissory Note, 

  

	 	•	 	 such repair or replacement is expected to be completed and is completed no more than 60 days from the date of loss or damage to the property, and

  

	 	•	 	 if the estimated cost of repair or replacement as determined by the Bank in its sole discretion will exceed $ 100,000.00, any insurance proceeds that are made
available directly to the Company will be deposited in an escrow account with the Bank and made available to the Company in accordance with the Bank’s customary disbursement procedures. 

 Company hereby assigns to Bank any return or unearned premium which may be due upon cancellation of any such policies for any reason and directs the
insurers to pay Bank any amount so due if the Bank advises the insurer that there has occurred and is continuing any Event of Default or Potential Default hereunder. Bank, or Bank’s designated agent, is hereby constituted and appointed
Company’s attorney-in-fact, effective upon the occurrence and during the continuance of an Event of Default or Potential Default hereunder or under the Loan Agreement or the Promissory Note (either in the name of Company or in the name of the
Bank) to make adjustments of all insurance losses, sign all applications, receipts, releases, and other papers necessary for the collection of any such loss, and any return of unearned premium, execute proof of loss, make settlements, and endorse
and collect all Instruments payable to Company or issued in connection therewith. Notwithstanding any action by Bank hereunder, Company hereby expressly assumes any and all risk of loss or damage to Company’s Inventory and Equipment to the
extent of any and all deficiencies in the effective insurance coverage. 
  

	7.	EVENTS OF DEFAULT 

 Upon the occurrence and during the continuance
of any one or more of the following Events of Default, any and all Obligations shall, at the option of Bank and notwithstanding any period of time permitted or allowed by any writing evidencing an Obligation, become immediately due and payable
without notice, demand, protest, or presentment, all of which are hereby expressly waived by Company: 
  

	 	(a)	Subject to any applicable grace period, the occurrence of an event of default under the terms of the Loan Agreement, or 

  

	 	(b)	Subject to any applicable grace period, failure of Company to perform or observe any covenant or agreement contained in this Security Agreement or any representation or warranty
made herein by Company is incorrect or misleading in any material respect when made. 

  

	8.	RIGHTS AND REMEDIES UPON EVENT OF DEFAULT 

 Upon the occurrence of
any such Event of Default and at all times thereafter, Bank shall have the rights and remedies of a secured party under the Ohio Uniform Commercial Code in addition to the rights and remedies provided elsewhere within the Security Agreement or in
any other writing executed by Company. Bank may require Company to assemble the Collateral and make it available to Bank at a reasonably convenient place to be designated by Bank. Unless the Collateral is perishable, threatens to decline speedily in
value, or is of a type customarily sold on a recognized market, Bank will give Company reasonable notice of the time and place of any public sale of the Collateral or of the time after which any private sale or other intended disposition thereof is
to be made. The requirement of reasonable notice shall 

  

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be met if such notice is mailed in accordance with Section 9(b) hereof, at least ten (10) days before the time of the public sale or the time after
which any private sale or other intended disposition thereof is to be made. At any such public or private sale, Bank may purchase the Collateral. After deduction for Bank’s Related Expenses, the residue of any such sale shall be applied in
satisfaction of the Obligations in such order of preference as Bank may determine. Any excess, to the extent permitted by law, shall be paid to Company, and Company shall remain liable for any deficiency. 
  

	9.	GENERAL 

  

	 	(a)	If any provisions of this Security Agreement, or any action taken hereunder, or any application thereof, is for any reason held to be illegal or invalid, such illegality or
invalidity shall not affect any other provision of this Security Agreement, each of which shall be construed and enforced without reference to such illegal or invalid portion and shall be deemed to be effective or taken in the manner and to the full
extent permitted by law. 

  

	 	(b)	Bank shall not be deemed to have waived any of Bank’s rights hereunder or under any other writing executed by Company unless such waiver is in writing and signed by Bank. No
delay or omission on part of Bank in exercising any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. All
Bank’s rights and remedies, whether evidenced hereby or by any other writing shall be cumulative and may be exercised singularly or concurrently. Any written demands, written requests, or written notices to Company that Bank may elect to give
shall be effective on first attempted delivery when deposited for delivery, postage prepaid, by U.S. mail, and addressed either, at Bank’s option, to (1) Company’s Headquarters set forth in Subsection 3(e) of the Security Agreement
(as modified by any change therein which Company has supplied in writing to Bank) or (2) Company’s address at which Bank customarily communicates with Company. If at any time or times, by assignment or otherwise, Bank transfers any of the
Obligations or any part of the Collateral to another person, such transfer shall carry with it Bank’s powers and rights under this Agreement with respect to the obligation or Collateral so transferred and the transferee shall have said powers
and rights, whether or not they are specifically referred to in the transfer. To the extent that Bank retains any other of the Obligations or any part of the Collateral, Bank will continue to have the rights and powers herein set forth with respect
thereto. 

  

	 	(c)	The laws of the State of Ohio, without regard to principles of conflict of laws, shall govern the construction of the Security Agreement (including, without limitation, any terms
not specifically defined in the Security Agreement that may be so specifically defined pursuant to Ohio Revised Code Chapter 1309, and including any amendments thereof or any substitution therefore) and the rights and duties of the parties hereto.
Company agrees that Bank may make a photocopy of the Security Agreement in the ordinary course of business and such photocopy may be used in place of the original of the Security Agreement. A carbon, photographic or other reproduction of the
Security Agreement may be used as a financing statement. The Security Agreement shall be binding upon and inure to the benefit of Company and Bank and their respective successors and assigns. The rights and powers herein given to the Bank are in
addition to those otherwise created or existing in the same Collateral by virtue of other agreements or writings. 

  

	 	(d)	The term of the Security Agreement shall commence with the date hereof and shall continue until terminated by either Company or Bank. Company may terminate the Security Agreement by
giving Bank not less than ten (10) days prior written notice thereof and by paying, performing, and observing all of the Obligations in full on or before such termination date. 

  

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	 	(e)	In the Security Agreement, unless the context otherwise requires, words in the singular number include the plural and words in the plural number include the singular.

  

	 	(f)	Company hereby releases Bank from and agrees to indemnify and hold harmless Bank, and its officers, agents, and employees for any and all claims of Company or any other Person for
damage or loss caused by any act or acts hereunder or in furtherance hereof whether by omission or commission, and whether based upon any error of judgment or mistake of law or fact (except gross negligence or willful misconduct) on the part of
Bank, or its officers, agents, and employees. 

 COMPANY, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN BANK AND COMPANY ARISING OUT OF, IN CONNECTION WITH, RELATING TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THE
SECURITY AGREEMENT, ANY AMENDMENT THERETO, OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR
MODIFY BANK’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED AND DELIVERED BY COMPANY TO BANK. 
 IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be executed on the day and year first above written. 
  

									
	COMPANY:	 		 	BANK:
	QUATECH, INC.	 		 	FIFTH THIRD BANK
					
	By:	 	 /s/ Steven D. Runkel
	 		 	By:	 	 /s/ Michael H. Babb

		 	Steve Runkel, Chief Executive Officer	 		 		 	Michael H. Babb, Vice President

  

 11 

 SECURITY AGREEMENT 
 As of January 30, 2008, Company and Bank (as herein defined), in consideration of the premises, and the covenants and agreements contained herein, hereby mutually agree as follows: 
  

	1.	DEFINITIONS 

 “Account”, “Chattel Paper”,
“Commercial Tort Claim”, “Consumer Goods”, “Deposit Account”, “Document”, “Farm Products”, “General Intangible”, “Goods”, “Health Care Receivable”,
“Instrument”, “Investment Property”, “Letter of Credit Rights”, “Payment Intangible”, and “Proceeds”, have the meanings as set forth in California Uniform Commercial Code, including any amendments
thereof and any substitutions therefore, which definitions are hereby incorporated by reference as though fully rewritten herein. 
 “Account
Debtor” means the Person who is obligated on an Account Receivable. 
 “Account Receivable” means: 
  

	 	(a)	any Account, account receivable, Health Care Receivable, Payment Intangible, and to the extent evidencing the right to payment of a monetary obligation, any Chattel Paper, Document,
or Instrument owned, acquired, or received by a Person, 

  

	 	(b)	any other indebtedness owed to or receivable owned, acquired, or received by a Person of whatever kind and however evidenced, and 

  

	 	(c)	any right, title, and interest in a Person’s Goods that were sold, leased, or furnished by that Person and gave rise to either (a) or (b) above, or both of them. This
includes, without limitation, 

  

	 	(1)	any rights of stoppage in transit of a Person’s sold, leased, or furnished Goods, 

  

	 	(2)	any rights to reclaim a Person’s sold, leased, or furnished Goods, and 

  

	 	(3)	any rights a Person has in such sold, leased, or furnished Goods that have been returned to or repossessed by that Person. 

 “Accounts Receivable Collection Account” means a commercial Deposit Account which may be maintained by Company with Bank, without liability by Bank to pay
interest thereon, from which account Bank shall have the exclusive right to withdraw funds until all Obligations are paid, performed, and observed in full. 
 “Bank” means FIFTH THIRD BANK, an Ohio banking corporation whose principal office is located at 121 South Main Street, Akron, Ohio 44308. 
 “Borrowers” means Quatech, Inc. and DPAC Technologies Corp. 
 “Cash Security” means all cash, Instruments, Deposit Accounts,
and other cash equivalents, whether matured or unmatured, whether collected or in the process of collection, upon which Company presently has or may hereafter have any claim, that are presently or may hereafter be existing or maintained with, issued
by, drawn upon, or in the possession of Bank. 
 “Collateral” means all of the Company’s personal property assets, including, without
limitation: 
  

	 	(a)	all of Company’s Accounts Receivable, whether now owned or hereafter acquired or received by Company, 

	 	(b)	all of Company’s Inventory, whether now owned or hereafter acquired by Company, 

  

	 	(c)	all of Company’s Equipment, whether now owned or hereafter acquired by Company, including but not limited to the vehicles listed on attached Exhibit A,

  

	 	(d)	all of Company’s Cash Security, 

  

	 	(e)	all of Company’s General Intangibles and other personal property and rights, whether now owned or hereafter acquired by Company, including but not limited to Deposit Accounts,
Instruments (including promissory notes), Chattel Paper, Documents, Investment Property, Letter of Credit Rights, Commercial Tort Claims, trademarks, tradenames, patents, copyrights, tax refunds, choses in action and contract rights, and

  

	 	(f)	all of the Proceeds, products, profits, and rents of Company’s Accounts Receivable, Inventory, Equipment, Cash Security, General Intangibles, and other Collateral, and all
books and records, including computer software, used in connection with any of the Collateral. 

 “Company” means DPAC
TECHNOLOGIES CORP., a corporation organized under the laws of the State of California. 
 “Company’s Headquarters” means the location of:

  

	 	(a)	Company’s place of business, if there is only one such place of business, or 

  

	 	(b)	if there is more than one place of business, the place (1) from which Company manages the main part of its business operations, and (2) where Persons dealing with Company
would normally look for credit information. 

 “Equipment” means: 
  

	 	(a)	any equipment, including without limitation, machinery, office furniture and furnishings, tools, dies, jigs, and molds and any warranty and other claims against the vendor or
supplier of such equipment, 

  

	 	(b)	all Goods that are used or bought for use primarily in a Person’s business, 

  

	 	(c)	all Goods that are not Consumer Goods, Farm Products, or Inventory, and 

  

	 	(d)	all substitutes or replacements for, and all parts, accessories, additions, attachments, or accessions to the foregoing. 

 “Event of Default” means the occurrence of any of the events set forth in Section 7 of the Security Agreement. 
 “Inventory” means: 
  

	 	(a)	any inventory, 

  

	 	(b)	all Goods that are raw materials, 

  

	 	(c)	all Goods that are work in process, 

  

 2 

	 	(d)	all Goods that are materials used or consumed in the ordinary course of a Person’s business, 

  

	 	(e)	all Goods that are, in the ordinary course of a Person’s business, held for sale or lease or furnished or to be furnished under contracts of service, and

  

	 	(f)	all substitutes and replacements for, and parts, accessories, additions, attachments, or accessions to (a) to (e) above. 

 “Loan Agreement” means the Credit Agreement by and among the Borrowers and the Bank, dated of even date herewith, and including any partial or total amendment,
renewal, restatement, extension, or substitution of any such agreement. 
 “Obligations” means any of the following obligations, whether direct or
indirect, absolute or contingent, secured or unsecured, matured or unmatured, originally contracted with Bank or another Person, and now or hereafter owing to or acquired in any manner partially or totally by Bank or in which Bank may have acquired
a participation, contracted by Company alone or jointly or severally with another Person: 
  

	 	(a)	any and all indebtedness, obligations, liabilities, contracts, indentures, agreements, warranties, covenants, guaranties, representations, provisions, terms, and conditions of
whatever kind, now existing or hereafter arising, and however evidenced, that are now or hereafter owed, incurred, or executed by Company to, in favor of, or with Bank (including, without limitation, those as are set forth or contained in, referred
to, evidenced by, or executed with reference to, the Security Agreement, the Loan Agreement, the Promissory Note, any other loan agreements, interest rate hedge agreements, letter agreements, letter of credit agreements, advance agreements,
indemnity agreements, guaranties, lines of credit, mortgage deeds, security agreements, assignments, pledge agreements, hypothecation agreements, Instruments, and acceptance financing agreements), and including any partial or total extension,
restatement, renewal, amendment, and substitution thereof or therefore; 

  

	 	(b)	any and all claims of whatever kind of Bank against Company, now existing or hereafter arising, including, without limitation, any arising out of or in any way connected with
warranties made by Company to Bank in connection with any Instrument deposited with or purchased by Bank; 

  

	 	(c)	any and all of Bank’s Related Expenses. 

 “Organization”
and “Person” have the meanings as set forth in the California Commercial Code, including any amendments thereof and any substitutions therefore, which definitions are hereby incorporated by reference as though fully rewritten herein.

 “Permitted Purchase Money Liens” means purchase money security interests incurred by the Company to an obligor other than the Bank, provided
that (A) they are confined to the property acquired, (B) the indebtedness secured thereby does not exceed the total cost of the purchase, construction, or improvement of the subject asset, (C) any such indebtedness, if repaid in whole
or in part, cannot be reborrowed, D) the Bank has been given the right of first refusal to finance such transaction, and (E) the aggregate dollar amount of all such security interests at any time outstanding shall not exceed $ 100,000.00.

 “Potential Default” shall mean any condition, action, or failure to act, which, with the passage of time, service of notice, or both, will
constitute an Event of Default under this Security Agreement or under the Loan Agreement. 
  

 3 

 “Promissory Note” means, collectively, the note issued under the Loan Agreement, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of and substitutions of or for any of such notes. 
 “Related Expenses” means any
and all reasonable out of pocket costs, liabilities, and expenses (including, without limitation, losses, damages, penalties, claims, actions, reasonable attorney’s fees, legal expenses, judgments, suits, and disbursements) incurred by, imposed
upon, or asserted against, Bank in any attempt by Bank: 
  

	 	(a)	to obtain, preserve, perfect, or enforce the security interest evidenced by (i) the Security Agreement, or (ii) any other pledge agreement, mortgage deed, hypothecation
agreement, guaranty, security agreement, assignment, or security instrument executed or given by Company to or in favor of Bank, 

  

	 	(b)	to obtain payment, performance, and observance of any and all of the Obligations, 

  

	 	(c)	to maintain, insure, collect, preserve, or upon any Event of Default, repossess and dispose of any of the Collateral, or 

  

	 	(d)	incidental or related to (a) through (c) above, including, without limitation, interest thereupon from the date incurred, imposed, or asserted until paid at the rate
payable upon the Promissory Note, but in no event greater than the highest rate permitted by law. 

 “Security Agreement” means this
agreement between Company and Bank, and including any partial or total amendment, renewal, restatement, extension, or substitution of or for such agreement. 
  

	2.	SECURITY INTEREST IN COLLATERAL 

 In consideration of and as
security for the full and complete payment, performance, and observance of all Obligations, Company does hereby (a) grant to Bank a security interest in the Collateral, and (b) collaterally assign to Bank all of its right, title, and
interest (including, without limitation, all rights to payment) arising under or with respect to all of Company’s Accounts Receivable, whether now owned or hereafter acquired or received by Company, but not including any duty, obligation, or
liability of Company with respect thereto; provided, however, the Bank’s lien on any Collateral that is subject to a Permitted Purchase Money Lien shall not take effect until such Permitted Purchase Money Lien is no longer in effect if the
documents relating to such Permitted Purchase Money Lien prohibit any other liens on such Collateral. 
 Company agrees to execute such financing statements
and to take whatever other actions are reasonably requested by Bank to perfect and continue Bank’s security interest in the Collateral. Upon request of Bank, Company will deliver to Bank any and all of the documents evidencing or constituting
the Collateral, and Company will note Bank’s interest upon any and all chattel paper if not delivered to Bank for possession by Bank. Company hereby appoints Bank as its irrevocable attorney-in-fact for the purpose of executing or filing any
documents necessary to grant, perfect, or continue the security interest granted in this Agreement. Bank may at any time, and without further authorization from Company, file an original, carbon, photographic, or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Company will reimburse Bank for all reasonable expenses for the perfection and the continuation of the perfection of Bank’s security interest in the Collateral. Company promptly
will notify Bank before any change in Company’s name including any change to the assumed business names of Company. This is a continuing Security Agreement and will continue in effect even though all or any part of the Indebtedness is paid in
full and even though for a period of time Company may not be indebted to Bank. 
  

 4 

	3.	WARRANTIES 

 Company represents and warrants to Bank (which
representations and warranties shall survive the execution and the delivery of the Promissory Note, and the extension of credit) that: 
  

	 	(a)	The execution, delivery, and performance hereof are within Company’s corporate powers, have been duly authorized, and are not in contravention of law or the terms of
Company’s articles of incorporation, regulations, or of any indenture, agreement, or undertaking to which Company is party or by which it is or may be bound; 

  

	 	(b)	Except for any security interest granted to or in favor of Bank, any Permitted Purchase Money Lien, or any lien permitted by the Loan Agreement, Company is, and as to Collateral to
be acquired after the date hereof will be, the owner of the Collateral free from any claim, lien, encumbrance, or security interest of any type, and Company agrees that it will defend, at its sole expense, the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein; 

  

	 	(c)	Subject to any limitation stated herein or in connection herewith, all information furnished to Bank concerning Company or the Collateral, is or will be at the time such information
is furnished, complete, accurate, and correct in all material respects; 

  

	 	(d)	Company is the lawful owner of and has full and unqualified right to transfer a security interest in all of the Collateral to Bank. Such Collateral is not and will not, so long as
Company has any Obligations to Bank, be subject to any financing statement, encumbrance, claim, lien, or security interest of any type except any granted to or in favor of Bank, except for any Permitted Purchase Money Lien or any lien permitted by
the Loan Agreement; 

  

	 	(e)	Company’s Headquarters is 5765 Hudson Industrial Parkway, Hudson Ohio 44236; 

  

	 	(f)	Company’s state of formation and registration number are: California—Registration Number C1210364. 

  

	4.	COVENANTS 

 Company undertakes, covenants, and agrees that, until
the full and complete payment, performance, and observance of all Obligations, Company: 
  

	 	(a)	shall promptly provide Bank with prior written notification of: 

  

	 	(1)	any change in Company’s name, and 

  

	 	(2)	any change in Company’s Headquarters; 

  

	 	(b)	shall at all reasonable times upon reasonable notice (except that no notice is required upon the occurrence of and during the continuance of an Event of Default or Potential
Default) allow Bank by or through any of its officers, agents, employees, attorneys, or accountants to: 

  

	 	(1)	examine, inspect, and make extracts from Company’s books and other records, 

  

	 	(2)	examine and inspect Company’s Inventory and Equipment wherever located, and 

  

	 	(3)	arrange for verification of Company’s Accounts Receivable, under reasonable procedures in conjunction with the Company, except upon the occurrence of and during the continuance
of an Event of Default or Potential Default the Bank may contact Account Debtors directly; 

  

 5 

	 	(c)	shall promptly furnish to Bank upon request: 

  

	 	(1)	additional information and statements with respect to the Collateral, 

  

	 	(2)	Company’s Instruments, Chattel Paper, Documents, and any other writings relating to or evidencing any of Company’s Accounts Receivable (including, without limitation,
computer printouts or typewritten reports listing the current mailing address of all present Account Debtors), and 

  

	 	(3)	any other writings and information Bank may reasonably request; 

  

	 	(d)	shall upon the request of Bank promptly take such action and promptly make, execute, and deliver all such additional and further items, deeds, assurances, and instruments as Bank
may require, including, without limitation, financing statements, so as to completely vest in and ensure to Bank its rights hereunder and in and to the Collateral; 

  

	 	(e)	if any of Company’s Accounts Receivable arise out of contracts with or orders from the United States or any of its departments, agencies, or instrumentalities, shall, upon the
request of the Bank, thereafter immediately notify Bank in writing of same and shall execute any writing or take any action required by Bank with reference to the Federal Assignment of Claims Act; 

  

	 	(f)	hereby authorizes Bank or Bank’s designated agent (but without obligation by Bank to do so) to incur Related Expenses (whether prior to, upon, or subsequent to any Event of
Default), and Company shall promptly repay, reimburse, and indemnify Bank for any and all Related Expenses; provided, however, that Bank shall give Company reasonable notice that it intends to incur any such Related Expenses (except that no notice
is required upon the occurrence of and during the continuance of an Event of Default or Potential Default); 

  

	 	(g)	shall not grant any consensual or permit to exist any non-consensual mortgage, encumbrance, security interest, or other lien upon any Collateral except any granted to or in favor of
Bank or as otherwise expressly permitted by this Agreement, the Loan Agreement, or the Bank in writing; 

  

	 	(h)	shall not sell, lease, transfer, assign, encumber or otherwise dispose of any Collateral in excess of $ 100,000.00 in any fiscal year, except in the ordinary course of business; if
any such permitted sale involves a titled piece of equipment, absent the occurrence and during the continuance of any Event of Default, the Bank agrees to release its lien on such Equipment and return to the Company the title of any such titled
Equipment. 

  

	 	(i)	shall not permit uninsured loss, damage, theft or destruction of any Collateral in excess of $ 100,000.00 in any fiscal year, nor permit levy, seizure, or attachment to, of, or
upon any of the Collateral or any attempt to accomplish the foregoing; and 

  

	 	(j)	shall not use any Collateral in material violation of any applicable statute, ordinance, or regulation. 

  

	 	(k)	to the extent that any of the Collateral consists of vehicles or other titled property, shall deliver original certificate(s) of title for such Collateral, properly endorsed to show
the Bank’s lien, and shall take whatever action the Bank requests necessary to permit the Bank to perfect its security interest in any vehicle titled outside the state of California. 

  

 6 

	5.	COLLECTIONS AND RECEIPT OF PROCEEDS 

  

	 	(a)	Upon the occurrence and during the continuance of any Event of Default, after written notification thereof to Company, Bank, or Bank’s designated agent, shall have the right
and power (as Company’s hereby constituted and appointed attorney-in-fact), which, being coupled with an interest, shall remain irrevocable until all Obligations are fully and completely paid, performed, and observed, at any time to:

  

	 	(1)	notify the Account Debtors on any or all of Company’s Accounts Receivable of the Bank’s security interest in and assignment of those Accounts Receivable upon which the
respective Account Debtors are liable, and to request from such Account Debtors, in Bank’s name or in Company’s name, information concerning the Accounts Receivable and amounts owing thereon, 

  

	 	(2)	notify purchasers of any or all of Company’s Inventory of Bank’s security interest therein, and to request from such Persons, at any time, in Bank’s name or in
Company’s name, information concerning Company’s Inventory and the amounts owing thereon by such purchasers, 

  

	 	(3)	notify and require the Account Debtors on any or all of Company’s Accounts Receivable to make payment upon such Accounts Receivable directly to Bank, 

 

	 	(4)	notify and require purchasers of Company’s Inventory to make payment of their indebtedness directly to Bank, 

  

	 	(5)	receive, retain, acquire, take, endorse, assign, deliver, accept, and deposit, in Bank’s name or Company’s name, any and all of Company’s cash, Instruments, Chattel
Paper, Documents, Proceeds of Accounts Receivable, Proceeds of Inventory, collections of Accounts Receivable, and any other writings relating to any of the Collateral theretofore collected, received or retained by Company pursuant to Subsection 5(b)
below or thereafter collected, received, or retained by Company, 

  

	 	(6)	require Company to open and maintain an Accounts Receivable Collection Account, 

  

	 	(7)	cause all remittances representing all collections and all Proceeds of Company’s Accounts Receivable and Inventory to be mailed to a lock box in Cleveland, Ohio, to which Bank
shall have access for the processing of such items in accordance with the provisions, terms, and conditions of Bank’s customary lock box agreement. and 

  

	 	(8)	take such other action with respect to any or all of the Collateral, in such manner and at such times, as Bank may deem advisable, including, without limitation, the following:
collection, legal proceedings, compromises, settlements, adjustments, extensions, postponements, exchanges, releases, and sales. 

 Bank may, in its sole discretion, at any time and from time to time, apply all or any portion of the collected balance in the Accounts Receivable Collections Account (allowing two (2) days for collection and clearance of remittances)
as a credit against Company’s outstanding obligations. If any remittance shall be dishonored, or if, upon final payment, any claim with respect thereto shall be made against Bank on its warranties of collection, Bank may charge the amount of
such item against the Accounts Receivable Collections Account or any other Deposit Account maintained by Company with Bank, and, in any event, retain same and Company’s interest therein as additional 

  

 7 

 
security for the Obligations. Bank may, in its sole discretion, at any time and from time to time, release funds from the Accounts Receivable Collections
Account to Company for use in Company’s business. Company may withdraw the balance in the Accounts Receivable Collections Account upon termination of the Security Agreement in accordance with Subsection 9(d). 
  

	 	(b)	With respect to Company’s Instruments, Documents, and Chattel Paper, upon the occurrence and during the continuance of any Event of Default, after written request from Bank,
Company shall immediately deliver or cause to be delivered to Bank all of Company’s Instruments, Chattel Paper, and Documents, appropriately endorsed either, at Bank’s option, (i) to Bank’s order, without limitation or
qualification, or (ii) for deposit in the Accounts Receivable Collection Account. Bank, or Bank’s designated agent, is hereby constituted and appointed Company’s attorney-in-fact with authority and power to so endorse any and all
Instruments, Documents, and Chattel Paper upon Company’s failure to do so. Such authority and power, being coupled with an interest, shall be (i) irrevocable until all Obligations are paid, performed, and observed in full,
(ii) exercisable by Bank at any time and without any request upon Company by Bank to so endorse, and (iii) exercisable in Bank’s name or Company’s name. Company hereby waives presentment, demand, notice of dishonor, protest,
notice of protest, and any and all other similar notices with respect thereto, regardless of the form of any endorsement thereof. Bank shall not be bound or obligated to take any action to preserve any rights in the foregoing against any prior
parties thereto. 

  

	 	(c)	Except as otherwise provided in Subsections 5(a) or 5(b), Company is authorized (1) to collect and enforce, by all lawful means, all of Company’s Accounts Receivable, and
(2) to receive and retain, by all lawful means, any and all Proceeds of all of Company’s Accounts Receivable and Inventory. The lawful collection and enforcement of all of Company’s Accounts Receivable and the lawful receipt and
retention by Company of all Proceeds of all of Company’s Accounts Receivable and Inventory shall be as Bank’s agent. 

  

	6.	INSURANCE AND USE OF INVENTORY AND EQUIPMENT 

  

	 	(a)	Until any Event of Default: 

  

	 	(1)	Company may retain possession of and use its Equipment and Inventory in any lawful manner not inconsistent with any applicable terms, conditions, and provisions of:

  

	 	(i)	the Security Agreement, and 

  

	 	(ii)	any insurance policy thereon. 

  

	 	(2)	Company may sell or lease its Inventory in the ordinary course of business; provided, however, that a sale or lease in the ordinary course of business does not include a transfer in
partial or total satisfaction of a debt, except for transfers in satisfaction of partial or total purchase money prepayments by a buyer in the ordinary course of Company’s business. 

  

	 	(3)	Company may use and consume any raw materials or supplies, the use and consumption of which are necessary in order to carry on Company’s business. 

 (b) Company shall obtain, and at all times maintain, insurance upon its Inventory and Equipment in such form, written by such companies, in such amounts,
for such period, and against such risks as may be reasonably acceptable to Bank, with provisions reasonably satisfactory to Bank for payment of all losses thereunder to Bank and Company as their interests may appear (loss payable endorsement in
favor of Bank), and, if required by Bank, Company will deliver copies of the policies with Bank. Any such policies of insurance shall provide for no less than thirty (30) days’ prior written 

  

 8 

 
cancellation notice to Bank. Company shall promptly provide notice to the Bank of any loss or damage to the Collateral in excess of $ 25,000.00. Company
shall use any sums payable under the insurance polices for loss or damage to the Collateral for the purpose of replacing, repairing, or restoring the Collateral. Notwithstanding the foregoing, in the event that there is any loss or damage to the
Collateral, upon written notice from Company to Bank, the Company will have the right to apply the proceeds of insurance to the restoration or repair of the Collateral only as long as: 
  

	 	•	 	 at the time of such loss or damage and during the 60 day period described below there has neither occurred and is continuing any Event of Default or any Potential
Default hereunder or under the Loan Agreement or the Promissory Note, 

  

	 	•	 	 such repair or replacement is expected to be completed and is completed no more than 60 days from the date of loss or damage to the property, and

  

	 	•	 	 if the estimated cost of repair or replacement as determined by the Bank in its sole discretion will exceed $ 100,000.00, any insurance proceeds that are made
available directly to the Company will be deposited in an escrow account with the Bank and made available to the Company in accordance with the Bank’s customary disbursement procedures. 

 Company hereby assigns to Bank any return or unearned premium which may be due upon cancellation of any such policies for any reason and directs the
insurers to pay Bank any amount so due if the Bank advises the insurer that there has occurred and is continuing any Event of Default or Potential Default hereunder. Bank, or Bank’s designated agent, is hereby constituted and appointed
Company’s attorney-in-fact, effective upon the occurrence and during the continuance of an Event of Default or Potential Default hereunder or under the Loan Agreement or the Promissory Note (either in the name of Company or in the name of the
Bank) to make adjustments of all insurance losses, sign all applications, receipts, releases, and other papers necessary for the collection of any such loss, and any return of unearned premium, execute proof of loss, make settlements, and endorse
and collect all Instruments payable to Company or issued in connection therewith. Notwithstanding any action by Bank hereunder, Company hereby expressly assumes any and all risk of loss or damage to Company’s Inventory and Equipment to the
extent of any and all deficiencies in the effective insurance coverage. 
  

	7.	EVENTS OF DEFAULT 

 Upon the occurrence and during the continuance
of any one or more of the following Events of Default, any and all Obligations shall, at the option of Bank and notwithstanding any period of time permitted or allowed by any writing evidencing an Obligation, become immediately due and payable
without notice, demand, protest, or presentment, all of which are hereby expressly waived by Company: 
  

	 	(a)	Subject to any applicable grace period, the occurrence of an event of default under the terms of the Loan Agreement, or 

  

	 	(b)	Subject to any applicable grace period, failure of Company to perform or observe any covenant or agreement contained in this Security Agreement or any representation or warranty
made herein by Company is incorrect or misleading in any material respect when made. 

  

	8.	RIGHTS AND REMEDIES UPON EVENT OF DEFAULT 

 Upon the occurrence of
any such Event of Default and at all times thereafter, Bank shall have the rights and remedies of a secured party under the California Uniform Commercial Code in addition to the rights and remedies provided elsewhere within the Security Agreement or
in any other writing executed by Company. Bank may require Company to assemble the Collateral and make it available to Bank at a reasonably convenient place to be designated by Bank. Unless the Collateral is perishable, threatens to decline speedily
in value, or is of a type customarily sold on a recognized market, Bank will give Company reasonable notice of the time and place of any public sale of the Collateral or of the time after which any private sale or other intended disposition thereof
is to be made. The requirement of reasonable notice shall 

  

 9 

 
be met if such notice is mailed in accordance with Section 9(b) hereof, at least ten (10) days before the time of the public sale or the time after
which any private sale or other intended disposition thereof is to be made. At any such public or private sale, Bank may purchase the Collateral. After deduction for Bank’s Related Expenses, the residue of any such sale shall be applied in
satisfaction of the Obligations in such order of preference as Bank may determine. Any excess, to the extent permitted by law, shall be paid to Company, and Company shall remain liable for any deficiency. 
  

	9.	GENERAL 

  

	 	(a)	If any provisions of this Security Agreement, or any action taken hereunder, or any application thereof, is for any reason held to be illegal or invalid, such illegality or
invalidity shall not affect any other provision of this Security Agreement, each of which shall be construed and enforced without reference to such illegal or invalid portion and shall be deemed to be effective or taken in the manner and to the full
extent permitted by law. 

  

	 	(b)	Bank shall not be deemed to have waived any of Bank’s rights hereunder or under any other writing executed by Company unless such waiver is in writing and signed by Bank. No
delay or omission on part of Bank in exercising any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. All
Bank’s rights and remedies, whether evidenced hereby or by any other writing shall be cumulative and may be exercised singularly or concurrently. Any written demands, written requests, or written notices to Company that Bank may elect to give
shall be effective on first attempted delivery when deposited for delivery, postage prepaid, by U.S. mail, and addressed either, at Bank’s option, to (1) Company’s Headquarters set forth in Subsection 3(e) of the Security Agreement
(as modified by any change therein which Company has supplied in writing to Bank) or (2) Company’s address at which Bank customarily communicates with Company. If at any time or times, by assignment or otherwise, Bank transfers any of the
Obligations or any part of the Collateral to another person, such transfer shall carry with it Bank’s powers and rights under this Agreement with respect to the obligation or Collateral so transferred and the transferee shall have said powers
and rights, whether or not they are specifically referred to in the transfer. To the extent that Bank retains any other of the Obligations or any part of the Collateral, Bank will continue to have the rights and powers herein set forth with respect
thereto. 

  

	 	(c)	The laws of the State of California, without regard to principles of conflict of laws, shall govern the construction of the Security Agreement (including, without limitation, any
terms not specifically defined in the Security Agreement that may be so specifically defined pursuant to the California Commercial Code, and including any amendments thereof or any substitution therefore) and the rights and duties of the parties
hereto. Company agrees that Bank may make a photocopy of the Security Agreement in the ordinary course of business and such photocopy may be used in place of the original of the Security Agreement. A carbon, photographic or other reproduction of the
Security Agreement may be used as a financing statement. The Security Agreement shall be binding upon and inure to the benefit of Company and Bank and their respective successors and assigns. The rights and powers herein given to the Bank are in
addition to those otherwise created or existing in the same Collateral by virtue of other agreements or writings. 

  

	 	(d)	The term of the Security Agreement shall commence with the date hereof and shall continue until terminated by either Company or Bank. Company may terminate the Security Agreement by
giving Bank not less than ten (10) days prior written notice thereof and by paying, performing, and observing all of the Obligations in full on or before such termination date. 

  

 10 

	 	(e)	In the Security Agreement, unless the context otherwise requires, words in the singular number include the plural and words in the plural number include the singular.

  

	 	(f)	Company hereby releases Bank from and agrees to indemnify and hold harmless Bank, and its officers, agents, and employees for any and all claims of Company or any other Person for
damage or loss caused by any act or acts hereunder or in furtherance hereof whether by omission or commission, and whether based upon any error of judgment or mistake of law or fact (except gross negligence or willful misconduct) on the part of
Bank, or its officers, agents, and employees. 

 COMPANY, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN BANK AND COMPANY ARISING OUT OF, IN CONNECTION WITH, RELATING TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THE
SECURITY AGREEMENT, ANY AMENDMENT THERETO, OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR
MODIFY BANK’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED AND DELIVERED BY COMPANY TO BANK. 
 IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be executed on the day and year first above written. 
  

									
	 COMPANY:
	 		 	BANK:
	 DPAC TECHNOLOGIES CORP.
	 		 	FIFTH THIRD BANK
					
	By:	 	 /s/ Steven D. Runkel
	 		 	By:	 	 /s/ Michael H. Babb

		 	Steve Runkel, Chief Executive Officer	 		 		 	Michael H. Babb, Vice President

  

 11Subordination Agreement

 Exhibit 10.4 
 SUBORDINATION AGREEMENT 
 (CANAL MEZZANINE PARTNERS, L.P.) 
 Dated: January 30, 2008 
  

			
	To:	 	Fifth Third Bank
		 	Commercial Banking
		 	Mailcode: MD A67811
		 	Fifth Floor
		 	121 South Main St.
		 	Akron, Ohio 44308

 To induce Fifth Third Bank (“Bank”) to establish a credit facility for making loans and
extending credit from time to time for the benefit of DPAC Technologies Corp., a California corporation, and Quatech, Inc. an Ohio corporation (collectively, together with each of their successors and permitted assigns, herein collectively referred
to as the “Borrowers” and each individually referred to a “Borrower”) as a pursuant to the terms of that certain Credit Agreement among Borrowers and Bank as of even date herewith (as hereafter amended, extended, modified,
supplemented, restated, or replaced from time to time, the “Loan Agreement”), and to induce the undersigned to make loans to and for the benefit of Borrowers pursuant to the terms of the SubDebt Agreement (as defined below), the
undersigned, intending to be legally bound, hereby agrees as follows: 
 1. The payment of any and all Subordinated Debt is expressly
subordinated to the Senior Debt to the extent and in the manner set forth in this Subordination Agreement. The term “Subordinated Debt” means the principal of and interest on all indebtedness, liabilities, and obligations of Borrowers, or
either of them, now existing or hereafter arising, to the undersigned, including but not limited to: (i) obligations, including without limitation, indemnification obligations, owing by Borrowers, or either of them, to the undersigned, or the
undersigned’s successors, assignees, affiliates, or designees, pursuant to the terms and conditions of the agreements and documents referred to on Schedule A, attached hereto and made a part hereof (collectively, “SubDebt Agreements”)
and (ii) the right of the undersigned to receive payments of principal, interest and other amounts that might or would be due under or, in connection with, the Warrants (as defined on Schedule A), and (iii) any other obligations owing by
Borrowers, or either of them, now or hereafter to the undersigned. The term “Senior Debt” means any and all obligations of Borrowers to Bank under, in connection with, or in any way related to (including debtor-in-possession financing),
the Loan Agreement (including, without limitation, 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 any Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), up to a maximum aggregate principal amount outstanding at any time not to exceed $ 3,000,000.00, in addition to all other obligations to the Bank,
including interest thereon and any reasonable fees or expenses relating thereto (“Senior Debt Limit”); provided that the Senior Debt shall exclude amounts that accrue due to modifications to the Loan Agreement made in contravention of
Section 10. (a) hereof. All capitalized terms not defined herein shall have the meaning set forth in the Loan Agreement as of the date hereof. 
 2. (a) As long as no Event of Default or Potential Default has occurred under the Loan Agreement, and if no Event of Default or Potential Default has would result from the making of any such payments, the Borrowers
may pay and, as long as no Payment Block (as defined below) is in effect, the undersigned may accept regularly scheduled payments of interest and payment of principal at maturity with respect to the Subordinated Debt and payments or reimbursements
of actual, reasonable costs and expenses as provided under the SubDebt Agreements. Unless and until the Senior Debt is indefeasibly paid in full and Bank has no further obligation to make loans to the Borrowers, Borrowers 

 
shall not pay, and the undersigned shall not accept, any other payments of any kind associated with the Subordinated Debt (including without limitation
amounts arising from the sale or disposition, or other proceeds, of Borrowers’ property that may be subject to a lien or security interest of the undersigned). No payment or distribution of any kind shall be made, directly or indirectly,
whether in cash, securities or other property, by setoff or otherwise, on account of any Subordinated Debt, or in respect of any redemption, repurchase, or other acquisition of any Subordinated Debt by Borrowers, or received by the undersigned,
(a) at any time during which any of the Senior Debt shall have been declared due and payable prior to its stated final maturity or shall have become due and payable at stated final maturity, and in either case shall remain unpaid, (b) at
any time during any Blockage Period, or (c) at any time during a Proceeding (as defined in the following paragraph) (each a “Payment Block”); provided that scheduled interest payments, and scheduled principal payments to the extent
permitted hereunder, and payments or reimbursements of actual costs and expenses that were not paid due to the existence of a Payment Block, may be paid as and when the Payment Block ceases to continue as long as such payments are otherwise
permitted hereunder. The Subordinated Debt shall not be prepayable, in whole or in part, without the prior written consent of Bank. . In addition, unless and until the Senior Debt is indefeasibly paid in full and Lender has no further obligations to
make Loans under the Loan Agreement, the undersigned shall not at any time exercise any rights to redeem or cause a repurchase of, the Subordinated Debt (including without limitation the exercise of any warrant associated therewith that results in
any cash payments), nor shall Companies permit any redemption or repurchase as set forth in the SubDebt Agreements except in accordance with an action or proceeding referenced in Section 8 hereof (but subject always to the subordination
provisions set forth herein). Notwithstanding anything to the contrary contained herein, Permitted Actions shall not be prohibited by the Subordination Agreement, including after the occurrence of an Event of Default or Potential Default. For
purposes hereof, “Permitted Actions” shall mean (i) payment on the Subordinated Debt in kind (i.e. non-cash), (ii) a conversion of the Subordinated Debt to equity, (iii) operation of anti-dilution rights under the SubDebt
Agreement, and (iv) the performance of all earlier agreements and covenants in accordance with the terms of the SubDebt Agreements that do not result in payments of cash to the undersigned. 
 (b) For purposes hereof (i) “Blockage Period” means the period commencing on the date that (a) Bank shall have delivered
written notice to the undersigned in accordance with Section 19. hereof that an Event of Default or Potential Default has occurred and is continuing, and ending on the earliest of (1) the day which is 180 days after the delivery of such
notice, (2) the day on which such Event of Default or Potential Default shall have been cured or waived in writing, and (3) the commencement of a Proceeding; provided that no default notice from Bank may be based on an Event of Default
which was in existence as of the time of the issuance of any earlier default notice and specified therein unless such Event of Default shall have been cured for not less than 90 days and is subsequently determined to be a new Event of Default (for
purposes of this paragraph, breaches of the same financial covenant for consecutive periods shall constitute separate and distinct Events of Default) and provided further that Bank shall not be permitted to institute more than three
(3) Blockage Periods in any twelve (12) consecutive month period or (b) the undersigned delivers a written notice to Bank that a default or event of default has occurred and is continuing under the SubDebt Agreements,
and ending on the earliest of (1) the day which is 180 days after delivery of such notice by Bank or (2) the day on which such default or event of default shall have been cured or waived in writing; and
(ii) “Proceeding” means (a) any voluntary or involuntary insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition, or other similar case or proceeding relating to a Borrower or any of
its property, (b) any case or proceeding for any liquidation, dissolution, or other wind-up of a Borrower, whether voluntary or involuntary, and whether or not involving insolvency or bankruptcy proceedings, or (c) any assignment for the
benefit of creditors or marshalling of assets of a Borrower or the appointment of a trustee, receiver, sequestrator, or other custodian for a Borrower or any of its property. 
  

 2 

 3. Any payments on the Subordinated Debt received by the undersigned (including, without limitation,
prepayments on the Subordinated Debt and receipt of proceeds from Borrowers’ property upon which the undersigned has a lien or security interest), other than as expressly permitted in Section 2. above, shall be held in trust for Bank and
the undersigned will forthwith turn over any such payments in the form received, properly endorsed, to Bank to be applied to the Senior Debt as determined by Bank in its sole discretion. 
 4. Borrowers shall not grant to the undersigned and the undersigned shall not take any lien on or security interest in any of the Collateral, now owned
or hereafter acquired or created, without Bank’s prior written consent; it being acknowledged and agreed by the Bank that the undersigned has been granted a lien on and security interest in certain of the Collateral and other property of
Borrowers on the date thereof; provided however, that the interests of Bank in any Collateral securing the Senior Debt shall have priority over any security or other interest of the undersigned in the Collateral and any other assets of Borrowers
that secures the Subordinated Debt. The undersigned agrees to execute and deliver to Bank, contemporaneously with the execution of this Agreement, an Agreement To Subordinate Priority Of Security Interests; except as specifically provided for herein
and therein , the priority of the security interests of the parties hereto in the Collateral shall be in accordance with the Uniform Commercial Code as enacted and amended from time to time. For purposes of this Agreement, the term
“Collateral” shall mean all “Collateral” as such term is defined in each separate Security Agreement by and between Bank and each of the Borrowers of even date herewith. 
 5. This Subordination Agreement shall be effective notwithstanding the time, order or method of attachment or perfection with respect to the Collateral,
the time or order of recording or the filing or non-filing of financing statements or other recordings or filings. Under no circumstances shall the undersigned have a right to foreclose upon the Collateral or otherwise attempt to enforce any rights
it may have with respect to the Collateral whether by judicial action or otherwise, until all of the Senior Debt has been indefeasibly paid and satisfied in full, and Bank has no further obligations to make loans to the Borrowers. 
 6. The undersigned shall have no right, as against the Bank, to receive or retain all or any portion of the Collateral, including the proceeds thereof,
at any time unless and until the Senior Debt is indefeasibly paid and satisfied in full and Bank has no further obligation to make loans to the Borrowers. To the extent the undersigned obtains possession of any Collateral and/or the proceeds
thereof, the undersigned shall hold the same in trust for Bank and shall immediately deliver the same to Bank, in the same form as received with any necessary endorsement. 
 7. The undersigned agrees that it will not make any assertion or claim in any action, suit or proceeding of any nature whatsoever in any way seeking to
avoid or otherwise challenging (a) the priority of the liens and security interests granted to Bank to secure the Senior Debt or the validity or effectiveness of the liens and security interests granted to Bank under and in connection with,
(b) the validity or effectiveness to the transactions contemplated by, or (c) any remedial action taken in respect of the Collateral by Bank in good faith under, the Loan Agreement or any other Loan Documents all as may be amended,
extended, modified, or replaced from time to time. 
 8. Notwithstanding any breach or default by Borrower under the SubDebt Agreements and
expressly subject to the terms and agreements set forth elsewhere in this Subordination Agreement, unless and until the Senior Debt shall be indefeasibly paid and satisfied in full, the undersigned shall not at any time or in any manner unless 180
days have passed since the receipt by Bank of written notice from the undersigned of its intention to do so following the occurrence of a default under the SubDebt Agreements, commence any action or proceeding against Borrowers to recover all or any
part of the Subordinated Debt not paid when due, or join with any creditor other than the Bank, in bringing any Proceeding against any 

  

 3 

 
of the Borrowers. Notwithstanding anything to the contrary contained in this Section 8., the undersigned shall be entitled to accelerate the amount of
the Subordinated Debt upon the acceleration of the Senior Debt or the filing of a Proceeding by any Borrower. Nothing in this Section 8. is intended to limit the rights of the undersigned to seek specific performance of any of the covenants or
other obligations of Borrowers (other than payment obligations which shall be limited by this Section 8.) set forth in the SubDebt Agreements as long as the performance by Borrowers of such covenant or obligations would not give rise to an
Event of Default under the Loan Agreement or other Loan Documents. 
 9. In the event of any Proceeding, the undersigned will at Bank’s
request file any claims, proofs of claim, or other instruments of similar character necessary to enforce the obligations of Borrowers in respect of the Subordinated Debt and will hold in trust for Bank and pay over to Bank in the same form received,
to be applied on the Senior Debt as determined by Bank, any and all money, dividends or other assets received in any such Proceeding on account of the Subordinated Debt, unless and until the Senior Debt shall be indefeasibly paid and satisfied in
full. In the event the undersigned fails to execute, verify, deliver, and file any proofs of claim in respect of the Subordinated Debt in connection with any such Proceeding prior to twenty (20) days before the expiration of the time to file
any such proof or fails to vote any such claim in any such Proceeding prior to five (5) days before the expiration of the time to vote any such claim, Bank may, as attorney-in-fact for the undersigned, take such action on behalf of the
undersigned and the undersigned hereby appoints Bank as attorney-in-fact for the undersigned to demand, sue for, collect, and receive any and all such money, dividends, or other assets and give acquittance therefore and to file any claim, proof of
claim or other instrument of similar character and to take such other similar actions in such Proceeding in Bank’s name or in the name of the undersigned, as Bank may deem reasonably necessary or advisable for the enforcement of this
Subordination Agreement. The undersigned will execute and deliver to Bank such other and further powers of attorney or other instruments as Bank may reasonably request in order to accomplish the foregoing. 
 10. Bank may at any time and from time to time, without the consent of or notice to the undersigned, without incurring responsibility to the undersigned
and without impairing or releasing any of Bank’s rights, or any of the obligations of the undersigned: 
 (a) Change the amount, manner,
place or terms of payment, or change or extend the time of payment of or renew or alter the Senior Debt, or any part thereof, or amend, supplement, or replace the Loan Agreement and/or any notes or other Loan Documents (as defined in the Loan
Agreement) executed in connection therewith in any manner or enter into or amend, supplement, or replace in any manner any other agreement relating to the Senior Debt including without limitation, such changes or modifications that may be made in
conjunction with a complete or partial refinance thereof or otherwise; provided however that the Borrowers and Bank agree that they will not amend, modify, or alter the Loan Agreement, the Senior Debt, or any other agreement relating to the Senior
Debt without the consent of the undersigned, if the effect would (directly or indirectly) be (i) to permit the principal amount of Senior Debt to exceed the Senior Debt Limit, (ii) to cause any applicable interest rate margin as in effect
on the date hereof to be increased by more than two percent (2%) per annum, or to impose an interest rate margin where none presently exists of more than two percent (2%) per annum (without taking into account and specifically excluding
any increases in margins or rates that may be imposed as the Default Rate, (as defined in the Loan Agreement in effect as of the date hereof) following an Event of Default), (iii) to charge fees in conjunction with any waiver or amendment of
the Loan Documents in an amount in excess of $ 25,000.00 (exclusive of fees currently described in the Loan Documents and fees, costs and expenses associated with such waiver or amendment) in any calendar year, (iv) to extend the maturity date
of the Senior Debt beyond January 31, 2013, (v) any additional restriction on the payment of the Subordinated Debt to that contained in the Loan Agreement or this Subordination Agreement, as in effect on the date hereof, or (vi) to
change or alter the nature or any part of the Senior Debt facility or any of the Loan Documents from a revolving credit facility or line of credit to a term loan. 
  

 4 

 (b) Subject to Section 14. below, sell, exchange, release, or otherwise deal with all or any part of
any property at any time pledged or mortgaged by any party to secure or securing the Senior Debt or any part thereof; 
 (c) Release any
Person liable in any manner for the payment or collection of the Senior Debt (including, without limitation, a Borrower); 
 (d) Exercise or
refrain from exercising any rights against any Borrower or others (including the undersigned); and 
 (e) Apply sums paid by any party to the
Senior Debt in any order or manner as determined by Bank. 
 11. The undersigned and the Borrowers shall not amend or modify the SubDebt
Agreements such that it would (directly or indirectly) (i) increase the maximum principal amount of the Subordinated Debt, (ii) increase the rate of interest on any of the Subordinated Debt (other than by payment of interest in kind (i.e.,
non-cash)) (without taking into account increases as currently set forth in the SubDebt Agreements, resulting from a default or event of default thereunder), (iii) subject to the subordination provisions contained herein, include fees payable
in conjunction with any amendment or waiver of any of the SubDebt Agreement (exclusive of fees currently described in the SubDebt Agreements and fees, costs and expenses associated with such waiver or amendment) in excess of $ 25,000.00 in the
aggregate in any calendar year, (iv) change to an earlier date any date upon which regularly scheduled payments of interest on the Subordinated Debt under and pursuant to the terms of the SubDebt Agreements are due or change the maturity of the
Subordinated Debt or (v) add or make more restrictive any event of default or any covenant with respect to the Subordinated Debt, without the prior written consent of the Bank; provided however, that at any time Bank amends any term of the Loan
Documents, the undersigned shall be permitted to make conforming amendments and modifications to the SubDebt Agreements; provided further however, that, amendments to the financial covenants in the SubDebt Agreements shall, if modified, at all
times, contain financial covenant thresholds that are at least 15% less restrictive than the financial covenants contained in the Loan Agreement, provided further that the undersigned shall not be obligated to modify or amend the financial covenants
in the SubDebt Agreement. 
 12. The undersigned shall advise each future holder of all or any part of the Subordinated Debt that the
Subordinated Debt is subordinated to the Senior Debt in the manner and to the extent provided herein. The undersigned represents that no part of the Subordinated Debt or any instrument evidencing the same has been transferred or assigned and the
undersigned shall not transfer or assign any part of the Subordinated Debt while any Senior Debt remains outstanding, unless such transfer or assignment is made expressly subject to this Subordination Agreement by the execution by the new holder of
the Subordinated Debt of (i) a joinder that will make the new holder a party to this Agreement or (ii) a separate agreement substantially identical to this Agreement. Upon Bank’s request, the undersigned will in the case of any
Subordinated Debt that is not evidenced by any instrument cause the same to be evidenced by an appropriate instrument or instruments, and place thereon and on any and all instruments evidencing the Subordinated Debt a legend in such form as Bank may
determine to the effect that the indebtedness evidenced thereby is subordinated and subject to the prior payment in full of all Senior Debt pursuant to this Subordination Agreement, as well as deliver all such instruments to Bank. 
  

 5 

 13. This is a continuing agreement and will remain in full force and effect until all of the Senior Debt
has been indefeasibly paid and satisfied in full and Bank has no further obligation to make Loans under the Loan Agreement. This Subordination Agreement will continue to be effective or will be automatically reinstated, as the case may be, if at any
time payment of all or any part of the Senior Debt is rescinded or must otherwise be returned by the Borrowers, or either of them, upon a Proceeding of any of the Borrowers or otherwise, all as though such payment had not been made. 
 14. (a) If at any time or from time to time the Collateral, or any portion thereof, is in any manner sold or otherwise transferred, the
undersigned’s consent to such disposition shall be automatically and irrevocably given if the Bank (i) in its sole discretion and for any reason, consents to such disposition and, except where a disposition or sale by any Borrower is
permitted by the terms of the Loan Agreement and/or the Loan Documents (as in effect on the date hereof) or where any Borrower is otherwise permitted by the terms of the Loan Agreement and/or the Loan Documents (as in effect on the date hereof) to
retain proceeds of a disposition, sale, or casualty, and (ii) notifies the undersigned that Bank intends to apply the proceeds received by Bank in conjunction with the sale or transfer referenced above to the Senior Debt and that the Senior
Debt Limit will be reduced by the amount of such proceeds so applied (exclusive of proceeds from the sale or disposition of Accounts effectuated when an Event of Default has not occurred or is no longer continuing). In any event, the undersigned
shall not be entitled to receive any proceeds of any such disposition unless and until the Senior Debt has been indefeasibly paid in full and Bank has no further obligation to make Loans under the Loan Agreement. 
 (b) If, at any time and for any reason, the undersigned consents, or is deemed to have consented to a sale, transfer, or disposition in accordance with
subsection (a) above and Bank releases its lien on the Collateral, or any portion thereof, the undersigned shall likewise release its lien on the property so released from the Bank’s lien. Bank may, as attorney-in-fact for the undersigned,
take such action on behalf of the undersigned (in Bank’s name or in the name of the undersigned, as Bank may deem necessary or advisable) and the undersigned hereby appoints Bank as attorney-in-fact for the undersigned to effectuate such
release, and the undersigned hereby authorizes Bank to file any Uniform Commercial Code amendments to the undersigned’s financing statements filed against the Borrowers, or either of them, in connection with such release. The undersigned shall
execute and deliver to Bank such other and further powers of attorney or other instruments as Bank reasonably may request in order to accomplish the foregoing. 
 15. Nothing in this Subordination Agreement is intended to compel the Bank or the undersigned at any time to declare any of the Borrowers in default or compel the Bank to proceed against or refrain from proceeding
against any Collateral in any order or manner. All rights and remedies of the Bank, with respect to the Collateral, any of the Borrowers, and any other obligors concerning the Senior Debt are cumulative and not alternative. In furtherance of the
foregoing, the undersigned waives any and all rights to assert the equitable doctrine of marshalling against Bank. 
 16. In the event of the
commencement of a Proceeding, the Bank shall have the option (in its sole and absolute discretion) to continue to provide financing (on terms acceptable to the Bank) of the trustee, other fiduciary, or of any of the Borrowers as a
debtor-in-possession, if the Bank deems such financing to be in its best interests. Subject to the Senior Debt Limit, the subordination and lien priority provisions of this Subordination Agreement shall continue to apply to all advances made during
the pendency of such Proceedings, so that the Bank shall have a prior lien on all Collateral, created before or during such Proceeding, to secure all Senior Debt, whether created before or during such Proceeding. The undersigned’s consent to
such financing shall not be required regardless of whether the court supervising such Proceeding approves, grants, or allows adequate protection to the undersigned. Nothing in this Section 16. is intended to limit the undersigned’s right,
if any, to object to such financing in conjunction with a Proceeding. 
  

 6 

 17. Upon indefeasible payment and satisfaction in full of all Senior Debt and termination of Bank’s
obligation to make Loans under the Loan Agreement, the undersigned shall be subrogated to the rights of Bank, in accordance with applicable equitable principles, to receive distributions with respect to the Senior Debt until Subordinated Debt is
paid in full. 
 18. Each of the Borrowers consents to Bank and the undersigned sharing with each other any information either may have from
time to time with respect to any of the Borrowers. Bank and the undersigned are not obligated to share such information, however. 
 19. All
notices, demands, requests, consents, approvals and other communications required or permitted hereunder must be in writing and will be effective upon receipt. Such notices and other communications may be hand delivered, sent by facsimile
transmission with confirmation of delivery with a copy sent by first class mail, or sent by nationally recognized overnight courier service, to a party’s address set forth below or to such other address as any party may give to the other in
writing for such purpose: 
  

			
	To the Bank:	 	Fifth Third Bank
		 	Commercial Banking
		 	Mailcode: MD A67811
		 	Fifth Floor
		 	121 South Main St.
		 	Akron, Ohio 44308
		 	Attention: Michael Babb
		 	Telephone No.: (330) 252-2065
		 	Facsimile No.: (330) 252-2080

 or at such other address or addressee as may have been furnished to the undersigned by the Bank in writing;

  

			
	To the Undersigned:	 	Canal Mezzanine Partners, L.P.
		 	1737 Georgetown Road, Suite A
		 	Hudson, Ohio 44236
		 	Attention: Shawn Wynne
		 	Telephone No.: (330) 650-6684
		 	Facsimile No.: (330) 528-0142

 or at such other address or addressee as may have been furnished to the Bank by the undersigned in writing;

  

			
	To the Borrowers:	 	c/o DPAC Technologies Corp
		 	5675 Hudson Parkway
		 	Hudson, Ohio 33236
		 	Attention: Steve Runkel
		 	Telephone No.: (330) 655-9002
		 	Facsimile No.: (330) 655-9020

 or at such other address or addressee as may have been furnished by the Company to the Bank and the undersigned in
writing. 
  

 7 

 20. Except for the Agreement To Subordinate Priority Of Security Interests, that the parties hereto shall
execute contemporaneously with this Agreement, this Subordination Agreement contains the entire agreement between the parties regarding the subject matter hereof and may be amended, supplemented or modified only by written instrument executed by
Bank and the undersigned. 
 21. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 
 22. This Subordination 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 Subordination Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart. Any party so
executing this Subordination 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.

 23. The undersigned and Bank represent and warrant that neither the execution or delivery of this Subordination Agreement nor fulfillment
of nor compliance with the terms and provisions hereof will conflict with, or result in a breach of the terms, conditions, or provisions of or constitute a default under any agreement or instrument to which such Person or any of such Person’s
assets is now subject. 
 24. Any notice of acceptance of this Subordination Agreement is hereby waived. 
 25. This Subordination Agreement shall be binding upon the parties hereto, and each of the parties’ successors, representatives and assigns and
neither Borrowers nor any other persons or entities whatsoever, including without limitation any other third party donee, investor, incidental beneficiary, or any creditor of a Borrower, shall have any right, benefit, priority, or interest under or
because of the existence of this Subordination Agreement. This Subordination Agreement may also be assigned by Bank, in whole or in part in connection with any assignment or transfer of any portion of the Senior Debt, and, if requested by Bank, the
undersigned shall execute and deliver in favor of the holders of the Senior Debt one or more subordination agreements containing terms and provisions that are substantially identical to the terms and provisions of this Subordination Agreement. The
undersigned may assign or transfer this Subordination Agreement subject to Section 12. hereof. 
 26. Except as provided in
Section 2. above, Borrowers agree that they will not make any payment on any of the Subordinated Debt, or take any other action in contravention of the provisions of this Subordination Agreement. 
  

 8 

 27. This Subordination Agreement shall in all respects be interpreted, construed and governed by the
substantive laws of the State of Ohio. The undersigned submits to the jurisdiction of the Courts of the State of Ohio or the United States District Court for the Northern District of Ohio for the purposes of resolving any controversy relating
thereto. EACH PARTY HERETO WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE PARTIES, OR EITHER OF THEM, A RISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND, OR MODIFY BANK’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN A NOTE OR OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT BETWEEN THE PARTIES.

 28. The term “Borrower” and “Borrowers” shall, as the context may require, each be deemed to refer to, and construed
as, Borrowers and/or either of them. 
 29. Nothing contained in this Agreement is intended to or shall impair, as between Borrowers and the
undersigned, the obligations of Borrowers which are absolute and unconditional, to pay to the undersigned the principal of, premium, if any, and interest on the Subordinated Debt as and when the same shall become due and payable in accordance with
the terms of the Subordinated Debt. In any event, this Agreement shall not be used by any trustee in bankruptcy or a bankruptcy court or any other court, agency, or panel charged with the responsibility of establishing the priorities of the secured
creditors of the Borrowers for the purpose of expanding upon or diminishing the rights of the parties hereto. 
 [SIGNATURE PAGE FOLLOW]

  

 9 

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

  

									
	CANAL MEZZANINE PARTNERS, L.P.,
	a Delaware limited partnership
			
		 	By:	 	Canal Mezzanine Management, LLC,
		 	an Ohio limited liability company
		 	Its General Partner
				
		 		 	By:	 	Canal Holdings, LLC,
		 		 	an Ohio limited liability company
		 		 	Its Managing Member
					
		 		 		 	By:	 	 /s/ Shawn M. Wynne

		 		 		 	Name:	 	Shawn M. Wynne
		 		 		 		 	Authorized Signer

 Intending to be legally bound, Borrowers consent 
 and agree to the terms of the Subordination 
 Agreement as of the date first
above written: 
  

			
	DPAC TECHNOLOGIES CORP
		
	By:	 	 /s/ Steven D. Runkel

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

		 	Steve Runkel, Chief Executive Officer
	
	Agreed to and Acknowledged by:
	
	FIFTH THIRD BANK
		
	By:	 	 /s/ Michael H. Babb

		 	Michael Babb, Vice President

 SCHEDULE A 
 SUBDEBT AGREEMENTS

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