<PAGE>

                                                                    EXHIBIT 10.1
                              EMPLOYMENT AGREEMENT

     This Employment Agreement (the "Agreement") is made and entered into
effective as of July 17, 2006, by and between Mobility Electronics, Inc., a
Delaware corporation ("Employer"), and Jonathan Downer ("Employee").

                                   WITNESSETH:

     WHEREAS, Employer desires to employ Employee as provided herein, and
Employee desires to accept such employment; and

     WHEREAS, Employee shall, as an employee of Employer, have access to
confidential information with respect to Employer and its affiliates;

     NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

     1. Employment. Employer hereby employs Employee and Employee hereby accepts
employment with Employer upon the terms and conditions hereinafter set forth.

     2. Duties. Subject to the power of the Board of Directors of Employer (the
"Board") to elect and remove officers, Employee shall serve Employer as Senior
Vice President, Worldwide Sales and Distribution of Employer, working remotely
from the Chicago metropolitan area, and shall perform, faithfully and
diligently, the services and functions relating to such position or otherwise
reasonably incident to such position as may be designated from time to time by
Employer's Chief Executive Officer and/or Board. Employee shall report directly
to the Chief Executive Officer of Employer, or his designee. Employee shall
devote his full time, attention, energies and business efforts to his duties
hereunder and to the promotion of the business and interests of Employer and its
affiliates including, without limitation, traveling, as required, to Employer's
corporate headquarters and to the various locations of Employer's customers from
time to time at Employer's expense pursuant to its Travel and Entertainment
Policy.

     3. Term. Unless earlier terminated pursuant to Section 6 below, the term of
this Agreement shall continue until December 31, 2008; provided, however, that
the term shall automatically renew for a one-year period at the end of the
original term and any additional one-year term, unless either party gives
written notice to the other party, at least ninety (90) days prior to the end of
the applicable term, of such party's termination of this Agreement at the end of
the applicable term. As used herein, "Term" shall mean the original term and any
additional renewal term(s).

     4. Compensation. As compensation for services rendered under this Agreement
during the Term, Employee shall be entitled to receive the compensation as
provided in Exhibit A attached hereto. In addition, Employer shall reimburse
Employee for all reasonable and necessary out-of-pocket travel and other
expenses incurred by Employee in rendering services required under this
Agreement on a regular basis upon submission of detailed statements and


                                        1

<PAGE>

reasonable documentation, including reimbursement for any pre-approved,
out-of-pocket expenses incurred by Employee in establishing an office in the
Chicago metropolitan area.

     5. Inventions. Unless otherwise agreed to in writing by both parties,
Employee agrees to disclose promptly, completely and in writing to Employer and
hereby assigns and agrees to assign and bind Employee's heirs, executors, or
administrators to assign to Employer or its designee, its assigns, successors or
legal representatives, any and all inventions, processes, diagrams, methods,
apparatus, or any improvements (all hereinafter collectively called
"Inventions") whatsoever, discovered, conceived, and/or developed, either
individually or jointly with others, pursuant to the performance of Employee's
duties for Employer, or using or influenced by Employer's time, data, facilities
and/or materials, provided the subject matter relates to Employer's business of
designing, developing, manufacturing and distributing products and solutions for
the mobile electronics industry (the "Employer Business"). Employee's
obligations under this Section apply without regard to whether an idea for an
Invention or a solution to a problem occurs to Employee on the job, at home, or
elsewhere. Employee further agrees that all such Inventions are Employer's
exclusive property, whether or not patent applications are filed thereon. It is
expressly understood that this Agreement does not apply to any of Employee's
patents or patent applications filed or based on inventions made prior to
Employee's employment with Employer or to matters (other than matters relating
to Employer Business) which are exclusively of personal interest.

     Employee shall assist Employer at any time during or after Employee's
employment is terminated, at Employer's expense, in the preparation, execution,
and delivery of any disclosures, patent applications or papers within the scope
and intent of this Agreement required to obtain patents in this or in other
countries and in connection with such other proceedings as may be necessary to
enforce Employer's rights in such Inventions against others or to vest title
thereto in Employer, its assigns, successors, or legal representatives. If such
assistance takes place after Employee's employment ends, Employee shall be paid
by Employer at a reasonable rate for any time that Employee actually spends in
such work at Employer's request.

     6. Representation. Employee agrees not to use Employer's name in
sponsorship or for gain, except pursuant to the performance of Employee's duties
for Employer, without prior written approval by the Chief Executive Officer of
Employer.

     7. Copyrights. Employee agrees that Employer shall be the copyright
proprietor in all copyrightable works of every kind and description created or
developed by Employee solely or jointly with others during Employee's employment
with Employer which works are created pursuant to the performance of Employee's
duties as those duties may be assigned or reassigned from time to time. Employee
further agrees, if so requested and at no further expense to Employer, to
execute in writing any acknowledgments or assignments of copyright ownership of
works within this Agreement as may be necessary for the preservation of the
worldwide proprietorship in Employer of such copyrights.

     8. Non-Solicitation and Other Restrictions.

          (a) Non-Solicitation of Employees and Contractors. During the term of
Employee's employment with Employer and for a period of twelve (12) months
following the


                                        2

<PAGE>

cessation of Employee's employment with Employer for any reason whatsoever,
Employee shall not either alone or as an agent, employee, partner,
representative, affiliate, or in any other capacity on behalf of any person or
entity, directly or indirectly, go into business with or hire any employee or
contractor of Employer or solicit, induce, or recruit any employee or contractor
of Employer to end its relationship with Employer for the purpose of having such
employee or contractor engage in services that are the same, similar or related
to and directly competitive with the services that such employee or contractor
provided for Employer. For the purpose of this Subsection, "employee or
contractor of Employer" means (i) anyone performing services for Employer as an
employee or contractor at the time of Employee's separation; or (ii) any former
employee or contractor of Employer whose relationship with Employer ended less
than twelve (12) months before the date of such co-venturing, hiring,
solicitation, inducement, or recruitment. Robert Levine is excluded from this
subsection.

          (b) Non-Solicitation of Customers. Employee, whether personally or as
an agent, employee, partner, representative, affiliate, or in any other capacity
on behalf of any person or entity, shall not during Employee's employment or for
a period of twelve (12) months following cessation of employment for any reason
whatsoever, directly or indirectly solicit, do business with, call upon, handle,
deliver products or render services to any active or prospective customer of
Employer for the purpose of soliciting or selling such customer the same, or
directly competitive products using similar technology or services that are
offered by Employer. For purposes of this Subsection, "customer" shall mean the
corporate customer itself, the individual representative(s) of the corporate
customer, and any affiliated entity of the corporate customer.

          (c) Reasonableness of Restrictions. Employee agrees and acknowledges
that, given the relationship between the parties, the restrictions in
subsections (a) and (b) above are reasonable and do not impose any greater
restraint than is necessary to protect the goodwill and other legitimate
business interests of Employer, including but not limited to the protection of
Employer's trade secrets, proprietary information and know-how. Employee further
agrees and acknowledges that the restrictions in subsections (a) and (b) above
will not prevent him/her from obtaining gainful employment in Employee's
occupation or field of expertise or cause Employee undue hardship; and that
there are numerous other employment and business opportunities available to
Employee that are not affected by the foregoing restrictions.

          (d) Confidentiality. Employee recognizes and acknowledges that
Employer's trade secrets, proprietary information and know-how are valuable,
special and unique assets of Employer's business, access to and knowledge of
which are essential to the performance of Employee's duties hereunder. Employee
agrees to keep confidential, except as Employer may otherwise consent in
writing, and not to disclose, or make any use of except for the benefit of
Employer, at any time either during or subsequent to Employee's employment, any
trade secrets, proprietary information or know-how of Employer, including but
not limited to that which relates to Employer or Employer's research, services,
development, processes, designs, formulas, test data, purchasing, accounting,
customer lists, business plans, marketing plans and strategies, pricing
strategies, payroll or personnel data, internal operating procedures, written
materials provided to third parties by agreement, implementation techniques of
Employer programs, or other subject matter pertaining to any business of
Employer or any of its clients, customers, consultants, licensees, or
affiliates, that Employee may produce, obtain or otherwise acquire during the
course of his employment, except as herein provided (collectively "Confidential


                                       3

<PAGE>

Information"). Employee further agrees not to deliver, reproduce or in any way
allow any such Confidential Information to be delivered to or used by any third
parties without specific direction or consent of a duly authorized
representative of Employer. Excluded from this Agreement is information that is
already disclosed to third parties by proper means and is in the public domain.
Employee agrees that in the event of a dispute involving this Section, Employee
shall have the burden of proof by clear and convincing evidence that the
disputed Confidential Information has been disclosed to third parties by proper
means and is in the public domain. Employee further agrees that Employee will
not use or disclose to other employees of Employer confidential information
belonging to Employee's former employers.

          (e) Disclosure. For a period of twelve (12) months after cessation of
Employee's employment with Employer, Employee shall inform any new
employer or business associate, prior to entering into the employment or
business relationship, of the existence of this Agreement and shall provide such
new employer or business associate with a copy of this Agreement. Employee
further agrees and authorizes Employer to notify others, including customers of
Employer and Employee's future employers, of Employee's obligations under this
Agreement.

          (f) Employer Documents. At the time of Employee's separation or upon
demand by Employer (whichever is sooner), Employee shall promptly turn over to
Employer all files, documents, business records, lists of customers and
potential customers, promotional materials, internal operating reports, employee
and potential employee names and addresses, customer strategy information,
employment and payroll records, marketing information, manuals, billing reports,
pricing information and strategies, management methods and systems, contracts
with customers, subcontractors and others, correspondence, resumes of existing
and potential employees, customer bids and proposals, books and records, and any
other records, documents, writings of any kind whatsoever, and all assets of any
kind whatsoever that belong to Employer. Further, Employee shall not copy or
record in any manner whatsoever the information contained in the foregoing
materials; and Employee shall turn over to Employer any copies or recordings of
any kind whatsoever containing information derived directly or indirectly from
such materials. To the maximum extent permitted by law, Employer reserves the
right to deduct the cost of unreturned or damaged Employer property from
Employee's paycheck.

          (g) Construction. The covenants of Employee contained in this Section
8 shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of Employee against
Employer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of the said covenants.
Should any provision of Section 8 be held unreasonably broad, any such
restriction shall be construed by limiting and reducing it to the extent
necessary to render it reasonable, and as so construed, such provision shall be
enforced.

     9. Termination. This Agreement and the employment relationship created
hereby shall terminate upon the occurrence of any of the following events (each,
a "Termination Event"):

          (a) The expiration of the Term;


                                        4

<PAGE>

          (b) The death of Employee;

          (c) The Excessive Absence (as hereinafter defined) of Employee;

          (d) Written notice to Employee from Employer of termination for Just
Cause (as hereinafter defined);

          (e) Written notice to Employee from Employer of termination for any
reason other than subparts (a), (b), (c) or (d) above;

          (f) Written notice to Employer from Employee of termination for any
reason other than Constructive Termination (as hereinafter defined); or

          (g) Written notice to Employer from Employee of termination for
Constructive Termination.

     In the event of the termination of Employee's employment pursuant to (a)
(provided the non-renewal of the Term is not a result of Employer's decision and
written notice), (b), (c), (d) or (f), then Employee shall be entitled to only
the compensation earned by Employee as of, and payable for the period prior to,
the date of such Termination Event. In the event of the termination of
Employee's employment pursuant to (a) (provided the non-renewal of the Term is a
result of Employer's decision and written notice), (e) or (g) above, upon
Employee's execution of a mutually acceptable separation and release agreement,
Employer shall pay to Employee a severance payment equal to the salary, cash
incentives and bonus earned by Employee during the twelve (12) month period
immediately preceding the date of such termination. Notwithstanding anything to
the contrary in this Agreement, the provisions of Section 8 above shall survive
any termination, for whatever reason, of Employee's employment under this
Agreement.

     For purposes of this Section 9 the following terms have the following
meanings:

          "Constructive Termination" shall mean: (a) a material reduction in
     Employee's duties and responsibilities without Employee's consent; (b) if
     Employee is terminated as the Senior Vice President, Worldwide Sales and
     Distribution of Employer; (c) any breach by Employer of any of the material
     terms of, or the failure to perform any material covenant contained in this
     Agreement and following written notice thereof from Employee to Employer,
     Employer does not cure such breach or failure within fifteen (15) days
     thereafter; provided, however, that Employer will not be entitled to cure
     any such breach or failure more than one time in any consecutive three
     month period; (d) a required relocation by Employee from the Chicago,
     Illinois metropolitan area or from such other location where Employee may
     be permanently domiciled as agreed to and authorized by Employer; or (e) a
     reduction in Employee's salary without Employee's prior written consent.

          "Excessive Absence" of Employee shall mean his inability, for whatever
     reason, to perform his duties under this Agreement for a continuous period
     of 60 days or for 120 days out of a continuous period of 240 days, unless
     otherwise approved by the Board.


                                        5

<PAGE>

          "Just Cause" shall mean (a) conviction of a felony or commission of
     any act of fraud, moral turpitude or dishonesty, (b) an intentional,
     material violation of a statutory or fiduciary duty not corrected within
     ten (10) days after notice from Employer, (c) any material breach by
     Employee of any of the terms or conditions of, or the failure to perform
     any material covenant contained in, this Agreement and Employee does not
     cure such breach or failure within ten (10) days following notice from
     Employer; provided, however, that Employee will not be entitled to cure any
     breach or failure under this subclause (c) more than one time in any
     consecutive three (3) month period, or (d) the violation by Employee of
     reasonable instructions or policies established by Employer with respect to
     the operation of its business and affairs or Employee's failure to carry
     out the reasonable instructions of the Chief Exeutive Officer or Board and
     following notice thereof from Employer to Employee, Employee does not cure
     any such violation or failure within ten (10) days following notice from
     Employer; provided, however, that Employee will not be entitled to cure any
     breach or failure under this subclause (d) more than one time in any
     consecutive three (3) month period.

     10. Change in Control.

          (a) Immediately upon a Change In Control (defined below), all stock
options held by Employee shall become immediately and fully vested and
exercisable and all restricted stock units and shares of restricted stock issued
to Employee under any benefit plan shall become immediately and fully vested and
not subject to restriction, and the term of any stock option, at the option of
Employee, shall be automatically extended to the maximum term under the
applicable stock option agreement (with any such extended stock option that is
an incentive stock option being deemed to be changed to a non-qualified stock
option).

          (b) A "Change in Control" means the occurrence of one or more of the
following events:

               (i)  Any person within the meaning of Section 13(d) and 14(d) of
                    the Securities Exchange Act or 1934, as amended (the
                    "Exchange Act"), other than Employer (including its
                    subsidiaries, directors or executive officers) has become
                    the beneficial owner, within the meaning of Rule 13d-3 under
                    the Exchange Act, of 50 percent or more of the combined
                    voting power of Employer's then outstanding common stock or
                    equivalent in voting power of any class or classes of
                    Employer's outstanding securities ordinarily entitled to
                    vote in elections of directors ("voting securities");

               (ii) Shares representing 50 percent or more of the combined
                    voting power of Employer's voting securities are purchased
                    pursuant to a tender offer or exchange offer (other than an
                    offer by Employer or its subsidiaries, directors or
                    executive officers);

               (iii) As a result of, or in connection with, any tender offer or
                    exchange offer, merger or other business combination, sale
                    of assets or contested election, or any combination of the
                    foregoing


                                        6

<PAGE>

                    transactions (a "Transaction"), the persons who were
                    directors of Employer before the Transaction shall cease to
                    constitute a majority of the Board or of any successor to
                    Employer;

               (iv) Following the date hereof, Employer is merged or
                    consolidated with another corporation and as a result of
                    such merger or consolidation less than 50 percent of the
                    outstanding voting securities of the surviving or resulting
                    corporation shall then be owned in the aggregate by the
                    former stockholders of Employer, other than (1) any party to
                    such merger or consolidation, or (2) any affiliates of any
                    such party; or

               (v)  Employer transfers more than 50 percent of its assets, or
                    the last of a series of transfers results in the transfer of
                    more than 50 percent of the assets of Employer, or Employer
                    transfers a business unit and/or business division
                    responsible for more than 35% of Employer's revenue for the
                    twelve-month period preceding the month in which such
                    transfer occurred, in either case, to another entity that is
                    not wholly-owned by Employer. Any determination required
                    above in this subsection (v) shall be made by the
                    Compensation Committee of the Board, as constituted
                    immediately prior to the occurrence of such event.

     11. Remedies. Employee recognizes and acknowledges that in the event of any
default in, or breach of any of, the terms, conditions or provisions of this
Agreement (either actual or threatened) by Employee, Employer's and its
affiliates remedies at law shall be inadequate. Accordingly, Employee agrees
that in such event, Employer and its affiliates shall have the right of specific
performance and/or injunctive relief in addition to any and all other remedies
and rights at law, in equity or provided herein, and such rights and remedies
shall be cumulative.

     12. Acknowledgments. Employee acknowledges and recognizes that the
enforcement of any of the provisions set forth in Section 8 above by Employer
and its affiliates will not interfere with Employee's ability to pursue a proper
livelihood. Employee recognizes and agrees that the enforcement of this
Agreement is necessary to ensure the preservation and continuity of the business
and good will of Employer and its affiliates.

     13. Notices. Any notices, consents, demands, requests, approvals and other
communications to be given under this Agreement by either party to the other
shall be deemed to have been duly given if given in writing and personally
delivered or sent by facsimile transmission, courier service, overnight delivery
service or by mail, registered or certified, postage prepaid with return receipt
requested, as follows:


                                        7

<PAGE>

           If to Employer: Mobility Electronics, Inc.
                           17800 N. Perimeter Drive, Suite 200
                           Scottsdale, Arizona 85255
                           Attn: Brian Roberts
                           Vice President and General Counsel
                           Fax: (480) 477-3725

           with a copy to: Richard F. Dahlson, Esq.
                           Jackson Walker L.L.P.
                           2435 N. Central Expressway, Suite 600
                           Richardson, Texas 75080
                           Fax: (214) 953-6187

           If to Employee: Jonathan Downer
                           5714 Wild Olive Lane
                           Crystal Lake, IL 60012

Notices delivered personally or by facsimile transmission, courier service or
overnight delivery shall be deemed communicated as of actual receipt; mailed
notices shall be deemed communicated as of three days after the date of mailing.

     14. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written between the parties hereto
with respect to the subject matter hereof. No modification or amendment of any
of the terms, conditions or provisions herein may be made otherwise than by
written agreement signed by the parties hereto.

     15. Governing Law and Venue. THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE INTERPRETED, CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ARIZONA, WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES.

     16. Parties Bound. This Agreement and the rights and obligations hereunder
shall be binding upon and inure to the benefit of Employer and Employee, and
their respective heirs, personal representatives, successors and assigns.
Employer shall have the right to assign this Agreement to any affiliate or to
its successors or assigns. The terms "successors" and "assigns" shall include
any person, corporation, partnership or other entity that buys all or
substantially all of Employer's assets or all of its stock, or with which
Employer merges or consolidates. The rights, duties or benefits to Employee
hereunder are personal to him, and no such right or benefit may be assigned by
him. The parties hereto acknowledge and agree that Employer's affiliates are
third-party beneficiaries of the covenants and agreements of Employee set forth
in Section 8 above.


                                        8

<PAGE>

     17. Estate. If Employee dies prior to the payment of all sums owed, or to
be owed, to Employee pursuant to Section 4 above, then such sums, as they become
due, shall be paid to Employee's estate.

     18. Enforceability. If, for any reason, any provision contained in this
Agreement should be held invalid in part by a court of competent jurisdiction,
then it is the intent of each of the parties hereto that the balance of this
Agreement be enforced to the fullest extent permitted by applicable law.
Accordingly, should a court of competent jurisdiction determine that the scope
of any covenant is too broad to be enforced as written, it is the intent of each
of the parties that the court should reform such covenant to such narrower scope
as it determines enforceable.

     19. Waiver of Breach. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.

     20. Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.

     21. Costs. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which he or it may be entitled.

     22. Affiliate. An "affiliate" of any party hereto shall mean any person
controlling, controlled by or under common control with such party.

     23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument, but only one of which need be produced.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

                                        MOBILITY ELECTRONICS, INC.


                                        By: /s/ Charles R. Mollo
                                            ------------------------------------
                                            Charles R. Mollo,
                                            Chief Executive Officer


                                            /s/ Jonathan Downer
                                            ------------------------------------
                                            Jonathan Downer


                                        9

<PAGE>

                                    EXHIBIT A

1.   Annual Salary: Annual Salary will be at the rate of $213,500.00 per year,
     paid biweekly at the rate of $8,211.54.

2.   Bonuses: Employee will be eligible for a commission/MBO plan pursuant to
     Employer's Executive Bonus Plan, consisting of incentives targeted at
     $200,000.00 per year. Employee's commission/MBO plan for the remainder of
     2006 is outlined in Schedule 1 attached hereto. Employee will also receive
     a signing bonus of $14,000 on July 31, 2006. Employee will further receive
     an additional annual bonus in 2007 and 2008 based on a percentage of gross
     margin if certain sales targets are achieved as outlined in Schedule 2
     attached hereto.

3.   Benefits: Employee shall be entitled to receive such group benefits as
     Employer may provide to its other employees at comparable salaries and
     responsibilities to those of Employee, which shall specifically include
     twenty-three (23) days of paid time off per calendar year for Employee's
     first year of employment (pro rated for partial years and earned in
     accordance with Employer's PTO policies).

4.   Restricted Stock Units: Employee shall receive 50,000 restricted stock
     units pursuant to Employer's 2005 Restricted Stock Unit Program, to be
     granted effective as of the date hereof and subject to the terms of the
     Restricted Stock Unit Agreement executed between Employer and Employee as
     of the date hereof. Employee shall further be eligible for new grants of
     restricted stock every two years (starting in January 2007) pursuant to
     Employer's Restricted Stock Unit Program in effect at such time.