Exhibit 10.3
**PATENT PURCHASE AGREEMENT**
     This PATENT PURCHASE AGREEMENT (“***Agreement***”) is entered into as of March 31, 2005 (“***EffectiveDate***”) by and between Tao Logic Systems LLC, a Nevada limited liability company with an office at3225 McLeod Dr., Suite 100, Las Vegas, NV 89121 (“***Purchaser***”), and Mobility Electronics, Inc., aDelaware corporation with an office at 17800 N. Perimeter Drive, Suite 200, Scottsdale, Arizona85255 (“***Seller***”). The parties hereby agree as follows.
**1.**  **Background** 1.1  Seller owns certain United States Letters Patents and/or applications for United StatesLetters Patents and/or related foreign patents and applications. 1.2  Seller wishes to sell its right, title and interest in such patents and applications toPurchaser. 1.3  Purchaser wishes to purchase such patents and applications. **2.**  **Definitions** 2.1  “***Assignment Agreements***” means the agreements assigning ownership of the Patents from theinventors and/or prior owners to Seller. 2.2  “***Entity***” means any corporation, partnership, limited liability company, association, jointstock company, trust, joint venture, unincorporated organization, governmental entity (or anydepartment, agency, or political subdivision thereof) or any other legal entity. 2.3  “***Expansion and Docking Products***” means any products that connect via a bus, using thePatents, to a computing device (including but not limited to handheld, tablet, server, desktop, personal digital assistant, laptop, notebook, or any similar computing device), for thepurpose of expanding or connecting the computing device to various peripherals commonlyconnected to computers in office or home or travel environments (including but not limited tosuch peripherals as display monitors, drives, storage devices, USB and 1394 ports, PCI cards,Ethernet, keyboards, mice, and the like). Typical products include docking products forportable computers and Seller’s line of expansion products (including but not limited toexpansion of available input/output slots and/or drive bays in a computing system), and anyderivatives, enhancements and modifications thereof, as well as any new products and relatedsemi-conductor chips that may be implemented from time to time 2.4  *“****List of Prosecution Counsel****”*means the names and addresses of prosecution counsel whoprosecuted the Patents and who are currently handling the Patents. 2.5  *“****Patents****”*means those patents and applications listed in ***Exhibit A***hereto, and all reissues**,**reexaminations, extensions, continuations, continuations in part, continuing prosecutionapplications, and divisions of such patents and applications; and foreign counterparts to anyof the foregoing including without limitation utility models.
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2.6  “***Person***” means any individual or Entity. 2.7  “***Subsidiary***” means any Entity that, as of or at any time after the Effective Date, isdirectly or indirectly controlled by Seller, but only as long as such control exists. Forpurposes of this definition, “control” means: (a) in the case of incorporated Entities,ownership or control of fifty percent (50%) or more of the voting power of the stock orparticipating shares entitled to vote for the election of directors of such incorporatedEntities; and (b) in the case of unincorporated Entities, ownership or control of fiftypercent (50%) or more of the equity interest with power to direct the management and policiesof such unincorporated Entities. An entity shall be deemed to be a Subsidiary under thisAgreement only so long as all requisite conditions of being a Subsidiary are met. **3.**  **Delivery and Payment** 3.1  Delivery. Within thirty (30) days following the Effective Date, Seller shall deliverto Purchaser’s representative at the below delivery address (or to anotherrepresentative/delivery address specified by Purchaser prior to delivery) the AssignmentAgreements, the List of Prosecution Counsel, and all files and original documents owned orcontrolled by Seller (including without limitation Letters Patents) relating to the Patentsincluding, without limitation, all prosecution files for pending patent applications includedin the Patents, and its own files relating to the issued Patents.   Delivery Address: Meyertons, Hood, Kivlin, Kowert & Goetzel, P.C. Attention:            Noel Kivlin The Chase Building 700 Lavaca, Suite 800 Austin, Texas 78701-3102    Telephone:       (512) 853-8800 Facsimile:        (512) 853-8801
3.2  Purchase Price. The purchase price for the Patents shall be Thirteen Million U.S.Dollars (US$13,000,000) (the “***Purchase Price***”). 3.3  Closing. On or before May 16, 2005, Seller and Purchaser (or representativesdesignated by them) shall meet at the delivery address (or another mutually agreed location)and execute the following closing process: (i) Seller and Purchaser shall determine whetherall of the items listed in Section 3.1 have been delivered and accounted for; (ii) if (i) isfully satisfied, Seller shall deliver to Purchaser an Assignment of Patent Rights, a copy ofwhich is attached hereto as ***Exhibit B***(the “***Assignment of Patent Rights***”), that has been fullyexecuted and notarized by Seller; and (iii) if (i) and (ii) are fully satisfied, Purchasershall pay the Purchase Price to Seller by wire transfer of immediately available funds. Thedate upon which (i), (ii) and (iii) are all fully satisfied shall be the “***Closing Date***”. 3.4  Failure to Close. If the requirements of 3.3(a)(i), 3.3(a)(ii), and 3.3(a)(iii) arenot fully satisfied on or before May 16, 2005, then: (x) Purchaser shall, and shall cause
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   Purchaser’s representative to, deliver to Seller all documentation, instruments andagreements previously delivered to Purchaser (or Purchaser’s representative) by Sellerand/or its attorneys and agents; (y) Seller shall destroy the executed Assignment of PatentRights; and (z) this Agreement shall terminate and Purchaser and Seller shall have nofurther obligations or duties hereunder. **4.**  **Transfer of Patents; Grant of License** 4.1  Patent Assignment. Effective as of the Closing Date, Seller hereby sells, assigns,transfers and conveys to Purchaser all right, title and interest it has in and to the Patentsand all inventions and discoveries described therein, including without limitation, all rightsof Seller under the Assignment Agreements, and all rights of Seller to collect royalties undersuch Patents. 4.2  Assignment of Causes of Action. Effective as of the Closing Date, Seller herebysells, assigns, transfers and conveys to Purchaser all right, title and interest it has in andto all causes of action and enforcement rights, whether currently pending, filed, orotherwise, for the Patents and all inventions and discoveries described therein, includingwithout limitation all rights to pursue damages, injunctive relief and other remedies forpast, current and future infringement of the Patents. 4.3  Grant of License to Seller. Effective as of the Closing Date, Purchaser herebygrants to Seller and its Subsidiaries a worldwide, non-exclusive, perpetual, non-transferable(except as provided in Section 4.4 below), non-sublicensable, and royalty-free license underthe Patents to do the following: (a) make Expansion and Docking Products; (b) have a thirdparty make Expansion and Docking Products, or subcomponents of Expansion and Docking Products,for Seller and its Subsidiaries; and (c) lease, use, market, sell, offer for sale, import andotherwise dispose of Expansion and Docking Products made by Seller, its Subsidiaries or by athird party in accordance with (a) or (b) above. 4.4  Limitation on Transferability of Seller’s License. Seller and its Subsidiaries mayassign (without any further rights to assign or transfer except as provided below) the aboverights one time to an acquirer (an “***Acquiror***”) of all, or substantially all, of the Expansionand Docking Business conducted by Seller and its Subsidiaries (an “***Acquisition***”), providedthat: (a) Acquiror shall not be licensed under the Patents for any product being offered orsold or planned (as evidenced in a formal product plan of some kind) by Acquiror at any timeon or prior to the date of the Acquisition (“***Acquisition Date***”); and (b) Acquiror shall onlybe licensed under the Patents for Seller’s Expansion and Docking Products which are: (i) onthe Acquisition Date being commercially offered and sold by Seller; (ii) on the AcquisitionDate under development and/or being planned by Seller (as evidenced by a road map or productplan) and are released for commercial sale within twelve (12) months after the AcquisitionDate; or (iii) future enhancements and/or modifications of the products set forth in (i) and(ii) above that have merely incremental differences from such products. Upon Acquiror’swritten request to Purchaser prior to the Acquisition Date, Purchaser agrees that, as soon asreasonably practicable prior to the Acquisition Date, it shall enter into good faithnegotiations with Acquiror intended to
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   result in a license under the Patents, on reasonable and non-discriminatory terms andconditions, for Acquiror’s Expansion and Docking Products not included in (b) above,provided that Purchaser shall have no obligation to continue such negotiations for more thanninety (90) days after they are initiated. In the event that Acquiror later sells all, orsubstantially all, of its Expansion and Docking Business then the license granted underclause (b) of this Section 4.4 to the Acquiror shall be assignable (without any furtherright to assign or transfer) to one such subsequent acquirer (“***First Subsequent Acquiror***”).Upon such First Subsequent Acquiror’s written request to Purchaser prior to the date ofacquisition, Purchaser agrees that, as soon as reasonably practicable prior to the date ofthe acquisition, it shall enter into good faith negotiations with such First SubsequentAcquiror intended to result in a license under the Patents, on reasonable andnon-discriminatory terms and conditions, for such First Subsequent Acquiror’s Expansion andDocking Products not already covered by the license assignable to such First SubsequentAcquiror pursuant to this Section 4.4, provided that Purchaser shall have no obligation tocontinue such negotiations for more than ninety (90) days after they are initiated. In theevent that First Subsequent Acquiror later sells all, or substantially all, of its Expansionand Docking Business then all licenses granted under Sections 4.3 and 4.4 are automaticallyrevoked for any such subsequent purchaser. **5.**   **Additional Obligations** 5.1  Further Cooperation. At the reasonable request of Purchaser, Seller shall executeand deliver such other instruments and do and perform such other acts and things as may benecessary or desirable for effecting completely the consummation of the transactionscontemplated hereby, including without limitation execution**,**acknowledgment and recordation ofother such papers, and using all reasonable commercial efforts to obtain the same from therespective inventors, as necessary or desirable for fully perfecting and conveying untoPurchaser the benefit of the transactions contemplated hereby. 5.2  Payment of Fees. Seller shall pay any maintenance fees, annuities, and the like dueon the Patents on or before the Closing Date. 5.3  Seller’s Related Cases. Seller agrees and covenants that it will not initiate orotherwise pursue any reissue or reexamination of U.S. patents 5,941,965 and/or 6,256,691.Seller agrees and covenants that it will remove and revoke all existing claims and statementsof priority, except for the existing claims of priority to provisional patent application US60/532,300, in U.S. patent applications US 10/766,660 and US 10/782,082 (the “***No PriorityClaim Patent Applications***”) to other patents and/or patent applications and it will not makeany new claims of priority in the No Priority Claim Patent Applications. Seller agrees andcovenants that it will not do anything in the prosecution of any of its patents related to thePatents that would negatively impact the validity of the Patents in any material way. **6.**   **Representations and Warranties**
        Except as specifically described on ***Exhibit C***to this Agreement, Seller hereby represents andwarrants to Purchaser as follows:
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6.1  Authority. Seller has the right and authority to enter into this Agreement and tocarry out its obligations hereunder. 6.2  Title and Contest. Seller has good and marketable title to the Patents, includingwithout limitation all rights, title, and interest in the Patents to sue for infringementthereof. The Patents are free and clear of all liens, mortgages, security interests or otherencumbrances, and restrictions on transfer. There are no actions, suits, investigations,claims or proceedings threatened, pending or in progress relating in any way to the Patents.There are no existing contracts, agreements, options, commitments, proposals, bids, offers, orrights with, to, or in any person to acquire any of the Patents. 6.3  Existing Licenses. No rights or licenses have been granted under the Patents. 6.4  Restrictions on Rights. Purchaser will not be subject to any covenant not to sue orsimilar restrictions on its enforcement or enjoyment of the Patents as a result of thetransaction contemplated in this Agreement, or any prior transaction related to the Patents. 6.5  Conduct. To the knowledge of Seller or its representatives has engaged in anyconduct, or omitted to perform any necessary act, the result of which would invalidate any ofthe Patents or materially hinder their enforcement, including but not limited tomisrepresenting Seller’s patent rights to a standard-setting organization. 6.6  Enforcement. Seller has not put a third party on notice of actual or potentialinfringement of any of the Patents or considered enforcement action(s) with respect to any ofthe Patents. 6.7  Patent Office Proceedings. None of the Patents have been or are currently involvedin any reexamination, reissue, interference proceeding, or any similar proceeding and that nosuch proceedings are pending or threatened. 6.8  Related Assets. There are not other patents issued and/or applications pending foror on behalf of Seller which include (or will include) claims such that practice of any of theclaims of the Patents conveyed in this Agreement would reasonably require a license under anyclaim of such other patents. 6.9  Fees. All maintenance fees, annuities, and the like due on the Patents on or priorto April 20, 2005, have been timely paid. 6.10  Consents. Seller has obtained all third party consents, approvals, and/or otherauthorizations required to make the assignments of Section 4. 6.11  Validity and Enforceability. The Patents have never been found invalid orunenforceable for any reason in any administrative, arbitration, judicial or other proceeding,and Seller has not received any notice or information of any kind from any source suggestingthat the Patents may be invalid or unenforceable. Seller makes no representation that thePatents are valid and enforceable.
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6.12  Limitation on Representations and Warranties of Seller. EXCEPT AS PROVIDED INPARAGRAPHS 6.1 – 6.11 ABOVE, (i) SELLER DOES NOT REPRESENT OR WARRANT THE PATENTABILITY OF ANYCLAIMED INVENTION IN, OR THE VALIDITY OF ANY PATENT; (ii) SELLER DOES NOT REPRESENT OR WARRANTTHAT THE MANUFACTURE, USE, SALE, OFFERING FOR SALE, IMPORTATION, EXPORTATION OR OTHERDISTRIBUTION OF ANY PRODUCT OR METHOD DISCLOSED AND CLAIMED IN ANY PATENT BY PURCHASER OR ANYSUBLICENSEE OR ANYONE ELSE SHALL NOT CONSTITUTE AN INFRINGEMENT OF THE INTELLECTUAL PROPERTYRIGHTS OF OTHERS; AND (iii) SELLER DOES NOT MAKES ANY REPRESENTATIONS, OR EXTEND ANYWARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO ANY PATENT OR ANY PRODUCT,INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR APARTICULAR PURPOSE. **7.**  **Miscellaneous** 7.1  Limitation on Consequential Damages. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FORLOSS OF PROFITS, OR ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED, EVEN IFADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THE PARTIES ACKNOWLEDGE THAT THESE LIMITATIONS ONPOTENTIAL LIABILITIES WERE AN ESSENTIAL ELEMENT IN SETTING CONSIDERATION UNDER THIS AGREEMENT. 7.2  Limitation of Liability. EXCEPT IN CASE OF FRAUD, PURCHASER’S TOTAL LIABILITY UNDERTHIS AGREEMENT SHALL BE AN AMOUNT EQUAL TO THE FUNDS PAID BY PURCHASER TO SELLER PURSUANT TOSECTION 3. EXCEPT IN CASE OF FRAUD, SELLER’S TOTAL LIABILITY UNDER THIS AGREEMENT SHALL BE ANAMOUNT EQUAL TO THE AMOUNT OF FUNDS RECEIVED BY SELLER UNDER SECTION 3. THE PARTIESACKNOWLEDGE THAT THESE LIMITATIONS ON POTENTIAL LIABILITIES WERE AN ESSENTIAL ELEMENT INSETTING CONSIDERATION UNDER THIS AGREEMENT. 7.3  Compliance with Laws. Notwithstanding anything contained in this Agreement to thecontrary, the obligations of the parties shall be subject to all laws, present and future, ofany government having jurisdiction over the parties and this transaction, and to orders,regulations, directions or requests of any such government. 7.4  Confidentiality of Terms. **The parties hereto shall keep the terms and existence ofthis Agreement and the identities of the parties hereto confidential and shall not now orhereafter divulge any of this information to any third party except:**(a) with the priorwritten consent of the other party; (b) as otherwise may be required by law or legal process,including in confidence to legal and financial advisors in their capacity of advising a partyin such matters; (c) during the course of litigation, so long as the disclosure of such termsand conditions are restricted in the same manner as is the confidential information of otherlitigating parties; (d) in confidence to its legal counsel,
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   accountants, banks and financing sources and their advisors solely in connection withcomplying with financial transactions; or (e) Purchaser may record the Assignment of PatentRights or a similar memorandum of its purchase with patent offices; provided that, in (b)through (d) above, (i) the disclosing party shall use all legitimate and legal meansavailable to minimize the disclosure to third parties, including without limitation seekinga confidential treatment request or protective order whenever appropriate or available; and(ii) the disclosing party shall provide the other party with at least ten (10) days priorwritten notice of such disclosure. Notwithstanding the above: (i) upon execution of thisAgreement by the parties hereto, the parties agree that Seller may issue a Press Release, inthe form of ***Exhibit D***attached hereto (the “***Press Release***”); and (ii) Seller may file thisAgreement, and the exhibits hereto, with the Securities and Exchange Commission, providedthat Seller shall redact the submitted Agreement and exhibits to the extent possible. 7.5  Governing Law. Any claim arising under or relating to this Agreement shall begoverned by the internal substantive laws of the State of New York without regard toprinciples of conflict of laws. 7.6  Jurisdiction. Each party hereby agrees to jurisdiction and venue in the courts ofthe State of New York or the Federal courts sitting therein for all disputes and litigationarising under or relating to this Agreement. 7.7  Entire Agreement. The terms and conditions of this Agreement, including itsexhibits, constitutes the entire agreement between the parties with respect to the subjectmatter hereof, and merges and supersedes all prior and contemporaneous agreements,understandings, negotiations and discussions. Neither of the parties shall be bound by anyconditions, definitions, warranties, understandings, or representations with respect to thesubject matter hereof other than as expressly provided herein. The section headings containedin this Agreement are for reference purposes only and shall not affect in any way the meaningor interpretation of this Agreement. No oral explanation or oral information by either partyhereto shall alter the meaning or interpretation of this Agreement. No amendments ormodifications shall be effective unless in writing signed by authorized representatives ofboth parties. These terms and conditions will prevail notwithstanding any different,conflicting or additional terms and conditions which may appear on any purchase order,acknowledgment or other writing not expressly incorporated into this Agreement. ThisAgreement may be executed in two (2) or more counterparts, all of which, taken together, shallbe regarded as one and the same instrument. The following exhibits are attached hereto andincorporated herein: ***Exhibit A***(entitled “Patent Rights to be Assigned”); ***Exhibit B***(entitled“Assignment of Patent Rights”); ***Exhibit C***(entitled “Exceptions to Seller’s Representations”);and ***Exhibit D***(entitled “Form of Press Release”).
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7.8  Notices: All notices required or permitted to be given hereunder shall be inwriting, shall make reference to this Agreement, and shall be delivered by hand, ordispatched by prepaid air courier or by registered or certified airmail, postage prepaid,addressed as follows:      If to Seller: If to Purchaser:      Mobility Electronics, Inc. Tao Logic Systems LLC 17800 N. Perimeter Drive, Suite 200 3225 McLeod Dr., Ste. 100 Scottsdale, Arizona 85255 Las Vegas, NV 89121 Attn: Chief Executive Officer Attn: Managing Director
   Such notices shall be deemed served when received by addressee or, if delivery is notaccomplished by reason of some fault of the addressee, when tendered for delivery. Eitherparty may give written notice of a change of address and, after notice of such change hasbeen received, any notice or request shall thereafter be given to such party at such changedaddress.
7.9  Relationship of Parties. The parties hereto are independent contractors. Neitherparty has any express or implied right or authority to assume or create any obligations onbehalf of the other or to bind the other to any contract, agreement or undertaking with anythird party. Nothing in this Agreement shall be construed to create a partnership, jointventure, employment or agency relationship between Seller and Purchaser 7.10  Equitable Relief. Seller agrees that damages alone would be insufficient tocompensate Purchaser for a breach of this Agreement, acknowledges that irreparable harm wouldresult from a breach of this Agreement, and consents to the entering of an order forinjunctive relief to prevent a breach or further breach, and the entering of an order forspecific performance to compel performance of any obligations under this Agreement. 7.11  Severability. The terms and conditions stated herein are declared to be severable.If any paragraph, provision, or clause in this Agreement shall be found to be or held to beinvalid or unenforceable in any jurisdiction in which this Agreement is being performed, theremainder of this Agreement shall be valid and enforceable and the parties shall use goodfaith to negotiate a substitute, valid and enforceable provision which most nearly effects theparties’ intent in entering into this Agreement. 7.12  Waiver. Failure by either party to enforce any term of this Agreement shall not bedeemed a waiver of future enforcement of that or any other term in this Agreement or any otheragreement that maybe in place between the parties. 7.13  Assignment. The terms and conditions of this Agreement shall inure to the benefit ofthe parties hereto, and their respective successors, assigns and other legal representatives,and shall be binding upon the parties hereto, and their respective successors**,**assigns andother legal representatives.
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     In witness whereof, the parties have executed this Agreement as of the Effective Date.     **TAO LOGIC SYSTEMS LLC**   **MOBILITY ELECTRONICS, INC.**     Signature   Signature     Printed Name   Printed Name     Title   Title
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