exv10w3



 






Exhibit 10.3




PATENT PURCHASE AGREEMENT




     This PATENT PURCHASE AGREEMENT (“Agreement”) is entered into as of March 31, 2005 (“Effective
Date”) by and between Tao Logic Systems LLC, a Nevada limited liability company with an office at
3225 McLeod Dr., Suite 100, Las Vegas, NV 89121 (“Purchaser”), and Mobility Electronics, Inc., a
Delaware corporation with an office at 17800 N. Perimeter Drive, Suite 200, Scottsdale, Arizona
85255 (“Seller”). The parties hereby agree as follows.




	1.  	 Background
	 
	1.1  	Seller owns certain United States Letters Patents and/or applications for United States
Letters Patents and/or related foreign patents and applications.
	 
	1.2  	Seller wishes to sell its right, title and interest in such patents and applications to
Purchaser.
	 
	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 the
inventors and/or prior owners to Seller.
	 
	2.2  	“Entity” means any corporation, partnership, limited liability company, association, joint
stock company, trust, joint venture, unincorporated organization, governmental entity (or any
department, 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 the
Patents, to a computing device (including but not limited to handheld, tablet, server, desk
top, personal digital assistant, laptop, notebook, or any similar computing device), for the
purpose of expanding or connecting the computing device to various peripherals commonly
connected to computers in office or home or travel environments (including but not limited to
such peripherals as display monitors, drives, storage devices, USB and 1394 ports, PCI cards,
Ethernet, keyboards, mice, and the like). Typical products include docking products for
portable computers and Seller’s line of expansion products (including but not limited to
expansion of available input/output slots and/or drive bays in a computing system), and any
derivatives, enhancements and modifications thereof, as well as any new products and related
semi-conductor chips that may be implemented from time to time
	 
	2.4  	“List of Prosecution Counsel” means the names and addresses of prosecution counsel who
prosecuted 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 prosecution
applications, and divisions of such patents and applications; and foreign counterparts to any
of the foregoing including without limitation utility models.




1









 






	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, is
directly or indirectly controlled by Seller, but only as long as such control exists. For
purposes 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 or
participating shares entitled to vote for the election of directors of such incorporated
Entities; and (b) in the case of unincorporated Entities, ownership or control of fifty
percent (50%) or more of the equity interest with power to direct the management and policies
of such unincorporated Entities. An entity shall be deemed to be a Subsidiary under this
Agreement 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 deliver
to Purchaser’s representative at the below delivery address (or to another
representative/delivery address specified by Purchaser prior to delivery) the Assignment
Agreements, the List of Prosecution Counsel, and all files and original documents owned or
controlled by Seller (including without limitation Letters Patents) relating to the Patents
including, without limitation, all prosecution files for pending patent applications included
in 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 representatives
designated 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 whether
all of the items listed in Section 3.1 have been delivered and accounted for; (ii) if (i) is
fully satisfied, Seller shall deliver to Purchaser an Assignment of Patent Rights, a copy of
which is attached hereto as Exhibit B (the “Assignment of Patent Rights”), that has been fully
executed and notarized by Seller; and (iii) if (i) and (ii) are fully satisfied, Purchaser
shall pay the Purchase Price to Seller by wire transfer of immediately available funds. The
date 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) are
not fully satisfied on or before May 16, 2005, then: (x) Purchaser shall, and shall cause




2









 






	   	Purchaser’s representative to, deliver to Seller all documentation, instruments and
agreements previously delivered to Purchaser (or Purchaser’s representative) by Seller
and/or its attorneys and agents; (y) Seller shall destroy the executed Assignment of Patent
Rights; and (z) this Agreement shall terminate and Purchaser and Seller shall have no
further 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 Patents
and all inventions and discoveries described therein, including without limitation, all rights
of Seller under the Assignment Agreements, and all rights of Seller to collect royalties under
such Patents.
	 
	4.2  	Assignment of Causes of Action. 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 all causes of action and enforcement rights, whether currently pending, filed, or
otherwise, for the Patents and all inventions and discoveries described therein, including
without limitation all rights to pursue damages, injunctive relief and other remedies for
past, current and future infringement of the Patents.
	 
	4.3  	Grant of License to Seller. Effective as of the Closing Date, Purchaser hereby
grants 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 under
the Patents to do the following: (a) make Expansion and Docking Products; (b) have a third
party 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 and
otherwise dispose of Expansion and Docking Products made by Seller, its Subsidiaries or by a
third party in accordance with (a) or (b) above.
	 
	4.4  	Limitation on Transferability of Seller’s License. Seller and its Subsidiaries may
assign (without any further rights to assign or transfer except as provided below) the above
rights one time to an acquirer (an “Acquiror”) of all, or substantially all, of the Expansion
and Docking Business conducted by Seller and its Subsidiaries (an “Acquisition”), provided
that: (a) Acquiror shall not be licensed under the Patents for any product being offered or
sold or planned (as evidenced in a formal product plan of some kind) by Acquiror at any time
on or prior to the date of the Acquisition (“Acquisition Date”); and (b) Acquiror shall only
be licensed under the Patents for Seller’s Expansion and Docking Products which are: (i) on
the Acquisition Date being commercially offered and sold by Seller; (ii) on the Acquisition
Date under development and/or being planned by Seller (as evidenced by a road map or product
plan) and are released for commercial sale within twelve (12) months after the Acquisition
Date; 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’s
written request to Purchaser prior to the Acquisition Date, Purchaser agrees that, as soon as
reasonably practicable prior to the Acquisition Date, it shall enter into good faith
negotiations with Acquiror intended to




3









 






	   	result in a license under the Patents, on reasonable and non-discriminatory terms and
conditions, 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 than
ninety (90) days after they are initiated. In the event that Acquiror later sells all, or
substantially all, of its Expansion and Docking Business then the license granted under
clause (b) of this Section 4.4 to the Acquiror shall be assignable (without any further
right 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 of
acquisition, Purchaser agrees that, as soon as reasonably practicable prior to the date of
the acquisition, it shall enter into good faith negotiations with such First Subsequent
Acquiror intended to result in a license under the Patents, on reasonable and
non-discriminatory terms and conditions, for such First Subsequent Acquiror’s Expansion and
Docking Products not already covered by the license assignable to such First Subsequent
Acquiror pursuant to this Section 4.4, provided that Purchaser shall have no obligation to
continue such negotiations for more than ninety (90) days after they are initiated. In the
event that First Subsequent Acquiror later sells all, or substantially all, of its Expansion
and Docking Business then all licenses granted under Sections 4.3 and 4.4 are automatically
revoked for any such subsequent purchaser.
	 
	5.   	Additional Obligations
	 
	5.1  	Further Cooperation. At the reasonable request of Purchaser, Seller shall execute
and deliver such other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the transactions
contemplated hereby, including without limitation execution, acknowledgment and recordation of
other such papers, and using all reasonable commercial efforts to obtain the same from the
respective inventors, as necessary or desirable for fully perfecting and conveying unto
Purchaser the benefit of the transactions contemplated hereby.
	 
	5.2  	Payment of Fees. Seller shall pay any maintenance fees, annuities, and the like due
on the Patents on or before the Closing Date.
	 
	5.3  	Seller’s Related Cases. Seller agrees and covenants that it will not initiate or
otherwise 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 statements
of priority, except for the existing claims of priority to provisional patent application US
60/532,300, in U.S. patent applications US 10/766,660 and US 10/782,082 (the “No Priority
Claim Patent Applications”) to other patents and/or patent applications and it will not make
any new claims of priority in the No Priority Claim Patent Applications. Seller agrees and
covenants that it will not do anything in the prosecution of any of its patents related to the
Patents 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 and
warrants to Purchaser as follows:



4









 






	6.1  	Authority. Seller has the right and authority to enter into this Agreement and to
carry out its obligations hereunder.
	 
	6.2  	Title and Contest. Seller has good and marketable title to the Patents, including
without limitation all rights, title, and interest in the Patents to sue for infringement
thereof. The Patents are free and clear of all liens, mortgages, security interests or other
encumbrances, 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, or
rights 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 or
similar restrictions on its enforcement or enjoyment of the Patents as a result of the
transaction 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 any
conduct, or omitted to perform any necessary act, the result of which would invalidate any of
the Patents or materially hinder their enforcement, including but not limited to
misrepresenting Seller’s patent rights to a standard-setting organization.
	 
	6.6  	Enforcement. Seller has not put a third party on notice of actual or potential
infringement of any of the Patents or considered enforcement action(s) with respect to any of
the Patents.
	 
	6.7  	Patent Office Proceedings. None of the Patents have been or are currently involved
in any reexamination, reissue, interference proceeding, or any similar proceeding and that no
such proceedings are pending or threatened.
	 
	6.8  	Related Assets. There are not other patents issued and/or applications pending for
or on behalf of Seller which include (or will include) claims such that practice of any of the
claims of the Patents conveyed in this Agreement would reasonably require a license under any
claim of such other patents.
	 
	6.9  	Fees. All maintenance fees, annuities, and the like due on the Patents on or prior
to April 20, 2005, have been timely paid.
	 
	6.10  	Consents. Seller has obtained all third party consents, approvals, and/or other
authorizations required to make the assignments of Section 4.
	 
	6.11  	Validity and Enforceability. The Patents have never been found invalid or
unenforceable 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 suggesting
that the Patents may be invalid or unenforceable. Seller makes no representation that the
Patents are valid and enforceable.




5









 






	6.12  	Limitation on Representations and Warranties of Seller. EXCEPT AS PROVIDED IN
PARAGRAPHS 6.1 – 6.11 ABOVE, (i) SELLER DOES NOT REPRESENT OR WARRANT THE PATENTABILITY OF ANY
CLAIMED INVENTION IN, OR THE VALIDITY OF ANY PATENT; (ii) SELLER DOES NOT REPRESENT OR WARRANT
THAT THE MANUFACTURE, USE, SALE, OFFERING FOR SALE, IMPORTATION, EXPORTATION OR OTHER
DISTRIBUTION OF ANY PRODUCT OR METHOD DISCLOSED AND CLAIMED IN ANY PATENT BY PURCHASER OR ANY
SUBLICENSEE OR ANYONE ELSE SHALL NOT CONSTITUTE AN INFRINGEMENT OF THE INTELLECTUAL PROPERTY
RIGHTS OF OTHERS; AND (iii) SELLER DOES NOT MAKES ANY REPRESENTATIONS, OR EXTEND ANY
WARRANTIES 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 A
PARTICULAR PURPOSE.
	 
	7.  	Miscellaneous
	 
	7.1  	Limitation on Consequential Damages. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
LOSS OF PROFITS, OR ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED, EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THE PARTIES ACKNOWLEDGE THAT THESE LIMITATIONS ON
POTENTIAL 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 UNDER
THIS AGREEMENT SHALL BE AN AMOUNT EQUAL TO THE FUNDS PAID BY PURCHASER TO SELLER PURSUANT TO
SECTION 3. EXCEPT IN CASE OF FRAUD, SELLER’S TOTAL LIABILITY UNDER THIS AGREEMENT SHALL BE AN
AMOUNT EQUAL TO THE AMOUNT OF FUNDS RECEIVED BY SELLER UNDER SECTION 3. THE PARTIES
ACKNOWLEDGE THAT THESE LIMITATIONS ON POTENTIAL LIABILITIES WERE AN ESSENTIAL ELEMENT IN
SETTING CONSIDERATION UNDER THIS AGREEMENT.
	 
	7.3  	Compliance with Laws. Notwithstanding anything contained in this Agreement to the
contrary, the obligations of the parties shall be subject to all laws, present and future, of
any 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 of
this Agreement and the identities of the parties hereto confidential and shall not now or
hereafter divulge any of this information to any third party except: (a) with the prior
written 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 party
in such matters; (c) during the course of litigation, so long as the disclosure of such terms
and conditions are restricted in the same manner as is the confidential information of other
litigating parties; (d) in confidence to its legal counsel,




6









 






	   	accountants, banks and financing sources and their advisors solely in connection with
complying with financial transactions; or (e) Purchaser may record the Assignment of Patent
Rights 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 means
available to minimize the disclosure to third parties, including without limitation seeking
a 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 prior
written notice of such disclosure. Notwithstanding the above: (i) upon execution of this
Agreement by the parties hereto, the parties agree that Seller may issue a Press Release, in
the form of Exhibit D attached hereto (the “Press Release”); and (ii) Seller may file this
Agreement, and the exhibits hereto, with the Securities and Exchange Commission, provided
that 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 be
governed by the internal substantive laws of the State of New York without regard to
principles of conflict of laws.
	 
	7.6  	Jurisdiction. Each party hereby agrees to jurisdiction and venue in the courts of
the State of New York or the Federal courts sitting therein for all disputes and litigation
arising under or relating to this Agreement.
	 
	7.7  	Entire Agreement. The terms and conditions of this Agreement, including its
exhibits, constitutes the entire agreement between the parties with respect to the subject
matter hereof, and merges and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions. Neither of the parties shall be bound by any
conditions, definitions, warranties, understandings, or representations with respect to the
subject matter hereof other than as expressly provided herein. The section headings contained
in this Agreement are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. No oral explanation or oral information by either party
hereto shall alter the meaning or interpretation of this Agreement. No amendments or
modifications shall be effective unless in writing signed by authorized representatives of
both 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. This
Agreement may be executed in two (2) or more counterparts, all of which, taken together, shall
be regarded as one and the same instrument. The following exhibits are attached hereto and
incorporated 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”).




7









 






	7.8  	Notices: All notices required or permitted to be given hereunder shall be in
writing, shall make reference to this Agreement, and shall be delivered by hand, or
dispatched 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 not
accomplished by reason of some fault of the addressee, when tendered for delivery. Either
party may give written notice of a change of address and, after notice of such change has
been received, any notice or request shall thereafter be given to such party at such changed
address.






	7.9  	Relationship of Parties. The parties hereto are independent contractors. Neither
party has any express or implied right or authority to assume or create any obligations on
behalf of the other or to bind the other to any contract, agreement or undertaking with any
third party. Nothing in this Agreement shall be construed to create a partnership, joint
venture, employment or agency relationship between Seller and Purchaser
	 
	7.10  	Equitable Relief. Seller agrees that damages alone would be insufficient to
compensate Purchaser for a breach of this Agreement, acknowledges that irreparable harm would
result from a breach of this Agreement, and consents to the entering of an order for
injunctive relief to prevent a breach or further breach, and the entering of an order for
specific 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 be
invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the
remainder of this Agreement shall be valid and enforceable and the parties shall use good
faith to negotiate a substitute, valid and enforceable provision which most nearly effects the
parties’ intent in entering into this Agreement.
	 
	7.12  	Waiver. Failure by either party to enforce any term of this Agreement shall not be
deemed a waiver of future enforcement of that or any other term in this Agreement or any other
agreement that maybe in place between the parties.
	 
	7.13  	Assignment. The terms and conditions of this Agreement shall inure to the benefit of
the parties hereto, and their respective successors, assigns and other legal representatives,
and shall be binding upon the parties hereto, and their respective successors, assigns and
other legal representatives.




8









 











     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







9