Exhibit 10.2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this
"Agreement"), made this 10th day of August, 2005, by
and between Digital Lifestyles Group, Inc., a Delaware
corporation (the "Company") and Xxxx Xxxx, an individual
having a residence of Diamond Bar, California ("Optionee").
W I T N E S S E T H:
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WHEREAS, pursuant to an Employment
Agreement, dated as of even date herewith, by and between
the Company and Optionee (the "Employment Agreement"), the
Company desires to afford Optionee the opportunity to
acquire the Company's common stock, $0.03 par value per
share ("Common Stock"), so that Optionee may have a direct
proprietary interest in the Company's success; and
WHEREAS, the Compensation Committee of the
Board of Directors of the Company (the "Committee") has
approved the grant of the stock option contemplated
hereunder.
NOW, THEREFORE, in consideration of
the covenants and agreements herein contained, the parties
hereto hereby agree as follows:
1. Grant of Option. Subject to the term
and conditions set forth herein, the Company hereby
grants to Optionee, during the period commencing on the
date of this Agreement and ending on the close of business
on the day of the third (3rd) anniversary of the date
hereof (the "Termination Date"), the right and option (the
right to purchase any one share of Common Stock hereunder
being an "Option") to purchase from the Company, at a price
of $0.20 per share (the "Option Price"), an aggregate of
3,000,000 shares of Common Stock (the "Option Shares"),
on a fully diluted basis, as of the Effective
Date (as defined in the Employment Agreement).
2. Limitation on Exercise of Option.
Subject to the terms and conditions set forth herein, the
Option will vest and become exercisable as to 8.333% of the
Option Shares subject to the Options on and after the
first monthly anniversary of the Effective Date and as to
any additional 8.333% of such shares on each monthly
anniversary thereafter until the Option is 100% vested;
provided, that, Optionee is still employed by the
Company on such anniversary dates. Notwithstanding the
foregoing, upon a Change in Control (as defined in the
Employment Agreementthe Company's 2004 Stock Incentive
Option), the unvested portion of the Option shall become
automatically vested and exercisable; provided, that,
Optionee is employed by the Company on the date of such
Change in Control.
3. Termination of Employment. Any
unvested Options held by Optionee upon termination of
employment for any reason shall terminate and cease to be
exercisable and any vested Options shall remain
exercisable and outstanding for 1890 days following such
termination (but in no event beyond the term of the
Option), and shall thereafter terminate. Nothing in this
Agreement shall confer upon Optionee any right or obligation
to continue in the employ of the Company or limit in any way
the right of the Company or Optionee to terminate Optionee's
employment at any time and for any reason (or no reason).
4. Method of Exercising Option.
(a) Options, to the extent vested and
exercisable, may be exercised, in whole or in part, by
giving written notice of exercise to the Company in such
form as may be approved by the Company which shall
specify, among other items, the number of shares of Common
Stock to be purchased, any restrictions imposed on the
Option Shares, and any representations, warranties and
agreements regarding Optionee's investment intent and
access to information as may be required by the Company to
comply with applicable law. Such notice shall be
accompanied by the payment in full of the Option Price.
Such payment shall be made in cash or by check.
(b) At the time of exercise, Optionee
shall pay to the Company such amount as the Company deems
necessary to satisfy its obligation to withhold Federal,
state or local income or other taxes incurred by reason of
the exercise of Options granted hereunder, if any. Such
payment shall be made in cash or by check.
5. Issuance of Shares. Except as
otherwise provided in this Agreement, as promptly as
practicable after receipt of such written notification of
exercise and full payment of the Option Price and any
required income tax withholding, the Company shall issue
or transfer to Optionee the number of Option Shares with
respect to which Options have been so exercised, and
shall deliver to Optionee a certificate or certificates
therefor, registered in Optionee's name.
6. Representations and Warranties of
Optionee. Optionee represents and warrants to the Company
that:
(a) Optionee has received a copy of,
and has read and understands, the terms of this
Agreement, and agrees to be bound by its terms and
conditions. Optionee acknowledges that there may be adverse
tax consequences upon the exercise of the Options or
disposition of the shares of Common Stock once exercised,
and that Optionee should consult a tax adviser prior to
such time.
(b) Optionee has had access to all
information regarding the Company and its present and
prospective business, assets, liabilities and financial
condition that Optionee reasonably considers important in
making the decision to purchase the Common Stock, and
Optionee has had ample opportunity to ask questions of the
Company's representatives concerning such matters and this
investment.
(c) Optionee is fully aware of: (i) the
highly speculative nature of the investment in the
Common Stock; (ii) the financial hazards involved;
(iii) the lack of liquidity of the Common Stock and the
restrictions on transferability of the Common Stock (e.g.,
that Optionee may not be able to sell or dispose of the
Common Stock or use them as collateral for loans); (iv)
the qualifications and backgrounds of the management of the
Company; and (v) the tax consequences of investment in
the Common Stock. Optionee is capable of evaluating the
merits and risks of this investment, has the ability to
protect Optionee's own interests in this transaction and
is financially capable of bearing a total loss of this
investment.
(e) At no time was Optionee presented with
or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general
advertising or solicitation in connection with the offer,
sale and purchase of the Common Stock.
(f) Optionee agrees to sign such
additional documentation as may reasonably be required from
time to time by the Company.
(g) Optionee's principal residence is
located in the State of California.
7. Compliance with Securities Laws.
Optionee understands and acknowledges that the Common Stock
has been registered with the Securities Exchange
Commission (the "SEC") under the Securities Act
and that, notwithstanding any other provision of the
Agreement to the contrary, the vesting and holding of the
Common Stock is expressly conditioned upon compliance with
the Securities Act and all applicable state securities
laws. Optionee agrees to cooperate with the Company to
ensure compliance with such laws.
8. Optionee. Whenever the word
"Optionee" is used in any provision of this Agreement
under circumstances where the provision should logically
be construed to apply to the beneficiaries, the
executors, the administrators, or the person or persons to
whom the Options may be transferred by will or by the laws
of descent and distribution, the word "Optionee" shall be
deemed to include such person or persons.
9. Non-Transferability. The Options are
not transferable by Optionee otherwise than to a designated
beneficiary upon death or by will or the laws of descent and
distribution, and are exercisable during Optionee's lifetime
only by him/her. No assignment or transfer of the
Options, or of the rights represented thereby, whether
voluntary or involuntary, by operation of law or otherwise
(except to a designated beneficiary, upon death, by will
or the laws of descent and distribution), shall vest in
the assignee or transferee any interest or right herein
whatsoever, but immediately upon such assignment or
transfer the Options shall terminate and become of no
further effect.
10. Rights as Shareholder. Optionee or a
transferee of the Options shall have no rights as
shareholder with respect to any Option Shares until he/she
shall have become the holder of record of such share,
and no adjustment shall be made for dividends or
distributions or other rights in respect of such Option
Shares for which the record date is prior to the date upon
which he shall become the holder of record thereof.
11. Adjustments.
(a) Capitalization Adjustments. In the
event of any dividend or other distribution (whether in
the form of cash, Common Stock, other securities, or
other property), recapitalization, reclassification, stock
split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase,
liquidation, dissolution, or sale, transfer, exchange or
other disposition of all or substantially all of the
assets or stock of the Company, or exchange of Common
Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or
other securities of the Company, or other similar corporate
transaction or event (an "Event"), and in the Company's
opinion, such event affects the Common Stock such that an
adjustment is determined by the Company to be appropriate
in order to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under
this Agreement, then the Company shall, in such manner
as it may deem equitable, including, without limitation,
adjust any or all of the following: (i) the number and
kind of shares of Common Stock (or other securities or
property) subject to any outstanding Options and (ii) the
Option Price with respect to any Option. The Company's
determination under this Section 13(a) shall be made in
its sole discretion.
(b) Termination of Options. Upon the
occurrence of an Event or similar corporate event or
transaction in which outstanding Options are not to be
assumed or otherwise continued following such an Event or
similar corporate event or transaction, the Company may
provide that such Option shall be exercisable (whether
or not vested) as to all shares covered thereby for at
least ten (10) days prior to such Event or similar
corporate event or transaction and shall thereafter
terminate.
(c) Future Transactions. The
existence of this Option Agreement and the Options
granted hereunder shall not affect or restrict in any way
the right or power of the Company or the shareholders of the
Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of
options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose
rights are superior to or affect the Common Stock or the
rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar
character or otherwise.
12. Compliance with Law. Notwithstanding
any of the provisions hereof, Optionee hereby agrees that
he/she will not exercise the Options, and that the Company
will not be obligated to issue or transfer any shares
to Optionee hereunder, if the exercise hereof or the
issuance or transfer of such shares shall constitute a
violation by Optionee or the Company of any provisions of
any law or regulation of any governmental authority. Any
determination in this connection by the Company shall be
final, binding and conclusive. The Company shall in no
event be obliged to register any securities pursuant to the
Securities Act as now in effect or as hereafter amended) or
to take any other affirmative action in order to cause the
exercise of the Options or the issuanceor transfer of shares
pursuant thereto to comply with any law or regulation of
any governmental authority.
13. Notice. Every notice or other
communication relating to this Agreement shall be in
writing, and shall be mailed to or delivered to the party
for whom it is intended at such address as may from
time to time be designated by it in a notice mailed or
delivered to the other party as herein provided; provided,
that, unless and until some other address be so designated,
all notices or communications by Optionee to the Company
shall be mailed or delivered to the Company at its principal
executive office, and all notices or communications by the
Company to Optionee may be given to Optionee personally or
may be mailed to him at his address as recorded in the
records of the Company.
14. Nonqualified Stock Options. The
Options granted hereunder are not intended to be incentive
stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
15. Binding Effect. Subject to Section
11 hereof, this Agreement shall be binding upon the
heirs, executors, administrators and successors of the
parties hereto.
16. Governing Law. This Agreement shall
be construed in accordance with and governed by the laws of
the State of California, without regard to its conflicts of
law principles.
17. Severability. If any provisions
of this Agreement as applied to any circumstance shall
be adjudged by a court to be invalid or unenforceable,
the same shall in no way affect any other provision of
this Agreement, the application of such provision in any
other circumstances or the validity or enforceability of
this Agreement.
18. Entire Agreement. This Agreement
constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all
prior agreements and understandings, written or oral,
with respect thereto. Option acknowledges that this
Agreement fully satisfies the Company's obligations under
the Employment Agreement with respect to the subject matter
hereof.
19. Amendment. No term of this Agreement
may be amended, nor may the observance of any term of this
Agreement be waived (either generally or in a particular
instance and either retroactively or prospectively), except
by an instrument in writing and signed by the party against
whom such amendment or waiver is sought to be enforced.
20. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall
constitute one and the same instrument.
21. Jurisdiction. Optionee consents
to the personal jurisdiction of the courts of the
County of Los Angeles and State of California and of the
United States District Court for the Southern District of
California, each as may have competent jurisdiction,
with respect to any dispute or controversy arising
under or in connection with this Agreement and agrees that
process issued out of any such court or in accordance with
the rules of practice of such court may be served by mail or
other form of substituted service to at the address
provided in the Preamble. Optionee also agrees not to
bring any dispute or controversy arising under or in
connection with this Agreement in any other court.
Optionee waives any defense of inconvenient forum to
the maintenance of any dispute or controversy so
brought and waives any bond, surety, or other security
that may be required of any other party hereto with respect
such dispute or controversy. Nothing contained herein shall
be deemed to prevent the Company from effecting service of
process upon Optionee in any other manner permitted by law
or from commencing any action in any court having
competent jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
DIGITAL LIFESTYLES GROUP, INC.
By: /s/ Xxx Xxxxxx
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Name: Xxx Xxxxxx
Title: Director
/s/ Xxxx Xxxx
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Xxxx Xxxx
