EX-10.2






STOCK OPTION AGREEMENT




THIS STOCK OPTION AGREEMENT (this “Agreement”), made this 10th day of April 3,
2007, by and between Digital Lifestyles Group, Inc., a Delaware corporation (the “Company”) and
L.E. Smith, an individual residing in Crossville, Tennessee (“Optionee”).



W I T N E S S E T H:














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”), 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 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 180 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 Tennessee.



7. Compliance with Securities Laws. Optionee understands and acknowledges upon registration
of the Common Stock with the Securities Exchange Commission (the “SEC”) under the
Securities Act and 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 Tennessee, 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 the Company’s principal place of business 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.



[signature page next]




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



DIGITAL LIFESTYLES GROUP, INC.



—



Name: Jay Furrow



Title: Director



—



L.E. Smith