Exhibit 10.17

 
REGISTRATION RIGHTS AGREEMENT
 
This Registration Rights Agreement (this "Agreement") is made and entered into
as of January 27, 2005, by and between Digital Lifestyles Group, Inc., a
Delaware corporation (the "Company"), and Alloy Marketing and Promotions, LLC
(the "Purchaser").
 
This Agreement is made pursuant to the Agreement, dated as of the date hereof,
by and between the Purchaser and the Company (as amended, modified or
supplemented from time to time, the "Payment Agreement"), and pursuant to the
Note referred to therein.
 
The Company and the Purchaser hereby agree as follows:
 
1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
 
"Commission" means the Securities and Exchange Commission.
 
"Common Stock" means shares of the Company's common stock, par value $0.03 per
share.
 
"Effectiveness Date" means the date that the Registration Statement is declared
effective under the Securities Act.
 
"Effectiveness Period" shall have the meaning set forth in Section 2(a).
 
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and any
successor statute.
 
"Filing Date" means the date on which the Company files the initial
pre-effective amendment to the Registration Statement including the Note Shares,
which may be no earlier than February 10, 2005.
 
"Holder" or "Holders" means the Purchaser or any of its affiliates or
transferees to the extent any of them hold Registrable Securities.
 
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
 
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus

 
1

--------------------------------------------------------------------------------

 
 
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
 
"Registrable Securities" means the shares of Common Stock issuable (a) upon the
conversion of the Note and (b) any securities issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event with
respect to any securities referenced in (a) above.
 
"Registration Statement" means the Registration Statement on Form S-1 that was
filed with the Commission by the Company on January 4, 2005, including the
Prospectus therein, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
 
"Requisite Information" has the meaning set forth in Section 2(d) hereof.
 
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
"Rule 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
"Securities Act" means the Securities Act of 1933, as amended, and any successor
statute.
 
"Trading Market" means any of the NASD OTC Bulletin Board, NASDAQ SmallCap
Market, the Nasdaq National Market, the American Stock Exchange or the New York
Stock Exchange.
 
"Underwritten Offering" means a registration in which securities of the Company
are sold to an underwriter for reoffering to the public.
 
References herein to the term "Holders of a majority in aggregate amount of the
then outstanding Registrable Securities" or words to a similar effect shall
mean, with respect to any request, notice, demand, objection or other action by
the holders of Registrable Securities hereunder or pursuant hereto (each, an
"Act"), registered holders of a number of shares of then outstanding Common
Stock constituting Registrable Securities and an aggregate amount of the Note
convertible into Registrable Securities, such that the sum of such shares of
Common Stock and the shares of Common Stock issuable upon conversion of the Note
constitute in excess of 50% of the sum of all of the then outstanding shares of
Common Stock constituting Registrable

 
2

--------------------------------------------------------------------------------

 
 
Securities and the number of shares of Common Stock issuable upon conversion of
the Note. For purposes of the immediately preceding sentence, any Holder may
elect to take any Act with respect to all or any portion of the Registrable
Securities held by it and only the portion as to which such Act is taken shall
be included in the numerator of the fraction described in the preceding sentence
 
2.  Registration.
 
(a)  On the Filing Date, the Company shall prepare and file with the Commission
a pre-effective amendment to the Registration Statement covering the Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Company shall cause the Registration Statement to become effective and
remain effective as provided herein. The Company shall use its reasonable
commercial efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event no later than February 23, 2005. The Company shall use its
reasonable commercial efforts to keep the Registration Statement continuously
effective under the Securities Act until the date which is the earlier date of
when all Registrable Securities covered by the Registration Statement (i) either
have been sold in a manner contemplated by the Registration Statement, (ii) have
been sold to the public in compliance with Rule 144, or (iii) may be sold
immediately without registration under the Securities Act and without volume
restrictions pursuant to Rule 144(k), as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent (each, an "Effectiveness Period") .
 
Thereafter, the Company shall be entitled to withdraw the Registration Statement
and, upon such withdrawal, the Holders shall have no further right to offer or
sell any of the Registrable Securities pursuant to such Registration Statement
(or any Prospectus relating thereto).
 
Notwithstanding anything contained within to the contrary, the Company shall
have the right to convert the Registration Statement to a registration statement
on Form S-2 or Form S-3 or file a new registration statement on Form S-2 or Form
S-3 for an offering to be made on a continuous basis pursuant to Rule 415
covering all the Registrable Securities subject to the Registration Statement
and, upon the declaration of effectiveness thereof by the Commission, the
Company shall have the right to withdraw the Registration Statement (in which
event, such registration statement on Form S-2 or Form S-3 will be deemed to be
the Registration Statement for the purposes of this Agreement, including the
Company's obligations with respect thereto).
 
(b)  (i) the Effective Date does not occur prior to February 23, 2005; (ii)
after the Effective Date, the Registration Statement ceases to be effective (by
suspension pursuant to Sections 2(e), 6(c) or otherwise) as to all Regishable
Securities to which it is required to relate at any time prior to the expiration
of the Effectiveness Period (without being succeeded immediately by an
additional Registration Statement filed and declared effective) for a period of
time that shall exceed 30 days in the aggregate per year or more than 20
consecutive calendar days (defined as a period of 365 days commencing on the
Effective Date); or (iii) the Common Stock is not listed or quoted, or is
suspended from trading on any Trading Market for a period of three (3)
consecutive Trading Days (provided the Company shall not have been able to

 
3

--------------------------------------------------------------------------------

 
 
cure such trading suspension within 30 days of the notice thereof or list the
Common Stock on another Trading Market); (any such failure or breach being
referred to as an "Event," and for purposes of clause (i) the date on which such
Event occurs, or for purposes of clause (ii) the date which such 30 day or 20
consecutive day period (as the case may be) is exceeded, or for purposes of
clause (iii) the date on which such three (3) Trading Day period is exceeded,
being referred to as "Event Date"), then until the applicable Event is cured,
the Company shall pay to each Holder an amount in cash, as a sole remedy and as
liquidated damages and not as a penalty, equal to 1.50% for each thirty (30) day
period (prorated for partial periods) on a daily basis of the original principal
amount of the Note. While such Event continues, such liquidated damages shall be
paid not less often than each thirty (30) days. Any unpaid liquidated damages as
of the date when an Event has been cured by the Company shall be paid within
three (3) days following the date on which such Event has been cured by the
Company.
 
(c)           Within three business days after the Effectiveness Date, the
Company shall issue a letter to the transfer agent (and, if required by the
transfer agent, a legal opinion) stating that the shares are subject to an
effective registration statement and can be reissued free of restrictive legend
upon notice of a sale by the Purchaser and confirmation by the Purchaser that it
has complied with the prospectus delivery requirements, provided that the
Company has not advised the transfer agent orally or in writing that the opinion
has been withdrawn. Copies of the letter required by this Section 2(c) shall be
delivered to the Purchaser within the time frame set forth above.
 
(d)           The Company may require each Holder of Registrable Securities as
to which any registration is being effected to furnish to the Company, within
ten calendar days after written request therefor has been made by the Company,
such information regarding the distribution of such Holder's Registrable
Securities as is required by law to be disclosed in the Registration Statement
(the "Requisite Information").
 
(i)     The Company shall file prospectus supplements pursuant to Rule 424 under
the Securities Act (or any successor provision thereto) to amend or supplement
the applicable Registration Statement to include in the Registration Statement
the Requisite Information as to each Holder (and the Registrable Securities held
by such Holder) that provides notice to the Company of the Requisite
Information. The Company shall file such a prospectus supplement with the
Commission no less than once every twenty business days if during such period
the Company receives notice from any Holder which includes the Requisite
Information with respect to any such Holder. The Company shall provide each
Holder a copy of such Prospectus as so amended or supplemented containing the
Requisite Information within three business days of filing such Prospectus with
the Commission in order to permit such Holder to comply with the prospectus
delivery requirements of the Securities Act in a timely manner with respect to
any proposed disposition of such Holder's Registrable Securities.
 
(ii)     No Holder shall be entitled to use the Prospectus unless and until such
Holder shall have furnished the information required by this Section 2(d) in
accordance with the first or second paragraph hereof and such information with
respect to such Holder shall have been included in the Prospectus. If any
information furnished to the Company by a Holder for inclusion in a Registration
Statement or the Prospectus

 
4

--------------------------------------------------------------------------------

 
 
becomes materially misleading, such Holder agrees (1) to furnish promptly to the
Company all information required to be disclosed in such Registration Statement
in order to make the information previously furnished to the Company not
materially misleading and (ii) to stop selling or offering for sale Registrable
Securities pursuant to the Registration Statement until such Holder's receipt of
the copies of a supplemented or amended Prospectus correcting such disclosure.
The Company shall have no obligation to keep a Prospectus usable with respect to
a particular Holder or to give notice that a Prospectus is not usable by such
Holder to the extent such Prospectus is not usable by such Holder because
current Requisite Information with respect to such Holder is not included
therein because such Holder has not provided such information to the Company in
accordance with this Section 2(d).
 
(e) Notwithstanding anything in this Section 2 to the contrary, if the Company
shall furnish to the Holders a certificate signed by the President or Chief
Executive Officer of the Company stating that the Company's Board of Directors
has made the good faith determination (i)      that the continued use by the
Holders of the Registration Statement for purposes of effecting offers or sales
of Registrable Securities pursuant thereto would require, under the Securities
Act and the rules and regulations promulgated thereunder, premature disclosure
in the Registration Statement (or the Prospectus relating thereto) of material,
nonpublic information concerning the Company, its business or prospects or any
proposed material transaction involving the Company, (ii) that such premature
disclosure would be materially adverse to the Company, its business or prospects
or any such proposed material transaction or would not be in the best interests
of the Company and (iii) that it is therefore essential to suspend the use by
the Holders of the Registration Statement (and the Prospectus relating thereto),
then the right of the Holders to use the Registration Statement (and the
Prospectus relating thereto) for purposes of effecting offers or sales of
Registrable Securities pursuant thereto shall be suspended for a period (the
"Suspension Period") not greater than sixty (60) days during any consecutive
twelve (12) month period, which shall include no more than thirty (30)
consecutive days. During the Suspension Period, the Holders shall not offer or
sell any Registrable Securities pursuant to or in reliance upon the Registration
Statement (or the Prospectus relating thereto). The Company agrees that, as
promptly as possible, but in no event later than three (3) business days, after
the consummation, abandonment or public disclosure of the event or transaction
that caused the Company to suspend the use of the Registration Statement (and
the Prospectus relating thereto) pursuant to this Section 2(e), the Company will
lift any suspension, provide the Holders with revised Prospectuses, if required,
and will notify the Holders of their ability to effect offers or sales of
Registrable Securities pursuant to or in reliance upon the Registration
Statement.
 
(f) Notwithstanding anything in this Agreement to the contrary, the Company will
have no obligation to register the resale of the Registrable Securities, or take
any other action required under this Agreement, unless and until the Company
becomes obligated to issue the Note to the Purchaser pursuant to the terms of
the Payment Agreement.

 
5

--------------------------------------------------------------------------------

 
 
3. Registration Procedures. The parties hereto agree that the Registration
Statement does not contemplate an Underwritten Offering and the Company shall
not be required to cooperate with any Underwritten Offering. If and whenever the
Company is required by the provisions hereof to effect the registration of the
Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:
 
(a)  prepare and file with the Commission a pre-effective amendment to the
Registration Statement with respect to such Registrable Securities, respond as
promptly as possible to any comments received from the Commission, and use its
reasonable commercial efforts to cause the Registration Statement to become and
remain effective for the Effectiveness Period with respect thereto, and promptly
provide to the Purchaser copies of all filings and Commission letters of comment
relating thereto;
 
(b)  prepare and file with the Commission such amendments and supplements to the
Registration Statement and the Prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such Registration
Statement and to keep such Registration Statement effective until the expiration
of the Effectiveness Period applicable to such Registration Statement;
 
(c)  furnish to the Purchaser such number of copies of the Registration
Statement and the Prospectus included therein (including each preliminary
Prospectus) as the Purchaser reasonably may request to facilitate the public
sale or disposition of the Registrable Securities covered by such Registration
Statement;
 
(d)  use its commercially reasonable efforts to register or qualify the
Purchaser's Registrable Securities covered by such Registration Statement under
the securities or "blue sky" laws of such jurisdictions within the United States
as the Purchaser may reasonably request, provided, however, that the Company
shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction;
 
(e)  list the Registrable Securities with the Trading Market or other securities
exchange on which the Common Stock of the Company is then principally listed;
 
(f)  immediately notify the Purchaser at any time when a Prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event of which the Company has knowledge as a result of which the
Prospectus contained in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing; and
 
(g) make available for inspection by the Purchaser and any attorney, accountant
or other agent retained by the Purchaser, all publicly available,
non-confidential financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all publicly available, non-confidential information
reasonably requested by the attorney, accountant or agent of the Purchaser.
 
 
6

--------------------------------------------------------------------------------

 
4.Registration Expenses. All expenses relating to the Company's compliance with
Sections 2 and 3 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars, fees of, and disbursements incurred by, one
counsel for the Holders are called "Registration Expenses". All selling
commissions applicable to the sale of Registrable Securities, including any fees
and disbursements of any special counsel to the Holders beyond those included in
Registration Expenses, are called "Selling Expenses." The Company shall only be
responsible for Registration Expenses.
 
5. Indemnification.
 
(a)  In the event of a registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless the Purchaser, and its officers, directors and each other person, if
any, who controls the Purchaser within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Purchaser, or such persons may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement
under which such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary Prospectus or final Prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Purchaser, and each such person for any
reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by or on
behalf of the Purchaser or any such person in writing specifically for use in
any such document; and provided further, however, that the foregoing indemnity
shall not inure to the benefit of any Purchaser or any such person if the person
asserting a loss, claim, damages or liability (A) purchased a Registrable
Security and the Purchaser, or someone acting on the Purchaser's behalf, did not
deliver to such person at or prior to the written confirmation of the sale of
such Registrable Security a Prospectus (as then amended or supplemented, at the
time of such purchase by the person asserting such loss, claim, damages or
liability) and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, liability, claim, damage or expense;
or (B) received a Prospectus or an amendment or supplement thereto in violation
of Section 7(d) of this Agreement if such violation caused such loss, claim,
damages or liability.
 
 
7

--------------------------------------------------------------------------------

 
(b)  In the event of a registration of the Registrable Securities under the
Securities Act pursuant to this Agreement, each Holder will indemnify and hold
harmless the Company, and its officers, directors and each other person, if any,
who controls the Company within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such persons may become subject under the Securities Act or the Securities
Exchange Act of 1934, each as amended, or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact which was furnished in writing by such Holder to the Company expressly for
use in (and such information is contained in) the Registration Statement under
which such Registrable Securities were registered under the Securities Act, as
amended, pursuant to this Agreement, any preliminary Prospectus or final
Prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and each such person for
any reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the Holder will be liable in any such case if and only
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished in writing to
the Company by or on behalf of the Holder specifically for use in any such
document. Notwithstanding the provisions of this paragraph, such Holder shall
not be required to indemnify any person or entity in excess of the amount of the
aggregate net proceeds received by such Holder in respect of Registrable
Securities in connection with any such registration under the Securities Act.
 
(c) Promptly after receipt by a party entitled to claim indemnification
hereunder (an "Indemnified Party") of notice of the commencement of any action,
such Indemnified Party shall, if a claim for indemnification in respect thereof
is to be made against a party hereto obligated to indemnify such Indemnified
Party (an "Indemnifying Party"), notify the Indemnifying Party in writing
thereof, but the omission so to notify the Indemnifying Party shall not relieve
it from any liability which it may have to such Indemnified Party other than
under this Section 5(c) and shall only relieve it from any liability which it
may have to such Indemnified Party under this Section 5(c) if and to the extent
the Indemnifying Party is prejudiced by such omission. In case any such action
shall be brought against any Indemnified Party and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
Indemnified Party, and, after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume and undertake the defense
thereof, the Indemnifying Party shall not be liable to such Indemnified Party
under this Section 5(c) for any legal expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof; if the Indemnified
Party retains its own counsel, then the Indemnified Party shall pay all fees,
costs and expenses of such counsel, provided, however, that, if the defendants
in any such action include both the Indemnified Party and the Indemnifying Party
and the Indemnified Party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the Indemnifying Party or if the interests of the Indemnified
Party reasonably may be deemed to conflict with the interests of the
Indemnifying Party, the Indemnified Party shall have the right to select one
separate counsel (which firm should be subject to the approval of the
Indemnifying Party, such approval not to be unreasonably withheld) and to assume
such legal defenses and
 
 
8

--------------------------------------------------------------------------------

 
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the Indemnifying Party as incurred; provided,
further, that the Company shall not in any event be responsible hereunder for
the fees and expenses of more than one firm of separate counsel. The Company
shall not be liable for any settlement of any such action or proceeding effected
without the Company's prior written consent, which consent shall not be
unreasonably withheld or delayed, and the Company agrees to indemnify and hold
harmless any Indemnified Party from and against any loss by reason of any
settlement of any action effected with the Company's written consent.
 
(d)  In order to provide for just and equitable contribution in the event of
joint liability under the Securities Act in any case in which either (i) an
Indemnified Party makes a claim for indemnification pursuant to this Section 5
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of the Indemnified Party in circumstances for which
indemnification is provided under this Section 5; then, and in each such case,
the Indemnifying Party and the Indemnified Party will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Indemnified
Party is responsible only for the portion represented by the percentage that the
public offering price of its securities offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, provided, however, that, in any such case, (A) the
Indemnified Party will not be required to contribute any amount in excess of the
public offering price of all such securities offered by it pursuant to such
Registration Statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
 
6. Miscellaneous.
 
(a)  Remedies. In the event of a breach by the Company or by a Holder, of any of
their respective obligations under this Agreement, each Holder or the Company,
as the case may be, in addition to being entitled to exercise all rights granted
by law and under this Agreement, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement.
 
(b)  Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
 
(c)   Discontinued Disposition. Each Holder agrees by its acquisition of any
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of a Discontinuation Event (as defined below) or notice described in
Section 3(f), such Holder shall keep the fact of such notice confidential and
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder's receipt of the copies

 
 
9

--------------------------------------------------------------------------------

 
of the supplemented Prospectus and/or amended Registration Statement or until it
is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph. For purposes of this Section 7(d), a "Discontinuation Event" shall
mean (i) when the Commission notifies the Company whether there will be a
"review" of the Registration Statement and whenever the Commission comments in
writing on the Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders); (ii) any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or far additional information; (iii) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and/or (v) the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
 
(d)  Piggy-Back Registrations. If at any time during any Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities required to be covered during such Effectiveness Period and the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen (15) days after receipt of such notice, any such Holder shall so request
in writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered, to
the extent the Company may do so without violating registration rights of others
which exist as of the date of this Agreement, subject to customary underwriter
cutbacks applicable to all holders of registration rights (except that no
cutback may be required for any holders that have the right to demand or request
the inclusion in such registration of shares of Common Stock held by such
stockholders) and subject to obtaining any required consent of any selling
stockholder(s) to such inclusion under such registration statement.
 
(e)Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or

 
 
10

--------------------------------------------------------------------------------

 
consents to departures from the provisions hereof may not be given, unless the
same shall be in writing and signed by the Company and the Holders of the then
outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of certain Holders and that does not directly
or indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
 
(f) Notices. Any notice or request hereunder may be given to the Company or the
Purchaser at the respective addresses set forth below or as may hereafter be
specified in a notice designated as a change of address under this Section 7(f).
Any notice or request hereunder shall be given by registered or certified mail,
return receipt requested, hand delivery, overnight mail or telecopy (confirmed
by mail). Notices and requests shall be, in the case of those by hand delivery,
deemed to have been given when delivered to any party to whom it is addressed,
in the case of those by mail or overnight mail, deemed to have been given three
(3) business days after the date when deposited in the mail or with the
overnight mail carrier, and, in the case of a telecopy, when confirmed. The
address for such notices and communications shall be as follows:

 
If to the Company:
 
Digital Lifestyles Group, Inc.
1001 S. Capital of Texas Hwy.
Building I, Suite 210 Austin, Texas 78746
Attention: Chief Financial Officer
Facsimile: (512) 617-8283
 
With a copy to:
 
1001 S. Capital of Texas Hwy.
Building I, Suite 210 Austin, Texas 78746
Attn: General Counsel
Facsimile: (512) 617-8283
       
If to a Purchaser:
To the address set forth under such Purchaser name on the signature pages
hereto.
        If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the stock transfer books of the
Company

 
or such other address as may be designated in writing hereafter in accordance
with this Section 7(f) by such Person.

 
 
11

--------------------------------------------------------------------------------

 
(g)Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and
shall inure to the benefit of each Holder; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless such successor or assignee and Holder provide the
Company with written notice at the time of such succession or assignment stating
the name of such successor or assignee and identifying the Registrable
Securities as to which this Agreement is being assigned; provided, however, that
any such assignee or successor shall receive such Registrable Securities subject
to all the terms and conditions of this Agreement, including without limitation,
Section 5 and shall thereafter be deemed a "Holder" for all purposes under this
Agreement. The Company may not assign its rights or obligations hereunder
without the prior written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Notes and the Securities Purchase Agreement with the prior written consent
of the Company, which consent shall not be unreasonably withheld.
 
(h)Execution and Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
 
 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware, without
regard to the principles of conflicts of law thereof.
 
 Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
 
(k)Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
 
(1)  Headings. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
 
[Balance of page intentionally left blank; signature page follows.]
 
 
12

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.
 
DIGITAL LIFESTYLES GROUP, INC.
 
By: /s/ Kent A. _________
Name: Kent A. _________
Title: CEO
 
 
ALLOY MARKETING AND PROMOTIONS, LLC
 
By: /s/ Matthew C. Diamond
Name: Matthew C. Diamond
Title: CEO
 
Address for Notices:
54 Canal Street
Boston, MA 02114
Tel: 617-723-8929
Fax: (617) 723-2188
Attn: Gary Colen
 
With a copy to:
 
Alloy, Inc.
151 W. 26th Street, 11th Floor
New York, NY 10001
Tel: 212-244-4307
Fax: 212-244-4311
Attn: General Counsel
 
 
 
13