Exhibit 4.12
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH STOCK UNDER SAID
ACT AND ANY APPLICABLE STATES SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO DIGITAL LIFESTYLES GROUP, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED.
SECURED REVOLVING NOTE
FOR VALUE RECEIVED, DIGITAL LIFESTYLES GROUP, INC. a Delaware corporation (the
"Borrower") promises to pay to LAURUS MASTER FUND, LTD., M&C Corporate Services
Limited, P.O. Box 309 GT, Xxxxxx House, South Church Street, Xxxxxx Town, Grand
Cayman, Cayman Islands, Fax: 000-000-0000 (the "Holder") or its registered
assigns, the sum of Four Million Seven Hundred Fifty Thousand Dollars
($4,750,000) without duplication of any amounts owing by Borrower to Holder
under the Minimum Borrowing Notes (as defined in the Security Agreement referred
to below), or, if different, the aggregate principal amount of all "Loans" (as
such term is defined in the Security Agreement referred to below), together with
any accrued and unpaid interest hereon, on November 29, 2007 (the "Maturity
Date").
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Security Agreement between the Borrower, certain
Subsidiaries party thereto and the Holder dated as of November 29, 2004 (as
amended, modified and supplemented from time to time, the "Security Agreement").
The following terms shall apply to this Note:
ARTICLE I
CONTRACT RATE & PREPAYMENTS
1.1. Interest Rate. Subject to Sections 1.2, 3.2, 4.1 and 5.7 hereof, interest
payable on this Note shall accrue at a rate per annum equal to the "prime
rate" published in The Wall Street Journal from time to time, plus two
percent (2.0%) (the "Contract Rate"). The Prime Rate shall be increased or
decreased as the case may be for each increase or decrease in the Prime
Rate in an amount equal to such increase or decrease in the Prime Rate;
each change to be effective as of the day of the change in such rate in
accordance with the terms of the Security Agreement. Subject to Section
1.2, the Contract Rate shall not be less than six percent (6.0%).
1.2. Contract Rate Adjustments and Payments. The Contract Rate shall be
calculated on the last business day of each month hereafter until the
Maturity Date (each a "Determination Date") and shall be subject to
adjustment as set forth herein. If (i) the Borrower shall have registered
the shares of the Borrower's common stock underlying each of the conversion
of each Minimum Borrowing Note then outstanding and that certain warrant
issued to Holder on a registration statement declared effective by the
Securities and Exchange Commission (the "SEC"), and (ii) the market price
(the "Market Price") of the Common Stock as reported by Bloomberg, L.P. on
the Principal Market for the five (5) trading days immediately preceding a
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty five percent (25%), the Contract Rate for the succeeding
calendar month shall automatically be reduced by 200 basis points (200
b.p.) (2.0.%) for each incremental twenty five percent (25%) increase in
the Market Price of the Common Stock above the then applicable Fixed
Conversion Price. If (i) the Borrower shall not have registered the shares
of the Borrower's common stock underlying the conversion of each Minimum
Borrowing Note then outstanding and that certain warrant issued to Holder
on a registration statement declared effective by the SEC and which remains
effective, and (ii) the Market Price of the Common Stock as reported by
Bloomberg, L.P. on the principal market for the five (5) trading days
immediately preceding a Determination Date exceeds the then applicable
Fixed Conversion Price by at least twenty five percent (25%), the Contract
Rate for the succeeding calendar month shall automatically be decreased by
100 basis points (100 b.p.) (1.0.%) for each incremental twenty five
percent (25%) increase in the Market Price of the Common Stock above the
then applicable Fixed Conversion Price. Notwithstanding the foregoing (and
anything to the contrary contained in herein), in no event shall the
Contract Rate be less than zero percent (0%). Interest shall be (i)
calculated on the basis of a 360 day year, and (ii) payable monthly, in
arrears, commencing on December 1, 2004 and on the first business day of
each consecutive calendar month thereafter until the Maturity Date (and on
the Maturity Date), whether by acceleration or otherwise (each, a "Contract
Rate Payment Date").
1.3 Allocation of Principal to serialized Minimum Borrowing Note. In the event
that the amount due and payable hereunder should equal or exceed
$1,500,000, to the extent that the aggregate outstanding balance on Minimum
Borrowing Note shall be less than $2,750,000 the difference of $2,750,000
less the actual aggregate balance of the Minimum Borrowing Note, the
"Available Minimum Borrowing"), the portion of the balance hereof (in
excess of $1,500,000) as shall equal the Available Minimum Borrowing shall
be deemed to be simultaneously extinguished on the Revolving Note and
transferred to, and evidenced by, a new serialized Minimum Borrowing Note,
substantially in the form as the Minimum Borrowing Note issued on the date
hereof.
ARTICLE II
HOLDER'S CONVERSION RIGHTS
2.1. Optional Conversion. Subject to the terms of this Article II, the Holder
shall have the right, but not the obligation, at any time until the
Maturity Date, or during an Event of Default (as defined in Article III),
and, subject to the limitations set forth in Section 2.2 hereof, to convert
all or any portion of the outstanding Principal Amount and/or accrued
interest and fees due and payable into fully paid and nonassessable
restricted shares of the Common Stock at the Fixed Conversion Price
(defined below). For purposes hereof, subject to Section 2.5 hereof, the
initial "Fixed Conversion Price" means $0.39. The shares of Common Stock to
be issued upon such conversion are herein referred to as the "Conversion
Shares."
2.2. Conversion Limitation. Notwithstanding anything contained herein to the
contrary, the Holder shall not be entitled to convert pursuant to the terms
of this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between 4.99% of the
outstanding shares of Common Stock of the Borrower and the number of shares
of Common Stock beneficially owned by such Holder or issuable upon exercise
of warrants held by such Holder. For the purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The
Conversion Shares limitation described in this Section 2.2 shall
automatically become null and void without any notice to Borrower upon the
occurrence and during the continuance beyond any applicable grace period of
an Event of Default, or upon 75 days prior notice to the Borrower. In
addition, the Holder shall not be entitled to convert pursuant to the terms
of this Note during any twenty two (22) trading day period an amount that
would result in the issuance of Conversion Shares in excess of thirty
percent (30%) of the trading volume of the Common Stock for the twenty two
(22) trading days immediately prior to the Conversion Date (defined below).
The Holder shall deliver no more than two (2) Notices of Conversion (as
defined below) to Borrower during any twenty two (22) day period.
2.3. Mechanics of Xxxxxx's Conversion. In the event that the Holder elects to
convert this Note into Common Stock, the Holder shall give notice of such
election by delivering an executed and completed notice of conversion
("Notice of Conversion") to the Borrower and such Notice of Conversion
shall provide a breakdown in reasonable detail of the Principal Amount,
accrued interest and fees that are being converted. On each Conversion Date
(as hereinafter defined) and in accordance with its Notice of Conversion,
the Holder shall make the appropriate reduction to the Principal Amount,
accrued interest and fees as entered in its records and shall provide
written notice thereof to the Borrower within two (2) business days after
the Conversion Date. Each date on which a Notice of Conversion is delivered
or telecopied to the Borrower in accordance with the provisions hereof
shall be deemed a Conversion Date (the "Conversion Date"). A form of Notice
of Conversion to be employed by the Holder is annexed hereto as Exhibit A.
Pursuant to the terms of the Notice of Conversion, the Borrower will issue
instructions to the transfer agent accompanied by an opinion of counsel, if
such an opinion is required by the transfer agent, within one (1) Business
Day of the date of the delivery to Borrower of the Notice of Conversion and
shall cause the transfer agent to transmit the certificates representing
the Conversion Shares to the Holder by crediting the account of the
Holder's designated broker with the Depository Trust Corporation ("DTC")
through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) Business Days after receipt by the Borrower of the Notice of
Conversion (the "Delivery Date"). In the case of the exercise of the
conversion rights set forth herein the conversion privilege shall be deemed
to have been exercised and the Conversion Shares issuable upon such
conversion shall be deemed to have been issued upon the date of receipt by
the Borrower of the Notice of Conversion. The Holder shall be treated for
all purposes as the record holder of such Common Stock, unless the Holder
provides the Borrower written instructions to the contrary. No fractional
share shall be issued upon any conversion of this Note. If a conversion
would result in the issuance of a fraction of a share of Common Stock, the
Borrower shall, in lieu of issuing any fractional share, pay the Holder
otherwise entitled to such fraction a sum in cash equal to the fair market
value of such fraction on the Conversion Date (based on the Current Market
Price Per Share). The "Current Market Price Per Share" on any date shall
mean the average of the Quoted Prices of the Common Stock for the fifteen
(15) consecutive Business Days ending before the day in question. If no
such Quoted Prices are available, however, "Current Market Price Per Share"
shall be the Fixed Conversion Price. "Quoted Price" means, with respect to
any security on any date, the average of the closing prices on such day of
such security on all domestic securities exchanges and inter-dealer
quotation systems providing last sale information on which such security is
then listed or tracked, or, if there have been no sales on any such
exchange or inter-dealer quotation system on such day, the average of the
F-41
highest bid and lowest asked prices on all such exchanges or inter-dealer
quotation system at the end of such day or, if on any such day such
security is not so listed, the average of the representative bid and asked
prices quoted on NASDAQ as of 4:00 p.m., New York time, on such day, or if
on any day such security is not quoted on NASDAQ, the average of the
highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization.
2.4. Late Payments. The Borrower understands that a delay in the delivery of the
shares of Common Stock in the form required pursuant to this Article beyond
the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Borrower agrees to pay late
payments to the Holder for late issuance of such shares in the form
required pursuant to this Article II upon conversion of the Note, in the
amount equal to $500 per business day after the Delivery Date. The Borrower
shall pay any payments incurred under this Section in immediately available
funds upon demand.
2.5. Adjustment Provisions. The Fixed Conversion Price and number and kind of
shares or other securities to be issued upon conversion determined pursuant
to Section 2.1 shall be subject to adjustment from time to time upon the
happening of certain events while this conversion right remains
outstanding, as follows:
A. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes, whether
by capital reorganization, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or a
stock dividend described in paragraph (B) of this Section 3.5, or a
consolidation, merger or sale of assets described in paragraph (C) of
this Section 3.5), then, and in each such event, this Note shall
thereafter be convertible into the kind and amount of securities
receivable upon such reorganization, recapitalization,
reclassification or other change by holders of the number of shares of
Common Stock into which this Note might have been converted
immediately prior to or immediately following consummation of such
reorganization, reclassification, recapitalization or change, at the
election of the Holder.
B. Stock Splits, Combinations and Dividends. If the shares of Common
Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock
or any preferred stock issued by the Borrower in shares of Common
Stock, the Fixed Conversion Price shall be proportionately reduced in
case of subdivision of shares or stock dividend or proportionately
increased in the case of combination of shares, in each such case by
the ratio which the total number of shares of Common Stock outstanding
immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event, such
increase or decrease to take effect at the opening of business on the
day following the day upon which (i) such subdivision or combination
becomes effective, or, (ii) in the case a dividend, the date fixed for
determination of stockholders entitled to receive such dividend. For
the purpose of this paragraph, the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of
the Borrower.
C. Consolidation, Merger or Sale of Assets. In case of any permitted
consolidation of the Borrower with, or merger of the Company into, any
Person, or in case of any merger of another Person into the Borrower
(other than a consolidation or merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock), or in case of any permitted sale or transfer
of all or substantially all of the assets of the Borrower, the Person
formed by such consolidation or resulting from such merger or which
acquires such assets, as the case may be, shall agree and provide or
cause provision to be made so that a Holder shall have the right,
during the period this Note shall be convertible, to convert this Note
into the kind and amount of securities, cash and other property
receivable immediately prior to or upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock
into which this Note might have been converted by its terms (at the
Holder sole discretion), assuming such holder of Common Stock (i) is
not a Person with which the Borrower consolidated or into which the
Borrower merged or which merged into the Borrower or to which such
sale or transfer was made, as the case may be (a "Constituent
Person"), or an affiliate of a Constituent Person and (ii) failed to
exercise such Person's rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share
of Common Stock held immediately prior to such consolidation, merger,
sale or transfer by other than a Constituent Person or an affiliate
thereof and in respect of which such rights of election shall not have
been exercised ("non-electing share"), then for the purpose of this
paragraph (C) the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer
by each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of non-electing shares). The
above provisions of this paragraph (C) shall similarly apply to
successive consolidations, mergers, sales or transfers.
D. Share Issuances. Subject to the provisions of this Section 2.5, if the
Borrower shall at any time (after the date hereof) prior to the
conversion or repayment in full of the Principal Amount issue any
shares of Common Stock or securities convertible into Common Stock to
a person other than the Holder (except (i) pursuant to Subsections A,
B or C above; (ii) pursuant to options, warrants, or other obligations
to issue shares outstanding on the date hereof as disclosed to Holder
in writing; or (iii) pursuant to options that may be issued under any
employee incentive stock option and/or any qualified stock option plan
adopted by the Borrower) for a consideration per share (the "Offer
Price") less than the Fixed Conversion Price in effect at the time of
such issuance, then the Fixed Conversion Price shall be immediately
reset pursuant to the formula below. For purposes hereof, the issuance
of any security of the Borrower convertible into or exercisable or
exchangeable for Common Stock for a consideration per share less than
the then applicable Fixed Conversion Price, shall result in an
adjustment to the Fixed Conversion Price as set forth below.
If the Borrower issues any additional shares of Common Stock for a consideration
per share less than the then-applicable Fixed Conversion Price pursuant to this
Section 2.5 then, and thereafter successively upon each such issue, the Fixed
Conversion Price shall be adjusted by multiplying the then applicable Fixed
Conversion Price by the following fraction:
A + B
------------------------------
(A + B) + [((C - D) x B) / C]
A = Total amount of shares convertible pursuant to the Security Agreement
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offering price
Such adjustment shall become effective immediately upon the earlier to occur of
the date of issuance of such shares of Common Stock or the record date for the
determination of stockholders entitled to receive the convertible securities, as
the case may be. If all of the shares of Common Stock subject to such
convertible securities have not been issued when such convertible securities
expire, then the Fixed Conversion Price shall promptly be readjusted to the
Fixed Conversion Price that would then be in effect had the adjustment upon the
issuance of such convertible securities been made on the basis of the actual
number of shares of Common Stock issued upon the exercise of such convertible
securities. For the purpose of this paragraph (D), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Borrower. The Borrower will not issue any shares of Common Stock
or rights, warrants, convertible or exchangeable securities in respect of shares
of Common Stock held in the treasury of the Borrower.
E. Computation of Consideration. For purposes of any computation
respecting consideration received pursuant to Subsection D above, the
following shall apply:
(a) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that
in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Borrower for any
underwriting of the issue or otherwise in connection therewith;
(b) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors of the Borrower (irrespective of the accounting
treatment thereof); and
(c) Upon any such issuance of securities convertible into or
exchangeable for Common Stock, the aggregate consideration
received for such securities shall be deemed to be the
consideration received by the Borrower for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Borrower upon the conversion or exchange
thereof (the consideration in each case to be determined in the
same manner as provided in clauses (a) and (b) of this Subsection
(E)).
F. Calculations. All calculations under this Section 3.5 shall be made to
the nearest tenth of one cent.
G. When Adjustment May Be Deferred. No adjustment in the Fixed Conversion
Price need be made unless the adjustment would require an increase or
decrease of at least 1% in the Fixed Conversion Price. Any adjustments
that are not made shall be carried forward and taken into account in
any subsequent adjustment.
H. Voluntary Decrease of Fixed Conversion Price. The Borrower from time
to time may, with the consent of the Holder decrease the Fixed
Conversion Price by any amount for any period of time as the Board of
Directors of the Borrower deems advisable, subject to a floor of
$0.10. The Borrower shall deliver a notice of such adjustment at least
fifteen (15) days before the date the decreased Fixed Conversion Price
will take effect. The notice shall state the decreased Fixed
Conversion Price and the period of time it will be in effect.
2.6. Reservation of Shares. During the period the conversion right exists, the
Borrower will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock
upon the full conversion of this Note. The Borrower represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable. The Borrower agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who
are charged with the duty of executing and issuing stock certificates to
execute and issue the necessary certificates for shares of Common Stock
upon the conversion of this Note.
ARTICLE III
EVENTS OF DEFAULT
3.1. The occurrence of any of the events set forth in Section 19 of the Security
Agreement shall constitute an Event of Default ("Event of Default")
hereunder.
DEFAULT RELATED PROVISIONS
3.2 Default Interest. Following the occurrence and during the continuance of an
Event of Default, the Borrower shall pay additional interest on this Note
in an amount equal to two percent (2%) per month, and all outstanding
Obligations, including unpaid interest, shall continue to accrue such
additional interest from the date of such Event of Default until the date
such Event of Default is cured or waived.
3.3 Conversion Privileges. The conversion privileges set forth in Article II
shall remain in full force and effect immediately from the date hereof and
until this Note is paid in full.
3.4 Cumulative Remedies. The remedies under this Note shall be cumulative.
ARTICLE IV
DEFAULT PAYMENTS
4.1. Default Payment. If an Event of Default occurs and is continuing beyond any
applicable grace period, the Holder, at its option, may elect, in addition
to all rights and remedies of Holder under the Security Agreement and the
Ancillary Agreements and all obligations of Borrower under the Security
Agreement and the Ancillary Agreements, to require the Borrower to make a
Default Payment ("Default Payment"). The Default Payment shall be 120% of
the outstanding principal amount of the Note, plus accrued but unpaid
interest, all other fees then remaining unpaid, and all other amounts
payable hereunder. The Default Payment shall be applied first to any fees
due and payable to Holder pursuant to the Notes or the Ancillary
Agreements, then to accrued and unpaid interest due on the Notes and then
to outstanding principal balance of the Notes.
4.2. Default Payment Date. The Default Payment shall be due and payable
immediately on the date that the Holder has exercised its rights pursuant
to Section 4.1 ("Default Payment Date").
ARTICLE V
MISCELLANEOUS
5.1. Failure or Indulgence Not Waiver. No failure or delay on the part of the
Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of any such power, right or privilege preclude other or further exercise
thereof or of any other right, power or privilege. All rights and remedies
existing hereunder are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
5.2. Notices. Any notice herein required or permitted to be given shall be in
writing and provided in accordance with the terms of the Security
Agreement.
5.3. Amendment Provision. The term "Note" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as it may be amended or
supplemented.
5.4. Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and
its successors and assigns, and may be assigned by the Holder in accordance
with the requirements of the Security Agreement, provided that no
assignment of this Note shall be permitted unless it is made in compliance
with applicable federal and state securities law.
5.5. Cost of Collection. If default is made in the payment of this Note, the
Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
5.6. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought
only in the state courts of New York or in the federal courts located in
the State of New York. Both parties agree to submit to the jurisdiction of
such courts. The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs. In the event that any
provision of this Note is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to
the extent that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Note. Nothing contained
herein shall be deemed or operate to preclude the Holder from bringing suit
or taking other legal action against the Borrower in any other jurisdiction
to collect on the Borrower's obligations to Holder, to realize on any
collateral or any other security for such obligations, or to enforce a
judgment or other court order in favor of Xxxxxx.
5.7. Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted
by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
5.8. Security Interest and Guarantee. The Holder has been granted a security
interest (i) in certain assets of the Borrower and its Subsidiaries as more
fully described in the Security Agreement dated as of the date hereof and
(ii) pursuant to the Stock Pledge Agreement dated as of the date hereof.
The obligations of the Borrower under this Note are guaranteed by certain
Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated as
of the date hereof.
5.9. Construction. Each party acknowledges that its legal counsel participated
in the preparation of this Note and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party
shall not be applied in the interpretation of this Note to favor any party
against the other.
[Balance of page intentionally left blank; signature page follows.]
IN WITNESS WHEREOF, the Borrower has caused this Secured Convertible Revolving
Note to be signed in its name effective as of this 29th day of November, 2004.
DIGITAL LIFESTYLES GROUP, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Chief Financial Officer
WITNESS:
/s/ X. Xxxxxxx Xxxxxx
-------------------------------------------
X. Xxxxxxx Xxxxxx
Corporate Secretary
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $ of the
principal and $ of the interest due on the Secured
Convertible Revolving Note issued by Digital Lifestyles Group, Inc. on , 2004
into Shares of Common Stock of Digital Lifestyles Group, Inc. (the "Borrower")
according to the conditions set forth in such Note, as of the date written
below.
Date of Conversion:
--------------------------------------------------------
Conversion Price:
--------------------------------------------------------
Shares To Be Delivered:
--------------------------------------------------------
Signature:
--------------------------------------------------------
Print Name:
--------------------------------------------------------
Address:
--------------------------------------------------------
--------------------------------------------------------
Holder DWAC
--------------------------------------------------------
instructions
