Exhibit 10.7

                             SUBORDINATION AGREEMENT

         This SUBORDINATION AGREEMENT ("Subordination  Agreement") is made as of
January 28, 2005, by NATIONAL LAMPOON, INC., a Delaware corporation (hereinafter
called "Borrower"),  and NATIONAL LAMPOON NETWORKS, INC., a Delaware corporation
(hereinafter called "Debtor"), in favor of N. WILLIAMS FAMILY INVESTMENTS, L.P.,
an Arizona limited partnership (hereinafter called "Lender").

                                    RECITALS

         A.  Debtor  is  indebted  to  Borrower,  as  successor  by merger to J2
Communications, Inc., a California corporation, pursuant to that certain General
Security  Agreement dated August,  2002 (the "Subordinate  Security  Agreement")
between  Borrower and Debtor,  as  evidenced by that certain  Demand Note in the
original   principal   amount  of  Two  Hundred   Thousand  and  No/100  Dollars
($200,000.00),  made by Debtor payable to the order of Borrower, as successor by
merger to J2  Communications,  Inc., a California  corporation (the "Subordinate
Note").

         B. Lender has agreed to extend  credit  (the  "Loan") to Borrower to be
evidenced by that certain  Secured  Promissory Note of even date herewith in the
principal  amount of Two  Million  Seven  Hundred  Thousand  and No/100  Dollars
($2,700,000.00), by Borrower payable to the order of Lender (the "Senior Note"),
and secured by that  certain  Security  Agreement  of even date  herewith by and
between  Borrower,  Debtor,  and  National  Lampoon  Tours,  Inc.,  a California
corporation,  as Grantors,  and Lender,  as Secured Party (the "Senior  Security
Agreement").

         C. It is a  condition  to the  making of the Loan,  that  Borrower  and
Debtor enter into this Subordination Agreement.

         D. In  order  to  induce  Lender  to enter  into  the  Senior  Security
Agreement, and to from time this time, or from time to time, at its option, make
loans or extend credit or other accommodations or benefits to or for the account
of Borrower,  with or without security, or to purchase or extend credit upon any
instrument  or writing in  respect  of which the  Borrower  may be liable in any
capacity in such manner and amount and upon terms and  conditions  as the Lender
may deem advisable,  and in consideration of any such loan, renewal or extension
of  credit  which  the  Lender  may  make,   the  Borrower  does  hereby  wholly
subordinate,   as  hereinafter   provided,   any  and  all  present  and  future
indebtedness of Debtor to Borrower,  absolute or contingent, and any instrument,
negotiable  or  otherwise,  evidencing  any such  indebtedness,  and all claims,
rights and remedies therefor,  including,  without  limitation,  the Subordinate
Security Agreement and the Subordinate Note (sometimes  hereinafter  referred to
as  "Subordinated  Indebtedness"),  to any and all  indebtedness  of Borrower to
Lender, whether now existing or hereafter arising, direct or indirect,  absolute
or  contingent,  joint  and  several,  secured  or  unsecured,  due or  not  due
(including,  without  limitation,  all  amounts due under the Senior  Note,  the
Senior Security Agreement, and any other documents,  instruments, and agreements
executed in connection therewith), and whether arising directly between Borrower
and Lender, or acquired outright,  conditionally or as collateral  security from
another by the Lender,  and any renewals,  modifications or extensions  thereof,
and any interest thereon, and all costs of collecting the same,  including,  but

<PAGE>

not  limited  to  attorneys'  fees  incurred  by Lender  (sometimes  hereinafter
referred to as "Superior Indebtedness").

         NOW THEREFORE,  so long as Borrower is indebted to Lender on account of
Superior Indebtedness, the parties hereto undertake and agree as follows:

         1.       Subordinated  Indebtedness  shall,  at  all  times  and in all
                  respects,  be wholly  subordinate  and  inferior  in claim and
                  right to the Superior Indebtedness, and all claims, rights and
                  remedies therefor are hereby  subordinated and made subsequent
                  and  inferior  to the  Superior  Indebtedness  and any claims,
                  rights  and  remedies   arising  out  of,  or  in   connection
                  therewith.

         2.       So long as no Event of Default (as defined in the Senior Note)
                  or event  which  with  notice  or lapse of time or both  would
                  become an Event of Default  has  occurred  and is  continuing,
                  regularly  scheduled payments of principal and interest on the
                  Subordinated  Indebtedness  may be made by Debtor and accepted
                  by Borrower as such payments become due.

         3.       During any period that an Event of Default,  or an event which
                  with notice or lapse of time or both would  become an Event of
                  Default, has occurred and is continuing, Debtor shall not make
                  and Borrower shall not accept any payments with respect to the
                  Subordinated Indebtedness.

         4.       In the event of any  distribution,  division,  or application,
                  partial or complete, voluntary or involuntary, by operation of
                  law or otherwise,  of all or any part of the assets of Debtor,
                  or the proceeds thereof,  to creditors of Debtor, by reason of
                  the liquidation,  dissolution, or other winding up of Debtor's
                  business,   or  in  the  event  of  any  sale,   receivership,
                  insolvency or bankruptcy  proceedings by or against Debtor, or
                  assignment for the benefit of creditors, or of any proceedings
                  by or against  Debtor for any relief under any  bankruptcy  or
                  insolvency  laws,  or  relating  to  the  relief  of  debtors,
                  readjustment of indebtedness,  reorganizations,  arrangements,
                  compositions  or extensions,  or of any other event whereby it
                  becomes  necessary  or  desirable  to file or  present  claims
                  against Debtor for the purpose of receiving  payment  thereof,
                  or on account thereof, then and in any such event, any payment
                  or  distribution  of any kind or character,  either in cash or
                  other  property,  which shall be made or shall be payable with
                  respect to any Subordinated Indebtedness shall be paid over to
                  Lender  for   application  to  the  payment  of  the  Superior
                  Indebtedness, whether due or not due, and no payments shall be
                  made upon or in respect of  Subordinated  Indebtedness  unless
                  and until the Superior  Indebtedness  shall have been paid and
                  satisfied in full. In any such event, all claims of the Lender
                  and all  claims of the  Borrower  shall,  at the option of the
                  Lender,  forthwith  become due and payable  without  demand or
                  notice.

         5.       In order to protect  and enable  Lender to enforce  its rights
                  hereunder, or otherwise, Borrower hereby assigns to Lender all
                  of the  Subordinated  Indebtedness,  and all of the  claims of
                  Borrower against Debtor subordinated hereby, together with any
                  security   interest  of  Borrower   securing  the  payment  of

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<PAGE>

                  Subordinated Indebtedness.  Lender shall not be under any duty
                  to take any action in connection with any of said  instruments
                  delivered or claims or security  therefor  assigned to it, and
                  shall  not  be   responsible  in  any  respect  in  connection
                  therewith  for action it may take or refrain from  taking,  or
                  otherwise, except for willful malfeasance.

         6.       Borrower  irrevocably  authorizes and empowers Lender,  or any
                  person Lender may  designate,  to act as attorney for Borrower
                  with full  power and  authority  in the name of  Borrower,  or
                  otherwise, to make and present such claims or proofs of claims
                  against Debtor on account of the Subordinated  Indebtedness as
                  Lender,  or its appointee,  may deem expedient and proper and,
                  if necessary,  to vote such claims in any  proceedings  and to
                  receive and collect any and all  dividends  or other  payments
                  and  disbursements  made thereon in whatever  form they may be
                  paid or issued, and to give acquittance  therefor and to apply
                  same to the Superior Indebtedness, and Borrower hereby agrees,
                  from  time to time and upon  request,  to  make,  execute  and
                  deliver  to  Lender  such  powers  of  attorney,  assignments,
                  endorsements,  proofs  of  claim,  pleadings,   verifications,
                  affidavits,  consents,  agreements or other instruments as may
                  be  requested  by  Lender  in order to  enable  the  Lender to
                  enforce  any and all  claims  upon,  or with  respect  to, the
                  Subordinated Indebtedness,  and to collect and receive any and
                  all  payments  or  distributions   which  may  be  payable  or
                  deliverable   at  any  time  upon  or  with   respect  to  the
                  Subordinated Indebtedness.

         7.       Should any  payment or  distribution  or  security or proceeds
                  thereof,  other than the  payments of  principal  and interest
                  permitted  pursuant  to  Paragraph  2 hereof,  be  received by
                  Borrower upon or with respect to the Subordinated Indebtedness
                  prior  to  the  satisfaction  of  the  Superior  Indebtedness,
                  Borrower  will  forthwith   deliver  the  same  to  Lender  in
                  precisely the form as received  except for the  endorsement or
                  assignment of Borrower where  necessary for application on the
                  Superior  Indebtedness,  whether due or not due,  and until so
                  delivered  the same  shall be held in  trust  by  Borrower  as
                  property  of the  Lender.  In the  event  of  the  failure  of
                  Borrower  to make  any such  endorsement  or  assignment,  the
                  Lender, or any of its officers or employees,  on behalf of the
                  Lender, is hereby irrevocably authorized to make the same.

         8.       No renewal,  modification  or  extension of time of payment of
                  the Superior Indebtedness,  and no release or surrender of any
                  security for the Superior Indebtedness,  or the obligations of
                  any endorsers, sureties or guarantors thereof, or release from
                  the terms of this or any other subordination  agreement of any
                  claims  subordinated,  and no delay or omission in  exercising
                  any right or power on  account  of or in  connection  with the
                  Superior Indebtedness,  or under this Subordination Agreement,
                  shall,  in any manner,  impair or affect the rights and duties
                  of Lender,  Debtor, and Borrower.  Lender, in its uncontrolled
                  discretion,  may waive or  release  any right or option  under
                  this  Subordination  Agreement without the consent of Borrower
                  or Debtor,  and without  otherwise  in any way  affecting  the
                  obligations  of Borrower and Debtor  hereunder.  Debtor hereby
                  waives  notice  of  the  creation,   existence,   renewal,  or
                  modification  or  extension  of the  time of  payment,  of the
                  Superior Indebtedness.

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<PAGE>

         9.       The Debtor and  Borrower  agree to make and  maintain in their
                  books of  account  notations  satisfactory  to  Lender  of the
                  rights and  priorities of Lender  hereunder,  and from time to
                  time,   upon  request,   to  furnish   Lender  with  financial
                  statements  certified by the chief financial  officer.  Lender
                  may  inspect  the  books of  account  and any  records  of the
                  Borrower and Debtor at any time during  business  hours.  Upon
                  the request of Lender,  Borrower and Debtor agree to cause all
                  Subordinated Indebtedness to be evidenced by the note or notes
                  of  Borrower  with such  maturity  date or dates as Lender may
                  request.  Such note or  notes,  together  with any  previously
                  existing notes or other  instruments  evidencing  Subordinated
                  Indebtedness,  shall be delivered to Lender and, at the option
                  of  Lender,  may be held by Lender  or  returned  to  Borrower
                  marked with a specific statement that the indebtedness thereby
                  evidenced is subject to the  provisions of this  Subordination
                  Agreement.

         10.      This Subordination  Agreement shall be a continuing  agreement
                  and Lender may continue, without notice to Borrower or Debtor,
                  to lend monies, extend credit and make other accommodations to
                  or for the account of Borrower on the faith hereof and until a
                  written revocation, signed by Borrower, is received by Lender.
                  Such revocation,  however, shall not affect this Subordination
                  Agreement  with respect to any  obligations  or liabilities of
                  Borrower   then   existing   in   connection   with   Superior
                  Indebtedness and, as to such obligations and liabilities, such
                  revocation  shall not become  effective  unless and until such
                  obligations  and  liabilities of Borrower to Lender shall have
                  been paid in full. If Debtor or Borrower is a partnership,  no
                  change in the  respective  partnership  shall affect the terms
                  hereof.

         11.      Borrower and Debtor  agree that  Lender,  at any time and from
                  time to time,  either  before  or after  any  such  notice  of
                  revocation,  may enter into such agreement or agreements  with
                  Borrower,  as Lender may deem  proper,  extending  the time of
                  payment or renewing or otherwise  altering the terms of all or
                  any of the obligations of Borrower to Lender, or affecting any
                  security  underlying  any or all of such  obligations,  or may
                  exchange,  sell or surrender  or otherwise  deal with any such
                  security, or may release any balance of funds of Borrower with
                  Lender,  without  notice to  Borrower or Debtor and without in
                  any way impairing or affecting this Subordination Agreement.

         12.      Borrower  and  Debtor  consent  and  agree  that all  Superior
                  Indebtedness  shall be deemed to have been made or incurred at
                  the request of Borrower  and Debtor and in reliance  upon this
                  Subordination Agreement.

         13.      No  waiver  shall be deemed to be made by Lender of any of its
                  rights hereunder unless the same shall be in writing signed on
                  behalf of the Lender, and each such waiver, if any, shall be a
                  waiver only with respect to the specific  matter or matters to
                  which the waiver relates and shall in no way impair the rights
                  of the  Lender or the  obligations  of  Borrower  or Debtor to
                  Lender in any other respect at any other time.

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<PAGE>

         14.      This  Subordination  Agreement  shall  inure to the benefit of
                  Lender and the  successors  and  assigns  of  Lender,  and any
                  financing  institution  joining  in  making  said  loan(s)  or
                  extending said line(s) of credit, or committing itself to make
                  any  advances in  connection  therewith,  or which may now, or
                  hereafter,  participate therein.  Notice of acceptance of this
                  Subordination    Agreement   is   hereby   waived   and   this
                  Subordination Agreement shall be binding upon the Borrower and
                  Debtor,  their  respective  heirs,  personal  representatives,
                  successors  and  assigns,   as  the  case  may  be,  it  being
                  understood,  however,  that no assignment of the  Subordinated
                  Indebtedness  due Borrower  from Debtor,  or any part thereof,
                  shall be made to one not a party  hereto  without  the written
                  consent of the Lender first had and obtained,  as  hereinabove
                  provided.

         15.      Borrower  agrees  not to  commence  or  join  with  any  other
                  creditor   of   Debtor   in   commencing    any    bankruptcy,
                  reorganization or insolvency proceedings against Debtor.

         16.      This  Subordination  Agreement  shall be  deemed  to have been
                  executed, delivered and performed in California, and construed
                  according to the laws of the State of  California.  Debtor and
                  Borrower  waive  notice  of  acceptance  hereof  and all other
                  notices or demands whatsoever.

         17.      In the event of a breach of any  covenant  or  agreement  made
                  herein  by either  Debtor  or  Borrower,  Lender  may,  at its
                  option,  declare  all  of  the  Superior  Indebtedness  and/or
                  Subordinated Indebtedness immediately due and payable.

         18.      The words "Debtor" and "Borrower" as herein used shall include
                  the plural as well as the singular  and, if Debtor or Borrower
                  includes two (2) or more,  they shall be jointly and severally
                  bound hereby.



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<PAGE>

         IN WITNESS WHEREOF, this Subordination Agreement has been duly executed
as of the date first written above.

                                         NATIONAL LAMPOON, INC., a Delaware
                                         corporation



                                         By:
                                            -----------------------------------
                                         Name:
                                              ---------------------------------
                                         Title:
                                               --------------------------------

                                                                     "Borrower"



                                         NATIONAL LAMPOON NETWORKS, INC., a
                                         Delaware corporation



                                         By:
                                            -----------------------------------
                                         Name:
                                              ---------------------------------
                                         Title:
                                               --------------------------------

                                                                       "Debtor"




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