December
18, 2008

    


    Lateral
Media, Inc.

    2121
Avenue of the Stars

    Suite
2550

    Los
Angeles, CA 90067

    Attention:
President

    


    Re:           Conversion
of Outstanding Indebtedness

     

    Ladies
and Gentlemen:

     

    The
undersigned (the “Lender”) has made
advances to Lateral Media, Inc. (the “Company”), pursuant
to that certain letter agreement, dated as of July 11, 2007, as subsequently
amended on November 15, 2007, April 18, 2008 and August 1, 2008 (the “Loan Agreement”),
pursuant to which the Lender agreed to provide a loan to the Company in the
principal amount of up to $750,000, plus any accrued interest thereon (the
“Loan”).  The
Lender and the Company now wish to convert all principle and interest
outstanding under the Loan as of the date hereof into shares of the Company’s
common stock, $0.001 par value per share (the “Common Stock”), on
the terms and conditions set forth below:

     

    1.           Conversion.  The
parties agree and acknowledge that, notwithstanding the terms of the Loan
Agreement, as of the date hereof, the principal balance of the Loan is $750,000,
and the accrued and unpaid interest outstanding under the Loan is $47,876.71,
for an aggregate balance of $797,876.71 (the “Current Outstanding
Debt”).  As repayment in full of such balance, the Current
Outstanding Debt is hereby converted into 1,063,836 fully paid and nonassessable
shares of the Company’s Common Stock.  Effective as of the date
hereof, the Current Outstanding Debt has been satisfied in
full.   Notwithstanding the foregoing, the Lender may still loan
the Company up to a principal amount of $750,000 at any time and from time to
time prior to the Company’s consummation of a Next Financing (as defined in the
Loan Agreement), as set forth in the Loan Agreement.  As soon as
practicable hereafter, the Company agrees to issue and deliver to the Lender a
certificate representing the shares of Common Stock issuable in exchange for the
Current Outstanding Debt as provided in this Section 1 (the “Shares”).

     

    2.           Investment
Intent. The Lender represents and warrants to the Company that such
Lender (i) is acquiring the Shares for such Lender’s own account for the purpose
of investment, and (ii) is not acquiring the Shares with a view to, or for
resale in connection with, a distribution, nor with any present intention of
distributing or selling the Shares and understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the “Securities Act”), or
the securities laws of any state.  The Lender understands that until
the Shares have been registered under the Securities Act and applicable state
securities laws each certificate representing such Shares shall bear a legend
substantially similar to the following:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND THEY MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON, INCLUDING A PLEDGEE, UNLESS
EITHER A REGISTRATION STATEMENT WITH RESPECT TO SUCH SHARES SHALL BE EFFECTIVE
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE COMPANY SHALL HAVE RECEIVED
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE TRANSACTION IS EXEMPT
FROM REGISTRATION UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.

     

    3.           Accredited
Investor.  The Lender represents and warrants to the Company
that such Lender is an “accredited investor” as such term is defined in
Regulation D under the Securities Act.

     

    4.           Power of
Lender.  The
Lender represents and warrants to the Company that it has the right and power to
execute, deliver and perform its obligations hereunder.

     

    5.           Power of
Company.  The Company represents and warrants to the Lender
that (i) it has the right and power under its charter and bylaws to execute,
deliver and perform its obligations hereunder; (ii) this Letter Agreement has
been duly authorized by all necessary corporate or action, and (iii) the officer
executing and delivering this Letter Agreement has the requisite right, power,
capacity and authority to do so on behalf of such corporation.

     

    6.           The
Shares.  The Company represents and warrants to the Lender
that: the Shares, when issued and delivered in exchange for the Current
Outstanding Debt in accordance with the terms of this Letter Agreement, will be
duly authorized, validly issued and fully paid and non-assessable, free and
clear of all pledges, liens, encumbrances and preemptive rights.

     

    7.           Governing
Law; Jurisdiction.  This Letter Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware governing
contracts to be made and performed therein without giving effect to principles
of conflicts of law, and, with respect to any dispute arising out of this Letter
Agreement, each party hereby consents to the exclusive jurisdiction of the
courts sitting in the State of Delaware.  Each of the parties waives
any defense of inconvenient forum to the maintenance of any action or proceeding
so brought and each party further agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court.

     

    8.           Counterparts.  This
Letter Agreement may be executed in several counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
document.

     

    
      
        
        

      

      
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    9.           Further
Assurances.  The Lender will execute and deliver to the Company
any writings and do all things necessary or reasonably requested by the Company
to carry into effect the provisions and intent of this Letter
Agreement.

     

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    IN WITNESS WHEREOF, the
undersigned have executed this Letter Agreement as of the date set forth
above.

    


    
      
        	
                LENDER:

              
	 
      
	
                Trinad
      Capital Master Fund, Ltd.

              
	 
      
	
                By:

              	
                /s/ Jay A. Wolf

              
	
                Name:

              	
                Jay
      A. Wolf

              
	
                Title:
      Managing Director of Trinad Management, LLC, the  Manager of
      Trinad Capital Master Fund
Ltd.

              


      

    

    


    Accepted
and Agreed:

    


    
      
        	
                THE COMPANY

              
	 
      
	
                Lateral
      Media, Inc.

              
	 
      
	
                By:

              	
                /s/ Jeffrey Schwartz

              
	
                Name:

              	
                Jeffrey
      Schwartz

              
	
                Title:

              	
                Chief
      Executive Officer

              


      

    

     

    
      
        
        

      

      
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