Document:

THIS NOTE
AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AS SET FORTH HEREIN.  NEITHER THIS
NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER SUCH ACT.

     

    LATERAL
MEDIA, INC.

     

    7%
Convertible Promissory Note

     

    
      	
              $[_______]

            	
              June
      __, 2009

            

    

    

     

     LATERAL
MEDIA, INC., a corporation organized under the laws of the State of Delaware
(the “Company”), for value received,, hereby promises to pay to [__________],
with an address at [________], or its successors or permitted assigns (the
“Holder”), the principal amount of [______] ($[______]) in lawful money of the
United States, with interest thereon to be computed from the date hereof on the
unpaid principal balance at the rate and as herein provided.

     

    1.           Interest;
Payments.

     

    (a)           Principal
of, and any accrued and unpaid interest on, this Note shall be due and payable
on June __,  2011 (such date and time hereinafter referred to as the
“Maturity Date”), unless it has been previously prepaid or converted in full in
accordance with the terms hereof.  Until this Note is converted or
paid in full, interest on this Note shall accrue from the date hereof (the
“Issue Date”) at a rate of seven percent (7%) per annum.

     

    (b)           If
the Maturity Date would fall on a day that is not a Business Day (as defined
below), the payment due on the Maturity Date will be made on the next succeeding
Business Day with the same force and effect as if made on the Maturity
Date.  “Business Day” means any day which is not a Saturday or Sunday
and is not a day on which banking institutions are generally authorized or
obligated to close in the city of New York, New York.

     

    (c)           Payment
of principal and accrued and unpaid interest on this Note shall be made by wire
transfer of immediately available funds to an account designated by the Holder
or by check sent to the Holder’s address set forth above or to such other
address as the Holder may designate for such purpose from time to time by
written notice to the Company, in such coin or currency of the United States as
at the time of payment shall be legal tender for the payment of public and
private debts.

     

    (d)           The
Company may prepay this Note in whole or in part at any time and from time to
time without penalty, each such prepayment to be accompanied by the payment of
accrued and unpaid interest to the date of each prepayment on the amount
prepaid.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.           Conversion.

     

    (a)           Conversion upon a Qualified
Financing.  Unless previously paid in full, the entire
outstanding principal plus accrued and unpaid interest under this Note shall
automatically convert into Qualified New Securities (as defined below) as of the
closing of a Qualified Financing (as defined below). For purposes hereof, a
“Qualified Financing” shall mean an equity financing of the Company the gross
proceeds of which, in the aggregate, equal or exceed $3,000,000 or such other
amount as shall be agreed upon by the Company and the Holder, and “Qualified New
Securities” shall mean the new securities issued in connection with such
Qualified Financing. The number of shares of Qualified New Securities into which
this Note shall be convertible shall be determined by dividing (i) the
outstanding principal balance of this Note and all accrued and unpaid interest
thereon (collectively, the “Note Value”), by (ii) the price per share at which
the Qualified New Securities are sold in the Qualified Financing; provided,
that, if a Qualified Financing consists of two or more capital raises, the price
per share shall be deemed to be the weighted average purchase price for such
capital raises computed on a fully-converted to common stock
basis.  In the event that more than one class or series of equity
securities are issued in a Qualified Financing, then the portion of this Note
convertible into each such class or series shall correspond to the percentage
that each such class or series represents of all of the New Qualified Equity
Securities so issued calculated based on the gross proceeds to the Company
derived from each such class and series.

     

    (b)           Issuance of Conversion
Shares.  Upon conversion of this Note pursuant to Section 2(a),
the Holder shall be deemed to be the holder of record of the Qualified New
Securities issuable upon such conversion (the “Conversion Shares”), without any
further action by the Holder and whether or not this Note is surrendered to the
Company or the transfer agent for this Note, notwithstanding that the transfer
books of the Company shall then be closed or certificates representing such
Conversion Shares shall not then have been actually delivered to the
Holder.  As soon as practicable after the closing of the Qualified
Financing, as applicable, the Company shall issue and deliver to the Holder a
certificate or certificates for the Conversion Shares registered in the name of
the Holder or its designee(s); provided, that the Company, by notice given to
the Holder promptly after the closing of the Qualified Financing may require the
Holder, as a condition to the delivery of such certificate or certificates, to
present this Note to the Company.

     

    (c)           Delivery of Certificates. The
issuance of any Conversion Shares, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made without
charge to the Holder for any tax or other charge in respect of such
issuance.  The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of any certificate in a name other than that of the Holder, and the
Company shall not be required to issue or deliver any such certificate unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.

     

    (d)           No Rights of
Stockholder.  The Holder shall not have, solely on account of
such status as a holder of this Note, any rights of a stockholder of the
Company, either at law or in equity, or any right to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided in
this Note.

     

    (e)           Reservation of
Shares.  The Company shall at all times reserve and keep
available out of its authorized and unissued capital stock, solely for the
purpose of providing for the exercise of the conversion rights provided for
under this Section 2, such number of shares of Qualified New Securities as
shall, from time to time, be sufficient for issuance upon conversion of this
Note in full.  The Company covenants that all Conversion Shares shall
be validly issued, fully paid, nonassessable, and free of preemptive
rights.

     

    (f)           Termination of Rights Under this
Note.  Immediately upon the date on which the full Note Value
has been converted, this Note shall no longer be deemed to be outstanding and
all rights with respect to this Note shall immediately cease and terminate on
the conversion date, except only the right of the Holder to receive the shares
to which it is entitled as a result of the conversion on the conversion date
under the terms, and subject to conditions, of this Note.

     

    
      
         

      

      
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    (g)           Fractional
Shares.  No fractional shares of Qualified New Securities shall
be issued upon conversion of this Note.  In lieu thereof, the shares
of Qualified New Securities otherwise issuable shall be rounded up or down to
the nearest whole share of such Qualified New Securities.

    

    (h)           Securities Act of
1933.  Upon conversion of this Note, the Holder may be required
to execute and deliver to the Company an instrument, in form satisfactory to the
Company, representing that the shares of Qualified New Securities issuable upon
conversion hereof are being acquired for investment only and not with a view to
distribution within the meaning of the Securities Act of 1933, as
amended.

    

    3.           Events of
Default.  The occurrence of any of the following events shall
constitute an event of default (an “Event of Default”):

     

    (a)           a
default in the payment of the principal or interest on any Note, when and as the
same shall become due and payable and a continuance of such default for three
days or more following receipt of written notice from the Holder of such default
(a “Payment Default”);

     

    (b)           the
Company’s failure to convert any portion of the Note Value as provided in this
Note (a “Conversion Default”); and/or

     

    (c)           the
entry of a decree or order by a court having jurisdiction adjudging the Company
a bankrupt or insolvent, or approving a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company, under
federal bankruptcy law, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, and the
continuance of any such decree or order unstayed and in effect for a period of
60 days; or the commencement by the Company of a voluntary case under federal
bankruptcy law, as now or hereafter constituted, or any other applicable federal
or state bankruptcy, insolvency, or other similar law, or the consent by the
Company to the institution of bankruptcy or insolvency proceedings against it,
or the filing by the Company of a petition or answer or consent seeking
reorganization or relief under federal bankruptcy law or any other applicable
federal or state law, or the consent by the Company to the filing of such
petition or to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company or of any substantial part of
the property of the Company, or the making by the Company of an assignment for
the benefit of creditors, or the admission by the Company in writing of its
inability to pay its debts generally as they become due, or the discontinuance
of the business, dissolution, winding up, liquidation or cessation of the
existence by or of the Company, or the taking of corporate action by the Company
in furtherance of any such action.

     

    4.           Remedies Upon Default. Upon
the occurrence of an Event of Default referred to in Sections 3 (a) through (c),
the principal amount then outstanding of, and the accrued and unpaid interest
on, this Note shall automatically become immediately due and
payable.  Upon the occurrence of an Event of Default referred to in
Sections 3(a) and (b), the Holder, by notice in writing given to the Company,
may declare the entire principal amount then outstanding of, and the accrued and
unpaid interest on, this Note to be due and payable immediately, and upon any
such declaration the same shall become and be due and payable immediately,
without presentation, demand, protest or other formalities of any kind, all of
which are expressly waived by the Company.  The Holder may institute
such actions or proceedings in law or equity as it shall deem expedient for the
protection of its rights and may prosecute and enforce its claims against all
assets of the Company, and in connection with any such action or proceeding
shall be entitled to receive from the Company payment of the principal amount of
this Note plus accrued and unpaid interest to the date of payment plus
reasonable expenses of collection, including, without limitation, reasonable
attorneys’ fees and expenses actually incurred.  For the avoidance of
doubt, the foregoing is not intended as an exclusive remedy and the Holder may
enforce any other rights under this Note any other agreement or otherwise under
applicable law.

     

    
      
         

      

      
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    5.           Miscellaneous.

     

    (a)           The
terms and conditions of this Note shall inure to the benefit of and be binding
upon the respective successors and permitted assigns of the parties; provided,
however, that neither party may assign any of its rights or obligations
hereunder without the prior written consent of the other.  Assignment
of all or any portion of this Note in violation of this Section 5(a) shall be
null and void.  Nothing in this Note, expressed or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations,
or liabilities under or by reason of this Note, except as expressly provided in
this Note.

     

    (b)           Any
notice or other communication required or permitted to be given hereunder shall
be in writing and shall be deemed delivered (i) when received, if delivered by
hand, (ii) one Business Day after being sent by nationally recognized overnight
courier service, (iii) three Business Days after being sent by certified or
registered mail, return receipt requested, or (iv) upon confirmed transmission
when sent by facsimile or other electronic transmission if sent during normal
business hours of the recipient and otherwise on the next Business Day
(provided, that any facsimile or other electronic transmission is followed by
delivery via another method permitted hereby), addressed (A) if to the Company,
at its address at 2121 Avenue of the Stars, Suite 2550, Los Angeles, California,
90067; to the attention of Jeffrey Schwartz; (B) if to the Holder, at its
address at ____________________; to the attention of ___________; or (C) in
either case, to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 5(b).  Any notice
given by means other than as set forth above shall be deemed effective upon
receipt.

     

    (c)           Upon
receipt of evidence satisfactory to the Company, of the loss, theft, destruction
or mutilation of this Note (and upon surrender of this Note if mutilated),
including an affidavit of the Holder thereof that this Note has been lost,
stolen, destroyed or mutilated together with an indemnity against any claim that
may be made against the Company on account of such lost, stolen, destroyed or
mutilated Note, and upon reimbursement of the Company’s reasonable incidental
expenses, the Company shall execute and deliver to the Holder a new Note of like
date, tenor and denomination.

     

    (d)           No
course of dealing and no delay or omission on the part of the Holder or the
Company in exercising any right or remedy shall operate as a waiver thereof or
otherwise prejudice the Holder’s or the Company’s rights, powers or remedies, as
the case may be.  No right, power or remedy conferred by this Note
upon the Holder or the Company shall be exclusive of any other right, power or
remedy referred to herein or now or hereafter available at law, in equity, by
statute or otherwise, and all such remedies may be exercised singly or
concurrently.

     

    (e)           If
one or more provisions of this Note are held to be unenforceable under
applicable law, such provision shall be excluded from this Note and the balance
of this Note shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.  This Note may be
amended only by a written instrument executed by the Company and the Holder
hereof.  Any amendment shall be endorsed upon this Note, and all
future Holders shall be bound thereby.

     

    (f)           This
Note shall be governed by and construed in accordance with the laws of the State
of Delaware, without giving effect to principles governing conflicts of
law.

     

     

     

     

     (Remainder
of this page left intentionally blank. Signature page to follow.)

     

     

     

    
      
         

      

      
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    IN WITNESS WHEREOF, the
Company has caused this Note to be executed and dated the day and year first
above written.

     

    
      
        
          
            	 
      	
                    LATERAL
      MEDIA, INC.

                  	 
	 
      	 
      	 
      	 
	 
      	
                    By:

                  	
                     
      

                  	 
	 
      	
                    Name:

                  	 
      	 
	 
      	
                    Title:

                  	 
      	 

          

        

      

    

    

     

     

     

     

     

     

     

    
      
         

      

      
        5THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ANY EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED TO ANY PERSON, INCLUDING A PLEDGEE, UNLESS (1) EITHER (A) A
REGISTRATION STATEMENT WITH RESPECT THERETO SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT, OR (B) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT IS AVAILABLE, AND (2) THERE  SHALL HAVE BEEN COMPLIANCE
WITH ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.

     

    
      	
              No.
      ____________

            	
              For
      the Purchase

            
	 
      	
              of
      [______]shares

            
	 
      	
              of
      Common Stock

            

    

    

    WARRANT
TO PURCHASE

     

    COMMON
STOCK

     

    OF

     

    LATERAL
MEDIA, INC.

    

    (A
DELAWARE CORPORATION)

     

    LATERAL MEDIA, INC., a Delaware
corporation (the “Company”), for value received, hereby certifies that [______] (the “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company, at
any time or from time to time at or before the earlier of 5:00 p.m. New York
City time on June __, 2011 (the “Expiration Date”) and the termination of this
Warrant as provided in Section 7 hereof, [______] shares of Common Stock, par
value $0.001 per share, of the Company (the “Common Stock”), at a purchase price
per share equal to $0.01 per share (the “Base Price”), as adjusted upon the
occurrence of certain events as set forth in Section 2 of this Warrant. The
shares of stock issuable upon exercise of this Warrant, and the purchase price
per share, are hereinafter referred to as the “Warrant Stock” and the “Purchase
Price,” respectively.

     

    1.           Exercise.

     

    1.1         
Manner of Exercise; Payment
in Cash.  This Warrant may be exercised by the Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as Exhibit A
duly executed by the Holder, at the principal office of the Company, or at such
other place as the Company may designate, accompanied by payment in full of the
Purchase Price payable in respect of the number of shares of Warrant Stock
purchased upon such exercise.  Payment of the Purchase Price shall be
in cash or by certified or official bank check payable to the order of the
Company.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.2         
Effectiveness.  Each
exercise of this Warrant shall be deemed to have been effected immediately prior
to the close of business on the day on which this Warrant shall have been
surrendered to the Company as provided in Section 1.1 above.  At such
time, the person or persons in whose name or names any certificates for Warrant
Stock shall be issuable upon such exercise as provided in Section 1.3 below
shall be deemed to have become the holder or holders of record of the Warrant
Stock represented by such certificates.

     

    1.3.        
Delivery of
Certificates.  As soon as practicable after the exercise of
this Warrant in full or in part, and in any event within ten (10) business days
thereafter, the Company at its sole expense will cause to be issued in the name
of, and delivered to, the Holder, or, subject to the terms and conditions
hereof, as such Holder (upon payment by such Holder of any applicable transfer
taxes) may direct:

     

    (a)         
A
certificate or certificates for the number of full shares of Warrant Stock to
which such Holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash in an
amount determined pursuant to Section 1.5 hereof, and

     

    (b)         
In case
such exercise is in part only, a new warrant or warrants (dated the date hereof)
of like tenor, calling in the aggregate on the face or faces thereof for the
number of shares of Warrant Stock (without giving effect to any adjustment
therein) equal  to the number of such shares called for on the face of
this Warrant minus the number of such shares purchased by the Holder upon such
exercise as provided in Section 1.1 above.

     

    1.4           Right to Convert Warrant
into Stock: Net Issuance.

    

    (a)           Right to
Convert.  Subject to Section 6, in addition to and without
limiting the rights of the Holder under the terms of this Warrant, the Holder
shall have the right to convert this Warrant or any portion thereof (the
“Conversion Right”) into shares of Warrant Stock as provided in this Section 1.4
at any time or from time to time during the term of this
Warrant.  Upon exercise of the Conversion Right with respect to a
particular number of shares subject to this Warrant (the “Converted Warrant
Shares”), the Company shall deliver to the Holder (without payment by the Holder
of any Purchase Price or any cash or other consideration) that number of shares
of fully paid and nonassessable Warrant Stock equal to the quotient obtained by
dividing (X) the value of this Warrant (or the specified portion hereof) on the
Conversion Date (as defined in subsection (b) hereof), which value shall be
determined by subtracting (A) the aggregate Purchase Price of the Converted
Warrant Shares immediately prior to the exercise of the Conversion Right from
(B) the aggregate fair market value of the Converted Warrant Shares issuable
upon exercise of this Warrant (or the specified portion hereof) on the
Conversion Date (as herein defined) by (Y) the fair market value of one share of
Warrant Stock on the Conversion Date (as herein defined).

     

    
      
        
        

      

      
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    Expressed
as a formula, such conversion shall be computed as follows:

    

    X           =           
B-A

                                 
Y

    

    
      	
              where:

            	
              X   =

            	
              the
      number of shares of Warrant Stock that may be issued to
    Holder

            

    

    

    
      	
               
      

            	
              Y   =

            	
              the
      fair market value (FMV) of one share of Warrant
  Stock

            

    

    

    
      
        	
                 
      

              	
                A   =

              	
                the
      aggregate Warrant Price (i.e., Converted Warrant Shares x Purchase
      Price)

              

         

        	 	B   =  	the
      aggregate FMV (i.e., FMV x Converted Warrant
Shares)

      

    

     

    No
fractional shares shall be issuable upon exercise of the Conversion Right, and,
if the number of shares to be issued determined in accordance with the foregoing
formula is other than a whole number, the Company shall pay to the Holder an
amount in cash equal to the fair market value of the resulting fractional share
of the Conversation Date (as herein defined).

    

    (b)           Method of
Exercise.  The Conversion Right may be exercised by the Holder
by the surrender of this Warrant at the principal office of the Company together
with the Subscription Form in the form attached hereto duly completed and
executed and indicating the number of shares subject to this Warrant which are
being surrendered (referred to in Section 1.4(a) hereof as the Converted Warrant
Shares) in exercise of the Conversion Right.  Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
“Conversion Date”), and, at the election of the Holder hereof, may be made
contingent upon the occurrence of any of the events specified in Section
7.  Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new Warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the Holder within thirty (30) days following the
Conversion Date.

    

    (c)           Determination of Fair Market
Value.  For purposes of this Section 1.4, “fair market value”
of a share of Warrant Stock as of a particular date (the “Determination Date”)
shall be determined as follows:

    

    (1)           If
the Company's Common Stock is traded on an exchange or is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") Stock
Market, then the closing price on the day before the Determination Date;
or

     

    
      
        
        

      

      
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    (2)           If
the Company's Common Stock is not traded on an exchange or on the NASDAQ Stock
Market but is traded in the over-the-counter market, then the closing price on
the day before the Determination Date; or

    

    (3) In
the event that the Determination Date is the date of a liquidation, dissolution
or winding up, or any event deemed to be a liquidation, dissolution or winding
up with respect to the Warrant Stock under the Company’s Certificate of
Incorporation, then the fair market value per share of the Warrant Stock shall
be determined by aggregating all amounts to be payable per share to holders of
the Warrant Stock in the event of such liquidation, dissolution or winding up,
plus all other amounts to be payable per share in respect of the Warrant Stock
in liquidation, assuming for the purposes of this subsection that all of the
shares of Warrant Stock issuable upon exercise of all of the Warrants are
outstanding at the Determination Date;  or

    

    (4)  In
all other cases, the fair market value per share of the Warrant Stock shall be
determined in good faith by the Company’s Board of Directors upon review of
relevant factors.

    

    
      1.5.         
Fractional
Shares.  The Company shall not be required upon the exercise of
this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the fair market value of the Warrant Stock
reasonably determined by The Board of Directors of the Company (and, in the case
of a conversion of this Warrant, in accordance with Section
1.4(c)).

    

     

    

    2.           Certain
Adjustments.  The Purchase Price and the number of shares of
Warrant Stock deliverable upon exercise of the Warrant shall be subject to
adjustment from time to time as follows:

    

    
      2.1     
     Subdivision, Consolidation,
Reclassification or Change in Common Stock.  In the event of
any subdivision, consolidation, reclassification or change of the Common Stock
into a greater or lesser number or different class or classes of stock, the
number of shares of Warrant Stock deliverable upon exercise of this Warrant
shall be determined in accordance with the terms of the Certificate of
Incorporation, and the Purchase Price for such Warrant Stock shall be
proportionately reduced.

    

     

    2.2           Subdivision, Consolidation,
Reclassification or Change in Warrant Stock.  In the event of
any consolidation, reclassification or change of the Warrant Stock into a lesser
number or different class or classes of stock, the number of shares of Warrant
Stock deliverable upon exercise of this Warrant shall be proportionally
decreased and the Purchase Price for such Warrant Stock shall be proportionately
increased.  In the event of any subdivision, reclassification or
change of the Warrant Stock into a greater number or different class or classes
of stock, the number of shares of Warrant Stock deliverable upon exercise of
this Warrant shall be proportionally increased and the Purchase Price for such
Warrant Stock shall be proportionately reduced.

     

    
      
        
        

      

      
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    2.3           Dividends or Other
Distributions.  In the event that the Company issues additional
shares of Common Stock as a dividend or other distribution with respect to the
Common Stock, the number of shares of Warrant Stock deliverable upon exercise of
this Warrant shall be determined in accordance with the terms of the Certificate
of Incorporation, and the Purchase Price for such Warrant Stock shall be
proportionately reduced.

     

    2.4           Reorganizations.  If
there shall occur any capital reorganization of the Common Stock or the Warrant
Stock (excluding mergers and consolidations covered under Section 2.5 hereto and
other than a subdivision, combination, reclassification or change in par value),
then, as part of any such reorganization, lawful provision shall be made so that
the Holder shall have the right thereafter to receive upon the exercise of this
Warrant the kind and amount of shares of stock or other securities or property
which such Holder would have been entitled to receive if, immediately prior to
any such reorganization, such Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this
Warrant.  In any such case, appropriate adjustment (as reasonably
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth herein with respect to the rights and
interests thereafter of the Holder such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.

     

    2.5           Merger, Consolidation or
Sale of Assets. Subject to the provisions of Section 6, if there shall be
a merger or consolidation of the Company with or into another corporation (other
than a merger or reorganization involving only a change in the state of
incorporation of the Company or the acquisition by the Company of other
businesses where the Company survives as a going concern), or the sale of all or
substantially all of the Company’s capital stock or assets to any other person,
then as a part of such transaction, provision shall be made so that the Holder
shall thereafter be entitled to receive the number of shares of stock or other
securities or property of the Company, or of the successor corporation resulting
from the merger, consolidation or sale, to which the Holder would have been
entitled if the Holder had exercised its rights pursuant to this Warrant
immediately prior thereto.  In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 2 to the end
that the provisions of this Section 2 shall be applicable after that event in as
nearly equivalent a manner as may be practicable.

     

    2.6           Certificate of
Adjustment.  When any adjustment is required to be made in the
Purchase Price, the Company shall promptly mail to the Holder a certificate
setting forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.  Delivery of such
certificate shall be deemed to be a final and binding determination with respect
to such adjustment unless challenged by the Holder within ten (10) days of
receipt thereof.  Such certificate shall also set forth the kind and
amount of stock or other securities or property into which this Warrant shall be
exercisable following the occurrence of any of the events specified in this
Section 2.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    3.           Compliance with Securities
Act.

     

    
      3.1           Unregistered
Securities.  The Holder acknowledges that this Warrant and the
Warrant Stock have not been registered under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any successor legislation
(the “Securities Act”), and agrees not to sell, pledge, distribute, offer for
sale, transfer or otherwise dispose of this Warrant or any Warrant Stock in the
absence of (i) an effective registration statement under the Securities Act
covering this Warrant or such Warrant Stock and registration or qualification of
this Warrant or such Warrant Stock under any applicable “blue sky” or state
securities law then in effect, or (ii) an opinion of counsel, satisfactory to
the Company, that such registration and qualification are not
required.  The Company may delay issuance of the Warrant Stock until
completion of any action or obtaining of any consent, which the Company deems
necessary under any applicable law (including without limitation state
securities or “blue sky” laws).

       

      3.2           Investment
Letter.  Without limiting the generality of Section 3.1, unless
the offer and sale of any shares of Warrant Stock shall have been effectively
registered under the Securities Act, the Company shall be under no obligation to
issue the Warrant Stock unless and until the Holder shall have executed an
investment letter in form and substance satisfactory to the Company, including a
warranty at the time of such exercise that the Holder is acquiring such shares
for its own account, for investment and not with a view to, or for sale in
connection with, the distribution of any such shares.

       

      3.3           Legend.  Certificates
delivered to the Holder pursuant to Section 1.3 shall bear the following legend
or a legend in substantially similar form:

    

     

    
      	
               
      

            	
              “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN FOR INVESTMENT AND
      THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON, INCLUDING A
      PLEDGEE, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
      SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF
      COUNSEL, SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION
      IS THEN AVAILABLE.”

            

    

     

    4.           Reservation of Stock.
The Company agrees that, prior to the expiration of this Warrant, the Company
will at all times have authorized and in reserve, and will keep available,
solely for issuance or delivery upon the exercise of this Warrant, the shares of
Common Stock and other securities and properties as from time to time shall be
receivable upon the exercise of this Warrant,  free and clear of all
restrictions on sale or transfer and free and clear of all preemptive rights and
rights of first refusal.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    5.           Replacement of
Warrants.  Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.

     

    6.           Termination Upon Certain
Events. If there
shall be a merger or consolidation of the Company with or into another
corporation (other than a merger or reorganization involving only a change in
the state of incorporation of the Company or the acquisition by the Company of
other businesses where the Company survives as a going concern), or the sale of
all or substantially all of the Company’s capital stock (other than a reverse
merger transaction) or assets to any other person, or the liquidation or
dissolution of the Company, then as a part of such transaction, at the Company’s
option, either:

     

    
      (a)          provision
shall be made so that the Holder shall thereafter be entitled to receive the
number of shares of stock or other securities or property of the Company, or of
the successor corporation resulting from the merger, consolidation or sale, to
which the Holder would have been entitled if the Holder had exercised its rights
pursuant to this Warrant immediately prior thereto (and, in such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 6(a) to the end that the provisions of Section 3 shall be
applicable after that event in as nearly equivalent a manner as may be
practicable); or

    

     

    
      (b)          this
Warrant shall terminate on the effective date of such merger, consolidation or
sale (the “Termination Date”) and become null and void, provided that if this
Warrant shall not have otherwise terminated or expired, (1) the Company shall
have given the Holder written notice of such Termination Date at least five
business days prior to the occurrence thereof and (2) the Holder shall have the
right until 5:00 p.m, Eastern Standard Time, on the day immediately prior to the
Termination Date to exercise its rights hereunder to the extent not previously
exercised.

    

     

    7.           Transferability.  Without
the prior written consent of the Company, this Warrant shall not be assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar
process.  Any attempted transfer, assignment, pledge, hypothecation or
other disposition of this Warrant or of any rights granted hereunder contrary to
the provisions of this Section 7, or the levy of any attachment or similar
process upon this Warrant or such rights, shall be null and void.

     

    8.           No Rights as
Stockholder.  Until the exercise of this Warrant, the Holder
shall not have or exercise any rights by virtue hereof as a stockholder of the
Company.

     

    9.           Notices.  All
notices, requests and other communications hereunder shall be in writing, shall
be either (i) delivered by hand, (ii) made by telex, telecopy or facsimile
transmission, (iii) sent by overnight courier, or (iv) sent by registered mail,
postage prepaid, return receipt requested.  In the case of notices
from the Company to the Holder, they shall be sent to the address furnished to
the Company in writing by the last Holder who shall have furnished an address to
the Company in writing.  All notices from the Holder to the Company
shall be delivered to the Company at Lateral Media, Inc., 2121 Avenue of the
Stars, Suite 2550, Los Angeles, CA, 90067, Attn:  President, or such
other address as the Company shall so notify the Holder.  All notices,
requests and other communications hereunder shall be deemed to have been given
(i) by hand, at the time of the delivery thereof to the receiving party at the
address of such party described above, (ii) if made by telex, telecopy or
facsimile transmission, at the time that receipt thereof has been acknowledged
by electronic confirmation or otherwise, (iii) if sent by overnight courier, on
the next business day following the day such notices is delivered to the courier
service, or (iv) if sent by registered mail, on the fifth business day following
the day such mailing is made.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

    10.           Amendment, Modification and
Waiver.  This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
Company and the then current Holder, and such change, waiver, discharge or
termination shall be binding on all future Holders.

     

    11.           Headings.  The
headings in this Warrant are for convenience of reference only and shall in no
way modify or affect the meaning or construction of any of the terms or
provisions of this Warrant.

     

    12.           Governing
Law.  This Warrant will be governed by and construed in
accordance with and governed by the law of the State of Delaware, without giving
effect to the conflict of law principles thereof.

     

    

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

     

     

    
      
        
          
            
              
                	 
      	
                        LATERAL
      MEDIA, INC.

                      	 
	 	 	 	 
	 	 	 	 
	 
      	
                        By:

                      	
                          
      

                      	 
	 
      	
                        Name:

                      	 
      	 
	 
      	
                        Title:

                      	 
      	 
	 
      	 
      	 
      	 

              

            

          

        

      

    

    

    

    

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

     

    EXHIBIT
A

    

    PURCHASE
FORM

    

    To:           LATERAL
MEDIA, INC.

    

    The
undersigned pursuant to the provisions set forth in the attached Warrant (No.
W-____), hereby irrevocably elects to (check one):

    

    
      
        
          	
                	
                  _____

                	
                  (A)         
      purchase
      ___ shares of Common Stock, par value $0.001 per share (the “Common
      Stock”) of LATERAL MEDIA, INC., covered by such Warrant and herewith makes
      payment of $_____________, representing the full purchase price for such
      shares at the price per share provided for in such Warrant;
    or

                

        

      

    

    

    
      
        
          	
                	
                  _____

                	
                  (B)         
      convert
      ___ Converted Warrant Shares into that number of shares of fully paid and
      nonassessable shares of Common Stock, determined pursuant to the
      provisions of Section 1.4 of the
Warrant.

                

        

      

    

    

    

    The Common Stock for which the Warrant
may be exercised or converted shall be known herein as the “Warrant
Stock.”

    

    The undersigned is aware that the
Warrant Stock has not been and will not be registered under the Securities Act
of 1933, as amended (the “Securities Act”) or any state securities
laws.  The undersigned understands that reliance by the Company on
exemptions under the Securities Act is predicated in part upon the truth and
accuracy of the statements of the undersigned in this Purchase
Form.

    

    The undersigned represents and warrants
that (1) it has been furnished with all information which it deems necessary to
evaluate the merits and risks of the purchase of the Warrant Stock, (2) it has
had the opportunity to ask questions concerning the Warrant Stock and the
Company and all questions posed have been answered to its satisfaction, (3) it
has been given the opportunity to obtain any additional information it deems
necessary to verify the accuracy of any information obtained concerning the
Warrant Stock and the Company and (4) it has such knowledge and experience in
financial and business matters that it is able to evaluate the merits and risks
of purchasing the Warrant Stock and to make an informed investment decision
relating thereto.

    

    The undersigned hereby represents and
warrant that it is purchasing the Warrant Stock for its own account for
investment and not with a view to the sale or distribution of all or any part of
the Warrant Stock.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
 

    The undersigned understands that
because the Warrant Stock has not been registered under the Securities Act, it
must continue to bear the economic risk of the investment for an indefinite
period of time and the Warrant Stock cannot be sold unless it is subsequently
registered under applicable federal and state securities laws or an exemption
from such registration is available.

    

    The undersigned agrees that it will in
no event sell or distribute or otherwise dispose of all or any part of the
Warrant Stock unless (1) there is an effective registration statement under the
Securities Act and applicable state securities laws covering any such
transaction involving the Warrant Stock, or (2) the Company receives an opinion
satisfactory to the Company of the undersigned’s legal counsel stating that such
transaction is exempt from registration.  The undersigned consents to
the placing of a legend on its certificate for the Warrant Stock stating that
the Warrant Stock has not been registered and setting forth the restriction on
transfer contemplated hereby and to the placing of a stop transfer order on the
books of the Company and with any transfer agents against the Warrant Stock
until the Warrant Stock may be legally resold or distributed without
restriction.

    

    The undersigned has considered the
federal and state income tax implications of the exercise of the Warrant and the
purchase and subsequent sale of the Warrant Stock.

    

    

    

    
      
        
          
            
              	 
      	  
        
	 
      	 
      	 
	 
      	
                      Dated:

                    	 
      

            

          

        

      

    

    

    

    

     

    
      
        
        

      

      
        11

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