Lateral Media, Inc. Suite 2550 Los Angeles, CA 90067 Attention: President
June 26,
2009
▇▇▇▇
▇▇▇▇▇▇ 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, August 1, 2008, April 30, 2009 and
June 11, 2009 (the “Loan Agreement”),
pursuant to which the Lender agreed to provide a loan to the Company in the
principal amount of up to $1,250,000, plus any accrued interest thereon (the
“Loan”). As
of the date hereof, the principal balance of the Loan is $1,200,000, and the
accrued and unpaid interest outstanding under the Loan is $ $30,507, for an
aggregate balance of $1,230,507 (the “Current Outstanding
Debt”). The Lender and the Company now wish to satisfy
$350,000 of the Current Outstanding Debt by means of delivery to the Lender of a
7% Convertible Promissory Note in the aggregate amount of $350,000 (the “Note”) and a Warrant
to purchase 350,000 shares of the Company’s common stock, par value $0.001 per
share (“Common
Stock”) at an exercise price of $0.01 per share (the “Warrant”) and to
provide that the Lender may elect to satisfy any and all amounts outstanding
under the Loan Agreement at any time, and from time to time with prior written
notice to the Company, by delivery by the Company of a 7% convertible promissory
note and a warrant to purchase shares of Common Stock in satisfaction of such
amounts to be so converted, on the terms and conditions set forth
below.
1. Conversion. The
parties hereby acknowledge and agree that, notwithstanding the terms of the Loan
Agreement, $350,000 of the Current Outstanding Debt is hereby satisfied in full
by delivery to Lender of the Note and the Warrant. The parties
further acknowledge and agree that, upon prior written notice to the Company,
the Lender may elect at any time, and from time to time until the consummation
of a Qualified Financing (as defined in the Note), to convert any and all
amounts outstanding under the Loan Agreement into a 7% convertible promissory
note and a warrant to purchase that number of shares of Common Stock equal to
one share of Common Stock for every $1.00 that is being so converted, on the
same terms and conditions as the Note and
Warrant. Notwithstanding the foregoing, the Lender may still
loan the Company up to a principal amount of $1,250,000 at any time and from
time to time prior to the Company’s consummation of a Next Financing (as defined
in the Loan Agreement), in accordance with the Loan Agreement. As
soon as practicable hereafter, the Company agrees to execute and deliver to the
Lender a Note in the aggregate principal amount of and Warrant (the “Securities”).
2. Investment
Intent. The Lender represents and warrants to the Company that such
Lender (i) is acquiring the Securities for such ▇▇▇▇▇▇’s own account for the
purpose of investment, and (ii) is not acquiring the Securities with a view to,
or for resale in connection with, a distribution, nor with any present intention
of distributing or selling the Securities and understands that the Securities
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 Securities have been registered under the Securities
Act and applicable state securities laws, each instrument or certificate
representing the Securities and the shares of Common Stock issuable upon
conversion of the Note and exercise of the Warrant, 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 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 the Company.
7. Governing
Law. 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.
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.
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.
2
IN WITNESS WHEREOF, the
undersigned have executed this letter agreement as of the date set forth
above.
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LENDER:
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▇▇▇▇▇▇
Capital Master Fund, Ltd.
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By:
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/s/
▇▇▇ ▇▇▇▇
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Name:
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▇▇▇
▇▇▇▇
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Title:
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Managing
Director of ▇▇▇▇▇▇ Management, LLC, the Manager of ▇▇▇▇▇▇ Capital Master
Fund Ltd.
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Accepted
and Agreed:
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THE
COMPANY
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By:
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/s/
▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name:
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▇▇▇▇▇▇▇
▇▇▇▇▇
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Title:
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Chief
Financial Officer
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