REGISTRATION
      RIGHTS AGREEMENT

     

    THIS
      REGISTRATION RIGHTS AGREEMENT
      (this
“Agreement”),
      dated
      as of October 31, 2007, by and among HANDHELD
      ENTERTAINMENT, INC.,
      a
      Delaware corporation (the “Company”),
      and
      the undersigned Buyers listed on Schedule I attached hereto (each, a
“Buyer”
and
      collectively, the “Buyers”).

     

    WHEREAS:

     

    A. In
      connection with the Additional Securities Purchase Agreement between the Company
      and each Buyer dated as of October 31, 2007 (the “Additional
      Securities Purchase Agreement”),
      the
      Company has agreed to issue and sell to the Buyers (i) junior secured
      convertible debentures (the “Junior
      Debentures”)
      which
      shall be convertible into shares of the Company’s common stock, par value
      $0.0001 per share (the “Common
      Stock,”
as
      converted, the “Conversion
      Shares”)
      in
      accordance with the terms of the Junior Debentures, and (ii) warrants (the
      “Warrants”),
      which
      will be exercisable to purchase shares of Common Stock (as exercised,
      collectively, the “Warrant
      Shares”).
      Capitalized terms not defined herein shall have the meaning ascribed to them
      in
      the Additional Securities Purchase Agreement.

     

    B. To
      induce
      the Buyers to execute and deliver the Additional Securities Purchase Agreement,
      the Company has agreed to provide certain registration rights under the
      Securities Act of 1933, as amended, and the rules and regulations thereunder,
      or
      any similar successor statute (collectively, the “Securities
      Act”),
      and
      applicable state securities laws.

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and the Buyers hereby agree as
      follows:

     

    1.  DEFINITIONS.

     

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    (a)  “Closing
      Date”
shall
      have the meaning assigned to it in the Additional Securities Purchase Agreement.
      

     

    (b)  “Effectiveness
      Deadline”
means
      the date that is 90 calendar days following the filing of such Registration
      Statement, provided, however, in the event the Company is notified by the U.S.
      Securities and Exchange Commission (“SEC”)
      that
      one of the above Registration Statements will not be reviewed or is no longer
      subject to further review and comments, the Effectiveness Date as to such
      Registration Statement shall be the fifth Trading Day following the date on
      which the Company is so notified if such date precedes the dates required above.
      In the event of delays in effectiveness resulting from the form of the
      Convertible Debenture or the Warrants and evidenced by written comments from
      the
      SEC the Effectiveness Deadline as set forth shall be extended for such period
      as
      effectiveness shall not be declared, until terms of those documents are waived
      by the Buyers or revised by the parties to satisfy regulatory
      requirements.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)  “Filing
      Deadline”
means,
      with respect to the Initial Registration Statement, the 30th calendar day
      following the Closing Date.

     

    (d)  “Initial
      Required Registration Amount”
means
      a
      number of Registrable Securities equal, at the time of filing of the applicable
      Registration Statement, to the aggregate number of shares of Common Stock
      constituting Premier Registrable Securities, subject to any cutback set forth
      in
      Section 3(c).

     

    (e)  “Initial
      Registration Statement”
means
      the registration statement covering the resale of the Initial Required
      Registration Amount of the Premier Registrable Securities, required to be filed
      pursuant to Section 2(a).

     

    (f)  “Initial
      YA Registration Statement”
means
      the initial registration statement required to be filed under the YA
      Registration Rights Agreement.

     

    (g)  “Person”
means
      a
      corporation, a limited liability company, an association, a partnership, an
      organization, a business, an individual, a governmental or political subdivision
      thereof or a governmental agency.

     

    (h)  “Premier
      Registrable Securities”
means
      (i) shares of Common Stock issuable pursuant to $2,224,290.41 aggregate
      principal amount of Junior Debentures and related warrants issued in exchange
      for $1,400,000 cash and $824,290.41 aggregate principal and interest outstanding
      on 2008 Notes to the various purchasers identified on Schedule 1(h), pursuant
      to
      the Additional Securities Purchase Agreement and (ii) shares of Common Stock
      issuable pursuant to up to $3.5 million aggregate principal amount of Junior
      Debentures and related warrants sold to Carl Page, Eric Bauman and/or Neil
      Bauman pursuant to the Additional Securities Purchase Agreement.

     

    (i)  “Prospectus”
means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by a Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

     

    (j)  “Registrable
      Securities”
means
      all of (i) the Conversion Shares issuable upon conversion of the Junior
      Debentures, (ii) the Warrant Shares issued or issuable upon exercise of the
      Warrants, (iii) any additional shares issuable in connection with any
      anti-dilution provisions in the Warrants or the Junior Debentures (without
      giving effect to any limitations on exercise set forth in the Warrants or Junior
      Debentures) and (iv) any shares of Common Stock issued or issuable with respect
      to the Conversion Shares, the Junior Debentures, the Warrant Shares, or the
      Warrants as a result of any stock split, dividend or other distribution,
      recapitalization or similar event or otherwise, without regard to any
      limitations on the conversion of the Junior Debentures or exercise of the
      Warrants.

     

    
      
        
        

      

      
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    (k)  “Registration
      Statement”
means
      the Initial Registration Statement and Secondary Registration Statement required
      to be filed hereunder and any additional registration statements contemplated
      by
      Section 3(c), including (in each case) the Prospectus, amendments and
      supplements to such registration statement or Prospectus, including pre- and
      post-effective amendments, all exhibits thereto, and all material incorporated
      by reference or deemed to be incorporated by reference in such registration
      statement.

     

    (l)  “Rule
      415”
means
      Rule 415 promulgated by the SEC pursuant to the Securities Act, as such Rule
      may
      be amended from time to time, or any similar rule or regulation hereafter
      adopted by the SEC having substantially the same purpose and effect as such
      Rule.

     

    (m)  “Secondary
      Filing Deadline”
means
      three (3) business days after the effectiveness of the Initial YA Registration
      Statement.

     

    (n)  “Secondary
      Registration Statement”
means
      the first registration statement required to be filed pursuant to Section 2(a)
      that covers the resale of any Registrable Securities other than the Initial
      Required Registration Amount of the Premier Registrable Securities.

     

    (o)  “YA
      Registrable Securities”
means
      all securities required to be registered pursuant to the YA Registration Rights
      Agreement.

     

    (p)  “YA
      Registration Rights Agreement”
the
      registration rights agreement between the Company and YA Global Investments,
      L.P., of even date herewith.

     

    2.  REGISTRATION.

     

    (a)  In
      accordance with the terms of this Agreement, the Company shall register the
      resale of all the Registrable Securities on behalf of the Buyers during the
      Registration Period (as described below). On or prior to the Filing Deadline,
      the Company shall prepare and file with the SEC a Registration Statement on
      Form
      S-1 or SB-2 (or, if the Company is then eligible, on Form S-3) covering the
      resale of the Initial Required Registration Amount of the Premier Registrable
      Securities. On or prior to the Secondary Filing Deadline, the Company shall
      prepare and file with the SEC a Registration Statement on Form S-1 or SB-2
      (or,
      if the Company is then eligible, on Form S-3) covering the resale of any other
      Registrable Securities. The Company shall use its best efforts to have the
      Initial Registration Statement, the Secondary Registration Statement, and all
      subsequent Registration Statements declared effective by the SEC as soon as
      practicable, but in no event later than the applicable Effectiveness Deadline.
      By 9:30 am on the date following the date of effectiveness, the Company shall
      file with the SEC in accordance with Rule 424 under the 1933 Act the final
      Prospectus to be used in connection with sales pursuant to such Registration
      Statement. The Company shall cause a Registration Statement to remain effective
      until all of the Registrable Securities covered thereby have been sold or may
      be
      sold without volume restrictions pursuant to Rule 144, as determined by the
      counsel to the Company pursuant to a written opinion letter to such effect,
      addressed and acceptable to the Company’s transfer agent and the affected
      Holders (“Registration
      Period”).
      

     

    
      
        
        

      

      
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    (b)  Failure
      to File or Obtain Effectiveness of the Registration Statement.
      If: (i)
      a Registration Statement is not filed on or prior to its Filing Deadline or
      (ii)
      the Company fails to file with the SEC a request for acceleration in accordance
      with Rule 461 promulgated under the Securities Act, within five Trading Days
      of
      the date that the Company is notified (orally or in writing, whichever is
      earlier) by the SEC that a Registration Statement will not be “reviewed,” or not
      subject to further review, or (iii) a Registration Statement filed or required
      to be filed hereunder is not declared effective by the SEC by its Effectiveness
      Deadline, or (iv) after the effectiveness, a Registration Statement ceases
      for
      any reason to remain continuously effective as to all Registrable Securities
      for
      which it is required to be effective, or the Buyers are otherwise not permitted
      to utilize the Prospectus therein to resell such Registrable Securities for
      more
      than 30 consecutive calendar days or more than an aggregate of 40 calendar
      days
      during any 12-month period (which need not be consecutive calendar days) (any
      such failure or breach being referred to as an “Event”),
      then
      in addition to any other rights the holders of the Junior Debentures may have
      hereunder or under applicable law, on each monthly anniversary of each such
      Event date (if the applicable Event shall not have been cured by such date)
      until the applicable Event is cured, the Company shall pay to each holder of
      Junior Debentures an amount in cash or, at the option of the Company, in shares
      of Common Stock of the Company valued at the 10 day VWAP preceding the due
      date
      for payment as partial liquidated damages (“Liquidated
      Damages”)
      and
      not as a penalty, equal to the pro-rata portion of 1.0% of the aggregate
      purchase price paid by such holder pursuant to the Additional Securities
      Purchase Agreement for any Junior Debentures then held by such holder for which
      a registration statement is then required to have been filed or declared
      effective. The parties agree that (1) the Company shall not be liable for
      Liquidated Damages under this Agreement with respect to any Warrants or Warrant
      Shares and (2) the maximum aggregate Liquidated Damages payable under this
      Agreement for all instances in which Liquidated Damages shall be payable,
      regardless of the cause, shall be six percent (6%) of the aggregate Purchase
      Price paid by such holder pursuant to the Additional Securities Purchase
      Agreement for securities required to be in a registration statement at the
      time
      of calculation. The partial Liquidated Damages pursuant to the terms hereof
      shall apply on a daily pro-rata basis for any portion of a month prior to the
      cure of an Event.

     

    (c)  Liquidated
      Damages.
      The
      Company and each of the Buyers hereto acknowledge and agree that the sums
      payable under subsection 2(b) above shall constitute liquidated damages and
      not
      penalties and are in addition to all other rights of the Buyers, including
      the
      right to call a default. The parties further acknowledge that (i) the amount
      of
      loss or damages likely to be incurred is incapable or is difficult to precisely
      estimate, (ii) the amounts specified in such subsections bear a reasonable
      relationship to, and are not plainly or grossly disproportionate to, the
      probable loss likely to be incurred in connection with any failure by the
      Company to obtain or maintain the effectiveness of a Registration Statement,
      (iii) one of the reasons for the Company and each of the Buyers reaching an
      agreement as to such amounts was the uncertainty and cost of litigation
      regarding the question of actual damages, and (iv) the Company and the each
      of
      the Buyers are sophisticated business parties and have been represented by
      sophisticated and able legal counsel and negotiated this Agreement at arm’s
      length. 

     

    3.  RELATED
      OBLIGATIONS.

     

    (a)  The
      Company shall, not less than three (3) Trading Days prior to the filing of
      each
      Registration Statement and not less than one (1) Trading Day prior to the filing
      of any related amendments and supplements to all Registration Statements (except
      for annual reports on Form 10-K or Form 10-KSB), provide an opportunity to
      a
      Buyer to be furnished with copies of all such documents proposed to be filed,
      which documents (other than those incorporated or deemed to be incorporated
      by
      reference) will be subject to delivery to a Buyer only upon the written request
      of such Buyer, which shall in all events upon delivery be deemed to be receipt
      by such Buyer of confidential non-public information of Company, and for the
      sole purpose of the reasonable and prompt review of such Buyer. The Company
      shall not file a Registration Statement or any such Prospectus or any amendments
      or supplements thereto to which the Buyers shall reasonably object in good
      faith; provided
      that,
      the Company is notified of such objection in writing no later than two (2)
      Trading Days after the Buyers have been so furnished copies of a Registration
      Statement, and upon such objection, all periods herein shall be extended by
      five
      (5) Business Days, but the Company may thereupon file such Registration
      Statement if the Company deems such action appropriate in its sole
      discretion.

     

    
      
        
        

      

      
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    (b)  The
      Company shall (i) prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      Prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the Securities Act, as
      may
      be necessary to keep such Registration Statement effective at all times during
      the Registration Period, and prepare and file with the SEC such additional
      Registration Statements in order to register for resale under the Securities
      Act
      all of the Registrable Securities provided that any further amount of shares
      shall not be required to exceed the amount that the Company, upon the advice
      of
      counsel, determines shall not contravene any rules, regulation, interpretation
      or positions (as stated in SEC comment letters or otherwise) shall determine
      may
      be registered at the time of filing such further Registration Statement); (ii)
      cause the related Prospectus to be amended or supplemented by any required
      Prospectus supplement (subject to the terms of this Agreement), and as so
      supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
      promptly as reasonably possible to any comments received from the SEC with
      respect to a Registration Statement or any amendment thereto and as promptly
      as
      reasonably possible provide the Buyers an opportunity to obtain true and
      complete copies of all correspondence from and to the SEC relating to a
      Registration Statement (provided that the Company may excise any information
      contained therein which would constitute material non-public information as
      to
      any Buyer which has not executed a confidentiality agreement with the Company);
      and (iv) comply with the provisions of the Securities Act with respect to the
      disposition of all Registrable Securities of the Company covered by such
      Registration Statement until such time as all of such Registrable Securities
      shall have been disposed of in accordance with the intended methods of
      disposition by the seller or sellers thereof as set forth in such Registration
      Statement. In the case of amendments and supplements to a Registration Statement
      which are required to be filed pursuant to this Agreement (including pursuant
      to
      this Section 3(b)) by reason of the Company’s filing a report on Form 10-KSB,
      Form 10-QSB or Form 8-K or any analogous report under the Securities Exchange
      Act of 1934, as amended (the “Exchange
      Act”),
      the
      Company shall incorporate such report by reference into the Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC within one business day of which the Exchange Act report is filed which
      created the requirement for the Company to amend or supplement the Registration
      Statement. 

     

    
      
        
        

      

      
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    (c)  Reduction
      of Registrable Securities Included in a Registration Statement.
      Notwithstanding anything contained herein, in the event that the SEC requires
      the Company to reduce the number of shares of Common Stock registered for resale
      by selling stockholders pursuant to registration statements filed by the Company
      in order to allow the Company to rely on Rule 415 with respect to such
      registration statements, then the Company shall be obligated to include in
      such
      registration statements (which may include a Registration Statement or a
      subsequent Registration Statement if the Company needs to withdraw or amend
      one
      Registration Statement and refile a new Registration Statement in order to
      rely
      on Rule 415) only such limited portion of the Registrable Securities as
      constitutes such Buyer’s Pro Rata Share (as defined below) of the amount of
      securities the SEC shall permit or which the Company, in its reasonable
      determination, determines should be included therein in order to not contravene
      any position stated by the SEC. Any Registrable Securities that are excluded
      in
      accordance with the foregoing terms are hereinafter referred to as “Cut
      Back Securities.”
To
      the
      extent Cut Back Securities exist, on the later of (a) sixty (60) days after
      the
      last of the securities registered on the previous Registration Statement are
      sold, or (b) six (6) months following the previous Registration Statement’s
      effective date, or such other time as the Company reasonably determines that
      registration of the Cut Back Securities may be permitted by the SEC, the Company
      shall seek to register by the filing of a Registration Statement covering the
      resale of the Cut Back Securities and shall use best efforts to cause such
      Registration Statement to be declared effective as promptly as practicable
      thereafter, provided, however, no liquidated damages, penalties, or rights
      shall
      inure to the benefit of the Buyers under the Junior Debentures, this Agreement
      or the Additional Securities Purchase Agreement if such position of the SEC
      results in withdrawal or abandonment of such effort to register such additional
      Cut Back Securities. “Pro Rata Share” means, with respect to any Buyer at any
      time, the portion that the Registrable Securities held by such Buyer constitute
      of all securities that the Company is required to register pursuant to this
      Agreement and any other agreements granting registration rights with respect
      to
      securities of the Company (prior to giving effect to any similar cut back
      provision).

     

    (d)  The
      Company shall furnish to each Buyer whose Registrable Securities are included
      in
      any Registration Statement, without charge, (i) at least one (1) copy of such
      Registration Statement as declared effective by the SEC and any amendment(s)
      thereto, including financial statements and schedules, all documents
      incorporated therein by reference, all exhibits and each preliminary prospectus,
      (ii) ten (10) copies of the final prospectus included in such Registration
      Statement and all amendments and supplements thereto (or such other number
      of
      copies as such Buyer may reasonably request) and (iii) such other documents
      as
      such Buyer may reasonably request from time to time in order to facilitate
      the
      disposition of the Registrable Securities owned by such Buyer. The Company
      may
      satisfy the requirement of this Section 3(d) be electronic means available
      to
      the Buyers.

     

    (e)  The
      Company shall use its best efforts to (i) register and qualify the Registrable
      Securities covered by a Registration Statement under such other securities
      or
“blue sky” laws of such jurisdictions in the United States as any Buyer
      reasonably requests, (ii) prepare and file in those jurisdictions, such
      amendments (including post-effective amendments) and supplements to such
      registrations and qualifications as may be necessary to maintain the
      effectiveness thereof during the Registration Period, (iii) take such other
      actions as may be necessary to maintain such registrations and qualifications
      in
      effect at all times during the Registration Period, and (iv) take all other
      actions reasonably necessary or advisable to qualify the Registrable Securities
      for sale in such jurisdictions; provided, however, that the Company shall not
      be
      required in connection therewith or as a condition thereto to (w) make any
      change to its articles of incorporation or by-laws, (x) qualify to do business
      in any jurisdiction where it would not otherwise be required to qualify but
      for
      this Section 3(d), (y) subject itself to general taxation in any such
      jurisdiction, or (z) file a general consent to service of process in any such
      jurisdiction. The Company shall promptly notify each Buyer who holds Registrable
      Securities of the receipt by the Company of any notification with respect to
      the
      suspension of the registration or qualification of any of the Registrable
      Securities for sale under the securities or “blue sky” laws of any jurisdiction
      in the United States or its receipt of actual notice of the initiation or threat
      of any proceeding for such purpose.

     

    
      
        
        

      

      
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    (f)  As
      promptly as practicable after becoming aware of such event or development,
      the
      Company shall notify each Buyer in writing of the happening of any event as
      a
      result of which the Prospectus included in a Registration Statement, as then
      in
      effect, includes an untrue statement of a material fact or omission to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading (provided that in no event shall such notice contain any material,
      nonpublic information), and promptly prepare a supplement or amendment to such
      Registration Statement to correct such untrue statement or omission, and deliver
      ten (10) copies of such supplement or amendment to each Buyer and prior thereto,
      after receiving notice of such event the Buyers shall not make any sales
      pursuant to such unamended or unsupplemented Registration Statement. The Company
      shall also promptly notify each Buyer in writing (i) when a Prospectus or any
      Prospectus supplement or post-effective amendment has been filed, and when
      a
      Registration Statement or any post-effective amendment has become effective
      (notification of such effectiveness shall be delivered to each Buyer by
      facsimile on the same day of such effectiveness), (ii) of any request by the
      SEC
      for amendments or supplements to a Registration Statement or related prospectus
      or related information, and (iii) of the Company’s reasonable determination
      that a post-effective amendment to a Registration Statement would be
      appropriate.

     

    (g)  The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a Registration Statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction within the United States of America and, if such an order or
      suspension is issued, to obtain the withdrawal of such order or suspension
      at
      the earliest possible moment and to notify each Buyer who holds Registrable
      Securities being sold of the issuance of such order and the resolution thereof
      or its receipt of actual notice of the initiation or threat of any proceeding
      for such purpose.

     

    (h)  If,
      after
      the execution of this Agreement, a Buyer believes, and receives a written legal
      opinion of its legal counsel reasonably acceptable to the Company that it would
      be deemed to be an underwriter of Registrable Securities, at the request of
      Buyers, the Company shall make available for inspection by (i) any Buyer and
      (ii) one (1) firm of accountants or other agents retained by the Buyers
      (collectively, the “Inspectors”)
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the “Records”),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company’s
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree,
      and
      each Buyer hereby agrees, to hold in strict confidence and shall not make any
      disclosure (except to a Buyer) or use any Record or other information which
      the
      Company determines in good faith to be confidential, and of which determination
      the Inspectors are so notified, unless (a) the disclosure of such Records is
      necessary to avoid or correct a misstatement or omission in any Registration
      Statement or is otherwise required under the Securities Act, (b) the release
      of
      such Records is ordered pursuant to a final, non-appealable subpoena or order
      from a court or government body of competent jurisdiction, or (c) the
      information in such Records has been made generally available to the public
      other than by disclosure in violation of this or any other agreement of which
      the Inspector and such Buyer has knowledge. Each Buyer agrees that it shall,
      upon learning that disclosure of such Records is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      notice to the Company and allow the Company, at its expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, the Records deemed confidential.

     

    
      
        
        

      

      
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    (i)  The
      Company shall hold in confidence and not make any disclosure of information
      concerning a Buyer provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release of
      such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement or any other
      agreement. The Company agrees that it shall, upon learning that disclosure
      of
      such information concerning a Buyer is sought in or by a court or governmental
      body of competent jurisdiction or through other means, give prompt written
      notice to such Buyer and allow such Buyer, at the Buyer’s expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, such information.

     

    (j)  The
      Company shall use its best efforts either to cause all the Required Registration
      Amount of Registrable Securities covered by a Registration Statement (i) to
      be
      listed on each securities exchange on which securities of the same class or
      series issued by the Company are then listed, if any, if the listing of such
      Registrable Securities is then permitted under the rules of such exchange or
      (ii) the inclusion for quotation on the National Association of Securities
      Dealers, Inc. OTC Bulletin Board for such Registrable Securities. The Company
      shall pay all fees and expenses in connection with satisfying its obligation
      under this Section 3(j).

     

    (k)  The
      Company shall cooperate with each Buyer who holds Registrable Securities being
      registered and, to the extent applicable, to satisfy the requirement for DTC
      delivery or to facilitate the timely preparation and delivery of certificates
      (not bearing any restrictive legend) representing the Registrable Securities
      to
      be sold pursuant to a Registration Statement and enable such certificates to
      be
      in such denominations or amounts, as the case may be, as the Buyers may
      reasonably request and registered in such names as the Buyers may
      request.

     

    (l)  The
      Company shall use its best efforts to cause the Registrable Securities covered
      by the applicable Registration Statement to be registered with or approved
      by
      such other governmental agencies or authorities as may be necessary to
      consummate the disposition of such Registrable Securities.

     

    (m)  The
      Company shall make generally available to its security holders as soon as
      practical, but not later than ninety (90) days after the close of the period
      covered thereby, an earnings statement (in form complying with the provisions
      of
      Rule 158 under the Securities Act) covering a twelve (12) month period beginning
      not later than the first day of the Company’s fiscal quarter next following the
      effective date of the Registration Statement.

     

    
      
        
        

      

      
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    (n)  The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

     

    (o)  Within
      two (2) business days after a Registration Statement which covers Registrable
      Securities is declared effective by the SEC, the Company shall deliver, and
      shall cause legal counsel for the Company to deliver, to the transfer agent
      for
      such Registrable Securities (with copies to each Buyer whose Registrable
      Securities are included in such Registration Statement) confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit
      A.

     

    (p)  The
      Company shall take all other reasonable actions upon the written request of
      a
      Buyer reasonably necessary to expedite and facilitate disposition by each Buyer
      of Registrable Securities pursuant to a Registration Statement.

     

    4.  OBLIGATIONS
      OF THE BUYERS.

     

    (a)  Each
      Buyer agrees that, upon receipt of any notice from the Company of the happening
      of any event of the kind described in Section 3(f) such Buyer will immediately
      discontinue disposition of Registrable Securities pursuant to any Registration
      Statement covering such Registrable Securities until such Buyer’s receipt of the
      copies of the supplemented or amended prospectus contemplated by Section 3(f)
      or
      receipt of notice that no supplement or amendment is required. Notwithstanding
      anything to the contrary, the Company shall cause its transfer agent to deliver
      unlegended certificates for shares of Common Stock to a transferee of a Buyer
      in
      accordance with the terms of the Additional Securities Purchase Agreement in
      connection with any sale of Registrable Securities with respect to which a
      Buyer
      has entered into a contract for sale prior to such Buyer’s receipt of a notice
      from the Company of the happening of any event of the kind described in Section
      3(f) or the first sentence of 3(e) and for which such Buyer has not yet
      settled.

     

    (b)  Each
      Buyer covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it or an exemption therefrom
      in connection with sales of Registrable
      Securities pursuant to the Registration Statement.

     

    5.  EXPENSES
      OF REGISTRATION.

     

    All
      expenses incurred in connection with registrations, filings or qualifications
      pursuant to Sections 2 and 3, including, without limitation, all registration,
      listing and qualifications fees, printers, legal and accounting fees shall
      be
      paid by the Company, other than counsel for any Buyer or the cost of accountants
      acting on behalf of any Buyer. 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    6.  INDEMNIFICATION.

     

    With
      respect to Registrable Securities which are included in a Registration Statement
      under this Agreement:

     

    (a)  To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Buyer, the directors, officers, partners,
      employees, agents, representatives of, and each Person, if any, who controls
      any
      Buyer within the meaning of the Securities Act or the Exchange Act (each, an
      “Indemnified
      Person”),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
      expenses, joint or several (collectively, “Claims”)
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto (“Indemnified
      Damages”),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other “blue sky” laws of any jurisdiction in
      which Registrable Securities are offered (“Blue
      Sky Filing”),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading; (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      final prospectus (as amended or supplemented, if the Company files any amendment
      thereof or supplement thereto with the SEC) or the omission or alleged omission
      to state therein any material fact necessary to make the statements made
      therein, in light of the circumstances under which the statements therein were
      made, not misleading; or (iii) any violation or alleged violation by the Company
      of the Securities Act, the Exchange Act, any other law, including, without
      limitation, any state securities law, or any rule or regulation there under
      relating to the offer or sale of the Registrable Securities pursuant to a
      Registration Statement (the matters in the foregoing clauses (i) through (iii)
      being, collectively, “Violations”).
      The
      Company shall reimburse the Buyers and each such controlling person promptly
      as
      such expenses are incurred and are due and payable, for reasonable legal fees
      or
      disbursements or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
      out of or based upon a Violation which occurs in reliance upon and in conformity
      with information furnished in writing to the Company by such Indemnified Person
      expressly for use in connection with the preparation of the Registration
      Statement or any such amendment thereof or supplement thereto; (y) shall not
      be
      available to the extent such Claim is based on a failure of a Buyer to deliver
      or to cause to be delivered the prospectus made available by the Company or
      other breach by a Buyer of the terms of this Agreement, and if such prospectus
      was timely made available by the Company pursuant to Section 3(c); and
      (z) shall not apply to amounts paid in settlement of any Claim if such
      settlement is effected without the prior written consent of the Company, which
      consent shall not be unreasonably withheld. Such indemnity shall remain in
      full
      force and effect regardless of any investigation made by or on behalf of the
      Indemnified Person and shall survive the transfer of the Registrable Securities
      by the Buyers pursuant to Section 9 hereof.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (b)  In
      connection with a Registration Statement, each Buyer agrees to severally and
      not
      jointly indemnify, hold harmless and defend, to the same extent and in the
      same
      manner as is set forth in Section 6(a), the Company, each of its directors,
      officers, partners, employees, agents, representatives of, and each Person,
      if
      any, who controls any the Company within the meaning of the Securities Act
      or
      the Exchange Act, (each an “Indemnified
      Party”),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the Securities Act, the Exchange Act or otherwise, insofar as
      such Claim or Indemnified Damages arise out of or is based upon any Violation,
      in each case to the extent, and only to the extent, that such Violation occurs
      in reliance upon and in conformity with written information furnished to the
      Company by such Buyer expressly for use in connection with such Registration
      Statement or omitted to be communicated by such Buyer expressly for use in
      connection with such Registration Statement; and, subject to Section 6(d),
      such
      Buyer will reimburse any reasonable legal or other expenses reasonably incurred
      by them in connection with investigating or defending any such Claim; provided,
      however, that the indemnity agreement contained in this Section 6(b) and the
      agreement with respect to contribution contained in Section 7 shall not apply
      to
      amounts paid in settlement of any Claim if such settlement is effected without
      the prior written consent of such Buyer, which consent shall not be unreasonably
      withheld; provided, further, however, that each Buyer shall be liable under
      this
      Section 6(b) for only that amount of a Claim or Indemnified Damages as does
      not
      exceed the net proceeds to such Buyer as a result of the sale of Registrable
      Securities. Such indemnity shall remain in full force and effect regardless
      of
      any investigation made by or on behalf of such Indemnified Party and shall
      survive the transfer of the Registrable Securities by the Buyers pursuant to
      Section 9. Notwithstanding anything to the contrary contained herein, the
      indemnification agreement contained in this Section 6(b) with respect to any
      prospectus shall not inure to the benefit of any Indemnified Party if the untrue
      statement or omission of material fact contained in the prospectus was corrected
      and such new prospectus was delivered to each Buyer prior to such Buyer’s use of
      the prospectus to which the Claim relates.

     

    (c)  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own counsel with the fees and expenses of
      not
      more than one (1) counsel for such Indemnified Person or Indemnified Party
      to be
      paid by the indemnifying party, if, in the reasonable written opinion of counsel
      retained by the indemnifying party, the representation by such counsel of the
      Indemnified Person or Indemnified Party and the indemnifying party would be
      inappropriate due to actual or potential differing interests between such
      Indemnified Person or Indemnified Party and any other party represented by
      such
      counsel in such proceeding. The Indemnified Party or Indemnified Person shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or claim by the indemnifying party and shall
      furnish to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      fully apprised at all times as to the status of the defense or any settlement
      negotiations with respect thereto. No indemnifying party shall be liable for
      any
      settlement of any action, claim or proceeding effected without its prior written
      consent; provided, however, that the indemnifying party shall not unreasonably
      withhold, delay or condition its consent. No indemnifying party shall, without
      the prior written consent of the Indemnified Party or Indemnified Person,
      consent to entry of any judgment or enter into any settlement or other
      compromise which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such Indemnified Party or Indemnified Person of
      a
      release from all liability in respect to such claim or litigation. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnified Party or Indemnified Person with
      respect to all third parties, firms or corporations relating to the matter
      for
      which indemnification has been made. The failure to deliver written notice
      to
      the indemnifying party within a reasonable time of the commencement of any
      such
      action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (d)  The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

     

    (e)  The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of action or similar right of the Indemnified Party or Indemnified Person
      against the indemnifying party or others, and (ii) any liabilities the
      indemnifying party may be subject to pursuant to the law.

     

    7.  CONTRIBUTION.

     

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided, however, that: (i) no seller of
      Registrable Securities guilty of fraudulent misrepresentation (within the
      meaning of Section 11(f) of the Securities Act) shall be entitled to
      contribution from any seller of Registrable Securities who was not guilty of
      fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
      Securities shall be limited in amount to the net amount of proceeds received
      by
      such seller from the sale of such Registrable Securities.

     

    8.  REPORTS
      UNDER THE EXCHANGE ACT.

     

    With
      a
      view to making available to the Buyers the benefits of Rule 144 promulgated
      under the Securities Act or any similar rule or regulation of the SEC that
      may
      at any time permit the Buyers to sell securities of the Company to the public
      without registration (“Rule
      144”)
      the
      Company agrees to:

     

    (a)  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

     

    (b)  file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the Securities Act and the Exchange Act so long as the Company
      remains subject to such requirements (it being understood that nothing herein
      shall limit the Company’s obligations under Section 4(c) of the Additional
      Securities Purchase Agreement) and the filing of such reports and other
      documents as are required by the applicable provisions of Rule 144;
      and

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (c)  furnish
      to each Buyer so long as such Buyer owns Registrable Securities, promptly upon
      request, (i) a written statement by the Company that it has complied with the
      reporting requirements of Rule 144, the Securities Act and the Exchange Act,
      (ii) a copy of the most recent annual or quarterly report of the Company and
      such other reports and documents so filed by the Company, and (iii) such other
      information as may be reasonably requested to permit the Buyers to sell such
      securities pursuant to Rule 144 without registration.

     

    9.  AMENDMENT
      OF REGISTRATION RIGHTS.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and Buyers who
      then
      hold at least fifty-one (51%) percent of the outstanding aggregate principal
      amount of the Junior Debentures then outstanding. Any amendment or waiver
      effected in accordance with this Section 9 shall be binding upon each Buyer
      and the Company. No such amendment shall be effective to the extent that it
      applies to fewer than all of the holders of the Registrable Securities. No
      consideration shall be offered or paid to any Person to amend or consent to
      a
      waiver or modification of any provision of any of this Agreement unless the
      same
      consideration also is offered to all of the parties to this
      Agreement.

     

    10.  MISCELLANEOUS.

     

    (a)  A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities or owns the right to
      receive the Registrable Securities. If the Company receives conflicting
      instructions, notices or elections from two (2) or more Persons with respect
      to
      the same Registrable Securities, the Company shall act upon the basis of
      instructions, notice or election received from the registered owner of such
      Registrable Securities.

     

    (b)  Limitations
      on Registration.
      Except
      as permitted by the YA Registration Rights Agreement, neither the Company nor
      any of its security holders may include securities of the Company in the Initial
      Registration Statement other than the Initial Required Registration Amount
      of
      Premier Registrable Securities. Unless permitted by the YA Registration Rights
      Agreement or waived by YA Global Investments, L.P., the Company shall not file
      any registration statements other than the Initial Registration Statement until
      the YA Registration Statement is declared effective by the SEC.

     

    (c)  Piggy-Back
      Registrations.
      If at
      any time there has not been filed when required an initial Registration
      Statement or other registration statement for Registrable Securities or
      following the Effectiveness Deadline for such Registrable Securities there
      is
      not an effective Registration Statement covering the Registrable Securities
      required to be filed (taking into account and Cut Back Securities not required
      to be registered) and the Company shall determine to prepare and file with
      the
      SEC a registration statement relating to an offering for its own account or
      the
      account of others under the Securities Act of any of its equity securities,
      other than on Form S-4 or Form S-8 (each as promulgated under the Securities
      Act) or their then equivalents relating to equity securities to be issued solely
      in connection with any acquisition of any entity or business or equity
      securities issuable in connection with the stock option or other employee
      benefit plans, then the Company shall send to each Buyer a written notice of
      such determination and, if within fifteen (15) days after the date of such
      notice, any such Buyer shall so request in writing, the Company shall include
      in
      such registration statement all or any part of such Registrable Securities
      such
      Buyer requests to be registered; provided,
      however,
      that,
      the Company shall not be required to register any Registrable Securities
      pursuant to this Section 10(c) that are eligible for resale pursuant to Rule
      144
      promulgated under the Securities Act or that are the subject of a then effective
      Registration Statement.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (d)  Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) business day after deposit with a nationally recognized
      overnight delivery service, in each case properly addressed to the party to
      receive the same. The addresses and facsimile numbers for such communications
      shall be:

     

    
      	
              If
                to the Company, to:

            	 	
              Handheld
                Entertainment, Inc.

            
	 	 	
              539
                Bryant Street, Suite 403

            
	 	 	
              San
                Francisco, CA 94107

            
	 	 	
              Attention:
                Jeffery Oscodar

            
	 	 	
              Telephone: (415)
                495-6470

            
	 	 	
              Facsimile: (415)
                495-7708

            
	 	 	 
	
              With
                Copy to:

            	 	
              Haynes
                and Boone, LLP

            
	 	 	
              153
                East 53rd
                Street

            
	 	 	
              New
                York, NY 10022

            
	 	 	
              Attention:
                Harvey J. Kesner, Esq.

            
	 	 	
              Telephone: (212)
                659-7300

            
	 	 	
              Facsimile: (212)
                918-8989

            
	 	 	 


    

    If
      to any
      Buyer, to its address and facsimile number on the Schedule of Buyers attached
      hereto, with copies to such Buyer’s representatives as set forth on the Schedule
      of Buyers or to such other address and/or facsimile number and/or to the
      attention of such other person as the recipient party has specified by written
      notice given to each other party five (5) days prior to the effectiveness of
      such change. Written confirmation of receipt (A) given by the recipient of
      such
      notice, consent, waiver or other communication, (B) mechanically or
      electronically generated by the sender’s facsimile machine containing the time,
      date, recipient facsimile number and an image of the first page of such
      transmission or (C) provided by a courier or overnight courier service shall
      be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (e)  Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    (f)  This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New York without regard to the principles of conflict of laws.
      The
      parties further agree that any action between them shall be heard in Hudson
      County, New Jersey, and expressly consent to the jurisdiction and venue of
      the
      Superior Court of New Jersey, sitting in Hudson County and the United States
      District Court for the District of New Jersey sitting in Newark, New Jersey
      for
      the adjudication of any civil action asserted pursuant to this Paragraph. Each
      party hereby irrevocably waives personal service of process and consents to
      process being served in any such suit, action or proceeding by mailing a copy
      thereof to such party at the address for such notices to it under this Agreement
      and agrees that such service shall constitute good and sufficient service of
      process and notice thereof. Nothing contained herein shall be deemed to limit
      in
      any way any right to serve process in any manner permitted by law. If any
      provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
      AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
      HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
      TRANSACTION CONTEMPLATED HEREBY.

     

    (g)  This
      Agreement shall inure to the benefit of and be binding upon the permitted
      successors and assigns of each of the parties hereto.

     

    (h)  The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    (i)  This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    (j)  Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    (k)  The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (l)  This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    


    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their signature page to this Registration
      Rights Agreement to be duly executed as of the date first above
      written.

    
      	 	 	 
	 	
              COMPANY:

            
	 	
              HANDHELD
                ENTERTAINMENT, INC.

            
	 
 	 
 	 
 
	
            	By:  	/s/ William
              J. Bush
	 	
              
                

              

              
                Name: William
                  J. Bush

                
                  Title: Chief
                    Financial Officer

                

              

            


    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their signature page to this Registration
      Rights Agreement to be duly executed as of the date first above
      written.

    
      	 	 	 
	 	
              BUYER:

            
	 
 	 
 	 
 
	
            	By:  	 
	 	
              
                

              

              
                Name: 

                
                  Title: 

                

              

            


    

     

    
      
        
        

      

      
        18