SUBSCRIPTION AGREEMENT
	 

	 
			
				
				  To: 
				

			 	
				
				  Handheld Entertainment, Inc.
				

			 

 

	 
		539 Bryant Street, Suite 403
	 

	 
		San Francisco, California 94107
	 

	 
		Fax: (415) 495-7708
	 

	 
			
				
				   
				

			 	
				
				  Attn:
				

			 	
				
				  Bill Bush,
 Chief Financial
				  Officer
				

			 

 

	  

	 
		This Subscription Agreement (this
		“Agreement”) is being delivered to the purchaser identified
		on the signature page to this Agreement (the “Subscriber”) in connection with its investment in Handheld
		Entertainment, Inc., a Delaware corporation (the “Company”).
		The Company is conducting a private placement (the “Offering”)
		of up to approximately $3,800,000 of units (“Units”),
		but in no event less than $3,500,000. Each Unit shall consist of (i) 100 shares
		of its common stock, par value $0.0001 per share (the “Shares”),
		(ii) a warrant to purchase 75 shares of common stock at $3.50 per share, and
		(iii) a callable warrant to purchase 75 shares of common stock at $4.00 per
		share (together with the warrants referenced in clause (ii) above, the
		“Warrants”). For purposes of this Agreement, the term
		“Securities” shall refer to the Units, the Shares, the
		Warrants, and the shares of common stock underlying the Warrants (the
		“Warrant Shares”). The warrants referenced in clause (iii) above
		may not be exercised prior to the six-month anniversary of the date of
		issuance. The purchase price per Unit shall be fixed at $300.00 (the
		“Purchase Price”). All funds received in the Offering prior to the
		closing of the Offering (the “Closing”)
		shall be held in escrow by Signature Bank (the “Escrow Agent”) and, upon fulfillment of the other conditions
		precedent set forth herein, shall be released from escrow and delivered to the
		Company at which time the Units subscribed for as further described below shall
		be delivered, subject to Section 8 hereof, to Subscriber. Notwithstanding
		anything to the contrary contained herein, in the event the funds delivered by
		a Subscriber are not evenly divisible by the Purchase Price, to the extent the
		Company accepts such subscription, the Company may round down to the nearest
		whole number the number of Shares and Warrants to be sold to such Subscriber
		and the Company shall be entitled to retain any additional funds remaining due
		to such rounding.
	 

	 
			
				
				  1.
				

			 	
				
				  SUBSCRIPTION AND PURCHASE
				  PRICE
				

			 

 

	 
		(a) Subscription.
		Subject to the conditions set forth in Section 2 hereof, the Subscriber hereby
		subscribes for and agrees to purchase the number of Units indicated on page 10
		hereof on the terms and conditions described herein. 
	 

	 
		(b) Purchase of Units. The Subscriber understands and acknowledges that the
		Purchase Price to be remitted to the Company in exchange for the Units shall be
		set at $300.00 per Unit, for an aggregate purchase price as set forth on page
		10 hereof (the “Aggregate Purchase
		Price”). The Subscriber’s
		delivery of this Agreement to the Company shall be accompanied by payment for
		the Units subscribed for hereunder, payable in United States dollars, by wire
		transfer of immediately available funds delivered contemporaneously with the
		Subscriber’s delivery of this Agreement to the Company in accordance with
		the instructions provided on Exhibit
		A. The Subscriber understands and
		agrees that, subject to Section 2 and applicable laws, by executing this
		Agreement, it is entering into a binding agreement.
	 

	 
			
				
				  2.
				

			 	
				
				  ACCEPTANCE, OFFERING TERM AND
				  CLOSING PROCEDURES
				

			 

 

	 
		(a) Acceptance or Rejection. The obligation of the Subscriber to purchase the Units
		shall be irrevocable, and the Subscriber shall be legally bound to purchase the
		Units subject to the terms set forth in this Agreement. The Subscriber
		understands and agrees that the Company reserves the right to reject this
		subscription for Units in whole or part, at any time prior to the Closing, for
		any reason, notwithstanding the Subscriber’s prior receipt of notice of
		acceptance of the Subscriber’s subscription. In the event of rejection of
		this subscription by the Company in accordance with this Section 2, or if the
		sale of the Units is not consummated by the Company for any reason, this
		Agreement and any other agreement entered into between the Subscriber and the
		Company relating to this subscription shall thereafter have no force or effect,
		and the Company shall promptly return or cause to be returned to the Subscriber
		the purchase price remitted to the Escrow Agent, without interest thereon or
		deduction therefrom.
	 

	 
		(b) Offering Term.
		The subscription period for the Offering will begin as of January 16, 2007, and
		will terminate upon the earliest to occur of (a) January 19, 2007, unless
		extended by the Company for up to one 
	 

	 
		 
	 

	 
		 
	 



	 
	 

	 

	 
		additional 1-week period, (b) the
		Company’s acceptance of subscriptions for $3,800,000 of Units and the
		receipt of payment therefore, or (c) the Company’s decision to terminate
		the Offering sooner.
	 

	 
		(c) Closing. The
		Closing shall take place at the offices of the Company at 539 Bryant Street,
		Suite 403, San Francisco, California 94107, or such other place as determined
		by the Company. The Closing shall take place on a Business Day promptly
		following the satisfaction of the conditions set forth in Section 8 below, as
		determined by the Company. “Business Day” shall mean from the hours of 9:00 a.m. (Pacific
		Time) through 5:00 p.m. (Pacific Time) of a day other than a Saturday, Sunday
		or other day on which commercial banks in California are authorized or required
		to be closed. The Securities purchased by the Subscriber will be delivered by
		the Company promptly following the Closing.
	 

	 
			
				
				  3.
				

			 	
				
				  INVESTOR’S REPRESENTATIONS
				  AND WARRANTIES
				

			 

 

	 
		The Subscriber hereby acknowledges, agrees
		with and represents and warrants to the Company and its affiliates, as
		follows:
	 

	 
		(a) The Subscriber has full power and
		authority to enter into this Agreement, the execution and delivery of which has
		been duly authorized, if applicable, and this Agreement constitutes a valid and
		legally binding obligation of the Subscriber.
	 

	 
		(b) The Subscriber acknowledges its
		understanding that the Offering and sale of the Securities is intended to be
		exempt from registration under the Securities Act of 1933, as amended (the
		“Securities Act”), by virtue of Section 4(2) of the Securities Act
		and the provisions of Regulation D promulgated thereunder
		(“Regulation D”). In furtherance thereof, the Subscriber
		represents and warrants to the Company and its affiliates as follows:
	 

	 
		(i) The Subscriber realizes that the basis
		for the exemption from registration may not be available if, notwithstanding
		the Subscriber’s representations contained herein, the Subscriber is
		merely acquiring the Securities for a fixed or determinable period in the
		future, or for a market rise, or for sale if the market does not rise. The
		Subscriber does not have any such intention.
	 

	 
		(ii) The Subscriber realizes that the basis
		for exemption would not be available if the Offering is part of a plan or
		scheme to evade registration provisions of the Securities Act or any applicable
		state or federal securities laws.
	 

	 
		(iii) The Subscriber is acquiring the
		Securities solely for the Subscriber’s own beneficial account, for
		investment purposes, and not with view towards, or resale in connection with,
		any distribution of the Securities.
	 

	 
		(iv) The Subscriber has the financial
		ability to bear the economic risk of the Subscriber’s investment, has
		adequate means for providing for its current needs and contingencies, and has
		no need for liquidity with respect to an investment in the Company.
	 

	 
		 (v) The Subscriber and the
		Subscriber’s attorney, accountant, purchaser representative and/or tax
		advisor, if any (collectively, the “Advisors”)
		has such knowledge and experience in financial and business matters as to be
		capable of evaluating the merits and risks of a prospective investment in the
		Securities. If other than an individual, the Subscriber also represents it has
		not been organized solely for the purpose of acquiring the Securities.
	 

	 
		(vi) The Subscriber (together with its
		Advisors, if any) has received all documents requested by the Subscriber, if
		any, has carefully reviewed them and understands the information contained
		therein, prior to the execution of this Agreement.
	 

	 
		(c) The Subscriber is not relying on the
		Company or any of its employees, agents, sub-agents or advisors with respect to
		economic considerations involved in this investment. The Subscriber has relied
		on the advice of, or has consulted with, only its Advisors. Each Advisor, if
		any, is capable of evaluating the merits and 
	 

	 
		 
	 

	 
		-2-
	 

	 
		 
	 



	 
	 

	 

	 
		risks of an investment in the Securities,
		and each Advisor, if any, has disclosed to the Subscriber in writing (a copy of
		which is annexed to this Agreement) the specific details of any and all past,
		present or future relationships, actual or contemplated, between the Advisor
		and the Company or any affiliate or sub-agent thereof.
	 

	 
		(d) The Subscriber has carefully considered
		the potential risks relating to the Company and a purchase of the Securities,
		and fully understands that the Securities are a speculative investment that
		involve a high degree of risk of loss of the Subscriber’s entire
		investment. Among other things, the Subscriber has carefully considered each of
		the risks described under the heading “Risk Factors” in the
		Company’s SEC Filings (as defined in Section 4(d) below), which risk
		factors are incorporated herein by reference.
	 

	 
		(e) The Subscriber represents, warrants and
		agrees that it will not sell or otherwise transfer the Securities without
		registration under the Securities Act or an exemption therefrom, and fully
		understands and agrees that the Subscriber must bear the economic risk of its
		purchase because, among other reasons, the Securities have not been registered
		under the Securities Act or under the securities laws of any state and,
		therefore, cannot be resold, pledged, assigned or otherwise disposed of unless
		they are subsequently registered under the Securities Act and under the
		applicable securities laws of such states, or an exemption from such
		registration is available. In particular, the Subscriber is aware that the
		Securities are “restricted securities,” as such term is defined in
		Rule 144 promulgated under the Securities Act (“Rule 144”),
		and they may not be sold pursuant to Rule 144 unless all of the conditions of
		Rule 144 are met. The Subscriber also understands that, except as otherwise
		provided in Section 5 hereof, the Company is under no obligation to register
		the Securities on behalf of the Subscriber or to assist the Subscriber in
		complying with any exemption from registration under the Securities Act or
		applicable state securities laws. The Subscriber understands that any sales or
		transfers of the Securities are further restricted by state securities laws and
		the provisions of this Agreement.
	 

	 
		(f) No oral or written representations or
		warranties have been made to the Subscriber by the Company or any of its
		officers, employees, agents, sub-agents, affiliates, advisors or subsidiaries,
		other than any representations of the Company contained herein, and in
		subscribing for the Units, the Subscriber is not relying upon any
		representations other than those contained herein.
	 

	 
		(g) The Subscriber’s overall commitment
		to investments that are not readily marketable is not disproportionate to the
		Subscriber’s net worth, and an investment in the Securities will not cause
		such overall commitment to become excessive.
	 

	 
		(h) The Subscriber understands and agrees
		that the certificates for the Securities shall bear substantially the following
		legend until (i) such Securities shall have been registered under the
		Securities Act and effectively disposed of in accordance with a registration
		statement that has been declared effective or (ii) in the opinion of counsel
		for the Company, such Securities may be sold without registration under the
		Securities Act, as well as any applicable “blue sky” or state
		securities laws:
	 

	 
		THE SECURITIES REPRESENTED BY THIS
		CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
		AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES
		LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE
		OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR
		HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE
		ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH
		SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
		THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
	 

	 
		(i) Neither the Securities and Exchange
		Commission (the “SEC”) nor
		any state securities commission has approved the Securities or passed upon or
		endorsed the merits of the Offering. There is no government or other insurance
		covering any of the Securities.
	 

	 
		(j) The Subscriber and its Advisors, if any,
		have had a reasonable opportunity to ask questions of and receive answers from
		a person or persons acting on behalf of the Company concerning the Offering
		
	 

	 
		 
	 

	 
		-3-
	 

	 
		 
	 



	 
	 

	 

	 
		and the business, financial condition,
		results of operations and prospects of the Company, and all such questions have
		been answered to the full satisfaction of the Subscriber and its Advisors, if
		any.
	 

	 
		(k) The Subscriber is unaware of, is in no
		way relying on, and did not become aware of the Offering through or as a result
		of, any form of general solicitation or general advertising including, without
		limitation, any article, notice, advertisement or other communication published
		in any newspaper, magazine or similar media or broadcast over television or
		radio, or electronic mail over the Internet, in connection with the Offering
		and is not subscribing for Units and did not become aware of the Offering
		through or as a result of any seminar or meeting to which the Subscriber was
		invited by, or any solicitation of a subscription by, a person not previously
		known to the Subscriber in connection with investments in securities
		generally.
	 

	 
		(l) The Subscriber has taken no action that
		would give rise to any claim by any person for brokerage commissions,
		finders’ fees or the like relating to this Agreement or the transactions
		contemplated hereby.
	 

	 
		(m) The Subscriber is not relying on the
		Company or any of its employees, agents, or advisors with respect to the legal,
		tax, economic and related considerations of an investment in the Securities and
		the Subscriber has relied on the advice of, or has consulted with, only its own
		Advisors.
	 

	 
		(n) The Subscriber acknowledges that any
		estimates or forward-looking statements or projections furnished by the Company
		to the Subscriber, were prepared by management of the Company in good faith,
		but that the attainment of any such projections, estimates or forward-looking
		statements cannot be guaranteed by the Company or its management and should not
		be relied upon.
	 

	 
		(o) No oral or written representations have
		been made, or oral or written information furnished, to the Subscriber or its
		Advisors, if any, in connection with the Offering that are in any way
		inconsistent with the information contained herein.
	 

	 
		(p) (For ERISA plans only) The fiduciary of
		the ERISA plan (the “Plan”)
		represents that such fiduciary has been informed of and understands the
		Company’s investment objectives, policies and strategies, and that the
		decision to invest “plan assets” (as such term is defined in ERISA)
		in the Company is consistent with the provisions of ERISA that require
		diversification of plan assets and impose other fiduciary responsibilities. The
		Subscriber or Plan fiduciary (i) is responsible for the decision to invest in
		the Company; (ii) is independent of the Company and any of its affiliates;
		(iii) is qualified to make such investment decision; and (iv) in making such
		decision, the Subscriber or Plan fiduciary has not relied primarily on any
		advice or recommendation of the Company or any of its affiliates.
	 

	 
		(q) This Agreement is not enforceable by the
		Subscriber unless it has been accepted by the Company, and the Subscriber
		acknowledges and agrees that the Company reserves the right to reject any
		subscription for any reason.
	 

	 
		(r) The Subscriber will indemnify and hold
		harmless the Company, Escrow Agent and, where applicable, their respective
		directors, officers, employees, agents, advisors, affiliates and shareholders,
		and each other person, if any, who controls any of the foregoing, from and
		against any and all loss, liability, claim, damage and expense whatsoever
		(including, but not limited to, any and all fees, costs and expenses whatsoever
		reasonably incurred in investigating, preparing or defending against any claim,
		lawsuit, administrative proceeding or investigation whether commenced or
		threatened) (a “Loss”)
		arising out of or based upon any representation or warranty of the Subscriber
		contained herein or in any document furnished by the Subscriber to the Company
		or the Escrow Agent in connection herewith being untrue in any material respect
		or any breach or failure by the Subscriber to comply with any covenant or
		agreement made by the Subscriber herein or therein; provided,
		however, that such Subscriber shall not be liable for any Loss
		that in the aggregate exceeds the amount such Subscriber would receive if
		Subscriber were to sell the Securities on the date the amount of the Loss was
		determined (based on the closing price of a share of Common Stock on its
		principal market on such date).
	 

	 
		(s) The Subscriber is, and on each date on
		which the Subscriber continues to own restricted securities from the Offering
		will be, an “Accredited Investor” as defined in Rule 501(a) under the
		Securities Act. In general, an “Accredited Investor” is deemed to be
		an institution with assets in excess of $5,000,000 or individuals
	 

	 
		 
	 

	 
		-4-
	 

	 
		 
	 



	 
	 

	 

	 
		with net worth in excess of $1,000,000 or
		annual income exceeding $200,000 or $300,000 jointly with his or her
		spouse.
	 

	 
		(t) The Subscriber, either alone or together
		with its representatives, has such knowledge, sophistication and experience in
		business and financial matters so as to be capable of evaluating the merits and
		risks of the Offering, and has so evaluated the merits and risks of such
		investment. The Subscriber has not authorized any person or entity to act as
		its Purchaser Representative (as that term is defined in Regulation D of the
		General Rules and Regulations under the Securities Act) in connection with the
		Offering. The Subscriber is able to bear the economic risk of an investment in
		the Securities and, at the present time, is able to afford a complete loss of
		such investment.
	 

	 
		(u) The Subscriber has reviewed, or had an
		opportunity to review, all of the SEC Filings.
	 

	 
			
				
				  4.
				

			 	
				
				  THE COMPANY’S
				  REPRESENTATIONS, WARRANTIES AND COVENANTS
				

			 

 

	 
		The Company hereby acknowledges, agrees with
		and represents, warrants and covenants to the Subscriber, as follows:
	 

	 
		(a) The Company has the corporate power and
		authority to execute and deliver this Agreement and to perform its obligations
		hereunder. This Agreement has been duly authorized, executed and delivered by
		the Company and is valid, binding and enforceable against the Company in
		accordance with its terms.
	 

	 
		(b) The Securities to be issued to the
		Subscriber pursuant to this Agreement, when issued and delivered in accordance
		with the terms of this Agreement, will be duly and validly issued and will be
		fully paid and non-assessable.
	 

	 
		(c) Neither the execution and delivery nor
		the performance of this Agreement by the Company will conflict with the
		Company’s organizational materials, as amended to date, or result in a
		breach of any terms or provisions of, or constitute a default under, any
		material contract, agreement or instrument to which the Company is a party or
		by which the Company is bound.
	 

	 
		(d) The Company is subject to, and in full
		compliance with, the reporting requirements of Section 13 or 15(d) of the
		Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has made available to each
		Subscriber through the EDGAR system true and complete copies of the
		Company’s Quarterly Reports on Form 10-QSB and each of the Company’s
		Current Reports on Form 8-K (collectively, the “SEC Filings”), and all such SEC Filings are incorporated
		herein by reference. The SEC Filings, including the financial statements
		included therein, when they were filed with the SEC (or, if any amendment with
		respect to any such document was filed, when such amendment was filed),
		complied in all material respects with the applicable requirements of the
		Exchange Act and the rules and regulations thereunder and did not, as of such
		date, contain an untrue statement of a material fact or omit to state a
		material fact required to be stated therein or necessary in order to make the
		statements therein, in the light of the circumstances under which they were
		made, not misleading. All reports and statements required to be filed by the
		Company under the Securities Act and the Exchange Act have been filed, together
		with all exhibits required to be filed therewith. The Company is engaged in all
		material respects only in the business described in the SEC Filings, and the
		SEC Filings contain a complete and accurate description in all material
		respects of the business of the Company.
	 

	 
		(e) Any information furnished by the Company
		in connection with the Offering is true and correct in all material respects as
		of its date.
	 

	 
		(f) The Company acknowledges and agrees that
		the Subscriber is acting solely in the capacity of an arm’s length
		purchaser with respect to the Securities and the transactions contemplated
		hereby. The Company further acknowledges that the Subscriber is not acting as a
		financial advisor or fiduciary of the Company (or in any similar capacity) with
		respect to this Agreement and the transactions contemplated hereby and any
		advice given by any Subscriber or any of their respective representatives or
		agents in connection with this Agreement and the transactions contemplated
		hereby is merely incidental to the Subscriber’s purchase of the Units. The
		Company further represents to the Subscriber that the Company’s decision
		to enter into this Agreement has been based solely on the independent
		evaluation of the transactions contemplated hereby by the Company and its
		representatives.
	 

	 
		 
	 

	 
		-5-
	 

	 
		 
	 



	 
	 

	 

	 
		(g) The Company will indemnify and hold
		harmless the Subscriber and, where applicable, its directors, officers,
		employees, agents, advisors and shareholders, from and against any and all
		loss, liability, claim, damage and expense whatsoever (including, but not
		limited to, any and all fees, costs and expenses whatsoever reasonably incurred
		in investigating, preparing or defending against any claim, lawsuit,
		administrative proceeding or investigation whether commenced or threatened)
		arising out of or based upon any representation or warranty of the Company
		contained herein or in any document furnished by the Company to the Subscriber
		in connection herewith being untrue in any material respect or any breach or
		failure by the Company to comply with any covenant or agreement made by the
		Company to the Subscriber in connection therewith.
	 

	 
		(h) The Company shall not sell or issue any
		shares of its capital stock, or any securities convertible or exercisable for
		shares of its capital stock, nor will the Company amend any of the terms of its
		outstanding securities, until the Registration Statement (as defined in Section
		5(a) below) has been declared effective.
	 

	 
		(i) For a period of 6 months from the date
		of the Closing, the Company shall not issue any warrants or options to purchase
		shares of capital stock of the Company having an exercise price lower than
		$3.50 per share, except for issuances to employees or service providers in the
		Company’s normal course of business.
	 

	 
		(j) The Company shall promptly file a
		listing application with The Nasdaq Stock Market in connection with securing a
		listing for the Shares, the Warrants and the Warrant Shares.
	 

	 
			
				
				  5.
				

			 	
				
				  REGISTRATION RIGHTS
				

			 

 

	 
		(a) The Company shall prepare and file a
		registration statement (the “Registration Statement”) with the SEC, covering the resale of the Shares,
		the Warrants and the Warrant Shares (the “Registered Securities”), by
		no later than January 31, 2007. The Company shall use its best efforts to have
		the Registration Statement declared effective by the SEC as soon as possible
		after the initial filing, and in any event no later than March 15, 2007. The
		Company will maintain the effectiveness of the Registration Statement from the
		date of the effectiveness of the Registration Statement until 18 months after
		that date; provided, however, that,
		if at any time or from time to time after the date of effectiveness of the
		Registration Statement, the Company notifies the Subscriber in writing of the
		existence of a Potential Material Event (as defined below), the Subscriber
		shall not offer or sell any of the Registered Securities, or engage in any
		other transaction involving or relating to the Registered Securities, from the
		time of the giving of notice with respect to a Potential Material Event until
		the Company notifies the Subscriber that such Potential Material Event either
		has been disclosed to the public or no longer constitutes a Potential Material
		Event; provided, further that,
		the Company may not suspend the right of the Subscriber pursuant to this
		Section 5(a) for more than 45 days in the aggregate. “Potential Material Event” means the possession by the Company of material
		information regarding a potential transaction not ripe for disclosure in a
		registration statement, which shall be evidenced by determinations in good
		faith by the Board of Directors of the Company that disclosure of such
		information in the registration statement would be detrimental to the business
		and affairs of the Company.
	 

	 
		(b) Subject to the provisions of Section
		5(f) below, (i) if the Company fails to file the Registration Statement with
		the SEC on or prior to January 31, 2007, then the exercise price of the
		Warrants Shares shall be reduced by 5% of the original exercise price or (ii)
		if the Company fails to obtain effectiveness of the Registration Statement by
		the SEC on or prior to March 15, 2007, then the exercise price per Warrant
		Share shall be reduced by 10% of the original exercise price; provided,
		however, that if the exercise price has been reduced pursuant to clause (i)
		above, then the exercise price shall only be reduced by an additional 5%
		pursuant to this clause (ii). To the extent the Company has failed to obtain
		effectiveness of the Registration Statement by the SEC on or prior to March 15,
		2007 (and the exercise price has been reduced by an aggregate of 10%), then at
		the end of every 30 day period thereafter that the Company has still not
		obtained the effectiveness of the Registration Statement, the exercise price of
		the Warrants Shares shall be reduced by an additional 5% of the original
		exercise price.
	 

	 
		(c) The Company shall notify the Subscriber
		at any time when a prospectus relating thereto is required to be delivered
		under the Securities Act, upon discovery that, or upon the happening of any
		event as a result of which, the prospectus included in such registration
		statement, as then in effect, includes an untrue statement of a material fact
		or omits to state any material fact required to be stated therein or necessary
		to make the statements therein not misleading in light of the circumstances
		then existing. At the request of the Subscriber, the Company shall also
		prepare, file and furnish to the Subscriber a reasonable number of copies of a
		supplement to or an amendment of such prospectus as may be necessary so that,
		as thereafter delivered to the purchasers of such
	 

	 
		 
	 

	 
		-6-
	 

	 
		 
	 



	 
	 

	 

	 
		Securities, such prospectus shall not
		include an untrue statement of a material fact or omit to state a material fact
		required to be stated therein or necessary to make the statements therein not
		misleading in light of the circumstances then existing. The Subscriber agrees
		not to offer or sell any Registered Securities after receipt of such
		notification until the receipt of such supplement or amendment.
	 

	 
		(d) The Company may request the Subscriber
		to furnish the Company such information with respect to the Subscriber and the
		Subscriber’s proposed distribution of the Securities pursuant to the
		Registration Statement as the Company may from time to time reasonably request
		in writing or as shall be required by law or by the SEC in connection
		therewith, and the Subscriber agrees to furnish the Company with such
		information.
	 

	 
		(e) Each of the Company and the Subscriber
		shall indemnify the other party hereto and their respective officers,
		directors, employees and agents against any and all Loss arising out of or
		based on any untrue statement (or alleged untrue statement) by the indemnifying
		party of a material fact contained in any prospectus or other document
		(including any related registration statement, notification or the like)
		incident to any registration of the type described in this Section 5, or any
		omission (or alleged omission) by the indemnifying party to state in any such
		document a material fact required to be stated therein or necessary to make the
		statements therein not misleading, and shall reimburse such indemnified party
		for any legal and any other expenses reasonably incurred in connection with
		investigating and defending any such claim, loss, damage, liability or action;
		provided, however, that no
		party will be eligible for indemnification hereunder to the extent that any
		such claim, loss, damage, liability or expense arises out of or is based on any
		untrue statement or omission based upon written information furnished by such
		party for use in connection with such registration; and provided,
		further, that a Subscriber shall not be liable for any Loss
		that in the aggregate exceeds the amount such Subscriber would receive if
		Subscriber were to sell the Securities on the date the amount of the Loss was
		determined (based on the closing price of a share of Common Stock on its
		principal market on such date).
	 

	 
		(f) Notwithstanding anything herein to the
		contrary, to the extent that the registration of any or all of the Securities
		by the Company on the Registration Statement is prohibited (the
		“Non-Registered
		Shares”) as a result of the
		SEC’s interpretation of Rule 415 under the Securities Act, the exercise
		price adjustment described in Section 5(b) above shall not be applicable to
		such Non-Registered Shares.
	 

	 
			
				
				  6.
				

			 	
				
				  USE OF PROCEEDS
				

			 

 

	 
		The Company shall use the net proceeds from
		the Offering for acquisitions and general working capital purposes.
	 

	 
			
				
				  7.
				

			 	
				
				  INSIDER TRADING PROHIBITION;
				  INDEMNITY; ESCROW RELEASE
				

			 

 

	 
		(a) Until the earlier of the effectiveness
		of the Registration Statement or the date on which sales are permitted under
		Rule 144(k) of the Securities Act, the Subscriber hereby agrees to (i) refrain
		from (A) engaging in any transactions with respect to the capital stock of the
		Company or securities exercisable or convertible into or exchangeable for any
		shares of capital stock of the Company, and (B) entering into any transaction
		that would have the same effect, or entering into any swap, hedge or other
		arrangement that transfers, in whole or in part, any of the economic
		consequences of ownership of the capital stock of the Company and (ii)
		indemnify and hold harmless the Company and its respective officers and
		directors, employees, agents, sub-agents, advisors and affiliates and each
		other person, if any, who controls any of the foregoing, against any Loss
		arising out of or based upon any violation of this Section 7 by the Subscriber;
		provided, however, that
		such Subscriber shall not be liable for any Loss that in the aggregate exceeds
		the amount such Subscriber would receive if Subscriber were to sell the
		Securities on the date the amount of the Loss was determined (based on the
		closing price of a share of Common Stock on its principal market on such
		date).
	 

	 
		(b) The Subscriber acknowledges that the
		Company may act on behalf of the Subscribers, solely for the sake of
		convenience, in connection with confirmation to the Escrow Agent that the
		Closing has occurred and thereby direct the Escrow Agent to disburse the
		Subscriber’s subscription funds held in escrow to the Company at such
		time. In doing so, however, the Company makes no representation or warranty to
		the Subscriber with respect to any due diligence investigations concerning the
		Company, all of which shall be and remain the Subscriber’s own
		responsibility.
	 

	 
		 
	 

	 
		-7-
	 

	 
		 
	 



	 
	 

	 

	 
			
				
				  8.
				

			 	
				
				  CONDITIONS TO ACCEPTANCE OF
				  SUBSCRIPTION
				

			 

 

	 
		The Company’s right to accept the
		subscription of the Subscriber, on the one hand, and a Subscriber’s right
		to withdraw its funds, on the other hand, is conditioned upon satisfaction of
		the following conditions precedent on or before the date the Company accepts
		such subscription (any or all of which may be waived by the other
		party):
	 

	 
		(a) As of the Closing, no legal action, suit
		or proceeding shall be pending which seeks to restrain or prohibit the
		transactions contemplated by this Agreement; provided that neither party hereto
		shall directly or indirectly initiate any such action, suit or
		proceeding.
	 

	 
		(b) The representations and warranties of
		the Company and the Subscriber contained in this Agreement shall have been true
		and correct on the date of this Agreement and shall be true and correct as of
		the Closing as if made on the date of the Closing.
	 

	 
		(c) The Common Stock shall continue to be
		listed on The Nasdaq Stock Market.
	 

	 
		(d) There are no stop orders preventing or
		suspending any offering of securities by the Company, or suspension of the
		qualification of the Common Stock for offering or sale in any
		jurisdiction.
	 

	 
			
				
				  9.
				

			 	
				
				  NOTICES TO SUBSCRIBERS

				

			 

 

	 
		(a) THE SECURITIES HAVE NOT BEEN REGISTERED
		UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING
		OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
		OF THE SECURITIES ACT AND SUCH LAWS. THE SECURITIES HAVE NOT BEEN APPROVED OR
		DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
		AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED
		THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF ANY INFORMATION
		FURNISHED IN CONNECTION WITH THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
		IS UNLAWFUL.
	 

	 
		(b) THE SECURITIES ARE SUBJECT TO
		RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
		EXCEPT AS PERMITTED UNDER THE SECURITIES ACT, AND APPLICABLE STATE SECURITIES
		LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. SUBSCRIBERS SHOULD BE
		AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
		FOR AN INDEFINITE PERIOD OF TIME.
	 

	 
			
				
				  10.
				

			 	
				
				  MISCELLANEOUS
				  PROVISIONS
				

			 

 

	 
		(a) Counsel. All
		parties hereto have been represented by counsel, and no inference shall be
		drawn in favor of or against any party by virtue of the fact that such
		party’s counsel was or was not the principal draftsman of this Agreement.
		The Company and the Subscriber each have requested that attorneys at Haynes and
		Boone, LLP (“Counsel”) assist in documenting the terms of the
		agreement of the parties contained in this Agreement and related agreements.
		The parties acknowledge that Counsel may have previously represented the
		Subscriber and currently is counsel to Company in connection with this
		Agreement and related matters, and may continue to represent each of the
		parties in the future. Each of the parties has been provided the opportunity to
		be represented by counsel of its choice and has been encouraged by Counsel to
		seek separate representation to the extent that it deems such desirable, but
		the absence of such shall not be asserted as a basis for the enforceability or
		interpretation of any of the terms or provisions of this Agreement, or as a
		reason to seek disqualification of Counsel in any controversy or
		proceeding.
	 

	 
		(b) Legal Fees. Each
		of the parties hereto shall be responsible to pay the costs and expenses of
		their own legal counsel in connection with the preparation and review of this
		Agreement and related documentation; provided, however, that the Company shall
		be responsible to pay $15,000 to Grushko & Mittman, P.C., counsel to the
		Subscribers in the Offering.
	 

	 
		 
	 

	 
		-8-
	 

	 
		 
	 



	 
	 

	 

	 
		(c) Modification.
		Neither this Agreement, nor any provisions hereof, shall be waived, modified,
		discharged or terminated except by an instrument in writing signed by the party
		against whom any waiver, modification, discharge or termination is
		sought.
	 

	 
		(d) Survival. The
		representations, warranties and agreements of the Subscriber and the Company
		made in this Agreement shall survive the execution and delivery of this
		Agreement and the delivery of the Securities.
	 

	 
		(e) Notices. Any
		party may send any notice, request, demand, claim or other communication
		hereunder to the Subscriber at the address set forth on the signature page of
		this Agreement or to the Company at the address set forth above using any means
		(including personal delivery, expedited courier, messenger service, fax,
		ordinary mail or electronic mail), but no such notice, request, demand, claim
		or other communication will be deemed to have been duly given unless and until
		it actually is received by the intended recipient. Any party may change the
		address to which notices, requests, demands, claims and other communications
		hereunder are to be delivered by giving the other parties written notice in the
		manner herein set forth.
	 

	 
		(f) Binding Effect.
		Except as otherwise provided herein, this Agreement shall be binding upon, and
		inure to the benefit of, the parties to this Agreement and their heirs,
		executors, administrators, successors, legal representatives and assigns. If
		the Subscriber is more than one person or entity, the obligation of the
		Subscriber shall be joint and several and the agreements, representations,
		warranties and acknowledgments contained herein shall be deemed to be made by,
		and be binding upon, each such person or entity and his or its heirs,
		executors, administrators, successors, legal representatives and assigns. This
		Agreement sets forth the entire agreement and understanding between the parties
		as to the subject matter thereof and merges and supersedes all prior
		discussions, agreements and understandings of any and every nature among
		them.
	 

	 
		(g) Assignability.
		This Agreement is not transferable or assignable by the parties hereto.
	 

	 
		(h) Governing Law.
		This Agreement shall be governed by and construed in accordance with the laws
		of the State of New York, without giving effect to conflicts of law
		principles.
	 

	 
		(i) Jurisdiction and Venue. The Company and the Subscriber hereby agree that any
		dispute which may arise between them arising out of or in connection with this
		Agreement shall be adjudicated before a court located in New York City, New
		York, and they hereby submit to the exclusive jurisdiction of the federal and
		state courts of the State of New York located in New York City with respect to
		any action or legal proceeding commenced by any party, and irrevocably waive
		any objection they now or hereafter may have respecting the venue of any such
		action or proceeding brought in such a court or respecting the fact that such
		court is an inconvenient forum, relating to or arising out of this Agreement or
		any acts or omissions relating to the sale of the securities hereunder, and
		consent to the service of process in any such action or legal proceeding by
		means of registered or certified mail, return receipt requested, postage
		prepaid, in care of the address set forth herein or such other address as
		either party shall furnish in writing to the other.
	 

	 
		(j) Counterparts.
		This Agreement may be executed in two or more counterparts, each of which shall
		be deemed an original, but all of which together shall constitute one and the
		same instrument.
	 

	 
		[SIGNATURE PAGE FOLLOWS]
	 

	 
		 
	 

	 
		-9-
	 

	 
		 
	 



	 
	 

	 

	 
		ALL SUBSCRIBERS MUST COMPLETE THIS
		PAGE
	 

	 
		IN WITNESS WHEREOF, the Subscriber has
		executed this Agreement on the ____ day of ____________ 2007.
	 

	 
		 
	 

	 
			
				
				  ________________________
				

			 	
				
				  x    $300.00 for each
				  Unit
				

			 	
				
				  = $_____________________.
				

			 
	
				
				  Units subscribed for
				

			 	
				
				  Purchase Price
				

			 	
				
				  Aggregate Purchase Price
				

			 

 

	 
		Manner in which Title is to be held (Please
		Check One):
	 

	 
		 
	 

	 
			
				
				  1.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  Individual
				

			 	
				
				  7.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  Trust/Estate/Pension or Profit
				  sharing Plan
				

				
				  Date Opened:______________
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  2.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  Joint Tenants with Right of
				  Survivorship
				

			 	
				
				  8.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  As a Custodian for
				  ________________________________
				

				
				  Under the Uniform Gift to Minors Act
				  of the State of
				

				
				  ________________________________
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  3.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  Community Property
				

			 	
				
				  9.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  Married with Separate
				  Property
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  4.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  Tenants in Common
				

			 	
				
				  10.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  Keogh
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  5.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  Corporation/Partnership/ Limited
				  Liability Company
				

			 	
				
				  11.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  Tenants by the Entirety
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  6.
				

			 	
				
				   
				

			 	
				
				  ___
				

			 	
				
				   
				

			 	
				
				  IRA
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 

 

	 
		ALTERNATIVE DISTRIBUTION INFORMATION
	 

	 
		To direct distribution to a party other than
		the registered owner, complete the information below. YOU MUST COMPLETE THIS
		SECTION IF THIS IS AN IRA INVESTMENT.
	 

	 
		Name of Firm (Bank, Brokerage,
		Custodian):
	 

	 
		Account Name:
	 

	 
		Account Number:
	 

	 
		Representative Name:
	 

	 
		Representative Phone Number:
	 

	 
		Address:
	 

	 
		City, State, Zip:
	 

	 
		 
	 

	 
		-10-
	 

	 
		 
	 



	 
	 

	 

	 
		IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER
		MUST SIGN.
	 

	 
		INDIVIDUAL SUBSCRIBERS MUST COMPLETE THIS
		PAGE 11.
	 

	 
		SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE
		PAGE 12.
	 

	 
		EXECUTION BY NATURAL PERSONS
	 

	 
		 
	 

	 
			
				
				   
				

			 
	
				
				  Exact Name in Which Title is to be
				  Held
				

			 

 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Name (Please Print)
				

			 	
				
				   
				

			 	
				
				  Name of Additional Purchaser
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Residence: Number and Street
				

			 	
				
				   
				

			 	
				
				  Address of Additional
				  Purchaser
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  City, State and Zip Code
				

			 	
				
				   
				

			 	
				
				  City, State and Zip Code
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Social Security Number
				

			 	
				
				   
				

			 	
				
				  Social Security Number
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Telephone Number
				

			 	
				
				   
				

			 	
				
				  Telephone Number
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Fax Number (if available)
				

			 	
				
				   
				

			 	
				
				  Fax Number (if available)
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  E-Mail (if available)
				

			 	
				
				   
				

			 	
				
				  E-Mail (if available)
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  (Signature)
				

			 	
				
				   
				

			 	
				
				  (Signature of Additional
				  Purchaser)
				

			 

 

	 
		ACCEPTED this ___ day of _________ 2007, on
		behalf of the Company.
	 

	 
		 
	 

	 
			
				
				

			 	
				
				   
				

			 	
				
				  By: 
				

			 	
				
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name:

				  Title:
				

			 

 

	 
		 
	 

	 
		-11-
	 

	 
		 
	 



	 
	 

	 

	 
		EXECUTION BY SUBSCRIBER WHICH IS AN
		ENTITY
	 

	 
		(Corporation, Partnership, LLC, Trust,
		Etc.)
	 

	 
		 
	 

	 
			
				
				   
				

			 
	
				
				  Name of Entity (Please Print)

				

			 

 

	 
		Date of Incorporation or
		Organization:
	 

	 
		State of Principal Office:
	 

	 
		Federal Taxpayer Identification
		Number:
	 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Office Address
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  City, State and Zip Code
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Telephone Number
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Fax Number (if available)
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  E-Mail (if available)
				

			 	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
			
				
				

			 	
				
				   
				

			 	
				
				  By: 
				

			 	
				
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name:

				  Title:
				

			 
	
				
				  [seal]
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Attest:
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  (If Entity is a Corporation)
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Address
				

			 

 

	 
		ACCEPTED this ____ day of __________ 2007,
		on behalf of the Company.
	 

	 
		 
	 

	 
			
				
				

			 	
				
				   
				

			 	
				
				  By: 
				

			 	
				
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name:

				  Title:
				

			 

 

	 
		 
	 

	 
		-12-
	 

	 
		 
	 



	 
	 

	 

	 
		INVESTOR QUESTIONNAIRE
	 

	 
		Instructions: Check all boxes below which
		correctly describe you.
	 

	 
			
				
				  
				

			 	
				
				  You are (i) a bank, as
				  defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the
				  “Securities Act”), (ii) a savings
				  and loan association or other institution, as defined in Section 3(a)(5)(A) of
				  the Securities Act, whether acting in an individual or fiduciary capacity,
				  (iii) a broker or dealer registered pursuant to Section 15
				  of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iv) an insurance
				  company as defined in Section 2(13) of the Securities Act, (v) an investment
				  company registered under the Investment Company Act of 1940, as amended (the
				  “Investment Company
				  Act”), (vi) a business
				  development company as defined in Section 2(a)(48) of the Investment Company
				  Act, (vii) a Small Business Investment Company licensed by the
				  U.S. Small Business Administration under Section 301 (c) or (d) of the Small
				  Business Investment Act of 1958, as amended, (viii) a plan
				  established and maintained by a state, its political subdivisions, or an agency
				  or instrumentality of a state or its political subdivisions, for the benefit of
				  its employees and you have total assets in excess of $5,000,000, or
				  (ix) an employee benefit plan within the meaning of the
				  Employee Retirement Income Security Act of 1974, as amended
				  (“ERISA”) and (1) the decision
				  that you shall subscribe for and purchase shares of common stock and warrants
				  to purchase common stock (the “Units”), is
				  made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either
				  a bank, savings and loan association, insurance company, or registered
				  investment adviser, or (2) you have total assets in excess of $5,000,000 and
				  the decision that you shall subscribe for and purchase the Units is made solely
				  by persons or entities that are accredited investors, as defined in Rule 501 of
				  Regulation D promulgated under the Securities Act (“Regulation D”) or (3) you are a
				  self-directed plan and the decision that you shall subscribe for and purchase
				  the Units is made solely by persons or entities that are accredited
				  investors.
				

			 

 

	 
			
				
				  
				

			 	
				
				  You are a private business
				  development company as defined in Section 202(a)(22) of the Investment Advisers
				  Act of 1940, as amended.
				

			 

 

	 
			
				
				  
				

			 	
				
				  You are an organization described in
				  Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the
				  “Code”), a corporation, Massachusetts or similar
				  business trust or a partnership, in each case not formed for the specific
				  purpose of making an investment in the Units and its underlying securities and
				  with total assets in excess of $5,000,000.
				

			 

 

	 
			
				
				  
				

			 	
				
				  You are a director or executive
				  officer of Handheld Entertainment, Inc.
				

			 

 

	 
			
				
				  
				

			 	
				
				  You are a natural person whose
				  individual net worth, or joint net worth with your spouse, exceeds $1,000,000
				  at the time of your subscription for and purchase of the Units.
				

			 

 

	 
			
				
				  
				

			 	
				
				  You are a natural person who had an
				  individual income in excess of $200,000 in each of the two most recent years or
				  joint income with your spouse in excess of $300,000 in each of the two most
				  recent years, and who has a reasonable expectation of reaching the same income
				  level in the current year.
				

			 

 

	 
			
				
				  
				

			 	
				
				  You are a trust, with total assets
				  in excess of $5,000,000, not formed for the specific purpose of acquiring the
				  Units and its underlying securities, whose subscription for and purchase of the
				  Units is directed by a sophisticated person as described in Rule 506(b)(2)(ii)
				  of Regulation D.
				

			 

 

	 
			
				
				  
				

			 	
				
				  You are an entity in which all of
				  the equity owners are persons or entities described in one of the preceding
				  paragraphs.
				

			 

 

	 
		 
	 

	 
		-13-
	 

	 
		 
	 



	 
	 

	 

	 
		Check all boxes below which correctly
		describe you.
	 

	 
		With respect to this investment in the Units
		and its underlying securities, your:
	 

	 
		 
	 

	 
			
				
				  Investment Objectives:
				

			 	
				
				   Aggressive
				  Growth
				

			 	
				
				   Speculation
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Risk Tolerance:
				

			 	
				
				   Low
				  Risk
				

			 	
				
				   Moderate
				  Risk
				

			 	
				
				   High
				  Risk
				

			 

 

	 
			
				
				  Are you associated with a NASD
				  Member Firm?  
				

			 	
				
				  
				  Yes  
				

			 	
				
				  
				   No 
				

			 

 

	 
		Your initials (purchaser and
		co-purchaser, if applicable) are required for each item below:
	 

	 
			
				
				  ____   ____  
				

			 	
				
				  I/We understand that this investment
				  is not guaranteed.
				

			 

 

	 
			
				
				  ____   ____  
				

			 	
				
				  I/We are aware that this investment
				  is not liquid.
				

			 

 

	 
			
				
				  ____   ____  
				

			 	
				
				  I/We are sophisticated in financial
				  and business affairs and are able to evaluate the risks and merits of
				  an investment in this offering.
				

			 

 

	 
			
				
				  ____   ____  
				

			 	
				
				  I/We confirm that this investment is
				  considered “high risk.” (This type of investment is considered high
				  risk due to the inherent risks including lack of liquidity and lack of
				  diversification. Success or failure of private placements such as this is
				  dependent on the corporate issuer of these securities and is outside the
				  control of the investors. While potential loss is limited to the amount
				  invested, such loss is possible.) 
				

			 

 

	  

	 

	 
		The Subscriber hereby represents and
		warrants that all of its answers to this Investor Questionnaire are true as of
		the date of its execution of the Subscription Agreement pursuant to which it
		purchased the Units.
	 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Name of Purchaser [please
				  print]
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name of Co-Purchaser [please
				  print]
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Signature of Purchaser (Entities
				  please provide signature of Purchaser’s duly authorized signatory.)

				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Signature of Co-Purchaser
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Name of Signatory (Entities
				  only)
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Title of Signatory (Entities
				  only)
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
		-14-
	 

	 
		 
	 



	 
	 

	 

	 
		VERIFICATION OF INVESTMENT
		ADVISOR/BROKER
	 

	 
		I state that I am familiar with the
		financial affairs and investment objectives of the investor named above and
		reasonably believe that a purchase of the securities is a suitable investment
		for this investor and that the investor, either individually or together with
		his or her purchaser representative, understands the terms of and is able to
		evaluate the merits of this offering. I acknowledge:
	 

	 
			
				
				   
				

			 	
				
				  (a)
				

			 	
				
				  that I have reviewed the
				  Subscription Agreement and forms of securities presented to me, and attachments
				  (if any) thereto;
				

			 

 

	 
			
				
				   
				

			 	
				
				  (b)
				

			 	
				
				  that the Subscription Agreement and
				  attachments thereto have been fully completed and executed by the appropriate
				  party; and
				

			 

 

	 
			
				
				   
				

			 	
				
				  (c)
				

			 	
				
				  that the subscription will be deemed
				  received by the Company upon acceptance of the Subscription Agreement.
				

			 

 

	 
			
				
				   
				

			 	
				
				  Deposit securities from this
				  offering directly to purchaser’s account?
				

			 	
				
				  
				  Yes  
				

			 	
				
				  
				  No
				

			 

 

	 
		If “Yes,” please indicate the
		account number : _____________________________________
	 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  Broker/Dealer
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Account Executive
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  (Name of Broker/Dealer)
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  (Signature)
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  (Street Address of Broker/Dealer
				  Office)
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  (Print Name)
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  (City of Broker/Dealer Office)
				  (State) (Zip)
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  (Representative I.D. Number)
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  (Telephone Number of Broker/Dealer
				  Office)
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  (Date)
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  (Fax Number of Broker/Dealer
				  Office)
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  (E-mail Address of Account
				  Executive)
				

			 

 

	 
		 
	 

	 
		-15-