Document:

November 22, 2006
	 

	 
		

	 

	 
		

	 

	 
		Genesis Lease Limited
	 

	 
		Clarendon House
 2 Church Street
 Hamilton, HM 11
	 

	 
		Bermuda
	 

	 
		

	 

	 
		Attention:
	 

	 
		John McMahon
	 

	 
		Chief Executive Officer
	 

	 
		

	 

	 
		SENIOR SECURED REVOLVING CREDIT FACILITY
	 

	 
		COMMITMENT LETTER
	 

	 
		

	 

	 
		Ladies and Gentlemen:
	 

	 
		

	 

	 
		Citigroup Global Markets Inc. (“CGMI”), on behalf
		of Citigroup (as defined below), and Wachovia Capital Markets, LLC
		(“WCM” and, together with CGMI, each a
		“Co-Lead Manager” and collectively the
		“Co-Lead Managers”), on behalf of Wachovia (as defined
		below), are pleased to inform Genesis Lease Limited
		(“GLL”) of Citigroup’s commitment and
		Wachovia’s commitment to each provide Genesis Acquisition Limited, which
		we understand is in formation (the “Company”) 50% of
		the entire amount of a $250,000,000 (subject to an increase to $1,000,000,000
		as provided for in Annex I provided that Citigroup and Wachovia each hereby
		commit individually to 50% of any such increase in any such commitment) senior
		secured revolving credit facility (the “Facility”) and
		for Citigroup to act as Administrative Agent, Wachovia to act as Syndication
		Agent, and Citigroup and Wachovia Bank, N.A. to each provide the Company 50% of
		the hedging arrangements for the Facility, subject to the terms and conditions
		of this letter and the attached Annex I (collectively, and together with
		the Fee Letter referred to below, this “Commitment
		Letter”).  The proceeds of the Facility will be used to
		purchase a portfolio of leased aircraft.  For purposes of this Commitment
		Letter, “Citigroup” means CGMI, Citibank, N.A.,
		Citicorp USA, Inc., Citicorp North America, Inc.,
		“Wachovia” means WCM, Wachovia Bank, N.A., Variable
		Funding Capital Company LLC, and/or any of Citigroup’s or Wachovia’s
		affiliates as may be appropriate to consummate the transactions contemplated
		herein.  Citigroup and Wachovia are referred to as “Initial
		Lenders”.
	 

	 
		

	 

	 
		Section 1.  Conditions Precedent.  The Initial
		Lenders’ commitment hereunder is subject to: (i) the preparation,
		execution and delivery of mutually acceptable loan documentation incorporating
		substantially the terms and conditions outlined in this Commitment Letter (the
		“Operative Documents”); (ii) the absence of
		(A) any material adverse change in the business, financial condition,
		operations or prospects of the Company, or the Company and its subsidiaries
		taken as a whole, since incorporation and (B) any circumstance, change or
		condition in the loan syndication, financial or capital markets generally
	 

	 
		
 

	 

	 
		 
	 

	 
		

	 

	 
	 
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		that, in the judgment of either Co-Lead Manager, could reasonably be
		expected to materially impair syndication of the Facility; (iii) the
		accuracy and completeness of all representations that GLL or the Company makes
		to the Initial Lenders and all information that GLL or the Company furnishes to
		the Initial Lenders; (iv) GLL’s compliance with the terms of this
		Commitment Letter, including, without limitation, the payment in full of all
		fees, expenses and other amounts payable under this Commitment Letter; (v)
		completion of the initial public offering of common equity by GLL resulting in
		gross proceeds of not less than $600,000,000; (vi) the issuance of certain
		Class G-1 Floating Rate Asset Backed Notes Series 2006-1 by Genesis Funding
		Limited having the terms and conditions we have discussed with you and
		resulting in gross proceeds of not less than $810,000,000; and (vii) not later
		than 30 days prior to the Signing Date (as defined in the attached Annex I),
		(A) your making senior management and representatives of GLL and the
		Company available to participate in information meetings with potential Lenders
		and (B) the preparation by you of  a confidential information
		memorandum for distribution to potential Lenders.
	 

	 
		

	 

	 
		Section 2.  Commitment Termination.  The Initial
		Lenders’ commitment hereunder will terminate on the earlier of (a) the
		date the Operative Documents become effective and (b) February 15, 2007.
		 Before such date, either Initial Lender may terminate its commitment
		hereunder if any event occurs or information becomes available that, in its
		judgment, results or is likely to result in the failure to satisfy any
		condition set forth in Section 1.
	 

	 
		

	 

	 
		Section 3.  Syndication.  The Initial Lenders reserve
		the right, before or after the execution of the Operative Documents, to
		syndicate all or a portion of their commitment to one or more other financial
		institutions that will become parties to the Operative Documents pursuant to a
		syndication to be jointly managed by the Co-Lead Managers (the financial
		institutions becoming parties to the Operative Documents being collectively
		referred to herein as the “Lenders”).  The Co-Lead
		Managers will manage all aspects of the syndication in consultation with GLL
		and the Company, including the timing of all offers to potential Lenders, the
		determination of the amounts offered to potential Lenders, the acceptance of
		commitments of the Lenders and the compensation to be provided to the Lenders.
	 

	 
		

	 

	 
		GLL will cause the Company to take all actions as the Co-Lead Managers
		may reasonably request to assist the Co-Lead Managers in forming a syndicate
		acceptable to the Co-Lead Managers.  The Company’s assistance in
		forming such a syndicate shall include but not be limited to (i) making
		senior management and representatives of the Company available to participate
		in information meetings with potential Lenders at such times and places as the
		Co-Lead Managers may reasonably request; (ii) preparing a confidential
		information memorandum for distribution to potential Lenders, (iii) using the
		Company’s best efforts to ensure that the syndication efforts benefit from
		the Company’s lending relationships; and (iv) providing the Co-Lead
		Managers with all information reasonably deemed necessary by it to successfully
		complete the syndication.
	 

	 
		

	 

	 
		To ensure an effective syndication of the Facility, GLL agrees that until
		the termination of the syndication (as determined by the Co-Lead Managers), the
		Company will not, and will not permit any of its affiliates to, syndicate or
		issue, attempt to syndicate or issue, announce or authorize the announcement of
		the syndication or issuance of, or engage in discussions concerning the
		syndication or issuance of, any debt facility or debt security (including any
		renewals thereof), without the prior written consent of the Co-Lead Managers.
	 

	 
		

	 

	 
		Citigroup will act as the sole Administrative Agent for the Facility and
		Wachovia will act as the sole Syndication Agent for the Facility.  No
		additional agents, co-agents or arrangers will be appointed, or other titles
		conferred, without the consent of the Initial Lenders.
	 

	 
		

	 

	 
		
 

	 

	 
		 
	 

	 
		

	 

	 
	 
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		Section 4.  Fees.  In addition to the fees described in
		Annex I, GLL will cause the Company to pay the non-refundable fees set
		forth in the letter agreement dated the date hereof (the “Fee
		Letter”) among GLL, Citigroup and Wachovia.  The terms of the
		Fee Letter are an integral part of the Initial Lenders’ commitment
		hereunder and constitute part of this Commitment Letter for all purposes
		hereof.
	 

	 
		

	 

	 
		Section 5.  Indemnification.  GLL shall indemnify and
		hold harmless Citigroup, Wachovia, each Lender and each of their respective
		affiliates and each of their respective officers, directors, employees, agents,
		advisors and representatives (each, an “Indemnified
		Party”) from and against any and all claims, damages, losses,
		liabilities and expenses (including, without limitation, fees and disbursements
		of counsel), that may be incurred by or asserted or awarded against any
		Indemnified Party (including, without limitation, in connection with any
		investigation, litigation or proceeding or the preparation of a defense in
		connection therewith), in each case arising out of or in connection with or by
		reason of this Commitment Letter or the Operative Documents or the transactions
		contemplated hereby or thereby or any actual or proposed use of the proceeds of
		the Facility, except to the extent such claim, damage, loss, liability or
		expense is found in a final, non-appealable judgment by a court of competent
		jurisdiction to have resulted primarily from such Indemnified Party’s
		gross negligence or willful misconduct.  In the case of an investigation,
		litigation or other proceeding to which the indemnity in this paragraph
		applies, such indemnity shall be effective whether or not such investigation,
		litigation or proceeding is brought by GLL, any of its directors, security
		holders or creditors, an Indemnified Party or any other person or an
		Indemnified Party is otherwise a party thereto and whether or not the
		transactions contemplated hereby are consummated.
	 

	 
		

	 

	 
		No Indemnified Party shall have any liability (whether in contract, tort
		or otherwise) to GLL, the Company or any of its respective security holders or
		creditors for or in connection with the transactions contemplated hereby,
		except to the extent such liability is determined in a final non-appealable
		judgment by a court of competent jurisdiction to have resulted primarily from
		such Indemnified Party’s gross negligence or willful misconduct.  In
		no event, however, shall any Indemnified Party be liable on any theory of
		liability for any special, indirect, consequential or punitive damages
		(including, without limitation, any loss of profits, business or anticipated
		savings).
	 

	 
		

	 

	 
		Section 6.  Costs and Expenses.  GLL shall cause the
		Company to pay, or to reimburse Citigroup and Wachovia, on demand for all
		out-of-pocket costs and expenses incurred by Citigroup and Wachovia (whether
		incurred before or after the date hereof) in connection with the Facility and
		the preparation, negotiation, execution and delivery of this Commitment Letter,
		including, without limitation, the reasonable fees and expenses of counsel,
		regardless of whether any of the transactions contemplated hereby are
		consummated.  GLL shall also cause the Company to pay all costs and
		expenses of Citigroup and Wachovia (including, without limitation, the
		reasonable fees and disbursements of counsel) incurred in connection with the
		enforcement of any of its rights and remedies hereunder.
	 

	 
		

	 

	 
		Section 7.  Confidentiality. By accepting delivery of this
		Commitment Letter, GLL agrees that this Commitment Letter is for GLL’s
		confidential use only and will ensure that neither the Commitment Letter’s
		existence nor the terms hereof will be disclosed by GLL or the Company to any
		person other than GLL’s and the Company’s officers, directors,
		employees, accountants, attorneys and other advisors, agents and
		representatives (the “Company Representatives”), and
		then only on a confidential and “need to know” basis in connection
		with the transactions contemplated hereby; provided, however, that GLL and the
		Company may make such other public disclosures of the terms and conditions
		hereof as GLL and the Company is required by law, in the opinion of GLL’s
		and the Company’s counsel, to make.  Notwithstanding any other
		provision in this Commitment Letter, Citigroup and Wachovia hereby confirm that
		GLL, the Company and the Company Representatives shall not be limited from
		disclosing the U.S. tax treatment or U.S. tax structure of the Facility.
	 

	 
		

	 

	 
		
 

	 

	 
		 
	 

	 
		

	 

	 
	 
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		Section 8.  Representations and Warranties of GLL.  GLL
		represents and warrants that (i) all information that has been or will
		hereafter be made available to Citigroup, Wachovia, any Lender or any potential
		Lender by the Company or any of its representatives in connection with the
		transactions contemplated hereby is and will be complete and correct in all
		material respects and does not and will not contain any untrue statement of a
		material fact or omit to state a material fact necessary in order to make the
		statements contained therein not misleading in light of the circumstances under
		which such statements were or are made and (ii) all financial projections,
		if any, that have been or will be prepared by the Company and made available to
		Citigroup, Wachovia, any Lender or any potential Lender have been or will be
		prepared in good faith based upon reasonable assumptions (it being understood
		that such projections are subject to significant uncertainties and
		contingencies, many of which are beyond the Company’s control, and that no
		assurance can be given that the projections will be realized).  GLL will
		cause the Company to supplement the information and projections from time to
		time until the Operative Documents become effective so that the representations
		and warranties contained in this paragraph remain correct.
	 

	 
		

	 

	 
		In providing this Commitment Letter, Citigroup and Wachovia are relying
		on the accuracy of the information furnished to them by or on behalf of GLL,
		the Company and their respective affiliates without independent verification
		thereof.
	 

	 
		

	 

	 
		Section 9.  No Third Party Reliance, Etc.  The
		agreements of Citigroup and Wachovia hereunder and of any Lender that issues a
		commitment to provide financing under the Facility are made solely for the
		benefit of the Company and may not be relied upon or enforced by any other
		person.  Please note that those matters that are not covered or made clear
		herein are subject to mutual agreement of the parties.  GLL may not assign
		or delegate any of its rights or obligations hereunder without Citigroup’s
		and Wachovia’s prior written consent.  This Commitment Letter may not
		be amended or modified, or any provision hereof waived, except by a written
		agreement signed by all parties hereto.  This Commitment Letter is not
		intended to create a fiduciary relationship among the parties hereto.
	 

	 
		

	 

	 
		GLL acknowledges that Citigroup, Wachovia and/or one or more of their
		affiliates may provide financing, equity capital, financial advisory and/or
		other services to parties whose interests may conflict with GLL’s or the
		Company’s interests.  Consistent with Citigroup’s and
		Wachovia’s policy to hold in confidence the affairs of their customers,
		neither Citigroup, Wachovia, nor any of their affiliates will furnish
		confidential information obtained from GLL or the Company to any of
		Citigroup’s or Wachovia’s other customers.  Furthermore, neither
		Citigroup, Wachovia, nor any of their affiliates will make available to GLL or
		the Company confidential information that Citigroup or Wachovia obtained or may
		obtain from any other person.
	 

	 
		

	 

	 
		Section 10.  Governing Law, Etc.  This Commitment Letter
		shall be governed by, and construed in accordance with, the law of the State of
		New York.  This Commitment Letter sets forth the entire agreement between
		the parties with respect to the matters addressed herein and supersedes all
		prior communications, written or oral, with respect hereto. This Commitment
		Letter may be executed in any number of counterparts, each of which, when so
		executed, shall be deemed to be an original and all of which, taken together,
		shall constitute one and the same Commitment Letter.  Delivery of an
		executed counterpart of a signature page to this Commitment Letter by
		telecopier shall be as effective as delivery of an original executed
		counterpart of this Commitment Letter.  Sections 3 through 8, 10 and
		11 hereof shall survive the termination of Citigroup’s and Wachovia’s
		commitment hereunder. GLL acknowledges that information and documents relating
		to the Facility may be transmitted through Intralinks, the internet or similar
		electronic transmission systems.
	 

	 
		

	 

	 
		
 

	 

	 
		 
	 

	 
		

	 

	 
	 
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		Section 11.  Waiver of Jury Trial.  Each party hereto
		irrevocably waives all right to trial by jury in any action, proceeding or
		counterclaim (whether based on contract, tort or otherwise) arising out of or
		relating to this Commitment Letter or the transactions contemplated hereby or
		the actions of the parties hereto in the negotiation, performance or
		enforcement hereof.
	 

	 
		

	 

	 
		
 

	 

	 
		 
	 

	 
		

	 

	 
	 
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		Please indicate GLL’s acceptance of the provisions hereof by signing
		the enclosed copy of this Commitment Letter and the Fee Letter and returning
		them to each of Thomas Bliemel, Director, Citigroup Global Markets Inc.,
		390 Greenwich Street, New York, New York  10013 (fax: (212) 723-8677)
		and to Eric Blau, Director, Wachovia Capital Markets, LLC, One Wachovia Center,
		301 South College Street, NC0174, Charlotte, NC 28288 (fax: (704) 374-3254) at
		or before 5:00 p.m. (New York City time) on December 22, 2006, the time at
		which Citigroup’s commitment hereunder (if not so accepted prior thereto)
		will terminate.  If GLL elects to deliver this Commitment Letter and the
		Fee Letter by telecopier, please arrange for the executed original to follow by
		next-day courier.
	 

	 
		

	 

	 
		Very truly yours,
	 

	 
		

	 

	 
		CITIGROUP GLOBAL MARKETS INC.
	 

	 
		

	 

	 
		

	 

	 
		By  /s/ Judith Fishlow
		Minter      
	 

	 
		Name:  Judith Fishlow Minter
	 

	 
		Title:  Authorized Signatory
	 

	 
		

	 

	 
		

	 

	 
		WACHOVIA CAPITAL MARKETS, LLC
	 

	 
		

	 

	 
		

	 

	 
		By  /s/ Eric C. Blau      

	 

	 
		Name:  Eric C. Blau, Director
	 

	 
		Title:  Authorized Signatory
	 

	 
		

	 

	 
		

	 

	 
		ACCEPTED AND AGREED
	 

	 
		on November 27, 2006:
	 

	 
		

	 

	 
		GENESIS LEASE LIMITED
	 

	 
		

	 

	 
		

	 

	 
		By  /s/ John McMahon      

	 

	 
		 Name: John McMahon
	 

	 
		  Title:  Chief Executive Officer
	 

	 
		
 

	 

	 
		 
	 

	 
		

	 

  

	 
		

	 

	 
		

	 

	 
		ANNEX I
	 

	 
		

	 

	 
		

	 

	 
		GENESIS ACQUISITION LIMITED
	 

	 
		Senior Secured Revolving Credit Facility
	 

	 
		Summary of Terms
	 

	 
		

	 

	 
		The terms and conditions outlined within are subject to
		satisfactory documentation. The terms are not a comprehensive statement of all
		applicable terms and conditions that would be contained in the definitive legal
		documentation for the facility and the transaction contemplated herein. 
		Those matters that are not covered or made clear herein are subject to the
		mutual agreement of the parties.
	 

	 
		

	 

	 		
	
			 
				Borrower:
			 

		  	
			 
				Genesis Acquisition Limited (“GAL” or the
				“Borrower”) will be a newly incorporated, bankruptcy remote special
				purpose company incorporated in Bermuda.  Genesis Lease Limited
				(“GLS”), a Bermuda corporation, will beneficially own a majority of
				the common equity of GAL.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Co-Lead Arrangers and 
Bookrunners:
			 

		  	
			 
				Citigroup Global Markets Inc. (“CGMI”) and Wachovia
				Capital Markets, LLC (“WCM” and, together with CGMI, the
				“Co-Lead Arrangers”).
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Lenders:
			 

		  	
			 
				Citibank, N.A., Citicorp USA, Inc., Citicorp North America, Inc.
				and/or any of their affiliates as may be appropriate to consummate the
				transactions contemplated herein (“Citigroup”), Wachovia Bank,
				National Association and/or any of its affiliates as may be appropriate to
				consummate the transactions contemplated herein  (“WBNA”),
				Variable Funding Capital Company LLC (a third-party conduit administered by
				WBNA for which WBNA will act as liquidity provider), and a syndicate of banks
				arranged by CGMI and WCM in consultation with GAL.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Administrative Agent: 
			 

		  	
			 
				CGMI or an affiliate.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Swap Providers:
			 

		  	
			 
				WBNA and Citigroup.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Manager:
			 

		  	
			 
				GLS will provide certain administrative, accounting and other
				services to GAL (including reporting requirements under the Facility) pursuant
				to a management agreement in form and substance reasonably satisfactory to the
				Administrative Agent and the Co-Lead Arrangers (“GLS Management
				Agreement”).
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Servicer:
			 

		  	
			 
				GE Commercial Aviation Services Limited, an Irish company
				(“GECAS”), will service the assets being financed by the Facility,
				including remarketing responsibilities, under a servicing agreement
				substantially in the form of the Servicing Agreements to be entered into among
				GECAS and GLS and GECAS and Genesis Funding Limited as applicable (the
				“GECAS Servicing Agreement”).
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Facility Description:
			 

		  	
			 
				Senior secured revolving credit facility (the
				“Facility”). Amounts repaid under the Facility may be repaid and
				reborrowed during the period (the “Revolving Period”) ending on the
				business day preceding the Facility Conversion Date (as defined below), subject
				to meeting the Warehouse Borrowing Base Covenant (as defined below) and the
				other conditions set forth in the documentation.   The Borrower will
				have the option (the “Term Option”) to convert loans outstanding on
				the Facility Conversion Date (as defined below) into term loans upon providing
				the Administrative Agent with 30 days written notice.
			 

		  

	 
		
 

	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		
 

	 

	 		

	 
		

	 

	 		
	
			 
				 
			 

		  	
			 
				The Facility will provide funding up to a specified percentage of
				the Initial Aircraft Value (as defined below) or Reappraised Aircraft Value (as
				defined below), as applicable, for Eligible Aircraft (as defined below) in
				order to finance a portion of the aggregate cost of new or used commercial
				aircraft (see “Eligible Aircraft” below).
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Commitment Amount:
			 

		  	
			 
				Initially $250 million (the “Initial Commitment Amount”)
				with a one-time option (the “Commitment Increase Option”) to increase
				by an additional $750 million (the “Commitment Increase Amount”).
				 The Maximum Commitment Amount means the Initial Commitment Amount or, if
				the Commitment Increase Option is exercised, the sum of the Initial Commitment
				Amount and the Commitment Increase Amount.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				 
			 

		  	
			 
				The Commitment Increase Option is a one-time option exercisable, in
				whole but not in part, by GAL at any time during the first 18 months from the
				Signing Date (the “Commitment Increase Availability Period”) with 30
				days’ prior written notice to the Lenders.  If the Commitment
				Increase Option is exercised, the Commitment Increase Amount shall be allocated
				among the Lenders pro rata.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Signing Date:
			 

		  	
			 
				The date of signing the definitive documentation for the Facility.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Facility Conversion Date:
			 

		  	
			 
				Third anniversary of the Signing Date.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Maturity Date:
			 

		  	
			 
				The later of:
			 

		  
	
			 
				 
			 

		  	
			 
				1)       the third anniversary of the
				Signing Date; or
			 

		  
	
			 
				 
			 

		  	
			 
				2)       the fifth anniversary of the
				Signing Date, if the Term Option is exercised.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Warehouse Advance Rate:
			 

		  	
			 
				The advance rate (the “Warehouse Advance Rate”) shall be
				determined for each aircraft using the following schedule and shall be
				calculated in each case as a percentage of the Initial Aircraft Value or
				Reappraised Aircraft Value, as applicable.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				 
			 

		  	
			 
				Aircraft Tier
				            Warehouse
				Advance Rate
			 

		  
	
			 
				 
			 

		  	
			 
				Tier I
				                                     72.5%

			 

		  
	
			 
				 
			 

		  	
			 
				Tier II
				                                    72.5%

			 

		  
	
			 
				 
			 

		  	
			 
				Tier III
				                                    65.0%

			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Appraisal Test:
			 

		  	
			 
				The Borrower shall seek Appraisals  (as defined below) of the
				aircraft funded under the Facility on the following dates (each, a “Report
				Date”):
			 

		  
	
			 
				 
			 

		  	
			 
				1)       at the end of the 22-month
				period after the Signing Date; and
			 

		  
	
			 
				 
			 

		  	
			 
				2)       at the end of each six-month
				period following the initial Report Date.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Warehouse Borrowing Base Covenant:
			 

		  	
			 
				The aggregate principal amount of the advances outstanding under
				the Facility shall not exceed the sum of the products of the respective
				Warehouse Advance Rates and the respective Initial Aircraft Values or
				Reappraised Aircraft Values, as applicable, of the Aircraft.  
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Optional Prepayment:
			 

		  	
			 
				The Borrower may prepay the Facility, in whole or in part, using
				additional capital contributions or from excess cash flow.
			 

		  

	 
		

	 

	 
		
 

	 

	 
		2
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		
 
 

	 

	 		
	
			 
				Mandatory Prepayment Events:
			 

		  	
			 
				1)       Upon the total loss or sale
				or other disposition of any Eligible Aircraft financed under the Facility (or
				the equity interests in any entity that holds any such Eligible Aircraft,
				including a transfer to any subsidiary of Genesis Lease Limited that is not a
				subsidiary of GAL), the Borrower will be required to prepay an amount
				sufficient for the loan-to-value to be in compliance with (i) the Warehouse
				Borrowing Base Covenant after giving effect to such loss, sale or disposition
				and (ii) the LTV Maintenance Test.  “LTV Maintenance Test” means
				that (x) the ratio of the aggregate principal amount of the loans outstanding
				under the Facility to the Initial Aircraft Values or Reappraised Aircraft
				Values, whichever is more recent, of all aircraft prior to such loss, sale or
				disposition does not exceed (y) the ratio of the aggregate principal amount of
				the loans outstanding under the Facility to the Initial Aircraft Values or
				Reappraised Aircraft Values, whichever is more recent, of all aircraft after
				such loss, sale or disposition.
			 

		  
	
			 
				 
			 

		  	
			 
				2)       If the Borrower is not in
				compliance with the Warehouse Borrowing Base Covenant or the Appraisal Test (as
				defined above), the Borrower will be required to prepay advances in an amount
				sufficient for the Borrower to be in such compliance.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Security:
			 

		  	
			 
				First priority perfected security interest and pledge or
				assignment, as applicable, in:
			 

		  
	
			 
				 
			 

		  	
			 
				1)       The equity, ownership and
				beneficial interests of each direct and indirect subsidiary of the Borrower
				(each an aircraft owning entity);
			 

		  
	
			 
				 
			 

		  	
			 
				2)       Leases relating to any
				Eligible Aircraft;
			 

		  
	
			 
				 
			 

		  	
			 
				3)       Insurances on the Eligible
				Aircraft;
			 

		  
	
			 
				 
			 

		  	
			 
				4)       The lockbox account(s) into
				which lease rentals, insurance and requisition proceeds and sale proceeds are
				to be paid such account under the sole dominion and control of the
				Administrative Agent; and
			 

		  
	
			 
				 
			 

		  	
			 
				5)       An international interest
				under the Cape Town Convention in each eligible airframe and related engines
				and an international interest in each eligible lease, which lease shall be
				assigned to the Administrative Agent.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Interest Rate:
			 

		  	
			 
				One- or three-month LIBOR plus the Applicable Margin (as defined
				below).
			 

		  
	
			 
				Applicable Margin:
			 

		  	
			 
				1)       1.75% per annum during the
				Revolving Period; and
			 

		  
	
			 
				 
			 

		  	
			 
				2)       2.75% per annum thereafter,
				if the Term Option is exercised.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Commitment Fees:
			 

		  	
			 
				1)       0.375% per annum on the
				unused amount of the Initial Commitment Amount, payable quarterly in arrears
				from the Signing Date.  
			 

		  
	
			 
				 
			 

		  	
			 
				2)       0.375% per annum on the
				unused amount of the Commitment Increase Amount (i) for a period of 12 months
				from the Signing Date, payable in advance on the Signing Date, (ii) thereafter
				for a period of 6 months, payable quarterly in arrears, in each case of (i) and
				(ii) whether or not the Commitment Increase Option is exercised, and (iii)
				thereafter, if the Commitment Increase Option is exercised, payable quarterly
				in arrears.  The fee payable under subclauses (i) and (ii) shall be
				non-refundable and fully earned on the Signing Date.  
			 

		  
	
			 
				 
			 

		  	
			 
				3)       In the case of the exercise
				of the Commitment Increase Option prior to the end of the first 12 months from
				the Signing Date, the Borrower shall receive a credit equal to the amount of
				the commitment fee paid with respect to the Commitment Increase Amount pursuant
				to subclause (i) of (2) above, for the period of time from the date of such
				exercise to the end of the first 12 months from the Signing Date.  The
				Borrower may apply any such credit towards its obligation to pay commitment
				fees hereunder.
			 

		  

	 
		
 

	 

	 
		3
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		
 

	 

	 		

	 
		

	 

	 		
	
			 
				Administrative Agent Fee:
			 

		  	
			 
				An administrative agency fee in an amount equal to $100,000 per
				annum, payable in advance on the Signing Date and on each anniversary of the
				Signing Date for so long as any amount under the Facility is outstanding.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Initial Aircraft Value 
			 

		  	
			 
				The Initial Aircraft Value for any individual aircraft shall be the
				lowest of: (a) the documented purchase price (excluding any sales fees,
				commissions or expenses) therefor, (b) the current market value
				(“CMV”) thereof, and (c) the base value (“BV”)
				thereof.  
			 

		  
	
			 
				Reappraised Aircraft Value:
			 

		  	
			 
				 
			 

		  
	
			 
				 
			 

		  	
			 
				Reappraised Aircraft Value for any individual aircraft shall be the
				lower of: (a) the CMV thereof, and (b) the BV thereof.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				 
			 

		  	
			 
				CMV and BV shall be calculated as the lower of the mean and median
				of three maintenance-adjusted current market value and base value appraisals
				(as applicable) from the most recent Appraisals approved by the Administrative
				Agent, acting on the instructions of the Required Lenders.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Appraisals:
			 

		  	
			 
				Airclaims and two other independent appraisal firms (together the
				“Initial Appraisers”) will provide maintenance-adjusted appraisals
				(“Appraisals”), at the direction and expense of GAL/GLS. The
				Administrative Agent shall maintain the right to request additional Appraisals,
				to be delivered at the expense of GAL/GLS, during the continuance of a Facility
				Event of Default.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Eligible Aircraft; Concentration Limits:
			 

		  	
			 
				Each aircraft shall comply with all the following criteria at the
				time of funding under the Facility in order to be eligible for such funding
				(“Eligible Aircraft”):
			 

		  
	
			 
				 
			 

		  	
			 
				1)       Aircraft are to be of the
				type outlined in the Eligible Aircraft table attached as Schedule A.
			 

		  
	
			 
				 
			 

		  	
			 
				2)       Aircraft are to be subject
				to leases with operators in non-“prohibited” jurisdictions as set out
				under the Concentration Limits table attached as Schedule B.
			 

		  
	
			 
				 
			 

		  	
			 
				3)       Aircraft are to be subject
				to an “eligible lease” by complying with the “Core Lease”
				provisions attached as Schedule C.
			 

		  
	
			 
				 
			 

		  	
			 
				4)       Addition of aircraft cannot
				result in the weighted average age of the portfolio exceeding 10 years if the
				Commitment Increase Option has not been exercised or 8 years if the Commitment
				Increase Option has been exercised.
			 

		  
	
			 
				 
			 

		  	
			 
				5)       Age of the individual
				aircraft cannot exceed the maximum age specified in the Eligible Aircraft table
				attached.
			 

		  
	
			 
				 
			 

		  	
			 
				6)       Remaining lease term for the
				lease associated with the individual aircraft must be greater than 2 years.
				 The Administrative Agent may waive this requirement, acting on the
				instructions of the Required Lenders.
			 

		  
	
			 
				 
			 

		  	
			 
				7)       The aircraft owning entity
				is not located in a “prohibited jurisdiction” and the aircraft is not
				used by a “prohibited person”, each as defined by the Office of
				Foreign Assets Control.
			 

		  
	
			 
				 
			 

		  	
			 
				8)       Each aircraft/engine type
				combination must have more than 10 operators.  The Administrative Agent
				may waive this requirement, acting on the instructions of the Required Lenders.

			 

		  

	 
		

	 

	 
		
 

	 

	 
		4
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		
 
 

	 

	 		
	
			 
				 
			 

		  	
			 
				9)       No more than 30% of world
				fleet for each aircraft type can be operated by the top 3 operators.  The
				Administrative Agent may waive this requirement, acting on the instructions of
				the Required Lenders.
			 

		  
	
			 
				 
			 

		  	
			 
				10)    Appraisals of the aircraft to be dated no
				earlier than 60 days prior to the funding date, and physical inspection reports
				(which include a summary of the overall condition of the aircraft and a spec
				report) (such physical inspection reports may be waived by the Administrative
				Agent, acting on the instructions of the Required Lenders) completed either (x)
				no earlier than three (3) months prior to the funding date or (y) no earlier
				than 18 months prior to the funding date (or the date of the most recent heavy
				maintenance event for such aircraft) and accompanied by a certification
				satisfactory to the Administrative Agent as to the absence of any material
				adverse change to the condition of the aircraft since the date of such report.
				 A complete package consisting of such appraisals and physical inspection
				reports to be delivered to the Administrative Agent no later than 15 days prior
				to funding.
			 

		  
	
			 
				 
			 

		  	
			 
				11)    The Servicer of such aircraft must be GECAS
				or a replacement servicer as agreed to by the Administrative Agent, acting on
				the instructions of the Required Lenders.
			 

		  
	
			 
				 
			 

		  	
			 
				12)    Other customary eligibility criteria as may
				be agreed to by the Administrative Agent.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Supplemental Rent, 
			 

		  	
			 
				Supplemental rent (including maintenance-related payments) and
				security deposits (if applicable) on each financed aircraft will be held in
				segregated accounts pledged to the Administrative Agent and applied as directed
				by the Servicer.  In the event of a Servicer Default (as defined below),
				application of these payments will be directed by the Administrative Agent
				until a replacement Servicer is obtained.
			 

		  
	
			 
				Security Deposits and Letters of Credit:
			 

		  	
			 
				 
			 

		  
	
			 
				 
			 

		  	
			 
				All letters of credit provided by lessees in lieu of paying
				supplemental rent will be written directly in favor of GAL (or the Servicer).
				 The Facility will include an appropriate mechanism to ensure that the
				Administrative Agent can obtain control of such letters of credit if a Facility
				Event of Default is existing.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Interest Coverage Ratio:
			 

		  	
			 
				1)       The ratio of EBITDA for any
				trailing period of three consecutive months to interest expense for such period
				shall apply from the earlier of (i) six months after the Signing Date and (ii)
				the Borrower having drawn down at least $100,000,000 under the Facility.
			 

		  
	
			 
				 
			 

		  	
			 
				2)       The Borrower shall provide
				the Administrative Agent a quarterly report, setting forth in reasonable detail
				the calculations necessary to demonstrate the Interest Coverage Ratio as of the
				end of each quarterly period.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Conditions Precedent:
			 

		  	
			 
				Customary for transactions of this nature, including but not
				limited to:
			 

		  
	
			 
				 
			 

		  	
			 
				1)       The Co-Lead Arrangers and
				the Administrative Agent are satisfied with the capital, legal and tax
				structure of GLS and GAL.
			 

		  
	
			 
				 
			 

		  	
			 
				2)       The Co-Lead Arrangers and
				the Administrative Agent are satisfied with the definitive documentation for
				the Facility.
			 

		  
	
			 
				 
			 

		  	
			 
				3)       The Co-Lead Arrangers and
				the Administrative Agent are satisfied that all consents, approvals,
				authorizations, filings and registrations that are necessary or desirable in
				connection with the Facility have been obtained.
			 

		  

	 
		

	 

	 
		
 

	 

	 
		5
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		
 
 

	 

	 		
	
			 
				 
			 

		  	
			 
				4)       The Administrative Agent
				shall have received certified copies of customary corporate documentation and
				approvals for GLS and GAL and acceptable legal opinions (including substantive
				consolidation opinions).
			 

		  
	
			 
				 
			 

		  	
			 
				5)       All representations and
				warranties are accurate.
			 

		  
	
			 
				 
			 

		  	
			 
				6)       The absence of any material
				adverse change in the business, financial condition, operations or prospects of
				the Borrower, the Borrower and its subsidiaries taken as a whole, or GLS, in
				the sole determination of the Co-Lead Arrangers and the Administrative Agent.
			 

		  
	
			 
				 
			 

		  	
			 
				7)       Absence of any Default,
				Servicer Default or Manager Default.
			 

		  
	
			 
				 
			 

		  	
			 
				8)       Evidence satisfactory to the
				Co-Lead Arrangers and the Administrative Agent of the perfection and priority
				of the collateral security.
			 

		  
	
			 
				 
			 

		  	
			 
				9)       Successful completion of the
				initial public offering of common equity by GLS resulting in gross proceeds of
				not less than $600,000,000 and the issuance of certain Class G-1 Floating Rate
				Asset Backed Notes Series 2006-1 by Genesis Funding Limited having the terms
				and conditions we have discussed with you and resulting in gross proceeds of
				not less than $810,000,000.
			 

		  
	
			 
				 
			 

		  	
			 
				10)    Other conditions precedent conventional for
				lending of this kind and otherwise required by the Administrative Agent and the
				Co-Lead Arrangers.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				 
			 

		  	
			 
				Conditions precedent to be satisfied before each advance is made
				under the Facility to include:
			 

		  
	
			 
				 
			 

		  	
			 
				1)       Timely delivery of the
				applicable notice of borrowing.
			 

		  
	
			 
				 
			 

		  	
			 
				2)       Delivery of aircraft
				appraisals, including physical inspection reports, in form and substance
				acceptable to the Administrative Agent no later than 15 days prior to date of
				advance.
			 

		  
	
			 
				 
			 

		  	
			 
				3)       Satisfactory evidence of
				lien perfection and priority as to collateral security, including priority
				search certificates for international interests under the Cape Town Convention.

			 

		  
	
			 
				 
			 

		  	
			 
				4)       Accuracy of representations
				and warranties including absence of defaults.
			 

		  
	
			 
				 
			 

		  	
			 
				5)       No material adverse change
				in the financial condition or business prospects of GLS or GAL, in the sole
				determination of the Co-Lead Arrangers and the Administrative Agent.
			 

		  
	
			 
				 
			 

		  	
			 
				6)       No breach of the Warehouse
				Borrowing Base Covenant.
			 

		  
	
			 
				 
			 

		  	
			 
				7)       Absence of any Default,
				Servicer Default or Manager Default.
			 

		  
	
			 
				 
			 

		  	
			 
				8)       The Interest Coverage Ratio
				is not less than 1.5 to 1.
			 

		  
	
			 
				 
			 

		  	
			 
				9)       Other drawdown conditions
				customary in facilities of this type and otherwise required by the Co-Lead
				Arrangers and the Administrative Agent.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  

	 
		

	 

	 
		
 

	 

	 
		6
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		

	 

	 		
	
			 
				Covenants:
			 

		  	
			 
				Customary for transactions of this nature, including but not
				limited to:
			 

		  
	
			 
				 
			 

		  	
			 
				1)       Informational covenants:
				 The Borrower will be required to deliver (a) monthly and quarterly
				servicer reports (in form and substance acceptable to the Administrative Agent)
				in the forms provided in the GECAS Servicing Agreement with restrictions on
				rent information to be agreed, (b) annual audited consolidated financial
				statements of GLS and annual unaudited financial statements of GAL within 90
				days of year-end, (c) quarterly company-prepared consolidated statements of GLS
				and quarterly company-prepared statements of GAL within 60 days of the
				quarter-end, (d) monthly reports of transaction activity and the ongoing
				balances of the security deposit and supplemental rent accounts, (e)
				officer-signed compliance certificates in conjunction with delivery of reports,
				(f) periodically as required by the GECAS Servicing Agreement, copies of the
				Lease Operating Budget and the Aircraft Asset Expenses Budget and (g) upon
				request from the Administrative Agent, any or all reports, documentation and
				other written material required to be submitted by the Servicer to the Manager
				pursuant to the GECAS Servicing Agreement subject to the confidentiality and
				other provisions thereof.  In addition, a Borrowing Base certificate is
				required to be provided by GAL, with each servicer report, and at the time of
				each Borrowing and loss/sale/disposition of assets above US$5MM.
			 

		  
	
			 
				 
			 

		  	
			 
				2)       Insurance covenants:
				 Insurance requirements shall meet the requirements of the GECAS Servicing
				Agreement.
			 

		  
	
			 
				 
			 

		  	
			 
				3)       Audits/Reviews:  As
				required by the Administrative Agent, but in any case a minimum of one on-site
				due diligence per year for each of the Servicer (as provided in the GECAS
				Servicing Agreement) and Manager, the expenses of which shall be borne by GAL.
			 

		  
	
			 
				 
			 

		  	
			 
				4)       Servicer:  GECAS or a
				replacement servicer as agreed by the Administrative Agent, acting on the
				instructions of the Required Lenders.
			 

		  
	
			 
				 
			 

		  	
			 
				5)       Limitations on encumbrances
				and additional indebtedness.
			 

		  
	
			 
				 
			 

		  	
			 
				6)       Limitation on engaging in
				certain business activities.
			 

		  
	
			 
				 
			 

		  	
			 
				7)       Limitation on consolidation,
				acquisition, merger and transfer of assets.
			 

		  
	
			 
				 
			 

		  	
			 
				8)       Notice of bankruptcy and
				insolvency proceedings.
			 

		  
	
			 
				 
			 

		  	
			 
				9)       Weighted average age of
				portfolio cannot exceed 10 years if the Commitment Increase Option has not been
				exercised or 8 years if the Commitment Increase Option has been exercised.
			 

		  
	
			 
				 
			 

		  	
			 
				10)    Title to not more than three aircraft will be
				held by a separate aircraft-owning entity.
			 

		  
	
			 
				 
			 

		  	
			 
				11)    Other usual and customary bankruptcy-remote
				SPC/issuer covenants.
			 

		  
	
			 
				 
			 

		  	
			 
				12)    Where applicable, covenants will be similar
				to those in the Trust Indenture among Genesis Funding Limited, the policy
				provider thereunder and the security trustee thereunder.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Facility Events of Default:
			 

		  	
			 
				Facility Events of Default shall be customary for a facility of
				this type including but not be limited to:
			 

		  
	
			 
				 
			 

		  	
			 
				1)       Non-payment of interest
				within five (5) business days of the date when due.
			 

		  
	
			 
				 
			 

		  	
			 
				2)       Failure to pay outstanding
				balance by the Final Maturity Date.
			 

		  
	
			 
				 
			 

		  	
			 
				3)       Failure to make required
				payments of principal when due, unless such principal payments were due to
				breach of the Warehouse Borrowing Base Covenant in which case failure to pay
				within sixty (60) days of date on which such breach occurred.
			 

		  

	 
		

	 

	 
		
 

	 

	 
		7
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		
 
 

	 

	 		
	
			 
				 
			 

		  	
			 
				4)       Breach of a covenant which
				has not been remedied within thirty (30) days after breach, provided such
				breach is curable within 30 days and GAL has notified the Administrative Agent
				of such cure period in form and substance satisfactory to the Administrative
				Agent.
			 

		  
	
			 
				 
			 

		  	
			 
				5)       Customary insolvency and
				bankruptcy events, as to GAL.
			 

		  
	
			 
				 
			 

		  	
			 
				6)       Failure to furnish
				appraisals within 90 days of each Report Date.
			 

		  
	
			 
				 
			 

		  	
			 
				7)       GECAS is not the Servicer
				for any reason and has not been replaced by a replacement servicer acceptable
				to the Administrative Agent, acting on the instructions of the Required
				Lenders.
			 

		  
	
			 
				 
			 

		  	
			 
				8)       The Interest Coverage Ratio
				falls below 1.1 to 1 and is not cured within thirty (30) days of the
				determination of such shortfall.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Servicer Default:
			 

		  	
			 
				As per the GECAS Servicing Agreement.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Manager Default:
			 

		  	
			 
				As per the GLS Management Agreement.  If a  Manager
				Default occurs, the Administrative Agent will facilitate and coordinate the
				finding of a replacement manager.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Default Margin:
			 

		  	
			 
				An increase of 2.00% on the Applicable Margin.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Required Lenders:
			 

		  	
			 
				Lenders holding in aggregate more than 50% of the Facility.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Governing Law and Forum:
			 

		  	
			 
				New York
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Disclosure regarding Anti-Money Laundering:
			 

		  	
			 
				To help fight the funding of terrorism and money laundering
				activities, Federal law requires all financial institutions to obtain, verify
				and record information that identifies each person or corporation who opens an
				account and/or enters into a business relationship.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				 
			 

		  	
			 
				The Lenders will require the following information from all third
				party issuers, including SPEs and/or Trusts established by issuers: full legal
				name, physical address (no PO boxes), Tax ID or  Social Security number
				(for individuals), and the date of birth in case of an individual.
			 

		  
	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Disclosure Regarding OFAC:
			 

		  	
			 
				The Office of Foreign Assets Control ("OFAC") of the U.S.
				Department of the Treasury administers and enforces economic and trade
				sanctions based on U.S. foreign policy and national security goals against
				targeted foreign countries, terrorists, international narcotics traffickers,
				and those engaged in activities related to the proliferation of weapons of mass
				destruction.  OFAC’s directives and authority are based on various
				statutes, executive orders and regulations promulgated thereunder. To
				facilitate compliance, OFAC maintains lists of persons and countries with which
				U.S. persons are prohibited from dealing to the extent provided in the
				applicable rules and regulations.
			 

		  
	
			 
				
			 

		  	
			 
				A U.S. person found dealing with persons or entities on the OFAC
				lists may be assessed civil penalties by OFAC and may also be subject to
				criminal penalties.  The amount of any civil penalty may be based on a
				number of mitigating and aggravating factors considered by OFAC on a
				case-by-case basis.
			 

			 
				

			 

			 
				The Lenders, in this case a “U.S. person,” will require
				the addition of certain provisions to the facility documents to support the
				Lenders’ OFAC compliance.
			 

		  

	 
		

	 

	 
		
 

	 

	 
		8
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		SCHEDULE A
	 

	 
		

	 

	 
		Eligible Aircraft
	 

	 
		

	 

	 				
	
			 
				Aircraft Type 1
			 

		  	
			 
				Maximum Age 2
			 

		  	
			 
				Commitment Amount       =<
				$250MM3
			 

		  	
			 
				Commitment Amount > $250MM4
			 

		  
	
			 
				Tier I
			 

		  
	
			 
				A319-100
			 

		  	
			 
				10
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				A320-200
			 

		  	
			 
				10
			 

		  	
			 
				100%
			 

		  	
			 
				100%
			 

		  
	
			 
				B737-700
			 

		  	
			 
				10
			 

		  
	
			 
				B737-800
			 

		  	
			 
				10
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Tier II
			 

		  
	
			 
				A321-2005
			 

		  	
			 
				10
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				A330-200
			 

		  	
			 
				10
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				B737-400 (EFIS)
			 

		  	
			 
				12
			 

		  	
			 
				34% for whole
			 

		  	
			 
				 
			 

		  
	
			 
				B737-300 (EFIS)
			 

		  	
			 
				12
			 

		  	
			 
				Tier with minimum
			 

		  	
			 
				 
			 

		  
	
			 
				B747-400F
			 

		  	
			 
				7
			 

		  	
			 
				requirement of
			 

		  	
			 
				50%
			 

		  
	
			 
				B757-200 ETOPS
			 

		  	
			 
				12
			 

		  	
			 
				two Tier I Aircraft
			 

		  	
			 
				 
			 

		  
	
			 
				B757-200F
			 

		  	
			 
				7
			 

		  	
			 
				for each Tier II Aircraft
			 

		  	
			 
				 
			 

		  
	
			 
				B767-300ER
			 

		  	
			 
				12
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				B767-200F
			 

		  	
			 
				7
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				B767-300F
			 

		  	
			 
				7
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				B777-200ER
			 

		  	
			 
				10
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				B777-300ER
			 

		  	
			 
				10
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				ERJ-170
			 

		  	
			 
				N/A
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				Tier III
			 

		  
	
			 
				A330-300
			 

		  	
			 
				10
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				B737-300(Analog)
			 

		  	
			 
				12
			 

		  	
			 
				25% for whole
			 

		  	
			 
				 
			 

		  
	
			 
				B737-400 (Analog)
			 

		  	
			 
				12
			 

		  	
			 
				Tier with minimum
			 

		  	
			 
				 
			 

		  
	
			 
				B737-300F
			 

		  	
			 
				7
			 

		  	
			 
				requirement of
			 

		  	
			 
				25%
			 

		  
	
			 
				B737-300QC
			 

		  	
			 
				10
			 

		  	
			 
				three Tier I Aircraft
			 

		  	
			 
				 
			 

		  
	
			 
				B737-500
			 

		  	
			 
				12
			 

		  	
			 
				for each Tier III Aircraft
			 

		  	
			 
				 
			 

		  
	
			 
				B757-200
			 

		  	
			 
				12
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  
	
			 
				MD-11F
			 

		  	
			 
				10
			 

		  	
			 
				 
			 

		  	
			 
				 
			 

		  

	 
		
 

	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		

	 

	 	
	
			 
				 All aircraft types and aircraft tiering are subject to
				change.
			 

		  
	
			 
				2 Maximum ages subject to change.  Ages for
				freighters measured from date of conversion.
			 

			 
				3 Limits are based on Initial Aircraft Value of aircraft
				in the respective category / Initial Aircraft Value or most recent Reappraised
				Aircraft Value, as applicable, of all aircraft in the portfolio.
			 

			 
				4 Limits are based on Initial Aircraft Value of aircraft
				in the respective category / Initial Aircraft Value or most recent Reappraised
				Aircraft Value, as applicable, of all aircraft in the portfolio.
			 

			 
				5 Limitation does not apply with respect to first
				$100,000,000 of the Facility.
			 

		  

	 
		

	 

	 
		

	 

	 
		

	 

	 
		
 

	 

	 
		10
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		SCHEDULE B
	 

	 
		

	 

	 
		Concentration Limits
	 

	 
		

	 

	 					
	
			 
				Warehouse Concentration Limits
			 

		  	
			 
				Warehouse Size (Debt Drawn)
			 

			 
				Up to $100MM(1)
			 

		  	
			 
				Warehouse Size (Debt Drawn)
			 

			 
				>100 - 175 MM(2)
			 

		  	
			 
				Warehouse Size (Debt Drawn)
			 

			 
				>175 - 250 MM(2)
			 

		  	
			 
				Warehouse Size (Debt Drawn)
			 

			 
				> 250 MM(2)
			 

		  
	
			 
				Lessee Concentration Limits
			 

		  
	
			 
				Single lessee
			 

		  	
			 
				$75MM
			 

		  	
			 
				50.00%
			 

		  	
			 
				30.00%
			 

		  	
			 
				15.00%
			 

		  
	
			 
				Any other single lessee habitually based or domiciled in an
				undesignated country
			 

		  	
			 
				$50MM
			 

		  	
			 
				30.00%
			 

		  	
			 
				20.00%
			 

		  	
			 
				10.00%
			 

		  
	
			 
				Three largest lessees
			 

		  	
			 
				N/A
			 

		  	
			 
				80.00%
			 

		  	
			 
				50.00%
			 

		  	
			 
				30.00%
			 

		  
	
			 
				Country Concentration Limits
			 

		  
	
			 
				U.S.
			 

		  	
			 
				N/A
			 

		  	
			 
				50.00%
			 

		  	
			 
				30.00%
			 

		  	
			 
				25.00%
			 

		  
	
			 
				Single country rated the equivalent of BBB/Baa2 or better
			 

		  	
			 
				N/A
			 

		  	
			 
				50.00%
			 

		  	
			 
				30.00%
			 

		  	
			 
				22.50%
			 

		  
	
			 
				Other single countries
			 

		  	
			 
				$75MM
			 

		  	
			 
				50.00%
			 

		  	
			 
				30.00%
			 

		  	
			 
				15.00%
			 

		  
	
			 
				Region Concentration Limits
			 

		  
	
			 
				Developed Europe
			 

		  	
			 
				N/A
			 

		  	
			 
				70.00%
			 

		  	
			 
				55.00%
			 

		  	
			 
				40.00%
			 

		  
	
			 
				Developed Asia
			 

		  	
			 
				N/A
			 

		  	
			 
				70.00%
			 

		  	
			 
				50.00%
			 

		  	
			 
				35.00%
			 

		  
	
			 
				North America
			 

		  	
			 
				N/A
			 

		  	
			 
				50.00%
			 

		  	
			 
				30.00%
			 

		  	
			 
				25.00%
			 

		  
	
			 
				Emerging Europe and Africa/Middle East
			 

		  	
			 
				N/A
			 

		  	
			 
				60.00%
			 

		  	
			 
				45.00%
			 

		  	
			 
				35.00%
			 

		  
	
			 
				Latin America/Caribbean
			 

		  	
			 
				N/A
			 

		  	
			 
				50.00%
			 

		  	
			 
				35.00%
			 

		  	
			 
				25.00%
			 

		  
	
			 
				Emerging Asia and Indian Subcontinent
			 

		  	
			 
				N/A
			 

		  	
			 
				60.00%
			 

		  	
			 
				45.00%
			 

		  	
			 
				40.00%
			 

		  
	
			 
				Aggregate undesignated
			 

		  	
			 
				$50MM
			 

		  	
			 
				30.00%
			 

		  	
			 
				20.00%
			 

		  	
			 
				10.00%
			 

		  
	
			 
				Additional Aircraft Concentration
				Limits
			 

		  
	
			 
				Widebody
			 

		  	
			 
				N/A
			 

		  	
			 
				60%
			 

		  	
			 
				40%
			 

		  	
			 
				25%
			 

		  
	
			 
				Freighter
			 

		  	
			 
				N/A
			 

		  	
			 
				50%
			 

		  	
			 
				30%
			 

		  	
			 
				15%
			 

		  
	
			 
				Regional Jet
			 

		  	
			 
				N/A
			 

		  	
			 
				15%
			 

		  	
			 
				15%
			 

		  	
			 
				10%
			 

		  
	
			 
				Manufacturer: Boeing
			 

		  	
			 
				N/A
			 

		  	
			 
				N/A
			 

		  	
			 
				N/A
			 

		  	
			 
				70%
			 

		  
	
			 
				Manufacturer: Airbus
			 

		  	
			 
				N/A
			 

		  	
			 
				N/A
			 

		  	
			 
				N/A
			 

		  	
			 
				70%
			 

		  
	
			 
				Manufacturer: Other
			 

		  	
			 
				N/A
			 

		  	
			 
				15%
			 

		  	
			 
				15%
			 

		  	
			 
				10%
			 

		  
	
			 
				 
			 

		  
	
			 
				(1)  Limits are based on maximum amount of debt
				that can be used in the respective category.
			 

		  
	
			 
				(2)  Limits are based on Initial Aircraft Value of
				aircraft in the respective category / Initial Aircraft Value or most recent
				Reappraised Aircraft Value, as applicable, of all aircraft in the portfolio.
			 

		  

	 
		

	 

	 
		
 

	 

	 
		11
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		

	 

	 
		

	 

	 		
	
			 
				Region
			 

		  	
			 
				Countries
			 

		  
	
			 
				Developed Markets:
			 

		  	
			 
				 
			 

		  
	
			 
				Europe
			 

		  	
			 
				European Union (excluding Cyprus, Czech Republic, Estonia, Hungary,
				Latvia, Lithuania, Malta, Poland, Portugal and Slovakia), Iceland, Norway and
				Switzerland
			 

		  
	
			 
				North America
			 

		  	
			 
				Canada and United States
			 

		  
	
			 
				Asia
			 

		  	
			 
				Australia, Hong Kong, Japan, New Zealand and Singapore
			 

		  
	
			 
				Emerging Markets:
			 

		  	
			 
				 
			 

		  
	
			 
				Europe
			 

		  	
			 
				Bulgaria, Channel Islands, Croatia, Cyprus, Czech Republic,
				Estonia, Hungary, Latvia, Lithuania, Malta, Northern Cyprus, Poland, Portugal,
				Russia, Slovakia and Turkey
			 

		  
	
			 
				Asia/Pacific
			 

		  	
			 
				China, Guam, Indonesia, Macau, Malaysia, Philippines, South Korea,
				Taiwan, Thailand and Vietnam
			 

		  
	
			 
				Indian Subcontinent
			 

		  	
			 
				India
			 

		  
	
			 
				Latin America/Caribbean
			 

		  	
			 
				Argentina, Bermuda, Brazil, Cayman Islands, Chile, Colombia, Costa
				Rica, El Salvador, Guatemala, Mexico, Panama and Peru
			 

		  
	
			 
				Africa/Middle East
			 

		  	
			 
				Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar, South Africa
				and United Arab Emirates
			 

		  
	
			 
				Undesignated
			 

		  	
			 
				Algeria, Aruba, Bahamas, Barbados, Bangladesh, Belarus, Bhutan,
				Botswana, Brunei Darussalam, Dominican Republic, Falkland Islands, Faroe
				Islands, Fiji, French Guiana, French Polynesia, Greenland, Guadeloupe, Guinea,
				Honduras, Isle of Man, Israel, Jamaica, Kazakhstan, Kenya, Lebanon, Macedonia,
				Mauritius, Mongolia, Mozambique, Nepal, Netherlands Antilles, Nicaragua,
				Pakistan, Papua New Guinea, Paraguay, Puerto Rico, Romania, Samoa, Saudi
				Arabia, Seychelles, Sri Lanka, Suriname, Tanzania, Tonga, Trinidad &
				Tobago, Tunisia, Ukraine, Uruguay, Vanuatu and Venezuela
			 

		  

	 
		

	 

	 
		Prohibited 
	 

	 
		Albania, Afghanistan, Armenia, Azerbaijan, Belize, Bolivia, Bosnia and
		Herzegovina, Cambodia, Cameroon, Cape Verde Islands, Cuba, Ecuador, Equatorial
		Guinea, Eritrea, Ethiopia, Gambia, Georgia, Ghana, Grenada, Guyana, Haiti,
		Iran, Iraq, Kyrgyz Republic, Laos, Libya, Madagascar, Malawi, Moldova, Myanmar,
		Namibia, New Caledonia, Nigeria, North Korea, Sao Tome and Principe, Senegal,
		Serbia and Montenegro, Solomon Islands, Sudan, Syria, Turkmenistan, Uganda,
		Uzbekistan, Yemen, Zambia, Zimbabwe and all other countries not listed.
	 

	 
		
 

	 

	 
		12
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		SCHEDULE C
	 

	 
		Core Lease Provisions
	 

	 
		

	 

	 
		1.
	 

	 
		Representations and Warranties, etc.
	 

	 
		representations and warranties or a legal opinion or such other comfort
		acceptable to the lessor as to, without limitation, the due execution of such
		lease by the related lessee and the validity of such lessee’s obligations
		thereunder, due authorization of such lease and procurement of relevant
		licenses and permits in connection therewith;
	 

	 
		

	 

	 
		2.
	 

	 
		Subleasing
	 

	 
		permission to sublease only if the primary lessee thereunder remains
		obligated to make payments on such primary lease, except with respect to the
		specific classes of sublessees and under the specific conditions provided in
		such lease;
	 

	 
		

	 

	 
		3.
	 

	 
		Permitted Encumbrances
	 

	 
		provisions requiring the lessee not to create any encumbrances in respect
		of the aircraft or the related engines, except for exceptions thereto
		consistent with the customary practices of any leading international aircraft
		operating lessor, including encumbrances not affecting the use or operation of
		the aircraft arising in the ordinary course of the lessee’s business;
	 

	 
		

	 

	 
		4.
	 

	 
		No Right to Sell
	 

	 
		the lease shall not permit a lessee to sell any aircraft except, with
		respect to an aircraft the subject of a purchase option, pursuant to an
		agreement entered into by such lessee prior to the exercise of such purchase
		option to sell or otherwise transfer ownership of such aircraft upon the
		exercise of such purchase option;
	 

	 
		

	 

	 
		5.
	 

	 
		Events of Loss
	 

	 
		provisions stipulating that the lease will terminate in the event of a
		total loss of the relevant aircraft (unless the lessee is provided a right to
		provide a replacement aircraft in accordance with the customary practices of
		any leading international aircraft operating lessor);
	 

	 
		

	 

	 
		6.
	 

	 
		Return of Aircraft
	 

	 
		provisions for redelivery of the relevant aircraft, including, if
		applicable, replacement engines and parts, on expiry or termination of the
		lease (other than any expiration or termination coincident with the purchase of
		the relevant aircraft pursuant to exercise of a purchase option by the relevant
		lessee or in cases in which such lease provides for retention of the relevant
		aircraft by the lessee or for delivery to a third party), specifying the
		required return condition and any obligation upon the lessee to remedy or
		compensate the lessor, directly or indirectly, for any material deviations from
		such return condition, in each case considering the other terms of the relevant
		lease and to the extent consistent with the customary  practices of any
		leading international aircraft operating lessor;
	 

	 
		

	 

	 
		7.
	 

	 
		Termination Events
	 

	 
		provisions setting forth the conditions under which the lessor may
		terminate a lease and repossess the relevant aircraft, at any time after the
		expiration of any agreed grace period or remedy period, in each case consistent
		with the customary  practices of any leading international aircraft
		operating lessor;
	 

	 
		

	 

	 
		
 

	 

	 
		13
	 

	 
		

	 

	 
		

	 

	 
	 
		

	 

	 
		

	 

	 
		8.
	 

	 
		Assignment
	 

	 
		provisions prohibiting the assignment of any benefits or obligations
		under the lease to any person, subject to exceptions consistent with the
		customary  practices of any leading international aircraft operating
		lessor;
	 

	 
		

	 

	 
		

	 

	 
		9.
	 

	 
		Disclaimer of Conditions or Warranty
	 

	 
		provisions acknowledging that when the lessee gives formal notice of
		acceptance of the relevant aircraft, it takes delivery of such aircraft with no
		condition, warranty or representation of any kind having been given by or on
		behalf of the lessor in respect of such aircraft, except as to matters
		expressly set forth in the lease or in connection with the acceptance of such
		aircraft;
	 

	 
		

	 

	 
		10.
	 

	 
		Net Lease
	 

	 
		provisions stating the lessee’s obligation to make rental payments
		is absolute and unconditional under any and all circumstances and regardless of
		other events or similar provisions, subject to exceptions consistent with the
		customary practices of any leading international aircraft operating lessor.
	 

	 
		

	 

	 
		11.
	 

	 
		Maintenance
	 

	 
		maintenance provisions consistent with the customary practices of any
		leading international aircraft operating lessorSEE
LAST PAGE FOR RESTRICTIVE LEGEND

4.9%
CONVERTIBLE
NOTE

							
	San
Francisco,
California				$	600,000	

	December
1,  2006					 	

	

FOR VALUE RECEIVED,
HandHeld Entertainment, Inc., a Delaware corporation, (the
‘‘Company’’) hereby promises
to pay, on or before December  31,  2011 (the
‘‘Maturity Date’’), to
Aperio Technologies, Inc., a Florida corporation
(‘‘Holder’’), at the address
set forth in Section 6 herein, the principal amount of Six Hundred
Thousand Dollars ($600,000), and to pay simple interest on the unpaid
principal amount from the date hereof at the rate of four and
nine-tenths percent (4.9%) per annum, until payment in full of
the principal amount hereof. Interest on the unpaid principal amount
shall be payable annually on the anniversary date of this
Note.

This Note is issued pursuant to the terms of that certain
Asset Purchase Agreement entered into by and among the Company, Holder
and Mary Dunne of even date herewith (the
‘‘Purchase Agreement’’).
This Note shall be subject to the following terms and
conditions:

1.    Conversion of Principal and
Interest.

1.1    Conversion by Holder. Holder may elect,
at any time prior to the Maturity Date to convert the principal on this
Note together with accrued and unpaid interest thereon into shares of
the Company’s Common Stock.

1.2    Number of Shares
Issuable on Conversion. The number of shares issuable upon conversion
by Holder (‘‘Consideration
Shares’’) shall be equal to that number of shares
as is calculated by dividing the principal amount of this Note,
together with any accrued and unpaid interest thereon, by the Value (as
defined below) of one share of the Company’s Common Stock. For
purposes of the above calculation, the
‘‘Value’’ per share of the
Company’s Common Stock shall be the average of the closing
prices of the Company’s Common Stock quoted on the Nasdaq
National Market (or similar system) or on any exchange on which the
Company’s Common Stock is listed, whichever is applicable
(‘‘Exchange’’), for the five
(5) most recent days upon which trades are reported preceding the
Closing Date (as defined in the Purchase
Agreement).

1.3    Conversion by Company. Company may elect,
at any time after the Company registers the Consideration Shares, to
force the conversion of the principal of this Note into the
Consideration Shares; provided, however, that the Company may only
force such conversion if at the time the Company provides Holder with
the Notice (as defined below), the average of the closing prices of the
Company’s Common Stock quoted on an Exchange for the five (5)
most recent days upon which trades are reported preceding the Notice
Date (as also defined below) is equal to or greater than twice the
Value; and further provided that the trading volume for the
Company’s Common Stock during the thirty (30)-trading-day period
preceding the Notice Date equals or exceeds fifty thousand (50,000)
shares per such trading day. For purposes of this Note,
‘‘Registers’’ or
‘‘Registration’’ shall mean
the Company preparing and filing with the United States Securities and
Exchange Commission a registration statement covering for resale all of
the Consideration Shares. For avoidance of doubt, the number of shares
issuable upon such forced conversion by Company shall be equal to that
number of Consideration Shares determined pursuant to Section 1.2 of
this Note.

1.4    Registration Notice to Holder. Company
shall provide Holder with written notice of Company’s intent to
Register the Consideration Shares
(‘‘Notice’’), which shall be
provided to Holder by Company no less than thirty (30) days prior to
the anticipated date (based solely and exclusively on Company’s
good-faith expectation of such date) of the registration
statement’s effectiveness (‘‘Notice
Date’’).

1

2.    Default.

The
following shall be deemed to be events of default
hereunder:

2.1    Nonpayment when due of any principal or
interest payment required to be made on the Note;

2.2    Any
affirmative act of insolvency by the Company, or filing by the Company
of any petition or action under any bankruptcy, reorganization, or
insolvency law, or any other law or laws for the relief of debtors;
and

2.3    The filing against the Company of any involuntary
petition under any bankruptcy statute, or an appointment of any
receiver or trustee to take possession of the properties of the
Company, unless such petition or appointment is set aside or withdrawn
or ceases to be in effect within sixty (60) days from the date of such
filing or appointment.

3.    Company’s Right of
Pre-Payment.

This Note may be pre-paid by Company at any
time prior to the Maturity Date with thirty  (30) days prior
written notice to Holder. During such thirty (30)-day period, Holder
shall retain the right to convert the principal on this Note (together
with accrued and unpaid interest thereon) into shares of the
Company’s Common Stock pursuant to Section 1 of this
Note.

4.    Acceleration.

4.1    If any
one or more of the events of default described in Section 2 hereof
shall occur, the Holder, by notice in writing to the Company, may
declare the principal of and all accrued interest on the Note then
outstanding immediately due and payable without further notice or
demand; provided, however, that at any time within fifteen (15) days
after such declaration the same may be rescinded and such event of
default may be waived by Holder of the Note by written notice from them
to the Company.

4.2    Upon any such acceleration of the
maturity of the Note, the Company will, within thirty  (30) days
thereof, pay to the Holder the entire principal balance unpaid on such
Note, together with accrued interest thereon to the date of such
payment. If the Company shall fail to make payment to the Holder as
provided above, the Holder shall be entitled and empowered to take such
measures as may be appropriate to enforce the Company's
obligations under the Note, by judicial proceedings or otherwise. In
the event suit shall be brought to enforce payment of this Note, the
Company promises to pay reasonable attorneys' fees to be fixed by
the court.

5.    Transferability.

This Note is
transferable only by the Holder hereof in person or by his, her, or its
attorney duly authorized in writing on a register maintained by the
Company, upon the surrender of this Note, duly endorsed without
recourse, and the Company shall not be required to make any transfer
unless and until it receives this Note duly and properly endorsed
without recourse by Holder hereof or by his, her, or its attorney duly
authorized in writing. Upon the surrender of this Note for transfer of
registration hereof, the Company shall issue a new Note in place
hereof, and shall cause such Note to be delivered to the transferee.
The Company may treat the registered holder hereof as the absolute
owner hereof for the purpose of receiving payment of, or on account of,
principal hereof and interest due hereon, for the purpose of effecting
the conversion of this Note into shares of Common Stock of the Company,
and for all other purposes, and may require guarantee of authenticity
of signatures with respect to endorsements.

2

6.    Notices.

Any
communication or notices hereunder may be delivered or mailed as
follows:

If to Company:
HandHeld Entertainment,
Inc.
ATTN: Jeffrey Oscodar
539 Bryan Street, Suite 403
San
Francisco, CA 94107

If to Holder:
Aperio
Technologies, Inc.
ATTN: Mary Dunne
2433 SW Independence
Rd.
Port St. Lucie, FL 34953

3

Or to such address as either party may
designate to the other party by notice in writing to such other party
from time to time.

7.    Interpretation.

The
validity, interpretation and performance of this Note shall be
construed under and controlled by the laws of the State of California,
without regard to its choice-of-law principles.

8.    Legend.

THIS CONVERTIBLE NOTE HAS NOT
BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED
(‘‘THE ACT’’) OR ANY STATE SECURITIES LAW.
THE NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NEITHER SAID NOTE NOR ANY
INTEREST THEREIN MAY BE TRANSFERRED, SOLD OR OFFERED FOR SALE UNLESS
(1) THERE IS AN EFFECTIVE REGISTRATION STATEMENT FOR THE NOTE AS A
SECURITY UNDER THE ACT AND QUALIFICATION UNDER ANY APPLICABLE STATE
SECURITIES LAW, (2) SUCH TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
UNDER THE ACT AND PURSUANT TO QUALIFICATION UNDER ANY APPLICABLE STATE
SECURITIES LAW OR EXEMPTION THEREFROM, OR (3) THERE IS AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED AS TO SAID TRANSFER, SALE OR
OFFER.

IN WITNESS WHEREOF, the Company has caused this Note
to be duly executed by its officer thereunto duly authorized, of the
day and year first above
written.

		HANDHELD ENTERTAINMENT,
INC.

		By:    /s/   Jeffrey
Oscodar                            

		Jeffrey
Oscodar,
President & Chief Executive
Offer

4

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