Document:

THIS
      NOTE IS SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT, A COPY OF WHICH IS
      ON
      FILE WITH, AND AVAILABLE FROM, THE SECRETARY OF HANDHELD ENTERTAINMENT,
      INC.

     

    THIS
      NOTE, THE WARRANTS ISSUABLE PURSUANT TO THE TERMS OF THIS NOTE AND THE
      SECURITIES ISSUABLE UPON CONVERSION OF SUCH WARRANTS HAVE NOT BEEN REGISTERED
      UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), OR ANY STATE SECURITIES LAWS. THIS NOTE AND ANY SUCH WARRANTS OR OTHER
      SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR
      OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
      WITH
      RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION
      FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. ANY SUCH TRANSFER
      MAY
      ALSO BE SUBJECT TO COMPLIANCE WITH APPLICABLE STATE SECURITIES
      LAWS.

     

    HANDHELD
      ENTERTAINMENT, INC.

     

    No.
      __

     

    8%
      Note due 2007

     

    $[___________]

     

    June
      27,
      2007

     

    Handheld
      Entertainment, Inc., a Delaware corporation, (the “Company”), for value
      received, hereby promises to pay to ______________ (the “Holder” or “Registered
      Holder”), or registered assigns, the principal sum set forth above, with accrued
      but unpaid interest thereon at a rate equal to eight percent (8%) per annum,
      on
      the Maturity Date. Payment shall be made at such place as designated by the
      Company upon surrender of this Note (as defined below), and shall be in such
      coin or currency of the United States of America as at the time of payment
      shall
      be legal tender for the payment of public and private debts. This Note is one
      of
      a duly authorized issue of up to $3,000,000 aggregate principal amount of
      Handheld Entertainment, Inc. 8% Notes due 2007 (individually a “Note” and
      collectively the “Notes”). Certain capitalized terms used herein are defined in
      Section 7.

     

    
      	
              SECTION
                1.

            	
              Interest.

            

    

     

    The
      Company will pay interest in arrears on the Maturity Date. Interest on this
      Note
      will accrue daily at a rate of eight percent (8%) per annum from the date of
      its
      issuance set forth above and shall be compounded annually.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              SECTION
                2.

            	
              Prepayment;
                Extension.

            

    

     

    (a) Upon
      prior written notice to the Holder (a “Prepayment Notice”), this Note (including
      interest accrued on the principal hereof) may be prepaid by the Company, at
      any
      time, in whole or in part, which prepayment shall be, except as expressly
      provided in this Section 2, without penalty or premium (a “Prepayment”).
      Prepayments shall be applied first to accrued and unpaid interest on this Note,
      then to the unpaid principal amount of this Note. If the Company Prepays any
      Notes, in whole or in part, then it must Prepay all of the Notes on a
pro
      rata
      basis.

     

    (b) Each
      Prepayment Notice shall set forth: (i) the date fixed for prepayment (the
“Redemption Date”), which must be at least five (5) days after the date of the
      Prepayment Notice; and (ii) the amount of accrued and unpaid interest, as of
      the
      Redemption Date, per $1,000 principal amount of Notes to be prepaid pursuant
      to
      the Prepayment Notice

     

    (c) Upon
      any
      Prepayment, the Company shall issue to each Holder common stock purchase
      warrants (“Penalty
      Warrants”)
      in the
      form attached hereto as Exhibit
      B,
      representing the right to purchase at issuance a number of shares of common
      stock of the Company equal to thirty-five percent (35%) of the principal amount
      of the Notes held by such Holder that are redeemed, at an exercise price of
      $1.90 per share (subject to adjustment pursuant to the terms of the Penalty
      Warrants). For purposes of this Section 2(c), any Subsequent Offering Exchange
      or Subsequent Offering Prepayment (as such terms are defined in Section 5)
      shall
      be deemed a “Prepayment,” however, the Company’s exercise of the Exchange Option
      (as defined below) shall not be deemed a “Prepayment.”

     

    (d) The
      Company has the right (the “Exchange Option”) to require the Holder to exchange
      this Note for (i) an 8% Note due June 27, 2008 of the Company (“Exchange Notes”)
      in the form attached hereto as Exhibit
      A,
      in
      principal amount equal to the principal and accrued interest outstanding on
      the
      Note that is exchanged therefor, and (ii) Penalty Warrants representing the
      right to purchase, at an initial exercise price of $1.90 per share, seven (7)
      shares of common stock of the Company (subject to adjustment pursuant to the
      terms of the Penalty Warrants) for each twenty dollars ($20.00) of principal
      amount of the Notes held by such Holder that are being exchanged for Exchange
      Notes pursuant to the Company’s exercise of the Exchange Option. The Company may
      exercise the Exchange Option by providing the Holder with at least five (5)
      days
      prior written notice that states the date as of which the exchange is to occur
      and that calculates the accrued interest per $1,000 principal amount of Notes
      through such date.

     

    
      	
              SECTION
                3.

            	
              Events
                of Default Defined.

            

    

     

    The
      following shall each constitute an “Event of Default” hereunder:

     

    (a) the
      failure of the Company to make any payment of principal of or interest on this
      Note when due;

     

    (b) the
      Company shall, (i) apply for or consent to the appointment of a receiver,
      trustee, liquidator or custodian of itself or of all or a substantial part
      of
      its property, (ii) be unable to, or admit in writing its inability, pay its
      debts generally as they mature, (iii) make a general assignment for the benefit
      of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence
      a
      voluntary case or other proceeding seeking liquidation, reorganization or other
      relief with respect to itself or its debts under any bankruptcy, insolvency
      or
      other similar law now or hereafter in effect or consent to any such relief
      or to
      the appointment of or taking possession of its property by any official in
      an
      involuntary case or other proceeding commenced against it, or (vi) take any
      action for the purpose of effecting any of the foregoing;

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    (c) proceedings
      for the appointment of a receiver, trustee, liquidator or custodian of the
      Company or of all or a substantial part of the property thereof, or an
      involuntary case or other proceedings seeking liquidation, reorganization or
      other relief with respect to the Company or the debts thereof under any
      bankruptcy, insolvency or other similar law now or hereafter in effect shall
      be
      commenced and an order for relief entered or such proceeding shall not be
      dismissed or discharged within 90 days of commencement;

     

    (d) any
      representation, warranty or certification made herein or pursuant hereto (or
      in
      any modification or supplement hereto) or under the Subscription Agreement
      by
      the Company was not true or correct in any material respect when
      made;

     

    (e) the
      Company shall default in the performance of any of its obligations under, or
      shall otherwise breach, any covenant in any agreement or instrument for borrowed
      money in an aggregate amount in excess of $500,000, the effect of which causes
      or permits any holder or holders of such agreement or instrument to cause such
      borrowed money to be declared due and payable prior to its stated maturity
      and
      such holder or holders in fact declare such money due and payable;
      and

     

    (f) one
      or
      more judgments for the payment of money in any aggregate amount in excess of
      $500,000 (to the extent not covered by insurance) shall be rendered against
      the
      Company and the same shall remain undischarged for a period of 90 days during
      which execution shall not be effectively stayed, or any action shall be legally
      taken by a judgment creditor to levy upon assets or properties of the Company
      to
      enforce such judgment.

     

    
      	
              SECTION
                4.

            	
              Remedies
                upon Event of Default.
                

            

    

     

    (a) If
      an
      Event of Default occurs and is continuing for a period of 15 or more consecutive
      days, the
      holder or holders of Notes constituting a majority of the principal amount
      of
      Notes then outstanding (the
      “Majority Noteholders”), by notice to the Company, may declare the unpaid
      principal of and accrued interest on all the Notes then outstanding to be due
      and payable without presentment, demand, protest or any other notice of any
      kind, all of which are hereby expressly waived (an “Acceleration”). Upon any
      such declaration, such principal and accrued interest shall be due and payable
      immediately. Majority Noteholders may rescind an Acceleration and its
      consequences; provided, however, that no such rescission shall affect any
      subsequent Default or impair any right consequent thereto.

     

    (b) Majority
      Noteholders may waive an existing Default or Event of Default and its
      consequences. Upon any such waiver, such Default shall cease to exist and any
      Event of Default arising therefrom shall be deemed to have been cured for every
      purpose of this Note; but no such waiver shall extend to any subsequent or
      other
      Default or impair any right consequent thereon.

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    (c) To
      the
      extent permitted by law, the remedies provided herein shall be exclusive of
      any
      other remedies now or hereafter existing at law or in equity or by statute
      or
      otherwise.

     

    (d) In
      any
      suit for the enforcement of any right or remedy under this Note or the
      Subscription Agreement, a court in its discretion may require the filing by
      any
      party litigant in the suit of an undertaking to pay the costs of the suit,
      and
      the court in its discretion may assess reasonable costs, including reasonable
      attorneys’ fees, against any party litigant in the suit, having due regard to
      the merits and good faith of the claims or defenses made by the party
      litigant.

     

    SECTION
      5. Participation
      in Qualified Offering. 

     

    If
      the
      Company enters into any private placement of equity securities or securities
      convertible into equity securities while this Note is outstanding (a “Subsequent
      Offering”), then the Company shall provide the Holder with notice (a “Subsequent
      Offering Notice”) describing in reasonable detail the terms and pricing of such
      Subsequent Offering. 

     

    (a) The
      Holder shall have thirty (30) days from the date of the Subsequent Offering
      Notice in which to provide the Company with irrevocable notice (a “Re-Start
      Notice”) of Holder’s election to participate in such Subsequent Offering on the
      same terms and conditions as the other investors therein, except that, in lieu
      of paying a cash purchase price in the Subsequent Offering, the Holder shall
      exchange this Note (a “Subsequent Offering Exchange”) for such securities as may
      be purchased in the Subsequent Offering for a purchase price equal to the
      principal and accrued interest on this Note as of the date of the Re-Start
      Notice.

     

    (b) If
      any
      Subsequent Offering raises gross proceeds in excess of $5,000,000, then the
      Company shall promptly provide to each Holder who did not elect to participate
      in such Subsequent Offering pursuant to Section 5(a) a notice (a “Pay-Off
      Notice”) stating the amount of gross proceeds raised in such Subsequent Offering
      and describing the Holder’s rights pursuant to Section 5(c). 

     

    (c) The
      Holder shall have up to thirty (30) days from the date of the Pay-Off Notice
      in
      which to provide the Company with irrevocable notice (a “Redemption Notice”) of
      Holder’s election to have the entire principal and accrued interest on such
      Holder’s Note prepaid (a “Subsequent Offering Prepayment”) in accordance with
      Section 2. The Company shall prepay any Note with respect to which a Redemption
      Notice is given on the date that is five (5) business days after the date of
      such Redemption Notice (which shall be the “Redemption Date” for purposes of
      Section 2).

     

    SECTION
      6. Lost,
      Mutilated, etc. Note. 

     

    Upon
      receipt by the Company of evidence reasonably satisfactory to it of the loss,
      theft, destruction or mutilation of this Note and of indemnity or bond
      reasonably satisfactory to it, and upon reimbursement to the Company of all
      reasonable expenses incidental thereto, and upon surrender and cancellation
      of
      this Note (in case of mutilation) the Company will make and deliver in lieu
      of
      this Note a new Note of like tenor and unpaid principal amount and dated as
      of
      the date to which interest has been paid on the unpaid principal amount of
      this
      Note in lieu of which such new Note is made and delivered.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

    
      	
              SECTION
                7.

            	
              Certain
                Definitions.
                

            

    

     

    (a) “Maturity
      Date” means July 31, 2007.

     

    (b) “Registered
      Holder,” with respect to any Note, shall mean the holder of record
      thereof.

     

    (c) “Subscription
      Agreement” means the subscription agreement, of even date herewith, between the
      Company and the Holder.

     

    (d) “Securities
      Act” means the United Stated Securities Act of 1933, as amended.

     

    
      	
              SECTION
                8.

            	
              Miscellaneous.

            

    

     

    (a) This
      Note
      may be amended only by mutual written agreement of the Company and the Holder
      or, if such amendment shall apply to all outstanding Notes, with the written
      consent of the Company and the Majority Holders. Furthermore, the Company may
      take any action herein prohibited or omit to take any action herein required
      to
      be performed by it, and any breach of any covenant, agreement, warranty or
      representation may be waived, if the Company has obtained the written consent
      or
      waiver of the Holder or, if such consent or waiver shall apply to all
      outstanding Notes, the Majority Holders. Any amendments approved in compliance
      with this Section 9 shall bind the Holder’s successors and assigns.

     

    (b) Governing
      Law.
      This
      Note shall be governed by, and construed in accordance with, the laws of the
      State of New York, excluding the body of law relating to conflict of laws.
      Notwithstanding anything to the contrary contained herein, in no event may
      the
      effective rate of interest collected or received by the Holder exceed that
      which
      may be charged, collected or received by the Holder under applicable
      law.

     

    (c) Interpretation.
      If any
      term or provision of this Note shall be held invalid, illegal or unenforceable,
      the validity of all other terms and provisions hereof shall in no way be
      affected thereby.

     

    (d) Successors
      and Assigns.
      Subject
      to the restrictions on transfer contained herein, this Note shall be binding
      upon the Company and its successors and assigns and shall inure to the benefit
      of the Holder and its successors and registered assigns.

     

    (e) Assignment
      by the Holder.
      This
      Note and any of the rights, interests or obligations hereunder, may be assigned
      at any time in whole or in part by the Holder, without the consent of the
      Company, if the transferee is an “accredited investor” as defined in Regulation
      D under the Securities Act and agrees to be bound by all of the provisions
      of
      the Note and the Subscription Agreement, including without limitation, making
      representations and warranties identical to those of the Holder contained in
      such documents but with respect to such transferee and as of the date of such
      transfer.

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    (f) Assignment
      by the Company.
      Neither
      this Note nor any of the rights, interests or obligations hereunder may be
      assigned, by operation of law or otherwise, in whole or in part, by the Company
      without the prior written consent of the Holder.

     

    (g) Saturdays,
      Sundays, Holidays.
      If any
      date that may at any time be specified in this Note as a date for the making
      of
      any payment of principal or interest under this Note shall fall on Saturday,
      Sunday or on a day which in New York shall be a legal holiday, then the date
      for
      the making of that payment shall be the next subsequent day which is not a
      Saturday, Sunday or legal holiday.

     

    (h) Subscription
      Agreement.
      This
      Note is subject to the terms contained in the Subscription Agreement and the
      registered Holder of this Note is entitled to the benefits of such Subscription
      Agreement to the extent provided therein. Each Holder, by such Holder’s
      acceptance of this Note, agrees to be bound by the terms of the Subscription
      Agreement.

     

    [Signature
      page follows immediately]

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, this 8% Note due 2007 has been executed and delivered on the
      date first above written by the duly authorized representative of the
      Company.

     

    
      	 	 	 
	 	HANDHELD ENTERTAINMENT,
              INC.
	 
 	 
 	 
	 	By:  	 
	 	
              

              Name:
                

            
	 	Title:

    

     

    
      
         

      

      
        -7-EXHIBIT
        A

    

     

    THIS
      NOTE IS SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT, A COPY OF WHICH IS
      ON
      FILE WITH, AND AVAILABLE FROM, THE SECRETARY OF HANDHELD ENTERTAINMENT,
      INC.

     

    THIS
      NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
      AS
      AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT
      BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED
      IN
      THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH
      SECURITIES UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE
      REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. ANY SUCH TRANSFER MAY ALSO
      BE
      SUBJECT TO COMPLIANCE WITH APPLICABLE STATE SECURITIES
      LAWS.

    

    HANDHELD
      ENTERTAINMENT, INC.

     

    No.
      __

     

    FORM
      OF 

    8%
      Note due 2008

     

    $[_________]

    ______
      __, 2007

     

    Handheld
      Entertainment, Inc., a Delaware corporation, (the “Company”), for value
      received, hereby promises to pay to ______________ (the “Holder” or “Registered
      Holder”), or registered assigns, the principal sum set forth above, with accrued
      but unpaid interest thereon at a rate equal to eight percent (8%) per annum,
      on
      the Maturity Date. Payment shall be made at such place as designated by the
      Company upon surrender of this Note (as defined below), and shall be in such
      coin or currency of the United States of America as at the time of payment
      shall
      be legal tender for the payment of public and private debts. This Note is one
      of
      a duly authorized issue of up to $3,050,000 aggregate principal amount of
      Handheld Entertainment, Inc. 8% Notes due 2008 (individually a “Note” and
      collectively the “Notes”). Certain capitalized terms used herein are defined in
      Section 7.

     

    SECTION
      1.  Interest.

     

    The
      Company will pay interest in arrears on the Maturity Date. Interest on this
      Note
      will accrue daily at a rate of eight percent (8%) per annum from the date of
      its
      issuance set forth above and shall be compounded annually.

     

    SECTION
      2.  Prepayment;
      Extension.

     

    (a)  Upon
      prior written notice to the Holder (a “Prepayment Notice”), this Note (including
      interest accrued on the principal hereof) may be prepaid by the Company, at
      any
      time, in whole or in part, which prepayment shall be, except as expressly
      provided in this Section 2, without penalty or premium (a “Prepayment”).
      Prepayments shall be applied first to accrued and unpaid interest on this Note,
      then to the unpaid principal amount of this Note. If the Company Prepays any
      Notes, in whole or in part, then it must Prepay all of the Notes on a
pro
      rata
      basis.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)  Each
      Prepayment Notice shall set forth: (i) the date fixed for prepayment (the
“Redemption Date”), which must be at least five (5) days after the date of the
      Prepayment Notice; and (ii) the amount of accrued and unpaid interest, as of
      the
      Redemption Date, per $1,000 principal amount of Notes to be prepaid pursuant
      to
      the Prepayment Notice

     

    SECTION
      3.  Events
      of Default Defined.

     

    The
      following shall each constitute an “Event of Default” hereunder:

     

    (a)  the
      failure of the Company to make any payment of principal of or interest on this
      Note when due;

     

    (b)  the
      Company shall, (i) apply for or consent to the appointment of a receiver,
      trustee, liquidator or custodian of itself or of all or a substantial part
      of
      its property, (ii) be unable to, or admit in writing its inability, pay its
      debts generally as they mature, (iii) make a general assignment for the benefit
      of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence
      a
      voluntary case or other proceeding seeking liquidation, reorganization or other
      relief with respect to itself or its debts under any bankruptcy, insolvency
      or
      other similar law now or hereafter in effect or consent to any such relief
      or to
      the appointment of or taking possession of its property by any official in
      an
      involuntary case or other proceeding commenced against it, or (vi) take any
      action for the purpose of effecting any of the foregoing;

     

    (c)  proceedings
      for the appointment of a receiver, trustee, liquidator or custodian of the
      Company or of all or a substantial part of the property thereof, or an
      involuntary case or other proceedings seeking liquidation, reorganization or
      other relief with respect to the Company or the debts thereof under any
      bankruptcy, insolvency or other similar law now or hereafter in effect shall
      be
      commenced and an order for relief entered or such proceeding shall not be
      dismissed or discharged within 90 days of commencement;

     

    (d)  any
      representation, warranty or certification made herein or pursuant hereto (or
      in
      any modification or supplement hereto) or under the Subscription Agreement
      by
      the Company was not true or correct in any material respect when
      made;

     

    (e)  the
      Company shall default in the performance of any of its obligations under, or
      shall otherwise breach, any covenant in any agreement or instrument for borrowed
      money in an aggregate amount in excess of $500,000, the effect of which causes
      or permits any holder or holders of such agreement or instrument to cause such
      borrowed money to be declared due and payable prior to its stated maturity
      and
      such holder or holders in fact declare such money due and payable;
      and

     

    (f)  one
      or
      more judgments for the payment of money in any aggregate amount in excess of
      $500,000 (to the extent not covered by insurance) shall be rendered against
      the
      Company and the same shall remain undischarged for a period of 90 days during
      which execution shall not be effectively stayed, or any action shall be legally
      taken by a judgment creditor to levy upon assets or properties of the Company
      to
      enforce such judgment.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    SECTION
      4.  Remedies
      upon Event of Default.
      

     

    (a)  If
      an
      Event of Default occurs and is continuing for a period of 15 or more consecutive
      days, the
      holder or holders of Notes constituting a majority of the principal amount
      of
      Notes then outstanding (the
      “Majority Noteholders”), by notice to the Company, may declare the unpaid
      principal of and accrued interest on all the Notes then outstanding to be due
      and payable without presentment, demand, protest or any other notice of any
      kind, all of which are hereby expressly waived (an “Acceleration”). Upon any
      such declaration, such principal and accrued interest shall be due and payable
      immediately. Majority Noteholders may rescind an Acceleration and its
      consequences; provided, however, that no such rescission shall affect any
      subsequent Default or impair any right consequent thereto.

     

    (b)  Majority
      Noteholders may waive an existing Default or Event of Default and its
      consequences. Upon any such waiver, such Default shall cease to exist and any
      Event of Default arising therefrom shall be deemed to have been cured for every
      purpose of this Note; but no such waiver shall extend to any subsequent or
      other
      Default or impair any right consequent thereon.

     

    (c)  To
      the
      extent permitted by law, the remedies provided herein shall be exclusive of
      any
      other remedies now or hereafter existing at law or in equity or by statute
      or
      otherwise.

     

    (d)  In
      any
      suit for the enforcement of any right or remedy under this Note or the
      Subscription Agreement, a court in its discretion may require the filing by
      any
      party litigant in the suit of an undertaking to pay the costs of the suit,
      and
      the court in its discretion may assess reasonable costs, including reasonable
      attorneys’ fees, against any party litigant in the suit, having due regard to
      the merits and good faith of the claims or defenses made by the party
      litigant.

     

    SECTION
      5.  Participation
      in Qualified Offering. 

     

    If
      the
      Company enters into any private placement of equity securities or securities
      convertible into equity securities while this Note is outstanding (a “Subsequent
      Offering”), then the Company shall provide the Holder with notice (a “Subsequent
      Offering Notice”) describing in reasonable detail the terms and pricing of such
      Subsequent Offering. 

     

    (a)  The
      Holder shall have thirty (30) days from the date of the Subsequent Offering
      Notice in which to provide the Company with irrevocable notice (a “Re-Start
      Notice”) of Holder’s election to participate in such Subsequent Offering on the
      same terms and conditions as the other investors therein, except that, in lieu
      of paying a cash purchase price in the Subsequent Offering, the Holder shall
      exchange this Note (a “Subsequent Offering Exchange”) for such securities as may
      be purchased in the Subsequent Offering for a purchase price equal to the
      principal and accrued interest on this Note as of the date of the Re-Start
      Notice.

     

    (b)  If
      any
      Subsequent Offering raises gross proceeds in excess of $5,000,000, then the
      Company shall promptly provide to each Holder who did not elect to participate
      in such Subsequent Offering pursuant to Section 5(a) a notice (a “Pay-Off
      Notice”) stating the amount of gross proceeds raised in such Subsequent Offering
      and describing the Holder’s rights pursuant to Section 5(c). 

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    (c)  The
      Holder shall have up to thirty (30) days from the date of the Pay-Off Notice
      in
      which to provide the Company with irrevocable notice (a “Redemption Notice”) of
      Holder’s election to have the entire principal and accrued interest on such
      Holder’s Note prepaid (a “Subsequent Offering Prepayment”) in accordance with
      Section 2. The Company shall prepay any Note with respect to which a Redemption
      Notice is given on the date that is five (5) business days after the date of
      such Redemption Notice (which shall be the “Redemption Date” for purposes of
      Section 2).

     

    SECTION
      6.  Lost,
      Mutilated, etc. Note.

     

    Upon
      receipt by the Company of evidence reasonably satisfactory to it of the loss,
      theft, destruction or mutilation of this Note and of indemnity or bond
      reasonably satisfactory to it, and upon reimbursement to the Company of all
      reasonable expenses incidental thereto, and upon surrender and cancellation
      of
      this Note (in case of mutilation) the Company will make and deliver in lieu
      of
      this Note a new Note of like tenor and unpaid principal amount and dated as
      of
      the date to which interest has been paid on the unpaid principal amount of
      this
      Note in lieu of which such new Note is made and delivered.

     

    SECTION
      7.  Certain
      Definitions.
      

     

    (a)  “Maturity
      Date” means June 27, 2008.

     

    (b)  “Registered
      Holder,” with respect to any Note, shall mean the holder of record
      thereof.

     

    (c)  “Subscription
      Agreement” means the subscription agreement, dated as of June 27, 2007, between
      the Company and the Holder.

     

    (d)  “Securities
      Act” means the United Stated Securities Act of 1933, as amended.

     

    SECTION
      8.  Miscellaneous.

     

    (a)  This
      Note
      may be amended only by mutual written agreement of the Company and the Holder
      or, if such amendment shall apply to all outstanding Notes, with the written
      consent of the Company and the Majority Holders. Furthermore, the Company may
      take any action herein prohibited or omit to take any action herein required
      to
      be performed by it, and any breach of any covenant, agreement, warranty or
      representation may be waived, if the Company has obtained the written consent
      or
      waiver of the Holder or, if such consent or waiver shall apply to all
      outstanding Notes, the Majority Holders. Any amendments approved in compliance
      with this Section 9 shall bind the Holder’s successors and assigns.

     

    (b)  Governing
      Law.
      This
      Note shall be governed by, and construed in accordance with, the laws of the
      State of New York, excluding the body of law relating to conflict of laws.
      Notwithstanding anything to the contrary contained herein, in no event may
      the
      effective rate of interest collected or received by the Holder exceed that
      which
      may be charged, collected or received by the Holder under applicable
      law.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

    (c)  Interpretation.
      If any
      term or provision of this Note shall be held invalid, illegal or unenforceable,
      the validity of all other terms and provisions hereof shall in no way be
      affected thereby.

     

    (d)  Successors
      and Assigns.
      Subject
      to the restrictions on transfer contained herein, this Note shall be binding
      upon the Company and its successors and assigns and shall inure to the benefit
      of the Holder and its successors and registered assigns.

     

    (e)  Assignment
      by the Holder.
      This
      Note and any of the rights, interests or obligations hereunder, may be assigned
      at any time in whole or in part by the Holder, without the consent of the
      Company, if the transferee is an “accredited investor” as defined in Regulation
      D under the Securities Act and agrees to be bound by all of the provisions
      of
      the Note and the Subscription Agreement, including without limitation, making
      representations and warranties identical to those of the Holder contained in
      such documents but with respect to such transferee and as of the date of such
      transfer.

     

    (f)  Assignment
      by the Company.
      Neither
      this Note nor any of the rights, interests or obligations hereunder may be
      assigned, by operation of law or otherwise, in whole or in part, by the Company
      without the prior written consent of the Holder.

     

    (g)  Saturdays,
      Sundays, Holidays.
      If any
      date that may at any time be specified in this Note as a date for the making
      of
      any payment of principal or interest under this Note shall fall on Saturday,
      Sunday or on a day which in New York shall be a legal holiday, then the date
      for
      the making of that payment shall be the next subsequent day which is not a
      Saturday, Sunday or legal holiday.

     

    (h)  Subscription
      Agreement.
      This
      Note is subject to the terms contained in the Subscription Agreement and the
      registered Holder of this Note is entitled to the benefits of such Subscription
      Agreement to the extent provided therein. Each Holder, by such Holder’s
      acceptance of this Note, agrees to be bound by the terms of the Subscription
      Agreement.

    

    [Signature
      page follows immediately]

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, this 8% Note due 2008 has been executed and delivered on the
      date first above written by the duly authorized representative of the
      Company.

     

    
      	 	 	 	
              HANDHELD
                ENTERTAINMENT, INC.

            
	 	 	 	 
	 	 	 	 
	
            	 	 	
              By:

            
	
            	 	 	
              
                

              

              Name:
                

            
	
            	 	 	
              Title:
                

            

    

     

    
      
         

      

      
        -6-

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