Document:

Exhibit
      10.2

     

    LETTER
      SUPPLEMENT

    SECURITIES
      PURCHASE AGREEMENT

    

    

    Dated
      as
      of May 30, 2007

     

    To
      the
      Purchasers parties to the

      Securities
      Purchase Agreement referred to below

       
      

      

    Ladies
      and Gentlemen:

    

     

    We
      refer
      to that certain Securities Purchase Agreement, dated as of May 25, 2007, among
      the undersigned and you (“Purchase
      Agreement”).
      Capitalized terms used herein and not otherwise defined shall have the meanings
      ascribed to them in the Purchase Agreement.

     

    We
      hereby
      request that you unconditionally and irrevocably agree forever that the total
      amount of the investment offered by the Company in the Purchase Agreement as
      set
      forth in Section 2.1 of “up to $10,000,000 of Shares and Warrants” shall be
      increased to an aggregate amount of “up to $13,000,000 of Shares and Warrants.”

    

    The
      Purchase Agreement and other Transaction Documents, except to the extent
supplemented
      as
      specifically provided above, are and shall continue to be in full force and
      effect and are hereby in all respect ratified and confirmed as entered into
      upon
      their execution dates. The execution, delivery and effectiveness of this Letter
      Supplement
      shall
      not, except as expressly provided herein, operate as a supplement
      or modification
      of any
      right, power or remedy of any party to the Purchase Agreement, nor constitute
      a
waiver
      or
      modification of any provision of the Purchase Agreement or other Transaction
      Documents.

    

    If
      you
      agree to the terms and provisions of this Letter Supplement,
      please
      evidence such agreement by executing and returning a counterpart of this Letter
      Supplement by
      fax or
      electronic mail to David “Lad” Wallace, CFO at dwallace@akeena.net
      or
      408.395.7979.  

        
      

    This
      Letter Supplement may
      be
      executed in any number of counterparts and by different Parties hereto in
      separate 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
      agreement. Delivery of an executed counterpart of a signature page to this
      Letter Supplement
      by
      telecopier or electronic mail shall be effective as delivery of a manually
      executed counterpart of this Letter Supplement.

    

    This
      Letter Supplement and
      the
      agreements contained herein shall become effective as of the date first above
      written when, and only when, the Company shall have received all counterparts
      of
      this Letter Supplement executed by us and all Purchasers.
      

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK -

    SIGNATURE
      PAGES FOLLOW]

     

    
      
        
        

      

      
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    This
      Letter Supplement
      shall be
      governed by, and construed in accordance with, the laws of the State of New
      York.

     

    
      	 	 	 
	 	Very truly yours,
	 	 
	 	Akeena
              Solar,
              Inc.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
David
“Lad”
Wallace,
              CFO
	 	 

    

    
      	 	 	 
	 	Signature of Authorized Signatory of
              Purchaser
	 
 	 
 	 
 
	 	By:  	 
	 	
              

            
	 	
              Title
                of Authorized Signatory:

            
	 	
               

              
                

              

              Email
                Address of Purchaser:

            
	 	
               

              
                

              

              Fax
                Number of Purchaser:

            
	 	
               

              
                

              

            

      

    
      
        
        

      

      
        2Unassociated Document

    Name
      of
      Subscriber: _______________________

    

    HANDHELD
      ENTERTAINMENT, INC.

     

    SUBSCRIPTION
      AGREEMENT

     

    Handheld
      Entertainment, Inc.

    539
      Bryant Street, Suite 403

    San
      Francisco, CA 94107

     

    Ladies
      and Gentlemen:

     

    1. Subscription.
      (a)
      The
      undersigned, intending to be legally bound, hereby irrevocably subscribes to
      purchase from Handheld Entertainment, Inc., a Delaware corporation (the
“Company”),
      for a
      purchase price equal to the face value thereof, the principal amount of 8%
      Notes
      due 2007 of the Company (the “Offering
      Notes”)set
      forth on the signature page hereof. This subscription is made in accordance
      with
      and subject to the terms and conditions described in this Subscription Agreement
      (this “Agreement”).
      The
      terms of the Offering Notes shall be substantially as set forth in the form
      of
      8% Note due 2007 attached hereto as Exhibit
      A.
      The
      terms of certain warrants (the “Warrants”)
      that
      may be issued pursuant to the terms of the Offering Notes shall be substantially
      as set forth in the form attached hereto as Exhibit
      B.

     

    The
      Offering Notes that are the subject of this Agreement are part of an offering
      by
      the Company (the “Offering”)
      of up
      to $3,000,000 aggregate principal amount of Offering Notes (the “Maximum
      Amount”).
      The
      Company is offering Offering Notes until June 15, 2007, although the Company
      reserves the right, in its sole discretion, to extend the Offering period until
      some later date (such date, as the same may be extended, the “Expiration
      Date”).

     

    The
      Company may hold the first closing of the Offering (the “First
      Closing”)
      at any
      time on or prior to the Expiration Date. Following the First Closing, the
      Company may continue to sell Offering Notes up to the Maximum Amount and may
      conduct closings from time to time for additional shares sold. A final closing
      will be held promptly after the earlier to occur of (i) the Expiration Date
      and
      (ii) acceptance of subscriptions for sale of the Maximum Amount. The Company
      may
      terminate the Offering at any time without prior notice. Also, the Company
      may
      reject any subscription for Offering Notes in whole or in part for any reason
      in
      its sole discretion. The Company and the undersigned intend that the Offering
      be
      a short-term “bridge” financing, and the Company is seeking to consummate an
      acquisition, debt or equity raise or other transaction (alternatively, the
      “Refinancing”)
      the
      proceeds of which may be used to repay the Offering Notes. The Company shall
      use
      its commercially reasonable efforts to consummate the Refinancing within 180
      days of the date hereof; however,
      the
      undersigned acknowledges that there can be no assurance that the Company will
      effect any Refinancing on a timely basis, on reasonable terms or at
      all.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    The
      Units being sold in the Offering and all of the Subject Securities (as defined
      below) are speculative and investment therein involves a high degree of risk.
      Prospective investors are urged to carefully consider examine the business
      and
      prospects of the Company. Investors must be prepared to bear the economic risk
      of their investment for an indefinite period and be able to withstand a total
      loss of their investment.

     

    The
      undersigned understands that the Offering Notes are being offered and issued
      pursuant to an exemption from the registration requirements of the Securities
      Act, provided by Section 4(2) of such Act. As such, the Offering Notes are
      being
      offered and sold only to investors who qualify as “Accredited Investors” (as
      defined in Rule 501 promulgated under the Securities Act), and the Company
      is
      relying on the representations made by the undersigned in this Agreement in
      determining the availability of such exemption. The Offering Notes are, and
      any
      Warrants issued pursuant to the Offering Notes and any shares of common stock,
      par value $0.001 per share, of the Company (the “Common Stock”) issued upon
      exercise of the Warrants will be, “restricted securities” for purposes of the
      United States securities laws and cannot be transferred except as permitted
      under those laws.

     

    (b) The
      undersigned is delivering (i) an executed copy of the signature page of and
      Exhibit
      C
      to this
      Agreement and (ii) the subscription payment, in immediately available funds,
      which may be made by wire transfer to the Company pursuant to the following
      instructions:

    

      
        	 	
                Bank:

              	
                 

              
	 	 	
                 

              
	 	 	
                 

              
	 	 	 
	 	
                ABA
                  No.:

              	
                 

              
	 	 	
              
	 	
                Account
                  Name:

              	
                 

              
	 	 	 
	 	
                Account
                  No.:

              	
                 

              
	 	 	
              
	 	
                Apply
                  To:

              	
                 

              
	 	 	 
	 	
                Attention:

              	
                 

              

      

    

     

    If
      the
      Offering is oversubscribed, or for any other reason determined by the Company
      in
      its discretion, the Company may determine to reject a subscription or to accept
      a subscription for only a portion of the Offering Notes for which the
      undersigned has subscribed in this Agreement. If this subscription is accepted
      by the Company, in whole or in part, then the Company will deliver to the
      undersigned the principal amount of Offering Notes for which the undersigned’s
      subscription is accepted. If this subscription is rejected in whole or in part,
      then the Company shall promptly refund to the undersigned, without interest,
      any
      funds that the undersigned had delivered to the Company in excess of the
      aggregate purchase price of any Offering Notes for which the undersigned’s
      subscription is accepted.

     

    
      
        
        

      

      
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    (c) The
      undersigned may not withdraw this subscription or any amount paid pursuant
      thereto except as otherwise provided below. 

     

    2. Piggy-Back
      Registration Rights.

     

    (a) The
      Company shall notify the undersigned in writing at least twenty (20) days prior
      the filing of any registration statement under the Securities Act of 1933,
      as
      amended (the “Securities
      Act”),
      in
      connection with a public offering of shares of Common Stock (including, but
      not
      limited to, registration statements relating to secondary offerings of
      securities of the Company but excluding any registration statements (i) on
      Form
      S-4 or S-8 (or any successor or substantially similar form), or of any employee
      stock option, stock purchase or compensation plan or of securities issued or
      issuable pursuant to any such plan, or a dividend reinvestment plan, (ii)
      otherwise relating to any employee, benefit plan or corporate reorganization
      or
      other transactions covered by Rule 145 promulgated under the Securities Act,
      or
      (iii) on any registration form which does not permit secondary sales or does
      not
      include substantially the same information as would be required to be included
      in a registration statement covering the resale of the shares of Common Stock
      issuable upon conversion of the Warrants (the “Warrant
      Shares”))
      and
      will afford the undersigned an opportunity to include in such registration
      statement all or part of the Warrant Shares held by the undersigned. In the
      event the undersigned desires to include in any such registration statement
      all
      or any part of the Warrant Shares held by the undersigned, the undersigned
      shall
      within ten (10) days after the above-described notice from the Company, so
      notify the Company in writing, including the number of such Warrant Shares
      the
      undersigned wishes to include in such registration statement. If the undersigned
      decides not to include all of its Warrant Shares in any registration statement
      thereafter filed by the Company the undersigned shall nevertheless continue
      to
      have the right to include any Warrant Shares in any subsequent registration
      statement or registration statements as may be filed by the Company with respect
      to the offering of the securities, all upon the terms and conditions set forth
      herein. 

     

    (b) Notwithstanding
      the foregoing, if the managing underwriter or underwriters of any such proposed
      public offering advise the Company that the total amount or kind of securities
      which the undersigned, the Company and any other Persons intended to be included
      in such proposed public offering is sufficiently large to adversely affect
      the
      success of such proposed public offering, then the amount or kind of securities
      to be offered for the amount of the various parties wishing to have shares
      of
      Common Stock registered shall be included in the following order:

     

    (i) If
      the
      Company proposed to register treasury shares or authorized but unissued shares
      of Common Stock (collectively, “Primary
      Securities”):

     

    (A) first,
      the Primary Securities;

     

    
      
        
        

      

      
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    (B) second,
      the Warrant Shares requested to be included in such registration, together
      with
      shares of Common Stock which do not constitute Warrant Shares or Primary
      Securities (“Other
      Securities”)
      held
      by parties exercising similar piggy-back registration rights (or if necessary,
      such Warrant Shares and Other Securities pro rata among the holders thereof
      based upon the number of such Warrant Shares and Other Securities requested
      to
      be registered by each such holder).

     

    (ii) If
      the
      Company proposed to register Other Securities:

     

    (A) first,
      the Other Securities requested to be included in such registration by holders
      exercising demand registration rights;

     

    (B) second,
      the Warrant Shares requested to be included in such registration, together
      with
      Other Securities held by parties exercising similar piggy-back registration
      rights (or if necessary, such Warrant Shares and Other Securities pro rata
      among
      the holders thereof based upon the number of such Warrant Shares and Other
      Securities requested to be registered by each such holder).

     

    Anything
      to the contrary in this Agreement notwithstanding, the Company may withdraw
      or
      postpone a registration statement referred to herein (a “Registration
      Statement”)
      at any
      time before it becomes effective or withdraw, postpone or terminate the offering
      after it becomes effective without obligation to the undersigned.

     

    (c) In
      connection with its obligation under this Section
      2,
      the
      Company will (i) furnish to undersigned without charge, at least one copy of
      any
      effective Registration Statement and any post-effective amendments thereto,
      including financial statements and schedules, and, if the undersigned so
      requests in writing, all documents incorporated therein by reference and all
      exhibits (including those incorporated by reference) in the form filed with
      the
      Securities and Exchange Commission; and (ii) deliver to the undersigned and
      the
      underwriters, if any, without charge, as many copies of the then effective
      the
      prospectus included the Registration Statement, as the same may be amended
      or
      supplemented, (including such prospectus subject to completion) (the
“Prospectus”) and any amendments or supplements thereto as such Persons may
      reasonably request.

     

    (d) As
      a
      condition to the inclusion of its Warrant Shares, the undersigned shall furnish
      to the Company such information regarding the undersigned and the distribution
      proposed by the undersigned as the Company may request in writing or as shall
      be
      required in connection with any registration, qualification or compliance
      referred to in this Agreement.

     

    (e) The
      undersigned agrees by acquisition of Warrant Shares that, upon receipt of any
      notice from the Company of the happening of any event that, in the good faith
      judgment of the Company’s Board of Directors, requires the suspension of the
      undersigned’s rights under this Section
      2,
      undersigned will forthwith discontinue disposition of Warrant Shares pursuant
      to
      the then current Prospectus until undersigned is advised in writing by the
      Company that the use of the Prospectus may be resumed. If so directed by the
      Company, on the happening of such event, undersigned will deliver to the Company
      (at the Company’s expense) all copies, other than permanent file copies then in
      buyer’s possession, of the Prospectus covering such Warrant Shares at the time
      of receipt of such notice.

     

    
      
        
        

      

      
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    (f) The
      undersigned hereby covenants with the Company (i) not to make any sale of
      Warrant Shares without effectively causing the prospectus delivery requirements
      under the Securities Act to be satisfied, and (ii) if such Warrant Shares are
      to
      be sold by any method or in any transaction other than on a national securities
      exchange, the Nasdaq National market, Nasdaq SmallCap Market or in the
      over-the-counter market, in privately negotiated transactions, or in a
      combination of such methods, to notify the Company at least 5 business days
      prior to the date on which the undersigned first offers to sell any such Warrant
      Shares.

     

    (g) The
      undersigned acknowledges and agrees that the Warrant Shares sold pursuant to
      the
      Registration Statement described in this Agreement are not transferable on
      the
      books of the Company unless the stock certificate submitted to the transfer
      agent evidencing such Warrant Shares is accompanied by a certificate reasonably
      satisfactory to the Company to the effect that (x) the Warrant Shares have
      been
      sold in accordance with such Registration Statement and (y) the requirement
      of
      delivering a current Prospectus has been satisfied.

     

    (h) The
      undersigned shall not take any action with respect to any distribution deemed
      to
      be made pursuant to such Registration Statement, which would constitute a
      violation of Regulation M under the Securities Exchange Act of 1934, as amended
      (the “Exchange
      Act”),
      or
      any other applicable rule, regulation or law.

     

    (i) Upon
      the
      expiration of the effectiveness of any Registration Statement, the undersigned
      shall discontinue sales of shares pursuant to such Registration Statement upon
      receipt of notice from the Company of its intention to remove from registration
      the shares covered by such Registration Statement which remain unsold, and
      the
      undersigned shall notify the Company of the number of shares registered which
      remain unsold immediately upon receipt of such notice from the
      Company

     

    (j) In
      the
      case of the registration of any underwritten primary offering initiated by
      the
      Company (other than any registration by the Company on Form S-4 or Form S-8
      (or
      any successor or substantially similar form), or of (i) an employee stock
      option, stock purchase or compensation plan or of securities issued or issuable
      pursuant to any such plan, or (ii) a dividend reinvestment plan) or any
      underwritten secondary offering initiated at the request of a holder of
      securities of the Company pursuant to registration rights granted by the
      Company. The undersigned agrees not to effect any public sale or distribution
      of
      securities of the Company, except as part of such underwritten registration,
      during the period beginning fifteen (15) days prior to the closing date of
      such
      underwritten offering and during the period ending ninety (90) days after such
      closing date (or such longer period as may be reasonably requested by the
      Company or by the managing underwriter or underwriters).

     

    
      
        
        

      

      
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    (k) Anything
      to the contrary contained in this Agreement notwithstanding, when, in the
      opinion of counsel for the Company, registration of the Warrant Shares is not
      required by the Securities Act, in connection with a proposed sale of such
      Warrant Shares, the undersigned shall have no rights pursuant to this
Section
      2.
      In
      furtherance and not in limitation of the foregoing, the undersigned shall have
      no rights pursuant to this Section
      2
      at such
      time as all of the undersigned’s Warrant Shares may be sold in a three-month
      period pursuant to Rule 144.

     

    3. Representations
      and Warranties of the Company.
      The
      Company represents and warrants to the undersigned as follows, in each case
      as
      of the date hereof and in all material respects as of the date of any closing,
      except for any changes resulting solely from the Offering:

     

    (a) The
      Company is duly organized, validly existing and in good standing under the
      laws
      of the jurisdiction of its organization with full power and authority to own,
      lease, license and use its properties and assets and to carry out the business
      in which it proposes to engage.

     

    (b) The
      Company has all requisite corporate power and authority to execute, deliver
      and
      perform its obligations under this Agreement and to issue and sell the
      Offering Notes subscribed for hereunder, the Exchange Notes (as defined below),
      the Warrants issuable pursuant to such Offering Notes and the shares of Common
      Stock issuable upon exercise of such Warrants (collectively, the “Subject
      Securities”).
      All
      necessary proceedings of the Company have been duly taken to authorize the
      execution, delivery, and performance of this Agreement, the Offering Notes
      and
      the Warrants (collectively, the “Transaction
      Documents”).
      The
      Transaction Documents have been duly authorized by the Company and, when
      executed and delivered by the Company, will constitute the legal, valid and
      binding obligation of the Company enforceable against the Company in accordance
      with their terms. The Common Stock issuable upon exercise of the Warrants,
      when
      issued in compliance with the provisions of the Transaction Documents, will
      be
      validly issued, fully paid and nonassessable and free of any liens or
      encumbrances other than any liens or encumbrances that result from such Common
      Stock being held by any person other than the Company. The Offering Notes and
      Warrants are duly authorized, and when issued pursuant to the Transaction
      Documents, will be validly issued.

     

    (c) No
      consent of any party to any contract, agreement, instrument, lease or license
      to
      which the Company is a party or to which any of its properties or assets are
      subject is required for the execution, delivery or performance by the Company
      of
      any of the Transaction Documents or the issuance and sale of the Subject
      Securities.

     

    
      
        
        

      

      
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    (d) The
      execution, delivery and performance of Transaction Documents and the issuance
      and sale of the Subject
      Securities will
      not
      violate or result in a breach of, or entitle any party (with or without the
      giving of notice or the passage of time or both) to terminate or call a default
      under any contract or agreement to which the Company is a party or violate
      or
      result in a breach of any term of the certificate of incorporation or by-laws
      of
      the Company, or, assuming compliance with applicable state securities or “blue
      sky” laws, violate any law, rule, regulation, order, judgment or decree binding
      upon, the Company, or to which any of their respective operations, businesses,
      properties or assets are subject, the breach, termination or violation of which,
      or default under which, would have a material adverse effect on the operations,
      business, properties or assets of the Company.

     

    (e) Except
      to
      the extent modified by the Offering, the Company’s capitalization is disclosed
      in the Handheld SEC Filings.

     

    (f) Except
      as
      set forth on Schedule
      3(f),
      there
      are no brokerage commissions, finder’s fees or similar fees or commissions
      payable by the Company in connection with the transactions contemplated hereby
      based on any agreement, arrangement or understanding with or known to the
      Company.

     

    (g) Except
      as
      would not reasonably be expected to have a Material Adverse Effect, the Company
      is not in violation or default of any provisions of its certificate of
      incorporation or bylaws, as may be amended, as applicable, any instrument,
      judgment, order, writ or decree, or any material provision of any contract
      or
      agreement, to which it is a party or by which it is bound or of any provision
      of
      federal, state or local statute, rule or regulation applicable to the Company
      or
      its business. Except as would not reasonably be expected to have a Material
      Adverse Effect, the execution, delivery and performance of the Transaction
      Documents and the consummation of the transactions contemplated thereby will
      not
      result in any such violation or be in conflict with or constitute, with or
      without the passage of time and giving of notice, either a default under any
      such provision, instrument, judgment, order, writ, decree, contract or
      agreement, or require any consent, waiver or approval thereunder, or constitute
      an event which results in the creation of any lien, charge or encumbrance upon
      any assets of the Company (solely except as provided in this
      Agreement).

     

    (h) Except
      as
      disclosed in the Handheld SEC Filings, the Company is not a party to any
      litigation, action, suit, proceeding or investigation, nor, to the knowledge
      of
      the Company, has any litigation, action, suit, proceeding or investigation
      been
      threatened against the Company where such litigation, action, suit, proceeding
      or investigation would, if adversely determined, reasonably be expected to
      (i)
      have a material adverse affect on the financial condition of the Company or
      (ii)
      have a material adverse effect on the ability of the Company to perform its
      obligations under this Agreement or any of the other Transaction Documents
      (either (i) or (ii), a “Material Adverse Effect”).

     

    (i) The
      Company has good and marketable title to its properties and assets held in
      each
      case free and clear of all liens, pledges, security interests, encumbrances,
      attachments or charges of any kind (each a “Lien”),
      except for (i) Liens for taxes that are not yet due and payable, (ii) Liens
      that
      do not or are not reasonably likely to result in a Material Adverse Effect
      or
      (iii) Liens disclosed in the Handheld SEC Filings (Liens described in clauses
      (i), (ii) and (iii) are referred to as “Permitted
      Liens”).
      With
      respect to the property and assets it leases, the Company is in compliance
      with
      such leases and, to the best of the Company’s knowledge, the Company holds valid
      leasehold interests in such property and assets free and clear of any Liens
      of
      any other party other than the lessors of such property and assets, except
      for
      Permitted Liens.

     

    
      
        
        

      

      
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    (j) Except
      as
      disclosed in the Financial Statements (as defined below), incurred pursuant
      to
      the Offering or incurred in the ordinary course of business, the Company has
      no
      obligations or liabilities of any kind (absolute or contingent, direct or
      indirect) pursuant to any agreement of any kind related to any indebtedness
      of
      any kind. 

     

    (k) The
      Company owns, free and clear of all Liens other than Permitted Liens, or is
      licensed or otherwise possesses legally enforceable rights to use, all patents,
      trademarks, trade names, service marks and copyrights material to the operation
      of the Company’s business, and any applications related to any of the foregoing
      (collectively, “Intellectual
      Property”).

     

    (l) All
      reports required to be filed by the Company since and including the Company’s
      Annual Report on Form 10-KSB for the year ended December 31, 2006, to and
      including the relevant Closing (collectively, the “Handheld
      SEC Filings”)
      have
      been duly filed with the Securities and Exchange Commission, complied at the
      time of filing in all material respects with the requirements of their
      respective forms and were complete and correct in all material respects as
      of
      the dates at which the information was furnished, and contained (as of such
      dates) no untrue statement of a material fact or omitted to state a material
      fact necessary in order to make the statements contained therein, in light
      of
      the circumstances under which they were made, not misleading. The parties agree
      that it shall not be a breach of this Section
      3(l)
      if the
      Company did not timely file any report.

     

    (m) The
      financial statements and supporting schedules (the “Financial
      Statements”)
      included in the Company's Annual Report on Form 10-KSB for the year ended
      December 31, 2006 (the “Balance
      Sheet Date”)
      are
      complete and correct in all material respects and present fairly the financial
      position of the Company as of the dates specified and the results of operations
      for the periods specified, in each case, in conformity with generally accepted
      accounting principles applied on a consistent basis during the periods involved,
      except as indicated therein or in the notes thereto. Since the Balance Sheet
      Date, there has not been, except where it was either disclosed in the Handheld
      SEC Filings or would not reasonably be expected to have a Material Adverse
      Effect, (a) any payment of dividends on, or other distribution with respect
      to,
      or any direct or indirect redemption, purchase or acquisition of, any shares
      of
      the capital stock or other securities of the Company, (b) any disposition of
      any
      tangible or intangible material asset of the Company, (c) any damage,
      destruction or loss (whether or not covered by insurance) of any material asset
      of the Company, or (d) any change in the accounting methods, practices or
      policies followed by the Company or any change in depreciation or amortization
      policies or rates theretofore adopted, which has not been adequately provided
      for or disclosed in the Financial Statements.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    4. Representations,
      Warranties and Covenants of the Subscriber.
      The
      undersigned hereby represents and warrants to, and agrees with, the Company
      as
      follows:

     

    (a) The
      undersigned is an Accredited Investor, as specifically indicated in Exhibit
      C
      to this
      Agreement, which is being delivered to the Company herewith.

     

    (b) If
      a
      natural person, the undersigned is: a bona fide resident of the state or
      non-United States jurisdiction contained in the address set forth on the
      signature page of this Agreement as the undersigned’s home address; at least
      twenty-one (21) years of age; and legally competent to execute the Transaction
      Documents. If an entity, the undersigned has its principal offices or principal
      place of business in the state or non-United States jurisdiction contained
      in
      the address set forth on the signature page of this Agreement, the individual
      signing on behalf of the undersigned is duly authorized to execute the
      Transaction Documents.

     

    (c) Each
      of
      the Transaction Documents to which the undersigned is party has been duly
      executed and delivered by the undersigned and constitutes the legal, valid
      and
      binding obligation of the undersigned, enforceable against the undersigned
      in
      accordance with its terms.

     

    (d) Neither
      the execution, delivery nor performance of the Transaction Documents by the
      undersigned violates or conflicts with, creates (with or without the giving
      of
      notice or the lapse of time, or both) a default under or a lien or encumbrance
      upon any of the undersigned’s assets or properties pursuant to, or requires the
      consent, approval or order of any government or governmental agency or other
      person or entity under (i) any note, indenture, lease, license or other
      agreement to which the undersigned is a party or by which it or any of its
      assets or properties is bound or (ii) any statute, law, rule, regulation or
      court decree binding upon or applicable to the undersigned or its assets or
      properties. If the undersigned is not a natural person, the execution, delivery
      and performance by the undersigned of the Transaction Documents, have been
      duly
      authorized by all necessary corporate or other action on behalf of the
      undersigned and such execution, delivery and performance does not and will
      not
      constitute a breach or violation of, or default under, the charter or by-laws
      or
      equivalent governing documents of the undersigned.

     

    (e) The
      undersigned has received, read carefully and is familiar with the Transaction
      Documents and the Handheld SEC Filings.

     

    (f) The
      undersigned is familiar with the business, plans and financial condition of
      the
      Company, the terms of the Offering and any other matters relating to the
      Offering; the undersigned has received all materials which have been requested
      by the undersigned; the undersigned has had a reasonable opportunity to ask
      questions of the Company and its representatives, and the Company has answered
      to the satisfaction of the undersigned all inquiries that the undersigned or
      the
      undersigned’s representatives have put to it. The undersigned has had access to
      all additional information that the undersigned has deemed necessary to verify
      the accuracy of the information set forth in this Agreement and the Handheld
      SEC
      Filings, and has taken all the steps necessary to evaluate the merits and risks
      of an investment as proposed under this Agreement.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (g) The
      undersigned acknowledges that this subscription is and shall be irrevocable
      and
      this subscription and the agreements contained herein shall survive the
      insolvency, death or disability of the undersigned (as applicable), except
      that
      the undersigned shall have no obligation hereunder in the event that its
      subscription is for any reason rejected or the Offering is cancelled or
      terminated by the Company, which the Company reserves the right to do in its
      sole and absolute discretion and for any reason.

     

    (h) The
      undersigned hereby acknowledges and represents that: (i) the undersigned has
      prior investment experience, including investment in securities which are
      non-listed, unregistered and/or not traded on an automated quotation system;
      (ii) the undersigned recognizes the highly speculative nature of an investment
      in the Subject Securities; and (iii) the undersigned is able to bear the
      economic risk which the undersigned hereby assumes. 

     

    (i) The
      undersigned understands the various risks of an investment in the Company as
      proposed herein and can afford to bear such risks, including, without
      limitation, the risks of losing the entire investment.

     

    (j) The
      undersigned acknowledges that the undersigned has been informed by the Company
      of, or is otherwise familiar with, the nature of the limitations imposed by
      the
      Securities Act and the rules and regulations thereunder on the transfer of
      the
      Subject Securities. In particular, the undersigned agrees that no sale,
      assignment or transfer of any of the Subject Securities acquired by the
      undersigned shall be valid or effective, and the Company shall not be required
      to give any effect to such a sale, assignment or transfer, unless (i) the sale,
      assignment or transfer of such Subject Securities is registered under the
      Securities Act, it being understood that the Subject Securities are not
      currently registered for sale and that the Company has no obligation or
      intention to so register the Subject Securities, except as contemplated by
      Section
      2;
      (ii)
      the Subject Securities are sold, assigned or transferred in accordance with
      all
      the requirements and limitations of an exemption from registration under the
      Securities Act. The undersigned further understands that an opinion of counsel
      satisfactory to the Company and other documents may be required to transfer
      the
      Subject Securities.

     

    (k) The
      undersigned acknowledges that the Subject Securities to be acquired will be
      subject to a stop transfer order and any certificate or certificates evidencing
      any Subject Securities shall bear the following or a substantially similar
      legend and such other legends as may be required by state blue sky
      laws:

     

    “THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
      SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
      SECURITIES LAWS. SUCH 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.”

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (l) The
      undersigned will acquire the Subject Securities for the undersigned’s own
      account (or, if such individual is married, for the joint account of the
      undersigned and the undersigned’s spouse either in joint tenancy, tenancy by the
      entirety or tenancy in common) for investment and not with a view to the sale
      or
      distribution thereof or the granting of any participation therein in violation
      of the securities laws, and has no present intention of distributing or selling
      to others any of such interest or granting any participation therein in
      violation of the securities laws.

     

    (m) In
      subscribing for Offering Notes, the undersigned is not relying on any
      representations and warranties of the Company other than those in this
      Agreement.

     

    (n) The
      undersigned is not subscribing for Offering Notes as a result of or subsequent
      to any advertisement, article, notice or other communication published in any
      newspaper, magazine or similar media or broadcast over television or radio,
      or
      presented at any seminar or meeting, or any solicitation of a subscription
      by a
      person other than a representative of the Company with which the undersigned
      had
      a pre-existing relationship in connection with investments in securities
      generally.

     

    (o) The
      undersigned is not relying on the Company or its officers, directors or
      professional advisors for advice with respect to the tax and other economic
      considerations of an investment.

     

    (p) The
      undersigned understands that the net proceeds from all subscriptions paid and
      accepted pursuant to the Offering (after deduction for any commissions,
      discounts, consulting fees and other expenses of the Offering) may be used
      for
      such purposes as the Company determines from time to time.

     

    (q) Except
      as
      set forth on the signature page hereto, the undersigned has not engaged any
      broker or other person or entity that is entitled to a commission, fee or other
      remuneration as a result of the execution, delivery or performance of this
      Agreement.

     

    (r) The
      undersigned represents, warrants and covenants to the Company as set forth
      in
Schedule
      4(r),
      which
      is incorporated herein by reference.

     

    (s) The
      undersigned represents and warrants that the undersigned has not during the
      last
      thirty (30) days, and hereby agrees that from the date hereof and continuing
      until the undersigned no longer holds any Subject Securities the undersigned
      shall not, without the prior written consent of the Company, directly or
      indirectly, through related parties, affiliates or otherwise, (i) sell “short”
or “short against the box” (as those terms are generally understood) any equity
      security of the Company or (ii) otherwise engage in any transaction which
      involves hedging of the undersigned’s position in any equity security of the
      Company, provided, however, that it shall not be a violation of this
Section
      4(s),
      if the
      undersigned places a sell order for shares of Common Stock issuable upon
      conversion of the Warrants at or following the time exercise of such Warrants
      is
      requested and all conditions to such exercise have been satisfied, relies on
      the
      Company to deliver such Common Stock in accordance with the Warrants and
      completes the sale of such Common Stock before the Company delivers the Common
      Stock to the undersigned.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    5. Participation
      Rights.
      As
      provided in the Offering Notes, if the Company enters into any private placement
      of equity securities or securities convertible into equity securities while
      any
      Offering Notes or 8% Notes due 2008 of the Company that may be issued in
      exchange for such Offering Notes (the “Exchange
      Notes”)
      are
      outstanding (a “Subsequent
      Offering”),
      then
      the Company shall provide each holder of Offering Notes or Exchange Notes (a
      “Holder”)
      with
      notice (a “Subsequent
      Offering Notice”)
      describing in reasonable detail the terms and pricing of such Subsequent
      Offering. Each Holder shall then be entitled, subject to the terms of the
      Offering Notes and Exchange Notes, 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, a Holder shall
      exchange such Holder’s Offering Note or Exchange Note for the Company securities
      being sold in the Subsequent Offering (the “Subsequent
      Offering Exchange”).
      Furthermore, if any Subsequent Offering raises gross proceeds in excess of
      $5,000,000, then, subject to the terms of the Offering Notes and Exchange Notes,
      each Holder that did not elect to participate in the Subsequent Offering may
      elect to have the entire principal and accrued interest on such Holder’s
      Offering Note or Exchange Note prepaid (the “Subsequent
      Offering Prepayment”).
      Any
      such Subsequent Offering Exchange or Subsequent Offering Prepayment shall
      constitute a Prepayment (as defined in the Offering Notes) and may trigger
      the
      Company’s obligations to issue Warrants pursuant to the Offering Notes (but not
      the Exchange Notes).

     

    6. Indemnification.
      

     

    (a) General.
      The
      undersigned understands the meaning and legal consequences of the
      representations, warranties and agreements contained in this Agreement and
      the
      other Transaction Documents, including without limitation Section
      4
      hereof,
      and agrees to indemnify and hold harmless the Company and each officer,
      director, partner, employee, agent and controlling person of the Company, past,
      present or future, from and against any and all loss, damage or liability
      (collectively, “Losses”)
      due to
      or arising out of a breach of any such representation, warranty or agreement.
      The Company shall indemnify and hold harmless the undersigned and each officer,
      director, partner, employee, agent and controlling person of the undersigned,
      past, present or future, from and against any and all Losses due to or arising
      out of a breach of any representation, warranty or agreement by the Company
      in
      this Agreement or any other Transaction Document.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    Without
      limiting the foregoing, the undersigned acknowledges that he/she understands
      the
      meaning and legal consequences of the representations and warranties contained
      hereof, and he/she hereby agrees to indemnify and hold harmless Chicago
      Investment Group from and against any and all Losses due to or arising out
      of a
      breach of any representation or warranty of the undersigned contained in this
      Agreement. This paragraph is expressly intended to be for the benefit of, and
      enforceable by, Chicago Investment Group, and shall survive any termination
      of
      this Agreement.

     

    (b) Limitation
      on Indemnification.
      The
      maximum amount payable by the undersigned, on the one hand, or the Company,
      on
      the other hand, to all indemnified parties in respect of claims made for
      indemnification under Section 6(a) shall not exceed, in the aggregate, the
      aggregate purchase price of Offering Notes paid by the undersigned in the
      Offering.

     

    (c) Sole
      Remedy.
      The
      parties hereto agree and acknowledge that subsequent to the Closing, the
      indemnification rights provided in this Section
      6
      shall be
      the exclusive remedy of each party hereto against each other party hereto for
      breaches of the representations and warranties contained in this Agreement
      except with respect to (i) claims involving fraud or (ii) any injunctive relief
      to which any party may be entitled.

     

    (d) Notice.
      (a) A
      party
      which is entitled to indemnification under this Section
      6
      (in such
      capacity, individually and collectively, an “Indemnified
      Party”)
      with
      respect to any Loss shall give written notice thereof to the party required
      to
      provide such indemnification hereunder (in such capacity, individually and
      collectively, an “Indemnifying
      Party”)
      promptly after receipt of any written claim by any third party and in any event
      not later than twenty (20) business days after receipt of any such written
      claim
      (or not later than ten (10) business days after the receipt of any such written
      claim in the event such written claim is in the form of a formal complaint
      filed
      with a court of competent jurisdiction and served on the Indemnified Party),
      specifying in reasonable detail the amount, nature and source of the claim,
      and
      including therewith copies of any notices or other documents received from
      third
      parties with respect to such claim; provided,
      however,
      that
      failure to give such notice shall not limit the right of an Indemnified Party
      to
      recover indemnity or reimbursement except to the extent that the Indemnifying
      Party suffers any prejudice or harm with respect to such claim as a result
      of
      such failure. The Indemnified Party shall also provide the Indemnifying Party
      with such further information concerning any such claims as the Indemnifying
      Party may reasonably request by written notice.

     

    (e) Payment
      of Losses.
      Within
      thirty (30) calendar days after receiving notice of a claim for indemnification
      or reimbursement, the Indemnifying Party shall, by written notice to the
      Indemnified Party, either (i) concede or deny liability for the claim in whole
      or in part, or (ii) in the case of a claim asserted by a third party, advise
      that the matters set forth in the notice are, or will be, subject to contest
      or
      legal proceedings not yet finally resolved. If the Indemnifying Party concedes
      liability in whole or in part, it shall, within twenty (20) business days of
      such concession, pay the amount of the claim to the Indemnified Party to the
      extent of the liability conceded. Any such payment shall be made in immediately
      available funds equal to the amount of such claim so payable. If the
      Indemnifying Party denies liability in whole or in part or advises that the
      matters set forth in the notice are, or will be, subject to contest or legal
      proceedings not yet finally resolved, then the Indemnifying Party shall make
      no
      payment (except for the amount of any conceded liability payable as set forth
      above) until the matter is resolved in accordance with this
      Agreement.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (f) Defense
      of Claims.
      In the
      case of any third party claim, if within 20 days after receiving the notice
      described in the preceding Section
      6(d),
      the
      Indemnifying Party or Parties (i) gives written notice to the Indemnified Party
      stating that the Indemnifying Party would be liable under the provisions hereof
      for indemnity in the amount of such claim if such claim were valid and that
      the
      Indemnifying Party disputes and intends to defend against such claim, liability
      or expense at the Indemnifying Party’s own cost and expense and (ii) provides
      assurance reasonably acceptable to such Indemnified Party that such
      indemnification will be paid fully and promptly if required and such Indemnified
      Party will not incur cost or expense during the proceeding, then the
      Indemnifying Party shall be entitled to assume the defense of such claim and
      to
      choose counsel for the defense (subject to the consent of such Indemnified
      Party
      which consent shall not be unreasonably withheld) and such Indemnified Party
      shall not be required to make any payment with respect to such claim, liability
      or expense as long as the Indemnifying Party is conducting a good faith and
      diligent defense at its own expense; provided, however, that the assumption
      of
      the defense of any such matters by the Indemnifying Party shall relate solely
      to
      the claim, liability or expense that is subject or potentially subject to
      indemnification. If the Indemnifying Party assumes such defense in accordance
      with the preceding sentence, it shall have the right to settle (provided that
      any such settlement which results in any adverse consequences to the Indemnified
      Party shall require the consent of such Indemnified Party, which consent shall
      not be unreasonably withheld) all indemnifiable matters related to claims by
      third parties which are susceptible to being settled provided the Indemnifying
      Party’s obligation to indemnify such Indemnified Party therefor will be fully
      satisfied by payment of money by the Indemnifying Party pursuant to a settlement
      which includes a complete release of such Indemnified Party. The Indemnified
      Party shall not settle any claim with respect to which the Indemnifying Party
      has assumed the defense, without the prior written consent of the Indemnifying
      Party. The Indemnifying Party shall keep such Indemnified Party apprised of
      the
      status of the claim, liability or expense and any resulting suit, proceeding
      or
      enforcement action, shall furnish such Indemnified Party with all documents
      and
      information that such Indemnified Party shall reasonably request and shall
      consult with such Indemnified Party prior to acting on major matters, including
      settlement discussions. Notwithstanding anything herein stated, such Indemnified
      Party shall at all times have the right to participate in, but not control,
      such
      defense at its own expense directly or through counsel; provided,
      however,
      if the
      named parties to the action or proceeding include both the Indemnifying Party
      and the Indemnified Party and representation of both parties by the same counsel
      would be inappropriate under applicable standards of professional conduct,
      the
      reasonable expense of separate counsel for such Indemnified Party shall be
      paid
      by the Indemnifying Party provided that such Indemnifying Party shall be
      obligated to pay for only one such counsel. If no such notice of intent to
      dispute and defend is given by the Indemnifying Party, or if such diligent
      good
      faith defense is not being or ceases to be conducted, such Indemnified Party
      may
      undertake the defense of (with counsel selected by such Indemnified Party and
      paid by the Indemnifying Party), and shall have the right to compromise or
      settle, such claim, liability or expense (exercising reasonable business
      judgment) with the consent of the Indemnifying Party, which consent shall not
      be
      unreasonably withheld. Such Indemnified Party shall make available all
      information and assistance that the Indemnifying Party may reasonably request
      and shall cooperate with the Indemnifying Party in such defense.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    7. Transferability.
      Neither
      this Agreement, nor any interest of the undersigned herein, shall be assignable
      or transferable by the undersigned in whole or in part except by operation
      of
      law. Any attempt to assign or transfer this agreement or any interest therein
      other than by operation of law shall be void.

     

    8. Confidentiality.
      The
      undersigned acknowledges and agrees that all information, written and oral,
      concerning the Company furnished from time to time to the undersigned,
      including, without limitation, the Memorandum, has been and is provided on
      a
      confidential basis pursuant to a confidentiality agreement between the
      undersigned and the Company.

     

    9. Miscellaneous.

     

    (a) This
      Agreement, including the exhibits hereto, sets forth the entire understanding
      of
      the parties with respect to the undersigned’s purchase of Offering Notes from
      the Company, supersedes all existing agreements among them concerning such
      subject matter, and may be modified only by a written instrument duly executed
      by the party to be charged.

     

    (b) Except
      as
      otherwise specifically provided herein, any notice or other communication
      required or permitted to be given hereunder shall be in writing and shall be
      mailed by certified mail, return receipt requested, or by Federal Express,
      Express Mail or similar guaranteed overnight delivery or courier service or
      delivered in person against receipt to the party to whom it is to be
      given,

    
       

      
        	 	
                (i)

              	
                if
                  to the Company, 

                 

                Handheld
                  Entertainment, Inc.

                539
                  Bryant Street, Suite 403

                San
                  Francisco, CA 94107

                Attn:
                  President

              

      

      
        
           

          
            	 	
                    (ii)

                  	
                    with
                      a copy to,

                     

                    
                      Haynes
                        and Boone, LLP

                      153
                        East 53rd Street

                      Suite
                        4900

                      New
                        York, New York 10022

                      Attn:
                        Harvey J. Kesner,
                        Esq.

                    

                  

          

        

      

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

    

    
      	 	
              (iii)

            	
              if
                to the undersigned, at the address set forth on the signature page
                hereof,

            

    

     

    or
      in
      either case, to such other address as the party shall have furnished in writing
      in accordance with the provisions of this Section
      9(b).
      Any
      notice given by means permitted by this Section
      9(b)
      shall be
      deemed given at the time of receipt thereof at the address specified in this
      Section
      9(b).

     

    (c) This
      Agreement shall be binding upon and inure to the benefit of the parties hereto,
      the successors and assigns of the Company, and the permitted successors,
      assigns, heirs and personal representatives of the undersigned, not including,
      however, any transferees of the Subject Securities.

     

    (d) The
      headings in this Agreement are solely for convenience of reference and shall
      be
      given no effect in the construction or interpretation of this
      Agreement.

     

    (e) This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument.

     

    (f) This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York, without giving effect to principles governing conflicts
      of
      law that would defer to the substantive law of another
      jurisdiction.

     

    (g) In
      the
      event that any provision of this Agreement shall be determined to be illegal
      or
      unenforceable, that provision will be limited or eliminated to the minimum
      extent necessary so that this Agreement shall otherwise remain in full force
      and
      effect and enforceable.

     

    (h) Except
      as
      otherwise expressly set forth herein, this Agreement does not create, and shall
      not be construed as creating, any rights enforceable by any person not a party
      to this Agreement.

     

    (i) The
      parties hereto irrevocably consent to the jurisdiction of the courts of the
      State of New York and of any federal court located in such State in connection
      with any action or proceeding arising out of or relating to this Agreement,
      any
      document or instrument delivered pursuant to, in connection with or
      simultaneously with this Agreement, or a breach of this Agreement or any such
      document or instrument.

     

    [Signature
      page follows immediately]

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE

     

    IN
      WITNESS WHEREOF,
      the
      parties hereto have executed this Agreement, which shall be effective as of
      the
      day and year this subscription has been accepted by the Company as set forth
      below.

     

    
      	
              Principal
                amount of Offering Notes subscribed for (and purchase price): $____________

            	 	
              Print
                Name of Subscriber:

              _________________________________

               

              _________________________________

               

              Social
                Security Number or other Taxpayer ID Number

               

              By:
                ______________________________

              (Signature
                of Subscriber or Authorized Signatory)

              Name:

              Title:

               

              Address:
                __________________________

               

              __________________________

               

              Telephone:_________________________

               

              Fax:_______________________________

            

    

     

    If
      the
      Subject Securities will be held as joint tenants, tenants in common, or
      community property, please complete the following:

    
       

      
        	
              	 	
                _________________________________

                
                  Print
                    name of spouse or other co-subscriber

                   

                

                _________________________________

                
                  Signature
                    of spouse or other co-subscriber

                

                 

                
                  _________________________________

                  Social
                    Security Number or other Taxpayer ID Number

                   

                

                
                  _________________________________

                

                
                  Print
                    manner in which shares will be
                    held

                

              

      

       

    

    If
      the
      Offering Notes have been purchased through a broker or other intermediary,
      please identify such entity: ___________       

     

    [Please
      complete Signature Page for each
      subscriber.]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ACCEPTANCE
      OF SUBSCRIPTION

    

    _____________________________

    Name
      of
      Subscriber

    

    ACCEPTED
      BY:

    

    HANDHELD
      ENTERTAINMENT, INC.

     

     

    By:
      ___________________________________

    Name:

    Title:

     

    Date:
      _______________________, 2007

     

    Accepted
      for $_________ principal amount of Offering Notes.

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