Document:

SECURITIES
      PURCHASE AGREEMENT

     

    This
      SECURITIES
      PURCHASE AGREEMENT
      (the
“Agreement”),
      dated
      as of April 23, 2007, by and among PokerTek, Inc., a North Carolina corporation
      with headquarters located at 1020 Crews Road, Suite J, Matthews, North Carolina
      28106 (the “Company”),
      and
      the investors listed on the Schedule of Buyers attached hereto (individually,
      a
“Buyer”
and
      collectively, the “Buyers”).

     

    RECITALS

     

    A.    The
      Company and each Buyer is executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by Section 4(2) of
      the
      Securities Act of 1933, as amended (the “1933
      Act”),
      and
      Rule 506 of Regulation D (“Regulation D”)
      as
      promulgated by the United States Securities and Exchange Commission (the
“SEC”)
      under
      the 1933 Act.

     

    B.    Each
      Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
      conditions stated in this Agreement, (i) that aggregate number of shares of
      the
      common stock, no par value, of the Company (the “Common
      Stock”),
      set
      forth opposite such Buyer’s name in column (3) on the Schedule of Buyers (which
      aggregate amount for all Buyers together shall be 1,444,444 shares of Common
      Stock and shall collectively be referred to herein as the “Common
      Shares”)
      and
      (ii) a warrant to acquire up to that number of additional shares of Common
      Stock
      set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers
      (the “Warrants”),
      in
      substantially the form attached hereto as Exhibit
      A
      (as
      exercised, collectively, the “Warrant
      Shares”).

     

    C.    At
      the
      Closing, the parties hereto shall execute and deliver a Registration Rights
      Agreement, in the form attached hereto as Exhibit
      B
      (the
“Registration
      Rights Agreement”),
      pursuant to which the Company has agreed to provide certain registration rights
      with respect to the Registrable Securities (as defined in the Registration
      Rights Agreement), under the 1933 Act and the rules and regulations promulgated
      thereunder, and applicable state securities laws.

     

    D.    The
      Common Shares, the Warrants and the Warrant Shares are collectively referred
      to
      herein as the “Securities.”

     

    AGREEMENT

     

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

     

    
      	
              1.

            	
              PURCHASE
                AND SALE OF COMMON SHARES AND
                WARRANTS.

            

    

     

    
      
        (a) 
          Common
          Shares and Warrants.
          Subject
          to the satisfaction (or waiver) of the conditions set forth in Sections
          6
          and
7
          below,
          the Company shall issue and sell to each Buyer, and each Buyer severally,
          but
          not jointly, agrees to purchase from the Company on the
          Closing

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Date
      (as
      defined below), the number of Common Shares, as is set forth opposite such
      Buyer’s name in column (3) on the Schedule of Buyers, along
      with the Warrants to acquire that number of Warrant Shares as is set forth
      opposite such Buyer’s name in column (4), on the Schedule of
      Buyers.

     

    (b) Closing.
      The
      closing (the “Closing”)
      of the
      purchase of the Common Shares and the Warrants by the Buyers shall occur at
      the
      offices of Greenberg Traurig, LLP, 77 W. Wacker Drive, Suite 2400, Chicago,
      Illinois 60601. The date and time of the Closing (the “Closing
      Date”)
      shall
      be 10:00 a.m., New York City Time, on the first (1st)
      Business Day on which the conditions to the Closing set forth in Sections
6
      and
7
      below
      are satisfied or waived (or such later date as is mutually agreed to by the
      Company and each Buyer). As used herein “Business
      Day”
means
      any day other than a Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    (c) Purchase
      Price.
      The
      aggregate purchase price for the Common Shares and the Warrants to be purchased
      by each Buyer at the Closing (the “Purchase
      Price”)
      shall
      be the amount set forth opposite such Buyer’s name in column (5) on the Schedule
      of Buyers. Each Buyer shall pay $9.00 for each Common Share and related Warrants
      to be purchased by such Buyer at the Closing.

     

    (d) Form
      of
      Payment.
      On the
      Closing Date, (i) each Buyer shall pay its respective Purchase Price to the
      Company for the Common Shares and the Warrants to be issued and sold to such
      Buyer at the Closing, by wire transfer of immediately available funds in
      accordance with the Company’s written wire instructions and (ii) the
      Company shall deliver to each Buyer (A) one or more stock certificates, free
      and
      clear of all restrictive and other legends (except as expressly provided in
      Section 5(c)
      hereof),
      evidencing the number of Common Shares such Buyer is purchasing as is set forth
      opposite such Buyer’s name in column (3) of the Schedule of Buyers and (B) a
      Warrant pursuant to which such Buyer shall have the right to acquire such number
      of Warrant Shares as is set forth opposite such Buyer’s name in column (4) of
      the Schedule of Buyers, in all cases duly executed on behalf of the Company
      and
      registered in the name of such Buyer or its designee.

     

    
      	
              2.

            	
              BUYER’S
                REPRESENTATIONS AND
                WARRANTIES.

            

    

     

    Each
      Buyer represents and warrants with respect to only itself that: 

     

    (a) Organization;
      Authority.
      Such
      Buyer is an entity duly organized, validly existing and in good standing under
      the laws of the jurisdiction of its organization with the requisite power and
      authority to enter into and to consummate the transactions contemplated by
      the
      Transaction Documents (as defined below) to which it is a party and otherwise
      to
      carry out its obligations hereunder and thereunder.

     

    (b) No
      Public
      Sale or Distribution.
      Such
      Buyer is (i) acquiring the Common Shares and the Warrants and (iii) upon
      exercise of the Warrants will acquire the Warrant Shares issuable upon exercise
      thereof, in each case, for its own account and not with a view towards, or
      for
      resale in connection with, the public sale or distribution thereof, except
      pursuant to sales registered or exempted under the 1933 Act; provided,
      however,
      that by
      making the

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    representations
      herein, such Buyer does not agree, or make any representation or warranty
      (except as set forth in Section 4(n)),
      to
      hold any of the Securities for any minimum or other specific term and reserves
      the right to dispose of the Securities at any time in accordance with or
      pursuant to a registration statement or an exemption under the 1933 Act. Such
      Buyer is not a broker-dealer registered, or required to be registered, with
      the
      SEC under the Securities and Exchange Act of 1934, as amended (the “1934
      Act”).
      Such
      Buyer is acquiring the Securities hereunder in the ordinary course of its
      business. Such Buyer does not presently have any agreement or understanding,
      directly or indirectly, with any Person to distribute any of the
      Securities.

     

    (c) Accredited
      Investor Status.
      At the
      time such Buyer was offered the Securities, it was, as of the date hereof it
      is,
      and as of the Closing, it will be, an “accredited investor” as that term is
      defined in Rule 501(a) of Regulation D.

     

    (d) Reliance
      on Exemptions.
      Such
      Buyer understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying in
      part
      upon the truth and accuracy of, and such Buyer’s compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Buyer set forth herein in order to determine the availability of such
      exemptions and the eligibility of such Buyer to acquire the
      Securities.

     

    (e) Information.
      Such
      Buyer and its advisors, if any, have been furnished with all materials relating
      to the business, finances and operations of the Company and materials relating
      to the offer and sale of the Securities which have been requested by such Buyer.
      Such Buyer and its advisors, if any, have been afforded the opportunity to
      ask
      questions of the Company. Neither such inquiries nor any other due diligence
      investigations conducted by such Buyer or its advisors, if any, or its
      representatives shall modify, amend or affect such Buyer’s right to rely on the
      Company’s representations and warranties contained herein or any representations
      and warranties contained in any other Transaction Document. Such Buyer
      understands that its investment in the Securities involves a high degree of
      risk. Such Buyer has sought such accounting, legal and tax advice as it has
      considered necessary to make an informed investment decision with respect to
      its
      acquisition of the Securities. Such Buyer has independently evaluated the merits
      of its decision to purchase Securities pursuant to the Transaction Documents,
      and such Buyer confirms that it has not relied on the advice of any other
      Buyer’s business and/or legal counsel in making such decision. Such Buyer has
      not relied on the business or legal advice of Roth Capital Partners, LLC or
      any
      of its agents, counsel or affiliates in making its investment decision
      hereunder, and confirms that none of such Persons has made any representations
      or warranties to such Buyer in connection with the transactions contemplated
      by
      the Transaction Documents.

     

    (f) No
      Governmental Review.
      Such
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    (g) Transfer
      or Resale.
      Such
      Buyer understands that except as provided in the Registration Rights Agreement
      and Section 4(g)
      hereof:
      (i) the Securities have not been and are not being registered under the 1933
      Act
      or any state securities laws, and may not be offered for sale, sold, assigned
      or
      transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
      have delivered to the Company an opinion of counsel to such Buyer, in a form
      reasonably acceptable to the Company, to the effect that such Securities to
      be
      sold, assigned or transferred may be sold, assigned or transferred pursuant
      to
      an exemption from such registration, or (C) such Buyer provides the Company
      with
      reasonable assurance that such Securities can be sold, assigned or transferred
      pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor
      rule thereto) (collectively, “Rule
      144”);
      (ii)
      any sale of the Securities made in reliance on Rule 144 may be made only in
      accordance with the terms of Rule 144 and further, if Rule 144 is not
      applicable, any resale of the Securities under circumstances in which the seller
      (or the Person (as defined in Section 3(s))
      through
      whom the sale is made) may be deemed to be an underwriter (as that term is
      defined in the 1933 Act) may require compliance with some other exemption under
      the 1933 Act or the rules and regulations of the SEC promulgated thereunder;
      and
      (iii) neither the Company nor any other Person is under any obligation to
      register the Securities under the 1933 Act or any state securities laws or
      to
      comply with the terms and conditions of any exemption thereunder.

     

    (h) Validity;
      Enforcement.
      This
      Agreement and the Registration Rights Agreement have been duly and validly
      authorized by all necessary action on the part of such Buyer, and when executed
      and delivered on behalf of such Buyer shall constitute the legal, valid and
      binding obligations of such Buyer enforceable against such Buyer in accordance
      with their respective terms, except as such enforceability may be limited by
      general principles of equity or to applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation and other similar laws relating to,
      or
      affecting generally, the enforcement of applicable creditors’ rights and
      remedies.

     

    (i) No
      Conflicts.
      The
      execution, delivery and performance by such Buyer of this Agreement and the
      Registration Rights Agreement and the consummation by such Buyer of the
      transactions contemplated hereby and thereby will not (i) result in a violation
      of the organizational documents of such Buyer or (ii) conflict with, or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture or
      instrument to which such Buyer is a party, or (iii) result in a violation of
      any
      law, rule, regulation, order, judgment or decree (including federal and state
      securities laws) applicable to such Buyer, except in the case of clauses (ii)
      and (iii) above, for such conflicts, defaults, rights or violations which would
      not, individually or in the aggregate, reasonably be expected to have a material
      adverse effect on the ability of such Buyer to perform its obligations
      hereunder.

     

    (j) Residency.
      Such
      Buyer is a resident of that jurisdiction specified below its address on the
      Schedule of Buyers.

     

    (k) Certain
      Trading Activities.
      Such
      Buyer has not directly or indirectly, nor has any Person acting on behalf of
      or
      pursuant to any understanding with such Buyer, engaged in any transactions
      in
      the securities of the Company (including without limitation, any Short Sales
      involving the Company’s securities) since the time that such Buyer and the
      Company first

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    communicated
      regarding an investment in the Company or such Buyer was first contacted by
      Roth
      Capital Partners, LLC regarding an investment in the Company (as the case may
      be). “Short
      Sales”
      include, without limitation, all “short sales” as defined in Rule 200
      promulgated under Regulation SHO under the 1934 Act (“Regulation
      SHO”)
      and
      all types of direct and indirect stock pledges, forward sale contracts, options,
      puts, calls, swaps and similar arrangements (including on a total return basis),
      and sales and other transactions through non-U.S. broker dealers or foreign
      regulated brokers. Such Buyer
      does not as of the date hereof, and will not immediately following the Closing,
      own 10% or more of the Company’s issued and outstanding shares of Common Stock
      (calculated based on the assumption that all Equivalents owned by such Buyer,
      whether or not presently exercisable or convertible, have been fully
      exercised or converted (as the case may be) without regard to any
      limitations on exercise or conversion (including “blockers”) contained
      therein).

    

    (l) General
      Solicitation.
      No
      Buyer is purchasing the Securities as a result of any advertisement, article,
      notice or other communication regarding the Securities published in any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      presented at any seminar.

     

    
      	
              3.

            	
              REPRESENTATIONS
                AND WARRANTIES OF THE
                COMPANY.

            

    

     

    The
      Company represents and warrants to each of the Buyers that:

     

    (a) Organization
      and Qualification.
      The
      Company is a corporation duly organized and validly existing and in good
      standing under the laws of the State of North Carolina, and has the requisite
      power and authorization to own its properties and to carry on its business
      as
      now being conducted and as presently proposed to be conducted. The Company
      is
      duly qualified as a foreign entity to do business and is in good standing in
      every jurisdiction in which its ownership of property or the nature of the
      business conducted by it makes such qualification necessary, except to the
      extent that the failure to be so qualified or be in good standing would not
      have
      a Material Adverse Effect. As used in this Agreement, “Material
      Adverse Effect”
means
      any material adverse effect on (i) the business, properties, assets,
      liabilities, operations (including results thereof), condition (financial or
      otherwise) or prospects of the Company, (ii) the transactions contemplated
      hereby or in the other Transaction Documents or (iii) the authority or ability
      of the Company to perform its obligations under the Transaction Documents (as
      defined below). The Company does not, directly or indirectly, own capital stock
      or hold an equity or similar interest in any Person.

     

    (b) Authorization;
      Enforcement; Validity.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement, the Warrants, the Registration
      Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in
      Section 5(b)),
      and
      each of the other agreements and instruments entered into and/or executed by
      the
      parties hereto in connection with the transactions contemplated hereby and
      thereby (collectively, the “Transaction
      Documents”)
      and to
      issue the Securities in accordance with the terms hereof and thereof. The
      execution and delivery of this Agreement and the other Transaction Documents
      by
      the Company and the consummation by the Company of the transactions contemplated
      hereby and thereby, including, without limitation, the issuance of the Common
      Shares, the issuance of the Warrants and the reservation for issuance and
      issuance of

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    the
      Warrant Shares issuable upon exercise of the Warrants, have been duly authorized
      by the Company’s Board of Directors and (other than the filing with the SEC of
      one or more Registration Statements in accordance with the requirements of
      the
      Registration Rights Agreement and any other filings as may be required by any
      state securities agencies) no further filing, consent or authorization is
      required by the Company, its Board of Directors or its stockholders. This
      Agreement and the other Transaction Documents have been duly executed and
      delivered by the Company, and constitute the legal, valid and binding
      obligations of the Company, enforceable against the Company in accordance with
      their respective terms, except as such enforceability may be limited by general
      principles of equity or applicable bankruptcy, insolvency, reorganization,
      moratorium, liquidation or similar laws relating to, or affecting generally,
      the
      enforcement of applicable creditors’ rights and remedies and except as rights to
      indemnification and to contribution may be limited by federal or state
      securities law. 

     

    (c) Issuance
      of Securities.
      The
      issuance of the Common Shares and the Warrants are duly authorized and upon
      issuance in accordance with the terms of the Transaction Documents shall be
      validly issued, fully paid and non-assessable and free from all taxes, liens,
      charges and other encumbrances with respect to the issue thereof. As of the
      Closing, the Company shall have reserved from its duly authorized capital stock
      not less than the number of shares of Common Stock issuable upon exercise of
      the
      Warrants (without regard to any limitations on the exercise of the Warrants
      set
      forth therein). Upon exercise in accordance with the Warrants the Warrant Shares
      will be validly issued, fully paid and nonassessable and free from all
      preemptive or similar rights, taxes, liens, charges and other encumbrances
      with
      respect to the issue thereof, with the holders being entitled to all rights
      accorded to a holder of Common Stock. Subject to the accuracy of the
      representations and warranties of the Buyers in this Agreement, the offer and
      issuance by the Company of the Securities is exempt from registration under
      the
      1933 Act.

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby (including, without limitation, the issuance of the Common Shares,
      the
      Warrants and Warrant Shares and the reservation for issuance of the Warrant
      Shares) will not (i) result in a violation of the Articles of Incorporation
      (as
      defined in Section 3(r))
      of the
      Company, any capital stock of the Company or Bylaws (as defined in Section
      3(r)),
      (ii)
      conflict with, or constitute a default (or an event which with notice or lapse
      of time or both would become a default) under, or give to others any rights
      of
      termination, amendment, acceleration or cancellation of, any agreement,
      indenture or instrument to which the Company is a party, except to the extent
      such conflict, default or termination right would not reasonably be expected
      to
      have a Material Adverse Effect, or (iii) result in a violation of any law,
      rule,
      regulation, order, judgment or decree (including federal and state securities
      laws and regulations and the rules and regulations of The
      Nasdaq Global Market
      (the
“Principal
      Market”)
      applicable to the Company or by which any property or asset of the Company
      is
      bound or affected except, in the case of clause (ii) or (iii) above, to the
      extent such violations that could not reasonably be expected to have a Material
      Adverse Effect. 

     

    (e) Consents.
      The
      Company is not required to obtain any consent, authorization or order of, or
      make any filing or registration with, any court, governmental agency or any
      regulatory or self-regulatory agency or any other Person in order for it to
      execute, deliver or perform any of its obligations under or contemplated by
      the
      Transaction Documents (other than

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    filings
      and orders contemplated by the Registration Rights Agreement and the Shareholder
      Approval (as defined below)), in each case, in accordance with the terms hereof
      or thereof. All consents, authorizations, orders, filings and registrations
      which the Company is required to obtain pursuant to the preceding sentence
      (other than filings and orders contemplated by the Registration Rights
      Agreement) have been obtained or effected on or prior to the Closing Date,
      and
      the Company is unaware of any facts or circumstances which might prevent the
      Company from obtaining or effecting any of the registration, application or
      filings pursuant to the preceding sentence. The Company is not in violation
      of
      the listing requirements of the Principal Market and has no knowledge of any
      facts or circumstances which could reasonably lead to delisting or suspension
      of
      the Common Stock in the foreseeable future. 

     

    (f) Acknowledgment
      Regarding Buyer’s Purchase of Securities.
      The
      Company acknowledges and agrees that each Buyer is acting solely in the capacity
      of an arm’s length purchaser with respect to the Transaction Documents and the
      transactions contemplated hereby and thereby and that no Buyer is (i) an officer
      or director of the Company, (ii) an “affiliate” of the Company (as defined in
      Rule 144) or (iii) to its knowledge, a “beneficial owner” of more than 10% of
      the shares of Common Stock (as defined for purposes of Rule 13d-3 of the 1934
      Act. The Company further acknowledges that no Buyer is acting as a financial
      advisor or fiduciary of the Company (or in any similar capacity) with respect
      to
      the Transaction Documents and the transactions contemplated hereby and thereby,
      and any advice given by a Buyer or any of its representatives or agents in
      connection with the Transaction Documents and the transactions contemplated
      hereby and thereby is merely incidental to such Buyer’s purchase of the
      Securities. The Company further represents to each Buyer that the Company’s
      decision to enter into the Transaction Documents has been based solely on the
      independent evaluation by the Company and its representatives.

     

    (g) No
      General Solicitation; Placement Agent’s Fees.
      Neither
      the Company, nor any of its affiliates, nor any Person acting on its or their
      behalf, has engaged in any form of general solicitation or general advertising
      (within the meaning of Regulation D) in connection with the offer or sale of
      the
      Securities. The Company shall be responsible for the payment of any placement
      agent’s fees, financial advisory fees, or brokers’ commissions (other than for
      persons engaged by any Buyer or its investment advisor) relating to or arising
      out of the transactions contemplated hereby. Other than Roth Capital Partners,
      LLC, the Company has not engaged any placement agent or other agent in
      connection with the sale of the Securities.

     

    (h) No
      Integrated Offering.
      None of
      the Company, any of its affiliates, and any Person acting on the Company’s
      behalf has, directly or indirectly, made any offers or sales of any security
      by
      the Company or solicited any offers to buy any security from the Company, under
      circumstances that would require registration of any of the Securities under
      the
      1933 Act or cause this offering of the Securities to be integrated with prior
      offerings by the Company for purposes of the 1933 Act or any applicable
      stockholder approval provisions, including, without limitation, under the rules
      and regulations of any exchange or automated quotation system on which any of
      the securities of the Company are listed or designated. None of the Company,
      its
      affiliates and any Person acting on its behalf will take any action or steps
      referred to in the preceding sentence that would require registration of any
      of
      the Securities under the 1933 Act or cause the offering of any of the Securities
      to be integrated with other offerings.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    (i) Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of Warrant Shares will
      increase in certain circumstances. The Company further acknowledges that its
      obligation to issue the Warrant Shares upon exercise of the Warrants in
      accordance with this Agreement and the Warrants is, absolute and unconditional
      regardless of the dilutive effect that such issuance may have on the ownership
      interests of other stockholders of the Company.

     

    (j) Application
      of Takeover Protections; Rights Agreement.
      The
      Company and its board of directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Articles of Incorporation
      or
      the laws of the jurisdiction of its incorporation or otherwise which is or
      could
      become applicable to any Buyer as a result of the transactions contemplated
      by
      this Agreement, including, without limitation, the Company’s issuance of the
      Securities and any Buyer’s ownership of the Securities. Except as set forth on
      Schedule 3(j),
      the
      Company has not adopted a stockholder rights plan or any other plan relating
      to
      accumulations of beneficial ownership of Common Stock or a change in control
      of
      the Company.

     

    (k) SEC
      Documents; Financial Statements.
      Except
      as set forth on Schedule 3(k),
      during
      the two (2) years prior to the date hereof, the Company has timely filed all
      reports, schedules, forms, statements and other documents required to be filed
      by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
      of the foregoing filed prior to the date hereof and all exhibits included
      therein and financial statements, notes and schedules thereto and documents
      incorporated by reference therein being hereinafter referred to as the
“SEC
      Documents”).
      The
      Company has delivered to the Buyers or their respective representatives true,
      correct and complete copies of each of the SEC Documents not available on the
      EDGAR system. As of their respective dates, the SEC Documents complied in all
      material respects with the requirements of the 1934 Act and the rules and
      regulations of the SEC promulgated thereunder applicable to the SEC Documents,
      and none of the SEC Documents, at the time they were filed with the SEC,
      contained any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading. As of their respective dates, the financial statements of the
      Company included in the SEC Documents complied as to form in all material
      respects with applicable accounting requirements and the published rules and
      regulations of the SEC with respect thereto as in effect as of the time of
      filing. Such financial statements have been prepared in accordance with
      generally accepted accounting principles, consistently applied, during the
      periods involved (except (i) as may be otherwise indicated in such financial
      statements or the notes thereto, or (ii) in the case of unaudited interim
      statements, to the extent they may exclude footnotes or may be condensed or
      summary statements) and fairly present in all material respects the financial
      position of the Company as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments). The information
      provided by or on behalf of the Company to the Buyers which is not included
      in
      the SEC Documents, including, without limitation, information referred to in
      Section 2(e)
      of this
      Agreement, considered collectively and taken together with the SEC Documents,
      does not contain any untrue statement of a material fact or omit to state any
      material fact necessary in order to make the statements therein, in the light
      of
      the circumstance under which they are or were made, not
      misleading.

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    (l) Absence
      of Certain Changes.
      Since
      the date of the Company’s most recent audited or reviewed financial statements
      contained in a Form 10-K, there has been no material adverse change and no
      material adverse development in the business, operations (including results
      thereof), condition (financial or otherwise) or prospects of the Company. Since
      the date of the Company’s most recent audited financial statements contained in
      a Form 10-K, the Company has not (i) declared or paid any dividends, (ii) sold
      any material assets, individually or in the aggregate, outside of the ordinary
      course of business or (iii) made any material capital expenditures, individually
      or in the aggregate. The Company has not taken any steps to seek protection
      pursuant to any bankruptcy law nor does the Company have any knowledge or reason
      to believe that its creditors intend to initiate involuntary bankruptcy
      proceedings or any actual knowledge of any fact which would reasonably lead
      a
      creditor to do so. The Company is not as of the date hereof, and after giving
      effect to the transactions contemplated hereby to occur at the Closing, will
      not
      be Insolvent (as defined below). For purposes of this Section 3(l),
      “Insolvent”
means
      (i) the present fair saleable value of the Company’ assets is less than the
      amount required to pay the Company’s total indebtedness, (ii) the Company is
      unable to pay its debts and liabilities, subordinated, contingent or otherwise,
      as such debts and liabilities become absolute and matured or (iii) the Company
      intends to incur or believes that it will incur debts that would be beyond
      its
      ability to pay as such debts mature. The Company has not engaged, and is not
      about to engage, in business or in any transaction, for which the Company’s
      remaining assets constitute unreasonably small capital. 

     

    (m) No
      Undisclosed Events, Liabilities, Developments or Circumstances.
      No
      event, liability, development or circumstance has occurred or exists, or is
      reasonably foreseeable to exist or occur with respect to the Company or its
      business, properties, liabilities, prospects, operations (including results
      thereof) or condition (financial or otherwise), that would be required to be
      disclosed by the Company under applicable securities laws on a registration
      statement on Form S-1 filed with the SEC relating to an issuance and sale by
      the
      Company of its Common Stock and which has not been publicly announced that
      could
      reasonably be expected to have a Material Adverse Effect.

     

    (n) Conduct
      of Business; Regulatory Permits.
      The
      Company is not in violation of any term of or in default under its Articles
      of
      Incorporation or Bylaws. The Company is not in violation of any judgment, decree
      or order or any statute, ordinance, rule or regulation applicable to the
      Company, except for possible violations which would not, individually or in
      the
      aggregate, have a Material Adverse Effect. Without limiting the generality
      of
      the foregoing, the Company is not in violation of any of the rules, regulations
      or requirements of the Principal Market and has no knowledge of any facts or
      circumstances that could reasonably lead to delisting or suspension of the
      Common Stock by the Principal Market in the foreseeable future. Since January
      1,
      2006, (i) the Common Stock has been designated for quotation on the Principal
      Market, (ii) trading in the Common Stock has not been suspended by the SEC
      or
      the Principal Market and (iii) the Company has received no communication,
      written or oral, from the SEC or the Principal Market regarding the suspension
      or delisting of the Common Stock from the Principal Market. The Company
      possesses all certificates, authorizations and permits issued by the appropriate
      regulatory authorities necessary to conduct its business where currently
      conducted, except where the failure to possess such certificates, authorizations
      or permits would not have, individually or in the aggregate, a Material Adverse
      Effect, and the Company has not received any notice of

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    proceedings
      relating to the revocation or modification of any such certificate,
      authorization or permit. 

     

    (o) Foreign
      Corrupt Practices.
      Neither
      the Company nor, to its knowledge, any director, officer, agent, employee or
      other Person acting on behalf of the Company has, in the course of its actions
      for, or on behalf of, the Company (i) used any corporate funds for any unlawful
      contribution, gift, entertainment or other unlawful expenses relating to
      political activity; (ii) made any direct or indirect unlawful payment to any
      foreign or domestic government official or employee from corporate funds; (iii)
      violated or is in violation of any provision of the U.S. Foreign Corrupt
      Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
      payoff, influence payment, kickback or other unlawful payment to any foreign
      or
      domestic government official or employee.

     

    (p) Sarbanes-Oxley
      Act.
      The
      Company is in compliance with all applicable requirements of the Sarbanes-Oxley
      Act of 2002 that are effective as of the date hereof, and all applicable rules
      and regulations promulgated by the SEC thereunder that are effective as of
      the
      date hereof, except where such noncompliance would not have, individually or
      in
      the aggregate, a Material Adverse Effect.

     

    (q) Transactions
      With Affiliates.
      Except
      as disclosed in the SEC Documents, none of the officers, directors or employees
      of the Company is presently a party to any transaction with the Company (other
      than for ordinary course services as employees, officers or directors),
      including any contract, agreement or other arrangement providing for the
      furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any such
      officer, director or employee or, to the knowledge of the Company, any
      corporation, partnership, trust or other entity in which any such officer,
      director, or employee has a substantial interest or is an officer, director,
      trustee or partner.

     

    (r) Equity
      Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of (i)
      100,000,000 shares of Common Stock, of which as of the date hereof, 9,472,020
      shares are issued and outstanding, 1,602,650 shares were subject to outstanding
      options granted pursuant to the Company’s stock incentive plans, 509,600 shares
      are reserved for issuance pursuant to the Company’s stock incentive plans and
      200,000 shares are reserved for issuance pursuant to securities (other than
      the
      Common Shares and the Warrants) exercisable or exchangeable for, or convertible
      into, shares of Common Stock and (ii) 5,000,000 shares of preferred stock,
      none
      of which, as of the date hereof, are issued and outstanding. All of such
      outstanding shares are duly authorized and have been, or upon issuance will
      be,
      validly issued, fully paid and nonassessable. 6,200,883 shares of the Company’s
      issued and outstanding shares of Common Stock on the date hereof are as of
      the
      date hereof owned by Persons who are “affiliates” (as defined in Rule 405
      promulgated under the 1933 Act and calculated based on the assumption that
      only
      officers, directors and known holders of at least 10% of
      the
      Company’s issued and outstanding shares of Common Stock
      are
“affiliates” without conceding that any such Persons are “affiliates” for
      purposes of federal securities laws) of the Company. To
      the
      Company’s knowledge, as of the date hereof no Person (other than the three
      Persons who have been previously identified to the Buyers) owns 10% or more
      of
      the Company’s issued and outstanding shares of Common Stock (calculated based on
      the assumption that all Equivalents, whether or not presently exercisable or
      convertible, have been fully exercised or
      converted (as

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    the
      case
      may be) without regard to any limitations on exercise or conversion (including
      “blockers”) contained therein without conceding that such identified Person is a
      10% stockholder for purposes of federal securities laws).
      Except
      as disclosed in the SEC Documents or on Schedule 3(r):
      (i)
      none of the Company’s capital stock is subject to preemptive rights or any other
      similar rights or any liens or encumbrances suffered or permitted by the
      Company; (ii) there are no outstanding options, warrants, scrip, rights to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, or exercisable or exchangeable for,
      any
      capital stock of the Company, or contracts, commitments, understandings or
      arrangements by which the Company is or may become bound to issue additional
      capital stock of the Company or options, warrants, scrip, rights to subscribe
      to, calls or commitments of any character whatsoever relating to, or securities
      or rights convertible into, or exercisable or exchangeable for, any capital
      stock of the Company; (iii) there are no outstanding debt securities, notes,
      credit agreements, credit facilities or other agreements, documents or
      instruments evidencing indebtedness of the Company or by which the Company
      is or
      may become bound; (iv) there are no financing statements securing obligations
      in
      any material amounts, either individually or in the aggregate, filed in
      connection with the Company; (v) there are no agreements or arrangements under
      which the Company is obligated to register the sale of any of its securities
      under the 1933 Act (except pursuant to the Registration Rights Agreement);
      (vi)
      there are no outstanding securities or instruments of the Company which contain
      any redemption or similar provisions, and there are no contracts, commitments,
      understandings or arrangements by which the Company is or may become bound
      to
      redeem a security of the Company; (vii) there are no securities or instruments
      containing anti-dilution or similar provisions that will be triggered by the
      issuance of the Securities; and (viii) the Company does not have any stock
      appreciation rights or “phantom stock” plans or agreements or any similar plan
      or agreement. The Company has furnished to the Buyers true, correct and complete
      copies of the Company’s Articles of Incorporation, as amended and as in effect
      on the date hereof (the “Articles of
      Incorporation”),
      and
      the Company’s bylaws, as amended and as in effect on the date hereof (the
“Bylaws”),
      and
      the terms of all securities convertible into, or exercisable or exchangeable
      for, shares of Common Stock and the material rights of the holders thereof
      in
      respect thereto.

     

    (s) Indebtedness
      and Other Contracts.
      Except
      as disclosed on Schedule 3(s),
      the
      Company (i) has no outstanding indebtedness, (ii) is not a party to any
      contract, agreement or instrument, the violation of which, or default under
      which, by the other party(ies) to such contract, agreement or instrument could
      reasonably be expected to result in a Material Adverse Effect, (iii) is not
      in
      violation of any term of or in default under any contract, agreement or
      instrument relating to any indebtedness, except where such violations and
      defaults would not result, individually or in the aggregate, in a Material
      Adverse Effect, or (iv) is not a party to any contract, agreement or instrument
      relating to any indebtedness, the performance of which, in the judgment of
      the
      Company’s officers, has or is expected to have a Material Adverse Effect.
      Schedule 3(s)
      provides
      a detailed description of the material terms of any such outstanding
      indebtedness which is not disclosed in the SEC Documents. For purposes of this
      Agreement, “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof. 

     

    (t) Absence
      of Litigation.
      Except
      as set forth on Schedule 3(t),
      there
      is no action, suit, proceeding, inquiry or investigation before or by the
      Principal Market, any court, public

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    board,
      government agency, self-regulatory organization or body pending or, to the
      knowledge of the Company, threatened against or affecting the Company, the
      Common Stock or any of the Company’s officers or directors in their capacities
      as such, which is outside of the ordinary course of business or that could,
      individually or in the aggregate, reasonably be expected to result in a Material
      Adverse Effect.

     

    (u) Insurance.
      The
      Company is insured by insurers of recognized financial responsibility against
      such losses and risks and in such amounts as management of the Company believes
      to be prudent and customary in the businesses in which the Company is engaged
      and the Company has no reason to believe that it will be unable to renew its
      existing insurance coverage as and when such coverage expires or to obtain
      similar coverage from similar insurers as may be necessary to continue its
      business at a cost that would not have a Material Adverse Effect.

     

    (v) Employee
      Relations.
      The
      Company is not a party to any collective bargaining agreement or employs any
      member of a union. The Company believes that its relations with its employees
      are good. No executive officer (as defined in Rule 501(f) promulgated under
      the
      1933 Act) or other key employee of the Company has notified the Company that
      such officer intends to leave the Company or otherwise terminate such officer’s
      employment with the Company. To the knowledge of the Company, no executive
      officer or other key employee of the Company is, or is now expected to be,
      in
      violation of any material term of any employment contract, confidentiality,
      disclosure or proprietary information agreement, non-competition agreement,
      or
      any other contract or agreement or any restrictive covenant, and the continued
      employment of each such executive officer or other key employee (as the case
      may
      be) does not subject the Company to any liability with respect to any of the
      foregoing matters. The Company is in compliance with all federal, state, local
      and foreign laws and regulations respecting labor, employment and employment
      practices and benefits, terms and conditions of employment and wages and hours,
      except where failure to be in compliance would not, either individually or
      in
      the aggregate, reasonably be expected to result in a Material Adverse
      Effect.

     

    (w) Title.
      The
      Company has good and marketable title to all personal property owned by it
      which
      is material to the business of the Company, free and clear of all liens,
      encumbrances and defects except such as do not materially affect the value
      of
      such property and do not interfere with the use made and proposed to be made
      of
      such property by the Company. Any real property and facilities held under lease
      by the Company is held by it under valid, subsisting and enforceable leases
      with
      such exceptions as are not material and do not interfere with the use made
      and
      proposed to be made of such property and buildings by the Company. The Company
      does not, directly or indirectly, own any real property. 

     

    (x) Intellectual
      Property Rights.
      The
      Company owns or possesses adequate rights or licenses to use all trademarks,
      trade names, service marks, service mark registrations, service names, patents,
      patent rights, copyrights, inventions, licenses, approvals, governmental
      authorizations, trade secrets and other intellectual property rights
      (“Intellectual
      Property Rights”)
      necessary to conduct its business as now conducted and as presently proposed
      to
      be conducted, except where the failure to so own or possess rights would not
      reasonably be expected to result in a Material Adverse Effect. Except for
      licenses which are immaterial to the Company’s business, none of the Company’s
      Intellectual Property Rights have expired, terminated or been abandoned, or
      are
      expected to expire, terminate or be abandoned, within three

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    years
      from the date of this Agreement. The Company does not have any knowledge of
      any
      infringement by the Company of Intellectual Property Rights of others. Except
      as
      set forth on Schedule 3(x),
      there
      is no claim, action or proceeding being made or brought, or to the knowledge
      of
      the Company, being threatened, against the Company regarding its Intellectual
      Property Rights. The Company is unaware of any facts or circumstances which
      might give rise to any of the foregoing infringements or claims, actions or
      proceedings. The Company has taken reasonable security measures to protect
      the
      secrecy, confidentiality and value of all of its Intellectual Property
      Rights.

     

    (y) Environmental
      Laws.
      The
      Company (i) is in compliance with all Environmental Laws (as hereinafter
      defined), (ii) has received all permits, licenses or other approvals required
      of
      it under applicable Environmental Laws to conduct its business and (iii) is
      in
      compliance with all terms and conditions of any such permit, license or approval
      where, in each of the foregoing clauses (i), (ii) and (iii), the failure to
      so
      comply could be reasonably expected to have, individually or in the aggregate,
      a
      Material Adverse Effect. The term “Environmental
      Laws”
means
      all federal, state, local or foreign laws relating to pollution or protection
      of
      human health or the environment (including, without limitation, ambient air,
      surface water, groundwater, land surface or subsurface strata), including,
      without limitation, laws relating to emissions, discharges, releases or
      threatened releases of chemicals, pollutants, contaminants, or toxic or
      hazardous substances or wastes (collectively, “Hazardous
      Materials”)
      into
      the environment, or otherwise relating to the manufacture, processing,
      distribution, use, treatment, storage, disposal, transport or handling of
      Hazardous Materials, as well as all authorizations, codes, decrees, demands
      or
      demand letters, injunctions, judgments, licenses, notices or notice letters,
      orders, permits, plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (z) Tax
      Status.
      The
      Company (i) has timely made or filed all foreign, federal and state income
      and
      all other tax returns, reports and declarations required by any jurisdiction
      to
      which it is subject, (ii) has timely paid all taxes and other governmental
      assessments and charges that are material in amount, shown or determined to
      be
      due on such returns, reports and declarations, except those being contested
      in
      good faith and (iii) has set aside on its books provision reasonably adequate
      for the payment of all taxes for periods subsequent to the periods to which
      such
      returns, reports or declarations apply. There are no unpaid taxes in any
      material amount claimed to be due by the taxing authority of any jurisdiction,
      and the officers of the Company know of no basis for any such
      claim.

     

    (aa) Off
      Balance Sheet Arrangements.
      There
      is no transaction, arrangement, or other relationship between the Company and
      an
      unconsolidated or other off balance sheet entity that is required to be
      disclosed by the Company in its 1934 Act filings and is not so disclosed or
      that
      otherwise could be reasonably likely to have a Material Adverse
      Effect.

     

    (bb) Investment
      Company Status.
      The
      Company is not, and upon consummation of the sale of the Securities will not
      be,
      an “investment company,” an affiliate of an “investment company,” a company
      controlled by an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company” as such terms
      are defined in the Investment Company Act of 1940, as amended.

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    (cc) Acknowledgement
      Regarding Buyers’ Trading Activity.
      It is
      understood and acknowledged by the Company (i) that, other than as contemplated
      by Section 2(k)
      and
      Section 4(n),
      following the public disclosure of the transactions contemplated by the
      Transaction Documents, in accordance with the terms thereof, none of the Buyers
      have been asked by the Company to agree, nor has any Buyer agreed with the
      Company, to desist from purchasing or selling, long and/or short, securities
      of
      the Company, or “derivative” securities based on securities issued by the
      Company or to hold the Securities for any specified term; (ii) that each Buyer
      shall not be deemed to have any affiliation with or control over any arm’s
      length counter party in any “derivative” transaction. The Company further
      understands and acknowledges that, except as set forth in Section 4(n),
      following the public disclosure of the transactions contemplated by the
      Transaction Documents pursuant to the Press Release one or more Buyers may
      engage in hedging and/or trading activities at various times during the period
      that the Securities are outstanding, and (b) such hedging and/or trading
      activities, if any, can reduce the value of the existing stockholders’ equity
      interest in the Company both at and after the time the hedging and/or trading
      activities are being conducted. Subject to the provisions of Section
2(b)
      and
      Section 4(n),
      the
      Company acknowledges that such aforementioned hedging and/or trading activities
      do not constitute a breach of this Agreement or any other Transaction Document
      or any of the documents executed in connection herewith or
      therewith.

     

    (dd) Manipulation
      of Price.
      The
      Company has not, and to its knowledge no Person acting on its behalf has, (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or paid any compensation for soliciting purchases of, any of the
      Securities, other than Roth Capital Partners, LLC, or (iii) paid or agreed
      to
      pay to any person any compensation for soliciting another to purchase any other
      securities of the Company.

     

    (ee) U.S.
      Real
      Property Holding Corporation.
      The
      Company is not, and has never been, a U.S. real property holding corporation
      within the meaning of Section 897 of the Internal Revenue Code of 1986, as
      amended, and the Company shall so certify upon Buyer’s request.

     

    (ff) Disclosure.
      All
      written disclosure provided to the Buyers regarding the Company, its businesses
      and the transactions contemplated hereby, including the Schedules to this
      Agreement, furnished by or on behalf of the Company is true and correct and
      does
      not contain any untrue statement of a material fact or omit to state any
      material fact necessary in order to make the statements made therein, in the
      light of the circumstances under which they were made, not misleading. The
      Company acknowledges and agrees that no Buyer makes or has made any
      representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in Sections 2
      and
4(n).

     

    
      	
              4.

            	
              COVENANTS.

            

    

     

    (a) Best
      Efforts.
      Each
      party shall use its reasonable best efforts timely to satisfy each of the
      conditions to be satisfied by it as provided in Sections 6
      and
7
      of this
      Agreement.

     

    (b) Form
      D
      and Blue Sky.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to each Buyer
      promptly

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    after
      such filing. The Company shall, on or before the Closing Date, take such action
      as the Company shall reasonably determine is necessary in order to obtain an
      exemption for, or to, qualify the Securities for sale to the Buyers at the
      Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States, and shall provide evidence of any
      such
      action so taken to the Buyers on or prior to the Closing Date. The Company
      shall
      make all filings and reports relating to the offer and sale of the Securities
      required under applicable securities or “Blue Sky” laws of the states of the
      United States following the Closing Date. 

     

    (c) Reporting
      Status.
      Until
      the date on which the Buyers shall have sold all of the Securities (the
“Reporting
      Period”),
      the
      Company shall timely file all reports required to be filed with the SEC pursuant
      to the 1934 Act, and the Company shall not terminate its status as an issuer
      required to file reports under the 1934 Act even if the 1934 Act or the rules
      and regulations thereunder would no longer require or otherwise permit such
      termination.

     

    (d) Use
      of
      Proceeds.
      The
      Company will use the proceeds from the sale of the Securities solely as set
      forth on Schedule 4(d).
      

     

    (e) Listing.
      The
      Company shall promptly secure the listing of all of the Registrable Securities
      (as defined in the Registration Rights Agreement) upon each national securities
      exchange and automated quotation system, if any, upon which the Common Stock
      is
      then listed (subject to official notice of issuance). The Company shall use
      its
      reasonable best efforts to maintain the Common Stock’s authorization for
      quotation on the Principal Market, the New York Stock Exchange or the Nasdaq
      Global Select Market (each being an “Eligible
      Market”)
      during
      the Reporting Period. During the Reporting Period, the Company shall not take
      any action which could be reasonably expected to result in the delisting or
      suspension of the Common Stock on the Principal Market or an Eligible Market
      if
      the Common Stock is not then listed on the Principal Market. The Company shall
      pay all fees and expenses in connection with satisfying its obligations under
      this Section 4(e).

     

    (f) Fees.
      At the
      Closing, the Company shall reimburse Magnetar Capital Master Fund, Ltd. or
      its
      designee(s) (in addition to any other expense amounts paid to any Buyer prior
      to
      the date of this Agreement) for all its reasonable expenses incurred in
      connection with this Agreement and the other Transaction Documents (including,
      without limitation, all reasonable legal fees and disbursements in connection
      therewith) up to a maximum of $85,000, which amount shall be withheld by
      Magnetar Capital Master Fund, Ltd. from its Purchase Price at the Closing or
      paid by the Company upon termination of this Agreement so long as such
      termination did not occur as a result of a material breach by Magnetar Capital
      Master Fund, Ltd. of any of its obligations hereunder (as the case may be).
      The
      Company shall be responsible for the payment of any placement agent’s fees,
      financial advisory fees, or broker’s commissions (other than for Persons engaged
      by any Buyer) relating to or arising out of the transactions contemplated
      hereby, including, without limitation, any fees payable to Roth Capital
      Partners, LLC, the Company’s sole placement agent in connection with the
      transactions contemplated by this Agreement. The Company shall pay, and hold
      each Buyer harmless against, any liability, loss or expense (including, without
      limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in
      connection with any claim relating to any such payment.

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    (g) Pledge
      of
      Securities.
      Notwithstanding anything to the contrary contained in Section 2(g),
      the
      Company acknowledges and agrees that the Securities may be pledged by a Buyer
      in
      connection with a bona fide margin agreement or other loan or financing
      arrangement that is secured by the Securities, if done in compliance with the
      1933 Act. The pledge of Securities shall not be deemed to be a transfer, sale
      or
      assignment of the Securities hereunder, and no Buyer effecting a pledge of
      Securities shall be required to provide the Company with any notice thereof
      or
      otherwise make any delivery to the Company pursuant to this Agreement or any
      other Transaction Document; provided that a Buyer and its pledge shall comply
      with the provisions of the 1933 Act in effecting any sale, transfer or
      assignment of Securities to such pledgee. The Company hereby agrees to execute
      and deliver such documentation as a pledgee of the Securities may reasonably
      request in connection with a pledge of the Securities to such pledgee by a
      Buyer.

     

    (h) Disclosure
      of Transactions and Other Material Information.
      The
      Company shall, on or before 5:30 p.m., New York City Time, on the third
      (3rd)
      Business Day after the date of this Agreement, issue a press release (the
“Press
      Release”)
      reasonably acceptable to the Buyers disclosing all the material terms of the
      transactions contemplated by the Transaction Documents. On
      or
      before 5:30 p.m., New York Time, on the third (3rd)
      Business Day following the date of this Agreement, the Company shall file a
      Current Report on Form 8-K describing all the material terms of the transactions
      contemplated by the Transaction Documents in the form required by the 1934
      Act
      and including as exhibits thereto, all the material Transaction Documents
      (including, without limitation, this Agreement, and the form of Warrants and
      the
      Registration Rights Agreement) (including all exhibits, the “8-K
      Filing”).
      The
      Company shall publicly disclose all information that constitutes or could
      reasonably be expected to constitute material, nonpublic information which
      has
      been provided to any of the Buyers prior to the date hereof no later than the
      Filing Deadline (as defined in the Registration Rights Agreement). From and
      after the date hereof, the Company shall not, and shall cause each of its
      subsidiaries and each of its and their respective officers, directors, employees
      and agents, not to, provide any Buyer with any material, nonpublic information
      regarding the Company or any of its subsidiaries from and after the issuance
      of
      the Press Release without the express prior written consent of such Buyer,
      except as expressly contemplated by Section 4(o)(vii).
      If a
      Buyer has, or believes it has, received any material, nonpublic information
      regarding the Company or any of its subsidiaries in breach of the immediately
      preceding sentence, such Buyer shall provide the Company with written notice
      thereof in which case the Company shall, within two (2) Trading Days of the
      receipt of such notice, make a public disclosure of all such material, nonpublic
      information so provided. In the event of a breach of any of the foregoing
      covenants by the Company, any of its subsidiaries, or any of its or their
      respective officers, directors, employees and agents (as determined in the
      reasonable good faith judgment of such Buyer after consultation with such
      Buyer’s legal counsel), in addition to any other remedy provided herein or in
      the Transaction Documents, such Buyer shall have the right to make a public
      disclosure, in the form of a press release, public advertisement or otherwise,
      of such material, nonpublic information without the prior approval by the
      Company, any of its subsidiaries or any of its or their respective officers,
      directors, employees or agents. No Buyer shall have any liability to the
      Company, any of its subsidiaries or any of its or their respective officers,
      directors, employees, stockholders or agents, for any such disclosure. Subject
      to the foregoing, neither the Company, any of its subsidiaries, nor any Buyer
      shall issue any press releases or any other public statements with respect
      to
      the transactions contemplated hereby; provided,
      however,
      that
      the Company shall be entitled, without the prior

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    approval
      of any Buyer, to make any press release or other public disclosure with respect
      to such transactions (i) in substantial conformity with the 8-K Filing and
      contemporaneously therewith and (ii) as is required by applicable law and
      regulations (provided
      that in
      the case of clause (i) each Buyer shall be consulted by the Company in
      connection with any such press release or other public disclosure prior to
      its
      release). Without the prior written consent of any applicable Buyer, the Company
      shall not disclose the name of such Buyer in any filing, announcement, release
      or otherwise.

     

    (i) Additional
      Registration Statements.
      Until
      after the Effective Date (as defined in the Registration Rights Agreement)
      of
      the initial Registration Statement required to be filed by the Company pursuant
      to Section 2(a) of the Registration Rights Agreement which covers all of the
      securities required to be covered thereunder, the Company shall not file a
      registration statement under the 1933 Act (other than on Form S-4 or Form S-8)
      relating to securities that are not the Registrable Securities.

     

    (j) 
      Additional
      Issuance of Securities.
      The
      Company agrees that for the period commencing on the date hereof and ending
      on
      the earlier of (i) one hundred sixty five (165) days after the Closing Date
      or
      (ii) sixty (60) days after the Effective Date of the initial Registration
      Statement required to be filed by the Company pursuant to Section 2(a) of the
      Registration Rights Agreement which covers all of the securities required to
      be
      covered thereunder (the “Restricted Period”),
      the
      Company shall not directly or indirectly issue, offer, sell, grant any option
      to
      purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant
      or any option to purchase or other disposition of) any of their respective
      equity or equity equivalent securities, including, without limitation, any
      debt,
      preferred stock, rights, options, warrants or other instrument that is at any
      time and under any circumstances convertible into or exchangeable for, or
      otherwise entitles the holder thereof to receive, capital stock and other
      securities of the Company (including, without limitation, any securities of
      the
      Company or any of its subsidiaries which entitle the holder thereof to acquire
      Common Stock at any time, including without limitation, any debt, preferred
      stock, rights, options, warrants or other instrument that is at any time
      convertible into or exchangeable for, or otherwise entitles the holder thereof
      to receive, Common Stock or other securities that entitle the holder to receive,
      directly or indirectly, Common Stock) (collectively with such capital stock
      or
      other securities of the Company, “Equivalents”)
      (any
      such issuance, offer, sale, grant, disposition or announcement being referred
      to
      as a “Subsequent
      Placement”).
      Notwithstanding the foregoing, this Section 4(j)
      shall
      not apply in respect of the issuance of (A) Common Stock or standard options
      to
      purchase Common Stock issued to directors, officers, employees or consultants
      of
      the Company in connection with their service as directors or officers of the
      Company, their employment by the Company or their retention as consultants
      by
      the Company pursuant to an equity compensation program or other contract or
      arrangement approved by the Board of Directors of the Company (or the
      compensation committee of the Board of Directors of the Company), provided
      that
      all such issuances after the date hereof pursuant to this clause (A) do not,
      in
      the aggregate, exceed more than 10% of the Common Stock issued and outstanding
      immediately prior to the date hereof, (B) Common Stock or standard warrants
      (including so-called penny warrants) to purchase Common Stock in connection
      with
      strategic alliances, acquisitions, mergers, strategic partnerships, joint
      ventures, vendor and supplier arrangements and as equity kickers in lease and
      financing transactions, the primary purpose of which is not to raise capital,
      and which are approved in good faith by the Company’s Board of Directors,
      provided that all such issuances

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    after
      the
      date hereof pursuant to this clause (B) do not, in the aggregate, exceed more
      than 10% of the Common Stock issued and outstanding immediately prior to the
      date hereof, (C) shares issued upon the conversion or exercise of Equivalents
      issued prior to the date hereof, provided that such Equivalents have not been
      amended since the date of this Agreement to increase the number of shares
      issuable thereunder or to lower the exercise or conversion price thereof or
      otherwise materially change the terms or conditions thereof in any manner that
      adversely affects any of the Buyers, (D) shares issued or issuable by reason
      of
      a dividend, stock split or other distribution on Common Stock or (E) the Warrant
      Shares (each of the foregoing in clauses (A) through (E), collectively the
      “Excluded
      Securities”).

     

    (k) Reservation
      of Shares.
      The
      Company shall take all action necessary to at all times have authorized, and
      reserved for the purpose of issuance, no less than the number of shares of
      Common Stock issuable upon exercise of the Warrants (without regard to any
      limitations on the exercise of the Warrants set forth therein).

     

    (l) Conduct
      of Business.
      The
      business of the Company shall not be conducted in violation of any law,
      ordinance or regulation of any governmental entity, except where such violations
      would not result, either individually or in the aggregate, in a Material Adverse
      Effect.

     

    (m) Variable
      Rate Transaction. From the date hereof until 18 months after the Effective
      Date
      of the initial Registration Statement required to be filed by the Company
      pursuant to Section 2(a) of the Registration Rights Agreement which covers
      all
      of the securities required to be covered thereunder, the Company shall be
      prohibited from effecting or entering into an agreement to effect any Subsequent
      Placement involving a “Variable
      Rate Transaction.”
The
      term “Variable
      Rate Transaction”
shall
      mean a transaction in which the Company (i) issues or sells any Equivalents
      either (A) at a conversion, exercise or exchange rate or other price that is
      based upon and/or varies with the trading prices of or quotations for the shares
      of Common Stock at any time after the initial issuance of such Equivalents,
      or
      (B) with a conversion, exercise or exchange price that is subject to being
      reset
      at some future date after the initial issuance of such Equivalents or upon
      the
      occurrence of specified or contingent events directly or indirectly related
      to
      the business of the Company or the market for the Common Stock, other than
      pursuant to a customary “weighted average” or “full ratchet” anti-dilution
      provision or (ii) enters into any agreement (including, but not limited to,
      an
      equity line of credit) whereby the Company may sell securities at a future
      determined price (other than standard and customary “preemptive” or
“participation” rights). Each Buyer shall be entitled to obtain injunctive
      relief against the Company to preclude any such issuance, which remedy shall
      be
      in addition to any right to collect damages.

     

    (n) Trading
      Restrictions. Each Buyer represents and warrants to, and covenants with, the
      Company that it will not (and its affiliates acting on its behalf or pursuant
      to
      any understanding with it will not) engage in or effect, directly or indirectly,
      any transactions in any securities of the Company (including, without
      limitation, any Short Sales, “locking-up” borrow or hedging activities involving
      the Company’s securities) during the period commencing on the date hereof and
      ending on the earlier to occur of (i) one (1) year after the Effective Date
      (as
      defined in the Registration Rights Agreement) of the initial Registration
      Statement covering the Registrable Securities to be filed by the Company
      pursuant to Section 2(a) of the Registration Rights Agreement, (ii) two years
      from the Closing Date and (iii) the date this Agreement is

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    terminated
      pursuant to Section 8.
      In
      furtherance (and without limitation) of the foregoing, during such restricted
      period, neither such Buyer nor any of such affiliates, (a) will directly or
      indirectly, sell, agree to sell, grant any call option or purchase any put
      option with respect to, pledge, borrow or otherwise dispose of any securities
      of
      the Company, or (b) will establish or increase any “put equivalent position” or
      liquidate or decrease any “call equivalent position” with respect to any such
      securities (in each case within the meaning of Section 16 of the 1934 Act and
      the rules and regulations promulgated thereunder), or otherwise enter into
      any
      swap, derivative or other transaction or arrangement that transfers to another,
      in whole or in part, any economic consequence of ownership of any such
      securities, whether or not such transaction is to be settled by delivery of
      any
      such securities, other securities, cash or other consideration. Notwithstanding
      the foregoing, it is understood and agreed that nothing contained in this
      Section 4(n)
      shall
      prohibit such Buyer (or such affiliates) from (1) purchasing or agreeing to
      purchase unrestricted securities of the Company or securities which are covered
      by an effective registration statement and the prospectus included therein
      is
      available for use on the date of such purchase (including through block trades
      or privately negotiated transactions), (2) purchasing or agreeing to purchase
      securities of the Company pursuant to Section 4(n)
      or
      otherwise from the Company, (3) exercising any or all Warrants to acquire
      Warrant Shares or otherwise acting under or enforcing, or receiving any right
      or
      benefit or adjustment under, the Warrants, (4) selling or agreeing to sell
      “long” securities of the Company (because such Buyer or such Affiliate is
“deemed to own such securities” pursuant to paragraph (b) of Rule 200 under
      Regulation SHO), including, without limitation, (I) any Common Shares, Warrants
      or Warrant Shares acquired hereunder or pursuant to the transactions
      contemplated hereby or any of the Transaction Documents or (II) securities
      acquired after the date hereof in accordance with this paragraph, (5) pledging
      or hypothecating any securities of the Company in connection with leverage
      arrangements engaged in by such Buyer (or such affiliates) without the purpose
      of transferring economic risk relating to such securities or (6) from
      transferring any of the Securities to any Affiliate who agrees in writing to
      be
      bound by this Section 4(n),
      in each
      case, provided such sale is in compliance with all applicable securities laws
      and following the public announcement of the transaction contemplated hereby
      pursuant to Section 4(h).

     

    (o) Participation
      Right. From the date hereof until the two year anniversary of the Closing Date,
      the Company shall not, directly or indirectly, effect any Subsequent Placement
      unless the Company shall have first complied with this Section 4(o).
      The
      Company acknowledges and agrees that the right set forth in this Section
4(o)
      is a
      right granted by the Company, separately, to each Buyer.

     

    (i) The
      Company shall deliver to each Buyer a written notice (the “Offer
      Notice”)
      of any
      proposed or intended issuance or sale or exchange (the “Offer”)
      of the
      securities being offered (the “Offered
      Securities”)
      in a
      Subsequent Placement, which Offer Notice shall (w) identify and describe the
      Offered Securities, (x) describe the price and other terms upon which they
      are
      to be issued, sold or exchanged, and the number or amount of the Offered
      Securities to be issued, sold or exchanged, (y) identify the Persons (if known)
      to which or with which the Offered Securities are to be offered, issued, sold
      or
      exchanged and (z) offer to issue and sell to or exchange with such Buyer in
      accordance with the terms of the Offer at least 50% of the Offered Securities,
      provided
      that the
      number of Offered Securities which such Buyer shall have the right to subscribe
      for under this Section 4(o)
      shall be
      (a) based on such Buyer’s pro rata portion of the

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    aggregate
      number of Common Shares purchased hereunder by all Buyers (the “Basic
      Amount”),
      and
      (b) with respect to each Buyer that elects to purchase its Basic Amount, any
      additional portion of the Offered Securities attributable to the Basic Amounts
      of other Buyers as such Buyer shall indicate it will purchase or acquire should
      the other Buyers subscribe for less than their Basic Amounts (the “Undersubscription
      Amount”).

    

    (ii) To
      accept
      an Offer, in whole or in part, such Buyer must deliver a written notice to
      the
      Company prior to the end of the fifth (5th)
      Business Day after such Buyer’s receipt of the Offer Notice (the “Offer
      Period”),
      setting forth the portion of such Buyer’s Basic Amount that such Buyer elects to
      purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
      the
      Undersubscription Amount, if any, that such Buyer elects to purchase (in either
      case, the “Notice
      of Acceptance”).
      If
      the Basic Amounts subscribed for by all Buyers are less than the total of all
      of
      the Basic Amounts, then such Buyer who has set forth an Undersubscription Amount
      in its Notice of Acceptance shall be entitled to purchase, in addition to the
      Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
      for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
“Available
      Undersubscription Amount”),
      such
      Buyer who has subscribed for any Undersubscription Amount shall be entitled
      to
      purchase only that portion of the Available Undersubscription Amount as the
      Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
      have subscribed for Undersubscription Amounts, subject to rounding by the
      Company to the extent its deems reasonably necessary. Notwithstanding the
      foregoing, if the Company desires to modify or amend the terms and conditions
      of
      the Offer in any material respect prior to the expiration of the Offer Period,
      the Company may deliver to each Buyer a new Offer Notice and the Offer Period
      shall expire on the fifth (5th)
      Business Day after such Buyer’s receipt of such new Offer Notice.

    

    (iii) The
      Company shall have ten (10) Business Days from the expiration of the Offer
      Period above to offer, issue, sell or exchange all or any part of such Offered
      Securities as to which a Notice of Acceptance has not been given by a Buyer
      (the
“Refused
      Securities”)
      pursuant to a definitive agreement(s) (the “Subsequent
      Placement Agreement”),
      but
      only to the offerees described in the Offer Notice (if so described therein)
      and
      only upon terms and conditions (including, without limitation, unit prices
      and
      interest rates) that are not materially more favorable to the acquiring Person
      or Persons or materially less favorable to the Company than those set forth
      in
      the Offer Notice. 

    

    (iv) In
      the
      event the Company shall propose to sell less than all the Refused Securities
      (any such sale to be in the manner and on the terms specified in Section
4(o)(iii)
      above),
      then such Buyer may, at its sole option and in its sole discretion, reduce
      the
      number or amount of the Offered Securities specified in its Notice of Acceptance
      to an amount that shall be not less than the number or amount of the Offered
      Securities that such Buyer elected to purchase pursuant to Section 4(o)(ii)
      above
      multiplied by a fraction, (i) the numerator of which shall be the number or
      amount of Offered Securities

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    the
      Company actually proposes to issue, sell or exchange (including Offered
      Securities to be issued or sold to Buyers pursuant to this Section 4(o)
      prior to
      such reduction) and (ii) the denominator of which shall be the original amount
      of the Offered Securities. In the event that any Buyer so elects to reduce
      the
      number or amount of Offered Securities specified in its Notice of Acceptance,
      the Company may not issue, sell or exchange more than the reduced number or
      amount of the Offered Securities unless and until such securities have again
      been offered to the Buyers in accordance with Section 4(o)(i)
      above.

     

    (v) Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, such Buyer shall acquire from the Company, and the Company shall
      issue to such Buyer, the number or amount of Offered Securities specified in
      the
      Notices of Acceptance. 

    

    (vi) Any
      Offered Securities not acquired by a Buyer or other Persons in accordance with
      this Section 4(o)
      may not
      be issued, sold or exchanged until they are again offered to such Buyer under
      the procedures specified in this Agreement.

    

    (vii) Notwithstanding
      anything to the contrary in this Section 4(o)
      and
      unless otherwise agreed to by such Buyer, the Company shall either confirm
      in
      writing to such Buyer that the transaction with respect to the Subsequent
      Placement has been abandoned or shall publicly disclose its intention to issue
      the Offered Securities, in either case, in such a manner such that such Buyer
      will not be in possession of any material, non-public information regarding
      such
      transaction, by the tenth (10th)
      Business Day following delivery of the Offer Notice. If by such tenth
      (10th)
      Business Day, no public disclosure regarding a transaction with respect to
      the
      Offered Securities has been made, and no notice regarding the abandonment of
      such transaction has been received by such Buyer, such transaction shall be
      deemed to have been abandoned and such Buyer shall not be deemed to be in
      possession of any material, non-public information regarding such transaction.
      Should the Company decide to pursue such transaction with respect to the Offered
      Securities, the Company shall provide such Buyer with another Offer Notice
      and
      such Buyer will again have the right of participation set forth in this Section
      4(o).
      The
      Company shall not be permitted to deliver more than one such Offer Notice to
      such Buyer in any sixty (60) day period.

     

    (viii) The
      restrictions contained in this Section 4(o)
      shall
      not apply in connection with the issuance of any Excluded Securities. The
      Company shall not circumvent the provisions of this Section 4(o)
      by
      providing terms or conditions to one Buyer that are not provided to
      all.

     

    (p) Shareholder
      Approval.
      The
      Company shall provide each shareholder entitled to vote at a special or annual
      meeting of shareholders of the Company (the “Shareholder
      Meeting”),
      which
      shall be held no later than the Company’s annual meeting in 2008 (which shall be
      held no later than May 30, 2008) (the “Shareholder
      Meeting Deadline”),
      a
      proxy statement, substantially in the form which has been previously reviewed
      by
      the Buyers and each of their counsel at the expense of the Company, soliciting
      each such shareholder’s affirmative vote at the Shareholder Meeting for approval
      of resolutions (the “Resolutions”)
      authorizing an increase in

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    the
      aggregate number of Warrant Shares to 505,555 and an upward adjustment to the
      number of Warrant Shares as a result of any adjustment to the Exercise Price
      (as
      defined in the Warrants) pursuant to Section 2(b) thereof, in each case, in
      a
      manner that complies with the rules and regulations of the Principal Market
      (such affirmative approval being referred to herein as the “Shareholder
      Approval”
and
      the
      date such approval is obtained, the “Shareholder
      Approval Date”),
      and
      the Company shall use its best efforts to solicit its shareholders’ approval of
      the Resolutions and to cause the Board to recommend to the shareholders that
      they approve the Resolutions. The Company shall be obligated to seek to obtain
      the Shareholder Approval by the Shareholder Meeting Deadline. The Company shall
      not directly or indirectly take any action which would result in a Dilutive
      Issuance prior to the Shareholder Approval Date. The Company agrees that any
      such action and resulting Dilutive Issuance (as defined in the Warrants) shall
      be null and void. 

    

    
      	
              5.

            	
              REGISTER;
                TRANSFER AGENT INSTRUCTIONS;
                LEGEND.

            

    

     

    (a) Register.
      The
      Company shall maintain at its principal executive offices (or such other office
      or agency of the Company as it may designate by notice to each holder of
      Securities), a register for the Warrants in which the Company shall record
      the
      name and address of the Person in whose name the Warrants have been issued
      (including the name and address of each permitted transferee), and the number
      of
      Warrant Shares issuable upon exercise of the Warrants held by such Person.
      The
      Company shall keep the register open and available at all times during business
      hours for inspection of any Buyer or its legal representatives, upon reasonable
      notice from such Buyer.

     

    (b) Transfer
      Agent Instructions.
      The
      Company shall issue irrevocable instructions to its transfer agent in form
      and
      substance reasonably acceptable to the Buyers (the “Irrevocable
      Transfer Agent Instructions”),
      and
      any subsequent transfer agent, to issue certificates or credit shares to the
      applicable balance accounts at The Depository Trust Company (“DTC”),
      registered in the name of each Buyer or
      its
      respective nominee(s),
      for the
      Common Shares and the Warrant Shares in such amounts as specified from time
      to
      time by each Buyer to the Company upon delivery of the Common Shares or the
      exercise of the Warrants. The Company represents and warrants that no
      instruction other than the Irrevocable Transfer Agent Instructions referred
      to
      in this Section 5(b),
      and
      stop transfer instructions to give effect to Section 2(g)
      hereof,
      will be given by the Company to its transfer agent with respect to the
      Securities, and that the Securities shall otherwise be freely transferable
      on
      the books and records of the Company, as applicable, to the extent provided
      in
      this Agreement and the other Transaction Documents. If a Buyer effects a sale,
      assignment or transfer of the Securities in accordance with Section 2(g),
      the
      Company shall permit the transfer and shall promptly instruct its transfer
      agent
      to issue one or more certificates or credit shares to the applicable balance
      accounts at DTC in such name and in such denominations as specified by such
      Buyer to effect such sale, transfer or assignment. In the event that such sale,
      assignment or transfer involves Common Shares or Warrant Shares sold, assigned
      or transferred pursuant to an effective registration statement or in compliance
      with Rule 144, the transfer agent shall issue such shares to the Buyer, assignee
      or transferee (as the case may be) without any restrictive legend in accordance
      with Section 5(d)
      below.
      The Company acknowledges that a breach by it of its obligations hereunder will
      cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that
      the remedy at law for a breach of its obligations under this Section
5(b)
      will be
      inadequate and agrees, in the event of a breach or

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    threatened
      breach by the Company of the provisions of this Section 5(b),
      that a
      Buyer shall be entitled, in addition to all other available remedies, to an
      order and/or injunction restraining any breach and requiring immediate issuance
      and transfer, without the necessity of showing economic loss and without any
      bond or other security being required. Any fees (with respect to the transfer
      agent, counsel to the Company or otherwise) associated with the issuance of
      such
      opinion or the removal of any legends on any of the Securities shall be borne
      by
      the Company.

     

    (c) Legends.
      Each
      Buyer understands that the certificates or other instruments representing the
      Common Shares and the Warrants and, until such time as the resale of the Common
      Shares and the Warrant Shares have been registered under the 1933 Act as
      contemplated by the Registration Rights Agreement, the stock certificates
      representing the Common Shares and the Warrant Shares, except as set forth
      below, shall bear any legend as required by the “blue sky” laws of any state and
      a restrictive legend in substantially the following form (and a stop-transfer
      order may be placed against transfer of such stock certificates):

     

    [NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] HAVE BEEN][THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER
      THE
      SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
      SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
      THE
      ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
      THE
      SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER,
      IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT
      REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
      UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
      IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
      ARRANGEMENT SECURED BY THE SECURITIES.

     

    
      
        (d) 
          Removal
          of Legends.
          Certificates evidencing Securities shall not be required to contain the
          legend
          set forth in Section 5(c)
          above or
          any other legend (i) while a registration statement (including the Registration
          Statement) covering the resale of such Securities is effective under the
          Securities Act, (ii) following any sale of such Securities pursuant to
          Rule 144
          (assuming the transferor is not an affiliate of the Company), (iii) if
          such
          Securities are eligible to be sold, assigned or transferred under Rule
          144(k)
          (provided
          that a
          Buyer provides the Company with reasonable assurances that such Securities
          are
          eligible for sale, assignment or transfer under Rule 144(k)), (iv) in connection
          with a sale, assignment or other transfer (other than under Rule 144)
provided
          such
          Buyer provides the Company with an opinion of counsel to such Buyer, in
          a
          generally acceptable form, to the effect that such sale, assignment or
          transfer
          of the Securities may be made without registration under the applicable
          requirements of the 1933 Act or (v) if such legend is not required under
          applicable requirements of the 1933 Act (including, without limitation,
          controlling judicial interpretations and pronouncements issued by the SEC).
          If
          a

      

    

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    legend
      is
      not required pursuant to the foregoing, the Company shall no later than five
      (5)
      Trading Days following the delivery by a Buyer to the Company or the transfer
      agent (with notice to the Company) of a legended certificate representing such
      Securities (endorsed or with stock powers attached, signatures guaranteed,
      and
      otherwise in form necessary to effect the reissuance and/or transfer, if
      applicable), together with any other deliveries from such Buyer as may be
      required above in this Section 5(d),
      as
      directed by such Buyer, either: (A) deliver (or cause to be delivered to) such
      Buyer a certificate representing such Securities that is free from all
      restrictive and other legends or (B) credit the balance account of such Buyer’s
      or such Buyer’s nominee with DTC with a number of shares of Common Stock equal
      to the number of Common Shares or Warrant Shares (as the case may be)
      represented by the certificate so delivered by such Buyer, provided that such
      five (5) Trading Day period shall be reduced to three (3) Trading Days if such
      Buyer indicates to the Company that any of the shares represented by such
      certificate have been sold (the date by which such certificate is required
      to be
      delivered to such Buyer or such shares are required to be so credited pursuant
      to the foregoing is referred to herein as the “Required
      Delivery Date”).
      

     

    (e) Buy-In.
      If the
      Company fails to (i) issue and deliver (or cause to be delivered) to a Buyer
      by
      the Required Delivery Date a certificate representing the Securities so
      delivered to the Company by such Buyer that is free from all restrictive and
      other legends or (ii) credit the balance account of such Buyer’s or such Buyer’s
      nominee with DTC for such number of shares of Common Shares or Warrant Shares
      so
      delivered to the Company, and if on or after the Required Delivery Date such
      Buyer purchases (in an open market transaction or otherwise) shares of Common
      Stock to deliver in satisfaction of a sale by such Buyer of shares of Common
      Stock that such Buyer anticipated receiving from the Company without any
      restrictive legend (a “Buy-In”),
      then,
      in addition to all other remedies available to such Buyer, the Company shall,
      within three (3) trading days after such Buyer’s request and in such Buyer’s
      sole discretion, either (i) pay cash to such Buyer in an amount equal to such
      Buyer’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased (the “Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate or credit such
      Buyer’s balance account shall terminate and such shares shall be cancelled, or
      (ii) promptly honor its obligation to deliver to such Buyer a certificate or
      certificates or credit such Buyer’s DTC account representing such number of
      shares of Common Stock that would have been issued if the Company timely
      complied with its obligations hereunder and pay cash to such Buyer in an amount
      equal to the excess (if any) of the Buy-In Price over the product of (A) such
      number of shares of Common Shares or Warrant Shares (as the case may be) that
      the Company was required to deliver to such Buyer by the Required Delivery
      Date
      times (B) the VWAP of the Common Stock for the five (5) Trading Day period
      immediately preceding the Required Delivery Date.

     

    For
      purposes of this Section 5(e),
      “VWAP” means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market (or, if the Principal Market is not the
      principal trading market for the Common Stock, then on the principal securities
      exchange or securities market on which the Common Stock is then traded) during
      the period beginning at 9:30:01 a.m., New York City Time, and ending at 4:00:00
      p.m., New York City Time, as reported by Bloomberg through its “Volume at Price”
function or, if the foregoing does not apply, the dollar volume-weighted average
      price of such security in the over-the-counter market on the electronic bulletin
      board for such security during the period beginning at 9:30:01 a.m., New York
      City Time, and ending at 4:00:00 p.m., New York City Time, as reported
      by

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

    Bloomberg,
      or, if no dollar volume-weighted average price is reported for such security
      by
      Bloomberg for such hours, the average of the highest closing bid price and
      the
      lowest closing ask price of any of the market makers for such security as
      reported in the “pink sheets” by Pink Sheets LLC (formerly the National
      Quotation Bureau, Inc.). If VWAP cannot be calculated for such security on
      such
      date on any of the foregoing bases, the VWAP of such security on such date
      shall
      be the fair market value as mutually determined by the Company and the Buyer.
      If
      the Company and the Buyer are unable to agree upon the fair market value of
      such
      security, then they shall agree in good faith on a reputable investment bank
      to
      make such determination of fair market value, whose determination shall be
      final
      and binding and whose fees and expenses shall be borne by the Company. All
      such
      determinations shall be appropriately adjusted for any share dividend, share
      split or other similar transaction during such period.

     

    
      	
              6.

            	
              CONDITIONS
                TO THE COMPANY’S OBLIGATION TO
                SELL.

            

    

     

    (a) The
      obligation of the Company hereunder to issue and sell the Common
      Shares and
      the
      related Warrants to each Buyer at the Closing is subject to the satisfaction,
      at
      or before the Closing Date, of each of the following conditions, provided that
      these conditions are for the Company’s sole benefit and may be waived by the
      Company at any time in its sole discretion by providing each Buyer with prior
      written notice thereof:

     

    (i) Such
      Buyer shall have executed each of the Transaction Documents to which it is
      a
      party and delivered the same to the Company.

     

    (ii) Such
      Buyer and each other Buyer shall have delivered to the Company the Purchase
      Price (less, in the case of Magnetar Capital Master Fund, Ltd., the amount
      withheld pursuant to Section 4(f))
      for the
      Common Shares and the related Warrants being
      purchased by such Buyer at the Closing by wire transfer of immediately available
      funds pursuant to the wire instructions provided by the Company.

     

    (iii) The
      representations and warranties of such Buyer shall be true and correct in all
      material respects as of the date when made and as of the Closing Date as though
      originally made at that time (except for representations and warranties that
      speak as of a specific date, which shall be true and correct as of such date),
      and such Buyer shall have performed, satisfied and complied in all material
      respects with the covenants, agreements and conditions required by this
      Agreement to be performed, satisfied or complied with by such Buyer at or prior
      to the Closing Date.

     

    (iv) The
      aggregate Purchase Price paid to the Company for the Securities by the Buyers
      at
      the Closing shall not be less than $12 million.

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

    
      	7.	
              CONDITIONS
                TO EACH BUYER’S OBLIGATION TO PURCHASE. 

            

    

     

    (a) The
      obligation of each Buyer hereunder to purchase the Common Shares and
      the
      related Warrants at the Closing is subject to the satisfaction, at or before
      the
      Closing Date, of each of the following conditions, provided that these
      conditions are for each Buyer’s sole benefit and may be waived by such Buyer at
      any time in its sole discretion by providing the Company with prior written
      notice thereof:

     

    (i) The
      Company shall have duly executed and delivered to such Buyer (A) each of
      the Transaction Documents and (B) the Common Shares (in such numbers as is
      set
      forth across from such Buyer’s name in column (3) of the Schedule of
      Buyers and
      the
      related Warrants (in such numbers as is set forth across from such Buyer’s name
      in column (4) of the Schedule of Buyers) being purchased by such Buyer at the
      Closing pursuant to this Agreement.

     

    (ii) Such
      Buyer shall have received the opinion of Womble Carlyle Sandridge & Rice
      PLLC, the Company’s outside counsel, dated as of the Closing Date, in form and
      substance reasonably to such Buyer.

     

    (iii) The
      Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
      Agent Instructions, which instructions shall have been delivered to and
      acknowledged in writing by the Company’s transfer agent.

     

    (iv) The
      Company shall have delivered to such Buyer a certificate evidencing the
      formation and existence of the Company issued by the Secretary of State of
      North
      Carolina as of a date within ten (10) days of the Closing Date.

     

    (v) The
      Company shall have delivered to such Buyer a certificate evidencing the
      Company’s qualification as a foreign corporation and good standing issued by the
      Secretary of State (or comparable office) of each jurisdiction in which the
      Company conducts business and is required to so qualify, as of a date within
      ten
      (10) days of the Closing Date.

     

    (vi) The
      Company shall have delivered to such Buyer a certified copy of the Articles
      of
      Incorporation as certified by the Secretary of State of the State of North
      Carolina within ten (10) days of the Closing Date.

     

    (vii) The
      Company shall have delivered to such Buyer a certificate, executed by the
      Secretary of the Company and dated as of the Closing Date, as to (i) the
      resolutions consistent with Section 3(b)
      as
      adopted by the Company’s board of directors in a form reasonably acceptable to
      such Buyer, (ii) the Articles of Incorporation and (iii) the Bylaws, each as
      in
      effect at the Closing, in form and substance reasonably acceptable to such
      Buyer.

     

    (viii) Each
      and
      every representation and warranty of the Company shall be true and correct
      as of
      the date when made and shall be true and correct in all material respects as
      of
      the Closing Date as though originally made at that time (except that any
      representation and warranty qualified by materiality or Material Adverse Effect
      shall be true and correct in all respects) and the Company shall have performed,
      satisfied and complied in all material respects with the covenants, agreements
      and conditions required by the Transaction Documents to be performed, satisfied
      or complied with by the Company at or prior to the Closing Date. Such Buyer
      shall have received a certificate, executed by the Chief Executive Officer
      of
      the Company, dated as of the Closing Date, to the foregoing effect and as to
      such other matters as may be reasonably requested by such Buyer in form and
      substance reasonably acceptable to such Buyer.

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

     

    (ix) The
      Company shall have delivered to such Buyer a letter from the Company’s transfer
      agent certifying the number of shares of Common Stock outstanding as of a date
      within five days of the Closing Date.

     

    (x) The
      Common Stock (I) shall be designated for quotation or listed on the Principal
      Market and (II) shall not have been suspended, as of the Closing Date, by the
      SEC or the Principal Market from trading on the Principal Market nor shall
      suspension by the SEC or the Principal Market have been threatened, as of the
      Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
      by
      falling below the minimum maintenance requirements of the Principal
      Market.

     

    (xi) The
      Company shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, necessary for the sale of the Securities, including
      without limitation, those required by the Principal Market.

     

    (xii) No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction that prohibits the consummation of any
      of
      the transactions contemplated by the Transaction Documents.

     

    (xiii) Since
      the
      date of execution of this Agreement, no event or series of events shall have
      occurred that reasonably would have or result in a Material Adverse
      Effect.

     

    (xiv) The
      Company shall have obtained approval of the Principal Market to list the Common
      Shares and the Warrant Shares.

     

    (xv) The
      aggregate Purchase Price paid to the Company for the Securities by the Buyers
      at
      the Closing shall not be less than $12 million.

     

    (xvi) The
      Company shall have delivered to such Buyer such other documents relating to
      the
      transactions contemplated by this Agreement as such Buyer or its counsel may
      reasonably request.

     

    
      	
              8.

            	
              TERMINATION. 

            

    

     

    In
      the
      event that the Closing shall not have occurred with respect to a Buyer on or
      before five (5) days from the date hereof due to the Company’s or such Buyer’s
      failure to satisfy the conditions set forth in Sections 6
      and
7
      above
      (and a non-breaching party’s failure to waive such unsatisfied condition(s)),
      any such non-breaching party shall have the right to terminate its obligations
      under this Agreement with respect to such breaching party on or after the close
      of business on such date without liability of such non-breaching party to any
      other party; provided,
      however,
      that
      the abandonment of the sale and purchase of the Common Shares and the Warrants
      shall be applicable only to such non-breaching party providing such written
      notice; provided further, notwithstanding any such termination the Company
      shall
      remain obligated to reimburse Magnetar Capital Master Fund, Ltd. for the
      expenses described in Section 4(f)
      above.
      Nothing contained in this Section 8
      shall be
      deemed to release any party from any liability for any breach by such party
      of
      the terms and provisions of this Agreement or the other Transaction Documents
      or
      to impair the right of any party to compel specific performance by any other
      party of its obligations under this Agreement or the other Transaction
      Documents.

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    
      	
              9.

            	
              MISCELLANEOUS.

            

    

     

    (a) Governing
      Law; Jurisdiction; Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
      TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY. 

     

    (b) Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party.
      In
      the event that any signature is delivered by facsimile transmission or by an
      e-mail which contains an electronic file of an executed signature page, such
      signature page shall create a valid and binding obligation of the party
      executing (or on whose behalf such signature is executed) with the same force
      and effect as if such facsimile or electronic file signature page (as the case
      may be) were an original thereof.

     

    (c) Headings;
      Gender.
      The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement. Unless the context
      clearly indicates otherwise, each pronoun herein shall be deemed to include
      the
      masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,”
      “includes,”
      “include”
and
      words of like import shall be construed broadly as if followed by the words
      “without limitation.” The terms “herein,”
      “hereunder,”
      “hereof”
and
      words of like import refer to this entire Agreement instead of just the
      provision in which they are found.

     

    (d) Severability.
      If any
      provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction.

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

     

    (e) Entire
      Agreement; Amendments.
      This
      Agreement, the other Transaction Documents and the schedules and exhibits
      attached hereto and thereto and the instruments referenced herein and therein
      supersede all other prior oral or written agreements between the Buyers, the
      Company, their affiliates and Persons acting on their behalf with respect to
      the
      matters contained herein, and this Agreement, the other Transaction Documents,
      the schedules and exhibits attached hereto and thereto and the instruments
      referenced herein and therein contain the entire understanding of the parties
      with respect to the matters covered herein and therein and, except as
      specifically set forth herein or therein, neither the Company nor any Buyer
      makes any representation, warranty, covenant or undertaking with respect to
      such
      matters. No provision of this Agreement may be amended or waived other than
      by
      an instrument in writing signed by the Company and the holders of at least
      a
      majority of the Common Shares issued and issuable hereunder, and any amendment
      or to, or waiver of any provision of, this Agreement made in conformity with
      the
      provisions of this Section 9(e)
      shall be
      binding on all Buyers and holders of Securities, as applicable, provided
      that any
      Buyer may give a waiver in writing as to itself. No such amendment or waiver
      (unless given pursuant to the foregoing proviso) shall be effective to the
      extent that it applies to less than all of the holders of the Common Shares
      then
      outstanding. No consideration shall be offered or paid to any Person to amend
      or
      consent to a waiver or modification of any provision of any of the Transaction
      Documents unless the same consideration also is offered to all of the parties
      to
      the Transaction Documents, holders of Common Shares or holders of the Warrants
      (as the case may be). The Company has not, directly or indirectly, made any
      agreements with any Buyers relating to the terms or conditions of the
      transactions contemplated by the Transaction Documents except as set forth
      in
      the Transaction Documents. Without limiting the foregoing, the Company confirms
      that, except as set forth in this Agreement, no Buyer has made any commitment
      or
      promise or has any other obligation to provide any financing to the Company
      or
      otherwise.

     

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

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

     

    If
      to the
      Company:

     

    PokerTek,
      Inc.

    1020
      Crews Road, Suite J

    Matthews,
      North Carolina 28106 

    Telephone:
      (704) 849-0860

    Facsimile:
      (704) 849-9148

    Attention:
      Chief Executive Officer

    

    With
      a
      copy (for informational purposes only) to:

     

    Womble
      Carlyle Sandridge & Rice, PLLC

    301
      South
      College Street, Suite 3500

    Charlotte,
      North Carolina 28202-6037

    Telephone:
      (704) 331-4964

    Facsimile:
      (704) 338-7812

    Attention:
      Robert M. Donlon, Esq.

     

    If
      to the
      Transfer Agent:

     

    American
      Stock Transfer & Trust

    6201
      15th
      Avenue

    Brooklyn,
      New York 11219

    Telephone:
      (800) 937-5449

    Facsimile:
      (718) 236-2641

    Attention:
      Operations Center

     

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
      with copies to such Buyer’s representatives as set forth on the Schedule of
      Buyers, 

     

    with
      a
      copy (for informational purposes only) to:

     

    Greenberg
      Traurig, LLP 

    77
      W.
      Wacker Drive, Suite 2400

    Chicago,
      Illinois 60602

    Telephone:
      (312) 456-8400

    Facsimile:
      (312) 456-8435

    Attention: 
      Peter H. Lieberman, Esq.

    Todd
      A.
      Mazur, Esq.

     

    or
      to
      such other address and/or facsimile number and/or to the attention of such
      other
      Person as the recipient party has specified by written notice given to each
      other party five (5) days prior to the effectiveness of such change provided,
      that
      Greenberg Traurig, LLP shall only be provided copies of notices sent to Magnetar
      Capital Master Fund, Ltd. Written confirmation of receipt (A) given by the
      recipient of such notice, consent, waiver or other communication, (B)
      mechanically or electronically generated by the sender’s facsimile machine
      containing the time, date, recipient facsimile number and an image of the first
      page of such transmission or (C) provided by an overnight courier service shall
      be rebuttable evidence of personal service, receipt by facsimile or receipt
      from
      an overnight courier service in accordance with clause (i), (ii) or (iii) above,
      respectively.

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

     

    (g) Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns, including any purchasers of any of
      the
      Securities. The Company shall not assign this Agreement or any rights or
      obligations hereunder without the prior written consent of the holders of at
      least a majority of the aggregate number of Registrable Securities issued and
      issuable under the Transaction Documents, including, without limitation, by
      way
      of a Fundamental Transaction (as defined in the Warrants) (unless the Company
      is
      in compliance with the applicable provisions governing Fundamental Transactions
      set forth in the Warrants). A Buyer may assign some or all of its rights
      hereunder in connection with transfer of any of its Securities without the
      consent of the Company, in which event such assignee shall be deemed to be
      a
      Buyer hereunder with respect to such assigned rights.

     

    (h) No
      Third
      Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, other than the Indemnitees
      referred to in Section 9(k).

     

    (i) Survival.
      Unless
      this Agreement is terminated under Section 8
      in
      accordance with the terms thereof, the representations, warranties, agreements
      and covenants shall survive the Closing. Each Buyer shall be responsible only
      for its own representations, warranties, agreements and covenants
      hereunder.

     

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

     

    (k) Indemnification.
      In
      consideration of each Buyer’s execution and delivery of the Transaction
      Documents and acquiring the Securities thereunder and in addition to all of
      the
      Company’s other obligations under the Transaction Documents, the Company shall
      defend, protect, indemnify and hold harmless each Buyer and each affiliate
      of a
      Buyer that holds any Securities and all of their stockholders, partners,
      members, officers, directors, employees and direct or indirect investors and
      any
      of the foregoing Persons’ agents or other representatives (including, without
      limitation, those retained in connection with the transactions contemplated
      by
      this Agreement) (collectively, the “Indemnitees”)
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such Indemnitee is a party to the action for which
      indemnification hereunder is sought), and including reasonable attorneys’ fees
      and disbursements (the “Indemnified
      Liabilities”),
      incurred by any Indemnitee as a result of, or arising out of, or relating to
      (a)
      any misrepresentation or breach of any representation or warranty made by the
      Company in any of the Transaction Documents, (b) any breach of any covenant,
      agreement or obligation of the Company contained in any of the Transaction
      Documents or (c) any cause of action, suit or claim brought or made against
      such
      Indemnitee by a third party (including for these purposes a derivative action
      brought on behalf of the Company) and arising out of or resulting from (i)
      the
      execution, delivery, performance or enforcement of any of the Transaction
      Documents, (ii) any disclosure properly made by such Buyer pursuant to Section
      4(h)
      or (iii)
      the status of such Buyer or holder of the Securities as an investor in the
      Company pursuant to the transactions contemplated by the Transaction Documents;
      provided,
      that no
      Buyer shall be entitled to indemnification to the extent any of the foregoing
      is
      caused by its gross negligence or willful misconduct. To the extent that the
      foregoing undertaking by the Company may be unenforceable for any reason, the
      Company shall make the maximum contribution to the payment and satisfaction
      of
      each of the Indemnified Liabilities which is permissible under applicable law.
      Except as otherwise set forth herein, the mechanics and procedures with respect
      to the rights and obligations under this Section 9(k)
      shall be
      the same as those set forth in Section 6 of the Registration Rights
      Agreement.

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

     

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

     

    (m) Remedies.
      Each
      Buyer and each affiliate of a Buyer that holds any Securities shall have all
      rights and remedies set forth in the Transaction Documents and all rights and
      remedies which such holders have been granted at any time under any other
      agreement or contract and all of the rights which such holders have under any
      law. Any Person having any rights under any provision of this Agreement shall
      be
      entitled to enforce such rights specifically (without posting a bond or other
      security), to recover damages by reason of any breach of any provision of this
      Agreement and to exercise all other rights granted by law. Furthermore, the
      Company recognizes that in the event that it fails to perform, observe, or
      discharge any or all of its obligations under the Transaction Documents, any
      remedy at law may prove to be inadequate relief to the Buyers. The Company
      therefore agrees that the Buyers shall be entitled to seek specific performance
      and/or temporary and permanent injunctive relief in any such case without the
      necessity of proving actual damages and without posting a bond or other
      security.

     

    (n) Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to the Buyers hereunder
      or
      pursuant to any of the other Transaction Documents or the Buyers enforce or
      exercise their rights hereunder or thereunder, and such payment or payments
      or
      the proceeds of such enforcement or exercise or any part thereof are
      subsequently invalidated, declared to be fraudulent or preferential, set aside,
      recovered from, disgorged by or are required to be refunded, repaid or otherwise
      restored to the Company, a trustee, receiver or any other Person under any
      law
      (including, without limitation, any bankruptcy law, foreign, state or federal
      law, common law or equitable cause of action), then to the extent of any such
      restoration the obligation or part thereof originally intended to be satisfied
      shall be revived and continued in full force and effect as if such payment
      had
      not been made or such enforcement or setoff had not occurred.

     

    (o) Independent
      Nature of Buyers’ Obligations and Rights.
      The
      obligations of each Buyer under the Transaction Documents are several and not
      joint with the obligations of any other Buyer, and no Buyer shall be responsible
      in any way for the performance of the obligations of any other Buyer under
      any
      Transaction Document. Nothing contained herein or in any other Transaction
      Document, and no action taken by any Buyer pursuant hereto or thereto, shall
      be
      deemed to constitute the Buyers as a partnership, an association, a joint
      venture or any other kind of group or entity, or create a presumption that
      the
      Buyers are in any way acting in concert or as a group or entity with respect
      to
      such obligations or the transactions contemplated by the Transaction Documents
      or any matters, and the Company acknowledges that the Buyers are not acting
      in
      concert or as a group with respect to such obligations or the transactions
      contemplated by the Transaction Documents. The decision of each Buyer to
      purchase Securities pursuant to the Transaction Documents has been made by
      such
      Buyer independently of any other Buyer. Each Buyer acknowledges that no other
      Buyer has acted as agent for such Buyer Purchaser in connection with such Buyer
      making its investment hereunder and that no other Buyer will be acting as agent
      of such Buyer in connection with monitoring such Buyer’s investment in the
      Securities or enforcing its rights under the Transaction Documents. The Company
      and each Buyer confirms that each Buyer has independently participated with
      the
      Company in the negotiation of the transaction contemplated hereby with the
      advice of its own counsel and advisors. Each Buyer shall be entitled to
      independently protect and enforce its rights, including, without limitation,
      the
      rights arising out of this Agreement or out of any other Transaction Documents,
      and it shall not be necessary for any other Buyer to be joined as an additional
      party in any proceeding for such purpose. The use of a single agreement to
      effectuate the purchase and sale of the Securities contemplated hereby was
      solely in the control of the Company, not the action or decision of any Buyer,
      and was done solely for the convenience of the Company and not because it was
      required or requested to do so by any Buyer. It is expressly understood and
      agreed that each provision contained in this Agreement and in each other
      Transaction Document is between the Company and a Buyer, solely, and not between
      the Company and the Buyers collectively and not between and among the
      Buyers.

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

     

    
      
        (p) 
          Delivery
          of Securities.
          Notwithstanding anything contained in this Agreement or any other Transaction
          Document to the contrary, unless otherwise directed in writing by the applicable
          Buyer, the Company shall, and shall cause its agents and representatives
          to,
          deliver all of such Buyer’s Securities purchased pursuant to this Agreement (and
          all securities which are issuable to such Buyer pursuant to the terms of
          this
          Agreement or any other Transaction Document) to the address for delivery
          of
          Securities set forth on such Buyer’s signature page to this Agreement, and
          copies of the certificates representing such Securities shall be sent to
          such
          Buyer to the address of such Buyer as set forth on such Buyer’s signature page
          to this Agreement. 

      

    

     

    [signature
      pages follow]

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

       

    

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

     

    

    
      	
              COMPANY:

            
	
              POKERTEK,
                INC.

               

              By: 
                /s/ Gehrig
                White                                         
                

              Name:
                Gehrig
                White                                   
                

              Title:
                C.E.O.                               
                                  
                

            
	
            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

    

    
      	
              BUYERS:

            
	
              MAGNETAR
                CAPITAL MASTER FUND, LTD.

               

              By: Magnetar
                Financial LLC

              Its: Investment
                Manager

               

              /s/
                Doug
                Litowitz                                               
                

              By: Doug
                Litowitz

              Its: Counsel

            

    

    

     

    ADDRESS
      FOR DELIVERY OF SECURITIES:

     

    Credit
      Suisse Securities

    11
      Madison Ave., 3rd Floor

    NY,
      NY
      10010

    Attention: 
      Joe Arens 

    (212)
      325-3019

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

    

      
        	 	
                BUYERS:

              
	 	 
	 	
                SRB
                  Greenway Capital, L.P.

              
	 	 
	 	
                By:
                  SRB Management, L.P., General Partner

              
	 	 
	 	
                By:
                  BC Advisors, L.L.C., General Partner

              
	 	 
	 	 
	 	
                By: 
                  /s/ Steven R.
                  Becker                                    
                  

              
	 	
                Steven
                  R. Becker, Member

              
	 	 
	 	 
	 	
                SRB
                  Greenway Capital (QP), L.P.

              
	 	 
	 	
                By:
                  SRB Management, L.P., General Partner

              
	 	 
	 	
                By:
                  BC Advisors, L.L.C., General Partner

              
	 	 
	 	 
	 	
                
                  By: 
                    /s/ Steven R.
                    Becker                                    
                    

                

              
	 	
                
                  Steven
                    R. Becker, Member

                

              
	 	 
	 	 
	 	
                SRB
                  Greenway Offshore Operating Fund, L.P.

              
	 	 
	 	
                By:
                  SRB Management, L.P., General Partner

              
	 	 
	 	
                By:
                  BC Advisors, LLC, General Partner

              
	 	 
	 	 
	 	
                
                  By: 
                    /s/ Steve 
                    Becker                  
                                          
                    

                

              
	 	
                
                  Steve Becker,
                    Member

                

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      

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

        

        
          	 	
                  JANUS
                    CAPITAL MANAGEMENT LLC

                
	 	
                  (“Janus”)
                    on behalf of each of the following 

                
	 	
                  funds
                    and portfolios advised by Janus:

                
	 	 
	 	
                  JANUS
                    VENTURE FUND (a series of Janus

                
	 	
                  Investment
                    Fund), and

                
	 	 
	 	
                  JANUS
                    US VENTURE FUND (a series of Janus 

                
	 	
                  Capital
                    Funds Plc), and

                
	 	 
	 	
                  SMALL
                    CAP GROWTH PORTFOLIO (a series 

                
	 	
                  of
                    Ohio National Fund Inc.),

                
	 	 
	 	 
	 	
                  By: 
                    /s/ William
                    Bales                                          
                    

                
	 	
                  Name:
                    William Bales

                
	 	
                  Title:
                    Portfolio Manager and authorized

                
	 	
                  signatory
                    as investment adviser to each of the 

                
	 	
                  aforementioned
                    funds and portfolios

                

        

        

        Address
          for Notice:

        151
          Detroit Street

        Denver,
          Colorado 80206

        Attn:
          Kelly Hagg, AVP and Associate Counsel

        Tel:
          303
          394 6457

        Fax:
          303
          394 7714

      

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      OF BUYERS

     

    
      	
              (1)

            	
              (2)

            	
              (3)

            	
              (4)

            	
              (5)

            	
              (6)

            
	
              Buyer

            	
              Address
                and Facsimile Number

            	
              Aggregate
                Number of Common Shares

            	
              Aggregate
                Number of Warrants

            	
              Purchase
                Price

            	
              Legal
                Representative’s

              Address
                and Facsimile Number

            
	
              Magnetar
                Capital Master Fund, Ltd..

               

            	
              1603
                Orrington Avenue, Suite 1300

              Evanston,
                IL 60201

              Attn:
                Michael Balkin

              Marc
                Falcone

              Facsimile:
                (847) 905-5603

            	
              533,815

            	
              162,439

            	
              $4,804,335

            	
              Greenberg
                Traurig, LLP

              77
                W. Wacker Drive, Suite 2400

              Chicago,
                Illinois 60601

              Attention: 
                Peter H. Lieberman

              Todd
                A. Mazur

              Facsimile:
                (312) 456-8435

              Telephone:
                (312) 456-8400

            
	
              Janus
                Venture Fund (a series of Janus Investment Fund)

               

            	
              151
                Detroit Street 

              Denver,
                Colorado 80206

              Attn:
                Kelly Hagg, AVP and 

              Associate
                Counsel

              Facsimile:
                (303) 394-7714

            	
              482,833

            	
              146,926

            	
              $4,345,497

            	
              Janus
                Venture Fund

              151
                Detroit Street 

              Denver,
                Colorado 80206

              Attn:
                Kelly Hagg, AVP and 

              Associate
                Counsel

              Facsimile:
                (303) 394-7714

              Telephone:
                (303) 394-6457

            
	
              Janus
                US Venture Fund (a series of Janus Capital Funds
                Plc)

            	
              151
                Detroit Street 

              Denver,
                Colorado 80206

              Attn:
                Kelly Hagg, AVP and 

              Associate
                Counsel

              Facsimile:
                (303) 394-7714

            	
              43,843

            	
              13,341

            	
              $394,587

            	
              Janus
                US Venture Fund

              151
                Detroit Street 

              Denver,
                Colorado 80206

              Attn:
                Kelly Hagg, AVP and 

              Associate
                Counsel

              Facsimile:
                (303) 394-7714

              Telephone:
                (303) 394-6457

            
	
              Small
                Cap Growth Portfolio (a series of Ohio National Fund
                Inc.)

               

            	
              151
                Detroit Street 

              Denver,
                Colorado 80206

              Attn:
                Kelly Hagg, AVP and 

              Associate
                Counsel

              Facsimile:
                (303) 394-7714

            	
              7,139

            	
              2,172

            	
              $64,251

            	
              Small
                Cap Growth Portfolio

              151
                Detroit Street 

              Denver,
                Colorado 80206

              Attn:
                Kelly Hagg, AVP and 

              Associate
                Counsel

              Facsimile:
                (303) 394-7714

              Telephone:
                (303) 394-6457

            
	
              SRB
                Greenway Capital (QP), L.P.

               

            	
              300
                Crescent Court, Suite 1111

              Dallas,
                Texas 75201

              Attn:
                George Lee

              Facsimile:
                (214) 756-6079

            	
              325,400

            	
              99,018

            	
              $2,928,600

            	
              N/A

            
	
              SRB
                Greenway Capital, L.P.

               

            	
              300
                Crescent Court, Suite 1111

              Dallas,
                Texas 75201

              Attn:
                George Lee

              Facsimile:
                (214) 756-6079

            	
              37,514

            	
              11,415

            	
              $337,626

            	
              N/A

            
	
              SRB
                Greenway Offshore Operating Fund, L.P.

               

            	
              300
                Crescent Court, Suite 1111

              Dallas,
                Texas 75201

              Attn:
                George Lee

              Facsimile:
                (214) 756-6079

            	
              13,900

            	
              4,230

            	
              $125,100

            	
              N/A

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBITS

     

    
      	
              Exhibit
                A

            	 	
              Form
                of Warrant

            
	
              Exhibit
                B

            	 	
              Form
                of Registration Rights Agreement

            
	 	 	 
	
              Schedule
                3(d)

            	 	
              Conflicts

            
	
              Schedule
                3(j) 

            	 	
              Rights
                Agreement 

            
	
              Schedule
                3(k)

            	 	
              SEC
                Documents

            
	
              Schedule
                3(r)

            	 	
              Capitalization

            
	
              Schedule
                3(s)

            	 	
              Indebtedness
                and Other Contracts

            
	
              Schedule
                3(t)

            	 	
              Litigation

            
	
              Schedule
                3(x)

            	 	
              Intellectual
                Property

            
	
              Schedule
                4(d)

            	 	
              Use
                of Proceeds[FORM
      OF WARRANT]

     

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
      LAWS OR (B) AN OPINION OF COUNSEL TO THE HOLDER, IN A FORM REASONABLY ACCEPTABLE
      TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
      SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
      FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES, IF
      EFFECTED IN COMPLIANCE WITH SAID ACT.

     

    POKERTEK,
      INC.

     

    Warrant
      To Purchase Common Stock

     

    Warrant
      No.:    

    Date
      of
      Issuance: April ___, 2007 (“Issuance
      Date”)

     

    
      PokerTek,
        Inc., a North Carolina corporation (the “Company”),
        hereby certifies that, for good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, [MAGNETAR CAPITAL MASTER FUND,
        LTD.], [OTHER BUYERS], the registered holder hereof or its permitted assigns
        (the “Holder”),
        is
        entitled, subject to the terms set forth below, to purchase from the Company,
        at
        the Exercise Price (as defined below) then in effect, upon exercise of this
        Warrant to Purchase Common Stock (including any Warrants to Purchase Common
        Stock issued in exchange, transfer or replacement hereof, the “Warrant”),
        at
        any time or times on or after the Issuance Date, but not after 11:59 p.m.,
        New
        York time, on the Expiration Date (as defined below), ______________1 
        fully
        paid and nonassessable shares of Common Stock (as defined below) (the
        “Warrant
        Shares”),
        provided that the number of Warrant Shares shall automatically be increased
        to
        ___________2 
        on the
        Shareholder Approval Date (as defined in the Securities Purchase Agreement).
        Except as otherwise defined herein, capitalized terms in this Warrant shall
        have
        the meanings set forth in Section 14. This Warrant is one of the Warrants
        to
        purchase Common Stock (the “SPA
        Warrants”)
        issued
        pursuant to Section 1 of that certain Securities Purchase Agreement, dated
        as of
        April 23,
        2007
        (the “Subscription
        Date”),
        by
        and among the Company and the investors (the “Buyers”)
        referred to therein (the “Securities
        Purchase Agreement”).

       

      
         

        
          

        

        
          
            	1	
                    Insert
                      162,439 if the Holder’s aggregate Purchase Price is $4,804,335, and insert
                      114,663 if the Holder’s aggregate Purchase Price is
                      $3,391,326.

                  

        

        
          
            	2	
                    Insert
                      186,835 if the Holder’s original number of Warrant Shares was 162,439, and
                      insert 131,885 if the Holder’s original number of Warrant Shares was
                      114,663.

                  

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        1.    EXERCISE
          OF WARRANT.

      

    

     

    (a) Mechanics
      of Exercise.
      Subject
      to the terms and conditions hereof (including, without limitation, the
      limitations set forth in Section 1(f)(i)),
      this
      Warrant may be exercised by the Holder on any day on or after the Issuance
      Date,
      in whole or in part, by (i) delivery of a written notice, in the form
      attached hereto as Exhibit
      A
      (the
“Exercise
      Notice”),
      of
      the Holder’s election to exercise this Warrant and (ii) (A) payment to the
      Company of an amount equal to the then-applicable Exercise Price multiplied
      by
      the number of Warrant Shares as to which this Warrant is being exercised (the
      “Aggregate
      Exercise Price”)
      in
      cash or wire transfer of immediately available funds or (B) by notifying the
      Company that this Warrant is being exercised pursuant to a Cashless Exercise
      (as
      defined in Section 1(d)).
      The
      Holder shall not be required to deliver the original Warrant in order to effect
      an exercise hereunder. Execution and delivery of the Exercise Notice with
      respect to less than all of the Warrant Shares shall have the same effect as
      cancellation of the original Warrant and issuance of a new Warrant evidencing
      the right to purchase the remaining number of Warrant Shares. Execution and
      delivery of the Exercise Notice for all of the Warrant Shares shall have the
      same effect as cancellation of the original Warrant after delivery of the
      Warrant Shares in accordance with the terms hereof. On or before the first
      (1st)
      Business Day following the date on which the Company has received each of the
      Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
      Exercise) (the “Exercise
      Delivery Documents”),
      the
      Company shall transmit by facsimile an acknowledgment of confirmation of receipt
      of the Exercise Delivery Documents to the Holder and the Company’s transfer
      agent (the “Transfer
      Agent”).
      On or
      before the third (3rd)
      Business Day following the date on which the Company has received all of the
      Exercise Delivery Documents (the “Share
      Delivery Date”),
      the
      Company shall (X) provided that the Transfer Agent is participating in The
      Depository Trust Company (“DTC”)
      Fast
      Automated Securities Transfer Program, upon the request of the Holder, credit
      such aggregate number of shares of Common Stock to which the Holder is entitled
      pursuant to such exercise to the Holder’s or its designee’s balance account with
      DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
      Transfer Agent is not participating in the DTC Fast Automated Securities
      Transfer Program, issue and deliver to the Holder or, at Holder’s instruction
      pursuant to the Exercise Notice, Holder’s agent or designee, in each case, sent
      by reputable overnight courier to the address as specified in the Exercise
      Notice, a certificate, registered in the Company’s share register in the name of
      the Holder or its designee (as indicated in the Exercise Notice), for the number
      of shares of Common Stock to which the Holder is entitled pursuant to such
      exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall
      be
      deemed for all corporate purposes to have become the holder of record of the
      Warrant Shares with respect to which this Warrant has been exercised,
      irrespective of the date such Warrant Shares are credited to the Holder’s DTC
      (as defined below) account or the date of delivery of the certificates
      evidencing such Warrant Shares, as the case may be. If this Warrant is submitted
      in connection with any exercise pursuant to this Section 1(a)
      and the
      number of Warrant Shares represented by this Warrant submitted for exercise
      is
      greater than the number of Warrant Shares being acquired upon an exercise,
      then
      the Company shall as soon as practicable and in no event later than five (5)
      Business Days after any exercise and at its own expense, issue and deliver
      to
      the Holder (or its designee) a new Warrant (in accordance with Section
6(d))
      representing the right to purchase the number of Warrant Shares purchasable
      immediately prior to such exercise under this Warrant, less the number of
      Warrant Shares with respect to which this Warrant is exercised. No fractional
      shares of Common Stock are to be issued upon the exercise of this Warrant,
      but
      rather the number of shares of Common Stock to be issued shall be rounded up
      to
      the nearest whole number. The Company shall pay any and all taxes which may
      be
      payable with respect to the issuance and delivery of Warrant Shares upon
      exercise of this Warrant, provided that the Company shall not be required to
      pay
      any tax that may be payable in respect of any transfer involved in the issue
      and
      delivery of any Warrant Shares in any name other than that of the Holder or
      one
      of its affiliates, or any income or transfer tax due by the Holder with respect
      to Warrant Shares issued upon exercise of this Warrant. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (b) Exercise
      Price.
      For
      purposes of this Warrant, “Exercise
      Price”
means
      $10.80, subject to adjustment as provided herein. 

     

    (c) Company’s
      Failure to Timely Deliver Securities.
      If
      within three (3) Trading Days of receipt of the Exercise Delivery Documents,
      the
      Company shall fail to issue and deliver a certificate to the Holder and register
      such shares of Common Stock on the Company’s share register or credit the
      Holder’s balance account with DTC for the number of shares of Common Stock to
      which the Holder is entitled upon such Holder’s exercise hereunder (as the case
      may be), and if on or after such third (3rd)
      Trading
      Day the Holder purchases (in an open market transaction or otherwise) shares
      of
      Common Stock to deliver in satisfaction of a sale by the Holder of shares of
      Common Stock issuable upon such exercise that the Holder anticipated receiving
      from the Company (a “Buy-In”),
      then,
      in addition to all other remedies available to the Holder, the Company shall,
      within three (3) Business Days after the Holder’s request and in the Holder’s
      discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s
      total purchase price (including brokerage commissions, if any) for the shares
      of
      Common Stock so purchased (the “Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate (and to issue
      such shares of Common Stock) shall terminate, or (ii) promptly honor its
      obligation to deliver to the Holder a certificate or certificates representing
      such shares of Common Stock or credit the Holder’s balance account with DTC for
      the number of shares of Common Stock to which the Holder is entitled upon such
      Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in
      an amount equal to the excess (if any) of the Buy-In Price over the product
      of
      (A) such number of shares of Common Stock times (B) the VWAP of the Common
      Stock
      for the five (5) Trading Day period immediately preceding the date of the
      Exercise Notice.

     

    (d) Cashless
      Exercise.
      Notwithstanding anything contained herein to the contrary (other than Section
      1(f)
      below),
      the Holder may, in its sole discretion, exercise this Warrant in whole or in
      part and, in lieu of making the cash payment otherwise contemplated to be made
      to the Company upon such exercise in payment of the Aggregate Exercise Price,
      elect instead to receive upon such exercise the “Net Number” of shares of Common
      Stock determined according to the following formula (a “Cashless
      Exercise”):

     

    Net
      Number = (A
      x
      B) - (A x C)

    B

     

    For
      purposes of the foregoing formula:

     

    A
      = the
      total number of shares with respect to which this Warrant is then being
      exercised.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    B
      = the
      VWAP of the Common Stock for the five (5) Trading Day period immediately
      preceding the date of the Exercise Notice.

     

    C
      = the
      Exercise Price then in effect for the applicable Warrant Shares at the time
      of
      such exercise.

     

    (e) Disputes.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the number of Warrant Shares to be issued pursuant
      to
      the terms hereof, the Company shall promptly issue to the Holder the number
      of
      Warrant Shares that are not disputed and resolve such dispute in accordance
      with
      Section 12.

     

    (f) Limitations
      on Exercises. 

     

    (i) Beneficial
      Ownership.
      Notwithstanding anything to the contrary contained in this Warrant, this Warrant
      shall not be exercisable by the Holder hereof to the extent (but only to the
      extent) that, if exercisable by the Holder, the Holder or any of its affiliates
      would beneficially own in excess of 4.90% (the “Maximum
      Percentage”)
      of the
      outstanding shares of Common Stock. To the extent the above limitation
      applies, the determination of whether this Warrant shall be exercisable
      (vis-a-vis other convertible, exercisable or exchangeable securities owned
      by
      the Holder) and of which warrants shall be exercisable (as among all warrants
      owned by the Holder) shall, subject to such Maximum Percentage limitation,
      be
      determined on the basis of the first submission to the Company for conversion,
      exercise or exchange (as the case may be). No prior inability to exercise this
      Warrant pursuant to this paragraph shall have any effect on the applicability
      of
      the provisions of this paragraph with respect to any subsequent
      determination of exercisability. For the purposes of this paragraph, beneficial
      ownership and all determinations and calculations (including, without
      limitation, with respect to calculations of percentage ownership) shall be
      determined by the Holder in accordance with Section 13(d) of the 1934 Act (as
      defined in the Securities Purchase Agreement) and the rules and regulations
      promulgated thereunder. The provisions of this paragraph shall be implemented
      in
      a manner otherwise than in strict conformity with the terms this paragraph
      to
      correct this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended Maximum Percentage beneficial ownership
      limitation herein contained or to make changes or supplements necessary or
      desirable to properly give effect to such Maximum Percentage limitation. The
      limitations contained in this paragraph shall apply to a successor Holder of
      this Warrant. The holders of Common Stock shall be third party
      beneficiaries of this paragraph and the Company may not waive this paragraph
      without the consent of holders of a majority of its Common Stock. For
      purposes of this Warrant, in determining the number of outstanding shares of
      Common Stock, the Holder may rely on the number of outstanding shares of Common
      Stock as reflected in (1) the Company’s most recent Form 10-K (or Form 10-KSB),
      Form 10-Q (or Form 10-QSB), Current Report on Form 8-K or other public filing
      with the SEC (as the case may be), (2) a more recent public announcement by
      the
      Company or (3) any other notice by the Company or the Transfer Agent setting
      forth the number of shares of Common Stock outstanding. For any reason at any
      time, upon the written or oral request of the Holder, the Company shall within
      one (1) Business Day confirm orally and in writing to the Holder the number
      of
      shares of Common Stock then outstanding, including by virtue of any prior
      conversion or exercise of convertible or exercisable securities into Common
      Stock, including, without limitation, pursuant to this Warrant or securities
      issued pursuant to the Securities Purchase Agreement.

     

    
      
        
        

      

      
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    (ii) Principal
      Market Regulation.
      The
      Company shall not be obligated to issue any shares of Common Stock upon exercise
      of this Warrant if the issuance of such shares of Common Stock would exceed
      that
      number of shares of Common Stock which the Company may issue upon exercise
      of
      this Warrant without breaching the Company’s obligations under the rules or
      regulations of the Principal Market (the “Exchange
      Cap”),
      except that such limitation shall not apply in the event that the Company (A)
      obtains the Shareholder Approval (as defined in the Securities Purchase
      Agreement) as required by the applicable rules of the Principal Market for
      issuances of shares of Common Stock in excess of such amount or (B) obtains
      a
      written opinion from outside counsel to the Company that such approval is not
      required, which opinion shall be reasonably satisfactory to the Holder. Until
      such approval or written opinion is obtained, no Buyer shall be issued, upon
      exercise of any SPA Warrants, shares of Common Stock in an amount greater than
      the product of the Exchange Cap multiplied by a fraction, the numerator of
      which
      is the total number of shares of Common Stock issued to such Buyer pursuant
      to
      the Securities Purchase Agreement on the Issuance Date and the denominator
      of
      which is the aggregate number of shares of Common Stock issued to all Buyers
      pursuant to the Securities Purchase Agreement on the Issuance Date (with respect
      to each Buyer, the “Exchange
      Cap Allocation”).
      In
      the event that any Buyer shall sell or otherwise transfer any of such Buyer’s
      SPA Warrants, the transferee shall be allocated a pro rata portion of such
      Buyer’s Exchange Cap Allocation, and the restrictions of the prior sentence
      shall apply to such transferee with respect to the portion of the Exchange
      Cap
      Allocation allocated to such transferee. In the event that any holder of SPA
      Warrants shall exercise all of such holder’s SPA Warrants into a number of
      shares of Common Stock which, in the aggregate, is less than such holder’s
      Exchange Cap Allocation, then the difference between such holder’s Exchange Cap
      Allocation and the number of shares of Common Stock actually issued to such
      holder shall be allocated to the respective Exchange Cap Allocations of the
      remaining holders of SPA Warrants on a pro rata basis in proportion to the
      shares of Common Stock underlying the SPA Warrants then held by each such
      holder.

     

    (g) Insufficient
      Authorized Shares.
      The
      Company shall at all times keep reserved for issuance under this Warrant a
      number of shares of Common Stock as shall be necessary to satisfy the Company’s
      obligation to issue shares of Common Stock hereunder (without regard to any
      limitation otherwise contained herein with respect to the number of shares
      of
      Common Stock that may be acquirable upon exercise of this Warrant). If,
      notwithstanding the foregoing, and not in limitation thereof, at any time while
      any of the Warrants remain outstanding the Company does not have a sufficient
      number of authorized and unreserved shares of Common Stock to satisfy its
      obligation to reserve for issuance upon exercise of the SPA Warrants a number
      of
      shares of Common Stock equal to the number of shares of Common Stock as shall
      from time to time be necessary to effect the exercise of all of the SPA Warrants
      then outstanding (the “Required
      Reserve Amount”)
      (an
“Authorized
      Share Failure”),
      then
      the Company shall promptly take all action necessary to increase the Company’s
      authorized shares of Common Stock to an amount sufficient to allow the Company
      to reserve the Required Reserve Amount for all the SPA Warrants then
      outstanding. Without limiting the generality of the foregoing sentence, as
      soon
      as practicable after the date of the occurrence of an Authorized Share Failure,
      but in no event later than seventy five (75) days after the occurrence of such
      Authorized Share Failure, the Company shall hold a meeting of its stockholders
      for the approval of an increase in the number of authorized shares of Common
      Stock. In connection with such meeting, the Company shall provide each
      stockholder with a proxy statement and shall use its best efforts to solicit
      its
      stockholders’ approval of such increase in authorized shares of Common Stock and
      to cause its board of directors to recommend to the stockholders that they
      approve such proposal.

     

    
      
        
        

      

      
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    2.    ADJUSTMENT
      OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
      The
      Exercise Price and number of Warrant Shares issuable upon exercise of this
      Warrant are subject to adjustment from time to time as set forth in this Section
      2.

     

    (a) Stock
      Dividends and Splits.
      If the
      Company, at any time on or after the date of the Securities Purchase Agreement,
      (i) pays a stock dividend on one or more classes of its then outstanding shares
      of Common Stock or otherwise makes a distribution on any class of capital stock
      that is payable in shares of Common Stock, (ii) subdivides (by any stock split,
      stock dividend, recapitalization or otherwise) one or more classes of its then
      outstanding shares of Common Stock into a larger number of shares or (iii)
      combines (by combination, reverse stock split or otherwise) one or more classes
      of its then outstanding shares of Common Stock into a smaller number of shares,
      then in each such case the Exercise Price shall be multiplied by a fraction
      of
      which the numerator shall be the number of shares of Common Stock outstanding
      immediately before such event and of which the denominator shall be the number
      of shares of Common Stock outstanding immediately after such event. Any
      adjustment made pursuant to clause (i) of this paragraph shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution, and any adjustment pursuant to clause
      (ii) or (iii) of this paragraph shall become effective immediately after the
      effective date of such subdivision or combination. If any event requiring an
      adjustment under this paragraph occurs during the period that an Exercise Price
      is calculated hereunder, then the calculation of such Exercise Price shall
      be
      adjusted appropriately to reflect such event.

     

    (b) Adjustment
      Upon Issuance of Shares of Common Stock.
      If and
      whenever on or after the date of the Securities Purchase Agreement, the Company
      issues or sells, or in accordance with this Section 2
      is
      deemed to have issued or sold, any shares of Common Stock (including the
      issuance or sale of shares of Common Stock owned or held by or for the account
      of the Company, but excluding any Excluded Securities (as defined in the
      Securities Purchase Agreement), for a consideration per share (the “New
      Issuance Price”)
      less
      than a price (the “Applicable
      Price”)
      equal
      to the Exercise Price in effect immediately prior to such issue or sale or
      deemed issuance or sale (the foregoing a “Dilutive
      Issuance”),
      then
      immediately after such Dilutive Issuance, the Exercise Price then in effect
      shall be reduced to an amount equal to the New Issuance Price. For purposes
      of
      determining the adjusted Exercise Price under this Section 2(b),
      the
      following shall be applicable:

     

    (i) Issuance
      of Options.
      If the
      Company in any manner grants or sells any Options and the lowest price per
      share
      for which one share of Common Stock is issuable upon the exercise of any such
      Option or upon conversion, exercise or exchange of any Convertible Securities
      issuable upon exercise of any such Option is less than the Applicable Price,
      then such share of Common Stock shall be deemed to be outstanding and to have
      been issued and sold by the Company at the time of the granting or sale of
      such
      Option for such price per share. For purposes of this Section 2(b)(i),
      the
“lowest price per share for which one share of Common Stock is issuable upon
      the
      exercise of any such Options or upon conversion, exercise or exchange of any
      Convertible Securities issuable upon exercise of any such Option” shall be equal
      to the sum of the lowest amounts of consideration (if any) received or
      receivable by the Company with respect to any one share of Common Stock upon
      the
      granting or sale of the Option, upon exercise of the Option and upon conversion,
      exercise or exchange of any Convertible Security issuable upon exercise of
      such
      Option. Except as contemplated below, no further adjustment of the Exercise
      Price shall be made upon the actual issuance of such shares of Common Stock
      or
      of such Convertible Securities upon the exercise of such Options or upon the
      actual issuance of such shares of Common Stock upon conversion, exercise or
      exchange of such Convertible Securities.

     

    
      
        
        

      

      
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    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon the
      conversion, exercise or exchange thereof is less than the Applicable Price,
      then
      such share of Common Stock shall be deemed to be outstanding and to have been
      issued and sold by the Company at the time of the issuance or sale of such
      Convertible Securities for such price per share. For the purposes of this
      Section 2(b)(ii),
      the
“lowest price per share for which one share of Common Stock is issuable upon
      the
      conversion, exercise or exchange thereof” shall be equal to the sum of the
      lowest amounts of consideration (if any) received or receivable by the Company
      with respect to one share of Common Stock upon the issuance or sale of the
      Convertible Security and upon conversion, exercise or exchange of such
      Convertible Security. Except as contemplated below, no further adjustment of
      the
      Exercise Price shall be made upon the actual issuance of such shares of Common
      Stock upon conversion, exercise or exchange of such Convertible Securities,
      and
      if any such issue or sale of such Convertible Securities is made upon exercise
      of any Options for which adjustment of this Warrant has been or is to be made
      pursuant to other provisions of this Section 2(b),
      except
      as contemplated below, no further adjustment of the Exercise Price shall be
      made
      by reason of such issue or sale. 

     

    (iii) Change
      in Option Price or Rate of Conversion.
      If the
      purchase or exercise price provided for in any Options, the additional
      consideration, if any, payable upon the issue, conversion, exercise or exchange
      of any Convertible Securities, or the rate at which any Convertible Securities
      are convertible into or exercisable or exchangeable for shares of Common Stock
      increases or decreases at any time, the Exercise Price in effect at the time
      of
      such increase or decrease shall be adjusted to the Exercise Price which would
      have been in effect at such time had such Options or Convertible Securities
      provided for such increased or decreased purchase price, additional
      consideration or increased or decreased conversion rate, as the case may be,
      at
      the time initially granted, issued or sold. For purposes of this Section
2(b)(iii),
      if the
      terms of any Option or Convertible Security that was outstanding as of the
      date
      of issuance of this Warrant are increased or decreased in the manner described
      in the immediately preceding sentence, then such Option or Convertible Security
      and the shares of Common Stock deemed issuable upon exercise, conversion or
      exchange thereof shall be deemed to have been issued as of the date of such
      increase or decrease. No adjustment pursuant to this Section 2(b)
      shall be
      made if such adjustment would result in an increase of the Exercise Price then
      in effect.

     

    
      
        
        

      

      
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    (iv) Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for a consideration of $0.01. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold or deemed
      to have been issued or sold for cash, the consideration received therefor will
      be deemed to be the net amount received by the Company therefor. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold for a
      consideration other than cash, the amount of such consideration received by
      the
      Company will be the fair value of such consideration, except where such
      consideration consists of securities, in which case the amount of consideration
      received by the Company for each such security will be the VWAP of such security
      for the five (5) Trading Day period immediately preceding the date of receipt.
      If any shares of Common Stock, Options or Convertible Securities are issued
      to
      the owners of the non-surviving entity in connection with any merger in which
      the Company is the surviving entity, the amount of consideration therefor will
      be deemed to be the fair value of such portion of the net assets and business
      of
      the non-surviving entity as is attributable to such shares of Common Stock,
      Options or Convertible Securities, as the case may be. The fair value of any
      consideration other than cash or securities will be determined by the Board
      of
      Directors of the Company within five (5) days after the occurrence of an event
      requiring valuation (the “Valuation
      Event”).
      If
      the Required Holders disagree with the determination of the Board of Directors
      of the Company and give written notice of such disagreement to the Company
      within ten (10) days after the occurrence of such Valuation Event, the fair
      value of such consideration will be determined within five (5) Trading Days
      after the tenth (10th)
      day
      following such Valuation Event by an independent, reputable appraiser jointly
      selected by the Company and the Required Holders. The determination of such
      appraiser shall be final and binding upon all parties absent manifest error
      and
      the fees and expenses of such appraiser shall be borne by the
      Company.

     

    (v) Record
      Date.
      If the
      Company takes a record of the holders of shares of Common Stock for the purpose
      of entitling them (A) to receive a dividend or other distribution payable
      in shares of Common Stock, Options or in Convertible Securities or (B) to
      subscribe for or purchase shares of Common Stock, Options or Convertible
      Securities, then such record date will be deemed to be the date of the issue
      or
      sale of the shares of Common Stock deemed to have been issued or sold upon
      the
      declaration of such dividend or the making of such other distribution or the
      date of the granting of such right of subscription or purchase (as the case
      may
      be).

     

    (c) Number
      of Warrant Shares.
      Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs
      (a) or (b) of this Section 2,
      unless
      waived in writing by the Holder with respect to a particular adjustment, the
      number of Warrant Shares that may be purchased upon exercise of this Warrant
      shall be increased or decreased proportionately, so that after such adjustment
      the aggregate Exercise Price payable hereunder for the adjusted number of
      Warrant Shares shall be the same as the aggregate Exercise Price in effect
      immediately prior to such adjustment (without regard to any limitations on
      exercise contained herein).

     

    
      
        
        

      

      
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    (d) Other
      Events.
      In the
      event that the Company (or any direct or indirect subsidiary thereof) shall
      take any action to which the provisions hereof are not strictly applicable,
      or,
      if applicable, would not operate to protect the Holder from dilution or if
      any
      event occurs of the type contemplated by the provisions of this Section
2
      but not
      expressly provided for by such provisions (including, without limitation, the
      granting of stock appreciation rights, phantom stock rights or other rights
      with
      equity features), then the Company’s Board of Directors shall in good faith
      determine and implement an appropriate adjustment in the Exercise Price and
      the
      number of Warrant Shares (if applicable) so as to protect the rights of the
      Holder; provided that no such adjustment pursuant to this Section 2(d)
      will
      increase the Exercise Price or decrease the number of Warrant Shares as
      otherwise determined pursuant to this Section 2,
      provided further that if the Holder does not accept such adjustments as
      appropriately protecting its interests hereunder against such dilution, then
      the
      Company’s Board of Directors and the Holder shall agree, in good faith, upon an
      independent investment bank of nationally recognized standing to make such
      appropriate adjustments, whose determination shall be final and binding and
      whose fees and expenses shall be borne by the Company.

     

    (e) Calculations.
      All
      calculations under this Section 2
      shall be
      made to the nearest cent or the nearest 1/100th
      of a
      share, as applicable. The number of shares of Common Stock outstanding at any
      given time shall not include shares owned or held by or for the account of
      the
      Company, and the disposition of any such shares shall be considered an issue
      or
      sale of Common Stock.

     

    3.    PURCHASE
      RIGHTS; FUNDAMENTAL TRANSACTIONS.

     

    (a) Purchase
      Rights.
      In
      addition to any adjustments pursuant to Section 2
      above,
      if at any time the Company grants, issues or sells any Options, Convertible
      Securities or rights to purchase stock, warrants, securities or other property
      pro rata to the record holders of any class of shares of Common Stock (the
      “Purchase
      Rights”),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete exercise of this Warrant (without regard to any limitations on
      exercise hereof, including without limitation, the Maximum Percentage)
      immediately before the date on which a record is taken for the grant, issuance
      or sale of such Purchase Rights, or, if no such record is taken, the date as
      of
      which the record holders of shares of Common Stock are to be determined for
      the
      grant, issue or sale of such Purchase Rights (provided, however, that to the
      extent that the Holder’s right to participate in any such Purchase Right would
      result in the Holder exceeding the Maximum Percentage, then the Holder shall
      not
      be entitled to participate in such Purchase Right to such extent (or beneficial
      ownership of such shares of Common Stock as a result of such Purchase Right
      to
      such extent) and such Purchase Right to such extent shall be held in abeyance
      for the Holder until such time, if ever, as its right thereto would not result
      in the Holder exceeding the Maximum Percentage).

     

    
      
        
        

      

      
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    (b) Fundamental
      Transactions.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      the
      Successor Entity assumes in writing all of the obligations of the Company under
      this Warrant and the other Transaction Documents (as defined in the Securities
      Purchase Agreement) in accordance with the provisions of this Section
3(b)
      pursuant
      to written agreements in form and substance satisfactory to the Holder and
      approved by the Holder prior to such Fundamental Transaction, including
      agreements to deliver to the Holder in exchange for this Warrant a security
      of
      the Successor Entity evidenced by a written instrument substantially similar
      in
      form and substance to this Warrant, including, without limitation, which is
      exercisable for a corresponding number of shares of capital stock equivalent
      to
      the shares of Common Stock acquirable and receivable upon exercise of this
      Warrant (without regard to any limitations on the exercise of this Warrant)
      prior to such Fundamental Transaction, and with an exercise price which applies
      the exercise price hereunder to such shares of capital stock (but taking into
      account the relative value of the shares of Common Stock pursuant to such
      Fundamental Transaction and the value of such shares of capital stock, such
      adjustments to the number of shares of capital stock and such exercise price
      being for the purpose of protecting the economic value of this Warrant
      immediately prior to the consummation of such Fundamental Transaction), and
      which is satisfactory in form and substance to the Holder. Upon the occurrence
      of any Fundamental Transaction, the Successor Entity shall succeed to, and
      be
      substituted for (so that from and after the date of such Fundamental
      Transaction, the provisions of this Warrant and the other Transaction Documents
      referring to the “Company” shall refer instead to the Successor Entity), and may
      exercise every right and power of the Company and shall assume all of the
      obligations of the Company under this Warrant and the other Transaction
      Documents with the same effect as if such Successor Entity had been named as
      the
      Company herein. Upon consummation of the Fundamental Transaction, the Successor
      Entity shall deliver to the Holder confirmation that there shall be issued
      upon
      exercise of this Warrant at
      any
      time after the consummation of the Fundamental Transaction, in lieu of the
      shares of the Common Stock (or
      other
      securities, cash, assets or other property (except such items still issuable
      under Section 3(a)
      above,
      which shall continue to be receivable thereafter)) issuable
      upon the exercise of this Warrant
      prior
      to
      such Fundamental Transaction,
      such
      shares of the publicly traded Common Stock (or its equivalent) of the Successor
      Entity (including its Parent Entity) which the Holder would have been entitled
      to receive upon the happening of such Fundamental Transaction had this
Warrant
      been
      exercised immediately prior to such Fundamental Transaction (without
      regard to any limitations on the exercise of this Warrant),
      as
      adjusted in accordance with the provisions of this Warrant.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of shares
      of Common Stock are entitled to receive securities or other assets with respect
      to or in exchange for shares of Common Stock (a “Corporate
      Event”),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon an exercise of this Warrant
at
      any
      time after the consummation of
      the
      Fundamental Transaction but
      prior
      to the Expiration Date,
      in lieu
      of the shares of the Common Stock (or
      other
      securities, cash, assets or other property (except such items still issuable
      under Section 3(a)
      above,
      which shall continue to be receivable thereafter)) issuable
      upon the exercise of the Warrant prior to such Fundamental
      Transaction,
      such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had the Warrant been exercised immediately prior to such Fundamental
      Transaction (without
      regard to any limitations on the exercise of this Warrant).
      Provision
      made pursuant to the preceding sentence shall be in a form and substance
      reasonably satisfactory to the Holder. The provisions of this Section
3
      shall
      apply similarly and equally to successive Fundamental Transactions and Corporate
      Events and shall be applied as if this Warrant (and any such subsequent
      warrants) were fully exercisable and without regard to any limitations on the
      exercise of this Warrant (provided that the Holder shall continue to be entitled
      to the benefit of the Maximum Percentage, applied however with respect to shares
      of capital stock registered under the 1934 Act and thereafter receivable upon
      exercise of this Warrant (or any such other warrant)).

     

    
      
        
        

      

      
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    (c) Black
      Scholes Value.
      Notwithstanding the foregoing and the provisions of Section 3(b)
      above,
      in the event of a Fundamental Transaction, if the Holder has not exercised
      this
      Warrant in full prior to the consummation of such Fundamental Transaction,
      at
      the request of the Holder delivered on or before the date of the consummation
      of
      such Fundamental Transaction, (i) if the fair market value of the consideration
      per share that the Holder would receive with respect to such Fundamental
      Transaction if the Holder exercised this Warrant in full prior to the
      consummation thereof (without regard to any limitations on exercise contained
      herein) exceeds the Exercise Price then in effect on the date of such
      consummation, the Company or the Successor Entity (as the case may be) shall
      purchase this Warrant from the Holder for an amount in cash equal to the fair
      market value of such consideration per share multiplied by the number of shares
      of Common Stock for which this Warrant is then exercisable (without regard
      to
      any limitations on exercise contained herein) (less the aggregate Exercise
      Price
      which would be payable in connection with such exercise) or (ii) if the fair
      market value of the per share consideration which the Holder would receive
      with
      respect to such Fundamental Transaction if the Holder exercised this Warrant
      in
      full prior to the consummation thereof (without regard to any limitations on
      exercise contained herein) is equal to or less than the Exercise Price then
      in
      effect, the Company or the Successor Entity (as the case may be) shall
purchase
      this Warrant from the Holder by paying to the Holder,
      cash in
      an amount equal to the Black Scholes Value of the remaining unexercised portion
      of this Warrant on the date of the consummation of such Fundamental Transaction.
      For purposes of this paragraph, fair market value shall be mutually determined
      by the Company and the Holder. If the Company and the Holder are unable to
      agree
      upon fair market value, then such dispute shall be resolved in accordance with
      the procedures in Section 12.
      All
      such determinations shall be appropriately adjusted for any share dividend,
      share split or other similar transaction during such period.

     

    4.    NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Articles of Incorporation, Bylaws or through any reorganization, transfer
      of
      assets, consolidation, merger, scheme of arrangement, dissolution, issue or
      sale
      of securities, or any other voluntary action, for the principal purpose of
      avoiding or seeking to avoid the observance or performance of any of the terms
      of this Warrant, and will at all times in good faith carry out all the
      provisions of this Warrant and take all action as may be required to protect
      the
      rights of the Holder. Without limiting the generality of the foregoing, the
      Company (i) shall not increase the par value of any shares of Common Stock
      receivable upon the exercise of this Warrant above the Exercise Price then
      in
      effect, (ii) shall take all such actions as may be necessary or appropriate
      in order that the Company may validly and legally issue fully paid and
      nonassessable shares of Common Stock upon the exercise of this Warrant, and
      (iii) shall, so long as any of the SPA Warrants are outstanding, take all action
      necessary to reserve and keep available out of its authorized and unissued
      shares of Common Stock, solely for the purpose of effecting the exercise of
      the
      SPA Warrants, the number of shares of Common Stock as shall from time to time
      be
      necessary to effect the exercise of the SPA Warrants then outstanding (without
      regard to any limitations on exercise).

     

    
      
        
        

      

      
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    5.    WARRANT
      HOLDER NOT DEEMED A SHAREHOLDER.
      Except
      as otherwise specifically provided herein, the Holder, solely in such Person’s
      capacity as a holder of this Warrant, shall not be entitled to vote or receive
      dividends or be deemed the holder of share capital of the Company for any
      purpose, nor shall anything contained in this Warrant be construed to confer
      upon the Holder, solely in such Person’s capacity as the Holder of this Warrant,
      any of the rights of a shareholder of the Company or any right to vote, give
      or
      withhold consent to any corporate action (whether any reorganization, issue
      of
      stock, reclassification of stock, consolidation, merger, conveyance or
      otherwise), receive notice of meetings, receive dividends or subscription
      rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
      which such Person is then entitled to receive upon the due exercise of this
      Warrant. In addition, nothing contained in this Warrant shall be construed
      as
      imposing any liabilities on the Holder to purchase any securities (upon exercise
      of this Warrant or otherwise) or as a shareholder of the Company, whether such
      liabilities are asserted by the Company or by creditors of the Company.
      Notwithstanding this Section 5,
      the
      Company shall provide the Holder with copies of the same notices and other
      information given to the stockholders of the Company generally,
      contemporaneously with the giving thereof to the shareholders.

     

    6.    REISSUANCE
      OF WARRANTS.

     

    (a) Transfer
      of Warrant.
      If this
      Warrant is to be transferred, the Holder shall surrender this Warrant to the
      Company, whereupon the Company will forthwith issue and deliver upon the order
      of the Holder a new Warrant (in accordance with Section 6(d)),
      registered as the Holder may request, representing the right to purchase the
      number of Warrant Shares being transferred by the Holder and, if less than
      the
      total number of Warrant Shares then underlying this Warrant is being
      transferred, a new Warrant (in accordance with Section 6(d))
      to the
      Holder representing the right to purchase the number of Warrant Shares not
      being
      transferred.

     

    (b) Lost,
      Stolen or Mutilated Warrant.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Warrant, and, in the case of
      loss, theft or destruction, of any indemnification undertaking by the Holder
      to
      the Company in customary and reasonable form and, in the case of mutilation,
      upon surrender and cancellation of this Warrant, the Company shall execute
      and
      deliver to the Holder a new Warrant (in accordance with Section 6(d))
      representing the right to purchase the Warrant Shares then underlying this
      Warrant.

     

    (c) Exchangeable
      for Multiple Warrants.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Warrant or Warrants (in accordance
      with Section 6(d))
      representing in the aggregate the right to purchase the number of Warrant Shares
      then underlying this Warrant, and each such new Warrant will represent the
      right
      to purchase such portion of such Warrant Shares as is designated by the Holder
      at the time of such surrender; provided, however, that no warrants for
      fractional shares of Common Stock shall be given.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (d) Issuance
      of New Warrants.
      Whenever the Company is required to issue a new Warrant pursuant to the terms
      of
      this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
      (ii) shall represent, as indicated on the face of such new Warrant, the right
      to
      purchase the Warrant Shares then underlying this Warrant (or in the case of
      a
      new Warrant being issued pursuant to Section 6(a)
      or
      Section 6(c),
      the
      Warrant Shares designated by the Holder which, when added to the number of
      shares of Common Stock underlying the other new Warrants issued in connection
      with such issuance, does not exceed the number of Warrant Shares then underlying
      this Warrant), (iii) shall have an issuance date, as indicated on the face
      of
      such new Warrant which is the same as the Issuance Date, and (iv) shall have
      the
      same rights and conditions as this Warrant.

     

    7.    NOTICES.
      Whenever notice is required to be given under this Warrant, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement. The Company shall provide the Holder with
      prompt written notice of all actions taken pursuant to this Warrant, including
      in reasonable detail a description of such action and the reason therefore.
      Without limiting the generality of the foregoing, the Company will give written
      notice to the Holder (i) immediately upon each adjustment of the Exercise Price
      and the number of Warrant Shares, setting forth in reasonable detail, and
      certifying, the calculation of such adjustment(s) and (ii) at least fifteen
      (15)
      days prior to the date on which the Company closes its books or takes a record
      (A) with respect to any dividend or distribution upon the shares of Common
      Stock, (B) with respect to any grants, issuances or sales of any Options,
      Convertible Securities (other than Excluded Securities) or rights to purchase
      stock, warrants, securities or other property to holders of shares of Common
      Stock or (C) for determining rights to vote with respect to any Fundamental
      Transaction, dissolution or liquidation, provided in each case that such
      information shall be made known to the public prior to or in conjunction with
      such notice being provided to the Holder and (iii) at least ten (10) Trading
      Days prior to the consummation of any Fundamental Transaction. To the extent
      that any notice provided hereunder constitutes, or contains, material,
      non-public information regarding the Company or any of its subsidiaries, the
      Company shall simultaneously file such notice with the SEC pursuant to a Current
      Report on Form 8-K.

     

    8.    AMENDMENT
      AND WAIVER.
      Except
      as otherwise provided herein, the provisions of this Warrant (other than Section
      1(f)(i))
      may be
      amended and the Company may take any action herein prohibited, or omit to
      perform any act herein required to be performed by it, only if the Company
      has
      obtained the written consent of the Holders. The Holder shall be entitled,
      at
      its option, to the benefit of any amendment of any other similar warrant issued
      under the Securities Purchase Agreement.

     

    9.    SEVERABILITY.
      If any
      provision of this Warrant or the application thereof becomes or is declared
      by a
      court of competent jurisdiction to be illegal, void or unenforceable, the
      remainder of the terms of this Warrant will continue in full force and
      effect.

     

    10.    GOVERNING
      LAW.
      This
      Warrant shall be governed by and construed and enforced in accor-dance with,
      and
      all questions concerning the construction, validity, interpretation and
      performance of this Warrant shall be governed by, the internal laws of the
      State
      of New York, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the State of New York or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of New York.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    11.    CONSTRUCTION;
      HEADINGS.
      This
      Warrant shall be deemed to be jointly drafted by the Company and the Holder
      and
      shall not be construed against any Person as the drafter hereof. The headings
      of
      this Warrant are for convenience of reference and shall not form part of, or
      affect the interpretation of, this Warrant.

     

    12.    DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Exercise Price or fair market
      value or the arithmetic calculation of the Warrant Shares, the Company or the
      Holder (as the case may be) shall submit the disputed determinations or
      arithmetic calculations (as the case may be) via facsimile within two (2)
      Business Days of receipt of the applicable notice giving rise to such dispute
      to
      the Company or the Holder (as the case may be). If the Holder and the Company
      are unable to agree upon such determination or calculation of the Exercise
      Price
      or fair market value or the number of Warrant Shares (as the case may be) within
      three (3) Business Days of such disputed determination or arithmetic calculation
      being submitted to the Company or the Holder (as the case may be), then the
      Company shall, within two (2) Business Days submit via facsimile (a) the
      disputed determination of the Exercise Price or fair market value to an
      independent, reputable investment bank selected by the Company and approved
      by
      the Holder or (b) the disputed arithmetic calculation of the Warrant Shares
      to
      the Company’s independent, outside accountant. The Company shall cause at its
      expense the investment bank or the accountant (as the case may be) to perform
      the determinations or calculations (as the case may be) and notify the Company
      and the Holder of the results no later than ten (10) Business Days from the
      time
      it receives such disputed determinations or calculations (as the case may be).
      Such investment bank’s or accountant’s determination or calculation (as the case
      may be) shall be binding upon all parties absent demonstrable
      error.

     

    13.    REMEDIES,
      OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
      The
      remedies provided in this Warrant shall be cumulative and in addition to all
      other remedies available under this Warrant and the other Transaction Documents,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the right of the Holder
      to
      pursue actual damages for any failure by the Company to comply with the terms
      of
      this Warrant. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the holder of this Warrant shall
      be entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required. 

     

    14.    TRANSFER. This
      Warrant may be offered for sale, sold, transferred or assigned without the
      consent of the Company, except as may otherwise be required by Section 2(g)
      of
      the Securities Purchase Agreement.

     

    15.    CERTAIN
      DEFINITIONS.
      For
      purposes of this Warrant, the following terms shall have the following
      meanings:

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (a) “Black
      Scholes Value”
means
      the value of this Warrant based on the Black and Scholes Option Pricing Model
      obtained from the “OV” function on Bloomberg determined as of the day
      immediately following the public announcement of the applicable Fundamental
      Transaction and reflecting (i) a risk-free interest rate corresponding to the
      U.S. Treasury rate for a period equal to the remaining term of this Warrant
      as
      of such date and (ii) an expected volatility equal to the 100 day volatility
      obtained from the HVT function on Bloomberg as of such date.

     

    (b) “Bloomberg”
means
      Bloomberg Financial Markets.

     

    (c) “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    (d) “Common
      Stock”
means
      (i) the Company’s shares of common stock, no par value per share, and (ii)
      any capital stock into which such common stock shall have been changed or any
      share capital resulting from a reclassification of such common
      stock.

     

    (e) “Convertible
      Securities”
means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for shares of Common Stock.

     

    (f) “Eligible
      Market”
means
      the The New York Stock Exchange, Inc., the Nasdaq Global Select Market or the
      Principal Market.

     

    (g) “Expiration
      Date”
means
      the date that is the fifth (5th)
      anniversary of the Issuance Date or, if such date falls on a day other than
      a
      Business Day or on which trading does not take place on the Principal Market
      (a
“Holiday”),
      the
      next date that is not a Holiday. 

     

    (h) “Fundamental
      Transaction”
means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into another Person (unless
      the
      Company is the surviving corporation and the shareholders of the Company prior
      to such merger or consolidation continue to hold immediately thereafter a
      majority of the aggregate ordinary voting power represented by the issued and
      outstanding Common Stock), or (ii) sell, assign, transfer, convey or otherwise
      dispose of all or substantially all of the properties or assets of the Company
      to another Person, or (iii) allow another Person to make a purchase, tender
      or
      exchange offer that is accepted by the holders of more than the 50% of the
      outstanding shares of Common Stock (not including any shares of Common Stock
      held by the Person or Persons making or party to, or associated or affiliated
      with the Persons making or party to, such purchase, tender or exchange offer),
      or (iv) consummate a stock purchase agreement or other business combination
      (including, without limitation, a reorganization, recapitalization, spin-off
      or
      scheme of arrangement) with another Person whereby such other Person acquires
      more than the 50% of the outstanding shares of Common Stock (not including
      any
      shares of Common Stock held by the other Person or other Persons making or
      party
      to, or associated or affiliated with the other Persons making or party to,
      such
      stock purchase agreement or other business combination), or (v) reorganize,
      recapitalize or reclassify its Common Stock, or (vi) any “person” or “group” (as
      these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
      Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under
      the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary
      voting power represented by issued and outstanding Common Stock.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (i) “Options”
means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities.

     

    (j) “Parent
      Entity”
of
      a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

    (k) “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity and
      a
      government or any department or agency thereof.

     

    (l) “Principal
      Market”
means
      The Nasdaq Global Market.

     

    (m) “Required
      Holders”
means
      the holders of the SPA Warrants representing at least a majority of shares
      of
      Common Stock underlying the SPA Warrants then outstanding.

     

    (n) “Successor
      Entity”
means
      the Person (or, if so elected by the Holder, the Parent Entity) formed by,
      resulting from or surviving any Fundamental Transaction or the Person (or,
      if so
      elected by the Holder, the Parent Entity) with which such Fundamental
      Transaction shall have been entered into.

     

    (o) “Trading
      Day”
means
      any day on which the Common Stock is traded on the Principal Market, or, if
      the
      Principal Market is not the principal trading market for the Common Stock,
      then
      on the principal securities exchange or securities market on which the Common
      Stock is then traded; provided that “Trading Day” shall not include any day on
      which the Common Stock is scheduled to trade on such exchange or market for
      less
      than 4.5 hours or any day that the Common Stock is suspended from trading during
      the final hour of trading on such exchange or market (or if such exchange or
      market does not designate in advance the closing time of trading on such
      exchange or market, then during the hour ending at 4:00:00 p.m., New York
      time).

     

    (p) “VWAP”
means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market (or, if the Principal Market is not the
      principal trading market for such security, then on the principal securities
      exchange or securities market on which such security is then traded) during
      the
      period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m.,
      New
      York time, as reported by Bloomberg through its “Volume at Price” function or,
      if the foregoing does not apply, the dollar volume-weighted average price of
      such security in the over-the-counter market on the electronic bulletin board
      for such security during the period beginning at 9:30:01 a.m., New York time,
      and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if
      no
      dollar volume-weighted average price is reported for such security by Bloomberg
      for such hours, the average of the highest closing bid price and the lowest
      closing ask price of any of the market makers for such security as reported
      in
      the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
      Inc.). If VWAP cannot be calculated for such security on such date on any of
      the
      foregoing bases, the VWAP of such security on such date shall be the fair market
      value as mutually determined by the Company and the Holder. If the Company
      and
      the Holder are unable to agree upon the fair market value of such security,
      then
      such dispute shall be resolved in accordance with the procedures in Section
      12.
      All
      such determinations shall be appropriately adjusted for any share dividend,
      share split or other similar transaction during such period.

     

     

    [signature
      page follows]

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to Purchase Common Stock to be duly executed
      as
      of the Issuance Date set out above.

     

    
      	 	 	POKERTEK,
              INC. 
	 	 	 	 
	 	 	By: 	 
	 	 	Name: 	 
	 	 	Title: 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    EXERCISE
      NOTICE

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
      TO PURCHASE COMMON STOCK

     

    POKERTEK,
      INC.

     

    The
      undersigned holder hereby exercises the right to purchase _________________
      of
      the shares of Common Stock (“Warrant
      Shares”)
      of
      PokerTek, Inc., a North Carolina corporation (the “Company”),
      evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

     

    1.    Form
      of Exercise Price.
      The
      Holder intends that payment of the Exercise Price shall be made as:

     

    ____________ a
      “Cash
      Exercise”
with
      respect to _________________ Warrant Shares; and/or

     

    ____________ a
      “Cashless
      Exercise”
with
      respect to _______________ Warrant Shares.

     

    Notwithstanding
      anything to the contrary contained herein, this Exercise Notice shall constitute
      a representation by the undersigned holder of the Warrant submitting this
      Exercise Notice that, immediately following the exercise provided for in this
      Exercise Notice, such holder (together with its affiliates) will not have
      beneficial ownership (together with the beneficial ownership of such Person’s
      affiliates) of a number of shares of Common Stock which exceeds the Maximum
      Percentage of the total outstanding shares of Common Stock as determined
      pursuant to the provisions of Section 1(f)(i)
      of the
      attached Warrant

     

    2.    Payment
      of Exercise Price.
      In the
      event that the holder has elected a Cash Exercise with respect to some or all
      of
      the Warrant Shares to be issued pursuant hereto, the holder shall pay the
      Aggregate Exercise Price in the sum of $_____________ to the Company in
      accordance with the terms of the Warrant.

     

    3.    Delivery
      of Warrant Shares.
      The
      Company shall deliver to holder, or its designee or agent as specified below,
      __________ Warrant Shares in accordance with the terms of the Warrant. Delivery
      shall be made to holder, or for its benefit, to the following
      address:

     

    _______________________

    _______________________

    _______________________

    _______________________

     

    Date:
      _______________ __, ______

     

    _________________________

     

    Name
      of
      Registered Holder

     

    
      
        	By: 	  	 	 
	 	Name: 	 	 
	 	Title: 	 	 

      

    

      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ACKNOWLEDGMENT

     

    The
      Company hereby acknowledges this Exercise Notice and hereby directs
      ______________ to issue the above indicated number of shares of Common Stock
      in
      accordance with the Transfer Agent Instructions dated _____________, 2007 from
      the Company and acknowledged and agreed to by _______________.

     

    
      	 	 	POKERTEK, INC. 
	 	 	 	 
	 	 	By: 	  

	 	 	 	Name: 
	 	 	 	Title:

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