exhibit42descriptionofca






    Exhibit 4.2  DESCRIPTION OF CAPITAL STOCK     Our Certificate of Incorporation authorizes us to issue 300,000,000 shares of common stock, par value $0.0001  per share.      The following statements are summaries only of provisions of our authorized capital stock and are qualified in  their entirety by our Certificate of Incorporation. You should review these documents for a description of the rights,  restrictions and obligations relating to our capital stock. A copy of our Certificate of Incorporation may be obtained  from us upon written request.     Common Stock     Voting. The holders of our common stock are entitled to one vote for each share held of record on all matters on  which the holders are entitled to vote (or consent to).     Dividends. The holders of our common stock are entitled to receive, ratably, dividends only if, when and as  declared by our board of directors out of funds legally available therefor and after provision is made for each class of  capital stock having preference over the common stock. As of the date of this Annual Report on Form 10-K, the  JPMorgan facility only permits payments of dividends if certain payment conditions are met, including an excess  availability test and a fixed charge coverage test.     Liquidation Rights. In the event of our liquidation, dissolution or winding-up, the holders of our common stock  may be entitled to share, ratably, in all assets remaining available for distribution after payment of all liabilities and  after provision is made for each class of capital stock having preference over the common stock.     Preemptive and Similar Rights. The holders of our common stock have no preemptive or similar rights.      Forum Selection     Our Certificate of Incorporation and our Bylaws provide that the Court of Chancery of the State of Delaware is  the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of  fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our  Certificate of Incorporation or our Bylaws; or any action asserting a claim against us that is governed by the internal  affairs doctrine. Notwithstanding the foregoing, the exclusive forum provision does not apply to suits brought to  enforce any liability or duty created by the Exchange Act, the Securities Act or any other claim for which the federal  courts have exclusive jurisdiction. Unless we consent in writing to the selection of an alternative forum, the federal  district courts of the United States of America shall, to the fullest extent permitted by applicable law, be the sole and  exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. The  choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable  for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and  our directors, officers and other employees.     Anti-Takeover Provisions     Our Certificate of Incorporation and Bylaws contain provisions that may delay, defer or discourage another party  from acquiring control of us. We expect that these provisions, which are summarized below, will discourage coercive  takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to  acquire control of us to first negotiate with our board of directors, which we believe may result in an improvement of  the terms of any such acquisition in favor of our stockholders. However, they also give our board of directors the  power to discourage acquisitions that some stockholders may favor.     Authorized but unissued shares. The authorized but unissued shares of our common stock and our preferred  stock are available for future issuance without stockholder approval, subject to the requirements of any national  securities exchange on which our common stock is listed, should we so qualify for listing. These additional shares  may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of  





 






    authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage  an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.     Stockholder action by written consent. Our Certificate of Incorporation and Bylaws provide that no action shall  be taken by our stockholders except at an annual or special meeting of our stockholders called in accordance with our  Bylaws and no action shall be taken by our stockholders by written consent, subject to the rights of any series of  preferred stock permitting the holders of such series of preferred stock to act by written consent; provided, however,  that, for so long as S5 Enterprises Inc. (formerly 2118769 Ontario Inc.), Fruzer Inc., Indulge Inc. (formerly 2208742  Ontario Inc.), Jackpot Inc. (formerly 2208744 Ontario Inc.), HF I Investments LLC, HF II Investments LLC, HF III  Investments LLC, Hawthorn LP, Hydrofarm Co-Investment Fund, LP, Arch Street Holdings I, LLC and Payne Capital  Corp., together with their respective affiliates or successors, collectively beneficially own (directly or indirectly), in  the aggregate, at least fifty percent (50%) of our then issued and outstanding common stock, any action required or  permitted to be taken by our stockholders at an annual meeting or special meeting of stockholders called in accordance  with our Bylaws may be taken by our stockholders by written consent.     Special meetings of stockholders. Our Certificate of Incorporation and Bylaws provide that, except as otherwise  required by law or provided by the resolution or resolutions adopted by our board of directors designating the rights,  powers and preferences of any series of preferred stock, special meetings of our stockholders may be called only by  (a) our board of directors pursuant to a resolution approved by a majority of the total number of our directors that we  would have if there were no vacancies or (b) the chair of our board of directors, and any power of our stockholders to  call a special meeting is specifically denied.     Advance notice requirements for stockholder proposals and director nominations. Our Bylaws provide for an  advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including  proposed nominations of candidates for election to our board of directors. In order for any matter to be “properly  brought” before a meeting, a stockholder must comply with advance notice and duration of ownership requirements  and provide us with certain information. Stockholders at an annual meeting may only consider proposals or  nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board of  directors or by a qualified stockholder of record on the record date for the meeting, who is entitled to vote at the  meeting and who has delivered timely written notice in proper form to our secretary of the stockholder’s intention to  bring such business before the meeting. These provisions could have the effect of delaying stockholder actions that  are favored by the holders of a majority of our outstanding voting securities until the next stockholder meeting.     Amendment of Certificate of Incorporation or Bylaws. The Delaware General Corporation Law (“DGCL”)  provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to  amend a corporation’s certificate of incorporation, unless a corporation’s certificate of incorporation requires a greater  percentage. Our Certificate of Incorporation provides that certain provisions of our Certificate of Incorporation  (namely, those provisions relating to (i) directors; (ii) limitation of director liability, indemnification and advancement  of expenses and renunciation of corporate opportunities; (iii) meetings of stockholders; and (iv) amendments to our  Certificate of Incorporation and Bylaws) may not be altered, amended or repealed in any respect (including by merger,  consolidation or otherwise), nor may any provision inconsistent therewith be adopted, unless such alteration,  amendment, repeal or adoption is approved by the affirmative vote of the holders of at least sixty-six and two-thirds  percent (66 2∕3%) of the voting power of all of our then-outstanding shares then entitled to vote generally in an election  of directors, voting together as a single class. Our Certificate of Incorporation and Bylaws also provide that approval  of stockholders holding sixty-six and two-thirds percent (66 2∕3%) of the voting power of all of our then- outstanding  shares entitled to vote generally in an election of directors, voting together as a single class, is required for stockholders  to make, alter, amend, or repeal any provision of our Bylaws. Our board of directors retains the right to alter, amend  or repeal our Bylaws.     Classified Board of Directors. Our amended and restated certificate of incorporation, upon the consummation of  this offering, provides for a classified board of directors consisting of three classes of approximately equal size, each  serving staggered three-year terms. Only the directors in one class will be subject to election by a plurality of the votes  cast at each annual meeting of stockholders, with the directors in the other classes continuing for the remainder of  their respective three-year terms. Stockholders do not have the ability to cumulate votes for the election of directors.     Limitations on Liability and Indemnification of Officers and Directors  





 






       Our Certificate of Incorporation and Bylaws provides indemnification for our directors and officers to the fullest  extent permitted by the DGCL. We have entered into indemnification agreements with each of our directors that may  be, in some cases, broader than the specific indemnification provisions contained under the DGCL. In addition, as  permitted by the DGCL, our Certificate of Incorporation and Bylaws includes provisions that eliminate the personal  liability of our directors for monetary damages resulting from breaches of certain fiduciary duties as a director. The  effect of this provision is to restrict our rights and the rights of our stockholders in derivative suits to recover monetary  damages against a director for breach of fiduciary duties as a director. These provisions may be held not to be  enforceable for violations of the federal securities laws of the United States.     Corporate Opportunity Doctrine     Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain  opportunities that are presented to the corporation or its officers, directors or stockholders. Under our Certificate of  Incorporation, to the maximum extent permitted by the laws of the State of Delaware, (a) we have renounced all  interest and expectancy that we otherwise would be entitled to have in, and all rights to be offered an opportunity to  participate in, any business opportunity that from time to time may be presented to (i) any of our directors, (ii) any of  our stockholders, officers or agents, or (iii) any Affiliate (as defined in our Certificate of Incorporation) of any person  or entity identified in the preceding clause (i) or (ii), but in each case excluding any such person in its capacity as an  employee or director of us or our subsidiaries; (b) no stockholder and no director, in each case, that is not an employee  of us or our subsidiaries, has any duty to refrain from (x) engaging in a corporate opportunity in the same or similar  lines of business in we or our subsidiaries from time to time are engaged or propose to engage or (y) otherwise  competing, directly or indirectly, with us or any of our subsidiaries; and (c) if any stockholder or any director, in each  case, that is not an employee of us or our subsidiaries, acquires knowledge of a potential transaction or other business  opportunity which may be a corporate opportunity both for such stockholder or such director or any of their respective  affiliates, on the one hand, and for us or our subsidiaries, on the other hand, such stockholder or director has no duty  to communicate or offer such transaction or business opportunity to us or our subsidiaries and such stockholder or  director may take any and all such transactions or opportunities for itself or offer such transactions or opportunities to  any other person or entity. The preceding sentence shall not apply to any potential transaction or business opportunity  that is expressly offered to a director or employee of our or our subsidiaries, solely in his or her capacity as a director  or employee of us or our subsidiaries.     Furthermore, to the fullest extent permitted by the laws of the State of Delaware, no potential transaction or  business opportunity may be deemed to be a corporate opportunity of ours or our subsidiaries unless (a) we or our  subsidiaries would be permitted to undertake such transaction or opportunity in accordance with our Certificate of  Incorporation, (b) we or our subsidiaries at such time have sufficient financial resources to undertake such transaction  or opportunity, (c) we or our subsidiaries have an interest or expectancy in such transaction or opportunity and (d)  such transaction or opportunity would be in the same or similar line of business in which we or our subsidiaries are  then engaged or a line of business that is reasonably related to, or a reasonable extension of, such line of business.     Section 203 of the Delaware General Corporation Law     We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section  203 prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested  stockholder” for a three-year period following the time that such stockholder becomes an interested stockholder, unless  the business combination is approved in a prescribed manner. A “business combination” includes, among other things,  a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An  “interested stockholder” is a person who, together with affiliates and associates, owns, or did own within three years  prior to the determination of interested stockholder status, 15% or more of the corporation’s voting stock. Under  Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it  satisfies one of the following conditions:      • before the stockholder became interested, the board of directors approved either the business combination or the  transaction that resulted in the stockholder becoming an interested stockholder;     





 






      • upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the  interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the  transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by  persons who are directors and also officers, and employee stock plans, in some instances; or      • at or after the time the stockholder became interested, the business combination was approved by the board of  directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative  vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.     A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of  incorporation or an express provision in its amended and restated certificate of incorporation or by-laws resulting from  a stockholders’ amendment approved by at least a majority of the outstanding voting shares. We have not opted out  of these provisions. As a result, mergers or other takeover or change in control attempts of us may be discouraged or  prevented.     Transfer Agent and Registrar     The transfer agent and registrar of our common stock is Continental Stock Transfer & Trust Company. They are  located at 1 State Street, 30th Floor, New York, New York 10004. Their telephone number is (212) 509-4000.