EXHIBIT 4.1


 


NEITHER THESE SECURITIES NOR THE
SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.  THESE SECURITIES AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 


WELLS-GARDNER
ELECTRONICS CORPORATION


 


WARRANT


 


Warrant No. [  ]    Dated:  September 20, 2004


 


Wells-Gardner Electronics Corporation, an Illinois
corporation (the “Company”), hereby certifies that, for value
received,
                      
or its registered assigns (the “Holder”), is entitled to purchase from the
Company up to a total of Forty-Four Thousand Two Hundred Forty Eight (44,248)
shares of common stock, $1 par value per share (the “Common Stock”), of the
Company (each such share, a “Warrant Share” and all such shares, the “Warrant
Shares”) at an exercise price equal to $6.24 per share (as adjusted
from time to time as provided in Section 9, the “Exercise
Price”), at any time and from time to time from and after the six
month anniversary of the date hereof and through and including March 20,
2010 (the “Expiration Date”), and subject to the following terms and
conditions.


 


Definitions. 
In addition to the terms defined elsewhere in this Warrant (the “Warrant”),
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Purchase Agreement, dated as of the date hereof, by and
among the Company, CD Investment Partners, Ltd. and EGI-NP Investments, LLC.


 


Registration of Warrant. 
The Company shall register this Warrant, upon records to be maintained
by the Company for that purpose (the “Warrant Register”), in the name of the
record Holder hereof from time to time. 
The Company may deem and treat the registered Holder of this Warrant as
the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual notice to
the contrary.


 


Registration of Transfers. The warrant agent shall register the
transfer of any portion of this Warrant in the Warrant Register, upon surrender
of this Warrant, with the Form of Assignment attached hereto duly completed and
signed, to the Transfer Agent or to the Company at its 


 

















 


address specified herein.  Upon any such registration or transfer, a
new warrant to purchase Common Stock, in substantially the form of this Warrant
(any such new warrant, a “New Warrant”), evidencing the portion of
this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. 
The acceptance of the New Warrant by the transferee thereof shall be
deemed the acceptance by such transferee of all of the rights and obligations
of a holder of a Warrant.


 


Exercise and Duration of
Warrants.


 


This Warrant shall be exercisable by the registered Holder at any time
and from time to time on or after the six month anniversary of the date hereof
to and including the Expiration Date. 
At 5:30 p.m., Chicago time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no
value.  Notwithstanding anything to the
contrary herein, the Expiration Date shall be extended for each day following
the Effective Date that the Registration Statement is not effective.


 


A Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise
Price for the number of Warrant Shares as to which this Warrant is being
exercised (which may take the form of a “cashless exercise” if so indicated in
the Exercise Notice and if a “cashless exercise” may occur at such time
pursuant to this Section 10 below), and the date such items are delivered
to the Company (as determined in accordance with the notice provisions hereof)
is an “Exercise
Date.”  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 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.


 


Delivery of Warrant
Shares.


 


Upon exercise of this
Warrant, the Company shall promptly (but in no event later than three Trading
Days after the Exercise Date) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends unless a registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder is not then effective and the Warrant Shares are not
freely transferable without volume restrictions pursuant to Rule 144 under the
Securities Act.  The Holder, or any Person
so designated by the Holder to receive Warrant Shares, shall be deemed to have
become holder of record of such Warrant Shares as of the Exercise Date.  The Company shall, upon request of the
Holder, use its best efforts to deliver Warrant Shares hereunder electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions.


 


This Warrant is
exercisable, either in its entirety or, from time to time, for a portion of the
number of Warrant Shares.  Upon
surrender of this Warrant following one or more partial exercises, the Company
shall issue or cause to be issued, at its expense, a New Warrant evidencing the
right to purchase the remaining number of Warrant Shares.


 


2

















 


In addition to any other rights available to a Holder, if the Company
fails to deliver to the Holder a certificate representing Warrant Shares by the
third Trading Day after the date on which delivery of such certificate is
required by this Warrant, and if after such third 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 the Warrant Shares that
the Holder anticipated receiving from the Company (a “Buy-In”), then the Company
shall, within three Trading 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 Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock 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 Closing Price on the date of the event giving rise to the Company’s
obligation to deliver such certificate.


 


The Company’s obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or
any violation or alleged violation of law by the Holder or any other Person,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares.  Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely
deliver certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.


 


Charges, Taxes and Expenses.   Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder or an Affiliate thereof.  The
Holder shall be responsible for all other tax liability that may arise as a
result of holding or transferring this Warrant or receiving Warrant Shares upon
exercise hereof.


 


Replacement of Warrant. 
If this Warrant is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Warrant, a New
Warrant, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable bond or
indemnity, if requested.  Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable third-party
costs as the Company may prescribe.


 


3

















 


Reservation of Warrant
Shares.  The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (after giving
effect to the adjustments and restrictions of Section 9, if any).
The Company covenants that all Warrant Shares so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly authorized, validly issued and fully
paid and nonassessable.  The Company
will take all such action as may be necessary to assure that such shares of Common
Stock may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed.


 


Certain Adjustments. 
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 9.


 


Stock Dividends and
Splits.  If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines 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.


 


Pro Rata Distributions. 
If the Company, at any time while this Warrant is outstanding,
distributes to holders of Common Stock (i) evidence of its indebtedness, (ii)
any security (other than a distribution of Common Stock covered by the
preceding paragraph), (iii) rights or warrants to subscribe for or
purchase any security, or (iv) any other asset (in each case, “Distributed
Property”), then the Company shall promptly provide the Holder with
notice of such Distributed Property.


 


Fundamental Transactions. 
If, at any time while this Warrant is outstanding, (i) the Company
effects any merger or consolidation of the Company with or into another Person,
(ii) the Company effects any sale of all or substantially all of its assets in
one or a series of related transactions, (iii) any tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of a subdivision or
combination of shares of Common Stock covered by Section 9(a) above) (in
any such case, a “Fundamental Transaction”), then the Holder
shall 


 


4

















 


have the right to
receive, (i) upon exercise of this Warrant prior to or in connection with the
closing of the Fundamental Transaction, the same amount and kind of securities,
cash or property that is received by holders of Common Stock or (ii) at the
Holder’s request, any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new warrant entitling the
Holder to acquire an equity interest in the Company or surviving entity in an
amount equal to the Holder’s pro rata position in the Company prior to such
Fundamental Transaction. The aggregate Exercise Price for this Warrant will not
be affected by any such Fundamental Transaction, but the Company shall
apportion such aggregate Exercise Price in a reasonable manner reflecting the
relative value of Holder’s interest in the Company before the Fundamental
Transaction and Holder’s pro rata interest in the Company or surviving entity
after the Fundamental Transaction.  The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this paragraph (c) and insuring that any replacement
security will be adjusted upon any subsequent transaction analogous to a
Fundamental Transaction.


 


Subsequent Equity Sales.


 


If from the date hereof
through and including the two year anniversary of the Effective Date, the
Company or any Subsidiary issues additional shares of Common Stock or rights,
warrants, options or other securities or debt convertible, exercisable or
exchangeable for shares of Common Stock or otherwise entitling any Person to
acquire shares of Common Stock (collectively, “Common Stock Equivalents”) at
an effective net price to the Company per share of Common Stock (the “Effective
Price”) less than the Exercise Price (as adjusted hereunder to such
date), then the Exercise Price shall be reduced to equal the Effective Price.
If from the date hereof through and including the two year anniversary of the
Effective Date, the Company or any Subsidiary issues Common Stock or Common
Stock Equivalents at an Effective Price greater than the Exercise Price (as
adjusted hereunder to such date) but less than the average Closing Price over
the five Trading Days prior to such issuance (such average being the “Adjustment
Price”), then the Exercise Price shall be reduced to equal the
product of (A) the Exercise Price in effect immediately prior to such issuance
of shares of Common Stock or Common Stock Equivalents times (B) a fraction, the
numerator of which is the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issuance, plus (2) the number of shares
of Common Stock which the aggregate Effective Price of the shares of Common
Stock issued (or deemed to be issued) would purchase at the Adjustment Price,
and the denominator of which is the aggregate number of shares of Common Stock
outstanding or deemed to be outstanding immediately after such issuance. For
purposes of this paragraph, in connection with any issuance of any Common Stock
Equivalents, (A) the maximum number of shares of Common Stock potentially
issuable at any time upon conversion, exercise or exchange of such Common Stock
Equivalents (the “Deemed Number”) shall be deemed to be
outstanding upon issuance of such Common Stock Equivalents, (B) the Effective
Price applicable to such Common Stock shall equal the minimum dollar value of
consideration payable to the Company to purchase such Common Stock Equivalents
and to convert, exercise or exchange them into Common Stock (net of any
discounts, fees, commissions and other expenses), divided by the Deemed Number,
and (C) no further adjustment shall be made to the Exercise Price upon the
actual issuance of Common Stock upon conversion, exercise or exchange of such
Common Stock Equivalents.


 


5

















 


If from the date hereof
through and including the two year anniversary of the Effective Date, the
Company or any Subsidiary issues Common Stock Equivalents with an Effective
Price or a number of underlying shares that floats or resets or otherwise
varies or is subject to adjustment based (directly or indirectly) on market
prices of the Common Stock (a “Floating Price Security”), then for
purposes of applying the preceding paragraph in connection with any subsequent
exercise, the Effective Price will be determined separately on each Exercise
Date and will be deemed to equal the lowest Effective Price at which any holder
of such Floating Price Security is entitled to acquire Common Stock on such
Exercise Date (regardless of whether any such holder actually acquires any
shares on such date).


 


Number of Warrant Shares. 
Simultaneously with any adjustments to the Exercise Price pursuant to
paragraphs (a) or (d) of this Section, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased proportionately, so
that after such adjustment the aggregate Exercise Price payable hereunder for
the increased number of Warrant Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.


 


Calculations. 
All calculations under this Section 9 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.


 


Notice of Adjustments. 
Upon the occurrence of each adjustment pursuant to this Section 9,
the Company at its expense will promptly compute such adjustment in accordance
with the terms of this Warrant and prepare a certificate setting forth such
adjustment, including a statement of the adjusted Exercise Price and adjusted
number or type of Warrant Shares or other securities issuable upon exercise of
this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is
based.  Upon written request, the
Company will promptly deliver a copy of each such certificate to the Holder and
to the Company’s Transfer Agent. Any dispute between the Company and the Holder
of this Warrant with respect to the matters set forth in such certificate may
at the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the “big five” selected by the Holder, provided
that the Company shall have ten (10) days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Company shall have no such right
of objection. The firm selected by the Holder of this Warrant as provided in
the preceding sentence shall be instructed to deliver, at the Company’s sole
cost and expense, a written opinion as to such matters to the Company and such
Holder within thirty (30) days after submission to it of such dispute.  Such opinion shall be final and binding on
the parties hereto.


 


Notice of Corporate Events. 
If the Company (i) declares a dividend or any other distribution of
cash, securities or other property in respect of its Common Stock, including
without limitation any granting of rights or warrants to subscribe for or
purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or
approves, enters into any agreement contemplating or solicits stockholder
approval for any Fundamental Transaction or (iii) authorizes the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Holder a notice describing the material terms and
conditions of such transaction, at least 10 calendar days prior to the
applicable record or effective date on which a Person would 


 


6

















 


need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps reasonably
necessary in order to insure that the Holder is given the practical opportunity
to exercise this Warrant prior to such time so as to participate in or vote
with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.


 


Payment of Exercise Price. 
The Holder shall pay the Exercise Price in immediately available funds;
provided, however, that following the Required Effectiveness Date, if the
Registration Statement is not effective at the time of exercise of this
Warrant, the Holder may satisfy its obligation to pay the Exercise Price
through a “cashless exercise,” in which event the Company shall issue to the
Holder the number of Warrant Shares determined as follows:


 


	
   

  	
   

  	
  X = Y [(A-B)/A]

  
	
  where:

  	
   

  	
   

  
	
   

  	
   

  	
  X = the number of
  Warrant Shares to be issued to the Holder.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Y = the number of
  Warrant Shares with respect to which this Warrant is being exercised.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A = the average of the
  Closing Prices for the five Trading Days immediately prior to (but not
  including) the Exercise Date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B = the Exercise Price.

  



 


For purposes of
Rule 144 promulgated under the Securities Act, it is intended, understood and
acknowledged that the Warrant Shares issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for
the Warrant Shares shall be deemed to have commenced, on the date this Warrant
was originally issued pursuant to the Purchase Agreement.


 


Limitation on Exercise.


 


(a)           Notwithstanding
anything to the contrary contained herein, at no time may a Holder of this
Warrant exercise this Warrant if the number of shares of Common Stock to be
issued pursuant to such exercise would exceed, when aggregated with all other
shares of Common Stock owned by such Holder and its Affiliates (together with
any other Persons whose beneficial ownership of Common Stock would be
aggregated with the Holder’s and its Affiliates’ for purposes of
Section 13(d) of the Exchange Act) at such time, the number of shares of Common
Stock which would result in such Holder and its Affiliates (together with any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder’s and its Affiliates’ for purposes of Section 13(d) of the
Exchange Act) owning more than 4.999% (the “Maximum Percentage”) of all
of the Common Stock issued and outstanding at such time. For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder. Each
delivery of an Exercise Notice hereunder will constitute a representation by
the Holder that it has evaluated the 


 


7

















 


limitation set forth in this paragraph and determined that issuance of
the full number of Warrant Shares requested in such Exercise Notice is
permitted under this paragraph.  For
purposes of this paragraph, 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 (x) the Company’s most recent Form 10-Q or Form 10-K, as
the case may be, (y) a more recent public announcement by the Company or (z)
any other notice by the Company or the Company’s Transfer Agent setting forth
the number of shares of Common Stock outstanding.  Upon the written or
oral request of the Holder, the Company shall within three Trading Days confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding. The provisions of this paragraph shall be implemented in a manner
otherwise than in strict conformity with the terms this Section 11(a) 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 of the Company shall be third party
beneficiaries of this Section 11(a) and the Company may not waive this
Section 11(a) without the consent of holders of a majority of its Common
Stock.


 


(b)           Notwithstanding
anything to the contrary contained herein, if the Trading Market is the
American Stock Exchange or any other market or exchange with similar applicable
rules, then the maximum number of shares of Common Stock that the Company may
issue pursuant to the Transaction Documents and any other documents entered
into with third party purchasers of the Company’s securities on the Closing
Date at an effective purchase price less than the Closing Price on the Trading
Day immediately preceding the Closing Date shall equal 19.99% of the outstanding
shares of Common Stock immediately preceding the Closing Date (the “Issuable
Maximum”), unless the Company obtains stockholder approval in
accordance with the rules and regulations of such Trading Market. If, at the
time any Holder requests an exercise of any of the Warrants, the Actual Minimum
(excluding any shares issued or issuable at an effective purchase price in
excess of the Closing Price on the Trading Day immediately preceding the
Closing Date) exceeds the Issuable Maximum (and if the Company has not
previously obtained the required stockholder approval), then the Company shall
issue to the Holder requesting such exercise a number of shares of Common Stock
not exceeding such Holder’s pro-rata portion of the Issuable Maximum (based on
the quotient obtained by dividing (x) the aggregate number of shares of Common
Stock sold to the Holder on the Closing Date by (y) the aggregate number of
shares of Common Stock issued and sold by the Company on the Closing Date). For
the purposes hereof, “Actual Minimum” shall mean, as of any date,
the maximum aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction Documents,
including any Underlying Shares issuable upon exercise in full of this Warrant
and any other similar documents entered into with third party purchasers of the
Company’s securities on the Closing Date, without giving effect to (x) any
limits on the number of shares of Common Stock that may be owned by any person
at any one time pursuant thereto, or (y) any additional shares of Common Stock,
including without limitation Underlying Shares, that could be issuable as a
result of any future possible adjustments made under Section 9(d) hereof
or any similar provision in any such other documents.


 


Fractional Shares. 
The Company shall not be required to issue or cause to be issued
fractional Warrant Shares on the exercise of this Warrant.  If any fraction of a Warrant Share would,
except 


 


8

















 


for the provisions of
this Section, be issuable upon exercise of this Warrant, the number of Warrant
Shares to be issued will be rounded down to the nearest whole share and the
balance shall be paid in cash.


 


Notices. 
Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 5:30 p.m. (Chicago
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading
Day or later than 5:30 p.m. (Chicago time) on any Trading Day, (iii) the
Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given. 
The address for such notices or communications shall be as set forth in
the Purchase Agreement.


 


Warrant Agent. 
The Company shall serve as warrant agent under this Warrant.  Upon 30 days’ notice to the Holder, the Company
may appoint a new warrant agent.  Any
corporation into which the Company or any new warrant agent may be merged or
any corporation resulting from any consolidation to which the Company or any
new warrant agent shall be a party or any corporation to which the Company or
any new warrant agent transfers substantially all of its corporate trust or
stockholders services business shall be a successor warrant agent under this
Warrant without any further act.  Any such
successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder
at the Holder’s last address as shown on the Warrant Register.


 


Miscellaneous.


 


Subject to the
restrictions on transfer set forth in the legend on the first page hereof, this
Warrant may be assigned by the Holder. This Warrant may not be assigned by the
Company except to a successor in the event of a Fundamental Transaction.  This Warrant shall be binding on and inure
to the benefit of the parties hereto and their respective successors and
assigns.  Subject to the preceding
sentence, nothing in this Warrant shall be construed to give to any Person
other than the Company and the Holder any legal or equitable right, remedy or
cause of action under this Warrant. 
This Warrant may be amended only in writing signed by the Company and
the Holder and their successors and assigns.


 


The Company will not, by
amendment of its governing documents or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder
against impairment.  Without limiting
the generality of the foregoing, the Company (i) will not increase the par
value of any Warrant Shares above the amount payable therefor on such exercise,
(ii) will take all such action as may be reasonably necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares on the exercise of this Warrant, and (iii) will
not close its stockholder books or records in any manner which interferes with
the timely exercise of this Warrant.


 


9

















 


GOVERNING LAW; VENUE;
WAIVER OF JURY TRIAL.  ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS.   EACH PARTY HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS SITTING IN THE CITY OF CHICAGO, COUNTY OF COOK, FOR THE ADJUDICATION OF
ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION
CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE
ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), 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 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 VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR 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.  THE COMPANY AND
HOLDER HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.


 


The headings herein are
for convenience only, do not constitute a part of this Warrant and shall not be
deemed to limit or affect any of the provisions hereof.


 


In case any one or more
of the provisions of this Warrant shall be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Warrant shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and
upon so agreeing, shall incorporate such substitute provision in this Warrant.


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]


 


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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.


 


 


	
   

  	
  WELLS-GARDNER ELECTRONICS

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


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FORM
OF EXERCISE NOTICE


 


(To be executed by the
Holder to exercise the right to purchase shares of Common Stock under the foregoing
Warrant)


 


To:  Wells-Gardner Electronics Corporation


 


The undersigned is the
Holder of Warrant No.
              
(the “Warrant”)
issued by Wells-Gardner Electronics Corporation, an Illinois corporation (the “Company”).  Capitalized terms used herein and not
otherwise defined have the respective meanings set forth in the Warrant.


 


The Warrant is currently
exercisable to purchase a total of
                            
Warrant Shares.


 


The undersigned Holder
hereby exercises its right to purchase                                   
Warrant Shares pursuant to the Warrant.


 


The Holder intends that
payment of the Exercise Price shall be made as (check one):


 


                “Cash Exercise” under Section 10


 


                “Cashless Exercise” under Section 10 (if permitted)


 


If the holder has elected
a Cash Exercise, the holder shall pay the sum of
$                        
to the Company in accordance with the terms of the Warrant.


 


Pursuant to this
exercise, the Company shall deliver to the Holder
                              
Warrant Shares in accordance with the terms of the Warrant.


 


Following this exercise,
the Warrant shall be exercisable to purchase a total of
                            
Warrant Shares.


 


 


	
  Dated: ,

  	
   

  	
   

  	
  Name of Holder:

  
	
   

  	
   

  
	
   

  	
  (Print)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform
  in all respects to name of holder as specified on the face of the Warrant)

  
								



 


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FORM OF ASSIGNMENT


 


[To be completed and signed only upon transfer of
Warrant]


 


FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto
                                                                
the right represented by the within Warrant to purchase 
                        
shares of Common Stock of Wells-Gardner Electronics Corporation to which the
within Warrant relates and appoints
                                
attorney to transfer said right on the books of Wells-Gardner Electronics
Corporation with full power of substitution in the premises.


 


 


	
  Dated: ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform
  in all respects to name of holder as specified on the face of the Warrant)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address of Transferee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  In the presence of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						



 


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