EXHIBIT 4.2


 


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, [Name of Holder] or its registered assigns (the “Holder”), is entitled to
purchase from the Company up to a total of
[          ](1) 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.  This
Warrant (this “Warrant”) is one of a series of similar warrants issued
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and among the Company and the Purchasers identified therein (the “Purchase
Agreement”).  All such
warrants are referred to herein, collectively, as the “Warrants.”


 


Definitions. 
In addition to the terms defined elsewhere in this Warrant, capitalized
terms that are not otherwise defined herein have the meanings given to such
terms in the Purchase Agreement.


 


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.


 












(1)            40%
warrant coverage (as per term sheet).


 

















 


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.


 


2

















 


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.


 


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 


 


3

















 


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.


 


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 and validly authorized, 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 


 


4

















 


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 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 the 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 


 


5

















 


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.


 


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.


 


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 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 


 


6

















 


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.  Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired by the Holder upon any exercise of this Warrant (or
otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares
of Common Stock then beneficially owned by such Holder and its Affiliates and
any other Persons whose beneficial ownership of Common Stock would be
aggregated with the Holder’s for purposes of Section 13(d) of the Exchange
Act, does not exceed 4.999% (the “Maximum Percentage”) of the total number of
issued and outstanding shares of Common Stock (including for such purpose the shares
of Common Stock issuable upon such exercise). 
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 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.  The Company’s obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section shall
be suspended (and shall not terminate or expire notwithstanding any contrary
provisions hereof) until such time, if any, as such shares of Common Stock may
be issued in compliance with such limitation, but in no event later than the
Expiration Date.  By written notice to
the Company, the Holder may waive the provisions of this Section or increase
or decrease the Maximum Percentage to any 


 


7

















 


other percentage
specified in such notice, but (i) any such waiver or increase will not be
effective until the 61st day after such notice is delivered to the Company, and
(ii) any such waiver or increase or decrease will apply only to the Holder and
not to any other holder of Warrants.


 


(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 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
such Holder’s share (vis-à-vis other Holders) of the aggregate purchase price
paid under the Purchase Agreement and taking into account any Warrant Shares
previously issued to such Holder).  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 all Warrants,
without giving effect to (x) any limits on the number of shares of Common Stock
that may be owned by a Holder at any one time, or (y) any additional Underlying
Shares that could be issuable as a result of any future possible adjustments
made under Section 9(d).


 


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 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 


 


8

















 


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 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.


 


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 


 


9

















 


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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