Exhibit 10.4
 
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED TO AN "ACCREDITED INVESTOR" (AS SUCH
TERM IS DEFINED IN THE RULES AND REGULATIONS PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED) IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES, IF EFFECTED IN
COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED.
 
Monaco Coach Corporation
 
Warrant To Purchase Common Stock
 

Warrant No.:  1
Number of Shares of Common Stock:  1,000,000
Date of Issuance:  November 7, 2008 ("Issuance Date")

 
Monaco Coach Corporation, a Delaware corporation, (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Ableco Holding LLC, the registered holder
hereof or its permitted assigns (the "Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to Purchase Common
Stock (including any Warrants to purchase Common Stock issued in exchange,
transfer or replacement hereof, the "Warrant"), at any time or times on or after
the date hereof, but not after 11:59 p.m., New York Time, on the Expiration Date
(as defined below), One Million (1,000,000) fully paid nonassessable shares of
Common Stock (as defined below) (the "Warrant Shares").  Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 17.  This Warrant is one of the Warrants to purchase Common
Stock (the "SPA Warrants" and holders of such SPA Warrants, the
"Warrantholders") issued pursuant to that certain Warrantholder Rights
Agreement, dated as of the Issuance Date by and among the Company and the Holder
referred to therein (the "Warrantholder Rights Agreement").
 

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1. EXERCISE OF WARRANT.
 
(a) Mechanics of Exercise.  Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any day on or after the date hereof in
whole or in part, by (i) delivery of a properly completed, written notice, in
the form attached hereto as Exhibit A (the "Exercise Notice"), of the Holder's
election to exercise this Warrant and (ii) (A) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash or by wire transfer of immediately available funds or
(B) if the conditions for Cashless Exercise (as defined in Section 1(d)) set
forth in Section 1(d) are satisfied, (by notifying the Company that this Warrant
is being exercised pursuant to a Cashless Exercise (as defined in Section
1(d)).  The Holder shall not be required to deliver the original Warrant in
order to effect an exercise hereunder.  Execution and delivery of the Exercise
Notice with respect to less than all of the Warrant Shares shall have the same
effect as cancellation of the original Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares.  On or
before the second Trading Day following the date on which the Company has
received each of the Exercise Notice and the Aggregate Exercise Price (or notice
of a Cashless Exercise) (the "Exercise Delivery Documents"), the Company shall
transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Delivery Documents to the Holder and the Company's transfer agent (the
"Transfer Agent").  On or before the third Trading Day following the date on
which the Company has received all of the Exercise Delivery Documents (the
"Share Delivery Date"), the Company shall (X) provided that the Transfer Agent
is participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the Company's
share register in the name of the Holder or its designee, for the number of
shares of Common Stock to which the Holder is entitled pursuant to such
exercise.  Upon delivery of the Exercise Delivery Documents, the Holder shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date such Warrant Shares are credited to the Holder's DTC
account or the date of delivery of the certificates evidencing such Warrant
Shares, as the case may be.  If this Warrant is submitted in connection with any
exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company shall as soon
as practicable and in no event later than three Business Days after any exercise
and at its own expense, issue a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised.  No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant, but
rather the number of shares of Common Stock to be issued shall be rounded up to
the nearest whole number.  The Company shall pay any and all taxes which may be
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant; provided that the Company shall not be required to pay
any income or transfer tax imposed on the issuance or delivery of shares of
Common Stock to any Holder other than the Holder as of the Issuance Date to the
extent such income or transfer tax would not have been imposed if the Holder as
of the Issuance Date had remained the Holder.
 

 
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(b) Exercise Price.  For purposes of this Warrant, "Exercise Price" means
$1.7197, subject to adjustment as provided herein.
 
(c) Company's Failure to Timely Deliver Securities.  If the Company shall fail
for any reason or for no reason to issue to the Holder within three (3) Trading
Days of receipt of the Exercise Delivery Documents, a certificate for the number
of shares of Common Stock to which the Holder is entitled and register such
shares of Common Stock on the Company's share register or to credit the Holder's
balance account with DTC for such number of shares of Common Stock to which the
Holder is entitled upon the Holder's exercise of this Warrant, and if on or
after such Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of shares of Common Stock issuable upon such exercise that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three Business Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such shares of Common
Stock) or credit such Holder's balance account with DTC shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock or credit such Holder's
balance account with DTC 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 Weighted Average Price on the date of
exercise.
 
(d) Cashless Exercise.  Notwithstanding anything contained herein to the
contrary, if a Registration Statement (as defined in the Registration Rights
Agreement) covering the resale of the Warrant Shares that are the subject of the
Exercise Notice (the "Unavailable Warrant Shares") is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula (a "Cashless Exercise"):
 
Net Number = (A x B) - (A x C)
                                                       B
 

 
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For purposes of the foregoing formula:
 
A  = the total number of shares with respect to which this Warrant is then being
exercised.
 
B  = the Closing Sale Price of the shares of Common Stock (as reported by
Bloomberg) on the date immediately preceding the date of the Exercise Notice.
 
C  = the Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.
 
(e) Disputes.  In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are not disputed
and resolve such dispute in accordance with Section 12.
 
(f) Limitations on Exercises.
 
(i) Beneficial Ownership.  The Company shall not effect the exercise of this
Warrant, and the Holder shall not have the right to exercise this Warrant, to
the extent that after giving effect to such exercise, such Person (together with
such Person's affiliates) would beneficially own in excess of 4.99% (the
"Maximum Percentage") of the shares of Common Stock outstanding immediately
after giving effect to such exercise.  For purposes of the foregoing sentence,
the aggregate number of shares of Common Stock beneficially owned by such Person
and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (A) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (B) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein.  Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").  For purposes of this Warrant, in determining the number
of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company's most recent
Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Current Report on Form 8-K or
other public filing with the Securities and Exchange Commission, as the case may
be, (2) a more recent public announcement by the Company or (3) any other notice
by the Company or the Transfer Agent setting forth the number of shares of
Common Stock outstanding.  For any reason at any time, upon the written or oral
request of the Holder, the Company shall within two (2) Business Days confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding. For purposes of this Warrant, in determining whether the Holder
(together with its affiliates) will not have beneficial ownership (together with
the beneficial ownership of the Holder's
 

 
4

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affiliates) of a number of shares of Common Stock which exceeds the Maximum
Percentage, the Company may rely solely on the representation of the Holder
contained in the Exercise Notice.  In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the SPA Warrants, by the Holder
and its affiliates since the date as of which such number of outstanding shares
of Common Stock was reported.  By written notice to the Company, the Holder may
from time to time increase or decrease the Maximum Percentage to any other
percentage not in excess of 9.99% specified in such notice; provided that (i)
any such increase will not be effective until the sixty-first (61st) day after
such notice is delivered to the Company, and (ii) any such increase or decrease
will apply only to the Holder and not to any other holder of SPA Warrants.  The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 1(f) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended beneficial ownership limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such limitation.
 
(ii) Principal Market Regulation.  The Company shall not be obligated to issue
any shares of Common Stock upon exercise of this Warrant and no Warrantholder
shall be entitled to receive any shares of Common Stock if the issuance of such
shares of Common Stock would exceed that number of shares of Common Stock which
the Company may issue upon exercise or conversion, as applicable, of the SPA
Warrants or otherwise without breaching the Company's obligations under the
rules or regulations of any applicable Eligible Market (the "Exchange Cap"),
except that such limitation shall not apply in the event that the Company (A)
obtains the approval of its shareholders as required by the applicable rules of
the Eligible Market for issuances of shares of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel to the Company that
such approval is not required, which opinion shall be reasonably satisfactory to
the Required Holders.  Until such approval or written opinion is obtained, no
Warrantholder shall be issued in the aggregate, upon exercise or conversion, as
applicable, of any SPA Warrants, shares of Common Stock in an amount greater
than the product of the Exchange Cap multiplied by a fraction, the numerator of
which is the total number of shares of Common Stock underlying the SPA Warrants
issued to such Warrantholder pursuant to the Warrantholder Rights Agreement on
the Issuance Date and the denominator of which is the aggregate number of shares
of Common Stock underlying the SPA Warrants issued to the Warrantholders
pursuant to the Warrantholder Rights Agreement on the Issuance Date (with
respect to each Warrantholder, the "Exchange Cap Allocation").  In the event
that any Warrantholder shall sell or otherwise transfer any of such
Warrantholder's SPA Warrants, the transferee shall be allocated a pro rata
portion of such Warrantholder's Exchange Cap Allocation, and the restrictions of
the prior sentence shall apply to such transferee with respect to the portion of
the Exchange Cap Allocation allocated to such transferee.  In the event that any
holder of SPA Warrants shall exercise all of such holder's SPA Warrants into a
number of shares of Common Stock which, in the aggregate, is less than such
holder's Exchange Cap Allocation, then the difference between such holder's
Exchange Cap Allocation and the number of shares of Common Stock actually issued
to such holder shall be allocated to the respective Exchange Cap Allocations of
the remaining holders of SPA Warrants on a pro rata basis in proportion to the
shares of Common Stock underlying the SPA Warrants then held by each such
holder.
 

 
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(g) Insufficient Authorized Shares.  If at any time while this Warrant remains
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon exercise of this Warrant at least a number of shares of Common
Stock equal to 130% (the "Required Reserve Amount") of the number of shares of
Common Stock as shall from time to time be necessary to effect the exercise of
all of this Warrant then outstanding (an "Authorized Share Failure"), then the
Company shall promptly use reasonable best efforts to increase the Company's
authorized shares of Common Stock to an amount sufficient to allow the Company
to reserve the Required Reserve Amount for this Warrant then
outstanding.  Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than ninety (90) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common
Stock.  In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders' approval of such increase in authorized shares of Common Stock and
to cause its board of directors to recommend to the stockholders that they
approve such proposal.
 
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows:
 
(a) Adjustment upon Issuance of shares of Common Stock.  If and whenever on or
after the Issuance Date the Company issues or sells, or in accordance with this
Section 2 is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding shares of Common Stock deemed to
have been issued by the Company in connection with any Excluded Securities) for
a consideration per share (the "New Issuance Price") less than the Exercise
Price (the "Applicable Price") in effect immediately prior to such issue or sale
or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to the product of (A) the Exercise Price in
effect immediately prior to such Dilutive Issuance and (B) the quotient
determined by dividing (1) the sum of (I) the product derived by multiplying the
Exercise Price in effect immediately prior to such Dilutive Issuance and the
number of shares of Common Stock Deemed Outstanding immediately prior to such
Dilutive Issuance plus (II) the consideration, if any, received by the Company
upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the
Exercise Price in effect immediately prior to such Dilutive Issuance by (II) the
number of shares of Common Stock Deemed Outstanding immediately after such
Dilutive Issuance.  Upon each such adjustment of the Exercise Price hereunder,
the number of Warrant Shares shall be adjusted to the number of shares of Common
Stock determined by multiplying the Exercise Price in effect immediately prior
to such adjustment by the number of Warrant Shares acquirable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.  For purposes of
determining the adjusted Exercise Price under this Section 2(a), the following
shall be applicable:
 

 
6

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

 
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(iii) Change in Option Price or Rate of Conversion.  If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or exercisable
or exchangeable for shares of Common Stock increases or decreases at any time
(except in each case in connection with the issuance of any Excluded
Securities), the Exercise Price and the number of Warrant Shares in effect at
the time of such increase or decrease shall be adjusted to the Exercise Price
and the number of Warrant Shares which would have been in effect at such time
had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased
conversion rate, as the case may be, at the time initially granted, issued or
sold.  For purposes of this Section 2(a)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the date of issuance of this
Warrant are increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the shares of
Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such increase or decrease.  No
adjustment pursuant to this Section 2(a)(iii) shall be made if such adjustment
would result in an increase of the Exercise Price then in effect or a decrease
in the number of Warrant Shares.
 
(iv) Calculation of Consideration Received.  In case any Option is issued
(except in connection with the issuance of any Excluded Securities) in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for a consideration of $0.01.  If any shares of Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the net amount received by the Company therefor.  If any shares of Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of publicly traded securities, in which case the amount of
consideration received by the Company will be the Closing Sale Price of such
security on the date of receipt.  If any shares of Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible Securities,
as the case may be.  The fair value of any consideration other than cash or
publicly traded securities will be determined jointly by the Company and the
Required Holders.  If such parties are unable to reach agreement within ten (10)
days after the occurrence of an event requiring valuation (the "Valuation
Event"), the fair value of such consideration will be determined within five (5)
Business Days after the tenth day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the
Required Holders.  The determination of such appraiser shall be final and
binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.
 
 
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(v) Record Date.  If the Company takes a record of the holders of shares of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
 
(b) Adjustment upon Subdivision or Combination of shares of Common Stock.  If
the Company at any time on or after the Issuance Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately increased.  If
the Company at any time on or after the Issuance Date  combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number of Warrant Shares will be proportionately decreased.  Any adjustment
under this Section 2(b) shall become effective at the close of business on the
date the subdivision or combination becomes effective.
 
(c) Voluntary Adjustment By Company. The Company may at any time during the term
of this Warrant reduce the then current  Exercise Price to any amount and for
any period of time deemed appropriate by the Board of Directors of the Company. 
 
(d) Other Events.  If any event occurs of the type contemplated by the
provisions of this Section 2 (except in connection with the issuance of any
Excluded Securities) but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.
 
3. RIGHTS UPON DISTRIBUTION OF ASSETS.  If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock generally, by way of return of capital or
otherwise not addressed by Section 2 above (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a "Distribution"), at any time after
the issuance of this Warrant, then, in each such case:

 
9

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(a) any Exercise Price in effect immediately prior to the close of business on
the record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the shares of Common Stock on the Trading Day immediately preceding
such record date minus the value of the Distribution (as determined in good
faith by the Company's Board of Directors) applicable to one share of Common
Stock, and (ii) the denominator shall be the Closing Bid Price of the shares of
Common Stock on the Trading Day immediately preceding such record date; and
 
(b) the number of Warrant Shares shall be increased to a number of shares equal
to the number of shares of Common Stock obtainable immediately prior to the
close of business on the record date fixed for the determination of holders of
shares of Common Stock entitled to receive the Distribution multiplied by the
reciprocal of the fraction set forth in the immediately preceding paragraph (a);
provided that in the event that the Distribution is of shares of common stock
("Other Shares of Common Stock") of a company whose common shares are traded on
a national securities exchange or a national automated quotation system, then
the Holder may elect to receive a warrant to purchase Other Shares of Common
Stock in lieu of an increase in the number of Warrant Shares, the terms of which
shall be identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Stock that would
have been payable to the Holder pursuant to the Distribution had the Holder
exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).
 
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
 
(a) Purchase Rights.  In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to all or substantially all of the record holders of any
class of shares of Common Stock (the "Purchase Rights"), then the Holder will be
entitled to acquire, upon the Holder's election and in lieu of any adjustments
to which the Holder is otherwise entitled under Section 2 above in respect to
such Purchase Rights upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder had
held the number of shares of Common Stock acquirable upon complete exercise of
this Warrant (without regard to any limitations on the exercise of this Warrant)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
 
 

 
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(b) Fundamental Transactions.  The Company shall not enter into or be party to a
Fundamental Transaction unless (i)  the Successor Entity assumes in writing all
of the obligations of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section (4)(b) pursuant to
written agreements in form and substance reasonably satisfactory to the Required
Holders and approved by the Required Holders prior to such Fundamental
Transaction (which approval shall not be unreasonably withheld), including
agreements to deliver to each holder of Warrants in exchange for such Warrants a
security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant, including, without limitation, an
adjusted exercise price equal to the value for the shares of Common Stock
reflected by the terms of such Fundamental Transaction, and exercisable for a
corresponding number of shares of capital stock equivalent to the shares of
Common Stock acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and satisfactory to the Required Holders and (ii) the
Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible
Market.  Upon the occurrence of any Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Warrant referring to the
"Company" shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such Successor Entity had
been named as the Company herein.  Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the shares of the Common
Stock (or other securities, cash, assets or other property) purchasable upon the
exercise of the Warrant prior to such Fundamental Transaction, such shares of
the publicly traded Common Stock (or its equivalent) of the Successor Entity
(including its Parent Entity) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been
converted immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant.  In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Common Stock are
entitled to receive securities or other assets with respect to or in exchange
for shares of Common Stock (a "Corporate Event"), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right
to receive upon an exercise of this Warrant at any time after the consummation
of the Fundamental Transaction but prior to the Expiration Date, in lieu of the
shares of the Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had the Warrant been exercised immediately prior
to such Fundamental Transaction.  Provision made pursuant to the preceding
sentence shall be in a form and substance reasonably satisfactory to the
Required Holders.  The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall be
applied without regard to any limitations on the exercise of this Warrant.
 
(c) Notwithstanding the foregoing and the provisions of Section 4(b) above, in
the event of a Fundamental Transaction, at the request of the Holder delivered
before the sixtieth (60th) day after the consummation of such Fundamental
Transaction, the Company (or the Successor Entity) shall purchase this Warrant
from the Holder by paying to the Holder, within five (5) Business Days of such
request (or, if later, on the effective date of the Fundamental Transaction),
cash in an amount equal to the Black-Scholes Value of the remaining unexercised
portion of this Warrant on the date of such Fundamental Transaction.
 

 
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5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.  Except as otherwise specifically
provided herein and in the Warrantholder Rights Agreement, the Holder, solely in
such Person's capacity as a holder of this Warrant, shall not be entitled to
vote or receive dividends or be deemed the holder of share capital of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder, solely in such Person's capacity as the
Holder of this Warrant, any of the rights of a stockholder of the Company or any
right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on the Holder to purchase any
securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.  Notwithstanding this Section 6, the Company shall
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.
 
6. NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company
will not, by amendment of its Articles of Incorporation, Bylaws or through any
reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, for the principal purpose of avoiding or seeking to avoid the observance
or performance of any of the terms of this Warrant, and will at all times in
good faith carry out all the provisions of this Warrant and use reasonable best
efforts to protect the rights of the Holder.  Without limiting the generality of
the foregoing, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, use reasonable
best efforts to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, 130% of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
 
7. REISSUANCE OF WARRANTS.
 
(a) Transfer of Warrant.  If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the Holder a new Warrant (in accordance with
Section 7(d)), registered as the Holder may request, representing the right to
purchase the number of Warrant Shares being transferred by the Holder and, if
less than the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.
 
 
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(b) Lost, Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this Warrant,
the Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.
 
(c) Exchangeable for Multiple Warrants.  This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Warrant or Warrants (in accordance with Section 7(d)) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional shares of
Common Stock shall be given.
 
(d) Issuance of New Warrants.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and (iv)
shall have the same rights and conditions as this Warrant.
 
8. NOTICES.  Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with Section
8.14 of the Warrantholder Rights Agreement.  The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore.  Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) promptly after any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen days prior to the date
on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the shares of Common Stock, (B) with respect to
any grants, issuances or sales of any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property generally to holders
of shares of Common Stock or (C) for determining rights to vote with respect to
any Fundamental Transaction, dissolution or liquidation, provided in each case
that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.
 
9. AMENDMENT AND WAIVER.  Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided that no such action may increase the exercise price of any SPA Warrant
or decrease the number of shares or class of stock obtainable upon exercise of
any SPA Warrant without the written consent of the Holder.  No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the SPA Warrants then outstanding.
 

 
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10. GOVERNING LAW.  This Warrant shall be governed by and construed and enforced
in accor­dance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
 
11. CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly drafted
by the Company and all the Warrantholders and shall not be construed against any
person as the drafter hereof.  The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
 
12. DISPUTE RESOLUTION.  In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall submit the disputed determinations or arithmetic calculations via
facsimile within two Business Days of receipt of the Exercise Notice giving rise
to such dispute, as the case may be, to the Holder.  If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two Business Days submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company's independent,
outside accountant.  The Company shall use its reasonable best efforts to cause
at its expense the investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the Holder
of the results no later than ten Business Days from the time it receives the
disputed determinations or calculations.  Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.
 
13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies
provided in this Warrant shall be cumulative and in addition to all other
remedies available under this Warrant and the other Transaction Documents, at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of
this Warrant shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
 

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14. LEGENDS.  
 
(a) Restrictive Legends .  Except as otherwise permitted by this Section 14,
each Warrant (including each Warrant issued upon the transfer of any Warrant)
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
 
"THIS WARRANT AND COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR
THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER AND APPLICABLE STATE
SECURITIES LAWS.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
TO AN "ACCREDITED INVESTOR" (AS SUCH TERM IS DEFINED IN THE RULES AND
REGULATIONS PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED) IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES, IF EFFECTED IN COMPLIANCE WITH THE ACT."
 
Except as otherwise permitted by this Section 14, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
 
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS
AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER AND APPLICABLE
STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED TO AN "ACCREDITED INVESTOR" (AS SUCH TERM IS DEFINED IN THE RULES AND
REGULATIONS PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED) IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES, IF EFFECTED IN COMPLIANCE WITH THE ACT."
 
(b) Termination of Restrictions.  The restrictions imposed on the
transferability of Restricted Securities set forth in the legend of this Warrant
shall cease and terminate as to any particular Restricted Securities (i) when a
registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (ii) when such
securities are sold pursuant to Rule 144 or Rule 144A (or any similar provision
then in force) under the Securities Act, or (iii) when such restrictions are no
longer required or necessary in order to protect the Company against a violation
of the Securities Act upon any sale or other disposition of such securities
without registration
 

 
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thereunder.  Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the Holder shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing the legend set forth
in this Warrant.  If the Company shall fail for any reason or for no reason to
issue to the holder of the Securities within three (3) Trading Days (as defined
below) shares of Common Stock to deliver in satisfaction of a sale by the holder
of such Securities that the holder anticipated receiving without legend from the
Company, then the Company shall, within three (3) Business Days after the
holder's request and in the holder's discretion, either (i) pay cash to the
holder in an amount equal to the Buy-In Price, at which point the Company's
obligation to deliver such unlegended Securities shall terminate, or (ii)
promptly honor its obligation to deliver to the holder such unlegended
Securities as provided above 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 Weighted Average Price on the date of
exercise.
 
15. NOTICES OF CORPORATE ACTION.
 
In the event of:
 
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any Common Stock or any other securities or
property, or to receive any other right, or
 
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the securities of the Company, any consolidation or merger
involving the Company and any other Person, any transaction or series of
transactions in which more than 50% of the voting securities of the Company are
transferred to another Person, or any transfer, sale or other disposition of all
or substantially all the assets of the Company to any other Person, or
 
(c) any voluntary or involuntary dissolution, liquidation or winding-up of the
Company, the Company shall mail to each Holder of a Warrant a notice specifying
(i) the date or expected date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right, and (ii) the date or expected date on
which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, sale, disposition, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be fixed, as of
which the holders of Common Stock (or Other Securities) shall be entitled to
exchange their Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up.  Such notice shall be mailed at least 15 days prior to the date
therein specified.
 
16. TRANSFER.  This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company, provided that any transfer shall
comply with the Securities Act and other applicable securities laws and
regulations.  Upon any partial transfer, the Company shall at its expense issue
and deliver to the Holder a new Warrant of like tenor, in the name of the
Holder, which shall be exercisable for such number of shares of Common Stock
with respect to which rights under this Warrant were not so transferred.

 
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17. SEVERABILITY. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the
parties.  The parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
 
18. CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:
 
(a) "Approved Stock Plan" means any employee benefit plan, stock grant, stock
option plan or purchase plan, or stock option exchange plan or other employee
stock incentive or similar agreement which has been approved by the Board of
Directors of the Company, pursuant to which the Company's securities may be
issued to any employee, consultant, officer or director for services provided to
the Company, including, without limitation, the Monaco Coach Corporation 1993
Stock Plan, as amended and restated through May 17, 2006, and the Monaco Coach
Corporation 2007 Employee Stock Purchase Plan.
 
(b) "Black-Scholes Value" means the value of this Warrant based on the Black and
Scholes Option Pricing Model obtained from the "OV" function on Bloomberg
determined as of the day of closing of the applicable Fundamental Transaction
for pricing purposes and reflecting (i) a risk-free interest rate corresponding
to the U.S. Treasury rate for a period equal to the remaining term of this
Warrant as of such date of request, (ii) an expected volatility equal to the
greater of 100% and the 100 day volatility obtained from the HVT function on
Bloomberg as of the day immediately following the public announcement of the
applicable Fundamental Transaction and (iii) the underlying price per share used
in such calculation shall be the sum of the price per share being offered in
cash, if any, plus the value of any non cash consideration, if any, being
offered in the Fundamental Transaction.
 
(c) "Bloomberg" means Bloomberg Financial Markets.
 
(d) "Business Day" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

 
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(e) "Closing Bid Price" and "Closing Sale Price" means, for any security as of
any date, the last closing bid price and last closing trade price, respectively,
for such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price, as the case may be,
then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price or last trade price, respectively, of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the "pink sheets" by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.).  If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the
case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder.  If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 12.  All such determinations
to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation
period.
 
(f) "Common Stock" means (i) the Company's shares of Common Stock, par value
$0.01 per share, and (ii) any share capital into which such Common Stock shall
have been changed or any share capital resulting from a reclassification of such
Common Stock.
 
(g) "Convertible Securities" means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
shares of Common Stock.
 
(h) "Eligible Market" means the Principal Market, the American Stock Exchange,
The NASDAQ Global Market., The NASDAQ Capital Market or The NASDAQ Global Select
Market.
 
(i) "Excluded Securities" means any Common Stock issued or issuable: (i) in
connection with any Approved Stock Plan; (ii) upon the exercise of the SPA
Warrants; (iii) in connection with any stock split, stock dividend,
recapitalization or similar transaction by the Company for which adjustment is
made pursuant to Section 2(b); (iv) pursuant to a bona fide firm commitment
underwritten public offering with a nationally recognized underwriter which
generates gross proceeds to the Company in excess of $4,000,000 (other than an
"at-the-market offering" as defined in Rule 415(a)(4) under the Securities Act
and "equity lines"); (v) in connection with any acquisition by the Company,
whether through an acquisition of stock or a merger of any business, assets or
technologies the primary purpose of which is not to raise equity capital (a
"Qualifying Acquisition"); provided such amount does not exceed, in the
aggregate 10% of the outstanding shares of Common Stock in any twelve month
period (the "10% Limit"); and provided further that in the event that a
Qualifying Acquisition exceeds the 10% Limit, any anti-dilution adjustments made
pursuant to Section 2(a) above shall only apply to the extent that such
Qualifying Acquisition exceeds the 10% Limit; (vi) upon exercise of any Options
or Convertible Securities which are outstanding on the day immediately preceding
the Issuance Date, provided that the terms of such Options or Convertible
Securities are not amended, modified or changed on or after the Issuance Date;
or (vii) in respect of subdivisions, stock dividends or capital reorganizations
affecting the Common Stock.
 

 
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(j) "Expiration Date" means the date ten years after the Issuance Date or, if
any such date falls on a day other than a Business Day or on which trading does
not take place on the Principal market (a "Holiday"), the next day that is not a
Holiday.
 
(k) "Fundamental Transaction" means that the Company shall directly or
indirectly, in one or more related transactions, (i) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another Person
(unless (A) the Company is the surviving corporation, (B) the shareholders of
the Company prior to such merger or consolidation continue to hold immediately
thereafter a majority of the aggregate ordinary voting power represented by
issued and outstanding Common Stock of such surviving corporation and (C) the
aggregate value of such consolidation or merger does not exceed $3,000,000);
(ii) sell, assign, transfer, convey or otherwise dispose of all or substantially
all of the properties or assets of the Company to another Person; (iii) allow
another Person to make a purchase, tender or exchange offer that is accepted by
the holders of more than the 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer); (iv) consummate a stock purchase agreement
or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than the 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock purchase agreement or other business
combination); (v) reorganize, recapitalize or reclassify its Common Stock; or
(vi) any "person" or "group" (as these terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act), become the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the
aggregate ordinary voting power represented by issued and outstanding Common
Stock.
 
(l) "Options" means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible Securities.
 
(m) "Parent Entity" of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.
 
(n) "Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
 
(o) "Principal Market" means The New York Stock Exchange, Inc.
 
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(p) "Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of the Issuance Date by and among the Company and the
Warrantholders.
 
(q) "Required Holders" means the holders of the SPA Warrants representing at
least a majority of shares of Common Stock underlying the SPA Warrants then
outstanding.
 
(r) "Restricted Securities" shall mean (i) any Warrants bearing the applicable
legend set forth in Section 14, (ii) any Common Stock issued or issuable upon
the exercise of Warrants which are (or, upon issuance, will be) evidenced by a
certificate or certificates bearing the applicable legend set forth in such
Section 14, and (ii) any Common Stock issued subsequent to the exercise of any
of the Warrants as a dividend or other distribution with respect to, or
resulting from a subdivision of the outstanding Common Stock into a greater
number of shares of Common Stock by reclassification, stock splits or otherwise,
or in exchange for or in replacement of the Common Stock issued upon such
exercise, which are evidenced by a certificate or certificates bearing the
applicable legend set forth in such Section.
 
(s) "Securities Act" shall mean the Securities Act of 1933, as amended from time
to time, and the rules and regulations thereunder, or any successor statute.
 
(t) "Successor Entity" means the Person (or, if so elected by the Required
Holders, the Parent Entity) formed by, resulting from or surviving any
Fundamental Transaction or the Person (or, if so elected by the Required
Holders, the Parent Entity) with which such Fundamental Transaction shall have
been entered into.
 
(u) "Trading Day" means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded; provided that
"Trading Day" shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York Time).
 
 

 
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(v) "Weighted Average Price" means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during
the period beginning at 9:30:01 a.m., New York Time (or such other time as the
Principal Market publicly announces is the official open of trading), and ending
at 4:00:00 p.m., New York Time (or such other time as the Principal Market
publicly announces is the official close of trading) as reported by Bloomberg
through its "Volume at Price" functions, or, if the foregoing does not apply,
the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such market publicly announces is the official open of trading), and ending
at 4:00:00 p.m., New York Time (or such other time as such market publicly
announces is the official close of trading) as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.).  If the Weighted Average Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Weighted Average Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder.  If the Company and the Holder are unable to
agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 12.  All such determinations are to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.
 
[Signature Page Follows]

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

 
MONACO COACH CORPORATION
     
By:
/s/ P. Martin Daley
   
Name:  P. Martin Daley
   
Title:  Vice President

 
 
 

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 EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK

 
Monaco Coach Corporation

To:           [___________]
Fax:           [___________]
 
The undersigned holder hereby exercises the right to purchase _________________
of the shares of Common Stock ("Warrant Shares") of Monaco Coach Corporation, a
Delaware corporation (the "Company"), evidenced by the attached Warrant to
Purchase Common Stock (the "Warrant").  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

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

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

 
____________
a "Cashless Exercise" with respect to _______________ Warrant Shares.

 
Notwithstanding anything to the contrary contained herein, this Exercise Notice
shall constitute a representation by the holder of the Warrant submitting this
Exercise Notice that, after giving effect to the exercise provided for in this
Exercise Notice, such holder (together with its affiliates) will not have
beneficial ownership (together with the beneficial ownership of such Person's
affiliates) of a number of shares of Common Stock which exceeds the Maximum
Percentage of the total outstanding shares of Common Stock as determined
pursuant to the provisions of Section 1(f)(i) of this Warrant.
 
2.           Payment of Exercise Price.  In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the
sum of $___________________ to the Company in accordance with the terms of the
Warrant.

3.           Delivery of Warrant Shares.  The Company shall deliver to the
holder __________ Warrant Shares in accordance with the terms of the Warrant.

4.           DTC Balance Account.  If applicable, the Company shall deliver the
Warrant Shares to the following balance account with DTC through the Deposit
Withdrawal Agent Commission system: _______________.

 
 

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Date: _______________ ____, ______

 

   
Name of Registered Holder
             
By:  
     
Name:
   
Title:
 

 
 
 

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