exhibit10_4.htm


    


    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").

     

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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

     

    


    
      
        
           


        

        
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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:

     

    


    
      
        
           


        

        
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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:

    


    
      
        
           


        

        
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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.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (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).

     

     

    


    
      
        
           


        

        
          20

          
            

          

        

        
           


        

      

    

    


     

    
      (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]

    


    


    
      
        
           


        

        
          21

          
            

          

        

        
           


        

      

    

    


    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

              


      

      


    

     

    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


     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: _______________.

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    Date:
_______________ ____, ______

    


     

    
      
        	 
      	 
      
	
                Name
      of Registered Holder

              	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                By:  

              	 
      	 
      
	 
      	
                Name:

              	 
      
	 
      	
                Title: