Exhibit 10.2


 


MONACO COACH
CORPORATION


1993 STOCK PLAN


PERFORMANCE SHARE


AGREEMENT


 


THIS PERFORMANCE
SHARE AGREEMENT (the “Agreement”) is effective as of (Date) (the “Date of Grant”),
between MONACO COACH CORPORATION (hereinafter called the “Company”) and (NAME) (hereinafter called the “Participant”). Unless
otherwise defined herein, the terms defined in the amended and restated 1993
Stock Plan (the “Plan”) will have the same defined meanings in this Agreement.


 


1.                                       Award Grant. The Company hereby
awards to Participant a target number of Performance Shares equal to (   #  ) under
the Plan, subject to the Company’s
stockholders approving the Plan, as amended and restated, at the Company ‘s
2006 Annual Stockholder Meeting. This Award relates to the Performance Period
from January 1, [YEAR] through December 31, [YEAR]. In the event the
Company’s stockholders do not approve the Plan, as amended and restated, at the
Company’s 2006 Annual Stockholder Meeting, this Award of Performance Shares
will immediately terminate and Participant will have no further rights to
acquire Shares pursuant to this Award. The number of Performance Shares that a
Participant may earn will depend upon achievement of targets of Total
Shareholder Return and Return on Net Assets for the Performance Period and will
be determined in accordance with the Performance Share Award Program, a copy of
which is attached hereto as Appendix A. In accordance with the Performance
Share Award Program, the number of the Performance Shares that Participant may earn
will range from zero percent (0%) of the target number of Performance Shares to
two hundred percent (200%) of the target number of Performance Shares. The
number of such Shares shall be determined following the end of the Performance
Period, in accordance with the terms and conditions set forth in the
Performance Share Award Program.


 


2.                                       Obligation
to Pay. Each Performance Share represents the right to
receive one Share to the extent it is earned. Unless and until the Performance Shares are earned in the manner set forth in Section 1
and the Performance Share Award Program, Participant will have no right to
payment of such Performance Shares. Prior to actual
payment of any earned Performance
Shares,
such Performance Shares will represent an
unsecured obligation. Payment of any earned Performance Shares shall be made in
whole Shares only. Notwithstanding the foregoing provisions of this Section 2,
in the event the Company (or the Subsidiary employing Participant) terminates
Participant as an Employee without Cause or Participant ceases to be an
Employee as the result of Participant’s death or Disability, Participant will
be entitled to receive a pro-rated amount of the Performance Shares that would
have actually been earned during the Performance Period had Participant
remained an Employee through the end of the Performance Period based on the
amount of time Participant was an Employee during the Performance Period, which
will be settled at the time they would have otherwise been paid pursuant to the
Performance Share Award Program. In addition, in the event Participant ceases
to be an Employee as the result of his or her Retirement, Participant will be
entitled to receive 100% of the Performance Shares that would have otherwise
been earned under the Performance Share Award Program had Participant remained
an Employee through the end of the Performance Period, which will be settled at
the time they would have otherwise been paid pursuant to the Performance Share
Award Program. In addition, in the event of a Change in Control that occurs
during the Performance Period while Participant is an Employee, a number of
Performance Shares will be earned and paid out as if all performance objectives
under the Performance Share Award Program had been earned at target, which will
be settled upon consummation of the Change in Control. Subject to the foregoing
acceleration provisions


 

















 


and any such provisions set forth in the Plan, in the
event Participant ceases to be an Employee for any or no reason before
Participant earns the Performance Shares pursuant to this Award, the Performance
Share Award and Participant’s right to acquire any Shares hereunder will
immediately terminate.


 


For purposes of this Section 2, “Cause”
is defined as (i) an act of dishonesty made by Participant in connection
with Participant’s responsibilities as an Employee, (ii) Participant’s
conviction of, or plea of nolo contendere to, a felony, (iii) Participant’s
gross misconduct, or (iv) Participant’s continued substantial violations
of his employment duties after Participant has received a demand for
performance from the Company.


 


3.                                       Payment
after Earning. Any Performance Shares that are earned or are deemed earned in
accordance with Section 2 will be paid to Participant (or in the event of
Participant’s death, to his or her estate) in whole Shares, subject to
Participant satisfying any applicable tax withholding obligations as set forth
in Section 7. Notwithstanding the foregoing sentence, to the extent necessary to avoid the imposition of
any additional tax or income recognition under Section 409A of the Code
prior to or upon the actual payment of Shares pursuant to this Award of Performance Shares that are
earned in accordance with Section 2 will be paid to Participant (or in the
event of Participant’s death, to his or her estate) no earlier than six (6) months
and one (1) day following the date of Participant’s termination of
employment with the Company (or any Affiliate), subject to Section 7. Participant will not be required to make any
additional monetary payment (other than applicable tax withholding, if any)
upon settlement of the Award.


 


4.                                       Payments after Death. Any distribution or delivery to be made to
Participant under this Agreement will, if Participant is then deceased, be made
to Participant’s designated beneficiary, or if no beneficiary survives
Participant, the administrator or executor of Participant’s estate. Any such
transferee must furnish the Company with (a) written notice of his or her
status as transferee, and (b) evidence satisfactory to the Company to
establish the validity of the transfer and compliance with any laws or
regulations pertaining to said transfer.


 


5.                                       Rights as
Stockholder. Except as set forth in Section 4, neither Participant nor any
person claiming under or through Participant will have any of the rights or
privileges of a stockholder of the Company in respect of any Shares deliverable
hereunder, unless and until certificates representing such Shares will have
been issued, recorded on the records of the Company or its transfer agents or
registrars, and delivered to Participant.


 


6.                                       Effect on
Employment. Participant acknowledges and agrees that the vesting of Performance
Shares pursuant to Section 2 hereof is earned only by Participant
continuing to be an Employee through the applicable vesting dates (and not
through the act of being hired or acquiring Shares hereunder). Participant
further acknowledges and agrees that this Agreement, the transactions
contemplated hereunder and the vesting provisions set forth herein do not
constitute an express or implied promise of Participant continuing to be an
Employee for the vesting period, for any period, or at all, and will not
interfere with the Participant’s right or the right of the Company (or the
Affiliate employing Participant) to terminate Participant as an Employee at any
time, with or without cause.


 


7.                                       Tax Withholding. Notwithstanding any contrary provision of this
Agreement, no certificate representing Shares will be issued to Participant,
unless and until satisfactory arrangements (as determined by the Administrator)
will have been made by Participant with respect to the payment of income,
employment and other taxes which the Company determines must be withheld with
respect to such Shares so issuable. All income, employment and other taxes
related to the Performance Share Award and any Shares delivered in payment
thereof are the sole responsibility of Participant. The Administrator, in its
sole


 

















 


discretion
and pursuant to such procedures as it may specify from time to time, may permit
Participant to satisfy such tax withholding obligation, in whole or in part by
one or more of the following (without limitation): (a) paying cash, (b) electing
to have the Company withhold otherwise deliverable Shares having a Fair Market
Value equal to the amount required to be withheld, (c) delivering to the
Company already vested and owned Shares having a Fair Market Value equal to the
amount  required to be withheld, or (d) selling
a sufficient number of such Shares otherwise deliverable to Participant through
such means as the Company may determine in its sole discretion (whether
through a broker or otherwise) equal to the amount required to be withheld. If
Participant fails to make satisfactory arrangements for the payment of any
required tax withholding obligations hereunder at the time this Award is
otherwise scheduled to vest pursuant to Section 2, Participant will
permanently forfeit the portion of the Award that so vests and the right to
receive any Shares with respect thereto and the Award will be returned to the
Company at no cost to the Company.


 


8.                                       Additional
Conditions to Issuance of Stock. If at any time the Company will determine, in
its discretion, that the listing, registration or qualification of the Shares
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory authority is necessary or desirable
as a condition to the issuance of Shares to Participant (or his estate), such
issuance will not occur unless and until such listing, registration,
qualification, consent or approval will have been effected or obtained free of
any conditions not acceptable to the Company. Where the Company determines that
the delivery of the payment of any Shares will violate federal securities laws
or other applicable laws, the Company will defer delivery until the earliest
date at which the Company reasonably anticipates that the delivery of Shares
will no longer cause such violation. The Company will make all reasonable efforts
to meet the requirements of any such state or federal law or securities
exchange and to obtain any such consent or approval of any such governmental
authority.


 


9.                                       Restrictions
on Sale of Securities. Subject to Section 8, the Shares issued as payment
for vested Performance Shares awarded under this Agreement will be registered
under the federal securities laws and will be freely tradable upon receipt. However,
Participant’s subsequent sale of the Shares will be subject to any market
blackout-period that may be imposed by the Company and must comply with
the Company’s insider trading policies, and any other applicable securities
laws.


 


10.                                 Successors. Subject to the
limitation on the transferability of this grant contained herein, this
Agreement will be binding upon and inure to the benefit of the heirs, legatees,
legal representatives, successors and assigns of the parties hereto.


 


11.                                 Address for
Notices. Any notice to be given to the Company under the terms of this Agreement
will be addressed to the Company, in care of it Secretary at Monaco Coach
Corporation, 91320 Coburg Industrial Way, Coburg, Oregon 97408, or at such
other address as the Company may hereafter designate in writing.


 


12.                                 Transferability. Except to the limited
extent provided in Section 4, this grant and the rights and privileges
conferred hereby will not be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and will not be subject to
sale under execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or
any right or privilege conferred hereby, or upon any attempted sale under any
execution, attachment or similar process, this grant and the rights and
privileges conferred hereby immediately will become null and void.


 

















 


13.                                 Plan Governs. This Agreement is
subject to all terms and provisions of the Plan. In the event of a conflict
between one or more provisions of this Agreement and one or more provisions of
the Plan, the provisions of the Plan will govern.


 


14.                                 Administrator
Authority. The Administrator will have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret or
revoke any such rules (including, but not limited to, the determination of
whether or not any Performance Shares have vested). All actions taken and all
interpretations and determinations made by the Administrator in good faith will
be final and binding upon Participant, the Company and all other interested
persons. No member of the Administrator will be personally liable for any
action, determination or interpretation made in good faith with respect to the
Plan or this Agreement.


 


15.                                 Electronic
Delivery. The Company may, in its sole discretion, decide to deliver any documents
related to Performance Shares awarded under the Plan or future Performance
Shares that may be awarded under the Plan by electronic means or request
Participant’s consent to participate in the Plan by electronic means. Participant
hereby consents to receive such documents by electronic delivery and agrees to
participate in the Plan through an on-line or electronic system established and
maintained by the Company or another third party designated by the Company.


 


16.                                 Captions. Captions provided
herein are for convenience only and are not to serve as a basis for
interpretation or construction of this Agreement.


 


17.                                 Agreement
Severable. In the event that any provision in this Agreement will be held invalid
or unenforceable, such provision will be severable from, and such invalidity or
unenforceability will not be construed to have any effect on, the remaining
provisions of this Agreement.


 


18.                                 Entire Agreement. This Agreement
constitutes the entire understanding of the parties on the subjects covered. The
Participant expressly warrants that he or she is not executing this Agreement
in reliance on any promises, representations, or inducements other than those
contained herein.


 


19.                                 Modifications
to the Agreement. This Agreement constitutes the entire understanding of
the parties on the subjects covered. The Participant expressly warrants that he
or she is not accepting this Agreement in reliance on any promises,
representations, or inducements other than those contained herein. Modifications
to this Agreement or the Plan can be made only in an express written contract
executed by a duly authorized officer of the Company. Notwithstanding anything
to the contrary in the Plan or this Agreement, the Company reserves the right
to revise this Agreement as it deems necessary or advisable, in its sole
discretion and without the consent of Participant, to comply with Section 409A
of the Code or to otherwise avoid
imposition of any additional tax or income recognition under Section 409A
of the Code prior to the actual payment of Shares pursuant to this Award of
Performance Shares.


 


20.                                 Amendment,
Suspension or Termination of the Plan. By accepting this Award, the Participant
expressly warrants that he or she has received a right to acquire Shares under
the Plan, and has received, read and understood a description of the Plan. The
Participant understands that the Plan is discretionary in nature and may be
modified, suspended or terminated by the Company at any time.


 


21.                                 Governing
Law.
This Agreement shall be governed by the laws of the State of Oregon, without
giving effect to the conflict of law principles thereof. For purposes of
litigating any dispute that arises under this Award of Performance Shares or
this Agreement, the parties hereby submit to and consent to the jurisdiction of
the State of Oregon, and agree
that such litigation shall be conducted in the courts of


 

















 


Lane County, Oregon, or the federal courts for the United
States located in or around Lane County, Oregon, and no other courts, where
this Award of Performance Shares is made and/or to be performed.


 


IN WITNESS WHEREOF, the parties have signed
this Agreement effective as of the date and year indicated above.


 


	
   

  	
  MONACO COACH CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED

  	
   

  	
   

  	
   

  
	
   

  	
    Participant

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PRINT NAME:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
   

  	
   

  	
   

  
								



 

















 


Appendix A


 


PERFORMANCE SHARE AWARD PROGRAM


 

















 


Monaco Coach Corporation


 


Performance Share Award Program


 


Introductory Note


 


The following Performance Share Award Program (the “PSA Program”) was
approved by the Board of Directors (the “Board”) of Monaco Coach Corporation
(the “Company”) on March 20, 2006. Awards under the PSA Program will
be granted under the Company’s 1993 Stock Plan (the “Plan”). Capitalized terms
not otherwise defined herein will have the meanings given to them under the
Plan.


 


The description provided herein sets forth the specific terms and
conditions of the PSA Program covering eligibility, performance measures,
Performance Period and other key factors not described in the Plan. Each year
when a new three-year Performance Period commences, the exhibits detailing the
specific performance goals for a Performance Period under the PSA Program will
be updated. Each participant in the PSA Program will receive an agreement that
defines the individual terms for participation in a Performance Period.


 


Purpose


 


The purpose of the PSA Program is to provide a means for rewarding
executives for their success in driving long-term performance results, which
increase shareholder value.


 


Eligibility


 


All Company executives are eligible to participate in the PSA Program,
unless otherwise specifically excluded by the Compensation Committee of the
Board (the “Committee”). Each executive participating in the PSA Program is
referred to as a “Participant.”  To be
eligible to receive an Award, an executive must be actively employed by the
Company or a Subsidiary of the Company on the date a Performance Period
commences. Participation for less than the full Performance Period under
certain circumstances set forth herein or the occurrence of a Change in Control
will allow a Participant to receive all or portion of his or her Award for a
particular Performance Period. An employee who becomes an executive after the
commencement of a Performance Period and within the first ninety (90) days of
such Performance Period may receive a pro-rated Award for such Performance
Period, as determined by the Committee (which employee’s target Award opportunity
must be established no later than the latest possible date that will not
jeopardize such employee’s Award qualification as performance based
compensation under Section 162(m) of the Internal Revenue Code of 1986 as
amended).


 


Termination of Employment and Change in Control


 


In the event the Company (or the Subsidiary employing a Participant)
terminates a Participant as an Employee without Cause or Participant ceases to
be an Employee as the result of Participant’s death or Disability, Participant
will be entitled to receive a pro-rated amount of the Award that would have
actually been earned during the Performance Period had Participant remained an
Employee through the end of the Performance Period based on the amount of time
Participant was an Employee during the Performance Period, which will be
settled at the time it 


 

















 


would have otherwise been paid had Participant remained employed
through the end of the Performance Period. In addition, in the event a
Participant ceases to be an Employee as the result of his or her Retirement,
Participant will be entitled to receive 100% of the Award that would have
otherwise been earned had Participant remained employed through the end of the
Performance Period, which will be settled at the time it would have otherwise
been paid had Participant remained employed through the end of the Performance
Period. In addition, in the event of a Change in Control that occurs during the
Performance Period while a Participant is an Employee, an Award will be deemed
earned and paid out as if all performance objectives under the Performance
Share Award Program had been earned at target, which will be settled upon
consummation of the Change in Control. Subject to the foregoing acceleration
provisions and any such provisions set forth in the Plan, in the event
Participant ceases to be an Employee for any or no reason before Participant
earns any portion of an Award, the Award and Participant’s right to acquire any
Shares thereunder will immediately terminate.


 


Performance Period


 


A Performance Period will begin on January 1 of each year and continue
to December 31, three years hence. On January 1 of each year a new three-year
Performance Period will commence, except that initially the PSA Program will
commence with two Performance Periods that will run concurrently with one
Performance Period having a period of two years and the other a period of three
years.


 


Award


 


Each Participant in the PSA Program has a target Award opportunity for
the Performance Period, which must be established no later than the latest
possible date that will not jeopardize an Award’s qualification as performance
based compensation under Section 162(m) of the Internal Revenue Code of 1986 as
amended. This target is determined by the Committee. The Award opportunity is
established for each executive pay grade level considering competitive
performance share award opportunities for comparable positions.


 


Performance Goals


 


Participants will have their actual Award payment determined based upon
the Company’s performance. The performance goals established for a Performance
Period and the formula for determining the “Performance Share Award Factor,” as
defined below, will be displayed in Exhibit A.


 


PSA Program Award Formula


 


Participants are limited to a maximum Award equal to 200% of the target
Award established for each Participant by the Committee. Final Awards will be
distributed in shares of the Company’s Common Stock. The Performance Share
Award Factor is the combined performance level achieved by the Company against
the two target measures of Total Shareholder Return (“TSR”) and Return on Net
Assets (“RONA”).


 

















 


The Award formula is provided below:


 


	
  PSA Factors

  	
   

  	
  X

  	
   

  	
  Participant’s Target Award

  (Base Pay x Target percent

  	
   

  	
  =

  	
   

  	
  Final 

  Performance

  
	
  (TSR & RONA)

  	
   

  	
   

  	
   

  	
  ÷ by Stock Price on Award Date)

  	
   

  	
   

  	
   

  	
  Share Award

  



 


Tax Withholding


 


The full value of the shares of Common Stock paid pursuant to an Award
is considered wages and is therefore subject to tax withholding at the time of
settlement. To satisfy such tax withholding obligations, a Participant may
request that a sufficient number of Shares be withheld to satisfy such tax
withholding obligation, or he or she may provide cash payment to cover such tax
withholding obligation.


 


Audit and Approval of Awards


 


The Corporate Controller will review the financial calculations
necessary to determine the performance against TSR and RONA measures as shown
in Exhibit A, as well as other steps in determining the actual Award for each
Participant, before Awards are settled. The Committee will approve all Awards
prior to payout. Notwithstanding any contrary provision of this PSA Program,
the Committee, in its sole discretion, may eliminate or reduce an actual Award
payable to any Participant below that which otherwise would be payable under
the Award formula.


 


Payment


 


Awards will be paid as soon as practicable following the completion of
the Performance Period and after the Committee has certified in writing that
the performance goals and other material terms are satisfied.


 


Definitions


 


“Performance Share Award Factor” means the
measure used to calculate the participants payout determined by Company
performance using Total Shareholder Return (TSR) and Return on Net Assets
(RONA) performance measures – see Exhibit A attached.


 


“Retirement”
means an Employee who retires on or after age sixty-two (62) and such
individual has been an Employee at least five (5) years at the date of
retirement.


 

















 


EXHIBIT A


 


2006 Performance Criteria


 


Two and Three Year 2006 Performance Periods


 


Formula
for Calculating the Performance Share Award Factor


 


The following formula will be used to determine the PSA Factor at the
end of the Performance Periods


 





 


TSR Component Factor


 


The following table represents the amount of the TSR Component Factor
earned, based on Total Shareholder Return versus the peer group.


 


	
  TSR Percentile

  	
   

  	
   

  	
   

  
	
  Ranking vs. Peers (1)  (2)

  	
   

  	
  TSR Payout%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  90th

  	
   

  	
  200

  	
  %

  
	
  80th

  	
   

  	
  150

  	
  %

  
	
  70th

  	
   

  	
  125

  	
  %

  
	
  60th

  	
   

  	
  100

  	
  %

  
	
  50th

  	
   

  	
  75

  	
  %

  
	
  40th

  	
   

  	
  50

  	
  %

  
	
  30th

  	
   

  	
  25

  	
  %

  
	
  <30

  	
   

  	
  0

  	
  %

  



 

















 






(1)          The TSR Ranking for each company in the peer
group and the Company will be determined as follows:


 


•                  TSR for the term
will be calculated by taking the company’s stock price at the end of the
Performance Period and adding the value of dividends paid during the
Performance Period (assuming reinvestment). This sum is then divided by the
company’s stock price at the beginning of the Performance Period. Beginning and
ending stock prices will be calculated by taking a 30 day average of the quoted
prices immediately preceding the first and last days of the Performance Period,
respectively


 


•                  Peer companies
will be ranked from lowest to highest using the above calculation.


 


•                  The Company’s
TSR performance will be compared to the ranked companies to determine the TSR
Component Factor. For example, if the Company ranked equivalent to a company
that ranked in the 50th percentile, the TSR Component Factor would
be 75% of the target Award.


 


•                  If the Company’s
TSR falls between the levels shown, the TSR Factor will be interpolated.


 


(2)          The following companies comprise the peer
group:


 


Peer Group


 


Coachmen Industries Inc.


Fleetwood Enterprises


National RV Holdings Inc.


Thor Industries Inc.


Winnebago Industries


Dover Corporation


Greenbrier Companies


Oshkosh Truck Corp


Paccar Inc.


Trinity Industries


Artic Cat Inc.


Champion Enterprises Inc.


Baldor Electric


Cummins Inc.


Harley Davidson


Parker Hannifin Corp.


Polaris


Regal-Beloit Corp


Spartan Motors


 

















 


Return
on Net Assets Factor


 


The Company must achieve an annual average rate of Return on Net Assets
(“RONA”) of at least 1% for the
Performance Period before any Award from the RONA Component Factor is payable.


 


	
  RONA Percentile

  	
   

  	
   

  	
   

  
	
  Ranking vs. Peers (1)

  	
   

  	
  RONA Payout%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  >90th

  	
   

  	
  200

  	
  %

  
	
  80th – 89th

  	
   

  	
  150

  	
  %

  
	
  70th – 79th

  	
   

  	
  125

  	
  %

  
	
  60th-69th

  	
   

  	
  100

  	
  %

  
	
  50th-59th

  	
   

  	
  75

  	
  %

  
	
  40th-49th

  	
   

  	
  50

  	
  %

  
	
  30th-39th

  	
   

  	
  25

  	
  %

  
	
  <30th

  	
   

  	
  0

  	
  %

  



 






(1)          The RONA Ranking for each company in the peer
group and the Company will be determined as follows:


 


•                  RONA for the
term will be an average of the RONA calculated for each year during the
Performance Period. RONA for each year is calculated by taking a company’s net
income for the year and dividing it by the company’s year-end Net Assets. Net
Assets are defined as the company’s total assets minus non-interest bearing
current liabilities.


 


•                  Peer companies
will be ranked from lowest to highest using the above calculation.


 


•                  The Company’s
RONA performance will be compared to the ranked companies to determine the RONA
Component Factor. For example, if the Company ranked equivalent to a company
that ranked in the 60th percentile, the RONA Component Factor would
be 100% of the target Award.


 


(2)          The following companies comprise the peer
group:


 


Peer Group


 


Coachmen Industries Inc.


Fleetwood Enterprises


National RV Holdings Inc.


Thor Industries Inc.


Winnebago Industries


Dover Corporation


Greenbrier Companies


Oshkosh Truck Corp


Paccar Inc.


Trinity Industries


Artic Cat Inc.


Champion Enterprises Inc.


Baldor Electric


Cummins Inc.


Harley Davidson


Parker Hannifin Corp.


Polaris


Regal-Beloit Corp


Spartan Motors