**EXHIBIT 10.2**

 

**MONACO COACH CORPORATION**

 

**1993 DIRECTOR OPTION PLAN**

 

**(as amended May 16, 2002)**

 

# 1.             *Purposes ofthe Plan*.  The purposes ofthis 1993 Director Option Plan are to attract and retain the best availablepersonnel for service as Outside Directors (as defined herein) of the Company,to provide additional incentive to the Outside Directors of the Company toserve as Directors, and to encourage their continued service on the Board.

 

All options granted hereunder shall be “non-statutory stock options.”

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# 2.             *Applicability of May 2002 Amendments*.  Options granted on or prior May 16, 2002shall not be subject to Section 9(f) of the Plan.  Options granted subsequent to May 16, 2002 shall be subject toSection 9(f) of the Plan.

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# 3.             *Definitions*.  As used herein, the following definitionsshall apply:

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## (a)           “*Board*”means the Board of Directors of the Company.

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## (b)           “*Code*”means the Internal Revenue Code of 1986, as amended.

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## (c)           “*Common**Stock*”means the Common Stock of the Company.

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## (d)           “*Company*”means Monaco Coach Corporation, a Delaware corporation.

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## (e)           “*Continuous**Status asa Director*” means the absence of any interruption or termination ofservice as a Director.

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## (f)            “*Director*”means a member of the Board.

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## (g)           “*Employee*”means any person, including officers and Directors, employed by the Company orany Parent or Subsidiary of the Company. The payment of a Director’s fee by the Company shall not be sufficientin and of itself to constitute “employment” by the Company.

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## (h)           “*Exchange Act*”means the Securities Exchange Act of 1934, as amended.

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## (i)            “*Fair MarketValue*” means, as of any date, the value of Common Stock determinedas follows:

 

### (i)    If the Common Stock is listed on anyestablished stock exchange or a national market system, including withoutlimitation the National Market System of the National Association of SecuritiesDealers, Inc. Automated Quotation (“NASDAQ”) System, the Fair Market Value of aShare of Common Stock shall be the closing sales price for such stock (or theclosing bid, if no sales were reported) as quoted on such system or exchange(or the exchange with the greatest volume of trading in Common Stock) on thedate of grant, as reported in The Wall Street Journal or such other source asthe Board deems reliable;

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### (ii)   If the Common Stock is quoted on the NASDAQSystem (but not on the National Market System thereof) or regularly quoted by arecognized securities dealer but selling prices are not reported, the FairMarket Value of a Share of Common Stock shall be the mean between the bid andasked prices for the Common Stock on the day of determination, as reported inThe Wall Street Journal or such other source as the Board deems reliable, or;

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### (iii)  In the absence of an established market forthe Common Stock, the Fair Market Value thereof shall be determined in goodfaith by the Board.

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## (j)            “*Option*”means a stock option granted pursuant to the Plan.

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## (k)           “*OptionedStock*” means the Common Stock subject to an Option.

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## (l)            “*Optionee*”means an Outside Director who receives an Option.

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## (m)          “*OutsideDirector*” means a Director who is not an Employee.

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## (n)           “*Parent*”means a “parent corporation”, whether now or hereafter existing, as defined inSection 424(e) of the Code.

 

## (o)           “*Plan*”means this 1993 Director Option Plan, as amended.

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## (p)           “*Share*”means a share of the Common Stock, as adjusted in accordance with Section 11 ofthe Plan.

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## (q)           *“Retirement*” means a Director whovoluntarily resigns from the Board on or after age sixty-two (62) and suchDirector has at least five (5) years of service on the Company’s Board ofDirectors at the date of retirement; provided, that, the Administrator,notwithstanding the foregoing, has the discretion to determine when a Directorretires so long as such determination is not less favorable than provided forin the foregoing definition.

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## (r)            “*Subsidiary*”means a “subsidiary corporation”, whether now or hereafter existing, as definedin Section 424(f) of the Internal Revenue Code of 1986.

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# 4.             *StockSubject to the Plan*.  Subjectto the provisions of Section 11 of the Plan, the maximum aggregate number ofShares which may be optioned and sold under the Plan is 352,500 Shares (the“Pool”) of Common Stock.  The Shares maybe authorized but unissued, or reacquired Common Stock.

 

If an Option should expire or become unexercisable for any reasonwithout having been exercised in full, the unpurchased Shares which weresubject thereto shall, unless the Plan shall have been terminated, becomeavailable for future grant under the Plan.

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# 5.             *Administrationof and Grants of Options under the Plan*.

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## (a)           *Administrator*.  Except as otherwise required herein, thePlan shall be administered by the Board.

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## (b)           *Procedurefor Grants*.  All grants ofOptions to Outside Directors under this Plan shall be automatic andnon-discretionary and shall be made strictly in accordance with the followingprovisions:

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### (i)            Noperson shall have any discretion to select which Outside Directors shall begranted Options or to determine the number of Shares to be covered by Optionsgranted to Outside Directors.

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### (ii)           EachOutside Director shall be automatically granted an Initial Option to purchaseeight thousand (8,000) Shares (the “First Option”) on the date on which thelater of the following events occurs: (A) the effective date of the Company’sinitial underwritten public offering of its Common Stock pursuant to aregistration statement filed under the Securities Act of 1933, as amended, or(B) the date on which such person first becomes a Director, whether throughelection by the stockholders of the Company or appointment by the Board to filla vacancy.

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### (iii)          Commencingon September 30, 1994, each Outside Director shall be automatically granted asubsequent Option to purchase thirty five hundred (3,500) Shares (a “SubsequentOption”) on September 30 of each year after the date of the First Option grant,provided such Outside Director shall have served on the Board for at least sixmonths prior to the date of the Subsequent Option grant and remains an OutsideDirector on such date.

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### (iv)          Notwithstandingthe provisions of subsections (ii) and (iii) hereof, any exercise of an Optionmade before the Company has obtained stockholder approval of the Plan inaccordance with Section 17 hereof shall be conditioned upon obtaining suchstockholder approval of the Plan in accordance with Section 17 hereof.

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### (v)           Theterms of a First Option granted hereunder shall be as follows:

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##### (A)  the term ofthe First Option shall be ten (10) years.

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##### (B)   the First Option shall be exercisable onlywhile the Outside Director remains a Director of the Company, except as setforth in Section 9 hereof.

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##### (C)   the exercise price per Share shall be 100% ofthe fair market value per Share on the date of grant of the First Option.

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##### (D)  the First Option shall become exercisable ininstallments cumulatively as to twenty percent (20%) of the Shares subject tothe First Option one (1) year from its date of grant and as to twenty percent(20%) each year thereafter if, on each such date, the Optionee has maintainedhis Continuous Status as a Director.

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### (vi)          Theterms of a Subsequent Option granted hereunder shall be as follows:

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##### (A)  the term of the Subsequent Option shall be ten(10) years.

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##### (B)   the Subsequent Option shall be exercisableonly while the Outside Director remains a Director of the Company, except asset forth in Section 9 hereof.

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##### (C)   the exercise price per Share shall be 100% ofthe fair market value per Share on the date of grant of the Subsequent Option.

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##### (D)  the Subsequent Option shall become exercisableas to one hundred percent (100%) of the Shares subject to the Subsequent Optionfive (5) years from its date of grant if, on such date, the Optionee hasmaintained his Continuous Status as a Director.

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### (vii)         Inthe event that any Option granted under the Plan would cause the number ofShares subject to outstanding Options plus the number of Shares previouslypurchased under Options to exceed the Pool, then the remaining Shares availablefor Option grant shall be granted under Options to the Outside Directors on apro rata basis.  No further grants shallbe made until such time, if any, as additional Shares become available forgrant under the Plan through action of the stockholders to increase the numberof Shares which may be issued under the Plan or through cancellation orexpiration of Options previously granted hereunder.

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## (c)           *Powers ofthe Board*.  Subject to theprovisions and restrictions of the Plan, the Board shall have the authority, inits discretion: (i) to determine, upon review of relevant information and inaccordance with Section 3(i) of the Plan, the Fair Market Value of the CommonStock; (ii) to interpret the Plan; (iii) to prescribe, amend and rescind rulesand regulations relating to the Plan; (iv) to authorize any person to executeon behalf of the Company any instrument required to effectuate the grant of anOption previously granted hereunder; and (v) to make all other determinationsdeemed necessary or advisable for the administration of the Plan.

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## (d)           *Effect ofBoard’s Decision*.  Alldecisions, determinations and interpretations of the Board shall be final.

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# 6.             *Eligibility*.  Options may be granted only to OutsideDirectors.  All Options shall beautomatically granted in accordance with the terms set forth in Section 5(b)hereof.  An Outside Director who hasbeen granted an Option may, if he is otherwise eligible, be granted anadditional Option or Options in accordance with such provisions.

 

The Plan shall not confer upon any Optionee any right with respect tocontinuation of service as a Director or nomination to serve as a Director, norshall it interfere in any way with any rights which the Director or the Companymay have to terminate his or her directorship at any time.

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# 7.             *Term of Plan*.  The Plan shall become effective upon theearlier to occur of its adoption by the Board or its approval by thestockholders of the Company as described in Section 17 of the Plan.  It shall continue in effect for a term often (10) years unless sooner terminated under Section 12 of the Plan.

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# 8.             *Form ofConsideration*.  Theconsideration to be paid for the Shares to be issued upon exercise of anOption, including the method of payment, shall be determined by the Board andmay consist entirely of (i) cash, (ii) check, (iii) promissory note, (iv) othershares which (x) in the case of Shares acquired upon exercise of an Option,have been owned by the Optionee for more than six (6) months on the date ofsurrender, and (y) have a Fair Market Value on the date of surrender equal tothe aggregate exercise price of the Shares as to which said Option shall beexercised, (v) delivery of a properly executed exercise notice together withsuch other documentation as the Board and the broker, if applicable, shallrequire to effect an exercise of the Option and delivery to the Company of thesale or loan proceeds required to pay the exercise price, (vi) any combinationof the foregoing methods of payment, or (vii) such other consideration andmethod of payment for the issuance of Shares to the extent permitted underapplicable law.

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# 9.             *Exercise ofOption*.

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## (a)           *Procedurefor Exercise; Rights as a Stockholder*.  Any Option granted hereunder shall be exercisable at such timesas are set forth in Section 5(b) hereof; provided, however, that no Optionsshall be exercisable until stockholder approval of the Plan in accordance withSection 17 hereof has been obtained.

 

An Option may not be exercised for a fraction of a Share.

 

An Option shall be deemed to be exercised when written notice of suchexercise has been given to the Company in accordance with the terms of theOption by the person entitled to exercise the Option and full payment for theShares with respect to which the Option is exercised has been received by theCompany.  Full payment may consist ofany consideration and method of payment allowable under Section 8 of thePlan.  Until the issuance (as evidencedby the appropriate entry on the books of the Company or of a duly authorizedtransfer agent of the Company) of the stock certificate evidencing such Shares,no right to vote or receive dividends or any other rights as a stockholdershall exist with respect to the Optioned Stock, notwithstanding the exercise ofthe Option.  A share certificate for thenumber of Shares so acquired shall be issued to the Optionee as soon aspracticable after exercise of the Option. No adjustment will be made for a dividend or other right for which therecord date is prior to the date the stock certificate is issued, except asprovided in Section 11 of the Plan.

 

Exercise of an Option in any manner shall result in a decrease in thenumber of Shares which thereafter may be available, both for purposes of thePlan and for sale under the Option, by the number of Shares as to which theOption is exercised.

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## (b)           *Rule 16b-3*.  Options granted to Outside Directors mustcomply with the applicable provisions of Rule 16b-3 promulgated under theExchange Act or any successor thereto and shall contain such additionalconditions or restrictions as may be required thereunder to qualify for themaximum exemption from Section 16 of the Exchange Act with respect to Plantransactions.

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## (c)           *Terminationof Continuous Status as a Director*. In the event an Optionee’s Continuous Status as a Director terminates(other than upon the Optionee’s death, total and permanent disability (asdefined in Section 22(e)(3) of the Code) or Retirement), the Optionee mayexercise his or her Option, but only within three (3) months from the date ofsuch termination, and only to the extent that the Optionee was entitled toexercise it at the date of such termination (but in no event later than theexpiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Optionat the date of such termination, and to the extent that the Optionee does notexercise such Option (to the extent otherwise so entitled) within the timespecified herein, the Option shall terminate.

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## (d)           *Disability ofOptionee*.  In the eventOptionee’s Continuous Status as a Director terminates as a result of total andpermanent disability (as defined in Section 22(e)(3) of the Code), the Optiongranted hereunder to such Optionee shall become vested and exercisable for thefull number of Shares covered by the Option. The Optionee may exercise his or her Option, at any time within twelve(12) months from the date of such termination (but in no event later than theexpiration of the term of such Option as set forth in the Notice ofGrant).  If, after termination, theOptionee does not exercise his or her Option within the time specified herein,the Option shall terminate, and the Shares covered by such Option shall revertto the Plan.

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## (e)           *Death ofOptionee*.  In the event ofthe death of an Optionee, the Option shall become vested and exercisable forthe full number of Shares covered by the Option.  The Option held by the Optionee

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## at thetime of death may be exercised at any time within twelve (12) months followingthe date of death by the Optionee’s estate or by a person who acquired theright to exercise the Option by bequest or inheritance.  In no event shall an Option be exercisedlater than the expiration of the term of the Option, as set forth in the Optionagreement.  If, after death, theOptionee’s estate or a person who acquired the right to exercise the Option bybequest or inheritance does not exercise the Option within the time specifiedherein, the Option shall terminate, and the Shares covered by such Option shallrevert to the Plan.

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## (f)            *Retirement of Optionee*.  In the event of an Optionee’s Retirementwhile a Director, the Option shall become vested and exercisable for the fullnumber of Shares covered by the Option. The Option held by the Optionee at the time of Retirement may beexercised at any time within twelve (12) months following the date ofRetirement.  In no event shall an Optionbe exercised later than the expiration of the term of the Option, as set forthin the Option Agreement; provided, however, that (i) this subsection (f) shallnot apply to grants made on or before May 16, 2002, and (ii) this subsection(f) shall apply to grants made on or after May 17, 2002.  If the Option is not so exercised within thetime specified herein, the Option shall terminate, and the Shares covered bysuch Option shall revert to the Plan.

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# 10.           *Non-Transferabilityof Options*.  The Option maynot be sold, pledged, assigned, hypothecated, transferred, or disposed of inany manner other than by will or by the laws of descent or distribution and maybe exercised, during the lifetime of the Optionee, only by the Optionee.

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# 11.           *AdjustmentsUpon Changes in Capitalization, Dissolution, Merger, Asset Sale or Change ofControl*.

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## (a)           *Changes inCapitalization*.  Subject toany required action by the stockholders of the Company, the number of Sharescovered by each outstanding Option and the number of Shares which have beenauthorized for issuance under the Plan but as to which no Options have yet beengranted or which have been returned to the Plan upon cancellation or expirationof an Option, as well as the price per Share covered by each such outstandingOption, shall be proportionately adjusted for any increase or decrease in thenumber of issued Shares resulting from a stock split, reverse stock split,stock dividend, combination or reclassification of the Common Stock, or anyother increase or decrease in the number of issued Shares effected withoutreceipt of consideration by the Company; provided, however, that conversion ofany convertible securities of the Company shall not be deemed to have been“effected without receipt of consideration.” Such adjustment shall be made bythe Board, whose determination in that respect shall be final, binding andconclusive.  Except as expresslyprovided herein, no issuance by the Company of shares of stock of any class, orsecurities convertible into shares of stock of any class, shall affect, and noadjustment by reason thereof shall be made with respect to, the number or priceof Shares subject to an Option.  Inaddition, a stock split, reverse stock split, stock dividend, combination orreclassification of the Common Stock, or any other increase or decrease in thenumber of issued Shares effected without receipt of consideration by theCompany shall not result in an adjustment to the number of shares granted toOutside Directors pursuant to Section 5(b)(ii) and Section 5(b)(iii) of thePlan subsequent to such stock split, reverse stock split, stock dividend,combination or reclassification of the Common Stock, or other increase ordecrease in the number of issued Shares effected without receipt ofconsideration by the Company.

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## (b)           *Dissolutionor Liquidation*.  In the eventof the proposed dissolution or liquidation of the Company, to the extent thatan Option has not been previously exercised, it will terminate immediatelyprior to the consummation of such proposed action.  The Board may, in the exercise of its sole discretion in suchinstances, declare that any Option shall terminate as of a date fixed by theBoard and give each Optionee the right to exercise his or her Option as to allor any part of the Optioned Stock, including Shares as to which the Optionwould not otherwise be exercisable.

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## (c)           *Merger orAsset Sale*.  In the event ofa merger of the Company with or into another corporation, or the sale ofsubstantially all of the assets of the Company, each outstanding Option shallbe assumed or an equivalent option shall be substituted by the successorcorporation or a Parent or Subsidiary of the successor corporation.  In the event that the successor corporationdoes not agree to assume the Option or to substitute an equivalent option, theBoard shall, in lieu of such assumption or substitution, provide for theOptionee to have the right to exercise the Option as to all of the OptionedStock, including Shares as to which it would not otherwise be exercisable.  If the Board makes an Option fullyexercisable in lieu of assumption or substitution in the event of a merger orsale of assets, the Board shall notify the Optionee that the Option shall befully exercisable for a period of thirty (30) days from the date of suchnotice, and the Option will terminate upon the expiration of such period.  For the purposes of this paragraph, theOption shall be considered assumed if, following the merger or sale of assets,the option or right confers the right to purchase, for each Share of OptionedStock subject to the Option immediately prior to the merger or sale of assets,the consideration (whether stock, cash, or other securities or property)received in the merger or sale of assets by holders of Common Stock for eachShare held on the effective date of the transaction (and if holders wereoffered a choice of consideration, the type of consideration chosen by theholders of a majority of the outstanding Shares); provided, however, that ifsuch consideration received in the merger or sale of assets was not solelycommon stock of the successor corporation or its Parent, the Board may, withthe consent of the successor corporation and the participant, provide for theconsideration to be received upon the exercise of the Option, for each Share ofOptioned Stock subject to the Option, to be solely common stock of thesuccessor corporation or its Parent equal in Fair Market Value to the per shareconsideration received by holders of Common Stock in the merger or sale ofassets.

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# 12.           *Amendmentand Termination of the Plan*.

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## (a)           *Amendmentand Termination*.  Except asset forth in Section 5, the Board may at any time amend, alter, suspend, ordiscontinue the Plan, but no amendment, alteration, suspension, ordiscontinuation shall be made which would impair the rights of any Optioneeunder any grant theretofore made, without his or her consent.  In addition, to the extent necessary anddesirable to comply with Rule 16b-3 under the Exchange Act (or any otherapplicable law or regulation), the Company shall obtain stockholder approval ofany Plan amendment in such a manner and to such a degree as required.

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## (b)           *Effect ofAmendment or Termination*. Any such amendment or termination of the Plan shall not affect Optionsalready granted and such Options shall remain in full force and effect as ifthis Plan had not been amended or terminated.

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# 13.           *Time ofGranting Options*.  The dateof grant of an Option shall, for all purposes, be the date determined inaccordance with Section 5(b) hereof. Notice of the determination shall be given to each Outside Director towhom an Option is so granted within a reasonable time after the date of suchgrant.

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# 14.           *ConditionsUpon Issuance of Shares*. Shares shall not be issued pursuant to the exercise of an Option unlessthe exercise of such Option and the issuance and delivery of such Sharespursuant thereto shall comply with all relevant provisions of law, including,without limitation, the Securities Act of 1933, as amended, the Exchange Act,the rules and regulations promulgated thereunder, state securities laws, andthe requirements of any stock exchange upon which the Shares may then belisted, and shall be further subject to the approval of counsel for the Companywith respect to such compliance.

 

As a condition to the exercise of an Option, the Company may requirethe person exercising such Option to represent and warrant at the time of anysuch exercise that the Shares are being purchased only for investment andwithout any present intention to sell or distribute such Shares, if, in theopinion of counsel for the Company, such a representation is required by any ofthe aforementioned relevant provisions of law.

 

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Inability of the Company to obtain authority from any regulatory bodyhaving jurisdiction, which authority is deemed by the Company’s counsel to benecessary to the lawful issuance and sale of any Shares hereunder, shallrelieve the Company of any liability in respect of the failure to issue or sellsuch Shares as to which such requisite authority shall not have been obtained.

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# 15.           *Reservationof Shares*.  The Company,during the term of this Plan, will at all times reserve and keep available suchnumber of Shares as shall be sufficient to satisfy the requirements of thePlan.

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# 16.           *OptionAgreement*.  Options shall beevidenced by written option agreements in such form as the Board shall approve.

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# 17.           *StockholderApproval*.  Continuance of thePlan shall be subject to approval by the stockholders of the Company at orprior to the first annual meeting of stockholders held subsequent to thegranting of an Option hereunder.  Suchstockholder approval shall be obtained in the degree and manner required underapplicable state and federal law.

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