Document:

Exhibit 10.3.1

 

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.  This Award relates to the Performance Period
for fiscal years [2008-2010].  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.

 

 

1

 

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.

 

For
purposes of this Section 2, “Change in Control” is defined as:

 

(i)        Any “person” (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial owner”
(as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company representing more than fifty percent (50%) of the
total voting power represented by the Company’s then outstanding voting; or

 

(ii)       A change in the
ownership of a substantial portion of the Company’s assets which occurs on the
date that any one person, or more than one person acting as a group acquires
(or has acquired during the twelve (12) month period ending on the date of the
most recent acquisition by such person or persons) assets from the Company that
have a total gross fair market value equal to or more than fifty percent (50%)
of the total gross fair market value of all of the assets of the Company
immediately prior to such acquisition; or

 

(iii)      A change in the
composition of the Company’s Board of Directors (the “Board”) occurring within
a twelve (12) month period, as a result of which fewer than a majority of the
directors are Incumbent Directors.  “Incumbent
Directors” means directors who either (A) are Directors as of the
effective date of the Plan, or (B) are elected, or nominated for election,
to the Board with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but will not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Company);
or

 

(iv)      The
consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its parent) fifty percent
(50%) or more of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately
after such merger or consolidation.

 

3.             Payment after Earning.  Any Performance Shares that are earned or
deemed earned in accordance with Section 2 will be paid to Participant
during the calendar year following the calendar year the Performance Period
expires; provided, however, that Performance Shares shall be paid earlier upon
a Change in Control as provided in Section 2 of this Agreement.  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.  Participant will not
be required to make any additional monetary payment (other than applicable tax
withholding, if any) upon settlement of the Award.

 

Notwithstanding
anything in the Plan or this Agreement to the contrary, if the vesting
of the balance, or some lesser portion of the balance, of the Performance
Shares is accelerated in connection with Participant’s
termination as an Employee (provided that such termination is a “separation from
service” within the meaning of Section 409A, as determined by the
Company), other than due to death,
and if

 

 

2

 

(i) Participant is a “specified employee” within the
meaning of Section 409A at the time of such termination as an Employee,
and (ii) the payment of such accelerated Performance Shares will result in
the imposition of additional tax under Section 409A if paid to Participant
on or within the six (6) month period following Participant’s termination
as an Employee, then the payment of such accelerated Performance Shares will
not be made until the date six (6) months and one (1) day following
the date of Participant’s termination as an Employee, unless the Participant
dies following his or her termination as an Employee, in which case, the
Performance Shares will be paid in Shares to the Participant’s estate as soon
as practicable following his or her death. 
It is the intent of this Agreement to comply with the requirements of Section 409A
so that none of the Performance Shares provided under this Agreement or Shares
issuable thereunder will be subject to the additional tax imposed under Section 409A,
and any ambiguities herein will be interpreted to so comply.  For purposes of this Agreement, “Section 409A”
means Section 409A of the Code, and any proposed, temporary or final
Treasury Regulations and Internal Revenue Service guidance thereunder, as each
may be amended from time to time.

 

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 (i) written notice of his or her status as transferee,
and (ii) 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.  The Company will withhold otherwise
deliverable Shares having a Fair Market Value equal to the minimum amount
required to be withheld with respect to any income, employment and other taxes
which the Company determines must be withheld with respect to such Shares
issuable with respect to this Award.  Only
whole Shares will be withheld to satisfy any tax withholding obligations
pursuant to this Section 7.  At the
discretion of the Company, the Company will either (i) round down the
number of Shares so withheld and Participant will pay to the Company an amount
in cash sufficient to satisfy the remaining tax withholding due and payable as
a result of the Company not retaining fractional Shares, or (ii) the
number of Shares withheld will be rounded up to the nearest whole Share, with a
cash refund to Participant for any value of the Shares withheld in excess of
the tax obligation (pursuant to such procedures as the Company may specify from
time to time).  Should the Company round
down the number of Shares withheld and is unable to procure the additional cash
amounts from Participant, Participant agrees and acknowledges that Participant
is giving the Company permission to withhold from Participant’s
paycheck(s) or other compensation or remuneration an amount equal to the
remaining tax withholding due

 

 

3

 

and
payable as a result of the Company not retaining fractional Shares.  By
accepting this Award, Participant expressly consents to the withholding of
Shares and to any additional cash withholding as provided for in this Section 7.

 

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

 

 

4

 

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.

 

 

5

 

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

 

	
   

  	
  MONACO COACH CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Kay L. Toolson, Chairman and

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED

  	
   

  	
   

  
	
   

  	
  Participant

  	
   

  
	
   

  	
   

  
	
  PRINT NAME:

  	
   

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
   

  	
   

  

 

 

6

 

Appendix A

 

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.

 

Notwithstanding
anything in this PSA Program or the Plan to the contrary, if the vesting of the
balance, or some lesser portion of the balance, of an Award is accelerated in
connection with Participant’s termination as an Employee (provided that such
termination is a “ separation from service” within the meaning of Section 409A,
as determined by the Company), other than due to death, and if (i) Participant is a “specified
employee” within the meaning of Section 409A at the time of such
termination as an Employee, and (ii) the payment of such accelerated Award
will result in the imposition of additional tax under Section 409A if paid
to Participant on or within the six (6) month period following Participant’s
termination as an Employee, then the payment of such accelerated Award will not
be made until the date six (6) months and one (1) day following the
date of Participant’s termination as an Employee, unless the Participant dies
following his or her termination as an Employee, in which case, the Award will
be paid in Shares to the Participant’s estate as soon as practicable following
his or her death.  It is the intent of
this PSA Program to comply with the requirements of Section 409A so that
none of the Awards provided under this PSA Program or Shares issuable pursuant
to Awards made thereunder will be subject to the additional tax imposed under Section 409A,
and any ambiguities herein will be interpreted to so comply.  For purposes of this Agreement, “Section 409A”
means Section 409A of the Code, and any proposed, temporary or final
Treasury Regulations and Internal Revenue Service guidance thereunder, as each
may be amended from time to time.

 

Performance Period

 

A
Performance Period will coincide with each fiscal year and will continue for a
3 year period, unless otherwise specified. Each year a new three-year
Performance Period will commence.

 

 

 

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”).

 

	
  PSA Factors (TSR &
  RONA)

  	
  X

  	
   Participant’s
  Target Award

   (Base Pay x Target percent

    ÷ by Stock Price on Award Date)

  	
  =

  	
   Final 

   Performance 

   Share Award

  

 

The Award formula is
provided below:

 

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, the Company, in its sole discretion and pursuant to
such procedures as it may specify from time to time, may permit a Participant
to satisfy such tax withholding obligation, in whole or in part by one or more
of the following (without limitation): (i) paying cash, (ii) electing
to have the Company withhold otherwise deliverable Shares having a Fair Market
Value equal to the minimum amount required to be withheld, (iii) delivering
to the Company already vested and owned Shares having a Fair Market Value equal
to the amount  required to be withheld,
or (iv) 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 a Participant fails
to make satisfactory arrangements for the payment of any required tax withholding
obligations at the time the Award is otherwise scheduled to vest, the Company
will, in its discretion, have the right (but not the obligation) to satisfy any
tax withholding obligations by either

 

 

 

(i) reducing
the number of Shares otherwisde deliverable having a Fair Market Value equal to
the minimum amount required to be withheld, or (ii) selling a sufficient
number of Shares otherwise deliverable on a Participant’s behalf through a
broker or such other means as the Company may determine equal to the amount
required to be withheld.

 

Audit and Approval of Awards

 

The
Chief Financial Officer 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. 
Payment will be made in whole Shares with any fractional Shares to be
rounded up to the nearest whole Share.

 

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

 

200X Performance Criteria

Two and Three Year 200X 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 calendar day average of
the quoted prices immediately preceding the first and last days of the Performance
Period, respectively

 

·                  The Company’s
TSR performance will be ranked with a peer group of companies to determine the
TSR Component Factor.  For example, if
the Company 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

  
	
   

  	
  Arctic
  Cat Inc.

  
	
   

  	
  Champion
  Enterprises Inc.

  
	
   

  	
  Baldor
  Electric

  
	
   

  	
  Cummins
  Inc.

  
	
   

  	
  Harley
  Davidson

  
	
   

  	
  Parker
  Hannifin Corp.

  
	
   

  	
  Polaris

  
	
   

  	
  Regal-Beloit
  Corp

  
	
   

  	
  Spartan
  Motors

  

 

* Company will be removed from peer group for
purposes of calculating Awards for Performance Periods beginning after 2007.

 

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:

 

 

7

 

·                  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.

 

·                  The Company’s
RONA performance will be ranked with a peer group of companies to determine the
RONA Component Factor.  For example, if
the Company 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

  
	
   

  	
  Arctic
  Cat Inc.

  
	
   

  	
  Champion
  Enterprises Inc.

  
	
   

  	
  Baldor
  Electric

  
	
   

  	
  Cummins
  Inc.

  
	
   

  	
  Harley
  Davidson

  
	
   

  	
  Parker
  Hannifin Corp.

  
	
   

  	
  Polaris

  
	
   

  	
  Regal-Beloit
  Corp

  
	
   

  	
  Spartan
  Motors

  

 

* Company will be removed from peer group for purposes of calculating
Awards for Performance Periods beginning after 2007.

 

8Exhibit 10.3.2

 

MONACO COACH CORPORATION

1993 STOCK PLAN

RESTRICTED STOCK UNIT

AGREEMENT

 

THIS
RESTRICTED STOCK 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
(   # 
) Restricted Stock Units under the Plan. 
Each Restricted Stock Unit represents a right to receive a Share at the
times and subject to the terms and conditions as set forth herein.  Prior to actual payment of any vested
Restricted Stock Units, such Restricted Stock Unit will represent an unsecured
obligation of the Company, payable (if at all) only from the general assets of
the Company.

 

2.             Obligation to Pay.  No Restricted Stock Units will vest hereunder
unless and until the Company achieves [either (A) 10% return on equity for
the Company’s fiscal year 2007, or (B) an average of 10% return on equity
for the Company’s fiscal years from 2007 through 2009 (the “Performance
Condition”)], except that if the Company experiences a Change in Control prior
to the commencement of the Company’s 2010 fiscal year, then vesting of the
Restricted Stock Units will no longer be conditioned upon the achievement of
either of the performance objectives set forth in clauses (A) and (B) and
the Performance Condition will be deemed to have been satisfied.

 

Subject to satisfaction of the Performance Condition and
any vesting acceleration provisions set forth herein or in the Plan, one
hundred percent (100%) of the Restricted Stock Units will vest on the third (3rd) anniversary of the Date of Grant, subject to Participant continuing to
be an Employee through such date.  Notwithstanding the
vesting schedule in the previous sentence, in the
event Participant ceases to be an Employee as the result of Participant’s
death, Disability or Retirement, 100% of the Restricted Stock
Units will immediately vest in full;
provided, however, that if at the time of such termination the Performance
Condition has not been satisfied, then the Restricted Stock Units will vest if
and to the extent the Performance Condition is thereafter satisfied, which will
be settled at the time such condition is satisfied (that is, the Award will be
settled in the calendar year in which the Company is first able to determine
whether and to what extent the Performance Condition has been satisfied).  In addition, if within twelve (12)
months of a Change in Control (i) the Company (or the Affiliate employing
Participant) terminates Participant as an Employee without Cause, or (ii) Participant
resigns as an Employee for Good Reason, then 100% of the Restricted Stock Units
will immediately vest in full.  Subject
to the foregoing provisions of this paragraph and the provisions of the Plan,
in the event Participant ceases to be an Employee for any or no reason before
Participant vests in the right to receive the Shares to be issued pursuant to
the Restricted Stock Unit or it becomes no longer possible to satisfy the
Performance Condition, the Restricted Stock Units and Participant’s right to
receive any Shares with respect thereto 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.

 

For
purposes of this Section 2, “Change in Control” is defined as:

 

(i)        Any “person” (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial owner”
(as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company representing more than fifty percent (50%) of the
total voting power represented by the Company’s then outstanding voting; or

 

(ii)       A change in the
ownership of a substantial portion of the Company’s assets which occurs on the
date that any one person, or more than one person acting as a group acquires
(or has acquired during the twelve (12) month period ending on the date of the
most recent acquisition by such person or persons) assets from the Company that
have a total gross fair market value equal to or more than fifty percent (50%)
of the total gross fair market value of all of the assets of the Company
immediately prior to such acquisition; or

 

(iii)      A change in the
composition of the Company’s Board of Directors (the “Board”) occurring within
a twelve (12) month period, as a result of which fewer than a majority of the
directors are Incumbent Directors.  “Incumbent
Directors” means directors who either (A) are Directors as of the effective
date of the Plan, or (B) are elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but will not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Company);
or

 

(iv)      The
consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its parent) fifty percent
(50%) or more of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately
after such merger or consolidation.

 

For
purposes of this Section 2, “Return on Equity” is defined as pre
management-bonus earnings before interest, tax, depreciation and amortization
divided by beginning equity.

 

For
purposes of this Section 2, “Good Reason” is defined as (i) a
significant reduction of Participant’s duties, position or responsibilities, or
the removal of Participant from such position and responsibilities, unless
Participant is provided with a comparable position (i.e., a position of equal
or greater organizational level, duties, authority and compensation); provided, however, that a reduction in
duties, position or responsibilities solely by virtue of a Change in Control
shall not constitute “Good Reason”, (ii) the reduction of Participant’s
aggregate base salary and target bonus opportunity (“Base Compensation”) below
Participant’s Base Compensation immediately prior to such reduction, unless the
Company also similarly reduces the Base Compensation of all other similarly
situated employees of the Company (and its successor) or (iii) a
relocation of Participant’s principal place of employment by more than fifty
(50) miles.

 

3.             Payment after Vesting.  Any Restricted Stock Units that vest 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 as soon 

 

 

 

as administratively
practicable after vesting, subject to Participant
satisfying any applicable tax withholding obligations as set forth in Section 8.  The Participant will not be
required to make any additional monetary payment (other than applicable tax withholding,
if any) upon settlement of the Award.

 

Notwithstanding
anything in the Plan or this Agreement to the contrary, if the vesting of the
balance, or some lesser portion of the balance, of the Restricted Stock Units
is accelerated in connection with Participant’s termination as an Employee
(provided that such termination is a “ separation from service” within the
meaning of Section 409A, as determined by the Company), other than due to
death, and if (i) Participant
is a “specified employee” within the meaning of Section 409A at the time
of such termination as an Employee, and (ii) the payment of such
accelerated Restricted Stock Units will result in the imposition of additional
tax under Section 409A if paid to Participant on or within the six (6) month
period following Participant’s termination as an Employee, then the payment of
such accelerated Restricted Stock Units will not be made until the date six (6) months
and one (1) day following the date of Participant’s termination as an
Employee, unless the Participant dies following his or her termination as an
Employee, in which case, the Restricted Stock Units will be paid in Shares to
the Participant’s estate as soon as practicable following his or her
death.  It is the intent of this
Agreement to comply with the requirements of Section 409A so that none of
the Restricted Stock Units provided under this Agreement or Shares issuable
thereunder will be subject to the additional tax imposed under Section 409A,
and any ambiguities herein will be interpreted to so comply.  For purposes of this Agreement, “Section 409A”
means Section 409A of the Code, and any proposed, temporary or final
Treasury Regulations and Internal Revenue Service guidance thereunder, as each
may be amended from time to time.

 

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 (i) written notice of his or her status as transferee,
and (ii) 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.             Dividend
Equivalent Rights. 
In the event cash dividends are paid with respect to Common Stock on and
after the Date of Grant and before the settlement of the Award pursuant to Section 3,
on the date this Award is settled upon vesting of Restricted Stock Units
pursuant to Section 3, Participant will also receive an amount of cash
equal to the per Share amount of cash dividends so paid on or after the Date of
Grant and before settlement multiplied by the number of Shares actually
deliverable upon settlement of this Award.

 

7.             Effect on Employment.  Participant acknowledges and agrees that the
vesting of the Restricted Stock Units 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 schedule 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.

 

8.             Tax Withholding.  The Company will withhold otherwise
deliverable Shares having a Fair Market Value equal to the minimum amount
required to be withheld with respect to any income, employment and other taxes
which the Company determines must be withheld with respect to such Shares
issuable with respect to this Award. 
Only whole Shares will be withheld to satisfy any tax withholding
obligations pursuant to this Section 8. 
At the discretion of the Company, the Company will either (i) round
down the number of Shares so withheld and Participant will pay to the
Company an amount in cash sufficient to satisfy the remaining tax withholding
due and payable as a result of the Company not retaining fractional Shares, or (ii) the
number of Shares withheld will be rounded up to the nearest whole Share, with a
cash refund to Participant for any value of the Shares withheld in excess of
the tax obligation (pursuant to such procedures as the Company may specify from
time to time).  Should the Company round
down the number of Shares withheld and is unable to procure the additional cash
amounts from Participant, Participant agrees and acknowledges that Participant
is giving the Company permission to withhold from Participant’s paycheck(s) or
other compensation or remuneration an amount equal to the remaining tax
withholding due and payable as a result of the Company not retaining fractional
Shares.  By
accepting this Award, Participant expressly consents to the withholding of
Shares and to any additional cash withholding as provided for in this Section 8.

 

9.             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.

 

10.           Restrictions on Sale of Securities.  Subject to Section 9, the Shares issued
as payment for vested Restricted Stock Units 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.

 

11.           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.

 

12.           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.

 

13.           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.

 

14.           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.

 

15.           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 Restricted Stock Units 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.

 

16.           Electronic Delivery.  The Company may, in its sole discretion,
decide to deliver any documents related to Restricted Stock Units awarded under
the Plan or future Restricted Stock Units 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.

 

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

 

18.           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.

 

19.           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.

 

20.           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 Restricted Stock Units.

 

21.           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.

 

22.           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 Restricted Stock Units 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 Restricted Stock Units 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:

  	
   

  
	
   

  	
   

  	
  Kay L. Toolson, Chairman and

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  ACCEPTED:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Participant

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRINT NAME:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DATE:

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