MONACO COACH CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To be held May 14, 2008

TO OUR STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the 2008 Annual Meeting of Stockholders of Monaco Coach Corporation will be held on Wednesday, May 14, 2008 at 1:00 p.m., local time, at the Hyatt Regency O’Hare, 9300 West Bryn Mawr Avenue, Rosemont, Illinois 60018 for the following purposes:

1.            To elect three Class I directors each to serve for a two-year term expiring upon the 2010 Annual Meeting of Stockholders or until their successors are elected.

2.            To approve the 2007 Employee Stock Purchase Plan.

3.            To approve the amended and restated Executive Variable Compensation Plan.

4.            To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2008 fiscal year.

5.            To transact such other business as may properly come before the meeting and any adjournment or postponement thereof.

The foregoing items of business are more fully described in the proxy statement accompanying this Notice.  Only stockholders of record at the close of business on March 19, 2008 are entitled to notice of and to vote at the meeting.

Pursuant to the new rules promulgated by the Securities and Exchange Commission (the SEC), we have elected to provide access to our proxy materials over the Internet.  Accordingly, the Company will mail, on or about April 2, 2008, a Notice of Internet Availability of Proxy Materials to its stockholders of record and beneficial owners at the close of business on March 19, 2008.  On the date of mailing of the Notice of Internet Availability of Proxy Materials, all stockholders and beneficial owners will have the ability to access all of the proxy materials on a website referred to in the Notice of Internet Availability of Proxy Materials.  These proxy materials will be available free of charge.

The Notice of Internet Availability of Proxy Materials will identify the website where the proxy materials will be made available; the date, the time and location of our 2008 Annual Meeting of Stockholders; the matters to be acted upon at the meeting and the Board of Directors’ recommendations with regard to each matter; a toll-free telephone number, an email address, and a website where stockholders can request a paper or email copy of the proxy statement, our 2008 Annual Report to Stockholders and a form of proxy relating to our 2008 Annual Meeting of Stockholders and all of our future stockholders’ meetings; information on how to access the form of proxy; and information on how to obtain directions to attend the meeting and vote in person.

All stockholders are cordially invited to attend the meeting in person.  However, to ensure your representation at the meeting, you are urged to submit your proxy by telephone or the Internet OR REQUEST A PAPER PROXY CARD, TO COMPLETE AND RETURN BY MAIL .  Any stockholder attending the meeting may vote in person even if such stockholder has submitted a proxy.

FOR THE BOARD OF DIRECTORS

RICHARD E. BOND

Secretary

Coburg, Oregon

April 2, 2008

YOUR VOTE IS IMPORTANT

TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO VOTE YOUR SHARES AS PROMPTLY AS POSSIBLE.  PLEASE VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM OR BY TELEPHONE 1-800-690-6903 .  ALTERNATIVELY, YOU MAY REQUEST A PAPER PROXY CARD, WHICH YOU MAY COMPLETE, SIGN AND RETURN BY MAIL.

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TABLE OF CONTENTS

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MONACO COACH CORPORATION
91320 Industrial Way
Coburg, Oregon 97408

PROXY STATEMENT

INFORMATION CONCERNING SOLICITATION AND VOTING

General

This proxy statement contains information relating to our Annual Meeting of Stockholders to be held on Wednesday, May 14, 2008 at 1:00 p.m. local time (the “Annual Meeting”), at the Hyatt Regency O’Hare, 9300 West Bryn Mawr Avenue, Rosemont, Illinois 60018.  The attached proxy is solicited on behalf of our Board of Directors for use at the 2008 Annual Meeting of Stockholders, or at any postponements or adjournment thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders.

In accordance with rules and regulations recently adopted by the SEC, instead of mailing a printed copy of our proxy materials to each stockholder of record, we are now furnishing proxy materials to our stockholders on the Internet.  If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials.  Instead, the Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review all of the important information contained in the proxy materials.  The Notice of Internet Availability of Proxy Materials also instructs you as to how you may submit your proxy on the Internet. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials or you would like to receive our future proxy materials electronically by email, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials.

Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual stockholders’ meetings on the environment.  If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site.  Your election to receive proxy materials by email will remain in effect until you terminate it.

The Company expects to mail the Notice of Internet Availability of Proxy Materials on or about April 2, 2008 to all stockholders entitled to vote at the meeting.  On the date of mailing of the Notice of Internet Availability of Proxy Materials, all stockholders and beneficial owners will have the ability to access all of the Company’s proxy materials on a website referred to in the Notice of Internet Availability of Proxy Materials.  These proxy materials will be free of charge.

Record Date and Voting Securities

Stockholders of record at the close of business on March 19, 2008, the record date for the Annual Meeting, are entitled to Notice of Internet Availability of Proxy Materials and to vote at the meeting and any adjournments or postponements thereof.  On the record date, 29,790,117 shares of our Common Stock, $0.01 par value, were issued and outstanding.

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Each stockholder is entitled to one vote for each share of Common Stock on all matters presented at the Annual Meeting.  Stockholders do not have the right to cumulate their votes in the election of directors.

Methods of Voting

Stockholders may vote by proxy.  The Company is offering stockholders of record four (4) methods of voting:

Voting via Internet —Specific instructions on how to vote via the Internet are included in the Notice of Internet Availability of Proxy Materials.

Voting by Telephone —Specific instructions on how to vote via the telephone are included in the Notice of Internet Availability of Proxy Materials.

Please note that the Internet and telephone voting facilities will close at 11:59 p.m. (EDT) on May 13, 2008.

Voting by Mail —You may request a proxy card from the Company, and indicate your vote by completing, signing and dating the proxy card where indicated and by returning it in the prepaid envelope that will be included with the proxy card.

Your shares will be voted in accordance with the instructions you indicate on the proxy card.  If you submit the proxy card but do not indicate your voting instructions, your shares will be voted as follows:

·                   FOR the election of the nominees for director identified in Proposal One.

·                   FOR the approval of the 2007 Employee Stock Purchase Plan as identified in Proposal Two.

·                   FOR the approval of the amended and restated Executive Variable Compensation Plan as identified in Proposal Three.

·                   FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending January 3, 2009, as identified in Proposal Four.

Voting in Person at the Meeting —If you plan to attend the Annual Meeting and vote in person, we will provide you with a ballot at the meeting.  If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person at the meeting.  If you choose to do so, please bring your Notice of Internet Availability of Proxy Materials or proof of identification.  If your shares are held in the name of your broker or other nominee, you are considered the beneficial owner of shares held in your name, but if you wish to vote at the meeting you will need to bring a legal proxy from your broker or other nominee authorizing you to vote these shares.

Even if you plan to attend the Annual Meeting, we recommend that you submit your vote as described in the Notice of Internet Availability of Proxy Materials, so that your vote will be counted if you later decide not to attend the Annual Meeting .

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Street Name (beneficial) Stockholders :  If your shares are held by a broker, bank or other nominee, you must follow the instructions on the form you receive from your broker, bank or other nominee in order for your shares to be voted.  Please follow their instructions carefully.

Revoking Your Proxy

Stockholders of Record —If you are a stockholder of record, you may revoke your proxy at any time before it is voted at the Annual Meeting.  In order to do this, you may either change your vote by:

·                   making a timely and valid later Internet or telephone vote no later than 11:59 p.m. (EDT), on May 13, 2008;

·                   signing and returning another proxy bearing a later date before the beginning of the Annual Meeting;

·                   providing written notice of the revocation to:

Corporate Secretary
Monaco Coach Corporation
91320 Industrial Way
Coburg, Oregon 97408

prior to the time we take the vote at the Annual Meeting; or

·                   attending the Annual Meeting and requesting that your proxy be revoked (attendance at the meeting will not by itself revoke a previously granted proxy).

Street Name (Beneficial) Stockholders —If you are a beneficial owner of shares held in street name, you may revoke your proxy by timely submitting new voting instructions to your broker, bank or other nominee or by obtaining a legal proxy from the broker, trustee or other nominee that holds your shares giving you the right to vote the shares, by attending the Annual Meeting and voting in person.

Solicitation of Votes

We will bear the cost of soliciting proxies.  In addition, we may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation material to such beneficial owners.  Solicitation of proxies by mail may be supplemented by telephone, telegram, facsimile or personal solicitation by our directors, officers or employees.  No additional compensation will be paid to such persons for such services.

Quorum Requirements

A quorum is necessary to hold a valid meeting.  The required quorum for the transaction of business at the Annual Meeting is a majority of the votes eligible to be cast by holders of shares of Common Stock, whether in person or by proxy, issued and outstanding on the record date.  Abstentions and broker non-votes are counted as present for establishing a quorum for the transaction of business at the Annual Meeting, but neither will be counted as votes cast.  A “broker non-vote” occurs when a broker votes on some matters on the proxy card but not on others because the broker does not have authority to do so.

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Votes Required for Each Proposal

The votes required for the proposals to be considered at the Annual Meeting are as follows:

Proposal One—Election of Directors .  The three (3) director nominees receiving the highest number of votes, in person or by proxy, will be elected as directors.  You may vote either “for” or “withhold” your vote for the director nominees.

Proposal Two—Approval of the 2007 Employee Stock Purchase Plan .  Approval of our 2007 Employee Stock Purchase Plan will require the affirmative vote of a majority of the shares present, represented and voting at the Annual Meeting.  You may vote “for,” “against,” or “abstain” from voting on the proposal to approve our 2007 Employee Stock Purchase Plan.

Proposal Three—Approval of the amended and restated Executive Variable Compensation Plan .  Approval of our amended and restated Executive Compensation Plan will require the affirmative vote of a majority of the shares present, represented and voting at the Annual Meeting.  You may vote “for,” “against,” or “abstain” from voting on the proposal to approve our Executive Variable Compensation Plan.

Proposal Four—Ratification of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm .  Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending January 3, 2009 will require the affirmative vote of a majority of the shares present, represented and voting at the Annual Meeting.  You may vote “for,” “against,” or “abstain” from voting on the proposal to ratify PricewaterhouseCoopers LLP as our independent registered public accounting firm.

Abstentions and Broker Non-Votes

A properly executed proxy marked “abstain” with respect to any such matter will not be voted, although it will be counted for purposes of determining whether there is a quorum.  Accordingly, an abstention will have the effect of a negative vote.

Under the rules that govern brokers who have record ownership of shares that are held in “street name” for their clients, the beneficial owners of the shares, brokers have discretion to vote these shares on routine matters but not on non-routine matters.  If you hold Common Stock through a broker and you have not given voting instructions to the broker, the broker may be prevented from voting shares on non-routine matters, resulting in a “broker non-vote.”  Thus, if you do not otherwise instruct your broker, the broker may turn in a proxy card voting your shares “FOR” routine matters but expressly instructing that the broker is NOT voting on non-routine matters.  Broker non-votes are counted for the purpose of determining the presence or absence of a quorum, but are not counted in the tabulation of the voting results with respect to a particular proposal.

Under New York Stock Exchange (“NYSE”) rules, the proposals to elect directors and ratify the appointment of the independent registered public accounting firm are considered routine items.  This means that brokerage firms may vote in their discretion on these matters on behalf of clients who have not furnished voting instructions.  The proposals to approve the Company’s 2007 Employee Stock Purchase Plan and amended and restated Executive Variable Compensation Plan are non-routine matters, which means that brokerage firms may not use their discretion to vote on such matters without express voting instructions from their clients.

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Stockholder Proposals for 2009 Annual Meeting of Stockholders

Stockholder proposals that are intended to be included in the Company’s proxy materials relating to the 2009 Annual Meeting of Stockholders must be received by our corporate secretary at our principal executive offices no later than December 3, 2008, which is 120 calendar days prior to the anniversary of the mailing of this year’s Notice of Internet Availability of Proxy Materials.   Such proposals must comply with the requirements of the proxy rules established by the Securities and Exchange Commission and with the advance notice provisions of our bylaws in order to be considered for inclusion in the proxy materials for that meeting.

Stockholder proposals that are not intended to be included in the proxy materials for the 2009 Annual Meeting of Stockholders but that are to be presented by the stockholder from the floor are also subject to the advance notice provisions contained in our bylaws.  In order to be properly brought before the meeting, a proposal not intended for inclusion in our proxy materials must also be received by our corporate secretary at our principal executive offices no later than December 3, 2008.

Information Regarding Our Proxy Materials

To request proxy materials or to ask questions regarding our proxy materials, you may contact us:

·                   By mail addressed to:

Monaco Coach Corporation

91320 Industrial Way

Coburg, Oregon 97408

Attn: Investor Relations

·                   By calling (800) 634-0855 and asking for Investor Relations.

·                   By leaving a message on the Investor Relations portal of our website at: http://www.monaco-online.com/ir.

We encourage you to conserve natural resources, as well as reduce printing and mailing costs, by using electronic delivery of our stockholder communications materials. By using electronic delivery, and voting electronically over the Internet or by telephone, you can reduce the number of bulky documents in your personal files, eliminate duplicate mailings, conserve natural resources and help us reduce our printing and mailing costs. If you have questions about electronic delivery, please call our Investor Relations department at the number set forth above.

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To sign up for electronic delivery:

·                   Stockholder of Record . If you are a stockholder of record, specific instructions on how to sign up for electronic delivery are included in the Notice of Internet Availability of Proxy Materials.

·                   Beneficial Owner . If you are a beneficial owner (your shares are held by a brokerage firm, a bank or other nominee), visit www.proxyvote.com to enroll or look for directions on the proxy card sent to you by your broker or bank.

Other Matters

We know of no other matters to be submitted at the meeting.  If any other matters properly come before the meeting or any adjournment or postponement thereof, it is the intention of the persons named in the attached form of proxy to vote the shares they represent as our Board of Directors may recommend.

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PROPOSAL ONE
ELECTION OF DIRECTORS

Nominees to the Board of Directors

Our Board of Directors currently has nine members divided into two classes (Class I and Class II), with the classes serving staggered, two-year terms.  Currently there are four directors in Class I and five directors in Class II.  The Class I directors are to be elected at the Annual Meeting.  Each of the Class II directors will hold office until the 2009 Annual Meeting of Stockholders or until their successors have been duly elected and qualified.

One of the current Class I directors, L. Ben Lytle, has advised us that he does not intend to stand for re-election.  Our Board has approved a bylaw amendment to reduce the size of the Board of Directors from nine (9) members to eight (8) members effective immediately before the election.  On the recommendation of our Governance Committee, the Board has nominated Kay L. Toolson, Richard A. Rouse and Daniel C. Ustian for election as Class I Directors.  Each nominee is currently a director.  Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR the nominees.  In the event that any nominee becomes unable or declines to serve as a director at the time of the Annual Meeting, the proxy holders will vote the proxies for any substitute nominee who is designated by the current Board of Directors to fill the vacancy.  It is not expected that any nominee listed below will be unable or will decline to serve as a director.

Certain information about each of the nominees for Class I directors is set forth below.  The names of, and certain information about, the five current Class II directors with unexpired terms are also set forth below.  All information is as of the record date.

Except as indicated below, each nominee or incumbent director has been engaged in the principal occupation set forth below during the past five years.  Michael P. Snell, an executive officer, is the nephew of Director Toolson.  Other than this family relationship, there are no family relationships between any directors or executive officers of Monaco Coach Corporation.

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Nominees for Class I Directors Whose Terms Expire in 2008

Mr. Toolson has served as our Chief Executive Officer and as the Chief Executive Officer of our predecessor company since 1986 and as Chairman since 1993.  He also served as President from 1986 to October 2000, except for the periods from October 1995 to January 1997 and August 1998 to September 1999.  From 1973 to 1986, Mr. Toolson held executive positions with two other motor coach manufacturers.  Mr. Toolson also serves on the Board of Paragon Medical, Inc., an Indiana based medical device manufacturing company.

Mr. Rouse has served as a director since July 1993.  He is currently a private investor.  From 1991 to 1998, Mr. Rouse served as Chairman of Emergency Road Service, Inc., a privately held nationwide roadside assistance company.  From 1978 to 1991, he was President of Trailer Life Enterprises, Inc., a publisher and sponsor of recreational vehicle publications and clubs.  Committees: Governance and Compensation .

Mr. Ustian has served as a director since June 2003.  Mr. Ustian is currently Chairman of the Board, President and Chief Executive Officer of Navistar International Corporation, a manufacturer of commercial trucks and engines.  Prior to his present position at Navistar, he was President and Chief Executive Officer from February 2003, President and Chief Operating Officer from April 2002, and President of the Engine Group of International Truck and Engine Corporation, Navistar’s principal operating subsidiary, from 1999 to 2002.  He also served as Group Vice President and General Manager of Engine & Foundry from 1993 to 1999.  Committees: Governance (Chair) and Compensation .

Class II Directors Whose Terms Expire in 2009

Mr. Cogan has served as a director since May 2005.  Mr. Cogan is the Leonard and Shirley Ely Senior Fellow at the Hoover Institution and a professor in the Public Policy Program at Stanford University, where he has held a continuing appointment since 1979.  Mr. Cogan also serves as a director of Venture Lending & Leasing Funds II & IV and Gilead Sciences Inc; and serves as a trustee of the Charles Schwab Family of Funds.  He is currently a member of California Governor Arnold Schwarzenegger’s Council of Economic Advisors. Mr. Cogan has previously held a number of positions in the U.S. government, including Deputy Director of the U.S. Office of Management and Budget and Assistant Secretary for Policy in the U.S. Department of Labor.   Committees: Audit

Mr. Colliver has served as a director since August 2006.  Mr. Colliver is Executive Vice President of American Honda Motor Co., Inc., heading up both Honda and Acura Automobile Divisions.  He joined Honda in 1993 as Senior Vice President of the Honda Automobile Division, and was promoted to Executive Vice President and appointed to the Board of Directors of American Honda Motor Co., Inc. on July 8, 1997.  In 1998, Mr. Colliver assumed responsibilities for the Acura Division and on March 1, 2005 he was appointed to the Board of Directors of Honda North America, Inc. and American Honda Finance Company, Inc.  Prior to joining Honda, Mr. Colliver enjoyed a career of more than 20 years with Mazda Motors of America where he rose through the ranks to Group Vice President and General Manager.  His automotive career, which began in 1962, included a variety of sales and marketing positions with General Motors and Chrysler.  Committees: Compensation and Governance .

Mr. Hanafee has served as a director since October 2001.  Mr. Hanafee served as the President of Gillette North America and he held various positions at Gillette Company, a consumer products company, from 1970 until retirement in 2001, including Vice President of Sales and Marketing of the Paper Mate Divisions, Senior Vice President of the North Atlantic Group, and President of the Stationary Products Group.  Committees: Governance  and Compensation (Chair) .

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Mr. Oklak has served as a director since February 2003.  Mr. Oklak has been Chairman and Chief Executive Officer since April 2005 and also a Director since April 2004, of Duke Realty Corporation, one of the largest real estate investment trusts in the United States.  From 1986 through April 2005, Mr. Oklak served in various other positions with Duke Realty Corporation, including President, Chief Operating Officer, Co-Chief Operating Officer, Executive Vice President and Chief Administrative Officer and Senior Vice President and Treasurer.  Prior to joining Duke Realty Corporation, Mr. Oklak was with Deloitte & Touche, a public accounting firm.  Committees: Audit (Chair) .

Mr. Vandenberg has served as a director since March 1993.  He currently serves as the President of Cariad Capital, Inc., a private equity investment business, which he founded in 1992.  Mr. Vandenberg also serves as a director of Wellman, Inc., a polyester fiber manufacturer.  From 1986 to December 2002, Mr. Vandenberg served as a Managing Director of Narragansett Capital, Inc., a private investment firm, as general partner of Narragansett Capital Partners -A and -B, L.P., related venture capital funds, and as a general partner of Narragansett First Fund, a venture capital fund.  From May 1999 to March 2000, Mr. Vandenberg served as President of EFD, Inc., a manufacturer and seller of fluid dispensers and dispensing components.  Committees: Audit .

Vote Required

The three nominees receiving the highest number of votes of the shares entitled to be voted shall be elected as directors.  Votes withheld from any director will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Meeting, but these votes have no other legal effect upon election of directors under Delaware law.

THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED KAY L. TOOLSON, RICHARD A. ROUSE AND DANIEL C. USTIAN AS ITS NOMINEES AND RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF THESE NOMINEES AS CLASS I DIRECTORS.

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CORPORATE GOVERNANCE

Board of Directors and Committee Meetings

Our Board of Directors (“Board”) held six (6) meetings during 2007.  Each of our directors attended 75% or more of the meetings of the Board and the committees on which he served in 2007.  Our directors are expected, absent exceptional circumstances, to attend all Board meetings and meetings of committees on which they serve, and are also expected to attend our Annual Meeting of Stockholders.  All directors then in office attended the 2007 Annual Meeting of Stockholders.

Our Board has summarized its corporate governance practices in the Monaco Coach Corporation Corporate Governance Guidelines , a copy of which is available on our Investor Relations website at http://www.monaco-online.com/ir.  The Board currently has three committees: an Audit Committee, a Compensation Committee and a Governance Committee.  Each committee has a written charter approved by the Board outlining the principal responsibilities of the committee.  These charters and our corporate governance guidelines are available on our Investor Relations website or in print by contacting Investor Relations at our principal executive offices.

Audit Committee

The purpose of our Audit Committee is to oversee our accounting and financial reporting processes and audits of our financial statements and internal control over financial reporting.  Our Audit Committee also assists the Board in the oversight and monitoring of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of our internal audit function and our independent auditors.  In addition, the Audit Committee’s duties and responsibilities include reviewing and pre-approving any audit and non-audit services performed by the independent auditors, reviewing, approving and monitoring our Code of Ethics for Executive Officers and establishing procedures for receiving, retaining and treating complaints regarding accounting, internal accounting controls or auditing matters.  The report of the Audit Committee for fiscal 2007 is included in this proxy statement.

The Audit Committee currently consists of Directors Cogan, Oklak and Vandenberg and held seven (7) meetings during 2007.  None of the Audit Committee members is an employee of Monaco Coach Corporation and all of them are independent within the meaning of the rules of the SEC and the listing standards of the NYSE.  Mr. Oklak serves as the Chair of the Audit Committee.  The Board has designated Mr. Oklak as an “audit committee financial expert” within the meaning of the rules of the SEC, and the Board has determined that he has accounting and related financial management expertise within the meaning of the listing standards of the NYSE.

Compensation Committee

The purpose of our Compensation Committee is to determine salaries, incentives and other forms of compensation for executive officers and other employees, to administer our various incentive compensation and benefit plans, and to provide oversight and guidance to management regarding general compensation goals and guidelines.  The report of the Compensation Committee for fiscal 2007 is included in this proxy statement.  The Compensation Committee currently consists of Directors Colliver, Hanafee, Lytle, Rouse and Ustian and held four (4) meetings during the last fiscal year.  Mr. Hanafee serves as the Chair of the Compensation Committee.  Each member of the Compensation Committee is independent within the meaning of the listing standards of the NYSE.

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Governance Committee

The purpose of our Governance Committee is to identify, evaluate and recommend nominees for the Board, evaluate the composition, organization and governance of the Board and its committees and develop and recommend to the Board appropriate corporate governance principles and policies.  The Governance Committee also supervises the Board’s annual review of director independence and the performance self-assessments of the Board and each of the committees.  The Governance Committee currently consists of Directors Colliver, Hanafee, Lytle, Rouse and Ustian and held three (3) meetings during the last fiscal year.  Mr. Ustian was appointed Chair of the Governance Committee in February 2008, succeeding Mr. Lytle.  Each member of the Governance Committee is independent within the meaning of the listing standards of the NYSE.

Stockholder Communications to Directors

Stockholders or interested parties may communicate directly with our non-management directors by sending a letter addressed to:

Corporate Secretary
Monaco Coach Corporation
91320 Industrial Way
Coburg, Oregon 97408

Richard Bond, our Senior Vice President, Chief Administrative Officer and Corporate Secretary will ensure that a summary of all communications received is provided to the Board of Directors at its regularly scheduled meetings.  Where the nature of a communication warrants, Mr. Bond may decide to obtain the more immediate attention of the appropriate committee of the Board of Directors or a non-management director, management or independent advisors, as Mr. Bond considers appropriate.  Mr. Bond may decide, in the exercise of his judgment, whether a response to any stockholder or interested party communication is necessary.

Policy for Director Recommendations and Nominations

The Governance Committee considers candidates for Board membership suggested by Board members, management and our stockholders.  The policy of the Governance Committee is to consider recommendations for candidates to the Board from any stockholder holding, as of the date the recommendation is submitted, not less than one percent (1%) of the then outstanding shares of our Common Stock continuously for at least twelve (12) months prior to such date.  The Governance Committee will consider a director candidate recommended by our stockholders in the same manner as a nominee recommended by a Board member, management or other sources.

In addition, a stockholder may nominate a person directly for election to the Board at an annual meeting of stockholders provided the stockholder meets the requirements set forth in our bylaws.  Where the Governance Committee has either identified a prospective nominee or determines that an additional or replacement director is required, the Governance Committee may take such measures as it considers appropriate in connection with its evaluation of a director candidate, including candidate interviews, inquiry of the person or persons making the recommendation or nomination, engagement of an outside search firm to gather additional information, or reliance on the knowledge of the members of the Governance Committee, the Board or management. In its evaluation of director candidates, including the members of the Board eligible for re-election, the Governance Committee considers a number of factors, including:

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·                   The current size and composition of the Board and the needs of the Board and the respective committees of the Board.

·                   Such factors as judgment, independence, character and integrity, age, area of expertise, diversity of experience, length of service, and potential conflicts of interest.

The Governance Committee has also specified the following minimum qualifications that it believes must be met by a nominee for a position on the Board:

·                   The highest personal and professional ethics and integrity.

·                   Proven achievement and competence in the nominee’s field and the ability to exercise sound business judgment.

·                   Skills that are complementary to those of the existing Board members.

·                   The ability to assist and support management and make significant contributions to the success of Monaco Coach Corporation.

·                   An understanding of the fiduciary responsibilities that are required of a member of the Board and the commitment of time and energy necessary to diligently carry out those responsibilities.

·                   A willingness of the prospective nominee to meet the minimum equity interest holding guideline set out in our Corporate Governance Guidelines.

After completing its evaluation, the Governance Committee makes a recommendation to the full Board as to the persons who should be nominated to the Board, and the Board determines the nominees after considering the recommendation and report of the Governance Committee.

Director Independence

In November 2003, the Board adopted Standards of Independence for the Board of Directors (the “Independence Standards”).  These guidelines for determining director independence are intended to be consistent with the NYSE’s director independence standards and are available on our Investor Relations website at http://www.monaco-online.com/ir .  The Independence Standards include certain relationships that will preclude a finding of independence and further require the Board to affirmatively determine whether any director has a relationship with the Company that would preclude a finding of independence.  Consistent with the Independence Standards, in February 2008 the Board reviewed the independence of our non-employee directors and considered whether any director had any relationship with Monaco Coach Corporation or management that would compromise his ability to exercise independent judgment in carrying out his responsibilities.  Based on this review, the Board has affirmatively determined that directors John F. Cogan, Richard E. Colliver, Robert P. Hanafee, Jr., L. Ben Lytle, Dennis D. Oklak, Richard A. Rouse, Daniel C. Ustian and Roger A. Vandenberg are independent directors for purposes of their service on our Board and, as the case may be, on the Audit, Compensation and Governance Committees.

In connection with its review, the Board identified and evaluated relationships between two of the directors, Richard A. Rouse and Daniel C. Ustian, and Monaco Coach Corporation.  No other non-employee directors were found to have any direct or indirect relationships with Monaco Coach Corporation other than in connection with their services as directors.

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Mr. Ustian is the Chairman, President and Chief Executive Officer of Navistar International Corporation (“Navistar”).  Navistar International Corporation is a holding company whose wholly-owned subsidiaries produce International® brand commercial trucks, MaxxForce brand diesel engines, IC brand school buses, and Workhorse brand chassis for motor homes and step vans.  It also is a private-label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets.  The company also provides truck and diesel engine parts and service.  There are two commercial relationships between Monaco Coach Corporation and units of Navistar’s consolidated corporate structure, both of which were evaluated by the Board in terms of their potential effect on Mr. Ustian’s independence.  In the first relationship, Navistar’s indirect operating subsidiary, Workhorse Custom Chassis, LLC (“Workhorse”), sells gasoline-powered chassis for motor homes to Monaco.  For 2007, Monaco’s purchases under this supply relationship amounted to approximately $11.8 million, representing approximately 1% of Monaco’s cost of sales and, based on Navistar’s last publicly issued financial statements, less than 1% of Navistar’s total annual revenues.

In addition to the supply relationship, in February 2007 Monaco Coach Corporation and Navistar, Inc., the principal operating subsidiary of Navistar, formed a joint venture company, Custom Chassis Products, LLC.  Monaco owns 49% of the joint venture and Navistar, Inc. owns 51%.  The governing board of the joint venture consists of three members from Navistar, Inc. and two members from Monaco.  Mr. Ustian is not a member.  Monaco and Workhorse are the joint venture’s only customers.  Monaco has the right to terminate the joint venture (after completion of a dispute resolution process) if its board representatives voted against certain matters and such matters were nonetheless approved by the board of the joint venture.  No action of the joint venture board can be implemented by the joint venture if the Monaco representatives vote against such action.  The joint venture will be Workhorse’s exclusive manufacturer and supplier of all production requirements for its current and future portfolio of rear diesel engine recreational vehicle and low-floor bus stripped chassis products.  In addition, the joint venture will be Monaco’s exclusive manufacturer and supplier of all production requirements for all of its current and future rear engine diesel stripped chassis products.  A five-year pro forma revenue forecast for the joint venture estimates that annual revenues from the joint venture would comprise less than 0.4% of Navistar’s revenues based on Navistar’s last publicly issued financial statements.

After analyzing the supply relationship and the joint venture, and examining Mr. Ustian’s relationship to these transactions through his positions at Navistar, including the fact that his equity holdings in Navistar are less than 0.01% of Navistar’s outstanding common stock and the nature of his salary and bonus arrangement with Navistar, and otherwise considering the relationships as a whole, in light of all circumstances, the Board determined that these affiliations do not violate any Monaco Coach Corporation or NYSE director independence standard and are not material to Mr. Ustian’s ability to exercise independent judgment in carrying out his duties and responsibilities as a director of Monaco and member of its Governance and Compensation Committees.

The Board also considered the fact that Richard A. Rouse provides occasional consulting services to Monaco without compensation but does participate in Monaco’s self-funded health care plans.  Monaco paid $6,468 in the equivalent of health care premiums for him in 2007.  The Board likewise determined that this relationship did not violate any Monaco Coach Corporation or NYSE director independence standard and is not material to Mr. Rouse’s ability to exercise independent judgment in carrying out his duties and responsibilities as a director of Monaco Coach Corporation and member of its Governance and Compensation Committees.

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Code of Business Conduct and Code of Ethics for Officers

Our Board has adopted a Code of Business Conduct that is applicable to all of our employees, officers and directors.  Our Code of Business Conduct is intended to ensure our employees act in accordance with high ethical standards based on respect for the dignity of each individual and a commitment to honesty and fairness.  In addition, we have in place a Code of Ethics for Executive Officers that applies to our Chief Executive Officer, our Chief Financial Officer and certain other officers and this code is intended to deter wrongdoing and promote ethical conduct among our executives and to ensure all of our public disclosure is full, fair and accurate.  Both the Code of Business Conduct and the Code of Ethics for Executive Officers are available on our Investor Relations website at http://www.monaco-online.com/ir or in print by contacting Investor Relations at our principal executive offices.  If necessary, we intend to post amendments to, or waivers from, these Codes for our executive officers and directors on our website.

Lead Director

In October 2002, the Board created the position of Lead Director (formerly Presiding Director).  The primary responsibility of the Lead Director is to preside over executive sessions of the Board in which management and management directors do not participate, to work with the Chairman of the Board and the committee chairs in establishing the agendas for board and committee meetings and to perform such other duties as the Board may from time to time delegate to him in order to help it fulfill its responsibilities.  Robert P. Hanafee, Jr. serves as our Lead Director.

DIRECTOR COMPENSATION

Cash Compensation

For 2007 each of our non-employee directors received an annual retainer of $50,000 for service on the Board and any committee of the Board.  No separate fees were paid for committee service or on a per-meeting basis.  Directors are also reimbursed for certain expenses in connection with attendance at Board and committee meetings.  In addition, non-employee directors may elect, prior to each new fiscal year, to receive a minimum of 10% up to a maximum of 50% of their annual retainer in the form of common stock or restricted stock/restricted stock units.

In 2007, our Compensation Committee requested its compensation consultant, Towers Perrin, to review our director compensation.  The consultant determined that the annual retainer was generally at the median level of our comparator companies and recommended no change to that element of compensation, but did recommend that the Chair of the Audit Committee receive an additional $10,000 annual retainer in recognition of the responsibilities of that position.  That change was implemented beginning in 2008.

Equity Compensation

In its review of director compensation, Towers Perrin also reviewed our equity compensation for directors.  The initial report indicated that our equity compensation for directors was generally below the 25 ^th percentile of our comparator companies.  The consultant recommended that an equity award for 2007 of $40,000-$50,000 in value would be appropriate.  The consultant was requested to prepare a more detailed report of director pay best practices and rates and, in particular, to review the total rewards strategy at the 19 comparator companies that are used for benchmarking Monaco’s executive compensation.

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In September 2007, we granted the non-employee directors restricted stock units representing approximately $40,000 in value in September 2007.  These restricted stock units vest in full three years from the date of grant.  Vesting is accelerated in the event of death, disability or retirement and upon a change of control of Monaco.

In a subsequent report late in 2007, the consultant noted that Monaco’s director compensation had remained relatively constant over the last three years compared to the market pay for directors, which had increased over the period.  Based on the report, we will increase our equity compensation for directors beginning in 2008 to $60,000 in value annually.  Newly-appointed directors will not receive any special grants upon joining the Board.

The following table sets forth information concerning compensation paid or accrued for services rendered to the Company in all capacities by the non-employee members of the Board for the fiscal year ended December 29, 2007:

Director Compensation Summary
For the Fiscal Year 2007

(1)           Stock awards consist of restricted stock units.  The amounts shown do not reflect compensation actually received by the non-employee directors.  Rather, these amounts are the compensation costs recognized by Monaco in 2007 for stock awards issued in 2006 and 2007 as determined pursuant to FAS 123R.  Directors Cogan, Colliver, Hanafee, Lytle, Oklak, Rouse, Ustian and Vandenberg each received 3,270 restricted stock units on September 13, 2007 valued at $40,450.  Directors Cogan, Hanafee, Lytle, Oklak, Rouse, Ustian and Vandenberg each received 3,000 restricted stock units on August 15, 2006 valued at $31,590  and Director Colliver received 4,000 restricted stock units on August 24, 2006 valued at $40,880.  The assumptions used to calculate the value of stock awards are set forth in Note 17 of the Notes to Consolidated Financial Statements included in Monaco’s Annual Report on Form 10-K for 2007.

(2)           The amounts shown do not reflect compensation actually received.  Instead, the amounts shown are the compensation costs recognized by Monaco in 2007 for stock option awards determined pursuant to FAS 123R.  Options with recognized expense in 2007 were as follows:  Director Oklak received a grant of 8,000 options on February 11, 2003 valued at $42,616; Director Cogan received a grant of 8,000 options on May 18, 2005 valued at $40,336; and Directors Hanafee, Lytle, Oklak, Rouse, Ustian and Vandenberg received grants of 4,000 options on September 30, 2005 valued at $19,868.  No stock options have been granted since 2005.  The assumptions used to calculate the value of option awards are set forth in Note 17 of the Notes to Consolidated Financial Statements included in Monaco’s Annual Report on Form 10-K for 2007.

(3)           Under the 1993 Stock Plan, the Directors can elect to receive a portion of their annual retainer in stock.  This amount includes $25,023 of director fees and 1,960 shares of Monaco Coach Corporation stock received in lieu of their cash retainer.

(4)           This amount represents dividend equivalent rights on 3,000 RSUs awarded on August 15, 2006 and 3,270 RSUs on September 13, 2007.

(5)           This amount represents dividend equivalent rights on 4,000 RSUs awarded on August 24, 2006 and 3,270 RSUs on September 13, 2007.

(6)           This amount represents $916 dividend equivalent rights on 3,000 RSUs awarded on August 15, 2006 and 3,270 RSUs awarded on September 13, 2007 and $6,468 medical and dental insurance premium equivalents from the Company.

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(7)           The following table shows the aggregate number of stock and option awards held by each non-employee director as of December 29, 2007.

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PROPOSAL TWO—APPROVAL OF THE 2007 EMPLOYEE STOCK PURCHASE PLAN

The stockholders are being asked to approve a new employee stock purchase plan, the 2007 Employee Stock Purchase Plan (the “Purchase Plan”).  The Company’s former Employee Stock Purchase Plan has expired.  The Board has determined that it is still in the best interests of the Company and its stockholders to have an employee stock purchase plan and is asking the Company’s stockholders to approve the Purchase Plan.  The Board has reserved a total of 400,000 shares of the Company’s Common Stock for purchase under the Purchase Plan, subject to stockholder approval at the Annual Meeting.  Approval of the Purchase Plan requires the affirmative vote of the holders of a majority of the shares of the Company’s Common Stock that are present in person or by proxy and entitled to vote at the Annual Meeting.  The first offering period under the Purchase Plan commenced in July 2007, but the purchase of shares pursuant to this offering period is contingent on the Company receiving stockholder approval of the Purchase Plan.

Summary of the 2007 Employee Stock Purchase Plan

The following is a summary of the principal features of the Purchase Plan and its operation.  The summary is qualified in its entirety by reference to the Purchase Plan as set forth in Appendix A.

General

The Purchase Plan was adopted by the Board on June 21, 2007, subject to stockholder approval at the Annual Meeting.  The purpose of the Purchase Plan is to provide employees with an opportunity to purchase shares of the Company’s Common Stock through accumulated payroll deductions.

Administration

The Board, or a committee of members appointed by the Board, administers the Purchase Plan.  The Board, in its sole discretion, may delegate to one or more individuals all or any part of its authority and powers under the Purchase Plan.  All questions of interpretation or application of the Purchase Plan are determined by the Board (or its designee) and its decisions are final and binding upon all participants.

Eligibility

Each individual who is an employee of the Company (or any designated subsidiary of the Company) for tax purposes and who is employed by the Company (or a designated subsidiary) on the first day of the applicable offering period and whose customary employment with the Company or a designated subsidiary is at least twenty (20) hours per week and more than five (5) months in a calendar year is eligible to participate in the Purchase Plan; except that no employee will be granted an option under the Purchase Plan (i) to the extent that, immediately after the grant, such employee would own capital stock of the Company and/or hold outstanding options to purchase such stock possessing 5% or more of the total combined voting power or value of all classes of the Company’s capital stock or the capital stock of one of the Company’s subsidiaries, or (ii) to the extent that his or her rights to purchase stock under all of the Company’s employee stock purchase plans accrues at a rate which exceeds $25,000 worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year.

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Offering Period

Unless otherwise determined by the Board, each offering period under the Purchase Plan will have a duration of approximately six (6) months, commencing on the first trading day on or after July 15 of each year and terminating on the last trading day in the period ending six (6) months later, and commencing on the first trading day on or after January 15 of each year and terminating on the last trading day in the period ending six (6) months later.  Notwithstanding the foregoing, the first offering period under the Purchase Plan commenced on July 16, 2007 and will end on the last trading day in the period ending twelve (12) months later, and the second offering period under the Purchase Plan will commence on the first trading day on or after July 15, 2008 and will end on the last trading day in the period ending six (6) months later.  To participate in the Purchase Plan, an eligible employee must authorize payroll deductions pursuant to the Purchase Plan.  Such payroll deductions may not exceed 10% of a participant’s compensation which he or she receives on each pay day during the offering period, and the aggregate of such payroll deductions during the offering period cannot exceed 10% of the participant’s compensation during the offering period.  Once an employee becomes a participant in the Purchase Plan, the employee automatically will participate in each successive offering period until the employee withdraws from the Purchase Plan or the employee’s employment with the Company or one of the Company’s designated subsidiaries terminates.  At the beginning of each offering period, each participant automatically is granted an option to purchase shares of the Company’s Common Stock.  The option expires at the end of the offering period or upon termination of employment, whichever is earlier, but is exercised at the end of each offering period to the extent of the payroll deductions accumulated during such offering period.

Purchase Price

Unless and until the Board determines otherwise, shares of the Company’s Common Stock may be purchased under the Purchase Plan at a purchase price of not less than 85% of the lesser of the fair market value of the Common Stock on (i) the first day of the offering period, or (ii) the last day of the offering period.  The fair market value of the Company’s Common Stock on any relevant date will be the closing price per share as reported on any established stock exchange or a national market system, or the mean of the closing bid and asked prices, if no sales were reported, as quoted on such exchange or reported in The Wall Street Journal .  In the absence of an established market for the Company’s Common Stock, the fair market value will be determined by the Board.

Payment of Purchase Price; Payroll Deductions

The purchase price of the shares is accumulated by payroll deductions throughout each offering period.  The number of shares of the Company’s Common Stock that a participant may purchase in each offering period will be determined by dividing the total amount of payroll deductions withheld from the participant’s compensation during that offering period by the purchase price; provided, however, that a participant may not purchase more than 10,000 shares each offering period.  During an offering period, a participant may discontinue his or her participation in the Purchase Plan, and may increase or decrease the rate of payroll deductions in an offering period within limits set by the Board.

All payroll deductions made for a participant are credited to the participant’s account under the Purchase Plan, are withheld in whole percentages only, and may be used by the Company for any corporate purpose.  The Company will not be obligated to segregate such payroll deductions.  A participant may not make any additional payments into his or her account.

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Withdrawal

Generally, a participant may withdraw from an offering period at any time by written or electronic notice without affecting his or her eligibility to participate in future offering periods.  Once a participant withdraws from a particular offering period, however, that participant may not participate again in the same offering period.  To participate in a subsequent offering period, the participant must deliver a new subscription agreement to the Company.

Termination of Employment

Upon termination of a participant’s employment for any reason, including by virtue of him or her having failed to remain customarily employed by the Company for at least twenty (20) hours per week during an offering period in which the employee is a participant, he or she will be deemed to have elected to withdraw from the Purchase Plan and the payroll deductions credited to the participant’s account (to the extent not used to make a purchase of the Company’s Common Stock) will be returned to him or her or, in the case of death, to the person or persons entitled thereto as provided in the Purchase Plan, and such participant’s option will automatically be terminated.

Adjustments upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale

Changes in Capitalization.   Subject to any required action by the Company’s stockholders, the number of shares of Common Stock covered by each option under the Purchase Plan which have not yet been exercised, the number of shares of Common Stock which have been authorized for issuance under the Purchase Plan but not yet placed under option, as well as the price per share of Common Stock covered by each option under the Purchase Plan which has not yet been exercised, will be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock of the Company resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company.  Such adjustment will be made by the Board, whose determination will be final, binding and conclusive.

Dissolution or Liquidation.   In the event of the Company’s proposed dissolution or liquidation, the offering period then in progress will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board.

Merger or Asset Sale.  In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each option under the Purchase Plan will be assumed or an equivalent option will be substituted by the successor corporation or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, to shorten the offering period then in progress by setting a new exercise date or to cancel each outstanding right to purchase and refund all sums collected from participants during the offering period then in progress.  If the Board shortens the offering period then in progress in lieu of assumption or substitution in the event of a merger or sale of assets, the Board will notify each participant in writing, at least ten (10) days prior to the new exercise date, that the exercise date has been changed to the new exercise date and that the option will be exercised automatically on the new exercise date, unless the participant has already withdrawn from the offering period.

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Amendment and Termination of the Purchase Plan

The Board may at any time amend or terminate the Purchase Plan including the term of any offering period then outstanding.  Generally, no such termination can adversely affect options previously granted.  The Purchase Plan will terminate in 2037, unless the Board terminates it earlier.

New Plan Benefits

Participation in the Purchase Plan is voluntary and is dependent on each eligible employee’s election to participate and his or her determination as to the level of payroll deductions.  Accordingly, future purchases under the Purchase Plan are not determinable.  Non-employee directors are not eligible to participate in the Purchase Plan.  While the first offering period under the Purchase Plan commenced in July 2007, no purchases have been made under the Purchase Plan since its adoption by the Board.  For illustrative purposes, the following table sets forth (i) the number of shares of our Common Stock that were purchased during the last full fiscal year during which the 1993 Employee Stock Purchase Plan was in operation, (ii) the average price per share paid for such shares, and (iii) the fair market value at the date of purchase.

(1)           All executive officers as a group six (6) persons.

(2)           Directors who are not employees of the Company are not eligible to participate in the Purchase Plan.

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Certain Federal Income Tax Information

The following brief summary of the effect of federal income taxation upon the participant and the Company with respect to the shares purchased under the Purchase Plan does not purport to be complete, and does not discuss the tax consequences of a participant’s death or the income tax laws of any state or foreign country in which the participant may reside.

The Purchase Plan, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Internal Revenue Code of 1986, as amended.  Under these provisions, no income will be taxable to a participant until the shares purchased under the Purchase Plan are sold or otherwise disposed of.  Upon sale or other disposition of the shares, the participant will generally be subject to tax in an amount that depends upon the holding period.  If the shares are sold or otherwise disposed of more than two (2) years from the first day of the applicable offering period and one (1) year from the applicable date of purchase, the participant will recognize ordinary income measured as the lesser of (a) the excess of the fair market value of the shares at the time of such sale or disposition over the purchase price, or (b) an amount equal to 15% of the fair market value of the shares as of the first day of the applicable offering period.  Any additional gain will be treated as long-term capital gain.  If the shares are sold or otherwise disposed of before the expiration of these holding periods, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price.  Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the shares have been held from the date of purchase.  The Company generally is not entitled to a deduction for amounts taxed as ordinary income or capital gain to a participant except to the extent of ordinary income recognized by participants upon a sale or disposition of shares prior to the expiration of the holding periods described above.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY UNDER THE PURCHASE PLAN.  IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.

Vote Required

The approval of the Purchase Plan requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ADOPTION OF THE 2007 EMPLOYEE STOCK PURCHASE PLAN AND THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER .

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PROPOSAL THREE—APPROVAL OF THE AMENDED AND RESTATED EXECUTIVE
VARIABLE COMPENSATION PLAN

Our Board of Directors has amended and restated our Executive Variable Compensation Plan (the “Bonus Plan”), subject to the approval of the holders of a majority of the shares of our common stock that are present in person or by proxy at the Annual Meeting.  If the stockholders approve the amended and restated Bonus Plan, it will replace the current version of the Executive Variable Compensation Plan.  If the stockholders do not approve the amended and restated Bonus Plan, the current Bonus Plan will remain in effect.

Our Board has amended the Bonus Plan to provide the Company with greater flexibility in structuring bonus arrangements for its most senior executives, which it believes will align the interests of those executives and the stockholders to create long-term stockholder value, and to update the plan in light of recent guidance issued by the Internal Revenue Service relating to “performance-based” compensation under Section 162(m) of the Internal Revenue Code.  The Board believes that plans such as the Bonus Plan increase the Company’s ability to achieve this objective, which the Board believes will help the Company to recruit, reward, motivate and retain talented executives.

The following paragraphs provide a summary of the principal features of the Bonus Plan and its operation.  The Bonus Plan is set forth in its entirety as Appendix B to this Proxy Statement.  The following summary is qualified in its entirety by reference to Appendix B.

Purpose

The purpose of the Bonus Plan is to motivate key executives to perform to the best of their abilities and to achieve the Company’s objectives.  The Bonus Plan accomplishes this by paying awards under the Bonus Plan only after the achievement of the specified goals.

The Bonus Plan also is designed to qualify awards under the Bonus Plan as “performance-based” compensation under Section 162(m).  Under Section 162(m), the Company may not receive a federal income tax deduction for compensation paid to our Chief Executive Officer and certain other highly compensated executive officers to the extent that any of these persons receives more than $1,000,000 in compensation in any one year.  However, if we pay compensation that is “performance-based” under Section 162(m), the Company still can receive a federal income tax deduction for the compensation even if it is more than $1,000,000 during a single year.  The Bonus Plan allows us to pay incentive compensation that is performance-based and therefore fully tax deductible on the Company’s federal income tax return.

Eligibility to Participate

The Compensation Committee selects the employees (and employees of our affiliates) who will be eligible to receive awards under the Bonus Plan.  The actual number of employees who will be eligible to receive an award during any particular year cannot be determined in advance because the Compensation Committee has discretion to select the participants.  However, we expect that approximately two to six executives will participate in the Bonus Plan in any year.

Target Awards and Performance Goals

For each performance period, the Compensation Committee assigns each participant a target award and performance goal or goals that must be achieved before an award actually will be paid to the participant.  The participant’s target award is generally expressed as a percentage of his or her base salary earned during a

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performance period, but may be designated as a dollar amount or in some other manner as the Compensation Committee may determine.  The performance goals will require the achievement of objectives based on one or more of the following financial measures:

Actual Awards and Awards to be Granted to Certain Individuals and Groups

After the performance period ends, the Compensation Committee certifies in writing the extent to which the pre-established performance goals actually were achieved or exceeded.  The actual award that is payable to a participant is determined using a formula that increases or decreases the participant’s target award based on the level of actual performance attained.  However, the Bonus Plan limits actual awards to a maximum of $3,000,000 per person in any performance period, even if the formula otherwise indicates a larger award.

Awards under the Bonus Plan are determined based on actual performance, so future actual awards (if any) cannot now be determined.  There is no assurance that the pre-established performance goals will be achieved and therefore is no assurance that the target awards shown below (or any awards at all) actually will be paid.

For our 2008 fiscal year, the Compensation Committee has designated Kay Toolson, our Chairman of the Board and Chief Executive Officer, and John Nepute, our President, as participants in the Bonus Plan.  Each executive is eligible to receive an award under the Bonus Plan as follows:

·                   The award is based on achievement by the Company in fiscal 2008 of a target level of earnings before interest, taxes, depreciation and amortization (EBITDA) (calculated before bonuses but including equity-based compensation charges) of $39,774,000.

·                   A minimum level of return on equity (EBITDA as a percentage of beginning stockholders’ equity) must be achieved by the Company in fiscal 2008 before any bonuses will be paid under the Bonus Plan.  The minimum return on equity necessary to receive an award under the Bonus Plan for fiscal 2008 is 6%.

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·                   The Compensation Committee established target bonus levels for each executive that are defined as a percentage of base pay.  Actual bonuses equal to a multiple of an executive’s target bonus amount will be paid based on achievement of the targets for fiscal 2008 by the Company as follows (intermediate percentages are interpolated linearly):

The Compensation Committee approved target bonuses for Bonus Plan participants* as follows:

If the Company’s stockholders do not approve the amended and restated Bonus Plan, then the Compensation Committee may consider an alternative compensation arrangement to properly incentivize the designated participants in the Bonus Plan.

Actual awards generally are paid in cash within two and one-half months after the performance period ends.  If a participant terminates employment before the end of the performance period in which the bonus is to be earned, the Compensation Committee has discretion to pay out part or all of the award to the extent the bonus would have otherwise been earned had the participant remained employed through the end of the performance period.  In addition, the Compensation Committee has the discretion to pay out all or part of an award upon a participant’s termination as a result of his or her death or disability or upon a change of control or in connection with a termination of employment following a change of control of Monaco Coach.

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Administration, Amendment and Termination

The Compensation Committee administers the Bonus Plan.  Members of the Compensation Committee must qualify as outside directors under Section 162(m).  Subject to the terms of the Bonus Plan, the Compensation Committee has sole discretion to:

·                   select the employees who will receive awards;

·                   determine the target award for each participant;

·                   determine the performance goals that must be achieved before any actual awards are paid;

·                   determine a formula to increase or decrease an award to reflect actual performance versus the predetermined performance goals; and

·                   interpret the provisions of the Bonus Plan.

The Compensation Committee may amend or terminate the plan at any time and for any reason.  An amendment also will be submitted for shareholder approval if necessary to maintain the Bonus Plan’s compliance with Section 162(m).

Vote Required

The approval of the Monaco Coach Corporation Executive Variable Compensation Plan, as amended and restated, requires the affirmative vote of a majority of the shares of our Common Stock present or represented and voting at the Annual Meeting.

THE BOARD OF DIRECTORS BELIEVES THAT THE EXECUTIVE VARIABLE COMPENSATION PLAN PROVIDES A STRONG INCENTIVE FOR PARTICIPATING EXECUTIVES TO WORK TO INCREASE THE VALUE OF THE COMPANY WHILE ALSO QUALIFYING THEIR BONUSES FOR FEDERAL INCOME TAX DEDUCTIBILITY AND RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED EXECUTIVE VARIABLE COMPENSATION PLAN.

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PROPOSAL FOUR—RATIFICATION OF
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has selected PricewaterhouseCoopers LLP, an independent registered public accounting firm, to audit our financial statements for the fiscal year ending January 3, 2009, and recommends that the stockholders vote for ratification of such appointment.  In the event of a negative vote on such ratification, the Audit Committee will reconsider its selection.  A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting.

Fees to PricewaterhouseCoopers LLP for Fiscal Years 2007 and 2006

The following table presents fees for professional services rendered by PricewaterhouseCoopers LLP for the audit of our annual financial statements for fiscal years 2007 and 2006 and fees billed for audit-related services and all other services rendered by PricewaterhouseCoopers LLP for these periods:

(1)           Audit fees —These are fees for professional services performed by PricewaterhouseCoopers LLP in auditing our annual financial statements and our internal control over financial reporting.  This included reviewing our quarterly financial statements.  These fees also include services that are normally provided in connection with statutory and regulatory filings or engagements.

(2)           Audit-related fees —These are fees for the assurance and related services performed by PricewaterhouseCoopers LLP that are reasonably related to the performance of the audit or review of the Company’s financial statements.  For 2007 and 2006, these fees consisted primarily of employee benefit plan audits.

(3)           Tax Fees — There were no tax fees for 2006 or 2007.

(4)           All other fees —These are fees for permissible services performed by PricewaterhouseCoopers LLP that do not fall within the above categories.  For 2006, these fees consisted of consultation regarding responding to an SEC comment letter.

All services provided by PricewaterhouseCoopers LLP were pre-approved by the Audit Committee, which concluded that the provision of such services by PricewaterhouseCoopers LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.  The Audit Committee’s current practice is to consider and approve in advance all proposed audit and non-audit services to be provided by our independent auditors.

Vote Required

The affirmative vote of a majority of the shares of our Common Stock present or represented and voting at the Annual Meeting will be required to ratify PricewaterhouseCoopers LLP as our independent registered public accounting firm.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 3, 2009.

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REPORT OF THE AUDIT COMMITTEE

The information contained in the following report shall not be deemed to be “soliciting material” or to be filed with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Monaco Coach Corporation specifically incorporates it by reference into such filing.

The following is the Audit Committee’s report submitted to the Board of Directors for the fiscal year ended December 29, 2007.

The Audit Committee of the Board of Directors has:

·                   Reviewed and discussed Monaco Coach Corporation (the “Company”) audited financial statements for the fiscal year ended December 29, 2007 with the Company’s management.

·                   Reviewed and discussed with the Company’s management the process designed to achieve compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

·                   Discussed with PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm for fiscal 2007, the matters required to be discussed by Statement on Auditing Standards No. 61 ( Codification of Statements on Auditing Standards, AU §380 ).

·                   Reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board No. 1 ( Independence Discussions with Audit Committees ) and has discussed with PricewaterhouseCoopers LLP its independence from the Company.

·                   Considered whether the provision of non-audit services as noted under Proposal Four is compatible with maintaining the independence of PricewaterhouseCoopers LLP and has determined that such provision of non-audit services is compatible.

Based on the foregoing review and discussion, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2007.

AUDIT COMMITTEE

Dennis D. Oklak, Chair

John F. Cogan

Roger A. Vandenberg

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REPORT OF THE COMPENSATION COMMITTEE

The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the Securities and Exchange Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

THE COMPENSATION COMMITTEE

Robert P. Hanafee, Jr., Chair

Richard E. Colliver

L. Ben Lytle

Richard A. Rouse

Daniel C. Ustian

Compensation Committee Interlocks and Insider Participation

During fiscal 2007, the Compensation Committee of the Board of Directors included Directors Colliver, Hanafee, Lytle, Rouse and Ustian.  None of the members of the Compensation Committee has interlocking relationships as defined by the Securities and Exchange Commission or had any relationships requiring disclosure by the Company under the Securities and Exchange Commission’s rules requiring disclosure of certain relationships and transactions with related persons.

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COMPENSATION DISCUSSION AND ANALYSIS

AND

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

The primary objectives of our executive compensation and benefit program are to:

·                   Align the interests of our executive team and our stockholders by providing rewards for superior performance and direct consequences for sub-par performance;

·                   Deliver a significant portion of the overall reward program through equity-based compensation, as our Compensation Committee believes this promotes long-term strategic focus and goal accomplishment;

·                   Tie both short-term and long-term rewards to pre-established financial measures of the business that are linked with individual performance objectives; and

·                   Provide a compensation package that, in terms of overall rewards, is market-based, competitive with our peers and promotes the retention of critical talent.

To achieve these objectives we have developed and implemented a multi-tiered executive compensation program consisting of executive base pay, cash bonuses that may be earned under our Annual Incentive Plan and longer-term performance-based equity awards under our Long-Term Incentive Plan.  Total compensation combining all three components is targeted at the midpoint of the market.  For our executives to realize their entire package of compensation-related benefits, Monaco must meet or exceed challenging performance goals.

Compensation Committee

Our Compensation Committee is appointed by our Board, and consists of directors whom we believe are independent for purposes of the rules of the New York Stock Exchange, are “outside directors” for purposes of Section 162(m) of the Internal Revenue Code and are “non-employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934.  For 2007, our Compensation Committee was comprised of Richard E. Colliver, Robert P. Hanafee, Jr., L. Ben Lytle, Richard A. Rouse and Daniel C. Ustian, and is chaired by Mr. Hanafee.

Our Compensation Committee is responsible for reviewing and ensuring the integrity of our compensation program design, approving salary levels, determining incentive compensation and benefit plans for our Chief Executive Officer and for our other executive officers, including the officers listed in the Summary Compensation Table whom we refer to as our “Named Executive Officers.”  In the case of the Chief Executive Officer’s base salary, the recommendation of our Compensation Committee is reviewed and approved by our Board.  With respect to other executive officers, our Compensation Committee reviews the recommendations for such individuals presented by the Chief Executive Officer, based upon market data, and approves or modifies the compensation packages for such individuals.  The Board is also consulted on any large scale compensation program design changes.

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Our Compensation Committee has the authority to, and actively uses, the services of compensation consultants to carry out their duties.  The Compensation Committee, to remain current with regulatory changes and market best-practices, receives periodic briefings from its outside compensation consultant, outside legal counsel and our Vice President of Human Resources.

Compensation Consultant

In 2005, our Compensation Committee retained Towers Perrin, a nationally-recognized human resources consulting firm, to act as its independent compensation consultant.  Towers Perrin continues to assist our Compensation Committee, our Chief Executive Officer and our Vice President of Human Resources in the evaluation of competitive market changes for executive pay and in providing recommendations regarding the adjustments for base pay, annual incentive pay and long-term incentive compensation targets.  This includes the evaluation and recommendation of plan design, pay rate and short and long-term award plans target changes based on competitive market factors.  Additionally, Towers Perrin assists with the annual evaluation of our performance against those companies that our Compensation Committee has selected as members of our peer group for purposes of determining payouts under certain components of our Long-Term Incentive Plan.

Executive Role in Establishing Compensation

Our Chief Executive Officer is responsible for reviewing the performance of our senior executives, including our Named Executive Officers, and making compensation recommendations to our Compensation Committee for those executives.  Our Compensation Committee reviews the recommendations presented by our Chief Executive Officer and approves or modifies the compensation packages for such individuals.  Additionally, our Chief Executive Officer may make base pay adjustments and allocate awards to lower-tier executives without specific discussion with our Compensation Committee within the established framework of our executive compensation pay program.  Our Chief Executive Officer participates in the meetings of the Compensation Committee, but the Committee meets in private when it discusses his compensation or when it otherwise deems it necessary to do so.

Our Vice President of Human Resources also participates in Compensation Committee meetings.  He is responsible for working with the compensation consultant in the design and management of all facets of the executive compensation program and reports to the Compensation Committee in this role.  He is also responsible for the implementation and the day-to-day management of the executive compensation program.  He may serve as secretary of the meetings and is responsible for ensuring that written minutes of the meetings are prepared.

Benchmarking

Our executive compensation program is based on a market-based compensation philosophy targeting the midpoint (50 th  percentile) of the market for comparable positions in similarly-sized organizations.  Our Compensation Committee and executive management believe that the midpoint of the market is the appropriate target point for compensation.  With respect to the Long-Term Incentive Plan component of our pay plan, our Compensation Committee believes that the performance of the corporation should attain the 60 th  percentile of our peer group for our executives to achieve target award levels.

Our compensation evaluation process utilizes a two-tier approach for benchmarking our executive compensation.  The first benchmark consists of a larger group of companies with revenue levels similar to ours in a broader industrial group.  To further validate market compensation data and to assure the fairness and equity of our rewards program, we also use a secondary reference consisting of a comparator group of 19

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related peer companies.  These are used to evaluate and compare Monaco’s compensation program design, compensation rates, performance and stockholder value creation objectives.

A significant portion of the recreational vehicle industry is comprised of privately held smaller manufacturers, which makes it somewhat difficult to obtain salary data.  There are currently five “direct competitor” companies in the peer comparator group.  Our Compensation Committee and Towers Perrin felt that this would be too small a group to provide a meaningful and valid comparison and therefore also included similar-sized companies in the truck and heavy equipment manufacturing and related transport manufacturing industries.

The following 19 companies comprised the comparator group for 2007:

*In 2007 National RV Holdings, Inc. filed for bankruptcy and will be removed from the peer group beginning in 2008.

Activities of the Compensation Committee in 2007

In 2007, our Compensation Committee met on four occasions.  These meetings were attended by our Chief Executive Officer and our Vice President of Human Resources, except when the Committee met in executive session.  A representative of Towers Perrin participated in two of these meetings.

Our Compensation Committee took a number of significant actions in 2007:

·                   Reviewed our results of operations for 2006 and determined that the performance targets for our Annual Incentive Plan had not been met and that no bonuses would be paid to executives with respect to 2006.

·                   Established and approved target measures for the 2007 Annual Incentive Plan and Executive Variable Compensation Plan and for the performance share award component of our Long-Term Incentive Plan. Additionally, the performance based restricted stock unit performance targets were established.

·                   Reviewed and approved base pay changes and made award grants pursuant to the Long-Term Incentive Plan.  The Committee considered pay adjustments based on individual performance and market pay movement for similar positions, using the midpoint of the market.  The base pay changes were awarded contingent on the Company meeting its first quarter forecast.  These targets were achieved and the base pay adjustments were awarded.

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·                   Reviewed the restricted stock unit performance objectives that were established for our Chairman and our President and determined that such measures had been satisfied and therefore the restricted stock units granted in 2006 would vest on the third anniversary of their grant.

·                   Reviewed and approved grants of restricted stock units to the non-employee members of our Board of Directors.

Compensation Program Design

Our executive compensation program is designed to be a market-based program that allows us to attract, motivate and retain key talent.  For the past several years, the recreational vehicle industry has been challenged with soft market conditions and robust competition.  In part because of the changes that we made to our executive compensation program in 2005, Monaco has been able to retain the majority of its key executive talent.  This has been a critical element in the Company’s ongoing success during these challenging times.

Elements of Compensation

Our executive compensation program consists of three principal elements: base cash compensation, annual bonus cash compensation under our Annual Incentive Plan and long-term equity awards under our Long-Term Incentive Plan.  In 2007, our Chief Executive Officer had approximately 71% of his total potential target compensation directly linked to the attainment of established performance objectives.  Our President had approximately 67% of his total potential target compensation linked to the attainment of established performance objectives.   Pay packages for our other Named Executive Officers are also directly related to the achievement of business results.  Depending on the position, between 37% and 42% of their total potential target compensation is delivered in the form of variable, performance-based awards.  The actual mix or percentage of each element of the total pay package for each position has been determined based on market criteria.  The market midpoint is the target for total compensation.

Our management and our Compensation Committee believe that the mix of the three elements creates the correct tension and balance between several competing objectives: short-term versus long-term results; individual performance versus team performance; and short-term pay (cash) versus long-term rewards (equity).

We compete for talent both within and outside the recreational vehicle industry.  Many of our key executives, including our Named Executive Officers, possess skills and experience that are readily transferable to other industries.  The challenge in the design and administration of our executive pay program is to maintain an internally equitable pay program while recognizing market forces both within and outside the immediate industry.  Our experience has shown that we have been successful in this effort, in part, through our pay program design.

Base Pay

·                   We have established a base salary structure that utilizes relatively broad pay bands.  The midpoint of the pay band is the 50 th  percentile of the market for similar jobs. This is where we target base pay for each of our executives, adjusted for individual performance and experience.

·                   We group positions based on levels of responsibility using market-based salary data and an internal review of relative responsibility.

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·                   The pay policy does not allow an employee to exceed the maximum of the pay range.  An employee’s base pay may be established anywhere within the pay range, based upon performance, experience and service.

·                   We review salaries on an annual basis utilizing market data.  Pay adjustments are considered based on market pay changes, individual performance and where the individual currently falls within the pay range.

At the end of the first quarter of 2007, we adjusted the base salaries of our Named Executive Officers to recognize changing market pay conditions.  As in prior years, individual performance, responsibility and service were also factored into the adjustments for our Named Executive Officers.  Base salaries of our Named Executive Officers were increased by 4%.  Additionally, Mr. Nepute, President, Mr. Daley, Chief Financial Officer, Mr. Bond, Chief Administrative Officer, and Mr. Snell, Vice President of Sales and Marketing, received an additional adjustment in order to move them closer to the market midpoint for their respective positions.  We increased Mr. Toolson’s base salary by 4%, placing him above the market midpoint but well within the market pay range for similar officers.  In making Mr. Toolson’s salary adjustment, the Committee considered Mr. Toolson’s central role in leading the organizational changes that resulted in the solid performance attained by the company in a very difficult market. The Committee and Board also considered Mr. Toolson’s many years of service to Monaco Coach Corporation and his 35+ years of industry knowledge.

Annual Incentive Plan

·                   We have established annual cash bonus pay targets for our executive officers, expressed as a percentage of base salaries for each pay grade using the same criteria we use for base pay midpoint of the market salary data.  The annual cash bonus targets for our Named Executive Officers range from 45% of base salary to 100% for our Chief Executive Officer.  As we explain below, for 2007 the executives earned slightly below the target payout level for the annual incentive plan.  Our Chairman, Mr. Toolson, and our President, Mr. Nepute, participate in the Executive Variable Compensation Plan which generally follows the same parameters as the Annual Incentive Plan used for other executives.  For purposes of this Proxy, references to the Annual Incentive Plan include Messrs. Toolson and Nepute who participate in the Executive Variable Compensation Plan.

·                   The “performance period” for the Annual Incentive Plan is our fiscal year.

·                   The indicator we have used to measure our performance for purposes of cash bonus payments is our consolidated earnings before interest, taxes, depreciation and amortization (known as “EBITDA”).  EBITDA is defined for purposes of the Plan as earnings before payment of bonuses but after any deduction of stock-based compensation.  EBITDA was selected as the primary measure since we believe it best aligns with key measures of Monaco’s business strategy and strongly correlates with stockholder value creation.  The target performance measures are established annually by the Committee.

·                   In addition to the EBITDA target, Monaco must attain a minimum level of Return on Equity before any bonus can be paid under our Annual Incentive Plan.  We define “Return on Equity” as earnings before interest, tax, depreciation, and amortization divided by beginning stockholders’ equity.

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·                   We fully review the performance targets with our Named Executive Officers and all other executives.  We publish internal periodic reports, which reflect year-to-date corporate performance and year-to-date results for the Annual Incentive Plan.

·                   Cash bonus payments may range from zero to 200% of the executive’s target amount based on Company and individual performance.  The chart below shows the scale in greater detail.  If the actual performance is above the 50% threshold, the bonus pool begins to be funded.

·                   In February 2007, our Compensation Committee established the 2007 Annual Incentive Plan target EBITDA measure at $44,127,000.  In setting this target, consideration was given to the economic outlook for our Company and our industry, industry performance forecasts for unit shipping, historical performance measures and our current budget and forecasts.  Given the challenging market conditions at that time and that were projected to continue at least through 2007, the Committee felt that the established target would be a difficult goal to achieve.  In 2007, we achieved approximately 96% of the EBITDA target, which resulted in our Named Executive Officers receiving a cash bonus payment for 2007 of approximately 92% of their target bonus amounts.

Even though the 2007 performance target that was established was considered to be quite challenging given the business environment, the market for our products actually proved to be more difficult than originally anticipated. The class A motorhome retail sales market, which was already down from prior years, declined an additional 7.7% from 2006 to 2007.    Our motorized recreational vehicle segment represents 78% of Monaco’s revenue.    In addition, all segments of our business felt the effects of declining consumer confidence, weakening housing and equity markets and high fuel prices.

The Company was able to attain its performance objectives in spite of the declining markets due to a number of innovative initiatives.  These included the enhancement of our product line; creation of business venture partnerships; and cost reduction efforts in raw material procurement, health care and plant consolidations.  This resulted in increased market share, expense reductions and improved earnings for Monaco, in a declining market.  In 2007, our motorized segments net sales increased by 6% while our overall SG&A expenses declined by almost $3,000,000.

·                   Our Compensation Committee established a 6% Return on Equity, as a minimum level of performance for 2007, which was attained.

Long-Term Incentive Plan

·                   We deliver value under our Long-Term Incentive Plan through two primary types of equity awards—restricted stock units and performance share awards.  Restricted stock units and performance share awards were selected because we believe they closely align with stockholder value creation, incorporate clear measures of operating performance and establish retention value for critical executive talent.

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·                   We establish target award opportunities for each pay grade in our executive salary structure, providing award opportunities that we believe are competitive with comparable positions in the market place.  The annual Long-Term Incentive Plan award targets for our Named Executive Officers range from 60% of base salary to 150% for our Chief Executive Officer. The respective targets for the various Named Executive Officers are largely based on comparative market pay data.

·                   We grant 50% of the annual award in the form of restricted stock units.  For our Named Executive Officers other than our Chief Executive Officer and President, the units vest at the rate of 25% annually from the date of grant, subject to the continued employment of the individual.  In the case of our Chief Executive Officer and our President, awards vest in full at three years from the date of grant, but only if we achieve at least a specified Return on Equity in the first year of the award, or a specified average Return on Equity over the three-year period.  For 2007, the specified Return on Equity was 10%.  In 2007, Monaco exceeded the 10% threshold, and, therefore, the restricted stock units granted to our Chief Executive Officer and our President in 2007 have been earned and will be paid in accordance with the vesting schedule.

·                   We grant the remaining 50% of the Long-Term Incentive Plan award in the form of performance share awards.  These awards vest based upon the achievement of pre-established performance criteria that compare Monaco’s performance against our 19 peer group companies over a three-year performance period.  During the phase-in of the new plan, a single two-year performance period was utilized.  If the performance criteria are met, awards are distributed to the participants in the form of shares of our Common Stock.

·                   Actual performance share award payouts may range from zero to 200% of the original award grant based on relative peer group performance as measured by our Total Shareholder Return and Return on Net Assets.  For payout to occur at target (100%), our relative performance must be at or above the 60 th  percentile of the peer group.  The Total Shareholder Return and Return on Net Assets measures are each worth 50% of the total award value.

·                   We determine Total Shareholder Return by using the daily average stock price during the month preceding the start of the performance period and comparing it to the daily average price for the last month of the performance period.  The results are calculated using the cumulative stock price change and dividends for each of the peer companies as well as for Monaco, thereby establishing our relative ranking.  We believe that using Total Shareholder Return as a measure allows us to effectively assess our relative value creation for our stockholders.

·                   We define Return on Net Assets as net income divided by net assets (total assets minus non-interest bearing current liabilities).  Performance is determined by calculating the average annual return on net assets for each year of the performance period.  As with Total Shareholder Return, the results are calculated for each of the peer companies and our performance is ranked against the peers.  A minimum level of Return on Net Assets, which is established by the Compensation Committee for each performance period, must be achieved before an award is earned.  We believe that using Return on Net Assets as a measure provides an assessment of our efficiency with respect to our use of capital.

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The tables below reflect the relationship of company performance to award payouts for each measure:

Total Shareholder Return

Return on Net Assets

·                   We fully review our Total Shareholder Return and Return on Net Asset performance targets with our executives.  We publish internal periodic reports reflecting year-to-date corporate performance and the related results of the Long-Term Incentive Plan.

·                   For both restricted stock units and performance share awards, the number of shares awarded is determined by using the closing price of our Common Stock on the date the awards are granted.    The base salary for each Named Executive Officer is multiplied by their respective Long-Term Incentive Plan target percentage.  This figure is then divided by the closing stock price, resulting in the target Long-Term Incentive Plan award.  The Compensation Committee typically approves these grants at a pre-scheduled meeting in the first quarter of each year.

·                   In 2007, the first performance period was completed.  The Company did not  attain the 30 th  percentile ranking of the peer group using the Return on Net Asset calculation resulting in no payout for this component.  With respect to Total Shareholder Return, the Company achieved a percentile ranking of 31.5, resulting in a payout for 2007 of 28.75% of target award for Total Shareholder Return (or 14.375% of the total performance share awards program).

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Audit and Approval of Awards

Our Chief Financial Officer reviews the calculations of  Monaco’s performance against the pre-established targets for the Annual Incentive Plan and the Long-Term Incentive Plan before awards are settled.  The findings are reported to our Compensation Committee and the Committee approves the final payouts.  The outside compensation consultant independently reviews the Total Shareholder Return and Return on Net Assets performance results.  The Compensation Committee, in its sole discretion, may eliminate or reduce an actual award payable to any participant below that which otherwise would be payable.

Personal Benefits and Perquisites

We provide limited perquisites to our Named Executive Officers and other executives.  Our philosophy is to minimize the use of executive perquisites and other benefits and focus on performance-based rewards.  These individuals receive $120,000 of life insurance coverage in excess of what other salaried employees receive, as well as slightly greater long-term disability benefits.  Additionally, the Compensation Committee permits the Chief Executive Officer to take a portion of his bonus in the form of limited use of the corporate jet for purposes of personal travel.  The incremental costs for this usage are reflected in Mr. Toolson’s compensation in the Summary Compensation Table under the caption “All Other Annual Compensation.”  We have traditionally not provided other executive perquisites such as special executive financial planning assistance, tax services, automobile leases, deferred compensation programs or country club memberships.

Our Named Executive Officers also receive the same benefits that we provide other employees.  These include traditional benefits such as health care insurance, dental insurance and vacation.  We also provide a 401(K) Plan and vision care insurance.  Executives participate in these programs on terms consistent with those offered to all other salaried employees.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan is available generally to all employees, including Named Executive Officers.  However, our Chief Executive Officer is currently not eligible since the plan limits participation to employees who own less than 5% of our Common Stock.  The plan allows employees to purchase shares of our Common Stock directly from Monaco.  An eligible employee may authorize payroll deductions each pay period up to a maximum of 10% of his or her base pay and sales commission.  These amounts are accumulated and, at the end of each offering period, applied to the purchase of Common Stock.  The purchase price is 15% less than the fair market value on the first or last day of the offering period, whichever is lower.

Internal Revenue Code Section 162(m)

Internal Revenue Code Section 162(m) limits the deductibility for federal tax purposes of compensation paid to our Chief Executive Officer and certain other of our highest paid executives to $1,000,000 annually, unless it falls within certain exemptions including compensation that is considered “performance-based.”  Although we seek to design the relevant components of our executive compensation to be performance-based under Section 162(m), in 2007 we were not able to deduct the full amount of Mr. Toolson’s cash bonus payment due to limits established in 2004 that were overlooked in subsequent years when revised performance targets were implemented.  No deductions were lost in 2005 or 2006 because no bonuses were earned.  To address this issue for future bonus payments to the executives to whom Section 162(m) would apply, we are asking, in Proposal Three, that our stockholders approve an amended and

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restated Executive Variable Compensation Plan.   If the amended plan is approved, we believe that the only components of our executive compensation plan that would be subject to the limitations of Section 162(m) would be the base salaries of Mr. Toolson and Mr. Nepute and the base salaries, bonuses and certain equity awards of our other executives.  In the case of named executive officers other than Mr. Toolson, the levels of their cash and other compensation have not to date reached the $1,000,000 deduction limit.

Employment Agreements

We currently do not have employment agreements or change-of-control agreements with our executive officers.  However, the Annual Incentive Plan and Long-Term Incentive Plan contain special provisions for vesting and payment in the event of a change of control.

Post-Termination Compensation

Retirement

All employees, including executives, are eligible to retire on or after age 62 if the individual has at least five years of service on the date of retirement.  We do not have a defined benefit retirement plan and the impact of retirement is limited to a few specific plans as outlined below:

·                   Annual Incentive Plan—In the event a participant in this program retires, the participant is entitled to receive a pro-rated amount of the cash bonus that would have otherwise been earned during the performance period had the employee remained an employee.  In the case of Mr. Toolson and Mr. Nepute, the Compensation Committee could award all or a portion of the bonus to the extent it would otherwise be earned pursuant to the terms of the Executive Variable Compensation Plan, in which they are currently the only participants.

·                   Long-Term Incentive Plan—Performance Share Awards—In the event a holder of a performance share award retires, the holder is entitled to receive 100% of the award that would otherwise have been earned had he or she remained employed through the end of the performance period.

·                   Long-Term Incentive Plan—Restricted Stock Units—In the event a holder of restricted stock units retires, 100% of the participant’s restricted stock units will vest.  For Messrs. Toolson and Nepute, restricted stock units will be earned if the minimum Return on Equity target is achieved following retirement.

·                   Stock Options—In the event a participant retires, all of the participant’s stock options become fully vested and exercisable for grants made after May 17, 2002.  Options must be exercised within 12 months of the date of retirement.

·                   Retiree Medical—Employees between the ages of 62 and 65 may elect to continue health care coverage at a discounted premium rate until age 65.

Death or Disability

For each award type the provision is the same as for retirement except that performance share awards are pro-rated for the employee’s period of participation, all stock options fully vest and retiree health care coverage is not included.

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Involuntary Termination Without Cause

Performance share awards are treated the same as for “Retirement” noted above.  All other award types are forfeited.  The executive may be eligible for “Retiree Medical” coverage if they meet plan requirements.

Change of Control

In the event of a change of control of Monaco, employees who are employed through the consummation of the change of control will receive the following benefits:

·                   Annual Incentive Plan—Awards for the performance period are deemed earned and paid out as if all performance objectives had been earned at target levels.  Awards are paid upon consummation of the change of control;

·                   Long-Term Incentive Plan/Performance Share Awards—Awards are paid as if performance objectives had been earned at target levels.  Awards are paid upon consummation of the change of control;

·                   Long-Term Incentive Plan/Restricted Stock Units—If, within 12 months after a change of control, (i) Monaco (or the affiliated company employing the participant) terminates the employment of the participant without Cause or (ii) the participant resigns for Good Reason (as those terms are defined in the 1993 Stock Plan), then 100% of the restricted stock units will immediately vest in full; and

·                   Stock Options—Options will be assumed by the acquiring company or an equivalent right will be substituted.  If the acquiring company does not assume or substitute the option, all options vest and become exercisable in full.

Stock Ownership Guidelines

We do not currently require our executives to own a minimum amount of our Common Stock.  Our Chief Executive Officer and our President have historically held significant blocks of stock, and other Named Executive Officers also hold relatively sizeable positions.

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Conclusion

We believe we have developed an equitable compensation program that incentivizes the appropriate behavior of our executives and is targeted to deliver the correct results.  Our target rates for each element of the package, as well as the total package, are benchmarked to the market midpoint (50 ^th percentile).  This assumes that Monaco delivers business results that meet or exceed the median of our peers.  For business performance that exceeds this, our executives have an opportunity to earn greater rewards than the market midpoint; awards are currently capped at two times the target payment amount for the Annual Incentive Plan and performance share awards.  To achieve these maximum payouts, requires extraordinary performance, but is not out of reach or an unrealistic goal.

Our pay elements have been benchmarked against similar-sized companies both within and outside our industry.  In summary, we believe the components and the pay and award levels are competitive and reflect favorably when one considers the caliber of our Named Executive Officers.

We believe that the current program also provides a competitive base rate of pay, which allows the Company to retain the critical talent and leadership of the Named Executive Officers when a market downturn takes place and no bonuses are paid, such as we experienced in 2005 and 2006.  With the addition of the longer-term components of our Long-Term Incentive Plan, we believe we have created a positive bond to the corporation, giving our Named Executive Officers equity interests and goals that are closely aligned to those of our public stockholders.

We believe that the pay program design, award/pay levels and performance targets are structured to support the optimum delivery of business results.

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Summary Compensation

The following table presents information concerning the total compensation of the Named Executive Officers for services rendered to the Company in all capacities for the fiscal years ended December 30, 2006 and December 29, 2007:

Summary Compensation Table

(1)           Stock awards consist of performance share awards and restricted stock units. The amounts shown do not reflect compensation actually received by the Named Executive Officer. Rather, these amounts are the compensation costs recognized by Monaco in 2006 and 2007 for stock awards as determined pursuant to FAS 123R. Performance share awards require the achievement of specified levels of performance based on Return on Net Assets and Total Shareholder Return compared to a group of peer companies, as more fully described in our Compensation Discussion and Analysis. Depending on the ranking of the Company’s performance against the peer group, participants could earn from 0% up to 200% of the target payout of performance shares. Restricted stock units are subject to vesting based on continued employment and those issued to Messrs. Toolson and Nepute also require achievement of a minimum return on equity before they are earned. The assumptions used to calculate the value of stock awards are set forth in Note 17 of the Notes to Consolidated Financial Statements included in Monaco’s Annual Report on Form 10-K for 2007.

(2)           The amounts shown do not reflect compensation actually received. Instead, the amounts shown are the compensation costs recognized by Monaco in 2007 for stock option awards granted prior to 2006 as determined pursuant to FAS 123R. No stock options were granted in 2006 or 2007. The assumptions used to calculate the value of option awards are set forth in Note 17 of the Notes to Consolidated Financial Statements included in Monaco’s Annual Report on Form 10-K for 2007.

(3)           These amounts consist of matching contributions made by Monaco under its tax-qualified 401(k) Plan, which provides for broad-based employee participation, premiums paid by Monaco for life and accidental death and disability insurance, dividend equivalent rights on restricted stock units, and, in the case of Mr. Toolson, Monaco’s incremental cost of $20,046 and $23,178 for 2006 and 2007, respectively and related tax reimbursements of $3,533 and $3,060 for 2006 and 2007 on personal use of the corporate aircraft. The cost of aircraft usage by Mr. Toolson is the incremental cost to Monaco for fuel, trip-related maintenance, crew travel expenses, landing fees, trip-related hangar/parking costs and smaller variable costs. Since the aircraft is used primarily for business travel, we do not include the fixed costs that do not change based on usage, such as pilots’ salaries, the purchase costs of the aircraft and the cost of maintenance not related to trips.

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Grants of Plan-Based Awards

The following table presents information concerning grants of plan-based awards to each of the Named Executive Officers during the fiscal year ended December 29, 2007.

Grants of Plan-Based Awards for the Fiscal Year 2007