MONACO COACH CORP /DE/, S-2, 1997-03-19

MONACO COACH CORP /DE/
S-2, 1997-03-19
MOTOR VEHICLES & PASSENGER CAR BODIES

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1997
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MONACO COACH CORPORATION

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3711 35-1880244
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

91320 INDUSTRIAL WAY
COBURG, OREGON 97408
(541) 686-8011

(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------

KAY L. TOOLSON
CHIEF EXECUTIVE OFFICER AND CHAIRMAN
MONACO COACH CORPORATION
91320 INDUSTRIAL WAY
COBURG, OREGON 97408
(541) 686-8011

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

COPIES TO:

<TABLE>
<S> <C>
Henry P. Massey, Jr., Esq. Geoffrey P. Leonard, Esq.
Steven L. Berson, Esq. Scott D. Elliott, Esq.
Gregory T. Cox, Esq. Jeffrey R. Brown, Esq.
Bradley A. Bugdanowitz, Esq. Orrick, Herrington & Sutcliffe LLP
Wilson Sonsini Goodrich & Rosati Old Federal Reserve Bank Bldg.
Professional Corporation 400 Sansome Street
650 Page Mill Road San Francisco, CA 94111
Palo Alto, CA 94304 (415) 392-1122
(415) 493-9300
</TABLE>

------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING
OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2)
<S> <C> <C> <C>
Common Stock, $.01 par value......................... 2,415,000 shares $20.375 $49,205,625.00

TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, $.01 par value......................... $14,910.80
</TABLE>

(1) Includes 315,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any.

(2) Estimated solely for the purpose of computing the amount of the registration
fee, based on the average of the high and low last reported sale prices for
the Common Stock as reported on the Nasdaq National Market on March 17, 1997
in accordance with Rule 457 under the Securities Act of 1933, as amended.
------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 19, 1997
PROSPECTUS

2,100,000 SHARES

[LOGO]

COMMON STOCK
---------

Of the 2,100,000 shares of Common Stock, par value $.01 per share, offered
hereby (the "Offering"), 800,000 shares are being sold by Monaco Coach
Corporation (the "Company") and 1,300,000 shares are being sold by certain
stockholders (the "Selling Stockholders"). See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
the Common Stock by the Selling Stockholders.

The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "MCCO." The last reported sale price of the Company's Common Stock on the
Nasdaq National Market on March 17, 1997 was $20.00 per share. See "Price Range
of Common Stock."
--------------

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
--------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share $ $ $ $
Total(3) $ $ $ $
</TABLE>

(1) For information concerning indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses estimated at $475,000 payable by the Company.

(3) Certain of the Selling Stockholders have granted the Underwriters a
30-day option to purchase up to 315,000 additional shares of Common Stock
to cover over-allotments, if any. See "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholders will be $ ,
$ and $ , respectively.
--------------

The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock will be available for delivery on or about , 1997, at
the office of Smith Barney Inc., 333 West 34th Street, New York, New York 10001.
--------------

SMITH BARNEY INC.

WILLIAM BLAIR & COMPANY

A.G. EDWARDS & SONS, INC.

, 1997
<PAGE>
[PHOTO OF MONACO MOTOR COACH WITH MONACO COACH CORPORATION LOGO OVERLAY]

"Aluma-Lite," "Dynasty," "Endeavor," "The Executive," "Holiday Rambler,"
"Vacationer" and "Windsor" are among the registered trademarks of the Company.
This Prospectus also includes other trade names and trademarks of the Company as
well as other companies.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."

2
<PAGE>
[ARTWORK A]

Monaco Coach Corporation is a leading manufacturer of premium Class A
motor coaches, fifth wheel trailers and travel trailers sold under the well
known ""Monaco'' and ""Holiday Rambler'' brand names.

[Five photos consisting of; (i) Holiday Rambler Alumascape Travel
Trailer, (ii) Company employee using computer aided design program, (iii)
Company employee installing electrical wiring, (iv) inside of manufacturing
facility and (v) Monaco Signature Series Motor Coach. Also A drawing of the
Monaco Roadmaster chassis.]

<PAGE>
[ARTWORK B]

The Company fosters brand loyalty through its innovative designs,
emphasis on quality and responsive and professional customer service

[Five photos consisting of; (i) Holiday Rambler Imperial Motor Coach,
(ii) inside of Monaco Signature Series motor coach, (iii) Holiday Rambler
Imperial Fifth Wheel Trailer, (iv) man and woman at barbeque in front of motor
coaches, (v) man with dog in chair in front of motor coaches.]

<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS SET FORTH IN THE FINANCIAL STATEMENTS
AND NOTES THERETO APPEARING ELSEWHERE HEREIN, INFORMATION IN THIS PROSPECTUS
ASSUMES: (I) THE CONVERSION OF THE 65,217 SHARES OF REDEEMABLE SERIES A
CONVERTIBLE PREFERRED STOCK (THE "REDEEMABLE PREFERRED STOCK") ACQUIRED BY HR,
LLC, A COMPANY OWNED BY HARLEY-DAVIDSON, INC. ("HARLEY-DAVIDSON"), IN CONNECTION
WITH THE HOLIDAY ACQUISITION (AS HEREINAFTER DEFINED) INTO 230,767 SHARES OF
COMMON STOCK AND THE SALE OF SUCH 230,767 SHARES OF COMMON STOCK IN THE
OFFERING; AND (II) NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THE
COMPANY'S FISCAL YEAR CONSISTS OF THREE 13-WEEK QUARTERS AND A FOURTH QUARTER
ENDING ON THE SATURDAY CLOSEST TO THE END OF THE CALENDAR YEAR. REFERENCES TO
1994, 1995 AND 1996 REFER TO THE FISCAL YEARS ENDED DECEMBER 31, 1994, DECEMBER
30, 1995 AND DECEMBER 28, 1996, RESPECTIVELY.

THE COMPANY

The Company is a leading manufacturer of premium Class A motor coaches and
towable recreational vehicles. The Company's product line consists of ten models
of motor coaches and five models of fifth wheel trailers and travel trailers
(collectively, "towables") under the well known "Monaco" and "Holiday Rambler"
brand names. The Company's products, which are typically priced at the high end
of their respective product categories, range in suggested retail price from
$60,000 to $750,000 for motor coaches and from $15,000 to $70,000 for towables.
During 1996, the Company had significant market positions in the high end price
range of the market segments in which it competes. Based upon retail
registrations in 1996, the Company believes it had a 25% share of the market for
High-Line Class A motor coaches (units with retail prices above $120,000), an
11% share of the market for high end fifth wheel trailers (units with retail
prices above $24,000) and a 48% share of the market for high end travel trailers
(units with retail prices above $20,000). The Company's products are sold
through an extensive network of 173 dealerships located primarily in the United
States and Canada.

Prior to March 1996, the Company's product line consisted exclusively of
High-Line Class A motor coaches. In March 1996, the Company acquired Holiday
Rambler, a manufacturer of a full line of Class A motor coaches and towables.
The Holiday Acquisition: (i) more than doubled the Company's net sales; (ii)
provided the Company with a significantly broader range of products, including
complementary High-Line Class A motor coaches and the Company's first product
offerings of fifth wheel trailers, travel trailers and entry-level to mid-range
motor coaches; and (iii) lowered the price threshold for first-time buyers of
the Company's products, thus making them more affordable for a significantly
larger base of potential customers. The Company believes that developing
relationships with a broader base of first-time buyers, coupled with the
Company's strong emphasis on quality, customer service and design innovation,
will foster brand loyalty and increase the likelihood that, over time, more
customers will trade-up through the Company's line of products. Attracting
larger numbers of first-time buyers is important to the Company because of the
Company's belief that many recreational vehicle customers purchase multiple
recreational vehicles during their lifetime.

The Company's strategy is to increase sales and earnings by attracting new
customers in both the Class A motor coach and towables market segments and
providing these customers with additional products to choose from when they
trade-up to a higher priced product category. Principal elements of this
strategy include: (i) continuing to offer high quality, premium products in both
the Class A motor coach and towables market segments; (ii) introducing new Class
A motor coach and towable products to broaden the price range of the Company's
products within each market segment; (iii) expanding production capacity while
maximizing manufacturing efficiencies in an effort to better meet market demand
as well as lower costs and improve operating margins; (iv) maintaining and
expanding the Company's dealer network, primarily by adding more towables
dealers with greater geographic coverage; (v) emphasizing new product design and
innovation; and (vi) promoting customer satisfaction and brand loyalty.

3
<PAGE>
The recreational vehicle industry is currently experiencing favorable
demographic trends. Recreational vehicles are purchased by adults in all age
ranges, with the highest market penetration in the 45 to 74 age group. According
to the Census Bureau of the U.S. Department of Commerce, the number of adults
between the ages of 45 and 74 is projected to increase by approximately 41% from
1995 through the year 2010, compared with a projected increase of approximately
13% for the overall population, thereby representing an expanded potential
consumer market for recreational vehicle sales. In 1996, according to the
Recreation Vehicle Industry Association (the "RVIA"), recreational vehicle
manufacturers shipped units (excluding conversion vehicles) with an aggregate
retail value of approximately $6.3 billion.

The principal office of the Company is located at 91320 Industrial Way,
Coburg, Oregon 97408, and its telephone number is (541) 686-8011. The Company
has manufacturing facilities in Coburg, Oregon, Elkhart, Indiana and Wakarusa,
Indiana. The Company maintains websites for both the "Monaco" and "Holiday
Rambler" brand names on the World Wide Web.

Unless the context otherwise requires, (i) the term "Holiday Acquisition"
when used in this Prospectus means the Company's acquisition on March 4, 1996 of
Harley-Davidson's Holiday Rambler LLC Recreational Vehicle Manufacturing
Division ("Holiday Rambler") and ten retail dealerships (the "Holiday World
Dealerships") owned by an affiliate of Harley-Davidson; (ii) the term "Company"
when used in this Prospectus refers to Monaco Coach Corporation, its Predecessor
(as hereinafter defined) and, after March 4, 1996, the combined operations of
the Company, Holiday Rambler and the Holiday World Dealerships; and (iii) the
term "Monaco" refers to the Company's Monaco Division.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company............. 800,000 shares
Common Stock Offered by the Selling 1,300,000 shares
Stockholders..................................
Total Common Stock Offered...................... 2,100,000 shares

Common Stock to be Outstanding after the 5,468,984 shares(1)
Offering......................................

Use of Proceeds................................. For repayment of debt, working capital,
general corporate purposes, and potential
acquisitions

Nasdaq National Market Symbol................... MCCO
</TABLE>

- ------------------------
(1) Excludes: (i) 525,000 shares reserved for issuance under the Company's 1993
Incentive Stock Option Plan (the "Option Plan"), under which options to
purchase 178,445 shares were outstanding as of the date of this Prospectus;
and (ii) 40,000 shares reserved for issuance under the Company's 1993
Director Option Plan (the "Director Plan"), under which options to purchase
12,800 shares were outstanding as of the date of this Prospectus. See
"Capitalization."

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
COMPANY
PREDECESSOR(1) -------------------------------------------------------
----------------------------
TWO MONTHS TEN MONTHS
ENDED ENDED
------------- ------------- FISCAL YEAR
MARCH 4, JAN. 1, ----------------------------------------
1992 1993 1994 1994 1995 1996(2)
------------- ------------- ------------- ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND CONSOLIDATED OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Net sales................................. $ 64,338 $ 12,026 $ 65,964 $ 107,300 $ 141,611 $ 365,638
Gross profit.............................. 10,028 1,825 9,823 17,406 17,019 47,729(3)
Operating income.......................... 5,306 464 5,151 9,633 8,355 13,741
Interest expense.......................... 163 5 1,308 69 298 3,914
Net income................................ 3,152(4) 283(4) 2,302(5) 5,941 4,898 5,909
Earnings per common share................. -- -- $ 0.67(5) $ 1.33 $ 1.09 $ 1.26(6)
Weighted average common shares
outstanding............................. -- -- 3,416 4,473 4,475 4,678

CONSOLIDATED OPERATING DATA:
Units sold(7):
Motor coaches........................... 477 87 463 717 982 2,733
Towables................................ -- -- -- -- -- 1,977
Dealerships at end of period.............. 34 34 37 48 49 173
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 28, 1996
-------------------------
ACTUAL AS ADJUSTED(8)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital....................................................................... $ 4,502 $ 15,318
Total assets.......................................................................... 135,368 149,973
Long-term borrowings, less current portion............................................ 16,500 16,500
Redeemable Preferred Stock............................................................ 2,687 --
Total stockholders' equity............................................................ 43,807 58,412
</TABLE>

- ------------------------------

(1) The Company commenced operations on March 5, 1993 by acquiring substantially
all of the assets and liabilities of a business formed in 1968 (the
"Predecessor"). See "Selected Historical Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."

(2) Includes the operations of Holiday Rambler and the Holiday World Dealerships
from March 4, 1996. The Holiday World Dealerships generated $25.0 million in
net sales in 1996, which included the sale of 820 units that were either
previously owned or not Holiday Rambler units, as well as service revenues.
The Company sold seven Holiday World Dealerships in 1996 and intends to sell
the three remaining dealerships.

(3) Includes a $1.7 million increase in cost of sales resulting from the sale of
inventory that was written up to fair value at the date of the Holiday
Acquisition.

(4) The Predecessor was an S Corporation not subject to federal and certain
state income taxes during the periods indicated. Net income reflects federal
and state income taxes during the periods indicated on a pro forma basis as
if the Predecessor had been a C Corporation, based on the effective tax
rates that would have been in effect during these periods. See "Selected
Historical Consolidated Financial Data."

(5) Excludes an extraordinary charge of $558,000, net of tax effect, or $0.16
per share.

(6) 1996 earnings per common share are fully diluted earnings per share.
Includes a one time charge of $0.22 per share, net of tax effect, related to
the inventory write-up described in Note 3 above. Excluding this charge,
fully diluted earnings per common share would have been $1.48 per share.

(7) Excludes 820 units sold by the Holiday World Dealerships in 1996 that were
either previously owned or not Holiday Rambler units.

(8) Adjusted for the sale by the Company of 800,000 shares of Common Stock
offered hereby at an assumed public offering price of $20.00 per share, the
application of the estimated net proceeds therefrom as described under "Use
of Proceeds" and the conversion of the 65,217 shares of Redeemable Preferred
Stock into 230,767 shares of Common Stock.

5
<PAGE>
RISK FACTORS

THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), INCLUDING STATEMENTS
THAT INCLUDE THE WORDS "BELIEVES," "EXPECTS" OR "ANTICIPATES" OR SIMILAR
EXPRESSIONS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED
BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE RISK
FACTORS DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS AND IN DOCUMENTS WHICH
ARE INCORPORATED BY REFERENCE HEREIN. IN ANALYZING AN INVESTMENT IN THE
SECURITIES OFFERED HEREBY, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER,
TOGETHER WITH THE OTHER MATTERS REFERRED TO HEREIN, THE RISK FACTORS DESCRIBED
BELOW. THE COMPANY CAUTIONS THE READER, HOWEVER, THAT THIS LIST OF RISK FACTORS
MAY NOT BE EXHAUSTIVE.

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS

The Company's net sales, gross margin and operating results may fluctuate
significantly from period to period due to factors such as the mix of products
sold, the ability to utilize and expand manufacturing resources efficiently, the
introduction and consumer acceptance of new models offered by the Company,
competition, the addition or loss of dealers, the timing of trade shows and
rallies, and factors affecting the recreational vehicle industry as a whole. In
addition, the Company's overall gross margin on its products may decline in
future periods to the extent the Company increases its sales of lower gross
margin towable products or if the mix of motor coaches shifts to lower gross
margin units. Due to the relatively high selling prices of the Company's
products (in particular, its High-Line Class A motor coaches), a relatively
small variation in the number of recreational vehicles sold in any quarter can
have a significant effect on sales and operating results for that quarter.
Demand in the overall recreational vehicle industry generally declines during
the winter months, while sales and revenues are generally higher during the
spring and summer months. With the broader range of recreational vehicles now
offered by the Company as a result of the Holiday Acquisition, seasonal factors
could have a significant impact on the Company's operating results in the
future. In addition, unusually severe weather conditions in certain markets
could delay the timing of shipments from one quarter to another.

CYCLICALITY

The recreational vehicle industry has been characterized by cycles of growth
and contraction in consumer demand, reflecting prevailing economic, demographic
and political conditions that affect disposable income for leisure-time
activities. Unit sales of recreational vehicles (excluding conversion vehicles)
reached a peak of approximately 259,000 units in 1994 and declined to
approximately 247,000 units in 1996. Although unit sales of High-Line Class A
motor coaches have increased in each year since 1989, there can be no assurance
that this trend will continue. Furthermore, as a result of the Holiday
Acquisition, the Company offers a much broader range of recreational vehicle
products and will likely be more susceptible to recreational vehicle industry
cyclicality than in the past. Factors affecting cyclicality in the recreational
vehicle industry include fuel availability and fuel prices, prevailing interest
rates, the level of discretionary spending, the availability of credit and
overall consumer confidence. In particular, interest rates rose significantly in
1994 and while recent interest rates have not had a material adverse effect on
the Company's business, no assurances can be given that an increase in interest
rates would not have a material adverse effect on the Company's business,
results of operations and financial condition.

MANAGEMENT OF GROWTH

As a result of the Holiday Acquisition, the Company has experienced
significant growth in the number of its employees, in the size of its
manufacturing operations and in the scope of its business. This growth has
resulted in the addition of new management personnel, increased responsibilities
for existing management personnel, and has placed added pressure on the
Company's operating, financial and management

6
<PAGE>
information systems. While management believes it has substantially completed
the integration of Holiday Rambler's operations and personnel into the Company,
due to the large size of the Holiday Acquisition relative to the Company, there
can be no assurance that the Company will not encounter problems in the future
associated with the integration of the acquisition or that the anticipated
benefits of the Holiday Acquisition will be fully realized. In addition, there
can be no assurance that the Company will adequately support and manage the
growth of its business and the failure to do so could have a material adverse
effect on the Company's business, results of operations and financial condition.

MANUFACTURING EXPANSION

The Company significantly increased its manufacturing capacity in 1995 by
expanding its Elkhart, Indiana facility and opening its Coburg, Oregon facility.
In order to meet market demand and realize manufacturing efficiencies, the
Company is constructing a new motor coach manufacturing facility in Wakarusa,
Indiana, is relocating its Elkhart, Indiana motor coach production to the new
Wakarusa facility, and is also planning to open a Springfield, Oregon facility
to manufacture towables. The integration of the Company's facilities and the
expansion of the Company's manufacturing operations involve a number of risks
including unexpected production difficulties. In 1995, the Company experienced
start-up inefficiencies in manufacturing the Windsor model, and, beginning in
1996, the Company experienced difficulty in increasing production rates of motor
coaches at its Coburg facility. There can be no assurance that the Company will
successfully integrate its manufacturing facilities or that it will achieve the
anticipated benefits and efficiencies from its expanded manufacturing
operations. In addition, the Company's operating results could be materially and
adversely affected if sales of the Company's products do not increase at a rate
sufficient to offset the Company's increased expense levels resulting from this
expansion.

The set-up and scale-up of production facilities in Wakarusa and Springfield
involve various risks and uncertainties, including timely performance of a large
number of contractors, subcontractors, suppliers and various government agencies
that regulate and license construction, each of which is beyond the control of
the Company. The set-up of the new facilities involves risks and costs
associated with the development and acquisition of new production lines, molds
and other machinery, the training of employees, and compliance with
environmental, health and safety and other regulatory requirements. The
inability of the Company to complete the set-up of its Wakarusa and Springfield
facilities and to commence full-scale commercial production in a timely manner
could have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, at such time as the Company
commences production at these new facilities, it may from time to time
experience lower than anticipated yields or production constraints that may
adversely affect its ability to satisfy customer orders. Any prolonged inability
to satisfy customer demand could have a material adverse effect on the Company's
business, results of operations and financial condition.

CONCENTRATION OF SALES TO CERTAIN DEALERS

Although the Company's products were offered by 173 dealerships located
primarily in the United States and Canada at the end of 1996, a significant
percentage of the Company's sales have been and will continue to be concentrated
among a relatively small number of independent dealers. Although no single
dealer accounted for as much as 10.0% of the Company's net sales in 1996, the
top three dealers accounted for approximately 22.5% of the Company's net sales
in that period. The loss of a significant dealer or a substantial decrease in
sales by such a dealer could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business--Sales
and Marketing."

POTENTIAL LIABILITY UNDER REPURCHASE AGREEMENTS

As is common in the recreational vehicle industry, the Company enters into
repurchase agreements with the financing institutions used by its dealers to
finance their purchases. These agreements obligate the Company to repurchase a
dealer's inventory under certain circumstances in the event of a default by the

7
<PAGE>
dealer to its lender. In 1993, the Company's then third largest dealer went into
default with its lenders, and the Company was required to repurchase 16 motor
coaches. Although the Company was able to resell these motor coaches within
three months, the Company incurred expenses of approximately $291,000 in
connection with this dealer's default. Additionally, the need to resell these
motor coaches and the loss of that dealer temporarily limited the Company's
sales of new motor coaches. If the Company were obligated to repurchase a
significant number of its products in the future, it could have a material
adverse effect on the Company's financial condition, business and results of
operations. The Company's contingent obligations under repurchase agreements
vary from period to period and totaled approximately $105.7 million as of
December 28, 1996, with approximately 8.5% concentrated with one dealer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 17 of Notes to the
Company's Consolidated Financial Statements.

AVAILABILITY AND COST OF FUEL

An interruption in the supply, or a significant increase in the price or tax
on the sale, of diesel fuel or gasoline on a regional or national basis could
have a material adverse effect on the Company's business, results of operations
and financial condition. Diesel fuel and gasoline have, at various times in the
past, been difficult to obtain, and there can be no assurance that the supply of
diesel fuel or gasoline will continue uninterrupted, that rationing will not be
imposed, or that the price of or tax on diesel fuel or gasoline will not
significantly increase in the future, any of which could have a material adverse
effect on the Company's business, results of operations and financial condition.

DEPENDENCE ON CERTAIN SUPPLIERS

A number of important components for certain of the Company's products are
purchased from single or limited sources, including its turbo diesel engines
(Cummins Engine Company, Inc. ("Cummins")), substantially all of its
transmissions (Allison Transmission Division of General Motors Corporation
("Allison")), axles for all diesel motor coaches other than the Holiday Rambler
Endeavor Diesel model (Eaton Corporation ("Eaton")), and chassis for certain of
its Holiday Rambler products (the Chevrolet Motor Division of General Motors
Corporation ("Chevrolet"), the Ford Motor Company ("Ford") and Freightliner
Custom Chassis Corporation ("Freightliner")). The Company has no long term
supply contracts with these suppliers or their distributors, and there can be no
assurance that these suppliers will be able to meet the Company's future
requirements for these components. Although the Company believes that adequate
alternative suppliers exist for each of these components, an extended delay or
interruption in the supply of any of the components currently obtained from a
single source supplier or limited supplier could have a material adverse effect
on the Company's business, results of operations and financial condition. See
"Business--Manufacturing."

NEW PRODUCT INTRODUCTIONS

The Company believes that the introduction of new features and new models
will be critical to its future success. Delays in the introduction of new models
or product features, a lack of market acceptance of new models or features, or
quality problems with new models or features could have a material adverse
effect on the Company's business, results of operations and financial condition.
For example, in the third quarter of 1995 the Company incurred unexpected costs
associated with three model changes introduced in that quarter which adversely
affected the Company's gross margin. There also can be no assurance that product
introductions in the future will not divert revenues from existing models and
adversely affect the Company's business, results of operations and financial
condition.

COMPETITION

The market for the Company's products is highly competitive. The Company
currently competes with a number of other manufacturers of motor coaches, fifth
wheel trailers and travel trailers, some of which have significantly greater
financial resources and more extensive marketing capabilities than the Company.
There can be no assurance that either existing or new competitors will not
develop products that are

8
<PAGE>
superior to, or that achieve better consumer acceptance than, the Company's
products, or that the Company will continue to remain competitive. See
"Business--Competition."

RISKS OF LITIGATION

The Company is subject to litigation arising in the ordinary course of its
business, including a variety of product liability and warranty claims typical
in the recreational vehicle industry. In addition, as a result of the Holiday
Acquisition, the Company assumed most of the liabilities of Holiday Rambler,
including product liability and warranty claims. Although the Company does not
believe that the outcome of any pending litigation, net of insurance coverage,
will have a material adverse effect on the business, results of operations or
financial condition of the Company, due to the inherent uncertainties associated
with litigation, there can be no assurance in this regard.

To date, the Company has been successful in obtaining product liability
insurance on terms the Company considers acceptable. The Company's current
policies jointly provide coverage against claims based on occurrences within the
policy periods up to a maximum of $26.0 million for each occurrence and $27.0
million in the aggregate. There can be no assurance that the Company will be
able to obtain insurance coverage in the future at acceptable levels or that the
costs of insurance will be reasonable. Furthermore, successful assertion against
the Company of one or a series of large uninsured claims, or of one or a series
of claims exceeding any insurance coverage, could have a material adverse effect
on the Company's business, results of operations and financial condition.

ENVIRONMENTAL REGULATION AND REMEDIATION

REGULATION

The Company's recreational vehicle manufacturing operations are subject to a
variety of federal and state environmental regulations relating to the use,
generation, storage, treatment and disposal of hazardous materials. These laws
are often revised and made more stringent, and it is likely that future
amendments to these laws will impact the Company's operations.

The Company has submitted applications for "Title V" air permits for its
operations in Elkhart, Indiana and Wakarusa, Indiana and is in the process of
preparing such applications for its facilities in Coburg, Oregon and the
expansion of its operations in Wakarusa. The Company has provided the relevant
state agency with a schedule of completion for the Coburg application, which
will be filed after the regulatory deadline, and the agency has indicated to the
Company that the schedule will be acceptable.

The Company does not currently anticipate that any additional air pollution
control equipment will be required as a condition of receiving new air permits,
although new regulations and their interpretation may change over time, and
there can be no assurance that additional expenditures will not be required.

While the Company has in the past provided notice to the relevant state
agencies that air permit violations have occurred at its facilities, the Company
has resolved all such issues with those agencies, and the Company believes that
there are no ongoing violations of any of its existing air permits at any of its
owned or leased facilities at this time. However, the failure of the Company to
comply with present or future regulations could subject the Company to: (i)
fines; (ii) potential civil and criminal liability; (iii) suspension of
production or cessation of operations; (iv) alterations to the manufacturing
process; or (v) costly clean-up or capital expenditures, any of which could have
a material adverse effect on the Company's business, results of operations and
financial condition.

REMEDIATION

9
<PAGE>
the relevant Indiana regulatory authority that no further action be taken
because the remaining contaminants are below the state's clean-up standards. The
Company currently expects that the regulatory authority will concur with this
finding, although there is no assurance that such approval will be forthcoming
or that the regulatory authority will not require additional investigation
and/or remediation. The Company is investigating the Wakarusa site and expects
soon to recommend to the relevant regulatory authority that no further action be
taken at that site based on its consultant's view that there is a limited risk
associated with the remaining contamination. It is unclear whether the
regulatory authority will concur in this finding or whether additional
remediation will be required. In Florida, the Company and its consultants are
conducting investigations to determine the appropriate remediation program to
recommend to the relevant Florida regulatory authority for the contamination
associated with former underground storage tanks at the Leesburg dealership.
With regard to the Wakarusa and Leesburg sites, the Company is indemnified by
Harley-Davidson for investigation and remediation costs incurred by the Company
(subject to a $300,000 deductible in the case of the Wakarusa site and subject
to a $10 million maximum in the case of the Wakarusa site and a $5 million
maximum in the case of the Leesburg site for matters, such as these, that were
identified at the closing of the Holiday Acquisition).

The Company does not believe that any costs it will bear with respect to
continued investigation or remediation of the foregoing locations and other
facilities currently or formerly owned or occupied by the Company will have a
material adverse effect upon the Company's business, results of operations or
financial condition. Nevertheless, there can be no assurance that the Company
will not discover additional environmental problems or that the cost to the
Company of the remediation activities will not exceed the Company's
expectations.

OTHER REGULATORY MATTERS

The Company, its products and its manufacturing operations are subject to a
variety of federal, state and local regulations, including the National Traffic
and Motor Vehicle Safety Act and numerous state consumer protection laws and
regulations relating to the operation of motor vehicles, including so-called
"Lemon Laws." Amendments to these regulations and laws and the implementation of
new regulations and laws could significantly increase the costs of
manufacturing, purchasing, operating or selling the Company's products and could
have a material adverse effect on the Company's business, results of operations
and financial condition. The failure of the Company to comply with present or
future regulations and laws could subject the Company to fines, potential civil
and criminal liability, suspension of production or cessation of operations. See
"Business--Government Regulation."

Certain U.S. tax laws currently afford favorable tax treatment for the
purchase and sale of recreational vehicles that are financed through mortgage
loans. These laws and regulations have historically been amended frequently, and
it is likely that further amendments and additional laws and regulations will be
applicable to the Company and its business in the future. Amendment or repeal of
these laws and regulations and the implementation of new laws and regulations
could have a material adverse effect on the Company's business, results of
operations and financial condition.

The Company is subject to regulations that may require the Company to recall
products with safety defects. Product defects may also result in a large number
of product liability or warranty claims. The Company has on occasion voluntarily
recalled certain products. The occurrence of a major product recall or the
incurrence of warranty claims in excess of warranty reserves in any period could
have a material adverse effect on the Company's business, results of operations
and financial condition.

DEPENDENCE ON KEY PERSONNEL

The Company's future prospects depend upon its key management personnel,
including Kay L. Toolson, the Company's Chief Executive Officer. The loss of one
or more of these key management personnel could adversely affect the Company's
business. The prospects of the Company also depend in

10
<PAGE>
part on its ability to attract and retain qualified technical, manufacturing,
managerial and marketing personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will be successful in attracting
and retaining such personnel. See "Business--Employees" and "Management."

CONCENTRATION OF STOCK OWNERSHIP

Based upon the shares of Common Stock that will be outstanding upon
completion of the Offering (assuming no exercise of the Underwriters'
over-allotment option), the Company's directors and executive officers, as a
group, will beneficially own approximately 23.3% of the Company's outstanding
Common Stock. As a result, these stockholders will have the ability to strongly
influence the actions of the Board of Directors and the outcome of actions that
are brought before the stockholders for approval. Such a high level of ownership
may have the effect of delaying or preventing a change in control of the Company
and may adversely affect the voting and other rights of the holders of Common
Stock. See "Management" and "Principal and Selling Stockholders."

SHARES ELIGIBLE FOR FUTURE SALE

Substantial sales of the Company's Common Stock in the public market after
the Offering could adversely affect the market price of the Common Stock. All of
the 5,468,984 shares which will be outstanding after the Offering will be freely
tradeable in the public market, subject in some cases to compliance with certain
volume limitations under Rule 144 and to "lock-up" agreements under which
certain holders have agreed not to sell or otherwise dispose of any of their
shares for 90 days from the date of this Prospectus without the prior written
consent of Smith Barney Inc. In addition, the holders of 1,301,605 shares of
Common Stock (986,605 shares if the Underwriters' over-allotment option is
exercised in full) are entitled to certain rights with respect to registration
of such shares of Common Stock for offer or sale to the public, which can be
exercised after the lock-up agreements have terminated. Furthermore, as of the
date of this Prospectus, there were options outstanding under the Company's
stock option plans to purchase 191,245 shares of Common Stock, of which 69,948
shares have vested and are eligible for sale upon exercise. See "Description of
Capital Stock," "Shares Eligible for Future Sale" and "Underwriting."

POSSIBLE VOLATILITY OF STOCK PRICE

The Company believes that the market price of the Company's Common Stock
could be subject to wide fluctuations in response to quarter-to-quarter
variations in operating results, changes in earnings estimates by investment
analysts, announcements of new products by the Company or its competitors,
general economic conditions and conditions in the recreational vehicle market
and other events or factors. In addition, the stocks of many recreational
vehicle companies have experienced price and volume fluctuations that have not
necessarily been directly related to the companies' operating performance, and
the market price of the Company's Common Stock could experience similar
fluctuations. See "Price Range of Common Stock."

ANTI-TAKEOVER PROTECTIONS

The Company's Certificate of Incorporation and Bylaws provide for a
classified Board of Directors and authorize the Board of Directors to issue
without stockholder approval Preferred Stock with such terms as the Board may
determine. These provisions could delay or prevent a change in control of the
Company or could impede a merger, consolidation, takeover or other business
combination involving the Company or discourage a potential acquiror from making
a tender offer or otherwise attempting to obtain control of the Company. The
Company is also afforded the protections of Section 203 of the Delaware General
Corporation Law, which could have similar effects. See "Description of Capital
Stock--Preferred Stock" and "--Delaware Anti-Takeover Law and Certain Charter
Provisions."

11
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the Offering are estimated to be $14.6
million, assuming a public offering price of $20.00 per share and after
deducting underwriting discounts and commissions and the estimated expenses of
the Offering.

The Company will use a portion of the net proceeds from the sale of the
shares offered by the Company to retire the outstanding balance under its
revolving line of credit. At March 17, 1997, a balance of $11.5 million was
outstanding under the revolving line of credit, which bears interest at prime
rate plus 1.25% and matures in March 2001. See Note 7 of Notes to the Company's
Consolidated Financial Statements. The balance of the net proceeds will be used
for working capital and general corporate purposes. The Company may use an
unspecified portion of the net proceeds from the Offering to acquire other
businesses having product lines that are compatible with the Company's business.
In addition, any such acquisitions may be financed with additional indebtedness
and may involve the issuance of the Company's capital stock. Such issuances of
additional capital stock could result in dilution of ownership interests in the
Company. The Company is not involved in any ongoing negotiations related to any
material acquisition at the present time, and there can be no assurance that any
acquisition will be made. Pending such uses, the Company intends to invest the
net proceeds from the Offering in short-term, investment-grade, interest-bearing
instruments. The Company will not receive any proceeds from the sale of shares
of Common Stock by the Selling Stockholders.

DIVIDEND POLICY

The Company currently intends to retain any earnings for reinvestment in its
business and does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future. The Company's existing loan agreements prohibit the
payment of dividends on the Common Stock, and future borrowing agreements may
contain similar restrictions. Any future determinations to pay dividends will be
at the discretion of the Company's Board of Directors and will be dependent upon
the Company's results of operations, financial condition, contractual
restrictions and other factors deemed relevant by the Board of Directors.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "MCCO." The following table sets forth for the periods indicated the high
and low sale prices for the Common Stock as reported on the Nasdaq National
Market.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1995
First Quarter......................................................... $16.50 $14.00
Second Quarter........................................................ 16.50 13.75
Third Quarter......................................................... 16.00 12.25
Fourth Quarter........................................................ 13.00 8.25

1996
First Quarter......................................................... 14.25 8.50
Second Quarter........................................................ 14.00 11.50
Third Quarter......................................................... 14.625 10.625
Fourth Quarter........................................................ 16.50 12.25

1997
First Quarter (through March 17, 1997)................................ 22.50 15.50
</TABLE>

On March 17, 1997 the last reported sale price of the Company's Common Stock
on the Nasdaq National Market was $20.00. As of March 17, 1997, there were
approximately 105 holders of record of the Company's Common Stock.

12
<PAGE>
CAPITALIZATION

The following table sets forth short-term borrowings and the capitalization
of the Company as of December 28, 1996 and as adjusted to give effect to: (i)
the conversion of the 65,217 shares of Redeemable Preferred Stock into 230,767
shares of Common Stock; and (ii) the sale of the 800,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of $20.00 per
share, after deducting underwriting discounts and commissions and estimated
expenses of the Offering, and the application of the net proceeds therefrom as
described in "Use of Proceeds."

<TABLE>
<CAPTION>
DECEMBER 28, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings:
Bank line of credit..................................................................... $ 3,789 $ --
Flooring agreements..................................................................... 6,202 6,202
Current portion of long-term note payable................................................. 2,000 2,000
--------- -----------
Total................................................................................. $ 11,991 $ 8,202
--------- -----------
--------- -----------

Long-term note payable, less current portion.............................................. $ 16,500 $ 16,500

Redeemable Series A Convertible Preferred Stock, $.01 par value; redemption value of
$3,005,000; 100,000 shares designated; 65,217 shares issued and outstanding, actual; no
shares issued and outstanding, as adjusted.............................................. 2,687 --

Stockholders' equity:
Preferred Stock, $.01 par value: 2,000,000 shares authorized, actual; 1,934,783 shares
authorized, as adjusted; no shares issued and outstanding, actual and as adjusted..... -- --
Common Stock, $.01 par value: 20,000,000 shares authorized; 4,430,467 shares issued and
outstanding, actual; 5,461,234 shares issued and outstanding, as adjusted(1).......... 44 55
Additional paid-in capital.............................................................. 25,430 40,024
Retained earnings....................................................................... 18,333 18,333
--------- -----------
Total stockholders' equity............................................................ 43,807 58,412
--------- -----------
Total capitalization................................................................ $ 62,994 $ 74,912
--------- -----------
--------- -----------
</TABLE>

- ------------------------

(1) Excludes: (i) 525,000 shares reserved for issuance under the Option Plan,
under which options to purchase 186,196 shares were outstanding as of
December 28, 1996; and (ii) 40,000 shares reserved for issuance under the
Director Plan, under which options to purchase 12,800 shares were
outstanding as of December 28, 1996. Also excludes the following activity
that occurred after December 28, 1996 and prior to the date of this
Prospectus: (i) the grant of options under the Option Plan to purchase 5,725
shares; (ii) the exercise of options under the Option Plan to purchase 2,631
shares; (iii) the forfeiture of options under the Option Plan to purchase
10,845 shares and (iv) the issuance of 5,119 shares under the Company's 1993
Employee Stock Purchase Plan.

13
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The Consolidated Statements of Income Data set forth below with respect to
fiscal years 1994, 1995 and 1996, and the Consolidated Balance Sheet Data at
December 30, 1995 and December 28, 1996, are derived from, and should be read in
conjunction with, the audited Consolidated Financial Statements and Notes
thereto of the Company included in this Prospectus. The Consolidated Statements
of Income Data set forth below with respect to fiscal years 1992 and 1993 and
the Consolidated Balance Sheet Data at January 2, 1993, January 1, 1994 and
December 31, 1994 are derived from audited financial statements of the
Predecessor and the Company, respectively, not included in this Prospectus. The
Company's fiscal year consists of three 13-week quarters and a fourth quarter
ending on the Saturday closest to the end of the calendar year. References to
1994, 1995 and 1996 refer to the fiscal years ended December 31, 1994, December
30, 1995 and December 28, 1996, respectively.

The data set forth in the following table should be read in conjunction
with, and are qualified in their entirety by, Management's Discussion and
Analysis of Financial Condition and Results of Operations, the Company's
Consolidated Financial Statements and the Notes thereto appearing elsewhere in
this Prospectus and the Unaudited Pro Forma Combined Statements of Income.

14
<PAGE>

<TABLE>
<CAPTION>
COMPANY
PREDECESSOR(1) ----------------------------------------------
------------------------
TWO MONTHS TEN MONTHS
ENDED ENDED
------------- ------------- FISCAL YEAR
MARCH 4, JAN. 1, -------------------------------
1992 1993 1994 1994 1995 1996(2)
--------- ------------- ------------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND CONSOLIDATED OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Net sales..................................... $ 64,338 $ 12,026 $ 65,964 $ 107,300 $ 141,611 $ 365,638
Cost of sales................................. 54,310 10,202 56,141 89,894 124,592 317,909(3)
--------- ------------- ------------- --------- --------- ---------
Gross profit.............................. 10,028 1,825 9,823 17,406 17,019 47,729
Selling, general and administrative
expenses.................................... 3,922 1,202 4,036 7,184 8,075 33,299
Management fees to stockholders............... 800 159 205 72 72 72
Amortization of goodwill...................... -- -- 431 517 517 617
--------- ------------- ------------- --------- --------- ---------
Operating income.......................... 5,306 464 5,151 9,633 8,355 13,741
Other expense (income), net................... (8) (5) (11) (153) 40 (244)
Interest expense.............................. 163 5 1,308 69 298 3,914
--------- ------------- ------------- --------- --------- ---------
Income from continuing operations before
provision for income taxes.............. 5,151 464 3,855 9,717 8,017 10,071
Provision for income taxes.................... -- -- 1,553 3,776 3,119 4,162
Pro forma provision for income taxes.......... 1,999(4) 181(4) -- -- -- --
--------- ------------- ------------- --------- --------- ---------
Net income................................ 3,152 283 2,302(5) 5,941 4,898 5,909
Redeemable Preferred Stock dividends.......... -- -- -- -- -- (75)
Accretion of Redeemable Preferred Stock....... -- -- -- -- -- (84)
--------- ------------- ------------- --------- --------- ---------
Net income attributable to common stock....... $ 3,152 $ 283 $ 2,302(5) $ 5,941 $ 4,898 $ 5,750
--------- ------------- ------------- --------- --------- ---------
--------- ------------- ------------- --------- --------- ---------
Earnings per common share..................... -- -- $ 0.67(5) $ 1.33 $ 1.09 $ 1.26(6)
------------- --------- --------- ---------
------------- --------- --------- ---------
Weighted average common shares outstanding.... -- -- 3,416 4,473 4,475 4,678

CONSOLIDATED OPERATING DATA:
Units sold: (7)
Motor coaches............................... 477 87 463 717 982 2,733
Towables.................................... -- -- -- -- -- 1,977
Dealerships at end of period.................. 34 34 37 48 49 173
</TABLE>

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------- ----------------------------------------------
JAN. 2, JAN. 1, DEC. 31, DEC. 30, DEC. 28,
1993 1994 1994 1995 1996
----------- --------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.............................................. $ 5,577 $ 2,918 $ 5,910 $ 3,795 $ 4,502
Total assets................................................. 11,092 40,052 48,219 68,502 135,368
Long-term borrowings, less current portion................... -- -- -- 5,000 16,500
Redeemable Preferred Stock................................... -- -- -- -- 2,687
Total stockholders' equity................................... 6,431 26,951 32,945 37,930 43,807
</TABLE>

- ------------------------------
(1) The Company commenced operations on March 5, 1993 by acquiring substantially
all of the assets and liabilities of the Predecessor. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
(2) Includes the operations of Holiday Rambler and the Holiday World Dealerships
from March 4, 1996. The Holiday World Dealerships generated $25.0 million in
net sales in 1996, which included the sale of 820 units that were either
previously owned or not Holiday Rambler units, as well as service revenues.
The Company sold seven Holiday World Dealerships in 1996 and intends to sell
the three remaining dealerships.
(3) Includes a $1.7 million increase in cost of sales resulting from the sale of
inventory that was written up to fair value at the date of the Holiday
Acquisition.
(4) The Predecessor was an S Corporation not subject to federal and certain
state income taxes during the periods indicated. The pro forma provision for
income taxes reflects the effect of the federal and state income taxes as if
the Predecessor had been a C Corporation, based on the effective tax rates
that would have been in effect during these periods.
(5) Excludes an extraordinary charge of $558,000, net of tax effect, or $0.16
per share.
(6) 1996 earnings per common share are fully diluted earnings per common share.
Includes a one time charge of $0.22 per share, net of tax effect, related to
the inventory write-up described in Note 3 above. Excluding this charge,
fully diluted earnings per common share would have been $1.48 per share.
(7) Excludes 820 units sold by the Holiday World Dealerships in 1996 that were
either previously owned or not Holiday Rambler units.

15
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME

The Unaudited Pro Forma Combined Statements of Income for 1996 present the
results of operations of the Company as if the Holiday Acquisition had occurred
on December 30, 1995. This unaudited pro forma information is based on the
historical Consolidated Financial Statements of the Company for the period from
December 30, 1995 to December 28, 1996, adjusted to give effect to the
assumptions and adjustments set forth in the accompanying notes. Company results
include the results of Holiday Rambler and the Holiday World Dealerships for the
period from March 4, 1996 to December 28, 1996. Historical results for Holiday
Rambler and the Holiday World Dealerships consist of the results of Holiday
Rambler and the Holiday World Dealerships from January 1, 1996 to March 3, 1996.

The Unaudited Pro Forma Combined Statements of Income have been prepared by
management of the Company and are not necessarily indicative of the Company's
results of operations had the Holiday Acquisition been consummated at December
30, 1995, nor are they necessarily indicative of the Company's results of
operations for any future period. This unaudited pro forma combined financial
data should be read in conjunction with the historical Consolidated Financial
Statements and related Notes thereto of the Company included elsewhere in this
Prospectus and Management's Discussion and Analysis of Financial Condition and
Results of Operations.

16
<PAGE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 28, 1996
---------------------------------------------------------------------
HOLIDAY RAMBLER HOLIDAY ACQUISITION PRO FORMA FOR
AND HOLIDAY WORLD ADJUSTMENTS INCOME THE HOLIDAY
COMPANY DEALERSHIPS(1) (EXPENSE) ACQUISITION
----------- ------------------- -------------------- -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales............................................ $ 365,638 $ 53,802 $ -- $ 419,440
Cost of sales........................................ 317,909(2) 46,349 -- 364,258
----------- ------- ------ -------------
Gross profit..................................... 47,729 7,453 -- 55,182
Selling, general and administrative expenses......... 33,299 8,477 68(3) 41,708
Management fees to stockholders...................... 72 -- -- 72
Amortization of goodwill............................. 617 -- (20)(4) 637
----------- ------- ------ -------------
Operating income (loss).......................... 13,741 (1,024) 48 12,765
Other expense (income), net.......................... (244) 31 -- (213)
Interest expense and debt issuance costs............. 3,914 1,879 (460)(5) --
-- -- (100)(6) --
-- -- 1,434(7) 4,919
----------- ------- ------ -------------
Income before provision (benefit) for income
taxes.......................................... 10,071 (2,934) 922 8,059
Provision (benefit) for income taxes................. 4,162 (1,170) (368)(8) 3,360
----------- ------- ------ -------------
Net income (loss).................................. 5,909 (1,764) 554 4,699
----------- ------- ------ -------------
Redeemable Preferred Stock dividends................. (75) -- (15)(9) (90)
Accretion of Redeemable Preferred Stock.............. (84) -- (16)(9) (100)
----------- ------- ------ -------------
Net income (loss) attributable to common stock....... $ 5,750 $ (1,764) $ 523 $ 4,509
----------- ------- ------ -------------
----------- ------- ------ -------------
Earnings per share:
Primary............................................ $ 1.28 $ 1.01
Fully diluted...................................... $ 1.26 $ 1.00
Weighted average common shares outstanding:
Primary............................................ 4,474,791 4,474,791
Fully diluted...................................... 4,678,111 41,262(10) 4,719,373
</TABLE>

- ------------------------------

(1) For the period beginning January 1, 1996 and ended March 3, 1996.

(2) Includes a $1.7 million increase in cost of sales resulting from the sale of
inventory that was written up to fair value at the date of the Holiday
Acquisition.

(3) Elimination of depreciation expense for the Holiday World Dealerships
held-for-sale.

(4) Amortization of goodwill over the useful life of 20 years.

(5) Interest expense on the approximately $39.4 million of acquisition-related
indebtedness.

(6) Amortization of debt issuance costs of $2.1 million related to the
incurrence of debt to be amortized over a five-year term.

(7) Elimination of interest expense related to affiliated companies of Holiday
Rambler and the Holiday World Dealerships. No intercompany debt of Holiday
Rambler and the Holiday World Dealerships was assumed by the Company in the
Holiday Acquisition.

(8) Pro forma effect on income taxes based on pro forma adjustments.

(9) The issuance of 65,217 shares of the Redeemable Preferred Stock, which are
convertible into 230,767 shares of Common Stock, is excluded from the
calculation of primary earnings per share because the Redeemable Preferred
Stock does not meet the conditions of common stock equivalents. However,
dividends of $90,000 per year and accretion to redemption value of $100,000
per year related to the Redeemable Preferred Stock are subtracted from net
income in determining primary earnings per share. The total accretion to
redemption value of the Redeemable Preferred Stock to be recognized is
$401,000.

(10) The fully diluted share adjustment of 41,262 shares is necessary to reflect
common shares outstanding as if the Redeemable Preferred Stock had been
converted into Common Stock as of December 30, 1995.

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company is the successor to a company formed in 1968 and commenced
operations on March 5, 1993 by acquiring substantially all of the assets and
liabilities of the Predecessor (the "Predecessor Acquisition"). The
Predecessor's management and the manufacturing of its High-Line Class A motor
coaches were largely unaffected by the Predecessor Acquisition. However, the
Company's consolidated financial statements for fiscal years 1994, 1995 and 1996
all contain Predecessor Acquisition-related expenses, consisting primarily of
the amortization of acquired goodwill.

On March 4, 1996, the Company acquired from Harley-Davidson certain assets
of Holiday Rambler in exchange for $21.5 million in cash, 65,217 shares of
Redeemable Preferred Stock (which is currently convertible into 230,767 shares
of Common Stock), and the assumption of most of the liabilities of Holiday
Rambler. Concurrently, the Company acquired ten Holiday World Dealerships for
$13.0 million, including a $12.0 million subordinated promissory note, and the
assumption of certain liabilities. The Company sold seven Holiday World
Dealerships in 1996, retired the $12.0 million note from the proceeds of these
sales, and intends to sell the remaining three dealerships. The Holiday
Acquisition was accounted for using the purchase method of accounting.

Beginning on March 4, 1996, the acquired operations were incorporated into
the Company's consolidated financial statements. The Company's consolidated
financial statements for the fiscal year ended December 28, 1996 contain
expenses related to the Holiday Acquisition, primarily consisting of a $1.7
million increase in cost of sales resulting from the sale of inventory in the
first and second quarters that was written up to fair value at the date of the
Holiday Acquisition, interest expense, the amortization of debt issuance costs
and Holiday Acquisition goodwill.

RESULTS OF OPERATIONS

1996 COMPARED WITH 1995

Net sales increased 158.2% from $141.6 million in 1995 to $365.6 million in
1996, primarily due to the Holiday Acquisition. Excluding the Holiday
Acquisition, net sales of Monaco motor coaches decreased 3.4% from $141.6
million in 1995 to $136.8 million in 1996, primarily due to difficulties in
achieving higher production rates of motor coaches at its Coburg facility, which
commenced operations in late 1995. Net sales in 1996 also included $25.0 million
of sales of units that were either previously owned or not Holiday Rambler units
and service revenues generated by the Holiday World Dealerships. The Company's
overall unit sales increased almost five-fold from 982 units in 1995 to 4,710
units in 1996 (excluding 820 units sold by the Holiday World Dealerships that
were either previously owned or not Holiday Rambler units). The Company's
overall average unit selling price declined from $145,600 in 1995 to $66,500 in
1996, primarily as a result of the Company selling a significantly large number
of lower priced Holiday Rambler products, particularly towable products. Due to
the inclusion of Holiday Rambler's generally lower priced products, the Company
expects its overall average unit selling price to remain below $100,000.

Gross profit increased by $30.7 million from $17.0 million in 1995 to $47.7
million in 1996 and gross margin increased from 12.0% in 1995 to 13.1% in 1996.
The increase in gross profit and gross margin was limited by a $1.7 million
increase in cost of sales as a result of an inventory write-up to fair value
arising from the Holiday Acquisition. Without this charge, gross margin would
have been 13.5% for 1996. Gross margin in 1995 was depressed primarily due to
start-up inefficiencies relating to the Windsor model and unexpected costs
associated with making three model changes simultaneously. One of the Company's
objectives continues to be to improve individual model gross margins, primarily
through additional purchasing and manufacturing synergies anticipated to be
derived from the Holiday Acquisition. The Company's overall gross margin may
fluctuate in future periods if the mix of products shifts from higher to

18
<PAGE>
lower gross margin units or if the Company encounters unexpected manufacturing
difficulties or competitive pressures.

Selling, general and administrative expenses increased by $25.2 million from
$8.1 million in 1995 to $33.3 million in 1996 and increased as a percentage of
net sales from 5.7% in 1995 to 9.1% in 1996. The increase in selling, general
and administrative expenses in dollars and as a percentage of net sales in 1996
was primarily attributable to the addition of the Holiday Rambler operations
that have traditionally had higher selling, general and administrative expenses
as a percentage of net sales than Monaco. In addition, the Company's selling,
general and administrative expenses in 1995 were unusually low, both in dollars
and as a percentage of net sales, in part because of lower than normal
incentive-based compensation. The Company expects continued reduction of Holiday
Rambler's selling, general and administrative expenses as a percentage of net
sales; however, the combined Company's selling, general and administrative
expenses as a percentage of net sales is expected to remain higher than the
level prior to the Holiday Acquisition.

Amortization of goodwill was $617,000 in 1996 compared with $517,000 in
1995. At December 28, 1996, goodwill arising from the Predecessor Acquisition,
net of accumulated amortization, was $18.7 million, which is currently being
amortized on a straight-line basis over 40 years. Goodwill of approximately $2.2
million was acquired in the Holiday Acquisition and is being amortized over 20
years.

Operating income was $13.7 million in 1996, a $5.4 million increase over the
$8.4 million in 1995. The increase in the Company's gross margin was less than
the increase in selling, general and administrative expenses as a percentage of
net sales, resulting in a decline in operating margin from 5.9% in 1995 to 3.8%
in 1996. The Company's operating margin was adversely affected in 1996 by a $1.7
million expense related to an inventory write-up to fair value as a result of
the Holiday Acquisition. Without that charge, the Company's operating margin
would have been 4.2% for the year.

Interest expense increased substantially from $298,000 in 1995 to $3.9
million in 1996. The Company's 1996 interest expense included approximately
$992,000 of floor plan interest expense relating to the Holiday World
Dealerships. Additionally, 1996 interest expense included $343,000 related to
the amortization of $2.1 million in debt issuance costs recorded in conjunction
with the Holiday Acquisition. These costs are being written off over a five-year
period. The Company capitalized approximately $244,000 of interest in 1996
primarily due to the purchase of the Holiday World Dealerships and construction
in progress at the manufacturing facility in Wakarusa, Indiana. The Company
capitalized $625,000 of interest in 1995 related to the expansion of its Coburg,
Oregon facility.

The Company reported a provision for income taxes of $4.2 million, or an
effective tax rate of 41%, for 1996 compared to $3.1 million, or an effective
tax rate of 39%, for the comparable period in 1995.

Net income increased by $1.0 million from $4.9 million in 1995 to $5.9
million in 1996 due to substantial increases in net sales and operating income
that more than offset increases in interest and amortization expense.

1995 COMPARED WITH 1994

Net sales for 1995 increased by $34.3 million from $107.3 million in 1994 to
$141.6 million in 1995, a 32.0% increase. The increase was attributable
primarily to net sales of the Company's Windsor model motor coach, which was
introduced in 1994 and, to a lesser extent, net sales of its Dynasty model motor
coach, offset by decreases in the net sales of its Signature and Executive model
motor coaches. Total unit net sales for 1995 were up 37.0% over 1994 while the
Company's average unit selling price decreased 3.7%, with a 6.0% increase for
same models being offset by a shift in the mix of motor coaches sold towards the
Company's lower priced models, Windsor and Dynasty.

Gross profit for 1995 decreased $388,000, or 2.2%, and gross margin
decreased to 12.0% from 16.2% in the prior year. The decrease in gross margin in
1995 was attributable to several factors. In the first half

19
<PAGE>
of 1995, the Company experienced start-up inefficiencies related to the Windsor
model resulting in lower than projected gross margins. In addition, the Company
encountered many unexpected costs in making three model changes simultaneously
during the third quarter. These costs, combined with a sales mix that included a
lower-than-anticipated percentage of higher margin Signature and Executive motor
coaches, significantly lowered the Company's gross margin for the year.

Selling, general, and administrative expenses increased by $890,000, or
12.4%, in 1995, but decreased as a percentage of net sales to 5.7% in 1995 from
6.7% in 1994. The decline in selling, general, and administrative expenses as a
percentage of net sales was due to a combination of marketing and administrative
efficiencies related to the Company's increased sales level and a significant
decline, both in dollars and as a percentage of net sales, in incentive-based
compensation.

Amortization of goodwill arising from the Predecessor Acquisition was
$517,000 in 1995, the same as in 1994.

Operating income for 1995 was $8.4 million, a $1.3 million decrease from
1994. The Company's lower gross margin resulted in a decline in operating margin
from 9.0% in 1994 to 5.9% in 1995.

Interest expense increased from $69,000 in 1994 to $298,000 in 1995 due to
higher outstanding borrowings. The Company capitalized approximately $625,000 of
interest paid in 1995 that was incurred in connection with the construction of a
new manufacturing facility in Coburg, Oregon.

Net income of $4.9 million in 1995 was $1.0 million lower than that reported
for 1994. The decline was attributable to the substantial increase in net sales
being more than offset by the reduction in gross margin, lower operating income
and higher interest expense.

INFLATION

The Company does not believe that inflation has had a material impact on its
results of operations for the periods presented.

20
<PAGE>
UNAUDITED QUARTERLY RESULTS

The following table sets forth certain unaudited financial and operating
data for each of the Company's most recent eight fiscal quarters. The financial
data for each of these quarters include, in the opinion of management, all
adjustments (consisting only of normal and recurring adjustments) necessary for
a fair presentation of the results of operations for such periods. The results
for any quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
-------------------------------------------------------------------------------------
1995 1996(1)
-------------------------------------------------- ---------------------------------
APR. 1 JULY 1 SEPT. 30 DEC. 30 MAR. 30 JUNE 29 SEPT. 28
----------- ----------- ----------- ----------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND UNITS SOLD DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales........................ $ 38,015 $ 35,082 $ 36,726 $ 31,788 $ 61,964 $ 106,729 $ 102,065
Gross profit..................... 5,342 4,650 3,255 3,772 6,727 12,408 14,944
Operating income................. 2,726 2,632 1,269 1,728 1,930 2,934 4,109
Net income....................... 1,662 1,606 705 925 634 891 1,957
----------- ----------- ----------- ----------- ----------- --------- ---------
----------- ----------- ----------- ----------- ----------- --------- ---------
Net income per fully diluted
share.......................... $ 0.37 $ 0.36 $ 0.16 $ 0.20 $ 0.14 $ 0.19 $ 0.42
----------- ----------- ----------- ----------- ----------- --------- ---------
----------- ----------- ----------- ----------- ----------- --------- ---------
Other data:
Gross sales(2):
Motor coaches................ $ 38,513 $ 35,409 $ 37,146 $ 31,933 $ 51,574 $ 80,480 $ 80,920
Towables..................... -- -- -- -- 5,552 15,464 14,200
Units sold(2):
Motor coaches................ 265 252 252 213 441 796 787
Towables..................... -- -- -- -- 200 585 530

DEC. 28
-----------

<S> <C>
Net sales........................ $ 94,880
Gross profit..................... 13,650
Operating income................. 4,768
Net income....................... 2,427
-----------
-----------
Net income per fully diluted
share.......................... $ 0.51
-----------
-----------
Other data:
Gross sales(2):
Motor coaches................ $ 78,757
Towables..................... 15,600
Units sold(2):
Motor coaches................ 709
Towables..................... 662
</TABLE>

- ------------------------------
(1) Includes operations of Holiday Rambler and the Holiday World Dealerships
from March 4, 1996.
(2) Excludes 820 units sold by the Holiday World Dealerships in 1996 that were
either previously owned or not Holiday Rambler units.

The following table sets forth certain unaudited financial data expressed as
a percentage of net sales for each of the most recent eight fiscal quarters.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
-------------------------------------------------------------------------------------------
1995 1996(1)
------------------------------------------------- ----------------------------------------
APR. 1 JULY 1 SEPT. 30 DEC. 30 MAR. 30 JUNE 29 SEPT. 28
---------- ---------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit......................... 14.1 13.3 8.9 11.9 10.9 11.6 14.6
Operating income..................... 7.2 7.5 3.5 5.4 3.1 2.7 4.0
Net income........................... 4.4 4.6 1.9 2.9 1.0 0.8 1.9

DEC. 28
-----------
<S> <C>
Net sales............................ 100.0%
Gross profit......................... 14.4
Operating income..................... 5.0
Net income........................... 2.6
</TABLE>

- ------------------------------

(1) Includes operations of Holiday Rambler and the Holiday World Dealerships
from March 4, 1996.

21
<PAGE>
and operating results for that quarter. Demand in the overall recreational
vehicle industry generally declines during the winter months, while sales and
revenues are generally higher during the spring and summer months. With the
broader range of recreational vehicles now offered by the Company as a result of
the Holiday Acquisition, seasonal factors could have a significant impact on the
Company's operating results in the future. In addition, unusually severe weather
conditions in certain markets could delay the timing of shipments from one
quarter to another.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are internally generated cash
from operations and available borrowings under its credit facilities. During
1996, the Company generated net cash from operations of $26.7 million. Net
income and non-cash expenses such as depreciation and amortization generated
approximately $9.0 million of this amount and the balance was generated by
increases in accrued expenses and income taxes payable combined with a decrease
in trade receivables and inventories, primarily from the sale of seven Holiday
World Dealerships, which more than offset a reduction in deferred income taxes.

In connection with the Holiday Acquisition, on March 4, 1996, the Company
replaced its bank line of credit with new credit facilities consisting of a term
loan of $20.0 million (the "Term Loan") and a revolving line of credit of up to
$45.0 million (the "Revolving Loans"). The Term Loan bears interest at various
rates based upon the prime lending rate announced from time to time by Banker's
Trust Company (the "Prime Rate") or LIBOR and is due and payable in full on
March 1, 2001. The Term Loan requires monthly interest payments, quarterly
principal payments and certain mandatory prepayments. The mandatory prepayments
consist of: (i) an annual payment on April 30 of each year, beginning April 30,
1997, of seventy-five percent (75%) of the Company's defined excess cash flow
for the then most recently ended fiscal year; and (ii) subsequent to repayment
by the Company of the $12.0 million note issued in conjunction with the purchase
of the Holiday World Dealerships (which was repaid in full in the third quarter
of 1996), a payment, within two days of the sale of any dealership, of the net
cash proceeds received by the Company from such sale. At the election of the
Company, the Revolving Loans bear interest at variable interest rates based on
the Prime Rate or LIBOR. At December 28, 1996, the effective interest rates on
the Revolving Loans and the Term Loan were 9.5% and 8.6%, respectively. The
Revolving Loans are due and payable in full on March 1, 2001, and require
monthly interest payments. As of December 28, 1996, $18.5 million was
outstanding under the Term Loan and $3.8 million was outstanding under the
Revolving Loans. The Term Loan and the Revolving Loans are collateralized by a
security interest in all of the assets of the Company and include various
restrictions and financial covenants. Because borrowings under the Revolving
Loans have been less than originally anticipated, the Company is currently in
the process of negotiating new terms relating to the amount available under the
Revolving Loans and the interest rates, covenants and restrictions relating to
both loans. The Company does not expect any adverse changes to the credit
facilities as a result of these discussions. The Company also has various loans
outstanding to finance retail inventory at the three remaining Holiday World
Dealerships which amounted to approximately $6.2 million at December 28, 1996
and which bear interest at various rates based on the prime rate and are
collateralized by the assets of the Company.

The Company's principal working capital requirements are for purchases of
inventory and, to a lesser extent, financing of trade receivables. The Company's
dealers typically finance product purchases under wholesale floor plan
arrangements with third parties as described below. At December 28, 1996, the
Company had working capital of approximately $4.5 million, an increase of
$700,000 from working capital of $3.8 million at December 30, 1995. The Company
used short-term credit facilities to finance the Coburg, Oregon facility as well
as the construction in progress on the new Wakarusa facility. The Company
primarily used long-term debt and the Redeemable Preferred Stock to finance the
Holiday Acquisition.

The Company's capital expenditures were $7.3 million in 1996, primarily for
expansion of manufacturing facilities. In the first quarter of 1996, the Company
completed spending on the new Coburg, Oregon

22
<PAGE>
manufacturing facility started in 1995. During the second half of 1996,
construction began on the new manufacturing facility and administrative offices
in Wakarusa, Indiana which will enable the Company to increase its production
capacity of motor coaches. The total cost of the Wakarusa facility is now
estimated to be approximately $15.0 million, and the plant is expected to be
operational by the end of the second quarter of 1997.

The Company believes that cash flow from operations, funds available under
its credit facilities and the proceeds of the Offering will be sufficient to
meet the Company's liquidity requirements for the next 12 months. The Company
anticipates capital expenditures in 1997 will total approximately $17.0 to $20.0
million, of which an estimated $10.0 million will be used to finish construction
of the Wakarusa facility, $1.0 million will be used to set up the Springfield,
Oregon facility and up to $2.0 million will be used to upgrade the Company's
management information systems, including software to handle the "Year 2000"
issue. The Company may, however, require additional equity or debt financing to
address working capital and facilities expansion needs, particularly if the
Company further expands its operations to address greater than anticipated
growth in the market for its products. The Company may also from time to time
seek to acquire businesses that would complement the Company's current business,
and any such acquisition could require additional financing. There can be no
assurance that additional financing will be available if required or on terms
deemed favorable by the Company.

As is typical in the recreational vehicle industry, many of the Company's
retail dealers, including the Holiday World Dealerships, utilize wholesale floor
plan financing arrangements with third party lending institutions to finance
their purchases of the Company's products. Under the terms of these floor plan
arrangements, institutional lenders customarily require the recreational vehicle
manufacturer to agree to repurchase any unsold units if the dealer fails to meet
its commitments to the lender, subject to certain conditions. The Company has
agreements with several institutional lenders under which the Company currently
has repurchase obligations. The Company's contingent obligations under these
repurchase agreements are reduced by the proceeds received upon the sale of any
repurchased units. The Company's obligations under these repurchase agreements
vary from period to period. At December 28, 1996, approximately $105.7 million
of products sold by the Company to independent dealers were subject to potential
repurchase under existing floor plan financing agreements, with approximately
8.5% concentrated with one dealer. If the Company were obligated to repurchase a
significant number of products under any repurchase agreement, its business,
operating results and financial condition could be adversely affected

NEWLY ISSUED FINANCIAL REPORTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". This
standard revises the disclosure requirements of earnings per share, simplifies
the computation of earnings per share and increases the comparability of
earnings per share on an international basis. SFAS No. 128 will be effective for
the Company for the year ending December 27, 1997. The Company has not
determined the impact that adopting SFAS No. 128 will have on its financial
statements.

23
<PAGE>
BUSINESS

The Company is a leading manufacturer of premium Class A motor coaches and
towable recreational vehicles. The Company's product line consists of ten models
of motor coaches and five models of fifth wheel trailers and travel trailers
under the well known "Monaco" and "Holiday Rambler" brand names. The Company's
products, which are typically priced at the high end of their respective product
categories, range in suggested retail price from $60,000 to $750,000 for motor
coaches and from $15,000 to $70,000 for towables. During 1996, the Company had
significant market positions in the high end price range of the market segments
in which it competes. Based upon retail registrations in 1996, the Company
believes it had a 25% share of the market for High-Line Class A motor coaches
(units with retail prices above $120,000), an 11% share of the market for high
end fifth wheel trailers (units with retail prices above $24,000) and a 48%
share of the market for high end travel trailers (units with retail prices above
$20,000). The Company's products are sold through an extensive network of 173
dealerships located primarily in the United States and Canada.

INDUSTRY AND DEMOGRAPHIC DATA

Recreational vehicles are broadly classified as "motor coaches" (full-size
Class A motorhomes, Class B motorhomes (or van campers), Class C mini-motorhomes
and van conversions) and "towables" (fifth wheel trailers, travel trailers,
truck campers and folding camping trailers). Set forth below is a brief
description of the principal segments of the recreational vehicle market.

MOTOR COACHES

The RVIA defines a "motorhome," also known as a "motor coach," as a
self-propelled recreational vehicle chassis with permanently installed living
systems, including cooking, refrigeration, toilet, water and other systems.

CLASS A MOTOR COACHES are designed for full-time living. They include a
living room, kitchen, dining room, bedroom and bathroom. These vehicles
typically are equipped with a wide range of kitchen and bathroom appliances,
stereo, television and other amenities, including deluxe carpeting and fabrics,
couches, air conditioner, closets and other luxury options. Class A motor
coaches are built on specially designed heavy duty motor vehicle chassis to
provide safety and stability. The category of Class A motor coaches can be
further divided into two groups according to price points: High-Line Class A
motor coaches (defined as units with retail prices above $120,000) and
entry-level to mid-range Class A motor coaches (defined as units with retail
prices between $40,000 and $120,000). According to the RVIA, the 1996 industry
average retail price for Class A motor coaches was $78,965.

CLASS B MOTOR COACHES, also known as van campers, are automotive vans that
are converted by the recreational vehicle manufacturer to provide sleeping,
kitchen and toilet facilities. According to the RVIA, the 1996 industry average
retail price for Class B motor coaches was $42,953.

24
<PAGE>
CLASS C MOTOR COACHES are constructed on van chassis. Retaining the cab
section of the chassis, the recreational vehicle manufacturer adds the body
section with complete living quarters, including bathroom, kitchen, bedroom and
various appliances. According to the RVIA, the 1996 industry average retail
price for Class C motor coaches was $47,060.

TOWABLES

FIFTH WHEEL TRAILERS are transported by a pickup truck equipped with a
device known as a fifth wheel hitch. They are distinguished by their raised
forward section that extends over the bed of the pickup truck to form a spacious
and functional bi-level floor plan. According to the RVIA, the 1996 industry
average retail price for fifth wheel trailers was $22,673.

TRAVEL TRAILERS are towed by a bumper or frame hitch attached to the towing
vehicle. They are constructed with solid sidewalls and solid interior walls that
include beds, dinettes and fully functional kitchens. According to the RVIA, the
1996 industry average retail price for travel trailers was $14,213.

TRUCK CAMPERS slide into the bed of a pickup truck. They can be unloaded and
parked at home or at the campsite, enabling owners to use the truck with or
without the camper. According to the RVIA, the 1996 industry average retail
price for truck campers was $11,083.

FOLDING CAMPING TRAILERS are constructed with collapsible "tent" sidewalls
which fold for easy towing. When opened, camping trailers provide many of the
comforts of travel trailers, with beds, dinettes and fully functional kitchens.
According to the RVIA, the 1996 industry average retail price for folding
camping trailers was $4,957.

The following table shows the retail sales in dollars of Class A motor
coaches, fifth wheel trailers, travel trailers and the total recreational
vehicle market (excluding conversion vehicles), based on vehicle registration
data prepared by the RVIA.

INDUSTRY RETAIL SALES

<TABLE>
<CAPTION>
COMPOUND
ANNUAL
GROWTH
1992 1993 1994 1995 1996 RATE
--------- --------- --------- --------- --------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Class A motor coaches......................................... $ 1,748 $ 1,966 $ 2,555 $ 2,737 $ 2,882 13.3%
Fifth wheel trailers.......................................... $ 750 $ 810 $ 956 $ 950 $ 1,100 10.0%
Travel trailers............................................... $ 773 $ 834 $ 956 $ 977 $ 1,072 8.5%
Total recreational vehicle market............................. $ 4,282 $ 4,712 $ 5,690 $ 5,895 $ 6,327 10.3%
</TABLE>

Customers purchase recreational vehicles for a variety of purposes,
including camping, traveling, sightseeing, vacationing, retirement and enjoyment
of outdoor activities and sporting events. Recreational vehicle purchasers are
also often attracted to the "recreational vehicle lifestyle" as a way to enjoy
the outdoors in comfort and to join others in the comradery of recreational
vehicle activities. Thousands of campgrounds and recreational vehicle parks are
available through the U.S. Forest Service, other governmental agencies and
private organizations such as Coast-to-Coast Resorts, Kampgrounds of America,
Inc., Thousand Trails, Inc., Outdoor Resorts of America, Inc. and Fort
Wilderness, which is owned by The Walt Disney Company. These sites offer
electrical and water hook-ups in a wide variety of settings ranging from rugged
wilderness areas to exclusive country club-style resorts. Recreational vehicle
owners can also participate in the social aspects of the recreational vehicle
lifestyle by joining a recreational vehicle club, by attending any of the
numerous gatherings, known as "rallies," sponsored by the clubs or recreational
vehicle associations, or by attending tailgate parties at sporting events. Two
of the larger recreational vehicle clubs, the Good Sam Club and the Family Motor
Coach Association, have over 900,000 and 100,000 members, respectively. Rallies
sponsored by these associations can attract thousands of recreational vehicle
owners to a single location. These clubs also offer emergency road-side
services, publish magazines and offer group affinity benefits such as credit
cards and insurance.

25
<PAGE>
According to a 1994 study sponsored by the RVIA, approximately 8.2 million
households owned recreational vehicles (including conversion vehicles) in 1993,
up from 7.7 million households in 1988 and 5.8 million households in 1980.
Recreational vehicles are purchased by adults in all age ranges, but the highest
market penetration is with those individuals between the ages of 45 to 74.
According to the Census Bureau of the U.S. Department of Commerce, the number of
adults between the ages of 45 and 74 is projected to grow by approximately 41%
from 1995 through the year 2010, compared with a projected increase of
approximately 13% for the overall population, thereby representing an expanded
potential consumer market for recreational vehicle sales.

BUSINESS STRATEGY

- CONTINUING TO OFFER HIGH QUALITY, PREMIUM PRODUCTS
Historically, the Company has targeted its motor coach and towable products
at the high end of each market segment in which it competes and has achieved
a significant market share in each of these market segments. With its focus
on the high end, the Company has gained a reputation for high quality,
premium products. By continuing to offer premium products in each of its
market segments, the Company is able to take advantage of the growing number
of its target customers, which the Company believes may be more affluent and
may retire earlier than prior generations. Additionally, the Company
believes that directing its product offerings towards the high end of each
market segment generally offers the opportunity to achieve higher gross
margins.

- INTRODUCING NEW PRODUCTS TO OFFER A BROADER PRICE RANGE
The Company intends to capitalize on its reputation as a high quality
manufacturer of premium motor coaches and towables to broaden the price
range of its products. By increasing the number of price points available to
potential customers, the Company plans to attract a wider range of buyers in
order to be better positioned to capture their trade-up business. The
Company believes that many recreational vehicle customers purchase multiple
recreational vehicles during their lifetime. The Company significantly
increased the price range of its product offerings with the Holiday
Acquisition by expanding its Class A motor coach line to include
complementary High-Line and entry-level to mid-range motor coaches and by
adding its first towable products. The Company plans to continue to broaden
the price range of its product offerings through selective new product
introductions. For example, the Company recently entered the mid-range fifth
wheel and travel trailer markets with the introduction of its Alumascape
models.

- EXPANDING PRODUCTION CAPACITY WHILE MAXIMIZING MANUFACTURING
EFFICIENCIES
In recent years, the Company has been capacity constrained in its High-Line
Class A motor coach production. As a result, the Company believes it has
lost sales opportunities. The Company expects to complete construction of a
new, three line, motor coach production facility adjoining its existing
Wakarusa, Indiana facility by the end of the second quarter of 1997, which
should almost double its motor coach manufacturing capacity. As part of this
process, the Company intends to relocate its Elkhart, Indiana motor coach
production to the Wakarusa facility which it believes will increase
production efficiencies and improve gross margins on its motor coach
products. Furthermore, this consolidation into the new facility will make
available space in the Elkhart facility that may be used to produce
additional towable products. In addition, the Company has leased a facility
in Springfield, Oregon to manufacture towable products which is expected to
be operational in the third quarter of 1997 and which should substantially
increase the Company's towable products manufacturing capacity.

26
<PAGE>
- MAINTAINING AND EXPANDING THE DEALER NETWORK
The Company has an extensive dealer network in the United States and Canada.
This dealer network provides customers with more accessible post-sales
service, affords the Company more direct customer communication and provides
the Company with a broad geographic presence in the market. The recreational
vehicle market is highly fragmented, with over 3,000 dealers in the United
States. There has been a recent trend toward consolidation in the industry
with the creation of larger "megadealers" which carry a broader product
range and emphasize superior quality and customer service. The Company
believes this trend is favorable to the Company due to its broad product
offerings, longstanding relationships with many of the leading dealers, and
the Company's focus on product quality, design innovation and customer
service.
The Company's strategy is to expand further its dealer network by adding
dealers that are more focused on selling entry-level to mid-range products
and expanding into currently underpenetrated markets including the West
Coast and Canada. To accomplish this, the Company plans to selectively grow
the number of motor coach dealers to increase geographic coverage and
density, and to aggressively add new dealers for its towable products. To
support this strategy, the Company recently added five account executives to
focus exclusively on towable products.

- EMPHASIZING NEW PRODUCT DESIGN AND INNOVATION
The Company has successfully introduced a number of industry-leading
product design innovations that the Company believes have been important
elements in differentiating its products from those of its competitors.
These products include its Roadmaster semi-monocoque chassis (which enhances
ride stability and performance), kitchen suite slide (which expands the
living space in the kitchen/ dining area), flat-floored coaches and
one-piece windshields. The Company believes its innovative designs and its
emphasis on the quality and value of each model have supported the Company's
penetration of the high end of various product categories. The Company's
focus on product innovation has led to a series of successful new product
introductions and model redesigns in the last eight years. To maintain its
product innovation and brand quality, the Company modifies and improves each
model yearly and typically redesigns models at least every three to four
years to meet changing consumer preferences. The Company also focuses on the
vertical integration of its manufacturing process, which allows the Company
to more quickly introduce new designs in response to changes in consumer
preferences.

- PROMOTING CUSTOMER SATISFACTION AND BRAND LOYALTY
The Company believes that customer satisfaction is vitally important in the
recreational vehicle market because of the large number of repeat customers
and the rapid communication of business reputations among recreational
vehicle enthusiasts. The Company believes that a significant number of its
customers are repeat customers and that this is largely due to the high
quality of the Company's products and its emphasis on customer satisfaction.
The Company also believes that responsive and professional customer service
is necessary to promote customer satisfaction and brand loyalty. The
Company's approximately 180-person service and warranty staff provides
support to both the Company's retail customers and its dealer network. The
Company maintains individualized production records and a computerized
warranty tracking system which enables the Company's service personnel to
identify problems quickly and to provide individualized customer service.
Another important element in promoting customer satisfaction and brand
loyalty is the Company's advertising and marketing activities. The Company
advertises regularly in trade journals and magazines and participates in
more than 150 recreational vehicle trade shows and rallies each year. The
Company provides its customers complimentary service for minor repairs at
several of these trade shows and rallies. The Company also attempts to
foster brand loyalty by sponsoring clubs for the owners of its products so
that the owners can share experiences and enjoy the comradery of other
Monaco and Holiday Rambler owners.

27
<PAGE>
PRODUCTS

The Company currently manufactures ten motor coach and five towable models,
each of which has distinct features and attributes designed to target the model
to a particular suggested retail price range. The Company's product offerings
currently target three segments of the recreational vehicle market: Class A
motor coaches, fifth wheel trailers and travel trailers. The Company does not
currently compete, and has no present plans to compete, in any other segment of
the recreational vehicle industry. The following table highlights the Company's
product offerings as of the date of this Prospectus:

COMPANY MOTOR COACH PRODUCTS

<TABLE>
<CAPTION>
CURRENT SUGGESTED
MODEL RETAIL PRICE RANGE BRAND
- -------------------------------------------------- -------------------- -------------------
<S> <C> <C>
Royale Coach...................................... $550,000-$750,000 Monaco
Signature Series.................................. $300,000-$400,000 Monaco
Executive......................................... $250,000-$300,000 Monaco
Navigator......................................... $250,000-$300,000 Holiday Rambler
Dynasty........................................... $205,000-$240,000 Monaco
Imperial.......................................... $190,000-$210,000 Holiday Rambler
Windsor........................................... $150,000-$175,000 Monaco
Endeavor-Diesel................................... $130,000-$145,000 Holiday Rambler
Endeavor-Gasoline................................. $ 80,000-$ 95,000 Holiday Rambler
Vacationer........................................ $ 60,000-$ 85,000 Holiday Rambler
</TABLE>

COMPANY TOWABLE PRODUCTS

<TABLE>
<CAPTION>
CURRENT SUGGESTED
MODEL RETAIL PRICE RANGE BRAND
- ----------------------------------------------------- ------------------ -------------------
<S> <C> <C>
Imperial Fifth Wheel................................. $50,000-$70,000 Holiday Rambler
Aluma-Lite Fifth Wheel............................... $35,000-$50,000 Holiday Rambler
Alumascape Fifth Wheel............................... $20,000-$35,000 Holiday Rambler

Aluma-Lite Travel Trailer............................ $25,000-$45,000 Holiday Rambler
Alumascape Travel Trailer............................ $15,000-$25,000 Holiday Rambler
</TABLE>

In 1996, the average unit wholesale selling prices of the Company's motor
coaches, fifth wheel trailers and travel trailers were approximately $103,000,
$33,500 and $20,500, respectively.

The Company's recreational vehicles are designed to offer all the comforts
of home within a 190 to 400 square foot area. Accordingly, the interior of the
recreational vehicle is designed to maximize use of available space. The
Company's products are designed with five general areas, all of which are
smoothly integrated to form comfortable and practical mobile accommodations. The
five areas are the living room, kitchen, dining room, bathroom and bedroom. For
each model, the Company offers a variety of interior layouts.

28
<PAGE>
An interior layout for a Signature Series motor coach is shown below:

[Drawing of interior floorplan of Signature Series motor coach]

An interior layout for an Imperial Fifth Wheel Trailer (with double
slide-outs) is shown below:

[Drawing of interior floorplan of Imperial Fifth Wheel Trailer]

An interior layout for an Alumascape Travel Trailer (with a slide-out) is
shown below:

[Drawing of interior floorplan of Alumascape Travel Trailer]

Each of the Company's recreational vehicles comes fully equipped with a wide
range of kitchen and bathroom appliances, audio and visual electronics,
communication devices, and other amenities, including couches, dining tables,
closets and storage spaces. All of the Company's recreational vehicles
incorporate products from well-recognized suppliers, including stereos, video
cassette recorders and televisions from Quasar and Sony, microwave ovens from
Sharp and General Electric, stoves and ranges from KitchenAid and Modern Maid,
and refrigerators from Dometic and Norcold. The Company's high end products
offer

29
<PAGE>
top-of-the-line amenities, including 20" Sony stereo televisions, fully
automatic DSS (satellite) systems, Corian kitchen and bath countertops, imported
ceramic tile and leather furniture.

PRODUCT DESIGN

To address changing consumer preferences, the Company modifies and improves
its products each model year and typically redesigns each model every three or
four years. The Company's designers work with the Company's marketing,
manufacturing and service departments to design a product that is appealing to
consumers, practical to manufacture and easy to service. The designers try to
maximize the quality and value of each model at the strategic retail price point
for that model. The marketing and sales staffs suggest features or
characteristics that they believe could be integrated into the various models to
differentiate the Company's products from those of its competitors. By working
with manufacturing personnel, the Company's product designers engineer the
recreational vehicles so that they can be built efficiently and with high
quality. Service personnel suggest ideas to improve the serviceability and
reliability of the Company's products and give the designers feedback on the
Company's past designs.

The exteriors of the Company's recreational vehicles are designed to be
aesthetically appealing to consumers, aerodynamic in shape for fuel efficiency
and practical to manufacture. Larry Shinoda, who is credited with designing the
1963 Corvette Stingray automobile, assists as a consultant to the Company in the
design process. The Company also has an experienced team of
computer-aided-design personnel to complete the product design and produce
prints from which the products will be manufactured.

SALES AND MARKETING

DEALERS

Over the past five years, the Company has expanded its dealer network from
34 dealerships in 1992 to 173 dealerships primarily located in the United States
and Canada at December 28, 1996, including 116 dealerships added as a result of
the Holiday Acquisition. The Company's dealerships generally sell either Monaco
motor coaches or Holiday Rambler motor coaches and towables. The Company intends
to expand its dealer network, primarily by adding towables-only dealers. The
Company maintains an internal sales organization consisting of 17 account
executives who service the Company's dealer network, including five recently
hired account executives who will be focusing exclusively on the towables
market.

The Company analyzes and selects new dealers on the basis of such criteria
as location, marketing ability, sales history, financial strength and the
capability of the dealer's repair services. The Company provides its dealers
with a wide variety of support services, including advertising subsidies and
technical training, and offers certain model pricing discounts to dealers who
exceed wholesale purchase volume milestones. The Company's sales staff is also
available to educate dealers about the characteristics and advantages of the
Company's recreational vehicles compared with competing products. The Company
offers dealers geographic exclusivity to carry a particular model. While the
Company's dealership contracts have renewable one or two-year terms,
historically the Company's dealer turnover rate has been low.

Dealers typically finance their inventory through revolving credit
facilities established with asset-based lending institutions, including
specialized finance companies and banks. It is industry practice that such
"floor plan" lenders require recreational vehicle manufacturers to agree to
repurchase (for a period of 12 to 18 months from the date of the dealer's
purchase) motor coaches and towables previously sold to the dealer in the event
the dealer defaults on its financing agreements. The Company's contingent
obligations under these repurchase agreements are reduced by the proceeds
received upon the sale of any repurchased units. See "Management's Discussion
and Analysis of Financial Conditions and Results of Operations-- Liquidity and
Capital Resources", and Note 17 of Notes to the Company's Consolidated Financial
Statements. The Company was not required to repurchase any of its products in
1996 pursuant to these repurchase agreements.

30
<PAGE>
As a result of the Holiday Acquisition, the Company acquired ten Holiday
World Dealerships. The Company sold seven of these Holiday World Dealerships in
1996 and plans to sell the remaining three dealerships.

ADVERTISING AND PROMOTION

The Company advertises regularly in trade journals and magazines,
participates in cooperative advertising programs with its dealers, and produces
color brochures depicting its models' performance features and amenities. The
Company also promotes its products with direct incentive programs to dealer
sales personnel linked to sales of particular models.

A critical marketing activity for the Company is its participation in the
more than 150 recreational vehicle trade shows and rallies each year. National
trade shows and rallies, which can attract as many as 40,000 attendees, are an
integral part of the Company's marketing process because they enable dealers and
potential retail customers to compare and contrast all the products offered by
the major recreational vehicle manufacturers. Setting up attractive display
areas at major trade shows to highlight the newest design innovations and
product features of its products is critical to the Company's success in
attracting and maintaining its dealer network and in generating enthusiasm at
the retail customer level. The Company also provides complimentary service for
minor repairs to its customers at several rallies and trade shows.

The Company attempts to encourage and reinforce customer loyalty through
clubs for the owners of its products so that they may share experiences and
communicate with each other. The Company's clubs currently have more than 14,000
members. The Company publishes magazines to enhance its relations with these
clubs and holds rallies for clubs to meet periodically to view the Company's new
models and obtain maintenance and service guidance. Attendance at
Company-sponsored rallies can be as high as 1,800 recreational vehicles. The
Company frequently receives support from its dealers and suppliers to host these
rallies.

CUSTOMER SERVICE

The Company believes that customer satisfaction is vitally important in the
recreational vehicle market because of the large number of repeat customers and
the rapid communication of business reputations among recreational vehicle
enthusiasts. The Company also believes that service is an integral part of the
total product the Company delivers and that responsive and professional customer
service is consistent with the premium image the Company strives to convey in
the marketplace.

The Company offers a warranty to all purchasers of its new vehicles. The
Company's current warranty covers its products for one year. In addition,
customers are protected by the warranties of major component suppliers such as
those of Cummins (diesel engines), Eaton (axles), Allison (transmissions) and
Chevrolet, Ford and Freightliner (chassis). The Company's warranty covers all
manufacturing-related problems and part and system failures, regardless of
whether the repair is made at a Company facility or by one of the Company's
dealers or authorized service centers. As of December 28, 1996, the Company had
173 dealerships providing service to owners of the Company's products. In
addition, owners of the Company's diesel products have access to the entire
Cummins dealer network, which includes over 2,000 repair centers.

The Company operates service centers in Coburg, Oregon and Elkhart and
Wakarusa, Indiana. The Company currently has approximately 180 employees in
customer service. The Company maintains individualized production records and a
computerized warranty tracking system which enable the Company's service
personnel to identify problems quickly and to provide individualized customer
service. While many problems can be resolved on the telephone, the customer may
be referred to a nearby dealer or service center. The Company believes that
dedicated customer service phone lines are an ideal way to interact directly
with the Company's customers and to quickly address their technical problems.

31
<PAGE>
MANUFACTURING

The Company currently operates manufacturing facilities in Coburg, Oregon,
where it manufactures Signature Series, Executive, Dynasty and Navigator motor
coaches; in Elkhart, Indiana, where it manufactures Dynasty and Windsor motor
coaches and Alumascape fifth wheel and travel trailers; and in Wakarusa,
Indiana, where it manufactures Imperial, Endeavor and Vacationer motor coaches
and Imperial and Aluma-Lite fifth wheel and travel trailers. The Company also
operates its Royale Coach bus conversion facility in Elkhart, Indiana. The
Company's current motor coach production capacity is three units per day at its
Coburg facility, and a combined 11.5 units per day at its Wakarusa and Elkhart
facilities. The Company's production of motor coaches has been limited by
capacity constraints in recent years. The Company's current towables production
capacity is a combined 16 units per day at its Wakarusa and Elkhart facilities.

The Company is in the process of expanding its manufacturing capacity at its
Wakarusa location and has leased an additional facility in Springfield, Oregon.
The new Wakarusa facility, which is expected to be operational by the end of the
second quarter of 1997, will enable the Company to consolidate Indiana motor
coach production in Wakarusa, freeing up existing space at the Elkhart facility
which may be used to increase production of towable products. As part of the new
Wakarusa facility, the Company may construct a new paint facility in order to
take advantage of the benefits of vertical integration and reduce production
costs. The Springfield towables facility is expected to be operational in the
third quarter of 1997. Upon completion of the expansion of its manufacturing
capacity, the Company should have motor coach production capacity of 25 units
per day in Wakarusa, and three units per day in Coburg, and towables production
capacity of a combined 16 units per day in its Elkhart and Wakarusa facilities,
and eight units per day in Springfield. The Company believes that this expanded
manufacturing capacity will free the Company from capacity constraints on its
motor coaches and allow the Company to gradually increase its overall production
volumes for motor coaches and towables, consistent with anticipated market
demand.

The Company believes that its manufacturing process is one of the most
vertically integrated in the recreational vehicle industry. By manufacturing a
variety of items, including the Roadmaster semi-monocoque chassis, plastic
components, some of its cabinetry and fiberglass parts, as well as many
subcomponents, the Company maintains increased control over scheduling,
component production and overall product quality. In addition, vertical
integration enables the Company to be more responsive to market dynamics.

Each facility has several stations for manufacturing, organized into four
broad categories: chassis manufacturing, body manufacturing, painting and
finishing. It takes from three weeks to two months to build each unit, depending
on the product. The Company keeps a detailed log book during the manufacture of
each product and has a computerized service tracking system.

Each unit is given an inspection during which its appliances and plumbing
systems are thoroughly tested. As a final quality control check, each motor
coach is given a road test. To further ensure both dealer and end-user
satisfaction, the Company pays a unit fee per recreational vehicle to its
dealers so that they will thoroughly inspect each product upon delivery, and
return a detailed report form.

The Company purchases raw materials, parts, subcomponents, electronic
systems, and appliances from approximately 750 vendors. These items are either
directly mounted in the vehicle or are utilized in subassemblies which the
Company assembles before installation in the vehicle. The Company attempts to
minimize its level of inventory by ordering most parts as it needs them. Certain
key components that require longer purchasing lead times are ordered based on
planned needs. Examples of these components are diesel engines, axles,
transmissions, chassis and interior designer fabrics. The Company has a variety
of major suppliers, including Allison, Chevrolet, Cummins, Eaton, Ford and
Freightliner. The Company does not have any long-term supply contracts with
these suppliers or their distributors, but believes it has good relationships
with them. To minimize the risks associated with reliance on a single-source
supplier, the Company typically keeps a 60-day supply of axles, engines, chassis
and transmissions in stock or available at

32
<PAGE>
the suppliers' facilities and believes that, in an emergency, other suppliers
could fill the Company's needs on an interim basis. However, there can be no
assurance that these suppliers will be able to meet the Company's future
requirements for these components. An extended delay or interruption in the
supply of any components obtained from a single or limited source supplier could
have a material adverse effect on the Company's business, results of operations
and financial condition.

BACKLOG

The Company's products are generally manufactured against orders from the
Company's dealers. As of December 28, 1996, the Company's backlog of orders was
$100.2 million compared with the combined Monaco and Holiday Rambler backlog of
$64.5 million at December 30, 1995. The Company includes in its backlog all
accepted purchase orders from dealers shippable within the next six months.
Orders in backlog can be canceled at the option of the purchaser at any time
without penalty and, therefore, backlog should not be used as a measure of
future sales.

FACILITIES

The Company is headquartered in Coburg, Oregon, approximately 100 miles from
Portland, Oregon. The following table summarizes the Company's current and
planned manufacturing facilities:

<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
MANUFACTURING FACILITY OWNED/LEASED FOOTAGE PRODUCTS MANUFACTURED
- ----------------------------------------------- -------------------- ------------ -----------------------------
<S> <C> <C> <C>
Coburg, Oregon................................. Owned 300,000 Motor Coaches
Elkhart, Indiana............................... Owned 325,000 Motor Coaches, Towables
Elkhart, Indiana............................... Leased 28,000 Bus Conversions
Wakarusa, Indiana.............................. Owned/Leased(1) 516,000 Motor Coaches, Towables
Wakarusa, Indiana(2)........................... Owned 500,000 Motor Coaches
Springfield, Oregon(3)......................... Leased 100,000 Towables
</TABLE>

- ------------------------

(1) The Company leases approximately 110,510 square feet of this facility.

(2) Includes approximately 400,000 square feet currently under construction,
which is expected to be operational by the end of the second quarter of
1997.

(3) Expected to be operational in the third quarter of 1997.

As of the date of this Prospectus, the Company's production of motor coaches
is capacity constrained. After the new Wakarusa, Indiana and Springfield, Oregon
plants are operational and the transfer of the Elkhart, Indiana motor coach
production has been successfully completed, the Company believes that its
existing facilities will be sufficient to meet its production requirements for
the foreseeable future. Should the Company require increased production capacity
in the future, the Company believes that additional or alternative space
adequate to serve the Company's foreseeable needs would be available on
commercially reasonable terms.

COMPETITION

The market for recreational vehicles is highly competitive. The Company
currently encounters significant competition at each price point for its
recreational vehicle products. The Company believes that the principal
competitive factors that affect the market for the Company's products include
product quality, product features, reliability, performance, quality of support
and customer service, loyalty of customers, brand recognition and price. The
Company believes that it competes favorably against its competitors with respect
to each of these factors. The Company's competitors include, among others:
Coachmen Industries, Inc., Fleetwood Enterprises, Inc., National R.V. Holdings,
Inc., Skyline Corporation, SMC Corporation, Thor Industries, Inc. and Winnebago
Industries, Inc. Some of the Company's competitors have significantly greater
financial resources and more extensive marketing capabilities than the

33
<PAGE>
Company. There can be no assurance that either existing or new competitors will
not develop products that are superior to or that achieve better consumer
acceptance than the Company's products, or that the Company will continue to
remain competitive.

GOVERNMENT REGULATION

The manufacture and operation of recreational vehicles are subject to a
variety of federal, state and local regulations, including the National Traffic
and Motor Vehicle Safety Act and safety standards for recreational vehicles and
their components that have been promulgated by the Department of Transportation.
These standards permit the National Highway Traffic Safety Administration to
require a manufacturer to repair or recall vehicles with safety defects or
vehicles that fail to conform to applicable safety standards. Because of its
sales in Canada, the Company is also governed by similar laws and regulations
promulgated by the Canadian government. The Company has on occasion voluntarily
recalled certain products. The Company's operating results could be adversely
affected by a major product recall or if warranty claims in any period exceed
warranty reserves.

The Company is a member of the RVIA, a voluntary association of recreational
vehicle manufacturers and suppliers, which promulgates recreational vehicle
safety standards. Each of the products manufactured by the Company has an RVIA
seal affixed to it to certify that such standards have been met.

Many states regulate the sale, transportation and marketing of recreational
vehicles. The Company is also subject to state consumer protection laws and
regulations, which in many cases require manufacturers to repurchase or replace
chronically malfunctioning recreational vehicles. Some states also legislate
additional safety and construction standards for recreational vehicles.

The Company is subject to regulations promulgated by the Occupational Safety
and Health Administration ("OSHA"). The Company's plants are periodically
inspected by federal or state agencies, such as OSHA, concerned with workplace
health and safety.

The Company believes that its products and facilities comply in all material
respects with the applicable vehicle safety, consumer protection, RVIA and OSHA
regulations and standards. Amendments to any of the foregoing regulations and
the implementation of new regulations could significantly increase the cost of
manufacturing, purchasing, operating or selling the Company's products and could
materially and adversely affect the Company's net sales and operating results.
The failure of the Company to comply with present or future regulations could
result in fines being imposed on the Company, potential civil and criminal
liability, suspension of production or cessation of operations.

The Company is subject to product liability and warranty claims arising in
the ordinary course of business. To date, the Company has been successful in
obtaining product liability insurance on terms the Company considers acceptable.
The Company's current policies jointly provide coverage against claims based on
occurrences within the policy periods up to a maximum of $26.0 million for each
occurrence and $27.0 million in the aggregate. There can be no assurance that
the Company will be able to obtain insurance coverage in the future at
acceptable levels or that the costs of insurance will be reasonable.
Furthermore, successful assertion against the Company of one or a series of
large uninsured claims, or of one or a series of claims exceeding any insurance
coverage, could have a material adverse effect on the Company's business,
operating results and financial condition.

Certain U.S. tax laws currently afford favorable tax treatment for the
purchase and sale of recreational vehicles. These laws and regulations have
historically been amended frequently, and it is likely that further amendments
and additional laws and regulations will be applicable to the Company and its
products in the future. Furthermore, no assurance can be given that any increase
in personal income tax rates will not have a material adverse effect on the
Company's business, operating results and financial condition.

34
<PAGE>
ENVIRONMENTAL REGULATION AND REMEDIATION

REGULATION

REMEDIATION

The Company has identified petroleum and/or solvent ground contamination at
the Elkhart, Indiana manufacturing facility, and the Wakarusa, Indiana
manufacturing facility and Leesburg, Florida dealership acquired in the Holiday
Acquisition. The Company has remediated the Elkhart site and recommended to the
relevant Indiana regulatory authority that no further action be taken because
the remaining contaminants are below the state's clean-up standards. The Company
currently expects that the regulatory authority will concur with this finding,
although there is no assurance that such approval will be forthcoming or that
the regulatory authority will not require additional investigation and/or
remediation. The Company is investigating the Wakarusa site and expects soon to
recommend to the relevant regulatory authority that no further action be taken
at that site based on its consultant's view that there is a limited risk
associated with the remaining contamination. It is unclear whether the
regulatory authority will concur in this finding or whether additional
remediation will be required. In Florida, the Company and its consultants are
conducting investigations to determine the appropriate remediation program to
recommend to the relevant Florida regulatory authority for the contamination
associated with former underground storage tanks at the Leesburg dealership.
With regard to the Wakarusa and Leesburg sites, the Company is indemnified by
Harley-Davidson for investigation and remediation costs incurred by the Company
(subject to a $300,000 deductible in the case of the Wakarusa site and subject
to a $10 million maximum in the case of the Wakarusa site and a $5 million
maximum in the case of the Leesburg site for matters, such as these, that were
indentified at the closing of the Holiday Acquisition).

35
<PAGE>
EMPLOYEES

As of December 28, 1996, the Company had 2,183 employees, including 1,773 in
production, 48 in sales, 174 in service and 188 in management and
administration. The Company's employees are not represented by any collective
bargaining organization, and the Company has never experienced a work stoppage.
The Company believes its relations with its employees are good.

LEGAL PROCEEDINGS

The Company is involved in legal proceedings arising in the ordinary course
of its business, including a variety of product liability and warranty claims
typical in the recreational vehicle industry. In addition, in connection with
the Holiday Acquisition, the Company assumed most of the liabilities of that
business, including product liability and warranty claims. The Company does not
believe that the outcome of its pending legal proceedings, net of insurance
coverage, will have a material adverse effect on the business, results of
operations or financial condition of the Company.

36
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, and their ages as of
December 28, 1996, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Kay L. Toolson......................... 53 Chairman, Chief Executive Officer and President

John W. Nepute......................... 44 Vice President of Finance and Chief Financial Officer

D. Page Robertson...................... 58 President of Monaco Division

James V. Sheldon....................... 56 President of Holiday Rambler Division and Chief Operating Officer,
Indiana Operations

Richard E. Bond........................ 43 Vice President, Secretary and General Counsel

Michael J. Kluger...................... 40 Director

Carl E. Ring, Jr.(1)(2)................ 59 Director

Richard A. Rouse(1)(2)................. 51 Director

Roger A. Vandenberg(2)................. 50 Director
</TABLE>

- ------------------------

(1) Member of the Audit Committee of the Board of Directors

(2) Member of the Compensation Committee of the Board of Directors

MR. TOOLSON has served as President and Chief Executive Officer of the
Company and the Predecessor since 1986 and as Chairman of the Company since July
1993. From September 1982 to August 1986, Mr. Toolson served as Executive Vice
President of Executive Industries, Inc., a motor coach manufacturer. Prior to
joining Executive Industries, Mr. Toolson served from 1973 until 1982 as Vice
President of Kings Highway Mobile Industries, Inc., a motor coach manufacturer.
He holds a B.S. degree in Business Administration and Computer Science and an
M.B.A. degree, both from Utah State University.

MR. NEPUTE has served the Company and the Predecessor in his current
capacity as Vice President of Finance and Chief Financial Officer since January
1991. From January 1988 until January 1991 he served the Predecessor as
Controller. From 1977 to 1988, Mr. Nepute served as Controller of Tiffany Drug
Stores, Inc., a privately-held retail chain. Mr. Nepute holds a B.S. degree in
Industrial Management from Georgia Institute of Technology and an M.B.A. degree
in Finance from the University of Oregon.

MR. ROBERTSON has served as the President of the Monaco Division since
January 1997. From October 1995 until January 1997, Mr. Robertson served as
President of the Company. Mr. Robertson also served the Company and its
Predecessor as Vice President of Sales and Marketing from January 1991 to August
1995. From January 1988 until January 1991, he served the Company's predecessor
as National Sales Manager. Mr. Robertson attended Western Carolina College and
Louisburg College, where he studied business administration and marketing.

MR. SHELDON has served as the President of the Holiday Rambler Division and
Chief Operating Officer, Indiana Operations of the Company since March 1996.
From 1971 to 1995, Mr. Sheldon held several key management positions with the
Recreational Group of Fleetwood Enterprises, including Plant General Manager,
Director of Sales, Director of Product Development, Director of Marketing, and
Managing Director of European Operations. Mr. Sheldon holds a B.S. degree in
Economics from Georgetown University and an M.B.A. degree in Marketing from
George Washington University.

MR. BOND has served as Vice President, Secretary and General Counsel of the
Company since February 1997 and has been an employee of the Company since
January 1997. From 1987 to December 1996 he served as Vice President, Secretary
and General Counsel of Holiday Rambler. He also served

37
<PAGE>
as Holiday Rambler's Vice President and Assistant General Counsel from 1984 to
1987. Prior to that and from 1979, Mr. Bond was engaged in the private practice
of law in Oregon and Indiana. Mr. Bond holds an A.B. in Economics and History
from Indiana University and a J.D. from Willamette University College of Law.

MR. KLUGER has served as a Director of the Company since March 1993. He is a
founding partner of Liberty Partners, L.P., whose general partner is Liberty
Capital Partners, Inc., a New York investment management firm, where he has
served as Managing Director since September 1992. For five years prior thereto,
Mr. Kluger was a Director and Senior Vice President of Merrill Lynch
Interfunding Inc., a subsidiary of Merrill Lynch & Co., an investment banking
and brokerage firm. Mr. Kluger is also a director and stockholder of Liberty
Capital Partners, Inc.

MR. RING has served as a director of the Company since March 1993. He is a
founding partner of Liberty Partners, L.P., whose general partner is Liberty
Capital Partners, Inc., a New York investment management firm, where he has
served as Managing Director since September 1992. From June 1991 to September
1992 he was President of Eden, Miller & Co., Incorporated, an investment banking
firm. For more than five years prior thereto, Mr. Ring was a Managing Director
of Lehman Brothers, an investment banking and brokerage firm. Mr. Ring is also a
director and stockholder of Liberty Capital Partners, Inc.

MR. ROUSE has served as a director of the Company since July 1993. He
currently serves as Chairman of Emergency Road Service, Inc., a privately-held
nationwide roadside assistance company, which position he has held since July
1991. From July 1988 to July 1991, he was President of Trailer Life Enterprises,
Inc., a publisher and sponsor of recreational vehicle publications and clubs.

MR. VANDENBERG has served as a director of the Company since March 1993. He
currently serves as the President of Cariad Capital, Inc., which he founded in
January 1992, and as a Managing Director of Narragansett Capital, Inc., a
private investment firm, a position he has held since June 1986. Mr. Vandenberg
is also a general partner of the general partner of Narragansett Capital
Partners -A and - B, L.P. ("NCPAB"), related venture capital funds, and a
general partner of the general partner of Narragansett First Fund, a venture
capital fund. One of the portfolio companies with which NCPAB is affiliated
filed for protection under Federal bankruptcy laws in 1993, although it has
subsequently emerged from bankruptcy and is operating profitably. Mr. Vandenberg
served as the President and a director of this portfolio company, Glasstech
Industries, Inc., and as a director and vice chairman of its operating company
subsidiary, Glasstech, Inc. ("Glasstech"), from 1989 to December 1994. Glasstech
manufactures equipment for bending and tempering glass. Mr. Vandenberg is also a
director of Wellman, Inc., a polyester fiber manufacturer, and a general partner
of Monaco Capital Partners.

The Board of Directors is divided into two classes with each director
serving a two year term and one class being elected at each year's annual
meeting of stockholders. Directors Kluger and Toolson are in the class of
directors whose term expires at the 1998 Annual Meeting of Stockholders and
Directors Ring, Rouse and Vandenberg are in the class of directors whose term
expires at the 1997 Annual Meeting of Stockholders.

All executive officers serve at the discretion of the Board of Directors.
There are no family relationships between any of the directors or executive
officers of the Company.

STOCKHOLDERS' AGREEMENT

In March 1993, all the holders of the outstanding shares of Common Stock
then outstanding and the Company entered into a Stockholders Agreement, which
was amended in August 1993 (the "Stockholders Agreement"). The stockholders
subject to the Stockholders Agreement are obligated to vote for two nominees to
the Company's Board of Directors presented by Liberty Investment Partners, II,
two nominees presented by Monaco Capital Partners, and one nominee chosen by the
Company's executive officers from among the executive officers. The Stockholders
Agreement also provides that so long as

38
<PAGE>
Mr. Toolson is the Company's Chief Executive Officer, he will serve as the
nominee of the executive officers. The Stockholders Agreement will terminate
upon the closing of the Offering.

REGISTRATION RIGHTS

Monaco Capital Partners, Liberty Investment Partners II and certain members
of the Company's management have the right to require the Company to register
their shares of Common Stock under the Securities Act under certain
circumstances. See "Description of Capital Stock--Registration Rights."

39
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 1, 1997 (except
as otherwise indicated), and as adjusted to reflect the sale of the 2,100,000
shares offered by this Prospectus, by: (i) each person who is known by the
Company to own beneficially more than five percent of the Common Stock, (ii)
each of the Company's directors, (iii) each of the Company's executive officers,
(iv) all directors and executive officers as a group, and (v) each Selling
Stockholder. Except as indicated in the footnotes to this table, the persons
named in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING
--------------------------- SHARES ---------------------------
NAME SHARES PERCENTAGE(1) TO BE SOLD(2) SHARES PERCENTAGE(1)
- ---------------------------------------------------- ---------- --------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Liberty Partners Holdings 2, L.L.C. (3) ............ 1,276,931 28.8% 741,717 535,214 9.8%
c/o Liberty Capital Partners, Inc.
1177 Avenue of the Americas
New York, N.Y. 10036
Michael J. Kluger (4) .............................. 1,277,931 28.8% 741,717 536,214 9.8%
c/o Liberty Capital Partners, Inc.
1177 Avenue of the Americas
New York, N.Y. 10036
Carl E. Ring, Jr. (5) .............................. 1,276,931 28.8% 741,717 535,214 9.8%
c/o Liberty Capital Partners, Inc.
1177 Avenue of the Americas
New York, N.Y. 10036
Kay L. Toolson (6) ................................. 637,107 14.3% 190,000 447,107 8.2%
c/o Monaco Coach Corporation
91320 Industrial Way
Coburg, OR 97408
Roger A. Vandenberg (7) ............................ 271,683 6.1% 65,000 206,683 3.8%
c/o Cariad Capital, Inc.
1 Turks Head Place
Providence, R.I. 02903
Bass Management Trust .............................. 251,000 5.7% -- 251,000 4.6%
201 Main St., Suite 3200
Fort Worth, TX 76102
D. Page Robertson (6)............................... 67,990 1.5% 20,000 47,990 *
John W. Nepute (6).................................. 44,750 1.0% 10,000 34,750 *
Richard A. Rouse (6)................................ 12,800 * -- 12,800 *
James V. Sheldon (6)................................ 1,748 * -- 1,748 *
Richard E. Bond (6)................................. 240 * -- 240 *
All directors and executive officers as a group (9
persons) (4)(5)(6)(7)............................. 2,314,249 51.6% 1,026,717 1,287,532 23.3%

OTHER SELLING STOCKHOLDERS
- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
HR, LLC (8)......................................... 230,767 4.9% 230,767 -- --
Andreas P. Graham (9)............................... 53,689 1.2% 28,689 25,000 *
B. Ray Mehaffey (6)................................. 47,973 1.1% 10,000 37,973 *
Mary A. Ferreira.................................... 7,846 * 3,846 4,000 *
Monaco Capital Partners (7)......................... 100 * 100 -- --
</TABLE>

- ------------------------

* Less than one percent.

40
<PAGE>
(1) Applicable percentage of beneficial ownership both before and after the
Offering is based on 4,437,742 shares of Common Stock outstanding as of
March 1, 1997 together with applicable options for each stockholder.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting and investment power
with respect to shares. Shares of Common Stock subject to options currently
exercisable or exercisable within 60 days after March 1, 1997 are deemed
outstanding for purposes of computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage of any other stockholder. Beneficial ownership after the Offering
also reflects the issuance of the 230,767 shares of Common Stock upon
conversion of the 65,217 shares of Redeemable Preferred Stock held by HR,
LLC.

(2) Assumes no exercise of the Underwriters' over-allotment option. If the
over-allotment option is exercised in full, the following Selling
Stockholders will sell the additional shares (and will beneficially own the
percentages) indicated: Liberty Partners Holdings 2, L.L.C., 215,000 shares
(5.9%); Kay L. Toolson, 60,000 shares (7.1%); Roger A. Vandenberg, 20,000
shares (3.4%); D. Page Robertson, 10,000 shares (less than 1.0%); B. Ray
Mehaffey, 5,000 shares (less than 1.0%); and John W. Nepute, 5,000 shares
(less than 1.0%).

(3) Liberty Partners Holdings 2, L.L.C., a Delaware limited liability company,
holds 1,276,931 shares of Common Stock. The members of Liberty Partners
Holdings 2, L.L.C. are Liberty Investments 5, Inc., which is beneficially
owned by the State Board of Administration of Florida, and Liberty
Investment Partners II, which is beneficially owned by, among others,
Directors Michael J. Kluger and Carl E. Ring, Jr., as well as Peter E.
Bennet and Paul J. Huston. The Manager of Liberty Partners Holdings 2,
L.L.C., which has sole voting and investment power over the shares of Common
Stock, is Liberty Partners, L.P. Liberty Capital Partners, Inc. is the
general partner of Liberty Partners, L.P. Michael J. Kluger, Carl E. Ring,
Jr., Peter E. Bennett and Paul J. Huston are directors and stockholders of
Liberty Capital Partners, Inc.

(4) Includes 1,000 shares held by Mr. Kluger directly. Also includes the shares
held of record by Liberty Partners Holdings 2, L.L.C. See Note (3) above.

(5) Includes the shares held of record by Liberty Partners Holdings 2, L.L.C.
See Note (3) above.

(6) Includes the number of shares subject to options which are exercisable
within 60 days of March 1, 1997 by the following persons: Mr. Toolson (6,000
shares), Mr. Rouse (4,800 shares), Mr. Nepute (12,120 shares), Mr. Robertson
(12,220 shares), Mr. Sheldon (500 shares), Mr. Bond (240 shares) and Mr.
Mehaffey (12,120 shares).

(7) Includes 100 shares held of record by Monaco Capital Partners, all of which
will be sold in the Offering. Mr. Vandenberg, as the managing general
partner of Monaco Capital Partners, has the sole right to direct the voting
and disposition of securities of the Company held by Monaco Capital
Partners, except for 19 shares, as to which Mr. Graham directs the voting
but does not have the right to direct the disposition thereof. See Note (9)
below. Mr. Vandenberg may therefore be deemed to be a beneficial owner of
all of the 100 shares held of record by Monaco Capital Partners. Cariad
Capital, Inc., of which Mr. Vandenberg is President, currently receives
consulting and management fees of $72,000 per year from the Company pursuant
to the terms of a management contract scheduled to expire on September 23,
1998.

(8) HR, LLC presently holds 65,217 shares of Redeemable Preferred Stock which
will be converted into 230,767 shares of Common Stock that will be sold in
the Offering. HR, LLC is a company owned by Harley-Davidson, Inc.

(9) Includes 19 shares held of record by Monaco Capital Partners, as to which
Mr. Graham directs the voting but does not have the right to direct the
disposition. Mr. Graham was a director of the Company from March 1993 to May
1996.

41
<PAGE>
DESCRIPTION OF CAPITAL STOCK

Upon the closing of the Offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, $.01 par value, and
1,934,783 shares of Preferred Stock, $.01 par value, after giving effect to the
conversion of the 65,217 shares of Redeemable Preferred Stock held by HR, LLC
into 230,767 shares of Common Stock.

The following summary of certain provisions of the Common Stock does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Company's Certificate of Incorporation which is included as an
exhibit to the Registration Statement of which this Prospectus is a part, and by
the provisions of applicable law.

COMMON STOCK

As of March 17, 1997, there were 4,438,217 shares of Common Stock
outstanding that were held of record by approximately 105 stockholders.

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior liquidation
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable, and the
shares of Common Stock to be issued upon completion of the Offering will be
fully paid and non-assessable.

PREFERRED STOCK

Effective upon the closing of the Offering, the Board of Directors will have
the authority, without any further vote or action by the stockholders, to
provide for the issuance of up to 1,934,783 shares of Preferred Stock from time
to time in one or more series with such designations, rights, preferences and
limitations as the Board of Directors may determine, including the consideration
received therefor, the number of shares comprising each series, dividend rates,
redemption provisions, liquidation preferences, sinking fund provisions,
conversion rights and voting rights, all without approval by the holders of
Common Stock. Although it is not possible to state the effect that any issuance
of Preferred Stock might have on the rights of holders of Common Stock, the
issuance of Preferred Stock may have one or more of the following effects: (i)
restrict Common Stock dividends if Preferred Stock dividends have not been paid;
(ii) dilute the voting power and equity interest of holders of Common Stock to
the extent that any Preferred Stock series has voting rights or is convertible
into Common Stock; or (iii) prevent current holders of Common Stock from
participating in the Company's assets upon liquidation until any liquidation
preferences granted to holders of Preferred Stock are satisfied. In addition,
the issuance of Preferred Stock may, under certain circumstances, have the
effect of discouraging a change in control of the Company by, for example,
granting voting rights to holders of Preferred Stock that require approval by
the separate vote of the holders of Preferred Stock for any amendment to the
Certificate of Incorporation or any reorganization, consolidation or merger (or
other similar transaction involving the Company). As a result, the issuance of
such Preferred Stock may discourage bids for the Company's Common Stock at a
premium over the market price therefor and could have a material adverse effect
on the market value of the Common Stock. The Board of Directors does not
presently intend to issue any shares of Preferred Stock.

42
<PAGE>
REGISTRATION RIGHTS

After the Offering, the holders (or their permitted transferees) of
1,301,605 shares of Common Stock (or 986,605 shares if the Underwriters'
over-allotment option is exercised in full), will be entitled to certain rights
with respect to the registration of such shares under the Securities Act. Under
the terms of agreements between the Company and such holders, if the Company
proposes to register any of its securities under the Securities Act, either for
its own account or the account of other security holders exercising registration
rights, the holders are entitled to notice of such registration and are entitled
to include shares of Common Stock therein; provided, among other conditions,
that the underwriters of any offering have the right to limit or exclude such
shares from registration. In addition, the holders of 1,301,605 shares of Common
Stock (or 986,605 shares if the Underwriters' over-allotment option is exercised
in full) may require the Company on not more than three occasions to file a
registration statement under the Securities Act with respect to such shares, and
the Company is required to use its reasonable best efforts to effect such
registration, subject to certain conditions and limitations, and is required to
pay the expenses incurred in connection with such registrations.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

Certain provisions of Delaware law and the Company's Certificate of
Incorporation could make more difficult the acquisition of the Company by means
of a tender offer, a proxy contest or otherwise and the removal of incumbent
officers and directors. These provisions are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of the Company to first negotiate
with the Company. The Company believes that the benefits of increased protection
of the Company's potential ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to acquire or restructure the Company
outweigh the disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals could result in an improvement of their
terms.

The Company is subject to the provisions of Section 203 of the Delaware law.
In general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the stockholder. Generally, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior, did
own) 15% or more of the corporation's voting stock. This provision may have the
effect of delaying, deferring or preventing a change in control of the Company
without further action by the stockholder.

The Company's Certificate of Incorporation provides that the Board of
Directors is divided into two classes, with staggered two-year terms. As a
result, only one class of directors will be elected at each annual meeting of
stockholders of the Company, with the other class continuing for the remainder
of its respective two-year term. The classification of the Board of Directors
makes it more difficult for the Company's existing stockholders to replace the
Board of Directors as well as for another party to obtain control of the Company
by replacing the Board of Directors. Since the Board of Directors has the power
to retain and discharge officers of the Company, these provisions could also
make it more difficult for existing stockholders or another party to effect a
change in management.

The Company's Certificate of Incorporation provides that stockholder action
can be taken only at an annual or special meeting of stockholders and may not be
taken by written consent. The Bylaws provide that special meetings of
stockholders can be called only by the Chairman of the Board, the President or
the Board of Directors. Stockholders are not permitted to call a special meeting
or to require that the Board of Directors call a special meeting of the
stockholders. Moreover, the business permitted to be conducted at

43
<PAGE>
any special meeting of stockholders is limited to the business brought before
the meeting by the Chairman of the Board, the President or the Board of
Directors. The Bylaws set forth an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors and with regard to business to be brought
before an annual meeting of stockholders of the Company.

The Company's Certificate of Incorporation and the Bylaws contain provisions
requiring the affirmative vote of the holders of at least two-thirds of the
voting stock of the Company to amend the foregoing provisions of the Certificate
of Incorporation and Bylaws.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is Norwest
Bank Minnesota, N.A.

SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of the Offering, the Company will have 5,468,984 shares of
Common Stock outstanding, all of which will be freely tradeable without
restriction under the Securities Act, unless they are held by "affiliates" of
the Company as that term is used under the Securities Act. The shares held by
affiliates of the Company are "restricted securities" as defined in Rule 144
under the Securities Act (the "Restricted Shares"), and are eligible for resale,
subject to the volume limitations of Rule 144, as hereinafter described.

In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned his or her restricted
securities (as that term is defined in Rule 144) for at least two years is
entitled to sell, within any three-month period, a number of such securities
that does not exceed the greater of 1% of the then outstanding shares of the
Company's Common Stock (approximately 54,690 shares immediately after the
Offering) or the average weekly trading volume during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. A person who is not an
affiliate, has not been an affiliate within three months prior to the sale and
has beneficially owned the restricted securities for at least three years is
entitled to sell such shares under Rule 144(k) without regard to any of the
limitations described above. In meeting the two year and three year holding
periods described above, a holder of Restricted Shares may include the holding
period of a prior owner who is not an affiliate of the Company.

As of the date of this Prospectus, options to purchase an aggregate of
191,245 shares of Common Stock were outstanding under the Company's stock option
plans, of which 69,948 shares have vested and are eligible for sale upon
exercise.

Certain holders of Restricted Shares have the right, after termination of
the lock-up agreements, to cause the Company to register the sale of their
shares under the Securities Act. If such registration rights are exercised, the
shares can be sold without any holding period or sales volume limitation. See
"Description of Capital Stock--Registration Rights."

44
<PAGE>
UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company and the Selling Stockholders have agreed to
sell to such Underwriter, the number of shares of Common Stock set forth
opposite the name of such Underwriter below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- -------------------------------------------------------------------------------- ------------
<S> <C>
Smith Barney Inc................................................................
William Blair & Company, L.L.C..................................................
A.G. Edwards & Sons, Inc........................................................
------------
Total....................................................................... 2,100,000
------------
------------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all of the shares of Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc., William Blair & Company,
L.L.C. and A.G. Edwards & Sons, Inc. are acting as the Representatives, propose
to offer part of the shares directly to the public at the public offering price
set forth on the cover page of this Prospectus and part of the shares to certain
dealers at a price which represents a concession not in excess of $ per
share under the public offering price. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to certain
other dealers. After the initial offering of the shares to the public, the
public offering price and such concessions may be changed by the
Representatives.

Certain of the Selling Stockholders have granted to the Underwriters an
option, exercisable for 30 days from the date of this Prospectus, to purchase up
to 315,000 additional shares of Common Stock at the price to public set forth on
the cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, in connection with the offering of the shares
offered hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.

The Company, its officers and directors, the Selling Stockholders, and
certain other stockholders of the Company designated by the Representatives,
have agreed that, for a period of 90 days from the date of this Prospectus, they
will not, without the prior written consent of Smith Barney Inc., offer, sell,
contract to sell, or otherwise dispose of, any shares of Common Stock of the
Company or any securities convertible into, or exercisable or exchangeable for,
Common Stock of the Company.

The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the Offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to

45
<PAGE>
reduce a short position incurred by the Underwriters in connection with the
Offering. A "penalty bid" is an arrangement permitting the Representatives to
reclaim the selling concession otherwise accruing to an Underwriter or syndicate
member in connection with the Offering if the Common Stock originally sold by
such Underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such Underwriter or syndicate member. The Representatives have advised the
Company that such transactions may be effected on the Nasdaq National Market or
otherwise and, if commenced, may be discontinued at any time.

As permitted by Rule 103 under the Exchange Act, Underwriters or prospective
Underwriters that are market makers ("passive market makers") in the Common
Stock may make bids for or purchases of Common Stock in the Nasdaq National
Market until such time, if any, when a stabilizing bid for such securities has
been made. Rule 103 generally provides that: (i) a passive market maker's net
daily purchases of the Common Stock may not exceed 30% of its average daily
trading volume in such securities for the two full consecutive calendar months
(or any 60 consecutive days ending within the 10 days) immediately preceding the
filing date of the registration statement of which this Prospectus forms a part;
(ii) a passive market maker may not effect transactions or display bids for the
Common Stock at a price that exceeds the highest independent bid for the Common
Stock by persons who are not passive market makers; and (iii) bids made by
passive market makers must be identified as such.

LEGAL MATTERS

The validity of Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Certain legal matters in
connection with this offering will be passed upon for the Underwriters by
Orrick, Herrington & Sutcliffe LLP, San Francisco, California.

EXPERTS

The consolidated balance sheets as of December 30, 1995 and December 28,
1996 and the consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 28, 1996 of
Monaco Coach Corporation and subsidiaries included in this Prospectus have been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, on the authority of that firm as experts in accounting
and auditing.

The combined balance sheets of Holiday Rambler LLC Recreational Vehicle
Manufacturing Division and certain Holiday World Retail Operations at December
31, 1994 and 1995 and for each of the three years in the period ended December
31, 1995 appearing in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of that firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected without charge at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048, and copies of all or any part of such material can also be obtained
from such offices upon payment of the fees prescribed by the Commission. In
addition, the Commission maintains a World Wide Web site on the Internet at
www.sec.gov that contains reports, proxy and information statements and other

46
<PAGE>
information regarding registrants that file electronically with the Commission.
Quotations relating to the Company's Common Stock appear on the Nasdaq National
Market and such reports, proxy statements and other information concerning the
Company can also be inspected at the offices of the Nasdaq Stock Market, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission in Washington, D.C. a registration
statement (herein together with all amendments thereto called the "Registration
Statement") under the Securities Act, with respect to the securities covered by
this Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain items of which are contained in or
incorporated by reference as exhibits to the Registration Statement as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits filed or incorporated as a
part thereof. Statements contained herein concerning the provisions of documents
filed with, or incorporated by reference in, the Registration Statement as
exhibits are necessarily summaries of such documents and each such statement is
qualified in its entirety by reference to the copy of the applicable documents
filed with the Commission. Copies of the Registration Statement, including
exhibits, may be obtained from the Commission upon payment of a prescribed fee,
or may be examined without charge at the offices of the Commission as described
above.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated by reference herein: (i) the Company's Annual
Report on Form 10-K for the year ended December 28, 1996 and (ii) all other
reports and other documents filed by the Company pursuant to Sections 13(a), 14
and 15(d) of the Exchange Act since the end of the fiscal year covered by the
Annual Report referred to above and prior to the date of this Prospectus.

Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained in the Registration Statement or in this Prospectus
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.

The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered (including any beneficial owner),
upon the written or oral request of any such person, a copy of any or all of the
documents referred to above or elsewhere herein which have been incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to John W. Nepute, Vice President of
Finance and Chief Financial Officer, 91320 Industrial Way, Coburg, Oregon 97408.
Telephone requests may be directed to Mr. Nepute at (541) 686-8011.

47
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
MONACO COACH CORPORATION--CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants......................................................................... F-2
Consolidated Balance Sheets as of December 30, 1995 and December 28, 1996................................. F-3
Consolidated Statements of Income for the Fiscal Years Ended December 31, 1994, December 30, 1995 and
December 28, 1996....................................................................................... F-4
Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended December 31, 1994, December 30,
1995 and December 28, 1996.............................................................................. F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended December 31, 1994, December 30, 1995 and
December 28, 1996....................................................................................... F-6
Notes to Consolidated Financial Statements................................................................ F-8

HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION AND CERTAIN HOLIDAY WORLD RETAIL
OPERATIONS--COMBINED FINANCIAL STATEMENTS:
Report of Independent Accountants......................................................................... F-23
Combined Balance Sheets as of December 31, 1994 and 1995.................................................. F-24
Combined Statements of Operations and Deficiency in Net Assets for the Years Ended December 31, 1993, 1994
and 1995................................................................................................ F-25
Combined Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995.................... F-26
Notes to Combined Financial Statements.................................................................... F-27
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Monaco Coach Corporation:

We have audited the accompanying consolidated balance sheets of Monaco Coach
Corporation and its subsidiaries (the "Company") as of December 30, 1995 and
December 28, 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 28, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Monaco Coach
Corporation and its subsidiaries as of December 30, 1995 and December 28, 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 28, 1996 in conformity with
generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Eugene, Oregon
January 31, 1997

F-2
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Trade receivables, net of $31 and $140, respectively............................... $ 7,071 $ 14,891
Inventories........................................................................ 19,591 46,930
Prepaid expenses................................................................... 447 1,343
Deferred income taxes.............................................................. 575 8,278
Notes receivable................................................................... -- 1,064
Assets held for sale............................................................... -- 1,383
------------ ------------
Total current assets............................................................. 27,684 73,889

Notes receivable..................................................................... -- 636
Debt issuance costs, net of accumulated amortization of $343......................... -- 1,760
Property and equipment, net.......................................................... 21,587 38,309
Goodwill, net of accumulated amortization of $1,466 and $2,084, respectively......... 19,231 20,774
------------ ------------
Total assets..................................................................... $ 68,502 $ 135,368
------------ ------------
------------ ------------

LIABILITIES
Current liabilities:
Book overdraft..................................................................... $ 516 $ 2,455
Short-term borrowings:
Bank line of credit.............................................................. 9,845 3,789
Flooring agreements.............................................................. -- 6,202
Current portion of long-term note payable.......................................... 2,000 2,000
Accounts payable................................................................... 8,459 24,218
Income taxes payable............................................................... 221 7,362
Accrued expenses and other liabilities............................................. 2,848 23,361
------------ ------------
Total current liabilities........................................................ 23,889 69,387

Note payable, less current portion................................................... 5,000 16,500
Deferred income tax liabilities...................................................... 1,483 2,787
Deferred income...................................................................... 200 200
------------ ------------
Total liabilities................................................................ 30,572 88,874
------------ ------------
Redeemable Series A Convertible Preferred Stock, $.01 par value; redemption value of
$3,005; 100,000 shares authorized; 65,217 shares issued and outstanding (Note 9)... -- 2,687
------------ ------------
Commitments and contingencies (Notes 12 and 17)...................................... -- --

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,900,000 shares authorized; no shares issued and
outstanding........................................................................
Common stock, $.01 par value, 20,000,000 shares authorized; 4,410,889 and 4,430,467
shares issued and outstanding, respectively........................................ 44 44
Additional paid-in capital........................................................... 25,303 25,430
Retained earnings.................................................................... 12,583 18,333
------------ ------------
Total stockholders' equity....................................................... 37,930 43,807
------------ ------------
Total liabilities and stockholders' equity....................................... $ 68,502 $ 135,368
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................................................. $ 107,300 $ 141,611 $ 365,638
Cost of sales.............................................................. 89,894 124,592 317,909
---------- ---------- ----------
Gross profit........................................................... 17,406 17,019 47,729

Selling, general and administrative expenses............................... 7,184 8,075 33,299
Management fees to stockholders............................................ 72 72 72
Amortization of goodwill................................................... 517 517 617
---------- ---------- ----------
Operating income....................................................... 9,633 8,355 13,741

Other expense (income), net................................................ (153) 40 (244)
Interest expense........................................................... 69 298 3,914
---------- ---------- ----------
Income before income taxes............................................. 9,717 8,017 10,071
Provision for income taxes................................................. 3,776 3,119 4,162
---------- ---------- ----------
Net income............................................................. 5,941 4,898 5,909

Preferred stock dividends.................................................. -- -- (75)
Accretion of redeemable preferred stock.................................... -- -- (84)
---------- ---------- ----------
Net income attributable to common stock................................ $ 5,941 $ 4,898 $ 5,750
---------- ---------- ----------
---------- ---------- ----------
Earnings per common share:
Primary................................................................ $ 1.33 $ 1.09 $ 1.28
Fully diluted.......................................................... $ 1.33 $ 1.09 $ 1.26
---------- ---------- ----------
---------- ---------- ----------
Weighted average common shares outstanding:
Primary................................................................ 4,469,734 4,473,383 4,474,791
Fully diluted.......................................................... 4,473,098 4,475,229 4,678,111
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1994................................ 4,394,548 $ 44 $ 25,163 $ 1,744 $ 26,951
Issuance of common stock................................. 6,549 0 34 -- 34
Tax benefit of stock options exercised................... -- -- 19 -- 19
Net income............................................... -- -- -- 5,941 5,941
---------- --- ----------- --------- ---------
Balances, December 31, 1994.............................. 4,401,097 44 25,216 7,685 32,945
Issuance of common stock................................. 9,792 0 58 -- 58
Tax benefit of stock options exercised................... -- -- 29 -- 29
Net income............................................... -- -- -- 4,898 4,898
---------- --- ----------- --------- ---------
Balances, December 30, 1995.............................. 4,410,889 44 25,303 12,583 37,930
Issuance of common stock................................. 19,578 0 89 -- 89
Tax benefit of stock options exercised................... -- -- 38 -- 38
Preferred stock accretion................................ -- -- -- (84) (84)
Preferred stock dividends................................ -- -- -- (75) (75)
Net income............................................... -- -- -- 5,909 5,909
---------- --- ----------- --------- ---------
Balances, December 28, 1996.............................. 4,430,467 $ 44 $ 25,430 $ 18,333 $ 43,807
---------- --- ----------- --------- ---------
---------- --- ----------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH:
Cash flows of operating activities:
Net income..................................................................... $ 5,941 $ 4,898 $ 5,909
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................ 812 1,077 3,005
Loss on disposal of equipment................................................ 2 60 79
Deferred income taxes........................................................ 269 273 (6,399)
Change in assets and liabilities, net of effects of business combination:
Trade receivables.......................................................... (431) (3,440) 1,266
Inventories................................................................ (3,549) (4,180) 9,702
Prepared expenses.......................................................... (96) (15) (810)
Accounts payable........................................................... 1,911 745 (457)
Accrued expenses and other current liabilities............................. 1,070 (218) 7,246
Income taxes payable....................................................... (169) 140 7,141
Deferred income............................................................ -- 200 --
--------- --------- ---------
Net cash provided by (used in) operating activities...................... 5,760 (460) 26,682
--------- --------- ---------
Cash flows of investing activities:
Additions to property and equipment............................................ (4,399) (13,864) (7,327)
Payment for business acquisition (Note 1)...................................... -- -- (24,645)
Proceeds from sale of retail stores, collections on notes receivable, net of
closing costs................................................................ -- -- 11,749
Other.......................................................................... (188) -- 40
--------- --------- ---------
Net cash used in investing activities.................................... (4,587) (13,864) (20,183)
--------- --------- ---------
Cash flows of financing activities:
Book overdraft................................................................. -- 516 1,939
Borrowings (payments) on line of credit, net................................... (1,095) 6,487 (6,056)
Payments on subordinated note.................................................. -- (12,000)
Borrowings on long-term notes payable.......................................... -- 7,000 20,000
Debt issuance costs............................................................ -- -- (2,060)
Payments on long-term notes payable............................................ (163) -- (8,500)
Other.......................................................................... 53 87 178
--------- --------- ---------
Net cash provided by (used in) financing activities...................... (1,205) 14,090 (6,499)
--------- --------- ---------
Net decrease in cash............................................................. (32) (234) 0
Cash at beginning of period...................................................... 266 234 0
--------- --------- ---------
Cash at end of period............................................................ $ 234 $ 0 $ 0
--------- --------- ---------
--------- --------- ---------
</TABLE>

Continued

F-6
<PAGE>
MONACO COACH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest, net of amount capitalized of $69 in 1994, $625 in 1995 and $244 in
1996............................................................................ $ 61 $ 273 $ 3,679
Income taxes...................................................................... 3,670 2,731 3,382

Business acquisition:
Fair value of assets acquired..................................................... $ 92,143
Less liabilities assumed........................................................ 52,899
Less issuance of subordinated debt.............................................. 12,000
Less issuance of preferred stock................................................ 2,599
---------
Net cash paid at the acquisition.............................................. $ 24,645
---------
---------
Sale of retail stores:
Notes receivable obtained from the sale of retail stores.......................... $ 2,730
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-7
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS

Monaco Coach Corporation and its subsidiaries (the "Company") manufacture a
line of premium motor coaches, bus conversions and towable recreational vehicles
at manufacturing facilities in Oregon and Indiana. These products are sold
primarily to independent dealers throughout the United States and Canada.

CONSOLIDATION POLICY

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
transactions and balances have been eliminated.

FISCAL PERIOD

The Company follows a 52/53 week fiscal year period ending on the Saturday
closest to December 31. Interim periods also end on the Saturday closest to the
calendar quarter end.

REVENUE RECOGNITION

The Company recognizes revenue from the sale of recreational vehicles (i)
upon shipment or dealer/ customer pick-up (most of the dealers finance their
purchases under flooring arrangements with banks or finance companies; for these
sales, the flooring is completed before the vehicles are shipped), or (ii) when
the dealer has floor planned the vehicle and the vehicle is available for
delivery but has been set aside and held at the request of the dealer, generally
for a few days, until pick-up or delivery.

ESTIMATES AND INDUSTRY FACTORS

ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CONCENTRATION OF CREDIT RISK--The Company distributes its products through
an independent dealer network for recreational vehicles. Sales to one customer
were approximately 19%, 17% and 7% of net revenues for the fiscal years ended
December 31, 1994, December 30, 1995 and December 28, 1996, respectively. Sales
to a second customer were approximately 28%, 23% and 9% of net revenues for the
fiscal years ended December 31, 1994, December 30, 1995 and December 28, 1996,
respectively. No other individual dealers represented over 10% of net revenues.
The loss of a significant dealer or a substantial decrease in sales by such a
dealer could have a material adverse effect on the Company's business, results
of operations and financial results.

Concentrations of credit risk exist for accounts receivable and repurchase
agreements (see Note 17), primarily for the Company's largest dealers. The
Company sells to dealers throughout the United States and there is no geographic
concentration of credit risk.

WARRANTY CLAIMS--Estimated warranty costs are provided for at the time of
sale of products with warranties covering the products for up to one year.

F-8
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INVENTORIES

Inventories consist of raw materials, work-in-process and finished
recreational vehicles and are stated at the lower of cost (first-in, first-out)
or market. Cost of work-in-process and finished recreational vehicles includes
material, labor and manufacturing overhead costs. Holiday World retail
inventory, including new and used units, is valued at the lower of specific cost
or market.

PROPERTY AND EQUIPMENT

Property and equipment, including significant improvements thereto, are
stated at cost less accumulated depreciation and amortization. Cost includes
expenditures for major improvements replacements and renewals and the net amount
of interest cost associated with significant capital additions during periods of
construction. Capitalized interest was $69 in 1994, $625 in 1995, and $48 in
1996. Maintenance and repairs are charged to expense as incurred. Replacements
and renewals are capitalized. When assets are sold, retired or otherwise
disposed of, the cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is reflected in income.

The cost of plant and equipment is depreciated using the straight-line
method over the estimated useful lives of the related assets. Buildings are
generally depreciated over 39 years and equipment is depreciated over 3 to 10
years. Leasehold improvements are amortized under the straight-line method based
on the shorter of the lease periods or the estimated useful lives.

GOODWILL AND DEBT ISSUANCE COSTS

Goodwill represents the excess of the cost of acquisition over the fair
value of net assets acquired. The goodwill arising from the acquisition of the
assets and operations of the Company's Predecessor in March 1993 is being
amortized on a straight-line basis over 40 years and, at December 28, 1996, the
unamortized amount was $18,713. The goodwill arising from the acquisition of
Holiday Rambler (as hereinafter defined) and Holiday World (as hereinafter
defined) is being amortized on a straight-line basis over 20 years; at December
28, 1996, the unamortized amount was $2,061. At each balance sheet date,
management assesses whether there has been permanent impairment in the value of
goodwill and the amount of such impairment by comparing anticipated undiscounted
future cash flows from operating activities with the carrying value of the
goodwill. The factors considered by management in performing this assessment
include current operating results, trends and prospects, as well as the effects
of obsolescence, demand, competition and other economic factors.

Unamortized debt issuance costs of $1,760 at December 28, 1996 arising from
the Holiday Acquisition are being amortized over the term of the loan.

INCOME TAXES

Deferred taxes are recognized based on the difference between the financial
statement and tax bases of assets and liabilities at enacted tax rates in effect
in the years in which the differences are expected to reverse. Deferred tax
expense represents the change in deferred tax asset/liability balances. A
valuation allowance is established for deferred tax assets when it is more
likely than not that the deferred tax asset will not be realized.

F-9
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ADVERTISING COSTS

The Company expenses advertising costs as incurred, except for prepaid show
costs which are expensed when the event takes place.

At December 30, 1995 and December 28, 1996, total advertising reported in
prepaid expenses was $185 and $51, respectively. During the fiscal year 1996,
approximately $5,483 ($1,136 in 1994 and $1,539 in 1995) of advertising costs
were expensed.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to expense as incurred and were
$3,205 for 1996. These costs were insignificant in 1995 and 1994.

2. HOLIDAY ACQUISITION:

On March 4, 1996, the Company acquired certain assets of the Holiday Rambler
LLC Recreational Vehicle Manufacturing Division ("Holiday Rambler") and ten
retail dealerships ("Holiday World") from an affiliate of Harley-Davidson, Inc.
("Harley-Davidson"). The acquisition was accounted for as a purchase.

The purchase price for Holiday Rambler and Holiday World was comprised of:

<TABLE>
<S> <C>
Cash, including transaction costs of $2,131........................ $ 24,645
Preferred stock (Note 9)........................................... 2,599
Subordinated debt.................................................. 12,000
---------
$ 39,244
---------
---------
</TABLE>

The purchase price was allocated to the assets acquired and liabilities
assumed based on estimated fair values at March 4, 1996, as follows:

<TABLE>
<S> <C>
Receivables....................................................... $ 9,536
Inventories....................................................... 61,269
Property and equipment............................................ 11,592
Prepaids and other assets......................................... 86
Assets held for sale.............................................. 7,499
Goodwill.......................................................... 2,161
Notes payable..................................................... (21,784)
Accounts payable.................................................. (16,851)
Accrued liabilities............................................... (14,264)
---------
$ 39,244
---------
---------
</TABLE>

The allocation of the purchase price and the related goodwill of $2,161 is
subject to adjustment upon resolution of preacquisition contingencies. The
effects of resolution of preacquisition contingencies occurring: (i) within one
year of the acquisition date will be reflected as an adjustment of the
allocation of

F-10
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

2. HOLIDAY ACQUISITION: (CONTINUED)
the purchase price and of goodwill, and (ii) after one year will be recognized
in the determination of net income.

The ten acquired Holiday World retail store properties were classified as
"assets held for sale". Seven of the stores were sold during 1996 at a gain of
$1,402, which has been reflected as an adjustment of goodwill. The remaining
three stores are still held for sale. The Company's 1996 results of operations
and cash flows include Holiday World for the period March 4, 1996 through
December 28, 1996, as the operating activities of Holiday World are not clearly
distinguishable from other continuing operations. Net sales of the Holiday World
retail stores subsequent to the purchase were approximately $25,000.

The following unaudited pro forma information presents the consolidated
results as if the acquisition had occurred at the beginning of the period and
giving effect to the adjustments for the related interest on financing the
purchase price, goodwill and depreciation. The pro forma information does not
necessarily reflect results that would have occurred nor is it necessarily
indicative of future operating results.

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Net sales........................................................ $ 441,850 $ 419,440
Net income (loss)................................................ (5,376) 4,699
Earnings (loss) per common share................................. $ (1.15) $ 1.00
</TABLE>

3. INVENTORIES:

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Raw materials.................................................... $ 8,069 $ 16,844
Work-in-process.................................................. 10,136 17,592
Finished units................................................... 1,386 3,998
Holiday World retail inventory................................... -- 8,496
------------ ------------
$ 19,591 $ 46,930
------------ ------------
------------ ------------
</TABLE>

F-11
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

4. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Land............................................................. $ 1,708 $ 5,440
Buildings........................................................ 16,783 23,358
Equipment........................................................ 2,416 4,085
Furniture and fixtures........................................... 1,069 1,958
Vehicles......................................................... 106 748
Leasehold improvements........................................... 263 312
Construction in progress......................................... 276 5,542
------------ ------------
22,621 41,443
Less accumulated depreciation and amortization................... 1,034 3,134
------------ ------------
$ 21,587 $ 38,309
------------ ------------
------------ ------------
</TABLE>

5. NOTES RECEIVABLE:

The Company acquired notes receivable from the sale of certain Holiday World
retail stores. The notes provide for the periodic collection of principal, with
interest ranging from 8% to 10% and mature though September 2001. The
outstanding balance at December 28, 1996 was $1,700, with $1,064 expected to be
collected in 1997.

6. ACCRUED EXPENSES AND OTHER LIABILITIES:

<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------- ------------
<S> <C> <C>
Payroll, vacation and related accruals........................... $ 1,100 $ 5,132
Payroll and property taxes....................................... 326 1,424
Provision for warranty claims.................................... 1,037 8,791
Provision for product liability claims........................... 100 4,507
Promotional and advertising...................................... 9 818
Other............................................................ 276 2,689
------ ------------
$ 2,848 $ 23,361
------ ------------
------ ------------
</TABLE>

7. SHORT-TERM BORROWINGS:

In connection with the acquisition of Holiday Rambler and Holiday World, on
March 5, 1996, the Company replaced its bank line of credit with new credit
facilities consisting, in part, of a revolving line of credit of up to $45,000,
with interest payable monthly at varying rates based on the Company's interest
coverage ratio and interest payable monthly on the unused available portion of
the line at 0.5%. There were outstanding borrowings of $3,789 at December 28,
1996, with an effective interest rate of 9.5%. The weighted average interest
rate on the outstanding borrowings under the revolving line of credit at
December 28, 1996 was 10.8% (8.4% at December 30, 1995). The revolving line of
credit expires on

F-12
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

7. SHORT-TERM BORROWINGS: (CONTINUED)
March 1, 2001 and would be collateralized by all the assets of the Company in
the event the Company is in default under the loan agreement. The agreement
contains restrictive covenants as to EBITDA (earnings before interest, taxes,
depreciation and amortization), interest coverage ratio, leverage ratio and
capital expenditures.

Holiday World retail stores have various flooring agreements outstanding to
finance retail inventory at the dealerships which amounted to $6,202 at December
28, 1996, with interest at the prime rate plus 1% (prime rate at December 28,
1996 was 8.25%). The loans are collateralized by the assets of a subsidiary.

8. LONG-TERM BORROWINGS:

The Company obtained a term loan of $20,000 primarily to finance the
acquisition of Holiday Rambler and Holiday World on March 5, 1996, with interest
payable monthly at various rates based on the Company's interest coverage ratio,
expiring on March 1, 2001. The term loan requires quarterly principal payments
and certain mandatory payments. At December 28, 1996, there were outstanding
borrowings of $18,500, with $500 at an effective interest rate of 9.75% and
$18,000 at 8.59% under a LIBOR arrangement. The term loan would be
collateralized by all the assets of the Company in the event the Company is in
default under the loan agreement. The agreement contains restrictive covenants
as to EBITDA, interest coverage ratio, leverage ratio and capital expenditures.

The principal on the long-term debt is payable as follows:

9. PREFERRED STOCK:

The Company has authorized "blank check" preferred stock (2,000,000 shares
authorized, $.01 par value) ("Preferred Stock"), which may be issued from time
to time in one or more series upon authorization by the Company's Board of
Directors. The Board of Directors, without further approval of the stockholders,
is authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions applicable to each series of
the Preferred Stock. There were no shares of Preferred Stock outstanding as of
December 28, 1996, except as described below.

The Company has designated 100,000 shares of its Preferred Stock as
redeemable Convertible Series A Convertible Preferred Stock ("Series A") at $.01
par value. The Company issued 65,217 shares of Series A in connection with the
acquisition of Holiday Rambler and Holiday World. Shares of Series A may be
redeemed by its holders at established dates at the stated value of $46 per
share plus any accrued but unpaid dividends. Dividends are cumulative and accrue
annually at a rate of $1.38 per share through February 28, 1997, at which time
the dividend rate may vary based on the average closing market price of

F-13
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

9. PREFERRED STOCK: (CONTINUED)
the Company's Common Stock for the thirty days prior to March 1, June 1,
September 1 and December 1. The rate for such period will be: (i) if such
average is less than $10 per share, $2.30 per share per annum, or (ii) if such
average is more than or equal to $10 per share, $1.38 per share per annum. The
holders of Series A have preference over holders of Common Stock as to payment
of dividends or in the event of liquidation. Each share of Series A is
convertible into approximately 3.54 shares of Common Stock.

The excess of redemption value over the carrying value of Series A is being
accreted by periodic charges to retained earnings. For the year ended December
28, 1996, the accretion charge was $84.

The accrual of Series A dividends was $75 ($70 was paid in 1996) for the
year ended December 28, 1996, the unpaid portion of which was included in the
carrying amount of preferred stock.

The holders of Series A may require the Company to redeem the holder's
outstanding shares at the stated value as follows:

<TABLE>
<S> <C>
March 4, 1998....................................................... $ 1,000
March 4, 1999....................................................... 1,500
March 4, 2000....................................................... 500
---------
$ 3,000
---------
---------
</TABLE>

In addition, the holders of Series A may accelerate their redemption rights
upon the occurrence of certain events, such as a secondary offering of the
Company's Common Stock or dispositions of substantially all of the Company's
assets. The redemption value is 100% of issue price plus any accumulated
dividends.

10. INCOME TAXES:

The provision for income taxes for the years ended December 31, 1994,
December 30, 1995 and December 28, 1996 is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Current:
Federal......................................... $ 2,774 $ 2,382 $ 8,563
State........................................... 733 464 1,998
------ ------ ------
3,507 2,846 10,561
Deferred:
Federal......................................... 219 211 (5,245)
State........................................... 50 62 (1,154)
------ ------ ------
Provision for income taxes.................... $ 3,776 $ 3,119 $ 4,162
------ ------ ------
------ ------ ------
</TABLE>

F-14
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

10. INCOME TAXES: (CONTINUED)
The reconciliation of the provision of income taxes at the U.S. federal
statutory rate to the Company's effective income tax rate is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Expected U.S. federal income taxes at statutory
rates........................................... $ 3,304 $ 2,726 $ 3,525
State and local income taxes, net of federal
benefit......................................... 484 366 541
Other............................................. (12) 27 96
------ ------ ------
$ 3,776 $ 3,119 $ 4,162
------ ------ ------
------ ------ ------
</TABLE>

The components of the current net deferred tax asset and long-term net
deferred tax liability are:

<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------- -------------
<S> <C> <C>
Current deferred income tax assets:
Warranty liability............................................. $ 404 $ 3,519
Product liability.............................................. 40 1,802
Other accruals................................................. 56 1,454
Contingent dealer rebates...................................... 108 841
Payroll and related............................................ 85 781
Prepared expenses.............................................. (118) (119)
------ ------
$ 575 $ 8,278
------ ------
------ ------
Long-term deferred income tax liabilities:
Depreciation................................................... $ 206 $ 189
Amortization................................................... 1,277 2,598
------ ------
$ 1,483 $ 2,787
------ ------
------ ------
</TABLE>

Management believes that the temporary differences which gave rise to the
deferred income tax assets will be reversed in the foreseeable future and that
the benefit thereof will be realized as a reduction in the provision for current
income taxes.

11. EARNINGS PER SHARE:

Earnings per common share is based on the weighted average number of shares
outstanding during the period after consideration of the dilutive effect of
stock options and the Series A Convertible Preferred

F-15
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

11. EARNINGS PER SHARE: (CONTINUED)
Stock. The weighted average number of common shares used in the computation of
earnings per common share for the years ended December 31, 1994, December 30,
1995 and December 28, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Primary:
Issued and outstanding shares (weighted
average)...................................... 4,397,282 4,407,327 4,422,187
Stock options................................... 72,452 66,056 52,604
------------ ------------ ------------
Weighted average number of shares............. 4,469,734 4,473,383 4,474,791
------------ ------------ ------------
------------ ------------ ------------
Fully Diluted:
Issued and outstanding shares (weighted
average)...................................... 4,397,282 4,407,327 4,422,187
Stock options................................... 75,816 67,902 66,419
Convertible preferred stock..................... -- -- 189,505
------------ ------------ ------------
Weighted average number of shares............. 4,473,098 4,475,229 4,678,111
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

12. LEASES:

The Company leases equipment under operating leases that expire May 1997 and
September 1998, respectively.

The Company leases administrative and production facilities under operating
leases that expire 2001 and has the option to renew the leases annually for the
two subsequent years. Lease terms, upon renewal, will be adjusted for changes in
the Consumer Price Index since the date of occupancy. Total rental expense for
the fiscal years ended December 31, 1994, December 30, 1995 and December 28,
1996 related to operating leases amounted to approximately $327, $375 and $570,
respectively.

Approximate future minimum rental commitments under these leases at December
28, 1996 are summarized as follows:

13. BONUS PLAN:

The Company has a discretionary bonus plan for certain key employees. Bonus
expense included in selling, general and administrative expenses for the years
ended December 31, 1994, December 30, 1995 and December 28, 1996 was $1,765,
$1,140 and $2,938, respectively.

F-16
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

14. STOCK PURCHASE PLANS:

The Company has an Employee Stock Purchase Plan (the "Purchase Plan")--1993,
a Nonemployee Director Stock Option Plan (the "Director Plan")--1993, and an
Incentive Stock Option Plan (the "Option Plan")--1993:

STOCK PURCHASE PLAN

The Company's 1993 Employee Stock Purchase Plan (the "Purchase Plan")
qualifies under Section 423 of the Internal Revenue Code. The Company has
reserved 135,000 shares of Common Stock for issuance under the Purchase Plan.
During the years ended December 30, 1995 and December 28, 1996, 2,857 shares and
5,450 shares, respectively, were purchased under the Purchase Plan. The
weighted-average fair value of those purchase rights granted in 1995 and 1996
was $15.09 and $10.66, respectively. Under the Purchase Plan, an eligible
employee may purchase shares of Common Stock from the Company through payroll
deductions of up to 10% of base compensation, at a price per share equal to 85%
of the lesser of the fair market value of the Company's Common Stock as of the
first day or the last day of each six-month offering period under the Purchase
Plan.

The Purchase Plan is administered by a committee appointed by the Board. Any
employee who is customarily employed for at least 20 hours per week and more
than five months in a calendar year by the Company, or by any majority-owned
subsidiary designated from time to time by the Board, and who does not own 5% or
more of the total combined voting power or value of all classes of the Company's
outstanding capital stock, is eligible to participate in the Purchase Plan.

DIRECTORS' OPTION PLAN

The Board of Directors and the stockholders have authorized a total of
40,000 shares of Common Stock for issuance pursuant to the Company's 1993
Director's Option Plan (the "Director Plan"), which is currently administered by
the Board. Under the Director Plan, each non-employee director of the Company,
other than directors affiliated with Liberty Partners, L.P. or Monaco Capital
Partners, is entitled to participate. Each eligible director will receive a
nonstatutory option to purchase 8,000 shares of the Company's Common Stock. In
connection with the effective date of the initial public offering, the Company
granted options to purchase 8,000 shares of Common Stock to a director. In
addition, as of September 30, 1994, each eligible director was granted an
additional nonstatutory option to purchase 1,600 shares of Common Stock on
September 30 of each year if, on such date, they have served on the Board of
Directors for at least six months. Unless terminated sooner, the Director Plan
will terminate in 2003. The exercise price of each option granted under the
Director Plan is equal to the fair market value of a share of the Company's
Common Stock on the date of grant. The initial option granted to each eligible
director has a ten-year term and vests ratably over five years. Subsequent
options granted under the Plan vest at the end of five years. As of December 28,
1996, no options have been exercised and options to purchase 12,800 shares of
Common Stock were outstanding.

OPTION PLAN

The Company's 1993 Incentive Stock Option Plan (the "Option Plan") provides
for the grant to employees of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
for the grant to employees and consultants of the Company of nonstatutory stock
options. A total of 525,000 shares of Common Stock have been reserved for
issuance

F-17
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

14. STOCK PURCHASE PLANS: (CONTINUED)
under the Option Plan. As of December 28, 1996, options to purchase 186,196
shares of Common Stock were outstanding. These options vest over five years
commencing March 5, 1993, October 29, 1993, April 1, 1994, November 2, 1994,
April 1, 1995 and April 1, 1996, respectively. Options to purchase 6,935 and
14,128 shares of Common Stock at $3.35 per share were exercised during the years
ended December 30, 1995 and December 28, 1996, respectively.

The exercise price of all incentive stock options granted under the Option
Plan must be at least equal to the fair market value of a share of the Company's
Common Stock on the date of grant. With respect to any participant possessing
more than 10% of the voting power of the Company outstanding capital stock, the
exercise price of any option granted must equal at least 110% of the fair market
value on the grant date, and the maximum term of the option must not exceed five
years. The terms of all other options granted under the Option Plan may not
exceed ten years.

Transactions involving the Director Plan and the Option Plan are summarized
as follows:

<TABLE>
<CAPTION>
1995 1996
---------------------- ----------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Outstanding at beginning of year..................................... 141,884 $ 7.36 179,249 $ 9.68
Granted............................................................ 46,600 16.06 56,000 13.97
Exercised.......................................................... (6,935) 3.35 (14,128) 3.35
Forfeited.......................................................... (2,300) 14.92 (22,125) 10.26
--------- ----- --------- -----------
Outstanding at end of year........................................... 179,249 $ 9.68 198,996 $ 11.27
--------- ---------
--------- ---------
</TABLE>

The following table summarizes information about the stock options
outstanding at December 28, 1996:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ --------------------------
NUMBER OF WEIGHTED- NUMBER OF
OUTSTANDING AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
AT REMAINING AVERAGE AT AVERAGE
DECEMBER 28, CONTRACTUAL EXERCISE DECEMBER 28, EXERCISE
RANGE OF EXERCISE PRICES 1996 LIFE PRICE 1996 PRICE
- --------------------------------------------------------- ------------ --------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
$3.35.................................................... 59,546 6.3 $ 3.35 19,570 $ 3.35
$11.50-12.75............................................. 4,800 8.4 12.29 800 11.50
$13.00-15.00............................................. 84,550 8.3 13.96 10,950 13.75
$15.26-17.60............................................. 50,100 6.7 16.03 4,900 16.11
------------ ------
198,996 36,220
------------ ------
------------ ------
</TABLE>

The Company adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation", and thus no compensation cost has
been recognized for the Director Plan, the Option Plan or the Purchase Plan. Had
compensation cost for the three stock-based compensation plans been determined
based on the fair value of options at the date of grant consistent with the
provisions of SFAS

F-18
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

14. STOCK PURCHASE PLANS: (CONTINUED)
No. 123, the Company's pro forma net income and pro forma earnings per share
would have been as follows:

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Net income--as reported.................................................... $ 4,898 $ 5,909
Net income--pro forma...................................................... 4,741 5,624
Earnings per share--as reported............................................ $ 1.09 $ 1.26
Earnings per share--pro forma.............................................. 1.07 1.20
</TABLE>

The pro forma effect on net income for 1995 and 1996 is not representative
of the pro forma effect in future years because compensation expense related to
grants made in prior years is not considered. For purposes of the above pro
forma information, the fair value of each option grant was estimated at the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Risk-free interest rate.................................................. 7.20% 6.33%
Expected life (in years)................................................. 7.50 7.50
Expected volatility...................................................... 60.60% 60.60%
Expected dividend yield.................................................. 0.00% 0.00%
</TABLE>

15. 401(K) DEFINED CONTRIBUTION PLAN:

The Company sponsors a 401(k) defined contribution plan covering
substantially all full-time employees. The plan has a one-quarter match of
participants' contributions up to 4% of compensation. ln addition, contributions
may be made at the discretion of the Company's Board of Directors and are
allocated ratably based on each participant's compensation to total
compensation. Participants may make salary deferral contributions up to the
lesser of 15% of their regular monthly compensation or the statutory limit.
Company contributions to the plan totaled $370 in 1996 ($49 in 1995 and $40 in
1994).

16. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The fair value of the Company's financial instruments are presented below.
The estimates require subjective judgments and are approximate. Changes in
methodologies and assumptions could significantly affect estimates.

LONG-TERM RECEIVABLES--The estimated fair value approximates the carrying
value of $1,700 at December 28, 1996.

LONG-TERM BORROWINGS--The estimated fair values of long-term borrowings were
determined by discounting estimated future cash flows using the Company's
incremental borrowing rate. Based on this calculation, the estimated fair value
approximates the carrying value of $7,000 and $18,500 at December 30, 1995 and
December 28, 1996, respectively.

SHORT-TERM BORROWINGS--The carrying amount outstanding against the revolving
line of credit is $9,845 and $3,789 at December 30, 1995 and December 28, 1996,
respectively, which approximates the estimated

F-19
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

16. FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED)
fair value. The carrying amount on the various outstanding loans of $6,202 at
December 28, 1996 also approximates market.

17. COMMITMENTS AND CONTINGENCIES:

REPURCHASE AGREEMENTS

Substantially all of the Company's sales to independent dealers are made on
terms requiring cash on delivery. The Company does not finance dealer purchases.
However, most purchases are financed on a "floor plan" basis by a bank or
finance company which lends the dealer all or substantially all of the wholesale
purchase price and retains a security interest in the vehicles. Upon request of
a lending institution financing a dealer's purchases of the Company's product,
the Company will execute a repurchase agreement. These agreements provide that,
for up to 18 months after a unit is shipped, the Company will repurchase a
dealer's inventory in the event of a default by a dealer to its lender.

The Company's liability under repurchase agreements is limited to the unpaid
balance owed to the lending institution by reason of its extending credit to the
dealer to purchase its vehicles, reduced by the resale value of vehicles which
may be repurchased. The risk of loss is spread over numerous dealers and
financial institutions.

The Company does not anticipate any significant losses will be incurred
under these agreements. No such charge was recorded during the years ended
December 31, 1994, December 30, 1995 and December 28, 1996. The approximate
amount subject to contingent repurchase obligations arising from these
agreements at December 28, 1996 is $105,660. If the Company were obligated to
repurchase a significant number of recreational vehicles in the future, losses
and reduction in new recreational vehicle sales could result.

OBLIGATION TO PURCHASE CONSIGNED INVENTORIES

The Company obtains vehicle chassis for certain of its recreational and
specialized vehicle products directly from automobile manufacturers under
converter pool agreements. The agreements generally provide that the
manufacturer will provide a supply of chassis at the Company's various
production facilities under the terms and conditions as set forth in the
agreement. Chassis are accounted for as consigned inventory until either
assigned to a unit in the production process or 90 days have passed. At the
earlier of these dates, the Company is obligated to purchase the chassis and it
is recorded as inventory. At December 28, 1996, chassis inventory, accounted for
as consigned inventory, approximated $3,000. No such obligation existed at
December 30, 1995.

WARRANTY AND PRODUCT LIABILITY

The Company is subject to regulations that may require the Company to recall
products with design or safety defects, and such recall could have a material
adverse effect on the Company's business, results of operations and financial
condition.

The Company has from time to time been subject to product liability claims.
To date, the Company has been successful in obtaining product liability
insurance on terms the Company considers acceptable. The terms of the policy
contain a self-insured retention amount per occurrence and an annual aggregate

F-20
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

17. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
"stop loss" amount. In addition, the Company has obtained excess umbrella
policies. There can be no assurance that the Company will be able to obtain
insurance coverage in the future at acceptable levels or that the cost of
insurance will be reasonable. Furthermore, successful assertion against the
Company of one or a series of large uninsured claims, or of one or a series of
claims exceeding any insurance coverage, could have a material adverse effect on
the Company's business, results of operations and financial condition.

LITIGATION

The Company is involved in various legal proceedings which are incidental to
the industry and for which certain matters are covered in whole or in part by
insurance or, otherwise, the Company has recorded accruals for estimated
settlements. Management believes that any liability which may result from these
proceedings will not have a material adverse effect on the Company's
consolidated financial statements.

OTHER COMMITMENTS

In 1996, the Company began construction of a new manufacturing facility in
Indiana. The new facility is expected to be completed in 1997 at a total
estimated cost of $15,000. At December 28, 1996, the Company had incurred
approximately $5,000 in expenditures related to construction in progress on the
facility.

F-21
<PAGE>
MONACO COACH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

18. QUARTERLY RESULTS (UNAUDITED):

<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
--------- ---------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 30, 1995:
Net sales.......................................................... $ 38,015 $ 35,082 $ 36,726 $ 31,788
Gross profit....................................................... 5,342 4,650 3,255 3,772
Operating income before management fees and amortization........... 2,873 2,779 1,416 1,877
Operating income................................................... 2,726 2,632 1,269 1,728
Net income......................................................... 1,662 1,606 705 925
--------- ---------- ---------- ---------
Earnings per common share.......................................... $ 0.37 $ 0.36 $ 0.16 $ 0.20
--------- ---------- ---------- ---------
</TABLE>

<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
--------- ---------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 28, 1996(A):
Net sales.......................................................... $ 61,964 $ 106,729 $ 102,065 $ 94,880
Gross profit....................................................... 6,727 12,408 14,944 13,650
Operating income before management fees and amortization........... 2,077 3,131 4,307 4,915
Operating income................................................... 1,930 2,934 4,109 4,768
Net income......................................................... 634 891 1,957 2,427
Net income attributable to common stock............................ 634 828 1,894 2,394
--------- ---------- ---------- ---------
Earnings per common share:
Primary.......................................................... $ 0.14 $ 0.19 $ 0.42 $ 0.53
Fully diluted.................................................... $ 0.14 $ 0.19 $ 0.42 $ 0.51
--------- ---------- ---------- ---------
</TABLE>

- ------------------------

(a) Includes results of operations of Holiday Rambler and Holiday World after
March 4, 1996.

F-22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
Harley-Davidson, Inc.

We have audited the accompanying combined balance sheets of Holiday Rambler
LLC Recreational Vehicle Manufacturing Division and certain Holiday World Retail
Operations (as described in Note 1) as of December 31, 1994 and 1995, and the
related combined statements of operations and deficiency in net assets and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the management of Holiday Rambler
LLC. Our responsibility is to express an opinion on these financial statements
based on our audits.

The Recreational Vehicle Manufacturing Division and Holiday World Retail
Operations are part of Holiday Rambler LLC, which is ultimately a wholly owned
subsidiary of Harley-Davidson, Inc. As more fully described in Note 8, the
Recreational Vehicle Manufacturing Division has significant notes payable to
Harley-Davidson, Inc.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Holiday
Rambler LLC Recreational Vehicle Manufacturing Division and certain Holiday
World Retail Operations at December 31, 1994 and 1995, and the combined results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Milwaukee, Wisconsin
January 20, 1996

F-23
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 2,200 $ 675
Accounts Receivable, net of allowance for doubtful accounts (NOTE 3).................... 18,052 14,665
Inventories (NOTE 3).................................................................... 64,264 61,893
Deferred income taxes................................................................... 6,302 4,764
Prepaid expenses........................................................................ 615 535
---------- ----------
Total current assets.................................................................. 91,433 82,532

Due from affiliates (NOTE 8).............................................................. 7,832 --
Property, plant and equipment, at cost, less accumulated depreciation (NOTE 3)............ 32,851 33,430
Other assets.............................................................................. 1,729 2,254
---------- ----------
$ 133,845 $ 118,216
---------- ----------
---------- ----------

LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Notes payable (NOTE 4).................................................................. $ 12,718 $ 17,225
Accounts payable........................................................................ 20,541 12,926
Accrued expenses and other liabilities.................................................. 16,026 17,005
---------- ----------
Total current liabilities............................................................. 49,285 47,156

Due to Harley-Davidson, Inc. (NOTE 8)..................................................... 102,259 93,466
Deferred income taxes..................................................................... -- 666
Due to affiliates (NOTE 8)................................................................ -- 4,587

Commitments and contingencies (NOTE 6).................................................... -- --

Deficiency in net assets (NOTES 1 AND 8).................................................. (17,699) (27,659)
---------- ----------
$ 133,845 $ 118,216
---------- ----------
---------- ----------
</TABLE>

See accompanying notes.

F-24
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
COMBINED STATEMENTS OF OPERATIONS AND DEFICIENCY IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................................... $ 190,980 $ 271,474 $ 300,239
Cost of goods sold........................................................... 162,050 230,678 258,796
---------- ---------- ----------
Gross margin................................................................. 28,930 40,796 41,443

Selling and administrative expenses.......................................... 40,145 42,757 47,426
Goodwill charges (NOTE 2).................................................... 46,401 -- --
---------- ---------- ----------
Loss from operations......................................................... (57,616) (1,961) (5,983)

Other income................................................................. 598 537 542
Interest expense............................................................. (13,635) (9,920) (9,591)
---------- ---------- ----------
Loss before income tax benefit............................................... (70,653) (11,344) (15,032)

Income tax benefit (NOTE 5).................................................. 8,250 6,093 5,072
---------- ---------- ----------
Net loss..................................................................... (62,403) (5,251) (9,960)

Deficiency in net assets, beginning of year.................................. (14,277) (76,680) (17,699)
Capital contribution (NOTE 8)................................................ -- 64,232 --
---------- ---------- ----------
Deficiency in net assets, end of year........................................ $ (76,680) $ (17,699) $ (27,659)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

See accompanying notes.

F-25
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS
COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss....................................................................... $ (62,403) $ (5,251) $ (9,960)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................ 5,375 3,237 2,728
Deferred income taxes........................................................ 90 (6,750) 2,204
Write-off of goodwill........................................................ 46,401 -- --
Changes in operating assets and liabilities:
Receivables................................................................ 7,799 (10,597) 3,387
Inventories................................................................ (7,213) (20,324) 2,371
Prepaid expenses and other assets.......................................... 1,601 (500) (445)
Accounts payable and accrued expenses...................................... 16,025 11,412 (6,636)
---------- ---------- ---------
Total adjustments.............................................................. 70,078 (23,522) 3,609
---------- ---------- ---------
Net cash provided by (used in) operating activities............................ 7,675 (28,773) (6,351)

INVESTING ACTIVITIES
Capital expenditures........................................................... (944) (1,363) (3,307)
Other.......................................................................... 673 -- --
---------- ---------- ---------
Net cash used in investing activities.......................................... (271) (1,363) (3,307)

FINANCING ACTIVITIES
Net change in notes payable.................................................... (527) 46 4,507
Net change in due to Harley-Davidson, Inc...................................... (280) 20,413 (8,793)
Other.......................................................................... 77 (126) --
Net change in due to/from affiliates........................................... (9,824) 11,166 12,419
---------- ---------- ---------
Net cash provided by (used in) financing activities............................ (10,554) 31,499 8,133
---------- ---------- ---------
Net increase (decrease) in cash and cash equivalents........................... (3,150) 1,363 (1,525)
Cash and cash equivalents at beginning of year................................. 3,987 837 2,200
---------- ---------- ---------
Cash and cash equivalents at end of year....................................... $ 837 $ 2,200 $ 675
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

See accompanying notes.

F-26
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 1995

1. BASIS OF PRESENTATION

On January 21, 1996, an asset purchase agreement was entered into between
Harley-Davidson, Inc. ("Harley-Davidson"), Holiday Rambler LLC and State Road
Properties L.P. (collectively, the "Company") and Monaco Coach Corporation
("Monaco") wherein Monaco agreed to purchase certain assets and liabilities of
Holiday Rambler LLC's Recreational Vehicle Manufacturing Division and certain
real estate owned by State Road Properties L.P. In addition, Monaco signed a
letter of intent to purchase certain assets and liabilities of the retail sales
operation of Holiday World Stores, a subsidiary of Holiday Holding Corp. Holiday
Rambler LLC and Holiday Holding Corp. are ultimately wholly owned by
Harley-Davidson. State Road Properties L.P. is 67% ultimately owned by
Harley-Davidson.

The purpose of the combined financial statements is to present the
historical financial position and results of operations of the businesses Monaco
intends to purchase. Accordingly, the accompanying combined financial statements
include the accounts of the Holiday Rambler LLC Recreational Vehicle
Manufacturing Division, certain real estate used in the Holiday Rambler
operations which is owned by State Road Properties, L.P. and ten retail sales
operations. These retail sales operations are located in Elkhart, Indiana;
Everett, Washington; Tacoma, Washington; Houston, Texas (North and South
operations); Mesquite, Texas; Camarillo, California; Leesburg, Florida;
Albuquerque, New Mexico; and Portland, Oregon.

Although the Company is owned by nontaxable pass-through entities, because
the entities' operations were included in Harley-Davidson's consolidated federal
tax return, all tax accounts are presented as if the Company were taxable.

The combined financial statements are not intended to be complete
presentations of the consolidated financial statements of Holiday Rambler LLC.

All significant interdivisional accounts and transactions are eliminated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

The Holiday Rambler LLC Recreational Vehicle Manufacturing Division produces
and distributes recreational motor vehicles, which are sold through dealers,
including Holiday World retail operations.

CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments consist primarily of cash and cash equivalents, trade
receivables and notes payable, the carrying values of which are considered to
approximate their respective fair values.

F-27
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES

Inventories are valued at the lower of cost or market. All inventories are
valued using the last-in, first-out (LIFO) method except for used recreational
vehicles and other miscellaneous inventories ($8.1 million in 1994 and $9.9
million in 1995), which are valued using the first-in, first-out (FIFO) method.

DEPRECIATION

Depreciation of plant and equipment is determined on the straight-line basis
over the estimated useful lives of the assets. Accelerated methods are used for
income tax purposes.

PRODUCT WARRANTY

Product warranty costs are charged to operations as revenues are recorded
based upon the estimated historical warranty cost per unit sold.

GOODWILL

During 1993, Holiday Rambler LLC recorded a $46.4 million charge to
operations resulting from the write-off of the remaining goodwill associated
with the purchase of Holiday Rambler LLC by Harley-Davidson in 1986. Since 1986,
the markets in which Holiday Rambler LLC operates have become increasingly
competitive, resulting in lower profitability than initially anticipated.
Holiday Rambler LLC considered these factors, as well as estimated future
operating results, during the fourth quarter of 1993 in concluding that an
impairment had occurred. The Company measured the impairment and, based on the
results of that measurement, recorded a $46.4 million charge against earnings.
In measuring the impairment, Holiday Rambler LLC calculated the discounted value
of its estimated cash flows, over the approximate remaining goodwill
amortization period, using a targeted cost of capital discount rate.

Prior to its write-off in 1993, goodwill was being amortized over 25 years
using the straight-line method.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

ENVIRONMENTAL LIABILITIES

Environmental loss contingencies are accrued when it is probable that a
liability has been incurred and the amount can be reasonably estimated.
Environmental loss contingencies are not believed to be material to the
financial position of the combined operations at December 31, 1995.

F-28
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

3. ADDITIONAL BALANCE SHEET INFORMATION

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Allowance for doubtful accounts included in accounts receivable......... $ 162 $ 212
--------- ---------
--------- ---------
Inventories:
Components at the lower of FIFO cost, or market:
Raw materials....................................................... $ 17,074 $ 15,699
Work in process..................................................... 12,461 8,285
Finished goods...................................................... 38,171 42,710
--------- ---------
67,706 66,694

Excess of FIFO over LIFO inventories.................................... 3,442 4,801
--------- ---------
$ 64,264 $ 61,893
--------- ---------
--------- ---------
Property, plant and equipment:
Land.................................................................. $ 9,657 $ 9,565
Buildings and improvements............................................ 20,897 23,581
Machinery and equipment............................................... 21,150 21,985
--------- ---------
51,704 55,131

Less accumulated depreciation......................................... 18,853 21,701
--------- ---------
Total............................................................. $ 32,851 $ 33,430
--------- ---------
--------- ---------
Accrued expenses and other liabilities:
Payroll, bonuses and related expenses................................. $ 5,864 $ 4,636
Dealer incentives..................................................... 1,935 2,101
Other taxes........................................................... 1,610 1,827
Product liability..................................................... 1,277 1,707
Product warranty...................................................... 2,303 3,561
Interest.............................................................. 115 166
Other current liabilities............................................. 2,922 3,007
--------- ---------
Total............................................................. $ 16,026 $ 17,005
--------- ---------
--------- ---------
</TABLE>

4. NOTES PAYABLE

Notes payable represent floor plan obligations of the Holiday World retail
operations which are secured by specific units held for sale (approximately
$20.3 million of finished goods inventory at December 31, 1995). The floor plan
obligations are primarily with Eaglemark Financial Services, Inc., which is a
wholly owned subsidiary of Harley-Davidson.

F-29
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

5. INCOME TAXES

Deferred income taxes result from timing differences in the recognition of
revenues and expenses for financial statements and tax returns. The principal
sources of these differences and the related effect of each on the provision
(benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accruals not yet deductible.............................................. $ 1,511 $ 2,188
Legal reorganization..................................................... 2,912 --
Inventory adjustments.................................................... 691 940
Other, net............................................................... 1,188 1,636
--------- ---------
6,302 4,764

Deferred tax liabilities:
Fixed assets, book tax basis difference.................................. -- (666)
--------- ---------
Net deferred tax asset................................................. $ 6,302 $ 4,098
--------- ---------
--------- ---------
</TABLE>

The income tax benefit differs from the amount which would be provided by
applying the statutory U.S. corporate income tax rate due to the following
items:

<TABLE>
<CAPTION>
1993 1994 1995
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Benefit at statutory rate.................................... $ (24,729) $ (3,970) $ (5,151)
Write-off of goodwill........................................ 16,251 -- --
Legal reorganization......................................... -- (2,282) --
Other........................................................ 228 159 79
---------- --------- ---------
Income tax benefit........................................... $ (8,250) $ (6,093) $ (5,072)
---------- --------- ---------
---------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
1993 1994 1995
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax benefit:
Current.................................................... $ (5,118) $ 657 $ (7,276)
Deferred................................................... (3,132) (6,750) 2,204
---------- --------- ---------
$ (8,250) $ (6,093) $ (5,072)
---------- --------- ---------
---------- --------- ---------
</TABLE>

The Company's 1994 tax provision includes a one-time benefit of $2.3 million
related to the legal reorganization of the Company.

6. COMMITMENTS AND CONTINGENCIES

At December 31, 1995, Holiday Rambler LLC estimates that it is contingently
liable under repurchase agreements for an approximate maximum of $76.9 million
to lending institutions that provide wholesale

F-30
<PAGE>
HOLIDAY RAMBLER LLC RECREATIONAL VEHICLE MANUFACTURING DIVISION
AND CERTAIN HOLIDAY WORLD RETAIL OPERATIONS

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
floor plan financing to its dealers. These agreements are customary in the
recreational vehicle industry. Holiday Rambler LLC's loss exposure on repurchase
is limited to the difference between the net realized resale value of the
vehicle and the amount required to be paid to the lending institution at the
time of repurchase.

Holiday Rambler LLC has not incurred any material losses from the repurchase
or guaranty agreements and currently anticipates no material losses.

Various claims and litigation are pending, including claims with respect to
warranties and product liability. Prior to June 30, 1995, product liability
losses were fully self-insured. Beginning on July 1, 1995, product liability
losses in the United States are self-insured up to $3 million (catastrophic
coverage is maintained for individual claims in excess of $3 million, up to $25
million). Holiday Rambler LLC accrues for claim exposures which are probable of
occurrence and can be reasonably estimated.

7. EMPLOYEE RETIREMENT PLAN

Holiday Rambler LLC sponsors a retirement plan (the "Plan") covering
substantially all full-time employees. The Plan is funded partly by employee
wage deferrals in accordance with Section 401(k) of the Internal Revenue Code.
Holiday Rambler LLC matches employee contributions up to 3% of compensation.
Matching is discretionary and subject to certain net worth measurements. Holiday
Rambler LLC's contributions for 1993, 1994 and 1995 were $0 million, $1.0
million and $1.1 million, respectively.

8. RELATED-PARTY TRANSACTIONS

The Company has amounts due to Harley-Davidson, its parent company, of
$107.1 million and $98.3 million at December 31, 1994 and 1995, respectively.
Interest is charged at rates between 9% and 10%. Interest expense on this debt
was $12.7 million, $8.4 million and $9.0 million for the years ended 1993, 1994
and 1995, respectively. During 1994, Harley-Davidson contributed capital of
$64.2 million to the Company in the form of debt forgiveness in a non-cash
transaction.

The Company provides management information systems, human resources and
other administrative services to certain affiliated entities. Certain affiliated
companies transfer all excess operating cash to the Company. The net advances
to/from affiliates represents the net of the operating cash transfers with the
affiliates. These advances are non-interest-bearing. General and administrative
costs of $1.2 million, $1.2 million and $1.4 million for the years ended 1993,
1994 and 1995, respectively, have been allocated to the affiliated entities and
are, therefore, not included in the general and administrative costs presented
in these financial statements.

F-31
<PAGE>
[Inside Back Cover]

[Monaco Coach Corporation logo next to picture of Monaco Dynasty motor
coach; Holiday Rambler logo next to Holiday Rambler Vacationer motor coach;
Royale Coach by Monaco logo next to picture of Royale Coach by Monaco bus
conversion; picture of Company's Coburg, Oregon headquarters with motor
coaches in front.]

<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 12
Dividend Policy................................ 12
Price Range of Common Stock.................... 12
Capitalization................................. 13
Selected Historical Consolidated Financial
Data......................................... 14
Unaudited Pro Forma Combined Statements of
Income....................................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 18
Business....................................... 24
Management..................................... 37
Principal and Selling Stockholders............. 40
Description of Capital Stock................... 42
Shares Eligible for Future Sale................ 44
Underwriting................................... 45
Legal Matters.................................. 46
Experts........................................ 46
Available Information.......................... 46
Incorporation of Certain Documents By
Reference.................................... 47
Index to Financial Statements.................. F-1
</TABLE>

2,100,000 SHARES

[LOGO]

COMMON STOCK

------

PROSPECTUS

, 1997

---------

SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
A.G. EDWARDS & SONS, INC.

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
Registration Fee.................................................................. $ 14,911
NASD Filing Fee................................................................... 5,421
Nasdaq National Market Listing Fee................................................ 17,500
Printing.......................................................................... 150,000
Legal Fees and Expenses........................................................... 150,000
Accounting Fees and Expenses...................................................... 110,000
Blue Sky Fees and Expenses........................................................ 10,000
Transfer Agent and Registrar Fees................................................. 10,000
Miscellaneous..................................................................... 24,668
-----------
Total......................................................................... $ 475,000
-----------
-----------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145(a) of the Delaware General Corporation Law (the "DGCL") provides
in relevant part that "a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful." With respect to
derivative actions, Section 145(b) of the DGCL provides in relevant part that
"[a] corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor . . . [by
reason of his service in one of the capacities specified in the preceding
sentence] against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper."

The Company's Certificate of Incorporation provides that any director,
officer or employee of the Company may be indemnified by the Company to the full
extent permitted by the DGCL or any other applicable laws. Such Certificate of
Incorporation also provides that no amendment or repeal of such Certificate
shall apply to or have any effect on the right to indemnification permitted
thereunder for or with respect to claims asserted before or after such amendment
or repeal arising from acts or omissions occurring before the effective date of
such amendment or repeal.

II-1
<PAGE>
The Company's Bylaws provide that the Company shall indemnify to the full
extent authorized by law any person made or threatened to be made a party to any
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that he, his testator or intestate was or is a director,
officer, employee or agent of the Company or any predecessor of the Company or
serves or served any other enterprise as a director, officer, employee or agent
at the request of the Company or any predecessor of the Company.

The Company has entered into indemnification agreements with its directors
and each of its executive officers. In addition, the registration rights
agreements between the Company and each of its current stockholders provide for
cross indemnification for certain liabilities under the Securities Act of 1933,
as amended (the "Act") or otherwise.

The Company has purchased and maintains insurance on behalf of any person
who is or was a director or officer against any loss arising from any claim
asserted against him and incurred by him in any such capacity, subject to
certain exclusions.

The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Registrant and its directors, executive officers and other
persons for certain liabilities, including liabilities arising under the Act.

See also the undertakings set out in response to Item 17 herein.

ITEM 16. EXHIBITS

<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement.

2.1(1) Asset Purchase Agreement dated February 4, 1993 between the Registrant, Warrick
Industries, Inc., William L. Warrick, Arlen J. Paul, Kay L. Toolson, Jay M.
DeVoss and James A. Krider.

2.2(1) First Amendment to Asset Purchase Agreement dated March 5, 1993 between the
Registrant, Warrick Industries, Inc., William L. Warrick, Arlen J. Paul, Kay L.
Toolson, Jay M. DeVoss and James A. Krider.

2.3(1) Assumption Agreement dated March 5, 1993 between the Registrant and Warrick
Industries, Inc.

2.4(1) Letter Agreement dated August 10, 1993 between the Registrant, Warrick
Industries, Inc., William L. Warrick, Arlen J. Paul, Jay M. DeVoss, James A.
Krider and Kay L. Toolson.

2.5(2) Asset Purchase Agreement dated as of January 21, 1996 among Harley-Davidson,
Inc., Holiday Rambler LLC, State Road Properties L.P., and Monaco Coach
Corporation (the "HR Asset Purchase Agreement").

2.6(2) Amendment No. 1 to the HR Asset Purchase Agreement dated as of March 4, 1996
among Harley-Davidson, Inc., Holiday Rambler LLC, State Road Properties L.P., and
Monaco Coach Corporation.

2.7(2) Asset Purchase Agreement dated as of March 4, 1996 among Harley-Davidson, Inc.,
Holiday Holiday Corp., Holiday World, Inc., a California corporation, Holiday
World, Inc., a Texas corporation, Holiday World, Inc., a Florida corporation,
Holiday World, Inc., an Oregon corporation, Holiday World, Inc., an Indiana
corporation, Holiday World, Inc., a Washington corporation, Holiday World, Inc.,
a New Mexico corporation, Monaco Coach Corporation and MCC Acquisition
Corporation.

2.8(2) Subordinated Promissory Note, dated as of March 4, 1996, issued to Holiday
Holding Corp. by MCC Acquisition Corporation.

5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
</TABLE>

II-2
<PAGE>
<TABLE>
<S> <C>
10.1(1) Stockholders Agreement dated August 10, 1993 between the Registrant, Liberty
Investment Partners II, the State Board of Administration of Florida ("SBA"),
Monaco Capital Partners, Tucker Anthony Holding Corporation, Kay L. Toolson, Page
Robertson, Ed Kinney, Ray Mehaffey, Enoch Hutchcraft, Gary Smith, John Nepute,
Miki Scheer and C.D. Smith.

10.2(1) Form of Indemnification Agreement for directors and executive officers.

10.3(1) 1993 Incentive Stock Option Plan and form of option agreement thereunder.

10.4(1) 1993 Director Option Plan.

10.5(1) 1993 Employee Stock Purchase Plan and form of subscription agreement thereunder.

10.6(1) Amended and Restated Management Agreement dated August 10, 1993 between the
Registrant and Cariad Capital, Inc.

10.7A(1) Letter Agreement dated March 5, 1993 between the Registrant, Cariad Capital, Inc.
and Liberty Partners, L.P.

10.7B(1) Amendment to Letter Agreement dated August 12, 1993 between the Registrant and
Liberty Partners, L.P.

10.8(1) Registration Agreement dated March 5, 1993 between the Registrant, Liberty
Investment Partners, II and SBA.

10.9(1) Registration Agreement dated March 5, 1993 among the Registrant, Monaco Capital
Partners, Tucker Anthony Holding Corporation and certain other stockholders of
the Registrant.

10.10(2) Credit Agreement dated as of March 5, 1996 among BT Commercial Corporation,
Deutsche Financial Services Corporation, Nationsbank of Texas, N.A., LaSalle
National Bank and Monaco Coach Corporation.

10.11(2) Registration Rights Agreement dated as of March 4, 1996 among Holiday Rambler LLC
and Monaco Coach Corporation.

11.1 Computation of earnings per share (See Note 11 of Notes to Consolidated Financial
Statements).

23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.

23.2 Consent of Ernst & Young LLP, Independent Auditors.

23.3* Consent of Counsel (included in Exhibit 5.1).

24.1 Power of Attorney (see page II-5).

27 Financial Data Schedule
</TABLE>

- ------------------------

(1) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
33-67374) declared effective on September 23, 1993.

(2) Incorporated by reference to exhibits filed in response to Item 7,
"Financial Statements and Exhibits," of the Company's Current Report on Form
8-K dated March 4, 1996.

* To be filed by amendment.

ITEM 17. UNDERTAKINGS

1. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's Annual
Report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE>
2. Insofar as indemnification by the Registrant for liabilities arising
under the Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered hereunder,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

3. The undersigned Registrant hereby undertakes that:

(a) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Coburg, State of Oregon, on this 17th day of March,
1997.

<TABLE>
<S> <C> <C>
MONACO COACH CORPORATION

BY: /S/ KAY L. TOOLSON,
-----------------------------------------
Kay L. Toolson,
CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Kay L. Toolson, John W. Nepute and Henry
P. Massey, Jr. and each of them acting individually, as his attorney-in-fact,
each with full power of substitution, for him in any and all capacities, to sign
any and all amendments to this Registration Statement, (including post-effective
amendments), and any and all Registration Statements to be filed pursuant to
Rule 462 under the Securities Act of 1933, as amended, in connection with or
related to the offering contemplated by this Registration Statement, if any, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorney, or his
substitute or substitutes, to any and all amendments to said Registration
Statement.

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
Chairman Of The Board,
/s/ KAY L. TOOLSON Chief Executive Officer
- ------------------------------ and President (Principal March 17, 1997
(Kay L. Toolson) Executive Officer)

Vice President of Finance
/s/ JOHN W. NEPUTE and Chief Financial
- ------------------------------ Officer (Principal March 17, 1997
(John W. Nepute) Financial and Accounting
Officer)

/s/ MICHAEL J. KLUGER
- ------------------------------ Director March 17, 1997
(Michael J. Kluger)

/s/ CARL E. RING, JR.
- ------------------------------ Director March 17, 1997
(Carl E. Ring, Jr.)

/s/ RICHARD A. ROUSE
- ------------------------------ Director March 17, 1997
(Richard A. Rouse)

/s/ ROGER A. VANDENBERG
- ------------------------------ Director March 17, 1997
(Roger A. Vandenberg)
</TABLE>

II-5
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------------------------------- -------------
<S> <C> <C>
1.1 Form of Underwriting Agreement.

2.1(1) Asset Purchase Agreement dated February 4, 1993 between the Registrant, Warrick
Industries, Inc., William L. Warrick, Arlen J. Paul, Kay L. Toolson, Jay M. DeVoss and
James A. Krider.

2.2(1) First Amendment to Asset Purchase Agreement dated March 5, 1993 between the Registrant,
Warrick Industries, Inc., William L. Warrick, Arlen J. Paul, Kay L. Toolson, Jay M.
DeVoss and James A. Krider.

2.3(1) Assumption Agreement dated March 5, 1993 between the Registrant and Warrick Industries,
Inc.

2.4(1) Letter Agreement dated August 10, 1993 between the Registrant, Warrick Industries, Inc.,
William L. Warrick, Arlen J. Paul, Jay M. DeVoss, James A. Krider and Kay L. Toolson.

2.5(2) Asset Purchase Agreement dated as of January 21, 1996 among Harley-Davidson, Inc.,
Holiday Rambler LLC, State Road Properties L.P., and Monaco Coach Corporation (the "HR
Asset Purchase Agreement").

2.6(2) Amendment No. 1 to the HR Asset Purchase Agreement dated as of March 4, 1996 among
Harley-Davidson, Inc., Holiday Rambler LLC, State Road Properties L.P., and Monaco Coach
Corporation.

2.7(2) Asset Purchase Agreement dated as of March 4, 1996 among Harley-Davidson, Inc., Holiday
Holiday Corp., Holiday World, Inc., a California corporation, Holiday World, Inc., a
Texas corporation, Holiday World, Inc., a Florida corporation, Holiday World, Inc., an
Oregon corporation, Holiday World, Inc., an Indiana corporation, Holiday World, Inc., a
Washington corporation, Holiday World, Inc., a New Mexico corporation, Monaco Coach
Corporation and MCC Acquisition Corporation.

2.8(2) Subordinated Promissory Note, dated as of March 4, 1996, issued to Holiday Holding Corp.
by MCC Acquisition Corporation.

5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.

10.1(1) Stockholders Agreement dated August 10, 1993 between the Registrant, Liberty Investment
Partners II, the State Board of Administration of Florida ("SBA"), Monaco Capital
Partners, Tucker Anthony Holding Corporation, Kay L. Toolson, Page Robertson, Ed Kinney,
Ray Mehaffey, Enoch Hutchcraft, Gary Smith, John Nepute, Miki Scheer and C.D. Smith.

10.2(1) Form of Indemnification Agreement for directors and executive officers.

10.3(1) 1993 Incentive Stock Option Plan and form of option agreement thereunder.

10.4(1) 1993 Director Option Plan.

10.5(1) 1993 Employee Stock Purchase Plan and form of subscription agreement thereunder.

10.6(1) Amended and Restated Management Agreement dated August 10, 1993 between the Registrant
and Cariad Capital, Inc.

10.7A(1) Letter Agreement dated March 5, 1993 between the Registrant, Cariad Capital, Inc. and
Liberty Partners, L.P.

10.7B(1) Amendment to Letter Agreement dated August 12, 1993 between the Registrant and Liberty
Partners, L.P.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.8(1) Registration Agreement dated March 5, 1993 between the Registrant, Liberty Investment
Partners, II and SBA.

10.9(1) Registration Agreement dated March 5, 1993 among the Registrant, Monaco Capital
Partners, Tucker Anthony Holding Corporation and certain other stockholders of the
Registrant.

10.10(2) Credit Agreement dated as of March 5, 1996 among BT Commercial Corporation, Deutsche
Financial Services Corporation, Nationsbank of Texas, N.A., LaSalle National Bank and
Monaco Coach Corporation.

10.11(2) Registration Rights Agreement dated as of March 4, 1996 among Holiday Rambler LLC and
Monaco Coach Corporation.

11.1 Computation of earnings per share (See Note 11 of Notes to Consolidated Financial
Statements).

23.1 Consent of Coopers & Lybrand, Independent Accountants.

23.2 Consent of Ernst & Young LLP, Independent Auditors.

23.3 Consent of Counsel (included in Exhibit 5.1).

24.1 Power of Attorney (see page II-5).

27 Financial Data Schedule
</TABLE>

- ------------------------

(2) Incorporated by reference to exhibits filed in response to Item 7,
"Financial Statements and Exhibits," of the Company's Current Report on Form
8-K dated March 4, 1996.

* To be filed by amendment.

<PAGE>

EXHIBIT 1.1

2,100,000 Shares

MONACO COACH CORPORATION

Common Stock

UNDERWRITING AGREEMENT

April , 1997

SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
A.G. EDWARDS & SONS, INC.

As Representatives of the Several Underwriters

c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013

Dear Sirs:

Monaco Coach Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell an aggregate of 800,000 shares of its common stock, $.01 par
value per share, to the several Underwriters named in Schedule II hereto (the
"Underwriters") and the persons named in Part A of Schedule I hereto (the
"Selling Stockholders") propose to sell to the several Underwriters an aggregate
of 1,300,000 shares of common stock of the Company. The Company and the Selling
Stockholders are hereinafter sometimes referred to as the "Sellers". The
Company's common stock, $0.01 par value, is hereinafter referred to as the
"Common Stock" and the 800,000 shares of Common Stock to be issued and sold to
the Underwriters by the Company and the 1,300,000 shares of Common Stock to be
sold to the Underwriters by the Selling Stockholders are hereinafter referred to
as the "Firm Shares". The Selling Stockholders listed in Part B of Schedule I
hereto also propose to sell to the Underwriters, upon the terms and conditions
set forth in Section 2 hereof, up to an additional 315,000 shares (the
"Additional Shares") of Common Stock. The Firm Shares and the Additional Shares
are hereinafter collectively referred to as the "Shares".

The Company and the Selling Stockholders wish to confirm as follows their
respective agreements with you (the "Representatives") and the other several
Underwriters on whose behalf you are acting, in connection with the several
purchases of the Shares by the Underwriters.

1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the

<PAGE>

Commission thereunder (collectively, the "Act"), a registration statement on
Form S-2 under the Act (the "registration statement"), including a prospectus
subject to completion, relating to the Shares. The term "Registration
Statement" as used in this Agreement means the registration statement
(including all financial schedules and exhibits), as amended at the time it
becomes effective, or, if the registration statement became effective prior
to the execution of this Agreement, as supplemented or amended prior to the
execution of this Agreement; provided, however, that such term shall also
include, (i) all Rule 430A information deemed to be included in such
registration statement at the time such registration statement becomes
effective as provided by Rule 430A under the Act, and (ii) a registration
statement, if any, filed pursuant to Rule 462(b) under the Act relating to
the Common Stock. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will
be filed and must be declared effective before the offering of the Shares may
commence, the term "Registration Statement" as used in this Agreement means
the registration statement as amended by said post-effective amendment. The
term "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the
Act and such information is included in a prospectus filed with the
Commission pursuant to Rule 424(b) under the Act, the term "Prospectus" as
used in this Agreement means the prospectus in the form included in the
Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant to
Rule 424(b). The term "Prospectus" shall also include a term sheet as
described in Rules 434 and 424(b) under the Act, in the form it is first
filed with the Commission pursuant to Rule 424(b), together with the
Prepricing Prospectus included in the Registration Statement when it became
effective. The term "Prepricing Prospectus" as used in this Agreement means
the prospectus subject to completion in the form included in the registration
statement at the time of the initial filing of the registration statement
with the Commission, and as such prospectus shall have been amended from time
to time prior to the date of the Prospectus. Any reference in this Agreement
to the registration statement, the Registration Statement, any Prepricing
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-2
under the Act. As used herein, the term "Incorporated Documents" means the
documents which are incorporated by reference into the registration
statement, the Registration Statement, any Prepricing Prospectus, the
Prospectus, or any amendment or supplement thereto.

2. AGREEMENTS TO SELL AND PURCHASE. Subject to such adjustments as
you may determine in order to avoid fractional shares, the Company hereby
agrees, subject to all the terms and conditions set forth herein, to issue
and sell to each Underwriter and, upon the basis of the representations,
warranties and agreements of the Company and the Selling Stockholders herein
contained and subject to all the terms and conditions set forth herein, each
Underwriter agrees, severally and not jointly, to purchase from the Company,
at a purchase price of $________ per Share (the "purchase price per share"),
the number of Firm Shares which bears the same proportion to the aggregate
number of Firm Shares to be issued and sold by the Company as the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule II
hereto (or such number of Firm Shares increased as set forth in Section 12
hereof)

2
<PAGE>

bears to the aggregate number of Firm Shares to be sold by the Company and the
Selling Stockholders.

Subject to such adjustments as you may determine in order to avoid
fractional shares, each Selling Stockholder agrees, subject to all the terms and
conditions set forth herein, to sell to each Underwriter and, upon the basis of
the representations, warranties and agreements of the Company and the Selling
Stockholders herein contained and subject to all the terms and conditions set
forth herein, each Underwriter, severally and not jointly, agrees to purchase
from each Selling Stockholder at the purchase price per share that number of
Firm Shares which bears the same proportion to the number of Firm Shares set
forth opposite the name of such Selling Stockholder in Part A of Schedule I
hereto as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule II hereto (or such number of Firm Shares increased as
set forth in Section 12 hereof) bears to the aggregate number of Firm Shares to
be sold by the Company and the Selling Stockholders.

The Selling Stockholders listed in Part B of Schedule I hereto also agree,
subject to all the terms and conditions set forth herein, to sell to the
Underwriters, and, upon the basis of the representations, warranties and
agreements of the Selling Stockholders herein contained and subject to all the
terms and conditions set forth herein, the Underwriters shall have the right to
purchase from the Selling Stockholders listed in Part B of Schedule I hereto, at
the purchase price per share, pursuant to an option (the "over-allotment
option") which may be exercised at any time and from time to time prior to 9:00
P.M., New York City time, on the 30th day after the date of the Prospectus (or,
if such 30th day shall be a Saturday or Sunday or a holiday, on the next
business day thereafter when the New York Stock Exchange is open for trading),
up to an aggregate of 315,000 Additional Shares from the Selling Stockholders
listed in Part B of Schedule I hereto (the maximum number of Additional Shares
which each of them agrees to sell upon the exercise by the Underwriters of the
over-allotment option is set forth opposite their respective names in Part B of
Schedule I). Additional Shares may be purchased only for the purpose of
covering over-allotments made in connection with the offering of the Firm
Shares. The number of Additional Shares which the Underwriters elect to
purchase upon any exercise of the over-allotment option shall be provided by
each Selling Stockholder who has agreed to sell Additional Shares in proportion
to the respective maximum numbers of Additional Shares which each such Selling
Stockholder has agreed to sell. Upon any exercise of the over-allotment option,
each Underwriter, severally and not jointly, agrees to purchase from each
Selling Stockholder who has agreed to sell Additional Shares the number of
Additional Shares (subject to such adjustments as you may determine in order to
avoid fractional shares) which bears the same proportion to the number of
Additional Shares to be sold by each Selling Stockholder who has agreed to sell
Additional Shares as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule II hereto (or such number of Firm Shares increased
as set forth in Section 12 hereof) bears to the aggregate number of Firm Shares
to be sold by the Company and the Selling Stockholders.

Certificates in transferable form for the Shares (including any Additional
Shares) which each of the Selling Stockholders agrees to sell pursuant to this
Agreement have been placed in custody with Norwest Bank Minnesota, N.A. (the
"Custodian") for delivery under this

3
<PAGE>

Agreement pursuant to a Custody Agreement and Power of Attorney (the "Custody
Agreement") executed by each of the Selling Stockholders appointing
and as agents and attorneys-in-fact (the "Attorneys-in-Fact").
Each Selling Stockholder agrees that (i) the Shares represented by the
certificates held in custody pursuant to the Custody Agreement are subject to
the interests of the Underwriters, the Company and each other Selling
Stockholder, (ii) the arrangements made by the Selling Stockholders for such
custody are, except as specifically provided in the Custody Agreement,
irrevocable, and (iii) the obligations of the Selling Stockholders hereunder and
under the Custody Agreement shall not be terminated by any act of such Selling
Stockholder or by operation of law, whether by the death or incapacity of any
Selling Stockholder or the occurrence of any other event. If any Selling
Stockholder shall die or be incapacitated or if any other event shall occur
before the delivery of the Shares hereunder, certificates for the Shares of such
Selling Stockholder shall be delivered to the Underwriters by the
Attorneys-in-Fact in accordance with the terms and conditions of this Agreement
and the Custody Agreement as if such death or incapacity or other event had not
occurred, regardless of whether or not the Attorneys-in-Fact or any Underwriter
shall have received notice of such death, incapacity or other event. Each
Attorney-in-Fact is authorized, on behalf of each of the Selling Stockholders,
to execute this Agreement and any other documents necessary or desirable in
connection with the sale of the Shares to be sold hereunder by such Selling
Stockholder, to make delivery of the certificates for such Shares, to receive
the proceeds of the sale of such Shares, to give receipts for such proceeds, to
pay therefrom any expenses to be borne by such Selling Stockholder in connection
with the sale and public offering of such Shares, to distribute the balance
thereof to such Selling Stockholder, and to take such other action as may be
necessary or desirable in connection with the transactions contemplated by this
Agreement. Each Attorney-in-Fact agrees to perform his duties under the Custody
Agreement.

3. TERMS OF PUBLIC OFFERING. The Sellers have been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.

4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
counsel for the Underwriters, at 10:00 A.M., New York City time, on ,
1997 (the "Closing Date"). The place of closing for the Firm Shares and the
Closing Date may be varied by agreement among you, the Company and the
Attorneys-in-Fact.

Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at the aforementioned office of
counsel for the Underwriters at such time on such date (the "Option Closing
Date"), which may be the same as the Closing Date but shall in no event be
earlier than the Closing Date nor earlier than two nor later than ten business
days after the giving of the notice hereinafter referred to, as shall be
specified in a written notice from you on behalf of the Underwriters to the
Company and the Attorneys-in-Fact of the Underwriters' determination to purchase
a number, specified in such

<PAGE>

notice, of Additional Shares. The place of closing for any Additional Shares
and the Option Closing Date for such Shares may be varied by agreement among
you, the Company and the Attorneys-in-Fact.

Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor in immediately available funds.

5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:

(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause the Registration Statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.

(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event, which makes any statement of a material fact made in the
Registration Statement or the Prospectus (as then amended or supplemented)
untrue or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus (as then amended or supplemented) in
order to state a material fact required by the Act or the regulations thereunder
to be stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as then
amended or supplemented) to comply with the Act or any other law. If at any
time the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal of such order at the earliest possible time.

5
<PAGE>

(c) The Company will furnish to you, without charge, (i) four signed
copies of the registration statement as originally filed with the Commission and
of each amendment thereto, including financial statements and all exhibits to
the registration statement, (ii) such number of conformed copies of the
registration statement as originally filed and of each amendment thereto, but
without exhibits, as you may request, (iii) such number of copies of the
Incorporated Documents, without exhibits, as you may request, and (iv) four
copies of the exhibits to the Incorporated Documents.

(d) The Company will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which you
shall not previously have been advised or to which you shall object after being
so advised or (ii) so long as, in the opinion of counsel for the Underwriters, a
Prospectus is required to be delivered in connection with sales by any
Underwriter or dealer, file any information, documents or reports pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act") without
delivering a copy of such information, documents or reports to you, as
representatives of the Underwriters, prior to or concurrently with such filing.

(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you have
requested, copies of each form of the Prepricing Prospectus. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Company.

(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer, the Company will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may request. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer. If during such
period of time any event shall occur that in the judgment of the Company or in
the opinion of counsel for the Underwriters is required to be set forth in the
Prospectus (as then amended or supplemented) or should be set forth therein in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Prospectus to comply with the Act or any other law, the Company will
forthwith prepare and, subject to the provisions of paragraph (d) above, file
with the Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Underwriters and dealers a reasonable number of
copies thereof. In the event that the Company and you, as Representatives of
the several Underwriters, agree that the Prospectus should be amended or
supplemented, the Company, if

6
<PAGE>

requested by you, will promptly issue a press release announcing or disclosing
the matters to be covered by the proposed amendment or supplement.

(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares, in any jurisdiction where it is not now so
subject.

(h) The Company will make generally available to its security holders
a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act.

(i) During the period of five years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to stockholders or filed with the Commission, and (ii) from time to time
such other information concerning the Company as you may request.

(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 12 hereof or by notice given by you terminating this
Agreement pursuant to Section 12 or Section 13 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company or the Selling Stockholders to comply with the terms or
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the Representatives for all out-of-pocket expenses (including fees and expenses
of counsel for the Underwriters) incurred by you in connection herewith.

(k) The Company will apply the net proceeds from the sale of the
Shares to be sold by it hereunder substantially in accordance with the
description set forth in the Prospectus.

(l) If Rule 430A of the Act is employed, the Company will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.

(m) Except as provided in this Agreement, the Company will not sell,
contract to sell or otherwise dispose of any Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or grant any
options or warrants to purchase Common Stock, except pursuant to its 1993
Employee Stock Purchase Plan, 1993

7
<PAGE>

Incentive Stock Option Plan and 1993 Director Stock Option Plan, for a period of
90 days after the date of the Prospectus, without the prior written consent of
Smith Barney Inc.

(n) The Company has furnished or will furnished to you "lock-up"
letters, in form and substance satisfactory to you, signed by each of its
current officers and directors and each of its stockholders designated by you.

(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.

(p) The Company will use its best efforts to have the shares of
Common Stock which it agrees to sell under this Agreement listed, subject to
notice of issuance, on the Nasdaq National Market on or before the Closing Date.

6. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each of the Selling
Stockholders agrees with the several Underwriters as follows:

(a) Such Selling Stockholder will cooperate to the extent necessary
to cause the registration statement or any post-effective amendment thereto to
become effective at the earliest possible time.

(b) Such Selling Stockholder will pay all Federal and other taxes, if
any on the transfer or sale of the Shares being sold by the Selling Stockholder
to the Underwriters.

(c) Such Selling Stockholder will do or perform all things required
to be done or performed by the Selling Stockholder prior to the Closing Date or
any Option Closing Date, as the case may be, to satisfy all conditions precedent
to the delivery of the Shares pursuant to this Agreement.

(d) Such Selling Stockholder has executed or will execute a "lock-up"
letter as provided in Section 5(n) above and will not sell, contract to sell or
otherwise dispose of any Common Stock, except for the sale of Shares to the
Underwriters pursuant to this Agreement, prior to the expiration of 90 days
after the date of the Prospectus, without the prior written consent of Smith
Barney Inc.

(e) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, such Selling Stockholder will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.

(f) Such Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of time
referred to in Section 5(f) hereof, of any change in the information relating to
such Selling Stockholder stated in the

8
<PAGE>

Registration Statement or the Prospectus (as then amended or supplemented) that
suggests that such information relating to such Selling Stockholder is or may be
untrue in any material respect.

7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Underwriter that:

(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the provisions of the Act. The Commission has not issued
any order preventing or suspending the use of any Prepricing Prospectus.

(b) The Company meets the requirements for the use of Form S-2 under
the Act. The registration statement in the form in which it became or becomes
effective and also in such form as it may be when any post-effective amendment
thereto shall become effective and the prospectus and any supplement or
amendment thereto when filed with the Commission under Rule 424(b) under the
Act, complied or will comply in all material respects with the provisions of the
Act and did not or will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the registration statement or the prospectus made in reliance upon and in
conformity with information relating to any Underwriter furnished to the Company
in writing by or on behalf of any Underwriter through you expressly for use
therein.

(c) The Incorporated Documents, when they were filed (or, if any
amendment with respect to any such document was filed, when such amendment was
filed), complied in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.

(d) All the outstanding shares of Common Stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws and are
free of any preemptive or similar rights; the Shares to be issued and sold by
the Company have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof, will
be validly issued, fully paid and nonassessable and free of any preemptive or
similar rights; the capital stock of the Company conforms to the description
thereof in the Registration Statement and the Prospectus; except as disclosed in
or contemplated by the Prospectus and the financial statements of the Company,
and the related notes thereto, included in the Prospectus or the Incorporated
Documents, the Company does not have outstanding any options or warrants to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
warrants, rights,

9
<PAGE>

convertible securities or obligations; and the description of the Company's
stock option and other stock plans or arrangements, and the options or other
rights granted and exercised thereunder, set forth in the Prospectus or the
Incorporated Documents accurately and fairly presents the information required
to be shown with respect to such plans, arrangements, options and rights.

(e) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and
is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not
have a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company and
the Subsidiaries (as hereinafter defined), taken as a whole.

(f) All the Company's subsidiaries (collectively, the "Subsidiaries")
are listed in an exhibit to the Company's Annual Report on Form 10-K which is
incorporated by reference into the Registration Statement. Each Subsidiary is a
corporation duly organized, validly existing and in good standing in the
jurisdiction of its incorporation, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement and the Prospectus, and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify does not have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries, taken as a whole; all the outstanding
shares of capital stock of each of the Subsidiaries have been duly authorized
and validly issued, are fully paid and nonassessable, and are owned by the
Company directly, or indirectly through one of the other Subsidiaries, free and
clear of any lien, adverse claim, security interest, equity or other
encumbrance.

(g) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or to which
any of their respective properties is subject, that are required to be described
in the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as required by the Act or
the Exchange Act.

(h) Neither the Company nor any of the Subsidiaries is in violation
of its certificate or articles of incorporation or by-laws, or other
organizational documents, or, in any respect that has a material adverse effect
on the condition (financial or other), business, properties, net worth or
results of operations of the Company and the Subsidiaries, taken as a

10
<PAGE>

whole, of any law, ordinance, administrative or governmental rule or regulation
applicable to the Company or any of the Subsidiaries or any decree of any court
or governmental agency or body having jurisdiction over the Company or any of
the Subsidiaries, or in default in any material respect in the performance of
any obligation, agreement or condition contained in any bond, debenture, note or
any other evidence of indebtedness or in any material agreement, indenture,
lease or other instrument to which the Company or any of the Subsidiaries is a
party or by which any of them or any of their respective properties may be
bound.

(i) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby (i) requires any consent,
approval, authorization or other order of or registration or filing with, any
court, regulatory body, administrative agency or other governmental body, agency
or official (except such as may be required for the registration of the Shares
under the Act and compliance with the securities or Blue Sky laws of various
jurisdictions, all of which have been or will be effected in accordance with
this Agreement) or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles of
incorporation or bylaws, or other organizational documents, of the Company or
any of the Subsidiaries or (ii) conflicts or will conflict with or constitutes
or will constitute a breach of, or a default under, any agreement, indenture,
lease or other instrument to which the Company or any of the Subsidiaries is a
party or by which any of them or any of their respective properties may be
bound, or violates or will violate any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Company or any of the
Subsidiaries or any of their respective properties, or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms of any
agreement or instrument to which any of them is a party or by which any of them
may be bound or to which any of the property or assets of any of them is
subject.

(j) The accountants, Coopers & Lybrand L.L.P., and Ernst & Young LLP,
who have certified or shall certify the financial statements included or
incorporated by reference in the Registration Statement and the Prospectus (or
any amendment or supplement thereto) are independent public accountants as
required by the Act.

(k) The financial statements, together with related schedules and
notes, included or incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and the Subsidiaries on the basis stated in the
Registration Statement at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; the other financial and statistical information and data included or
incorporated by reference in the Registration Statement and the Prospectus (and
any amendment or supplement thereto) are accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company and the Subsidiaries; no other financial statements or schedules are
required to be

11
<PAGE>

included in the Registration Statement; and the pro forma financial statements
and other pro forma information included in the Prospectus present fairly the
information shown therein, have been prepared in accordance with generally
accepted accounting principles and the Commission's rules and guidelines with
respect to pro forma financial statements and other pro forma information, have
been properly compiled on the pro forma basis described therein, and, in the
opinion of the Company, the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate under the
circumstances.

(l) The execution and delivery of, and the performance by the Company
of its obligations under, this Agreement have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution hereunder may be limited by federal or state
securities laws.

(m) Except as disclosed in or contemplated by the Registration
Statement and the Prospectus (or any amendment or supplement thereto),
subsequent to the respective dates as of which such information is given in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), neither the Company nor any of the Subsidiaries has incurred any
liability or obligation, direct or contingent, or entered into any transaction,
not in the ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any change in the capital
stock, or material increase in the short-term debt or long-term debt, of the
Company or any of the Subsidiaries, or any material adverse change, or any
development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or other),
business, net worth or results of operations of the Company and the Subsidiaries
taken as a whole.

(n) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Prospectus as being
owned by it, free and clear of all liens, claims, security interests or other
encumbrances except such as are described in the Registration Statement and the
Prospectus or in a document filed as an exhibit to the Registration Statement
and all the property described in the Prospectus as being held under lease by
each of the Company and the Subsidiaries is held by it under valid, subsisting
and enforceable leases.

(o) The Company has not distributed and, prior to the later to occur
of (i) the Closing Date and (ii) completion of the distribution of the Shares,
will not distribute any offering material in connection with the offering and
sale of the Shares other than the Registration Statement, the Prepricing
Prospectus, the Prospectus or other materials, if any, permitted by the Act.

(p) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its respective properties and to
conduct its business in the manner described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus; the

12
<PAGE>

Company and each of the Subsidiaries has fulfilled and performed all its
material obligations with respect to such permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the rights of
the holder of any such permit, in each case if such revocation, termination or
impairment would have a material adverse effect on the condition (financial or
other), business, net worth or results of operations of the Company and the
Subsidiaries, taken as a whole, subject in each case to such qualification as
may be set forth in the Prospectus; and, except as described in the Prospectus,
none of such permits contains any restriction that is materially burdensome to
the Company or any of the Subsidiaries.

(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

(r) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any employee or agent of the Company or any Subsidiary has made
any payment of funds of the Company or any Subsidiary or received or retained
any funds in violation of any law, rule or regulation, which payment, receipt or
retention of funds is of a character required to be disclosed in the Prospectus.

(s) The Company and each of the Subsidiaries have filed all tax
returns required to be filed, which returns are complete and correct, and
neither the Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with respect
thereto.

(t) Except as disclosed in the Prospectus or the Incorporated
Documents, no holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the Company or
preemptive rights or similar rights to purchase Common Stock because of the
filing of the registration statement or consummation of the transactions
contemplated by this Agreement; and holders of any registration rights or
preemptive or similar rights have waived such rights with respect to the
offering being made by the Prospectus.

(u) The Company and the Subsidiaries own or possess all patents,
trademarks, trademark registration, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, and the Company is not aware of
any claim to the contrary or any challenge by any other person to the rights of
the Company and the Subsidiaries with respect to the foregoing.

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<PAGE>

(v) The Company is not now, and after sale of the Shares to be sold
by it hereunder and application of the net proceeds from such sale as described
in the Prospectus under the caption "Use of Proceeds" will not be, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.

(w) The Company has complied with all provisions of Florida Statutes,
Section 517.075, relating to issuers doing business with Cuba.

(x) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or otherwise,
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.

(y) Except as disclosed in the Prospectus, (1) to the best of the
Company's knowledge, the Company is in compliance with all applicable
federal, state and local environmental laws, regulations and ordinances
governing its business, properties or assets, except where failure to be so
in compliance would not have a material adverse effect upon the condition
(financial or otherwise), business, properties or results of operations of
the Company and its subsidiary taken as a whole; (2) to the best of the
Company's knowledge, all material licenses, permits or registrations required
for the business of the Company as presently conducted and proposed to be
conducted under federal, state and local environmental laws, regulations or
ordinances have been secured; (3) to the best of the Company's knowledge, no
reportable quantities (as set forth in Title 40, Code of Federal Regulations
Section 302) of any hazardous or toxic substance, pollutant or waste which is
regulated by any federal, state or local governmental authority
(collectively, "HAZARDOUS MATERIAL") are located in the soil, groundwater,
surface water, or waterways at or under any property owned, leased or
operated by the Company in quantities or concentrations sufficient to require
removal or remediation under federal, state or local laws, regulations and
ordinances; and (4) to the best of the Company's knowledge, no hazardous
materials, including but not limited to asbestos, are present in buildings
presently leased, owned, or otherwise occupied by the Company in amounts or
concentrations that could, under current law, have a material adverse effect
upon the Company's financial position if such hazardous materials were
required to be removed.

(z) The Company maintains insurance of the types and in the
amounts which it deems adequate for its business, including, but not limited
to, general liability insurance, products liability insurance and insurance
covering all real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect.

8. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder represents and warrants to each Underwriter that:

(a) Such Selling Stockholder now has, and on the Closing Date and any
Option Closing Date will have, valid and marketable title to the Shares to be
sold by such

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<PAGE>

Selling Stockholder, free and clear of any lien, claim, security interest or
other encumbrance, including, without limitation, any restriction on transfer.

(b) Such Selling Stockholder now has, and on the Closing Date and any
Option Closing Date will have, full legal right, power and authorization, and
any approval required by law, to sell, assign transfer and deliver such Shares
in the manner provided in this Agreement, and upon delivery of and payment for
such Shares hereunder, the several Underwriters will acquire valid and
marketable title to such Shares free and clear of any lien, claim, security
interest, or other encumbrance.

(c) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling Stockholder
and are the valid and binding agreements of such Selling Stockholder enforceable
against such Selling Stockholder in accordance with their terms.

(d) Neither the execution and delivery of this Agreement or the
Custody Agreement by or on behalf of such Selling Stockholder nor the
consummation of the transactions herein or therein contemplated by or on behalf
of such Selling Stockholder requires any consent, approval, authorization or
order of, or filing or registration with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required under the Act or such as may be required under state
securities or Blue Sky laws governing the purchase and distribution of the
Shares) or conflicts or will conflict with or constitutes or will constitute a
breach of, or default under, or violates or will violate, any agreement,
indenture or other instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder is or may be bound or to which any of such
Selling Stockholder's property or assets is subject, or any statute, law, rule,
regulation, ruling, judgment, injunction, order or decree applicable to such
Selling Stockholder or to any property or assets of such Selling Stockholder.

(e) The Registration Statement and the Prospectus, insofar as they
relate to such Selling Stockholder, do not and will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.

(f) Such Selling Stockholder does not have any actual knowledge that
the Registration Statement or the Prospectus (or any amendment or supplement
thereto) contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.

(g) The representations and warranties of such Selling Stockholder in
the Custody Agreement are, and on the Closing Date and any Option Closing Date
will be, true and correct.

(h) Such Selling Stockholder has not taken, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or

15
<PAGE>

manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares, except for the lock-up arrangements described in the Prospectus.

9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and Kay L. Toolson,
B. Ray Mehaffey, John W. Nepute and D. Page Robertson (each an "Indemnifying
Selling Stockholder" and collectively, the "Indemnifying Selling Stockholders")
jointly and severally, agree to indemnify and hold harmless each of you and each
other Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act from
and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Prepricing Prospectus or in the Registration Statement or the Prospectus or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arising
out of or based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph (a) with respect
to any Prepricing Prospectus shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) on account of any
such loss, claim, damage, liability or expense arising from the sale of the
Shares by such Underwriter to any person if a copy of the Prospectus shall not
have been delivered or sent to such person within the time required by the Act
and the regulations thereunder, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
Prepricing Prospectus was corrected in the Prospectus, provided that the Company
has delivered the Prospectus to the several Underwriters in requisite quantity
on a timely basis to permit such delivery or sending. The foregoing indemnity
agreement shall be in addition to any liability which the Company or any
Indemnifying Selling Stockholder may otherwise have.

(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company or any Selling Stockholder, such
Underwriter or such controlling person shall promptly notify the parties against
whom indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the indemnifying parties have agreed in
writing to pay such fees and expenses, (ii) the indemnifying parties have failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the indemnifying parties and such
Underwriter or such controlling person shall have been advised by its counsel
that

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<PAGE>

representation of such indemnified party and any indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without their
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless any Underwriter, to
the extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.

(c) Each Selling Stockholder, other than the Indemnifying Selling
Stockholders set forth in paragraph (a) above, agrees, severally and not
jointly, to indemnify and hold harmless each of you and each other Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, the Company, its
directors, its officers who sign the Registration Statement, and any person who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act to the same extent as the foregoing indemnity from the
Company and the Indemnifying Selling Stockholders to each Underwriter, but only
with respect to the information relating to such Selling Stockholder furnished
in writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against any Underwriter, any such controlling person of any Underwriter,
the Company, any of its directors, any such officer, or any such controlling
person of the Company, based on the Registration Statement, the Prospectus or
any Prepricing Prospectus or any amendment or supplement thereto, and in respect
of which indemnity may be sought against any Selling Stockholder pursuant to
this paragraph (c), such Selling Stockholder shall have the rights and duties
given to the Company by paragraph (b) above (except that if the Company shall
have assumed the defense thereof such Selling Stockholder shall not be required
to do so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such Selling
Stockholder's expense), and each Underwriter, each such controlling person of
any Underwriter, the Company, its directors, any such officer, and any such
controlling person of the Company shall have the rights and duties given to the
Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be
in addition to any liability which any Selling Stockholder may otherwise have.
The liability of each Selling Stockholder under

17
<PAGE>

paragraphs (a) and (e) and this paragraph (c) shall be limited to an amount
equal to the net proceeds received by such Selling Stockholder (before deducting
expenses) from the sale of the Shares by such Selling Stockholder.

(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, each Selling Stockholder, and any person who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company and
the Selling Stockholders to each Underwriter, but only with respect to
information relating to such Underwriter furnished in writing by or on behalf of
such Underwriter through you expressly for use in the Registration Statement,
the Prospectus or any Prepricing Prospectus, or any amendment or supplement
thereto. If any action, suit or proceeding shall be brought against the
Company, any of its directors, any such officer, any Selling Stockholder, or any
such controlling person based on the Registration Statement, the Prospectus or
any Prepricing Prospectus, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against any Underwriter pursuant to
this paragraph (d), such Underwriter shall have the rights and duties given to
the Company by paragraph (b) above (except that if the Company shall have
assumed the defense thereof such Underwriter shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at such Underwriter's expense),
and the Company, its directors, any such officer, the Selling Stockholder, and
any such controlling person shall have the rights and duties given to the
Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be
in addition to any liability which any Underwriter may otherwise have.

(e) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under paragraphs (a), (c) or (d) hereof
in respect of any losses, claims, damages, liabilities or expenses referred
to therein, then an indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, the Selling Stockholders and the
Underwriters from the offering of the Shares, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company,
the Selling Stockholders and the Underwriters in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, the Selling
Stockholders and the Underwriters shall be deemed to be in the same
proportion, in the case of the Company and the Selling Stockholders, as the
total net proceeds from the offering (before deducting expenses) received by
the Company and the Selling Stockholders bear to the total price to public
set forth in the table on the cover page of the Prospectus, and in the case
of the Underwriters, as the underwriting discounts and commissions received
by the Underwriters bears to the total price to public set forth in the table
on the cover page of the Prospectus; provided that, in the event that the
Underwriters shall have purchased any Additional Shares hereunder, any
determination of the relative

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<PAGE>

benefits received by the Company, the Selling Stockholders or the
Underwriters from the offering of the Shares shall include the net proceeds
(before deducting expenses) received by the Company and the Selling
Stockholders, and the underwriting discounts and commissions received by the
Underwriters, from the sale of such Additional Shares, in each case computed
on the basis of the respective amounts set forth in the notes to the table on
the cover page of the Prospectus. The relative fault of the Company, the
Selling Stockholders and the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholders or
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

(f) The Company, the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
9 were determined by a pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (e) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
paragraph (e) above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or defending any such action,
suit or proceeding. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price of the Shares underwritten by it and distributed to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several in proportion to the respective numbers of Firm Shares set
forth opposite their names in Schedule II hereto (or such numbers of Firm Shares
increased as set forth in Section 12 hereof) and not joint.

(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.

(h) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company and the Selling Stockholders set
forth in this Agreement shall remain operative and in full force and effect,

19
<PAGE>

regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or the Selling Stockholders or any person controlling the Company, (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter or any person
controlling any Underwriter, or to the Company, its directors or officers, or
any person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
9.

10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:

(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the effectiveness of the registration
statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the registration statement or the prospectus or
otherwise) shall have been complied with to your satisfaction.

(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectus, which in your opinion, as
Representatives of the several Underwriters, would materially adversely affect
the market for the Shares, or (ii) any event or development relating to or
involving the Company or any officer or director of the Company or any Selling
Stockholder which makes any statement made in the Prospectus untrue or which, in
the opinion of the Company and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in the Prospectus in
order to state a material fact required by the Act or any other law to be stated
therein or necessary in order to make the statements therein not misleading, if
amending or supplementing the Prospectus to reflect such event or development
would, in your opinion, as Representatives of the several Underwriters,
materially adversely affect the market for the Shares.

(c) You shall have received on the Closing Date or the Option Closing
Date, as the case may be, an opinion of Wilson Sonsini, Goodrich & Rosati,
counsel for the Company and the Selling Stockholders, dated the Closing Date or
the Option Closing Date, as the case may be, and addressed to you, as
Representatives of the several Underwriters, to the effect that:

20
<PAGE>

(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with corporate power and authority to own its properties and conduct
its business as described in the Prospectus; and the Company has been duly
qualified to do business as a foreign corporation under the corporation law of,
and is in good standing as such in, every jurisdiction where the ownership or
leasing of property, or the conduct of its business requires such qualification
except where the failure so to qualify would not have a material adverse effect
upon the condition (financial or otherwise) or results of operations of the
Company and its subsidiary taken as a whole;

(ii) an opinion to the same general effect as clause (i) of
this subparagraph (c) in respect of the Subsidiaries;

(iii) all of the issued and outstanding capital stock of the
Subsidiaries has been duly authorized, validly issued and is fully paid and
nonassessable, and the Company owns directly or indirectly all of the
outstanding capital stock of its Subsidiaries, and to the best knowledge of such
counsel, such stock is owned free and clear of any claims, liens, encumbrances
or security interests;

(iv) the authorized, issued and outstanding capital stock of
the Company is as set forth under the caption "Capitalization" in the
Prospectus;

(v) the issued and outstanding capital stock of the Company
has been duly authorized and validly issued and is fully paid and nonassessable;

(vi) the Shares have been duly authorized; the certificates for
the Shares to be delivered hereunder are in due and proper form under Delaware
law, and when duly countersigned by the Company's transfer agent and delivered
to you or upon your order against payment of the agreed consideration therefor
in accordance with the provisions of this Agreement the Shares represented
thereby will be validly issued, fully paid and nonassessable and will conform in
all material respects as to legal matters to the description thereof contained
in the Prospectus, and there are no preemptive rights or other rights to
subscribe for or to purchase any of the Shares pursuant to the Company's
certificate of incorporation or bylaws or, to the knowledge of such counsel,
pursuant to any agreement or other instrument to which the Company is a party or
by which it is bound;

(vii) the Registration Statement has become effective under
the 1933 Act, and, to the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or contemplated
under the 1933 Act, and the Registration Statement (including the information
deemed to be part of the Registration Statement at the time of effectiveness
pursuant to Rule 430A(b), if applicable), the Prospectus and each amendment or
supplement thereto (except for the financial statements and other statistical or
financial data included therein as to which such counsel need express no
opinion) comply as to form in all material respects with the requirements of the
1933 Act; each of the Incorporated Documents

21
<PAGE>

(except for the financial statements and the notes thereto and the schedules and
other financial and statistical data included therein as to which such counsel
need not express any opinion) complies as to form in all material respects with
the Exchange Act and the rules and regulations of the Commission thereunder; any
required filing of the Prospectus and any supplement thereto pursuant to Rule
424(b) has been made in the manner and within the time period required by such
Rule 424(b); such counsel have no reason to believe that either the Registration
Statement (including the Incorporated Documents and the information deemed to be
part of the Registration Statement at the time of effectiveness pursuant to Rule
430A(b), if applicable) or the Prospectus, or the Registration Statement or the
Prospectus as amended or supplemented (except as aforesaid), as of their
respective effective or issue dates, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus as amended or supplemented, if applicable, as of the Closing Date or
the Option Closing Date, as the case may be, contained any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made; and such counsel does not know of any legal or governmental
proceedings pending or threatened against the Company required to be described
in the Prospectus which are not described as required, nor of any contracts or
documents of a character required to be described in the Registration Statement
or Prospectus or to be filed as exhibits to the Registration Statement which are
not described or filed, as required;

(viii) the statements under the captions "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as
such statements constitute a summary of documents referred to therein or
matters of law, are accurate summaries and fairly and correctly present, in
all material respects, the information called for with respect to such
documents and matters;

(ix) the Company has full corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder; this Agreement and the performance
of the Company's obligations hereunder have been duly authorized by all
necessary corporate action and this Agreement has been duly executed and
delivered by and on behalf of the Company, and is a legal, valid and binding
agreement of the Company, except as enforceability of the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights and by the exercise of judicial discretion in
accordance with general principles applicable to equitable and similar remedies
and except as to those provisions relating to indemnities for liabilities
arising under the 1933 Act as to which no opinion need be expressed; and no
approval, authorization or consent of any public board, agency, or
instrumentality of the United States or of any state or other jurisdiction is
necessary in connection with the issue or sale of the Shares by the Company
pursuant to this Agreement (other than such as have been obtained and are in
full force and effect under the 1933 Act, and such as may be required under
applicable blue sky laws and the rules of the NASD) or the consummation by the
Company of any other transactions contemplated hereby;

22
<PAGE>

(x) the execution and performance of this Agreement will not
contravene any of the provisions of, or result in a default under, any
agreement, franchise, license, indenture, mortgage, deed of trust, or other
instrument known to such counsel, of the Company or its Subsidiaries or by which
the property of any of them is bound and which contravention or default would be
material to the Company and its Subsidiaries taken as a whole; or violate any of
the provisions of the charter or bylaws of the Company or its Subsidiaries or,
so far as is known to such counsel, violate any statute, order, rule or
regulation of any regulatory or governmental body having jurisdiction over the
Company or its Subsidiaries;

(xi) except as disclosed in or specifically contemplated in the
Prospectus, to the knowledge of such counsel, there are no outstanding options,
warrants or other rights calling for the issuance of, and no commitments, plans
or arrangements to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable for capital stock of the Company; and

(xii) to such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus or disclosed in the Incorporated Documents
(including their exhibits), no holders of Common Stock or other securities of
the Company have registration rights with respect to securities of the Company
and, except as set forth in the Registration Statement and Prospectus, all
holders of securities of the Company having rights to registration of shares of
Common Stock, or other securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering contemplated hereby,
waived such rights or such rights have expired by reason of lapse of time
following notification of the Company's intent to file the Registration
Statement.

(xiii) This Agreement and the Custody Agreement have each been
duly executed and delivered by or on behalf of each of the Selling Stockholders
and are valid and binding agreements of each Selling Stockholder enforceable
against each Selling Stockholder in accordance with their terms;

(xiv) To the knowledge of such counsel, each Selling Stockholder
has full legal right, power and authorization, and any approval required by
law, to sell, assign, transfer and deliver good and marketable title to the
Shares which such Selling Stockholder has agreed to sell pursuant to this
Agreement;

(xv) The execution and delivery of this Agreement and the
Custody Agreement by the Selling Stockholders and the consummation of the
transactions contemplated hereby and thereby will not conflict with, violate,
result in a breach of or constitute a default under the terms or provisions
of any agreement, indenture, mortgage or other instrument known to such
counsel to which any Selling Stockholder is a party or by which any of them
or any of their assets or property is bound, or any court order or decree or
any law, rule, or regulation applicable to any Selling Stockholder or to any
of the property or assets of any Selling Stockholder; and

23
<PAGE>

(xvi) Upon delivery of the Shares pursuant to this Agreement
and payment therefor as contemplated herein the Underwriters will acquire good
and marketable title to the Shares free and clear of any lien, claim, security
interest, or other encumbrance, restriction on transfer or other defect in
title.

Insofar as such counsel's opinion under clause (vii) above relates to
the accuracy and completeness of the Prospectus and Registration Statement, it
is based upon a general review with the Company's representatives and
independent accountants of the information contained therein, without
independent verification by such counsel of the accuracy or completeness of such
information. In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
or the State of New York, provided that (1) each such local counsel is
acceptable to the Representatives, (2) such reliance is expressly authorized by
each opinion so relied upon and a copy of each such opinion is delivered to the
Representatives and is, in form and substance satisfactory to them and their
counsel, and (3) counsel shall state in their opinion that they believe that
they and the Underwriters are justified in relying thereon.

(d) You shall have received on the Closing Date or the Option Closing
Date, as the case may be, an opinion of Orrick, Herrington & Sutcliffe LLP,
counsel for the Underwriters, to the effect that:

(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.

(ii) The Shares to be issued by the Company pursuant to the
terms of this Agreement will be, upon issuance and delivery against payment
therefor in accordance with the terms hereof, duly authorized and validly issued
and fully paid and nonassessable, and the stockholders of the Company have no
preemptive rights pursuant to the Certificate of Incorporation of the Company.

(iii) This Agreement has been duly authorized, executed and
delivered by the Company.

(iv) The Registration Statement has become effective under the
1933 Act and, to our knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the 1933 Act.

(v) The Registration Statement and the Prospectus (except the
financial statements and schedules and other financial and statistical data
included therein, as to which we express no opinion), as of their respective
effective or issue date, complied as to form in all material respects with the
1933 Act.

24
<PAGE>

(vi) Nothing has come to the attention of such counsel to cause
such counsel to believe that the Registration Statement, at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus, at its issue date or
as of the date hereof, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel have not been requested to and do not make any comment in this
paragraph with respect to the financial statements and schedules and other
financial and statistical information contained in the Registration Statement or
the Prospectus).

(e) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Coopers & Lybrand L.L.P., and Ernst & Young LLP, independent
certified public accountants, substantially in the forms heretofore approved by
you.

(f)(i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing Date; (ii) there shall not have been any
change in the capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the ordinary course
of business) from that set forth or contemplated in the Registration Statement
or the Prospectus (or any amendment or Supplement thereto); (iii) there shall
not have been, since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material adverse change
in the condition (financial or other), business, prospects, properties, net
worth or results of operations of the Company and the Subsidiaries taken as a
whole; (iv) the Company and the Subsidiaries shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company and the Subsidiaries, taken as a
whole, other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date or the Option Closing Date, as the case may be, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and you shall have
received a certificate, dated the Closing Date or the Option Closing Date, as
the case may be, and signed by the chief executive officer and the chief
financial officer of the Company (or such other officers as are acceptable to
you), to the effect set forth in this Section 10(f) and in Section 10(g) hereof.

(g) The Company shall not have failed at or prior to the Closing
Date or the Option Closing Date, as the case may be, to have performed or
complied with any of its agreements herein contained and required to be
performed or complied with by it hereunder at or prior to the Closing Date or
the Option Closing Date, as the case may be.

25
<PAGE>

(h) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on and as of
the date hereof and on and as of the Closing Date or the Option Closing Date, as
the case may be, as if made on and as of the Closing Date or the Option Closing
Date, as the case may be, and you shall have received a certificate, dated the
Closing Date or the Option Closing Date, as the case may be, and signed by or on
behalf of the Selling Stockholders to the effect set forth in this Section 10(h)
and in Section 10(i) hereof.

(i) The Selling Stockholders shall not have failed at or prior to
the Closing Date or the Option Closing Date, as the case may be, to have
performed or complied with any of their agreements herein contained and required
to be performed or complied with by them hereunder at or prior to the Closing
Date or the Option Closing Date, as the case may be.

(j) Prior to the Closing Date or the Option Closing Date, as the
case may be, the Shares of Common Stock which the Company agrees to sell
pursuant to this Agreement shall have been listed, subject to notice of
issuance, on the Nasdaq National Market.

(k) The Sellers shall have furnished or caused to be furnished to
you such further certificates and documents as you shall have requested.

All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to you and your counsel.

Any certificate or document signed by any officer of the Company or
any Attorney-in-Fact or any Selling Stockholder and delivered to you, as
Representatives of the Underwriters, or to counsel for the Underwriters, shall
be deemed a representation and warranty by the Company, the Selling Stockholders
or the particular Selling Stockholder, as the case may be, to each Underwriter
as to the statements made therein.

The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of any Option Closing
Date of the conditions set forth in this Section 10, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (c) through (h) shall be dated the Option
Closing Date in question and the opinions called for by paragraphs (c), (d) and
(e) shall be revised to reflect the sale of Additional Shares.

11. EXPENSES. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by them of their
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all
amendments or supplements to any of them,

26
<PAGE>

as may be reasonably requested for use in connection with the offering and sale
of the Shares; (iii) the preparation, printing, authentication, issuance and
delivery of certificates for the Shares, including any stamp taxes in connection
with the original issuance and sale of the Shares; (iv) the printing (or
reproduction) and delivery of this Agreement, the preliminary and supplemental
Blue Sky Memoranda and all other agreements or documents printed (or reproduced)
and delivered in connection with the offering of the Shares; (v) the listing of
the Shares on the Nasdaq National Market; (vi) the registration or qualification
of the Shares for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 5(g) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Underwriters relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); (vii)
the filing fees and the fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc.; and (viii) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company and the Selling Stockholders.

12. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company and the Selling Stockholders.

If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter shall
be obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule II hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or
refuse to purchase Shares which it or they are obligated to purchase on the
Closing Date and the aggregate number of Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares which
the Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either you or the

27
<PAGE>

Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule II hereto who, with your approval and the approval of the Company,
purchases Shares which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.

Any notice under this Section 12 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.

13. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or any Selling Stockholder, by notice to the Company,
if prior to the Closing Date or any Option Closing Date (if different from the
Closing Date and then only as to the Additional Shares), as the case may be, (i)
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York or California shall have been declared by either federal or state
authorities, or (iii) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in your judgment,
impracticable or inadvisable to commence or continue the offering of the Shares
at the offering price to the public set forth on the cover page of the
Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.

14. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set
forth in the last paragraph on the cover page, the stabilization legend on
the inside cover page, and the statements in the first, second, third, seventh
and eighth paragraphs under the caption "Underwriting" in any Prepricing
Prospectus and in the Prospectus, constitute the only information furnished
by or on behalf of the Underwriters through you as such information is
referred to in Sections 7(b) and 9 hereof.

15. MISCELLANEOUS. Except as otherwise provided in Sections 5, 12 and 13
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company or the Selling
Stockholders, at the office of the Company at 91320 Industrial Way, Coburg,
Oregon 97408, Attention: John W. Nepute, Vice President of Finance and Chief
Financial Officer; or (ii) if to you, as Representatives of the several
Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New York, New
York 10013, Attention: Manager, Investment Banking Division.

This Agreement has been and is made solely for the benefit of the several
Underwriters, the Company, its directors and officers, and the other controlling
persons referred to in Section 9 hereof and their respective successors and
assigns, to the extent

28
<PAGE>

provided herein, and no other person shall acquire or have any right under or by
virtue of this Agreement. Neither the term "successor" nor the term
"successors and assigns" as used in this Agreement shall include a purchaser
from any Underwriter of any of the Shares in his status as such purchaser.

16. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.

This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.

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<PAGE>

Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Stockholders and the several Underwriters.

Very truly yours,

MONACO COACH CORPORATION

By
-------------------------------------------
Chief Executive Officer

Each of the Selling Stockholders
named in Schedule I hereto

By
-------------------------------------------
Attorney-in-Fact

Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule II
hereto.

SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
A.G. EDWARDS & SONS, INC.

As Representatives of the Several Underwriters

By SMITH BARNEY INC.

By
--------------------------
Managing Director

30
<PAGE>

SCHEDULE I

MONACO COACH CORPORATION

PART A - FIRM SHARES
- --------------------
NUMBER OF
SELLING STOCKHOLDERS FIRM SHARES
--------------------- -----------

Liberty Partners Holding 2 LLC . . . . . . . . . . . . . . . . . . . .741,717
HR, LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .230,767
Kay L. Toolson . . . . . . . . . . . . . . . . . . . . . . . . . . . .190,000
Roger A. Vandenberg. . . . . . . . . . . . . . . . . . . . . . . . . . 64,900
Andreas P. Graham. . . . . . . . . . . . . . . . . . . . . . . . . . . 28,670
D. Page Robertson. . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
B. Ray Mehaffey. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
John W. Nepute . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Mary A. Ferreira . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,846
Monaco Capital Partners. . . . . . . . . . . . . . . . . . . . . . . . . .100
----------
TOTAL 1,300,000

PART B - ADDITIONAL SHARES
- --------------------------
NUMBER OF
SELLING STOCKHOLDERS ADDITIONAL SHARES
------------------- -----------------

Liberty Partners Holding 2 LLC . . . . . . . . . . . . . . . . . . . .215,000
Kay L. Toolson . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Roger A. Vandenberg. . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
D. Page Robertson. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
B. Ray Mehaffey. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,000
John W. Nepute . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,000
----------
TOTAL 315,000

I
<PAGE>
SCHEDULE II

MONACO COACH CORPORATION

NUMBER OF
UNDERWRITER FIRM SHARES
- ----------- ------------

Smith Barney Inc.. . . . . . . . . . . . . . . . . . . . . . . .

William Blair & Company. . . . . . . . . . . . . . . . . . . . .

A.G. Edwards & Sons, Inc.. . . . . . . . . . . . . . . . . . . .
----------
TOTAL 2,100,000
----------

<PAGE>
EXHIBIT 23.1

CONSENT OF COOPERS & LYBRAND L.L.P., INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-2 (File
No. 333- ) of our report, dated January 31, 1997, on our audits of the
consolidated financial statements of Monaco Coach Corporation as of December 30,
1995 and December 28, 1996, and for the years ended December 31, 1994, December
30, 1995 and December 28, 1996. We also consent to the reference to our firm
under the caption "Experts".

COOPERS & LYBRAND L.L.P.

Eugene, Oregon
March 18, 1997

<PAGE>
EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 20, 1996, with respect to the combined
financial statements of Holiday Rambler LLC Recreational Vehicle Manufacturing
Division and Certain Holiday World Retail Operations included in the
Registration Statement (Form S-2) and related Prospectus of Monaco Coach
Corporation for the registration of 2,100,000 shares of its common stock.

ERNST & YOUNG LLP

Milwaukee, Wisconsin
March 17, 1997

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME OF MONACO COACH CORPORATION
AS OF AND FOR THE YEAR ENDED DECEMBER 28, 1996, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 15,031
<ALLOWANCES> 140
<INVENTORY> 46,930
<CURRENT-ASSETS> 73,889
<PP&E> 41,443
<DEPRECIATION> 3,134
<TOTAL-ASSETS> 135,368
<CURRENT-LIABILITIES> 69,387
<BONDS> 16,500
2,687
0
<COMMON> 44
<OTHER-SE> 43,763
<TOTAL-LIABILITY-AND-EQUITY> 135,368
<SALES> 365,638
<TOTAL-REVENUES> 365,638
<CGS> 317,909
<TOTAL-COSTS> 351,897
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,914
<INCOME-PRETAX> 10,071
<INCOME-TAX> 4,162
<INCOME-CONTINUING> 5,909
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,909
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.26

</TABLE>