SPARTAN MOTORS, INC.
STOCK INCENTIVE PLAN OF 2005

Effective May 24, 2005

As amended July 26, 2005

TABLE OF CONTENTS

Section 1

Establishment of Plan; Purpose of Plan

1

 

1.1

Establishment of Plan

1

 

1.2

Purpose of Plan

1

       

Section 2

Definitions

1

       

Section 3

Administration

5

 

3.1

Power and Authority

5

 

3.2

Grants or Awards to Participants

5

 

3.3

Amendments or Modifications of Awards

5

 

3.4

Indemnification of Committee Members

6

       

Section 4

Shares Subject to the Plan

6

 

4.1

Number of Shares

6

 

4.2

Limitation Upon Incentive Awards

6

 

4.3

Adjustments

7

       

Section 5

Stock Options

7

 

5.1

Grant

8

 

5.2

Stock Option Agreements

8

 

5.3

Stock Option Price

8

 

5.4

Medium and Time of Payment

8

 

5.5

Stock Options Granted to 10% Shareholders

8

 

5.6

Limits on Exercisability

8

 

5.7

Restrictions on Transferability

9

 

5.8

Termination of Employment, Directorship or Officer Status

9

       

Section 6

Stock Appreciation Rights

11

 

6.1

Grant

11

 

6.2

Exercise; Payment

11

 

6.3

Annual Grant to Non-Employee Directors

11

       

Section 7

Restricted Stock and Restricted Stock Units

12

 

7.1

Grant

12

 

7.2

Restricted Stock Agreements

12

 

7.3

Vesting

12

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7.4

Termination of Employment, Directorship or Officer Status

12

 

7.5

Restrictions on Transferability

14

 

7.6

Legending of Restricted Stock

14

 

7.7

Rights as a Shareholder

15

 

7.8

Voting Rights

15

 

7.9

Annual Grant to Non-Employee Directors

15

       

Section 8

Stock Awards

16

 

8.1

Grant

16

 

8.2

Rights as a Shareholder

16

       

Section 9

Change in Control

16

 

9.1

Acceleration of Vesting

16

 

9.2

Cash Payment for Stock Options and Stock Appreciation Rights

16

       

Section 10

General Provisions

17

 

10.1

No Rights to Awards

17

 

10.2

Withholding

17

 

10.3

Compliance With Laws; Listing and Registration of Shares

17

 

10.4

No Limit on Other Compensation Arrangements

17

 

10.5

No Right to Employment

18

 

10.6

No Liability of Company

18

 

10.7

Suspension of Rights under Incentive Awards

18

 

10.8

Governing Law

18

 

10.9

Severability

18

       

Section 11

Termination and Amendment

18

 

11.1

 

18

 

11.2

 

19

       

Section 12

Effective Date and Duration of the Plan

19

2

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SPARTAN MOTORS, INC.
STOCK INCENTIVE PLAN OF 2005

SECTION 1

Establishment of Plan; Purpose of Plan

          1.1          Establishment of Plan.  The Company hereby establishes
the STOCK INCENTIVE PLAN OF 2005 (the "Plan") for its directors, corporate,
divisional and Subsidiary officers and other key employees. The Plan permits the
grant and award of Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units and Stock Awards.

          1.2          Purpose of Plan.  The purpose of the Plan is to provide
directors, officers and other key employees of the Company, its divisions and
its Subsidiaries with an increased incentive to contribute to the long-term
performance and growth of the Company and its Subsidiaries, to join the
interests of directors, officers and other key employees with the interests of
the Company's shareholders through the opportunity for increased stock ownership
and to attract and retain directors, officers and other key employees. The Plan
is further intended to provide flexibility to the Company in structuring
long-term incentive compensation to best promote the foregoing objectives.
Within that context, it is intended that most awards of Stock Options under the
Plan are to provide performance-based compensation under Section 162(m) of the
Code and the Plan shall be interpreted, administered and amended if necessary to
achieve that purpose.

SECTION 2

Definitions

          The following words have the following meanings unless a different
meaning plainly is required by the context:

          2.1          "Act" means the Securities Exchange Act of 1934, as
amended.

          2.2          "Board" means the Board of Directors of the Company.

          2.3          "Change in Control," unless otherwise defined in an
Incentive Award, means (a) the failure of the Continuing Directors at any time
to constitute at least a majority of the members of the Board; (b) the
acquisition by any Person other than an Excluded Holder of beneficial ownership
(within the meaning of Rule 13d-3 issued under the Act) of 35% or more of the
outstanding Common Stock or the combined voting power of the Company's
outstanding securities entitled to vote generally in the election of directors;
(c) the approval by the shareholders of the Company of a reorganization, merger
or consolidation, unless with or into a Permitted Successor; or (d) the approval
by the shareholders of the Company of the sale or

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disposition of all or substantially all of the assets of the Company other than
to a Permitted Successor.

          2.4          "Code" means the Internal Revenue Code of 1986, as
amended.

          2.5          "Committee" means the Compensation Committee of the Board
or such other committee as the Board may designate from time to time. The
Committee shall consist of at least 2 members of the Board and all of its
members shall be Non-Employee Directors and "outside directors" as defined in
the regulations issued under Section 162(m) of the Code.

          2.6          "Common Stock" means the Common Stock, $.01 par value, of
the Company.

          2.7          "Company" means Spartan Motors, Inc., a Michigan
corporation, and its successors and assigns.

          2.8          "Competition" means participation, directly or
indirectly, in the ownership, management, financing or control of any business
that is the same as or similar to the present or future businesses of the
Company or any Subsidiary. Such participation may be by way of employment,
consulting services, directorship or officership. Ownership of less than 3% of
the shares of any corporation whose shares are traded publicly on any national
or regional stock exchange or over the counter shall not be deemed Competition.

          2.9          "Continuing Directors" mean the individuals constituting
the Board as of the date this Plan was adopted and any subsequent directors
whose election or nomination for election by the Company's shareholders was
approved by a vote of three-quarters (3/4) of the individuals who are then
Continuing Directors, but specifically excluding any individual whose initial
assumption of office occurs as a result of either an actual or threatened
solicitation subject to Rule 14a-12(c) of Regulation 14A issued under the Act or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board.

          2.10          "Disability" means: (a) a Participant is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months; or (b) a Participant is, by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than three months under an
accident and health plan covering employees of Company.

          2.11          "Employee Benefit Plan" means any plan or program
established by the Company or a Subsidiary for the compensation or benefit of
employees of the Company or any of its Subsidiaries.

          2.12          "Excluded Holder" means (a) any Person who at the time
this Plan was adopted was the beneficial owner of 10% or more of the outstanding
Common Stock; or (b) the Company, a Subsidiary or any Employee Benefit Plan of
the Company or a Subsidiary or any

2

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trust holding Common Stock or other securities pursuant to the terms of an
Employee Benefit Plan.

          2.13          "Incentive Award" means the award or grant of a Stock
Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or
Stock Award to a Participant pursuant to the Plan.

          2.14          "Market Value" shall equal the closing price of Common
Stock reported on Nasdaq on the date of grant, exercise or vesting, as
applicable, or if Nasdaq is closed on that date, the last preceding date on
which Nasdaq was open for trading and on which shares of Common Stock were
traded. If the Common Stock is not listed on Nasdaq, the Market Value shall be
determined by any means deemed fair and reasonable by the Committee, which
determination shall be final and binding on all parties.

          2.15          "Mature Shares" means shares of Common Stock that a
Participant has owned for at least six months and that meet any other holding
requirements established by the Committee for the shares to be used for
attestation.

          2.16          "Nasdaq" means the NASDAQ National Market, or if the
Common Stock is not listed for trading on the on the NASDAQ National Market on
the date in question, then such other United States-based quotation system or
stock exchange on which the Common Stock may be traded on the date in question.

          2.17          "Non-Employee Directors" shall mean individuals who
qualify as such within the meaning of Rule 16b-3 under the Exchange Act (or any
successor definition thereto).

          2.18          "Participant" means a director, corporate officer,
divisional officer or any key employee of the Company, its divisions or its
Subsidiaries who the Committee determines is eligible to participate in the Plan
and who is designated to be granted an Incentive Award under the Plan.

          2.19          "Permitted Successor" means a company that, immediately
following the consummation of a transaction specified in clauses (c) and (d) of
the definition of "Change in Control" above, satisfies each of the following
criteria: (a) 50% or more of the outstanding common stock of the company and the
combined voting power of the outstanding securities of the company entitled to
vote generally in the election of directors (in each case determined immediately
following the consummation of the applicable transaction) is beneficially owned,
directly or indirectly, by all or substantially all of the Persons who were the
beneficial owners of the outstanding Common Stock and outstanding securities
entitled to vote generally in the election of directors (respectively)
immediately prior to the applicable transaction; (b) no Person other than an
Excluded Holder beneficially owns, directly or indirectly, 10% or more of the
outstanding common stock of the company or the combined voting power of the
outstanding securities of the company entitled to vote generally in the election
of directors (for these purposes the term Excluded Holder shall include the
company, any subsidiary of the company and any employee benefit plan of the
company or any such subsidiary or any trust holding

3

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common stock or other securities of the company pursuant to the terms of any
such employee benefit plan); and (c) at least a majority of the board of
directors of the company is comprised of Continuing Directors.

          2.20          "Person" has the same meaning as set forth in Sections
13(d) and 14(d)(2) of the Act.

          2.21          "Restricted Period" means the period of time during
which Restricted Stock or Restricted Stock Units awarded under the Plan are
subject to the risk of forfeiture, restrictions on transfer and other
restrictions and/or conditions pursuant to Section 7. The Restricted Period may
differ among Participants and may have different expiration dates with respect
to shares of Common Stock covered by the same Incentive Award.

          2.22          "Restricted Stock" means Common Stock awarded to a
Participant pursuant to Section 7 of the Plan.

          2.23          "Restricted Stock Unit" means an award to a Participant
pursuant to Section 7 of the Plan as described in Section 7.

          2.24          "Retirement" means any of the following: (a) the
voluntary termination by a Participant of all employment with the Company, (b)
the fulfillment of the term for which a director of the Company was elected
followed by that director standing for re-election at a meeting of the Company's
shareholders and failing to be re-elected, or (c) the fulfillment of the term
for which a director of the Company was elected followed by that director not
standing for re-election (as applicable) after the Participant has attained 62
years of age, or such other age as shall be determined by the Committee in its
sole discretion or as otherwise may be set forth in the Incentive Award
agreement or other grant document with respect to a Participant and a particular
Incentive Award.

          2.25          "Stock Appreciation Right" or "SAR" means a right
awarded to a Participant pursuant to Section 6 of the Plan, which shall entitle
the Participant to receive cash, Common Stock, other property or a combination
thereof, as determined by the Committee, having a value on the date the SAR is
exercised equal to the excess of (a) the Market Value of a share of Common Stock
at the time of exercise over (b) the base price of the right, as established by
the Committee on the date the award is granted.

          2.26          "Stock Award" means an award of Common Stock awarded to
a Participant pursuant to Section 8 of the Plan.

          2.27          "Stock Option" means the right to purchase Common Stock
at a stated price for a specified period of time. For purposes of the Plan, a
Stock Option may be either an incentive stock option within the meaning of
Section 422(b) of the Code or a nonqualified stock option.

4

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          2.28          "Subsidiary" means any corporation or other entity of
which 50% or more of the outstanding voting stock or voting ownership interest
is directly or indirectly owned or controlled by the Company or by one or more
Subsidiaries of the Company.

SECTION 3

Administration

          3.1          Power and Authority.  The Committee shall administer the
Plan. The Committee may delegate record keeping, calculation, payment and other
ministerial administrative functions to individuals designated by the Committee,
who may be officers or employees of the Company or its Subsidiaries. Except as
limited in this Plan or as may be necessary to ensure that this Plan provides
performance-based compensation under Section 162(m) of the Code, the Committee
shall have all of the express and implied powers and duties set forth in the
Bylaws of the Company and this Plan, shall have full power and authority to
interpret the provisions of the Plan and Incentive Awards granted under the Plan
and shall have full power and authority to supervise the administration of the
Plan and Incentive Awards granted under the Plan and to make all other
determinations and do all things considered necessary or advisable for the
administration of the Plan. All determinations, interpretations and selections
made by the Committee regarding the Plan shall be final and conclusive. The
Committee shall hold its meetings at such times and places as it considers
advisable. Action may be taken by a written instrument signed by all of the
members of the Committee and any action so taken shall be fully as effective as
if it had been taken at a meeting duly called and held. The Committee shall make
such rules and regulations for the conduct of its business as it considers
advisable.

          3.2          Grants or Awards to Participants.  In accordance with and
subject to the provisions of the Plan, the Committee shall have the authority to
determine all provisions of Incentive Awards as the Committee may consider
necessary or desirable and as are consistent with the terms of the Plan,
including, without limitation, the following: (a) the persons who shall be
selected as Participants; (b) the nature and, subject to the limitations set
forth in Sections 4.1 and 4.2 of the Plan, extent of the Incentive Awards to be
made to each Participant (including the number of shares of Common Stock to be
subject to each Incentive Award, any exercise or purchase price, the manner in
which an Incentive Award will vest or become exercisable and the form of payment
for the Incentive Award); (c) the time or times when Incentive Awards will be
granted; (d) the duration of each Incentive Award; and (e) the restrictions and
other conditions to which payment or vesting of Incentive Awards may be subject.

          3.3          Amendments or Modifications of Awards.  Subject to
Section 11, the Committee shall have the authority to amend or modify the terms
of any outstanding Incentive Award in any manner, provided that the amended or
modified terms are not prohibited by the Plan as then in effect, including,
without limitation, the authority to: (a) modify the number of shares or other
terms and conditions of an Incentive Award; (b) extend the term of an Incentive
Award; (c) accelerate the exercisability or vesting or otherwise terminate,
waive or modify any restrictions relating to an Incentive Award; (d) accept the
surrender of any outstanding Incentive

5

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Award; and (e) to the extent not previously exercised or vested, authorize the
grant of new Incentive Awards in substitution for surrendered Incentive Awards;
provided, that Incentive Awards issued under the Plan may not be repriced,
replaced, regranted through cancellation or modified without shareholder
approval if the effect of such repricing, replacement, regrant or modification
would be to reduce the exercise price or base price of such Incentive Awards to
the same Participants.

          3.4          Indemnification of Committee Members.  Neither any member
or former member of the Committee nor any individual to whom authority is or has
been delegated shall be personally responsible or liable for any act or omission
in connection with the performance of powers or duties or the exercise of
discretion or judgment in the administration and implementation of the Plan.
Each person who is or shall have been a member of the Committee shall be
indemnified and held harmless by the Company from and against any cost,
liability or expense imposed or incurred in connection with such person's or the
Committee's taking or failing to take any action under the Plan. Each such
person shall be justified in relying on information furnished in connection with
the Plan's administration by any appropriate person or persons.

SECTION 4

Shares Subject to the Plan

          4.1          Number of Shares.  Subject to adjustment as provided in
Section 4.3 of the Plan, the total number of shares of Common Stock available
for Incentive Awards under the Plan shall be 600,000 shares of Common Stock;
plus shares subject to Incentive Awards that are canceled, surrendered,
modified, exchanged for substitute Incentive Awards or expire or terminate prior
to the exercise or vesting of the Incentive Award in full and shares that are
surrendered to the Company in connection with the exercise or vesting of an
Incentive Award, whether previously owned or otherwise subject to such Incentive
Award; provided, that not more than 50% of the shares authorized for issuance
under the Plan pursuant to this Section 4.1 may be issued as Stock Awards,
Restricted Stock or Restricted Stock Units. Such shares shall be authorized and
may be either unissued shares, shares issued and repurchased by the Company
(including shares purchased on the open market), shares issued and otherwise
reacquired by the Company and shares otherwise held by the Company.

          4.2          Limitation Upon Incentive Awards.  No Participant shall
be granted, during any calendar year, Incentive Awards with respect to more than
125,000 shares of Common Stock, subject to adjustment as provided in Section 4.3
of the Plan, but only to the extent that such adjustment will not affect the
status of any Incentive Award theretofore issued or that may thereafter be
issued as "performance based compensation" under Section 162(m) of the Code. A
purpose of this Section 4.2 is to ensure that the Plan may provide
performance-based compensation under Section 162(m) of the Code and this Section
4.2 shall be interpreted, administered and amended if necessary to achieve that
purpose.

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          4.3          Adjustments.

          (a)          Stock Dividends and Distributions.  If the number of
shares of Common Stock outstanding changes by reason of a stock dividend, stock
split, recapitalization or other general distribution of Common Stock or other
securities to holders of Common Stock, the Committee shall provide that the
number and kind of securities available for Incentive Awards and reserved for
issuance under the Plan and the limitation provided in Section 4.2, together
with applicable exercise prices and base prices, as well as the number and kind
of securities available for issuance under the Plan, shall be adjusted in such
manner and at such time as it determines shall be appropriate under the
circumstances. No fractional shares shall be issued pursuant to the Plan and any
fractional shares resulting from such adjustments shall be eliminated from the
respective Incentive Awards.

          (b)          Other Actions Affecting Common Stock.  If there occurs,
other than as described in the preceding subsection, any merger, business
combination, recapitalization, reclassification, subdivision or combination
approved by the Board that would result in the Persons who were shareholders of
the Company immediately prior to the effective time of any such transaction
owning or holding, in lieu of or in addition to shares of Common Stock, other
securities, money and/or property (or the right to receive other securities,
money and/or property) immediately after the effective time of such transaction,
then the Committee shall provide that the outstanding Incentive Awards
(including exercise prices and base prices) and reserves for Incentive Awards
under this Plan shall be adjusted in such manner and at such time as it
determines shall be appropriate under the circumstances. It is intended that in
the event of any such transaction, Incentive Awards under this Plan shall
entitle the holder of each Incentive Award to receive (upon exercise in the case
of Stock Options and SARs), in lieu of or in addition to shares of Common Stock,
any other securities, money and/or property receivable upon consummation of any
such transaction by holders of Common Stock with respect to each share of Common
Stock outstanding immediately prior to the effective time of such transaction;
upon any such adjustment, holders of Incentive Awards under this Plan shall have
only the right to receive in lieu of or in addition to shares of Common Stock
such other securities, money and/or other property as provided by the
adjustment. If the agreement, resolution or other document approved by the Board
to effect any such transaction provides for the adjustment of Incentive Awards
under the Plan in connection with such transaction, then the adjustment
provisions contained in such agreement, resolution or other document shall be
final and conclusive.

SECTION 5

Stock Options

          5.1          Grant.  A Participant may be granted one or more Stock
Options under the Plan. No Participant shall have any rights as a shareholder
with respect to any shares of stock subject

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to Stock Options granted hereunder until said shares have been issued. Stock
Options shall be subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in its sole
discretion. In addition, the Committee may vary, among Participants and among
Stock Options granted to the same Participant, any and all of the terms and
conditions of the Stock Options granted under the Plan. Subject to the
limitation imposed by Section 4.2 of the Plan, the Committee shall have complete
discretion in determining the number of Stock Options granted to each
Participant. The Committee may designate whether or not a Stock Option is to be
considered an incentive stock option as defined in Section 422(b) of the Code;
provided, that the number of shares of Common Stock that may be designated as
subject to incentive stock options for any given Participant shall be limited to
that number of shares that become exercisable for the first time by the
Participant during any calendar year (under all plans of the Company and its
Subsidiaries) and have an aggregate Market Value less than or equal to $100,000
(or such other amount as may be set forth in the Code) and all shares subject to
an Incentive Award that have a Market Value in excess of such aggregate amount
shall automatically be subject to Stock Options that are not incentive stock
options. Stock Options granted to directors who are not employees of the Company
or its Subsidiaries shall not be treated as incentive stock options under
Section 422(b) of the Code.

          5.2          Stock Option Agreements  Stock Options shall be evidenced
by stock option agreements and/or certificates of award containing the terms and
conditions applicable to such Stock Options. To the extent not covered by the
stock option agreement, the terms and conditions of this Section 5 shall govern.

          5.3          Stock Option Price.  The per share Stock Option exercise
price shall be determined by the Committee, but shall be a price that is equal
to or greater than 100% of the Market Value on the date of grant. The date of
grant of a Stock Option shall be the date the Stock Option is authorized by the
Committee or a future date specified by the Committee as the date for issuing
the Stock Option.

          5.4          Medium and Time of Payment.  The exercise price for each
share purchased pursuant to a Stock Option granted under the Plan shall be
payable in cash or, if the Committee consents or provides in the applicable
stock option agreement or grant, in Mature Shares or other consideration
substantially equivalent to cash. The time and terms of payment may be amended
with the consent of a Participant before or after exercise of a Stock Option.
The Committee may implement a program for the broker-assisted cashless exercise
of Stock Options.

          5.5          Stock Options Granted to 10% Shareholders.  No Stock
Option granted to any Participant who at the time of such grant owns, together
with stock attributed to such Participant under Section 424(d) of the Code, more
than 10% of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries may be designated as an incentive stock
option, unless such Stock Option provides an exercise price equal to at least
110% of the Market Value on the date of grant and the exercise of the Stock
Option after the expiration of five years from the date of grant of the Stock
Option is prohibited by its terms.

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          5.6          Limits on Exercisability.  Except as set forth in Section
5.5, Stock Options shall be exercisable for such periods, not to exceed 10 years
from the date of grant, as may be fixed by the Committee. At the time of
exercise of a Stock Option, the holder of the Stock Option, if requested by the
Committee, must represent to the Company that the shares are being acquired for
investment and not with a view to the distribution thereof. The Committee may in
its discretion require a Participant to continue the Participant's service with
the Company and its Subsidiaries for a certain length of time prior to a Stock
Option becoming exercisable and may eliminate such delayed vesting provisions.

          5.7          Restrictions on Transferability.

          (a)          General.  Unless the Committee otherwise consents or
permits (before or after the option grant) or unless the stock option agreement
or grant provides otherwise, Stock Options granted under the Plan may not be
sold, exchanged, transferred, pledged, assigned or otherwise alienated or
hypothecated except by will or the laws of descent and distribution, and, as a
condition to any transfer permitted by the Committee or the terms of the stock
option agreement or grant, the transferee must execute a written agreement
permitting the Company to withhold from the shares subject to the Stock Option a
number of shares having a Market Value at least equal to the amount of any
federal, state or local withholding or other taxes associated with or resulting
from the exercise of a Stock Option. All provisions of a Stock Option that are
determined with reference to the Participant, including without limitation those
that refer to the Participant's employment with the Company or its Subsidiaries,
shall continue to be determined with reference to the Participant after any
transfer of a Stock Option.

          (b)          Other Restrictions.  The Committee may impose other
restrictions on any shares of Common Stock acquired pursuant to the exercise of
a Stock Option under the Plan as the Committee deems advisable, including,
without limitation, holding periods or further transfer restrictions, forfeiture
or "claw-back" provisions, and restrictions under applicable federal or state
securities laws.

          5.8          Termination of Employment, Directorship or Officer
Status.  Unless the Committee otherwise consents or permits (before or after the
option grant) or unless the stock option agreement or grant provides otherwise:

          (a)          General.  If a Participant ceases to be a director of the
Company or ceases to be employed by or an officer of the Company or one of its
Subsidiaries for any reason other than the Participant's death, Disability,
Retirement or termination for cause (which are addressed below in Subsections
5.8(b), (c), (d) and (e), respectively), the Participant may exercise his or her
Stock Options in accordance with their terms for a period of three months after
such termination of employment, directorship or officer status, but only to the
extent the Participant was entitled to exercise the Stock Options on the date of
termination unless the Committee otherwise consents or the terms of the stock
option agreement provide otherwise, and not beyond the original terms of the
Stock Options. For purposes of the Plan, the following shall not be considered a
termination of

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employment, or, where applicable, directorship or officer status: (i) a transfer
of an employee from the Company to any Subsidiary; (ii) a leave of absence, duly
authorized in writing by the Company, for military service or for any other
purpose approved by the Company if the period of such leave does not exceed 90
days; (iii) a leave of absence in excess of 90 days, duly authorized in writing
by the Company, provided that the employee's right to re-employment is
guaranteed by statute, contract or written policy of the Company; (iv) a
termination of employment with continued service as an officer or director; or
(v) a termination of a directorship with continued service as an employee or
officer. For purposes of the Plan, termination of employment shall be considered
to occur on the date on which the employee is no longer obligated to perform
services for the Company or any of its Subsidiaries and the employee's right to
re-employment is not guaranteed by statute, contract or written policy of the
Company, regardless of whether the employee continues to receive compensation
from the Company or any of its Subsidiaries after such date.

          (b)          Death.  If a Participant dies either while a director of
the Company or an employee or officer of the Company or one of its Subsidiaries
or after the termination of employment or directorship other than for cause
(termination for cause is addressed below in Subsection 5.8(e)) but during the
time when the Participant could have exercised a Stock Option, the Stock Options
issued to such Participant shall be exercisable in accordance with their terms
by the personal representative of such Participant or other successor to the
interest of the Participant for one year after the Participant's death, but only
to the extent that the Participant was entitled to exercise the Stock Options on
the date of death or termination of employment or directorship, whichever first
occurred, and not beyond the original terms of the Stock Options.

          (c)          Disability.  If a Participant ceases to be a director of
the Company or ceases to be an employee or officer of the Company or one of its
Subsidiaries due to the Participant's Disability, the Participant may exercise
his or her Stock Options in accordance with their terms for one year following
such termination of employment or directorship, but only to the extent that the
Participant was entitled to exercise the Stock Options on the date of such event
and not beyond the original terms of the Stock Options.

          (d)          Participant Retirement.  If a Participant Retires as a
director of the Company or an employee or officer of the Company or one of its
Subsidiaries, Stock Options granted under the Plan may be exercised in
accordance with their terms during the remaining terms of the Stock Options.

          (e)          Termination for Cause.  Notwithstanding anything to the
contrary in this Section 5.8, if a Participant is terminated for cause, the
Participant shall have no further right to exercise any Stock Options previously
granted. For purposes of the Plan, the Committee or officers designated by the
Committee shall have absolute discretion to determine whether a termination is
for cause.

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          (f)          Additional Provisions in Stock Option Agreements.  The
Committee may, in its sole discretion, provide by resolution or by including
provisions in any stock option agreement entered into with a Participant that
the Participant shall have no further right to exercise any Stock Options after
termination of employment or directorship if the Committee determines the
Participant has entered into Competition with the Company.

SECTION 6

Stock Appreciation Rights

          6.1          Grant.  A Participant may be granted one or more Stock
Appreciation Rights under the Plan and such SARs will be subject to such terms
and conditions, consistent with the other provisions of the Plan, as will be
determined by the Committee in its sole discretion. A SAR may relate to a
particular Stock Option and may be granted simultaneously with or subsequent to
the Stock Option to which it relates. Except to the extent otherwise modified in
the grant, (i) SARs not related to a Stock Option shall be granted subject to
the same terms and conditions applicable to Stock Options as set forth in
Section 5, and (ii) all SARs related to Stock Options granted under the Plan
shall be granted subject to the same restrictions and conditions and shall have
the same vesting, exercisability, forfeiture and termination provisions as the
Stock Options to which they relate. SARs may be subject to additional
restrictions and conditions. The per-share base price for exercise or settlement
of SARs shall be determined by the Committee, but shall be a price that is equal
to or greater than the Market Value of such shares on the date of the grant.

          6.2          Exercise; Payment.  To the extent granted in tandem with
a Stock Option, SARs may be exercised only when a related Stock Option could be
exercised and only when the Market Value of the stock subject to the Stock
Option exceeds the exercise price of the Stock Option. Unless the Committee
decides otherwise (in its sole discretion), SARs will only be paid in cash or in
shares of Common Stock. Other than as adjusted pursuant to Section 4.3, the base
price of SARs may not be reduced without shareholder approval (including
canceling previously awarded SARs and regranting them with a lower base price).

          6.3          Annual Grant to Non-Employee Directors.  Subject to the
limitation imposed by Section 4.2 and the adjustments provided for by Section
4.3, and in lieu of all Stock Options to be granted to non-employee directors on
December 31 of each year under the Spartan Motors, Inc. Stock Option and
Restricted Stock Plan of 1998 and/or the Spartan Motors, Inc. Stock Option and
Restricted Stock Plan of 2003, Stock Appreciation Rights with respect to 1,750
shares of Common Stock shall be granted automatically on December 31 of each
year (beginning on December 31, 2005), to each director of the Company who is,
at the time of such grant, a Non-Employee Director; provided, however, that if
any Non-Employee Director is at the time of grant the Chairman of the Board, the
number of shares subject to the SARs granted to that Non-Employee Director on
such date shall be 3,750. The automatic grants provided for by this Section 6.3
may be suspended, modified or terminated by the Board, in its sole discretion.

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SECTION 7

Restricted Stock and Restricted Stock Units

          7.1          Grant.  Subject to the limitations set forth in Sections
4.1 and 4.2 of the Plan, Restricted Stock and Restricted Stock Units may be
granted to Participants under the Plan. Shares of Restricted Stock are shares of
Common Stock the retention, vesting and/or transferability of which is subject,
during specified periods of time, to such conditions (including continued
employment or performance conditions) and terms as the Committee deems
appropriate. Restricted Stock Units are Incentive Awards denominated in units of
Common Stock under which the issuance of shares of Common Stock is subject to
such conditions (including continued employment or performance conditions) and
terms as the Committee deems appropriate. For purposes of determining the number
of shares available under the Plan, each Restricted Stock Unit shall count as
the number of shares of Common Stock subject to the Restricted Stock Unit.
Unless determined otherwise by the Committee, each Restricted Stock Unit will be
equal to one share of Common Stock and will entitle a Participant to either
shares of Common Stock or an amount of cash determined with reference to the
value of shares of Common Stock. To the extent determined by the Committee,
Restricted Stock and Restricted Stock Units may be satisfied or settled in
Common Stock, cash or a combination thereof. Restricted Stock and Restricted
Stock Units granted pursuant to the Plan need not be identical but shall be
consistent with the terms of the Plan. Subject to the requirements of applicable
law, the Committee shall determine the price, if any, at which awards of
Restricted Stock or Restricted Stock Units, or shares of Common Stock issuable
under Restricted Stock Unit awards, shall be sold or awarded to a Participant,
which may vary from time to time and among Participants.

          7.2          Restricted Stock Agreements.  Awards of Restricted Stock
and Restricted Stock Units shall be evidenced by restricted stock or restricted
stock unit agreements or certificates of award containing such terms and
conditions, consistent with the provisions of the Plan, as the Committee shall
from time to time determine. Unless the restricted stock or restricted stock
unit agreement or certificate provides otherwise, Restricted Stock and
Restricted Stock Unit awards shall be subject to the terms and conditions set
forth in this Section 7.

          7.3          Vesting.  The grant, issuance, retention, vesting and/or
settlement of shares of Restricted Stock and Restricted Stock Units shall occur
at such time and in such installments as determined by the Committee or under
criteria established by the Committee. The Committee shall have the right to
make the timing of the grant and/or the issuance, ability to retain, vesting
and/or settlement of shares of Restricted Stock and under Restricted Stock Units
subject to continued employment, passage of time and/or such performance
criteria as deemed appropriate by the Committee.

          7.4          Termination of Employment, Directorship or Officer
Status.  Unless the Committee otherwise consents or permits (before or after the
grant of Restricted Stock or Restricted Stock Units) or unless the restricted
stock or restricted stock unit agreement or grant provides otherwise:

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          (a)          General.  In the event of termination of employment,
directorship or officer status during the Restricted Period for any reason other
than death, Disability, Retirement or termination for cause (which are addressed
below in Subsections 7.4(b), (c), (d) and (e), respectively), each Restricted
Stock and Restricted Stock Unit award still subject in full or in part to
restrictions at the date of such termination shall automatically be forfeited
and returned to the Company. For purposes of the Plan, the following shall not
be considered a termination of employment, or, where applicable, directorship or
officer status: (i) a transfer of an employee from the Company to any
Subsidiary; (ii) a leave of absence, duly authorized in writing by the Company,
for military service or for any other purpose approved by the Company if the
period of such leave does not exceed 90 days; (iii) a leave of absence in excess
of 90 days duly authorized in writing by the Company, provided that the
employee's right to re-employment is guaranteed by statute, contract or written
policy of the Company; (iv) a termination of employment with continued service
as an officer or director; or (v) a termination of a directorship with continued
service as an employee or officer. For purposes of the Plan, termination of
employment shall be considered to occur on the date on which the employee is no
longer obligated to perform services for the Company or any of its Subsidiaries
and the employee's right to re-employment is not guaranteed by statute, contract
or written policy of the Company, regardless of whether the employee continues
to receive compensation from the Company or any of its Subsidiaries after such
date.

          (b)          Death.  If a Participant dies either while a director of
the Company or an employee or officer of the Company or one of its Subsidiaries
or after the termination of employment or directorship other than for cause
(termination for cause is addressed below in Subsection 7.4(e)) but during the
time when the Participant holds Restricted Stock or Restricted Stock Units still
subject in full or in part to restrictions at the date of death, (1) the
Participant's Restricted Stock and Restricted Stock Units subject to a
Restricted Period of one year or less from the date of the Participant's death
shall vest in accordance with their terms and the Participant's ownership (or
that of his successor in interest) of such Restricted Stock and Restricted Stock
Units shall not be affected by the Participant's death, and (2) the
Participant's Restricted Stock and Restricted Stock Units subject to a
Restricted Period of more than one year from the date of the Participant's death
shall be forfeited and returned to the Company. Notwithstanding any provisions
to the contrary in this paragraph, the Committee may, in its sole discretion and
either before or after the Participant's death, waive the restrictions remaining
on any or all remaining shares of Restricted Stock and Restricted Stock Units.

          (c)          Disability.  If a Participant ceases to be a director of
the Company or ceases to be an employee or officer of the Company or one of its
Subsidiaries due to the Participant's Disability, (1) the Participant's
Restricted Stock and Restricted Stock Units subject to a Restricted Period of
one year or less from the date the Participant became Disabled shall vest in
accordance with their terms and the Participant's ownership of such Restricted
Stock and Restricted Stock Units shall not be affected by such Disability, and
(2) the Participant's Restricted Stock and Restricted Stock Units subject to a
Restricted Period of more than one year from the date the Participant became
Disabled shall be

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forfeited and returned to the Company. Notwithstanding any provisions to the
contrary in this paragraph, the Committee may, in its sole discretion and either
before or after the Participant becomes Disabled, waive the restrictions
remaining on any or all remaining shares of Restricted Stock and Restricted
Stock Units.

          (d)          Participant Retirement.  If a Participant Retires as a
director of the Company or an employee or officer of the Company or one of its
Subsidiaries, Restricted Stock and Restricted Stock Units granted under the Plan
shall vest in accordance with their terms and the Participant's ownership of the
Restricted Stock and Restricted Stock Units shall not be affected by such
Retirement.

          (e)          Termination for Cause.  Notwithstanding anything to the
contrary in this Section 7.4, if a Participant's employment or directorship is
terminated for cause, the Participant shall have no further right to receive any
Restricted Stock or Restricted Stock Units and all Restricted Stock and
Restricted Stock Units still subject to restrictions at the date of such
termination shall automatically be forfeited and returned to the Company. For
purposes of the Plan, the Committee or officers designated by the Committee
shall have absolute discretion to determine whether a termination is for cause.

          7.5          Restrictions on Transferability.

          (a)          General.  Unless the Committee otherwise consents or
permits or unless the terms of the restricted stock or restricted stock unit
agreement or grant provide otherwise: (i) shares of Restricted Stock or and
interests in Restricted Stock Units shall not be sold, exchanged, transferred,
pledged, assigned or otherwise alienated or hypothecated during the Restricted
Period except by will or the laws of descent and distribution; and (ii) all
rights with respect to Restricted Stock and Restricted Stock Units granted to a
Participant under the Plan shall be exercisable during the Participant's
lifetime only by such Participant, his or her guardian or legal representative.

          (b)          Other Restrictions.  The Committee may impose other
restrictions on any shares of Common Stock subject to Restricted Stock and
Restricted Stock Unit awards under the Plan as the Committee considers
advisable, including, without limitation, holding periods or further transfer
restrictions, forfeiture or "claw-back" provisions, and restrictions under
applicable federal or state securities laws.

          7.6          Legending of Restricted Stock.  In addition to any other
legend that may be set forth on a Participant's share certificate, any
certificates evidencing shares of Restricted Stock awarded pursuant to the Plan
shall bear the following legend:

> The shares represented by this certificate were issued subject to certain
> restrictions under the Spartan Motors, Inc. Stock Incentive Plan of 2005 (the
> "Plan"). This certificate is held subject to the terms and conditions
> contained in a restricted stock agreement that includes a prohibition against
> the sale or transfer of the stock represented by this certificate except in
> compliance with that

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> agreement and that provides for forfeiture upon certain events. Copies of the
> Plan and the restricted stock agreement are on file in the office of the
> Secretary of the Company.

The Committee may require that certificates representing shares of Restricted
Stock be retained and held in escrow by a designated employee or agent of the
Company or any Subsidiary until any restrictions applicable to shares of
Restricted Stock so retained have been satisfied or lapsed.

          7.7          Rights as a Shareholder.  A Participant shall have all
dividend, liquidation and other rights with respect to Restricted Stock held by
such Participant as if the Participant held unrestricted Common Stock; provided,
that the unvested portion of any award of Restricted Stock shall be subject to
any restrictions on transferability or risks of forfeiture imposed pursuant to
this Section 7 and the terms and conditions set forth in the Participant's
restricted stock agreement. Unless the Committee otherwise determines or unless
the terms of the applicable restricted stock unit agreement or grant provide
otherwise, a Participant shall have all dividend and liquidation rights with
respect to shares of Common Stock subject to awards of Restricted Stock Units
held by such Participant as if the Participant held unrestricted Common Stock.
Unless the Committee determines otherwise or unless the terms of the applicable
restricted stock or restricted stock unit agreement or grant provide otherwise,
any noncash dividends or distributions paid with respect to shares of unvested
Restricted Stock and shares of Common Stock subject to unvested Restricted Stock
Units shall be subject to the same restrictions and vesting schedule as the
shares to which such dividends or distributions relate.

          7.8          Voting Rights.  Unless otherwise determined by the
Committee, Participants holding shares of Restricted Stock granted hereunder may
exercise full voting rights with respect to those shares during the Restricted
Period. Participants shall have no voting rights with respect to shares of
Common Stock underlying Restricted Stock Units unless and until such shares are
reflected as issued and outstanding shares on the Company's stock ledger.

          7.9          Annual Grant to Non-Employee Directors.  Subject to the
limitation imposed by Section 4.2 and the adjustments provided for by Section
4.3 and in lieu of all Stock Options to be granted to non-employee directors on
June 30 of each year under the Spartan Motors, Inc. Stock Option and Restricted
Stock Plan of 1998 and/or the Spartan Motors, Inc. Stock Option and Restricted
Stock Plan of 2003, 2,100 shares of Restricted Stock shall be granted
automatically on June 30 of each year (beginning on June 30, 2006), to each
director of the Company who is, at the time of such grant, a Non-Employee
Director; provided, however, that if any Non-Employee Director is at the time of
grant the Chairman of the Board, the number of shares of Restricted Stock
granted to that Non-Employee Director on such date shall be 4,500. The
Restricted Period(s) for such Restricted Stock shall be not less than one year
from the date of grant, during which time such Restricted Stock shall be
restricted from being sold, exchanged, transferred, pledged, assigned or
otherwise alienated or hypothecated, except by will or according to the laws of
descent and distribution. Such Restricted Stock shall be subject to all of the
provisions of this Section 7. The automatic grants provided for by this Section
7.9 may be suspended, modified or terminated by the Board, in its sole
discretion.

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SECTION 8

Stock Awards

          8.1          Grant.  Subject to the limitations set forth in Sections
4.1 and 4.2 of the Plan, a Participant may be granted one or more Stock Awards
under the Plan. Stock Awards shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee in its sole discretion.

          8.2          Rights as a Shareholder.  A Participant shall have all
voting, dividend, liquidation and other rights with respect to shares of Common
Stock issued to the Participant as a Stock Award under this Section 8 upon the
Participant becoming the holder of record of the Common Stock granted pursuant
to such Stock Award; provided, that the Committee may impose such restrictions
on the assignment or transfer of Common Stock awarded pursuant to a Stock Award
as it considers appropriate.

SECTION 9

Change in Control

          9.1          Acceleration of Vesting.  If a Change in Control of the
Company shall occur, then, unless the Committee or the Board otherwise
determines with respect to one or more Incentive Awards, without action by the
Committee or the Board: (a) all outstanding Stock Options and Stock Appreciation
Rights shall become immediately exercisable in full and shall remain exercisable
during the remaining terms thereof as set forth in Sections 5.6 and 6.1,
regardless of whether the Participants to whom such Stock Options and Stock
Appreciation Rights have been granted remain in the employ or service of the
Company or any Subsidiary; and (b) all other outstanding Incentive Awards shall
become immediately fully vested and exercisable and nonforfeitable.

          9.2          Cash Payment for Stock Options and Stock Appreciation
Rights.  If a Change in Control of the Company shall occur, then the Committee,
in its sole discretion, without the consent of any Participant affected thereby,
may determine that some or all Participants holding outstanding Stock Options
and/or Stock Appreciation Rights shall receive, with respect to some or all of
the shares of Common Stock subject to such Stock Options and/or Stock
Appreciation Rights, as of the effective date of any such Change in Control of
the Company, cash in an amount equal to the greater of the excess of (a) the
highest sales price of the shares on Nasdaq on the date immediately prior to the
effective date of such Change in Control of the Company or (b) the highest price
per share actually paid in connection with any Change in Control of the Company
over the exercise price per share of such Stock Options and/or the base price
per share of such Stock Appreciation Rights.

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SECTION 10

General Provisions

          10.1          No Rights to Awards.  No Participant or other person
shall have any claim to be granted any Incentive Award under the Plan and there
is no obligation of uniformity of treatment of Participants or holders or
beneficiaries of Incentive Awards under the Plan. The terms and conditions of
Incentive Awards of the same type and the determination of the Committee to
grant a waiver or modification of any Incentive Award and the terms and
conditions thereof need not be the same with respect to each Participant or the
same Participant.

          10.2          Withholding.  The Company or a Subsidiary shall be
entitled to: (a) withhold and deduct from future wages of a Participant (or from
other amounts that may be due and owing to a Participant from the Company or a
Subsidiary), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any and all federal, state, local and
foreign withholding and employment-related tax requirements attributable to an
Incentive Award, including, without limitation, the grant, exercise or vesting
of, or payment of dividends with respect to, an Incentive Award or a
disqualifying disposition of Common Stock received upon exercise of an incentive
stock option; or (b) require a Participant promptly to remit the amount of such
withholding to the Company before taking any action with respect to an Incentive
Award. Unless the Committee determines otherwise, withholding may be satisfied
(but only to the extent required to satisfy the minimum amount required to be
withheld by law or regulation) by withholding Common Stock to be received upon
exercise or vesting of an Incentive Award or by delivery to the Company of
previously owned Common Stock. The Company may establish such rules and
procedures concerning timing of any withholding election as it deems
appropriate.

          10.3          Compliance With Laws; Listing and Registration of
Shares.  All Incentive Awards granted under the Plan (and all issuances of
Common Stock or other securities under the Plan) shall be subject to all
applicable laws, rules and regulations, and to the requirement that if at any
time the Committee shall determine, in its discretion, that the listing,
registration or qualification of the shares covered thereby upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the grant of such Incentive Award or the issuance or purchase
of shares thereunder, such Incentive Award may not be exercised in whole or in
part, or the restrictions on such Incentive Award shall not lapse, unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.

          10.4          No Limit on Other Compensation Arrangements.  Nothing
contained in the Plan shall prevent the Company or any Subsidiary from adopting
or continuing in effect other or additional compensation arrangements, including
the grant of stock options and other stock-based awards, and such arrangements
may be either generally applicable or applicable only in specific cases.

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          10.5          No Right to Employment.  The grant of an Incentive Award
shall not be construed as giving a Participant the right to be retained in the
employ or directorship of the Company or any Subsidiary. The Company or any
Subsidiary may at any time dismiss a Participant from employment and a
directorship may be terminated consistent with the Company's Restated Articles
of Incorporation and Bylaws, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any written
agreement with a Participant.

          10.6          No Liability of Company.  The Company and any Subsidiary
or affiliate which is in existence or hereafter comes into existence shall not
be liable to a Participant or any other person as to: (a) the non-issuance or
sale of Common Stock as to which the Company has been unable to obtain from any
regulatory body having jurisdiction the authority deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any shares hereunder;
(b) any tax consequence to any Participant or other person due to the receipt,
exercise or settlement of any Incentive Award granted hereunder; and (c) any
provision of law or legal restriction that prohibits or restricts the transfer
of shares of Common Stock issued pursuant to any Incentive Award.

          10.7          Suspension of Rights under Incentive Awards.  The
Company, by written notice to a Participant, may suspend a Participant's and any
transferee's rights under any Incentive Award for a period not to exceed 60 days
while the termination for cause of that Participant's employment or directorship
with the Company and its Subsidiaries is under consideration.

          10.8          Governing Law.  The validity, construction and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the State of Michigan and applicable federal law.

          10.9          Severability.  In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining provisions of the Plan and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included, unless such construction would cause the Plan to fail in its essential
purposes.

SECTION 11

Termination and Amendment

          11.1          The Board may terminate the Plan at any time or may from
time to time amend or alter the Plan or any aspect of it as it considers proper
and in the best interests of the Company, provided that no such amendment may be
made, without the approval of shareholders of the Company, that would (i) reduce
the exercise price at which Stock Options, or the base price at which Stock
Appreciation Rights, may be granted below the prices provided for in Sections
5.3 and 6.1, respectively (ii) reduce the exercise price of outstanding Stock
Options or the base price of outstanding Stock Appreciation Rights, (iii)
increase the individual maximum limits in

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Section 4.2 or (iv) otherwise amend the Plan in any manner requiring shareholder
approval by law or under Nasdaq listing requirements or other applicable Nasdaq
rules. The Committee may alter or amend an award agreement and/or Incentive
Award previously granted under the Plan to the extent it determines that such
action is appropriate.

          11.2          Notwithstanding anything to the contrary in Section
11.1, no such amendment or alteration to the Plan or to any previously granted
award agreement or Incentive Award shall be made which would impair the rights
of the holder of the Incentive Award, without such holder's consent, provided
that no such consent shall be required if the Committee determines in its sole
discretion and prior to the date of any Change of Control that such amendment or
alteration either is required or advisable in order for the Company, the Plan or
the Incentive Award to satisfy any law or regulation or to meet the requirements
of or avoid adverse financial accounting consequences under any accounting
standard.

SECTION 12

Effective Date and Duration of the Plan

          This Plan shall take effect May 24, 2005, subject to approval by the
shareholders at the 2005 Annual Meeting of Shareholders or any adjournment
thereof or at a Special Meeting of Shareholders. Unless earlier terminated by
the Board of Directors, no Incentive Award shall be granted under the Plan after
May 23, 2015.

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