EXHIBIT 10.1

SPARTAN MOTORS, INC.

1988 NONQUALIFIED STOCK OPTION PLAN

          1.          Purpose. The 1988 Nonqualified Stock Option Plan (the
"Plan") is intended to advance the interest of Spartan Motors, Inc. (the
"Company"), its shareholders, and its subsidiaries by encouraging and enabling
selected officers, directors and other key employees upon whose judgment,
initiative and effort the Company is largely dependent for the successful
conduct of its business, to acquire and retain a proprietary interest in the
Company by ownership of its stock. Options granted under the Plan are intended
to be options which do not meet the requirements of Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code").

          2.          Definitions.

          (a)          "Board" means the Board of Directors of the Company.

          (b)          "Committee" means the body administering the Plan.

          (c)          "Common Stock" means the company's Common Stock, $.01 par
value.

          (d)          "Date of Grant" means the date on which an option is
granted under the Plan.

          (e)          "Option" means an option granted under the Plan.

          (f)          "Optionee" means a person to whom an option, which has
not expired, has been granted under the Plan.

          (g)          "Subsidiary" or "Subsidiaries" means a subsidiary
corporation or corporations of the Company as defined in Section 425 of the
Code.

          (h)          "Successor" means the legal representative of the estate
of a deceased optionee or the person or persons who acquire the right to
exercise an option by bequest or inheritance or by reason of the death of any
optionee.

          (i)          "Tax Benefit Right" means any right granted to a
Participant under Paragraph 8 of the Plan;

          3.          Administration of the Plan. The Plan shall be administered
by a committee appointed by the Board (the "Committee"). The Committee shall
report all action taken by it to the Board. Options to directors who are not
employees of the Company may be granted only pursuant to subparagraph (a) of
paragraph 6 of the Plan. The Committee shall have full and final authority in
its discretion, subject to the provisions of the Plan and in particular to the
provisions of subparagraph (a) of paragraph 6, to determine the employees to
whom and the time or times at which options shall be granted and the number of
shares and purchase price of Common Stock covered by each option; to construe
and interpret the Plan; to determine the terms and provisions of the respective
option agreements, which need not be identical, including, but without
limitation, terms covering the payment of the option price; and to make all
other determinations and take all other actions deemed necessary or advisable
for the proper administration of the Plan. All such actions and determinations
shall be conclusively binding for all purposes and upon all persons.

          4.          Common Stock Subject to Options. The aggregate number of
shares of the Company's Common Stock which may be issued upon the exercise of
options granted under the Plan shall not exceed 400,000 (900,000 as adjusted
through June 5, 1996), subject to adjustment under the provisions of paragraph
7. The shares of Common Stock to be issued upon the exercise of options may be
authorized but unissued shares, shares issued and reacquired by the Company, or
shares bought on the market for the purposes of the Plan. In the event any
option shall, for any reason, terminate or expire or be surrendered without
having been exercised in full, the shares

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subject to such option but not purchased thereunder shall again be available for
options to be granted under the Plan. Subject to adjustments under paragraph 7,
options for no more than 16,000 shares (36,000 as adjusted through June 5,
1996), may be granted under this or any other Plan of the Company to any one
person in any calendar year.

          5.          Participants. Options and tax benefit rights may be
granted under the Plan to: (a) any person who is an officer or employee
(including officers and employees who are directors) of the Company or any of
its subsidiaries; and (b) directors of the Company who are not employees of the
Company only as provided in subparagraph (a) of paragraph 6 of the Plan.

          6.          Terms and Conditions of Options. Any option granted under
the Plan shall be evidenced by an agreement executed by the Company and the
applicable director, officer, or employee and shall contain such terms and be in
such form as the Committee may from time to time approve, consistent with the
terms of the Plan and specifically subject to the following limitations and
conditions.

          (a)          Non-Employee Director Options. Subject to adjustment as
provided in paragraph 7, an option to purchase 3,500 shares of Common stock
shall be granted automatically on June 30 and December 31, of each year, to each
director of the Company who is not an employee of the Company or any of its
subsidiaries. Stock options awarded under this paragraph 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. The per share price
of each option awarded pursuant to this paragraph shall be 100 percent of: (i)
if Common Stock is not then listed and traded on a recognized securities
exchange, the mean of the bid and asked quotations for Common Stock on the Date
of Grant (as reported by a recognized stock quotation service) or, if there is
no bid or asked quotation on the Date of Grant, the mean of the bid and asked
quotations on the date nearest preceding the Date of Grant; or (ii) if Common
Stock is then listed and traded on a recognized securities exchange, the mean of
the highest and lowest sales prices at which shares of Common Stock were traded
on that exchange on the Date of Grant or, if Common Stock was not traded on the
Date of Grant, the mean of such prices on the date nearest preceding the Date of
Grant. The exercise price for each share purchased pursuant to an option granted
under the Plan shall be payable in cash or in shares of Common Stock (including
Common Stock to be received upon a simultaneous exercise) or other consideration
substantially equivalent to cash. When appropriate arrangements are made with a
broker or other institution, payment may be made by a properly executed exercise
notice directing delivery of shares to a broker, together with irrevocable
instructions to the broker to deliver promptly to the Company the amount of sale
or loan proceeds to pay the exercise price. Except as provided in this
subparagraph, no director who is not an employee of the Company or any other
person shall have any claim to be granted any option under the Plan. Nothing in
the Plan shall prevent the Company from adopting or continuing in effect other
or additional compensation arrangements. The grant of an option under the Plan
shall not be considered to give a director the right to be retained as a
director of the Company or to continue as a director of the Company.

          (b)          Option Price. Other than for awards to directors who are
not employees of the Company or any of its subsidiaries, the per share price of
each option awarded pursuant to the Plan shall be determined by the Committee
but shall not be less than 85 percent of the fair market value of a share of
Common Stock on the Date of Grant. For purposes of this subparagraph, fair
market value shall be as determined by the Committee and that determination
shall be binding on the Company and the Optionee. The Committee may base that
determination on: (i) if Common Stock is not then listed and traded on a
recognized securities exchange, the mean of the bid and asked quotations for
Common Stock on the Date of Grant (as reported by a recognized stock quotation
service) or, if there is no bid or asked quotation on the Date of Grant, the
mean of the bid and asked quotations on the date nearest preceding the Date of
Grant; (ii) if Common Stock

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is then listed and traded on a recognized securities exchange, the mean of the
highest and lowest sales prices at which shares of Common Stock were traded on
that exchange on the Date of Grant or, if Common Stock was not traded on the
Date of Grant, the mean of such prices on the date nearest preceding the Date of
Grant, and (iii) any other factors that the Committee deems appropriate.

          (c)          Option Period. The expiration date of each option shall
be fixed by the Committee, but, notwithstanding any provision of the Plan to the
contrary, such expiration date shall be more than ten (10) years from the Date
of Grant.

          (d)          Vesting of Shareholder Rights. Neither an Optionee nor
his successor shall have any of the rights of a shareholder of the Company until
the certificates evidencing the shares purchased are properly delivered to such
Optionee or his successor.

          (e)          Exercise of Option. Each option shall be exercisable from
time to time over a period beginning on the Date of Grant and ending upon the
expiration or termination of the option; provided that the Committee may, by the
provisions of any option agreement, limit the number of shares that may be
purchased pursuant to an option in any period or periods of time during which
the option is exercisable. An option shall not be exercisable in whole or in
part prior to the date of shareholder approval of the Plan.

          (f)          Nontransferability of Option. No option shall be
transferable or assignable by an Optionee, other than by will or the laws of
descent and distribution, and each option shall be exercisable during the
Optionee's lifetime only by him. No option shall be pledged or hypothecated in
any way and no option shall be subject to execution, attachment, or similar
process except with the express consent of the Committee.

          (g)          Termination of Employment or Directorship. Unless the
Committee otherwise consents, upon termination of an Optionee's employment or
association with the Company or with any of its subsidiaries, his option
privileges shall be limited to the shares which were immediately purchasable by
him at the date of such termination and such option privileges shall expire
unless exercised by him within 90 days after the date of such termination. The
award of an option to any participant shall not alter in any way the Company's
or the relevant subsidiary's rights to terminate the Optionee's employment or
directorship at any time for any reason, nor shall it confer upon an Optionee
any rights or privileges except as specifically provided in the Plan.

          (h)          Death of Optionee. If an Optionee dies while in the
employ of the Company or any of its subsidiaries or while serving as a director
of the Company, the Optionee's successor in interest may purchase only those for
which options were exercisable at the date of death and such options shall
expire unless exercised by the successor within one year of the date of death.

          7.          Adjustments.

          (a)          In the event that the outstanding shares of Common Stock
of the Company are hereafter increased or decreased or changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation, by reason of a recapitalization, reclassification, stock
split-up, combination of shares, or dividend or other distribution payable in
capital stock, appropriate adjustment shall be made by the Committee in the
number and kind of shares for the purchase of which options may be granted under
the Plan. In addition, the Committee shall make appropriate adjustment in the
number and kind of shares as to which outstanding options, or portions thereof
then unexercised, shall be exercisable, to the end that the proportionate
interest of the holder of the option shall, to the extent practicable, be
maintained as before the

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occurrence of such event. Such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of the
option but with a corresponding adjustment in the option price per share.

          (b)          In the event of the dissolution or liquidation of the
Company, any option granted under the Plan shall terminate as of a date to be
fixed by the Committee, provided that not less than 30 days' written notice of
the date so fixed shall be given to each optionee and each such optionee shall
have the right during such period to exercise his option as to all or any part
of the shares covered thereby including shares as to which such option would not
otherwise be exercisable by reason of an insufficient lapse of time.

          (c)          In the event of a Reorganization (as hereinafter defined)
in which the company is not the surviving or acquiring company, or in which the
Company is or becomes a wholly-owned subsidiary of another company after the
effective date of the Reorganization, then the committee shall adjust the shares
under such outstanding and unexercised stock options (and shall adjust the
shares remaining under the Plan which are then available to the Option under the
Plan) in a manner not inconsistent with the provisions of the Reorganization
Agreement for the adjustment, change, conversion, or exchange of such stock and
such options.

                    The term "Reorganization" as used in this subparagraph (c)
of this paragraph 7 shall mean any statutory merger, statutory consolidation,
sale of all or substantially all of the assets of the Company, or sale, pursuant
to an agreement with the Company, or securities of the Company pursuant to which
the Company is or becomes a wholly-owned subsidiary of another company after the
effective date of the Reorganization.

          (d)          Adjustments and determinations under this paragraph 7
shall be made by the Committee, whose decisions as to what adjustments or
determinations shall be made, and the extent thereof, shall be final, binding,
and conclusive.

          8.          Tax Benefit Rights. A Participant may be granted Tax
Benefit Rights under the Plan to encourage a Participant to exercise Options and
provide certain tax benefits to the Company.

          (a)          Grant. A Tax Benefit Right entitles a Participant to
receive from the Company or a Subsidiary a cash payment not to exceed the amount
calculated by multiplying the ordinary income, if any, realized by the
Participant for federal tax purposes as a result of the exercise of a
nonqualified stock option by the maximum federal income tax rate (including any
surtax or similar charge or assessment) for corporations, plus the applicable
state and local tax imposed on the exercise of the Option.

          (b)          Restrictions. A Tax Benefit Right may be granted only
with respect to a stock option issued and outstanding or to be issued under the
Plan or any other plan of the Company or its Subsidiaries that has been approved
by the shareholders as of the date of the Plan and may be granted concurrently
with or after the grant of the stock option. Such rights with respect to
outstanding incentive stock options under Section 422 of the Code shall be
issued only with the consent of the Participant if the effect would change the
date of grant or the exercise price, or otherwise impair the Participant's
existing stock options. A stock option to which a Tax Benefit Right has been
attached shall not be exercisable by an officer or employee subject to Section
16 of the Securities Exchange Act of 1934 for a period of six months from the
date of the grant of the option.

          (c)          Terms and Conditions. The Committee shall determine the
terms and conditions of any Tax Benefit Rights granted and the Participants to
whom such rights will be granted with respect to stock options under the Plan or
any

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other plan of the Company. The Committee may amend, cancel, limit the term of,
or limit the amount payable under a Tax Benefit Right at any time prior to the
exercise of the related stock option, unless otherwise provided under the terms
of the Tax Benefit Right. The net amount of a Tax Benefit Right, subject to
withholding, may be used to pay a portion of the stock option price, unless
otherwise provided by the Committee. The provisions of Section 9 with respect to
stock-based tax withholding shall also apply to any tax benefit rights granted
under the Plan.

          9.          Restrictions on Issuing Shares.

          (a)          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 the
subsidiary), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any and all federal, state and local
withholding and employment-related tax requirements attributable to an Option
including, without limitation, the grant, exercise or vesting of, or payment of
dividends with respect to, an 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 Option. Unless the Committee determines otherwise,
withholding may be satisfied by withholding Common Stock to be received upon
exercise 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 to comply with Rule 16b-3 under the
Act.

          (b)          Compliance With Laws; Listing and Registration of Shares.
All Options granted under the Plan (and all issuances of Common Stock or other
securities under the Plan) shall be subject to applicable laws, rules and
regulations, and to the requirement that if at any time the Committee
determines, in its sole 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 granting of such Option or the issue or purchase of shares thereunder,
such Option may not be exercised in whole or in part, or the restrictions on
such Option 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.          Use of Proceeds. The proceeds received by the Company
from the sale of Common Stock pursuant to the exercise of options granted under
the Plan shall be added to the Company's general funds and used for general
corporate purposes.

          11.          Amendment, Suspension and Termination of Plan. The Board
may at any time suspend or terminate the Plan. The Board may amend the Plan from
time to time in such respects as the Board may deem advisable for the options
granted under the Plan to conform to any changes in law or any other respect
which the Board may deem to be in the best interests of the Company; provided,
that: (a) the provisions of subparagraph (a) of paragraph 6 may not be amended
more than once every six months, other than to conform to changes in the
Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, as amended, or the rules issued under either of such
statutes; and (b) without approval of the shareholders of the Company
representing a majority of the voting power, no such amendment shall (i) except
as specified in paragraph 7, increase the maximum number of shares for which
options may be granted under the Plan, (ii) change the provisions of
subparagraph (b) of paragraph 6 relating to the establishment of the option
price, (iii) change the provisions of subparagraph (c) of paragraph 6 relating
to the expiration date of each option, or (iv) change the provisions of the
third sentence of this paragraph 11 relating to the term of the Plan. Unless the
Plan is terminated earlier by the Board or as provided in paragraph 12, the Plan
shall terminate ten years after the effective date of the Plan. No option may be
granted during any suspension or after the termination of the Plan. Except as
provided in paragraph 12, no amendment,

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suspension, or termination of the Plan shall, without an Optionee's consent,
alter or impair any of the rights or obligations under any option previously
granted to that Optionee under the Plan.

          12.          Effective Date of Plan and Shareholder Approval. The
effective date of the Plan is March 28, 1988, the date of its approval by the
Board; provided, however, if the Plan is not approved by such shareholders
before December 31, 1988, the Plan shall terminate and any options granted
thereunder shall be void and have no force or effect.

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