Exhibit 10.1

 

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Spartan Motors, Inc.

2019 LEADERSHIP TEAM COMPENSATION PLAN

 

Approved by the Board of Directors April 15, 2019

 

A.

OVERALL

 

 

1.

PHILOSOPHY

 

This 2019 Leadership Team Compensation Plan (the “Plan”) of Spartan Motors, Inc.
(the “Company” or “Spartan”) aims to provide competitive levels of compensation
and incentives to drive strong long-term financial performance, maximize the
Company’s market valuation, and provide for the long-term interests of its
stakeholders.

 

 

2.

OBJECTIVES OF THE PLAN

 

The Plan is designed to achieve the following objectives:

 

 

a.

Attract and retain qualified management

 

b.

Align the interests of management with those of shareholders to encourage
achievement of continuing sustainable increases in shareholder value

 

c.

Align management’s compensation with the achievement of the Company’s annual and
long-term performance goals

 

d.

Reward excellent corporate performance

 

e.

Recognize individual and team initiatives and achievements

 

 

3.

COMPENSATION COMPONENTS

 

Leadership team compensation is comprised of three components: base salary,
annual cash-based incentive (“AIC”), and long-term equity-based incentive
(“LTIC”). Base salary is a fundamental component of the Company’s compensation
system, and competitive salary levels are necessary to attract and retain
well-qualified executives. Base salaries are determined by evaluating the
responsibilities of the position, the experience of the individual, the
performance of the individual, and the competitive marketplace for similar
management talent. The review process includes a comparison of base salaries for
comparable positions at companies of similar type, size, and financial
performance. Performance reviews and base salary reviews are both done on an
annual basis.

 

Total compensation is established at levels comparable to market-median ranges.

 

In addition, there are equity holding requirements for the Leadership Team
members. This Plan is established by the full Board after consideration of input
from external sources and is reviewed annually.

 

 

4.

APPROACH

 

Spartan believes that Leadership Team compensation should track with the
Company’s overall financial performance. Compensation should be structured to be
proportionately generous in periods when leadership’s performance is deemed to
be superior.

 

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5.

LEADERSHIP TEAM TIERS

 

Unclassified

CEO

Tier 1

CFO, COO, CAO, CLO, BU Presidents, Corp. Vice Presidents1 

Tier 2

Corp. Vice Presidents, Vice-Presidents

Tier 3

Directors or other key high level positions

Tier 4

Key manager positions

 

 

6.

ELIGIBILITY

 

This Plan applies to the CEO and each employee in Tiers 1-4 (collectively, the
“Leadership Team”). Each executive eligible to participate in this Plan is
referred to as a “Participant.”

 

A Participant is included in one of the tiers above upon the recommendation of
the CEO and the approval of Human Resources & Compensation Committee (the “Comp
Committee”) of the Spartan Board of Directors (the “Board”).

 

Participation in one year does not guarantee participation in subsequent years.
Due to the varying nature of certain positions among business units, inclusion
of a position at one organization will not necessarily mean a similarly titled
position at another unit would be included in the Plan.

 

All proposed changes in eligibility and structure for the CEO and Leadership
Team Tier 1 must be approved by the Comp Committee. All proposed changes in
eligibility and structure for the Leadership Team Tiers 2 - 4 will be made and
approved by the CEO, with oversight by the Comp Committee.

 

 

7.

EFFECTIVE DATE

 

This Plan is effective upon approval of the Board and will continue indefinitely
at the discretion of the Board. Upon approval by the Board, this Plan shall
apply with respect to compensation for performance years starting January 1,
2019.

 

 

8.

PLAN ADMINISTRATION

 

The CEO is responsible for the ongoing administration of the Plan. The Comp
Committee shall annually review both the provisions of the Plan and review
payouts hereunder to confirm that the payments are in compliance with the Plan
document.

 

 

9.

DELAY IN PAYMENT TO SPECIFIED EMPLOYEE

 

For any payment due under this Plan to a “Specified Employee,” as defined in
Section 409A of the Internal Revenue Code, where such payment is not permitted
to be made by Section 409A on the payment date, then no payment under this Plan
may be paid before the date that is six months after the Participant’s
“Separation from Service,” as defined in Section 409A. The payment to which the
Participant would otherwise have been entitled during that six months will be
paid on the first regular Friday payroll date after six months following the
Participant’s Separation from Service. Any payments that are not permitted to be
paid under this section shall be paid in a lump sum included with the first
payment after the six month time period.

 

 

10.

FUNDING

 

The Plan is an unfunded, nonqualified deferred compensation plan. Monies that
become due to Participants are unsecured obligations of the Company.

 

 

 

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1 Corporate Vice Presidents may be included in Tier 1 or Tier 2.

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11.

WITHHOLDING

 

The Company has the right to withhold and deduct from a Participant’s payments,
including payments made in the form of Company stock, or make arrangements for
the collection of, all amounts deemed necessary to satisfy federal, state and
local withholding and employment-related tax requirements attributable to a
Participant’s payments pursuant to this Plan.

 

 

12.

AMENDMENT AND TERMINATION OF PLAN

 

This Plan may be amended or terminated at any time and without prior notice at
the sole discretion of the Board, as permitted by Section 409A of the Internal
Revenue Code.

 

 

13.

DISCRETION OF COMMITTEE

 

Notwithstanding anything to the contrary in this Plan, the Comp Committee
determines appropriate compensation, and this Plan does not represent a
contractual obligation. The Board reserves discretionary authority to change
this Plan as appropriate.

 

 

14.

CLAWBACK

 

Awards will be retracted to the extent there is a material misrepresentation and
should not have been granted.

 

 

15.

SECTION 409A

 

The payments under this Plan are intended to be exempt from or to comply with
the requirements of Section 409A of the Code and the regulations thereunder, and
the Company shall interpret and administer this Plan in a manner consistent with
Section 409A. However, Company makes no representation or warranty regarding
compliance with Section 409A, and the Company shall have no liability to any
Participant or any other person for any failure to comply with Section 409A.

 

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B.

AIC PLAN – ALL PARTICIPANTS

 

 

1.

OVERVIEW OF AIC PLAN STRUCTURE

 

The AIC component of the Plan rewards Participants based upon achievement of the
top priorities for business performance which will include key metrics. Each
year, the CEO will review the metrics and weightings based upon current business
conditions and attain approval of the framework from the Comp Committee. Tier 1
Participants will have additional criteria based upon results of top priorities.
Annually, the Comp Committee will approve the metrics and determine the
appropriate weightings between the elements.

 

Each Participant’s annual AIC award is calculated by multiplying (x) the
Participant’s current annual salary (see item a. below) by (y) his or her AIC
Bonus Percentage (see item b. below) by (z) the X-Multiple (see item c. below).

 

 

a.

Annual Salary. The current annual salary is calculated as the weekly salary in
effect on April 1 of the performance year times 52 weeks. If the Participant
changes roles or experiences a compensation increase or decrease after April 1,
the annual salary will be prorated.

 

 

b.

AIC Bonus Percentage. Each Participant is assigned an “AIC Bonus Percentage”
based on his or her level within the Plan, as follows:

 

CEO

150%

Tier 1

60%

Tier 2

40%

Tier 3

30%

Tier 4

20%

 

Notwithstanding the foregoing, the final AIC Bonus Percentage for the CEO and
each Tier 1 Participant is subject to annual review and approval by the Comp
Committee.

 

 

c.

X-Multiple. Annually, the CEO will present to the Board the proposed performance
metrics to be used for the AIC Plan for the coming performance year. A
Participant’s target bonus (the “AIC Target Bonus”) will be equal to (x) his or
her annual salary, multiplied by (y) his or her AIC Bonus Percentage, multiplied
by (z) an X-Multiple of 1X. This Plan and other market factors will be the basis
for determining 1X. A Participant’s actual AIC award payout may be more or less
than the AIC Target Bonus, based upon achieving varying levels of performance as
compared to the approved performance metrics for that year. The “Threshold,”
“Target,” and “Maximum” levels (as measured against the approved performance
metrics) are as follows:

 

0X =

80% of Target Metric

1X=

100% of Target Metric

2X =

120% of Target Metric

 

 

0X =

50% payout of Target Bonus

1X=

100% payout of Target Bonus

2X =

200% payout of Target Bonus

 

Annually, the CEO will propose and the Comp Committee will evaluate and
establish, based upon the current performance metrics, the incremental
improvements required to attain an incremental X-Multiple (i.e., going from 0X
to 1X to 2X). The 0X, 1X, and 2X targets for each performance metric within a
target matrix will be published by the CEO.

 

The X-Multiple can be a fractional value based upon calculating the results
within the target matrix, as determined by the Comp Committee.

 

There will be no AIC award for Participants in the event that Spartan loses
money for the applicable performance year. For the sake of clarity, the Comp
Committee will have oversight of the AIC component of the Plan and can make
discretionary adjustments as it deems appropriate.

 

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2.

AIC PAYOUT

 

Should AIC bonuses be earned, they will be paid to all Participants employed by
the Company at the time of payment subject to the section below entitled “Death,
Disability, Retirement, and Changes in Control.” Payment shall be made no later
than March 10th of the year following the end of the performance year. Although
the AIC component of this Plan is designed to be cash-based, the Comp Committee
retains the discretion to pay the annual payout in an equivalent amount of
Company stock. The amount of the annual payout is one hundred percent (100%) of
the AIC bonus earned for the current performance year.

 

 

3.

TREATMENT OF NEW ASSOCIATES

 

An associate eligible to participate in this Plan who joins the Company during a
performance period may be included in the AIC as a Participant by the decision
of the CEO and approval of the Comp Committee. The new Participant will be
entitled to a prorated share of an annual AIC bonus. The prorated bonus will be
calculated by multiplying (x) the Participant’s AIC Bonus Percentage by (y) the
X-Multiple by (z) the Participant’s current prorated salary. The current
prorated salary is calculated as the weekly salary in effect on the date of hire
multiplied by the number of weeks the Participant was a member of the Plan. If a
Participant is hired mid-week, a full week will be credited for the partial
week.

 

 

4.

ACQUISITIONS/DISPOSITIONS

 

If during a performance year, an acquisition or disposition of a business unit
occurs, the Comp Committee will determine and remove the effect of such business
unit from the consolidated results in determining the X-Multiple.

 

 

5.

TERMINATIONS AND VESTING OF DEFERRED BALANCES

 

Except as may be set forth in the Management Severance Plan (if applicable to a
Participant), if a Participant has a termination of employment (either
voluntarily or involuntarily) that meets the requirements of a Separation From
Service with Spartan during any performance year, for reason other than death,
disability, retirement, or a change in control (which are covered in
Section B(6) below), the Participant will not be eligible to receive any AIC
bonus for that year or any portion of that year.

 

 

6.

DEATH, DISABILITY, RETIREMENT, AND CHANGES IN CONTROL

 

  a.

 

Upon the first to occur of the following events:

 

 

1.

a Participant’s death;

 

 

2.

a Participant’s Disability, as defined in the Spartan Motors, Inc. Stock
Incentive Plan of 2016 (as may be subsequently amended, supplemented, restated,
and/or otherwise modified from time to time, the “Stock Plan”); and/or

 

 

3.

a Participant voluntarily retires who is at least age 62 and who has been
employed by the Company or a subsidiary of the Company for a continuous period
of at least 5 years as of the date of retirement;

 

the Participant will be eligible to receive a prorated AIC bonus for the
performance year in which the event occurs. The prorated bonus will be
calculated as (x) the Participant’s AIC Bonus Percentage multiplied by (y) the
X-Multiple by (z) the Participant’s current prorated salary. The current
prorated salary is calculated as the weekly salary in effect on the date of the
event multiplied by the number of weeks the Participant was a Participant in the
Plan prior to the event. If the event occurs mid-week, a full week will be
credited for the partial week. Payment of such prorated AIC bonus will be made
at the next regularly scheduled date for the payment of AIC bonuses.

 

 

b.

If, following a Change in Control (as defined in the Stock Plan), the employment
of a Participant who is the CEO or a Section 16 officer is terminated without
cause (as determined by the Committee in its absolute discretion) or is
terminated by the individual for Good Reason (as defined in the Stock Plan),
then:

 

 

1.

the CEO will receive (a) a severance of 2X multiple of his or her annual salary
plus target AIC bonus, to be paid in biweekly installments, with the first
payment to be made on the first Friday after the event, and (b) benefits
continuation for a period of 18 months (Company-paid COBRA premiums under the
Company health plan); and

 

 

2.

the other Section 16 officers will receive (a) a severance of 12 months’ (1X
multiple) of their annual salary plus target AIC bonus, to be paid in biweekly
installments, with the first payment to be made on the first Friday after the
event, and (b) benefits continuation for a period of 12 months (Company-paid
COBRA premiums under the Company health plan).

 

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C.

LTIC PLAN – SECTION 16 OFFICERS AND BUSINESS UNIT PRESIDENTS REPORTING TO THE
CEO

 

This Section C applies only to those Participants who are Section 16 officers or
Business Unit Presidents reporting to the CEO. When used in this Section C,
“Participant” refers only to Participants who are Section 16 officers or
Business Unit Presidents reporting to the CEO.

 

 

1.

TARGET LTIC AWARD

 

Each Participant’s “Target LTIC Award” for a performance year is equal to (x)
the Participant’s current annual salary (see Section B(1)(a) above), multiplied
by (y) his or her LTIC Bonus Percentage. A Participant’s “LTIC Bonus Percentage”
is based on his or her level within the Plan, as follows:

 

CEO

200%

COO, CFO

100%

CAO

90%

Other Tier 1

60%

 

Notwithstanding the foregoing, the final LTIC Bonus Percentage for the CEO and
each Tier 1 Participant is subject to annual review and approval by the Comp
Committee.

 

 

2.

OVERVIEW OF LTIC PLAN STRUCTURE

 

Each Participant’s Target LTIC Award for a performance year will be apportioned
as follows:

 

 

●

30% of the Target LTIC Award value will be in the form of restricted stock units
(“RSUs”); and

 

●

70% of the Target LTIC Award value will be in the form of performance share
units (“PSUs”).

 

 

3.

RESTRICTED STOCK UNITS

 

The value of each annual LTIC award to be made in the form of RSUs will be equal
to 30% of the Participant’s Target LTIC Award for a performance year. The award
is generally to be made on March 30 of each year (or, if March 30 is not a
business day, on the immediately preceding business day). The number of RSUs to
be issued to the Participant for that performance year will be determined by
using the average stock price over the preceding 30 calendar days. The RSUs
shall vest ratably over a three-year period, subject to any exceptions set forth
in the award agreement reflecting the grant of such RSUs.

 

In accordance with the requirements of the Stock Plan, the Company and each
Participant shall enter into an award agreement reflecting this grant of RSUs.
Any impact on the vesting schedule for such RSUs resulting from a change in
control of the Company or the Participant’s death, disability, retirement, or
other termination of service shall be as set forth in the award agreement and
the Stock Plan.

 

 

4.

PERFORMANCE SHARE UNITS

 

The portion of each annual LTIC award to be made in the form of PSUs is designed
to reward Participants based upon achievement of cumulative financial
performance over a three-year period (with cliff vesting to occur at the end of
such three-year performance period) starting with the performance year in which
the annual LTIC award is granted. This cumulative financial performance is
measured by two metrics:

 

 

●

60% of the value of the PSUs will be dependent on Spartan’s TSR (Total
Shareholder Return) over such three-year period relative to the Dow Jones U.S.
Commercial Vehicles and Truck Index (the “Index”); and

 

●

40% of the value of the PSUs will be dependent on Spartan’s cumulative GAAP Net
Income over such three-year period.

 

GAAP Net Income shall be subject to such adjustments as approved by the Comp
Committee in its sole discretion.

 

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The number of PSUs earned with respect to a 3-year performance period shall be
determined as follows:

 

 

●

TSR over the performance period relative to the Index (60% weighting):

 

Percentile Rank Compared to Index

Payout as Percentage of Target

Less than 25th percentile

0%

25th percentile (Threshold)

50% (0X)

50th percentile (Target)

100% (1X)

75th percentile (Maximum)

200% (2X)

 

Achievement between the stated percentages will be interpolated on a
straight-line basis.

 

 

●

Cumulative GAAP Net Income over the performance period:

 

Cumulative GAAP Net Income

Payout as Percentage of Target

GAAP Net Income for Less than Threshold

0%

GAAP Net Income for Threshold – 70%

50% (0X)

GAAP Net Income for Target – 100%

100% (1X)

GAAP Net Income for Maximum – 120%

200% (2X)

 

Achievement between the stated dollar amounts will be interpolated on a
straight-line basis.

 

Depending on (1) the Company’s TSR over the 3-year performance period relative
to the Index and (2) the Company’s cumulative GAAP Net Income over the 3-year
performance period, the Participant may earn between 0% and 200% of the value of
the Target LTIC Award made in PSUs (i.e., 70% of the overall Target LTIC Award).

 

In accordance with the requirements of the Stock Plan, the Company and each
Participant shall enter into an award agreement reflecting this grant of PSUs.
Any impact on the vesting schedule for such PSUs resulting from a change in
control of the Company or the Participant's death, disability, retirement, or
other termination of service shall be as set forth in the award agreement and
the Stock Plan.

 

D.

LTIC PLAN – PARTICIPANTS OTHER THAN SECTION 16 OFFICERS AND BUSINESS UNIT
PRESIDENTS REPORTING TO THE CEO

 

This Section D applies only to those Participants who are not Section 16
officers or Business Unit Presidents reporting to the CEO. When used in this
Section D, “Participant” refers only to Participants who are not Section 16
officers or Business Unit Presidents reporting to the CEO.

 

This LTIC component of the Plan rewards Participants based upon achievement of
long-term financial performance. Financial performance is measured by two
metrics:

 

 

●

TSR (Total Shareholder Return)

 

●

Spartan financial results (adjusted EBITDA)

 

The combined performance of these two metrics will used to calculate the LTIC
Multiple.

 

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The Participant’s annual LTIC earned is calculated by multiplying the
Participant’s current annual salary (see Section B(1)(a) above) by his or her
Target Bonus (see 1 below) then multiplied by the LTIC Multiple (see 2 below).

 

 

1.

Target Bonus. Each Participant is assigned a “Target Bonus” based on his or her
level within the Plan. The Target Bonus is determined each year by multiplying
the Participant’s current annual salary (see Section B(1)(a) above) by the
following guideline percentages. The Comp Committee will annually review the
final Target Bonus for the Participants.

 

Tier 1 (non-Section 16 and Bus.

Unit Pres. reporting to CEO)

60%

Tier 2

30%

Tier 3

15%

Tier 4

N/A

 

A Participant is included in one of the levels above upon the approval of the
CEO and, and in the case of Tier 1 Participants, the approval of the Comp
Committee.

 

 

2.

LTIC Multiple. The “LTIC Multiple” can range from 0% thru 100% (referred to as
0X thru 1X).

 

TSR Metric: Up to one-half of the annual LTIC award is based on Spartan’s TSR
for the performance year as compared to the Index. The CEO will provide the
data, the appropriate analysis, and make a recommendation as to the Company’s
performance relative to the Index. The Comp Committee will make the final
determination as to the appropriate score.

 

Spartan Financial Results: Up to one-half of the annual LTIC award is based on
achievement of established financial metrics (adjusted EBITDA). On an annual
basis, the CEO will propose to the Comp Committee the financial metrics (and
measurement metrics) based upon priorities discussed and derived during the
annual plan process.

 

Restricted stock that is earned as part of an LTIC award for a performance year
shall be issued on March 30 following the end of such performance year (or, if
March 30 is not a business day, on the immediately preceding business day). The
number of shares of restricted stock to be issued will be determined by using
the average stock price over the preceding 30 calendar days. All such shares of
restricted stock awarded shall vest ratably over a three year period, subject to
any exceptions set forth in the award agreement and/or Stock Plan. At the time
of grant, and in accordance with the requirements of the Stock Plan, the Company
and each Participant shall enter into an award agreement reflecting this grant
of restricted stock. Any impact on the vesting schedule for such restricted
stock resulting from a change in control of the Company or the Participant's
death, disability, retirement, or other termination of service shall be as set
forth in the award agreement and the Stock Plan.

 

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