Document:

Spartan Motors, Inc. Exhibit 10.8 to Form 10-K - 03-13-09

EXHIBIT 10.8

Spartan Motors, Inc. (SMI)

SPARTAN PROFIT AND RETURN (SPAR)

MANAGEMENT INCENTIVE BONUS PLAN

Plan Purpose

The purpose of the Spartan Motors, Inc. (SMI) Spartan Profit And Return Plan ("SPAR Plan") is to motivate and encourage SMI management to create economic value from the dollars invested in SMI. Only through value creation can Spartan achieve sustainable profitable growth, maximize Spartan's market valuation and provide for the long-term interests of its stakeholders.

Objectives of the Plan

The specific objectives of the SPAR Plan are as follows:

	
1.
	
Provide management with incentives to choose strategies and investments that maximize shareholder wealth. In other words think, act and be paid like owners.

	
 
	
 

	
2.
	
Utilize a financial measurement that conforms to the market's evaluation of Spartan's performance.

	
 
	
 

	
3.
	
Communicate SMI's financial objectives in a clearly defined and quantifiable manner.

	
 
	
 

	
4.
	
Focus management on continuous improvement in shareholder value.

Approach

SMI believes that Management financial rewards should track with SMC financial performance. Rewards should be structured to be generous in periods when management drives SMI toward the achievement of superior performance and scant when performance falls short. Since Spartan Motors' shareholders have historically viewed Spartan as a "value" stock, it is essential that the financial interest of the executive be based on a comparable view.

Eligibility

The following positions are eligible for participation in the Plan:

          Leadership Team

          Management Team

Other positions may be included upon the recommendation of the both the SMI President/Chief Executive Officer (CEO) and the SMI Chief Financial Officer (CFO) and

the approval of the SMI Chairman of the Board. Participants in the Plan may not participate in any other incentive pay, commission override, gainsharing, or other supplemental compensation program. The only exceptions are quarterly bonus, stock appreciation rights, restricted stock, stock awards, stock options and the Spartan Motors, Inc. Supplemental Executive Retirement Plan. Participation in one year does not guarantee participation in subsequent years. Due to the varying nature of certain positions between 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.

Effective Date

This Plan is effective upon approval of the Board of Directors of Spartan and will continue indefinitely at the discretion of the Board.

Plan Administration

The SMI President/CEO and SMI CFO are responsible for the ongoing administration of the Plan. The Compensation Committee of Spartan 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.

Overview of Plan Structure

The Plan rewards Participants based upon achievement in sustaining and increasing the SPAR of SMI operations. Spartan Profit and Return (SPAR) is a single, comprehensive measurement by which individual subsidiary and consolidated performance is evaluated. "SPAR" is defined as net operating profit after tax (NOPAT) less a capital charge based upon the tangible net operating assets employed in the business. More detailed information regarding how the Company calculates SPAR is provided in Exhibit I.

	
 
	
1.
	
Annual SPAR Incentive Bonus Earned. The Participant's Target Bonus percentage (see 2 below) times the Spar Multiple (see 3 below) times the Participant's current annual salary ("Annual Incentive Bonus Earned"). The current annual salary is calculated as the weekly salary in effect on December 31st of the performance year times 52 weeks.

	
 
	
 
	
 

	
 
	
2.
	
Target Bonus. Each Participant is assigned a "Target Bonus" based on his or her level within the Plan. The Target Incentive is determined each year by multiplying the Participant's current annual salary (as calculated in 1 above) by the following percentages.

	
 
	
Level 7
	
45%
	
 

	
 
	
Level 6
	
40%
	
 

	
 
	
Level 5
	
30%
	
 

	
 
	
Level 4
	
25%
	
 

	
 
	
Level 3
	
20%
	
 

	
 
	
Level 2
	
15%
	
 

	
 
	
Level 1
	
10%
	
 

2

	
 
	
A Participant is included in one of the levels above upon the recommendation of both the SMI President/CEO and SMI CFO and the approval of SMI Chairman of the Board.

	
 
	
 
	
 

	
 
	
3.
	
SPAR Target Multiple. The Target Bonus can be increased or decreased based upon achieving varying levels of SPAR. The amount of increase or decrease is based upon predetermined levels of SPAR that relate to a SPAR Target or "1X". The SPAR Target ("1X") is established on an annual basis by the SMI CFO in February of the performance year. An example of the SPAR Multiple for SMI is illustrated by the following table:

	
 
	
 

	
 

	
 
	
 
	
SPAR Required for Various SPAR Multiples - Example

	
 
	
 

	
-2X

	
-1X

	
0X

	
+1X

	
+2X

	
+3X

	
+4X

	
 
	
Spartan Motors, Inc.
	
-6,200,000
	
-3,100,000
	
0
	
3,100,000
	
6,200,000
	
9,300,000
	
12,400,000

	
 
	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 
	
 
	
The SPAR multiple used for determining annual bonuses is computed by interpolating (or extrapolating, if necessary) where the SPAR earned for the year falls within (or outside) the various multiples indicated in the above table. The SPAR multiple is computed to one decimal.

	
 
	
 
	
 

	
 
	
4.
	
Annual Incentive Bonus Payout: Annual Incentive Bonuses to all Participants employed by the Company on the last day of the performance year are calculated and paid no later than February 28 of the year following the end of the performance year. The Compensation Committee retains the discretion to pay the annual payout in cash or an equivalent amount of Company stock based on the closing value of the Company stock on the date of payment. The amount of the annual payout is equal to the sum of:

	
 
	
 
	
a.
	
Seventy-five percent (75%) of any unpaid carryover balance (mandatory deferred balance) from prior years (see 6 below); and

	
 
	
 
	
b.
	
Seventy-five percent (75%) of the Annual Incentive Bonus Earned for the current performance year (see 1 above).

	
 
	
 
	
 

	
 
	
5.
	
Mandatory Deferral: Twenty-five percent (25%) of the current year Annual Incentive Bonus Earned, plus twenty-five percent (25%) of the unpaid carryover balance from the previous year.

	
 
	
 
	
 

	
 
	
6.
	
Carryover Account Balance: The cumulative effect of the Initial Carryover Balance (see below) plus the current year Annual Incentive Bonus Earned (1 above), plus any interest on the previous year unpaid carryover balance, minus the Annual Incentive Bonus Payout (4 above).

Initial Carryover Balance

Participants enrolled in the plan in 2001 will receive an "Initial Carryover Balance. For purposes of computing annual incentive payouts, Participants are credited with an Initial Carryover Balance equal to the following percentage of the 2001 Annual SPAR Incentive Bonus Earned for the year 2001:

3

	
 
	
Spartan Motors
	
33.3%
	
 

The Initial Carryover Balance is not subject to interest charges or credits or repayment during a Participant's period of employment. In determining a Participant's vested account balance, the Initial Carryover Balance is deducted from a Participant's total account balance upon termination of employment for any reason. Participants entering the plan in years subsequent to 2001 will not qualify for an initial account balance.

Interest on Mandatory Deferrals

Interest is credited on any deferred balances at an annual rate equal to the highest rate the Company pays at the time of the deferral on its debt capital or 10 percent, whichever is lower. Interest continues to be credited at this rate until the deferrals and the related accrued interest are paid. Interest is not credited on the Participant's Initial Carryover Balance.

Treatment of New Employees

An eligible employee who joins the Company during a performance period may be included in the Plan as a Participant at the discretion of his or her respective business unit President. The SMI President/CEO, SMI CFO and SMI Chairman must approve the level of participation.

The new Participant will be entitled to a prorated share of an annual bonus. The prorated bonus will be calculated as the Participant's Target Bonus percentage (2 above) times the SPAR Multiple (3 above) times the Participant's current prorated salary. The current prorated salary is calculated as the weekly salary in effect on December 31st of the performance year times the number of weeks the Participant was a member of the SPAR plan at the Company. If a Participant is hired mid-week, a full week will be credited for the partial week.

Acquisitions

Upon acquisition or disposal of a business unit, the SPAR Target ("1X") in number 3 above is adjusted for Spartan (consolidated) and any other business unit which includes the acquired business (or as a separate stand-alone business unit).

The SPAR Target ("1X") is determined in a manner providing a minimum return on capital invested in the acquired business.

Terminations and Vesting of Deferred Balances

In the event a Participant either voluntarily or involuntarily experiences a "Separation From Service," as that term is defined under Section 409A of the Internal Revenue Code (i.e., a termination of employment), with SMI during any performance year, for reason other than death, disability, retirement, or a change in control (as described in "Death, Disability, Retirement, and Changes in Control below), the Participant will not earn an Annual Incentive Bonus for that year or any portion of an Annual Incentive Bonus. In addition, deferred balances will be payable as follows:

4

	
 
	
Mandatory Deferred Balances (excluding Initial Carryover Balance)
	
50%
	
 

Payment of the mandatory deferred balances will be made to a terminated Participant within thirty days after the Separation From Service, but in no case in a later taxable year than the year of the Separation From Service. Notwithstanding the previous sentence, if the Separation From Service occurs in 2008 then payment will be made on the first business day of January, 2009.

Death, Disability, Retirement, and Changes in Control

Upon the first to occur of the following events:

	
1.
	
a Participant dies,

	
2.
	
a Participant becomes disabled (meaning the 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: (i) unable to engage in any substantial gainful activity; or (ii) receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company),

	
3.
	
a Participant retires, (meaning the Participant's voluntary Separation From Service after either age 62 or age 60 with 10 years of service, as determined under the Company's Retirement Plan), or

	
4.
	
a change in control of the Company (defined as acquisition by a purchaser of more than 50 percent of the Company's stock or substantially all the assets of the Company);

the Participant will receive the following payments:

	
1.
	
a prorated Annual Incentive Bonus for the year in which the event occurs. The prorated bonus will be calculated as the Participant's Target Bonus percentage (2 above) times the SPAR Multiple (3 above) times the Participant's current prorated salary. The current prorated salary is calculated as the weekly salary in effect on the date of the event times the number of weeks the Participant was a member of the SPAR plan at the Company prior to the event. If event occurs mid-week, a full week will be credited for the partial week; and

	
2.
	
100 percent of the sum of the Participant's mandatory deferred balances (less Initial Carryover Balances).

Payment of the prorated Annual Incentive Bonus will be made at the next regularly scheduled date for the payment of incentive bonuses. Payment of the mandatory deferred balances will be made to a Participant within thirty days after the event, but in no case in a later taxable year than the year of the Separation From Service. Notwithstanding the previous sentence, if the event occurs in 2008 then payment will be made on the first business day of January, 2009.

Delay in Payment to Specified Employee

For any payment due upon a Participant's Separation From Service (i.e., payment upon retirement or termination of employment for any reason), if, at the time the payments would commence, the Participant is a "Specified Employee" as defined by Section 409A

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of the Internal Revenue Code, then no payment under this Plan may be paid before the date that is six months after the Participant's Separation from Service. The payment to which the Participant would otherwise have been entitled during that six months will be paid on the first regular payroll date after six months following the Participant's Separation from Service.

Time of Payment

The time of payment under this Plan may not be accelerated or deferred for any reason, including by agreement of the parties.

Funding

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

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.

Amendment and Termination of the Plan

The Plan may be amended or terminated at any time and without prior notice at the sole discretion of the Board of Directors of Spartan Motors, Inc. Any deferred balances (excluding any Initial Carryover Balances) shall become 100 percent vested upon termination of the Plan and will be paid to the Participants at the next regularly scheduled date for payment of incentive bonuses, subject to the following restrictions:

	
1.
	
The termination and liquidation of the Plan may not occur in proximity to a downturn in the Company's financial health;

	
2.
	
The Company must terminate and liquidate all arrangments sponsored by the Company that would be aggregated with the Plan under Section 409A of the Internal Revenue Code if the same service provider had deferrals of compensation under all the arrangements that are terminated and liquidated;

	
3.
	
No payments in liquidation of the Plan will be made within 12 months of the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan other than payments that would be payable under the terms of the Plan if the action to terminate and liquidate the Plan had not occurred;

	
4.
	
All payments under the Plan must be made within 24 months of the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan; and

	
5.
	
Within three years following the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan, the Company may not adopt a new plan that that would be aggregated with the Plan under Section 409A of the Internal Revenue Code if the same service provider participated in both plans.

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Exhibit I - Terms and Definitions

	
SPAR
	
Spartan Profit and Return (SPAR) equals Net Operating Profit After Taxes (NOPAT) minus Capital Charge.

	
 
	
 

	
NOPAT
	
Net Operating Profit After Taxes is calculated as the Operating Profit of the Company less Taxes at 38%.

	
 
	
 

	
OPERATING

PROFIT
	

Operating Profit is defined as Earnings Before Income Taxes determined for purposes of both internal and external reporting and subject to annual audit by the Company's independent accountants plus/minus the adjustments summarized below.

	
 
	
 

	
 
	
Adjustments to Earnings Before Income Tax to result in Operating Profit consist of the following:

	
 
	
 

	
 
	
•
	
Add interest expense

	
 
	
•
	
Subtract interest income and other investment income

	
 
	
•
	
Add (subtract) equity in losses (income) of unconsolidated investments

	
 
	
•
	
Add (subtract) other non-operating expenses (income)

	
 
	
•
	
Add (subtract) any increases (decrease) in LIFO reserves

	
 
	
•
	
Add depreciation

	
 
	
•
	
Subtract annual rental charge for plant and equipment determined per Exhibit II

	
 
	
•
	
Add amortization of goodwill and other intangible assets arising from business acquisitions.

	
 
	
•
	
Add amortization of other intangibles.

	
 
	
•
	
Subtract recovery charge for capitalized intangibles per the attached table, excluding those arising from business acquisitions.

	
 
	
•
	
Add any recorded provision for noncompete payments (+)

	
 
	
•
	
Add any items deemed to be strategic investments (+)

	
 
	
•
	
Subtract annual recovery charge of any items deemed to be strategic investments determined on a straight-line basis over an agreed-upon amortization period per Exhibit III

	
 
	
 

	
STRATEGIC

INVESTMENTS
	

Strategic Investments are expenditures greater than $100,000 that are expected to result in operating income in future periods but are required to be recognized as expenses or losses in the current fiscal year under generally-accepted accounting principles. Examples of such items include certain research and development expenses, acquired businesses that are not expected to initially generate positive SPAR and certain advertising and promotional costs. In order to qualify as a strategic investment for incentive computation purposes, the amount and amortization period of the investment must be planned and agreed

7

	
 
	

to by the SMI President/CEO, SMI CFO and SMI Chairman the Board in advance of any expenditure or loss. Generally this is done as part of the annual strategic planning review. The business unit is required to recognize an amortization charge in future performance periods regardless of whether the item actually results in future operating income.

	
CAPITAL CHARGE
	
Cost of capital percentage times capital base.

	
 
	
 

	
COST OF CAPITAL
	
The minimum overall percentage return required by an investor providing both the debt and equity capital of the business. The required return for Spartan Motors, Inc. is 12 percent.

	
 
	
 

	
CAPITAL BASE
	
The Capital Base consists of average current assets plus other assets and land net of investment securities, LIFO reserve, intercompany notes and intangible assets and less average total liabilities excluding interest bearing debt and intercompany notes. Deferred income taxes, income taxes receivable and income taxes payable are eliminated from the computation of the Capital Base.

8Spartan Motors, Inc. Exhibit 10.15 to Form 10-K - 03-13-09

EXHIBIT 10.15

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE

          THIS AGREEMENT is made between Spartan Motors, Inc. (the "Employer"), as defined below and Richard J. Schalter (the "Associate").  For the purposes of this Agreement, the "Employer" shall include any and all predecessor corporations or organizations, any and all successor corporations or organizations, and any and all parent, subsidiary or related organizations.

RECITALS

	 	
A.
	
On December 22, 2008 Employer's subsidiary Spartan Motors Chassis, Inc. entered into a plea agreement (the "Plea Agreement") and settlement agreement (the "Settlement Agreement") with the U.S. Government settling criminal and civil charges related to making a false statement.

	 	
B.
	
During Employer's investigation and defense of the charges stated in Recital A. above, Employer, at its cost, provided independent legal counsel for Associate, incurring fees of approximately $1,500,000.  By entering into this Agreement, Employer intends to waive and forego any action seeking reimbursement from Associate for certain legal fees as defined below in Section 4A, to the extent they are otherwise recoverable under the law.

	 	
C.
	
Associate's employment with Employer ended effective December 29, 2008.  Wholly independent from this Agreement, Associate resigned effective 29 December 2008.  Regardless of whether Associate decides to enter into this Agreement and/or revoke the Agreement after signing it, Associate will no longer be an active employee of Employer as of December 29, 2008.  This Agreement merely is intended to provide additional benefits to Associate, should he decide to voluntarily enter into this Agreement.

	 	
D.
	
The Employer and Associate desire to enter into this Agreement in order to provide certain benefits

	 	 	
to the Associate, as specified in this Agreement, to provide for an orderly conclusion of employment, and to release and waive potential claims against each other.

The parties therefore agree as follows:

TERMS AND SETTLEMENT

          1.          Termination of Employment.  The Associate's employment with the Employer ended effective December 29, 2008.  Associate will be paid his regular wages and benefits earned from the Employer through the end of the payroll period in which that day falls.  Such consideration includes:

	 	
a.
	
Regular compensation

	 	
b.
	
Payment of $44,899.00, representing 50% of the Mandatory Deferred Balance under the Employer's SPAR Management Incentive Bonus Plan at the time provided in the Plan (including, if applicable, the provision for the delay in payment to certain "Specific Employees" under section 409(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended).

	 	
c.
	
Accrued but unused vacation accrued as of December 29, 2008, and determined from Employer's records.

	 	
d.
	
Restricted stock, stock options and stock appreciation rights (SARs) - Share-based awards previously granted to Associate pursuant to the terms and conditions of Employer's equity compensation plans.

	 	
In consideration for the agreement of the parties as set forth herein, the Associate hereby waives any and all rights to reemployment with Employer and further waives any rights to any other compensation, bonus, or payment relating to his employment with Employer, other than those set forth in this Agreement.

          2.          Release Payment.  As consideration for the promises and releases contained in this Agreement, the Employer shall pay to the Associate the following:

          A.          $305,000 payable during calendar year 2009 in equal weekly installments in accordance with Employer's normal payroll practices less applicable income and employment tax withholding.  The first weekly

2

installment shall be paid on the first payroll date that is at least seven days after the Associate executes and delivers this agreement to the Employer.  The first payment will be made retroactive to the payroll period beginning 1 January 2009, and the last payment will be made for the period ending 31 December 2009.

          B.          In full satisfaction of any and all rights which Associate may have under the Employer's SPAR Management Incentive Bonus Plan ("Plan"), the Employer shall pay to the Associate an amount equal to the following:

Base Salary ($305,000.00) x Target Bonus Percentage (40%) x 2008 Spartan Chassis SPAR Multiple.  "2008 Spartan Chassis SPAR Multiple" shall mean the SPAR Multiple used to compute SPAR Annual Incentive Bonuses for all other Spartan Chassis participants in the Plan.  If the 2008 Spartan Chassis SPAR Multiple exceeds 2.6, all incentive in excess of 2.6 will be paid in the form of Spartan Motors stock.  The price of the stock that will be used to calculate the number of shares is the market closing price on the date that the bonus is paid.  The cash and Spartan Motors stock payable under this paragraph B shall be paid to the Associate on the sixth month anniversary of his separation for service (as such term is defined in section 409A of the Internal Revenue Code of 1986, as amended). Such payment shall be made net of all applicable income and employment tax withholding.

          3.          Health Benefits.  Employer-provided health benefits for the Associate will be discontinued effective December 31, 2008 in accordance with Employer policy.  When health benefits are discontinued, COBRA rights will be extended to the Associate, as provided by law.  The Employer will pay all premiums on behalf of the Associate for COBRA continuation coverage for up to 12 months or until Associate gains new employment.

          4.          Legal Fees and Other Fees.

	 	
A.
	
Legal Fees in Connection with Government Charges.  As recited above, Employer incurred and paid for independent legal counsel for Associate in connection with investigation and

3

	 	 	
defense of the charges stated in Recital A.  "Legal Fees" as intended herein includes only legal fees incurred and paid in connection with the investigation and defense of charges stated in Recital A, but expressly excludes any legal fees incurred on behalf of Associate by Associate's counsel between 1 December 2008 and 22 December 2008 and paid related to suspension and debarment issues.  For the avoidance of doubt, to the extent that legal fees are incurred on behalf of Associate by Associate's counsel between 1 December 2008 and 22 December 2008 and paid related to suspension and debarment issues, such fees shall be the responsibility of Associate.  Effective on 22 December 2008 Employer shall cease to be responsible for Legal Fees on Associate's behalf.  Accordingly, Employer shall pay for all Legal Fees incurred to such date and Associate shall pay for any Legal Fees incurred after such date.  Employer further waives and releases all claims for reimbursement relating to the Legal Fees already incurred.  Except as provided in this Section 4(A), Employer agrees to indemnify Associate as set forth in Article VII of Employer's By-Laws.

	 	 	 
	 	
B.
	
Other Fees.  Employer also agrees to pay Associate $6,000 for legal and miscellaneous fees incurred in connection with the review and Associate's obtaining advice regarding this Agreement.

          5.          Payments in Excess of Pre-Existing Obligations.  The parties agree that the payments and benefits provided to the Associate under paragraphs 2, and 3 of this Agreement, except as set forth below, are being paid as consideration to support the promises and releases contained in this Agreement.  Such payments and benefits exceed any pre-existing obligations of the Employer to the Associate (including, without limitation, continued salary, benefits, or bonuses), and are not being paid for services rendered or to be rendered by the Associate to the Employer.  The consideration being paid under paragraph 2B is being paid as consideration to support the promises and releases contained in this agreement with the exception of the promises contained in paragraph 7.  For the avoidance of doubt, the consideration being paid under paragraph 2B is not conditioned on

4

Associate's compliance with paragraph 7.

          6.          Non-disparagement and Confidentiality.

                    A.          Associate agrees, on his own behalf and on behalf of his immediate family members, attorneys, representatives and agents, that neither he nor any of his immediate family members, attorneys (except Warner, Norcross & Judd), agents or representatives will make any disparaging or defamatory comments to any third party concerning the Employer or any Employer Releasee (see paragraph 9 below for definition), including but not limited to any disparaging or defamatory comments about their integrity, honesty or morality, or about the quality or value of their products, services, methods of doing business, or employment practices, or any other business or personal matter.  Associate further agrees not to encourage or assist in any litigation against the Employer or any Employer Releasee, except insofar as his testimony is required by law.  If Associate is served with process concerning any matter in which Employer or any Employer Releasee has an interest, he will immediately notify Thomas Kivell at 1000 Reynolds Road, Charlotte, MI 48813.

                    B.          The Employer agrees that it will instruct its executive level employees to refrain from making any disparaging or defamatory comments to any third party concerning Associate's integrity, honesty or morality, about the quality or value of his job performance for the Employer or about any other business or personal matter concerning Associate.  Employer also agrees to instruct its executive level employees to refer all inquiries about Associate to the Spartan Chassis Human Resources Director.

5

          C.          The Associate acknowledges that he has had access to, created, or acquired confidential, privileged, copyrighted or proprietary records, provider records, or trade/market/financial information, secrets, or processes.  He understands that this information, regardless of the format (or changing formats over time), is solely the property of the Employer.  He further recognizes that disclosures of this information, whether inadvertent or intentional, will damage the Employer's business interests, and accordingly he agrees not to disclose that information to any person or entity.    In addition, the Associate represents that he has returned to the Employer all such information, whether paper or electronic, or copies along with any other Employer property in his possession, but excluding those items that Tom Kivell has agreed in writing that the Employer will permit Associate to retain.  Employer understands that Associate has presented certain documents to his attorneys which may be deemed confidential as described in this paragraph.  Associate agrees not to authorize disclosure of any such documents by his attorneys without the written consent of Employer

          D.          The Associate agrees that he, and anyone to whom this paragraph allows disclosure, shall keep the terms, conditions and amount of this Confidential Separation Agreement and Release strictly confidential.  The Associate shall disclose no information concerning the terms, conditions or amount of separation pay granted under this Agreement to anyone, except his spouse, attorneys, accountants, auditors, tax advisors, or taxing authorities, unless required to do so by process of law.  This covenant of Confidentiality is a material term of this Confidential Separation Agreement and Release and constitutes an inducement to the Employer to enter into this Agreement.

          E.          In the event that the Associate is deemed to have materially breached any part of Section 6 of this Agreement, the Employer may, in addition to any other remedy it may have, withhold or cancel any other payments due to the Associate pursuant to this Agreement.  The Employer shall give prior or contemporaneous written notice of such withholding or cancellation of payments to the Associate and a fifteen (15) day opportunity to cure any alleged breach.

6

          7.          Noncompete.

          A.  For a period of twelve (12) months after employment with the Employer, Associate shall not, directly or indirectly, become employed by, or become a consultant to, a Competing Business.  For a period of twelve (12) months after employment with the Employer, Associate covenants that he shall not establish a Competing Business that, or work as an employee or consultant in a capacity competing with Employer.  "Competing Business" for purposes of this paragraph, means:

          (i) a business offering products or services in direct competition with Employer or Employer's subsidiaries and divisions; or

          (ii) a business developing the ability to compete in selling, designing, marketing, or manufacturing, products or services that compete with Employer or Employer's subsidiaries and divisions.

          B.  Associate further covenants that for a period of twelve (12) months after employment with the Employer, he will not, directly or indirectly, solicit the employment of any person who is employed by the Employer or Employer's subsidiaries and divisions on a full or part-time basis.

          8.          Employer Property.  To the extent Associate still has any Employer property, Associate agrees to return all Employer property, whether leased or owned, of any kind whatsoever, including without limitation all confidential records identified in Section 6(C) of this Agreement, by December 29, 2008, but excluding those items that Tom Kivell has agreed the Employer will permit Associate to retain.

          9.          Release.  The Associate hereby releases, acquits, and forever discharges the Employer as defined herein, its present and former associates, officers, agents, directors, successors, predecessors, assigns and attorneys (except Warner, Norcross & Judd) (the "Employer Releasees"), from any and all grievances, claims, actions, charges, suits, causes of action, demands, rights, damages, levies, costs, executions, expenses (including,

7

but not limited to the fees set forth in Paragraph 4 above) and compensation whatsoever, known or unknown, liquidated or unliquidated, fixed or contingent, direct or indirect, which the Associate has now or which may accrue to the date of execution of this Agreement on account of or growing out of the Associate's employment with Employer, the termination of that employment or the circumstances surrounding termination of that employment, or arising out of related events occurring through the date that this Agreement is executed.  This includes, but is not limited to, claims for wrongful discharge; any breach of express or implied contracts; continued employment; loss of wages or benefits; employment discrimination specifically including age or other discrimination claims arising under Title VII or the Federal Age Discrimination in Employment Act, as amended, or any other federal or state civil rights or anti-discrimination act, or any other statute; slander; libel; defamation; attorney fees; and all other types of claims or causes of action whatsoever.

          The above release does not affect the Associate's right to participate or cooperate in a charge or investigation with the Equal Employment Opportunity Commission, but it is understood and agreed that the Associate waives, releases, and gives up any right to reimbursement, money damages, or other payment or monetary benefit with regard to or arising out of any such charge, investigation, agency or administrative adjudication, or litigation.  The above release also does not affect the Associate's rights to pursue any claims for breach of this Confidential Separation Agreement and Release.

          Employer also releases Associate from any and call claims, damages, charges or expenses, known or unknown, liquidated or unliquidated, which Employer may have against Associate on account of or growing out of the Associate's employment with employer, but excluding reckless or intentional torts and criminal acts.

          10.          Consultation with an Attorney.  Associate is advised to consult an Attorney regarding his rights and this Agreement before this Agreement is signed.

          11.          Time to Decide.  Associate is urged to consider this Agreement carefully and he acknowledges

8

that this Agreement was first given to him/her for his consideration on or about December 29, 2008.  The Associate has a period of at least twenty-one (21) days from that date to decide whether to sign this Confidential Separation Agreement and Release.  If the Associate chooses to sign this Agreement before expiration of the 21 days, he acknowledges that he does so voluntarily, and free from any threat to withdraw or alter the offer before expiration of the 21-day period.

          12          Seven (7) Day Period to Revoke.  The Associate further acknowledges that he has seven (7) days from the date he executes this Agreement within which to revoke this Agreement ("Revocation Period") and that this Release is not effective until after the expiration of the Revocation Period.  Any revocation of this Agreement shall be made in writing by the Associate and shall be delivered to Thomas Kivell before 5 p.m. on the seventh day following the date on which Associate executes this Agreement.  This Agreement shall not become effective or enforceable until the Revocation Period has expired.   If the last day of the revocation period is a Saturday, Sunday, or legal holiday in the state in which Associate was employed at the time of her last day of employment, then the revocation period shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday.  Should the Associate revoke this Agreement during the Revocation Period, the entire Agreement may be deemed null and void.

          13.          No Admission of Liability.  Nothing contained herein and no actions taken by any party with respect to this Confidential Separation Agreement and Release shall be construed as an admission by any person, entity, or party to this Agreement, of any act of wrongdoing or any liability of any kind, all such liability and wrongdoing being expressly denied.

          14.          Severability.  Should any provision of this Agreement be declared or determined by any court to be illegal or invalid, the remaining parts, terms or provisions shall not be affected thereby, and said illegal or invalid part, term or provision shall be deemed not to be a part of this Agreement.

9

          15.          Entire Agreement.  This Agreement sets forth the entire Agreement between the parties and fully supersedes any and all prior agreements or understandings between them.  This Agreement may not be modified or amended except by written agreement signed by all parties.

          16.          Governing Law.  This agreement shall be construed and enforced under the laws of the State of Michigan.

THE PARTIES HAVE READ AND FULLY CONSIDERED THIS AGREEMENT AND GENERAL RELEASE AND ARE MUTUALLY DESIRE TO ENTER INTO SUCH AGREEMENT AND GENERAL RELEASE.  ASSOCIATE UNDERSTANDS THAT THIS DOCUMENT SETTLES, BARS AND WAIVES ANY AND ALL CLAIMS HE HAD OR MIGHT HAVE AGAINST THE EMPLOYER; AND HE ACKNOWLEDGES THAT HE IS NOT RELYING ON ANY OTHER REPRESENTATIONS, WRITTEN OR ORAL, NOT SET FORTH IN THIS DOCUMENT.  HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THEREBY THE SUMS AND BENEFITS SET FORTH ABOVE, ASSOCIATE FREELY AND KNOWINGLY AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE.

THEREFORE, the parties to this Confidential Separation Agreement and Release now voluntarily and knowingly execute this Agreement.

[READ THIS DOCUMENT CAREFULLY.  IT CONTAINS A RELEASE OF CLAIMS AGAINST THE EMPLOYER.]

	
RICHARD J. SCHALTER
	 	
SPARTAN MOTORS, INC.
	 
	 	 	 	 
	
/s/ Richard J. Schalter

	 	
/s/ David R. Wilson

	 

10

	 	 	
By:
	
David R. Wilson

	 	 	
Its:
	
Chairman, Board of Directors

	
Dated:  January 22, 2009
	 	
Dated:  December 29th, 2008

	 	 	 
	 	 	 
	
WITNESS:
	 	 
	 	 	 
	
/s/ Kathy A. Schalter

	 	 

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