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spar20190416_8k.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): April 10, 2019

SPARTAN MOTORS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Michigan

(State or Other Jurisdiction

of Incorporation)

001-33582

(Commission File No.)

38-2078923

(IRS Employer

Identification No.)

1541 Reynolds Road, Charlotte, Michigan

(Address of Principal Executive Offices)

48813

(Zip Code)

517-543-6400

(Registrant's Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Section Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b)	Resignation of Director

Effective April 10, 2019, Jeri L. Isbell resigned from the Board of Directors of Spartan Motors, Inc. (the “Company”) for personal reasons.

(e)	Compensatory Arrangements of Certain Officers

On April 15, 2019, the Board of Directors of the Company adopted the 2019 Leadership Team Compensation Plan (the “Plan”). A copy of the Plan is filed as Exhibit 10.1 to this Current Report.

Pursuant to the Plan, performance share units (PSUs) will represent 70% of our named executive officers’ long-term incentive compensation and restricted stock units (RSUs) will represent the remaining 30%. The PSUs, which reflect a target number of shares that will be issued to the award recipient at the end of a three-year award cycle, are based on the achievement of performance metrics established at the time of the grant. These metrics are three-year cumulative GAAP net income (40% weighting) and three-year relative TSR (60% weighting). PSUs are capped at 200% of target. The time-based RSUs will have a three-year ratable vesting period. Copies of the form Performance Share Unit Agreement and Restricted Stock Unit Agreement approved by the Board are filed as Exhibits 10.2 and 10.3 to this Current Report, respectively.

The Plan also provides for annual cash incentive bonuses for named executive officers; however, the Plan did not make any material changes related to these annual cash incentive bonuses from the Company’s previous Leadership Team Compensation Plan, as disclosed in the Company’s most recent proxy statement.

Item 9.01

Financial Statements and Exhibits

(d)

Exhibits

10.1

Spartan Motors, Inc. 2019 Leadership Team Compensation Plan dated April 15, 2019.*

10.2

Form of Spartan Motors, Inc. Performance Share Unit Agreement*

10.3

Form of Spartan Motors, Inc. Restricted Stock Unit Agreement*

* Management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SPARTAN MOTORS, INC.


Dated: April 16, 2019	/s/ Frederick J. Sohm
	By: Frederick J. Sohm
	Its: Chief Financial Officer

ex_140880.htm

Exhibit 10.1

Spartan Motors, Inc.

2019 LEADERSHIP TEAM COMPENSATION PLAN

Approved by the Board of Directors April 15, 2019

A.	OVERALL

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.

OBJECTIVES OF THE PLAN

The Plan is designed to achieve the following objectives:

Attract and retain qualified management

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

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

Reward excellent corporate performance

Recognize individual and team initiatives and achievements

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.

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.

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

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.

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.

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.

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.

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

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.

B.	AIC PLAN – ALL PARTICIPANTS

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).

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.

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.

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.

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.

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.

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.

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.

DEATH, DISABILITY, RETIREMENT, AND CHANGES IN CONTROL

Upon the first to occur of the following events:

a Participant’s death;

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

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.

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:

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

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).

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.

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.

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”).

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.

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.

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 25^th percentile	0%
25^th percentile (Threshold)	50% (0X)
50^th percentile (Target)	100% (1X)
75^th 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.

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).

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.

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.

ex_140881.htm

Exhibit 10.2

SPARTAN MOTORS, INC.

PERFORMANCE SHARE UNIT AGREEMENT

This PERFORMANCE SHARE UNIT AGREEMENT (the “Agreement”) is made and entered into as of [●] (the “Grant Date”), by and between Spartan Motors, Inc., a Michigan corporation (the “Company”) and [●] (the “Grantee”).

Background

The Company has adopted the Spartan Motors, Inc. Stock Incentive Plan of 2016 (the “Plan”) pursuant to which Restricted Stock Units may be granted subject to the achievement of performance conditions.

The Committee has determined that it is in the best interests of the Company and its shareholders to grant the award of Restricted Stock Units subject to the achievement of certain performance conditions, as provided for in this Agreement (the “Performance Share Units” or “PSUs”).

Agreement

Therefore, the parties, intending to be legally bound, agree as follows:

1. Grant of Performance Share Units. Pursuant to the Plan, the Company hereby grants to the Grantee an Incentive Award for a target number of [●] Performance Share Units (the “Target Award”).¹ Each PSU represents the right to receive one share of Common Stock, subject to the terms and conditions set forth in this Agreement and the Plan. The number of PSUs that the Grantee actually earns for the Performance Period (from zero up to a maximum of [●]²) will be determined by the level of achievement of the performance goals in accordance with the attached Exhibit A. The PSUs shall be credited to a separate account maintained for the Grantee on the books and records of the Company (the “Account”). Capitalized terms that are used but not defined in this Agreement have the meanings assigned to them in the Plan.

2. Performance Period. For purposes of this Agreement, the term “Performance Period” shall be the period commencing on [●] and ending on [●].

3. Performance Goals.

(a) The number of PSUs earned by the Grantee for the Performance Period will be determined at the end of the Performance Period based on the level of achievement of the performance goals described on and determined in accordance with the attached Exhibit A. All determinations of whether and the extent to which the performance goals have been achieved, the number of PSUs earned by the Grantee, and all other matters related to this Section 3 shall be made by the Committee in its sole discretion.

(b) Promptly following completion of the Performance Period (and no later than 60 days following the end of the Performance Period), the Committee will review and certify in writing (1) whether, and to what extent, the performance goals for the Performance Period have been achieved, and (2) the number of PSUs the Grantee shall earn, if any, subject to compliance with the requirements of Section 4. Such certification shall be final, conclusive, and binding on the Grantee, and on all other persons, to the maximum extent permitted by law.

¹ The Target Award represents an X-Multiple of 1X. I.e., the number of shares actually issuable pursuant to this Agreement could be twice the Target Award.

² Insert 200% of Target Award.

4. Vesting of PSUs. The PSUs are subject to forfeiture until they vest. Except as otherwise provided in this Agreement, the PSUs will vest and become non-forfeitable on the last day of the Performance Period, subject to (a) the achievement of the minimum threshold performance goals for payout set forth in the attached Exhibit A, and (b) there being no termination of Grantee’s employment (as determined pursuant to Section 7.2 of the Plan) from the Grant Date through the last day of the Performance Period. The number of PSUs that vest and become payable under this Agreement shall be determined by the Committee based on the level of achievement of the performance goals set forth on the attached Exhibit A and shall be rounded to the nearest whole PSU.

5. Termination of Employment.

(a) Except as otherwise expressly provided in this Agreement or the Spartan Motors, Inc. Management Severance Plan (to the extent such plan applies to the Grantee), if the Grantee’s employment terminates for any reason at any time before all of his or her PSUs have vested, the Grantee’s unvested PSUs shall be automatically forfeited upon such termination of employment, and neither the Company nor any Subsidiary shall have any further obligations to the Grantee under this Agreement. For purposes of this Section 5, termination of employment shall be determined in accordance with Section 7.2 of the Plan.

(b) Notwithstanding Section 5(a) above, if the Grantee’s employment terminates during the Performance Period as a result of the Grantee’s death or Disability, all of the outstanding PSUs will vest in accordance with Section 4 subject to achievement of the performance goals as if the Grantee’s employment had not terminated.

(c) Notwithstanding Section 5(a) above, if the Grantee’s employment terminates during the Performance Period as a result of the Grantee’s Qualified Retirement (defined below) that occurs at least nine months after the Grant Date, then on the last day of the Performance Period, the Grantee will vest in a pro rata portion of the number of PSUs that would have been earned pursuant to this Agreement if the Participant had remained employed throughout the entire Performance Period, calculated by multiplying such number of PSUs by a fraction, the numerator of which equals the number of days that the Grantee was employed during the Performance Period and the denominator of which equals the total number of days in the Performance Period. A “Qualified Retirement” shall mean the voluntary retirement by a Grantee who is at least age 62 and who has been employed by the Company or a Subsidiary for a continuous period of 5 years as of the date of retirement.

6. Effect of a Change in Control. The provisions of Section 9 of the Plan shall apply if there is a Change in Control during the Performance Period.

7. Payment of PSUs. Payment in respect of the PSUs earned for the Performance Period shall be made in shares of Common Stock and shall be issued to the Grantee within 90 days following the last day of the Performance Period. The Company shall (a) issue and deliver to the Grantee the number of shares of Common Stock equal to the number of vested PSUs, (b) issue and deliver to the Grantee the number of shares of Common Stock having a Market Value equal to the Dividend Equivalents (and interest, if any) to which the Grantee is entitled pursuant to Section 9(c) below, and (c) enter the Grantee’s name on the books of the Company as the shareholder of record with respect to all such shares of Common Stock delivered to the Grantee.

8. Transferability. Subject to any exceptions set forth in this Agreement or the Plan, the PSUs or the rights relating to the PSUs may not be assigned, alienated, pledged, attached, sold, or otherwise transferred or encumbered by the Grantee, except by will or the laws of descent and distribution, and upon any such transfer by will or the laws of descent and distribution, the transferee shall hold such PSUs subject to all of the terms and conditions that were applicable to the Grantee immediately prior to such transfer. Any attempt to assign, alienate, pledge, attach, sell, or otherwise transfer or encumber the PSUs or the rights relating to the PSUs shall be wholly ineffective.

9. Rights as Shareholder; Dividend Equivalents.

(a) The Grantee shall not have any rights of a shareholder with respect to the shares of Common Stock underlying the PSUs unless and until the PSUs vest and are settled by the issuance of such shares of Common Stock.

(b) Upon and following the vesting of the PSUs and the issuance of shares, the Grantee shall be the record owner of the shares of Common Stock underlying the PSUs unless and until such shares are sold or otherwise disposed of, and as record owner shall be entitled to all rights of a shareholder of the Company (including voting and dividend rights).

(c) During the Performance Period, the Grantee’s Account shall be credited with an amount equal to all cash and stock dividends (“Dividend Equivalents”) that would have been paid to the Grantee if one share of Common Stock had been issued on the Grant Date for each PSU granted to the Grantee as set forth in this Agreement. Dividend Equivalents shall be credited to the Grantee’s Account and interest may be credited on the amount of cash Dividend Equivalents credited to the Grantee’s Account at a rate and subject to such terms as determined by the Committee. Dividend Equivalents shall be subject to the same performance conditions and vesting restrictions as the PSUs to which they are attributable. Notwithstanding anything to the contrary in this Agreement, the Grantee shall only be entitled to receive Dividend Equivalents credited to his or her Account to the extent the Grantee becomes entitled to receive the shares of Common Stock underlying the PSUs to which such Dividend Equivalents relate, and the Grantee shall forfeit any Dividend Equivalents credited to the Grantee’s Account that were attributable to PSUs that did not result in the issuance of shares of Common Stock to the Grantee.

10. No Right to Continued Service. Neither the Plan nor this Agreement shall confer upon the Grantee any right to be retained in any position, as an employee, consultant, or director of the Company. Further, nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the Grantee’s employment at any time, with or without cause.

11. Adjustments. If any change is made to the outstanding Common Stock or the capital structure of the Company, if required, the PSUs shall be adjusted or terminated in any manner as contemplated by Section 4.3 of the Plan.

12. Compliance with Law. The issuance and transfer of shares of Common Stock in connection with the PSUs shall be subject to compliance by the Company and the Grantee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be listed. No shares of Common Stock shall be issued or transferred unless and until any then applicable requirements of state and federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel.

13. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Secretary of the Company at the Company’s principal corporate offices. Any notice required to be delivered to the Grantee under this Agreement shall be in writing and addressed to the Grantee at the Grantee’s address as shown in the records of the Company. Either party may designate another address in writing (or by such other method approved by the Company) from time to time.

14. Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Michigan without regard to conflict of law principles.

15. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Grantee or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Grantee and the Company.

16. PSUs Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s shareholders. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated in this Agreement by reference. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

17. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in this Agreement, this Agreement will be binding upon the Grantee and the Grantee’s beneficiaries, executors, administrators, and the person(s) to whom the PSUs may be transferred by will or the laws of descent or distribution.

18. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.

19. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled, or terminated by the Company at any time, in its discretion. The grant of the PSUs in this Agreement does not create any contractual right or other right to receive any PSUs or other Incentive Awards in the future. Future Incentive Awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Grantee’s employment with the Company.

20. Section 162(m). All payments under this Agreement are intended to constitute “qualified performance-based compensation” within the meaning of Section 162(m) of the Code. This Award shall be construed and administered in a manner consistent with such intent.

21. Section 409A. This Agreement is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A of the Code, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code.

22. No Impact on Other Benefits. The value of the Grantee’s PSUs is not part of his or her normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance, or similar employee benefit.

23. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

24. Acceptance. The Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement. The Grantee has read and understands the terms and provisions of the Plan and this Agreement and accepts the PSUs subject to all of the terms and conditions of the Plan and this Agreement. The Grantee acknowledges that there may be adverse tax consequences upon the vesting or settlement of the PSUs or disposition of the underlying shares and that the Grantee has been advised to consult a tax advisor prior to such vesting, settlement, or disposition.

INTENDING TO BE LEGALLY BOUND, the parties have executed this Performance Share Unit Agreement as of the Grant Date.

COMPANY:		GRANTEE:
Spartan Motors, Inc.


By:		[●]
Its:

EXHIBIT A

Performance Period

The Performance Period shall commence on [●] and end on [●].

Performance Measures

The number of PSUs earned shall be determined by reference to:

(1)

60% shall be based on the Company’s Total Shareholder Return (“TSR”) over the Performance Period relative to the Dow Jones U.S. Commercial Vehicles and Truck Index (the “Index”); and

(2)

40% shall be based on the Company’s cumulative GAAP Net Income over the Performance Period. Cumulative GAAP Net Income shall be subject to such adjustments as approved by the Compensation Committee in its sole discretion.

Determining PSUs Earned

Except as otherwise provided in the Plan or the Agreement, the number of PSUs earned with respect to the Performance Period shall be determined as follows:

(1)

TSR over the Performance Period relative to the Index (60% weighting):

Percentile Rank Compared to Index	Payout as Percentage of Target
Less than [●] percentile	0%
[●] percentile (Threshold)	50% (0X)
[●] percentile (Target)	100% (1X)
[●] percentile (Maximum)	200% (2X)

With respect to both the Company’s stock and the stock of each company in the Index, the TSR performance shall be calculated (a) using a 20-trading day average of the stock price ending on the first day and last day of the Performance Period, and (b) assuming all dividends declared during the Performance Period are reinvested at the closing price on the applicable ex-dividend date. The Company’s TSR performance will be compared to the TSR performance of the companies in the Index over the same Performance Period. Achievement between the stated percentages will be interpolated on a straight-line basis.

(2)

Cumulative GAAP Net Income over the Performance Period:

Cumulative GAAP Net Income	Payout as Percentage of Target
Less than $[●]	0%
$[●] (Threshold)	50% (0X)
$[●] (Target)	100% (1X)
$[●] (Maximum)	200% (2X)

Achievement between the stated dollar amounts will be interpolated on a straight-line basis with no rounding.

Award Range

Depending on (1) the Company’s TSR over the Performance Period relative to the Index and (2) the Company’s cumulative GAAP Net Income, the Grantee may earn between 0% and 200% of the Target Award.

ex_140882.htm

Exhibit 10.3

SPARTAN MOTORS, INC.

RESTRICTED STOCK UNIT AGREEMENT

(Employees)

This RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”) is made and entered into as of [●] (the “Grant Date”), by and between Spartan Motors, Inc., a Michigan corporation (the “Company”) and [●] (the “Grantee”).

Background

The Company has adopted the Spartan Motors, Inc. Stock Incentive Plan of 2016 (the “Plan”) pursuant to which awards of Restricted Stock Units may be granted.

The Committee has determined that it is in the best interests of the Company and its shareholders to grant the award of Restricted Stock Units provided for in this Agreement.

Agreement

Therefore, the parties, intending to be legally bound, agree as follows:

1. Grant of Restricted Stock Units. Pursuant to the Plan, the Company hereby issues to the Grantee on the Grant Date an Incentive Award consisting of, in the aggregate, [●] Restricted Stock Units (the “RSUs”). Each RSU represents the right to receive one share of Common Stock on the terms and conditions and subject to the restrictions set forth in this Agreement and the Plan. The RSUs shall be credited to a separate account maintained for the Grantee on the books and records of the Company (the “Account”). Capitalized terms that are used but not defined in this Agreement have the meanings assigned to them in the Plan.

2. Consideration. The grant of the RSUs is made in consideration of the services to be rendered by the Grantee to the Company.

3. Restricted Period; Vesting. Except as otherwise provided in this Agreement, provided there is no termination of Grantee’s employment (as determined in accordance with Section 7.2 of the Plan) as of the applicable vesting date, the RSUs will vest in accordance with the following schedule:

Vesting Date	Number of RSUs That Vest
First anniversary of Grant Date	33⅓%
Second anniversary of Grant Date	33⅓%
Third anniversary of Grant Date	33⅓%

The period over which the RSUs vest is referred to as the “Restricted Period.” Once vested, the RSUs become “Vested Units.”

4. Restrictions. Subject to any exceptions set forth in this Agreement or the Plan, during the Restricted Period and until such time as the RSUs are settled in accordance with Section 8 below, neither the RSUs nor the rights relating to the RSUs may be assigned, alienated, pledged, attached, sold, or otherwise transferred or encumbered by the Grantee. Any attempt to assign, alienate, pledge, attach, sell, or otherwise transfer or encumber the RSUs or the rights relating to the RSUs shall be wholly ineffective.

5. Termination of Employment.

(a) Except as otherwise expressly provided in this Agreement or the Spartan Motors, Inc. Management Severance Plan (to the extent such plan applies to the Grantee), if the Grantee’s employment terminates for any reason at any time before all of his or her RSUs have vested, the Grantee’s unvested RSUs shall be automatically forfeited upon such termination of employment, and neither the Company nor any Subsidiary shall have any further obligations to the Grantee under this Agreement. For purposes of this Section 5, termination of employment shall be determined in accordance with Section 7.2 of the Plan.

(b) Notwithstanding Section 5(a) above, if the Grantee’s employment terminates during the Restricted Period as a result of the Grantee’s death or Disability, all of the RSUs will vest in accordance with Section 3 as if the Grantee’s employment had not terminated.

(c) Notwithstanding Section 5(a) above, if the Grantee’s employment terminates during the Restricted Period as a result of the Grantee’s Qualified Retirement (defined below) that occurs at least nine months after the Grant Date, then all of the RSUs will vest in accordance with Section 3 as if the Grantee’s employment had not terminated. A “Qualified Retirement” shall mean the voluntary retirement by a Grantee who is at least age 62 and who has been employed by the Company or a Subsidiary for a continuous period of 5 years as of the date of retirement.

6. Effect of a Change in Control. The provisions of Section 9 of the Plan shall apply if there is a Change in Control during the Restricted Period.

7. Rights as Shareholder; Dividend Equivalents.

(a) The Grantee shall not have any rights of a shareholder with respect to the shares of Common Stock underlying the RSUs unless and until the RSUs vest and are settled by the issuance of such shares of Common Stock.

(b) Upon and following the settlement of the RSUs, the Grantee shall be the record owner of the shares of Common Stock underlying the RSUs unless and until such shares are sold or otherwise disposed of, and as record owner shall be entitled to all rights of a shareholder of the Company (including voting rights).

(c) Until such time as the RSUs vest, the Grantee’s Account shall be credited with an amount equal to all cash and stock dividends (“Dividend Equivalents”) that would have been paid to the Grantee if one share of Common Stock had been issued on the Grant Date for each RSU granted to the Grantee as set forth in this Agreement. Dividend Equivalents shall be credited to the Grantee’s Account and interest may be credited on the amount of cash Dividend Equivalents credited to the Grantee’s Account at a rate and subject to such terms as determined by the Committee. Dividend Equivalents shall be subject to the same vesting restrictions as the RSUs to which they are attributable and shall be paid on the same date that the RSUs to which they are attributable are settled in accordance with Section 8 below. Dividend Equivalents credited to a Grantee’s Account shall be distributed in cash or, at the discretion of the Committee, in shares of Common Stock having a Market Value equal to the amount of the Dividend Equivalents and interest, if any.

8. Settlement of RSUs. Subject to any withholding for applicable taxes pursuant to the Plan, promptly following the vesting date, and in any event no later than March 15 of the calendar year following the calendar year in which such vesting occurs, the Company shall (a) issue and deliver to the Grantee the number of shares of Common Stock equal to the number of Vested Units and cash equal to any Dividend Equivalents credited with respect to such Vested Units and the interest thereon or, at the discretion of the Committee, shares of Common Stock having a Market Value equal to such Dividend Equivalents and the interest thereon; and (b) enter the Grantee’s name on the books of the Company as the shareholder of record with respect to the shares of Common Stock delivered to the Grantee.

9. No Right to Continued Service. Neither the Plan nor this Agreement shall confer upon the Grantee any right to be retained in any position, as an employee, consultant, or director of the Company. Further, nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the Grantee’s employment at any time, with or without cause.

10. Adjustments. If any change is made to the outstanding Common Stock or the capital structure of the Company, if required, the RSUs shall be adjusted or terminated in any manner as contemplated by Section 4.3 of the Plan.

11. Compliance with Law. The issuance and transfer of shares of Common Stock shall be subject to compliance by the Company and the Grantee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be listed. No shares of Common Stock shall be issued or transferred unless and until any then applicable requirements of state and federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel.

12. Legends. A legend may be placed on any certificate(s) or other document(s) delivered to the Grantee indicating restrictions on transferability of the RSUs or the shares of Common Stock issuable upon settlement of the RSUs pursuant to this Agreement or any other restrictions that the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any applicable federal or state securities laws, or any stock exchange on which the shares of Common Stock are then listed or quoted.

14. Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Michigan without regard to conflict of law principles.

16. RSUs Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s shareholders. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated in this Agreement by reference. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

19. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled, or terminated by the Company at any time, in its discretion. The grant of the RSUs in this Agreement does not create any contractual right or other right to receive any RSUs or other Incentive Awards in the future. Future Incentive Awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Grantee’s employment.

20. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

21. Acceptance. The Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement. The Grantee has read and understands the terms and provisions of the Plan and this Agreement, and accepts the RSUs subject to all of the terms and conditions of the Plan and this Agreement. The Grantee acknowledges that there may be adverse tax consequences upon the grant, vesting, or settlement of the RSUs or disposition of the underlying shares and that the Grantee has been advised to consult a tax advisor prior to such grant, vesting or disposition.

INTENDING TO BE LEGALLY BOUND, the parties have executed this Restricted Stock Unit Agreement as of the Grant Date.

COMPANY:		GRANTEE:
Spartan Motors, Inc.


By:		[●]
Its: