SPARTAN MOTORS, INC. STOCK OPTION AND RESTRICTED STOCK PLAN OF 2003

EXHIBIT 10.5

SPARTAN MOTORS, INC.
STOCK OPTION AND RESTRICTED STOCK PLAN OF 2003

PLAN DESCRIPTION

January 13, 2004

          The Spartan Motors, Inc. Stock Option and Restricted Stock Plan of 2003 (the " Plan ") permits the grant and award of stock options and restricted stock to directors, officers and key employees of Spartan Motors, Inc. and its subsidiaries. The Plan's purposes are to provide Plan participants with an increased incentive to contribute to the long-term performance and growth of Spartan Motors and its subsidiaries, to join the interests of participants with the interests of Spartan Motors' shareholders through the opportunity for increased stock ownership and to attract and retain directors, officers and key employees. The Plan is further intended to provide flexibility to Spartan Motors in structuring long-term incentive compensation to best promote the foregoing objectives.

GENERAL PLAN INFORMATION

          The Plan permits the grant and award of stock options and restricted stock (collectively, the " incentive awards ") to directors, officers and key employees (collectively, " participants ") of Spartan Motors, Inc. and its subsidiaries. Spartan Motors' board of directors believes that aligning the interests of participants with the interests of Spartan Motors' shareholders best advances the company's long-term interests. In addition, the board of directors recognizes participants' importance to Spartan Motors' long-term performance and growth. Accordingly, the issuance of incentive awards as part of a comprehensive compensation program provides them with an incentive to continue their directorship or employment with Spartan Motors, while further aligning their interests with those of Spartan Motors' shareholders.

          A total of 1,000,000 shares of Spartan Motors common stock, $.01 par value, may be granted or awarded under the Plan. However, the number of shares may be adjusted in the future to reflect stock dividends and other changes in Spartan Motors' capitalization. Shares deliverable on the exercise or grant of an incentive award under the Plan will be authorized and unissued shares or shares repurchased by Spartan Motors, including shares purchased on the open market. No participant may be granted, during any calendar year, incentive awards with respect to more than 125,000 shares of Spartan Motors common stock (subject to certain capital adjustments) made available for incentive awards under the Plan.

          The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and is not qualified under Section 401(a) of the Internal Revenue Code of 1986. The Plan took effect, subject to shareholder approval, on April 22, 2003. Spartan Motors' shareholders approved the Plan on May 28, 2003. Incentive awards can be made under the Plan until April 21, 2013.

ADMINISTRATION OF THE PLAN

          The compensation committee of Spartan Motors' board of directors (the " committee ") administers the Plan. Each member of the committee is appointed by and serves at the pleasure of the board of directors. The Plan requires the committee to consist of at least two members of Spartan Motors' board of directors, and all of its members to be "non-employee directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934 and "outside directors" as defined in the regulations under Section 162(m) of the Internal Revenue Code.

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          The committee will determine, subject to the terms of the Plan, (1) who will participate in the Plan, (2) the nature and extent of incentive awards to be granted to each participant, (3) the time of each grant, (4) the duration of and restrictions applicable to each incentive award, and (5) all other matters necessary or advisable for administration of the Plan. The committee may amend the terms of the incentive awards granted under the Plan from time to time in any manner, subject to the limitations specified in the Plan.

STOCK OPTIONS

          Grant.   Except as discussed in the following paragraph, the committee will select the participants who will receive stock options and will determine the terms and conditions of stock options granted under the Plan. The committee may vary, among participants and among stock options granted to the same participant, any and all of the terms and conditions of the stock options granted under the Plan. If you are granted a stock option under the Plan, then it will be evidenced by either a stock option agreement or a certificate of award, or both (collectively, a " stock option agreement "). You should carefully read your stock option agreement(s) and the Plan to understand the specific terms of your option(s). In addition, the committee may designate whether a stock option is to be considered an "incentive stock option" as defined in Section 422(b) of the Internal Revenue Code; however, no stock option granted to a director who is not an employee of Spartan Motors or its subsidiaries may be an incentive stock option.

          Option Grants to Non-employee Directors.   Notwithstanding the foregoing, the Plan provides that, to the extent not granted under the Stock Option and Restricted Stock Plan of 1998, a stock option to purchase 3,500 (7,500 for a non-employee director who is also Chairman of the Board) shares of Spartan Motors common stock (subject to adjustment in the event of a stock split, stock dividend, recapitalization, etc.) will automatically be granted to each non-employee director on June 30 and December 31 of each year during the life of the Plan.

          Stock Option Price.   The committee will determine the per-share exercise price of any stock options granted under the Plan, provided that the per-share exercise price of options must be equal to or greater than 100% of the fair market value of Spartan Motors common stock on the grant date. Furthermore, if you own more than 10% of the total combined voting power of all classes of company stock (as determined under Section 424(d) of the Internal Revenue Code), then stock options granted to you will not be incentive stock options, unless those options have a per-share exercise price equal to at least 110% of the market price on the grant date.

          Exercise Period.   Each stock option granted under the Plan may be exercised in whole or in part from time to time during the period that is specified in the stock option agreement governing that option. You cannot exercise a stock option later than ten years after the option is granted to you. However, if you own more than 10% of the total combined voting power of all classes of company stock (as determined under Section 424(d) of the Internal Revenue Code), then no option granted to you will be an incentive stock option unless the option must be exercised within five years of the date of grant. In addition, the committee may require you to continue service with Spartan Motors for a specified period of time before stock options become

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exercisable and/or may require you to represent that your shares are being acquired for investment purposes only.

          Payment of Option Price.   When exercising your stock options, you must pay Spartan Motors the exercise price in cash or, if the committee consents or provides in your stock option agreement, in shares of Spartan Motors common stock that were held by you for at least six months (" mature shares ") or other consideration substantially equivalent to cash.

          Restrictions on Transferability.   Unless the committee consents or your stock option agreement provides otherwise, you may not sell, exchange, transfer, pledge, assign or otherwise alienate or hypothecate your stock options, except by will or the laws of descent and distribution. If a transfer is permitted, the transferee must execute a written agreement permitting Spartan Motors to withhold a number of shares to be received upon the exercise of the stock option to pay for any federal, state or local withholding or other taxes associated with or resulting from the exercise of the stock option. The committee may also impose other restrictions on shares of stock acquired pursuant to the exercise of options.

          Termination of Employment, Directorship or Officer Status.   Unless the committee consents or your stock option agreement provides otherwise, if you cease to be a director of Spartan Motors or cease to be employed by or an officer of Spartan Motors or one of its subsidiaries for any reason other than death, disability, retirement (as defined in the Plan) or termination for cause, then you may exercise your stock options in accordance with their terms for three months after your termination, but only to the extent that your stock options could have been exercised on the date of your termination. However, stock options may not be exercised after their expiration dates.

          Death.   Unless the committee consents or your stock option agreement provides otherwise, if you die while you are a director of Spartan Motors or an employee or officer of Spartan Motors or one of its subsidiaries, or after your directorship or employment is terminated, other than for cause, during the time when you could have exercised your stock options, your personal representative or other successor may exercise your stock options in accordance with their terms for one year after your death. However, only stock options that could have been exercised on the date of death or the date of termination of employment or directorship (whichever happened first) may be exercised, unless the committee consents to a different time period or your stock option agreement provides otherwise. However, in no event may stock options be exercised after their expiration dates.

          Disability.   Unless the committee consents or your stock option agreement provides otherwise, if you cease to be a director of Spartan Motors or an employee or officer of Spartan Motors or one of its subsidiaries due to a disability, then you may exercise your stock options in accordance with their terms for one year following your termination of employment or directorship. Only stock options that could have been exercised on the date of termination may be exercised, unless the committee consents to different time period or your stock option

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agreement provides otherwise. However, in no event may stock options be exercised after their expiration dates.

          Retirement.   Unless the committee consents or your stock option agreement provides otherwise, if you retire (as set forth in the Plan), stock options granted to you under the Plan may be exercised in accordance with their terms before their expiration dates.

          Termination for Cause; Competition.   If you are terminated for cause, then you will have no further right to exercise any stock options. For purposes of the Plan the committee or officers designated by the committee will have absolute discretion to determine whether a termination is for cause. The committee may also provide by resolution or through a stock option agreement that you will have no further right to exercise stock options after termination of employment or directorship if the committee determines that you have entered into competition (as defined in the Plan) with Spartan Motors.

RESTRICTED STOCK

          Grant.   The Plan provides that the committee may award restricted stock, but not more than 50% of the shares authorized for issuance under the Plan may be issued as restricted stock. The committee, consistent with the Plan, will select the recipients (if any) of restricted stock awards and determine the terms and conditions of those awards.

          Restricted Stock Agreements.   The Plan provides that each award of restricted stock will be evidenced by a restricted stock agreement or a certificate of award (collectively, a " restricted stock agreement "). You should carefully read your restricted stock agreement(s) and the Plan to understand the specific terms of your restricted stock award(s).

          Restrictions on Transferability.   Unless the committee consents or your restricted stock agreement provides otherwise, you may not sell, exchange, transfer, pledge, assign or otherwise alienate or hypothecate your restricted stock, except by will or the laws of descent and distribution during the " restricted period " (the period before the restrictions on the restricted stock lapse and the restricted stock vests). In addition, only you, your guardian or legal representative may exercise rights with respect to your restricted stock during your lifetime.

          Termination of Employment or Directorship.   Unless the committee consents or your restricted stock agreement provides otherwise, if you cease to be a director, employee or officer before your restricted stock vests for any reason other than death, disability, retirement (as defined in the Plan) or termination for cause, then any shares that are still subject to restrictions at that time will be automatically forfeited and returned to Spartan Motors.

          Death, Retirement or Disability.   Unless the committee consents or your restricted stock agreement provides otherwise, if your employment or directorship is terminated because of death, disability or retirement (as defined in the Plan) during the restricted period, then the restrictions applicable to your shares of restricted stock will terminate automatically with respect

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to that number of shares (rounded to the nearest whole number) equal to the total number of shares of restricted stock granted to you, multiplied by the number of full months that have elapsed since the date of grant, divided by the total number of full months in the restricted period. All remaining shares will be forfeited and returned to Spartan Motors; provided , that the committee may, in its sole discretion, waive the restrictions remaining on any or all such shares of restricted stock either before or after your death, disability or retirement.

          Termination for Cause.   If you are terminated for cause, then you will have no further right to exercise or receive any restricted stock and all restricted stock still subject to restrictions as of the date of termination will be automatically forfeited and returned to Spartan Motors. The committee or officers designated by the committee will have absolute discretion to determine whether a termination is for cause.

          Rights as a Shareholder.   During the restricted period, subject to the transfer restrictions, risk of forfeiture and other terms of the Plan, you will have all rights as a shareholder with respect to your restricted stock, including the right to vote, the right to receive without restriction all cash dividends paid on those shares of restricted stock and the right to participate in any stock dividend, stock split, recapitalization or other adjustment in Spartan Motors common stock. Unless the committee otherwise determines or the terms of your restricted stock agreement provide otherwise, any non-cash dividends or distributions paid with respect to shares of unvested restricted stock will be subject to the same restrictions as the shares to which such dividends or distributions relate.

CHANGE IN CONTROL

          General.   If a change in control (as defined in the Plan) of Spartan Motors occurs, then, unless the committee or the board of directors determines otherwise, all of your unvested stock options will become immediately exercisable in full and will remain exercisable during the remaining term. All other outstanding incentive awards will become fully vested, exercisable and nonforfeitable.

          Cash Payment for Options.   If a change of control occurs, then the committee, in its sole discretion and without your consent, may choose to redeem some or all of your unexercised stock options for cash in accordance with Section 7.2 of the Plan.

NO RIGHT TO EMPLOYMENT OR AWARDS

          You do not have any claim to be granted an incentive award under the Plan and there is no obligation of unity of treatment under the Plan. The grant of an incentive award does not give you a right to remain in the employ or directorship of Spartan Motors or any of its subsidiaries. Spartan Motors or any of its subsidiaries may at any time dismiss you from employment or terminate your directorship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any written agreement with you. Spartan Motors may also suspend your rights under any incentive award (including your right to exercise stock options)

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for a period of up to 60 days while the termination for cause of your employment or directorship is under consideration.

TAX WITHHOLDING

          Spartan Motors has the right to (1) withhold and deduct from your future wages (or from other amounts that may be due and owing to you from Spartan Motors or a subsidiary), or make arrangements for the collection of, all legally required amounts necessary to satisfy federal, state, local and foreign withholding and employment-related tax requirements attributable to an incentive award, or (2) require you to promptly remit the amount of such withholding to Spartan Motors before taking any action with respect to an incentive award. Unless the committee determines otherwise, withholding may be satisfied (but only to the extent required to satisfy the minimum amount required to be withheld by law or regulation) by withholding common stock to be received in connection with an incentive award or by delivering to Spartan Motors previously owned shares of Spartan Motors common stock.

AMENDMENT AND TERMINATION

          Spartan Motors' board of directors may amend or terminate the Plan at any time, provided that no such amendment or termination, except where explicitly permitted by the Plan or by the terms of an incentive award, may impair any of your outstanding incentive awards without your written consent.

FEDERAL INCOME TAX CONSEQUENCES

Stock Options

          Incentive Stock Options.   Options for Spartan Motors common stock granted to employees of Spartan Motors or one of its subsidiaries with a value of not more than $100,000 as of the date of grant which are first exercisable by a participant in any one year may be treated as incentive stock options under the Internal Revenue Code. There is no limit on the aggregate value of underlying shares for options that are not incentive stock options. If you receive options that qualify under Section 422 of the Internal Revenue Code as incentive stock options, then the following tax consequences apply.

          You will recognize no income when you are granted or exercise your option to purchase shares and recognition of gain or loss is deferred until you subsequently sell the stock, provided that the following conditions are satisfied:

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Special rules apply when you own an option at the time of your death.

          If you meet the above conditions, there are no federal tax consequences to Spartan Motors upon the grant or exercise of an incentive stock option. The difference between the market value and the exercise price is, however, a tax preference item for the purpose of calculating your alternative minimum tax.

          If you fail to meet any of the above conditions, you will recognize compensation income at the time you exercise the option (as in (3) above) or make the disqualifying disposition (as in (1) or (2) above). The ordinary income would be the difference between the option price and the market value of the stock at the time of exercise, but not more than the excess of the amount recognized on the disqualifying disposition over the adjusted basis in the stock acquired upon the exercise of the option (generally, the difference between the option price and the price at which you sell the stock in the disqualifying disposition). Additional gain, if any, will be capital gain, long-term or short-term, depending on your holding period. Spartan Motors is entitled to a deduction for federal income tax purposes at the same time and in the same amount as you are considered to have recognized compensation income.

          Proposed Treas. Reg. §1.422-5 provides that where an option is exercised through payment with shares of stock, the basis and holding period of the shares received are adjusted. If you use mature shares to pay the exercise price of an option, then you will not recognize gain at the time of exercise on any appreciation in value of the mature shares that were used to exercise the option, unless the mature shares were acquired under an incentive stock option and did not meet the holding period requirements discussed above. A number of shares received, equal to the number of shares used for payment, have the same basis and holding period as the shares used for payment, increased, where applicable, by an amount included as compensation income as a result of such exercise. Your basis in any additional shares will be the sum of the amount of cash paid to exercise the option and the gain that you recognized on the exercise. Whenever shares of stock acquired through the exercise of an option are used as payment in the exercise of an option before satisfying the holding periods described above, the shares with the lowest basis will be considered a disqualifying disposition first in determining the amount of compensation income to be taxed to the optionee.

          Except in cases of substitute basis resulting from payment of the exercise price with shares of stock as provided above, the basis of the shares will be the option exercise price plus any income recognized on a disqualifying disposition. Upon a sale, you will recognize long- or short-term capital gain or loss on the transaction depending upon your holding period and the basis and the amount of the proceeds.

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          Non-Incentive Stock Options.   If you receive options that do not qualify as "incentive stock options" under Section 422 of the Internal Revenue Code, then the following tax consequences apply:

          You will not recognize any income when the option is granted. You will recognize compensation income on the day you exercise the option in an amount equal to the excess of the market value of the shares on the exercise date over the amount paid for the shares. Spartan Motors is entitled to a deduction for this same amount. Tax withholding applies and may be satisfied out of other compensation or shares of Spartan Motors common stock, either those received on exercise or other shares. Social Security Tax and Unemployment Tax (FICA and FUTA) apply to non-incentive stock options on the same date income is recognized.

          If you use previously owned shares of Spartan Motors common stock as consideration to purchase the shares pursuant to the option (if the committee consents or your stock option agreement so allows), then you will not recognize gain at the time of exercise on any appreciation in value of the Spartan Motors common stock that you used to exercise the option. Your tax basis in the aggregate number of shares will be the basis in the shares exchanged plus the income recognized on exercise as provided above, plus any cash consideration used to pay the option price.

          Upon the sale of the shares, the transaction will be a sale or exchange of property resulting in long- or short-term capital gain or loss, depending upon your holding period and the basis and amount of proceeds.

Restricted Stock

          Generally, you only recognize income on the restricted stock once it vests (when the restrictions lapse). Once vested, you will recognize compensation income on the difference between the fair market value of the restricted stock and the amount you paid for the stock, if any. Spartan Motors would receive a corresponding deduction in the same amount. Before the restricted stock vests, any dividends paid on the restricted stock will be treated as compensation income to you, with Spartan Motors receiving a corresponding deduction.

          Under Section 83(b) of the Internal Revenue Code, you may elect to report compensation income for the tax year in which you receive a grant of restricted stock. Again, Spartan Motors would be entitled to take a corresponding deduction for federal income tax purposes. If you make such an election, the amount of compensation income is the value of the restricted stock at the time of grant. Any later appreciation in the value of the restricted stock is treated as capital gain and recognized only upon a sale of the restricted stock. Dividends received after such an election is made are taxable as dividends and not treated as additional compensation income. However, if the restricted stock is forfeited after you make a Section 83(b) election, you will not be allowed any deduction for the amount that you earlier took into income. Because a Section 83(b) election is irrevocable and has both benefits and risks, you should consult tax counsel at

the time you receive a grant of restricted stock to determine the most advantageous course in your individual circumstances.

          Upon the sale of restricted stock (subject to any terms imposed by Spartan Motors to ensure compliance with federal or state securities laws), you will recognize capital gain or loss in the amount of the difference between the sale price and the value of the stock that you previously reported as compensation income.

          The federal income tax provisions applicable to incentive awards are complex and are subject to change. Spartan Motors encourages you to seek tax counsel before accepting incentive awards under the Plan.

INFORMATION AVAILABLE TO PARTICIPANTS

          General.   Spartan Motors' latest Form 10-K Annual Report, all reports and documents that Spartan Motors has filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act since the end of the fiscal year covered by the latest Form 10-K Annual Report and the description of Spartan Motors' stock contained in its Registration Statement filed under the Securities Exchange Act, including any amendment or report filed for the purpose of updating such description, and all documents filed by Spartan Motors pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Securities Exchange Act of 1934 after the registration on Form S-8 of shares to be issued under the Plan and before the filing of a post-effective amendment that indicates that all securities offered under the Plan have been sold or that deregisters all securities then remaining unsold are incorporated by reference in this Plan Description.

          You may obtain this information without charge by making written or oral requests to James W. Knapp, Spartan Motors' Chief Financial Officer, Secretary and Treasurer. Employees may obtain additional information regarding the Plan or the administration of the Plan by making written or oral requests to Spartan Motors at 1000 Reynolds Road, Post Office Box 440, Charlotte, Michigan 48813, telephone number (517) 543-6400. Spartan Motors does not intend to provide you with regular statements regarding your incentive awards. You may, however, obtain information regarding your incentive awards by contacting Spartan Motors at the address or telephone number set forth above.

          Annual Report.   A copy of Spartan Motors' annual report for the year ended December 31, 2002 is included with this Plan Description.

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EXHIBIT A

SPARTAN MOTORS, INC.

STOCK OPTION AND RESTRICTED STOCK PLAN OF 2003

(As Amended October 21, 2003)

SECTION 1

Establishment of Plan; Purpose of Plan

          1.1          Establishment of Plan.   The Company hereby establishes the STOCK OPTION AND RESTRICTED STOCK PLAN OF 2003 (the "Plan") for its directors, corporate, divisional and Subsidiary officers and other key employees. The Plan permits the grant and award of Stock Options and Restricted Stock.

          1.2          Purpose of Plan.   The purpose of the Plan is to provide directors, officers and key management employees of the C