Exhibit
10.26


 


DOUGLAS DYNAMICS, INC.


 


AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN


 


SECOND AMENDED AND RESTATED


 


MANAGEMENT NON-QUALIFIED OPTION AGREEMENT


 


This Second Amended and
Restated Non-Qualified Stock Option Agreement (“Agreement”) is made and entered
into as of                     ,
2010 by and between Douglas Dynamics, Inc., a Delaware corporation (the “Company”),
and the person named below as Optionee.


 


THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE,
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THAT ACT AND UNDER APPLICABLE STATE SECURITIES LAW OR THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH
SECURITIES UNDER THAT ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.  THE
SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES IS ALSO SUBJECT TO COMPLIANCE
WITH THE TERMS AND CONDITIONS OF THAT CERTAIN SECOND AMENDED AND RESTATED
SECURITYHOLDERS AGREEMENT, DATED AS OF JUNE 30, 2004, AS SUPPLEMENTED,
MODIFIED AND AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND THE
SECURITYHOLDERS SIGNATORY THERETO, A COPY OF WHICH AGREEMENT IS AVAILABLE FOR
INSPECTION DURING REGULAR BUSINESS HOURS AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE COMPANY.


 


WHEREAS, Optionee is an
eligible participant in the Company’s Amended and Restated 2004 Stock Incentive
Plan (the “Plan”); and


 


WHEREAS, the Company and
Optionee entered into that certain Management Non-Qualified Stock Option
Agreement dated as of March 31,
2004 (as subsequently amended and restated, the “Original Agreement”) pursuant
to which Optionee was granted an option to purchase shares of the Company’s Common
Stock, $0.01 par value per share (the “Common Stock”), on the terms and
conditions set forth therein; and


 


WHEREAS, the Company and
Optionee desire to amend and restate the terms of the Original Agreement to, in
addition to certain ministerial changes, delete the ability of Optionee to use
a promissory note to pay any portion of the Exercise Price (as defined below) and
provide that the use of “net exercise” shall be at the sole discretion of the Committee.


 

















 


NOW, THEREFORE, in
consideration of the foregoing recitals and the covenants set forth herein, the
parties hereto hereby agree as follows:


 


1.                                       Grant
of Option; Certain Terms and Conditions. 
The Company hereby grants to Optionee, and Optionee hereby accepts, as
of the Date of Grant, an option to purchase the number of shares of Common
Stock indicated below (the “Option Shares”) at the Exercise Price per share
indicated below, which option shall expire at 5:00 o’clock p.m.,
California time, on the Expiration Date indicated below and shall be subject to
all of the terms and conditions set forth in this Agreement (the “Option”).  On each of the first, second, third, fourth
and fifth anniversaries of March 31, 2004, the Option shall become
exercisable to purchase, and shall vest with respect to, that number of Option
Shares (rounded to the nearest whole share) equal to the total number of Option
Shares multiplied by the Vesting Rate indicated below.


 


	
  Optionee:

  	
   

  	
  James L. Janik

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
  March 31,
  2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Number of shares
  purchasable:

  	
   

  	
  19,444

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exercise Price per
  share:

  	
   

  	
  $100.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
  March 30,
  2014

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Vesting Rate:

  	
   

  	
  20% per year on
  a cumulative basis

  	
   

  



 


The Option is not
intended to qualify as an incentive stock option under Section 422 of the
Internal Revenue Code (an “Incentive Stock Option”).


 


2.                                       Acceleration
and Termination of Option.


 


(a)                                  Change
of Control and Other Events Causing Acceleration of Option.  All Options shall become fully exercisable
immediately prior to a Change of Control or the dissolution or liquidation of
the Company while the Optionee is employed by the Company.  In addition, the Committee, in its sole
discretion, may accelerate the exercisability of the Option at any time and for
any reason.


 


(b)                                 Termination
of Employment.


 


(i)                                     Termination
With Cause.  In the event that
Optionee shall cease to be an employee of the Company or any of its
subsidiaries (such event shall be referred to herein as Optionee’s “Termination”)
for reason of Cause (as defined below), all unexercised Options (whether vested
or unvested) shall terminate as of the date of such Termination.


 


(ii)                                  Retirement;
Death or Disability.  In the event
that Optionee shall retire, die or become Disabled (as defined below), then (A) the
portion of the Option that has not vested on or prior to the date of such
Termination shall terminate as of the 


 


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date of such
Termination and (B) the vested portion of the Option shall terminate as of
the date that is twenty-four (24) months following the date of such
Termination.


 


(iii)                               Voluntary
Termination for Material Breach; Termination Without Cause.  In the event of a Termination by Optionee of
his employment for a Material Breach (as defined below) or in the event of a
Termination of Optionee by the Company without Cause, then (A) the portion
of the Option that has not vested on or prior to the date of such Termination
shall terminate as of the date of such Termination; provided,
however, that the unvested portion of the Option that would otherwise
have vested at the end of the twelve (12) month period in which the Termination
by Optionee of his employment or Termination of Optionee by the Company without
Cause occurs, shall vest immediately on the date of such Termination on a pro
rata basis according to the number of months in which Optionee has been
employed during such 12-month period, and (B) the vested portion of the
Option shall terminate as of the date that is twenty-four (24) months following
the date of such Termination.


 


(iv)                              Voluntary
Termination for Any Reason Other than Material Breach.  In the event of a Termination by Optionee of
his employment for any reason other than a Material Breach (as defined below),
then (A) the portion of the Option that has not vested on or prior to the
date of such Termination shall terminate as of the date of such Termination and
(B) the vested portion of the Option shall terminate as of the date that
is one hundred eighty (180) days following the date of such Termination.


 


(c)                                  Other
Events Causing Termination of Option. 
Notwithstanding anything to the contrary in this Agreement, the Option
shall terminate (unless the terms of the transaction giving rise to such
termination provide otherwise) upon the consummation of the dissolution or
liquidation of the Company or a Change of Control, or, if later, the thirtieth
(30th) day following the first date upon which either of such events shall have
been approved by both the Board and the stockholders of the Company; provided however, that no such termination shall occur until
the Company shall have provided the Optionee with reasonable notice of such
pending termination and Optionee shall have been provided reasonable
opportunity to exercise the Option, as such Option may be accelerated pursuant
to Section 2(a) hereof.


 


3.                                       Adjustments.  In the event that the outstanding securities
of the class then subject to the Option are increased, decreased or exchanged
for or converted into cash, property and/or a different number or kind of
securities, or cash, property and/or securities are distributed in respect of
such outstanding securities, in either case as a result of a reorganization,
merger, consolidation, recapitalization, reclassification, dividend (other than
a regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split or the like, or in the event that substantially all of the property
and assets of the Company are sold, then, unless (i) such event shall cause the
Option to terminate pursuant to Section 2(c) hereof, or (ii) the terms
of such transaction provide otherwise, the Committee shall make appropriate and
proportionate adjustments in the number and type of shares or other securities
or cash or other property that may thereafter be acquired upon the exercise of
the Option; provided,  however,
that any such adjustments in the Option shall be made without changing the
aggregate Exercise Price of the then unexercised portion of the Option.


 


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4.                                       Exercise.  The Option shall be exercisable during
Optionee’s lifetime only by Optionee or by his or her guardian or legal
representative, and after Optionee’s death only by the person or entity
entitled to do so under Optionee’s last will and testament or applicable
intestate law.  The Option may only be
exercised by the delivery to the Company of a written notice of such exercise,
which notice shall specify the number of Option Shares to be purchased (the “Purchased
Shares”) and the aggregate Exercise Price for such shares, together with payment
in full of such aggregate Exercise Price in cash or by check payable to the
Company; provided, however, that payment of such
aggregate Exercise Price may instead be made, in whole or in part, by (i) the
delivery to the Company of a certificate or certificates representing shares of
Common Stock, duly endorsed or accompanied by a duly executed stock powers,
which delivery effectively transfers to the Company good and valid title to
such shares, free and clear of any pledge, commitment, lien, claim or other
encumbrance (such shares to be valued on the basis of the aggregate Fair Market
Value (as defined in the Plan) thereof on the date of such exercise), or (ii)
at the sole discretion of the Committee, by a reduction in the amount of
Purchased Shares or other property otherwise issuable pursuant to such Option
(such reduction to be valued on the basis of the aggregate Fair Market Value,
on the date of exercise, of the additional Purchased Shares that would have
been delivered to the Optionee upon exercise of the Option), provided that the
Company is not then prohibited from purchasing or acquiring such shares of
Common Stock.


 


5.                                       Securityholders
Agreement.  As of the Date of Grant,
the Optionee shall execute and agree to be bound by the terms of that certain Amended
and Restated Securityholders Agreement among the Company and certain of its
securityholders, dated as of April 12, 2004, as amended from time to time
(the “Securityholders Agreement”).


 


6.                                       Payment
of Withholding Taxes.  If the Company
becomes obligated to withhold an amount on account of any tax imposed as a
result of the exercise of the Option, including, without limitation, any
federal, state, local or other income tax, or any F.I.C.A., state disability
insurance tax or other employment tax, then Optionee shall, on the first day
upon which the Company becomes obligated to pay such amount to the appropriate
taxing authority, pay such amount to the Company in cash or by check or other
property acceptable to the Secretary of the Company in his sole discretion;
and, if the Optionee fails to make such payment, the Company is authorized by
the Optionee to withhold from any payments then or thereafter payable to the
Optionee, any such amounts or the Company may otherwise refuse to issue or
transfer any shares otherwise required to be issued or transferred pursuant to
the terms hereof.  The Committee may, in
its sole discretion, allow the Optionee to pay any such amounts through the
surrender of whole shares of Common Stock or by having the Company withhold whole
shares of Common Stock otherwise issuable upon the exercise of this
Option.  Any such shares surrendered or
withheld shall be valued at their market value, determined by such method as
the Secretary of the Company in his sole discretion shall determine, equal to
the sums required to be withheld as of the date on which the amount of tax to
be withheld is determined.


 


7.                                       Notices.  All notices and other communications required
or permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed given if delivered personally or five days after mailing by certified
or registered mail, postage prepaid, return receipt requested, to the Company
c/o Gibson, Dunn & Crutcher LLP, 333 S. Grand Avenue, Los Angeles,
California 90071, Attention: Bruce D. Meyer, Esq., or to Optionee at the
address set 


 


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forth beneath his or her
signature on the signature page hereto, or at such other addresses as
Optionee may designate by written notice in the manner aforesaid.


 


8.                                       Compliance
with Legal Requirements.


 


(a)                                  No
Option Shares shall be issued or transferred pursuant to this Agreement unless
and until all legal requirements applicable to such issuance or transfer have,
in the opinion of counsel to the Company, been satisfied.  Such requirements may include, but are not
limited to, registering or qualifying such Option Shares under any state or
federal law, satisfying any applicable law relating to the transfer of unregistered
securities or demonstrating the availability of an exemption from applicable
laws, placing a legend on the Option Shares to the effect that they were issued
in reliance upon an exemption from registration under the Securities Act of
1933, as amended (the “Act”), and may not be transferred other than in reliance
upon Rule 144 or Rule 701 promulgated under the Act, if available, or
upon another exemption from the Act, or obtaining the consent or approval of
any governmental regulatory body.  The
Company shall use its best efforts to comply with all legal requirements
applicable to the issuance or transfer of Option Shares.


 


(b)                                 The
Optionee understands that the Company intends for the offering and sale of
Option Shares to be effected in reliance upon Rule 701 or another
available exemption from registration under the Act, and that the Company is
under no obligation to register for resale the Option Shares issued upon
exercise of the Option, subject to the Securityholders Agreement.  In connection with any such issuance or
transfer, the person acquiring the Option Shares shall, if requested by the
Company, provide information and assurances satisfactory to counsel to the
Company with respect to such matters as the Company reasonably may deem
desirable to assure compliance with all applicable legal requirements.


 


9.                                       Nontransferability.  Neither the Option nor any interest therein
may be Transferred in any manner other than by will or the laws of descent and
distribution.


 


10.                                 Plan.  The Option is granted pursuant to the Plan,
as in effect on the Date of Grant, and is subject to all the terms and
conditions of the Plan, as the same may be amended from time to time; provided, however, that no such amendment shall deprive
Optionee, without his or her consent, of the Option or of any of Optionee’s
rights under this Agreement.  The
interpretation and construction by the Committee of the Plan, this Agreement,
the Option and such rules and regulations as may be adopted by the
Committee for the purpose of administering the Plan shall be final and binding
upon Optionee.  Until the Option shall
expire, terminate or be exercised in full, the Company shall, upon written
request therefor, send a copy of the Plan, in its then-current form, to
Optionee or any other person or entity then entitled to exercise the Option.


 


11.                                 Stockholder
Rights.  No person or entity shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
any Option Shares until the Option shall have been duly exercised to purchase
such Option Shares in accordance with the provisions of this Agreement.


 


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12.                                 Employment
Rights.  No provision of this
Agreement or of the Option granted hereunder shall (a) confer upon
Optionee any right to be or continue, as the case may be, in the employ of the
Company or any of its subsidiaries, (b) affect the right of the Company
and each of its subsidiaries to terminate the employment of Optionee, with or
without cause, or (c) confer upon Optionee any right to participate in any
employee welfare or benefit plan or other program of the Company or any of its
subsidiaries other than the Plan.  Optionee hereby acknowledges and agrees that the Company and each of
its subsidiaries may terminate the employment of Optionee at any time and for any
reason, or for no reason, unless Optionee and the Company or such subsidiary
are parties to a written employment agreement that expressly provides
otherwise.


 


13.                                 Governing
Law.  This Agreement and the Option
granted hereunder shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware without reference to choice or conflict
of law principles.


 


14.                                 Definitions.


 


An “Affiliate”
of a specified Person means a Person that controls, is controlled by, or is
under common control with, the specified Person, and in this context, “control”,
“controls” and “controlled” mean the direct or indirect power to
direct the management and policies or affairs of a Person through the ownership
of voting securities or by contract or otherwise and, in the case of a limited
partnership, shall include, but shall not be limited to, all of the limited
partnership’s general partners and their respective Affiliates.


 


“Ares” means Ares
Corporate Opportunities Fund, L.P., a Delaware limited partnership.


 


“Ares Purchasers”
means Ares and its Affiliates.


 


“Aurora Purchasers”
means Aurora Equity Partners II L.P., a Delaware limited partnership, Aurora
Overseas Equity Partners II, L.P., a Cayman Islands limited partnership, and
their respective Affiliates and co-investors.


 


“Beneficial Owner”
has the meaning attributed to it in Rules 13d-3 and 13d-5 of the rules and
regulations promulgated by the Securities and Exchange Commission (the “Commission”)
under the Securities Exchange Act of 1934 (as in effect on the date hereof),
whether or not applicable, except that a Person shall be deemed to have “beneficial
ownership” of any securities that such Person has the right to acquire, whether
or not such right is exercisable immediately or within 60 days after the date
as of which such determination is being made. 
“Beneficially Owned” and “Beneficial Ownership” shall have
correlative meanings to the term “Beneficial Owner.”


 


“Board”
means the Board of Directors of the Company.


 


“Capital Stock”
means any and all shares, interests, participations or other equivalents  (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation), including, without limitation, partnership interests and membership
interests, and any and all warrants, rights or options to purchase or other
arrangements or rights to acquire any of the foregoing.


 


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“Cause”
means (i) if a definition of “Cause” is included in the then effective
employment agreement between the Optionee and the Company (the “Employment
Agreement”), such definition, or (ii) if no such definition exists, the
occurrence or existence of any of the following with respect to Optionee, as
determined by a majority of the disinterested directors of the Board:  (a) a material breach by Optionee of any
of his obligations under the Employment Agreement, provided,
however, that Cause shall not be deemed to exist under this clause (a) until
the Company shall have given written notice specifying the claimed material
breach and Optionee fails to correct the claimed breach within thirty (30) days
after the receipt of the applicable notice; (b) any transaction by
Optionee that represents direct or indirect self-dealing with the Company or
any of its Affiliates that was not approved in advance by a majority of the
disinterested directors of the Board, provided, however,
that Cause shall not be deemed to exist under this clause (b) until the
Company shall have given written notice specifying the claimed self-dealing and
Optionee fails to correct the claimed self-dealing within thirty (30) days
after the receipt of the applicable notice; (c) the repeated material
breach by Optionee of any material duty referred to in clause (a) or (b) above
as to which at least two (2) written notices have been given pursuant to
such clause (a) or (b), (d) any act of dishonesty, misappropriation,
embezzlement, fraud or similar conduct involving the Company or any of its
Affiliates; (e) the conviction or the plea of nolo contendere or the
equivalent in respect of a felony involving moral turpitude; (f) the
intentional infliction by Optionee of any damage of a material nature to any
property of the Company or any of its Affiliates; or (g) the repeated use
of any controlled substance or alcohol or any other non-controlled substance
which, in any case described in this clause (f), the Board reasonably
determines renders the Optionee unfit to serve in his capacity as an officer or
employee of the Company or its Affiliates.


 


“Change of Control”
means, at any time, (i) the Aurora Purchasers and Ares Purchasers shall
cease to collectively beneficially own and control at least 51%, on a fully
diluted basis, of the outstanding Capital Stock of the Company entitled
(without regard to the occurrence of any contingency) to vote for the election
of members of the Board (or similar governing body) of the Company, unless the
Aurora Purchasers and Ares Purchasers collectively beneficially own and control
(a) at least 35%, on a fully diluted basis, of the outstanding Capital
Stock of the Company entitled (without regard to the occurrence of any
contingency) to vote for the election of members of the Board (or similar
governing body) of the Company and (b) on a fully diluted basis, more of
the outstanding Capital Stock of the Company entitled (without regard to the
occurrence of any contingency) to vote for the election of members of the Board
(or similar governing body) of the Company than any other Person or “group”
(within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act); (ii) any
Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the
Exchange Act) other than the Aurora Purchasers and Ares Purchasers collectively
shall have obtained the power (whether or not exercised) to elect a majority of
the members of the Board (or similar governing body) of the Company; (iii) the
Company shall cease to beneficially own and control 100% on a fully diluted
basis of the economic and voting interests in the Capital Stock of Douglas
Dynamics, L.L.C.; or (iv) the majority of the seats (other than vacant
seats) on the Board (or similar governing body) of the Company cease to be
occupied by Persons who either (a) were members of the Board of the
Company on the Initial Date or (b) were nominated for election by the
Board of the Company, a majority of whom were directors on the Initial Date or
whose election or nomination for election was previously approved by a majority
of such directors.


 


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“Committee” means
a committee of the Board administering the Plan pursuant to the terms of the
Plan, or in the absence of such a committee, the Board itself.


 


“Disabled” or “Disability”
means, if a definition of “Disabled” or “Disability” is included in the
Employment Agreement, such definition or, if no such definition exists, the
occurrence of an event or events that renders Optionee unable to perform the
essential functions of his position, even with reasonable accommodation.


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time, and
any successor statute.


 


“Initial Date”
means the date of the filing of the Second Amended and Restated Certificate of
Incorporation of the Company with the Secretary of State of the State of
Delaware.


 


“Material Breach”
means the definition of “Material Breach” included in the Employment Agreement.


 


“Person” means a
company, a corporation, an association, a partnership, a limited liability
company, an organization, a joint venture, a trust or other legal entity, an
individual, a government political subdivision thereof or a governmental
agency.


 


“Transfer” means
any sale, exchange, assignment, transfer, pledge, mortgage, hypothecation,
gift, grant, encumbrance or other disposition of any kind, whether voluntary,
involuntary or by operation of law and whether direct or indirect by transfer
of any interest in the subject property or otherwise.


 


15.                                 Optionee
Address.  Optionee represents that
the address set forth on the signature page hereto is Optionee’s true and
correct address, and acknowledges that the Company is relying upon such
representations for securities law purposes.


 


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IN WITNESS WHEREOF, the
Company and Optionee have duly executed this Agreement as of date set forth
above.


 


	
   

  	
  DOUGLAS DYNAMICS, INC.,

  
	
   

  	
    a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
      Name:

  	
   

  
	
   

  	
      Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  James L. Janik

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Street Address

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  City, State and Zip Code

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social Security Number

  
				



 


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