Exhibit 10.40


 


SECOND AMENDMENT

TO

SECOND AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT

AMONG

DOUGLAS DYNAMICS, INC.

(fka DOUGLAS DYNAMICS HOLDINGS, INC.)

AND

CERTAIN OF ITS

STOCKHOLDERS, OPTIONHOLDERS AND WARRANTHOLDERS

DATED AS OF [·], 2010


 


 


THIS SECOND AMENDMENT TO
SECOND AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT (the “Amendment”),
dated as of  [·],
2010, is being entered into by and among Douglas Dynamics, Inc. (formerly
known as Douglas Dynamics Holdings, Inc.), a Delaware corporation (the “Company”),
Aurora Equity Partners II L.P., a Delaware limited partnership, Aurora Overseas
Equity Partners II, L.P., a Cayman Islands exempt limited partnership, Ares
Corporate Opportunities Fund, L.P., a Delaware limited partnership, the holders
of a majority in voting interests of the Common Stock and Preferred Stock,
voting together as a single class, held by the Securityholders, and each of the
Class A Securityholders listed on Exhibit A.  All capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Agreement (as defined below).


 


R E C I T A L S


 


WHEREAS, the Company and
the Securityholders are parties to that certain Second Amended and Restated
Securityholders Agreement dated as of June 30, 2004, as amended by that
certain First Amendment thereto dated December 27, 2004 (the “Agreement”);


 


WHEREAS, in connection
with the proposed initial public offering of the Common Stock, the parties
hereto desire to enter into this Amendment to amend the Agreement as set forth
below; and


 


WHEREAS, pursuant to Section 13.2
of the Agreement, the Agreement may be amended, modified or supplemented by
written agreement of the parties hereto.


 


A G R E E M E N T


 


NOW, THEREFORE, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:


 


A.            Amendment to the
Agreement


 


1.             The first paragraph under the heading “RECITALS” is
hereby amended and restated in its entirety to read as follows:


 


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WHEREAS, the Company is
authorized to issue an aggregate of [  ] shares of capital stock,
including [  ] shares of common stock, par value $.01 per share, and
[  ] shares of preferred stock, par value $.01 per share; and


 


2.             The definition of “Preferred Stock” set forth in Section 1.1
of the Agreement is hereby amended and restated in its entirety to read as
follows:


 


“Preferred Stock”
means any preferred stock of the Company issued after the date hereof howsoever
designated that is entitled to any preference over the Common Stock in the
payment of dividends or in the distribution of assets upon liquidation of the
Company.


 


3.             The following shall be added as a new Section 3.5
of the Agreement:


 


3.5           Additional Restriction on Transfer by Certain Class A
Securityholders.  Subject to Article VI, each Class A
Securityholder whose name is set forth on Exhibit A hereto (each, a
“Specified Securityholder,” and collectively, the “Specified
Securityholders”) agrees that, without the consent of the Aurora Entities
(which consent shall not be unreasonably withheld with respect to any Transfer
of Securities to a Permitted Transferee), after the occurrence of the Qualified
IPO Date, such Specified Securityholder will not effectuate any Transfer or
submit to any broker any sell order with respect to a proposed Transfer, of
Securities at any time other than pursuant to a Tag-Along Sale by the Aurora
Entities pursuant to Section 6 herein. 
Notwithstanding the foregoing, upon the occurrence of a “Tax Event”
the  Specified Securityholder shall be
permitted to sell a number of Securities with a market value (calculated at the
time of sale based on the market price at that time) equal to an amount that
would provide the Specified Securityholder with after-tax proceeds from such
sale equal to the
Tax Amount.  “Tax Event”
shall mean the recognition of ordinary compensation income by a Specified
Securityholder for United States federal income tax purposes as a result of the
transfer, issuance, or vesting of Securities granted by the Company or any
direct or indirect Subsidiaries of the Company to the Specified Securityholder
in connection with the performance of services. 
The “Tax Amount” shall mean the sum of the (a) compensation income
required to be included in the Specified Securityholder’s taxable income for
federal and state income tax purposes multiplied by the maximum marginal
federal, state and local income tax rate applicable for such period and (b) other
taxes imposed on such income (including FICA, FUTA, Medicare and AMT).  The Securities that are permitted to be sold
pursuant to this paragraph may be sold only within one (1) week after the
applicable transfer, issuance or vesting that gives rise to the ordinary income
recognition described above.  The
restrictions set forth in this Section 3.5 shall terminate upon such date
as the Aurora Entities cease to collectively beneficially own at least 10% of
the Company’s outstanding common stock.


 


4.             Section 6.1 of the Agreement is hereby amended
and restated in its entirety to read as follows:


 


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6.1           “Tag-Along” Sales.  If either or both of the Aurora Entities (for
purposes of this Section 6, collectively the “Proposed Transferor”)
at any time or from time to time, in one transaction or in a series of related
transactions, desire to enter into an agreement (whether oral or written) to
Transfer (for purposes of this Section 6, a “Tag-Along Sale”)
shares of Common Stock to any Person, then each of the Specified
Securityholders shall have the right, but not the obligation, to elect that the
Proposed Transferor be obligated to require, as a condition to such Tag-Along
Sale, that the proposed purchaser purchase from each such electing Specified
Securityholder up to the number of shares of Common Stock derived by
multiplying the total number of shares of Common Stock owned by or issuable to
such electing Specified Securityholder by a fraction, the numerator of which is
equal to the number of shares of Common Stock then owned by or issuable to the
Proposed Transferor that are to be purchased by the proposed purchaser (without
giving effect to any reduction in such number of shares by reason of any Specified
Securityholder’s election to exercise the “tag-along” rights provided in this Section 6
in connection with such transaction) and the denominator of which is the total
number of shares of Common Stock owned by or issuable to the Proposed
Transferor prior to such sale; provided,  however,
that if any Specified Securityholder chooses not to sell any or all Securities
which such Specified Securityholder may be entitled to sell under this Section 6.1,
the Proposed Transferor may sell, in the same transaction, additional shares of
Common Stock equal to the difference between the number of shares of Common
Stock which such Specified Securityholder is entitled to sell and the number of
shares of Common Stock such Specified Securityholder chooses to sell, if
any.  Any such sales by any Specified
Securityholder shall be on the same terms and conditions as the proposed
Tag-Along Sale by the Proposed Transferor. 
Each Specified Securityholder whose Securities are sold in a Tag-Along
Sale shall be required to bear a proportionate share of the expenses of the
transaction, including, without limitation, legal, accounting and investment
banking fees and expenses.


 


5.             Section 6.2 of the Agreement is hereby amended
and restated in its entirety to read as follows:


 


6.2           Notice of Tag-Along Opportunity. 
The Proposed Transferor shall promptly (and in no event less than fifteen
(15) Business Days prior to the consummation thereof) provide the Company with
notice (for purposes of this Section 6, the “Proposed Transferor Notice”)
of the proposed Tag-Along Sale (which the Company shall transmit to each Specified
Securityholder within two (2) Business Days after its receipt thereof)
containing the following:


 


(a)           the name and address of the proposed transferee of the
Common Stock in the Tag-Along Sale;


 


(b)           the number of shares of Common Stock proposed to be
Transferred by the Proposed Transferor in the event none of the Specified
Securityholders elects to participate;


 


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(c)           the proposed amount and form of consideration to be
paid for such Common Stock and the terms and conditions of payment offered by
the proposed transferee;


 


(d)           the aggregate number of shares of Common Stock held of
record by the Proposed Transferor as of the date of the notice (for purposes of
this Section 6, “Notice Date”) from the Proposed Transferor to the
Company;


 


(e)           the aggregate number of shares of Common Stock held of
record as of the Notice Date by all Specified Securityholders as a group;


 


(f)            the maximum number of shares of Common Stock each such
Specified Securityholder is entitled to include in the Tag-Along Sale (as
computed in accordance with the equations set forth in Section 6.1); and


 


(g)           that the proposed transferee has been informed of the “tag-along”
rights provided for in Section 6.1.


 


6.             Section 6.3 of the Agreement is hereby amended
and restated in its entirety to read as follows:


 


6.3           Notice and Terms of Acceptance of Tag-Along
Opportunity.


 


(a)           If a Specified Securityholder desires to participate
in such Tag-Along Sale, such Specified Securityholder shall provide written
notice (the “Tag-Along Notice”) to the Proposed Transferor not later than five (5) Business
Days after the Notice Date setting forth the number of shares of Common Stock,
if any, such Specified Securityholder elects to include in the Tag-Along Sale.


 


(b)           The Tag-Along Notice given by any Specified
Securityholder shall constitute such Specified Securityholder’s binding
agreement to sell such Common Stock as are included therein on the terms and
conditions applicable to such sale (including the requirements of this Section 6),
in which case the number of shares of Common Stock to be Transferred by the
Proposed Transferor shall be correspondingly reduced.  In the event that the proposed transferee
does not purchase the Securities of the Proposed Transferor, then the proposed
Tag-Along Sale by the Specified Securityholders to such proposed transferee
shall not take place.  If the Tag-Along
Notice from any Specified Securityholder is not received by the Proposed
Transferor within the five (5) Business Day period specified above in this
Section 6.3, the Proposed Transferor shall have the right to transfer the
Securities of Common Stock to the proposed transferee without any participation
by such Specified Securityholder, but only on the terms and conditions stated
in the notice to such Specified Securityholders or on terms and conditions no
more favorable to the Proposed Transferor and only if a definitive and binding
agreement to sell or otherwise transfer such Common Stock is entered into not
later than forty-five (45) days after the end of such five (5) Business
Day period specified above in this Section 6.3.


 


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7.             Section 6.4 of the Agreement is hereby amended
and restated in its entirety to read as follows:


 


6.4           Application of Tag-Along Provisions. 
The provisions of this Section 6 shall not apply to:


 


(a)           any Transfer to a Permitted Transferee; or


 


(b)           any one transaction or series of related transactions
involving the Transfer (other than to a Permitted Transferee) by the Proposed
Transferor of less than 1% of the issued and outstanding shares of Common
Stock.


 


8.             Section 6.5 of the Agreement is hereby amended
and restated in its entirety to read as follows:


 


6.5           Termination of Tag-Along Rights.


 


(a)           Notwithstanding anything herein to the contrary, the
rights and obligations provided for in this Section 6 shall terminate with
respect to all Securities held by each Other Securityholder (other than any Specified
Securityholder, the rights of whom will be set forth in Section 6.5(b)),
upon the occurrence of the Qualified IPO Date.


 


(b)           Following the occurrence of the Qualified IPO Date,
each Specified Securityholder shall be entitled to the rights and obligations
provided for in this Section 6 solely with respect to any Transfer by the
Aurora Entities.


 


B.            Miscellaneous


 


1.             Except as amended as set forth above, the Agreement
shall continue in full force and effect.


 


2.             This Amendment may be signed in one or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall be deemed one and the same document.


 


[Signature Pages follows]


 


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IN WITNESS WHEREOF, the
parties hereto have executed this First Amendment to Second Amended and
Restated Securityholders Agreement as of the date first written above.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  DOUGLAS DYNAMICS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  James L. Janik

  
	
   

  	
  Title:  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SECURITYHOLDERS:

  
	
   

  	
   

  
	
   

  	
  AURORA EQUITY PARTNERS II L.P.

  
	
   

  	
   

  
	
   

  	
  By: Aurora Capital Partners II L.P., its general
  partner

  
	
   

  	
   

  
	
   

  	
  By: Aurora Advisors II LLC, its general partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Timothy J. Hart

  
	
   

  	
  Title:  Vice President, Secretary and General
  Counsel

  
	
   

  	
   

  
	
   

  	
  AURORA OVERSEAS EQUITY PARTNERS II, L.P.

  
	
   

  	
   

  
	
   

  	
  By: Aurora Overseas Capital Partners II L.P., its
  general partner

  
	
   

  	
   

  
	
   

  	
  By: Aurora Overseas Advisors II LDC, its general
  partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Timothy J. Hart

  
	
   

  	
  Title:  Vice President, Secretary and General
  Counsel

  



 

















 


	
   

  	
  ARES CORPORATE OPPORTUNITIES
  FUND, L.P.

  
	
   

  	
   

  
	
   

  	
  By:   ACOF Operating Manager,
  L.P., its manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Jeffrey Serota

  
	
   

  	
  Title:  Vice President

  
	
   

  	
   

  
	
   

  	
  DOUGLAS DYNAMICS EQUITY
  PARTNERS L.P.

  
	
   

  	
  By:

  	
  AURORA ADVISORS II LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Timothy J. Hart

  
	
   

  	
  Title:  Vice President, Secretary and General
  Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC
  PENSION TRUST

  
	
   

  	
   

  
	
   

  	
  By:

  	
  GE ASSET MANAGEMENT INCORPORATED,

  
	
   

  	
   

  	
  its investment manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AURORA CAPITAL GROUP
  401(k) PLAN

  
	
   

  	
  fbo Gerald L. Parsky

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  John Billings

  
	
   

  	
  Title:  Trustee

  
				



 

















 


	
   

  	
  AURORA CAPITAL GROUP
  401(k) PLAN

  
	
   

  	
  fbo Richard K. Roeder

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  John Billings

  
	
   

  	
  Title:  Trustee

  
	
   

  	
   

  
	
   

  	
  AURORA CAPITAL
  GROUP 401(k) PLAN

  
	
   

  	
  fbo John T.
  Mapes

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  John Billings

  
	
   

  	
  Title:  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JAMES D. AND MARIA D. HODGSON INTERVIVOS PERSONAL
  TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  James Hodgson

  
	
   

  	
  Title:  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DALE FREY FAMILY
  LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Dale Frey

  
	
   

  	
  Title:  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Richard K. Roeder

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Richard R. Crowell

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Lawrence A. Bossidy

  



 

















 


	
   

  	
  DIANE ANDERSON REVOCABLE TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROBERT ANDERSON, JR. REVOCABLE TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROBERT ANDERSON LIVING TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  James R. Roethle

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Flemming H. Smitsdorff

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Raymond S. Littlefield

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Ralph R. Gould

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  James L. Janik

  



 

















 


	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Robert McCormick

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Mark Adamson

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Jack O. Peiffer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Michael Wickham

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  John Anderson

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Robert Anderson

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Simon Ramo

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  James Hodgson

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Dale Frey

  



 

















 


EXHIBIT A


 


	
  1.

  	
  James Janik

  
	
   

  	
   

  
	
  2.

  	
  Robert McCormick

  
	
   

  	
   

  
	
  3.

  	
  Mark Adamson

  
	
   

  	
   

  
	
  4.

  	
  Keith Hagelin

  
	
   

  	
   

  
	
  5.

  	
  Ralph Gould

  
	
   

  	
   

  
	
  6.

  	
  Flemming Smitsdorff

  
	
   

  	
   

  
	
  7.

  	
  Raymond Littlefield

  
	
   

  	
   

  
	
  8.

  	
  James Roethle