Exhibit
10.19


 


Douglas
Dynamics 

2009 Annual Incentive Plan


 


Operating
Income Metric


 


·                  Operating Income will be given a 70% weighting


 


·                  Operating
Income is defined as EBITDA less Depreciation, plus Other Expense (i.e. before
Amortization and Other Expense)


 


·                  Performance
will be measured by the degree to which Actual Operating Income achieved
exceeds, or falls short of, Baseline Operating Income


 


·                  Baseline
Operating Income is calculated by multiplying $13,018 per inch by snowfall for
the snow season that ends in the then current fiscal year


·                  For
example, for the year ended December 2009, if there were 3,300 inches of
snowfall for the snow season from November 2008 to April 2009, then
Baseline Operating Income would be $43.0 million for the year ended December 2009
($13,018 x 3,300 inches)


 


·                  Each
executive starts with a Base Percentage of 35% (in a few instances this Base
Percentage is 25%, but we will assume 35% for illustrative purposes for the
balance of the memo).  The Target Bonus
for each executive is to earn 70% of that executive’s base salary.  Therefore Target Bonuses are achieved when a
2X factor is achieved (2X * 35% = 70%). 
Payouts for Operating Income begin once 80% of Baseline Operating Income
has been achieved and increase linearly thereafter, according to the following
schedule:


·                  80%
of Baseline Operating Income = 0X factor (0X * 35% = 0% of base salary)


·                  90%
of Baseline Operating Income = 1X factor (1X * 35% = 35% of base salary)


·                  100%
of Baseline Operating Income = 2X factor (2X * 35% = 70% of base salary)


 


·                  Additionally,
Actual Operating Income in excess of Baseline Operating Income would
follow the schedule below:


·                  112.5%
of Baseline Operating Income = 3X factor (3X * 35% = 105% of base salary)


·                  125%
of Baseline Operating Income = 4X factor (4X * 35% = 140% of base salary)


·                  Etc.


 


·                  Performance
between points on the Matrix and beyond 125% is extrapolated based on a linear
relationship.  Please see the Operating
Income Matrix below:


 


Operating Income Matrix - 2009


 


	
  Weight

  	
   

  	
  0X

  	
   

  	
  1X

  	
   

  	
  2X

  	
   

  	
  3X

  	
   

  	
  4X

  	
   

  
	
  70.0

  	
  %

  	
  80.0

  	
  %

  	
  90.0

  	
  %

  	
  100.0

  	
  %

  	
  112.5

  	
  %

  	
  125.0

  	
  %

  



 

















 


·                  The
result of this calculation is then given
a 70% weighting (since the Operating Income component has a 70%
weighting).  As an example, if 100% of
Baseline Operating Income is achieved, then 49% of base salary is earned in
bonus thus far, before factoring in the remaining metric discussed next (2X *
35% Base Percentage * 70% weighting = 49% of base salary).


 


Perfect Shipment Metric


 


·                  Perfect
Shipment will be given a 30% weighting


 


·                  A
Perfect Shipment is defined as the shipment of an order that (i) includes
all components that were ordered, and (ii) was shipped on or before the
date promised by Douglas.  Douglas
currently promises shipment of all plows within 5 days and all parts and
accessories within 3 days.  However, components
currently in stock often ship sooner.


 


Perfect
Shipment Matrix - 2009


 




	
  Weight

  	
   

  	
  0X

  	
   

  	
  1X

  	
   

  	
  2X

  	
   

  	
  3X

  	
   

  	
  4X

  	
   

  
	
  30.0

  	
  %

  	
  90.0

  	
  %

  	
  92.5

  	
  %

  	
  95.0

  	
  %

  	
  97.5

  	
  %

  	
  100.0

  	
  %

  






 


·                  Performance
between points on the Matrix is extrapolated based on a linear
relationship.  The 2009 budget for Perfect
Shipment is 95% (similar to the prior table on Operating Income, this is the
point on the Perfect Shipment Matrix where a 2X factor is achieved).  If the Company achieves its plan of 95%
Perfect Shipment, then the Base Percentage of 35% is multiplied by 2X
factor.  This results in 70%.  The result of this calculation is then given
a 30% weighting of the total compensation plan. 
Therefore, if 95% Perfect Shipment is achieved, then 21% of base salary
is earned in bonus for the Perfect Shipment component (2X * 35% Base Percentage
* 30% weighting = 21% of base salary). 
When this 21% for achieving the Perfect shipment plan is added to the
49% for achieving the Operating Income plan, the resulting payout is 70% of base
salary (which is the Target Bonus if the company achieves its plan).


 


·                  The
Perfect Shipment matrix used in 2008 is below for reference.  The 2008 metric only measured Q2-Q4
performance.  Actual Perfect Shipment for
those 9 months was 97.5%.  For the full
year (Q1-Q4 2008), Perfect Shipment performance was 81.5%


 


Perfect Shipment Matrix - 2008


 




	
  Weight

  	
   

  	
  0X

  	
   

  	
  1X

  	
   

  	
  2X

  	
   

  	
  3X

  	
   

  	
  4X

  	
   

  
	
  30.0

  	
  %

  	
  70.0

  	
  %

  	
  77.5

  	
  %

  	
  85.0

  	
  %

  	
  87.5

  	
  %

  	
  90.0

  	
  %

  






 


2

















 


·                  The
Company’s perfect shipment history for 2005 to 2008 is below for reference:


 


Perfect Shipment History


 




	
  2009 Target

  	
   

  	
  95.0

  	
  %

  
	
  2008 Actual

  	
   

  	
  81.5

  	
  %

  
	
  2007 Actual

  	
   

  	
  74.0

  	
  %

  
	
  2006 Actual

  	
   

  	
  82.0

  	
  %

  
	
  2005 Actual

  	
   

  	
  71.0

  	
  %

  






 


Overall:


 


·                  Once
both Operating Income and Perfect Shipment metrics have been individually
calculated with no caps, then the total bonus payout is subject to a cap of
140% of base salary.  This amount is two
times the Target Bonus of 70% of Base Salary.


 


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