Document:

Exhibit 10.20

 

DOUGLAS DYNAMICS, INC.

 

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

 

AMENDED AND RESTATED MANAGEMENT NON-QUALIFIED OPTION
AGREEMENT

 

This 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                               
(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 the Date of Grant set forth below 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:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
  ,                      

  
	
   

  	
   

  	
   

  
	
  Number of shares
  purchasable:

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price
  per share:

  	
   

  	
  $                 

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
  ,                      

  
	
   

  	
   

  	
   

  
	
  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 

 

2

 

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.

 

(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 one hundred eighty
(180) days 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.

 

3

 

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 

 

4

 

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.

 

5

 

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.

 

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

 

“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.”

 

“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.

 

6

 

“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.

 

7

 

“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.

 

8

 

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

 

	
   

  	
  DOUGLAS
  DYNAMICS, INC.,

  
	
   

  	
    a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Name]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Street Address

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  City, State and
  Zip Code

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social Security Number

  

 

9Exhibit 10.21

 

DOUGLAS DYNAMICS HOLDINGS, INC.

 

2004 STOCK INCENTIVE PLAN

 

NON-QUALIFIED OPTION AGREEMENT

 

This
Non-Qualified Stock Option Agreement (“Agreement”) is made and entered into as
of                                 ,
              
(the “Date of Grant”) by and between Douglas Dynamics Holdings, 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 2004 Stock Incentive Plan
(the “Plan”); and

 

WHEREAS,
pursuant to the Plan, the committee of the Board of Directors of the Company
administering the Plan (the “Committee”) has approved the grant to Optionee of
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 herein;

 

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 on
the signature page hereto (the “Option Shares”) at the Exercise Price of $          
per share, which option shall expire at 5:00 o’clock p.m., California
time, on                                   ,
           (the “Expiration
Date”) 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                         ,
          , 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 of 20% per year.

 

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 in
Control and Other Events Causing Acceleration of Option.  All Options shall become fully exercisable
immediately prior to a Change in Control or the dissolution or liquidation of
the Company while the Optionee is a member of the Board of Directors of the
Company or any of its subsidiaries.  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
Directorship.  In the
event that Optionee shall cease to be a member of the Board of Directors of the
Company or any of its subsidiaries (such event shall be referred to herein as
Optionee’s “Termination”) for any reason, 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 day following the first date upon which such event shall have
been approved by both the Board of Directors 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.

 

2

 

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) 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 Second Amended and
Restated Securityholders Agreement among the Company and certain of its
securityholders, dated as of June 30, 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 South Grand Avenue, Los
Angeles, California 90071-3197, Attention: Bruce D. Meyer, Esq., or to
Optionee at the address 

 

3

 

set forth beneath his or her signature on the signature page hereto,
or at such other addresses as they 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.

 

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 

 

4

 

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.”

 

“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

 

“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 

 

5

 

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.

 

“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

 

“Option”
means any options now or hereafter issued by the Company to purchase Common
Stock.

 

“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 or 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.

 

6

 

IN
WITNESS WHEREOF, the Company and Optionee have duly executed this Agreement as
of the Date of Grant.

 

	
   

  	
  DOUGLAS
  DYNAMICS HOLDINGS, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Name
  of Optionee]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Street
  Address

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  City,
  State and Zip Code

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social
  Security Number

  
	
   

  	
   

  
	
   

  	
   

  
	
  Number
  of Shares Subject to Option:          

  	
   

  

 

7

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