Document:

Exhibit 10.24

 

DOUGLAS DYNAMICS, INC.

 

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

 

SECOND AMENDED AND RESTATED

 

MANAGEMENT INCENTIVE OPTION AGREEMENT

 

This Second Amended and Restated Management Incentive
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 Incentive 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:

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price
  per share:

  	
  $100.00

  	
   

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
  March 30,
  2014

  	
   

  
	
   

  	
   

  	
   

  
	
  Vesting Rate:

  	
  20% per year on
  a cumulative basis

  	
   

  

 

The Option is
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 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.

 

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 

 

5

 

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.

 

“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 

 

6

 

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.

 

“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.

 

7

 

“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 the 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

  

 

9Exhibit 10.25

 

DOUGLAS DYNAMICS HOLDINGS, INC.

 

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 the Date of Grant
indicated below 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 AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT, DATED AS OF
APRIL 12, 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 (the “Board”) 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 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 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 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 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

 

2

 

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 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 such event shall cause the Option to terminate
pursuant to Section 2(c) hereof, 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.

 

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

 

3

 

(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), (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 or (iii) the delivery of a promissory note in the form
attached hereto as Exhibit A (or any other form approved by the
Committee), provided that the Purchased Shares shall be pledged as security for
payment under such note by means of a Pledge and Security Agreement in the form
attached hereto as Exhibit B (or such other form approved by the
Committee).

 

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 Holdings and its 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.

 

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

 

“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.

 

“Holdings” means Douglas Dynamics Holdings,
LLC, a Delaware limited liability company.

 

“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 natural person, a company, a
corporation, a joint venture, a limited liability company, a partnership, a
trust, an unincorporated association or organization or other legal entity, or
a government or an agency or political subdivision thereof.

 

“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 of Grant.

 

	
   

  	
  DOUGLAS DYNAMICS HOLDINGS, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Robert McCormick

  
	
   

  	
   

  	
  Name: 

  	
  Robert McCormick

  
	
   

  	
   

  	
  Title:

  	
  VP-CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
  /s/ James L. Janik

  
	
   

  	
  James L. Janik

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Street Address

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  City, State and Zip Code

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social Security Number

  

 

9

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