Document:

Exhibit 10.22

 

DOUGLAS DYNAMICS, INC.

 

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

 

AMENDED AND RESTATED 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 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, 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 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 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 a member of the Board 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 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 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

 

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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 (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 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.  Any such shares
surrendered 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

 

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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

 

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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

 

5

 

“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 absence of such a committee, the Board itself.

 

“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 set forth above.

 

	
   

  	
  DOUGLAS
  DYNAMICS, 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:

  	
   

  

 

7Exhibit 10.23

 

DOUGLAS DYNAMICS HOLDINGS, INC.

 

2004 STOCK INCENTIVE PLAN

 

AMENDED AND RESTATED

 

MANAGEMENT INCENTIVE
OPTION AGREEMENT

 

This Amended and Restated Incentive 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:

  	
  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 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 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

 

2

 

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 (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

 

3

 

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 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.

 

4

 

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 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

 

5

 

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.

 

“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

 

6

 

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.

 

“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.

 

7

 

“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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