Document:

Exhibit 10.16

 

DOUGLAS DYNAMICS, INC.

 

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

 

Section 1.  PURPOSE OF PLAN

 

The purpose of
this Amended and Restated 2004 Stock Incentive Plan (“Plan”) of Douglas
Dynamics, Inc., a Delaware corporation (the “Company”), is to enable the
Company to attract, retain and motivate (i) its employees, non-employee
directors, independent contractors and consultants, (ii) members of the
Advisory Committee (the “Advisors”) of Aurora Capital Group (“ACG”), and (iii) employees
of ACG or Ares Management (the “ACG/Ares Employees”) by providing for or
increasing the proprietary interests of such employees, non-employee directors,
independent contractors, consultants, Advisors and ACG/Ares Employees in the
Company.

 

Section 2.  PERSONS ELIGIBLE UNDER PLAN

 

Any Advisor,
ACG/Ares Employee or employee, non-employee director, independent contractor or
consultant of the Company or any of its subsidiaries (each, a “Participant”),
shall be eligible to be considered for the grant of Awards (as hereinafter
defined) hereunder.

 

Section 3.  AWARDS

 

(a)           Subject to Section 3(b), the
Committee (as hereinafter defined), on behalf of the Company, is authorized
under this Plan to enter into any type of arrangement with a Participant that
is not inconsistent with the provisions of this Plan and that, by its terms,
involves or might involve the issuance of (i) shares of the Common Stock,
par value $0.01, of the Company (the “Common Shares”) or (ii) a Derivative
Security (as such term is defined in Rule 16a-1 promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as such rule may
be amended from time to time) with an exercise or conversion privilege at a
price related to the Common Shares or with a value derived from the value of
the Common Shares.  The entering into of
any such arrangement is referred to herein as the “grant” of an “Award.”

 

(b)           Awards are not restricted to any
specified form or structure and may include, without limitation, sales or
bonuses of stock, restricted stock, stock options, reload stock options, stock
purchase warrants, other rights to acquire stock, securities convertible into
or redeemable for stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares, and an Award may consist
of one such security or benefit, or two or more of them in tandem or in the
alternative.

 

(c)           Awards may be issued, and Common
Shares may be issued pursuant to an Award, for any lawful consideration as
determined by the Committee, including, without limitation, services rendered
by the recipient of such Award.

 

 

(d)           Subject to the provisions of this
Plan, the Committee, in its sole and absolute discretion, shall determine all
of the terms and conditions of each Award granted under this Plan, which terms
and conditions may include, among other things:

 

(i)            a
provision permitting the recipient of such Award, including any recipient who
is a director or officer of the Company, to pay the purchase price of the
Common Shares or other property issuable pursuant to such Award, or such
recipient’s tax withholding obligation with respect to such issuance, in whole
or in part, by any one or more of the following:

 

(A)          the
delivery of cash;

 

(B)           the
delivery of other property deemed acceptable by the Committee;

 

(C)           the
delivery of previously owned shares of capital stock of the Company (including “pyramiding”)
or other property; or

 

(D)          a
reduction in the amount of Common Shares or other property otherwise issuable
pursuant to such Award (such reduction to be valued on the basis of the
aggregate Fair Market Value, on the date of exercise, of the additional Common
Shares that would have been delivered to the Participant upon exercise of the
Award), provided that the Company is not then prohibited from purchasing or
acquiring Common Shares

 

(ii)           provisions
specifying the exercise or settlement price for any option, stock appreciation
right or similar Award, or specifying the method by which such price is
determined, provided that the exercise or settlement price of any option, stock
appreciation right or similar Award that is intended to qualify as “performance
based compensation” for purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the “Code”) shall be not less than the Fair
Market Value of a Common Share on the date such Award is granted;

 

(iii)          provisions
relating to the exercisability and/or vesting of Awards, lapse and non-lapse
restrictions upon the Common Shares obtained or obtainable under Awards or
under the Plan and the termination, expiration and/or forfeiture of Awards;

 

(iv)          a
provision conditioning or accelerating the receipt of benefits pursuant to such
Award, either automatically or in the discretion of the Committee, upon the
occurrence of specified events, including, without limitation, a change of
control of the Company (as defined in the applicable award agreement), an
acquisition of a specified percentage of the voting power of the Company, the
dissolution or liquidation of the

 

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Company, the financial
performance of the Company, a sale of substantially all of the property and
assets of the Company or an event of the type described in Section 7
hereof;

 

(v)           a
provision required in order for such Award to qualify (A) as an incentive
stock option under Section 422 of the Code (an “Incentive Stock Option”), (B) as
“performance based compensation” under Section 162(m) of the Code,
and/or (C) for an exemption from Section 16 of the Exchange Act; or

 

(vi)          provisions
restricting the transferability of Awards or Common Shares issued under Awards.

 

(e)           For purposes of any Award under this
Plan, unless provided otherwise in the grant of such Award, the “Fair Market
Value” of a Common Share or other security on any date (the “Determination Date”)
shall be equal to the closing price per Common Share or unit of such other
security on the business day immediately preceding the Determination Date, as
reported in The Wall Street Journal, or, if no closing price was so reported
for such immediately preceding business day, the closing price for the next
preceding business day for which a closing price was so reported, or, if no
closing price was so reported for any of the 30 business days immediately
preceding the Determination Date, the average of the high bid and low asked
prices per Common Share or unit of such other security on the business day
immediately preceding the Determination Date in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System or such other system then in use, or, if the Common Shares or
such other security were not quoted by any such organization on such
immediately preceding business day, the average of the closing bid and asked
prices on such day as furnished by a professional market maker making a market
in the Common Shares or such other security selected by the Board of Directors
of the Company (the “Board”), or, if no such market was made in the Common
Shares or such other security, the value of a Common Share or such other
security as determined by the Board in its sole discretion.  The Fair Market Value of a Common Share as of
the effective date of this Plan as provided in Section 9 hereof is
$100.00.

 

Section 4.  STOCK SUBJECT TO PLAN

 

(a)           The aggregate number of Common Shares
that may be issued pursuant to all Incentive Stock Options granted under this
Plan shall not exceed 68,345, subject to adjustment as provided in Section 7
hereof.

 

(b)           At any time, the aggregate number of
Common Shares issued and issuable pursuant to all Awards (including all
Incentive Stock Options) granted under this Plan shall not exceed 68,345,
subject to adjustment as provided in Section 7 hereof.

 

(c)           For purposes of Section 4(b) hereof,
the aggregate number of Common Shares issued and issuable pursuant to Awards
granted under this Plan shall at any time be deemed to be equal to the sum of
the following:

 

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(i)            the
number of Common Shares that were issued prior to such time pursuant to Awards
granted under this Plan, other than Common Shares that were subsequently
reacquired by the Company pursuant to the terms and conditions of such Awards
and with respect to which the holder thereof received no benefits of ownership
such as dividends; plus

 

(ii)           the
number of Common Shares that were otherwise issuable prior to such time
pursuant to Awards granted under this Plan, but that were withheld by the
Company as payment of the purchase price of the Common Shares issued pursuant
to such Awards or as payment of the recipient’s tax withholding obligation with
respect to such issuance; plus

 

(iii)          the
maximum number of Common Shares that are or may be issuable at or after such
time pursuant to Awards granted under this Plan prior to such time.

 

Section 5.  DURATION OF PLAN

 

No Awards shall be
made under this Plan after March 31, 2014. 
Although Common Shares may be issued after March 31, 2014 pursuant
to Awards made prior to such date, no Common Shares shall be issued under this
Plan after March 31, 2024.

 

Section 6.  ADMINISTRATION OF PLAN

 

(a)           This Plan shall be administered by the
Compensation Committee of the Board (the “Committee”) or, in the absence of the
Committee, the Board itself.  Any power
of the Committee may also be exercised by the Board, except to the extent that
the grant or exercise of such authority would cause any Award or transaction to
become subject to (or lose an exemption under) the short-swing profit recovery
provisions of Section 16 of the Exchange Act or cause an Award designated
as a performance-based Award not to qualify for treatment as performance-based
compensation under Section 162(m) of the Code.  The Committee may delegate any or all aspects
of the day-to-day administration of the Plan to one or more officers or
employees of the Company or any Subsidiary, and/or to one or more agents.

 

(b)           Subject to the provisions of this
Plan, the Committee shall be authorized and empowered to do all things
necessary or desirable in connection with the administration of this Plan,
including, without limitation, the following:

 

(i)            adopt,
amend and rescind rules and regulations relating to this Plan;

 

(ii)           determine
which persons are eligible to participate in the Plan and to which of such
persons, if any, Awards shall be granted hereunder;

 

(iii)          grant
Awards to Participants and determine the terms and conditions thereof,
including the number of Common Shares issuable pursuant thereto;

 

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(iv)          determine
whether, and the extent to which adjustments are required pursuant to Section 7
hereof; and

 

(v)           interpret
and construe this Plan and the terms and conditions of any Award granted
hereunder.

 

Section 7.  ADJUSTMENTS

 

If the outstanding
securities of the class then subject to this Plan are increased, decreased or
exchanged for or converted into cash, property or a different number or kind of
securities, or if cash, property or securities are distributed in respect of
such outstanding securities, in either case as a result of a reorganization,
merger, consolidation, recapitalization, restructuring, reclassification,
dividend (other than a regular, quarterly cash dividend) or other distribution,
stock split, reverse stock split or the like, or if substantially all of the
property and assets of the Company are sold, then the Committee shall make
appropriate and proportionate adjustments in (a) the number and type of
shares or other securities or cash or other property that may be acquired
pursuant to Incentive Stock Options and other Awards theretofore granted under
this Plan, (b) the maximum number and type of shares or other securities
that may be issued pursuant to Incentive Stock Options and other Awards
thereafter granted under this Plan, and (c) the minimum option exercise
price set forth in Section 3(d)(ii).

 

Section 8.  AMENDMENT AND TERMINATION OF PLAN

 

The Board may
amend or terminate this Plan at any time and in any manner, provided, however, that no such amendment or termination
shall deprive the recipient of any Award theretofore granted under this Plan,
without the consent of such recipient, of any of his or her rights thereunder
or with respect thereto.

 

Section 9.  EFFECTIVE DATE OF PLAN

 

This Plan shall be
effective as of June 21, 2004, the date as of which it was approved by the
Board; provided, however, that no Common Shares
may be issued under this Plan until it has been approved, directly or
indirectly, by the affirmative votes of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote by
unanimous written consent or at a meeting duly held in accordance with the laws
of the State of Delaware.

 

5Exhibit 10.17

 

DOUGLAS DYNAMICS HOLDINGS, INC.

 

2004 STOCK INCENTIVE PLAN

 

MANAGEMENT INCENTIVE
OPTION AGREEMENT

 

This 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
                ,
2004(1), the Option shall become exercisable to purchase, and shall vest with
respect to, that number of Option Shares (rounded to the nearest whole share)
equal to the total number of Option Shares multiplied by the Vesting Rate
indicated below.

 

	
  Optionee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
  , 2004

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of shares purchasable:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per share:

  	
  $100.00

  	
   

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
  , 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 one hundred eighty (180) days following the date of such
Termination.

 

(1)  This date
to reflect the Effective Date as defined in the Employment Agreement for the
applicable executive.

 

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(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 one hundred eighty
(180) days following the date of such Termination.

 

(iv)                              Voluntary Termination for Any Reason
Other than Material Breach.  In the event
of a Termination by Optionee of his employment for any reason other than a
Material Breach (as defined below), then (A) the portion of the Option
that has not vested on or prior to the date of such Termination shall terminate
as of the date of such Termination and (B) the vested portion of the
Option shall terminate as of the date that is one hundred eighty (180) days
following the date of such Termination.

 

(c)                                  Other Events Causing Termination of
Option.  Notwithstanding anything to the contrary in
this Agreement, the Option shall terminate 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 

 

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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), (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 

 

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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 

 

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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.

 

“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 

 

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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.

 

“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.

 

7

 

“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: 

  	
   

  
	
   

  	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Name]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Street Address

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  City, State and Zip Code

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social Security Number

  

 

9

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