Document:

Exhibit 10.20

 

Douglas Dynamics, L.L.C.

Annual Incentive Plan

2009

 

Plan Participants

Employees
are recommended for participation in the plan by the President of Douglas
Dynamics subject to review and approval of the DDLLC board of directors
Compensation Committee.

 

Plan Description

The
annual incentive plan will reward participants for achieving performance
objectives in areas critical to the company’s success, specifically operating
income and delivery.  The performance
matrix is shown below:

 

Performance Matrix - 2009

 

	
  Performance

  Factor

  	
   

  	
  Weight

  	
   

  	
  0X

  	
   

  	
  1X

  	
   

  	
  2X

  	
   

  	
  3X

  	
   

  	
  4X

  	
   

  
	
  Operating
  Income

  	
   

  	
  70.0

  	
  %

  	
  $

  	
  38.1

  	
   

  	
  $

  	
  42.8

  	
   

  	
  $

  	
  47.6

  	
   

  	
  $

  	
  53.6

  	
   

  	
  $

  	
  59.5

  	
   

  
	
  Perfect
  Shipment

  	
   

  	
  30.0

  	
  %

  	
  90.0

  	
  %

  	
  92.5

  	
  %

  	
  95.0

  	
  %

  	
  97.5

  	
  %

  	
  100.0

  	
  %

  
																			

 

Plan Details

The
annual incentive factor will be equal to the participant’s participation level
(25% or 35%) times the total weighted interpolated “X” factor from the above
performance matrix.  For example, the
total weighted average “X” factor for the 2009
projection is shown below, assuming projected performance levels in all
categories.

 

“X” Factor at Projection

 

	
  Performance

  Factor

  	
   

  	
  Proj

  	
   

  	
  Factor

  	
   

  	
  Weight

  	
   

  	
  “X” Factor

  	
   

  
	
  Operating Income

  	
   

  	
  $

  	
  42.7

  	
   

  	
  0.97

  	
   

  	
  70.00

  	
  %

  	
  0.69

  	
   

  
	
  Perfect Shipment

  	
   

  	
  97.5

  	
  %

  	
  3.00

  	
   

  	
  30.00

  	
  %

  	
  0.90

  	
   

  
	
   

  	
   

  	
  Total
  Weighted Factor

  	
   

  	
   

  	
   

  	
  1.59

  	
   

  
											

 

The
measurement period for the Perfect Shipment metric is January-December.

 

 

Plan Payout

The
annual incentive payout will be equal to the participants base earnings for the
year times the annual incentive factor.

 

Participants
must be actively employed by Douglas Dynamics on the last day of the fiscal
year to be eligible for an annual incentive payout, except in the case of death
or disability, where the employee or employees estate would be eligible for a
pro rata payout.

 

Participants
must have signed a confidentiality and non compete agreement prior to the last
day of the fiscal year to be eligible for an annual payout.

 

Payout
will occur no later than February 15th of the following year.

 

The
DDLLC board of directors Compensation Committee will review and approve all
proposed payments of the plan.  The
committee may modify, suspend or terminate the plan at any time.Exhibit 10.21

 

Douglas Dynamics, LLC

Long Term Incentive Plan 

2009

 

Plan Participants

Participants
are recommended by the President of DDLLC and are subject to review and
approval by the DDLLC board of directors Compensation Committee.

 

Plan Description

The
key measurement factor for the Long Term Incentive Plan (LTIP) will be defined
cash flow (DCF).  DCF is measured as cash
flow from operations before financing costs, management fees, interest, and
income taxes and after normal capital expenditures.

 

Plant
expansions in excess of $2 million will be considered non-normal and amortized
as normal over a four (4) year period beginning with the year of
expansion.

 

Acquisitions
in excess of $2 million will be considered non-normal and amortized as normal
over a six (6) year period beginning with the year of acquisition.

 

If
the initial calculation of DCF in the current year is negative then
amortization of acquisitions or large capital expenditures will not be included
in the current year DCF calculation. 
Under these circumstances the amortization will be included in
subsequent years calculations until the amortization period is complete.

 

There
are two potential sources of input to the participants’ account:

 

1.                                       A Douglas
Dynamics, L.L.C. (DDLLC) total seed amount will be calculated each year equal
to 0.5% of DCF from current year operations, excluding the impact of plant
expansion or acquisition amortization. 
There will be no seed amount in any year where DCF is less than $20
million.

 

2.                                       A growth % will
be determined through interpolation by the following matrix:

 

	
  DCF

  	
   

  	
  $5M

  	
   

  	
  $10M

  	
   

  	
  $20M

  	
   

  	
  $30M

  	
   

  	
  $40M

  	
   

  	
  $50M

  	
   

  	
  $55M

  	
   

  	
  $60M

  	
   

  	
  $65M

  	
   

  	
  >$65M

  	
   

  
	
  Growth
  %

  	
   

  	
  -45

  	
  %

  	
  -25

  	
  %

  	
  -10

  	
  %

  	
  -5

  	
  %

  	
  5

  	
  %

  	
  15

  	
  %

  	
  20

  	
  %

  	
  25

  	
  %

  	
  30

  	
  %

  	
  30

  	
  %

  

 

Seed
money will be allocated to each participant’s account by the ratio of their
base earnings to the total of all participants’ base earnings.  The total cumulative seed money allocated to
a participant cannot exceed the participant’s current base earnings.

 

 

The
growth % will be applied to the participant’s beginning of the year balance
adjusted for any payouts during the year. 
The amount of growth, which can be positive or negative, will be
allocated to the participants’ account.

 

All
amounts allocated to the participant’s account are vested except in the event
of voluntary separation (quit) or termination for cause.  In this case the last two years will not be
considered vested as far as positive increase in the participant’s account are
considered.  Each of the last two years
will be considered separately, but growth and seed amounts will be combined for
each year for determining if the total is positive or not for the year.

 

Participants
will be eligible to receive vested portions of the plan upon separating from
DDLLC.  The payment methods are:

 

·                  Lump sum payment for death, long term
disability, or normal retirement

·                  For all other reasons if the balance to be
paid is less than $75,000, the payment will be lump sum and for balances of
$75,000 or more, the payout will be made in five equal annual payments with
interest on the unpaid balances at US treasury one-year rates effective at the
beginning of each year.

 

Employees
who cease being a participant without separation from DDLLC will receive a
payout in five equal annual installments with interest on unpaid balances at US
treasury one-year rates effective at the beginning of each year.  If the employee voluntarily separates (quits)
or is terminated for cause, the payouts will not include any non-vested
amounts.

 

If
the total in any given participant’s account reaches two times their base
earnings, one-fifth of the account balance will be paid out by February 15th.

 

The
DDLLC board of directors Compensation Committee will review and approve all
allocations and payments of the plan. 
The Compensation Committee may modify, suspend, or terminate the plan at
any time.

 

2Exhibit 10.22

 

DOUGLAS DYNAMICS HOLDINGS, INC.

 

Liquidity Bonus Plan

 

Douglas Dynamics Holdings, Inc., a Delaware
corporation (the “Company”),
wishes to attract and retain employees of the Company and
encourage them to increase their efforts to make the Company’s business more
successful.  In furtherance thereof, this
Liquidity Bonus Plan (the “Plan”) is designed to provide grants
of cash-based incentives to select employees of the Company in the event of a
change in control of the Company.

 

1.                                      Definitions.  Whenever used herein, the
following terms shall have the meanings set forth below:

 

“Affiliate”
means, as to any Person, any other Person that, directly or indirectly,
is in Control of, is Controlled by, or is under common Control with, such
Person.

 

“Aurora Entities”  means Aurora Industrial Holdings LLC, Aurora Equity
Partners II L.P., Aurora Overseas Equity Partners II, L.P., and their
Affiliates.

 

“Ares Entities”  means Ares Corporate Opportunities Fund, L.P. and
its Affiliates.

 

“Award”  means a bonus award
granted under the Plan.

 

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

 

“Change in Control”  means the Aurora Entities
and the Ares Entities shall cease collectively to have the power to vote or
direct the voting of securities having a majority of the ordinary voting power
for the election of directors of the Company (determined on a fully diluted
basis), unless: (i) the Aurora Entities and the Ares Entities collectively
own, beneficially and of record, at least 35% of the common stock of the Company
(determined on a fully diluted basis), (ii) the Aurora Entities and the
Ares Entities collectively own, of record and beneficially, an amount of common
stock of the Company equal to at least 51% (on a fully diluted basis) of the
common stock of the Company collectively owned by the Aurora Entities and the
Ares Entities, of record and beneficially, as of the Effective Date, (iii) the
Aurora Entities and the Ares Entities collectively have the power (pursuant to
stockholder agreements, proxies or other contractual arrangements) to elect a
majority of the Board and (iv) no “person” or “group” (as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)), has become, or had obtained rights (whether by means
of warrants, options or otherwise) to become, the “beneficial owner” (as
defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or
indirectly, of more of the outstanding common stock of the Company than that so
held collectively by the Aurora Entities and the Ares Entities.

 

“Code” means the
Internal Revenue Code of 1986, as amended.

 

“Company”  means Douglas
Dynamics Holdings, Inc., a Delaware corporation.

 

 

“Eligible Employee”  means any individual who is
treated by the Company or its subsidiaries as an employee as of the date of a
Change in Control, as determined by the Board.

 

“Participant”  means an Eligible Employee granted an Award under
the Plan.

 

“Person”  means an individual, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.

 

“Pool”
means a bonus pool
established in accordance with Section 5.1 upon the occurrence of a Change
in Control.

 

“Plan”  means this
Liquidity Bonus Plan, as it may from time to time be amended.

 

“Termination of Employment”  means, subject to the terms
of any Award Agreement, a termination (whether for cause or without cause,
voluntarily or involuntarily) of the Participant’s employment with the Company
or its Affiliates for any reason.

 

2.                                      Effective Date; Termination.  The effective
date of the Plan is November     , 2007 (the “Effective
Date”).  The Plan shall
automatically terminate on the fifth anniversary of the Effective Date unless a
Change in Control occurs prior to such date. 
Other than as set forth in the preceding sentence, the Board shall not
have the discretion to terminate the Plan.

 

3.                                      Administration of Plan.  The Plan shall be administered by the Board, which shall have complete
discretion and authority to interpret and construe the Plan and any Awards
issued hereunder, decide all questions of eligibility and benefits (including
underlying factual determinations), and adjudicate all claims and disputes.  The determination of the Board on the matters
pertaining to the Plan shall be final, binding, and conclusive on all
interested parties.  No member of the
Board shall be liable, with respect to the Plan, for any act, whether of
commission or omission, taken by any other member or by any officer, agent, or
employee of the Company or any of its subsidiaries, nor, excepting
circumstances involving his or her own bad faith, for anything done or omitted
to be done by himself.

 

4.                                      Eligibility.  The Board shall authorize Awards under the Plan to Eligible
Employees.  Plan Participants shall take
whatever additional actions and execute whatever additional documents the Board
may deem necessary or advisable in order to carry out or effect one or more of
the obligations or restrictions imposed on the Participant pursuant to the
express provisions of the Plan and the Participant’s Award.

 

5.                                      Bonus
Awards Under the Plan.

 

5.1                                 Bonus Pool.  Upon the consummation of a Change in Control,
a Pool equal to $1,000,000 (or such greater amount as may be provided by the
Board) shall be established.

 

2

 

5.2                                 Allocation of Pool.  The Pool will be allocated among Eligible
Employees in the manner determined by the Board in its sole discretion (after
giving due consideration to the recommendations of the Company’s then current
Chief Executive Officer) at or prior to the occurrence of a Change in Control;
provided, however, that the Board shall be required to allocate 100% of the Pool
to Eligible Employees.

 

5.3                                 Form of Payment.  Payments to Participants under
the Plan will generally be made in cash; provided, however, that in the event
of Change in Control in which the consideration payable to the Company’s
stockholders is not 100% cash, payments under the Plan may, in the sole
discretion of the Board, be made in the same form as the consideration payable
to the Company’s stockholders in the Change in Control transaction.

 

5.4                                 Time of Payment.  In general, each Participant’s benefit under
the Plan will be paid as soon as practicable following the consummation of a
Change in Control, but in no event more than thirty (30) days after the date
the consideration payable in the transaction is paid to the Company’s
stockholders.

 

5.5                                 No Other Payment Rights.  No payment shall be made (and
no amounts shall be retained for future payment) with respect to any Awards
under the Plan prior to the occurrence of a Change in Control.  Other than in connection with a Change in
Control, Participants shall have no rights to receive any payments in respect
of Awards granted under this Plan.

 

5.6                                 No Segregation
of Assets.  The Company
shall not segregate any assets in connection with or as a result of the
Plan.  The rights of a Participant to
benefits under this Plan shall be solely those of a general, unsecured creditor
of the Company.

 

6.                                      Withholding of Taxes.  The amounts
payable to a Participant (or successors) under the Plan shall be reduced by the
statutory minimum amount that the Company is required to withhold with respect
to such payments under the then applicable provisions of the Code, and state or
local or other tax laws.  The Board may
condition delivery to the Participant of any payment hereunder on the payment
by the Participant to the Company, in cash or in such other form as the Board
may permit, of any tax withholding applicable to such payment.

 

7.                                      No Right to Continued Employment.  The grant of
Awards to a Participant pursuant to the Plan shall not confer upon the
Participant any right to continue in the employ of the Company or any of its
Affiliates or interfere in any way with the right of the Company or any such
affiliates to terminate the Participant’s employment at any time.

 

8.                                      Section 280G of the Code.  To the extent
any of the payments or benefits received or to be received by a Participant
under the Plan might be characterized as parachute payments under Section 280G
of the Code, the Company and the affected Participant(s) shall take
reasonable steps to qualify such payments or benefits under Section 280G(b)(5)(A)(ii) of
the Code.  Participants shall not be
entitled to any such payments or benefits pursuant to this Plan until the
stockholders of the Company have

 

3

 

approved such payments and benefits in a
manner consistent with Section 280G(b)(5)(A)(ii)(II) of the Code.

 

9.                                      Amendments.  The Board may amend the Plan from time to time prior to a Change in
Control as it shall deem advisable; provided, however, that no amendment shall
operate to reduce the Pool below the amount set forth in Section 5.1 or
eliminate the requirement set forth in Section 5.2 that 100% of the Pool
be allocated to Eligible Employees in connection with a Change in Control.

 

10.                               Nontransferability. 
No right, benefit or
interest of a Participant hereunder shall be subject to anticipation,
alienation, sale, assignment, encumbrance, charge, pledge, hypothecation or set
off in respect of any claim, debt or obligation, or to execution, attachment,
levy or similar process, or assignment by operation of law.

 

11.                               Captions.  The use of
captions in this Plan is for convenience. 
The captions are not intended to and do not provide substantive rights.

 

12.                               Governing Law.  THE PLAN SHALL
BE GOVERNED BY THE LAWS OF DELAWARE, WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICT OF LAWS.

 

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