SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Dover Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[DOVER CORPORATION LOGO]
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Notice Of Annual Meeting Of Stockholders
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March 10, 2004
TO THE STOCKHOLDERS:
Please take notice that the Annual Meeting of Stockholders of DOVER
CORPORATION will be held at the 1st Floor Room 107, Wilmington Trust Company,
1100 North Market Street, Rodney Square North, Wilmington, Delaware 19801, on
April 20, 2004, at 10:00 A.M., for the following purposes:
1. To elect ten directors;
2. To consider and approve the 2005 Equity and Cash Incentive Plan; and
3. To transact such other business as may properly come before the meeting.
Only holders of record of the outstanding common stock at the close of
business on February 27, 2004 are entitled to notice of and to vote at the
meeting or any adjournments thereof.
By authority of the Board of Directors,
JOSEPH W. SCHMIDT
Secretary
DOVER IS PLEASED TO OFFER ITS STOCKHOLDERS THE CHOICE OF VOTING THEIR
SHARES BY RETURNING THE ENCLOSED PROXY BY MAIL, VIA A TOLL-FREE TELEPHONE NUMBER
OR BY VOTING ON THE INTERNET. INSTRUCTIONS FOR VOTING BY THESE THREE
ALTERNATIVES ARE PRINTED ON THE ENCLOSED PROXY CARD.
DOVER CORPORATION
PROXY STATEMENT
GENERAL
This statement is furnished to the stockholders of Dover Corporation (the
"COMPANY" or "DOVER"), whose principal executive offices are at 280 Park Avenue,
New York, NY 10017, in connection with the solicitation of proxies by the Board
of Directors for use at the Annual Meeting of Stockholders (the "MEETING") to be
held on April 20, 2004 or any adjournments thereof, for the purposes set forth
in the notice of meeting. Dover will pay the reasonable and actual costs of
soliciting proxies, but no amount will be paid to any officer or employee of
Dover or its subsidiaries as compensation for soliciting proxies. In addition to
solicitation by mail, Dover has retained Morrow & Co. to solicit brokerage
houses and other custodians, nominees or fiduciaries and to send proxies and
proxy material to the beneficial owners of such shares, at a cost not to exceed
$12,000. This statement and the proxy form are being first sent to the
stockholders on or about March 10, 2004.
As of the close of business on February 27, 2004, the record date for
determining stockholders eligible to vote at the Meeting, Dover had outstanding
203,189,581 shares of common stock. Each share of common stock is entitled to
one vote on all matters.
DOVER HAS PROVIDED TO EACH PERSON SOLICITED HEREIN A COPY OF DOVER'S 2003
ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "SEC"), (INCLUDING THE FINANCIAL SCHEDULES THERETO BUT WITHOUT THE
EXHIBITS) AS PART OF DOVER'S ANNUAL REPORT TO SHAREHOLDERS FOR 2004. DOVER WILL
PROVIDE TO EACH PERSON SOLICITED HEREIN, ON THE WRITTEN REQUEST OF ANY SUCH
PERSON, A COPY OF SUCH ANNUAL REPORT ON FORM 10-K, WITHOUT CHARGE (EXCEPT THAT
THE COMPANY MAY CHARGE FOR ANY EXHIBIT). A REQUEST FOR THE ANNUAL REPORT ON FORM
10-K SHOULD BE DIRECTED TO THE CORPORATE SECRETARY AT DOVER'S OFFICE, 280 PARK
AVENUE, NEW YORK, NY 10017. A COPY OF THE ANNUAL REPORT ON FORM 10-K (WITHOUT
EXHIBITS) MAY ALSO BE OBTAINED FROM DOVER'S INTERNET WEBSITE,
HTTP://WWW.DOVERCORPORATION.COM. NO MATERIALS ON THE COMPANY'S WEBSITE ARE PART
OF THIS PROXY STATEMENT.
The shares covered by each proxy will be voted for the election of the ten
nominees for director or their substitutes as indicated below unless directed
otherwise in the proxy in which case the shares will be voted as directed. The
proxy also grants discretionary authority to the persons named as proxies in
connection with other matters that may properly come before the Meeting to the
full extent allowed by the rules under the Securities Exchange Act of 1934 (the
"EXCHANGE ACT"), as amended, and any other applicable rules and regulations.
Abstentions and broker non-votes will be included in determining whether a
quorum exists at the Meeting. The election of directors requires a plurality of
shares of common stock present in person or by proxy at the Meeting and entitled
to vote thereon. Stockholders may not cumulate their votes. All other matters
will require the majority of shares of common stock present in person or by
proxy at the Meeting and entitled to vote thereon. In determining whether a
proposal specified in the notice of meeting has received the requisite number of
affirmative votes, abstentions and broker non-votes will have the same effect as
votes against the proposal, except with respect to the election of directors
where abstentions and broker non-votes will result in the respective nominees
receiving fewer votes but will have no effect on the outcome of the vote.
A person giving a proxy by mail, by telephone or by the internet may revoke
it at any time before it is exercised, by giving written notice to the Corporate
Secretary of Dover at the address referred to above or by attending the Meeting
and requesting in writing the cancellation of the proxy.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is the ownership, as of February 27, 2004 (except as
otherwise stated), of the number of shares and percentage of Company common
stock beneficially owned by: (i) each Director and nominee for Director, (ii)
each Executive Officer listed in the compensation table, (iii) all Directors,
nominees and Executive Officers of Dover as a group, and (iv) all persons or
entities known to beneficially own more than 5% of the outstanding Company
common stock. Unless otherwise indicated, the business address for all Directors
and Executive Officers is c/o Dover Corporation, 280 Park Avenue, New York, NY
10017.
NUMBER OF SHARES (1) PERCENTAGE
-------------------- ----------
David H. Benson........................................ 18,586(2) *
Jean-Pierre M. Ergas................................... 24,350(3) *
Kristiane C. Graham.................................... 1,282,868(4) *
Ronald L. Hoffman...................................... 24,982 *
James L. Koley......................................... 27,850(5) *
Richard K. Lochridge................................... 9,500(6) *
John E. Pomeroy........................................ 386,263 *
Thomas L. Reece........................................ 1,210,508(7) *
Bernard G. Rethore..................................... 5,000 *
Gary L. Roubos......................................... 311,499(8) *
Timothy J. Sandker..................................... 85,720 *
Michael B. Stubbs...................................... 236,234(9) *
Jerry W. Yochum........................................ 263,127 *
Directors and Executive Officers as a Group............ 4,380,583 2.2
---------------
* Less than one percent.
(1) Includes shares which are (a) owned by officers in the Company's Retirement
Savings Plan, totaling 81,246 shares as of December 31, 2003 and (b) subject
to options exercisable within 60 days for the following persons: Mr.
Hoffman, 22,088 shares; Mr. Pomeroy, 221,082 shares; Mr. Reece, 897,009
shares; Mr. Sandker, 55,774 shares; Mr. Yochum, 201,919 shares; and all
Directors and Executive Officers as a group, 1,787,514 shares.
(2) Includes 1,000 shares held by his spouse.
(3) Includes 11,500 shares held by a limited partnership of which Mr. Ergas is
the Managing General Partner.
(4) Includes 793,684 shares held by foundations of which Ms. Graham is a
director and in which she disclaims any beneficial ownership, 89,578 shares
held in various trusts of which she is a co-trustee sharing voting and
investment powers and in which she disclaims any beneficial ownership, and
2,460 shares held by her minor children.
(5) Includes 1,000 shares held by his spouse and 7,800 shares held by a
retirement plan of which Mr. Koley is the beneficiary.
(6) Includes 1,400 shares held by a Trust of which Mr. Lochridge is the Trustee.
(7) Includes 75,410 shares held by his spouse.
(8) Includes 99,434 shares held by his spouse.
(9) Includes 500 shares held by his spouse as to which Mr. Stubbs disclaims
beneficial ownership, 17,500 shares held by a family trust, and 181,232
shares held by trusts of which Mr. Stubbs is a co-trustee and various
members of his immediate family are beneficiaries. Excludes 84,701 shares
held in grantor
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retained annuity trusts and 2,349,978 shares held by trusts of which Mr.
Stubbs or members of his immediate family are beneficiaries.
EQUITY COMPENSATION PLANS
The Equity Compensation Plan Table below presents information regarding the
Company's equity compensation plans at December 31, 2003:
NUMBER OF SECURITIES
NUMBER OF SECURITIES WEIGHTED-AVERAGE REMAINING AVAILABLE FOR
TO BE ISSUED UPON EXERCISE PRICE OF FUTURE ISSUANCE UNDER
EXERCISE OF OUTSTANDING EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OPTIONS, WARRANTS (EXCLUDING SECURITIES
WARRANTS AND RIGHTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------- -------------------- ------------------- -------------------------
Equity compensation plans approved
by stockholders................... 11,383,082 $30.99 7,383,887
Equity compensation plans not
approved by stockholders.......... -- -- --
Total............................... 11,383,082 $30.99 7,383,887
The Company has three compensation plans under which equity securities of
the Company have been authorized for issuance and have been issued to employees
and to non-employee directors:
THE 1984 INCENTIVE STOCK OPTION PLAN AND CASH PERFORMANCE PROGRAM
The purpose of the 1984 Stock Option Plan and Cash Performance Program (the
"1984 PLAN") was to give key employees of the Company the opportunity to receive
options to purchase the Company's common stock and to participate in the cash
performance program. The 1984 Plan expired in January 1995 and was replaced by
the 1995 Incentive Stock Option Plan and Cash Performance Program. As of
December 31, 2003, there were outstanding options for 81,548 shares under the
1984 Plan, all of which will expire, if not exercised, during 2004.
THE 1995 INCENTIVE STOCK OPTION PLAN AND 1995 CASH PERFORMANCE PROGRAM
The Company's 1995 Incentive Stock Option Plan and 1995 Cash Performance
Program (the "1995 PLAN"), adopted in 1995 (replacing the 1984 Plan which
expired in January 1995), provides for stock options, restricted stock awards
and cash performance awards. The 1995 Plan will expire in January 2005.
The 1995 Plan is intended to promote the long-term success of Dover by
providing salaried officers and other key employees of Dover and its
subsidiaries with a long-range inducement to remain with Dover and to encourage
them to increase their efforts to make Dover successful. Options granted under
the 1995 Plan are designated as either non-qualified stock options or incentive
stock options ("ISOS") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "CODE").
The exercise price of options is based on the fair market value on the date
of grant as determined in good faith by the Compensation Committee. The
Compensation Committee determines the term of each option but in no event may an
option be exercised more than 10 years following the grant date. No more than
600,000 shares may be granted to a single participant in any one year. Options
granted under this plan may not be sold, transferred, hypothecated, pledged or
otherwise disposed of by any of the holders except by will or by the laws of
descent and distribution except that a holder may transfer any non-qualified
option granted under this plan to members of the holder's immediate family, or
to one or more trusts for the benefit of such family members provided that the
holder does not receive any consideration for the transfer.
The information above summarizes the material aspects of the 1995 Plan. The
rights and obligations of participants are determined by the provisions of the
1995 Plan document itself.
3
THE 1996 NON-EMPLOYEE DIRECTORS' STOCK COMPENSATION PLAN
Under the Dover Corporation 1996 Non-Employee Directors' Stock Compensation
Plan (the "DIRECTORS' PLAN"), non-employee Directors were granted 2,000 shares
of the Company's common stock per year (adjusted for stock splits) as their
primary compensation for serving as Directors through 2002. If any Director
served for less than a full calendar year, the number of shares granted to that
Director for the year was adjusted pro rata, based on the number of calendar
quarters for such year for which he or she served as a Director.
The Directors' Plan was amended effective January 1, 2003 as approved by
the stockholders and, under the amended Directors' Plan, non-employee Directors
are to receive annual compensation in an amount set from time to time by the
Board, which the Board intends to have paid 25% in cash and 75% in common stock
under the Directors' Plan, subject to the limitations set forth therein on the
maximum number of shares that may be granted to any Director in any year. Annual
compensation for 2003 was $90,000, payable by $22,500 in cash and 1,786 shares
of common stock, based on the fair market value of common stock on November 15,
2003. If any Director serves for less than a full calendar year, the
compensation to be paid to that Director for the year will be prorated as deemed
appropriate by the Compensation Committee.
Shares granted under the Directors' Plan may be treasury shares or newly
issued shares but in either case they will be listed on the New York Stock
Exchange (the "NYSE").
1. ELECTION OF DIRECTORS
The persons named as proxies will vote the shares covered by a proxy for
the election as Directors of the ten nominees listed below unless directed
otherwise in the proxy, in which case the shares will be voted as directed.
Votes may be cast only for the nominees listed below. If any such nominee for
election is not for any reason a candidate for election at the Meeting, an event
which management does not anticipate, the proxies will be voted for a substitute
nominee or nominees as may be designated by the Board of Directors and for the
others named below. Directors will be elected by a plurality of the votes cast.
All the nominees are presently Directors. Each Director elected at the Meeting
will serve until the election and qualification of his or her successor.
YEAR FIRST
BUSINESS EXPERIENCE FOR PAST FIVE YEARS, BECAME
NAME AND AGE POSITIONS WITH DOVER, AND OTHER DIRECTORSHIPS DIRECTOR
------------ --------------------------------------------- ----------
David H. Benson....... Senior Advisor, Fleming Family & Partners (since 1995
66 September 2001); formerly Vice Chairman of The Kleinwort
Benson Group, Plc.; Chairman of The COIF Charities Fund;
Director of The Rouse Company (real estate development),
Daniel Thwaites Plc. (beverage manufacturer), B. G. Plc.
(British gas company), Murray International Investment
Trust (since October 1999; investment management) and F.
F. and P. Alternative Strategies Income Fund (investment
management).
Jean-Pierre M. Chairman and Chief Executive Officer, BWAY Corporation 1994
Ergas............... (since January 2000; steel manufacturer); previously
64 Executive Vice President, Europe, Alcan Aluminum Limited
(from 1996 through 1999; aluminum manufacturer); and
Director, Brockway Standard Holdings Corporation
(container manufacturer).
Kristiane C. Graham... Private Investor. 1999
46
Ronald L. Hoffman..... President and Chief Operating Officer of Dover (since 2003
55 July 2003); President and Chief Executive Officer of
Dover Resources, Inc. (from 2002 to 2003); Executive Vice
president of Dover Resources, Inc. (from 2000 to 2002);
and President of Tulsa Winch (through mid-2000).
4
YEAR FIRST
BUSINESS EXPERIENCE FOR PAST FIVE YEARS, BECAME
NAME AND AGE POSITIONS WITH DOVER, AND OTHER DIRECTORSHIPS DIRECTOR
------------ --------------------------------------------- ----------
James L. Koley........ Director (Chairman until February 2002) of Arts-Way 1989
73 Manufacturing Co., Inc. (agricultural manufacturer);
Chairman and shareholder (until July 2002), Koley Jessen,
P.C. (law firm).
Richard K. President, Lochridge & Company, Inc. (management 1999
Lochridge........... consulting firm); Director of The Lowe's Company, Inc.
60 (home improvement retailer); PETsMART (pet supplies
retailer) and John H. Harland Company (financial
marketing services).
Thomas L. Reece....... Chairman of the Board (since May 1999), Chief Executive 1993
61 Officer and (until July 2003) President of Dover.
Bernard G. Rethore.... Chairman of the Board Emeritus, Flowserve Corporation 2001
62 (fluid transfer and control equipment and services);
previously Chairman (from July 1997 to April 2000), Chief
Executive Officer (from July 1997 to December 1999) and
President (from October 1998 to July 1999), Flowserve
Corporation; Director of Maytag Corporation (major
appliances), Belden, Inc. (specialty wires and cables),
and Walter Industries, Inc. (homebuilding, financing,
industrial products, carbon and natural resources).
Gary L. Roubos........ Former Chairman of the Board of Dover (through May 1999); 1976
67 Director of ProQuest Company (information management) and
Omnicom Group, Inc. (advertising).
Michael B. Stubbs..... Private Investor; Director of Moore-Handley, Inc. 1999
55 (wholesale hardware distributor).
During 2003, the Board of Directors held four regular meetings and one
special meeting. The Board has three standing committees, namely an Audit
Committee, a Compensation Committee and a Governance and Nominating Committee.
The Board had an Executive Committee until February 2004 when it was
discontinued by the Board. In 2003, all Directors attended all of the meetings
of the Board of Directors and all of the meetings of the standing committees of
which he or she was a member except Messrs. Benson, Rethore and Ergas, each of
whom attended at least 75% of such meetings.
The Audit Committee is composed of five Directors, all of whom satisfy all
the criteria for being "independent" members of the Board and the Audit
Committee established by the Securities and Exchange Commission (the "SEC") and
the NYSE Listing Standards, and also the Company's Standards for classification
as an Independent Director (the "DOVER INDEPENDENCE STANDARDS") which are set
forth below on page 8 and available on the Company's website at
HTTP://WWW.DOVERCORPORATION.COM. In addition, the Board of Directors has
determined that all members of the Audit Committee qualify as "audit committee
financial experts" as defined in the applicable SEC rules. The primary functions
of the Audit Committee consist of: selecting, engaging and overseeing the work
of the Company's independent auditors; approving in advance all services to be
provided by, and all fees to be paid to, the Company's independent auditors, who
report directly to the Committee; reviewing with management and such auditors
the audit plan and results of the auditing engagement; and reviewing with
management and the Company's independent auditors the quality and adequacy of
Dover's internal accounting controls. See the Audit Committee Report beginning
on page 17. The Audit Committee's responsibilities, authority and resources are
described in greater detail in its written charter which is attached to this
Proxy Statement as Exhibit A and is also available on the Company's website at
HTTP://WWW.DOVERCORPORATION.COM. In 2003, the Audit Committee held four
meetings. The members of the Audit Committee are Michael B. Stubbs (Chairman),
David H. Benson, James L. Koley, Bernard G. Rethore and Gary L. Roubos.
The Compensation Committee is composed of three Directors, all of whom
satisfy all the criteria for being "independent" members of the Board
established in the NYSE Listing Standards and the Dover Independence Standards.
The Compensation Committee, together with the other independent directors,
approves compensation for the chief executive officer. The Compensation
Committee also approves compen-
5
sation for other executive officers, grants awards and payouts under the 1995
Plan, approves changes to the compensation plans and supervises the
administration of the compensation plans. See the Compensation Committee Report
beginning on page 15. The Compensation Committee's responsibilities, authority
and resources are described in greater detail in its written charter, which is
available on the Company's website at HTTP://WWW.DOVERCORPORATION.COM. In 2003,
the Compensation Committee held four meetings. The members of the Compensation
Committee are Richard K. Lochridge (Chairman), Jean-Pierre M. Ergas and
Kristiane C. Graham.
The Governance and Nominating Committee is composed of all Directors who
satisfy all the criteria for being "independent", as established in the NYSE
Listing Standards and the Dover Independence Standards. The Governance and
Nominating Committee develops and recommends to the Board corporate governance
principles for the Company. In addition, the Governance and Nominating Committee
identifies and recommends to the Board candidates for election as Directors and
any changes it believes desirable in the size and composition of the Board, and
also recommends to the Board committee structure and membership. The Governance
and Nominating Committee's responsibilities, authority and resources are
described in greater detail in its written charter, which is available on the
Company's website at HTTP://WWW.DOVERCORPORATION.COM. The Governance and
Nominating Committee held four meetings in 2003. The members of the Governance
and Nominating Committee are David H. Benson, Jean-Pierre M. Ergas, Kristiane C.
Graham, James L. Koley (Chairman), Richard K. Lochridge, Bernard G. Rethore,
Gary L. Roubos and Michael B. Stubbs.
The Executive Committee was composed of four Directors. The Executive
Committee was generally empowered to act unanimously on behalf of the Board and
to meet or otherwise take action on an as needed basis between the regularly
scheduled quarterly Board meetings. The Executive Committee did not meet during
2003 and it was discontinued by the Board in February 2004. The members of the
Executive Committee were Gary L. Roubos (Chairman), Jean-Pierre M. Ergas, James
L. Koley and Thomas L. Reece.
The Company does not require Directors to attend the annual meeting of
stockholders. Directors generally do not, and in 2003 did not, attend the annual
meeting.
CORPORATE GOVERNANCE
Since inception, the Company has set high standards of business ethics, and
has had the expectation that the conduct of its operations and its executives
would demonstrate a commitment to high moral, legal and ethical principles. This
has been evident in a number of ways.
First, the Board of Directors has set a high standard for corporate
governance and has had Corporate Governance Guidelines in place for at least ten
years. For at least the past ten years, the majority of Directors has qualified
as independent under standards in effect at the time. Currently, there are two
management representatives on the Board, Mr. Reece and Mr. Hoffman, and the only
former management Board member is Mr. Roubos, who was the Chief Executive
Officer until May 1994 and Chairman of the Board until April 1999. Since 2002,
non-management directors have met in conjunction with Board meetings to discuss
issues of Board governance and oversight without any management representatives
present.
Second, the Compensation Committee, since inception in 1993, has been
composed entirely of non-management independent Directors. This Committee has
routinely hired and worked directly with an outside compensation consultant to
evaluate overall compensation arrangements for senior executives and managers,
and to satisfy itself that these arrangements are both competitive and
consistent with shareholders' interests.
Third, a majority of the Audit Committee members has always been
independent. Since May 1, 2001, all members have been independent. This
Committee has routinely met with both the auditors and management separately to
assess the effectiveness of the independent audit process. Since the third
quarter of 2002, the Audit Committee Chairman has participated in meetings with
management and the Company's independent auditors in the process of reviewing
both earnings releases and quarterly public filings immediately prior to the
release and filing of such information.
6
Fourth, the Company's headquarters, each of its four independent subsidiary
offices and all operating companies have had a written code of conduct for a
number of years, as well as appropriate conflict of interest policies, including
annual verification, as part of their normal business operations.
Fifth, each independent subsidiary for the past several years has routinely
conducted annual internal control and compliance reviews of select operating
companies, with the objective of reviewing and improving operating companies'
internal control environments and overall compliance levels. The results of
these activities have periodically been reported to the Audit Committee as part
of its normal financial review process.
Sixth, over the years, in addition to their normal Board meeting
attendance, non-employee Directors have been encouraged to attend independent
subsidiary board and business review and planning meetings. During 2003 a
majority of non-employee Directors did so: David H. Benson, Kristiane C. Graham,
James L. Koley, Bernard G. Rethore and Michael B. Stubbs attended one or more
board and/or business review meetings of the four independent subsidiaries.
Seventh, since PricewaterhouseCoopers LLP was first engaged as the
Company's independent auditors, representatives of that firm have been invited
to attend operating company business review and strategy meetings during the
year. During 2003, one or more representatives attended several such meetings.
In light of the enactment of the Sarbanes-Oxley Act of 2002 (the "SO ACT"),
as well as companion actions taken by the NYSE and the SEC, the Company has
continued to evaluate its compliance with overall corporate governance
consistent with these developments. The Board of Directors, its various
committees and management have reviewed the requirements of the SO Act, the
rules of the SEC and the NYSE's new Listing Standards regarding corporate
governance policy and procedure, have taken appropriate action, and have
determined that the Company is currently in compliance with such rules and
Listing Standards.
In November 2002, the Board of Directors established a Governance and
Nominating Committee composed entirely of independent Directors. This committee
worked throughout 2003 on a variety of governance matters, including an update
of the Corporate Governance Guidelines, the preparation of an updated Code of
Business Conduct and Ethics for the Dover group as a whole, and a Code of Ethics
for the Chief Executive Officer and Senior Financial Officers. The Board of
Directors amended the charter of the Audit Committee, adopted charters for the
Compensation Committee and the Governance and Nominating Committee and adopted
final versions of the Corporate Governance Guidelines and the two codes referred
to above, to implement the new rules and standards. These documents are
available on the Company's website at HTTP://WWW.DOVERCORPORATION.COM.
As discussed above, in accordance with the NYSE Listing Standards, the
Company's non-management Directors meet at regularly scheduled executive
sessions without management. Mr. Koley, the Chairman of the Governance and
Nominating Committee, presides at these sessions.
The Audit Committee has adopted policies and procedures requiring
pre-approval of all services performed by the Company's independent auditors.
These policies and procedures are described below on pages 19-20. The Audit
Committee has also adopted a Policy on Hiring from Auditor and the Board has
adopted the Dover Independence Standards, both of which are available on the
Company's website.
In accordance with the SO Act, the Audit Committee has established
procedures for (i) the receipt, retention and treatment of complaints regarding
accounting, internal accounting controls, or auditing matters ("ACCOUNTING
MATTERS"), and (ii) the confidential, anonymous submission by employees of
concerns regarding questionable Accounting Matters. Such complaints or concerns
may be submitted to the Company, care of the Corporate Secretary, or through the
Communications Coordinator, an external service provider (the "COMMUNICATIONS
COORDINATOR"), via a toll-free hotline at 1-800-495-1775 for calls made from
within the U.S., Canada and the U.S. Virgin Islands, and via collect call at
1-770-582-5268 from all other places. Mail inquiries submitted through the
Communications Coordinator may be addressed as follows: The Network Call Center,
Attn: Dover Corporation Account Manager, 333 Research Court, Norcross, Georgia
30092. The Network will forward such communications to the Chair of the Audit
Committee and Dover's General Counsel, in each case without disclosing the
identity of the sender if anonymity is requested.
7
Shareholders and other interested persons may also communicate with the Board
and the non-management Directors in either of these same manners. Such
communications will be forwarded to the Chair of the Governance and Nominating
Committee and Dover's General Counsel.
The Board has determined that all members of the Board, except for Thomas
L. Reece and Ronald L. Hoffman who are the management representatives on the
Board, meet the Dover Independence Standards.
DOVER INDEPENDENCE STANDARDS
In order for a Dover Director to qualify as independent for purposes of the
NYSE rules, the Dover Board must affirmatively determine that the Director has
no material relationship with Dover and its subsidiaries (either directly or as
a partner, shareholder or officer of an organization that has a relationship
with Dover or its subsidiaries). The Board has determined that individuals who
satisfy the following standards shall be deemed independent per se for purposes
of Board membership, although additional eligibility standards may exist with
respect to a specific Board committee. In the following list, the term "Dover"
means Dover and its consolidated subsidiaries.
1. The Director is not and has not been, within the prior three years, an
employee of Dover (excluding service as an interim Chairman or CEO of Dover).
2. No member of the Director's immediate family is or has been, within the
prior three years, an executive officer of Dover Corporation (excluding service
as an interim Chairman or CEO of Dover).
3. The Director has not received, in any of the prior three years, more
than $100,000 in direct compensation from Dover (other than Director and
committee fees and pension or other deferred compensation for prior services not
contingent on continued service).
4. No member of the Director's immediate family has received, in any of
the prior three years, more than $100,000 in direct compensation from Dover
(other than compensation received for services as a non-executive employee of
Dover or pension or other deferred compensation for prior services not
contingent on continued service).
5. The Director is not and has not, in the prior three years, been
affiliated with or employed by Dover's independent auditors and, in the case
that Dover has changed its independent auditors within the prior three years,
such former independent auditors.
6. No member of the Director's immediate family is or has been, in the
prior three years, affiliated with or employed in a professional capacity by
Dover's independent auditors and, in the case that Dover has changed its
independent auditors within the prior three years, such former independent
auditors.
7. During the past three years, neither the Director nor any member of the
Director's immediate family was employed as an executive officer of a company
while one of Dover's current executive officers served on the compensation
committee of that company.
8. The Director is not an officer, partner, member, or employee or 10% or
more owner of a company, partnership or other entity that makes payments to, or
receives payments from, Dover for property or services in an amount which, in
any of the three most recent fiscal years, exceeded the greater of $1 million or
2% of such entity's consolidated gross revenues.
9. No member of the Director's immediate family is an executive officer,
partner or member of a company, partnership or other entity that makes payments
to, or receives payments from, Dover for property or services in an amount
which, in any of the three most recent fiscal years, exceeded the greater of $1
million or 2% of such entity's consolidated gross revenues.
10. The Director does not serve as an officer, director or trustee of a
charitable organization to which Dover contributed an amount in the prior fiscal
year that exceeded the greater of $1 million or 2% of the charitable
organization's annual gross revenues for that fiscal year.
8
QUALIFICATIONS AND NOMINATIONS OF DIRECTORS
The Governance and Nominating Committee considers and recommends to the
Board of Directors nominees for election or for filling any vacancy in
accordance with the Company's by-laws and the Committee's charter. The Committee
annually reviews the requisite skills and characteristics of new Board members
as well as the size, composition, functioning and needs of the Board as a whole.
To be considered for Board membership, a nominee for director must be an
individual who has the highest personal and professional integrity, who has
demonstrated exceptional ability and judgment, and who shall be most effective,
in conjunction with the other nominees to the Board, in collectively serving the
long-term interests of the stockholders. The Committee also considers members'
qualifications as independent, the financial literacy of members of the Audit
Committee, the qualification of at least one member of the Audit Committee as an
"audit committee financial expert", and the diversity, skills, background and
experiences of Board members in the context of the needs of the Board.
The Governance and Nominating Committee may also consider such other
factors as it may deem to be in the best interests of the Company and its
stockholders. The Company's Corporate Governance Guidelines do require that at
least two thirds of the Board must meet the criteria for independence
established by the NYSE and any applicable SEC rules. The Board also believes it
appropriate for at least one key member of the Company's management to
participate as a member of the Board. In appropriate circumstances, this number
may be increased to two.
Whenever the Committee concludes, based on the reviews or considerations
described above or due to a vacancy, that a new nominee to the Board is required
or advisable, it will consider recommendations from Directors, management,
stockholders and, if it deems appropriate, consultants retained for that
purpose. In such circumstances, it will evaluate individuals recommended by
stockholders in the same manner as nominees recommended from other sources.
Stockholders who wish to recommend an individual for nomination should send that
person's name and supporting information to the Committee, care of the Corporate
Secretary, or through the Company's Communications Coordinator.
All of the nominees for Director for election at this Annual Meeting
currently serve on the Board and are being proposed by the Board.
DIRECTORS' COMPENSATION
Management Directors receive no compensation for services as a Director or
as a member of any Committee. Under the Directors' Plan, as amended, effective
for calendar year 2003, non-employee Directors receive annual compensation in an
amount set from time to time by the Board, payable 25% in cash and 75% in common
stock, subject to the Directors' Plan's limitations on the maximum number of
shares that may be granted to any Director. Annual compensation for 2003 was
$90,000, paid $22,500 in cash and 1,786 shares, based on the fair market value
of common stock on November 15, 2003. If any Director serves for less than a
full calendar year, the Compensation Committee will prorate the Director's
compensation for the year as the Committee deems appropriate. No additional
compensation is paid to Directors for serving on any committee or attending any
board or committee meetings, except that the Chairman of the Audit Committee
receives an additional $10,000 per annum.
Each non-employee Director may serve as a director of one of the Company's
four independent subsidiary boards, or may otherwise be invited to attend
independent subsidiary board, presidents' or strategy review meetings. In each
such case, he or she receives $1,500 for each meeting attended. During 2003,
David H. Benson, Kristiane C. Graham, James L. Koley, Bernard G. Rethore and
Michael B. Stubbs each received $4,500 for attending such subsidiary board
meetings. In addition Mr. Rethore received $1,500 for attending a subsidiary
strategy review meeting during 2003.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table below shows all remuneration paid by Dover
and its subsidiaries to the Chief Executive Officer, the four other most highly
paid executive officers, and Mr. Lewis Burns, a retired Vice President of Dover,
for services in all capacities for each of the three calendar years ended
December 31, 2003.
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
------------------------------------ --------------------------------------
AWARDS PAYOUTS
---------- ----------
RESTRICTED SECURITIES LONG-TERM ALL
STOCK UNDERLYING INCENTIVE OTHER
NAME AND AWARD(S) OPTIONS PLAN COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS ($)(5) (#)(6) PAYOUTS(7) (8)
------------------ ---- ---------- ---------- ---------- ---------- ---------- ------------
Thomas L. Reece(2)................ 2003 $1,000,000 $1,350,000 170,909 $ 0 $ 4,800
Chairman and Chief 2002 1,000,000 472,000 296,245 0 4,400
Executive Officer of Dover 2001 941,250 472,000 195,101 822,323 8,400
Ronald L. Hoffman(3).............. 2003 637,500 625,000 106,533 0 6,450
President and Chief Operating 2002 475,000 325,000 76,041 0 5,975
Officer of Dover 2001 270,000 190,000 40,500 168,390 4,800
John E. Pomeroy................... 2003 625,000 325,000 51,840 0 3,000
Vice President of Dover; 2002 582,500 125,000 87,376 0 2,750
Director and President 2001 582,500 0 56,484 770,225 4,200
of Dover Technologies
International, Inc.
Timothy J. Sandker................ 2003 512,500 300,000 47,913 0 6,450
Vice President of Dover; 2002 365,000 200,000 38,939 294,376 5,133
Director and President 2001 325,000 160,000 20,363 657,531 5,565
of Dover Industries, Inc.
Jerry W. Yochum................... 2003 610,000 400,000 50,662 0 14,770
Vice President of Dover; 2002 565,000 380,000 80,669 0 9,970
Director and President 2001 565,000 316,000 $485,380 49,476 89,114 9,770
of Dover Diversified, Inc.
Lewis E. Burns(4)................. 2003 610,000 300,000 0 0 4,800
Retired 2002 580,000 385,000 80,669 0 5,975
2001 580,000 371,000 339,000 50,789 410,433 6,825
---------------
(1) Compensation deferred at the election of the named executive officers is
included in the category (e.g. salary, bonus, LTIP payouts) and the year
that it would otherwise have been reported had it not been deferred. The
bonus amount is determined as described in the Compensation Committee Report
beginning on page 15 of this proxy statement. Cash bonuses for the calendar
years shown have been listed for the year earned, and are generally paid in
February of the following calendar year. Bonuses for 2003 paid to certain
officers listed in this table were awarded under the Company's Executive
Officer Annual Incentive Plan (the "INCENTIVE PLAN"). Perquisites and other
personal benefits paid to each officer in each instance aggregated less than
the lesser of $50,000 or 10% of total salary plus bonus, and accordingly are
omitted from the table.
(2) Until July 1, 2003, Mr. Reece also held the position of President of Dover.
(3) Mr. Hoffman became the President and Chief Operating Officer of Dover on
July 1, 2003. He was Vice President of Dover and Director and President of
Dover Resources, Inc. from January 2002 to June 2003. Prior to that he was
Executive Vice President of Dover Resources, Inc.
(4) Mr. Burns was the President and a Director of Dover Industries, Inc. and a
Vice President of Dover until June 2003. He retired from the Company as of
December 31, 2003.
10
(5) Mr. Burns and Mr. Yochum were granted restricted stock awards on November 1,
2001 in the amounts of 10,000 shares and 14,318 shares, respectively, in
recognition of their efforts in the successful disposition of businesses in
their operating groups. The dollar values of the restricted stock awards to
Mr. Burns and Mr. Yochum were calculated by multiplying the number of shares
awarded by the closing market price of Dover common stock (as reported on
the New York Stock Exchange-Composite Transactions) on the date of grant of
$33.90. Both Mr. Burns and Mr. Yochum vested in the restricted stock award
granted above and all restrictions lapsed with respect to 5,000 shares and
7,159 shares, respectively, on November 1, 2002 and with respect to the
remaining 5,000 shares and 7,159 shares, respectively, on November 1, 2003.
(6) Awards shown are generally for services performed in the calendar year
indicated but were granted in February of the following year. Each of Mr.
Reece's 2002 and 2001 awards includes an additional 20,000 shares granted in
light of his substantially reduced cash bonuses for 2002 and 2001, and in
recognition of his leadership of the Company during very difficult years.
The 2001 award for Mr. Reece also includes 4,417 shares to compensate for a
salary reduction taken by him during 2001. The 2001 award for Mr. Pomeroy
includes 3,195 shares for a salary reduction taken by him during 2001, and
his 2002 award includes 4,723 shares for a salary reduction taken by him
during 2002.
(7) The payout amount is determined as described under Long-Term Incentive Plan
Awards for Calendar Year 2004 beginning on page 12. Amounts shown represent
payouts for the three-year performance period ended with the year shown.
(8) Represents Company matching contributions to the Dover Corporation
Retirement Savings Plan, and Company paid life insurance premiums. For 2003,
these amounts are detailed as follows:
DOVER
RETIREMENT INSURANCE
NAME SAVINGS PLAN PREMIUMS TOTAL
---- ------------ --------- -------
Thomas L. Reece....................................... $4,800 $ 4,800
Ronald L. Hoffman..................................... 6,450 6,450
John E. Pomeroy....................................... 3,000 3,000
Timothy J. Sandker.................................... 6,450 6,450
Jerry W. Yochum....................................... 9,200 $5,570 14,770
Lewis E. Burns........................................ 4,800 4,800
INCENTIVE PROGRAMS
The Company's 1995 Plan, which replaced a similar plan that expired in
January 1995, provides for stock options and restricted stock (in special
circumstances) coordinated with cash performance awards. At the time of grant,
allocations are made such that of each combined award, greater emphasis is given
to cash performance awards at the operating level, and greater emphasis is given
to stock options at the corporate level. Information on current grants and cash
performance awards is given below. For payouts on prior awards under this
program see the Summary Compensation Table on page 10.
OPTION GRANTS IN LAST CALENDAR YEAR
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE PRESENT
NAME GRANTED(#)(1) CALENDAR YEAR ($/SHARE) EXPIRATION DATE VALUE($)(2)
---- ------------- ------------- --------- --------------- -----------
Thomas L. Reece............... 296,245 8.4 $24.50 2/13/13 $2,627,693
Ronald L. Hoffman............. 76,041 2.2 $24.50 2/13/13 674,484
John E. Pomeroy............... 87,376 2.5 $24.50 2/13/13 775,025
Timothy J. Sandker............ 38,939 1.1 $24.50 2/13/13 345,389
Jerry W. Yochum............... 80,669 2.3 $24.50 2/13/13 715,534
Lewis E. Burns................ 80,669 2.3 $24.50 2/13/13 715,534
11
---------------
(1) All options shown were granted in 2003 for services performed in 2002 and
correspond to the awards shown in the Summary Compensation Table for 2002.
The options become exercisable on February 13, 2006. The awards made in
February 2004 with respect to services performed in 2003 are shown in the
Summary Compensation Table for 2003 on page 10.
(2) The grant date present values were determined using the Black-Scholes option
pricing model applied as of the grant date. The assumptions used in applying
this model were: expected life of 8 years; expected dividend yield of 1.40%;
average stock price volatility of 30.63% and a risk-free interest rate of
3.87%, which represents the approximate yield of a zero coupon Treasury Bond
on the date of grant with a maturity date similar to the assumed exercise
period. This resulted in a discounted per share value of $8.87 (36.20% of
the option price). The valuation model was not adjusted for risk of
forfeiture or any vesting or transferability restrictions of the options,
all of which would reduce the value of the options if factored into the
calculation. The Black-Scholes model generates a theoretical value based on
the assumptions stated above and this value is not intended to be used for
predicting the future prices of the Company's common stock nor is there any
assurance that the theoretical value or any other value will be achieved.
The actual value of the options will depend on the future performance of the
Company's common stock, the overall market conditions and the executive
officer's continued service with the Company. The value ultimately realized
by the executive officer will depend on the amount by which the market price
of the Company's common stock on the date of exercise exceeds the exercise
price.
AGGREGATED OPTION EXERCISES IN LAST CALENDAR YEAR AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT YEAR END (#) YEAR END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
Thomas L. Reece...... 36,560 $ 900,473 731,936 656,419 $8,785,210 $4,567,487
Ronald L. Hoffman.... -- -- 9,454 129,175 68,447 1,197,915
John E. Pomeroy...... 23,604 329,392 192,270 196,592 2,811,758 1,339,859
Timothy J. Sandker... 3,776 54,423 39,213 75,863 1,553,619 598,892
Jerry W. Yochum...... 25,720 301,053 157,212 173,550 2,122,291 1,236,062
Lewis E. Burns....... 72,176 1,749,007 129,104 175,976 1,257,389 1,236,551
---------------
(1) Calculated by determining the difference between the exercise price and the
average of the high and low market price of Dover common stock (as reported
on the New York Stock Exchange-Composite Transactions) for the exercise
dates or December 31, 2003, as the case may be. The average of the high and
low market price on December 31, 2003 was $39.62.
LONG-TERM INCENTIVE PLAN AWARDS FOR CALENDAR YEAR 2004
PERFORMANCE OR ESTIMATED FUTURE
OTHER PERIOD PAYOUTS UNDER
FEBRUARY 2004 UNTIL MATURATION NON-STOCK PRICE
NAME AWARD OR PAYOUT BASED PLANS (1)
---- ------------- ---------------- ----------------
Thomas L. Reece................................... $450,000 2004-2006 $450,000
Ronald L. Hoffman................................. 280,500 2004-2006 280,500
John E. Pomeroy................................... 534,600 2004-2006 534,600
Timothy J. Sandker................................ 494,100 2004-2006 494,100
Jerry W. Yochum................................... 522,450 2004-2006 522,450
Lewis E. Burns.................................... -- N/A --
---------------
(1) The actual cash payout at the end of the three-year performance measurement
period will be equal to the award amount multiplied by a percentage which is
derived from a performance matrix, or table, which
12
uses two performance parameters: (1)(a) real (inflation adjusted) growth in
earnings per share, or (b) real growth in operating earnings; and (2)(a)
return on equity, or (b) return on investment. Parameters (1)(a) and (2)(a)
apply to Mr. Reece, Mr. Hoffman and other corporate officers and parameters
(1)(b) and (2)(b) apply to the other three listed officers and those
participating officers at independent subsidiaries and operating companies.
There is no payout if growth in earnings is not achieved; there is no
payout if return on equity or return on investment is less than 10 percent.
Moreover, in calculating any payout, the earnings in the base year (the year
preceding the award year) from which earnings growth is measured is deemed to be
an amount equal to 10 percent of equity or 10 percent of invested capital if
actual earnings in such year are less than such amount.
There is a $2 million limit on the amount of any annual individual payout,
and the aggregate payout at each appropriate business unit may not exceed an
amount equal to 30% of the average annual nominal earnings increase at that unit
over the three-year performance period. The same plan is applied to three
separate "Business Units" as follows: (a) the entire company for corporate
officers, (b) the market segment subsidiaries for their respective officers, and
(c) operating businesses for their respective officers.
Given the foregoing, the range of payouts is large. Earned payouts may not
exceed 1,562% of the award. For the past three years, the amounts shown in the
Payouts Column of the Summary Compensation Table represent percentage payouts
from 0% to 497.0% of the award given three years prior to the year of the
payout. Given this range, it is difficult to forecast the required estimates
called for by this column; the amounts shown above, payable in February 2007,
represent payouts at the 100% level on the aforementioned matrix. This could be
achieved with real average annual earnings growth of 7% and a Return on
Investment/Return on Equity of 13% over the three-year performance period, or
various other similar combinations of growth and return on investment. There
were no payouts for the three-year performance period ended December 31, 2003
for any of the individuals listed in the Summary Compensation Table.
RELATED PARTY TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
In November 2003, Wiseco Piston, a subsidiary of Dover, sold its American
Powersports division to a company controlled by Mr. Jeff Yochum by selling the
assets of the division for a purchase price of $1,700,000, payable in cash. The
purchase price was determined by negotiations between Mr. Yochum and the
management of Dover and was based on the fair market value of the assets. Mr.
Jeff Yochum is the son of Mr. Jerry Yochum, the Chief Executive Officer of Dover
Diversified, Inc. and a Vice President of Dover.
RETIREMENT PLANS
Dover has a number of defined benefit and defined contribution pension
plans covering substantially all employees of the Company and its domestic and
foreign subsidiaries. Dover also has unfunded supplemental executive retirement
plans and other similar unfunded retirement programs ("SERPS") which provide
supplemental retirement benefits for eligible key management employees including
certain officers of Dover and its subsidiaries. These supplemental plans
basically extend or increase retirement benefits to cover compensation not
covered by underlying qualified plans because of Federal statutory limitations.
Pursuant to those plans, payments will be made at the appropriate time (e.g.,
retirement) to such officers and other plan participants.
Benefits under various defined benefit plans and related SERPs are based
generally upon (i) final average compensation, defined as the highest 60
consecutive months of compensation out of the last 120 months and
13
(ii) the years of service credit. The following table sets forth the aggregate
estimated annual benefits payable upon normal retirement (age 65) pursuant to
the Company's retirement plans.
PENSION PLAN TABLE
YEARS OF SERVICE
----------------------------------------------------------
FINAL AVERAGE COMPENSATION 15 20 25 30 35
-------------------------- -- -- -- -- --
800,000 240,000 320,000 400,000 480,000 480,000
900,000 270,000 360,000 450,000 540,000 540,000
1,000,000 300,000 400,000 500,000 600,000 600,000
1,100,000 330,000 440,000 550,000 660,000 660,000
1,200,000 360,000 480,000 600,000 720,000 720,000
1,300,000 390,000 520,000 650,000 780,000 780,000
1,400,000 420,000 560,000 700,000 840,000 840,000
1,500,000 450,000 600,000 750,000 900,000 900,000
1,600,000 480,000 640,000 800,000 960,000 960,000
1,700,000 510,000 680,000 850,000 1,020,000 1,020,000
1,800,000 540,000 720,000 900,000 1,080,000 1,080,000
1,900,000 570,000 760,000 950,000 1,140,000 1,140,000
2,000,000 600,000 800,000 1,000,000 1,200,000 1,200,000
Compensation for plan purposes includes salary, annual bonus and
commissions but excludes any payments or stock option or restricted stock awards
under the 1995 Plan. Generally, vesting of qualified pension benefits occurs
after completion of five years of employment subsequent to age 18. The table
above shows the estimated annual benefit payable upon normal retirement on a
straight life annuity basis to persons in the specified remuneration and years
of service classifications. The benefit amounts listed in the table include the
annuitized portion of the defined contribution accumulation attributable to
Company contributions and one half of the social security benefits to which the
covered employee may be entitled. Commencing January 1, 2003, executives covered
by the corporate SERP with at least 10 years of service credit can retire at age
62 with no reduction in benefits, and executives who join Dover at or after age
40 are credited with one additional year of service for every four years of
service after age 25 at another employer. The years of service credit for
eligible persons named in the Summary Compensation Table as of December 31, 2003
are: Mr. Reece 38, Mr. Hoffman 13, Mr. Pomeroy 23, Mr. Sandker 34, Mr. Yochum 25
and Mr. Burns 44. All of these persons are vested.
EXECUTIVE DEFERRED INCOME PLAN
In 1984-1985, the Company offered its executive officers an executive
deferred income plan (the "EDIP"). Messrs. Reece, Pomeroy and Yochum, along with
certain other executive officers, participated in the EDIP, pursuant to which
they each elected to defer certain income during the period 1985-88, which will
be repaid to them (or their estate) beginning at the time they reach age 65, and
continuing thereafter for a period of 15 years. Amounts deferred will be repaid
together with interest compounding at the rate of 10 percent (if they retire
prior to age 65) or 12.5% (if they retire at age 65 or later), which were
competitive market interest rates at the time the program was introduced. As
part of the EDIP, the Company purchased whole life insurance policies payable to
the Company to fund the anticipated cost of this program. Amounts deferred by
Messrs. Reece, Pomeroy and Yochum were $60,000, $50,000 and $120,000, and the
Company is scheduled to repay such individuals the annual amounts of $102,055,
$67,197 and $127,425 beginning at age 65. The Program is subject to termination
under certain conditions, provided all participants are treated in the same
manner, and in the event of a change of control, all sums due and owing become
payable immediately.
14
DEFERRED COMPENSATION PLAN
Effective August 1, 2001, Dover adopted a deferred compensation plan as a
means whereby the Company may afford a select group of management or highly
compensated employees an opportunity to defer to a future year the receipt of
certain compensation that, absent such election, would have otherwise been paid.
The plan is intended to be an unfunded, nonqualified deferred compensation plan,
where the individual participants are responsible for their own investment
choices. Amounts deferred are credited with the earnings or losses of
hypothetical investments designated by plan participants. The Company has
established a grantor trust (the "TRUST") with The Bank of New York as the
trustee thereof, to hold certain amounts deferred under the plan. In certain
instances, the assets of the Trust become subject to claims of the general
creditors of the Company.
CHANGE OF CONTROL PROVISIONS
The Company has agreements with Mr. Reece and other officers including
those shown on the Summary Compensation Table designed to encourage each such
officer to continue to carry out his duties with the Company in the event of a
potential change of control of the Company. For purposes of these agreements, a
"change of control" occurs generally when (a) a person becomes beneficial owner
of 20% or more of the Company's common stock, (b) as a result of a business
combination or tender offer, a majority of the Board of Directors changes, or
(c) the stockholders approve a merger or other business combination, as a result
of which the Company ceases to be an independent public company. The agreements
provide that if within eighteen months following a change of control of the
Company the officer's employment is terminated either by the Company for other
than "cause" or "disability" or by such officer for "good reason" (all as
defined in the agreements), then such officer will receive a lump sum payment
equal to three times the highest base salary and annual bonus (but not any award
under the 1995 Plan or any other compensation) received by such officer in any
of the five most recent years. The severance amounts to be paid may be subject
to reduction if the officer, at the time of termination, is within 36 months
from his normal retirement age. In addition, upon termination, all cash
performance awards outstanding will immediately vest and be paid to the officer
and all stock options will immediately vest and become exercisable. Also, in the
event of a change of control, the present value of certain unfunded deferred
compensation plans, including the Company's SERP plans, will be paid immediately
to such officers in a lump sum.
The Code imposes certain excise taxes on, and limits the deductibility of,
certain compensatory payments made by a corporation to or for the benefit of
certain individuals if such payments are contingent upon certain changes in the
ownership or effective control of the corporation or in the ownership of a
substantial portion of the assets of the corporation, and have an aggregate
present value of more than three times the individual's annualized includable
compensation for the base period, as defined in the Code. Although Dover
payments would not be expected to reach this amount in most cases, if an
individual became subject to the excise taxes, the Company would gross-up the
individual's payments to make him or her whole.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "COMMITTEE") of the Board of Directors is
composed entirely of independent Directors. The Compensation Committee approves
compensation for executive officers, grants, awards and payouts under the stock
option plan and performance program and compensation plan changes, and
supervises the administration of the compensation plans. From time to time, most
recently in 2002, the Committee reviews studies conducted by its independent
compensation consultant as to the competitiveness of the Company's overall
executive compensation program. The results of those reviews are reflected in
this report.
A. EXECUTIVE COMPENSATION POLICY
The Committee's basic overriding compensation principle is that
compensation at the corporate level, the independent subsidiary level, and at
the operating president level should generally be linked to Dover's total return
to stockholders and should be competitive with other comparable companies. The
Committee also
15
believes that all compensation, i.e., annual, medium-term and long-term, should
be closely aligned to the performance of the business over which the executive
has the most control. This is done annually through salaries and bonuses, on a
medium-term basis through three-year payout cash performance awards, and on a
long-term basis through stock options. The relative "mix" of medium-term and
long-term opportunity is adjusted in accordance with the breadth of the
executive's responsibility across the organization, with increasingly larger
percentages allocated to long-term reward potential through stock options in the
case of those persons who are in positions to most materially affect the
profitability and growth of the Company. In early 1999, the 1995 Plan was
amended to also allow the Committee to make restricted stock awards, with voting
and dividend rights, that vest up to five years after grant. Restricted stock is
generally not awarded except in connection with special or unusual
circumstances. Cash performance awards and stock option grants are generally
made on an annual basis although stock option grants can be made quarterly based
on individual circumstances. However, to provide incentives to management to
increase stockholder value over the medium and long-term, payouts on cash
performance awards, if earned, occur three years later based on achieving
certain performance goals for the three-year period; restricted stock vests from
one up to five years after grant; and stock options generally have 10-year terms
and are not exercisable until three years after their grant. With respect to
pensions and other similar benefit programs, the Committee has set a target at
the median of comparable companies. All compensation paid to the executive
officers for 2003 qualified for deductibility for federal income tax purposes
under Section 162(m) of the Code.
Annual Compensation: The Committee reviews the Company's performance
annually. As indicated above, the compensation programs of the Company are
highly leveraged on the basis of performance. In setting compensation, the
Company reviews the performance of the Company as compared to the companies in
the Total Compensation Management database (the "TCM DATABASE"). Until the most
recent report (which is based on 2002 data), the Company consistently performed
in the top 26% of companies as measured by the TCM database, which currently
includes in excess of 60% of the manufacturing companies included in the Fortune
500 listings. The TCM database includes a substantially larger number of
companies than the peer index group referred to in connection with the Stock
Performance Graph below. The average rank of a company in the TCM database,
which determines that company's overall standing, is the average of the
following nine separate measurements: return on equity for one year and five
years; return on capital for one year and five years; return on sales for the
current year; return on assets for one year and five years; and total capital
return for one and five years. As a result of the 2002 compensation review
mentioned above (and the earlier compensation review conducted in 2000), the
Committee determined that as long as the Company continues to perform as it has
on the TCM Database, salaries and bonuses would be targeted at the 62nd
percentile for all company executives. Should the Company's performance fall
below, compensation targets will be adjusted downward. Annual bonuses vary with
annual performance based upon earnings growth, return on investment and
achievement of special Company goals as well as the Committee's judgment of
overall performance.
In 1998, the Company adopted the Incentive Plan which is administered by
the Committee and, in 2003, stockholders re-approved the Incentive Plan and the
performance goals set forth therein to satisfy certain Internal Revenue Code
requirements. The Committee has discretion to select executive officers to
participate in the Incentive Plan in any given year. Executive officers selected
to participate in the Incentive Plan would normally receive their annual
bonuses, if any, for that year under the terms of the Incentive Plan instead of
the Company's traditional bonus program. In 2003, Messrs. Reece, Hoffman,
Pomeroy and Yochum participated in the Incentive Plan.
Long-Term Compensation: Dover's management, the Committee and the Board of
Directors believe that tangible (cash) and intangible (stock) incentives should
be provided to key management at each of the three levels within the Company
(i.e. corporate, independent subsidiary and operating levels) over periods of
time longer than one fiscal year, typically three years. Given the different
levels and opportunities to impact Dover's long-term growth, and hence benefit
Dover's stockholders, Dover has a long-term compensation program, the 1995 Plan,
which includes both stock-based awards and cash incentive awards, and operates
substantially as described below.
16
Only officers and executives who are in a position to affect materially the
profitability and growth of the Company are eligible for stock options,
restricted stock or cash incentive awards under the 1995 Plan. Long-term awards
under the 1995 Plan are basically a mix of stock-based and cash incentives, with
operating management receiving a significant percentage of their respective gain
opportunity in the form of cash incentive awards, and the executive officers
receiving a substantial portion of their opportunity in the form of stock-based
awards, usually stock options. Under the 1995 Plan, the maximum award is
calculated based on an individual's base salary, which amount is then multiplied
by pre-established factors to determine both the allocation of the award between
cash and options and the value of the two. Once the value to be applied to the
stock option grant is determined, the value is converted into a number of shares
based on the fair market value of the Company's stock on the date of grant. The
payout of cash incentive awards is conditional upon achievement of certain
performance criteria over the three-year period commencing with the year of the
award. For a discussion of the performance criteria with respect to cash
incentive awards, see the Long-Term Incentive Plan Awards for Calendar Year 2004
table beginning on page 12. The multiples for each award are set by the
Committee. For the officers identified in the Summary Compensation Table above,
in 2003 the cash incentive awards made were based on multiples ranging from .23
to .81, and the number of shares granted was based on multiples ranging from
3.24 to 6.77. The comparable multiples for the 2004 cash awards and share grants
are .33 to .81 and 3.24 to 7.05, respectively. In all cases, these multiples
were determined by the independent compensation consultant retained in 2002 (and
in 2000), and confirmed by the Compensation Committee. The multiples in 2003 and
2004 reflect the 2002 compensation review, which suggested increases based on a
competitive analysis, and a shift in long term reward opportunity from cash to
stock as adjusted in 2002 to use only base salary. It is anticipated that these
multiples will be used until the next compensation review is conducted. In
February of each of 2002 and 2003, there were additional option shares granted
as described in footnote (6) to the Summary Compensation Table. Cash incentive
awards are made annually for the three-year performance period commencing in the
year of the award. The number of shares that may be granted to each participant
is limited to 600,000 to any one individual in a given year. In 2003, the number
of optionees granted shares under the Plan was 4.8% of the total number of Dover
employees. The annual number of shares granted has averaged less than 1% of
shares outstanding over the past five years. For 2004, that percentage was
1.02%. Dover expects that, except in cases of unusual need, shares acquired
through exercise of options will be held by participants (or the participant's
family members) for the duration of their employment with the Company.
B. CHIEF EXECUTIVE OFFICER COMPENSATION
In February 2004, the Compensation Committee, acting together with the
other independent Directors, awarded Mr. Thomas L. Reece, Chief Executive
Officer, a bonus of $1,350,000 for 2003, which was equal to 135% of his 2003
salary of $1,000,000, a stock option grant of 170,909 shares under the 1995 Plan
and a cash performance award of $450,000 under the 1995 Plan. The annual bonus
amount was determined based upon: (a) outside independent compensation survey
data (the TCM database) for a comparative group of companies of Dover's size;
(b) the sales and earnings achieved in 2003; (c) the general business
environment during 2003; and (d) a subjective judgment factor which is the
prerogative of the Committee, acting together with the other independent
Directors. The first three factors were given the greatest weight. It was also
noted that Mr. Reece did not receive a cash performance award payout for 2003 or
2002. During the latter half of 2001, Mr. Reece voluntarily reduced his base
salary down to the level it had been in 1999. Effective January 1, 2002, his
salary was re-established at $1,000,000.
Compensation Committee: Richard K. Lochridge (Chairman)
Jean-Pierre M. Ergas
Kristiane C. Graham
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors consists entirely
of non-employee Directors who are independent in accordance with the NYSE
Listing Standards, the rules of the SEC applicable to audit committee members
and the Dover Independence Standards.
17
The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is attached as Exhibit A to this proxy statement. The
Audit Committee is responsible for the duties set forth in its charter but is
not responsible for either the preparation of the financial statements or the
auditing of the financial statements. The Company's management has the
responsibility for preparing the financial statements and implementing internal
controls, and the Company's independent accountants have the responsibility for
auditing the financial statements and monitoring the effectiveness of the
internal controls. The review of the financial statements by the Audit Committee
is not the equivalent of an audit.
Pursuant to its oversight responsibilities, the Audit Committee discussed
with the Company's auditors the overall scope and plans for the audit of the
Company's 2003 financial statements. During 2003, the Audit Committee met with
the auditors, with and without management of the Company present, to discuss the
results of the auditors' examination, the evaluation of the Company's internal
controls and the overall quality of the Company's financial reporting.
The Audit Committee reviewed and discussed, with both management of the
Company and the independent auditors, the fiscal year 2003 audited financial
statements, including a discussion of critical accounting policies, the quality,
not just the acceptability, of the accounting principles followed, the
reasonableness of significant judgments reflected in such financial statements
and the clarity of disclosures in the financial statements.
The Audit Committee also (1) discussed with the independent auditors,
PricewaterhouseCoopers LLP, the matters required to be discussed by Statement on
Auditing Standards No. 61; and (2) reviewed the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1, and discussed with the independent auditors any relationships or
permitted non-auditing services, including those described below under
"Relationship with Independent Accountants", that may impact their objectivity
and independence.
In accordance with the requirements under the SO Act, the related SEC rules
and the NYSE Listing Standards, the Audit Committee engaged the independent
certified public accounting firm of PricewaterhouseCoopers LLP to audit the
annual accounts of Dover and its subsidiaries for 2003. Consistent with its
charter and applicable SEC rules, the Audit Committee approved in advance all
permitted non-audit services provided by PricewaterhouseCoopers LLP to Dover and
its subsidiaries in 2003. For a description of the Audit Committee pre-approval
policy and non-audit services provided by PricewaterhouseCoopers LLP in 2003,
see "Relationship with Independent Accountants" on page 19.
Consistent with its charter and SEC guidance, the Audit Committee has
delegated to the Chairman of the Committee the responsibility of reviewing the
quarterly financial information prior to public dissemination. The Chairman
fulfilled these responsibilities for each of the quarterly financial disclosures
in 2003.
Based upon the review and discussions referred to above, the Audit
Committee recommended that the audited financial statements for the year ended
December 31, 2003 be included in the Company's Annual Report on Form 10-K.
Audit Committee: Michael B. Stubbs (Chairman)
David H. Benson
James L. Koley
Bernard G. Rethore
Gary L. Roubos
18
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
As discussed above, the independent certified public accounting firm of
PricewaterhouseCoopers LLP is the independent public accountant selected by the
Audit Committee to audit the annual accounts of Dover and its subsidiaries for
2003. This firm also audited the financial statements for 2001 and 2002.
Representatives of PricewaterhouseCoopers LLP will not be present at the
Meeting.
FEES PAID TO INDEPENDENT ACCOUNTANTS
A. AUDIT FEES
Audit fees include fees for audit or review services in accordance with
generally accepted auditing standards and fees for services that generally only
the Company's auditors provide, such as statutory audits and review of documents
filed with the SEC. The aggregate fees, rounded to the nearest thousand dollars,
paid to PricewaterhouseCoopers LLP for consolidated auditing services to the
Company during the years ended December 31, 2003 and December 31, 2002, were
$4,571,000 and $3,799,000, respectively.
B. AUDIT RELATED FEES
Audit-related fees include fees for assurance and related services that are
traditionally performed by the Company's auditors. These services include audits
of employee benefit plans, due diligence on acquisition targets, internal
control reviews and consultation in connection with financial and accounting
standards. The aggregate fees, rounded to the nearest thousand dollars, paid to
PricewaterhouseCoopers LLP for audit-related services to the Company during the
years ended December 31, 2003 and December 31, 2002 were $525,000 and $297,000,
respectively.
C. TAX FEES
Tax Fees include fees for services that are performed by professional tax
staff other than in connection with the audit. These services include tax
compliance services, tax planning and tax advice. The aggregate fees, rounded to
the nearest thousand dollars, paid to PricewaterhouseCoopers LLP for the
Company's tax services during the years ended December 31, 2003 and December 31,
2002, were $1,996,000 and $2,290,000 respectively.
D. ALL OTHER FEES
During the year ended December 31, 2003, the aggregate fees, rounded to the
nearest thousand dollars, paid to PricewaterhouseCoopers LLP for all other
services were $11,000. During the year ended December 31, 2002, no fees were
paid to PricewaterhouseCoopers LLP for services other than those described
above.
PRE-APPROVAL OF SERVICES BY INDEPENDENT ACCOUNTANTS
Consistent with its charter and applicable SEC rules, the Audit Committee
pre-approves all audit and permissible non-audit services provided by
PricewaterhouseCoopers LLP to Dover and its subsidiaries. With respect to
certain services which the Company's independent auditors have traditionally
provided, the Audit Committee has adopted specific pre-approval policies and
procedures. In developing these policies and procedures, the Audit Committee
considered the need to ensure the independence of the Company's outside auditors
while recognizing that, in certain situations, the Company's independent
auditors may possess the expertise and be in the best position to advise the
Company on issues and matters other than accounting and auditing.
The policies and procedures adopted by the Audit Committee allow the
pre-approval by the Audit Committee of audit-related services and
non-audit-related services and tax services. Under the policies and procedures,
pre-approval is generally provided for up to one year and any general
pre-approval is detailed as to the particular services or category of services
and is subject to a specific budget. The policies and procedures require that
any other services be expressly and separately approved by the Audit Committee
prior to such services being performed by the independent auditors. In addition,
pre-approved services which exceed the
19
budgeted amount included in a general pre-approval require separate, specific
pre-approval. For each proposed service, the independent auditor and/or
management is required to provide detailed information at the time of approval.
The Audit Committee considers whether each pre-approved service is consistent
with the SEC's rules and regulations on auditor independence.
All audit-related and non-audit-related services performed by
PricewaterhouseCoopers LLP during 2003 were pre-approved specifically or
pursuant to the procedures outlined above.
20
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
DOVER CORPORATION, S&P 500 INDEX & PEER GROUP INDEX
TOTAL STOCKHOLDER RETURNS
[PERFORMANCE GRAPH]
S&P 500 INDEX PEER GROUP DOVER CORP.
------------- ---------- -----------
Dec-98 100.00 100.00 100.00
Dec-99 121.04 113.46 125.32
Dec-00 110.02 135.84 113.24
Dec-01 96.95 127.97 104.56
Dec-02 75.52 99.91 83.60
Dec-03 97.18 142.75 116.00
Data Source: Media General Financial Services
This graph assumes $100 invested on December 31, 1998 in Dover Corporation
common stock, the S&P 500 index and a peer group index. The peer index consists
of the following public companies selected by the Company based on its
assessment of businesses with similar industrial characteristics: Actuant Corp.,
Ametek Inc., Carlisle Cos. Inc., Cooper Industries Inc., Crane Co., Danaher
Corp., Eaton Corp., Emerson Electric Co., Federal Signal Corp., Honeywell
International, Inc., Hubbell Inc. CL B, Illinois Tool Works, Ingersoll-Rand
Company Limited, ITT Industries Inc., 3M Co. (formerly Minnesota Mining & Mfg.),
Parker-Hannifin Corp., Pentair Inc., Perkinelmer Inc., Tecumseh Products Co.,
Tyco International Inc. and United Technologies Corp. Last year's peer group
included TRW, Inc. As a result of its acquisition by Northrop Grumman, TRW Inc.
is no longer a public company and has been eliminated from Dover's peer group.
* Total return assumes reinvestment of dividends.
21
2. PROPOSAL TO CONSIDER AND APPROVE THE 2005 EQUITY AND
CASH INCENTIVE PLAN
The Company proposes the adoption of the 2005 Equity and Cash Incentive
Plan (the "2005 PLAN") to continue to be able to provide the types of rewards
currently available under the Company's only other equity compensation plan, the
1995 Incentive Stock Option Plan and 1995 Cash Performance Program (the "1995
PLAN") which expires on January 30, 2005. If approved, the 2005 Plan will become
effective on February 1, 2005. Dover believes that the Company is best served by
providing key people who are in positions to affect materially the Company's
profitability and growth with long-term incentive compensation.
The Company believes that the 2005 Plan, like the 1995 Plan, will provide
the Compensation Committee with the flexibility to select from among a variety
of performance awards, both cash and equity, and to subject any such award to
various performance criteria when the Compensation Committee believes it is in
the best interests of the Company to do so. This flexibility allows the
Committee to tailor awards and performance criteria to particular individuals
and their ability to influence the performance of a particular business, a
segment, or the Company in general. It also allows the Committee to adjust the
structure of future awards from time to time after receiving recommendations
from independent consultants based on periodic (currently biennial) compensation
studies.
In February 2004 the Compensation Committee recommended that the Board of
Directors approve the 2005 Plan to replace the current 1995 Plan which will
expire on January 30, 2005. In making its recommendation, the Committee received
advice from its independent compensation consultant which has reviewed the 2005
Plan. At its meeting in February 2004, the Board of Directors adopted the new
2005 Plan to be effective as of February 1, 2005. The 2005 Plan is subject to
approval by the stockholders, and no grants may be made under the 2005 Plan
unless such approval is obtained. If the stockholders approve the 2005 Plan, the
Compensation Committee may make awards under the 2005 Plan commencing after
January 31, 2005.
The following plan summary is qualified in its entirety by reference to the
full text of the 2005 Plan, which is attached to this Proxy Statement as Exhibit
B.
GENERAL
Participation in the 2005 Plan will be limited to a group of salaried
officers and other key employees of Dover and its subsidiaries who are in a
position to affect materially the profitability and growth of Dover and its
subsidiaries and on whom major responsibility rests for the present and future
success of Dover. Directors of Dover will be eligible under the 2005 Plan only
if they are also salaried officers of Dover. The Board of Directors believes
that the 2005 Plan will provide these key employees with a long-range inducement
to remain with Dover and to encourage them to increase their efforts to make
Dover and its subsidiaries successful.
The 2005 Plan will be administered by the Compensation Committee. At
present, there are approximately 1,200 persons who might be considered by the
Committee for grants and awards under the 2005 Plan. This number will vary from
time to time during the existence of the 2005 Plan.
The 2005 Plan provides for stock option grants, and restricted stock and
cash incentive awards. Each of these is separately discussed below.
EQUITY INCENTIVES
A maximum aggregate of 20,000,000 shares of Common Stock will be reserved
for issuance under the 2005 Plan pursuant to grants of stock options or the
issuance of restricted shares during the 10-year term of the 2005 Plan. This is
slightly less than 10% of the Company's stock outstanding on March 1, 2004. Of
these 20,000,000 shares, only a maximum aggregate of 5% of the shares (i.e.
1,000,000 shares) may be granted as restricted shares. Grants and awards may be
made by the Compensation Committee at any time or from time to time on or after
February 1, 2005 and before January 31, 2015, provided that no incentive stock
options under Section 422 of the Code ("ISOS") may be granted after February 11,
2014. The shares that will be used
22
for purposes of the 2005 Plan may either be treasury or authorized but unissued
stock. These maximum aggregate numbers of shares are subject to adjustments
resulting from stock dividends, stock splits, recapitalizations, reorganizations
and other similar changes.
STOCK OPTIONS
Options granted under the 2005 Plan may be either options intended to
qualify as ISO's or options not intended to so qualify (i.e., non-qualified
stock options). No single recipient may be granted options for more than 600,000
shares in any year. Options will have a term not exceeding ten years and will
become exercisable after not less than three years. The exercisability of
options also may be subject to such performance or such other criteria as the
Compensation Committee may determine. The option exercise price for shares
covered by any option will be fixed by the Compensation Committee and may be
equal to or more than (but not less than) the "fair market value" of such shares
on the date the option is granted. The fair market value will be determined in
good faith by the Compensation Committee on the basis of such consideration as
the Compensation Committee deems appropriate from time to time, including the
closing price for a share of the Common Stock on the grant day on the principal
U.S. exchange on which the Common Stock regularly trades, the average of the
closing bid and asked prices on such exchange on the day of grant or the average
of the high and low sales price of a share of Common Stock on such exchange on
the date the option is granted. The purchase price for the shares upon exercise
of the option may be paid by cash or by transfer to Dover at the time the option
is exercised of shares of Dover's Common Stock owned by the option holder. The
value per share of the shares so transferred to Dover to be credited toward the
purchase price will be the market value on the date the option is exercised.
Generally, stock options are not transferable, except for non-qualified
options which may be transferred to members of the holder's immediate family (or
a trust for the benefit of one or more of such family members), except that such
transferred option cannot be further transferred by the transferee during the
transferee's lifetime. In the event of death or permanent disability, all
options held by the option holder at such time shall become immediately
exercisable and the option holder or his or her estate will have five years (or,
if shorter, until the end of the option term) to exercise such options. In the
event of retirement on or after age 65 (or at an earlier age if approved by the
Committee), the option holder has five years (or, if shorter, until the end of
the options term) to exercise options which are or may become exercisable within
five years of such retirement. Where the option holder voluntarily resigns or is
involuntarily terminated, the holder has three months to exercise options then
exercisable, except where the holder is terminated for cause, in which event the
options terminate immediately with such termination of employment. Where there
is a "change of control" as defined generally above on page 15, all options will
become immediately exercisable.
RESTRICTED STOCK
Restricted stock may be awarded to employees as determined by the
Compensation Committee subject to the aggregate maximum of 5% of the 2005 Plan's
shares (i.e. 1,000,000 shares) described above that may be granted during the
10-year term of the 2005 Plan. The Compensation Committee will also determine
the vesting period, of not less than one year or more than five years, with
respect to a restricted stock award and whether other restrictions, including
any performance criteria, will be applicable with respect to the restricted
stock award. The Compensation Committee also will determine whether a holder of
restricted stock will be entitled to exercise voting rights with respect to such
restricted stock and whether dividends payable with respect to restricted stock
will be distributed in cash to the holder of such stock when paid or at a later
time or will be reinvested in additional shares of restricted stock for the
account of the holder of such restricted stock.
Generally, shares of restricted stock are not transferable, and may not be
sold, assigned, transferred, pledged or otherwise encumbered, except as
otherwise provided in the applicable award agreement. In the event of the death,
permanent disability, termination of employment of the holder of restricted
stock other than for retirement or cause, or other special circumstances, as
determined by the Compensation Committee, any purely temporal restrictions
remaining with respect to restricted stock will lapse and, if any performance
objectives are applicable, the shares of restricted stock shall continue to vest
as if the holder's employment had
23
not terminated until the prescribed time for determining attainment of
performance objectives has passed and the appropriate determination has been
made. In the event of retirement on or after age 65 (or at an earlier age if
approved by the Compensation Committee), the holder of the restricted stock may
be allowed to continue to vest in such stock as if his or her employment had not
terminated until such time as any purely temporal restrictions have lapsed and,
if any performance objectives are applicable, the prescribed time for
determining attainment of performance objectives has passed and the appropriate
determination has been made. Where the holder of restricted stock is voluntarily
or involuntarily terminated for any other reason during the restricted period,
all unvested shares of restricted stock will be forfeited. Where there is a
"change of control" as defined generally above on page 15, all remaining
restrictions on restricted stock will lapse and be deemed satisfied. The
Compensation Committee at any time may cancel any outstanding restricted stock
award in consideration of a cash payment or an alternative award of equivalent
value to the cancelled award.
Because all awards of stock options and restricted stock that are made
under the 2005 Plan will be made after the February 1, 2005 effective date of
the 2005 Plan, it is not possible to determine at this time the awards which may
be granted under the 2005 Plan.
CASH INCENTIVES
Under the 2005 Plan, the Compensation Committee may grant a participant the
opportunity to earn a discretionary cash incentive payment conditional upon the
satisfaction, over a performance period of not less than three fiscal years, of
certain objective performance criteria designed to reward long-term growth and
return on investment. Performance criteria with respect to each performance
period are pre-established by the Compensation Committee and are based on one or
more of the following factors, as they apply to Dover as a whole, to an
independent subsidiary or to an operating company: earnings per share, operating
earnings, return on equity, and return on investment. A cash incentive payment
is made only upon certification by the Compensation Committee that the
applicable performance criteria has been satisfied.
Since no awards can be made under the 2005 Plan until after January 31,
2005, it is not known what maximum amounts may be determined by the Compensation
Committee to be paid out as cash incentives in future years, except that no
participant may receive an annual cash incentive payment greater than
$2,000,000.
The Compensation Committee has the discretion to adjust the amount of cash
incentives payable under the 2005 Plan upon the satisfaction of performance
criteria to take into account the effect of any unusual, non-recurring
circumstance. However, the Compensation Committee has the discretion to increase
the amount payable to take into account any unusual, non-recurring circumstance
only if such discretion would not adversely affect the compensation's status as
"qualified performance-based compensation" for purposes of Section 162(m) of the
Code.
In the event of a participant's normal retirement on or after age 65 (or at
an earlier retirement date approved by the Compensation Committee) and before
one or more cash incentive payments may be made, the participant will receive
the full cash incentive payment as if he or she had not retired and had remained
an active employee throughout the relevant performance period. In the event of a
participant's death, permanent disability, or approved termination of employment
before the date of payment of an award, or in the event a participant otherwise
ceases to be an employee (other than for cause) after the performance period has
begun, on the payment date the participant will receive a prorated payment based
on the number of months in the performance period during which he or she was
employed, provided that any applicable performance criteria are satisfied. The
termination of a participant's employment under any other circumstances will
cancel his or her right to receive a cash incentive payment.
FEDERAL INCOME TAX CONSEQUENCES
The grant of a stock option will not result in income tax consequences at
the time of grant for the optionee or Dover. The grantee will have no taxable
income upon exercising an ISO, although the alternative minimum tax may apply,
and Dover will receive no deduction when an ISO is exercised. Upon exercising a
non-qualified stock option, the grantee will recognize ordinary income in the
amount by which the fair market
24
value exceeds the option price and Dover will be entitled to a deduction against
its taxable income for the same amount. The treatment to a grantee of a
disposition of shares acquired through the exercise of an option is dependent
upon the length of time the shares have been held and on whether such shares
were acquired by exercising an ISO or a non-qualified stock option. Generally,
there will be no tax consequence to Dover in connection with the disposition of
shares acquired under an option except that Dover may be entitled to a deduction
in the case of a disposition of shares acquired upon exercise of an ISO before
the applicable ISO holding periods have been satisfied. In the event a grantee's
employment terminates by reason of retirement or permanent disability, any ISOs
held by the grantee will generally be treated as non-qualified stock options if
exercised more than three months (one year in the case of disability) following
such termination of employment.
The award of shares of restricted stock generally will not result in income
tax consequences to the participant or Dover at the time of the award so long as
such shares are not transferable and are subject to a substantial risk of
forfeiture. Dividends paid with respect to restricted stock prior to the lapse
of restrictions applicable to such stock will be taxable as compensation to the
participant if such dividends are payable in cash to the participant or the
participant otherwise has the right to receive such dividends. Generally, a
participant will recognize ordinary income at the first time restricted stock
becomes transferable or is no longer subject to a substantial risk of
forfeiture, in an amount equal to the fair market value of the stock on the date
the restrictions lapse. A participant, however, may elect within 30 days of the
date that restricted stock is transferred to recognize ordinary income upon the
date the restricted stock was awarded based on the fair market value of the
stock subject to the award on that date. If the participant makes that election,
Dover will be entitled to an income tax deduction in the taxable year in which
the participant recognizes ordinary income with respect to the restricted stock.
In addition, dividends paid with respect to such restricted stock will be
treated as dividend income, rather than compensation, the participant will not
recognize additional taxable income when the restrictions applicable to his or
her restricted stock award lapse and the dividends paid during the restriction
period will not be deductible by Dover.
The initial grant of a participation in the cash incentive portion of the
2005 Plan, consisting of contingent future rights to cash after the completion
of the performance measurement period, will not result in taxable income to the
individual at the time of the initial grant. At the time Dover pays a cash
award, the amount of the cash will constitute compensation taxable to the
individual as ordinary income, and Dover will be entitled to a deduction in
computing its Federal income taxes for the year taxable to the individual.
OTHER CONSIDERATIONS
The Board may amend or terminate the 2005 Plan as it deems advisable,
except that stockholder approval is required for any amendment that would
increase the maximum number of shares covered by the Plan, change the class of
employees eligible to receive options, restricted stock awards or cash
performance awards, reduce the exercise price of any option price below its fair
market value at the time of grant, extend to more than 10 years the period from
the date of option grant to the date of exercise, or make any other amendment or
modification to the 2005 Plan which requires shareholder approval pursuant to
any applicable law or regulation or rule of the principal U.S. exchange on which
Dover's common stock is traded.
Each participant in the 2005 Plan, as a condition to and upon acceptance of
a grant or award, will be deemed to agree that in the event that any person
initiates a tender or exchange offer, circulates a proxy to stockholders or
takes other steps to effect a change of control, the participant will not
voluntarily terminate his or her employment with Dover or a subsidiary of Dover,
and, unless terminated by Dover or such subsidiary, will continue to render
services to Dover or such subsidiary until efforts to effect a change of control
have been abandoned, terminated or successful.
In the event of a "change of control", the following shall occur: (i) any
outstanding stock options not already exercisable will become immediately
exercisable; (ii) remaining restrictions with respect to any restricted stock
awards will lapse and such stock will immediately vest; and (iii) outstanding
cash performance awards will immediately vest, all performance measurement
periods will terminate on the last day of the month prior to the month in which
the change in control occurs and participants will be entitled to a cash
25
payment on a prorated basis, based on the performance award and the number of
months elapsed compared to the number of months in the award period.
The Committee may approve treating a participant who takes early retirement
as if the participant had retired at or after age 65 or may approve treating a
participant who terminates employment (other than for retirement) as having an
"approved termination", provided that any such participant will be deemed to
have expressly agreed not to compete with Dover or any Dover subsidiary at which
the participant was employed at any time in the three years immediately prior to
termination of employment. The non-compete provision covers the geographic area
in which Dover or the subsidiary actively carried on business at the end of the
participant's employment and is effective for the period during which the
employee receives enhanced benefits as a result of the Committee's approval.
This period will be (i) with respect to stock options, the additional period
allowed for the vesting and exercise of options outstanding at termination of
employment, (ii) with respect to restricted stock, the period remaining after
the participant's termination of employment until the end of the original
restriction period for such restricted stock, and (iii) with respect to cash
performance awards, the period until the payment date following the end of the
last applicable performance period. If the participant fails to comply with the
non-compete provision, the Committee's approval will be automatically rescinded
and the participant will forfeit the enhanced benefits received as a result of
such approval and will return to Dover the economic value of any such benefits
already received, as determined by the Committee.
The Financial Accounting Standards Board has announced that it will require
public companies to begin disclosing as an accounting expense on their financial
statements all equity-based compensation arrangements, including stock option
awards, effective for fiscal years beginning after December 15, 2004, i.e. 2005
financial statements for calendar year companies such as Dover. The financial
disclosure standard is expected to be released in late 2004. Accordingly, all
employee stock option awards granted or modified by Dover on and after January
1, 2005 will be accounted for as an expense on the Company's 2005 financial
statements as necessary to comply with the accounting standards.
RECOMMENDATION
The Board of Directors recommends approval of the 2005 Plan by the
stockholders. The proxies will vote for or against the 2005 Plan as specified by
the stockholder in his or her Proxy but, unless otherwise instructed, will be
voted to ratify and approve the 2005 Plan. To be effective, the 2005 Plan must
be approved by a majority of the total number of outstanding shares of stock
present in person or by proxy and entitled to vote at the meeting.
MISCELLANEOUS
OTHER MATTERS
Management does not know of any other business to be taken up at the
Meeting. If, however, any other business properly comes before the Meeting or
any adjournments thereof, the persons named as proxies will vote the shares
covered by a proxy in accordance with their best judgment on such matters.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's Directors and certain of its officers file reports of ownership and
changes of ownership of the Company's common stock with the SEC and the NYSE.
Based solely on copies of such reports provided to the Company, the Company
believes that all Directors and officers filed on a timely basis all such
reports required of them with respect to stock ownership and changes in
ownership during 2003 except that Mr. Robert A. Tyre was late reporting the
inheritance by his wife of shares of common stock in 2002 and Ms. Kristiane C.
Graham was late reporting two sales of shares held directly by her and one sale
of shares held by a trust of which she is a co-trustee.
26
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
In order for stockholder proposals to be included in Dover's proxy
statement for the 2005 Annual Meeting, they must be received by Dover at its
principal executive offices, 280 Park Avenue, New York, NY 10017 by November 11,
2004. All other stockholder proposals, including nominations for Directors, must
be received by Dover not less than 60 days or more than 90 days prior to such
Meeting, which is tentatively scheduled for April 19, 2005.
Dated: March 10, 2004
By authority of the Board of
Directors,
JOSEPH W. SCHMIDT
Secretary
27
EXHIBIT A
CHARTER
OF THE
AUDIT COMMITTEE
OF
DOVER CORPORATION
The Board of Directors of Dover Corporation (the "COMPANY") has adopted and
approved this Charter, setting forth the purpose, responsibilities, authority
and membership requirements of its Audit Committee.
1. PURPOSE
The primary purpose of the Audit Committee (the "COMMITTEE") is to assist
the Board of Directors (the "BOARD") in overseeing (a) the quality and integrity
of the financial statements and other financial information provided by the
Company to the stockholders of the Company, any governmental or regulatory body,
the public or other users thereof, (b) the Company's compliance with legal and
regulatory requirements, (c) the qualifications, independence and performance of
the Company's independent auditors, and (d) the performance of the Company's
internal audit function.
2. MEMBERSHIP
The Committee shall be comprised of not less than three members of the
Board. Each member of the Committee shall satisfy the "independence"
requirements of (i) Section 10A of the Securities Exchange Act of 1934 (the
"EXCHANGE ACT"), (ii) the rules of the Securities and Exchange Commission (the
"SEC") adopted pursuant to such Section 10A, (iii) The New York Stock Exchange,
Inc. (the "NYSE"), and (iv) any other applicable regulatory requirements. Each
member of the Committee must meet the financial literacy requirements of the
rules of the NYSE, and at least one member of the Committee shall qualify as an
"audit committee financial expert" in accordance with the rules of the SEC.
The members and the Chair of the Committee shall be nominated by the
Governance and Nominating Committee of the Board and shall be appointed by the
Board. The members and the Chair of the Committee shall serve at the pleasure of
the Board.
3. RESPONSIBILITIES
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function.
A. RESPONSIBILITIES RELATING TO FINANCIAL REPORTS
1. Scope of Audit
The Committee shall review annually with management and the independent
auditors the scope and general extent of the independent auditors' examination
prior to the commencement of the annual audit.
2. Annual Financial Statements
The Committee shall review with management and the independent auditors the
audited financial statements to be included in the Company's Annual Report to
Stockholders and Annual Report on Form 10-K and the Company's disclosure under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
3. Quarterly Financial Statements
The Committee shall review with management and the independent auditors,
prior to the filing of each Quarterly Report on Form 10-Q, the Company's interim
financial results to be included in such quarterly
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reports and the Company's disclosure under "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
4. Accounting Principles
From time to time, the Committee shall review and discuss, with management
and/or the independent auditors, (a) significant financial reporting issues and
judgments made in connection with the preparation of the Company's financial
statements; (b) major issues regarding accounting principles and financial
statement presentation, including major changes to the Company's selection or
application of accounting principles; and (c) the effect on the Company's
financial statements of significant regulatory and accounting initiatives and
any material off-balance sheet transactions, arrangements, obligations
(including contingent obligations) and other relationships of the Company with
unconsolidated entities.
B. RESPONSIBILITIES RELATING TO INDEPENDENT AUDITORS
1. Discussions with Auditors on Independence
The Committee shall, at least annually, obtain and review a written report
from the independent auditors describing all relationships between the
independent auditors and the Company; discuss with the independent auditors any
such disclosed relationships and their impact on the independent auditors'
objectivity and independence; and consider whether the provision of non-audit
services by the independent auditors is compatible with maintaining the
independent auditors' independence.
2. Report on Auditor Qualifications
The Committee shall, at least annually, obtain and review a written report
from the independent auditors describing: (a) the auditing firm's internal
quality control procedures, and (b) any material issues raised by the most
recent internal quality-control review, or peer review, of the independent
auditors, or by any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting any audit carried out
by the independent auditors, and any steps taken to deal with any such issues.
3. Other Auditor Reports
The Committee shall review any reports provided by the independent auditors
to the Committee as required under the Exchange Act with regard to (a) critical
accounting policies and practices used by the Company; (b) alternative
treatments of financial information within GAAP for policies and practices
related to material items that have been discussed with management (including
ramifications of the use of such alternative disclosures and treatments, and the
treatment preferred by the independent auditors); and (c) other material written
communications between the independent auditors and management, such as any
"management" or "internal control" letter, or schedule of unadjusted
differences.
4. Audit Issues
The Committee shall regularly review with the independent auditors and
management any problems or difficulties the auditors may have encountered in the
course of their audit work, and management's response thereto, including any
restrictions on the scope of activities or access to requested information, and
any significant disagreements with management.
5. Hiring Employees of Auditors
The Committee shall establish policies for hiring current or former
partners, principals, shareholders or employees of the independent auditors in
accordance with applicable law.
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C. RESPONSIBILITIES RELATING TO INTERNAL AUDIT FUNCTION, INTERNAL CONTROLS AND
RISK MANAGEMENT
1. Internal Audit Function
The Committee shall have principal responsibility to assist with the
Board's oversight of the Company's internal audit function, including review of
the performance of the internal audit function in providing management and the
Committee with ongoing assessments of the Company's risk management processes
and system of internal controls.
2. Internal Controls; Executive Sessions
The Committee shall meet periodically with management, the person(s)
primarily responsible for the internal audit function and the independent
auditors in separate executive sessions to discuss any major issues as to the
quality and adequacy of the Company's internal controls, and any other matters
that the Committee or any of these groups believes should be discussed
privately.
3. Risk Assessment and Management
The Committee shall periodically discuss policies and guidelines with
respect to risk assessment and risk management, the Company's major financial
risk exposures and the steps management has taken to monitor and control such
exposures.
D. OTHER ACTIVITIES
1. Proxy Statement Report
With the assistance of counsel, the Committee shall prepare the report of
the Committee required by the rules of the SEC to be included in the Company's
annual proxy statement.
2. Earnings Releases; Guidance to Analysts
The Committee shall, from time to time, discuss and review generally
earnings press releases (with particular attention to any use of "pro forma" or
"adjusted" non-GAAP information,) as well as financial information and earnings
guidance, if any, provided to analysts and rating agencies.
3. Code of Ethics
The Committee shall develop and recommend to the Board a Code of Ethics for
the Chief Executive Officer and Senior Financial Officers. The Committee shall
review this code annually, or more frequently if appropriate, and recommend to
the Board any changes deemed appropriate.
4. Financial Expertise
The Committee shall make appropriate determinations and recommendations to
the Board regarding the financial literacy and expertise of the members of the
Committee.
5. Legal Matters
The Committee shall review periodically with the Company's General Counsel
legal matters that may have a material impact on the financial statements, the
Company's compliance policies and any material reports or inquiries received
from regulators or governmental agencies.
6. Complaint Procedures
The Committee shall establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
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7. Review of Charter and Committee Performance
The Committee shall review and assess the adequacy of this Charter and the
Committee's performance on an annual basis.
8. Other Activities
The Committee may perform any other activities consistent with this
Charter, the Company's by-laws and governing laws that the Committee or the
Board deems necessary or appropriate.
4. AUTHORITY AND RESOURCES
A. Access
The Committee shall have full and unrestricted access to all books,
records, facilities and personnel of the Company as required or appropriate in
the Committee's sole discretion to properly discharge its responsibilities. The
Committee is empowered to investigate any matter relating to its
responsibilities which is brought to its attention.
B. Authority Concerning Auditors
The Committee shall have the sole authority to, and shall, directly
appoint, retain, set the terms of engagement of, evaluate, terminate, oversee
and cause the Company to compensate the Company's independent auditors for the
purpose of preparing or issuing an audit report or performing other audit,
audit-related or attest services for the Company (including resolution of
disagreements between management and the independent auditors regarding
financial reporting). The independent auditors shall report directly to the
Committee.
C. Pre-Approval of Non-Audit Services
The Committee shall have sole authority to pre-approve all engagements for
non-audit services permitted under the Exchange Act to be performed for the
Company by the independent auditors. The Committee may pre-approve non-audit and
audit-related services pursuant to pre-approval policies and procedures adopted
by the Committee.
D. Advisors
The Committee has the authority to retain independent legal, accounting and
other advisors to advise the Committee as the Committee shall deem appropriate
in the discharge of its responsibilities.
E. Funding
The Committee has the authority to determine the appropriate amount of, and
require the Company to pay, compensation to the independent auditors for
services rendered to the Company, compensation to any independent legal,
accounting and other advisors retained to advise the Committee, and any
administration expenses that are necessary or appropriate in the Committee's
sole discretion in the carrying out of the Committee's duties.
5. LIMITATIONS OF COMMITTEE'S ROLE
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the independent auditors are responsible for auditing those
financial statements. The Company's financial management, as well as the
Company's independent auditors, have more time, knowledge and detailed
information about the Company than do Committee members. Consequently, in
carrying out its oversight responsibilities, the Committee is not providing any
expert or special assurance as to the Company's financial statements or any
professional certification as to the independent auditors' work.
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In carrying out its responsibilities, the Committee and its policies and
procedures should remain flexible, in order to best react to changing conditions
and circumstances and, accordingly, the Committee may diverge from the forgoing
functions as appropriate given the circumstances.
6. DELEGATION
The Committee may, in its discretion, form and delegate all or a portion of
its authority and responsibilities to subcommittees (which may consist of any
one or more members, including the Chair) of the Committee when appropriate, as
permitted by the Exchange Act, the rules of the SEC and NYSE and other
applicable law, including the authority to grant pre-approvals of engagements
related to audit, audit-related and non-audit services permitted under the
Exchange Act, provided that the decisions of any such subcommittee to grant such
pre-approvals shall be presented to the Committee and subject to the disclosure
provisions of the Exchange Act.
7. MEETINGS
The Committee shall meet at least four times per year on a quarterly basis,
or more frequently as circumstances require. The Committee shall report
periodically to the Board at regularly scheduled Board meetings.
[As amended and approved by the Board of Directors on February 12, 2004.]
A-5
EXHIBIT B
DOVER CORPORATION
2005 EQUITY AND CASH INCENTIVE PLAN
A. PURPOSE AND SCOPE OF THE PLAN
1. PURPOSE. The 2005 Equity and Cash Incentive Plan (the "PLAN") is
intended to promote the long-term success of Dover Corporation by providing
salaried officers and other key employees of Dover Corporation and its
subsidiaries, on whom major responsibility for the present and future success of
Dover Corporation rests, with long-range and medium-range inducements to remain
with the organization and to encourage them to increase their efforts to make
Dover Corporation successful. The term "CORPORATION" shall mean Dover
Corporation and any present or future corporation which is or would be a
"subsidiary corporation" of Dover Corporation as defined in Section 424 of the
Internal Revenue Code of 1986, as amended (the "CODE"), unless the context
requires otherwise.
2. SUCCESSOR PLAN. The Plan is the successor to the 1995 Incentive Stock
Option Plan and 1995 Cash Performance Program (the "PREDECESSOR PLAN"). No
further grants of options, restricted stock or cash performance awards may be
made under the Predecessor Plan after the Predecessor Plan expires on January
30, 2005. Options, restricted stock and performance awards under the Predecessor
Plan shall be administered pursuant to the provisions of the Predecessor Plan.
3. ADMINISTRATION. The Plan shall be administered and interpreted by the
Compensation Committee or such other Committee of the Board of Directors as the
Board may designate if there is no Compensation Committee (the "COMMITTEE"),
consisting of not less than three (3) persons appointed by the Board of
Directors of Dover Corporation from among its members. A person may serve as a
Committee member provided he or she shall comply in all respects with any
qualifications required by law, including specifically being a "non-employee
director" for purposes of the rules promulgated under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), and an "outside director" for
purposes of Section 162(m) of the Code, and satisfying any other independence
requirement under applicable law and regulations. The Committee will have sole
and complete authority to administer all aspects of the Plan, including but not
limited to: (a) determining the individuals eligible to receive options,
restricted stock and/or cash performance awards under the Plan; (b) granting
options, restricted stock and cash performance awards; (c) determining the
number of shares to be subject to options and the amount of restricted stock and
cash performance awards to be granted to any such eligible individuals at any
time or from time to time; (d) determining the terms and conditions under which
option grants, restricted stock awards and cash performance awards will be made;
and (e) determining whether objectives, conditions and performance criteria for
cash performance awards and, if applicable, restricted stock awards have been
met. The Committee may, subject to the provisions of the Plan, from time to time
establish such rules and regulations as it deems appropriate for the proper
administration of the Plan. The Committee's decisions shall be final, conclusive
and binding with respect to the interpretation and administration of the Plan
and any grants or awards made thereunder.
4. ELIGIBILITY. Option grants, restricted stock awards and cash
performance awards may be made to any employee of the Corporation who is a
salaried officer or other key employee, including salaried officers who are also
members of the Board of Directors (hereinafter sometimes referred to as
"PARTICIPANTS"). The Committee shall select the participants eligible and
determine the terms of the grants and awards to each.
5. SHARES AVAILABLE FOR GRANT. An aggregate maximum of 20,000,000 shares
of common stock of Dover Corporation (the "COMMON STOCK") will be reserved for
issuance upon exercise of options to purchase Common Stock granted under the
Plan and for awards of restricted stock. This maximum number is subject to
appropriate adjustment resulting from future stock splits, stock dividends,
recapitalizations, reorganizations and other similar changes to be computed in
the same manner as that provided for in Paragraph 14 below. If any option or
award of restricted stock granted under the Plan expires, terminates, or is
forfeited or canceled
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for any reason, the number of unpurchased, forfeited or cancelled shares under
such option or award will again be available under the Plan.
B. STOCK OPTION AWARDS
6. STOCK OPTIONS. Options granted under the terms of the Plan shall be
designated as either "non-qualified" stock options or "incentive" stock options
("ISOs") within the meaning of Section 422 of the Code, and shall contain such
terms and conditions as the Committee may from time to time determine, subject
to the following limitations:
(a) EXERCISE PRICE. The price at which shares of Common Stock may be
purchased upon exercise of an option shall be fixed by the Committee and
may be equal to or more than (but not less than) the fair market value (as
defined below) of a share of the Common Stock as of the date the option is
granted.
(b) FAIR MARKET VALUE. For purposes of the Plan, the fair market
value of a share of Common Stock on the date the option is granted shall be
determined in good faith by the Committee on the basis of such
considerations as the Committee deems appropriate from time to time,
including, but not limited to, such factors as the closing price for a
share of Common Stock on such day (or, if such day is not a trading day, on
the next trading day) on the principal United States exchange on which the
Common Stock then regularly trades (the "EXCHANGE"), the average of the
closing bid and asked prices for a share of Common Stock on the Exchange on
the date the option is granted by the Committee or the average of the high
and low sales price of a share of Common Stock on the Exchange on the date
the option is granted by the Committee. The Committee shall be authorized,
in its discretion, to round the fair market value of a share of Common
Stock to the nearest whole number or quarterly fraction thereof.
(c) OPTION TERM. The term of each option will be for such period as
the Committee shall determine as set forth in the stock option agreement,
but in no event shall the term of an option be greater than 10 years from
the date the option was granted.
(d) RIGHTS OF OPTION HOLDER. A recipient of stock options shall have
no rights as a stockholder with respect to any shares issuable or
transferable upon exercise thereof until the date of issuance of a stock
certificate for such shares. Except as specifically set forth in Paragraph
14 below, no adjustment shall be made for dividends or other distributions
of cash or other property on or with respect to shares of stock covered by
these options paid or payable to holders of record prior to such issuance.
(e) LIMITS ON INDIVIDUALS. Options on a maximum number of 600,000
shares of common stock may be granted each year to a single participant.
The aggregate fair market value (determined on the date of grant) of Common
Stock with respect to which a participant is granted ISOs (including ISOs
granted under the Predecessor Plan) which first become exercisable during
any given calendar year shall not exceed $100,000.
7. EXERCISE OF OPTION. An option granted under the Plan shall be
exercisable during the term of the option subject to such terms and conditions
as the Committee shall determine and are specified in the stock option
agreement, not inconsistent with the terms of the Plan; provided, however, that
except as set forth in Paragraphs 11, 14 and 35, no option may be exercised
prior to the third (3rd) anniversary of such option grant and any partial
exercise of an option shall be for not less than 500 shares. In addition, the
Committee may condition the exercise of an option upon the attainment by the
Corporation or any subsidiary or division or by the participant of any
performance objectives set by the Committee. To exercise an option, the option
holder must give written notice to the Corporation of the number of shares to be
purchased accompanied by payment of the full purchase price of such shares as
set forth in Paragraph 8. The date of actual receipt by the Corporation of such
notice and payment shall be deemed the date of exercise of the option with
respect to the shares being purchased and the stock certificates therefor shall
be issued as soon as practicable thereafter. The shares to be issued upon
exercise of an option will be either treasury or authorized and unissued stock,
in the sole discretion of the Corporation.
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8. PAYMENT OF EXERCISE PRICE. Payment of the option exercise price must
be made in full at the time of exercise (a) by check made payable to the
Corporation, (b) by transfer to the Corporation of shares of Common Stock owned
by the participant, or (c) with a combination of the foregoing. If payment is
made by the transfer of shares, the shares of Common Stock to be transferred to
the Corporation must have been owned by the option holder for more than six (6)
months on the date of transfer (or such other period as may be required to
prevent the Corporation from incurring an adverse accounting charge), the value
per share of the shares so transferred to the Corporation to be credited toward
the purchase price will be the average between the high and the low sales price
per share of Common Stock on the Exchange on the date the option is exercised
or, if no sales have occurred on that date, such value will be the closing price
per share on the Exchange on the next trading day following the exercise of the
option. The shares transferred to the Corporation will be added to the
Corporation's treasury shares or canceled and become authorized and unissued
shares.
9. OPTION TRANSFERS. The options granted under the Plan may not be sold,
transferred, hypothecated, pledged or otherwise disposed of by any of the
holders except by will or by the laws of descent and distribution, or as
otherwise provided herein. The option of any person to acquire stock and all
rights thereunder shall terminate immediately if the holder attempts to or does
sell, assign, transfer, pledge, hypothecate or otherwise dispose of the option
or any rights thereunder to any other person except as permitted herein.
Notwithstanding the foregoing, a participant may transfer any non-qualified
stock option granted under this Plan to members of the holder's immediate family
(defined as a spouse, children and/or grandchildren), or to one or more trusts
for the benefit of such family members if the instrument evidencing such option
expressly so provides and the option holder does not receive any consideration
for the transfer; provided that any such transferred option shall continue to be
subject to the same terms and conditions that were applicable to such option
immediately prior to its transfer (except that such transferred option shall not
be further transferred by the transferee during the transferee's lifetime).
10. REGISTRATION. The Corporation will stamp stock certificates delivered
to the stockholder with an appropriate legend if the shares are not registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or are
otherwise not free to be transferred by the holder and will issue appropriate
stop-order instructions to the transfer agent for the Common Stock, if and to
the extent such stamping or instructions may then be required by the Securities
Act or by any rule or regulation of the Securities and Exchange Commission
issued pursuant to the Securities Act.
11. EFFECT OF DEATH, OR PERMANENT DISABILITY OR RETIREMENT. If an option
holder dies or becomes permanently disabled while employed by the Corporation,
all options held by such option holder shall become immediately exercisable and
the option holder or such holder's estate or the legatees or distributees of
such holder's estate or of the options, as the case may be, shall have the
right, on or before the earlier of the respective expiration date of an option
or sixty (60) months following the date of such death or permanent disability,
to exercise any or all options held by such option holder as of such date of
death or permanent disability. If an option holder retires at or after age 65
(or at an earlier retirement date approved by the Committee and subject to the
provisions of Paragraph 36 below), the option holder shall have the right, on or
before the earlier of the expiration date of the option or sixty (60) months
following the date of such retirement, to purchase shares under any options
which at retirement are, or within sixty (60) months following retirement would
become, exercisable.
12. VOLUNTARY OR INVOLUNTARY TERMINATION. If any option holder's
employment with the Corporation is voluntarily or involuntarily terminated for
any reason, other than for reasons specified above or for "cause" (as defined
below), the option holder shall have the right to purchase under the option the
number of shares, if any, which such holder was entitled to purchase at the time
of such termination at any time on or before the earlier of three (3) months
following the effective date of such termination of employment or the expiration
date of the option.
13. TERMINATION FOR CAUSE. If an option holder's employment with the
Corporation is terminated for cause (defined as (a) a felony conviction of the
option holder; (b) the commission by the option holder of an act of fraud or
embezzlement against the Corporation; or (c) the option holder's willful
misconduct or gross
B-3
negligence materially detrimental to the Corporation), the option shall be
canceled and the holder shall have no further rights to exercise any such option
and all of such holder's rights thereunder shall terminate as of the effective
date of termination of employment.
14. EFFECT OF STOCK DIVIDENDS, MERGER, RECAPITALIZATION OR REORGANIZATION
OR SIMILAR EVENTS. If any Common Stock dividend is paid by the Corporation, if
any non-cash distribution is made by the Corporation as respects its Common
Stock, if the shares of Common Stock are split or reclassified, if the
Corporation should be reorganized or consolidated or merged with or into another
corporation, or if all or substantially all the assets of the Corporation are
transferred to any other corporation in a reorganization, each option holder
shall be entitled, upon exercise of such holder's option, to receive for the
same aggregate exercise price the same number and kind of shares of stock (to
the nearest whole number) as he or she would have been entitled to receive upon
the happening of such stock dividend, distribution, stock split,
reclassification, reorganization, consolidation, merger or transfer, if he or
she had been, immediately prior to such event, the holder of such shares.
Outstanding options shall be appropriately amended as to price and other terms
in a manner consistent with the aforementioned adjustment to the shares of
Common Stock subject to the Plan. The Board of Directors shall have the power,
in the event of any disposition of substantially all of the assets of the
Corporation, its dissolution, any merger or consolidation, or the merger or
consolidation of any other corporation into the Corporation, to amend all
outstanding options to permit their exercise prior to the effectiveness of any
such transaction and to terminate such options as of such effectiveness. If the
Board of Directors shall exercise such power, all options outstanding shall be
deemed to have been amended to permit the exercise thereof in whole or in part
by the holder at any time or from time to time as determined by the Board of
Directors prior to the effectiveness of such transaction and such options shall
be deemed to terminate upon such effectiveness.
15. CHANGE OF CONTROL. Options and grantees of options shall be subject
to the terms of Paragraph 35 below related to a change of control of the
Corporation.
C. RESTRICTED STOCK AWARDS
16. GRANT. Subject to the provisions and as part of the Plan, the
Committee shall have the discretion and authority to award to persons eligible
to participate in the Plan shares of Common Stock which are subject to specified
forfeiture restrictions during a specified restriction period and subject to the
other applicable terms of the Plan ("RESTRICTED STOCK"). Subject to the
provisions of the Plan, awards of restricted stock shall contain such terms and
conditions as the Committee may determine at the time of award; provided,
however, in no event shall the aggregate number of shares of restricted stock
awarded under the Plan exceed five percent (5%) of the total number of shares
reserved for issuance under the Plan in accordance with Paragraph 5 hereof.
17. TERM OF RESTRICTION PERIOD. The Committee may adopt such vesting
schedules, not less than one (1) year and not longer than five (5) years from
the date of the award, as it may deem appropriate with respect to awards of
restricted stock and may condition the lapse of the restrictions applicable to
an award upon the attainment by the Corporation or any subsidiary or division or
by the participant of any performance objectives set by the Committee.
18. ISSUANCE OF SHARES. Certificates issued for restricted stock shall be
registered in the name of the participant and deposited by the participant with
the Secretary of the Corporation, together with a stock power endorsed in blank.
Upon lapse of the applicable restriction period and/or attainment of any
applicable performance objectives and/or satisfaction of any other restrictions,
the Corporation shall deliver such certificates to the participant. In the event
that the shares of restricted stock are forfeited, such shares automatically
shall be transferred back to the Corporation. The Corporation will stamp the
stock certificates delivered to the participant with an appropriate legend if
the shares are not registered under the Securities Act, or are otherwise not
free to be transferred by the participant and will issue appropriate stop-order
instructions to the transfer agent for the Common Stock, if and to the extent
such stamping or instructions may then be required by the Securities Act or by
any rule or regulation of the Securities and Exchange Commission issued pursuant
to the Securities Act.
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19. DIVIDENDS AND VOTING RIGHTS. In the discretion of the Committee,
dividends which become payable with respect to restricted stock during the
restriction period will be reinvested in additional shares of restricted stock
for the account of the award recipient, accumulated for later distribution to
vested participants, or distributed to the award recipient as paid. An employee
who receives an award of restricted stock may also in the discretion of the
Committee be entitled, during the restriction period, to exercise voting rights
with respect to such restricted stock.
20. NONTRANSFERABILITY. Shares of restricted stock may not be sold,
assigned, transferred, pledged or otherwise encumbered and shall not be subject
to execution, attachment, garnishment or other similar legal process, except as
otherwise provided in the applicable award agreement. Upon any attempt to sell,
transfer, assign, pledge, or otherwise encumber or dispose of the restricted
stock contrary to the provisions of the award agreement or the Plan, the
restricted stock shall immediately be forfeited to the Corporation.
21. TERMINATION OF EMPLOYMENT. In the case of a participant's permanent
disability, death, termination of employment by the Corporation other than for
cause (as defined in Paragraph 13 above) or special circumstances, as determined
by the Committee, any purely temporal restrictions remaining with respect to
shares of restricted stock as of the date of such disability, death or
termination of employment shall lapse and, if any performance objectives are
applicable, the shares of restricted stock shall continue to vest as if the
participant's employment had not terminated until the prescribed time for
determining attainment of performance objectives has passed and the appropriate
determination has been made. If the participant's employment with the
Corporation is terminated as a result of the retirement of the participant at or
after age 65 (or at an earlier retirement date approved by the Committee and
subject to the provisions of Paragraph 36 below), the shares of restricted stock
shall continue to vest as if the participant's employment had not terminated
until such time as the remaining temporal restrictions lapse and, if any
performance objectives are applicable, the prescribed time for determining
attainment of performance objectives has passed and the appropriate
determination has been made. If a participant's employment with the Corporation
is voluntarily or involuntarily terminated for any other reason during the
restriction period, the shares of restricted stock shall be forfeited.
22. EFFECT OF STOCK DIVIDENDS, MERGER, RECAPITALIZATION OR REORGANIZATION
OR SIMILAR EVENTS. In the event of a stock dividend, merger, recapitalization,
reorganization or other transaction described in Paragraph 14 above, the terms
and conditions of the restricted stock awards shall be adjusted in a manner
consistent with adjustments made to options granted under the Plan.
23. CHANGE OF CONTROL. Awards of restricted stock and participants who
are awarded restricted stock shall be subject to the terms of Paragraph 35
below.
24. CANCELLATION. The Committee may at any time require the cancellation
of any award of restricted stock in consideration of a cash payment or
alternative award under the Plan equal to the fair market value of the cancelled
award of restricted stock.
D. CASH PERFORMANCE AWARDS
25. AWARDS AND PERIOD OF CONTINGENCY. The Committee may, concurrently
with, or independently of, the granting of an option under the Plan, in its sole
discretion, grant to a participant the opportunity to earn a cash performance
payment, conditional upon the satisfaction of objective performance criteria
during a performance period. The performance period shall be not less than three
(3) fiscal years of the Corporation, including the year in which the conditional
grant is made. Any performance criteria established by the Committee shall
include one or more objective formulas or standards for determining the amount
of the performance payment payable to a participant if the criteria are
satisfied. The performance criteria may be fixed by the Committee for the
Corporation as a whole or for a subsidiary or division of the Corporation,
depending on the Committee's judgment as to what is most appropriate for the
individual involved, and shall be set by the Committee before the 90th day after
the commencement of the period of services to which the performance payment
relates. Performance criteria shall be based on at least one or more of the
following factors which the Committee deems appropriate, as they apply to the
Corporation as a whole or to a subsidiary
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or a division: (a) earnings per share, (b) operating earnings, (c) return on
equity, and (d) return on investment. The performance criteria with respect to a
performance period will be the same for all persons within the same business
unit. The material terms of the performance criteria shall be subject to
stockholder approval to the extent provided in regulations promulgated under
Section 162(m) of the Code.
26. DETERMINATION OF PAYMENT AMOUNT. The aggregate maximum cash payout
for any business unit within the Corporation or the Corporation as a whole shall
not exceed a fixed percentage of the annual average earnings increase of the
relevant entity during the performance period, such percentages and dollar
amounts to be determined by the Committee annually when performance criteria are
established. In no event can an individual receive an annual payment which
exceeds $2 million. A performance payment shall be payable with respect to a
performance period only if the Committee shall have certified that the
applicable performance criteria has been satisfied. The Committee shall also
have the power to approve proportional or adjusted payments under the Plan to
address situations where participants join the Corporation, or transfer within
the Corporation, during a performance period. The Committee shall have the
discretion to decrease the amount payable upon attainment of the performance
criteria (as determined under such formula or standard) to take into account the
effect of any unusual, non-recurring circumstance, but shall have the discretion
to increase the amount payable to take into account any such effect only if such
discretion would not cause such compensation to fail to qualify as "qualified
performance-based compensation" for purposes of Section 162(m) of the Code.
27. EFFECT OF DEATH, DISABILITY OR OTHER EARLY TERMINATION OF
EMPLOYMENT. If the participant in the Plan (a) dies, (b) becomes permanently
disabled while employed by the Corporation or (c) terminates employment for any
reason (other than related to retirement covered by Paragraph 28 below) approved
by the Committee as an "approved termination", then, subject to the provisions
of Paragraph 36 below, the participant (or the participant's estate or the
legatees or distributees of the participant's estate, as the case may be) shall
be entitled to receive on the payment date the cash payment which the
participant would have earned had the participant then been an employee of the
Corporation, multiplied by a fraction, the numerator of which is the number of
months the participant was employed by the Corporation during the performance
measurement period and the denominator of which is the number of months of the
performance measurement period (treating fractional months as whole months in
each case).
28. EFFECT OF NORMAL RETIREMENT. If before the date of payment, the
participant retires on or after age 65 years (or earlier as an "approved early
retirement" approved by the Committee and subject to the provisions of Paragraph
36 below), the participant shall be entitled to receive on the payment date the
same amount of cash which the participant would have earned had such participant
then been an employee of the Corporation as of such date.
29. EFFECT OF OTHER TERMINATIONS OF EMPLOYMENT.
(a) GENERAL TERMINATION. If a participant's employment with the
Corporation is terminated for any reason, whether voluntary, involuntary, or for
cause (as defined as Paragraph 13 above), other than those described in
Paragraphs 27 or 28 above or in Paragraph 29(b) below, then his or her cash
performance awards shall be canceled and all of the participant's rights under
any award shall terminate as of the effective date of the termination of such
employment.
(b) PRE-PAYMENT TERMINATION. If, after the end of a performance
measurement period and before the date of payment or distribution of any final
award, a participant's employment is terminated, whether voluntarily or
involuntarily for any reason other than for cause (as defined in Paragraph 13
above), the participant shall be entitled to receive on the payment or
distribution date the cash payment which the participant would have earned had
the participant continued to be an employee of the Corporation as of the payment
or distribution date.
30. CHANGE OF CONTROL. The terms of any performance criteria and each
participant who is granted a cash performance award shall be subject to the
terms of Paragraph 35 below.
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E. GENERAL PROVISIONS
31. LEGAL COMPLIANCE. It is the intent of the Corporation that the Plan
comply in all respects with applicable provisions of the Exchange Act, including
Section 16 and Rule 16b-3, so that any grant of options or restricted stock to,
or other transaction by, a participant who is subject to the reporting
requirements of Section 16(a) of the Exchange Act shall not result in
short-swing profits liability under Section 16(b) (except for any transaction
exempted under alternative Exchange Act rules or intended by such participant to
be a non-exempt transaction). It is also the intent of the Corporation that any
compensation income realized in connection with options, restricted stock or any
cash performance payments made under the Plan constitute "performance-based
compensation" within the meaning of Section 162(m)(4)(C) of the Code so that any
deduction to which the Corporation is entitled in connection with such
compensation will not be subject to the limitations of Section 162(m)(1) of the
Code. Accordingly, if any provision of the Plan or any agreement relating to an
option grant, a restricted stock award or cash performance award does not comply
with the requirements of Rule 16b-3 as then applicable to any such transaction
so that such a participant would be subject to Section 16(b) liability (except
for any transaction exempted under alternative Exchange Act rules or intended by
such participant to be a non-exempt transaction), or if any provision of the
Plan or any agreement relating to an option grant, a restricted stock award or
cash performance award would limit, under Section 162(m)(1) of the Code, the
amount of compensation income to an optionee or participant that the Corporation
would otherwise be entitled to deduct, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements, or to
eliminate such deductibility limitation, and the participant shall be deemed to
have consented to such construction or amendment.
32. WITHHOLDING TAXES. The Committee shall make arrangements for the
collection of any Federal, State or local taxes of any kind required to be
withheld with respect to any transactions effected under the Plan. The
obligations of the Corporation under the Plan shall be conditional on
satisfaction of such obligations and the Corporation, to the extent permitted by
law, shall have the right to deduct any such taxes from any payment of any kind
otherwise due to or with respect to a participant.
33. EFFECT OF RECAPITALIZATION OR REORGANIZATION. The obligations of the
Corporation with respect to an option, restricted stock award or cash
performance award granted under the Plan shall be binding upon the Corporation,
its successors or assigns, including any successor or resulting company either
in liquidation or merger of the Corporation into another company owning all the
outstanding voting stock of the Corporation or in any other transaction whether
by merger, consolidation or otherwise under which such succeeding or resulting
company acquires all or substantially all the assets of the Corporation and
assumes all or substantially all its obligations, unless options are terminated
in accordance with Paragraph 14.
34. EMPLOYMENT RIGHTS AND OBLIGATIONS. Neither the granting of any
option, nor the making of a restricted stock or cash performance award under the
Plan, nor the provisions related to a change of control of the Corporation (as
defined below) or a Person (as defined below) seeking to effect a change of
control of the Corporation, shall alter or otherwise affect the rights of the
Corporation to change any and all the terms and conditions of employment of any
participant including, but not limited to, the right to terminate such
participant's employment.
35. CHANGE OF CONTROL.
(a) Each participant, upon acceptance of a grant of options, restricted
stock award or cash performance award, and as a condition to such grant or
award, shall be deemed to have agreed that, in the event any Person begins a
tender or exchange offer, circulates a proxy to shareholders, or takes other
steps seeking to effect a change of control of the Corporation (as defined
below), such participant will not voluntarily terminate his or her employment
with the Corporation or with a direct or indirect subsidiary of the Corporation,
as the case may be, and, unless terminated by the Corporation or such
subsidiary, will continue to render services to the Corporation or such
subsidiary until such Person has abandoned, terminated or succeeded in such
efforts to effect a change of control.
B-7
(b) In the event of a change of control,
(i) all options to purchase shares of common stock of the Corporation
shall immediately vest and become exercisable in accordance with the terms
of the appropriate stock option agreement;
(ii) all outstanding restrictions, including any performance
objectives, with respect to any restricted stock shall immediately expire
and be deemed to have been satisfied;
(iii) with respect to cash performance award grants:
(A) all cash performance awards outstanding shall immediately vest
and become immediately due and payable;
(B) the performance measurement period of all cash performance
awards outstanding shall terminate on the last day of the month prior to
the month in which the change of control occurs;
(C) the participant shall be entitled to a cash payment the amount
of which shall be determined in accordance with the terms and conditions
of the Plan and the appropriate cash performance award agreement, which
amount shall be multiplied by a fraction, the numerator of which is the
actual number of months in the performance measurement period (as
determined in accordance with clause (iii)(B) above) and the denominator
of which is 36 (or 48 if the performance measurement period established
at the date of grant is four (4) years or more); and
(D) the Continuing Directors (as defined in Article Fourteenth of
the Corporation's Certificate of Incorporation) shall promptly determine
whether the participant is entitled to any performance award, and any
performance award payable shall be paid to the participant promptly but
in no event more than five (5) days after a change of control;
(iv) the Continuing Directors shall have the sole and complete
authority and discretion to decide any questions concerning the
application, interpretation or scope of any of the terms and conditions of
any grant, award or participation under the Plan, and their decisions shall
be binding and conclusive upon all interested parties; and
(v) other than as set forth above, the terms and conditions of all
grants and awards shall remain unchanged.
(c) A "CHANGE OF CONTROL" shall be deemed to have taken place upon the
occurrence of any of the following events (capitalized terms are defined below):
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Corporation or its Affiliates) representing 20% or more
of either the then outstanding shares of common stock of the Corporation or
the combined voting power of the Corporation's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection with
a transaction described in clause (A) of paragraph (iii) below; or
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on April
21, 2004, constituted the Board and any new director (other than a director
whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Corporation)
whose appointment or election by the Board or nomination for election by
the Corporation's stockholders was approved or recommended by a vote of at
least two-thirds ( 2/3) of the directors in office at the time of such
approval or recommendation who either were directors on April 21, 2004 or
whose appointment, election or nomination for election was previously so
approved or recommended; or
(iii) there is consummated a merger or consolidation of the
Corporation or any direct or indirect subsidiary of the Corporation with
any other corporation, other than (A) any such merger or consolidation
after the consummation of which the voting securities of the Corporation
outstanding immediately prior to such merger or consolidation continue to
represent (either by remaining outstanding
B-8
or by being converted into voting securities of the surviving entity or any
parent thereof) at least 50% of the combined voting power of the voting
securities of the Corporation or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or (B)
any such merger or consolidation effected to implement a recapitalization
of the Corporation (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of securities of the
Corporation (not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Corporation or its
Affiliates) representing 20% or more of either the then outstanding shares
of common stock of the Corporation or the combined voting power of the
Corporation's then outstanding securities; or
(iv) the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or there is consummated an
agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets, other than a sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by stockholders of the
Corporation in substantially the same proportions as their ownership of the
Corporation immediately prior to such transaction or series of
transactions.
(d) For purposes of this Paragraph 35, the following terms shall have the
meanings indicated:
(i) "AFFILIATE" shall have the meaning set forth in Rule 12b-2 under
Section 12 of the Exchange Act.
(ii) "BENEFICIAL OWNER" shall have the meaning set forth in Rule 13d-3
under the Exchange Act, except that a Person shall not be deemed to be the
Beneficial Owner of any securities which are properly filed on a Schedule
13-G.
(iii) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(iv) "PERSON" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Corporation or any of its
Affiliates, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as
their ownership of stock of the Corporation.
36. NON-COMPETE. (a) Any approval by the Committee of a participant who
takes early retirement being accorded the same treatment as a participant
retiring at or after age 65, as contemplated in Paragraphs 11, 21 and 28, and
any designation by the Committee of a termination as an "approved termination"
under Paragraph 27(c) shall be subject to the provisions of this Paragraph 36.
Any participant who is the beneficiary of any such approval or designation by
the Committee shall be deemed to have expressly agreed not to compete with the
Corporation or any subsidiary of the Corporation at which such participant was
employed at any time in the three (3) years immediately prior to termination of
employment, as the case may be, in the geographic area in which the Corporation
or such subsidiary actively carried on business at the end of the participant's
employment there, for the period with respect to which such approval or
designation affords the participant enhanced benefits, which period shall be,
(a) with respect to stock options, the additional period allowed the participant
for the vesting and exercise of options outstanding at termination of
employment, (b) with respect to restricted stock, the period remaining after the
participant's termination of employment until the end of the original
restriction period for such restricted stock, and (c) with respect to cash
performance awards granted under the Plan, the period until the payment date
following the end of the last applicable performance period.
(b) In the event that a participant shall fail to comply with the
provisions of this Paragraph 36, the Committee's approval and/or designation, as
applicable, described above shall be automatically rescinded and the participant
shall forfeit the enhanced benefits referred to above and shall return to the
Corporation the
B-9
economic value theretofore realized by reason of such benefits as determined by
the Committee. If the provisions of this Paragraph 36, or the corresponding
provisions of a stock option, restricted stock award or cash performance award
agreement, shall be unenforceable as to any participant, the Committee may
rescind any such approval or designation with respect to such participant.
(c) If any provision of this Paragraph 36, or the corresponding provisions
of a stock option, restricted stock award or cash performance award agreement,
is determined by a court to be unenforceable because of its scope in terms of
geographic area or duration in time or otherwise, the Corporation and the
participant agree that the court making such determination is specifically
authorized to reduce the duration and/or geographical area and/or other scope of
such provision and, in its reduced form, such provision shall then be
enforceable; and in every case the remainder of this Paragraph 36, or the
corresponding provisions of a stock option, restricted stock award or cash
performance award agreement, shall not be affected thereby and shall remain
valid and enforceable, as if such affected provision were not contained herein
or therein.
37. INTERPRETATION. The Committee shall have the sole and complete
authority and discretion to decide any questions concerning the application,
interpretation or scope of any of the terms and conditions of the Plan, of any
loan, stock option, restricted stock award or cash performance award agreement
entered into pursuant to the Plan, and its decisions shall be binding and
conclusive upon all interested parties. Reference to any statute or regulation
in the Plan shall mean such statute or regulation in effect from time to time
and shall include any successor statute or regulation.
38. AMENDMENT. Except as expressly provided in the next sentence, the
Board of Directors may amend the Plan in any manner it deems necessary or
appropriate (including any of the terms, conditions or definitions contained
herein), or terminate the Plan at any time prior to January 31, 2015; provided,
however, that any such termination will not affect the validity of any then
outstanding options, restricted stock awards or cash performance awards
previously granted under the Plan, as the case may be. Without the approval of
the Corporation's stockholders, the Board of Directors cannot: (a) increase the
maximum number of shares covered by the Plan or change the class of employees
eligible to receive options or restricted stock or cash performance awards; (b)
reduce the exercise price of any option below the fair market value of the
Common Stock on the date of the option grant; (c) extend beyond 120 months from
the date of the grant the period within which an option may be exercised; or (d)
make any other amendment to the Plan that would constitute a modification,
revision or amendment requiring shareholder approval pursuant to any applicable
law or regulation or rule of the Exchange.
39. EFFECTIVE DATE AND TERMINATION DATE OF PLAN. The Plan shall become
effective on February 1, 2005, and will terminate on January 31, 2015, provided
that no ISOs shall be granted under the Plan after February 11, 2014. No
non-qualified stock options, restricted stock or cash performance awards shall
be granted after January 31, 2015.
40. FOREIGN JURISDICTIONS. The Committee may adopt, amend, and terminate
such arrangements, not inconsistent with the intent of the Plan, as it may deem
necessary or desirable to make available tax or other benefits of the laws of
foreign jurisdictions to participants who are subject to such laws.
41. GOVERNING LAW. The Plan and all grants, options, awards and payments
made hereunder shall be governed by and interpreted in accordance with the laws
of the State of New York.
B-10
PROXY DOVER CORPORATION 2004 ANNUAL MEETING PROXY Please [ ]
Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
1. Election of Directors
Nominees:
WITHHOLD
(01) D. H. Benson (02) J-P. M. Ergas FOR ALL
(03) K. C. Graham (04) R. L. Hoffman
(05) J. L. Koley (06) R. K. Lochridge [ ] [ ]
(07) T. L. Reece (08) B. G. Rethore
(09) G. L. Roubos (10) M. B. Stubbs
FOR ALL (EXCEPT NOMINEE(S) WRITTEN BELOW)
----------------------------------------------------------------
FOR AGAINST ABSTAIN
2. To consider and approve the 2005 Equity and
Cash Incentive Plan. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. To transact such other business as may
properly come before the meeting. [ ] [ ] [ ]
CONSENTING TO RECEIVE ALL FUTURE ANNUAL MEETING MATERIALS AND SHAREHOLDER
COMMUNICATIONS ELECTRONICALLY IS SIMPLE AND FAST! Enroll today at
www.melloninvestor.com/ISD for secure online access to your proxy materials,
statements, tax documents and other important shareholder correspondence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
SIGNATURE SIGNATURE DATE , 2004
-------------------- -------------------- ----------
PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ABOVE. FOR JOINT ACCOUNTS, EACH
OWNER SHOULD SIGN. WHEN SIGNING AS EXECUTOR, ADMINISTRATOR, ATTORNEY, TRUSTEE OR
GUARDIAN, ETC., PLEASE GIVE YOUR FULL TITLE.
- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
HTTP://WWW.EPROXY.COM/DOV 1-800-435-6710 Mark, sign and date
Use the Internet to vote Use any touch-tone your proxy card and
your proxy. Have your OR telephone to vote OR return it in the
proxy card in hand when your proxy. Have enclosed postage-paid
you access the web site. your proxy card in envelope.
hand when you call.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
PROXY PROXY
DOVER CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING, APRIL 20, 2004.
The undersigned hereby appoints Thomas L. Reece, Robert G. Kuhbach and
Joseph W. Schmidt, or any of them, as the undersigned's proxy or proxies, with
full power of substitution, to vote all shares of Common Stock of Dover
Corporation which the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held in Wilmington, Delaware, on April 20, 2004 at 10:00
A.M., local time, and any adjournments thereof, as fully as the undersigned
could if personally present, upon the proposals set forth on the reverse side
hereof, revoking any proxy or proxies heretofore given. For participants in the
Company's Retirement Savings Plan, this proxy will govern the voting of stock
held for the account of the undersigned in the Plan.
IMPORTANT -- You have the option of voting your shares by returning the enclosed
proxy card, voting via internet or by using a toll-free telephone number. On the
reverse side of this proxy card are instructions on how to vote via the internet
or by telephone. If you vote by either of these methods your vote will be
recorded as if you mailed in your proxy card. If you vote by returning this
proxy card, you must sign and date this proxy on the reverse side.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE
REVERSE SIDE, BUT IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED ON THE REVERSE SIDE.
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
- FOLD AND DETACH HERE -
YOU CAN NOW ACCESS YOUR DOVER CORPORATION ACCOUNT ONLINE.
Access your Dover Corporation shareholder/stockholder account online via
Investor ServiceDirect(R) (ISD).
Mellon Investor Services LLC, Transfer Agent for Dover Corporation, now makes it
easy and convenient to get current information on your shareholder account.
- View account status - View payment history for dividends
- View certificate history - Make address changes
- View book-entry information - Obtain a duplicate 1099 tax form
- Establish/change your PIN
VISIT US ON THE WEB AT HTTP://WWW.MELLONINVESTOR.COM
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN 9AM-7PM
MONDAY-FRIDAY EASTERN TIME