SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by Rule
[X] Definitive Proxy Statement 14a-6(e)(2))
[ ] 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 the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[DOVER CORPORATION LOGO]
------------------------------
Notice Of Annual Meeting Of Stockholders
------------------------------
March 17, 2003
TO THE STOCKHOLDERS:
Please take notice that the Annual Meeting of Stockholders of DOVER
CORPORATION will be held at the 3rd Floor Board Room, Wilmington Trust Company,
1100 North Market Street, Rodney Square North, Wilmington, Delaware 19801, on
April 22, 2003, at 10:00 A.M., for the following purposes:
1. To elect nine directors;
2. To re-approve the Dover Corporation Executive Officer Annual Incentive
Plan and the performance goals set forth therein to satisfy certain
Internal Revenue Code requirements;
3. To ratify and approve the Amended and Restated 1996 Non-Employee
Directors' Stock Compensation Plan;
4. To consider a stockholder proposal; and
5. 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 28, 2003 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 OR VIA A TOLL-FREE TELEPHONE
NUMBER. INSTRUCTIONS FOR VOTING BY THESE TWO 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 22, 2003 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 17, 2003.
As of the close of business on February 28, 2003, the record date for
determining stockholders eligible to vote at the Meeting, Dover had outstanding
202,515,631 shares of common stock. Each share of common stock is entitled to
one vote on all matters.
DOVER WILL PROVIDE TO EACH PERSON SOLICITED HEREIN, ON THE WRITTEN REQUEST
OF ANY SUCH PERSON, A COPY OF DOVER'S 2002 ANNUAL REPORT ON FORM 10-K INCLUDING
THE FINANCIAL SCHEDULES THERETO, FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, ALL WITHOUT CHARGE (EXCEPT THAT THE COMPANY MAY CHARGE FOR ANY
EXHIBIT). A REQUEST FOR THE 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
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 nine
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, as
amended.
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 or by telephone 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 28, 2003 (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........................................ 16,800(2) *
Lewis E. Burns......................................... 515,508 *
Jean-Pierre M. Ergas................................... 23,100(3) *
Kristiane C. Graham.................................... 1,453,980(4) *
Ronald L. Hoffman...................................... 11,972 *
James L. Koley......................................... 28,909(5) *
Robert G. Kuhbach...................................... 194,183(6) *
Richard K. Lochridge................................... 8,250 *
Thomas L. Reece........................................ 1,041,646(7) *
Bernard G. Rethore..................................... 3,750 *
Gary L. Roubos......................................... 326,116(8) *
Michael B. Stubbs...................................... 238,332(9) *
Jerry W. Yochum........................................ 249,354 *
Directors and Executive Officers as a Group............ 4,827,416 2.4
Davis Selected Advisers, L.P........................... 11,251,448(10) 5.6
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
---------------
* Less than one percent.
(1) Includes shares which are (a) owned by officers in the Company's Retirement
Savings Plan, totaling 144,133 shares as of December 31, 2002 and (b)
subject to options exercisable within 60 days for the following persons:
Mr. Burns, 201,280 shares; Mr. Hoffman, 9,454 shares; Mr. Kuhbach, 154,499
shares; Mr. Reece, 768,496 shares; Mr. Yochum, 182,932 shares; and all
Directors and Executive Officers as a group, 1,771,893 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 960,216 shares held by foundations of which Ms. Graham is a
director and in which she disclaims any beneficial ownership, 88,908 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,
1,910 shares held as a custodian for a minor and 550 shares held by her
spouse.
(5) Includes 1,000 shares held by his spouse and 2,309 shares held by a
retirement plan of which Mr. Koley is the beneficiary.
(6) Includes 3,000 shares held by his spouse and 31,980 shares held jointly
with his spouse.
(7) Includes 75,410 shares held by his spouse.
(8) Includes 99,434 shares held by his spouse and 14,497 shares held by a
limited liability company as to which he disclaims any beneficial interest.
2
(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 182,632
shares held by trusts of which Mr. Stubbs is a co-trustee and various
members of his immediate family are beneficiaries. Excludes 2,453,381
shares held by trusts of which Mr. Stubbs or members of his immediate
family are beneficiaries.
(10) Davis Select Advisers, L.P. is a registered investment advisor that manages
the Davis and Selected families of mutual funds as well as separate
mid/large-cap growth/value portfolios for individuals.
EQUITY COMPENSATION PLANS
The Equity Compensation Plan Table below presents information regarding the
Company's equity compensation plans at December 31, 2002:
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------- -------------------- -------------------- -------------------------
Equity compensation plans approved
by stockholders.................. 8,832,383 $288,907,248 8,046,891
Equity compensation plans not
approved by stockholders......... 0 0 0
Total.............................. 8,832,383 $288,907,248 8,046,891
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, 2002, there were outstanding options for 312,211 shares under the
1984 Plan.
THE 1995 INCENTIVE STOCK OPTION PLAN AND CASH PERFORMANCE PROGRAM
The Company has an Incentive Stock Option Plan and Cash Performance Program
(the "PERFORMANCE PLAN"), adopted in 1995 (replacing the 1984 Plan which expired
in January 1995), which provides for stock options, restricted stock awards and
cash performance awards.
The Performance 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 Performance Plan are designated as either non-qualified stock options or
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code.
The option price is based on the fair market value on the date of grant and
is 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.
3
The information above summarizes the material aspects of the Performance
Plan. The rights and obligations of participants are determined by the
provisions of the plan document itself.
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 are granted 2,000 shares of
the Company's common stock per year (adjusted for stock splits) as their primary
compensation for serving as Directors. If any Director serves for less than a
full calendar year, the number of shares to be granted to that Director for the
year is adjusted pro rata, based on the number of calendar quarters for such
year for which he or she serves as a Director. The 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 information above summarizes the material aspects of the Directors'
Plan. The rights and obligations of participants are determined by the
provisions of the plan document itself. As described in Item 3 on page 20, the
Directors' Plan has been amended, subject to shareholder approval, and as
amended will provide for different levels of stock grants in 2003 and beyond.
1. ELECTION OF DIRECTORS
The persons named as proxies will vote the shares covered by a proxy for
the election as Directors of the nine 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....... Chairman of The Charities Official Investment Fund; 1995
65 Senior Advisor, Fleming Family & Partners (September,
2001); formerly Vice Chairman of The Kleinwort Benson
Group, Plc.; Director of The Rouse Company (real estate
development), Daniel Thwaites Plc. (beverage
manufacturer), B. G. Plc. (British gas company) and
Murray International Investment Trust (since October
1999; financial management).
Jean-Pierre M. Chairman and Chief Executive Officer, BWAY Corporation 1994
Ergas............... (since January 2000; steel manufacturer); previously
63 Executive Vice President, Europe, Alcan Aluminum Limited
(from 1996 through 1999; aluminum manufacturer); and
Director, Brockway Standard Holdings Corporation
(container manufacturer).
Kristiane C. Private Investor. 1999
Graham..............
45
James L. Koley........ Director (Chairman until February 2002) of Arts-Way 1989
72 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.
59 (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), President and 1993
60 Chief Executive Officer of Dover.
4
YEAR FIRST
BUSINESS EXPERIENCE FOR PAST FIVE YEARS, BECAME
NAME AND AGE POSITIONS WITH DOVER, AND OTHER DIRECTORSHIPS DIRECTOR
------------ --------------------------------------------- ----------
Bernard G. Rethore.... Chairman of the Board Emeritus, Flowserve Corporation 2001
61 (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; Chairman (1997), President and Chief
Executive Officer (from 1995 to 1997) BW/IP, Inc. (which
merged into Flowserve Corporation in July 1997); Director
of Maytag Corporation (major appliances), Belden, Inc.
(specialty wires and cables), Amcast Industrial
Corporation (technology intensive metal products) 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
66 Director of ProQuest Company (information management) and
Omnicom Group, Inc. (advertising).
Michael B. Stubbs..... Private Investor; Director of Moore-Handley, Inc. 1999
54 (wholesale hardware distributor).
During 2002, the Board of Directors held four regular meetings. The Board
has four standing committees, namely an Audit Committee, a Compensation
Committee, an Executive Committee, and, since November 2002, a Governance and
Nominating Committee. In 2002, all Directors attended all of the meetings of the
Board of Directors and all meetings of the standing committees of which he or
she was a member.
The Audit Committee is composed of five Directors who are not employees of
the Company. The functions of the Audit Committee consist of selecting and
engaging 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; 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 16. In 2002, the
Audit Committee held three meetings. The members of the Audit Committee are
James L. Koley (Chairman), David H. Benson, Bernard G. Rethore, Gary L. Roubos
and Michael B. Stubbs. After the November 2002 Audit Committee meeting, the
Governance and Nominating Committee was formed. Mr. Koley became Chairman of
this new committee and Mr. Stubbs replaced him as Chairman of the Audit
Committee.
The Compensation Committee is composed of three Directors who are not
employees of the Company. The Compensation Committee approves compensation for
executive officers, grants awards and payouts under the Performance Plan,
approves changes to the compensation plans and supervises the administration of
the compensation plans. See the Compensation Committee Report beginning on page
13. In 2002, the Compensation Committee held two 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
are not employees of the Company. 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 was formed on November 7, 2002 and held one meeting in 2002. 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 is composed of four Directors. The Executive
Committee is generally empowered to act unanimously on behalf of the Board and
meets or otherwise takes action on an as needed
5
basis between the regularly scheduled quarterly Board meetings. The Executive
Committee did not meet during 2002. The members of the Executive Committee are
Gary L. Roubos (Chairman), Jean-Pierre M. Ergas, James L. Koley and Thomas L.
Reece.
CORPORATE GOVERNANCE
Since inception, the Company has set high standards of business ethics, and
has had the expectation that its operations and executives would conduct
themselves in a way that demonstrates 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 have qualified
as independent under standards in effect at the time. Currently, there is only
one management representative on the Board, Mr. Reece, and the only former
management Board member is Mr. Gary Roubos, who was the Chief Executive Officer
until May 1994 and Chairman of the Board until April 1999. Last year, the Board
of Directors began holding an executive session at Board meetings without any
management representatives present to discuss issues of Board governance and
oversight.
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 have always been
independent. Currently all members are independent. This Committee has routinely
met with both the auditors and management separately to assess the effectiveness
of the independent audit process.
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 and during 2002 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 the Company engaged PricewaterhouseCoopers LLP as its
independent auditors, representatives of that firm have been invited to attend
operating company business review meetings during the year. During 2002, 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 New York Stock Exchange, the Company
has continued to evaluate its compliance with overall corporate governance
consistent with these new initiatives, and fully expects to meet or exceed all
of the various requirements in a timely manner. In particular:
1. The Company's Chief Executive Officer and Chief Financial Officer
satisfied themselves that the Company has met the requirements of Section
302 of the SO Act and certified the Company's financial statements for the
3rd quarter of 2002 and the full year 2002.
2. At its August 2002 meeting, the Company's Audit Committee reviewed
and affirmed that it was composed entirely of independent Directors. 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 public filings immediately prior to the release and
filing of such information.
6
3. At its November 2002 meeting, the Board of Directors established a
new Governance and Nominating Committee composed entirely of independent
Directors, and this committee held a lengthy meeting to review a variety of
management and governance issues, including an update of its Corporate
Governance Guidelines. The Governance and Nominating Committee continued
this work at a February 2003 meeting.
DIRECTORS' COMPENSATION
Management Directors receive no compensation for services as a Director or
as a member of any Committee. Under the Dover 1996 Non-Employee Directors' Stock
Compensation Plan (the "DIRECTORS' PLAN"), non-employee Directors are granted
2,000 shares of the Company's common stock per year as their primary
compensation for serving as Directors. If any Director serves for less than a
full calendar year, the number of shares to be granted to that Director for the
year is adjusted pro rata, based on the number of quarterly periods for which
the Director serves. For 2002, each non-employee Director received 2,000 shares.
Each non-employee Director received a fee of $2,000 for serving on any of the
Board Committees and also received $1,500 for each Board or Committee meeting
attended.
In February 2003, the Board, upon the recommendation of the Compensation
Committee which had retained and received advice from an independent
compensation consulting firm, decided to change the amount and composition of
the compensation paid to non-employee Directors and approved amendments to the
Directors' Plan, subject to approval by the stockholders at the Meeting. See
Item 3 on page 20.
Each non-employee Director may serve as a director of one of the Company's
four independent subsidiary Boards, in which case he or she receives $1,500 for
each subsidiary company board meeting attended. During 2002, David H. Benson,
Kristiane C. Graham, James L. Koley, Bernard G. Rethore and Michael B. Stubbs
received $1,500, $3,000, $4,500, $1,500 and $4,500, respectively, for attending
such subsidiary board meetings.
In July 2002, James L. Koley resigned as Chairman of, and sold all his
shares in, Koley Jessen, P.C., a Nebraska law firm which from time to time
performs legal services on behalf of Dover.
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table below shows all remuneration paid by Dover
and its subsidiaries to the Chief Executive Officer and the four other most
highly paid executive officers for services in all capacities for each of the
three calendar years ended December 31, 2002.
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
-------------------------------------- ---------------------------------------
AWARDS PAYOUTS
----------- -----------
RESTRICTED SECURITIES LONG-TERM
OTHER ANNUAL STOCK UNDERLYING INCENTIVE
NAME AND COMPENSATION AWARD(S) OPTIONS PLAN
PRINCIPAL POSITION YEAR SALARY BONUS ($)(2) ($)(3) (#)(4) PAYOUTS(5)
------------------ ----- ---------- ---------- ------------ ----------- ----------- -----------
Thomas L. Reece.................... 2002 $1,000,000 $ 472,000 296,245 $ 0
Chairman, President and Chief 2001 941,250 472,000 195,101 822,323
Executive Officer of Dover 2000 920,000 1,250,000 165,073 1,265,485
Lewis E. Burns..................... 2002 580,000 385,000 80,669 0
Vice President of Dover; 2001 580,000 371,000 $339,000 50,789 410,433
Director and President of 2000 550,000 420,000 45,854 731,338
Dover Industries, Inc.
Ronald L. Hoffman.................. 2002 475,000 325,000 76,041 0
Vice President of Dover; 2001 270,000 190,000 40,500 168,390
Director and President of 2000 175,000 100,000 12,634 36,119
Dover Resources, Inc.
Robert G. Kuhbach(7)............... 2002 385,000 300,000 65,608 0
Vice President, Finance and 2001 379,792 202,000 36,582 166,295
Chief Financial Officer 2000 360,000 275,000 34,046 246,257
of Dover
Jerry W. Yochum.................... 2002 565,000 380,000 80,669 0
Vice President of Dover; 2001 565,000 316,000 $106 485,380 49,476 89,114
Director and President 2000 535,000 410,000 44,707 736,147
of Dover Diversified, Inc.
ALL
OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION (6)
------------------ ------------
Thomas L. Reece.................... $ 4,400
Chairman, President and Chief 8,400
Executive Officer of Dover 8,200
Lewis E. Burns..................... 5,975
Vice President of Dover; 6,825
Director and President of 8,200
Dover Industries, Inc.
Ronald L. Hoffman.................. 5,975
Vice President of Dover; 4,800
Director and President of 4,200
Dover Resources, Inc.
Robert G. Kuhbach(7)............... 4,400
Vice President, Finance and 8,400
Chief Financial Officer 8,200
of Dover
Jerry W. Yochum.................... 9,970
Vice President of Dover; 9,770
Director and President 13,770
of Dover Diversified, Inc.
---------------
(1) Compensation deferred at the election of the named executive officers is
included in the category (e.g. salary, bonus, LTIP payouts) and 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 13 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 2002 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) Includes with respect to Mr. Yochum that portion of interest above market
rate (which market rate is determined by the SEC to be 120% of the
applicable long-term treasury rate) credited in 2001 on compensation
voluntarily deferred by him.
(3) 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 respective segments. 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
8
November 1, 2002 and will vest with respect to the remaining 5,000 shares
and 7,159 shares, respectively, on November 1, 2003. During the restricted
period, Mr. Burns and Mr. Yochum have the right to receive any dividends
declared and other distributions paid with respect to their restricted
shares as such are declared and paid to stockholders with respect to common
stock of the Company generally. As of December 31, 2002, the aggregate
restricted stock holdings of Mr. Burns and Mr. Yochum were 5,000 shares and
7,159 shares respectively and the dollar values of these restricted stock
holdings were $145,800 and $208,756 respectively, determined by multiplying
the number of shares by the closing market price of $29.16 on December 31,
2002.
(4) 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 20,000 shares in light of his
substantially reduced bonus for 2002 and 2001, and in recognition of his
leadership of the Company during very difficult years. The 2001 awards for
Messrs. Reece and Kuhbach also include 4,417 shares and 392 shares,
respectively, to compensate for salary reductions taken by them (along with
a number of other executives) during 2001.
(5) The payout amount is determined as described under Long-Term Incentive Plan
Awards for Calendar Year 2003 on page 11. Amounts shown represent payouts
for the three-year performance period ended with the year shown.
(6) Represents Company contributions to the Dover Corporation Retirement Savings
Plan, Company payments to other defined contribution plans and Company paid
life insurance premiums on split dollar term life insurance. For 2002, these
amounts are detailed as follows:
OTHER
DOVER DEFINED
RETIREMENT CONTRIBUTION INSURANCE
NAME SAVINGS PLAN PLANS PREMIUMS TOTAL
---- ------------ ------------ --------- ------
T. L. Reece........................................... $4,400 $4,400
L. E. Burns........................................... 5,975 5,975
R. L. Hoffman......................................... 5,975 5,975
R. G. Kuhbach......................................... 4,400 4,400
J. W. Yochum.......................................... 4,400 $5,570 9,970
(7) Mr. Kuhbach became Vice President, Finance and Chief Financial Officer on
November 18, 2002. Prior to that date he was Vice President, General Counsel
and Secretary of the Company.
9
INCENTIVE PROGRAMS
The Company's Performance Plan, adopted in 1995 (replacing a similar plan
which expired in January 1995), provides for stock options and restricted stock
(in special circumstances) coordinated with cash performance awards. At the time
of grant, allocations are made such that of each combined award, greater
emphasis is given to cash performance awards at the operating level, and greater
emphasis is given to stock options at the corporate level. Information on
current grants and cash performance awards is given below. For payouts on prior
awards under this program see the Summary Compensation Table on page 8.
OPTION GRANTS IN LAST CALENDAR YEAR
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE PRESENT
NAME GRANTED(#)(1) CALENDAR YEAR ($/SHARE) EXPIRATION DATE VALUE($)(2)
---- ------------- ------------- --------- ----------------- -----------
Thomas L. Reece............... 195,101 9.1 $38 February 14, 2012 $2,983,094
Lewis E. Burns................ 50,789 2.4 $38 February 14, 2012 776,564
Ronald L. Hoffman............. 40,500 1.9 $38 February 14, 2012 619,245
Robert G. Kuhbach............. 36,582 1.7 $38 February 14, 2012 559,339
Jerry W. Yochum............... 49,476 2.3 $38 February 14, 2012 756,488
---------------
(1) All options shown were granted in 2002 for services performed in 2001 and
correspond to the awards shown in the Summary Compensation Table for 2001.
The options become exercisable on February 14, 2005. The awards made in
February 2003 with respect to services performed in 2002 are shown in the
Summary Compensation Table for 2002 on page 8.
(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 9 years; expected dividend yield of 1.27%;
average stock price volatility of 28.10% and a risk-free interest rate of
5.32%, 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 $15.29 (40.24% of
the option price). The valuation model was not adjusted for risk of
forfeiture or any vesting or transferability restrictions of the options,
all of which would reduce the value of the options if factored into the
calculation. The Black-Scholes model generates a theoretical value based on
the assumptions stated above and this value is not intended to be used for
predicting the future prices of the Company's common stock nor is there any
assurance that the theoretical value or any other value will be achieved.
The actual value of the options will depend on the future performance of the
Company's common stock, the overall market conditions and the executive
officer's continued service with the Company. The value ultimately realized
by the executive officer will depend on the amount by which the market price
of the Company's common stock on the date of exercise exceeds the exercise
price.
10
AGGREGATED OPTION EXERCISES IN LAST CALENDAR YEAR AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES YEAR END(#) YEAR END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
Thomas L. Reece.......... -- -- 683,216 445,454 $2,377,844 $--
Lewis E. Burns........... -- -- 179,015 117,572 1,156,142 --
Ronald L. Hoffman........ -- -- 6,851 55,737 -- --
Robert G. Kuhbach........ -- -- 137,931 87,196 401,918 --
Jerry W. Yochum.......... 25,720 $301,053 161,479 114,334 1,029,717 --
---------------
(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, 2002, as the case may be. The average of the high and
low market price on December 31, 2002 was $28.995.
LONG-TERM INCENTIVE PLAN AWARDS FOR CALENDAR YEAR 2003
ESTIMATED FUTURE
PERFORMANCE OR PAYOUTS UNDER
OTHER PERIOD NON-STOCK
FEBRUARY 2003 UNTIL MATURATION PRICE BASED
NAME AWARD OR PAYOUT PLANS(1)
---- ------------- ---------------- ----------------
Thomas L. Reece................................. $432,000 2003-2005 $432,000
Lewis E. Burns.................................. 494,100 2003-2005 494,100
Ronald L. Hoffman............................... 465,750 2003-2005 465,750
Robert G. Kuhbach............................... 102,600 2003-2005 102,600
Jerry W. Yochum................................. 494,100 2003-2005 494,100
---------------
(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 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. Kuhbach 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, the earnings in the base year (the year preceding the award year) from
which earnings growth is measured may not be less than an amount equal to 10
percent of equity or 10 percent of invested capital.
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 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%. For the past three years, the amounts shown in the Payout Column
of the Summary Compensation Table represent percentage payouts from 0% to 365.8%
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 2006, represent payouts at
the 100% level on the aforementioned matrix. This could be
11
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, 2002
for any of the individuals listed in the Summary Compensation Table, on page 8.
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 months
of compensation out of the last 120 months and (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 and annual bonus but
excludes any payments or stock option or restricted stock awards under the
Performance 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 years of service credit for eligible persons named in the
Summary Compensation Table as of December 31, 2002 are: Mr. Reece 37, Mr. Burns
43, Mr. Hoffman 6, Mr. Kuhbach 9 and Mr. Yochum 19. All of these persons are
vested. 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.
12
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 with 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 Performance Plan or any other compensation) received by such officer
in any of the most recent five 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 Internal Revenue Code of 1986, as amended (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 outside 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.
13
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 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 Performance 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 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 2002 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"). The Company
consistently performs in the top quartile as measured by the TCM database, which
currently includes in excess of 40% of the manufacturing companies included in
the Fortune 500 listings. Prior to 1999, when the Management Compensation
Services Project 777 database (the "PROJECT 777 DATABASE") merged into the TCM
database, the Company measured its performance against the Project 777 database
and consistently performed in the top quartile. 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 year 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 in the top quartile, salaries and bonuses would be targeted
at the 62nd percentile for all company executives. Should the Company's
performance fall below that level, 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. 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 2002, Messrs. Reece, Burns, Hoffman
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
14
program, the Performance Plan, which includes both stock-based awards and cash
incentive awards, and operates substantially as described below.
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 Performance Plan. Long-term
awards under the Performance 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 Performance 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 of 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 2003 table on page 11. The multiples for each award are
set by the Committee. For the officers identified in the Summary Compensation
Table above, in 2002 the cash incentive awards made were based on multiples
ranging from .41 to .81, and the number of shares granted was based on multiples
ranging from 3.24 to 6.49. The comparable multiples for the 2003 cash awards and
share grants are .23 to .81 and 3.24 to 6.77, 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 reflect the 2000 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. These multiples were
confirmed by the 2002 compensation review. 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 options shares granted
as described in footnote (4) to the Summary Compensation Table. Cash incentive
awards are made annually for the three-year performance period commencing in
that year and prior awards are not considered by the Committee when current
awards are made. Likewise, the number of shares that may be granted to each
participant is not limited (except that the Plan itself limits the maximum
option grant to an individual in any given year to 600,000 shares) and prior
grants are not considered by the Committee when current grants are awarded,
although a schedule of outstanding stock options for executive officers is
reviewed by the Committee. In 2002, the number of optionees granted shares under
the Plan was 4.6% 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 2003, that percentage was 1.38%. 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
The Compensation Committee awarded Mr. Thomas L. Reece, Chief Executive
Officer, a bonus of $472,000 for 2002, which was equal to 47.2% of his 2002
salary of $1,000,000, plus an increased stock option grant of 20,000 shares more
than would otherwise be granted under the Performance Plan. 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. In February 2003, Mr. Reece was granted 296,245 option shares
(including the 20,000 shares noted above) and a cash performance award of
$432,000 under the Performance 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 2002; (c) the general business environment during 2002; and (d) a
subjective judgment factor which is the prerogative of the Committee. The first
three factors were given the greatest weight by the Committee.
Compensation Committee: Richard K. Lochridge (Chairman)
Jean-Pierre M. Ergas
Kristiane C. Graham
15
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors consists of
non-employee Directors who are independent as defined in Section 303.01 of the
New York Stock Exchange Listing Standards. Mr. Gary L. Roubos, a member of the
Audit Committee, was originally appointed to the Audit Committee in May 1998
pursuant to the "override" provision of Section 303.02(D) of the New York Stock
Exchange Listing Standards which allowed the appointment of one member who was
an officer at the Company during the prior three years and accordingly would not
be deemed "independent." Mr. Roubos was an employee of the Company until April
30, 1998, the Company's Chief Executive Officer until May 1994 and the
non-employee Chairman of the Board of Directors through May 1999. With respect
to Mr. Roubos' appointment, the Board of Directors determined in its business
judgment that because of Mr. Roubos' unique in-depth knowledge of the operations
of the Company, his membership on the Audit Committee was necessary for the best
interests of the Company and its stockholders.
The Board of Directors adopted a written Audit Committee Charter on May 4,
2000, a copy of which was included as Appendix A to the proxy statement dated
March 14, 2001. 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.
In fulfilling its oversight responsibilities, during 2002 the Audit
Committee discussed with the Company's auditors the overall scope and plans for
the audit. The Audit Committee met with the auditors, with and without
management of the Company present, to discuss the results of the auditor's
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 2002 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
non-auditing services, including those described below under "Relationship with
Independent Accountants", that may impact their objectivity and independence.
In addition, in accordance with the requirements under the SO Act, the
Audit Committee engaged the independent certified public accounting firm of
PricewaterhouseCoopers LLP to audit the annual accounts of Dover and its
subsidiaries for 2002. Also pursuant to the SO Act, the Audit Committee approved
in advance all non-audit services provided by PricewaterhouseCoopers LLP to
Dover and its subsidiaries in 2002.
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 2002.
Based upon the review and discussions referred to above, the Audit
Committee recommended that the audited financial statements for the year ended
December 31, 2002 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
16
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
As discussed above, the independent certified public accounting firm of
PricewaterhouseCoopers LLP is the independent public accountant selected to
audit the annual accounts of Dover and its subsidiaries for 2002. This firm also
audited the financial statements for 2000 and 2001. Representatives of
PricewaterhouseCoopers LLP will not be present at the Meeting.
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 Securities and Exchange Commission. The aggregate fees paid to
PricewaterhouseCoopers LLP for the Company's consolidated auditing services
during the years ended December 31, 2002 and December 31, 2001, were $3,798,644
and $3,448,868 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 paid to PricewaterhouseCoopers LLP for the
Company's audit related services during the years ended December 31, 2002 and
December 31, 2001 were $296,928 and $463,200 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 paid to
PricewaterhouseCoopers LLP for the Company's tax services during the years ended
December 31, 2002 and December 31, 2001, were $2,289,906 and $2,302,108
respectively.
D. ALL OTHER FEES
There were no fees paid to PricewaterhouseCoopers LLP for services to the
Company during the years ended December 31, 2002 and December 31, 2001, other
than those described above.
17
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
DOVER CORPORATION, S&P 500 INDEX & PEER GROUP INDEX
TOTAL STOCKHOLDER RETURNS
[PERFORMANCE GRAPH]
PEER GROUP DOVER CORP. S&P 500 INDEX
---------- ----------- -------------
Dec '97 100 100 100
Dec '98 116.35 102.57 128.58
Dec '99 131.67 128.53 155.64
Dec '00 155.27 116.15 141.46
Dec '01 145.61 107.24 124.65
Dec '02 119.09 85.75 97.1
Data Source: Media General Financial Services
This graph assumes $100 invested on December 31, 1997 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 Co.,
ITT Industries Inc., 3M Co. (formerly Minnesota Mining & Mfg.), Parker-Hannifin
Corp., Pentair Inc., Perkinelmer Inc., Tecumseh Products Co., TRW Inc., Tyco
International Inc. and United Technologies Corp.
* Total return assumes reinvestment of dividends.
18
2. PROPOSAL TO RE-APPROVE THE DOVER CORPORATION EXECUTIVE OFFICER
ANNUAL INCENTIVE PLAN AND THE PERFORMANCE GOALS SET FORTH THEREIN
The executive compensation policy of Dover's Compensation Committee (which
is described in detail on page 14) has traditionally included annual cash
bonuses to executive officers based upon earnings growth, return on investment
and other criteria. Under Section 162(m) of the Internal Revenue Code of 1986
(as amended) (the "CODE"), it is necessary to obtain stockholder approval every
five years of the material terms of the performance goals for such
performance-based compensation to ensure that the performance-based compensation
will be fully tax deductible to the Company. To make this deductibility
available to the Company, the Board of Directors of the Company adopted,
effective as of January 1, 1998, the Dover Corporation Executive Officer Annual
Incentive Plan (the "INCENTIVE PLAN"). At the 1998 Annual Meeting, the
stockholders approved the Incentive Plan, including the material terms of the
performance goals to be used by the Compensation Committee for awarding
specified executives from the date of that meeting. The material terms of the
performance goals must be again approved by the stockholders. As the material
terms of the performance goals are set forth in the Incentive Plan itself, it is
proposed that the entire plan, including the material terms of the performance
goals, be re-approved by the stockholders. None of the terms of the Incentive
Plan, including the terms of the performance goals set forth therein, have been
changed from the Incentive Plan approved in 1998. If the Incentive Plan is
re-approved by the stockholders, the executive officers who are selected by the
Compensation Committee each year to participate therein will receive their
annual bonus, if any, under the Incentive Plan instead of the Company's
traditional bonus program.
The following plan summary is qualified in its entirety by reference to the
full text of the Incentive Plan, which is attached to this Proxy Statement as
Exhibit A.
RECOMMENDATION
To enable the Company to continue to receive tax deductions for executive
compensation awarded under the Incentive Plan until the 2008 Annual Meeting, the
Board of Directors recommends that the stockholders re-approve the Incentive
Plan and the business criteria set forth therein on which the performance goals
will be based. Unless otherwise indicated, the accompanying form of Proxy will
be voted FOR the proposal to re-approve the Incentive Plan. The affirmative vote
of holders of a majority of the shares of the Common Stock present in person or
by proxy at the Meeting is required for re-approval of the Incentive Plan.
PURPOSE OF THE PLAN
The Incentive Plan has been established to make certain that amounts
payable under the plan are deductible to the Company for Federal income tax
purposes in accordance with Section 162(m) of the Code, which denies certain tax
deductions for annual compensation paid to the Company's Chief Executive Officer
and the next four highest paid executives which is in excess of $1 million in
any year. The Incentive Plan has been adopted to meet the requirements of
Section 162(m) of the Code so that amounts paid under the plan will be fully tax
deductible to the Company. By approving the Incentive Plan, the stockholders
also will be approving the material terms of the performance measures,
eligibility requirements and annual bonus limits contained in the plan.
The Incentive Plan, like the Company's traditional bonus program which it
replaces for the executive officers chosen to participate, will provide annual
amounts of performance-based incentive compensation to certain executive
officers of the Company who are in a position to make a material contribution to
the successful operation of the Company's business, as selected each year by the
Compensation Committee. Granting such persons incentive compensation based on
the financial success of the Company is intended to motivate them to achieve the
Company's business goals. The Incentive Plan is also intended to encourage
executive officers to remain in the employ of the Company, and to attract and
motivate new executive officers.
DURATION AND MODIFICATION
The Incentive Plan does not have a predetermined period over which it will
remain in existence. The Board of Directors of the Company may at any time
suspend or terminate the Incentive Plan, or make such
19
modifications to the Incentive Plan with respect to future performance periods,
as it may deem advisable. However, no amendments which are expected to
materially increase amounts payable under the Incentive Plan to those executive
officers who are subject to Section 162(m) of the Code may be made unless
appropriate measures have been taken to cause the increased benefits to be
deductible under Section 162(m).
ADMINISTRATION
The Incentive Plan is administered by the Compensation Committee, which
consists of not less than two members of the Board of Directors who are "outside
directors" within the meaning of Section 162(m) of the Code.
ELIGIBILITY
The Compensation Committee will in its sole discretion determine the
"executive officers" eligible to participate in the Incentive Plan each year.
The "EXECUTIVE OFFICERS" of the Company means the Company's chief executive
officer and the executives of the Company or its affiliates (as determined by
the Compensation Committee) who report directly to the chief executive officer.
PLAN FEATURES
Performance Goals. The Incentive Plan provides for the payment of an
annual cash bonus to any executive officer designated as described above, which
payment is conditioned upon the attainment of pre-established performance goals
measured over a "performance period" which corresponds to each calendar year.
The performance goals must be established in writing by the Compensation
Committee within the first 90 days of each year. Performance goals are
determined by reference to the Company's net income, earnings per share or
return on investment, in the case of participants employed by the Company, and
operating earnings or return on investment, in the case of participants employed
with an affiliate of the Company, during each performance period.
Certain Adjustments. The Compensation Committee has the discretion to
reduce or eliminate any amounts otherwise payable under the Incentive Plan.
Payment of Incentive Compensation. The determination of whether any amount
is payable under the Incentive Plan is made by the Compensation Committee which
will certify, in writing and before any amount under the Incentive Plan is paid,
the amount that is payable with respect to each participant during each
performance period. All payments from the Incentive Plan will be made in cash.
The maximum annual cash bonus that could be payable under the Incentive Plan to
any covered individual with respect to any performance period is one-half
percent of the Company's net income for the performance period.
NEW PLAN BENEFITS
Because amounts payable under the Incentive Plan are based on performance
goals each year determined at the discretion of the Compensation Committee, it
cannot be determined at this time what benefits or amounts, if any, will be
received by or allocated to any person or group of persons under the Incentive
Plan if the Incentive Plan is re-approved. However, it is likely that the amount
payable to any participant pursuant to the Incentive Plan will approximate the
amount payable to such person for the fiscal year under the Company's
traditional bonus program.
3. PROPOSAL TO RATIFY AND APPROVE THE AMENDED AND RESTATED 1996 NON-EMPLOYEE
DIRECTORS' STOCK COMPENSATION PLAN
On February 13, 2003, the Board of Directors, upon the recommendation of
the Compensation Committee which had retained and received advice from an
independent compensation consulting firm, decided to change the amount and
composition of compensation paid to non-employee Directors and approved
amendments to the Dover 1996 Non-Employee Directors' Stock Compensation Plan
(the "DIRECTORS' PLAN"), subject to approval by Dover's stockholders at the
Meeting.
Prior to this decision, non-employee Directors received as compensation
2,000 shares of Common Stock per year under the Directors' Plan, a fee of $2,000
for serving on any of the Board committees, and $1,500 for
20
each Board or committee meeting attended. Directors also received $1,500 for
attending a meeting of the board of any of the Company's four independent
subsidiary companies on which he or she serves. Non-employee Directors are also
reimbursed for reasonable expenses incurred to attend meetings.
Under the new compensation arrangements adopted by the Board, non-employee
Directors will be entitled to receive annual compensation in an amount to be set
from time to time by the Board (currently $90,000 per year), 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. All fees for serving on
any committee or attending any Dover Board or committee meetings are eliminated,
with the exception that the Chair of the Audit Committee will be paid an
additional $10,000 per year in cash. Non-employee Directors will continue to
receive reasonable expenses incurred to attend meetings as well as fees for
attending meetings of independent subsidiaries' boards on which they serve.
Management Directors receive no compensation for services as a Director or on
any committee and this will not change.
Under the new compensation arrangements, for 2003, non-employee Directors
will receive $22,500 in cash and $67,500 worth of Common Stock, based on the
fair market value of Common Stock on November 15, 2003.
If the amendments to the Directors' Plan are approved by the stockholders
at the Meeting, these amendments will become effective retroactively as of
January 1, 2003, and the amended Directors' Plan will have a term expiring on
December 31, 2012. Absent the amendments, the existing Directors' Plan will
remain in effect and is scheduled to expire on December 31, 2005.
If the amendments to the Directors' Plan are not approved by the
stockholders, the number of shares to be granted to non-employee Directors under
the Directors' Plan will continue to be 2,000 and any additional compensation
that would have been paid in shares if the amendment had been approved will be
paid in cash. For a description of the Plan as in effect for 2002, see "Equity
Compensation Plans -- The 1996 Non-Employee Directors' Stock Compensation Plan"
on page 4.
DESCRIPTION OF THE DIRECTORS' PLAN
The following plan summary is qualified in its entirety by reference to the
full text of the Directors' Plan as amended, which is attached to this Proxy
Statement as Exhibit B.
PURPOSE
The purpose of the Directors' Plan is to promote the interests of Dover and
its stockholders by attracting and retaining non-employee Directors capable of
furthering the future success of Dover and by aligning their economic interests
more closely with those of Dover's stockholders.
GRANTS OF SHARES
Each person who (i) serves as a Director during any calendar year during
the term of the Directors' Plan and (ii) is not then, and has not been for a
period of at least six months prior to the later of the beginning of such
calendar year and the date on which such a person became a Director, an employee
of Dover or any subsidiary of Dover will be eligible to receive shares of Common
Stock under the Directors' Plan as compensation for services performed as a
Director during each such calendar year. The number of shares to be granted as
compensation to any Director shall be determined by dividing the dollar amount
of such compensation that is to be paid in shares by the fair market value of a
share on the date of grant, provided that the number of shares granted to any
Director for any calendar year shall not exceed 10,000. Such fair market value
shall be determined in good faith by the Compensation Committee of the Board of
Directors on the basis of such considerations as the Compensation Committee
deems appropriate, and may be rounded to the nearest whole number or quarterly
fraction thereof. Such shares will normally be granted on November 15 of such
calendar year, and will be prorated for partial years of service. The number of
shares for which certificates are delivered to each such Director will be
automatically reduced by the appropriate percentage (currently 30%) to provide
for the estimated Federal income tax and/or withholding tax payment obligations
of the Director (unless the Company reasonably believes that such Director is
not subject to U.S. income
21
taxes), with Dover remitting to the appropriate tax authorities the fair market
value of the shares for which certificates are not so delivered. Fractional
shares will be rounded to the nearest whole share.
The last sale price of Dover's shares, as reported on the New York Stock
Exchange-Composite Transactions, for March 6, 2003 was $24.50.
ADJUSTMENTS
The method of determining the number and kind of shares to be granted, and
the limit on the number of shares that may be granted, to each non-employee
Director will be subject to automatic adjustment as appropriate for any changes
in the number or kind of outstanding shares resulting from a merger,
recapitalization, stock split, stock dividend, or other extraordinary change in
Dover's corporate or capital structure.
AMENDMENT OF THE PLAN
The Board of Directors is permitted to amend, suspend or discontinue the
Directors' Plan, provided that stockholder approval is required (i) to increase
the number of shares which may be granted for any calendar year to more than
10,000 (except for the automatic adjustments described above), and (ii) if
necessary to ensure compliance with any requirement of the Securities and
Exchange Commission or the New York Stock Exchange.
RECOMMENDATION
To be effective in its amended form, the Directors' 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. The Board of Directors
recommends a vote FOR the adoption of the Directors' Plan. Proxies will be voted
FOR approval of the Directors' Plan unless otherwise specified in the proxy.
4. STOCKHOLDER PROPOSAL
Three stockholders of the Company have submitted the following proposal.
The proponents state that they own an aggregate amount of approximately 410,000
shares of Dover common stock or approximately 0.20% of the aggregate outstanding
common stock of the Company.
The Company will furnish the name, address and stockholdings of each
proponent of this proposal promptly upon written or oral request directed to the
Corporate Secretary of the Company.
Their proposal is the following:
DOVER CORPORATION
SEXUAL ORIENTATION NONDISCRIMINATION POLICY
WHEREAS: Dover Corporation does not explicitly prohibit discrimination based on
sexual orientation in its written employment policy;
Our industry competitors and peers, including Applied Materials, Baldor
Electric, Cummins, Deere, General Electric, General Motors, Illinois Tool Works,
3M, Teleflex, and United Technologies, do explicitly prohibit this form of
discrimination in their written policies;
Other major companies that are headquartered in New York, including Citigroup,
IBM, Philip Morris, Verizon, AIG, AT&T, JPMorgan Chase, Morgan Stanley, Merrill
Lynch, AOL Time Warner, Pfizer, MetLife, Goldman Sachs, PepsiCo, International
Paper, and New York Life, also explicitly prohibit this form of discrimination
in their written policies;
According to the Human Rights Campaign, a national advocacy group, more than
half of the Fortune 500 companies have adopted written nondiscrimination
policies prohibiting harassment and discrimination on the basis of sexual
orientation, as have more than 75 percent of Fortune 100 companies;
The hundreds of corporations with nondiscrimination policies that reference
sexual orientation have a competitive advantage in recruiting and retaining
employees from the widest talent pool;
22
According to a recent survey by Harris Interactive and Witeck-Combs, 41 percent
of gay and lesbian workers in the United States report facing some form of
hostility or harassment on the job; almost one out of every 10 gay or lesbian
adults also stated that they had been fired or dismissed unfairly from a
previous job, or pressured to quit a job because of their sexual orientation;
Atlanta, San Francisco, Seattle and Los Angeles have adopted legislation
restricting business with companies that do not guarantee equal treatment for
lesbian and gay employees, and similar legislation is pending in other
jurisdictions;
Our company has operations in, and makes sales to, institutions in states and
cities that prohibit discrimination on the basis of sexual orientation;
National public opinion polls consistently find that more than three-quarters of
the American people support equal rights in the workplace for gay men, lesbians
and bisexuals; for example, in a Gallup poll conducted in June 2001, 85 percent
of respondents favored equal opportunity in employment for gays and lesbians.
RESOLVED: The Shareholders request that Dover Corporation amend its written
equal employment opportunity policy to explicitly prohibit discrimination based
on sexual orientation and to substantially implement that policy.
SUPPORTING STATEMENT: Employment discrimination on the basis of sexual
orientation diminishes employee morale and productivity. Because state and local
laws are inconsistent with respect to employment discrimination, our company
would benefit by a consistent, corporate-wide policy to enhance efforts to
prevent discrimination, resolve complaints internally, and ensure a respectful
and supportive atmosphere for all employees. Moreover, Governor George Pataki
and other New York political leaders committed in Fall 2002 that New York State
would pass in the near future a law banning private employment discrimination
based on sexual orientation. Dover will enhance its competitive edge by joining
the majority of large companies guaranteeing equal opportunity for all
employees.
THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
Since its founding, Dover has practiced a highly decentralized
management style. Its subsidiaries operate with a high degree of autonomy
and the presidents of its operating companies have a high level of
independent responsibility for their businesses. The Company adopted and
has continued this philosophy because of its belief that the executives who
are closest to the business are best able to manage the business in the
particular markets and regulatory environments in which the business
operates. The Board believes that this core operating philosophy has been a
major contributor to the Company's successful acquisition program and its
overall strong performance.
Dover does not have a centralized human resources function and does
not dictate human resources policies or procedures to its subsidiaries.
Dover does impose on all its operating companies the requirement that they
must fully comply with all laws and regulations applicable wherever they
operate. Discrimination on the basis of sexual preference is contrary to
the law of a number of jurisdictions where Dover companies operate,
including New York where Dover's Corporate Office is located. Dover
requires that it and its operating companies comply with the law of those
jurisdictions.
The Board strongly believes that the Company's future success depends
on engendering the highest ethical standards, and assuring equal employment
and promotional opportunities free of discrimination on any basis other
than merit and performance related qualifications. The Company's Corporate
Office policy statement sets forth these principles, and they are promoted
to all Dover operating companies.
However, the Board believes that it is not advisable for the Company
to go against a firmly ingrained founding principle responsible for much of
its success and dictate that its operating companies around the world be
subject to the proposed action where not already required. Therefore, the
Board recommends a vote AGAINST this proposal.
23
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 Securities and
Exchange Commission and the New York Stock Exchange. 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 2002 except that Mr.
Robert Tyre was late reporting eight routine acquisitions made during 2001 and
2002 under a broker-sponsored dividend reinvestment program and Ms. Kristiane
Graham was late reporting six sales of shares by certain trusts of which she is
either a member of the beneficiary class or a co-trustee.
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
In order for stockholder proposals to be included in Dover's proxy
statement for the 2004 Annual Meeting, they must be received by Dover at its
principal executive offices, 280 Park Avenue, New York, NY 10017 by November 11,
2003. 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 the
Meeting, which is tentatively scheduled for April 20, 2004.
Dated: March 17, 2003
By authority of the Board of
Directors,
JOSEPH W. SCHMIDT
Secretary
24
EXHIBIT A
DOVER CORPORATION EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN
1. PURPOSE. The purposes of the Dover Corporation Executive Officer
Annual Incentive Plan (the "PLAN") are to provide annual incentive compensation
to designated executive officers of Dover Corporation (the "COMPANY") based on
the achievement of established performance goals, to encourage such executive
officers to remain in the employ of the Company, to assist the Company in
attracting and motivating new executive officers and to qualify the incentive
payments awarded under the Plan (the "AWARDS") as qualified "performance-based
compensation" so that all payments under the Plan shall be deductible in
accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "CODE").
2. ELIGIBILITY. The Compensation Committee of the Board of Directors of
the Company (the "COMMITTEE") shall each year determine the Executive Officers
of the Company eligible to participate in the Plan (the "PARTICIPANTS"). For
purposes hereof, "EXECUTIVE OFFICERS" shall mean the Chief Executive Officer of
the Company and each executive of the Company or an Affiliate of the Company who
reports directly to the Chief Executive Officer of the Company. As used herein,
"AFFILIATE" shall mean (i) any entity that, directly or indirectly, is
controlled by or under common control with the Company and (ii) any entity in
which the Company has a significant equity interest, in either case as
determined by the Committee.
3. PERFORMANCE PERIODS. Each performance period for purposes of the Plan
shall have a duration of one calendar year, commencing January 1 and ending the
next December 31. The first Performance Period under the Plan shall commence on
January 1, 1998.
4. ADMINISTRATION. The Committee shall have the full power and authority
to administer and interpret the Plan and to establish rules for its
administration. Such power and authority shall include proration or adjustment
of awards in the case of retirement, termination, changes in base salary,
dismissal, death and other conditions as appropriate; provided, however, that
the discretion granted above with respect to an Award earned by a Participant
who is a "covered employee" within the meaning of Section 162(m) of the Code (a
"COVERED EMPLOYEE") may be used by the Committee only to reduce or eliminate
such Award.
5. PERFORMANCE GOALS. On or before the 90th day of each Performance
Period, the Committee shall establish in writing one or more performance goals
and criteria for the Performance Period. The performance criteria shall in all
instances be determined on the basis of Dover Corporation net income, earnings
per share and/or return on investment with respect to Participants employed by
the Company and operating earnings and/or return on investment with respect to
Participants employed by an Affiliate, in each case as reflected in the
Company's audited financial statements for the relevant Performance Period.
6. INCENTIVE PAYOUT CALCULATION. As soon as practicable after the end of
each Performance Period, the Committee will certify in writing the Company's
attainment of the financial performance goals and criteria established for such
Performance Period pursuant to Section 5 and will calculate the possible payout
of incentive awards for each Participant.
7. REDUCTION OF CALCULATED PAYOUTS. The Committee shall have the power
and authority to reduce or eliminate for any reason the payout calculated
pursuant to Section 6 that would otherwise be payable to a Participant based on
the established target Award and payout schedule.
8. PAYOUTS. After calculation of incentive payouts pursuant to Section 6
and any reduction or elimination thereof pursuant to Section 7, the Committee
shall certify the amount of the payout to each Participant under the Plan for
the Performance Period. In no event shall the payout under the Plan to any
Participant for any Performance Period exceed one-half percent (.5%) of the
Dover Corporation net income for the relevant Performance Period. Payment of the
Award determined in accordance with the Plan for each Performance Period shall
be made to a Participant in cash.
1
9. MISCELLANEOUS PROVISIONS.
(a) The Board of Directors of the Company shall have the right to suspend
or terminate the Plan at any time and may amend or modify the Plan with respect
to future Performance Periods prior to the beginning of any Performance Period,
provided that no such amendment or modification which is expected to materially
increase benefits payable to Covered Employees who are Participants under the
Plan shall be made unless such measures as the Committee deems necessary for the
increased benefit to be deductible pursuant to Section 162(m) of the Code have
been taken.
(b) Nothing contained in the Plan or any agreement related hereto shall
affect or be construed as affecting the terms of the employment of any
Participant except as specifically provided herein or therein. Nothing contained
in the Plan or any agreement related hereto shall impose or be construed as
imposing any obligation on (i) the Company or any Affiliate to continue the
employment of any Participant or (ii) any Participant to remain in the employ of
the Company or any Affiliate.
(c) No person shall have any claim to be granted an Award under the Plan
and there is no obligation of uniformity of treatment of eligible employees
under the Plan. Awards under the Plan may not be assigned or alienated.
(d) The Company or Affiliate, as applicable, shall have the right to deduct
from any Award to be paid under the Plan any federal, state or local taxes
required by law to be withheld with respect to such payment.
(e) If any provision of the Plan would cause the Awards granted to a
Covered Employee not to be qualified "performance-based compensation" under
Section 162(m), that provision, insofar as it pertains to such Covered Employee
shall be severed from, and shall be deemed not to be a part of, the Plan, but
the other provisions hereof shall remain in full force and effect.
10. ADOPTION. The Plan shall become effective as of January 1, 1998,
subject to approval by the stockholders of the Company.
2
EXHIBIT B
AMENDED AND RESTATED
DOVER CORPORATION
1996 NON-EMPLOYEE DIRECTORS'
STOCK COMPENSATION PLAN
1. PURPOSE
The purpose of the Dover Corporation 1996 Non-Employee Directors' Stock
Compensation Plan (the "ORIGINAL PLAN") as amended and restated as of January 1,
2003 (the "PLAN") is to promote the interests of Dover Corporation (the
"COMPANY") and its stockholders by attracting and retaining non-employee
Directors capable of furthering the future success of the Company and by
aligning their economic interests more closely with those of the Company's
stockholders.
2. DEFINITIONS
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations thereunder. References to any provision of
the Code or rule or regulation thereunder shall be deemed to include any amended
or successor provision, rule or regulation.
"DIRECTOR" means a member of the Board of Directors.
"EXCHANGE" means the New York Stock Exchange or any other national
securities exchange which then constitutes the principal trading market for the
Shares.
"GRANTEE" means any person who has been granted Shares under Section 4.
"RULE 16B-3" means Rule 16b-3 under the Securities Exchange Act of 1934, as
amended from time to time, and any replacement or substitute therefor.
"SHARE" means a share of common stock of the Company and such other
securities as may be substituted for a Share or such other securities pursuant
to the adjustment provisions of Section 5.
3. EFFECTIVE DATE AND TERM OF THE PLAN
The Original Plan became effective as of January 1, 1996, pursuant to
approval by the Company's stockholders at the annual meeting of the Company's
stockholders held on April 30, 1996. This Plan as amended and restated shall
become effective only if it is approved by the affirmative vote of the holders
of a majority of the Shares present or represented and entitled to vote at the
annual meeting of the Company's stockholders to be held on April 22, 2003, or at
any adjournment thereof and, if so approved, shall be deemed effective as of
January 1, 1998.
The term during which Shares may be granted under the Plan shall expire on
December 31, 2012.
4. GRANTS OF SHARES
The Board of Directors determines the compensation to be paid to persons
for serving as a Director. The Board of Directors has currently determined that
75% of annual non-employee Director compensation should be paid in the form of
Shares pursuant to this Plan, although the Board of Directors may change such
percentage at anytime without stockholder approval.
A Director shall be eligible to receive Shares under this Plan as
compensation for services performed as a Director during each calendar year
during the term of the Plan if such Director (i) serves as a Director during
such calendar year and (ii) is not then, and has not been for a period of at
least six months prior to the later of the beginning of such calendar year and
the date on which such Person became a Director, an employee of the Company or
any subsidiary of the Company.
3
The number of Shares to be granted as compensation to any Director shall be
determined by dividing the dollar amount of such compensation to be paid in
Shares by the fair market value of a Share on the date of grant, provided that
the number of Shares granted to any Director for any calendar year shall not
exceed 10,000. Such fair market value of a Share shall be determined in good
faith by the Compensation Committee of the Board of Directors on the basis of
such considerations as the Compensation Committee deems appropriate from time to
time, including, but not limited to, such factors as the closing price for a
Share on the Exchange on the date of grant, the average of the closing bid and
asked prices for a Share on the Exchange on the date of grant, or the average of
the high and low sales prices of a Share on the Exchange on the date of grant.
The Compensation Committee shall be authorized, in its discretion, to round the
fair market value of a Share to the nearest whole number or a quarterly fraction
thereof.
Persons who are Directors in any calendar year shall be granted Shares on
November 15 of such calendar year (or if such November 15 is not a trading day
on the Exchange, the next such trading day). Any person who serves as a Director
during any such calendar year but ceases to be a Director prior to November 15
of such year shall be granted Shares as of the date he or she ceases to be a
Director (or if such date is not a trading day on the Exchange, the next such
trading day), provided that the Board of Directors may decide that any Director
removed for cause at any time during any calendar year shall forfeit any Shares
for such calendar year. The number of Shares to be granted to any Director for
any calendar year for less than all of which he or she serves as a Director
shall be prorated as deemed appropriate by the Compensation Committee. There
shall be no fractional Shares issued under this Plan; the number of Shares
granted at any time to any Grantee shall be rounded to the nearest whole Share.
Certificates for Shares granted under the Plan shall be delivered on the
date of grant or as soon thereafter as reasonably practicable, provided that the
number of Shares for which certificates shall be delivered to each Grantee shall
be automatically reduced by the appropriate percentage (currently 30%) to
provide for the Federal estimated income and/or withholding tax payment
obligations of the Grantee (unless the Company reasonably believes that such
Grantee is not subject to U.S. income taxes), with the Company remitting to the
appropriate tax authorities the fair market value of the Shares for which
certificates are not so delivered.
The Shares granted under the Plan may be treasury shares or newly-issued
shares. The obligation of the Company to deliver Shares shall be subject to all
applicable laws, rules and regulations, and to such approvals by governmental
agencies as may be deemed necessary or appropriate by the Company, including,
among others, such steps as counsel for the Company shall deem necessary or
appropriate to comply with requirements of relevant securities laws. This
obligation shall also be subject to the condition that any Shares reserved for
issuance under the Plan shall have been duly listed on any national securities
exchange which then constitutes the principal trading market for the Shares.
5. ADJUSTMENTS
The method of determining the number and kind of Shares to be granted, and
the limit on the number of Shares that maybe granted, to each Grantee under
Section 4 of the Plan shall be automatically adjusted to prevent dilution or
enlargement of the rights of Grantees in the event of any changes in the number
or kind of outstanding Shares resulting from a merger, recapitalization, stock
exchange, stock split, stock dividend, other extraordinary dividend or
distribution, corporate division or other change in the Company's corporate or
capital structure.
6. AMENDMENT, SUSPENSION AND DISCONTINUANCE
The Board of Directors may at any time amend, suspend or discontinue the
Plan, provided that (i) the maximum number of Shares that may be granted to any
Director for any calendar year shall not be increased above 10,000 (except
pursuant to Section 5 of the Plan) without stockholder approval, and (ii) if
stockholder approval of such action is necessary in order to ensure compliance
with any applicable rule or regulation put into effect by the Securities and
Exchange Commission or the Exchange, such action shall be subject to approval by
the holders of the Shares by the vote and in the manner required by such rule or
regulation.
4
7. COMPLIANCE WITH RULE 16B-3
The Company intends that the Plan and all transactions hereunder meet all
of the requirements of Rule 16b-3, and that any Grantee shall not, as a result
of any grant hereunder, lose his or her status as a "Non-Employee Director" as
defined in Rule 16b-3. Accordingly, if any provision of the Plan does not meet a
requirement of Rule 16b-3 as then applicable to any such transaction, or would
cause a Grantee not to be a "Non-Employee Director," such provision shall be
construed or deemed amended to the extent necessary to meet such requirement and
to preserve such status.
8. GOVERNING LAW
The Plan shall be applied and construed in accordance with and governed by
the law of the State of Delaware and applicable Federal law.
5
PROXY PROXY
DOVER CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING, APRIL 22, 2003.
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 22, 2003 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 or by using a toll-free telephone number. On the reverse side of
this proxy card are instructions on how to vote by telephone. If you vote by
telephone, 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.
PROXY DOVER CORPORATION PROXY
2003 ANNUAL MEETING
1. Election of Directors- For Withhold For all (Except Nominee(s)
written below)
All All __________________________
Nominees:(01) D.H. Benson,
(02) J-P.M. Ergas, (03) K.C. Graham,
(04) J.L. Koley, (05) R.K. Lochridge,
(06) T.L. Reece, (07) B.G. Rethore,
(08) G.I. Roubos, and (09) M.B. Stubbs.
2. To re-approve the Dover Corporation Executive For Against Abstain
Officer Annual Incentive Plan and the performance
goals set forth therein to satisfy certain
Internal Revenue Code requirements.
3. To ratify and approve the Amended and Restated For Against Abstain
1996 Non-Employee Directors' Stock Compensation
Plan.
4. To consider a stockholder proposal. For Against Abstain
5. To transact such other business as may properly For Against Abstain
come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 5 AND A
VOTE AGAINST ITEM 4.
Please Sign Here and Return Promptly
Signature(s) Dated 2003
----------------------- ---------------,
-----------------------
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 TELEPHONE OR MAIL
CALL**TOLL FREE**ON A TOUCH TONE TELEPHONE
24 Hours a Day, 7 Days a Week
Telephone voting is available through 11 PM Eastern Time the
business day prior to annual meeting day.
Your telephone vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed and returned your proxy card.
______________________________ ______________________________
TELEPHONE MAIL
1-800-435-6710
Use any touch-tone telephone
to vote your proxy. Have your Mark, sign and date your
proxy card in hand when you proxy card and return it in
call. You will be prompted to OR the enclosed postage-paid
enter your control number, envelope.
located in the box below, and
then follow the directions
given.
______________________________ ______________________________
IF YOU VOTE YOUR PROXY BY TELEPHONE, YOU DO NOT NEED TO MAIL
BACK YOUR PROXY CARD.
Control Number
_______________