8-KMaterial Agreements

DOVER Corp 8-K Report, Material Agreement (May 10, 2006)

Filed May 10, 2006For Securities:DOV

Summary

DOVER Corporation (DOV) filed an 8-K on May 10, 2006, detailing amendments to its 2005 Equity and Cash Incentive Plan and outstanding awards under predecessor plans. The key change involves the post-departure vesting and exercise periods for stock options and stock-settled stock appreciation rights (SSARs). Previously discretionary, these periods will now be standardized based on specific service and age criteria or the sale of a subsidiary employing the participant. These amendments are investor-focused as they clarify potential future equity dilution and provide greater transparency regarding executive compensation and retention strategies. The new rules offer defined timelines for exercising awards, which can impact cash flow and share count expectations. Specifically, longer vesting/exercise periods are now tied to longer employee tenure and age, suggesting a focus on retaining long-serving employees.

Key Highlights

  • 1Amendments approved to Dover Corp's 2005 Equity and Cash Incentive Plan and predecessor plans (1995 Plans).
  • 2Key changes impact the post-employment vesting and exercise periods for stock options and stock-settled stock appreciation rights (SSARs).
  • 3Previously discretionary, these post-departure periods are now standardized under specific "Rule of 65" and "Rule of 70" provisions.
  • 4Rule of 65: For employees with >=10 years of service and age+service >= 65, options/SSARs vest/are exercisable for 24 months post-termination.
  • 5Rule of 70: For employees with >=15 years of service and age+service >= 70, options/SSARs vest/are exercisable for 36 months post-termination.
  • 6A third provision covers the sale of a subsidiary; employees remaining until closing have 12 months post-sale to vest/exercise, unless Rule of 65 or 70 applies.
  • 7All post-termination exercise periods are still subject to the original expiration date of the options/SSARs and potential non-compete provisions.

Frequently Asked Questions

The main purpose is to standardize and clarify the period after an employee departs from Dover during which their outstanding stock options and stock-settled stock appreciation rights (SSARs) can continue to vest and be exercised. Previously, this was at the Compensation Committee's discretion.

The "Rule of 65" allows employees with at least 10 years of service and whose age plus years of service equals 65 or more, to have their options/SSARs continue to vest and be exercisable for 24 months after termination. The "Rule of 70" provides a longer 36-month period for employees meeting stricter criteria (at least 15 years of service and age plus service equals 70 or more).

If a subsidiary is sold and the employee remains with the company through the closing, their outstanding options and SSARs will automatically continue to vest and be exercisable for 12 months from the date of the sale. However, if the employee also meets the criteria for the "Rule of 65" or "Rule of 70", they will receive the longer vesting/exercise period granted under those rules instead.

Yes, all extended vesting and exercise periods are still subject to the original expiration date of the options or SSARs. Additionally, the new provisions related to the "Rule of 65" and "Rule of 70" are subject to non-compete provisions, and the sale of a subsidiary scenario also requires the employee to remain employed through the transaction's closing.