<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For three months ended March 31, 1999 Commission File No. 1-4018
DOVER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 53-0257888
(State of Incorporation) (I.R.S. Employer Identification No.)
280 Park Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 922-1640
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
The number of shares outstanding of the Registrant's common stock as of the
close of the period covered by this report was 213,383,374.
<PAGE> 2
Part. I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
THREE MONTHS ENDED MARCH 31,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
1999 1998
--------- --------
<S> <C> <C>
Net sales $ 969,755 $930,496
Cost of sales 626,882 598,372
--------- --------
Gross profit 342,873 332,124
Selling & administrative expenses 233,719 214,503
--------- --------
Operating profit 109,154 117,621
--------- --------
Other deductions (income):
Interest expense 13,623 11,839
Interest income (9,204) (5,180)
Foreign exchange 277 1,079
All other, net (306) (1,345)
--------- --------
Total 4,390 6,393
--------- --------
Earnings before taxes on income 104,764 111,228
Federal & other taxes on income 35,544 37,385
--------- --------
Net earnings from continuing operations 69,220 73,843
Earnings from discontinued operations, net of tax 16,152
Gain on sale of discontinued operations, net of tax 523,938
--------- --------
Net earnings $ 593,158 $ 89,995
========= ========
Weighted average number of common shares
outstanding during the period
- Basic 216,928 222,775
========= ========
- Diluted 218,326 224,822
========= ========
Net earnings per share:
Basic - Continuing $ 0.32 $ 0.33
Discontinued -- 0.07
Gain on sale 2.41 --
--------- --------
Net earnings $ 2.73 $ 0.40
========= ========
Diluted - Continuing $ 0.32 $ 0.33
Discontinued -- 0.07
Gain on sale 2.40 --
--------- --------
Net earnings $ 2.72 $ 0.40
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 3
CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS
THREE MONTHS ENDED MARCH 31,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
1999 1998
--------- --------
<S> <C> <C>
Net earnings $ 593,158 $ 89,995
--------- --------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (25,090) (1,344)
Less: reclassification adjustment for adjustments
included in net earnings -- --
--------- --------
Total foreign currency translation adjustments (25,090) (1,344)
--------- --------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period -- (3,312)
Less: reclassification adjustment for gains (losses)
included in net earnings -- 6
--------- --------
-- (3,318)
--------- --------
Other comprehensive earnings (25,090) (4,662)
--------- --------
Comprehensive earnings $ 568,068 $ 85,333
========= ========
</TABLE>
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
1999 1998
---------- ----------
<S> <C> <C>
Retained earnings at January 1 $1,992,991 $1,703,335
Net earnings 593,158 89,995
---------- ----------
2,586,149 1,793,330
Deduct:
Common stock cash dividends
$ 0.105 per share ($0.095 in 1998) 22,685 21,175
---------- ----------
Retained earnings at end of period $2,563,464 $1,772,155
========== ==========
</TABLE>
<PAGE> 4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Assets:
Current assets:
Cash & cash equivalents $ 519,942 $ 96,774
Marketable securities -- --
Receivables, net of allowance for doubtful accounts 611,711 575,630
Inventories 607,478 559,267
Prepaid expenses 80,126 72,853
----------- -----------
Total current assets 1,819,257 1,304,524
----------- -----------
Property, plant & equipment (at cost) 1,337,265 1,282,436
Accumulated depreciation (749,665) (710,473)
----------- -----------
Net property, plant & equipment 587,600 571,963
----------- -----------
Intangible assets, net of amortization 1,547,967 1,438,793
Other intangible assets 7,358 7,358
Deferred charges & other assets 32,917 59,755
Net assets of discontinued operations -- 244,883
----------- -----------
$ 3,995,099 $ 3,627,276
=========== ===========
Liabilities:
Current liabilities:
Notes payable $ 104,696 $ 427,529
Current maturities of long-term debt 6,472 6,060
Accounts payable 193,843 187,738
Accrued compensation & employee benefits 125,804 149,855
Accrued insurance 49,243 43,246
Other accrued expenses 199,155 175,036
Income taxes 372,021 283
----------- -----------
Total current liabilities 1,051,234 989,747
----------- -----------
Long-term debt 609,182 610,090
Deferred taxes 56,596 50,196
Other deferrals (principally compensation) 61,378 66,359
Stockholders' equity:
Preferred stock -- --
Common stock 236,030 235,571
Additional paid-in surplus 27,907 18,630
Cumulative translation adjustments (52,333) (27,243)
Unrealized holding gains (losses) 51 51
----------- -----------
Accumulated other comprehensive earnings (52,282) (27,192)
----------- -----------
Retained earnings 2,563,464 1,992,991
----------- -----------
Subtotal 2,775,119 2,220,000
Less: treasury stock 558,410 309,116
----------- -----------
2,216,709 1,910,884
----------- -----------
$ 3,995,099 $ 3,627,276
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
THREE MONTHS ENDED MARCH 31,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
1999 1998
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 593,158 $ 89,995
----------- ---------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Income from discontinued operations -- (16,152)
Gain on sale of discontinued business (523,938)
Depreciation 29,146 25,808
Amortization 14,036 11,699
Net increase (decrease) in deferred taxes 3,637 4,962
Net increase (decrease) in LIFO reserves 570 486
Increase (decrease) in deferred compensation (4,960) (2,573)
Other, net (7,090) (3,532)
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable (9,864) 18,436
Decrease (increase) in inventories, excluding LIFO reserve (11,272) (34,038)
Decrease (increase) in prepaid expenses (6,419) (167)
Increase (decrease) in accounts payable (7,116) (256)
Increase (decrease) in accrued expenses (33,004) (38,847)
Increase (decrease) in federal & other taxes on income (194) 28,437
----------- ---------
Total adjustments (556,468) (5,737)
----------- ---------
Net cash provided by operating activities 36,690 84,258
----------- ---------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities -- (2,339)
Additions to property, plant & equipment (26,305) (24,926)
Acquisitions, net of cash & cash equivalents (164,048) (117,038)
Proceeds from sale of business 1,169,599 --
Purchase of treasury stock (249,294) (1,028)
----------- ---------
Net cash from (used in) investing activities 729,952 (145,331)
----------- ---------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable (324,350) 68,221
Increase (decrease) in long-term debt (989) (1,062)
Proceeds from exercise of stock options 4,550 4,161
Cash dividends to stockholders (22,685) (21,175)
----------- ---------
Net cash from (used in) financing activities (343,474) 50,145
----------- ---------
----------- ---------
Cash from discontinued operations -- (14,254)
----------- ---------
Net increase (decrease) in cash & cash equivalents 423,168 (25,182)
Cash & cash equivalents at beginning of period 96,774 103,111
----------- ---------
Cash & cash equivalents at end of period $ 519,942 $ 77,929
=========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT RESULTS
(unaudited)
<TABLE>
<CAPTION>
EARNINGS SALES
First quarter ended March 31, : 1999 1998 * 1999 1998 *
- ------------------------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Dover Industries $ 37,284,000 $ 34,014,000 $258,706,000 $229,494,000
Dover Technologies 24,614,000 33,699,000 288,120,000 297,657,000
Dover Diversified 24,906,000 28,637,000 230,580,000 210,275,000
Dover Resources 26,933,000 32,046,000 193,757,000 194,301,000
------------ ============
Subtotal (after intramarket eliminations) 113,737,000 128,396,000 $969,755,000 $930,496,000
============ ============
Corporate expense & interest net (8,973,000) (17,168,000)
------------- -------------
Earnings before taxes on income 104,764,000 111,228,000
Taxes on income 35,544,000 37,385,000
------------- -------------
Net earnings - Continuing Operations 69,220,000 73,843,000
Earnings from discontinued operations * 16,152,000
Gain on sale of discontinued operations * 523,938,000
------------- --------------
Net earnings $ 593,158,000 $ 89,995,000
============= ==============
</TABLE>
* On January 5, 1999, Dover completed the sale of its elevator business to
Thyssen Industrie AG for $1.17 billion. Results for 1998 have been restated to
classify the elevator business as discontinued.
DOVER CORPORATION AND SUBSIDIARIES
MARKET SEGMENT IDENTIFIABLE ASSETS
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Dover Industries $ 738,243 $ 732,136
Dover Technologies 1,098,717 1,000,209
Dover Diversified 909,561 802,872
Dover Resources 771,815 781,933
Corporate (1) 476,763 65,243
----------- ----------
Total Continuing 3,995,099 3,382,393
Net assets of discontinued operations -- 244,883
----------- ----------
Consolidated Total $ 3,995,099 $3,627,276
=========== ==========
</TABLE>
(1) - Principally cash and equivalents
<PAGE> 7
DOVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and changes in financial position in
conformity with generally accepted accounting principles. In the opinion of the
Company, all adjustments, consisting only of normal recurring items necessary
for a fair presentation of the operating results have been made. The results of
operations of any interim period are subject to year-end audit and adjustments,
and are not necessarily indicative of the results of operations for the fiscal
year.
On January 5, 1999 the company sold the Dover Elevator International
segment. The results of prior year first quarter have been restated to show the
segment as discontinued operations.
NOTE B - Inventory
Inventories, by components, are summarized as follows :
<TABLE>
<CAPTION>
(000 omitted)
--------------------------
UNAUDITED
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Raw materials $238,384 $220,467
Work in progress 189,359 175,117
Finished goods 220,746 204,123
-------- --------
Total 648,489 599,707
Less LIFO reserve 41,011 40,440
-------- --------
Net amount per balance sheet $607,478 $559,267
======== ========
</TABLE>
NOTE C - Accumulated other comprehensive earnings
Accumulated other comprehensive earnings, by components are summarized as
follows:
<TABLE>
<CAPTION>
UNAUDITED (000 omitted)
---------------------------------------------
ACCUMULATED
OTHER Unrealized
COMPREHENSIVE Cumulative Holding
EARNINGS Translation Gains
(LOSSES) Adjustments (losses)
------------- ------------ ------------
<S> <C> <C> <C>
Beginning balance $ (27,192) $ (27,243) $ 51
Current-period change (25,090) (25,090) 0
----------- ----------- ------------
Ending balance $ (52,282) $ (52,333) $ 51
=========== =========== ============
</TABLE>
<PAGE> 8
NOTE D - Additional Information
For a more adequate understanding of the Company's financial position
operating results, business properties and other matters, reference is made to
the Company's Annual Report on Form 10-K which was filed with the Securities and
Exchange Commission on March 30, 1999.
On January 5, 1999, Dover completed the sale of it's Elevator business
to Thyssen Industrie AG for $1.17 billion. Results for first quarter 1998 have
been restated to classify the elevator business as discontinued.
Net earnings as reported was used in computing both basic EPS and
diluted EPS without further adjustment. The Company does not have a complex
capital structure; accordingly, the entire difference between basic weighted
average shares and diluted weighted average shares results from assumed stock
option exercise. The diluted EPS computation was made using the treasury stock
method.
In June 1998, the FASB issued statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999. The Company does not expect the statement to have a
significant effect on its current financial reporting and disclosure
requirements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:
The Company's liquidity increased during the first three months of 1999
as compared to the position at December 31, 1998. The proceeds from sale of
elevator business ($1.17 billion), net of amounts invested in treasury stock
($249 million) and acquisitions ($166 million) is the principle reason for the
increase in liquidity.
Working capital increased from $314,777 million at the end of last year
to $768,023 million at March 31, 1999.
The Company repurchased 7,482,000 shares of its common stock in the
first quarter, paying an average price of $33 per share. This investment of $249
million, plus the $166 million of acquisitions described below, redeploys about
one-half of the after-tax proceeds from the sale of the elevator business. The
balance, plus the Company's normal free cash flow, will continue to be invested
in solid, fairly-priced acquisition transactions and in opportunistic share
repurchases.
The Company completed five add-on and one stand-alone acquisitions
during the quarter at a combined cost of $166 million. The largest of these was
Alphasem (Switzerland) a maker of semiconductor manufacturing equipment - which
joins the Company's Universal Instruments. Alphasem is well known for its die
bonders and sorters used in back-end semiconductor assembly. Its technology in
this area will help Universal's Advanced Manufacturing Assembly business in the
area of "array" package placement.
Van Dam (Netherlands) a maker of equipment for printing on plastic
material joins Belvac; Hydra-Tight (U.K.) a leader in bolt tensioning and other
mechanical jointing products joins Waukesha Bearings; TTI Testron (test
fixtures) will be integrated into Everett Charles; and EMA (Brazil) gives
De-Sta-Co Industries a position in that market for manual and power clamps.
Dover Diversified completed the only stand-alone acquisition - Graphic
Microsystems (California), which manufactures pressroom automation equipment for
precise color measurement and ink control. Its expertise in opto-electronics and
machine control has created systems that increase a printer's ability to handle
complex, shorter-run printing jobs while improving quality and reducing ink
consumption and scrap.
These acquisitions, as a group, have an annualized sales volume of
about $150 million. Their profit impact in 1999 will be small due to acquisition
write-offs, imputed financing costs, and the soft current electronics market for
Alphasem and TTI Testron.
<PAGE> 9
At March 31, 1999, net debt (defined as long-term debt plus current
maturities on long-term debt plus notes payable less cash and equivalents and
marketable securities) of $200.4 million represented 8.3% of total capital. This
compares with 33.1% at December 31, 1998.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $2.72 per diluted share in its first quarter ending
March 31, compared to $.40 per share in the first quarter of 1998. This year's
figure includes $2.40 per share ($524 million) realized from the sale of its
elevator business, concluded in early January, while the 1998 figure includes
$.07 earned by the elevator business.
Continuing operations earned $.32 per share in the first quarter,
compared to $.33 per share in the prior year. The decision to exit from two
small operations in this year's first quarter resulted in a pretax charge of
$3.7 million, equivalent to slightly more than one cent per share.
Non-operational factors at the Company largely offset the $14.6 million
(11%) decline in segment profits described below. Interest costs dropped $6.7
million and average diluted shares outstanding dropped 3%, reducing the earnings
per share decline to 3%.
DOVER INDUSTRIES:
Dover Industries was the only market segment to achieve a gain in first
quarter earnings which exceeded prior year by 10% on a 13% sales gain.
Acquisitions made during 1998 (principally PDQ - car washing equipment)
represented $1.3 million of the $3.3 million gain in segment profits. Most
Industries companies achieved sales and earnings gains, which were strongest at
Heil Environmental and Rotary Lift. The U.S. market for refuse trucks, and
Heil's position within it, are strong, as reflected in a 24% increase in
shipments and book-to-bill ratio of 1.22. Rotary achieved higher sales and
margins as its more competitive posture in the market place raised unit volume
substantially and permitted unit cost reduction. Total bookings at Industries
were 1.06x shipments for the quarter. In March they were 34% above prior year
(20% adjusted for acquisitions).
DOVER TECHNOLOGIES:
Technologies' segment profits declined $9 million (27%), primarily due
to continued softness in its four companies that serve the circuit board
assembly and test market (CBAT). Sales in this market were down 8% (13% adjusted
for acquisitions) with a $7 million decline in operating profits. Imaje realized
lower, but still excellent, margins on increased sales. Strong gains in several
of Quadrant's product lines (notably high frequency oscillators and filters used
in wired communications) offset declines in other areas especially components
used in wireless communication infrastructure. Provision was also made for a
$1.3 million non-recurring loss anticipated from the sale of product line.
Book-to-bill ratios were above 1.0 at most companies, and averaged 1.07 for CBAT
and 1.06 for Technologies as a whole.
DOVER DIVERSIFIED:
Profits in the Diversified segment fell $3.7 million (13%) despite a
10% sales gain. The profit decline includes a $2.4 million loss from the shut
down of a facility acquired by Tranter early last year. Operating profits for
Belvac's can making machines dropped by more than $4 million reflecting low
year-end backlog and continued low spending on new equipment by can makers. The
majority of Diversified's other businesses also earned less than last year with
only Sargent, SWF, and Waukesha achieving gains. Acquisitions made subsequent to
the close of last year's first quarter added $29 million to Segment sales and
about $5 million to earnings (after acquisition premium write-offs).
Diversified's book-to-bill in the quarter was 1.05, mostly due to strength at
A-C Compressor which has long lead times between orders and shipments.
DOVER RESOURCES:
Profits in the Resources segment dropped $5.1 million (16%) from prior
year, primarily due to a decline of $5.5 million in the Petroleum Equipment
Group and Quartzdyne whose sales fell over 50%. New investment in oil/gas
drilling and related production equipment has been severely impacted by low
energy prices since the second quarter of last year. A record performance by
OPW-Fueling Components,
<PAGE> 10
smaller gains at two other companies, and the addition of $2.5 million from
acquisitions (primarily Wilden) offset declines at several other companies. The
Resources' companies involved in energy and chemical transfer products (Wilden,
Blackmer, Cook and OPW-Fluid Transfer Group) have experienced modest sales
slow-downs with larger profit decreases (due to the high marginal profitability
of their products). Combined margins in these four businesses dropped 4 points
to 19%. Resources had a .95 book-to-bill ratio for the quarter and expects only
a modest sequential improvement in profits in the second quarter.
OUTLOOK:
In mid-March the Company told a group of security analysts (press
release 3/16) that it expected first quarter EPS to exceed $.30 per share but be
below Wall Streets' expectations, which had been in the mid to high $.30's. The
Company expects earnings levels to improve during the balance of the year, but
with strong growth delayed until recovery begins in the Technology segment.
YEAR 2000:
The Company has taken action to assess the nature and extent of the
work required to make its systems, products, factories and infrastructure Year
2000 ready. The Company is approaching resolution of Year 2000 problems along
two separate tracks: (1) Corporate and Subsidiary Offices and Dover-wide
information systems. (2) Company-by-Company for each of the Company's 46
separate businesses. Corrective action has been ongoing for several years.
Additionally, the Company is evaluating Year 2000 readiness of suppliers and
where critical suppliers are not Year 2000 ready, the Company will monitor their
progress and take appropriate actions.
At the corporate/subsidiary level, appropriate remediation has been completed
for telecommunications equipment, and computer equipment and critical systems
and the Company believes they are Year 2000 compliant.
At the operating company level, each business has taken responsibility for its
own Year 2000 compliance and has assembled working groups to deal with critical
plant and office equipment; products, including " fixes " for any previous
product generations that are Year 2000 sensitive; software; and the ability of
critical suppliers to maintain deliveries. Progress of the working groups is
monitored by each company President and reported to Subsidiary and Corporate
management.
As of March 31, 1999 each of the 46 companies has gone through a process to take
an inventory of critical systems, to make an assessment of Year 2000 readiness
of those systems, to perform necessary remediation including replacing or
updating existing systems as needed, and to perform appropriate Year 2000
testing. More than two-thirds of the Company's 46 companies have completed these
procedures. All others have identified specific problems remaining and have
action plans to solve them by June 30, 1999. Further, the Company believes
products of all of these companies are either Year 2000 compliant or can be made
so by customers, using "fixes" already developed. Based on current progress and
future plans, the Company believes that the Year 2000 date change will not
significantly affect the Company's ability to deliver products and services to
its customers on a timely basis.
During 1997, 1998 and the first three months of 1999 the Company and its
companies spent approximately $22 million, $27 million and $4 million,
respectively, on computer equipment, software, and non-employee consultants.
Most of these expenditures were for new systems and improved functionality, but
an undetermined amount also served to meet Year 2000 compliance needs. The
Company and its companies do not separately track the internal cost incurred for
the Y2K project.
While no amount of preparation and testing can guarantee Year 2000 compliance,
the Company intends to complete its Year 2000 readiness during 1999, and does
not anticipate that expenditures to reach this goal will be material. Moreover,
due to the decentralized nature of the Company and the lack of reliance on
shared or "centralized" systems by its operating companies, the Company believes
that any Year 2000 problems that might become evident after 1999 will not be
material to the Company. Appropriate contingency plans will be developed in
critical areas if deemed necessary. However, given the uncertain consequences of
failure to resolve significant Year 2000 issues, there can be no assurance that
any one or more such failures would not have a material adverse effect on the
actual outcomes and results could be affected by future factors including, but
not limited to, the continued availability of skilled personnel,
<PAGE> 11
cost control, the ability to locate and remediate software code problems,
critical suppliers and subcontractors meeting their commitments to be Year 2000
ready, and timely actions by customers.
The above statement and similar statements, including estimated future costs,
timetables, contingency plans and remediation plans, and statements containing
the words "believes," "intends," "anticipates" and "expects" and words of
similar import, constitute "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and Section 21E of the
Securities Exchange Act of 1934.
This "Year 2000 Plan" constitutes a "Year 2000 Readiness Disclosure" within the
meaning of the "Year 2000 Information and Readiness Disclosure Act."
EUROPEAN MONETARY UNION - EURO:
On January 1, 1999, several member countries of the European Union established
fixed conversion rates between their existing sovereign currencies, and adopted
the Euro as their new common legal currency. The Euro conversion may affect
cross-border competition by creating cross-border price transparency. The
Company's businesses are assessing their pricing/marketing strategy in order to
ensure that it remains competitive in a broader European market. The Company is
also assessing its information technology systems to allow for transactions to
take place in both the legacy currencies and the Euro and the eventual
elimination of the legacy currencies, and reviewing whether certain existing
contracts will need to be modified. Final accounting, tax and governmental legal
and regulatory guidance generally has not been provided in final form. The
Company will continue to evaluate issues involving the introduction of the Euro.
Based on current information and the Company's current assessment, it does not
expect that the Euro conversion will have a material adverse effect on its
business, results of operations, cash flows or financial condition.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Dover Corporation Supplemental Executive Retirement Plan, as
Amended
(10.2) Form of Executive Employee Supplemental Retirement Agreement -
Agreement Letter
(27) Financial Data Schedule. (EDGAR filing only)
(b) No reports on Form 8-K were filed this quarter.
<PAGE> 12
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOVER CORPORATION
Date: April 20, 1998 /s/ John F. McNiff
----------------------- ----------------------------------------
John F. McNiff, Chief Financial Officer,
Vice President and Treasurer
Date: April 20, 1998 /s/ George F. Meserole
----------------------- ----------------------------------------
George F. Meserole, Chief Accounting
Officer, Vice President and Controller
<PAGE> 1
DOVER CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE 1. PURPOSE OF THE PLAN
The purpose of this Dover Corporation Supplemental Executive Retirement
Plan is to promote the long-term success of the Company by providing a uniform
minimum level of retirement benefits to salaried officers and other key
executives on whom major responsibility for the present and future success of
the Company rests.
ARTICLE 2. DEFINITIONS
2.01. "Administrator" means the Dover Corporation Pension Committee.
2.02. "Affiliated Company" means the Company and any other member of the
controlled group of corporations (within the meaning of Section 414(b) of the
Code) of which the Company is a member. Except as otherwise determined by the
Administrator, a corporation shall not be considered as an Affiliated Company
during any period while it is not a member of such controlled group.
2.03. "Applicable Percentage" means (i) 100% in the case of a Participant whose
Termination Date is on or after his or her Normal Retirement Date, (ii) in the
case of a Participant whose Termination Date precedes his or her Normal
Retirement Date by not more than 10 years, 100% minus the product of 5/12 of 1%
and the number of months between the Participant's Termination Date and his or
her Normal Retirement Date, (iii) in the case of a Participant whose Termination
Date precedes his or her Normal Retirement Date by more than 10 years but not
more than 20 years, 50% minus the product of 1/4 of 1% and the number of months
in excess of 120 by which the Participant's Termination Date precedes his or her
Normal Retirement Date, and (iv) in the case of a Participant whose Termination
Date precedes his or her Normal Retirement Date by more than 20 years, 20% minus
the product of 1/12 of 1% and the number of months in excess of 240 by which the
Participant's Termination Date precedes his or her Normal Retirement Date.
2.04. "Beneficiary" means the person or persons designated by the Participant to
receive any payments which may be required to be paid pursuant to the Plan
following his or her death, or, in the absence of any such designated person,
the Participant's estate; provided, however, that a married Participant's
Beneficiary shall be his or her spouse unless the spouse consents in writing to
the designation of a different Beneficiary.
2.05. "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.06. "Company" means Dover Corporation and any successor thereto.
2.07. "Compensation" means an Employee's basic salary, bonuses (including
payments deemed by an Employer to be the equivalent of bonuses), and commissions
paid or made available by an Affiliated Company, including the portion of any
such remuneration deferred under a qualified or nonqualified deferred
compensation plan or arrangement or contributed to a cafeteria plan. Other forms
of remuneration, including but not limited to long-term incentive compensation,
shall not be included in an Employee's Compensation.
2.08. "Death Benefit" means a death benefit payable pursuant to Section 5.01.
2.09. "Disability" means a disability which causes a Participant to be eligible
to receive disability benefits under his or her Employer's long-term disability
program or, in the case of a Participant who is not covered by a long-term
disability program, a disability which would cause the Participant to be
eligible for social security disability benefits. A Participant's Disability
shall be deemed to have ended on the last day of the last month with respect to
which he or she receives benefits described in the preceding sentence.
2.10. "Effective Date" means January 1, 1997.
<PAGE> 2
2.11. "Eligible Employee" means an Employee of an Employer who has been granted
by an Affiliated Company a stock option or a cash performance participation
award in each of five years (not necessarily consecutive) under the Dover
Corporation 1995 Incentive Stock Option Plan and 1995 Cash Performance Program
or a predecessor or successor plan or program.
2.12. "Employee" means an employee of an Affiliated Company.
2.13. "Employer" means the Company and any Affiliated Company or division
thereof that has adopted the Plan. A list of Employers is attached hereto as
Exhibit A.
2.14. "Final Average Compensation" means 12 times the average of a Participant's
monthly Compensation during the 60 consecutive complete calendar months of
service during the 120 consecutive complete calendar months of service with an
Affiliated Company prior to the Participant's ceasing to be an Employee during
which his or her Compensation was the highest. Any month in which Compensation
was not received, by reason of a leave of absence or otherwise, shall be omitted
in determining a Participant's Final Average Compensation. In the case of any
periods of part-time employment occurring in a Plan Year in which an Eligible
Employee is credited with less than one Year of Service, Compensation with
respect to such periods of part-time service shall be appropriately adjusted to
a full-time basis. In the event that a Participant is paid an annual bonus
during the 12-month period commencing on his or her Termination Date, for
purposes of calculating the Participant's Final Average Compensation the amount
of such bonus shall be substituted for the amount of the first bonus taken into
account during the applicable 60-month period, but only if (i) the 60-month
period used for purposes of the Final Average Compensation calculation includes
the Participant's last full month of employment, and (ii) the effect of such
substitution is to increase the Participant's Final Average Compensation.
2.15. "Gross Benefit" has the meaning provided in Section 4.01(b).
2.16. "Normal Retirement Age" means age 65.
2.17. "Normal Retirement Date" means the first day of the month coinciding with
or next following the date a Participant attains his or her Normal Retirement
Age.
2.18. "Offset Benefit" has the meaning provided in Section 4.01(c).
2.19. "Participant" means an individual who has commenced participation in the
Plan pursuant to Article 3 and whose benefit under the Plan has not been
distributed.
2.20. "Plan" means this Dover Corporation Supplemental Executive Retirement
Plan, as amended from time to time.
2.21. "Plan Year" means the calendar year.
2.22. "Prior Plan" means the Dover Corporation Supplemental Executive Retirement
Plan, as in effect prior to the adoption of this Plan.
2.23. "Retirement Benefit" means a retirement benefit payable pursuant to
Section 4.01(a).
2.24. "Termination Date" means the first day of the month coinciding with or
next following date on which a Participant has a Termination of Employment.
2.25. "Termination of Employment" means a Participant's termination of
employment with an Affiliated Company, whether voluntary or involuntary, for any
reason, including but not limited to quitting or discharge, but other than a
family or medical or other leave of absence, transfer of employment to another
Affiliated Company, incurring of a Disability, or death.
2.26. "Year of Service" means 12 consecutive months of service. Any period of
service of less than 12 consecutive months shall be counted on the basis of 1/12
of a Year of Service for each month of service. For purposes of this definition,
a month of service means any calendar month during any part of which an Employee
is employed by an Affiliated Company.
<PAGE> 3
ARTICLE 3. PARTICIPATION
3.01 Participation as of Effective Date. Any Eligible Employee as of the
Effective Date shall become a Participant as of such date.
3.02 Subsequent Participation. Any other Employee shall become a Participant on
the date he or she becomes an Eligible Employee.
3.03 Cessation of Participation. A Participant shall cease to be a Participant
on the date that all distributions due the Participant or his or her Beneficiary
have been made.
ARTICLE 4. RETIREMENT BENEFIT
4.01 Amount of Benefit.
(a) Each Participant shall be entitled under this Plan following his or her
retirement or other Termination of Employment to a benefit (the "Retirement
Benefit") equal to the Participant's Gross Benefit reduced by his or her Offset
Benefits.
(b) The Gross Benefit under the Plan, expressed as a single life annuity
commencing on the Participant's Termination Date, shall be the Applicable
Percentage of the product of (i) the Participant's Years of Service (not to
exceed 30) and (ii) 2% of the Participant's Final Average Compensation.
(c) The Participant's Offset Benefits shall consist of the following
benefits to which the Participant is or will become entitled, or which the
Participant received prior to the date of determination:
(1) All benefits paid or accrued under all qualified or nonqualified
defined benefit or defined contribution retirement plans sponsored by an
Affiliated Company; provided, however, that only the portion of any such benefit
attributable to Affiliated Company contributions shall be taken into account.
For purposes of the preceding sentence, Affiliated Company contributions shall
not include a Participant's elective deferrals under any such plan, or earnings
credited to any such elective deferrals to the extent such earnings are based on
a reasonable interest rate or on one or more predetermined investments.
(2) The employer portion of any social security or other retirement
benefits provided by any Federal, state, local, or foreign government. Such
employer portion shall be equal, in the case of a social security benefit, to
the employer portion of the Participant's projected social security benefit (at
the Participant's social security full benefit retirement age) multiplied by a
fraction the numerator of which is the Participant's Years of Service and the
denominator of which is 35. For purposes of determining a Participant's
projected social security benefit, it shall be assumed that the social security
wage base remains constant in years following the Participant's Termination of
Employment and that in each of the 35 years prior to the Participant's social
security full benefit retirement age he or she has earned income of at least the
social security wage base applicable to such year.
(d) In the event an Offset Benefit is not payable in the form of a single
life annuity commencing on the Participant's Termination Date, the offset
calculation in Section 4.01(a) shall be performed using such actuarial and other
adjustments as the Administrator shall determine.
4.02 Automatic Cash-Outs. Notwithstanding the provisions of Sections 4.02 and
4.03, in the case of any Participant who has a Termination of Employment:
(1) Before his or her Normal Retirement Age and either before
attaining age 55 or before having completed 10 Years of Service; or
(2) At a time when the lump-sum value of his or her Retirement Benefit
under the Plan is $50,000 or less the Participant's Retirement Benefit shall
automatically be paid in a lump sum within 30 days after his or her Termination
of Employment.
<PAGE> 4
4.03 Automatic Payments in Other Circumstances. In the case of any Participant
to whom Section 4.02 does not apply and for whom no valid election under Section
4.04 is in effect, such Participant's Retirement Benefit shall be paid in the
manner set forth in this Section 4.03.
(a) If the Participant participates in one or more qualified defined
benefit plans sponsored by an Affiliated Company, the Participant's benefit
shall commence at the same time and be paid in the same form as the
Participant's benefit under that qualified plan. If the Participant is covered
under more than one such plan, the plan in which he or she has the greatest
benefit will be controlling.
(b) If the Participant does not participate in any qualified defined
benefit plan sponsored by an Affiliated Company, the Participant's benefit shall
be paid as an actuarially reduced 50% joint and survivor annuity (if the
Participant is married) or a single life annuity (if the Participant is
unmarried), commencing in either case at his or her Normal Retirement Date (or,
if later, the first day of the month coinciding with or next following the date
of his or her actual retirement).
4.04 Election of Optional Forms of Benefit.
(a) A Participant may file an election with the Administrator, on such form
as the Administrator shall prescribe, specifying (i) the form in which his
Retirement Benefit is to be paid and (ii) the time at which such benefit is to
commence in the event of the Participant's retirement or other termination of
employment before his or her Normal Retirement Age. Such election may, subject
to Section 4.04(c), be changed at any time.
(b) If a valid election is in effect pursuant to this Section 4.04, except
as otherwise provided in Section 4.02 a Participant's Retirement Benefit shall
be paid in the form specified in such election. Such Retirement Benefit shall
commence (i) on the Participant's Normal Retirement Date (or, if later, the
first day of the month coinciding with or next following the date of the
Participant's actual retirement) if the Participant retires at or after his or
her Normal Retirement Age, (ii) in other cases, on the date specified in the
Participant's election.
(c) An election or change in election pursuant to Section 4.04(a) shall be
valid only if filed with the Administrator either (i) by December 31, 1997 or
within 90 days after a Participant becomes eligible to participate in the Plan,
whichever is later, or (ii) at least 12 months before he or she retires or
otherwise terminates employment. Notwithstanding the preceding sentence, if a
Participant whose most recent valid election is for an annuity form of benefit
demonstrates to the satisfaction of the Administrator that a relevant change in
family circumstances has occurred since the filing of such election, such
participant may change his election to a different form of annuity commencing on
the same date as that specified on such prior election, or may designate a new
contingent Beneficiary, without regard to such 12-month requirement.
(d) If, pursuant to Section 4.04(c), a change in a Participant's election
is not valid, the valid election previously in effect shall determine the form
and timing of the Participant's Retirement Benefit.
(e) The forms of benefit that a Participant may elect under the Plan are
(i) a single life annuity, (ii) a 100% or 50% joint and survivor annuity, or
(iii) a single life annuity with 120-month period certain. A lump-sum payment
generally is not available as an elective form of benefit. A Participant may
indicate on an election that the Participant wishes to receive his or her
benefit in a lump sum, but in that event must also indicate the form in which
the Participant wishes the benefit to be paid if the lump-sum request is denied.
Requests for lump-sum payments will be considered by the Administrator on a
case-by-case basis, and the granting of any such request shall be within the
Administrator's sole discretion.
(f) A participant who elects a joint and survivor form of benefit shall
designate his contingent Beneficiary in conjunction with such election. In the
event of such Beneficiary's death before the Retirement Benefit Date, the
participant's Retirement Benefit shall be paid in the form of a single life
annuity unless he has filed a valid change in election pursuant to Section
4.04(c).
4.05 Disability.
<PAGE> 5
A Participant who incurs a Disability as an Employee shall continue to
accrue Years of Service during his or her period of Disability. Upon the
Participant's subsequent termination of employment, retirement or death
following cessation of his or her Disability, he or she (or his or her
Beneficiary) shall be entitled to receive distribution of his or her Retirement
Benefit or Death Benefit pursuant to the other provisions of the Plan. For
purposes of calculating such Retirement Benefit, the Participant's Final Average
Compensation shall be determined as of the commencement of his or her
Disability.
ARTICLE 5. DEATH BENEFIT
5.01 In the event of a Participant's death prior to the commencement of payment
of his or her Retirement Benefit, the Participant's Beneficiary shall be paid
within 30 days after the Administrator receives notification of the
Participant's death, a lump-sum Death Benefit equal to the Retirement Benefit
the Participant would have received had he or she had a Termination of
Employment immediately before his or her death (or on the Participant's actual
Termination Date, if earlier) and elected to receive his or her benefit in a
lump sum. In calculating such Retirement Benefit, the amount of any Offset
Benefits shall be determined without regard to the fact of the Participant's
death.
ARTICLE 6. ADMINISTRATION
6.01 This Plan shall be administered by the Administrator. The Administrator
shall have discretionary authority to interpret the Plan and to adopt rules and
regulations consistent with the Plan. The Administrator's good-faith
determination with respect to any issue relating to the interpretation of the
Plan shall be conclusive and final.
ARTICLE 7. GENERAL PROVISIONS
7.01 No Contract of Employment. The establishment of the Plan shall not be
construed as conferring any legal rights upon any Participant for a continuation
of employment, nor shall it interfere with the rights of the Company to
discharge a Participant and to treat him without regard to the effect which such
treatment might have upon him as a Participant in the Plan.
7.02 Withholding. As a condition to a Participant's entitlement to benefits
hereunder, the Company shall have the right to deduct (or cause to be deducted)
from any amounts otherwise payable to a Participant, whether pursuant to the
Plan or otherwise, or otherwise to collect from the Participant, any required
withholding taxes with respect to benefits under the Plan.
7.03 Anti-Alienation Provisions. Subject to any applicable law, no benefit under
the Plan shall be subject in any manner to, nor shall the Company be obligated
to recognize, any purported anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any attempt to do so shall be
void. No such benefit shall in any manner be liable for or subject to
garnishment, attachment, execution, or a levy, or liable for or subject to the
debts, contracts, liabilities, engagements, or torts of the Participant.
7.04 Unfunded Benefits. The Plan is an unfunded plan maintained by the Company
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees. The Plan shall not be construed as
conferring on a Participant any right, title, interest, or claim in or to any
specific asset, reserve, account, or property of any kind possessed by the
Company. To the extent that a Participant or any other person acquires a right
to receive payments from the Company, such rights shall be no greater than the
rights of an unsecured general creditor.
7.05 Claim for Benefits. Any claim for benefits under the Plan shall be made in
writing to the Administrator. If a claim is denied, the Administrator shall so
notify the Participant within 90 days after receipt of the claim. The notice of
denial shall state (i) the specific reason for the denial of the claim, (ii)
specific references to the pertinent Plan provisions upon which the denial is
based, (iii) a description of any additional material or information necessary
to perfect the claim together with an explanation of why such material or
information is necessary, and (iv) an explanation of the claims review
procedure.
<PAGE> 6
Within 60 days after the Participant's receipt of notice of denial of a
claim, the Participant may (i) file a request with the Administrator that it
conduct a full and fair review of the denial of the claim, (ii) review pertinent
documents, and (iii) submit questions and comments to the Administrator in
writing.
The decision by the Administrator with respect to the review must be given
within 60 days after receipt of the request, unless special circumstances
require an extension. In no event shall the decision be delayed beyond 120 days
after receipt of the request for review. The decision shall be written in a
manner calculated to be understood by the Participant and shall contain specific
reasons for the decision and a specific reference to the Plan provisions upon
which the decision is based.
7.06 Incapacity. If the Administrator determines that any person to whom a
benefit is payable under the Plan is unable to care for his or her affairs
because of illness or accident, any payment due may be paid to the individual's
spouse, child, parent, sibling, or to any person deemed by the administrator to
have incurred expense for such person otherwise entitled to payment unless a
prior claim therefor shall have been made by a duly appointed guardian,
committee, or other legal representative.
7.07 Successor Entities. This plan shall be binding upon the successors and
assigns of the Company. The Company shall require any successor (whether direct
or indirect, and whether by purchase, merger, consolidation, or otherwise) to
all or substantially all of the business or assets of the Company, by written
agreement to expressly assume and agree to perform the Company's obligations
under the Plan in the same manner and to the same extent that the Company would
be required to perform them if no such succession had taken place. The
provisions of this Section 7.07 shall continue to apply to each subsequent
employer of the Participant hereunder in the event of any subsequent merger,
consolidation, or transfer of assets of such subsequent employer.
7.08 Prior Plan. Effective as of the date of adoption of this Plan, the Prior
Plan has been terminated, and Participants are entitled to no further benefits
thereunder. In no event shall the accrued benefit of such a Participant under
this Plan be less than his or her accrued benefit under the Prior Plan
immediately prior to such termination.
7.09 Governing Law. The laws of the State of New York shall govern the
construction of this Plan and the rights and the liabilities hereunder of the
parties hereto.
7.10 Plan Year. The plan year shall be the calendar year.
7.11 Headings. All headings are inserted solely for reference and shall not
constitute a part of this Plan, nor affect its meaning, construction, or effect.
ARTICLE 8. CHANGE OF CONTROL
8.01 Definition of Change of Control.
(a) For purposes hereof, a "Change of Control" shall be deemed to have
taken place upon the occurrence of any of the following events (capitalized
terms not previously defined in the Plan are defined in Section (b) below):
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its Affiliates) representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting power
of the Company's then outstanding securities, excluding any Person who becomes
such a Beneficial Owner in connection with a transaction described in clause (A)
of paragraph (iii) below; or
(ii) the following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals who, on the date
hereof, constitute the Board of Directors and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board of Directors or nomination for election by
the Company's stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the
<PAGE> 7
directors then still in office who either were directors on the date hereof or
whose appointment, election or nomination for election was previously so
approved or recommended; or
(iii) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof) at least 50% of the combined voting power of the voting securities of
the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company (not including in the securities Beneficially Owned
by such Person any securities acquired directly from the Company or its
Affiliates) representing 20% or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the Company's then
outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 50% of the
combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such transaction or series of
transactions.
(b) For purposes of this Section 8.01, the following terms shall have the
meanings indicated:
(i) "Affiliate" shall have the meaning set forth in Rule 12b-2
under Section 12 of the Exchange Act.
(ii) "Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act, except that a Person shall not be deemed to be the
Beneficial Owner of any securities which are properly filed on a Form 13-G.
(iii) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(iv) "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
Affiliates, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
8.02 Payments Upon Change of Control.
(a) In the event of a Change of Control, the value of each Participant's
Retirement Benefit accrued through the date of the Change of Control (and based
on the Participant's Years of Service through the date of the Change of Control)
shall be paid to the Participant (or if the Participant has died to the
Beneficiary of the Participant) in a single lump sum payment within five days
after the Change of Control. For purposes hereof, the amount of the lump sum
payment shall be determined using (i) the actuarial assumptions set forth in the
Administration Manual for the Plan as in effect immediately prior to the Change
of Control, or (ii) such actuarial assumptions as shall be specified by the
Continuing Directors (as defined in Article Fourteenth of the Company's
Certificate of Incorporation) of the Company, provided that in no event shall
the amount of the lump sum payment be less than the amount as determined
pursuant to (i) above.
(b) All determinations as to eligibility for and amount of benefits payable
pursuant to (a) above shall be made by the Continuing Directors (as defined in
Article Fourteenth of the Company's Certificate of Incorporation) of the
Company, and the decision of such persons shall be final and binding on the
Company and the Participant.
<PAGE> 8
ARTICLE 9. AMENDMENT OR TERMINATION
9.01 The Company's Board of Directors or the Administrator may amend or
terminate this Plan at any time; provided, however, that no amendment or
termination of the Plan shall adversely affect the right of any Participant to
receive his or her accrued benefit under the Plan, as determined as of the date
of such amendment or termination.
<PAGE> 9
APPENDIX A
PARTICIPATING EMPLOYERS AS OF FEBRUARY 4, 1999
INDEPENDENT SUBSIDIARY SUBSIDIARY/DIVISION
Dover Corporation Corporate Headquarters
OPW Fueling Components
Civacon
OPW Engineered Systems
Dover Diversified Inc. Corporate Headquarters
Sargent Controls
Sargent Technologies *
Waukesha Bearings Corp.
SWEP North America, Inc.
Tranter, Inc.
Central Research Laboratories
* Includes Kahr Bearing and
Precision Kinetics
Dover Industries, Inc. Corporate Headquarters
Rotary Lift
Dover Resources, Inc. Corporate Headquarters
Blackmer Pump
C. Lee Cook
De-Sta-Co
Norris Sucker Rods
O'Bannon Pump
Norriseal
Ronningen-Petter
<PAGE> 1
[DOVER CORPORATION LOGO]
April 20, 1999
Re: Executive Deferred Income Plan - Replacement of Change of Control
Provisions
Dear ________________:
You (the "Executive") are or were a key executive of Dover Corporation
(the "Corporation") or of a direct or indirect subsidiary of the corporation (a
"Subsidiary") who entered into an Executive Employee Supplemental Retirement
Agreement as of January 1, 1985 with the Corporation (the "EDIP") pursuant to
which you deferred a portion of your compensation in exchange for the
Corporation's agreement to pay a substantial retirement benefit to you beginning
at age 65. You also entered into a separate letter agreement in 1992 (the "Prior
EDIP Amendment") in which you and the Corporation agreed to certain amendments
to the EDIP to provide you with certain benefits in the event that a Change of
Control (as defined in the Prior EDIP Amendment) occurred.
Set forth below is an amendment to the EDIP (the "1999 EDIP
Amendment"), which replaces and supersedes the Prior EDIP Amendment. The purpose
of this 1999 EDIP Amendment is to replace the definition of Change in Control in
the Prior EDIP Amendment with a more favorable definition.
1. In the event any Person attempts to effect a Change of Control, you
will not voluntarily terminate your employment with the Corporation or a
Subsidiary, as the case may be, and unless involuntarily terminated will
continue to render services to the Corporation or such Subsidiary until such
Person has abandoned or terminated all efforts to effect a Change of Control or
until after the Change of Control has occurred. For purposes of this Agreement,
the term, Person is defined in paragraph 2(b) below.
2. (a) A "Change of Control" shall be deemed to have taken place upon
the occurrence of any of the following events (capitalized terms are defined
below):
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Corporation or its Affiliates) representing 20% or more of either the then
outstanding shares of common stock of the Corporation or the combined voting
power of the Corporation's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction described in
clause (A) of paragraph (iii) below; or
(ii) the following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals who, on the date
hereof, constitute the Board of Directors of the Corporation and any new
director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of the
Corporation) whose appointment or election by the Board of Directors of the
Corporation or nomination for election by the Corporation's stockholders was
approved or recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or
recommended; or
(iii) there is consummated a merger or consolidation of the
Corporation or any direct or indirect subsidiary of the Corporation with any
other corporation, other than (A) a merger or consolidation which would result
in the voting securities of the Corporation outstanding immediately prior to
such merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or any parent thereof) at least 50% of the combined voting power of the voting
securities of the Corporation or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Corporation (or
similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation (not including in the
securities Beneficially Owned by such Person any securities acquired directly
from the Corporation or its Affiliates) representing
<PAGE> 2
20% or more of either the then outstanding shares of common stock of the
Corporation or the combined voting power of the Corporation's then outstanding
securities; or
(iv) the stockholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or there is consummated
an agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets, other than a sale or disposition
by the Corporation of all or substantially all of the Corporation's assets to an
entity, at least 50% of the combined voting power of the voting securities of
which are owned by stockholders of the Corporation in substantially the same
proportions as their ownership of the Corporation immediately prior to such
transaction or series of transactions.
(b) For purposes of this Section 2(a), the following terms shall have
the meanings indicated:
(i) "Affiliate" shall have the meaning set forth in Rule
12b-2 under Section 12 of the Exchange Act.
(ii) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act, except that a Person shall not be deemed to
be the Beneficial Owner of any securities which are properly filed on a Form
13-G.
(iii) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.
(iv) "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the Corporation or any of
its Affiliates, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as their
ownership of stock of the Corporation.
3. Notwithstanding anything to the contrary set forth in the EDIP, in
the event of a Change of Control:
(a) (i) if you are not receiving benefit payments at the date of a Change
of Control all of the benefits provided by the Agreement shall become
immediately vested and immediately payable, in cash, in one lump sum amount
equal to the Actual Deferrals (as defined in the EDIP) together with interest
compounded annually at the rate(s) set forth in the EDIP from the Time of
Deferral (as defined in the Agreement) to the date of payment.
(ii) if you or any beneficiary are receiving benefit payments at the
date of a Change of Control, the Total Benefit (as set forth in the Benefit
Schedule attached to the EDIP), less the amount of benefits actually received
you and/or any beneficiary, present valued at a discount rate of 8% per year or
such other lower rate as is established by the Continuing Directors as defined
in Article Fourteenth of the Corporation's Certificate of Incorporation), shall
be immediately vested and immediately payable in cash in one lump sum.
(b) The Corporation shall pay such lump sum amount to you promptly but in
no event more than five days after a Change of Control.
(c) The first line of text in Section 5 of the EDIP is hereby deleted in
its entirety and replaced with the following:
"The Continuing Directors (as defined in Article Fourteenth of
the Company's Certificate of Incorporation) of the Company shall
appoint"
(d) Section 12 of the EDIP shall be deleted in its entirety and replaced
with the following:
"12. Amendment and Termination. The Continuing Directors (as
defined in Article Fourteenth of the Company's Certificate of
Incorporation) of the Company only with the prior written consent
of the Executive Employee may amend or terminate this Agreement."
<PAGE> 3
4. Other than as set forth above, the terms and conditions of the EDIP
remain unchanged.
5. Except as otherwise expressly provided herein, this letter shall not
confer any right or impose any obligation on you to continue in the employ of
the Corporation nor shall it limit the right of the Corporation or you to
terminate your employment at any time prior to a Change of Control nor shall it
limit the right of the Board of Directors to amend or terminate the EDIP at any
time prior to a Change of Control.
6. In the event of an inconsistency between the EDIP and this letter, the terms
and conditions of this letter shall control.
Very truly yours,
DOVER CORPORATION
-------------------------
Agreed and Accepted
- -------------------------
Executive
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Dover
Corporation Quarterly Report to stockholders for the three months ended March
31, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<CASH> 519,942
<SECURITIES> 0
<RECEIVABLES> 634,388
<ALLOWANCES> 22,677
<INVENTORY> 607,478
<CURRENT-ASSETS> 1,819,257
<PP&E> 1,337,265
<DEPRECIATION> (749,665)
<TOTAL-ASSETS> 3,995,099
<CURRENT-LIABILITIES> 1,051,234
<BONDS> 609,182
0
0
<COMMON> 236,030
<OTHER-SE> 1,980,679
<TOTAL-LIABILITY-AND-EQUITY> 3,995,099
<SALES> 969,755
<TOTAL-REVENUES> 969,755
<CGS> 626,882
<TOTAL-COSTS> 860,601
<OTHER-EXPENSES> (29)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,623
<INCOME-PRETAX> 104,764
<INCOME-TAX> 35,544
<INCOME-CONTINUING> 69,220
<DISCONTINUED> 523,938
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 593,158
<EPS-PRIMARY> 2.73
<EPS-DILUTED> 2.72
</TABLE>
