Business Context and Reporting Period
Company: Dover Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: February 2, 2006
Subject: Entry into a Material Definitive Agreement regarding amendments to executive compensation and benefit plans to comply with Section 409A of the Internal Revenue Code and to establish 2006 performance goals.
Key Financial Metrics
This filing does not contain financial statements, revenue, profit, cash flow, margin, debt, or liquidity data. The document focuses exclusively on corporate governance and executive compensation agreements.
Material Changes and Agreements
The Compensation Committee and Board of Directors approved amendments to several plans effective February 2, 2006:
- Deferred Compensation Plan: Implemented a six-month delay for payments to specified employees; removed early retirement features allowing lump-sum payouts; established a minimum five-year delay for further deferrals; eliminated in-service withdrawals except for hardship or scheduled withdrawals.
- Supplemental Executive Retirement Plan (SERP): Implemented a six-month payment delay; established a minimum five-year deferral delay; eliminated rollovers into the Deferred Compensation Plan; mandated an automatic lump-sum payment of 75% of the present value of accrued benefits with the remainder paid in five equal annual installments.
- Stock Incentive Plans: Eliminated discretionary early retirement for stock options; provided objective standards for limited extensions of option exercise dates within 10-year terms.
Guidance, Outlook, and Management Commentary
2006 Executive Officer Annual Incentive Plan:
- Participants: CEO (Ronald L. Hoffman), CFO (Robert G. Kuhbach), and Presidents of the six operating segments.
- Performance Goals: CEO and CFO goals are based on specified earnings per share; Segment Presidents' goals are based on specified operational earnings.
- Payout Structure: Payments are zero if performance is less than 50% of the goal and cannot exceed three times the targeted annual incentive amount.
- 2005 Payouts: The eight participants from 2005 will receive annual incentive payments within the established goals and parameters.
Stock-Settled Stock Appreciation Rights (SARs) Grants:
The Committee approved SAR awards under the 2005 Plan for named executive officers with a base price of $46:
| Name | Amount | Base Price |
|---|---|---|
| Ronald L. Hoffman | 169,609 | $46 |
| David J. Ropp | 49,304 | $46 |
| Timothy J. Sandker | 46,487 | $46 |
| Robert G. Kuhbach | 43,873 | $46 |
Executive Status Updates:
- Thomas L. Reece and Jerry W. Yochum retired and did not receive grants.
- John E. Pomeroy retired as CEO of Dover Technologies International, Inc. on December 31, 2005, but remains an employee until December 31, 2006, with a base salary of $685,000. He continues in the SERP but is ineligible for new grants under the 2005 Plan.
Investor Verification Checklist
- Verify the specific impact of the six-month payment delays on executive cash flow and the company's deferred compensation liabilities.
- Confirm the exact "specified earnings per share" and "operational earnings" targets for 2006 to assess the difficulty of achieving the 2006 incentive bonuses.
- Review the 2006 Proxy Statement for full details on the stock-settled stock appreciation rights and the terms of the 2005 Plan.
- Monitor the transition of John E. Pomeroy's role and compensation through his December 31, 2006, employment end date.