10.	Equity and Cash Incentive Program

2005 Equity and Cash Incentive Plan

Under the Company's shareholder-approved 2005 Equity and Cash Incentive Plan (the “2005 Plan”), a maximum aggregate of 20 million shares were reserved for grants (non-qualified and incentive stock options, stock settled stock appreciation rights (“SARs”), restricted stock, and performance share awards) to key personnel between February 1, 2005 and January 31, 2015, provided that no incentive stock options shall be granted under the plan after February 11, 2014 and a maximum of two million shares may be granted as restricted stock or performance share awards. The exercise price of options and SARs may not be less than the fair market value of the stock at the time the awards are granted. The period during which these options and SARs are exercisable is fixed by the Company's Compensation Committee at the time of grant. Generally, the stock options or SARs issued under the 2005 Plan vest after three years of service and expire at the end of ten years. All stock options and SARs are granted at regularly scheduled quarterly Compensation Committee meetings (usually only at the meeting during the first quarter) and have an exercise price equal to the closing price of the Company's stock on the New York Stock Exchange on the date of grant. New common shares are issued when options or SARs are exercised.

The following table summarizes the Company's compensation expense relating to all stock-based incentive plans:

	Years ended December 31,
	2011			2010			2009
Pre-tax compensation expense	$	25,991		$	21,207		$	17,158
Tax benefit		(9,097	)		(7,422	)		(6,005	)
Total stock-based compensation expense, net of tax	$	16,894		$	13,785		$	11,153

SARs and Stock Options

In 2011, 2010 and 2009, the Company issued SARs covering 1,524,329 shares, 2,304,574 shares, and 2,825,701 shares, respectively, under the 2005 Plan. Since 2006, the Company has only issued SARs under the 2005 Plan and does not anticipate issuing stock options in the future. The fair value of each SAR grant was estimated on the date of grant using a Black-Scholes option-pricing model with the following assumptions:

	2011 Grant			2010 Grant			2009 Grant

Risk-free interest rate		2.68	%		2.77	%		2.06	%
Dividend yield		1.70	%		2.33	%		3.23	%
Expected life (years)		5.8			6.0			6.5
Volatility		33.56	%		31.93	%		30.47	%
SAR grant price	$	66.59		$	42.88		$	29.45
Fair value of SAR award	$	20.13		$	11.66		$	6.58

A summary of activity relating to SARs and stock options granted under the 2005 Plan and the predecessor plan for the year ended December 31, 2011 is as follows:

	SARs									Stock Options
	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (Years)		Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (Years)

Outstanding at 1/1/2011		9,432,013		$	40.63						2,899,135		$	36.79
Granted		1,524,329			66.59						-			-
Forfeited / expired		(308,882	)		42.03						(77,699	)		38.75
Exercised		(1,253,826	)		45.54	$	24,322				(878,342	)		36.24	$	24,726
Outstanding at 12/31/2011		9,393,634			44.14		143,317		6.38		1,943,094			36.96		40,989		2.11

Total exercisable at December 31, 2011		3,302,555		$	45.92	$	40,051		4.35		1,943,094		$	36.96	$	40,989		2.11

The following table summarizes information about SAR and option awards outstanding that are vested and exercisable at December 31, 2011:

		SARs Outstanding						SARs Exercisable
Range of Exercise Prices		Number		Weighted Average Exercise Price		Weighted Average Remaining Life in Years		Number		Weighted Average Exercise Price		Weighted Average Remaining Life in Years
$	29.45 - $35.50		2,490,684	$	29.52		6.28		-	$	-		-
$	42.30 - $46.00		4,378,418		43.33		6.09		2,255,049		43.75		4.47
$	50.60 - $66.59		2,524,532		59.96		6.96		1,047,506		50.60		4.11

		Options Outstanding						Options Exercisable
Range of Exercise Prices		Number		Weighted Average Exercise Price		Weighted Average Remaining Life in Years		Number		Weighted Average Exercise Price		Weighted Average Remaining Life in Years
$	24.50 - $31.00		294,397	$	24.53		1.12		294,397	$	24.53		1.12
$	33.00 - $39.00		1,052,031		38.00		2.41		1,052,031		38.00		2.41
$	39.40 - $43.00		596,666		41.24		2.06		596,666		41.24		2.06

Unrecognized compensation expense related to SARs not yet exercisable was $27,570 at December 31, 2011. This cost is expected to be recognized over a weighted average period of 1.7 years. The fair value of SARs which became exercisable during the year was $21,202. Cash received by the Company for stock options exercised during 2011 totaled $26,519.

Performance Share Awards

In May 2009, the shareholders of the Company approved an amendment to the 2005 Plan allowing the granting of performance share awards that will become payable in new common shares upon achievement of pre-established performance targets. The changes to the 2005 Plan are detailed in the Company's Proxy Statement dated March 24, 2009 under the heading “Proposal 2 - Proposal to Approve Amendments to the 2005 Equity and Cash Incentive Plans.” Performance share awards granted under the 2005 Plan are being expensed over the three year period that is the requisite performance and service period. Awards shall become vested if (1) the Company achieves certain specified stock performance targets compared to a peer group of 38 companies and (2) the employee remains continuously employed by the company during the performance period. Partial vesting may occur after separation from service in the case of certain terminations not for cause and for retirements.

In 2011, 2010 and 2009, the Company issued performance shares covering 44,751 shares, 68,446 shares, and 75,892 shares, respectively. The performance share awards are market condition awards and have been fair valued on the date of grant using the Monte Carlo simulation model (a binomial lattice-based valuation model) with the following assumptions:

	2011 Grant			2010 Grant			2009 Grant

Risk-free interest rate		1.34	%		1.37	%		1.30	%
Dividend yield		1.61	%		2.38	%		2.93	%
Expected life (years)		2.9			2.9			2.7
Volatility		40.48	%		39.98	%		39.57	%
Fair value of performance award	$	91.41		$	57.49		$	35.79

	Number of Shares			Weighted-Average Grant-Date Fair Value

Unvested at December 31, 2010		143,452		$	46.14
Granted		44,751			91.41
Vested *		(72,151	)		35.79
Forfeited		(2,855	)		35.79
Unvested at December 31, 2011		113,197		$	57.23
* Under the terms of the performance share award, the actual number of shares awarded can range from zero to 200% of the original target grant, depending on Dover's three-year performance relative to the peer group for the relevant performance period. Awards vesting at the end of 2011, as shown above, are expected to be paid out at approximately 105% of their original target.

Unrecognized compensation expense related to unvested performance shares as of December 31, 2011 was $3,667, which will be recognized over a weighted average period of 1.6 years.

The Company also has restricted stock authorized for grant (as part of the 2005 Plan), under which common stock of the Company may be granted at no cost to certain officers and key employees. In general, restrictions limit the sale or transfer of these shares during a two or three year period, and restrictions lapse proportionately over the two or three year period. The Company granted 55,200 and 15,500 restricted shares in 2011 and 2010, respectively. No restricted shares were granted in 2009.

The Company has a stock compensation plan under which non-employee directors are granted shares of the Company's common stock each year as more than half of their compensation for serving as directors. The Company issued the following shares to its directors during each respective year as partial compensation for serving as directors of the Company:

	Years ended December 31,
	2011	2010	2009
Aggregate shares granted	20,929	20,853	21,549
Shares withheld to satisfy tax obligations	(562)	(574)	(6,823)
Net shares granted	20,367	20,279	14,726