10-12B/A

As filed with the Securities and Exchange Commission on April 11, 2018.

File No. 001-38441

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1 to

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

 

Apergy Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   82-3066826

(State or other jurisdiction of

incorporation or organization)

  (I.R.S. Employer
Identification No.)

2445 Technology Forest Blvd

Building 4, 9th Floor

The Woodlands, Texas

  77381
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (281) 403-5772

 

 

With copies to:

 

Ivonne M. Cabrera, Esq.

Dover Corporation

3005 Highland Parkway

Downers Grove, IL 60515

(630) 541-1540

 

Joshua Ford Bonnie

William R. Golden III

Simpson Thacher & Bartlett LLP
900 G Street, N.W.
Washington, D.C. 20001
(202) 636-5500

 

 

Securities to be registered pursuant to Section 12(b) of the Act:

 

Title of each class
to be so registered

 

Name of each exchange on which
each class is to be registered

Common Stock, par value $0.01 per share   New York Stock Exchange

 

 

Securities to be registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☐  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☒

 

 

 


APERGY CORPORATION

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

Certain information required to be included in this Form 10 is incorporated by reference to specifically-identified portions of the body of the information statement filed herewith as Exhibit 99.1. None of the information contained in the information statement shall be incorporated by reference herein or deemed to be a part hereof unless such information is specifically incorporated by reference.

Item 1. Business.

The information required by this item is contained under the sections of the information statement entitled “Summary,” “Risk Factors,” “Cautionary Statement Concerning Forward Looking Statements,” “Management Discussion and Analysis of Financing Condition and Results of Operations,” “Business,” “Apergy’s Relationship with Dover Following the Distribution” and “Where You Can Find More Information.” Those sections are incorporated herein by reference.

Item 1A. Risk Factors.

The information required by this item is contained under the section of the information statement entitled “Risk Factors” and “Cautionary Statement Concerning Forward Looking Statements.” Those sections are incorporated herein by reference.

Item 2. Financial Information.

The information required by this item is contained under the sections of the information statement entitled “Selected Historical Combined Financial Data,” “Unaudited Pro Forma Combined Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Those sections are incorporated herein by reference.

Item 3. Properties.

The information required by this item is contained under the section of the information statement entitled “Business—Properties.” That section is incorporated herein by reference.

Item 4. Security Ownership of Certain Beneficial Owners and Management.

The information required by this item is contained under the section of the information statement entitled “Security Ownership of Certain Beneficial Owners and Management.” That section is incorporated herein by reference.

Item 5. Directors and Executive Officers.

The information required by this item is contained under the section of the information statement entitled “Management.” That section is incorporated herein by reference.

Item 6. Executive Compensation.

The information required by this item is contained under the section of the information statement entitled “Management—Executive Compensation.” That section is incorporated herein by reference.

 

2


Item 7. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is contained under the sections of the information statement entitled “Management,” “Certain Relationships and Related Person Transactions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Those sections are incorporated herein by reference.

Item 8. Legal Proceedings.

The information required by this item is contained under the section of the information statement entitled “Business—Legal Proceedings.” That section is incorporated herein by reference.

Item 9. Market Price of, and Dividends on, the Registrant’s Common Equity and Related Stockholder Matters.

The information required by this item is contained under the sections of the information statement entitled “Dividend Policy,” “Capitalization,” “The Separation and Distribution” and “Description of Apergy Capital Stock.” Those sections are incorporated herein by reference.

Item 10. Recent Sales of Unregistered Securities.

The information required by this item is contained under the section of the information statement entitled “Description of Apergy Capital Stock—Sale of Unregistered Securities.” That section is incorporated herein by reference.

Item 11. Description of Registrant’s Securities to be Registered.

The information required by this item is contained under the sections of the information statement entitled “Dividend Policy,” “Capitalization,” “The Separation and Distribution” and “Description of Apergy Capital Stock.” Those sections are incorporated herein by reference.

Item 12. Indemnification of Directors and Officers.

The information required by this item is contained under the section of the information statement entitled “Description of Apergy Capital Stock—Limitations on Liability and Indemnification of Officers and Directors and Insurance.” That section is incorporated herein by reference.

Item 13. Financial Statements and Supplementary Data.

The information required by this item is contained under the sections of the information statement entitled “Index to Financial Statements” (and the financial statements referenced therein). That section is incorporated herein by reference.

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 15. Financial Statements and Exhibits.

(a) Financial Statements

The information required by this item is contained under the section of the information statement entitled “Index to Financial Statements” (and the financial statements referenced therein). That section is incorporated herein by reference.

 

3


(b) Exhibits

See below.

The following documents are filed as exhibits hereto:

 

Exhibit
Number

  

Exhibit Description

  2.1    Form of Separation and Distribution Agreement by and between Dover Corporation and Apergy Corporation.
  3.1    Form of Amended and Restated Certificate of Incorporation of Apergy Corporation.*
  3.2    Form of Amended and Restated By-Laws of Apergy Corporation.*
10.1    Form of Transition Services Agreement by and between Dover Corporation and Apergy Corporation.*
10.2    Form of Tax Matters Agreement by and between Dover Corporation and Apergy Corporation.*
10.3    Form of Employee Matters Agreement by and between Dover Corporation and Apergy Corporation.
10.4    Form of 2018 Equity and Cash Incentive Plan.*
10.5    Form of Executive Deferred Compensation Plan.*
10.6    Form of Senior Executive Changes-in-Control Severance Plan.*
10.7    Form of Executive Severance Plan.*
10.8    Form of Executive Officer Annual Incentive Plan.*
20.1    Subsidiaries of Apergy Corporation.*
99.1    Information Statement of Apergy Corporation, preliminary and subject to completion, dated April 11, 2018.
99.2    Form of Notice of Internet Availability of Information Statement Materials.*

 

* Previously filed.

 

4


SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Apergy Corporation
By:   /s/ Sivasankaran Somasundaram
Name:   Sivasankaran Somasundaram
Title:   President and Chief Executive Officer

Date: April 11, 2018

 

5

EX-2.1

Exhibit 2.1

SEPARATION AND DISTRIBUTION AGREEMENT

by and between

DOVER CORPORATION

and

APERGY CORPORATION

Dated as of [●]


TABLE OF CONTENTS

 

         Page  

Article I DEFINITIONS AND INTERPRETATION

     2  

Section 1.1

 

General

     2  

Section 1.2

 

References; Interpretation

     20  

Section 1.3

 

Effective Time

     21  

Section 1.4

 

Other Matters

     21  

Article II THE SEPARATION

     21  

Section 2.1

 

General

     21  

Section 2.2

 

Transfer of Assets

     22  

Section 2.3

 

Assumption and Satisfaction of Liabilities

     22  

Section 2.4

 

Intercompany Accounts

     23  

Section 2.5

 

Bank Accounts; Cash Balances

     23  

Section 2.6

 

Limitation of Liability; Termination of Intercompany Agreements

     24  

Section 2.7

 

Transfers Not Effected At or Prior to the Effective Time; Transfers Deemed Effective as of the Effective Time

     25  

Section 2.8

 

Transfer Documents

     28  

Section 2.9

 

Shared Contracts

     28  

Section 2.10

 

Further Assurances

     29  

Section 2.11

 

Novation of Liabilities; Consents

     30  

Section 2.12

 

Guarantees and Letters of Credit

     31  

Section 2.13

 

Disclaimer of Representations and Warranties

     32  

Section 2.14

 

Apergy Financing Arrangements

     34  

Article III CERTAIN ACTIONS PRIOR TO THE DISTRIBUTION

     34  

Section 3.1

 

Reorganization

     34  

Section 3.2

 

Certificate of Incorporation; Bylaws

     34  

Section 3.3

 

Directors and Officers

     34  

Section 3.4

 

Resignations

     34  

Section 3.5

 

Ancillary Agreements

     35  

Article IV THE DISTRIBUTION

     35  

Section 4.1

 

Stock Dividend to Dover; Distribution

     35  

Section 4.2

 

Fractional Shares

     35  

Section 4.3

 

Actions in Connection with the Distribution

     36  

Section 4.4

 

Sole Discretion of Dover

     36  

Section 4.5

 

Conditions to Distribution

     37  

Article V CERTAIN COVENANTS

     39  

Section 5.1

 

No Solicit

     39  

Section 5.2

 

Legal Names and Other Parties’ Trademark

     39  

Section 5.3

 

Auditors and Audits; Annual and Quarterly Financial Statements and Accounting

     40  

Section 5.4

 

No Restrictions on Corporate Opportunities

     42  

 

i


Article VI RELEASES AND INDEMNIFICATION

     43  

Section 6.1

 

Release of Pre-Distribution Claims

     43  

Section 6.2

 

Indemnification by Dover

     45  

Section 6.3

 

Indemnification by Apergy

     46  

Section 6.4

 

Procedures for Indemnification

     46  

Section 6.5

 

Indemnification Payments

     49  

Section 6.6

 

Additional Matters; Survival of Indemnities

     49  

Section 6.7

 

Indemnification Obligations Net of Insurance Proceeds and Other Amounts; Contribution

     50  

Section 6.8

 

Cooperation in Defense and Settlement

     51  

Section 6.9

 

Limitation of Liability

     51  

Section 6.10

 

Covenant not to Sue

     52  

Article VII CONFIDENTIALITY; ACCESS TO INFORMATION

     52  

Section 7.1

 

Preservation of Corporate Records

     52  

Section 7.2

 

Provision of Corporate Records

     52  

Section 7.3

 

Access to Information

     53  

Section 7.4

 

Witness Services

     54  

Section 7.5

 

Confidentiality

     54  

Section 7.6

 

Privileged Matters

     55  

Section 7.7

 

Ownership of Information

     58  

Section 7.8

 

Other Agreements

     58  

Section 7.9

 

Compensation for Providing Information

     58  

Article VIII DISPUTE RESOLUTION

     58  

Section 8.1

 

Negotiation

     58  

Section 8.2

 

Arbitration

     59  

Section 8.3

 

Selection of Arbitrators

     59  

Section 8.4

 

Arbitration Procedures

     60  

Section 8.5

 

Discovery

     60  

Section 8.6

 

Confidentiality of Proceedings

     60  

Section 8.7

 

Pre-Hearing Procedure and Disposition

     60  

Section 8.8

 

Continuity of Service and Performance

     61  

Section 8.9

 

Awards

     61  

Section 8.10

 

Costs

     61  

Section 8.11

 

Adherence to Time Limits

     61  

Article IX INSURANCE

     61  

Section 9.1

 

General Liability Policies to be Maintained by Apergy

     61  

Section 9.2

 

Policies and Allocation of Related Rights and Obligations

     62  

Section 9.3

 

Third Party Shared Policies

     62  

Section 9.4

 

Administration of Third Party Shared Policies; Other Matters

     62  

Section 9.5

 

Agreement for Waiver of Conflict and Shared Defense

     64  

Section 9.6

 

Cooperation

     64  

Section 9.7

 

Miscellaneous

     64  

 

ii


Article X MISCELLANEOUS

     65  

Section 10.1

 

Complete Agreement; Construction

     65  

Section 10.2

 

Ancillary Agreements

     65  

Section 10.3

 

Counterparts

     65  

Section 10.4

 

Survival of Agreements

     65  

Section 10.5

 

Expenses

     66  

Section 10.6

 

Notices

     66  

Section 10.7

 

Waivers

     67  

Section 10.8

 

Amendments

     67  

Section 10.9

 

Assignment

     67  

Section 10.10

 

Termination, Etc

     67  

Section 10.11

 

Payment Terms

     68  

Section 10.12

 

No Circumvention

     68  

Section 10.13

 

Subsidiaries

     68  

Section 10.14

 

Third Party Beneficiaries

     68  

Section 10.15

 

Title and Headings

     69  

Section 10.16

 

Exhibits and Schedules

     69  

Section 10.17

 

Public Announcements

     69  

Section 10.18

 

Governing Law

     69  

Section 10.19

 

Consent to Jurisdiction

     69  

Section 10.20

 

Specific Performance

     70  

Section 10.21

 

Waiver of Jury Trial

     70  

Section 10.22

 

Severability

     70  

Section 10.23

 

Construction

     70  

Section 10.24

 

Authorization

     70  

SCHEDULES

 

Schedule 1.1(10)(vii)

   Specified Apergy Assets

Schedule 1.1(14)

   Specified Apergy Contracts

Schedule 1.1(17)

   Apergy Financing Arrangements

Schedule 1.1(19)

   Apergy Group Entities

Schedule 1.1(21)(i)

   Specified Apergy Liabilities

Schedule 1.1(21)(iii)

   Apergy Former Businesses

Schedule 1.1(21)(vi)

   Apergy Actions

Schedule 1.1(33)

   Continuing Arrangements

Schedule 1.1(42)(v)

   Specified Dover Assets

Schedule 1.1(50)(i)

   Specified Dover Liabilities

Schedule 1.1(50)(iv)(A)

   Dover Distribution Disclosure Document Liabilities

Schedule 1.1(54)

   Financing Cash Payment

Schedule 1.1(99)

   Shared Contracts

Schedule 2.2(a)(i)

   Transferred Entities

Schedule 2.4(a)

   Intercompany Accounts

Schedule 2.9(c)(i)

   Separated Shared Contracts

Schedule 2.9(c)(ii)

   Assigned Shared Contracts

Schedule 2.12(a)

   Apergy Guarantees

Schedule 2.12(b)

   Dover Guarantees

 

iii


Schedule 3.1

   Reorganization

Schedule 5.2(a)(i)

   Dover Marks

Schedule 5.2(a)(ii)

   Apergy Marks

Schedule 6.2

   Dover Excluded Indemnification

Schedule 10.5(a)

   Allocation of Certain Expenses Prior to Effective Time

Schedule 10.17

   Public Announcements

EXHIBITS

 

Exhibit A

   Form of Employee Matters Agreement

Exhibit B

   Form of Tax Matters Agreement

Exhibit C

   Form of Transition Services Agreement

 

iv


INDEX OF DEFINED TERMS

 

AAA

     2, 59  

Action

     2  

Affiliate

     2  

Agent

     2  

Agreement

     1, 2  

Agreement Disputes

     2, 59  

Amended Financial Reports

     2, 41  

Ancillary Agreements

     7  

Apergy

     1, 3  

Apergy Accounts

     3, 23  

Apergy Assets

     3  

Apergy Balance Sheet

     4  

Apergy Business

     4  

Apergy Common Stock

     1, 4  

Apergy Contracts

     4  

Apergy Disclosure

     4  

Apergy Employee

     5  

Apergy Financing Arrangements

     5  

Apergy General Liability Policies

     5, 62  

Apergy Group

     5  

Apergy Indemnitees

     5  

Apergy Liabilities

     5  

Assets

     7  

Audited Party

     9, 41  

Business

     9  

Business Day

     9  

Business Entity

     9  

Claims Administration

     9  

Code

     1, 9  

Commission

     9  

Confidential Information

     9  

Consents

     9  

Continuing Arrangements

     10  

Contract

     10  

Contribution

     10  

control

     2  

corporate opportunities

     43  

Dispute Notice

     10, 59  

Distribution

     10  

Distribution Date

     10  

Distribution Disclosure Documents

     10  

Dover

     1, 10  

Dover Accounts

     10, 23  

Dover Assets

     10  

Dover Business

     11  

 

v


Dover Common Stock

     11  

Dover Disclosure

     11  

Dover Employee

     12  

Dover Group

     12  

Dover Indemnitees

     12  

Dover LCs

     12, 32  

Dover Liabilities

     12  

Effective Time

     13  

Employee Matters Agreement

     13  

Exchange Act

     14  

Financing Cash Payment

     14  

Form 10

     14  

Form 10-K

     14  

Former Business

     14  

GAAP

     14  

Governmental Approvals

     14  

Governmental Entity

     14  

Group

     14  

Guaranty Release

     14, 31  

Indebtedness

     14  

Indemnifiable Loss

     15  

Indemnifiable Losses

     15  

Indemnifying Party

     15, 46  

Indemnitee

     15, 46  

Indemnity Payment

     15, 50  

Information

     15  

Information Statement

     15  

Insurance Administration

     16  

Insurance Proceeds

     16  

Insured Claims

     16  

Intellectual Property

     16  

Intercompany Accounts

     16  

Internal Control Audit and Management Assessments

     17, 41  

IT Equipment

     17  

Law

     17  

Liabilities

     17  

Liable Party

     17, 30  

linked

     23  

New York Courts

     17, 69  

NYSE

     17  

Other Parties’ Auditors

     17, 41  

Other Party

     30  

Other Party Marks

     17, 39  

Parties

     1  

Party

     1, 17  

Person

     17  

Policies

     18  

 

vi


Pre-Separation Disclosure

     18  

Prime Rate

     18  

Privileged Information

     18  

Record Date

     18  

Records

     18  

Reorganization

     1, 18  

Reorganization Documents

     18, 34  

Reorganization Step Plan

     18, 34  

Retained Energy Businesses

     19  

Rules

     19, 59  

Security Interest

     19  

Separation

     1, 19  

Shared Contracts

     19  

Shared Contractual Liabilities

     19  

Software

     19  

Subsidiary

     19  

Tax

     19  

Tax Matters Agreement

     19  

Tax Return

     19  

Third Party

     19  

Third Party Claim

     20, 46  

Third Party Shared Policies

     20  

Trademarks

     20  

Transfer

     20, 22  

Transfer Documents

     20  

Transferred Entities

     20, 22  

Transition Services Agreement

     20  

Wholly Owned Subsidiary

     20  

 

 

vii


SEPARATION AND DISTRIBUTION AGREEMENT

THIS SEPARATION AND DISTRIBUTION AGREEMENT (this “Agreement”) is entered into as of [•], by and between Dover Corporation, a Delaware corporation (“Dover”), and Apergy Corporation, a Delaware corporation (“Apergy”) (each a “Party” and together, the “Parties”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in Section 1.1 hereof.

R E C I T A L S:

WHEREAS, Dover, acting through its direct and indirect Subsidiaries, currently conducts a number of businesses, including the Apergy Business;

WHEREAS, the Board of Directors of Dover has determined that it is appropriate, desirable and in the best interests of Dover and its stockholders to separate Dover into two separate companies: (i) one comprising the Apergy Business, which shall be owned and conducted, directly or indirectly, by Apergy, all of the common stock of which is intended to be distributed to Dover stockholders; and (ii) one comprising the Dover Business, which shall continue to be owned and conducted, directly or indirectly, by Dover;

WHEREAS, in order to effect such separation, the Board of Directors of Dover has determined that it is appropriate, desirable and in the best interests of Dover and its stockholders: (i) for Dover and its Subsidiaries to enter into a series of transactions whereby Dover and its Subsidiaries will be reorganized such that (A) Dover and/or one or more other members of the Dover Group will own all of the Dover Assets and assume (or retain) all of the Dover Liabilities and (B) Apergy and/or one or more other members of the Apergy Group will own all of the Apergy Assets and assume (or retain) all of the Apergy Liabilities (the transactions referred to in clauses (A) and (B) being referred to herein as the “Reorganization”); and thereafter (ii) for Dover to cause the Agent to distribute to the holders of Dover Common Stock as of the Record Date on a pro rata basis all of the issued and outstanding shares of common stock, par value $0.01 per share, of Apergy (the “Apergy Common Stock”) (such transactions described in clauses (i) and (ii), as may be amended or modified from time to time in accordance with the terms and subject to the conditions of this Agreement, the “Separation”);

WHEREAS, Apergy has been incorporated for this purpose and has not engaged in activities prior to the date hereof except in preparation for its corporate reorganization (including activities with respect to the Apergy Financing Arrangements) and the distribution of its stock;

WHEREAS, Dover and Apergy have determined that it is necessary and desirable, at or prior to the Effective Time, to allocate, transfer or assign the Apergy Assets and Apergy Liabilities to the Apergy Group, and to allocate, transfer or assign the Dover Assets and Dover Liabilities to the Dover Group;

WHEREAS, the Parties intend that the Distribution, together with certain related transactions, generally will qualify as tax-free for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”), that other transactions connected with the Separation will also qualify as tax-free for U.S. federal income tax purposes under applicable provisions of the Code and that this Agreement is intended to be, and is hereby adopted as, a plan of reorganization under Section 368 of the Code to the extent relevant for these transactions; and


WHEREAS, the Parties intend in this Agreement to set forth the principal arrangements between them with respect to the Separation and Distribution and that certain other agreements will govern certain other matters following the Effective Time.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.1 General. As used in this Agreement, the following capitalized terms shall have the following meanings:

(1) “AAA” shall have the meaning set forth in Section 8.2.

(2) “Action” shall mean any demand, action, claim, charge, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any kind by or before any Governmental Entity or any arbitration or mediation tribunal.

(3) “Affiliate” shall mean, when used with respect to a specified Person, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purposes of this definition and the definition of “Subsidiary”, “control” (including the correlative meanings “controlled by” and “under common control with”), when used with respect to any specified Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by Contract or otherwise. From and after the Effective Time, and for purposes of this Agreement and the Ancillary Agreements, no Party or member of its Group shall be deemed to be an Affiliate of the other Party or such other Party’s Group solely by reason of having one or more directors in common or by reason of having been under common control of Dover or Dover’s stockholders prior to, or in the case of Dover’s stockholders, after, the Effective Time.

(4) “Agent” shall mean the distribution agent to be appointed by Dover to distribute to the stockholders of Dover all of the outstanding shares of Apergy Common Stock pursuant to the Distribution.

(5) “Agreement” shall have the meaning set forth in the preamble hereof.

(6) “Agreement Disputes” shall have the meaning set forth in Section 8.1(a).

(7) “Amended Financial Reports” shall have the meaning set forth in Section 5.3(b).

 

2


(8) “Apergy” shall have the meaning set forth in the preamble hereto.

(9) “Apergy Accounts” shall have the meaning set forth in Section 2.5(a).

(10) “Apergy Assets” shall mean only the following Assets (without duplication):

(i) the ownership interests (to the extent held by Dover, Apergy or any of their respective Affiliates immediately prior to the Effective Time) in each member of the Apergy Group;

(ii) all Apergy Contracts and any rights or claims (whether accrued or contingent) of Dover, Apergy, or any of their respective Affiliates, arising thereunder;

(iii) all Assets owned, leased or held by Dover, Apergy, or any of their respective Affiliates immediately prior to the Effective Time that are used exclusively or held for use exclusively in the Apergy Business, including inventory, accounts receivable, goodwill, and all Assets reflected on the Apergy Balance Sheet, or the accounting records supporting such balance sheet (including accounts receivable outstanding as of the Distribution Date but excluding cash and cash equivalents, the allocation of which shall be governed by Section 2.5) and any Assets acquired by or for the Apergy Business subsequent to the date of such balance sheet which, had they been so acquired on or before such date and owned as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any disposition of any of the foregoing Assets subsequent to the date of such balance sheet;

(iv) subject to Article IX, any rights of any member of the Apergy Group under any Third Party Shared Policies to the extent related to the Apergy Business;

(v) all Apergy Accounts, and, subject to the provisions of Section 2.5, all cash, cash equivalents, and securities on deposit in such accounts immediately prior to the Effective Time, after giving effect to any withdrawal by, or other distribution of cash to, Dover or any member of the Dover Group which may occur at or prior to the Effective Time;

(vi) the portion of any Shared Contract that relates to the Apergy Business; and

(vii) the Assets listed or described on Schedule 1.1(10)(vii) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, or assigned or transferred to, any member of the Apergy Group.

 

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Notwithstanding the foregoing, the Apergy Assets shall in no event include:

(A) the Assets listed or described on Schedule 1.1(42)(v); or

(B) any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, transferred or assigned to, any member of the Dover Group.

(11) “Apergy Balance Sheet” shall mean the balance sheet of the Apergy Business, as of December 31, 2017 that is included in the Information Statement; provided that to the extent any Assets or Liabilities are Transferred by any Party or any member of its Group to Apergy or any member of the Apergy Group or vice versa in connection with the Separation and Reorganization and prior to the Distribution Date, such Assets and/or Liabilities shall be deemed to be included or excluded from the Apergy Balance Sheet, as the case may be.

(12) “Apergy Business” shall mean:

(i) the businesses and operations of those portions of Dover’s upstream energy businesses within its Energy segment (but, for the avoidance of doubt, excluding the Retained Energy Businesses) conducted by the Apergy Group as of the Distribution Date, as such businesses and operations are further described in the Information Statement; and

(ii) the businesses and operations of Business Entities acquired or established by or for any member of the Apergy Group after the Effective Time.

(13) “Apergy Common Stock” shall have the meaning set forth in the recitals hereto.

(14) “Apergy Contracts” shall mean the following Contracts to which any Party or any of its Subsidiaries or Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is bound, except for any such Contract or part thereof that is expressly contemplated not to be transferred or assigned by any member of the Dover Group to any member of the Apergy Group pursuant to any provision of this Agreement or any Ancillary Agreement:

(i) any Contract that relates exclusively to the Apergy Business;

(ii) any Contract or part thereof that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be retained by, transferred or assigned to, any member of the Apergy Group; and

(iii) the Contracts listed or described on Schedule 1.1(14).

(15) “Apergy Disclosure” shall mean any form, statement, schedule or other material (other than the Distribution Disclosure Documents) filed with or furnished to the Commission, any other Governmental Entity, or holders of any securities of any member of the Apergy Group, in each case, on or after the Distribution Date by or on behalf of any member of the Apergy Group in connection with the registration, sale, or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

 

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(16) “Apergy Employee” shall have the meaning set forth in the Employee Matters Agreement.

(17) “Apergy Financing Arrangements” shall mean the financing arrangements described on Schedule 1.1(17).

(18) “Apergy General Liability Policies” shall have the meaning set forth in Section 9.1.

(19) “Apergy Group” shall mean Apergy and each Person identified on Schedule 1.1(19), and each Person who is or becomes an Affiliate of Apergy at or after the Effective Time.

(20) “Apergy Indemnitees” shall mean each member of the Apergy Group and each of their respective Affiliates from and after the Effective Time, and each of their respective current and former directors, officers, managers, employees and agents (in each case, in their respective capacities as such) and each of the heirs, administrators, executors, successors and assigns of any of the foregoing.

(21) “Apergy Liabilities” shall mean all of the following Liabilities of either Party or any of its Subsidiaries:

(i) the Liabilities listed or described on Schedule 1.1(21)(i) and any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained, assumed or retired by any member of the Apergy Group;

(ii) any and all Liabilities of Dover, Apergy, or any of their respective Affiliates, to the extent relating to, arising out of or resulting from:

(A) the operation or conduct of the Apergy Business, as conducted at any time prior to, on or after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Dover, Apergy, or any of their respective Affiliates (whether or not such act or failure to act is or was within such Person’s authority));

(B) the operation or conduct of any business conducted by any member of the Apergy Group at any time after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Apergy or any of its Affiliates after the Effective Time (whether or not such act or failure to act is or was within such Person’s authority)); or

(C) any Apergy Assets (other than Liabilities arising under Shared Contracts to the extent such Liabilities are allocated to the Dover Group under Section 2.9(a)), whether arising before, on or after the Effective Time;

 

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(iii) any and all Liabilities to the extent relating to, arising out of or resulting from any Former Business formerly owned or managed by, or associated with any member of the Apergy Group or any of the Apergy Business (including those Former Businesses listed and described on Schedule 1.1(21)(iii));

(iv) any and all Liabilities (including under applicable federal and state securities Laws) relating to, arising out of or resulting from:

(A) the Distribution Disclosure Documents, except to the extent specifically enumerated as a Dover Liability on Schedule 1.1(50)(iv)(A);

(B) any Pre-Separation Disclosure, but only to the extent such Liabilities arise out of or result from matters related to the Apergy Business; and

(C) any Apergy Disclosure;

(v) any and all Liabilities to the extent relating to, arising out of or resulting from (x) the Apergy Financing Arrangements or (y) any other Indebtedness of any member of the Apergy Group (whether incurred prior to, on or after the Effective Time);

(vi) any and all Liabilities relating to, resulting from, or arising out of any Action (x) listed or described on Schedule 1.1(21)(vi) or (y) to the extent such Action relates to, results from, or arises out of the Apergy Business, the Apergy Assets or the other Apergy Liabilities;

(vii) any and all Liabilities of the guarantor under the guarantees and obligations of the obligor under letters of credit listed or described on Schedule 2.12(b);

(viii) all Liabilities reflected as Liabilities or obligations on the Apergy Balance Sheet or on the accounting records supporting such balance sheet, and all Liabilities arising or assumed after the date of such balance sheet which, had they arisen or been assumed on or before such date and been retained as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any discharge of such Liabilities subsequent to the date of the Apergy Balance Sheet; it being understood that (x) the Apergy Balance Sheet and the accounting records supporting such balance sheet shall be used to determine the types of, and methodologies used to determine, those Liabilities that are included in the definition of Apergy Liabilities pursuant to this subclause (viii); and (y) the amounts set forth on the Apergy Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of Apergy Liabilities pursuant to this subclause (viii);

(ix) any and all obligations of an insured Person under each Third Party Shared Policy to the extent related to or arising out of the Apergy Business; and

(x) any and all Liabilities of any Business Entity that, following the Distribution, will be owned, directly or indirectly, by Apergy, except for those Liabilities retained or assumed by a member of the Dover Group pursuant to the Reorganization Documents.

 

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Notwithstanding the foregoing, the Apergy Liabilities shall in no event include any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the schedules hereto or thereto) as Liabilities to be retained or assumed by any member of the Dover Group, including any Liabilities set forth on Schedule 1.1(50)(i), or for which any member of the Dover Group is liable pursuant to this Agreement or such Ancillary Agreement.

(22) “Ancillary Agreements” shall mean all of the written Contracts or other arrangements (other than this Agreement and other than any Contract to which a Third Party is a party) entered into by any member of the Dover Group, on the one hand, and any member of the Apergy Group, on the other hand, in connection with the Separation, the Distribution or the other transactions contemplated hereby, including the Transfer Documents, the Reorganization Documents, the Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement and the Continuing Arrangements.

(23) “Assets” shall mean assets, properties, claims and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible or intangible, whether accrued, contingent or otherwise, in each case whether or not recorded or reflected or required to be recorded or reflected on the Records or financial statements of any Person, including the following:

(i) all accounting and other legal and business books, records, ledgers and files, whether printed, electronic or written;

(ii) all apparatus, IT Equipment, computers and other electronic data processing and communications equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks and other transportation equipment, special and general tools, test devices, prototypes and models and other tangible personal property;

(iii) all inventories of products, goods, materials, parts, raw materials, components, works-in-process and supplies;

(iv) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;

(v) all interests in any capital stock or other equity interests of any Subsidiary or any other Person, all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person, all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person and all other investments in securities of any Person;

(vi) all Contracts and any rights, benefits or claims (whether accrued or contingent) arising under any Contracts;

 

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(vii) all license agreements, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products, and other contracts, agreements or commitments;

(viii) all deposits, letters of credit and performance and surety bonds;

(ix) all written (including in electronic form) or oral technical information, data, specifications, research and development information, engineering drawings and specifications, operating and maintenance manuals, and materials and analyses (including those prepared by consultants and other Third Parties);

(x) all Intellectual Property;

(xi) all Software;

(xii) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product data and literature, artwork, design, formulations, development and business process files and data, vendor and customer drawings, specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents;

(xiii) all prepaid expenses, trade accounts and other accounts and notes receivables;

(xiv) all claims or rights against any Person, whether sounding in tort, contract or otherwise, whether accrued or contingent, including claims or rights against any Person arising from the ownership of any asset, including, to the extent transferrable, all rights against Third Parties with respect to indemnification;

(xv) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution;

(xvi) all licenses, permits, franchises, concessions, certificates, consents, exemptions, approvals, variances, registrations and authorizations which have been issued by any Governmental Entity;

(xvii) all cash or cash equivalents, bank accounts, brokerage accounts, lock boxes and other deposit arrangements; and

(xviii) all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar Contracts or arrangements.

Except as otherwise specifically set forth herein, in the Tax Matters Agreement, the Employee Matters Agreement or another Ancillary Agreement, the rights and obligations of the Parties with respect to Taxes shall be governed by the Tax Matters Agreement or the Employee Matters Agreement, and, therefore, any Tax assets shall not be treated as Assets.

 

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(24) “Audited Party” shall have the meaning set forth in Section 5.3(a)(2).

(25) “Business” shall mean the Apergy Business or the Dover Business, as applicable.

(26) “Business Day” shall mean any day that is not a Saturday, a Sunday or any other day on which banks are required or authorized by Law to be closed in New York, New York.

(27) “Business Entity” shall mean any corporation, partnership, trust, limited liability company, joint venture, or other incorporated or unincorporated organization or other entity of any kind or nature (including those formed, organized or otherwise existing under the Laws of jurisdictions outside the United States).

(28) “Claims Administration” shall mean the administration of claims made under the Third Party Shared Policies, including the reporting of losses or claims to the unaffiliated, Third Party insurance carriers that issued the Third Party Shared Policies, management and defense of such claims, negotiating the resolution of such claims, and providing for appropriate releases upon settlement of such claims.

(29) “Code” shall have the meaning set forth in the recitals hereto.

(30) “Commission” shall mean the United States Securities and Exchange Commission or any successor agency thereto.

(31) “Confidential Information” shall mean non-public, confidential or proprietary business, operations or other Information, data or material to the extent concerning a Party and/or its Affiliates which, prior to or following the Effective Time, has been disclosed by a Party or its Affiliates to the other Party or its Affiliates, in written, oral (including by recording), electronic, or visual form to, or otherwise has come into the possession of, the other, including pursuant to the access provisions of Section 7.2 or Section 7.3 or any other provision of this Agreement or any Ancillary Agreement, including (a) any and all technical information relating to the design, operation, testing, test results, development, and manufacture of any Party’s product; product costs, margins and pricing; as well as product marketing studies and strategies; all other know-how, methodology, procedures, techniques and trade secrets related to research, engineering, development and manufacturing; and (b) information, documents and materials relating to such Party’s financial condition, management and other business conditions, prospects, plans, procedures, infrastructure, security, information technology procedures and systems, and other business or operational affairs; (except to the extent that such information can be shown to have been (i) in the public domain through no fault of such Party or its Affiliates or (ii) lawfully acquired after the Effective Time from other sources by such Party or its Affiliates to which it was furnished; provided, however, that in the case of clause (ii) to the furnished Party’s knowledge, such sources did not provide such information in breach of any confidentiality or fiduciary obligations).

(32) “Consents” shall mean any consents, waivers or approvals from, or notification requirements to, any Person other than a Governmental Entity.

 

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(33) “Continuing Arrangements” shall mean those arrangements set forth on Schedule 1.1(33) and such other commercial arrangements between one or more members of the Dover Group, on the one hand, and one or more members of the Apergy Group, on the other hand, that are expressly intended in this Agreement or any Ancillary Agreement to survive and continue following the Effective Time.

(34) “Contract” shall mean any contract, obligation, indenture, instrument, agreement, lease, purchase order, commitment, permit, license, note, bond, mortgage, arrangement or undertaking (whether written or oral and whether express or implied) that is legally binding on any Person or any part of its property under applicable Law, but excluding this Agreement and any Ancillary Agreement except as otherwise expressly provided in this Agreement or any Ancillary Agreement.

(35) “Contribution” shall mean the contribution of certain Apergy Assets and members of the Apergy Group to Apergy in exchange for Apergy Common Stock and the assumption of certain Apergy Liabilities.

(36) “Dispute Notice” shall have the meaning set forth in Section 8.1(a).

(37) “Distribution” shall mean the distribution by Dover of all of the issued and outstanding shares of Apergy Common Stock to holders of record of shares of Dover Common Stock as of the Record Date on the basis of one share of Apergy Common Stock for every two issued and outstanding shares of Dover Common Stock.

(38) “Distribution Date” shall mean the date of the consummation of the Distribution, which shall be determined by the Board of Directors of Dover in its sole discretion.

(39) “Distribution Disclosure Documents” shall mean the Form 10 and all exhibits thereto (including the Information Statement), any current reports on Form 8-K and the registration statement on Form S-8 related to securities to be offered under Apergy’s employee benefit plans, in each case as filed or furnished by Apergy with the Commission in connection with the Distribution and including any amendments or supplements thereto.

(40) “Dover” shall have the meaning set forth in the preamble hereof.

(41) “Dover Accounts” shall have the meaning set forth in Section 2.5(a).

(42) “Dover Assets” shall mean (without duplication) any and all Assets of the Parties or their respective Affiliates as of the Effective Time that are not Apergy Assets, and any and all Assets that are acquired or otherwise become Assets of any member the Dover Group after the Effective Time, which shall include, without limiting the generality of the foregoing, the following:

(i) the ownership interests (to the extent held by Dover, Apergy or any of their respective Affiliates immediately prior to the Effective Time) in each member of the Dover Group;

 

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(ii) all Contracts to which Dover, Apergy or any of their Affiliates is a party or by which they or any of their respective Affiliates or any of their respective Assets are bound and any rights or claims (whether accrued or contingent) of Dover, Apergy, or any of their respective Affiliates arising thereunder, in each case, other than the Apergy Contracts;

(iii) subject to Article IX, any and all rights of any member of the Dover Group under any Third Party Shared Policies to the extent related to the Dover Business;

(iv) any and all work papers of Dover’s auditors and any Tax records (including accounting records) of any member of the Dover Group (which will be addressed in the Tax Matters Agreement);

(v) the Assets listed or described on Schedule 1.1(42)(v) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by, or assigned or transferred to, any member of the Dover Group;

(vi) all Dover Accounts, and, subject to the provisions of Section 2.5, all cash, cash equivalents, and securities on deposit in such accounts immediately prior to the Effective Time, including the Financing Cash Payment, and any cash or cash equivalents withdrawn from Apergy Accounts in accordance with Section 2.5(e); and

(vii) any collateral securing any Dover Liability immediately prior to the Effective Time.

(43) “Dover Business” shall mean:

(i) all businesses, operations and activities conducted at any point in time by the members of the Dover Group and conducted prior to the Effective Time by the members of the Apergy Group (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued), including for the avoidance of doubt (x) the Retained Energy Businesses and (y) the businesses, operations and activities of the Engineered Systems, Fluids and Refrigeration & Food Equipment operating segments, as described in Dover’s Form 10-K, in each case, other than the Apergy Business; and

(ii) the businesses, operations and activities of Business Entities acquired or established by or for any member of the Dover Group after the Effective Time.

(44) “Dover Common Stock” shall mean the issued and outstanding shares of common stock, par value $1.00 per share, of Dover.

(45) “Dover Disclosure” shall mean any form, statement, schedule or other material (other than the Distribution Disclosure Documents) filed with or furnished to the Commission, any other Governmental Entity, or holders of any securities of any member of the Dover Group, in each case, on or after the Effective Time by or on behalf of any member of the Dover Group in connection with the registration, sale or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

 

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(46) “Dover Employee” shall have the meaning set forth in the Employee Matters Agreement.

(47) “Dover Group” shall mean (i) Dover and each of its Subsidiaries immediately following the Effective Time and (ii) each other Person who is or becomes an Affiliate of Dover at or after the Effective Time, in each case, for the avoidance of doubt, other than the members of the Apergy Group.

(48) “Dover Indemnitees” shall mean each member of the Dover Group and each of their respective Affiliates from and after the Effective Time, and each of their respective current and former directors, officers, managers, employees and agents (in each case, in their respective capacities as such) and each of the heirs, administrators, executors, successors and assigns of any of the foregoing, except the Apergy Indemnitees.

(49) “Dover LCs” shall have the meaning set forth in Section 2.12(e).

(50) “Dover Liabilities” shall mean:

(i) the Liabilities listed or described on Schedule 1.1(50)(i) and any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained, assumed or retired by any member of the Dover Group;

(ii) any and all Liabilities of Dover, Apergy, or any of their respective Affiliates, to the extent relating to, arising out of or resulting from:

(A) the operation or conduct of the Dover Business, as conducted at any time prior to, on or after the Effective Time (including any Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Dover, Apergy, or any of their respective Affiliates (whether or not such act or failure to act is or was within such Person’s authority) with respect to the Dover Business);

(B) the operation or conduct of any business conducted by any member of the Dover Group at any time after the Effective Time (including any Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of Dover or any of its Affiliates after the Effective Time (whether or not such act or failure to act is or was within such Person’s authority) with respect to the Dover Business); or

(C) any Dover Assets (other than Liabilities arising under Shared Contracts to the extent such Liabilities are allocated to the Apergy Group under Section 2.9(a)), whether arising before, on or after the Effective Time;

 

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(iii) any and all Liabilities to the extent relating to, arising out of or resulting from any Former Business formerly owned or managed by, or associated with, any member of the Dover Group or any of the Dover Businesses, other than those Former Businesses described on Schedule 1.1(21)(iii);

(iv) any and all Liabilities (including under applicable federal and state securities Laws) relating to, arising out of or resulting from:

(A) a material misstatement or omission contained in the sections of the Distribution Disclosure Documents described in Schedule 1.1(50)(iv)(A) hereto;

(B) any Pre-Separation Disclosure, but only to the extent such Liabilities arise out of, or result from, matters related to the Dover Business; and

(C) any Dover Disclosure;

(v) any and all Liabilities to the extent relating to, arising out of or resulting from any Indebtedness of any member of the Dover Group (whether incurred prior to, on or after the Effective Time), other than any Indebtedness relating to the Apergy Financing Arrangements;

(vi) any and all Liabilities relating to, arising out of or resulting from any Action to the extent such Action relates to, results from, or arises out of, the Dover Business, the Dover Assets or any of the other Dover Liabilities;

(vii) any and all Liabilities of the guarantor under the guarantees and obligations of the obligor under letters of credit listed or described on Schedule 2.12(a); and

(viii) any and all obligations of an insured Person under each Third Party Shared Policy to the extent related to or arising out of the Dover Business.

Notwithstanding the foregoing, the Dover Liabilities shall in no event include any Liabilities (including Liabilities under Apergy Contracts and Apergy Liabilities) that are expressly contemplated by this Agreement or any Ancillary Agreement (or the schedules hereto or thereto) as Liabilities to be retained or assumed by any member of the Apergy Group, including any Liabilities set forth on Schedule 1.1(21)(i), or for which any member of the Apergy Group is liable pursuant to this Agreement or such Ancillary Agreement.

(51) “Effective Time” shall mean the time at which the Distribution is effective on the Distribution Date.

(52) “Employee Matters Agreement” shall mean the Employee Matters Agreement by and between Dover and Apergy, dated as of the date hereof and substantially in the form attached as Exhibit A hereto.

 

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(53) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time that reference is made thereto.

(54) “Financing Cash Payment” shall mean the cash payment made from Apergy to Dover in connection with the Apergy Financing Arrangements as further described on Schedule 1.1(54).

(55) “Form 10” shall mean the registration statement on Form 10 filed by Apergy with the Commission to effect the registration of the Apergy Common Stock pursuant to the Exchange Act in connection with the Distribution and all amendments or supplements thereto.

(56) “Form 10-K” shall mean the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed by Dover and all amendments thereto.

(57) “Former Business” shall mean any Business Entity, division, real estate, facility, material Asset, business unit or business, including any business within the definition of Rule 11-01(d) of Regulation S-X promulgated under the Exchange Act (in each case, including any Assets and Liabilities comprising the same) that has been sold, conveyed, assigned, transferred or otherwise disposed of or divested (in whole or in part) or the operations, activities or production of which has been discontinued, abandoned, completed or otherwise terminated (in whole or in part), in each case, prior to the Effective Time.

(58) “GAAP” shall mean United States generally accepted accounting principles.

(59) “Governmental Approvals” shall mean any notices or reports to be submitted to, or other filings to be made with or submitted to, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Entity.

(60) “Governmental Entity” shall mean any nation or government, any state, municipality or other political subdivision thereof and any entity, body, agency, commission, department, board, bureau or court, whether domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any official thereof, including the NYSE and any similar self-regulatory body under applicable securities Laws.

(61) “Group” shall mean either the Apergy Group or the Dover Group, as the context requires.

(62) “Guaranty Release” shall have the meaning set forth in Section 2.12(b).

(63) “Indebtedness” shall mean (i) any indebtedness for borrowed money, whether short term or long term, including all obligations evidenced by notes, debentures, bonds or other debt securities or similar instruments, (ii) obligations as lessee under capital leases (excluding, for the avoidance of doubt, any real estate leases), whether short term or long term (provided, however, that for purposes of determining the amount of Indebtedness with respect to

 

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this clause (ii), no effect shall be given to any change in accounting for leases pursuant to GAAP resulting from the implementation of Financial Accounting Standards Board ASU No. 2016-02, Leases (Topic 842) to the extent such adoption would require treating any lease (or similar arrangement) as a capital lease where such lease (or similar arrangement) would not have been required to be so treated under GAAP as in effect as of the date hereof), (iii) obligations secured by any mortgage, pledge, security interest, encumbrance, lien or charge of any kind existing on any asset owned or held by any Person, whether or not such Person has assumed or become liable for the obligations secured thereby, (iv) any obligation under any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, or other similar agreement designed to protect such Person against fluctuations in interest rates or other hedging arrangements, (v) all liabilities under any surety and performance bonds, letters of credit, bankers acceptances or similar arrangements, (vi) all interest bearing indebtedness for the deferred purchase price of property or services, (vii) all principal, prepayment and redemption premiums and penalties (if any), interest, fees, expenses, and other monetary obligations owed with respect to indebtedness described in the foregoing clauses (i) through (vii) above and (viii) obligations under direct or indirect guarantees of (including obligations, contingent or otherwise, to assure a creditor against loss in respect of) indebtedness or obligations of the kinds referred to in clauses (i) through (vii) above.

(64) “Indemnifiable Loss” and “Indemnifiable Losses” shall mean any and all damages, losses, deficiencies, Liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including costs and expenses provided for in Section 10.5(c) and the costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder).

(65) “Indemnifying Party” shall have the meaning set forth in Section 6.4(b).

(66) “Indemnitee” shall have the meaning set forth in Section 6.4(b).

(67) “Indemnity Payment” shall have the meaning set forth in Section 6.7(a).

(68) “Information” shall mean information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

(69) “Information Statement” shall mean the Information Statement attached as an exhibit to the Form 10 sent to the holders of shares of Dover Common Stock in connection with the Distribution, including any amendment or supplement thereto.

 

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(70) “Insurance Administration” shall mean, with respect to each Third Party Shared Policy: (i) the accounting for premiums, retrospectively-rated premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate, under the terms and conditions of such Third Party Shared Policy, (ii) discussions or negotiations with Third Party insurers and the control of any Actions relating to such Third Party Shared Policy, (iii) the reporting to excess insurance carriers of any losses or claims that may cause the per-occurrence, per claim or aggregate limits of such Third Party Shared Policy to be exceeded, (iv) the reporting to the relevant unaffiliated Third Party insurer that issues such Third Party Shared Policy of any losses or claims which may be covered by such Third Party Shared Policy and (v) the distribution of Insurance Proceeds related to such Third Party Shared Policy, subject to the terms of Article IX.

(71) “Insurance Proceeds” shall mean those monies (i) received by an insured from an unaffiliated Third Party insurer under any Third Party Shared Policy, or (ii) paid by such Third Party insurer on behalf of an insured under any Third Party Shared Policy, in either case net of any costs or expenses incurred in the collection thereof to the extent such adjustment is demonstrably related to such proceeds and net of any applicable premium adjustments (including reserves and retrospectively-rated premium adjustments) deductibles, retentions, or costs of reserve paid or held by or for the benefit of such insured.

(72) “Insured Claims” shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Third Party Shared Policies, whether or not subject to deductibles, co-insurance, uncollectibility, exhaustion of limits, or retrospectively-rated premium adjustments.

(73) “Intellectual Property” shall mean all intellectual property and industrial property rights of any kind or nature, including all United States and foreign (i) patents, patent applications, patent disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) Trademarks, (iii) copyrights and copyrightable subject matter, whether statutory or common law, registered or unregistered and published or unpublished, (iv) rights of publicity, (v) moral rights and rights of attribution and integrity, (vi) rights in Software, (vii) trade secrets and all other confidential and proprietary information, know-how, inventions, improvements, processes, formulae, models and methodologies, (viii) rights to personal information, (ix) telephone numbers and internet protocol addresses, (x) applications and registrations for the foregoing, and (xi) rights and remedies against past, present, and future infringement, misappropriation, or other violation of the foregoing.

(74) “Intercompany Accounts” shall mean any receivable, payable, loan or other intercompany balance (including in respect of any cash balances, any cash balances representing deposited checks or drafts or any cash held in any centralized cash management system) between any member of the Dover Group, on the one hand, and any member of the Apergy Group, on the other hand, that is reflected in the Records of the relevant members of the Dover Group and the Apergy Group, except for any such receivable, payable, loan or intercompany balance that arises pursuant to this Agreement, any Ancillary Agreement or any Continuing Arrangement.

 

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(75) “Internal Control Audit and Management Assessments” shall have the meaning set forth in Section 5.3(a)(1).

(76) “IT Equipment” shall mean all computers, servers, printers, computer hardware, wired or mobile telephones, on-site process control and automation systems, telecommunication assets, and other information technology-related equipment.

(77) “Law” shall mean any applicable United States or non-United States federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, income tax treaty, order, requirement or rule of law (including common law) or other binding directives promulgated, issued, entered into or taken by any Governmental Entity.

(78) “Liabilities” shall mean all obligations, responsibilities, response actions, losses, damages (whether compensatory, punitive, consequential, incidental, treble or other), fines, penalties and sanctions, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, reserved or unreserved, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, determined or determinable, whenever and however arising, including those arising under or in connection with any Law or other pronouncements of Governmental Entities having the effect of Law, Actions, threatened Actions, order or consent decree of any Governmental Entity or any award of any arbitration tribunal, and those arising under any Contract, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys’ fees, disbursements and expenses of counsel, expert and consulting fees and costs related thereto or to the investigation or defense thereof, and whether or not the same would be required by GAAP and accounting policies to be reflected in financial statements or disclosed in the notes thereto. Except as otherwise specifically set forth herein, in the Tax Matters Agreement, the Employee Matters Agreement or other Ancillary Agreement, as applicable, the rights and obligations of the Parties with respect to Taxes shall be governed by the Tax Matters Agreement or the Employee Matters Agreement, as applicable, and, therefore, Taxes shall not be treated as Liabilities.

(79) “Liable Party” shall have the meaning set forth in Section 2.11(b).

(80) “New York Courts” shall have the meaning set forth in Section 10.19.

(81) “NYSE” shall mean the New York Stock Exchange.

(82) “Other Parties’ Auditors” shall have the meaning set forth in Section 5.3(a)(2).

(83) “Other Party Marks” shall have the meaning set forth in Section 5.2(a).

(84) “Party” shall have the meaning set forth in the preamble hereof.

(85) “Person” shall mean any (i) individual, (ii) Business Entity or Governmental Entity.

 

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(86) “Policies” shall mean insurance policies and insurance Contracts of any kind (other than life and benefits policies or Contracts), including primary, excess and umbrella policies, commercial general liability policies, punitive damages liability, cyber liability, director and officer liability, fiduciary liability, automobile, aircraft, property and casualty, terrorism, business interruption, workers’ compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder.

(87) “Pre-Separation Disclosure” shall mean any form, statement, schedule or other material (other than the Distribution Disclosure Documents) that Dover, Apergy, or any of their respective Affiliates filed with or furnished to the Commission, any other Governmental Entity, or holders of any securities of Dover or any of its Affiliates, in each case, prior to the Effective Time and in connection with the registration, sale, or distribution of securities or disclosure related thereto (including periodic disclosure obligations).

(88) “Prime Rate” shall mean the rate per annum publicly announced by JPMorgan Chase Bank (or any successor thereto or other major money center commercial bank agreed to by the Parties) from time to time as its prime lending rate, as in effect from time to time.

(89) “Privileged Information” shall mean any information, in written, oral, electronic or other tangible or intangible forms, including any communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), as to which a Party or any member of its Group would be entitled to assert or have a privilege, including the attorney-client, attorney work product privileges, the tax practitioner privilege and any privilege relating to internal evaluation processes.

(90) “Record Date” shall mean the date to be determined by the Board of Directors of Dover in its sole discretion as the record date for the Distribution.

(91) “Records” shall mean any Contracts, documents, corporate, operational, accounting and other books and records, files, data, correspondence, studies, surveys, reports and other data (in each case whether in written or electronic format), including all title records, prospect information, title opinions, title insurance reports, abstracts, property ownership reports, customer lists, supplier lists, sales materials, and reports, health, environmental and safety information and records, Third Party licenses, accounting and financial records, promotional materials, operational records, technical records, reserve estimates and economic estimates; production and processing records, division order, lease and files, accounting files and Tax records (other than income Tax).

(92) “Reorganization” shall have the meaning set forth in the recitals hereto.

(93) “Reorganization Documents” shall have the meaning set forth in Section 3.1.

(94) “Reorganization Step Plan” shall have the meaning set forth in Section 3.1.

 

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(95) “Retained Energy Businesses” shall mean all businesses, operations and activities of the Bearings and Compression and Tulsa Winch Group (TWG) businesses as well as any businesses, operations and activities of the Energy operating segment (as described in Dover’s Form 10-K) of Dover as of the Distribution Date that are not conducted by the Apergy Group as of the Distribution Date (but immediately after giving effect to the Distribution).

(96) “Rules” shall have the meaning set forth in Section 8.2.

(97) “Security Interest” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever, excluding restrictions on transfer under securities Laws.

(98) “Separation” shall have the meaning set forth in the recitals hereto.

(99) “Shared Contracts” shall mean (i) the Contracts listed on Schedule 1.1(99) and (ii) the Contracts entered into prior to the Effective Time to which either Party or any of its respective Subsidiaries and one or more Third Parties are a party that inures to the benefit or burden of both the Apergy Business and the Dover Business.

(100) “Shared Contractual Liabilities” shall mean Liabilities in respect of Shared Contracts.

(101) “Software” shall mean all computer programs (whether in source code, object code, or other form), algorithms, databases, compilations and data, and technology supporting the foregoing, and all documentation, including flowcharts and other logic and design diagrams, technical, functional and other specifications, and user manuals and training materials related to any of the foregoing.

(102) “Subsidiary” shall mean with respect to any Person (i) a corporation, fifty percent (50%) or more of the voting or capital stock of which is, as of the time in question, directly or indirectly owned by such Person and (ii) any other Business Entity in which such Person, directly or indirectly, owns fifty percent (50%) or more of the equity or economic interest thereof or has the power to elect or direct the election of fifty percent (50%) or more of the members of the governing body of such entity or otherwise has control over such entity (e.g., as the managing partner of a partnership).

(103) “Tax” shall have the meaning set forth in the Tax Matters Agreement.

(104) “Tax Matters Agreement” shall mean the Tax Matters Agreement by and between Dover and Apergy, dated as of the date hereof, and substantially in the form attached as Exhibit B hereto.

(105) “Tax Return” shall have the meaning set forth in the Tax Matters Agreement.

(106) “Third Party” shall mean any Person other than the Parties or any of their respective Subsidiaries.

 

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(107) “Third Party Claim” shall have the meaning set forth in Section 6.4(b).

(108) “Third Party Shared Policies” shall mean all Policies, whether or not in force at the Effective Time, issued by unaffiliated Third Party insurers to Dover, Apergy, or any of their respective Affiliates, which cover risks that relate to both the Dover Business and the Apergy Business.

(109) “Trademarks” shall mean all United States and foreign trademarks, service marks, corporate names, trade names, domain names, logos, slogans, designs, trade dress and other similar designations of source or origin, whether registered or unregistered, together with the goodwill symbolized by any of the foregoing.

(110) “Transfer” shall have the meaning set forth in Section 2.2(a)(i).

(111) “Transfer Documents” shall mean, collectively, the various Contracts and other documents entered into and to be entered into to effect the transfer of Assets and the assumption of Liabilities in the manner contemplated by this Agreement (including as contemplated by the Reorganization Step Plan), or otherwise relating to, arising out of or resulting from the transactions contemplated by this Agreement (other than the Ancillary Agreements), each of which shall be in such form and dated as of such date as Dover shall determine in its sole discretion.

(112) “Transferred Entities” shall have the meaning set forth in Section 2.2(a)(i).

(113) “Transition Services Agreement” shall mean the Transition Services Agreement by and between Dover and Apergy, dated as of the date hereof, and substantially in the form attached as Exhibit C hereto.

(114) “Wholly Owned Subsidiary” shall mean, with respect to any Person, any Subsidiary of such Person if all of the common stock or other similar equity ownership interests (but not including non-voting preferred stock) in such Subsidiary (other than any director’s qualifying shares or investments by foreign nationals mandated by applicable Law) is owned directly or indirectly by such Person.

Section 1.2 References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Any action to be taken by the Board of Directors of a Party may be taken by a committee of the Board of Directors of such Party if properly delegated by the Board of Directors of a Party to such committee. Unless the context otherwise requires:

(i) the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation”;

(ii) references in this Agreement to Articles, Sections, Annexes, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement;

 

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(iii) the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement;

(iv) the words “written request” when used in this Agreement shall include email;

(v) references in this Agreement to any time shall be to New York City, New York time unless otherwise expressly provided herein; and

(vi) as described in Section 10.1, to the extent that the terms and conditions of any Schedule hereto conflict with the express terms of the body of this Agreement or any Ancillary Agreement, the terms of such Schedule shall control; it being understood that the Parties intend to include in the Schedules hereto any exceptions to the general rules described in the body of this Agreement and to give full effect to such exceptions, with respect to the matters expressly set forth therein.

Section 1.3 Effective Time. This Agreement shall be effective as of the Effective Time.

Section 1.4 Other Matters. As described in more detail in, but subject to the terms and conditions of, Section 10.1 and Section 10.2, the Tax Matters Agreement, the Employee Matters Agreement and the Transition Services Agreement will govern Dover’s and Apergy’s respective rights, responsibilities and obligations after the Distribution with respect to the matters set forth in such Ancillary Agreement, except as expressly set forth in this Agreement or any other Ancillary Agreement.

ARTICLE II

THE SEPARATION

Section 2.1 General. Subject to the terms and conditions of this Agreement, including Section 4.4, the Parties shall use, and shall cause their respective Affiliates to use, their respective commercially reasonable efforts to consummate the transactions contemplated hereby, a portion of which may have already been implemented prior to the date hereof. It is the intent of the Parties that prior to consummation of the Distribution, the Parties shall complete the Reorganization such that immediately following the consummation of such reorganization, subject to Section 2.7 and the provisions of any Ancillary Agreement, (i) all of Dover’s and its Subsidiaries’ right, title and interest in and to the Apergy Assets will be owned or held by a member or members of the Apergy Group, the Apergy Business will be conducted by the members of the Apergy Group and the Apergy Liabilities will be assumed directly or indirectly by (or retained by) a member of the Apergy Group; and (ii) all of Dover’s and its Subsidiaries’ right, title and interest in and to the Dover Assets will be owned or held by a member or members of the Dover Group, the Dover Business will be conducted by the members of the Dover Group and the Dover Liabilities will be assumed directly or indirectly by (or retained by) a member of the Dover Group, except for such steps (if any) as Dover in its sole discretion shall have determined need not be completed or may be completed after the consummation of the

 

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Distribution; provided, however, that any such determination shall not limit the Parties’ respective obligations under Section 2.2 or Section 2.3. Further, it is the intent of the Parties that the assumption by Apergy of Apergy Liabilities is made in connection with the Separation, including the transfer of the Apergy Assets to Apergy in the Reorganization.

Section 2.2 Transfer of Assets.

(a) At or prior to the Effective Time and to the extent not already completed (it being understood that some of such Transfers may occur following the Effective Time in accordance with Section 2.7):

(i) Dover shall, and hereby does, on behalf of itself and the other members of the Dover Group, as applicable, transfer, contribute, assign, distribute, convey and/or deliver or cause to be transferred, contributed, assigned, distributed, conveyed and/or delivered (“Transfer”), to Apergy or another member of the Apergy Group, and Apergy or such other member of the Apergy Group shall and hereby does accept from Dover and the applicable members of the Dover Group, all of Dover’s and the other members of the Dover Group’s respective direct or indirect right, title and interest in and to the Apergy Assets, including all of the outstanding shares of capital stock or other ownership interests in the entities listed on Schedule 2.2(a)(i) (the “Transferred Entities”) (it being understood that if any Apergy Asset shall be held by a Subsidiary of a Transferred Entity, such Apergy Asset may be Transferred for all purposes hereunder as a result of the Transfer of the equity interests in such Transferred Entity to Apergy or another member of the Apergy Group); and

(ii) Apergy shall and hereby does, on behalf of itself and the other members of the Apergy Group, as applicable, Transfer to Dover or another member of the Dover Group, and Dover or such other member of the Dover Group shall and hereby does accept from Apergy and the applicable members of the Apergy Group, all of Apergy’s and the other members of the Apergy Group’s respective direct or indirect right, title and interest in and to the Dover Assets held by Apergy or a member of the Apergy Group.

(b) Unless otherwise agreed to by the Parties, each of Dover and Apergy, as applicable, shall be entitled to designate the Business Entity within such Party’s respective Group to which any Assets are to be transferred pursuant to Section 2.2(a) or Section 2.7.

Section 2.3 Assumption and Satisfaction of Liabilities. Except as otherwise specifically set forth in this Agreement or any Ancillary Agreement, from and after the Effective Time, (a) Dover shall, or shall cause another member of the Dover Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill, in accordance with their respective terms, all of the Dover Liabilities and (b) Apergy shall, or shall cause another member of the Apergy Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill, in accordance with their respective terms, all the Apergy Liabilities, in each case regardless of (i) when or where such Liabilities arose or arise, (ii) where or against whom such Liabilities are asserted or determined, (iii) whether arising from or alleged to arise from negligence, gross negligence, recklessness, violation of Law, willful misconduct, bad faith, fraud,

 

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misrepresentation or any other cause by any member of the Dover Group or the Apergy Group, as the case may be, or any of their past or present respective directors, officers, employees, or agents, (iv) which entity is named in any Action associated with any Liability and (v) whether the facts on which they are based occurred prior to, on or after the date hereof.

Section 2.4 Intercompany Accounts.

(a) Each Intercompany Account (other than those set forth on Schedule 2.4(a)) which exists and is reflected immediately prior to the Effective Time in any general ledger account or other Records of Dover, Apergy or any of their respective Affiliates, shall be satisfied and/or settled by the relevant members of the Dover Group and the Apergy Group no later than the Effective Time by (i) forgiveness by the relevant obligee, (ii) one or a related series of distributions of and/or contributions to capital, (iii) payment by the relevant obligor to the relevant obligee, or (iv) dividends or a combination of the foregoing, in each case as determined by Dover.

(b) With respect to any Intercompany Account that is set forth on Schedule 2.4(a) and any other Intercompany Account that is not satisfied or settled as described in Section 2.4(a) for any reason, such Intercompany Account shall continue to be outstanding after the Effective Time and thereafter (i) shall be an obligation of the relevant Party (or the relevant member of such Party’s Group), each responsible for fulfilling its (or a member of such Party’s Group’s) obligations in accordance with the terms and conditions applicable to such obligation or if such terms and conditions are not set forth in writing, such obligation shall be satisfied within 30 days of a written request by the beneficiary of such obligation given to the corresponding obligor thereunder, and (ii) shall be for each relevant Party (or the relevant member of such Party’s Group) an obligation to a Third Party and shall no longer be an Intercompany Account.

Section 2.5 Bank Accounts; Cash Balances.

(a) The Parties agree to take, or to cause the respective members of their respective Groups to take, at the Effective Time (or such earlier time as Dover may determine), all actions necessary to amend all Contracts governing each bank and brokerage account owned by Apergy or any other member of the Apergy Group (the “Apergy Accounts”) so that such Apergy Accounts, if currently linked (whether by automatic withdrawal, automatic deposit, or any other authorization to transfer funds from or to, hereinafter “linked”) to any bank or brokerage account owned by Dover or any other member of the Dover Group (the “Dover Accounts”) are de-linked from the Dover Accounts. From and after the Effective Time, no Dover Employee shall have any authority to access or control any Apergy Account, except as provided for through the Transition Services Agreement.

(b) The Parties agree to take, or to cause the respective members of their respective Groups to take, at the Effective Time (or such earlier time as Dover may determine), all actions necessary to amend all Contracts governing the Dover Accounts so that such Dover Accounts, if currently linked to an Apergy Account, are de-linked from the Apergy Accounts. From and after the Effective Time, no Apergy Employee shall have any authority to access or control any Dover Account, except as provided for through the Transition Services Agreement.

 

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(c) With respect to any outstanding checks issued by Dover, Apergy, or any of their respective Subsidiaries prior to the Effective Time, such outstanding checks shall be honored following the Effective Time by the member of the applicable Group owning the account on which the check is drawn.

(d) As between the two Parties (and the members of their respective Groups) all payments and reimbursements received after the Effective Time by either Party (or member of its Group) that relate to a Business, Asset or Liability of the other Party (or member of its Group), shall be held by such Party in trust for the use and benefit of the Party entitled thereto. Each Party shall maintain an accounting of any such payments and reimbursements, and, promptly following the end of each month, the Parties shall effect a reconciliation with respect to such month, whereby all such payments and reimbursements received by each Party are calculated and the net amount owed to Apergy or Dover, as applicable, shall be promptly paid over with right of set-off.

(e) Except as otherwise provided in the Tax Matters Agreement, notwithstanding anything to the contrary contained herein, the Parties agree that, prior to the Effective Time, Dover or any other member of the Dover Group may (i) withdraw any and all cash or cash equivalents from the Apergy Accounts for the benefit of Dover or any other member of the Dover Group and (ii) use, retain or otherwise dispose of all cash generated by the Apergy Business and the Apergy Assets in accordance with the ordinary course operation of Dover’s cash management systems, and any such cash or cash equivalents so withdrawn, used, retained or otherwise disposed of pursuant to clauses (i) or (ii) above shall be a Dover Asset.

Section 2.6 Limitation of Liability; Termination of Intercompany Agreements.

(a) Except as otherwise expressly provided in this Agreement, no Party or any member of such Party’s Group shall have any Liability to any other Party or any member of such other Party’s Group in the event that any Information exchanged or provided pursuant to this Agreement (but excluding any such information included in the Distribution Disclosure Documents, any Liability for which shall be governed by Section 2.3) which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate.

(b) Except as provided in Section 2.4, Section 2.12, Article VI or as set forth in subsection (c) below, no Party or any member of such Party’s Group shall have any Liability to the other Party or any member of such other Party’s Group based upon, arising out of or resulting from any Contract, course of dealing or understanding, whether or not in writing, entered into or existing at or prior to the Effective Time between such Party or such member of such Party’s Group, on the one hand, and the other Party or any member of such other Party’s Group, on the other hand, and each Party hereby terminates, and shall cause all members in its Group to terminate, any and all Contracts, courses of dealing or understandings between it or any members in its Group, on the one hand, and the other Party or any members of such other Party’s Group, on the other hand, effective as of immediately prior to the Effective Time, and any such Liability, whether or not in writing, is hereby irrevocably cancelled, released and waived effective as of the Effective Time. No such terminated Contract, course of dealing or understanding (including any provision thereof which purports to survive such termination) shall be of any further force or effect after the Effective Time. Each Party shall, at the reasonable request of the other Party, take, or cause to be taken, any reasonably requested actions necessary to effect the foregoing.

 

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(c) The provisions of Section 2.6(b) shall not apply to any of the following Contracts, courses of dealing or understandings (or to any of the provisions thereof):

(i) this Agreement, the Ancillary Agreements, the Reorganization Documents, the Continuing Arrangements and any Contract entered into in connection herewith or in order to consummate the transactions contemplated hereby or thereby;

(ii) any Intercompany Accounts listed or described on Schedule 2.4(a);

(iii) any Contracts, courses of dealing or understandings to which any Third Party is a party (it being understood that to the extent that the rights and obligations of the Parties and the members of their respective Groups under any such Contracts, courses of dealing or understandings constitute Dover Assets, Apergy Assets, Dover Liabilities, or Apergy Liabilities, such Contracts, courses of dealing or understandings shall be assigned or retained pursuant to Article II); and

(iv) any Contracts, courses of dealing or understandings to which any non-Wholly Owned Subsidiary of Dover or Apergy is a party.

(d) If any Contract, course of dealing or understanding is terminated pursuant to Section 2.6(b) and, but for the mistake or oversight of either Party, would have been listed on Schedule 1.1(33) as a Continuing Arrangement as it is reasonably necessary for such affected Party to be able to continue to operate its businesses in substantially the same manner in which such businesses were operated prior to the Effective Time, then, at the request of such affected Party made within 12 months following the Effective Time, the Parties shall negotiate in good faith to determine whether and to what extent (including the terms and conditions relating thereto), if any, notwithstanding such termination, such Contract, course of dealing or understanding should continue following the Effective Time; provided, however, that any Party may determine, in its sole discretion, not to re-instate or otherwise continue any such Contract, course of dealing or understanding.

Section 2.7 Transfers Not Effected At or Prior to the Effective Time; Transfers Deemed Effective as of the Effective Time .

(a) To the extent that any Transfers or assumptions contemplated by this Article II shall not have been consummated at or prior to the Effective Time, the Parties shall cooperate and use commercially reasonable efforts to effect such Transfers or assumptions as promptly following the Effective Time as shall be reasonably practicable. Nothing herein shall be deemed to require or constitute the Transfer of any Assets or the assumption of any Liabilities which by their terms or operation of Law cannot be Transferred or assumed; provided, however, that the Parties shall, and shall cause the respective members of their Groups to, cooperate and use commercially reasonable efforts to seek to obtain, in accordance with applicable Law, any necessary Consents or Governmental Approvals for the Transfer of all Assets and assumption of all Liabilities contemplated to be Transferred or assumed pursuant to this Article II; provided further that except to the extent expressly provided in this Agreement or any of the Ancillary

 

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Agreements or as otherwise agreed between the Parties, neither Dover nor Apergy shall be obligated to contribute material capital or pay any material consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Consents or Governmental Approvals. In the event that any such Transfer of Assets or assumption or Liabilities has not been consummated as of the Effective Time, then from and after the Effective Time (i) the Party (or relevant member in its Group) retaining such Asset shall thereafter hold (or shall cause such member in its Group to hold) such Asset in trust for the use and benefit of the Party (or relevant member in its Group) entitled thereto (at the expense of the Person entitled thereto) and (ii) the Party intended to assume such Liability shall, or shall cause the applicable member of its Group to, pay or reimburse the Party (or the relevant member of its Group) retaining such Liability for all amounts paid or incurred in connection with the retention of such Liability; provided that in the event that any such Transfer of Assets or assumption of Liabilities is not able to be completed within 18 months following the Effective Time, the Parties shall cooperate and use commercially reasonable efforts to determine the appropriate treatment (including potential disposition) of such Asset or Liability. To the extent the foregoing applies to any Contracts (other than Shared Contracts, which shall be governed solely by Section 2.9) to be assigned for which any necessary Consents or Governmental Approvals are not received prior to the Effective Time, the treatment of such Contracts shall, for the avoidance of doubt, be subject to Section 2.10 and Section 2.11, to the extent applicable. In addition, the Party retaining such Asset or Liability (or relevant member of its Group) shall (or shall cause such member in its Group to) treat, insofar as is reasonably practicable and to the extent permitted by applicable Law, such Asset or Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the Party to which such Asset is to be Transferred or by the Party assuming such Liability in order to place such Party, insofar as is reasonably practicable and to the extent permitted by applicable Law, in the same position as if such Asset or Liability had been Transferred or assumed as contemplated hereby and so that all the benefits and burdens relating to such Asset or Liability, including possession, use, risk of loss, potential for income and gain, and dominion, control and command over such Asset or Liability, are to inure from and after the Effective Time to the relevant member or members of the Dover Group or the Apergy Group, as the case may be, entitled to the receipt of such Asset or required to assume such Liability pursuant to this Article II. In furtherance of the foregoing, the Parties agree that, as of the Effective Time, subject to Section 2.11(b), each Party shall be deemed to have acquired complete and sole beneficial ownership over all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incident thereto, which such Party is entitled to acquire or required to assume pursuant to the terms of this Agreement.

(b) If and when all Consents, Governmental Approvals and/or conditions, the absence or non-satisfaction of which caused the deferral of Transfer of any Asset or assumption of any Liability pursuant to Section 2.7(a), are obtained or satisfied, the Parties shall cause the Transfer, assumption or novation of the applicable Asset or Liability to be effected without further consideration in accordance with and subject to the terms of this Agreement (including Sections 2.2 and 2.3) and/or the applicable Ancillary Agreement as promptly as reasonably practicable after the receipt of such Consents, Governmental Approvals and/or absence or satisfaction of conditions, and such Transfer, assumption or novation shall, to the extent possible without the imposition of any undue cost on any Party, be deemed to have become effective as of the Effective Time.

 

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(c) The Party (or relevant member of its Group) retaining any Asset or Liability due to the deferral of the Transfer of such Asset or the deferral of the assumption of such Liability pursuant to Section 2.7(a) shall (i) not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced, assumed, or agreed in advance to be reimbursed, by the Party (or relevant member of its Group) entitled to such Asset or the Person intended to be subject to such Liability, other than reasonable attorneys’ fees and recording or similar or other incidental fees, all of which shall be promptly reimbursed by the Party (or relevant member of its Group) entitled to such Asset or the Person intended to be subject to such Liability and (ii) be indemnified for all Indemnifiable Losses or other Liabilities arising out of any actions (or omissions to act) of such retaining Party taken at the direction of the other Party (or relevant member of its Group) in connection with and relating to such retained Asset or Liability, as the case may be.

(d) From the Effective Time until the two year anniversary of this Agreement, if either Party determines that it (or any member of its Group) owns any Asset that was allocated by the terms of this Agreement to be Transferred to the other Party at the Effective Time or that is agreed by such Party and the other Party in their good faith judgment to be an Asset that more properly belongs to the other Party or an Asset that such other Party or Subsidiary was intended to have the right to continue to use, then the Party owning such Asset shall as applicable (i) Transfer any such Asset to the Party (or relevant member of its Group) identified as the appropriate transferee and following such Transfer, such Asset shall be an Apergy Asset or Dover Asset, as the case may be, or (ii) grant such mutually agreeable rights with respect to such Asset to permit such continued use, subject to and consistent with this Agreement, including with respect to assumption of associated Liabilities. In connection with such Transfer, the receiving party shall assume all Liabilities related to such Asset.

(e) After the Effective Time, each Party (or any member of its Group) may receive mail, packages and other communications properly belonging to the other Party (or any member of its Group). Accordingly, at all times after the Effective Time, each Party authorizes the other Party (or any member of its Group) to receive and open all mail, packages and other communications received by such Party (or any member of its Group) and not unambiguously intended for such first Party, any member of such first Party’s Group or any of their respective officers, directors, employees or other agents, and to the extent that they do not relate solely to the business of the receiving Party, the receiving party shall promptly deliver such mail, packages or other communications (or, in case the same relate to both businesses, copies thereof) to the other Party as provided for in Section 10.6. The provisions of this Section 2.7(e) are not intended to, and shall not, be deemed to constitute an authorization by any Party (or any member of its Group) to permit the other to accept service of process on its (or its members’) behalf and no Party (or any member of its Group) is or shall be deemed to be the agent of the other Party (or any member of its Group) for service of process purposes.

 

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Section 2.8 Transfer Documents. In connection with, and in furtherance of, the Transfers of Assets and the acceptance and assumptions of Liabilities contemplated by this Agreement, the Parties shall execute or cause to be executed, at or prior to the Effective Time, or after the Effective Time with respect to Section 2.7, by the appropriate entities, the Transfer Documents necessary to evidence the valid and effective assumption by the applicable Party (or any member of its Group) of its assumed Liabilities, and the valid Transfer to the applicable Party (or any member of its Group) of all rights, titles and interests in and to its accepted Assets, including the Transfer of real property with quit claim deeds, as may be appropriate.

Section 2.9 Shared Contracts.

(a) With respect to Shared Contractual Liabilities pursuant to, under or relating to a given Shared Contract, such Shared Contractual Liabilities shall be allocated, unless otherwise allocated pursuant to this Agreement or an Ancillary Agreement, between the Parties as follows:

(i) first, if a Liability is incurred exclusively in respect of a benefit received by one Party or its Group, the Party or Group receiving such benefit shall be responsible for such Liability;

(ii) second, if a Liability cannot be exclusively allocated to one Party or its Group under clause (i) above, such Liability shall be allocated among both Parties and their respective Groups based on the relative proportions of total benefit received (over the term of the Shared Contract, measured as of the date of allocation) under the relevant Shared Contract. Notwithstanding the foregoing, each Party and its Group shall be responsible for any or all Liabilities arising out of or resulting from such Party’s or Group’s breach of the relevant Shared Contract.

(b) Except as otherwise expressly contemplated in this Agreement or an Ancillary Agreement, if Dover or any member of the Dover Group, on the one hand, or Apergy or any member of the Apergy Group, on the other hand, receives any benefit or payment under any Shared Contract which was intended for the other Party or its Group, Dover, on the one hand, or Apergy, on the other hand, will use its respective commercially reasonable efforts, or will cause any member of its Group to use its commercially reasonable efforts, to deliver, transfer or otherwise afford such benefit or payment to the other Party.

(c) Notwithstanding anything to the contrary herein, the Parties have determined that it is advisable that certain Shared Contracts, or portions thereof, will be separated or assigned to a member of the Dover Group or Apergy Group, as applicable. The Parties shall use their commercially reasonable efforts to separate the Shared Contracts which are identified on Schedule 2.9(c)(i) into separate Contracts between the appropriate Third Party and either Apergy or a member of the Apergy Group or Dover or a member of the Dover Group. Dover or a member of the Dover Group will use commercially reasonable efforts to assign the rights and obligations, but only to the extent relating to the Apergy Business, under the Shared Contracts which are identified on Schedule 2.9(c)(ii) to Apergy or a member of the Apergy Group. The Parties agree to cooperate and provide reasonable assistance prior to the Effective Time and for a period of six months following the Effective Time (with no obligation on the part of either Party to pay any costs or fees with respect to such assistance) in effecting the separation or assignment of such Shared Contracts as described above.

 

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Section 2.10 Further Assurances.

(a) In addition to and without limiting the actions specifically provided for elsewhere in this Agreement and subject to the limitations expressly set forth in this Agreement, including Section 2.7, each of the Parties shall cooperate with each other and use (and will cause the relevant member of its Group to use) commercially reasonable efforts, prior to, on and after the Effective Time, to take, or to cause to be taken, all actions and to do, or to cause to be done, all things reasonably necessary on its part under applicable Law or contractual obligations to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

(b) Without limiting the foregoing each Party shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party (except as provided in Sections 2.7, 10.5(b), and 10.5(c)), from and after the Effective Time, to execute and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of Transfer or title or other Contracts, to make all filings, to obtain all Consents and/or Governmental Approvals, and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the Transfers of the applicable Assets and the assignment and assumption of the applicable Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each Party will, at the reasonable request, cost and expense of the other Party (except as provided in Sections 2.7, 10.5(b), and 10.5(c)), take such other actions as may be reasonably necessary to vest in such other Party such title and rights as possessed by the Transferring Party to the Assets allocated to such Party under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest, if and to the extent it is reasonably practicable to do so.

(c) From and after the Effective Time, with respect to any Action where any Party hereto (or any member of such Party’s Group) is a defendant, when and if requested by such Party, the other Party shall, unless such other Party reasonably determines that doing so would unduly burden or prejudice such other Party’s position with respect to such Action, petition the applicable court to remove the requesting Party (or such member of such Party’s Group) as a defendant to the extent that such Action relates solely to Assets or Liabilities that the other Party (or any member of such other Party’s Group) has been allocated pursuant to this Article II, and the other Party shall cooperate and assist in any required communication with any plaintiff or other related Third Party.

(d) On or prior to the Distribution Date, Dover and Apergy in their respective capacities as direct or indirect stockholders of their respective Subsidiaries, shall each ratify any actions that are reasonably necessary or desirable to be taken by any Subsidiary of Dover or Subsidiary of Apergy, as the case may be, to effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.

 

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Section 2.11 Novation of Liabilities; Consents.

(a) Each Party, at the request of the other Party or any member of the other Party’s Group (such other Party, the “Other Party”), shall use commercially reasonable efforts to obtain, or to cause to be obtained, any Consent, release, substitution or amendment required to novate or assign all obligations under Contracts (other than Shared Contracts, which shall be governed by Section 2.9) or other Liabilities (other than with regard to guarantees or letters of credit, which shall be governed by Section 2.12) for which a member of such Party’s Group and a member of the Other Party’s Group are jointly or severally liable and that do not constitute Liabilities of such other Party as provided in this Agreement, or to obtain in writing the unconditional release of all parties to such arrangements (other than any member of the Group who assumed or retained such Liability as set forth in this Agreement), so that, in any such case, the members of the applicable Group shall be solely responsible for such Contracts or Liabilities; provided, however, that no Party shall be obligated to pay any consideration therefor to any Third Party from whom any such Consent, release, substitution or amendment is requested (unless such Party is fully reimbursed by the requesting Other Party).

(b) If the Parties are unable to obtain, or to cause to be obtained, any such required Consent, release, substitution or amendment described in Section 2.11(a), the Other Party or a member of such Other Party’s Group shall continue to be bound by such Contract, license or other obligation that does not constitute a Liability of such Other Party and, to the extent permitted by Law and the terms thereof, as agent or subcontractor for such Other Party, the Party or member of such Party’s Group who assumed or retained such Liability as set forth in this Agreement (the “Liable Party”) shall, or shall cause a member of its Group to, pay, perform and discharge fully all the obligations or other Liabilities of such Other Party or member of such Other Party’s Group thereunder from and after the Effective Time; provided, however, that the Other Party shall not be obligated to extend, renew or otherwise cause such Contract, license or other obligation to remain in effect beyond the term in effect as of the Effective Time. The Liable Party shall indemnify each Other Party and the members of such Other Party’s Group and hold each of them harmless against any and all Liabilities (other than Liabilities of such Other Party) arising in connection therewith; provided that the Liable Party shall have no obligation to indemnify the Other Party or any member of such Other Party’s Group with respect to any matter to the extent that such Liabilities arise from such Other Party’s willful misconduct or fraud in connection therewith, in which case such Other Party shall be responsible for such Liabilities. The Other Party shall, without further consideration, promptly pay and remit, or cause to be promptly paid or remitted, to the Liable Party or, at the direction of the Liable Party, to another member of the Liable Party’s Group, all money, rights and other consideration received by it or any member of its Group in respect of such performance by the Liable Party (unless any such consideration is an Asset of such Other Party pursuant to this Agreement). If and when any such Consent, release, substitution or amendment shall be obtained or such agreement, lease, license or other rights or obligations shall otherwise become assignable or able to be novated, the Other Party shall, to the fullest extent permitted by applicable Law, promptly Transfer or cause the Transfer of all rights, obligations and other Liabilities thereunder of such Other Party or any member of such Other Party’s Group to the Liable Party or to another member of the Liable Party’s Group without payment of any further consideration and the Liable Party, or another member of such Liable Party’s Group, without the payment of any further consideration, shall assume such rights and Liabilities to the fullest extent permitted by applicable Law.

 

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Section 2.12 Guarantees and Letters of Credit.

(a) Except as otherwise specified in any Ancillary Agreement, at or prior to the Effective Time, Dover shall (with the commercially reasonable cooperation of Apergy and the other members of the Apergy Group) use its commercially reasonable efforts, if so requested by Apergy, to have any member of the Apergy Group removed as guarantor of, or obligor for, any Dover Liability, including with respect to those guarantees and obligations listed or described on Schedule 2.12(a), to the extent that they relate to Dover Liabilities.

(b) Except as otherwise specified in any Ancillary Agreement, at or prior to the Effective Time, Apergy shall (with the commercially reasonable cooperation of Dover and the other members of the Dover Group) use its commercially reasonable efforts, if so requested by Dover, to have any member of the Dover Group removed as guarantor of, or obligor for, any Apergy Liability, including with respect to those guarantees listed or described on Schedule 2.12(b), to the extent that they relate to the Apergy Liabilities (each of the releases referred to in subsections (a) and (b) of this Section 2.12, a “Guaranty Release”).

(c) In furtherance of the foregoing clauses (a) and (b), at or prior to the Effective Time:

(i) to the extent required to obtain a release from a guaranty of any member of the Dover Group, Apergy shall execute a guaranty agreement substantially in the form of the existing guaranty or such other form as is agreed to by the relevant parties to such guaranty agreement, except to the extent that such existing guaranty contains representations, covenants or other terms or provisions either (A) with which Apergy would be reasonably unable to comply or (B) which would be reasonably expected to be breached; and

(ii) to the extent required to obtain a release from a guaranty of any member of the Apergy Group, Dover shall execute a guaranty agreement substantially in the form of the existing guaranty or such other form as is agreed to by the relevant parties to such guaranty agreement, except to the extent that such existing guaranty contains representations, covenants or other terms or provisions either (A) with which Dover would be reasonably unable to comply or (B) which would be reasonably expected to be breached.

(d) If Dover or Apergy is unable to obtain, or to cause to be obtained, any removal of any guarantee or other obligation as set forth in clauses (a) and (b) of this Section 2.12, (i) the relevant beneficiary shall indemnify and hold harmless the guarantor or obligor for any Indemnifiable Loss arising from or relating thereto (in accordance with the provisions of Article VI) and shall or shall cause one of its Subsidiaries to, as agent or subcontractor for such guarantor or obligor, pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder, (ii) the relevant beneficiary shall pay to the guarantor or obligor a fee payable at the end of each calendar quarter based on a rate of 0.65% per annum on the average outstanding amount of the obligation underlying such guarantee or obligation during such quarter and (iii) each of Dover and Apergy shall not and shall cause the members of the respective Groups not to, renew or extend the term of, increase its obligations under, or transfer

 

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to a Third Party, any loan, guarantee, lease, contract or other obligation for which the other Party or member of such other Party’s Group is or may be liable unless all obligations of such other Party and the other members of such Party’s Group with respect thereto are thereupon terminated by documentation reasonably satisfactory in form and substance to such other Party; provided, however, that with respect to leases, in the event a Guaranty Release is not obtained and such first Party wishes to extend the term of such guaranteed lease then such first Party shall have the option of extending the term if it provides such security as is reasonably satisfactory to the guarantor under such guaranteed lease.

(e) Dover and Apergy shall cooperate and Apergy shall use commercially reasonable efforts to replace all letters of credit, performance bonds, surety bonds, bankers acceptances or similar arrangements issued by Dover or other members of the Dover Group on behalf of or in favor of any member of the Apergy Group or the Apergy Business (the “Dover LCs”) as promptly as practicable with letters of credit, performance bonds, surety bonds, bankers acceptances or similar arrangements from Apergy or a member of the Apergy Group as of the Effective Time. With respect to any Dover LCs that remain outstanding after the Effective Time (i) Apergy shall, and shall cause the members of the Apergy Group to, jointly and severally indemnify and hold harmless the Dover Indemnitees for any Indemnifiable Loss arising from or relating to such Dover LCs, including any fees in connection with the issuance and maintenance thereof and any funds drawn by (or for the benefit of), or disbursements made to, the beneficiaries of such Dover LCs in accordance with the terms thereof, (ii) Apergy shall pay to Dover a fee payable at the end of each calendar quarter based on a rate of 0.65% per annum on the average outstanding balance during such quarter of any outstanding Dover LCs and (iii) without the prior written consent of Dover, Apergy shall not, and shall not permit any member of the Apergy Group to, enter into, renew or extend the term of, increase its obligations under, or transfer to a Third Party, any loan, lease, Contract or other obligation in connection with which Dover or any member of the Dover Group has issued any Dover LCs which remain outstanding. Neither Dover nor any member of the Dover Group will have any obligation to renew any letters of credit, performance bonds, surety bonds, bankers acceptances or similar arrangements issued on behalf of or in favor of any member of the Apergy Group or the Apergy Business after the expiration of any such letter of credit, performance bond, surety bond, bankers acceptance or similar arrangement.

Section 2.13 Disclaimer of Representations and Warranties.

(a) EACH OF DOVER (ON BEHALF OF ITSELF AND EACH OTHER MEMBER OF THE DOVER GROUP), AND APERGY (ON BEHALF OF ITSELF AND EACH OTHER MEMBER OF THE APERGY GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN ANY ANCILLARY AGREEMENT OR IN ANY CONTINUING ARRANGEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY IS REPRESENTING OR WARRANTING IN ANY WAY, AND HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, AS TO THE ASSETS, BUSINESSES OR LIABILITIES CONTRIBUTED, TRANSFERRED, DISTRIBUTED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR GOVERNMENTAL APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR

 

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FREEDOM FROM ANY SECURITY INTERESTS OF, AS TO NO INFRINGEMENT, VALIDITY OR ENFORCEABILITY OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR BUSINESS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET, INCLUDING ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY CONTRIBUTION, DISTRIBUTION, ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, ALL ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM OF DEED OR CONVEYANCE WITHOUT WARRANTY) AND THE RESPECTIVE TRANSFEREES SHALL BEAR ALL ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS, CONTRACTS, OR JUDGMENTS ARE NOT COMPLIED WITH. ALL WARRANTIES OF HABITABILITY, MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE, AND ALL OTHER WARRANTIES ARISING UNDER THE UNIFORM COMMERCIAL CODE (OR SIMILAR FOREIGN LAWS), ARE HEREBY DISCLAIMED.

(b) Each of Dover (on behalf of itself and each member of the Dover Group) and Apergy (on behalf of itself and each member of the Apergy Group) further understands and agrees that if the disclaimer of express or implied representations and warranties contained in Section 2.13(a) is held unenforceable or is unavailable for any reason under the Laws of any jurisdiction outside the United States or if, under the Laws of a jurisdiction outside the United States, both Dover or any member of the Dover Group, on the one hand, and Apergy or any member of the Apergy Group, on the other hand, are jointly or severally liable for any Dover Liability or any Apergy Liability, respectively, then, the Parties intend that, notwithstanding any provision to the contrary under the Laws of such foreign jurisdictions, the provisions of this Agreement and the Ancillary Agreements (including the disclaimer of all representations and warranties, allocation of Liabilities among the Parties and their respective Subsidiaries, releases, indemnification and contribution of Liabilities) shall prevail for any and all purposes among the Parties and their respective Subsidiaries.

(c) Dover hereby waives compliance by itself and each and every member of the Dover Group with the requirements and provisions of any “bulk-sale” or “bulk transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Dover Assets to Dover or any member of the Dover Group.

(d) Apergy hereby waives compliance by itself and each and every member of the Apergy Group with the requirements and provisions of any “bulk-sale” or “bulk transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Apergy Assets to Apergy or any member of the Apergy Group.

 

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Section 2.14 Apergy Financing Arrangements. Prior to the Distribution Date, Apergy or another member of the Apergy Group shall enter into the Apergy Financing Arrangements, on such terms and conditions as agreed by Dover (including the amount that shall be borrowed pursuant to the Apergy Financing Arrangements and the interest rates for such borrowings). Dover and Apergy shall participate in the preparation of all materials and presentations as may be reasonably necessary to secure funding pursuant to the Apergy Financing Arrangements, including rating agency presentations necessary to obtain the requisite ratings needed to secure the financing under any of the Apergy Financing Arrangements. The Parties agree that Apergy, and not Dover, shall be ultimately responsible for all costs and expenses incurred by, and for reimbursement of such costs and expenses to, any member of the Dover Group or Apergy Group associated with the Apergy Financing Arrangements. It is the intent of the Parties that the Financing Cash Payment is made in connection with the Separation, including the transfer of the Apergy Assets to Apergy in the Reorganization whenever made.

ARTICLE III

CERTAIN ACTIONS PRIOR TO THE DISTRIBUTION

Section 3.1 Reorganization. The Parties agree to take, or to cause the members of their respective Groups to take, prior to the Distribution, all actions necessary, subject to the terms of this Agreement, to effectuate the Reorganization (such documentation necessary to effect the Reorganization, the “Reorganization Documents”) as set forth on Schedule 3.1 (the steps of the Reorganization being referred to herein as the “Reorganization Step Plan”), and as updated by Dover from time to time.

Section 3.2 Certificate of Incorporation; Bylaws. At or prior to the Effective Time, the Parties shall take, or cause the members of their respective Group to take, all necessary actions to adopt the form of amended and restated certificate of incorporation and amended and restated by-laws filed by Apergy with the Commission as exhibits to the Form 10, to be effective as of the Effective Time.

Section 3.3 Directors and Officers. At or prior to the Effective Time, (i) Dover shall take all necessary action to cause the Board of Directors of Apergy to consist of the individuals who are identified in the Form 10 (including the Information Statement) at the Effective Time as being directors of Apergy and (ii) Dover shall take all necessary action to cause the officers of Apergy to include the individuals who are identified in the Form 10 (including the Information Statement) at the Effective Time as being officers of Apergy.

Section 3.4 Resignations.

(a) Subject to Section 3.4(b), at or prior to the Effective Time, (i) Dover shall cause all its employees and any employees of its Affiliates who will not become Apergy Employees immediately following the Effective Time to resign or be removed, effective as of the Effective Time, from all positions as officers or directors of any member of the Apergy Group in which they serve and (ii) Apergy shall cause all Apergy Employees to resign or be removed, effective as of the Effective Time, from all positions as officers or directors of any member of the Dover Group in which they serve.

 

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(b) For the avoidance of doubt, no Person shall be required by any Party to resign from any position or office with another Party if such Person is disclosed in the Form 10 (including the Information Statement) as the Person who is to hold such position or office following the Distribution.

Section 3.5 Ancillary Agreements. At or prior to the Effective Time, Dover and Apergy shall enter into, and/or (where applicable) shall cause a member or members of their respective Groups to enter into, the Ancillary Agreements.

ARTICLE IV

THE DISTRIBUTION

Section 4.1 Stock Dividend to Dover; Distribution. On or prior to the Distribution Date, in connection with the Separation, including the Transfer of the Apergy Assets to Apergy in the Reorganization whenever made, Apergy shall issue to Dover as a stock dividend such number of shares of Apergy Common Stock (or Dover and Apergy shall take or cause to be taken such other appropriate actions to ensure that Dover has the requisite number of shares of Apergy Common Stock) as may be requested by Dover after consultation with Apergy in order to effect the Distribution, which shares as of the date of issuance shall represent (together with such shares previously held by Dover) all of the issued and outstanding shares of Apergy Common Stock. Subject to the conditions and other terms in this Article IV, Dover will cause the Agent on the Distribution Date to make the Distribution, including by crediting the appropriate number of shares of Apergy Common Stock to book entry accounts for each holder of Dover Common Stock or designated transferee or transferees of such holder of Dover Common Stock. For stockholders of Dover who own Dover Common Stock through a broker or other nominee, their shares of Apergy Common Stock will be credited to their respective accounts by such broker or nominee. No action by any holder of Dover Common Stock (or such holder’s designated transferee or transferees) on the Record Date shall be necessary for such stockholder (or such stockholder’s designated transferee or transferees) to receive the applicable number of shares of Apergy Common Stock (and, if applicable, cash in lieu of any fractional shares) such stockholder is entitled to in the Distribution.

Section 4.2 Fractional Shares. Dover stockholders who, after aggregating the number of shares of Apergy Common Stock (or fractions thereof) to which such stockholder would be entitled on the Record Date, would be entitled to receive a fraction of a share of Apergy Common Stock in the Distribution, will receive cash in lieu of fractional shares. Fractional shares of Apergy Common Stock will not be distributed in the Distribution nor credited to book-entry accounts. The Agent shall, as soon as practicable after the Distribution Date (a) determine the number of whole shares and fractional shares of Apergy Common Stock allocable to each other holder of record or beneficial owner of Dover Common Stock as of close of business on the Record Date, (b) aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions at then prevailing trading prices on behalf of holders who would otherwise be entitled to fractional share interests and (c) distribute to each such holder, or for the benefit of each such beneficial owner, such holder’s or owner’s ratable share of the net proceeds of such sale, based upon the average gross selling price per share of Apergy Common Stock, after making appropriate deductions for any amount required to be

 

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withheld for United States federal income tax purposes. Apergy shall bear the cost of brokerage fees and transfer taxes incurred in connection with these sales of fractional shares, which such sales shall occur as soon after the Distribution Date as practicable and as determined by the Agent. None of Dover, Apergy or the applicable Agent will guarantee any minimum sale price for the fractional shares of Apergy Common Stock. Neither Dover nor Apergy will pay any interest on the proceeds from the sale of fractional shares. The Agent will have the sole discretion to select the broker-dealers through which to sell the aggregated fractional shares and to determine when, how and at what price to sell such shares. Neither the Agent nor the selected broker-dealers will be Affiliates of Dover or Apergy.

Section 4.3 Actions in Connection with the Distribution.

(a) Apergy shall file or cause to be filed such amendments and supplements to the Form 10 as Dover may reasonably request, and such amendments as may be necessary in order to cause the same to become and remain effective as required by Law, including filing such amendments and supplements to the Form 10 and Information Statement as may be required by the Commission or federal, state or foreign securities Laws. Dover shall, or at Dover’s election Apergy shall, mail (or deliver by electronic means where not prohibited by Law) to the holders of Dover Common Stock, at such time on or prior to the Distribution Date as Dover shall reasonably determine, the Information Statement included in the Form 10, as well as any other information concerning Apergy, Apergy’s business, operations and management, the Separation and such other matters as Dover shall reasonably determine are necessary and as may be required by Law (or, in lieu of such mailing, shall mail to such holders a Notice of Internet Availability of Information Statement Materials). Promptly after receiving a request from Dover, Apergy shall prepare and, in accordance with applicable Law, file with the Commission any such documentation that Dover determines is necessary or desirable to effectuate the Distribution, and Dover and Apergy shall each use commercially reasonable efforts to obtain all necessary approvals from the Commission with respect thereto as soon as practicable.

(b) Apergy shall also prepare, file with the Commission and cause to become effective any registration statements or amendments thereof as may be required to effect the establishment of, or amendments to, any employee benefit and other plans or as otherwise necessary or appropriate in connection with the transactions contemplated by this Agreement, or any of the Ancillary Agreements, including any transactions related to financings or other credit facilities.

(c) Promptly after receiving a request from Dover, Apergy shall prepare and file, and shall use commercially reasonable efforts to have approved and made effective, an application for the original listing on the NYSE of the Apergy Common Stock to be distributed in the Distribution, subject to official notice of distribution.

(d) Nothing in this Section 4.3 shall be deemed, by itself, to shift Liability to or otherwise create a Liability for Dover for any portion of the Form 10.

Section 4.4 Sole Discretion of Dover. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, Dover shall, in its sole and absolute discretion, determine the Distribution Date, the Effective Time and all terms of the Distribution, including

 

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the form, structure and terms of any transactions to effect the Distribution and the timing of and conditions to the consummation thereof. In addition, Dover may, in its sole discretion, in accordance with Section 10.10, at any time prior to the Distribution Date and from time to time until the completion of the Distribution decide to abandon the Distribution or modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution. None of Apergy, any other member of the Apergy Group, any Apergy Employee or any Third Party shall have any right or claim to require the consummation of the Separation or the Distribution, each of which shall be effected at the sole discretion of the Board of Directors of Dover.

Section 4.5 Conditions to Distribution . Subject to Section 4.4, the following are conditions to the consummation of the Distribution (which, to the extent permitted by applicable Law, may be waived, in whole or in part, by Dover in its sole discretion). The conditions are for the sole benefit of Dover and shall not give rise to or create any duty on the part of Dover or the Board of Directors of Dover to waive or not waive any such condition. Any determination made by Dover prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 4.5 shall be conclusive and binding on the Parties hereto.

(a) The Form 10 shall have been declared effective by the Commission, with no stop order in effect with respect thereto or proceedings seeking any such stop order pending before or threatened by the Commission, and the Information Statement (or the Notice of Internet Availability of Information Statement Materials) shall have been mailed to Dover’s stockholders as of the Record Date;

(b) The Apergy Common Stock to be delivered to the Dover stockholders in the Distribution shall have been approved for listing on the NYSE, subject to official notice of distribution;

(c) Dover shall have obtained either:

(i) (A) a private letter ruling from the Internal Revenue Service in form and substance satisfactory to Dover (in its sole discretion) substantially to the effect, among other things, that the Distribution, together with the Contribution, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code, and that the Distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code, and such private letter ruling shall not have been revoked prior to the Distribution Date or modified in any material respect and (B) an opinion from McDermott Will & Emery LLP or other outside tax counsel of national standing, in form and substance satisfactory to Dover (in its sole discretion), substantially to the effect that the Distribution, together with the Contribution, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code, and the Distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code; or

(ii) an opinion from McDermott Will & Emery LLP or other outside tax counsel of national standing, in form and substance satisfactory to Dover (in its sole discretion), substantially to the effect, among other things, that the Distribution, together with the Contribution, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code, and the Distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code.

 

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(d) All permits, registrations and consents required under the securities or blue sky Laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the Distribution shall have been obtained and be in full force and effect;

(e) No order, injunction or decree issued by any Governmental Entity of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution or any of the transactions related thereto, including the Transfer of Assets and assumption of Liabilities pursuant to Article II hereof, shall be in effect, pending, threatened or issued and no other event outside the control of Dover shall have occurred or failed to occur that prevents the consummation of the Distribution or any of the related transactions;

(f) The Reorganization and the Separation shall have been effectuated, including execution of all related Reorganization Documents, in accordance with the Reorganization Step Plan, in each case, as provided for in Section 3.1, except for such steps (if any) as Dover in its sole discretion shall have determined need not be completed or may be completed after the Effective Time;

(g) The Board of Directors of Dover shall have declared the Distribution and approved all related transactions (and such declaration or approval shall not have been withdrawn);

(h) Each of the Ancillary Agreements shall have been duly executed and delivered by the parties thereto;

(i) All Governmental Approvals necessary to consummate the Distribution shall have been obtained and be in full force and effect;

(j) The Board of Directors of Dover shall have received an opinion from an independent appraisal firm confirming the solvency of each of Dover and Apergy after the Distribution and, as to the compliance by Dover in declaring the Distribution, with surplus requirements under Delaware Law, that is in form and substance acceptable to Dover in its sole discretion;

(k) Dover shall have received satisfactory assurances (as determined by Dover in its sole discretion) that on or prior to the Distribution Date, the Apergy Financing Arrangements shall have been executed and delivered and the proceeds thereof shall have been received by Apergy and Dover shall have received the Financing Cash Payment and Dover shall be satisfied in its sole discretion that, as of the Effective Time, no member of the Dover Group shall have any Liability under the Apergy Financing Arrangements; and

(l) No events or developments shall have occurred or exist that, in the judgment of the Board of Directors of Dover, in its sole and absolute discretion, make it inadvisable to effect the Distribution or the other transactions contemplated hereby, or would result in the Distribution or the other transactions contemplated hereby not being in the best interest of Dover or its stockholders.

 

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ARTICLE V

CERTAIN COVENANTS

Section 5.1 No Solicit . None of Dover or Apergy or any member of their respective Groups will from the Effective Time through and including the two year anniversary of the Effective Time, without the prior written consent of the other applicable Party, either directly or indirectly, on their own behalf or in the service or on behalf of others, solicit, aid, induce or encourage any employee of the other Party to terminate or breach an employment, contractual or other relationship with the other Party (or its Affiliates), hire or otherwise employ any employee of the other Party; provided, however, that nothing in this Section 5.1 shall be deemed to prohibit any general solicitation for employment through advertisements and search firms not specifically directed at employees of such other applicable Party; provided further, that the applicable Party has not encouraged or advised such firm to approach any such employee.

Section 5.2 Legal Names and Other Parties Trademark.

(a) Except as otherwise specifically provided in any Ancillary Agreement, as soon as reasonably practicable after the Distribution Date, but in any event within six months thereafter, each Party shall cease (and shall cause all of the other members of its Group to cease): (i) making any use of any names or Trademarks that include (A) any of the Trademarks of the other Party or such other Party’s Affiliates (including, in the case of Apergy, “Dover”, “Dover Corporation” or the Dover logo or any other name or Trademark containing the words “Dover” or the logos or names set forth on Schedule 5.2(a)(i), and in the case of Dover, “Apergy”, “Apergy Corporation” or the Apergy logo or any other name or Trademark containing the words “Apergy” or the logos or names set forth on Schedule 5.2(a)(ii)) and (B) any names or Trademarks confusingly similar thereto or dilutive thereof (with respect to each Party, such Trademarks of the other Party or any of such other Party’s Affiliates, the “Other Party Marks”) and (ii) holding themselves out as having any affiliation with the other Party or such other Party’s Affiliates; provided, however, that the foregoing shall not prohibit any Party or any member of a Party’s Group from (1) in the case of any member of the Apergy Group, making factual and accurate reference in a non-prominent manner that it was formerly affiliated with Dover or in the case of any member of the Dover Group, making factual and accurate reference in a non-prominent manner that it was formerly affiliated with Apergy, (2) making use of any Other Party Mark in a manner that would constitute “fair use” under applicable Law if any unaffiliated Third Party made such use or would otherwise be legally permissible for any unaffiliated Third Party without the consent of the Party owning such Other Party Mark, (3) in the case of any member of the Apergy Group, using, solely in connection with the operation of the Apergy Business and in the ordinary course in accordance with the prior practices of the Apergy Business, any existing inventory and packaging included in the Apergy Assets containing the Trademarks of Dover or Dover’s Affiliates for a period of 18 months following the Distribution Date and (4) making references in internal historical and tax records. In furtherance of the foregoing, as soon as practicable, but in no event later than six months following the Distribution Date (or 18 months following the Distribution Date pursuant to clause (3) of the previous sentence, as applicable), each Party shall (and cause all of the other members of its Group to) remove, strike over or otherwise obliterate all Other Party Marks from all of such Party’s and its Affiliates’ Assets and other materials owned by or in the possession of such Party or any member or such Party’s Group, including any vehicles, business cards, schedules, stationery, packaging materials, displays, signs, promotional materials, manuals, forms, websites, email, computer software and other

 

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materials and systems; provided, however, that Apergy shall promptly after the Distribution Date post a disclaimer in a form and manner reasonably acceptable to Dover on the “www.apergy.com” website informing its customers that as of the Effective Time and thereafter Apergy, and not Dover, is responsible for the operation of the Apergy Business, including such website and any applicable services. Any use by any Party or any of such Party’s Affiliates of any of the Other Party Marks as permitted in this Section 5.2 is subject to their compliance in all material respects with all quality control standards and related requirements and guidelines in effect for the Other Party Marks as of the Effective Time. No Party or any member of its Group shall use the Other Party Marks in a manner that may reflect negatively on such name and marks or on the other Party or any member of such Party’s Group. Each Party shall indemnify, defend and hold harmless the other Party and the members of the other Party’s Group from and against any and all Indemnifiable Losses arising from or relating to the use by any member of such first Party’s Group of the Other Party Marks pursuant to this Section 5.2(a).

(b) Notwithstanding the foregoing requirements of Section 5.2(a), if any Party or any member of such Party’s Group has used commercially reasonable efforts to comply with Section 5.2(a) but is unable, due to regulatory or other circumstance beyond its control, to effect a legal name change in compliance with applicable Law such that an Other Party Mark remains in such Party’s or its Group member’s legal name, then such Party or its relevant Group member will not be deemed to be in breach hereof as long as it continues to use commercially reasonable efforts to effectuate such name change and does effectuate such name change within 12 months after the Distribution Date, and, in such circumstances, such Party or Group member may continue to include in its Assets and other materials references to the Other Party Mark that is in such Party’s or Group member’s legal name which includes references to “Apergy” or “Dover” as applicable, but only to the extent necessary to identify such Party or Group member and only until such Party’s or Group member’s legal name can be changed to remove and eliminate such references.

(c) Notwithstanding the foregoing requirements of Section 5.2(a), Apergy shall not be required to change any name including the words “Dover” in any Third Party Contract, or in property records with respect to real or personal property, if an effort to change the name is commercially unreasonable; provided, however, that (i) Apergy on a prospective basis from and after the Distribution Date shall change the name in any new or amended Third Party Contract or property record and (ii) Apergy shall not advertise or make public any continued use of the “Dover” name permitted by this Section 5.2(c).

Section 5.3 Auditors and Audits; Annual and Quarterly Financial Statements and Accounting.

(a) Each Party agrees that during the period ending on June 30, 2020 with respect to paragraph (1) below and June 30, 2019 with respect to paragraph (2) (and with the consent of the other applicable Party, which consent shall not be unreasonably withheld or delayed, during any period of time after June 30, 2019 reasonably requested by such requesting Party so long as there is a reasonable business purpose for such request) and in any event solely with respect to the preparation and audit of each of the Party’s financial statements for any of the years ended December 31, 2018, 2017 and 2016, the printing, filing and public dissemination of such financial statements, the audit of each Party’s internal control over

 

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financial reporting related to such financial statements and such Party’s management’s assessment thereof, and each Party’s management’s assessment of such Party’s disclosure controls and procedures related to such financial statements:

(1) Annual Financial Statements. Each Party shall provide to the other Party on a timely basis all information reasonably required to meet its schedule for the preparation, printing, filing, and public dissemination of its annual financial statements and for management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K and, to the extent applicable to such Party, (a) its auditor’s audit report of its internal control over financial reporting and (b) management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the Commission’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder (such assessments and audit being referred to as the “Internal Control Audit and Management Assessments”). Without limiting the generality of the foregoing, each Party will provide all required financial and other Information with respect to itself and its Subsidiaries to its auditors in a sufficient and reasonable time and in sufficient detail to permit its auditors to take all steps and perform all reviews necessary to provide sufficient assistance to each other Party’s auditors with respect to information to be included or contained in such other Party’s annual financial statements and to permit such other Party’s auditors and management to complete their respective auditor’s report on Internal Control Audit and Management Assessments, to the extent applicable to such Party.

(2) Access to Personnel and Records. Each audited Party shall authorize, and use its commercially reasonable efforts to cause, its respective auditors to make available to the other Party’s auditors (each such other Party’s auditors, collectively, the “Other Parties’ Auditors”) both the personnel who performed or are performing the annual audits of such audited Party (each such Party with respect to its own audit, the “Audited Party”) and work papers related to the annual audits of such Audited Party (subject to the execution of any reasonable and customary access letters that such Audited Party’s auditors may require in connection with the review of such work papers by such Other Party’s Auditors), in all cases within a reasonable time prior to such Audited Party’s expected auditors’ opinion date, so that the Other Parties’ Auditors are able to perform the procedures they consider necessary to take responsibility for the work of the Audited Party’s auditors as it relates to their auditors’ report on such other Party’s financial statements, all within sufficient time to enable such other Party to meet its timetable for the printing, filing and public dissemination of its annual financial statements. Each Party shall make available to the Other Parties’ Auditors and management its personnel and Records in a reasonable time prior to the Other Parties’ Auditors’ opinion date and other Parties’ management’s assessment date so that the Other Parties’ Auditors and other Parties’ management are able to perform the procedures they consider necessary to conduct their respective Internal Control Audit and Management Assessments.

(b) Amended Financial Reports. In the event a Party restates any of its financial statements that includes such Party’s audited or unaudited financial statements with respect to any balance sheet date or period of operation between January 1, 2013 and December 31, 2018, such Party will deliver to the other Party a substantially final draft, as soon as the same is prepared, of any report to be filed by such first Party with the Commission that includes such restated audited or unaudited financial statements (the “Amended Financial Reports”); provided,

 

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however, that such first Party may continue to revise its Amended Financial Report prior to its filing thereof with the Commission, which changes will be delivered to the other Party as soon as reasonably practicable; provided further, however, that such first Party’s financial personnel will actively consult with the other Party’s financial personnel regarding any changes which such first Party may consider making to its Amended Financial Report and related disclosures prior to the anticipated filing of such report with the Commission, with particular focus on any changes which would have an effect upon the other Party’s financial statements or related disclosures. Each Party will reasonably cooperate with, and permit and make any necessary employees available to, the other Party and the Other Parties’ Auditors, in connection with the other Party’s preparation of any Amended Financial Reports.

(c) Financials; Outside Auditors. If any Party or member of its respective Group is required, pursuant to Rule 3-09 of Regulation S-X or otherwise, to include in its Exchange Act filings audited financial statements or other information of the other Party or member of the other Party’s Group, the other Party shall use its commercially reasonable efforts (i) to provide such audited financial statements or other information and (ii) to cause its outside auditors to consent to the inclusion of such audited financial statements or other information in the Party’s Exchange Act filings.

(d) Third Party Agreements. Nothing in this Section 5.3 shall require any Party to violate any Contract or arrangement with any Third Party regarding the confidentiality of confidential and proprietary information relating to that Third Party or its business; provided, however, that in the event that a Party is required under this Section 5.3 to disclose any such information, such Party shall use commercially reasonable efforts to seek to obtain such Third Party’s consent to the disclosure of such information. The Parties also acknowledge that the Other Parties’ Auditors are subject to contractual, legal, professional and regulatory requirements which such auditors are responsible for complying with.

Section 5.4 No Restrictions on Corporate Opportunities.

(a) In the event that Dover or any other member of the Dover Group, or any director or officer of Dover or any other member of the Dover Group, acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both Dover or any other member of the Dover Group and Apergy or any other member of the Apergy Group, neither Dover nor any other member of the Dover Group, nor any director or officer of Dover or any other member of the Dover Group, shall have any duty to communicate or present such corporate opportunity to Apergy or any other member of the Apergy Group and shall not be liable to Apergy or any other member of the Apergy Group or to Apergy’s stockholders for breach of any fiduciary duty as a stockholder of Apergy or an officer or director thereof by reason of the fact that Dover or any other member of the Dover Group pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another person or entity or does not present such corporate opportunity to Apergy or any other member of the Apergy Group.

(b) In the event that Apergy or any other member of the Apergy Group, or any director or officer of Apergy or any other member of the Apergy Group, acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both Dover or any other member of the Dover Group and Apergy or any other member of the Apergy Group, neither

 

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Apergy nor any other member of the Apergy Group, nor any director or officer of Apergy or any other member of the Apergy Group, shall have any duty to communicate or present such corporate opportunity to Dover or any other member of the Dover Group and shall not be liable to Dover or any other member of the Dover Group or to Dover’s stockholders for breach of any fiduciary duty as a stockholder of Dover or an officer or director thereof by reason of the fact that Apergy or any other member of the Apergy Group pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another person or entity or does not present such corporate opportunity to Dover or any other member of the Dover Group.

(c) For the avoidance of doubt, to the extent that any person who is a director or officer of Dover or any other member of the Dover Group is also a director or officer of Apergy or any other member of the Apergy Group, such person shall have no duty to communicate or present any corporate opportunity of which he or she acquires knowledge to Apergy or any other member of the Apergy Group and shall not be liable to Apergy or any other member of the Apergy Group or to Apergy’s stockholders for breach of any fiduciary duty as an officer or director of Apergy by reason of the fact that Dover or any other member of the Dover Group pursues or acquires such corporate opportunity, directs such corporate opportunity to another Person or does not present such corporate opportunity to Apergy or any other member of the Apergy Group.

(d) For the purposes of this Section 5.4, “corporate opportunities” of Apergy or any other member of the Apergy Group shall include business opportunities that are, by their nature, in a line of business of Apergy or any other member of the Apergy Group, including the Apergy Business, are of practical advantage to them and are ones in which Apergy or any other member of the Apergy Group have an interest or a reasonable expectancy, and in which, by embracing the opportunities, the self-interest of Dover or any other member of the Dover Group or any of their officers or directors will be brought into conflict with that of Apergy or any other member of the Apergy Group, and “corporate opportunities” of Dover or any other member of the Dover Group shall include business opportunities that are, by their nature, in a line of business of Dover or any other member of the Dover Group, including the Dover Business, are of practical advantage to them and are ones in which Dover or any other member of the Dover Group have an interest or a reasonable expectancy, and in which, by embracing the opportunities, the self-interest of Apergy or any other member of the Apergy Group or any of their officers or directors will be brought into conflict with that of Dover or any other member of the Dover Group.

ARTICLE VI

RELEASES AND INDEMNIFICATION

Section 6.1 Release of Pre-Distribution Claims.

(a) Except (i) as provided in Section 6.1(b), (ii) as may be otherwise provided in any Ancillary Agreement and (iii) for any matter for which any Party is entitled to indemnification or contribution pursuant to this Article VI, each Party, for itself and each member of its respective Group, their respective Affiliates and all Persons who at any time prior to the Effective Time were directors, officers, agents or employees of any member of their

 

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respective Group (in each case, in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, does hereby remise, release and forever discharge the other Party and the other members of such other Party’s Group, their respective Affiliates and all Persons who at any time prior to the Effective Time were stockholders, directors, officers, agents or employees of any member of such other Party’s Group (in each case, in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, including for fraud, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed at or before the Effective Time, including in connection with all activities to implement the Distribution, the Separation and any of the other transactions contemplated hereunder and under any of the Ancillary Agreements; provided, however, that nothing in this Section 6.1(a) shall relieve any Person released in this Section 6.1(a) who, after the Effective Time, is a director, officer or employee of any member of the Apergy Group and is no longer a director, officer or employee of any member of the Dover Group from Liabilities arising out of, relating to or resulting from his or her service as a director, officer or employee of any member of the Apergy Group after the Effective Time.

(b) Nothing contained in Section 6.1(a) shall impair or otherwise affect any right of any Party, and as applicable, a member of the Party’s Group to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings unrelated to the Separation and Distribution and explicitly contemplated in this Agreement or any Ancillary Agreement to continue in effect after the Effective Time. In addition, nothing contained in Section 6.1(a) shall release any Person from:

(i) any Liability assumed or Transferred by, or allocated to, a Party or a member of such Party’s Group pursuant to or as contemplated by this Agreement or any Ancillary Agreement including (A) with respect to Dover, any Dover Liability and (B) with respect to Apergy, any Apergy Liability;

(ii) any Liability provided in or resulting from any other Contract or understanding that is entered into after the Effective Time between one Party (and/or a member of such Party’s Group), on the one hand, and the other Party (and/or a member of such Party’s Group), on the other hand;

(iii) any Liability that the Parties may have with respect to indemnification or contribution pursuant to this Agreement or any Ancillary Agreement, including in respect of Actions brought against the Parties (or members of their respective Groups) by any Third Party, which Liability shall be governed by the provisions of this Article VI and, if applicable, the appropriate provisions of the Ancillary Agreements;

(iv) any Liability with respect to any Continuing Arrangements or any Intercompany Accounts that survive the Effective Time pursuant to Section 2.4(b); and

 

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(v) any Liability the release of which would result in a release of any Person other than the Persons released in Section 6.1(a); provided that the Parties agree not to bring any Action or permit any other member of their respective Group to bring any Action against a Person released in Section 6.1(a) with respect to such Liability.

In addition, nothing contained in Section 6.1(a) shall release any member of the Dover Group from honoring its existing obligations to indemnify any director, officer or employee of Apergy who was a director, officer or employee of Dover or any of its Affiliates at or prior to the Effective Time, to the extent such director, officer or employee is or becomes a named defendant in any Action with respect to which he or she was entitled to such indemnification pursuant to obligations existing prior to the Effective Time; it being understood that if the underlying obligation giving rise to such Action is an Apergy Liability, Apergy shall indemnify Dover for such Liability (including Dover’s costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article VI.

(c) Each Party shall not, and shall not permit any member of its Group to, make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or indemnification, against the other Party or any member of any other Party’s Group, or any other Person released pursuant to Section 6.1(a), with respect to any and all Liabilities released pursuant to Section 6.1(a).

(d) It is the intent of each Party, by virtue of the provisions of this Section 6.1, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Effective Time, whether known or unknown, between or among one Party and/or a member of such Party’s Group, on the one hand, and the other Party and/or a member of such other Party’s Group, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Effective Time), except as specifically set forth in Sections 6.1(a) and 6.1(b).

(e) If any Person associated with a Party (including any director, officer or employee of a Party) initiates an Action with respect to claims released by this Section 6.1, the Party with which such Person is associated shall be responsible for the fees and expenses of counsel of the other Party and such other Party shall be indemnified for all Liabilities incurred in connection with such Action in accordance with the provisions set forth in this Article VI.

(f) At any time, at the request of any Party, each Party shall cause each member of its respective Group and to the extent practicable each other Person on whose behalf it released Liabilities pursuant to this Section 6.1 to execute and deliver releases reflecting the provisions hereof.

Section 6.2 Indemnification by Dover. Except as otherwise specifically set forth in any provision of this Agreement or any Ancillary Agreement or as set forth in Schedule 6.2, following the Effective Time, Dover and each member of the Dover Group shall indemnify, defend and hold harmless the Apergy Indemnitees from and against any and all Indemnifiable Losses arising out of, by reason of or otherwise in connection with (i) the Dover Liabilities,

 

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including the failure of any member of the Dover Group or any other Person to pay, perform or otherwise discharge any Dover Liability in accordance with its respective terms, whether prior to, on or after the Effective Time or (ii) any breach by any member of the Dover Group of any provision of this Agreement or any Ancillary Agreement, unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder.

Section 6.3 Indemnification by Apergy. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, Apergy and each member of the Apergy Group shall indemnify, defend and hold harmless the Dover Indemnitees from and against any and all Indemnifiable Losses arising out of, by reason of or otherwise in connection with (i) the Apergy Liabilities, including the failure of any member of the Apergy Group or any other Person to pay, perform or otherwise discharge any Apergy Liability or Apergy Contract in accordance with its respective terms, whether prior to, on or after the Effective Time or (ii) any breach by Apergy or any member of the Apergy Group of any provision of this Agreement or any Ancillary Agreement, unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder.

Section 6.4 Procedures for Indemnification.

(a) An Indemnitee shall give the Indemnifying Party written notice of any matter that an Indemnitee has determined has given or could reasonably be expected to give rise to a right of indemnification under this Agreement or any Ancillary Agreement (other than a Third Party Claim which shall be governed by Section 6.4(b)), within ten Business Days of such determination, stating the expected amount of the Indemnifiable Loss claimed, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed by such Indemnitee or arises; provided, however, that the failure to provide such written notice within the ten Business Day period described above shall not release the Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying Party shall have been materially prejudiced as a result of such failure (except that the Indemnifying Party or Parties shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). The Indemnifying Party will have a period of 30 days after receipt of a notice under this Section 6.4(a) within which to respond thereto. If the Indemnifying Party fails to respond within such period, the Liability specified in such notice from the Indemnitee shall be conclusively determined to be a Liability of the Indemnifying Party hereunder. If such Indemnifying Party responds within such period and rejects such claim in whole or in part, the disputed matter shall be resolved in accordance with Article VIII.

(b) If a claim or demand (including the commencement of an Action) is made against a Dover Indemnitee or an Apergy Indemnitee (each, an “Indemnitee”) by any Third Party as to which such Indemnitee is or may be entitled to indemnification pursuant to this Agreement or any Ancillary Agreement (a “Third Party Claim”), such Indemnitee shall notify the Party which is or may be required pursuant to this Article VI or pursuant to any Ancillary Agreement to make such indemnification (the “Indemnifying Party”) in writing, and in reasonable detail (which notice obligation may be satisfied by providing copies of all notices and documents

 

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received by the Indemnitee relating to the Third Party Claim), of the Third Party Claim promptly (and in any event within ten Business Days) after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that the failure to provide notice of any such Third Party Claim pursuant to this sentence shall not release the Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying Party shall have been materially prejudiced as a result of such failure (except that the Indemnifying Party or Parties shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within ten Business Days) after the Indemnitee’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim.

(c) Other than in the case of a Liability being managed by a Party in accordance with any Ancillary Agreement and except as set forth in Schedule 6.4(c) or Section 6.4(k), an Indemnifying Party shall be entitled (but shall not be required) to assume and control the defense of, and seek to settle or compromise any Third Party Claim, at such Indemnifying Party’s own cost and expense and by such Indemnifying Party’s own counsel, that is reasonably acceptable to the applicable Indemnitees, if it gives notice of its intention to do so to the applicable Indemnitees within 30 days of the receipt of such notice from such Indemnitees. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, at its own expense and, in any event, shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party all witnesses, pertinent Information and materials in such Indemnitee’s possession or under such Indemnitee’s control relating thereto as are reasonably required by the Indemnifying Party. In the event of a conflict of interest between the Indemnifying Party and the applicable Indemnitee(s), or in the event that any Third Party Claim seeks equitable relief which would restrict or limit the future conduct of the Indemnitee’s business or operations, such Indemnitee(s) shall be entitled to retain, at the Indemnifying Party’s expense, separate counsel and to participate in (but not control) the defense, compromise, or settlement of that portion of the Third Party Claim that involves such conflict of interest or seeks equitable relief with respect to the Indemnitee(s).

(d) If an Indemnifying Party elects not to assume responsibility for defending a Third Party Claim, or fails to notify an Indemnitee of its election as provided in Section 6.4(c), such Indemnitee may defend such Third Party Claim at the cost and expense of the Indemnifying Party. If the Indemnitee is conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnitee in such defense and make available to the Indemnitee all witnesses, pertinent Information and materials in such Indemnifying Party’s possession or under such Indemnifying Party’s control relating thereto as are reasonably required by the Indemnitee.

(e) Unless the Indemnifying Party has failed to assume the defense of the Third Party Claim in accordance with the terms of this Agreement, no Indemnitee may settle, compromise or consent to the entry of any judgment with respect to any Third Party Claim without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. If an Indemnifying Party has failed to assume the defense of the Third Party Claim within the time period specified in clause (c) above, it shall not be a defense to any obligation to

 

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pay any amount in respect of such Third Party Claim that the Indemnifying Party was not consulted in the defense thereof, that such Indemnifying Party’s views or opinions as to the conduct of such defense were not accepted or adopted, that such Indemnifying Party does not approve of the quality or manner of the defense thereof or that such Third Party Claim was incurred by reason of a settlement rather than by a judgment or other determination of liability.

(f) In the case of a Third Party Claim, no Indemnifying Party shall consent to entry of any judgment with respect to, or enter into any settlement or compromise of, the Third Party Claim without the consent of the Indemnitee, which consent may not be unreasonably withheld, unless such settlement, compromise or judgment is solely for monetary damages, does not involve any finding or determination of wrongdoing or violation of Law by the Indemnitee and provides for a full, unconditional and irrevocable release of the Indemnitee from all Liability in connection with the Third Party Claim. Subject to the foregoing sentence, in the event the Indemnifying Party enters into a settlement or compromise in accordance with the foregoing sentence with respect to a Third Party Claim, the defense of which was assumed pursuant to Section 6.4(c), then any such settlement or compromise made or caused to be made of a Third Party Claim in accordance with this Article VI shall be binding on the Indemnitee, in the same manner as if a final judgment or decree had been entered by a court of competent jurisdiction in the amount of such settlement or compromise.

(g) Except as otherwise provided in Section 10.20 or any Ancillary Agreement, absent fraud or willful misconduct by an Indemnifying Party, the indemnification provisions of this Article VI shall be the sole and exclusive remedy of an Indemnitee for any monetary or compensatory damages or losses resulting from any breach of this Agreement (including with respect to monetary or compensatory damages or losses arising out of or relating to, as the case may be, any Apergy Liability or Dover Liability) or any Ancillary Agreement, and each Indemnitee expressly waives and relinquishes any and all rights, claims or remedies such Person may have with respect to the foregoing other than under this Article VI against any Indemnifying Party. The remedies provided in this Article VI shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. For the avoidance of doubt, all disputes in respect of this Article VI shall be resolved in accordance with Article VIII.

(h) Notwithstanding the foregoing, to the extent any Ancillary Agreement provides procedures for indemnification that differ from the provisions set forth in this Section 6.4, the terms of the Ancillary Agreement will govern.

(i) Any Indemnitee that has made a claim for indemnification pursuant to this Section 6.4 shall use commercially reasonable efforts to mitigate any Indemnifiable Losses in respect thereof.

(j) The provisions of this Article VI shall apply to Third Party Claims that are already pending or asserted as well as Third Party Claim brought or asserted after the date of this Agreement. There shall be no requirement under this Section 6.4 to give a notice with respect to any Third Party Claim that exists as of the Effective Time. The Parties acknowledge that Liabilities for Actions (regardless of the parties to the Actions) may be partly Dover Liabilities and partly Apergy Liabilities. If the Parties cannot agree on the allocation of any such Liabilities

 

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for Actions, they shall resolve the matter pursuant to the procedures set forth in Article VIII. Neither Party shall, nor shall either Party permit its Subsidiaries to, file Third Party Claims or cross-claims against the other Party or its Subsidiaries in an Action in which a Third Party Claim is being resolved.

(k) Notwithstanding anything to the contrary set forth in this Section 6.4, Dover may elect to have exclusive authority and control over the investigation, prosecution, defense and appeal of all Actions pending at the Effective Time which relate to or arise out of the Apergy Business, the Apergy Assets or the Apergy Liabilities if such Action also relates to the Dover Assets and Dover Liabilities and a member of the Dover Group is also named as a target or defendant thereunder (but excluding any such Actions which solely relate to or solely arise in connection with the Apergy Business, the Apergy Assets or the Apergy Liabilities); provided that (i) Dover will consult with Apergy on a regular basis with respect to strategy and developments with respect to any such Action, (ii) if Dover fails to take reasonable steps necessary to defend diligently such Action, Apergy may assume such defense, and Dover will be liable for its proportionate share of reasonable costs or expenses paid or incurred in connection with such defense, (iii) Apergy has the right to participate in (but, subject to clause (ii) above, not control) the defense of such Action, and (iv) Dover shall not settle, compromise or consent to the entry of judgment with respect to such Action without the consent of Apergy unless such settlement, compromise, or judgment (A) provides relief consisting solely of money damages borne by Dover, (B) does not involve any finding or determination of wrongdoing or violation of Law by Apergy and (C) provides for a full, unconditional and irrevocable release of Apergy from all Liability in connection with such Action. After any compromise, settlement, or consent to entry of judgment, Dover and Apergy will agree upon a reasonable allocation to Apergy and Apergy will be responsible for or receive, as the case may be, Apergy’s proportionate share of any such compromise, settlement, consent or judgment attributable to the Apergy Business, the Apergy Assets or the Apergy Liabilities, including its proportionate share of the reasonable costs and expenses associated with defending same. If the Parties cannot agree on the allocation of any such Liabilities for Actions, they shall resolve the matter pursuant to the procedures set forth in Article VIII.

Section 6.5 Indemnification Payments. Indemnification required by this Article VI shall be made from time to time by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or an Indemnifiable Loss incurred.

Section 6.6 Additional Matters; Survival of Indemnities.

(a) The indemnity and contribution agreements contained in this Article VI shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee and (ii) the knowledge by the Indemnitee of Indemnifiable Losses for which it might be entitled to indemnification or contribution hereunder. The indemnity agreements contained in this Article VI shall survive the Distribution.

(b) The rights and obligations of each Party and their respective Indemnitees under this Article VI shall survive (i) the sale or other Transfer by any Party or its Affiliates of any Assets or businesses or the assignment by it of any and all Liabilities and (ii) any merger, consolidation, business combination, sale of all or substantially all of the Assets, restructuring, recapitalization, reorganization or similar transaction involving either Party or any of its Subsidiaries.

 

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(c) Indemnification under this Article VI shall be treated for Tax purposes consistent with the private letter ruling, and if not addressed therein, to the extent allowed under existing Tax Law, in one of the following ways: (i) if made by Dover to Apergy, such payment shall be treated as an additional part of the transfer by Dover to Apergy in the Separation and if made from Apergy to Dover, such payment shall be treated as a reduction in the amount of the transfer by Dover to Apergy in the Separation.

Section 6.7 Indemnification Obligations Net of Insurance Proceeds and Other Amounts; Contribution.

(a) Insurance Proceeds and Other Amounts. The Parties intend that any Indemnifiable Loss subject to indemnification or contribution pursuant to this Agreement or any Ancillary Agreement: (i) shall be reduced by any Insurance Proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses actually incurred in the collection thereof) from any Person by or on behalf of the Indemnitee in respect of any indemnifiable Liability; (ii) shall not be increased to take into account any Tax costs incurred by the Indemnitee arising from any Indemnity Payments received from the Indemnifying Party; and (iii) shall not be reduced to take into account any Tax benefit received by the Indemnitee arising from the incurrence or payment of any Indemnity Payment. Accordingly, the amount which an Indemnifying Party is required to pay to any Indemnitee shall be reduced by any Insurance Proceeds or any other amounts theretofore actually recovered (net of any out-of-pocket costs or expenses actually incurred in the collection thereof) by or on behalf of the Indemnitee in respect of the related Liability. If an Indemnitee receives a payment required by this Agreement from an Indemnifying Party in respect of any Liability (an “Indemnity Payment”) and subsequently receives Insurance Proceeds or any other amounts in respect of the related Liability, then the Indemnitee shall pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or such other amounts (net of any out-of-pocket costs or expenses actually incurred in the collection thereof) had been received, realized or recovered before the Indemnity Payment was made.

(b) Insurers and Other Third Parties Not Relieved. The Parties hereby agree that an insurer or other Third Party that would otherwise be obligated to pay any amount shall not be relieved of the responsibility with respect thereto or have any subrogation rights with respect thereto by virtue of any provision contained in this Agreement or any Ancillary Agreement, and that no insurer or any other Third Party shall be entitled to a “windfall” (e.g., a benefit they would not otherwise be entitled to receive, or the reduction or elimination of an insurance coverage obligation that they would otherwise have, in the absence of the indemnification or release provisions) by virtue of any provision contained in this Agreement or any Ancillary Agreement. Each Party shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to collect or recover, or allow the Indemnifying Party to collect or recover, any Insurance Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification may be available under this Article VI. Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome

 

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of any Action to collect or recover Insurance Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds prior to making a claim for indemnification or receiving any Indemnity Payment otherwise owed to it under this Agreement or any Ancillary Agreement.

(c) Contribution. If the indemnification provided for in this Article VI is unavailable for any reason to an Indemnitee (other than failure to provide notice in accordance with Section 6.4(a) or (b)) in respect of any Indemnifiable Loss, then the Indemnifying Party shall, in accordance with this Section 6.7(c), contribute to the Indemnifiable Losses incurred, paid or payable by such Indemnitee as a result of such Indemnifiable Loss in such proportion as is appropriate to reflect the relative fault of Apergy and each other member of the Apergy Group, on the one hand, and Dover and each other member of the Dover Group, on the other hand, in connection with the circumstances which resulted in such Indemnifiable Loss. With respect to any Indemnifiable Losses arising out of or related to information contained in the Distribution Disclosure Documents or other securities law filing, the relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact relates to information supplied by the Apergy Business or a member of the Apergy Group, on the one hand, or the Dover Business or a member of the Dover Group, on the other hand. The information on Schedule 1.1(50)(iv)(A) shall be deemed supplied by the Dover Business. All other information in the Distribution Disclosure Documents shall be deemed supplied by the Apergy Business or the members of the Apergy Group. With respect to Pre-Separation Disclosure, any disclosure relating to the Dover Business shall be deemed supplied by the Dover Business or the members of the Dover Group and any disclosure relating to the Apergy Business shall be deemed supplied by the Apergy Business or the members of the Apergy Group.

Section 6.8 Cooperation in Defense and Settlement. With respect to any Third Party Claim that implicates two or more Parties (or any member of such Parties’ respective Groups) in any material respect due to the allocation of Liabilities, responsibilities for management of defense and related indemnities pursuant to this Agreement or any of the Ancillary Agreements, the applicable Parties agree to use commercially reasonable efforts to cooperate fully and maintain a joint defense (in a manner that will preserve for all Parties any privilege with respect thereto). The Party that is not responsible for managing the defense of any such Third Party Claim shall, upon reasonable request, be consulted with respect to significant matters relating thereto and may, if necessary or helpful, retain counsel (at its sole expense) to assist in the defense of such claims.

Section 6.9 Limitation of Liability. IN NO EVENT SHALL ANY PARTY OR ANY OTHER MEMBER OF ANY GROUP BE LIABLE TO ANY OTHER PARTY OR ANY MEMBER OF ANOTHER GROUP FOR EXEMPLARY, PUNITIVE, MULTIPLE, CONSEQUENTIAL, SPECIAL, INDIRECT OR SIMILAR DAMAGES, INCLUDING LOSS OF FUTURE PROFITS, REVENUE OR INCOME, DIMINUTION IN VALUE OR LOSS OF BUSINESS REPUTATION OR OPPORTUNITY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES EXCEPT TO THE EXTENT AWARDED BY A COURT OF COMPETENT JURISDICTION IN CONNECTION WITH A THIRD-PARTY CLAIM.

 

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Section 6.10 Covenant not to Sue. Each Party hereby covenants and agrees that neither it nor the members of such Party’s Group nor any Person claiming through it shall bring suit or otherwise assert any claim against any Indemnitee, or assert a defense against any claim asserted by any Indemnitee, before any court, arbitrator, mediator or administrative agency anywhere in the world, alleging that: (a) the assumption of any Apergy Liabilities by Apergy or a member of the Apergy Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason; (b) the retention of any Dover Liabilities by Dover or any member of the Dover Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason; or (c) the provisions of this Article VI are void or unenforceable for any reason.

ARTICLE VII

CONFIDENTIALITY; ACCESS TO INFORMATION

Section 7.1 Preservation of Corporate Records. The Parties agree that upon written request from the other that certain Information relating to the Apergy Business, the Dover Business or the transactions contemplated hereby be retained in connection with an Action, the Parties shall use commercially reasonable efforts to preserve and not to destroy or dispose of such Information without the consent of the requesting Party.

Section 7.2 Provision of Corporate Records. Other than in circumstances in which indemnification is sought pursuant to Article VI (in which event the provisions of such Article will govern), for matters related to the provision of Tax information (in which event the provisions of the Tax Matters Agreement shall govern) or as provided in Section 6.1 of the Employee Matters Agreement and without limiting the applicable provisions of Article VI, and subject to appropriate restrictions for classified Information, Privileged Information or Confidential Information and subject further to any restrictions or limitations contained in Section 5.3 or elsewhere in this Article VII:

(a) After the Effective Time, upon the prior written reasonable request by, and at the expense of, Apergy for specific and identified Information which (x) primarily relates to any member of the Apergy Group or the conduct of the Apergy Business (including Apergy Assets and Apergy Liabilities), as the case may be, up to the Effective Time or (y) is necessary for Apergy to comply with the terms of, or otherwise perform under, any Shared Contract or Ancillary Agreement to which Dover and/or Apergy are parties, Dover shall provide, as soon as reasonably practicable following the receipt of such request, appropriate copies of such Information (or the originals thereof if Apergy has a reasonable need for such originals) in the possession or control of Dover or any of its Affiliates, but only to the extent such items so relate and are not already in the possession or control of a member of the Apergy Group; provided that, to the extent any originals are delivered to any member of the Apergy Group pursuant to this Agreement, a Shared Contract or the Ancillary Agreements, Apergy shall or cause the applicable member of its Group to, at its own expense, return them to Dover within a reasonable time after the need to retain such originals has ceased.

(b) After the Effective Time, upon the prior written reasonable request by, and at the expense of, Dover for specific and identified Information which (x) primarily relates to any member of the Dover Group or the conduct of the Dover Business (including Dover Assets and

 

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Dover Liabilities), as the case may be, up to the Effective Time or (y) is necessary for Dover to comply with the terms of, or otherwise perform under, any Shared Contract or Ancillary Agreement to which Dover and/or Apergy are parties, Apergy shall provide, as soon as reasonably practicable following the receipt of such request, appropriate copies of such Information (or the originals thereof if Dover has a reasonable need for such originals) in the possession or control of Apergy or any of its Affiliates, but only to the extent such items so relate and are not already in the possession or control of a member of the Dover Group; provided that, to the extent any originals are delivered to any member of the Dover Group pursuant to this Agreement, a Shared Contract or the Ancillary Agreements, Dover shall or cause the applicable member of its Group to, at its own expense, return them to Apergy within a reasonable time after the need to retain such originals has ceased.

(c) In connection with the provision of information under this Section 7.2, the providing Party shall be entitled to redact any portion of the information to the extent related to any matter other than the receiving Party’s business.

Section 7.3 Access to Information. Other than in circumstances in which indemnification is sought pursuant to Article VI (in which event the provisions of such Article will govern), for matters related to the provision of Tax information (in which event the provisions of the Tax Matters Agreement shall govern) or as provided in Section 6.1 of the Employee Matters Agreement and without limiting the applicable provisions of Article VI, and subject to any restrictions or limitations contained in Section 5.3 or elsewhere in this Article VII, from and after the Effective Time, each of Dover and Apergy shall afford to the other and its authorized accountants, counsel and other designated representatives reasonable access during normal business hours, subject to appropriate restrictions for classified Information, Privileged Information or Confidential Information and to the requirements of any applicable Law, to the personnel, properties, and Information of such Party and its Subsidiaries insofar as such access is reasonably required by the other Party, and only for the duration such access is required, and (x) primarily relates to such other Party or the conduct of its business prior to the Effective Time or (y) is necessary for such party to comply with the terms of, or otherwise perform under, any Shared Contract or Ancillary Agreement; provided, however, that in the event that a Party determines that any such access or the provision of any such Information (including Information requested under Section 5.3 or Section 7.2) would be commercially detrimental in any material respect, violate any Law or Contract with a Third Party or waive any attorney-client privilege, rights under the work product doctrine or other applicable privilege, the Parties shall take all reasonable measures (and, to the extent applicable, shall use commercially reasonable efforts to obtain the Consent from any Third Party required to make such disclosure without violating a Contract with a Third Party) to permit compliance with such information request in a manner that avoids any such harm, violation or consequence. Each of Dover and Apergy shall inform their respective officers, employees, agents, consultants, advisors, authorized accountants, counsel and other designated representatives who have or have access to the other Party’s Confidential Information or other Information provided pursuant to Section 5.3 or this Article VII of their obligation to hold such Information confidential in accordance with the provisions of this Agreement and to use such Information only as required to perform services to any member of the Dover Group or the Apergy Group, as applicable.

 

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Section 7.4 Witness Services. At all times from and after the Effective Time, each of Dover and Apergy shall use its commercially reasonable efforts to make available to the other, upon reasonable written request, its and its Subsidiaries’ officers, directors, employees and agents (taking into account the business demands of such individuals) as witnesses to the extent that (i) such Persons may reasonably be required to testify in connection with the prosecution or defense of any Action in which the requesting Party may from time to time be involved (except for claims, demands or Actions in which one or more members of one Group is adverse to one or more members of the other Group) and (ii) there is no conflict in the Action between the requesting Party and the other Party. A Party providing a witness to the other Party under this Section 7.4 shall be entitled to receive from the recipient of such witness services, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses (which shall not include the costs of salaries and benefits of employees who are witnesses or any pro rata portion of overhead or other costs of employing such employees which would have been incurred by such employees’ employer regardless of the employees’ service as witnesses), as may be reasonably incurred and properly paid under applicable Law.

Section 7.5 Confidentiality.

(a) Notwithstanding any termination of this Agreement, from and after the Effective Time until the date that is five years after the date of termination of the Agreement, the Parties shall hold, and shall cause each of their respective Subsidiaries to hold, and shall each cause their respective directors, officers, employees, agents, consultants, advisors, accountants, attorneys, or other representatives to hold, in strict confidence, and not to disclose or release or, except as otherwise permitted by this Agreement or any Ancillary Agreement, use, including for any ongoing or future commercial purpose, without the prior written consent of the Party to whom the Confidential Information relates (which consent may be withheld in such Party’s sole and absolute discretion, except where disclosure is required by applicable Law), any and all Confidential Information concerning the other Party (and the members of its respective Group and Business); provided that the Parties may disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors, attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a need to know such information for auditing and other non-commercial purposes and are informed of their obligation to hold such information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, the applicable Party will be responsible, (ii) if the Parties or any of their respective Subsidiaries are required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of Law or stock exchange rule or (iii) as necessary in order to permit a Party to prepare and disclose its financial statements in connection with any regulatory filings or Tax Returns; provided further, that each Party (and members of its Group as necessary) may use, or may permit use of, Confidential Information of the other Party in connection with such first Party performing its obligations, or exercising its rights, under this Agreement or any Ancillary Agreement. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (ii) above, each Party, as applicable, shall promptly notify (to the extent permitted by applicable Law) the other of the existence of such request or demand and shall provide the other a reasonable opportunity to seek an appropriate protective order or other remedy, which such Parties will cooperate in obtaining to the extent reasonably practicable. In the event that such appropriate protective order or other remedy is not obtained, the Party that faces the disclosure requirement shall furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment is accorded such Confidential Information.

 

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(b) Notwithstanding anything to the contrary set forth herein, (i) the Parties shall be deemed to have satisfied their obligations hereunder with respect to Confidential Information if they exercise at least the same degree of care that applies to Dover’s confidential and proprietary information pursuant to policies in effect as of the Effective Time and (ii) confidentiality obligations provided for in any Contract between each Party or its Subsidiaries and their respective employees shall remain in full force and effect. Notwithstanding anything to the contrary set forth herein, Confidential Information of any Party in the possession of and used by any other Party as of the Effective Time may continue to be used by such Party in possession of the Confidential Information in and only in the operation of the Apergy Business (in the case of the Apergy Group) or the Dover Business (in the case of the Dover Group); provided that such Confidential Information may be used only so long as the Confidential Information is maintained in confidence and not disclosed in violation of Section 7.5(a).

(c) Each Party acknowledges that it and the other members of its Group may have in their possession confidential or proprietary information of Third Parties (i) that was received under confidentiality or non-disclosure agreements with such Third Parties prior to the Effective Time or (ii) that, as between the two Parties, was originally collected by the other Party (or another member of its Group) and that may be subject to and protected by privacy, data protection or other applicable Laws. Such Party will hold, and will cause the other members of its Group and their respective representatives to hold, in strict confidence the confidential and proprietary information of, or personal information relating to, Third Parties to which they or any other member of their respective Groups has access, in accordance with privacy, data protection and other applicable Laws and the terms of any Contracts entered into prior to the Effective Time between one or more members of such Party’s Group (whether acting through, on behalf of, or in connection with, the separated Businesses) and such Third Parties.

(d) Upon the written request of a Party, the other Party shall take commercially reasonable actions to promptly (i) deliver to such requesting Party all original Confidential Information (whether written or electronic) concerning such requesting Party and/or its Subsidiaries and (ii) if specifically requested by such requesting Party, destroy any copies of such Confidential Information (including any extracts therefrom); provided that such first Party may retain one copy of such Information to the extent required by applicable Law or professional standards, and shall not be required to destroy any such Information located in back-up, archival electronic storage. Upon the written request of such requesting Party, the other Party shall cause one of its duly authorized officers to certify in writing to such requesting Party that the requirements of the preceding sentence have been satisfied in full.

Section 7.6 Privileged Matters.

(a) Pre-Separation Services. The Parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been and will be rendered for the collective benefit of each of the members of the Dover Group and the Apergy Group, and that each of the members of the Dover Group and the Apergy Group should be deemed to be the client with respect to such pre-separation services for the purposes of

 

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asserting all privileges which may be asserted under applicable Law. The Parties shall have a shared privilege with respect to all Privileged Information which relates to such pre-separation services. For the avoidance of doubt, Privileged Information within the scope of this Section 7.6 includes, but is not limited to, services rendered by legal counsel retained or employed by any Party (or any member of such Party’s respective Group), including outside counsel and in-house counsel; provided, however, that any such privileged communications or attorney-work product, whether arising prior to, or after the Effective Time, with respect to any matter for which a Party has an indemnification obligation hereunder, shall be subject to the sole control of such Party, which shall be solely entitled to control the assertion or waiver of the privilege or protection, whether or not such communications or work product is in the possession of or under the control of such Party. Notwithstanding the foregoing, the Parties acknowledge and agree that Simpson Thacher & Bartlett LLP and in-house counsel of Dover represent only Dover and not Apergy in connection with the proposed transactions contemplated by this Agreement or any Ancillary Agreement and that (x) any advice given by or communications with Simpson Thacher & Bartlett LLP shall not be subject to any joint privilege and shall be owned solely by Dover; and (y) any advice given by or communications with in-house counsel of Dover (in each case to the extent it relates to any proposed transactions contemplated by this Agreement or any Ancillary Agreement) shall not be subject to any joint privilege and shall be owned solely by Dover.

(b) Post-Separation Services. The Parties recognize that legal and other professional services will be provided following the Effective Time to each of Dover and Apergy. The Parties further recognize that certain of such post-separation services will be rendered solely for the benefit of Dover or Apergy or their successors or assigns, as the case may be. With respect to such post-separation services, the Parties agree as follows:

(i) Dover shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with Privileged Information which relates solely to the Dover Business, whether or not the Privileged Information is in the possession of or under the control of Dover or Apergy. Dover shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with Privileged Information that relates solely to the subject matter of any claims constituting Dover Liabilities, now pending or which may be asserted in the future, in any Actions initiated against or by Dover, whether or not the Privileged Information is in the possession of or under the control of Dover or Apergy or their successors or assigns; and

(ii) Apergy shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with Privileged Information which relates solely to the Apergy Business, whether or not the Privileged Information is in the possession of or under the control of Dover or Apergy or their successors or assigns. Apergy shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with Privileged Information that relates solely to the subject matter of any claims constituting Apergy Liabilities, now pending or which may be asserted in the future, in any Actions initiated against or by Apergy, whether or not the Privileged Information is in the possession of or under the control of Dover or Apergy or their successors or assigns.

 

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(c) The Parties agree that they shall have a shared privilege, with equal right to assert or waive, subject to the restrictions in this Section 7.6, with respect to all privileges not allocated pursuant to the terms of Section 7.6(b). All privileges relating to any Actions, or other matters which involve both Dover and Apergy in respect of which both Parties retain any responsibility or Liability under this Agreement, shall be subject to a shared privilege among them.

(d) No Party may (or cause or permit any member of its Group to) waive, or allege or purport to waive, any privilege which could be asserted under any applicable Law, and in which any other Party has a shared privilege, without the consent of the other Party, which shall not be unreasonably withheld or delayed or as provided in subsections (e), (f) or (g) below. Consent shall be in writing, or shall be deemed to be granted unless written objection is made within 20 days after notice upon the other Party requesting such consent.

(e) In the event of any litigation, arbitration or dispute between or among any of the Parties, or any members of their respective Groups, either such Party may waive a privilege in which the other Party or member of such Group has a shared privilege, without obtaining the consent of the other Party; provided that such waiver of a shared privilege shall be effective only as to the use of information with respect to the litigation, arbitration or dispute between the relevant Parties and/or the applicable members of their respective Groups, and shall not operate as a waiver of the shared privilege with respect to Third Parties.

(f) If a dispute arises between or among the Parties or their respective Subsidiaries regarding whether a privilege should be waived to protect or advance the interest of any Party (or members of its Group) with respect to which the Parties have a shared privilege, each Party agrees that it shall negotiate and shall endeavor to minimize any prejudice to the rights of the other Party’s Group and shall not unreasonably withhold consent to any request for waiver by another Party. Each Party specifically agrees that it will not withhold consent to waiver for any purpose except to protect the legitimate interests of its Group.

(g) If, within 15 days of receipt by the requesting Party of written objection, the Parties have not succeeded in negotiating a resolution to any dispute regarding whether a privilege should be waived, and the requesting Party determines that a privilege should nonetheless be waived to protect or advance its interest, the requesting Party shall provide the objecting Party 15 days written notice prior to effecting such waiver. Each Party specifically agrees that failure within 15 days of receipt of such notice to commence proceedings in accordance with Section 8.2 to enjoin such disclosure under applicable Law shall be deemed full and effective consent to such disclosure, and the Parties agree that any such privilege shall not be waived by either Party until the final determination of any proceedings regarding such dispute in accordance with Section 8.2.

(h) Upon receipt by any Party or by any Subsidiary thereof of any subpoena, discovery or other request which arguably calls for the production or disclosure of information subject to a shared privilege or as to which another Party has the sole right hereunder to assert a privilege, or if any Party obtains knowledge that any of its or any of its Subsidiaries’ current or former directors, officers, agents or employees have received any subpoena or discovery or other requests which arguably call for the production or disclosure of such Privileged Information,

 

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such Party shall promptly notify the other Party of the existence of the request and shall provide the other Party a reasonable opportunity to review the information and to assert any rights it may have under this Section 7.6 or otherwise to prevent the production or disclosure of such Privileged Information.

(i) The transfer of all Information pursuant to this Agreement is made in reliance on the agreement of Dover and Apergy as set forth in Section 7.5 and this Section 7.6, to maintain the confidentiality of Privileged Information and to assert and maintain all applicable privileges. The access to information being granted pursuant to Section 5.3, Section 7.2 and Section 7.3, the agreement to provide witnesses and individuals pursuant to Section 7.4, the furnishing of notices and documents and other cooperative efforts contemplated by this Section 7.6, Section 6.4 and Section 6.8 and the transfer of Privileged Information between and among the Parties and their respective Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise.

Section 7.7 Ownership of Information. Any information owned by one Party or any of its Subsidiaries that is provided to a requesting Party pursuant to this Article VII or Section 5.3 shall be deemed to remain the property of the providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information, whether by implication, estoppel or otherwise.

Section 7.8 Other Agreements. The rights and obligations granted under this Article VII are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of information, or privileged matter with respect thereto, set forth in any Ancillary Agreement.

Section 7.9 Compensation for Providing Information. A Party requesting Information pursuant to this Article VII agrees to reimburse the providing Party for the reasonable expenses, if any, of gathering, copying and otherwise complying with the request with respect to such Information (including any reasonable costs and expenses incurred in any review of Information for purposes of protecting any privilege thereunder or any other restrictions on the disclosure of such Information).

ARTICLE VIII

DISPUTE RESOLUTION

Section 8.1 Negotiation.

(a) In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity, termination or breach of this Agreement or any Ancillary Agreement (unless such Ancillary Agreement expressly provides that disputes thereunder will not be subject to the resolution procedures set forth in this Article VIII) or otherwise arising out of, or in any way related to this Agreement or any such Ancillary Agreement or the transactions contemplated hereby or thereby, including any claim based in Contract, tort, Law or constitution (but excluding any controversy, dispute or claim arising out of any Contract with a Third Party if such Third Party is a necessary party to

 

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such controversy, dispute or claim) (collectively, “Agreement Disputes”), the general counsel or chief legal officer (as appropriate) of the relevant Parties (or such other officer designated by the relevant Party) shall negotiate for a reasonable period of time to settle such Agreement Dispute; provided that (i) such reasonable period shall not, unless otherwise agreed by the relevant Parties in writing, exceed 60 days from the time of receipt by a Party of written notice of such Agreement Dispute (“Dispute Notice”) and (ii) the relevant employees from both Parties with knowledge and interest in the Agreement Dispute, which shall include tax professionals in the event of an Agreement Dispute involving the Tax Matters Agreement, shall first have tried to resolve the differences between the Parties. Within 30 days of receipt of the Dispute Notice, the receiving Party shall submit to the other Party a written response. The Dispute Notice and the response shall each include a statement of the Party’s position, a general summary of the arguments supporting that position, the name and title of the executive who will represent the party and any other person(s) who will attend settlement meetings.

(b) Notwithstanding anything to the contrary contained in this Agreement or any Ancillary Agreement, in the event of any Agreement Dispute with respect to which a Dispute Notice has been delivered in accordance with this Section 8.1 (i) the relevant Parties shall not assert the defenses of statute of limitations and laches with respect to the period beginning after the date of receipt of the Dispute Notice and (ii) any contractual time period or deadline under this Agreement or any Ancillary Agreement to which such Agreement Dispute relates occurring after the Dispute Notice is received shall be tolled by the service of a Dispute Notice. Nothing said or disclosed, nor any document produced, in the course of any negotiations, conferences and discussions in connection with efforts to settle an Agreement Dispute that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any arbitration or other proceeding, but shall be considered as to have been disclosed for settlement purposes.

Section 8.2 Arbitration. If the Agreement Dispute has not been resolved for any reason after 60 days have elapsed from the receipt by a Party of a Dispute Notice, such Agreement Dispute shall be exclusively and finally determined, at the request of any relevant Party, by arbitration conducted where the Parties agree it would be most convenient, and in the absence of agreement in New York City, before and in accordance with the American Arbitration Association (“AAA”) Commercial Arbitration Rules then currently in effect, except as modified herein (the “Rules”).

Section 8.3 Selection of Arbitrators. Unless the Parties mutually agree to the appointment of a sole arbitrator, there shall be three arbitrators appointed pursuant to this Section 8.3. Each Party shall appoint an arbitrator within 20 days of receipt by respondent of a copy of the demand for arbitration. The two party-appointed arbitrators shall have 20 days from the appointment of the second arbitrator to agree on a third arbitrator who shall chair the arbitral tribunal. Any arbitrator not timely appointed by the Parties shall be appointed by the AAA in accordance with the listing and ranking method in the Rules, and in any such procedure, each Party shall be given a limited number of strikes, excluding strikes for cause. If any appointed arbitrator declines, resigns, becomes incapacitated, or otherwise refuses or fails to serve or to continue to serve as an arbitrator, the Party or arbitrators entitled to appoint such arbitrator shall promptly appoint a successor. In the event that an arbitrator is objected to, the AAA shall decide whether such objection is valid and whether the challenged arbitrator shall be removed. Any

 

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controversy concerning the jurisdiction of the arbitrators, whether an Agreement Dispute is arbitrable, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation of enforceability of this Article VIII shall be determined by the arbitrators. In the case of any Agreement Dispute related to the Tax Matters Agreement, if mutually agreed to by the Parties, each arbitrator shall be required to be a tax counsel or other tax advisor at a nationally recognized law or accounting firm (with no required affiliation with the AAA).

Section 8.4 Arbitration Procedures. Any hearing to be conducted shall be held no later than 180 days following appointment of the arbitrators or a soon thereafter as practicable.

Section 8.5 Discovery. The arbitrators, consistent with the expedited nature of arbitration, shall permit limited discovery only of documents directly related to the issues in dispute. There shall be no more than three depositions per party of no more than eight hours each. Notwithstanding the foregoing, each Party will, upon the written request of the other Party, promptly provide the other with copies of documents on which the producing Party may rely in support of a claim or defense or which are relevant to the issues raised in the Agreement Dispute. All discovery, if any, shall be completed within 90 days following the appointment of the arbitrators or as soon thereafter as practicable. Adherence to formal rules of evidence shall not be required and the arbitrators shall consider any evidence and testimony that the arbitrators determine to be relevant, in accordance with the Rules and procedures that the arbitrators determine to be appropriate. In resolving any Agreement Dispute, the Parties intend that the arbitrators shall apply the substantive Laws of the State of New York, without regard to any choice of law principles thereof that would mandate the application of the Laws of another jurisdiction. The Parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable, and any award rendered by the arbitrators shall be final and binding on the Parties. The Parties agree to comply and cause the members of their applicable Group to comply with any award made in any such arbitration proceedings and agree to enforcement of or entry of judgment upon such award, in any court of competent jurisdiction.

Section 8.6 Confidentiality of Proceedings. Without limiting the provisions of the Rules, unless otherwise agreed in writing by or among the relevant Parties or permitted by this Agreement or as may be required by law or any regulatory authority, the relevant Parties shall keep, and shall cause the members of their applicable Group to keep, confidential all matters relating to the arbitration or the award. The arbitral award shall be confidential; provided that such award may be disclosed (i) to the extent reasonably necessary in any proceeding brought to enforce this agreement to arbitrate or any arbitral award or for entry of a judgment upon the award and (ii) to the extent otherwise required by Law or regulatory authority.

Section 8.7 Pre-Hearing Procedure and Disposition. Nothing contained herein is intended to or shall be construed to prevent any Party, from applying to any court of competent jurisdiction for interim measures or other provisional relief in connection with the subject matter of any Agreement Disputes, including to compel a party to arbitrate any Agreement Dispute, to prevent irreparable harm prior to the appointment of the arbitral tribunal or to require witnesses to obey subpoenas issued by the arbitrators. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the Parties to request that any court modify or vacate any

 

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temporary or preliminary relief issued by such court, and to award damages for the failure of any party to respect the arbitral tribunal’s orders to that effect. The Parties agree to accept and honor any orders relating to interim or provisional remedies that are issued by the arbitrators and agree that any such interim order or remedy may be enforced, as necessary, in any court of competent jurisdiction.

Section 8.8 Continuity of Service and Performance. During the course of dispute resolution pursuant to the provisions of this Article VIII, the Parties will continue to provide all other services and honor all other commitments under this Agreement and each Ancillary Agreement with respect to all matters not subject to such dispute resolution.

Section 8.9 Awards. The arbitrators shall make an award and issue a reasoned opinion in writing setting forth the basis for such award within 30 days following the close of the hearing on the merits, or a soon thereafter as practicable. The arbitrators shall be entitled, if appropriate, to award any remedy in such proceedings that is permitted under this Agreement and applicable Law, including monetary damages, specific performance and other forms of legal and equitable relief. The Parties hereby waive any claim to exemplary, punitive, multiple, consequential, special, indirect damages or similar damages in excess of compensatory damages, attorneys’ fees, costs and expenses of arbitration, except as may be expressly required by statute or as necessary to indemnify a Party for a Third Party Claim and the arbitrators are not empowered to and shall not award such damages. Any final award must provide that the party against whom an award is issued shall comply with the order within a specified period of time, not to exceed 30 days.

Section 8.10 Costs. If any Party attempts, unsuccessfully, to prevent an Agreement Dispute from being arbitrated such Party shall reimburse the prevailing party for all costs incurred in compelling arbitration. Except as otherwise may be provided in any Ancillary Agreement, the costs of arbitration pursuant to this Article VIII shall be borne by the non- prevailing Party as determined by the arbitrator.

Section 8.11 Adherence to Time Limits. In accepting appointment, each of the arbitrators shall commit that his or her schedule permits him or her to devote the reasonably necessary time and attention to the arbitration proceedings and to resolving the Agreement Dispute within the time periods set by this Agreement and by the Rules. Any time limits set out in this Article VIII or in the Rules may be modified upon written agreement of the Parties and the arbitrators or by order of the arbitrators for good cause shown. Any failure of the arbitrators to comply with such time limits or to render a final award within the time specified shall not impair the validity of the award or cause the award to be void or voidable, nor shall it be a basis for challenge of the validity or enforceability of the award or of the arbitration proceedings.

ARTICLE IX

INSURANCE

Section 9.1 General Liability Policies to be Maintained by Apergy. Apergy agrees and covenants (on its own behalf and on behalf of each other member of the Apergy Group) that it will procure and maintain at its sole cost and expense, for a period of no less than five years from

 

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the Effective Time, annual occurrence-based primary and excess general liability insurance policies issued by insurers with an A.M. Best Company credit rating of “a” or better and naming Dover as an additional insured (together, the “Apergy General Liability Policies”). Such primary policies shall provide no less than $2,000,000 in per occurrence and $4,000,000 in aggregate annual limits and shall be subject to an aggregate retention of no more than $4,000,000. Such excess policies shall attach immediately above such primary policies and shall provide no less than $100,000,000 in annual limits. The Apergy General Liability Policies shall otherwise provide coverage with terms and conditions at least as favorable as Dover’s primary and excess general liability policies in place as of the Effective Time, subject to availability on commercially reasonable terms.

Section 9.2 Policies and Allocation of Related Rights and Obligations. Apergy acknowledges and agrees (on its own behalf and on behalf of each other member of the Apergy Group) that (i) neither Apergy nor any other member of the Apergy Group has any rights to or under any Third Party Shared Policy, except as expressly provided in this Article IX and (ii) nothing in this Article IX shall be deemed to constitute (or to reflect) an assignment of any rights to or under any Third Party Shared Policy.

Section 9.3 Third Party Shared Policies.

(a) With respect to Third Party Shared Policies for claims that arise out of insured events with an occurrence date prior to the Effective Time, to the extent reasonably possible, Dover will, or will cause the applicable insurance companies or members of the Dover Group that are insured thereunder to (i) continue to provide Apergy and any other member of the Apergy Group with access to and coverage under the applicable Third Party Shared Policies, and (ii) reasonably cooperate with Apergy and take commercially reasonable actions as may be necessary or advisable to assist Apergy in submitting such claims under the applicable Third Party Shared Policies; provided that Apergy shall be responsible for any and all applicable deductibles, self-insured retentions, retrospective premiums, claims-handling charges, co-payments or any other charge or fee legally due and owing relating to such claims and neither Dover nor the insurance company or member of the Dover Group shall be required to maintain such Third Party Shared Policies beyond their current terms. For the avoidance of doubt, if an occurrence date is after the Effective Time, then no payment for any damages, costs of defense, or other sums with respect to such claim shall be available to Apergy under such Third Party Shared Policies. For the avoidance of doubt, Schedule 1.1(50)(i)(a) sets forth certain known existing claims for which there are existing reserves as of the date of this Agreement, which claims constitute Dover Liabilities up to the amount set forth directly across each such claim under the heading “Total Incurred” on such schedule.

(b) With respect to all Third Party Shared Policies, Apergy agrees and covenants (on behalf of itself and each other member of the Apergy Group, and each other Affiliate of Apergy) not to make any claim or assert any rights against Dover and any other member of the Dover Group, or the unaffiliated Third Party insurers of such Third Party Shared Policies, except as expressly provided under this Section 9.3.

Section 9.4 Administration of Third Party Shared Policies; Other Matters.

(a) Administration. With respect to all Third Party Shared Policies, from and after the Effective Time, Dover or a member of the Dover Group shall be responsible for the Insurance Administration and Claims Administration of such Third Party Shared Policies; provided that the retention of such administrative responsibilities by Dover or a member of the

 

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Dover Group is in no way intended to limit, inhibit or preclude any right to insurance coverage for any Insured Claim of a named insured under such Third Party Shared Policies as contemplated by the terms of this Agreement; provided further, that the retention of such administrative responsibilities by Dover or a member of the Dover Group shall not relieve the Person submitting any Insured Claim of the primary responsibility for reporting such Insured Claim accurately, completely and in a timely manner, or of such Person’s authority to settle any such Insured Claim within any period permitted or required by the relevant Third Party Shared Policy. At its discretion, and in accordance with the terms of the Third Party Shared Policies, Dover may discharge its administrative responsibilities with respect to such Third Party Shared Policies by contracting for the provision of administrative services to any unaffiliated Person, including, after the Effective Time, Apergy or any of its Affiliates. Dover will use its commercially reasonable efforts to notify the appropriate member of the Apergy Group of such discharge. Apergy shall reimburse Dover for any costs incurred by Dover related to Insurance Administration and Claims Administration to the extent such costs (which include defense, out-of-pocket expenses, and direct and indirect costs of employees or agents of Dover providing the administrative services) are (i) not covered under the Third Party Shared Policies and (ii) related to Apergy Liabilities. Dover or any member of the Dover Group shall not settle any Insured Claim of Apergy or any member of Apergy Group under the Third Party Shared Policies without first consulting reasonably in good faith with Apergy or such member of Apergy Group.

(b) Exceeding Policy Limits. Where Apergy Liabilities are specifically covered under a Third Party Shared Policy for periods prior to the Effective Time, or where such Third Party Shared Policy covers claims made after the Effective Time with respect to an occurrence prior to the Effective Time, then from and after the Effective Time, Apergy may claim coverage for Insured Claims under such Third Party Shared Policy as and to the extent that such insurance is available up to the full extent of the applicable limits of liability of such Third Party Shared Policy (and may receive any Insurance Proceeds with respect thereto as contemplated by Section 9.4(d)), subject to the terms of this Section 9.4.

(c) Claims Not Reimbursed. Except as set forth in this Section 9.4, Dover and Apergy shall not be liable to one another (nor shall any member of the Dover Group be liable to any member of the Apergy Group) for claims, or portions of claims, not reimbursed by insurers under any Third Party Shared Policy for any reason not within the control of Dover or Apergy, including coinsurance provisions, deductibles, quota share deductibles, self-insured retentions, bankruptcy or insolvency of any insurance carrier(s), Third Party Shared Policy limitations or restrictions, any coverage disputes, any failure to timely file a claim by Dover or Apergy (or any of the members of their respective Groups), or any defect in such claim or its processing. The liability of Dover and Apergy to one another for such claims is expressly limited to the amount of Insurance Proceeds received with respect to such claims and allocated to the respective Parties in accordance with Section 9.4(d). It is expressly understood that the foregoing provisions in this Section 9.4(c) shall not limit any Party’s liability to any other Party for indemnification pursuant to Article VI.

 

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(d) Allocation of Insurance Proceeds. Insurance Proceeds received with respect to claims, costs and expenses under the Third Party Shared Policies shall be paid to or on behalf of Dover under the relevant Third Party Shared Policy, and Dover shall thereafter administer the Third Party Shared Policies, as appropriate, by retaining the Insurance Proceeds with respect to Dover Liabilities, and by paying the Insurance Proceeds to Apergy with respect to Apergy Liabilities. In the event that the aggregate limits on any Third Party Shared Policies are exceeded by the aggregate of outstanding Insured Claims by the Parties or members of their respective Groups, the Parties agree to allocate the Insurance Proceeds received thereunder based upon their respective percentage of the total of their bona fide claims which were covered under such Third Party Shared Policy, and any Party who has received Insurance Proceeds in excess of such Party’s respective percentage of Insurance Proceeds shall pay to the other Party the appropriate amount so that each Party will have received its respective percentage of Insurance Proceeds pursuant hereto. Each of the Parties agrees to use commercially reasonable efforts to maximize available coverage under those Third Party Shared Policies applicable to it, and to take all commercially reasonable steps to recover from all other responsible parties in respect of an Insured Claim to the extent coverage limits under a Third Party Shared Policy have been exceeded or would be exceeded as a result of such Insured Claim, provided that any allocation of Insurance Proceeds shall be made net of any recovery, whenever obtained, from such other responsible parties.

(e) Allocation of Deductibles. In the event that the Parties or members of their respective Groups have bona fide claims under any Third Party Shared Policy arising from the same occurrence and for which a deductible is payable, the Parties agree that the aggregate amount of the deductible paid shall be borne by the Parties in the same proportion which the Insurance Proceeds received by each such Party bears to the total Insurance Proceeds received under the applicable Third Party Shared Policy pursuant to Section 9.4(d), and any Party who has paid more than such allocable share of the deductible shall be entitled to receive from the other Party an appropriate amount so that each Party has borne its allocable share of the deductible pursuant hereto.

Section 9.5 Agreement for Waiver of Conflict and Shared Defense. In the event that Insured Claims of more than one of the Parties exist relating to the same occurrence or related occurrences, the Parties shall jointly defend and waive any conflict of interest necessary to the conduct of the joint defense. Nothing in this Article IX shall be construed to limit or otherwise alter in any way the obligations of the Parties, including those created by this Agreement, by operation of Law or otherwise.

Section 9.6 Cooperation. The Parties agree to use (and cause the members in their respective Groups to use) their commercially reasonable efforts to cooperate with respect to the various insurance matters contemplated by this Article IX.

Section 9.7 Miscellaneous. Nothing in this Agreement shall be deemed to restrict Apergy or Dover, or any members of their respective Groups, from acquiring at its own expense any insurance Policy in respect of any Liabilities or covering any period. Except as otherwise provided in this Agreement, from and after the Effective Time, Apergy and Dover shall be responsible for obtaining and maintaining their respective insurance programs for their risk of loss and such insurance arrangements shall be separate programs apart from each other and each will be responsible for its own deductibles and retentions for such insurance programs. Notwithstanding Section 9.1, Apergy acknowledges and agrees (on its own behalf and on behalf of each other member of the Apergy Group) that Dover has provided to Apergy prior to the

 

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Effective Time all information necessary for Apergy or the appropriate member of the Apergy Group to obtain such insurance policies and insurance programs as Apergy or the appropriate member of the Apergy Group, in its sole judgment and discretion, deems necessary to cover any and all risk of loss related to the Apergy Business.

ARTICLE X

MISCELLANEOUS

Section 10.1 Complete Agreement; Construction. This Agreement, including the Exhibits and Schedules, and the Ancillary Agreements (and the exhibits and schedules thereto) shall constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any conflict between the terms and conditions of the body of this Agreement and the terms and conditions of any Schedule, the terms and conditions of such Schedule shall control. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, in the case of any conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, the provisions of this Agreement shall control; provided, however, that in relation to (i) any matters concerning Taxes, the Tax Matters Agreement shall prevail over this Agreement and any other Ancillary Agreement, (ii) any matters governed by the Employee Matters Agreement, the Employee Matters Agreement shall prevail over this Agreement or any other Ancillary Agreement and (iii) the provision of support and other services after the Effective Time by the Apergy Group to the Dover Group, and vice versa, the Transition Services Agreement shall prevail over this Agreement or any other Ancillary Agreement. It is the intention of the Parties that the Transfer Documents shall be consistent with the terms of this Agreement and the other Ancillary Agreements. The Parties agree that the Transfer Documents are not intended and shall not be considered in any way to enhance, modify or decrease any of the rights or obligations of Dover, Apergy or any member of their respective Groups from those contained in this Agreement and the other Ancillary Agreements.

Section 10.2 Ancillary Agreements. Notwithstanding anything to the contrary contained in this Agreement, except with respect to the matters disclosed on Schedule 1.1(21)(i) hereof, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements (excluding the Transfer Documents and the Reorganization Documents).

Section 10.3 Counterparts. This Agreement may be executed in more than one counterparts, all of which shall be considered one and the same agreement, and, except as otherwise expressly provided in Section 1.3, shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Parties. Execution of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic copy of a signature shall be deemed to be, and shall have the same effect as, executed by an original signature.

Section 10.4 Survival of Agreements. Except as otherwise contemplated by this Agreement or any Ancillary Agreement, all covenants and agreements of the Parties contained in this Agreement and each Ancillary Agreement shall survive the Effective Time and remain in full force and effect in accordance with their applicable terms.

 

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Section 10.5 Expenses.

(a) Except as otherwise expressly provided in this Agreement (including Section 2.7, subsections (b) and (c) of this Section 10.5 and Schedule 10.5(a)) or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, all out-of-pocket fees and expenses incurred on or prior to the Effective Time in connection with the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, the Separation, the Information Statement, the plan of Separation and the Distribution and the consummation of the transactions contemplated hereby and thereby shall be borne and paid by the Person incurring such cost or Liability.

(b) Except as otherwise expressly provided in this Agreement (including Section 2.7 and subsection (c) of this Section 10.5) or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, each Party shall bear its own costs and expenses incurred or accrued after the Effective Time; provided, however, that any costs and expenses incurred in obtaining any Consents or novation from a Third Party in connection with the assignment to or assumption by a Party or its Subsidiary of any Contracts in connection with the Separation shall be borne by the Party or its Subsidiary to which such Contract is being assigned.

(c) With respect to any expenses incurred pursuant to a request for further assurances granted under Section 2.10, except as otherwise expressly provided in this Agreement (including Section 2.7 and subsection (b) of this Section 10.5), the Parties agree that any and all fees and expenses incurred by either Party shall be borne and paid by the requesting Party; it being understood that no Party shall be obligated to incur any Third Party accounting, consulting, advisor, banking or legal fees, costs or expenses, and the requesting Party shall not be obligated to pay such fees, costs or expenses, unless such fees, costs or expenses shall have had the prior written approval of the requesting Party. Notwithstanding the foregoing, each Party shall be responsible for paying its own internal fees, costs and expenses (e.g., salaries of personnel). With respect to any fees, costs and expenses incurred by either Party in satisfying its obligations under Section 5.3, the requesting Party shall be responsible for the other Party’s fees, costs and expenses.

Section 10.6 Notices. All notices, requests, claims, demands and other communications under this Agreement and, to the extent applicable and unless otherwise provided therein, under each of the Ancillary Agreements, as between the Parties, shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt unless the day of receipt is not a Business Day, in which case it shall be deemed to have been duly given or made on the next Business Day) by delivery in person, by overnight courier service, by facsimile or email with receipt confirmed or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.6):

 

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If to Dover:

Dover Corporation.

3005 Highland Parkway

Downers Grove, Illinois 60515

Attn:

Facsimile:

Email:

If to Apergy:

Apergy Corporation

[address]

Attn:

Facsimile:

Email:

Section 10.7 Waivers. The failure of any Party to require strict performance by any other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof.

Section 10.8 Amendments. Subject to the terms of Section 10.10, this Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.

Section 10.9 Assignment. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors (by merger, acquisition of assets or otherwise) and permitted transferees and assigns to the same extent as if such successors or permitted transferees and assigns had been an original party to the Agreement. Notwithstanding the foregoing, this Agreement shall not be assignable, in whole or in part, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be null and void; provided that (i) a Party may assign any or all of its rights and obligations under this Agreement to any of its Affiliates, but no such assignment shall release the assigning Party from any liability or obligation under this Agreement and (ii) a Party may assign this Agreement in whole in connection with a bone fide third party merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets, and upon the effectiveness of such assignment under this clause (ii) the assigning Party shall be released from all of its obligations under this Agreement if the surviving entity of such merger or the transferee of such Assets shall agree in writing, in form and substance reasonably satisfactory to the other Party, to be bound by the terms of this Agreement as if named as a “Party” hereto.

Section 10.10 Termination, Etc. Notwithstanding anything to the contrary herein, this Agreement (including Article VI (Indemnification) hereof) may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Effective Time by and in the sole discretion of Dover without the approval of Apergy or the stockholders of Dover or any other party. In the event of such termination, this Agreement shall become null and void and no Party, nor any of its officers, directors or employees, shall have any Liability to any other Party or any other Person. After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by each of the Parties.

 

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Section 10.11 Payment Terms.

(a) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount to be paid or reimbursed by any Party (and/or a member of such Party’s Group), on the one hand, to any other Party (and/or a member of such Party’s Group), on the other hand, under this Agreement shall be paid or reimbursed hereunder within 30 days after presentation of an undisputed invoice or a written demand therefor and setting forth, or accompanied by, reasonable documentation or other reasonable explanation supporting such amount.

(b) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement shall bear interest at a rate per annum equal to the then effective Prime Rate plus 2% (or the maximum legal rate, whichever is lower), calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.

Section 10.12 No Circumvention. The Parties agree not to directly or indirectly take any actions, act in concert with any Person who takes an action, or cause or allow any member of any such Party’s Group to take any actions (including the failure to take a reasonable action) intended to, or such that the resulting effect is to, materially undermine the effectiveness of any of the provisions of this Agreement or any Ancillary Agreement (including adversely affecting the rights or ability of any Party to successfully pursue indemnification, contribution or payment pursuant to Article VI).

Section 10.13 Subsidiaries. Each of the Parties shall cause (or with respect to an Affiliate that is not a Subsidiary, shall use commercially reasonable efforts to cause) to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such Party or by any Business Entity that becomes a Subsidiary or Affiliate of such Party on and after the Effective Time. This Agreement is being entered into by Dover and Apergy on behalf of themselves and the members of their respective Groups (the Dover Group and the Apergy Group). This Agreement shall constitute a direct obligation of each such entity and shall be deemed to have been readopted and affirmed on behalf of any Business Entity that becomes a Subsidiary or Affiliate of such Party on and after the Effective Time. Either Party shall have the right, by giving notice to the other Party, to require that any Subsidiary of the other Party execute a counterpart to this Agreement to become bound by the provisions of this Agreement applicable to such Subsidiary.

Section 10.14 Third Party Beneficiaries. Except as provided in Article VI relating to Indemnitees and for the release under Section 6.1 of any Person provided therein and except as specifically provided in any Ancillary Agreement, this Agreement is solely for the benefit of the Parties and their respective Affiliates after the Effective Time and their permitted successors and assigns, and is not intended to confer upon any Person except the Parties and their respective Affiliates after the Effective Time, and their permitted successors and assigns, any rights or remedies hereunder; and there are no other third-party beneficiaries of this Agreement and this Agreement should not be deemed to confer upon Third Parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

 

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Section 10.15 Title and Headings. Titles and headings to Sections and Articles are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

Section 10.16 Exhibits and Schedules. The Exhibits and Schedules attached hereto are incorporated herein by reference and shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.

Section 10.17 Public Announcements. From and after the Effective Time, Dover and Apergy shall consult with each other before issuing, and give each other the reasonable opportunity to review and comment upon, that portion of any press release or other public statements that relates to the transactions contemplated by this Agreement or the Ancillary Agreements, and shall not issue any such press release or make any such public statement prior to such consultation, except (a) as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system; (b) for disclosures made that are substantially consistent with disclosures contained in any Distribution Disclosure Document or Pre-Separation Disclosure or (c) as otherwise set forth on Schedule 10.17.

Section 10.18 Governing Law. This Agreement shall be governed by and construed in accordance with the internal Laws, and not the Laws governing conflicts of Laws (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law), of the State of New York.

Section 10.19 Consent to Jurisdiction. Subject to the provisions of Article VIII, each of the Parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York (the “New York Courts”), for the purposes of any Action to compel arbitration or for provisional relief in aid of arbitration in accordance with Article VIII or for provisional relief to prevent irreparable harm, and to the non-exclusive jurisdiction of the New York Courts for the enforcement of any award issued thereunder. Each of the Parties further agrees that service of any process, summons, notice or document by United States registered mail to such Party’s respective address set forth in Section 10.6 shall be effective service of process for any Action in the New York Courts with respect to any matters to which it has submitted to jurisdiction in this Section 10.19. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any Action arising out of this Agreement or the transactions contemplated hereby in the New York Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action brought in any such court has been brought in an inconvenient forum.

 

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Section 10.20 Specific Performance. The Parties agree that irreparable damage may occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to seek (i) an injunction or injunctions to enforce specifically the terms and provisions hereof in any arbitration in accordance with Article VIII, (ii) provisional or temporary injunctive relief in accordance therewith in any New York Court, and (iii) enforcement of any such award of an arbitral tribunal or a New York Court in any court of the United States, or any other any court or tribunal sitting in any state of the United States or in any foreign country that has jurisdiction, this being in addition to any other remedy or relief to which they may be entitled.

Section 10.21 Waiver of Jury Trial. SUBJECT TO ARTICLE VIII AND SECTIONS 10.19 AND 10.20 HEREIN, EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING PERMITTED HEREUNDER. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.21.

Section 10.22 Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and the Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid, legal and enforceable provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

Section 10.23 Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

Section 10.24 Authorization. Each of the Parties hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such Party, that this Agreement constitutes a legal, valid and binding obligation of each such Party enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and general equity principles.

[Signature Page Follows]

 

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DOVER CORPORATION
By:     
  Name:
  Title:

 

APERGY CORPORATION
By:     
  Name:
  Title:

 

[Signature Page to Separation and Distribution Agreement]

EX-10.3

Exhibit 10.3

 

 

 

EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

DOVER CORPORATION

AND

APERGY CORPORATION

DATED AS OF

[], 2018

 

 

 


TABLE OF CONTENTS

 

 

          Page  
Article I DEFINITIONS      1  
1.1     

Definitions

     1  
Article II GENERAL PRINCIPLES; EMPLOYMENT TERMS      5  
2.1      General Principles      5  
2.2      Continuation or Transfer of Employment      6  
2.3      Assumption and Retention of Liabilities      7  
2.4      Assumption of Employee Liabilities      8  
2.5      Cessation as Participating Companies      8  
2.6      No Duplication of Benefits; Service and Other Credit and No Expansion of Participation      9  
2.7      Reimbursements      9  
2.8      Labor Relations      9  
2.9      Plan Administration      10  
2.10    Special Provisions      10  

Article III DEFINED CONTRIBUTION, DEFINED BENEFIT, AND NON-QUALIFIED DEFERRED COMPENSATION PLANS IN THE U.S.

     10  
3.1      Defined Contribution Plan      10  
3.2      U.S. Defined Benefit Plans      11  
3.3      Non-Qualified Deferred Compensation Plans      14  
Article IV HEALTH AND WELFARE PLANS      14  
4.1      Cessation of Participation in Dover Health and Welfare Plans      14  
4.2      Allocation of Health and Welfare Plan Liabilities      15  
4.3      Flexible Spending Plan Treatment in the U.S.      15  
4.4      Workers’ Compensation Liabilities      16  
4.5      Payroll Taxes and Reporting      16  
4.6      COBRA Compliance in the U.S.      17  
4.7      Vacation, Holidays, Approved Leaves of Absence, and Paid Time Off      17  
Article V INCENTIVE COMPENSATION, EQUITY AND EQUITY-BASED COMPENSATION, AND OTHER BENEFITS      17  
5.1      Cash-Based Incentives      17  
5.2      Stock Options and SSARs      18  
5.3      Restricted Stock Units      19  
5.4      General      20  

 

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5.5      Non-U.S. Grants/Awards      20  
5.6      Adoption of Plan      20  
5.7      Administration      20  
5.8      Registration      20  
5.9      No Effect on Subsequent Awards      20  
Article VI GENERAL AND ADMINISTRATIVE      20  
6.1      Sharing of Participant Information      20  
6.2      Audit Rights with Respect to Information Provided      21  
6.3      Fiduciary Matters      21  
6.4      Consent of Third Parties      21  
6.5      Confidentiality of Employee Information      21  
6.6      Cooperation      21  
6.7      Subsequent Transfers of Employment      22  
Article VII GENERAL PROVISIONS      22  
7.1      Complete Agreement      22  
7.2      Counterparts      22  
7.3      Survival of Agreements      23  
7.4      Notices      23  
7.5      Termination      23  
7.6      Severability      23  
7.7      Assignment; No Third-Party Beneficiaries      24  
7.8      Governing Law      24  
7.9      Consent to Jurisdiction      24  
7.10    Dispute Resolution      25  
7.11    Specific Performance      25  
7.12    Amendment      25  
7.13    Rules of Construction      25  
7.14    Authorization      26  
7.15    Schedules      27  
7.16    Subsidiaries      27  
7.17    No Circumvention      27  
SCHEDULES   

Schedule 4.4(a) Workers’ Compensation Liabilities

  

 

 

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EMPLOYEE MATTERS AGREEMENT

THIS EMPLOYEE MATTERS AGREEMENT is entered into as of [], 2018, by and between Dover Corporation, a Delaware corporation (“Dover”), and Apergy Corporation, a Delaware corporation (“Apergy” and together with Dover, the “Parties” and each, a “Party”).

RECITALS

WHEREAS, the board of directors of Dover has determined that it is in the best interests of Dover and its shareholders to create a new publicly traded company which shall operate the Apergy Business;

WHEREAS, in furtherance thereof, Dover and Apergy have entered into that certain Separation and Distribution Agreement dated [], 2018 (the “Separation Agreement”); and

WHEREAS, as contemplated by the Separation Agreement, Dover and Apergy desire to enter into this Agreement to provide for the allocation of Assets, Liabilities, and responsibilities with respect to certain matters relating to Employees (including employee compensation and benefit plans and programs) between them.

NOW, THEREFORE, the Parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.1. Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Separation Agreement.

Adjusted Dover Option” has the meaning set forth in Section 5.2(a).

Adjusted Dover RSU” has the meaning set forth in Section 5.3(a).

Adjusted Dover SSAR” has the meaning set forth in Section 5.2(a).

Agreement” means this Employee Matters Agreement, together with all schedules hereto and all amendments, modifications, and changes hereto entered into pursuant to Section 7.12.

Apergy” has the meaning set forth in the preamble to this Agreement.


Apergy 401(k) Plan” means the Wellsite 401(k) Savings Plan, a tax-qualified 401(k) defined contribution savings plan established by a member of the Apergy Group effective as of the Plan Separation Date.

Apergy Employee” means any individual who, as of the applicable date of determination, is either actively employed by or then on a leave of absence (including maternity, paternity, family, sick, short-term or long-term disability leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act or other applicable Law and other approved leaves) from any member of the Apergy Group.

Apergy FSAs” has the meaning set forth in Section 4.3.

Apergy Long Term Incentive Plan” means the Apergy Corporation 2018 Equity and Cash Incentive Plan adopted by Apergy prior to the Effective Time under which the Apergy equity-based awards and long term cash incentive awards described in Article V shall be issued.

Apergy Participant” means any individual who is an Apergy Employee, a Former Apergy Employee, a member of or other participant in an Apergy Benefit Plan, or a beneficiary, dependent, alternate payee, or other person participating in an Apergy Benefit Plan in respect of any of the foregoing persons.

Apergy Pension Plan” has the meaning set forth in Section 3.2(b).

Apergy Ratio” has the meaning set forth in Section 5.2(b)(i).

Benefit Plan” when immediately preceded by “Dover,” means any plan, policy, program, payroll practice, on-going arrangement, Contract, trust, insurance policy, or other agreement or funding vehicle (including a Health and Welfare Plan) for which the eligible classes of participants include employees or former employees (and their respective eligible dependents) of a member of the Dover Group or, prior to the applicable Plan Separation Date only, a member of the Apergy Group, and when immediately preceded by “Apergy,” means any plan, policy, program, payroll practice, on-going arrangement, Contract, trust, insurance policy, or other agreement or funding vehicle (including a Health and Welfare Plan) which is sponsored exclusively by the members of the Apergy Group or for which the eligible classes of participants exclusively include employees or former employees (and their respective eligible dependents) of members of the Apergy Group.

COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code Section 4980B and ERISA Sections 601 through 608.

Dover” has the meaning set forth in the preamble to this Agreement.

Dover 401(k) Plan” means the Dover Corporation Retirement Savings Plan.

Dover Deferred Compensation Plan” means the Dover Corporation Deferred Compensation Plan, as amended and restated as of January 1, 2009.

Dover Employee” means any individual who, as of the applicable date of determination, is either actively employed by or then on a leave of absence (including maternity, paternity, family, sick, short-term or long-term disability leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act or other applicable Law and other approved leaves) from any member of the Dover Group, but does not include any Apergy Employee.

 

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Dover Equity Plan” means the Dover Corporation 2012 Equity and Cash Incentive Plan, the Dover Corporation 2005 Equity and Cash Incentive Plan, and any other equity incentive plan sponsored or maintained by Dover immediately prior to the Effective Time, each as amended from time to time.

Dover FSAs” has the meaning set forth in Section 4.3.

Dover Participant” means any individual who is a Dover Employee, a Former Dover Employee, or a beneficiary, dependent, alternative payee, or other person participating in a Dover Benefit Plan in respect of either of the foregoing.

Dover Pension Replacement Plan” means the Dover Corporation Pension Replacement Plan, as amended and/or restated from time to time.

Dover Performance Share” means a performance share granted pursuant to any Dover Equity Plan.

Dover Ratio” has the meaning set forth in Section 5.2(a)(i).

Dover U.S. Pension Plan” means the Dover Corporation Pension Plan, a U.S. defined benefit pension plan.

Employee” means any Dover Employee or Apergy Employee.

ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended. Reference to a specific provision of ERISA also includes any proposed, temporary, or final regulations in force under that provision.

Estimated Pension Plan Transfer Amount” has the meaning set forth in Section 3.2(c)(ii)(B).

Final Pension Plan Transfer Amount” has the meaning set forth in Section 3.2(c)(ii)(D).

Final Transfer Date” has the meaning set forth in Section 3.2(c)(ii)(E).

Former Apergy Employee” means, as of the applicable date of determination, any individual whose employment with either Party or any of its respective Subsidiaries and Affiliates terminated for any reason before such applicable date, and who primarily worked for an Apergy Business at the time of termination of his or her employment.

Former Dover Employee” means, as of the applicable date of determination, any individual whose employment with either Party or any of its respective Subsidiaries and Affiliates terminated for any reason before such applicable date, other than a Former Apergy Employee.

 

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Former Norris USW Employee” means a Former Apergy Employee who has an accrued benefit under the Dover U.S. Pension Plan as a result of participating in the Dover U.S. Pension Plan pursuant to a collective bargaining agreement with the United Steelworkers of America covering employees of Dover’s Norris division.

Health and Welfare Plans” means, when immediately preceded by “Dover,” the health and welfare plans established and sponsored by any member of the Dover Group, and when immediately preceded by “Apergy,” the health and welfare plans exclusively sponsored and maintained by the Apergy Group prior to or after the applicable Plan Separation Date, in each case excluding any governmental plans.

HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder.

Incentive Stock Option” means an option which qualifies as an incentive stock option under the provisions of Section 422 of the Code.

Initial Transfer Amount” has the meaning set forth in Section 3.2(c)(ii)(C).

IRS” means the Internal Revenue Service.

Local Agreement” means any local transfer agreement that provides for the transfer of Assets and the assumption of Liabilities relating to, arising out of or resulting from the transactions contemplated by the Separation Agreement.

New York Courts” has the meaning set forth in Section 7.9.

Norris USW Employee” means an Apergy Employee as of the Effective Time who has an accrued benefit under the Dover U.S. Pension Plan as a result of participating in the Dover U.S. Pension Plan pursuant to a collective bargaining agreement with the United Steelworkers of America covering employees of Dover’s Norris division.

Norris USW Participant” means any individual who is a Norris USW Employee, a Former Norris USW Employee, or a beneficiary, alternate payee, or other person participating in the Dover U.S. Pension Plan in respect of any of the foregoing persons.

Option” when immediately preceded by “Dover,” means an option (either nonqualified or an Incentive Stock Option) to purchase shares of Dover Common Stock pursuant to a Dover Equity Plan and, when immediately preceded by “Apergy,” means an option (either nonqualified or an Incentive Stock Option) to purchase shares of Apergy Common Stock, which option is granted pursuant to the Apergy Long Term Incentive Plan as set forth in Section 5.2.

Participating Company” means (a) Dover, (b) any Person (other than an individual) that Dover has approved for participation in, and which is a participating employer in, a Benefit Plan, and (c) any Person (other than an individual) which, by the terms of such a Benefit Plan, is a participating employer in such Benefit Plan.

Party” or “Parties” has the meaning set forth in the preamble to this Agreement.

 

4


Plan Separation Date” means January 1, 2018.

Post-Distribution Price” with respect to a share of common stock, means the average closing price for such common stock for the five (5) consecutive trading days immediately following the Distribution Date.

Post-Effective Time Transfer Individual” has the meaning set forth in Section 2.10.

Pre-Distribution Price” with respect to a share of common stock, means the average closing price for such common stock trading on the “regular way” basis on the NYSE for the five (5) consecutive trading days immediately preceding (and including) the Distribution Date.

RSU” when immediately preceded by “Dover,” means a unit granted or provided by Dover pursuant to a Dover Equity Plan or the Dover Deferred Compensation Plan, representing a general unsecured promise by Dover to deliver a share (or cash in respect of a share) of Dover Common Stock, and when immediately preceded by “Apergy,” means a unit granted by Apergy representing a general unsecured promise by Apergy to deliver a share of Apergy Common Stock, which unit is granted pursuant to the Apergy Long Term Incentive Plan as set forth in Section 5.3.

Separation Agreement” has the meaning set forth in the recitals to this Agreement.

SSAR” when immediately preceded by “Dover,” means a right to receive a payment in shares of Dover Common Stock equal in value to the increase in value in a share of Dover Common Stock over a designated strike price pursuant to a Dover Equity-Based Plan and, when immediately preceded by “Apergy,” means a right to receive a payment in shares of Apergy Common Stock equal in value to the increase in value in a share of Apergy Common Stock over a designated strike price, which right is granted pursuant to the Apergy Long Term Incentive Plan as set forth in Section 5.2.

True-Up Amount” has the meaning set forth in Section 3.2(c)(ii)(E).

U.S.” means the United States of America.

ARTICLE II

GENERAL PRINCIPLES; EMPLOYMENT TERMS

2.1 General Principles. All provisions herein shall be subject to the requirements of all applicable Law and any collective bargaining, works council, or similar Contract or arrangement with any labor union. The provisions of this Agreement shall apply in respect of all jurisdictions wherever situated in accordance with applicable Law. Notwithstanding the foregoing, to the extent the provisions of this Agreement conflict with the provisions of a Local Agreement or, in respect of jurisdictions outside of the U.S., with the terms of an offer letter or other Contract entered into with an Apergy Employee or a Dover Employee, the terms of such Local Agreement, offer letter or other Contract, as applicable, shall govern.

 

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2.2 Continuation or Transfer of Employment.

(a) Continuation or Transfer of Employment of Apergy Employees. Except as otherwise set forth in this Agreement, effective no later than immediately prior to the Effective Time, the employment of each Apergy Employee shall be continued by a member of the Apergy Group or shall be assigned and transferred to a member of the Apergy Group (in each case, with such member as determined by Apergy), or the Apergy Employee shall be engaged as a service provider to the Apergy Group. Apergy or another member of the Apergy Group confirms that it is a successor employer to Dover or a member of the Dover Group under all applicable employment and labor standards Laws. The Parties shall use their reasonable efforts to effect the provisions of this Agreement with respect to the compensation and benefits of such Apergy Employees following such continuation or transfer, as applicable.

(i) For Employees in the jurisdictions where the transfer of employment is by way of employer substitution, Apergy or its relevant Subsidiary or Affiliate shall effectuate an employer substitution, unless the Parties agree otherwise, no later than immediately prior to the Effective Time with respect to each such Employee, in accordance with applicable Law, pursuant to which each relevant Subsidiary or Affiliate will employ such Employee.

(ii) For Employees in the jurisdictions where the transfer is by way of termination/resignation and re-hire, Apergy or its relevant Subsidiary or Affiliate shall offer employment to each such Employee effective no later than immediately prior to the Effective Time, or as otherwise agreed between the Parties, and Dover or its relevant Subsidiary or Affiliate shall terminate such Employees but only then in accordance with applicable Law.

(b) Continuation or Transfer of Employment of Dover Employees. Except as otherwise set forth in this Agreement, effective no later than immediately prior to the Effective Time, the employment of each Dover Employee shall be continued by a member of the Dover Group or shall be assigned and transferred to a member of the Dover Group (in each case, with such member as determined by Dover). The Parties shall use their reasonable efforts to effect the provisions of this Agreement with respect to the compensation and benefits of such Dover Employees following such continuation or transfer, as applicable.

(i) For Employees in the jurisdictions where the transfer of employment is by way of employer substitution, Dover or its relevant Subsidiary or Affiliate shall effectuate an employer substitution, unless the Parties agree otherwise, no later than immediately prior to the Effective Time with respect to each such Employee, in accordance with applicable Law, pursuant to which each relevant Subsidiary or Affiliate will employ such Employee.

(ii) For Employees in the jurisdictions where the transfer is by way of termination/resignation and re-hire, Dover or its relevant Subsidiary or Affiliate shall offer employment to each such Employee effective no later than immediately prior to the Effective Time, or as otherwise agreed between the Parties, and Apergy or its relevant Subsidiary or Affiliate shall terminate such Employees but only then in accordance with applicable Law.

 

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2.3 Assumption and Retention of Liabilities.

(a) Apergy Liabilities. Dover and Apergy intend that all employment, compensation, and employee benefits-related Liabilities associated with Apergy Participants are to be assumed by Apergy or another member of the Apergy Group (as determined by Apergy), except as specifically set forth herein. Except as expressly provided in this Agreement, as of the Effective Time, (i) Apergy hereby retains or assumes and agrees to (or shall cause another member of the Apergy Group to) pay, perform, fulfill, and discharge, (ii) Dover shall have no further Liability with respect to, and (iii) Apergy shall indemnify Dover with respect to the following Liabilities, in all events whether arising prior to, as of, or following the Effective Time: (A) all Liabilities arising under or related to Apergy Benefit Plans, (B) all employment (including workers’ compensation), compensation (including wages, salaries, commissions, bonuses, fees, all unused entitlements to vacation earned by the Apergy Participant, and payment and withholding of social security and similar Taxes and contributions), employee benefits, or service-related Liabilities (including moving, relocation, repatriation, and immigration-related obligations), in each case, with respect to (x) all Apergy Participants as of the Effective Time and (y) any individual who is, or was, a dependent or independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment or similar relationship primarily connected to a member of the Apergy Group, including Liabilities relating to adopting and maintaining any policies or practices necessary to comply with employment-related Laws and requirements relating to the employment of Apergy Employees or such individuals described in the foregoing clause (y), (C) all Liabilities with respect to any and all collective bargaining agreements, collective agreements, trade union, or works council agreements entered into between any member of the Dover Group and any union, works council, or other body representing exclusively Apergy Employees, (D) all Liabilities and obligations whatsoever with respect to claims made by or with respect to any Apergy Participants in connection with any Apergy Benefit Plan, program, or policy not otherwise retained or assumed by any member of the Dover Group pursuant to this Agreement or otherwise, including such Liabilities relating to actions or omissions of or by any member of the Dover Group or any officer, director, employee or agent thereof as of or prior to the Effective Time, (E) all Liabilities retained or assumed by Apergy or another member of the Apergy Group pursuant to the terms of the Local Agreements, and (F) all Liabilities expressly transferred to a member of the Apergy Group under this Agreement.

(b) Dover Liabilities. Dover and Apergy intend that all employment, compensation, and employee benefits-related Liabilities associated with Dover Participants are to be assumed by Dover or another member of the Dover Group (as determined by Dover), except as specifically set forth herein. Except as expressly provided in this Agreement, as of the Effective Time, (i) Dover hereby retains or assumes and agrees to (or shall cause another member of the Dover Group to) pay, perform, fulfill, and discharge, (ii) Apergy shall have no further Liability with respect to, and (iii) Dover shall indemnify Apergy with respect to the following Liabilities, in all events whether arising prior to, as of or following the Effective Time: (A) all Liabilities arising under or related to Dover Benefit Plans, (B) all employment (including workers’ compensation), compensation (including wages, salaries, commissions, bonuses, fees, all unused entitlements to vacation earned by the Apergy Participant, and payment and withholding of social security and similar Taxes and contributions), employee benefits, or

 

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service-related Liabilities (including moving, relocation, repatriation, and immigration-related obligations), in each case, with respect to (x) all Dover Participants as of the Effective Time and (y) any individual who is, or was, a dependent or independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment or similar relationship primarily connected to a member of the Dover Group, including Liabilities relating to adopting and maintaining any policies or practices necessary to comply with employment-related Laws and requirements relating to the employment of Dover Employees or such individuals described in the foregoing clause (y), (C) all Liabilities and obligations whatsoever with respect to claims made by or with respect to any Dover Participants in connection with any Dover Benefit Plan, program or policy not otherwise retained or assumed by any member of the Apergy Group pursuant to this Agreement or otherwise, including such Liabilities relating to actions or omissions of or by any member of the Apergy Group or any officer, director, employee, or agent thereof as of or prior to the Effective Time, (D) all Liabilities retained or assumed by Dover or another member of the Dover Group pursuant to the terms of the Local Agreements, and (E) all Liabilities expressly transferred to a member of the Dover Group under this Agreement.

(c) General. All Liabilities retained or assumed by or allocated to (i) Apergy or any other member of the Apergy Group pursuant to this Agreement shall be deemed to be Apergy Liabilities for purposes of Article VI and Article VIII (and related sections) of the Separation Agreement and (ii) Dover or any other member of the Dover Group pursuant to this Agreement shall be deemed to be Dover Liabilities for purposes of Article VI and Article VIII (and related sections) of the Separation Agreement.

2.4 Assumption of Employee Liabilities. Apergy shall assume and be solely responsible for the administration of severance, notice or pay in lieu of notice, indemnity or other termination pay, or other similar benefits in accordance with applicable Law or the terms and conditions of the applicable offer letter, Contract, severance plan, or policy in effect as of the date of the applicable termination of employment (i) relating to or resulting from (A) the Apergy Group’s failure to continue the employment of any Apergy Employee following the Effective Time, (B) the Apergy Group’s failure to continue employment on terms and conditions which would preclude any claims of constructive dismissal or similar claims under any applicable Law, or (C) any failure by the Apergy Group to comply with the terms of this Agreement as of or prior to the Effective Time or (ii) where such severance, notice or pay in lieu of notice, indemnity or termination pay, or other benefits are required to be paid under applicable Law, the terms and conditions of the applicable offer letter, Contract, a Dover Benefit Plan, or an Apergy Benefit Plan, as applicable, upon the applicable date of any Apergy Employee’s transfer without regard to such terms and conditions or such continuation of employment.

2.5 Cessation as Participating Companies. No later than the Effective Time: (i) each member of the Apergy Group shall have ceased to be a Participating Company in any Dover Benefit Plan, (ii) each member of the Dover Group shall have ceased to be a Participating Company in any Apergy Benefit Plan, and (iii) Dover and Apergy shall have taken all necessary action to effectuate such cessations as Participating Companies.

 

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2.6 No Duplication of Benefits; Service and Other Credit and No Expansion of Participation. Dover and Apergy shall have adopted, or caused to have been adopted, all reasonable and necessary amendments and procedures to prevent Apergy Participants from receiving duplicative benefits pursuant to the Dover Benefit Plans and the Apergy Benefit Plans. With respect to Apergy Participants, except as otherwise provided in this Agreement, each Apergy Benefit Plan shall provide that for purposes of determining eligibility to participate, vesting, and entitlement to benefits, service prior to the applicable Plan Separation Date with a member of the Dover Group shall be treated as service with a member of the Apergy Group in accordance with the terms of the corresponding Dover Benefit Plan. Notwithstanding anything to the contrary, in connection with any Apergy Employee’s break in service, any determination as to service credit shall be made under and in accordance with the applicable Apergy Benefit Plan document, the terms of which shall control in the case of any conflict with this Section 2.6 unless otherwise provided under applicable Law. The Parties shall use their reasonable efforts so that such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements or the application of any pre-existing condition limitations under any Apergy Benefit Plan. Each Apergy Benefit Plan shall, to the extent practicable, waive pre-existing condition limitations with respect to Apergy Participants, to the extent such pre-existing condition limitations were waived with respect to such Apergy Participants under the corresponding Dover Benefit Plan as of immediately prior to the Effective Time. Except (i) as otherwise expressly provided in this Agreement, (ii) as otherwise determined or agreed to by Dover and Apergy, (iii) as required by applicable Law, or (iv) as explicitly set forth in an Apergy Benefit Plan, an Apergy Participant shall be entitled to participate in an Apergy Benefit Plan only to the extent that such Apergy Participant was entitled to participate in the corresponding Dover Benefit Plan as in effect immediately prior to the Effective Time. It is the intent of the Parties that this Agreement does not result in any expansion of (A) the number of Apergy Participants in the Apergy Benefit Plans as compared to the number of such Apergy Participants in the corresponding Dover Benefit Plans or (B) the Apergy Participants’ participation rights in Apergy Benefit Plans as compared to such Apergy Participants’ participation rights in the corresponding Dover Benefit Plans, in each case, as of prior to the Effective Time.

2.7 Reimbursements. From time to time after the Effective Time, the Parties shall promptly reimburse one another, upon reasonable request of the Party requesting reimbursement and the presentation by such Party of such substantiating documentation as the other Party shall reasonably request, for the cost of any Liabilities satisfied or assumed by the Party requesting reimbursement or any of its Subsidiaries or Affiliates that are made, pursuant to this Agreement, the responsibility of the other Party or any of its Subsidiaries or Affiliates.

2.8 Labor Relations. To the extent required by applicable Law or any Contract or arrangement with a labor union, works council, or similar employee organization, Apergy shall (or shall cause another member of the Apergy Group to) provide notice, engage in consultation, and take any similar action which may be required on its part in connection with the actions contemplated in this Agreement or the Distribution and shall fully indemnify each member of the Dover Group against any Liabilities arising from its failure (or the failure of the applicable member of the Apergy Group) to comply with such requirements.

 

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2.9 Plan Administration. The Parties acknowledge that the Dover Group or the Apergy Group may provide administrative services for certain of the Apergy Group’s benefit programs or the Dover Group’s benefit programs, respectively, for a transitional period under the terms of the Transition Services Agreement. The Parties agree to enter into a business associate agreement (if required by HIPAA or other applicable health information privacy Laws) in connection with such Transition Services Agreement.

2.10 Special Provisions. Notwithstanding any other provision in this Agreement to the contrary, the Senior Vice President & Chief Financial Officer, Senior Vice President, General Counsel & Secretary, and Senior Vice President, Human Resources, and each of them individually, of Dover shall have the discretion, power, and authority to adopt and implement special provisions, rules, or procedures applicable to the employment, compensation, and benefit arrangements of one or more individuals as are deemed necessary or advisable to give effect to the intentions of this Agreement, including special provisions relating to: (i) different equitable adjustments from those set forth in Article V, in the case of a grantee who has outstanding equity-based awards granted under any of the Dover Equity Plans or the Dover Deferred Compensation Plan to the extent that any such officer deems such different treatment to be equitable, necessary or advisable, based on the advice of counsel, (ii) errors in the timing of employment transfers, (iii) issues pertaining to immigration Law requirements, and (iv) any transfer of employment or service of any individuals to a member of the Apergy Group following the Effective Time (each such individual, a “Post-Effective Time Transfer Individual”). To the extent that any such special provisions, rules, or procedures are adopted or implemented with respect to any such Post-Effective Time Transfer Individual, such officer shall use best efforts to treat each such Post-Effective Time Transfer Individual in the same manner as if such Post-Effective Time Transfer Individual’s employment or service was continued, assigned, or transferred, as applicable, to a member of the Apergy Group as of no later than immediately prior to the Effective Time in accordance with Section 2.2(a).

ARTICLE III

DEFINED CONTRIBUTION, DEFINED BENEFIT, AND NON-QUALIFIED DEFERRED COMPENSATION PLANS IN THE U.S.

3.1 Defined Contribution Plan.

(a) Establishment of Apergy 401(k) Plan and Trust. Effective as of the Plan Separation Date, Apergy established the Apergy 401(k) Plan and any trust agreements or other plan documents reasonably necessary, and caused trustees to be appointed for such plan.

(b) Assumption of Liabilities and Transfer of Assets. In accordance with applicable Law, Dover and Apergy caused the accounts under the Dover 401(k) Plan of each Apergy Employee to be transferred to the Apergy 401(k) Plan as soon as practicable after the Plan Separation Date in the following manner: (i) Dover caused the accounts (including any outstanding loan balances) of each Apergy Employee as of the Plan Separation Date in the Dover 401(k) Plan to be transferred as soon as practicable after the Plan Separation Date to the Apergy 401(k) Plan and its related trust, (ii) the Apergy 401(k) Plan assumed and became solely responsible for all Liabilities relating to the accounts that were so transferred to the Apergy 401(k) Plan and its related trust as of the time of such transfer, and (iii) Apergy caused such transferred accounts to be accepted by the Apergy 401(k) Plan and its related trust and caused the Apergy 401(k) Plan to satisfy all protected benefit requirements under the Code and applicable Law with respect to the transferred accounts.

 

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(c) Establishment of Apergy 401(k) Plan Employer Securities Fund. Effective as of the Plan Separation Date, Dover and Apergy established a Dover employer securities fund under the Apergy 401(k) Plan. Shares of Dover Common Stock held in the Dover 401(k) Plan were transferred in kind to the new Dover employer securities fund under the Apergy 401(k) Plan pursuant to Section 3.1(b). Effective as of the Plan Separation Date, Apergy Participants in the Apergy 401(k) Plan have been and are prohibited from increasing their holdings in the Dover employer securities fund and may elect to liquidate their holdings in such Dover employer securities fund and invest the proceeds in any other investment fund under the Apergy 401(k) Plan.

(d) Employer Securities. Dover and Apergy each presently intend to preserve the right of Dover Participants and Apergy Participants to receive distributions in kind of employer securities from, respectively, the Dover 401(k) Plan and the Apergy 401(k) Plan, if, and to the extent, investments under such plans are comprised of Apergy Common Stock or Dover Common Stock, respectively; provided, that, Dover shall cause the Dover 401(k) Plan to provide that, no later than twelve (12) months following the Effective Time, the Dover 401(k) Plan shall hold no separate investment fund comprised of Apergy Common Stock and Apergy shall cause the Apergy 401(k) Plan to provide that, no later than twelve (12) months following the Effective Time, the Apergy 401(k) Plan shall not hold a separate investment fund comprised of Dover Common Stock. Each of Dover and Apergy shall authorize the appropriate plan fiduciary to determine, in its discretion, the extent to which and when Dover Common Stock (in the case of the Apergy 401(k) Plan) and Apergy Common Stock (in the case of the Dover 401(k) Plan) shall cease to be investment alternatives thereunder.

3.2 U.S. Defined Benefit Plans.

(a) Dover U.S. Pension Plan. No Apergy Participant shall accrue any additional benefits under the Dover U.S. Pension Plan for services performed following the Effective Time. Effective as of the Effective Time, each Apergy Participant in the Dover U.S. Pension Plan who is not a Norris USW Participant shall become fully vested in such Apergy Participant’s accrued benefit provided under such plan. Following the Effective Time, Dover shall retain and be solely responsible for all Dover U.S. Pension Plan Liabilities and obligations other than those Liabilities and obligations transferred to the Apergy Pension Plan pursuant to Section 3.2(c), and accordingly, there shall be no transfer of Assets or Liabilities among Dover, Apergy or any of their respective Subsidiaries, Affiliates, or plans in respect of the Dover U.S. Pension Plan with respect to each Apergy Participant except as set forth in Section 3.2(c).

(b) Establishment of Apergy Pension Plan. No later than the Effective Time, Dover and Apergy shall have adopted, or caused to have been adopted, a defined benefit pension plan (such new defined benefit pension plan, the “Apergy Pension Plan”) that is intended to meet the requirements of Section 401(a) of the Code and related trust that is intended to meet the requirements of Section 501(a) of the Code to provide retirement benefits to the Norris USW Participants who immediately prior to the Effective Time were participants in the Dover U.S. Pension Plan. Apergy shall be responsible for taking all necessary, reasonable, and appropriate

 

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actions to maintain and administer the Apergy Pension Plan so that it is qualified under Section 401(a) of the Code and that the related trust thereunder is exempt under Section 501(a) of the Code, including promptly seeking and obtaining a favorable determination letter from the IRS as to such qualification. Apergy (acting directly or through another member of the Apergy Group) shall be responsible for any and all Liabilities (including Liability for funding) and other obligations with respect to the Apergy Pension Plan.

(c) Norris USW Participants.

(i) Assumption of Dover U.S. Pension Plan Liabilities. Effective as of the Effective Time, Apergy (acting directly or through another member of the Apergy Group) agrees to cause the Apergy Pension Plan to assume, fully perform, pay, and discharge all Liabilities and obligations under the Dover U.S. Pension Plan relating to all benefits accrued under the Dover U.S. Pension Plan by Norris USW Participants solely as a result of participating in such plan pursuant to a collective bargaining agreement with the United Steelworkers of America covering employees of Dover’s Norris Division as of the Effective Time.

(ii) Transfer of the Dover U.S. Pension Plan Assets.

(A) The Parties intend that the portion of the Dover U.S. Pension Plan covering Norris USW Participants which represents benefits accrued under the Dover U.S. Pension Plan solely as a result of such Norris USW Participants’ participation in such plan pursuant to a collective bargaining agreement with the United Steelworkers of America covering employees of Dover’s Norris Division shall be transferred to the Apergy Pension Plan in accordance with Section 414(l) of the Code, Treasury Regulation Section 1.414(l)-1, and Section 208 of ERISA. It is intended that the transfers of Assets and Liabilities relating to the Norris USW Participants shall satisfy the de minimis rule of Treasury Regulations Section 414(l)-1(n)(2) and shall be deemed to comply with Section 414(l) of the Code so that no IRS Form 5310-A shall be filed with respect to such transfers.

(B) Prior to the Effective Time (or such later time as mutually agreed by the Parties), Dover shall cause the Dover U.S. Pension Plan actuary to determine the estimated value, as of the Effective Time, of the Assets from the trust of the Dover U.S. Pension Plan to be transferred to the trust of the Apergy Pension Plan (the “Estimated Pension Plan Transfer Amount”).

(C) As of the Effective Time (or such later time as mutually agreed by the Parties), Dover and Apergy shall cooperate in good faith to cause an initial transfer of Assets from the trust of the Dover U.S. Pension Plan to the trust of the Apergy Pension Plan in an amount to be approximately ninety percent (90%) of the Estimated Pension Plan Transfer Amount (such amount, the “Initial Transfer Amount”). Assets may be transferred in cash, cash equivalents, securities, Assets in kind or in a combination thereof, as determined by Dover in its sole discretion.

 

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(D) Within ninety (90) days (or such later time as mutually agreed by the Parties) following the Effective Time, Dover shall cause the Dover U.S. Pension Plan actuary to provide Apergy with a revised calculation of the value, as of the Effective Time, of the Assets from the trust of the Dover U.S. Pension Plan to be transferred to the trust of the Apergy Pension Plan. This revised value, as of the Effective Time, of the Assets from the trust of the Dover U.S. Pension Plan to be transferred to the trust of the Apergy Pension Plan as determined in accordance with this Section 3.2(c)(ii)(D) shall be referred to herein as the “Final Pension Plan Transfer Amount.”

(E) Within ten (10) days (or such later time as mutually agreed by the Parties) following the determination of the Final Pension Plan Transfer Amount, Dover shall cause the trust of the Dover U.S. Pension Plan to transfer to the trust of the Apergy Pension Plan (the date of such transfer, the “Final Transfer Date”) the amount, in cash, cash equivalents, securities, other Assets in kind or in a combination thereof, as determined by Dover in its sole discretion, equal to (i) the Final Pension Plan Transfer Amount minus (ii) the Initial Transfer Amount (such difference, as adjusted to reflect fees or charges paid or incurred and earnings or losses as determined based on the actual rate of return of the trust of the Dover U.S. Pension Plan for the period commencing as of the Effective Time and ending on a commercially reasonable date in advance of the Final Transfer Date, the “True-Up Amount”); provided, that in the event the True-Up Amount is negative, Dover shall not be required to cause any such additional transfer and instead Apergy shall be required to cause a transfer of cash, cash equivalents, or securities (or, in its discretion, if acceptable to Dover, Assets in kind) from the trust of the Apergy Pension Plan to the trust of the Dover U.S. Pension Plan, as required, in an amount equal to the absolute value of the True-Up Amount. The Parties acknowledge that the transfer of the True-Up Amount from the trust of the Dover U.S. Pension Plan to the trust of the Apergy Pension Plan, if applicable, shall be in full settlement and satisfaction of the obligations of Dover to cause the transfer of, and the trust of the Dover U.S. Pension Plan to transfer, Assets to the trust of the Apergy Pension Plan pursuant to this Section 3.2(c)(ii)(E). In the event that Apergy is obligated to cause the trust of the Apergy Pension Plan to reimburse the trust of the Dover U.S. Pension Plan pursuant to this Section 3.2(c)(ii)(E), such reimbursement shall be performed in accordance with the same principles set forth herein with respect to the payment of the True-Up Amount from the trust of the Apergy Pension Plan to the trust of the Dover U.S. Pension Plan. The Parties acknowledge that the transfer of such reimbursement amount from the trust of the Apergy Pension Plan to the trust of the Dover U.S. Pension Plan, if applicable, shall be in full settlement and satisfaction of the obligations of Apergy to cause the transfer of, and the trust of the Apergy Pension Plan to transfer, Assets to the trust of the Dover U.S. Pension Plan pursuant to this Section 3.2(c)(ii)(E).

 

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3.3 Non-Qualified Deferred Compensation Plans.

(a) Dover Deferred Compensation Plan. No Apergy Participant shall defer any compensation under the Dover Deferred Compensation Plan attributable to services performed on or following the Plan Separation Date. For the avoidance of doubt, the account balance of each Apergy Participant under the Dover Deferred Compensation Plan shall continue to change based on such Apergy Participant’s individual investment elections. Effective as of the Effective Time, a member of the Apergy Group shall assume all Dover Deferred Compensation Plan Liabilities determined as of immediately prior to the Effective Time, with respect to each Apergy Participant who is an Apergy Employee as of the Effective Time.

(b) Dover Pension Replacement Plan. No later than the Effective Time, Dover shall amend the Dover Pension Replacement Plan to (i) freeze benefit accruals under the Dover Pension Replacement Plan effective as of immediately prior to the Effective Time with respect to Apergy Participants who are actively accruing a benefit under the Dover Pension Replacement Plan immediately prior to the Effective Time, (ii) convert the benefit determined under clause (i) to an account balance effective as of immediately prior to the Effective Time, and (iii) reduce the amount determined under clause (ii) by any Taxes the Apergy Participant would be required to pay as a result of the conversion described in clause (ii) as permitted under Treasury Regulation Section 1.409A-3(j)(4)(vii). Effective as of the Effective Time, a member of the Apergy Group shall assume all Dover Pension Replacement Plan Liabilities determined pursuant to the preceding sentence with respect to each Apergy Participant who is an Apergy Employee as of the Effective Time.

(c) Establishment of Apergy Deferred Compensation Plan. Prior to the Effective Time, a member of the Apergy Group shall have adopted, or caused to have been adopted, a non-qualified deferred compensation benefit plan, which will serve as the plan document for the Dover Pension Replacement Plan Liabilities and Dover Deferred Compensation Plan Liabilities assumed by a member of the Apergy Group in accordance with Sections 3.3(a) and 3.3(b).

(d) Harbison-Fischer Manufacturing Company Restoration of Income Plan and Harbison-Fischer Manufacturing Company Deferred Compensation Agreement. As of and following the Effective Time, Apergy (or another applicable member of the Apergy Group) shall retain all Liabilities and the administration of the Harbison-Fischer Manufacturing Company Restoration of Income Plan and the Harbison-Fischer Manufacturing Company Deferred Compensation Agreement.

ARTICLE IV

HEALTH AND WELFARE PLANS

4.1 Cessation of Participation in Dover Health and Welfare Plans. Effective as of the Plan Separation Date, Apergy established Apergy Health and Welfare Plans which generally correspond to the Dover Health and Welfare Plans which provide group health, life, dental, accidental death and dismemberment, health care reimbursements, dependent care assistance and disability benefits in which certain Apergy Participants participated immediately prior to the Plan

 

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Separation Date. Effective as of immediately prior to the Plan Separation Date, such Apergy Participants ceased to participate in the Dover Health and Welfare Plans in which they participated and effective as of the Plan Separation Date commenced participation in the corresponding Apergy Health and Welfare Plans. Apergy caused those Apergy Participants who participated in Dover Health and Welfare Plans immediately prior to the Plan Separation Date to be automatically enrolled as of the Plan Separation Date in the Apergy Health and Welfare Plans corresponding to the Dover Health and Welfare Plans in which such Apergy Participants participated immediately prior to the Plan Separation Date. The transfer of employment from a member of the Dover Group to a member of the Apergy Group prior to or as of the Effective Time shall not be treated as a “status change” with respect to any Apergy Employee under the Dover Health and Welfare Plans or the Apergy Health and Welfare Plans.

4.2 Allocation of Health and Welfare Plan Liabilities.

(a) Health and Welfare Claims. Except as set forth in Section 4.2(b), Dover shall retain and be solely responsible for all outstanding Liabilities relating to, arising out of, or resulting from health and welfare coverage or claims incurred by Apergy Participants under the Dover Health and Welfare Plans prior to the Plan Separation Date.

(b) Short-Term and Long-Term Disability Coverage Liabilities. From and after the Effective Time, Apergy shall, or shall cause another member of the Apergy Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill, all Liabilities relating to, arising out of, or resulting from short-term or long-term disability coverage for Apergy Participants under the Dover Health and Welfare Plans, in each case, regardless of (i) when or where such Liabilities arose or arise, (ii) where or against whom such Liabilities are asserted or determined and (iii) whether the facts on which they are based occurred prior to, on or after the date hereof.

4.3 Flexible Spending Plan Treatment in the U.S. Effective as of the Plan Separation Date, Apergy established a dependent care spending account and a medical care spending account under a cafeteria plan meeting the requirements of Section 125 of the Code (collectively, the “Apergy FSAs”), which Apergy FSAs have terms that are substantially identical to the analogous Dover cafeteria plan and dependent care and medical care flexible spending accounts (collectively, the “Dover FSAs”) as were in effect immediately prior to the Plan Separation Date. As of the Plan Separation Date, Dover transferred the account balances (if any) under the Dover FSAs of each Apergy Employee who elected to participate therein to the corresponding Apergy FSAs. The Apergy FSAs assumed responsibility as of the Plan Separation Date for all outstanding dependent care and medical care claims under the Dover FSAs of each Apergy Employee and assumed and agreed to perform the obligations from and after the Plan Separation Date. On and following the Plan Separation Date, the contribution elections (if any) of each Apergy Employee as in effect immediately prior to the Plan Separation Date shall remain in effect under the applicable Apergy FSA. As of the Plan Separation Date, Dover transferred to Apergy an amount equal to the total contributions made to the Dover FSAs by Apergy Employees in respect of the plan year immediately prior to the plan year in which the Plan Separation Date occurs, reduced by an amount equal to the total claims already paid to Apergy Employees in respect of such immediately preceding plan year, if any. From and after the Plan Separation Date, Dover has provided and shall provide Apergy with such information that any member of the Apergy Group may reasonably request to enable it to verify any claims information pertaining to a Dover FSA.

 

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4.4 Workers Compensation Liabilities.

(a) Apergy Liabilities. All workers’ compensation Liabilities relating to, arising out of or resulting from any claim by Apergy Employees or Former Apergy Employees that result from an accident or from an occupational disease which is incurred or becomes manifest, as the case may be, as of or prior to the Effective Time and while such individual was employed by either Party or its respective Subsidiaries or Affiliates shall be assumed, or retained as the case may be, by Apergy as of the Effective Time. Each member of the Apergy Group shall also be solely responsible for all workers’ compensation Liabilities relating to, arising out of, or resulting from any claim incurred for a compensable injury sustained by an Apergy Employee or Former Apergy Employee that results from an accident or from an occupational disease which is incurred or becomes manifest, as the case may be, after the Effective Time. Effective as of the Effective Time, Apergy, acting through the applicable member of the Apergy Group employing each Apergy Employee, will be responsible for obtaining workers’ compensation insurance, including providing all collateral required by the insurance carriers. To the extent that such insurance coverage cannot be either assigned to or obtained by Apergy or another member of the Apergy Group, in respect of claims and Liabilities otherwise to be assumed by Apergy or another member of the Apergy Group pursuant to Section 2.3(a) and this Section 4.4(a), Dover shall remain primarily liable for such claims and Liabilities, but Apergy shall indemnify and hold harmless Dover for any such claims and Liabilities. If the preceding sentence applies, then at one or more mutually agreed upon dates, Dover will determine, in its sole discretion, the total amount paid with respect to such claims and Liabilities and Apergy shall reimburse Dover for that amount; provided, however, with respect to any claim or Liability listed on Schedule 4.4(a) hereto, Apergy shall only be required to reimburse Dover for an amount equal to the excess, if any, of (i) the total amount paid with respect to such claim or Liability, as determined by Dover, in its sole discretion, over (ii) the amount set forth on Schedule 4.4(a) hereto directly across from such claim or Liability under the heading “Total Incurred”.

(b) Assignment of Contribution Rights. Dover will transfer and assign (or cause a member of the Dover Group to transfer and assign) to a member of the Apergy Group all rights to seek contribution or damages from any applicable third party (such as a third party who aggravates an injury to a worker who makes a workers’ compensation claim) with respect to any workers’ compensation claim for which Apergy is responsible pursuant to Section 2.3(a) and this Article IV. Apergy will transfer and assign (or cause a member of the Apergy Group to transfer and assign) to a member of the Dover Group all rights to seek contribution or damages from any applicable third party (such as a third party who aggravates an injury to a worker who makes a workers’ compensation claim) with respect to any workers’ compensation claim for which Dover is responsible pursuant to Section 2.3(b).

(c) Collateral. As of and after the Effective Time, Apergy (acting directly or through another member of the Apergy Group) shall be responsible for providing all collateral required by insurance carriers in connection with workers’ compensation claims for which Liability is allocated to the Apergy Group under Section 2.3(a) and this Article IV. Dover (acting directly or through another member of the Dover Group) shall be responsible for providing all collateral required by insurance carriers in connection with workers’ compensation claims for which Liability is allocated to the Dover Group under Section 2.3(b).

4.5 Payroll Taxes and Reporting. To the fullest extent permitted by applicable Law, Dover and Apergy shall, to the extent practicable, (i) treat Apergy (or another member of the Apergy Group designated by Apergy) as a “successor employer” and Dover (or the appropriate member of the Dover Group) as a “predecessor,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code (or analogous terms under applicable Law, including the Employment

 

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Insurance and Quebec Parental Insurance Plan and the Canada Pension Plan and Quebec Pension Plan), with respect to Apergy Employees for purposes of Taxes imposed under the U.S. Federal Unemployment Tax Act or the U.S. Federal Insurance Contributions Act or other applicable Laws, and (ii) cooperate with each other to avoid, to the extent possible, the filing of more than one IRS Form W-2 with respect to each Apergy Employee for the year in which the Effective Time occurs. Without limiting in any manner the obligations and Liabilities of the Parties under the Tax Matters Agreement, each member of the Dover Group and each member of the Apergy Group shall each bear its responsibility for payroll Tax obligations and for the proper reporting to the appropriate Governmental Entities of compensation earned by their respective employees after the Effective Time, including compensation related to the exercise of stock options or the vesting or exercise of other equity awards.

4.6 COBRA Compliance in the U.S.. As of the Plan Separation Date, Apergy assumed responsibility for and has been and is responsible for administering compliance with the health care continuation requirements of COBRA, in accordance with the provisions of the Apergy Health and Welfare Plans, with respect to Apergy Participants who incurred a COBRA qualifying event under the Dover Health and Welfare Plans at any time prior to the Plan Separation Date. Apergy also has been and is responsible for administering compliance with the health care continuation requirements of COBRA and the corresponding provisions of the Apergy Health and Welfare Plans with respect to Apergy Employees and their covered dependents who incur a COBRA qualifying event under the Apergy Health and Welfare Plans at any time on or after the Plan Separation Date.

4.7 Vacation, Holidays, Approved Leaves of Absence, and Paid Time Off. As of or prior to the Effective Time, the applicable member of the Apergy Group shall have credited each Apergy Employee with the unused vacation days, holidays, annual leave, or other approved leave of absence, and personal, and sickness days that such Apergy Employee has accrued immediately prior to the Effective Time (not previously paid or required to be paid) in accordance with the vacation and personnel policies applicable to such Apergy Employee immediately prior to the Effective Time.

ARTICLE V

INCENTIVE COMPENSATION, EQUITY AND EQUITY-BASED COMPENSATION, AND OTHER BENEFITS

5.1 Cash-Based Incentives.

(a) Annual Cash Incentives and Commissions. At the regularly scheduled payment date, Apergy shall pay each Apergy Employee, and Dover shall pay each Dover Employee, in each case, who is participating in an annual cash incentive bonus or commission program of a member of the Apergy Group or a member of the Dover Group, as applicable, such Apergy Employee’s and such Dover Employee’s, as applicable, annual incentive bonus or commission under the applicable plan, based on actual performance for 2018.

 

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(b) Long-term Cash Incentives. Each Dover long-term cash incentive award that is held by an Apergy Employee with a performance period that extends beyond the Effective Time will be cancelled and forfeited as of the Effective Time.

5.2 Stock Options and SSARs.

(a) Dover Options and SSARs. Each Dover Option and Dover SSAR that is outstanding immediately prior to the Effective Time and that is held by a Dover Employee or a Former Dover Employee shall be adjusted as of the Effective Time (and shall thereafter be referred to as an “Adjusted Dover Option” or “Adjusted Dover SSAR,” as applicable) as follows:

(i) The number of shares of Dover Common Stock subject to each Adjusted Dover Option and each Adjusted Dover SSAR, as applicable, shall be equal to the product (rounded down to the nearest whole share on an aggregated basis for all Dover Options held by such Dover Employee or Former Dover Employee and for all Dover SSARs held by such Dover Employee or Former Dover Employee, as applicable) of (A) the number of shares of Dover Common Stock subject to the corresponding Dover Option or Dover SSAR, as applicable, immediately prior to the Effective Time and (B) a fraction, the numerator of which is the Pre-Distribution Price of a share of Dover Common Stock and the denominator which is the Post-Distribution Price of a share of Dover Common Stock (such fraction, the “Dover Ratio”).

(ii) The exercise price per share for each Adjusted Dover Option and the strike price per share for each Adjusted Dover SSAR, as applicable, shall be equal to (A) the exercise price or strike price (as the case may be) of the corresponding Dover Option or Dover SSAR, as applicable, immediately prior to the Effective Time divided by (B) the Dover Ratio, rounded up to the nearest whole cent.

(iii) Each Adjusted Dover Option and Adjusted Dover SSAR shall otherwise be subject to the same terms, vesting conditions, exercise procedures, expiration dates, and termination provisions and other terms and conditions as were in effect immediately prior to the Effective Time for the corresponding Dover Option and Dover SSAR, as applicable.

(b) Apergy Options and SSARs. Each Dover Option and Dover SSAR that is outstanding immediately prior to the Effective Time and that is held by an Apergy Employee shall, as of the Effective Time, be cancelled and immediately replaced with an Apergy Option or an Apergy SSAR, as applicable, as follows:

(i) The number of shares of Apergy Common Stock subject to each Apergy Option and each Apergy SSAR, as applicable, shall be equal to the product (rounded down to the nearest whole share on an aggregated basis for all Apergy Options held by such Apergy Employee and all Apergy SSARs held by such Apergy Employee, as applicable) of (A) the number of shares of Dover Common Stock subject to the corresponding Dover Option or Dover SSAR, as applicable, immediately prior to the Effective Time and (B) a fraction, the numerator of which is the Pre-Distribution Price of a share of Dover Common Stock and the denominator of which is the Post-Distribution Price of a share of Apergy Common Stock (such fraction, the “Apergy Ratio”).

 

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(ii) The exercise price per share for each Apergy Option and strike price per share for each Apergy SSAR, as applicable, shall be equal to (A) the exercise price or strike price (as the case may be) of the corresponding Dover Option or Dover SSAR, as applicable, immediately prior to the Effective Time divided by (B) the Apergy Ratio, rounded up to the nearest whole cent.

(iii) Each Apergy Option and Apergy SSAR shall otherwise be subject to the same terms, vesting conditions, exercise procedures, expiration dates, and termination provisions and other terms and conditions as were in effect immediately prior to the Effective Time for the corresponding Dover Option and Dover SSAR, as applicable.

5.3 Restricted Stock Units.

(a) Dover RSUs. Each Dover RSU that is outstanding immediately prior to the Effective Time and that is held by a Dover Employee, a Former Dover Employee or a non-employee director shall be adjusted as of the Effective Time (and shall thereafter be referred to as an “Adjusted Dover RSU”) as follows:

(i) the number of shares of Dover Common Stock subject to each Adjusted Dover RSU shall be equal to the product (rounded down to the nearest whole share on an aggregated basis) of (A) the number of shares of Dover Common Stock subject to the corresponding Dover RSU immediately prior to the Effective Time and (B) the Dover Ratio.

(ii) Each Adjusted Dover RSU shall be subject to the same terms, vesting conditions, issuance dates and method of distribution and other terms and conditions as were in effect immediately prior to the Effective Time for the corresponding Dover RSU.

(b) Apergy RSUs. Each Dover RSU that is outstanding immediately prior to the Effective Time and that is held by an Apergy Employee shall, as of the Effective Time, be cancelled and immediately replaced with an Apergy RSU, as follows:

(i) The number of shares of Apergy Common Stock subject to each Apergy RSU shall be equal to the product (rounded down to the nearest whole share on an aggregated basis) of (A) the number of shares of Dover Common Stock subject to the corresponding Dover RSU immediately prior to the Effective Time and (B) the Apergy Ratio.

(ii) Each Apergy RSU shall be subject to the same terms, vesting conditions, issuance dates and method of distribution and other terms and conditions that were in effect immediately prior to the Effective Time for the corresponding Dover RSU, and as of the Effective Time, Apergy shall assume all Liabilities with respect to any dividend equivalents that have been credited in respect of such corresponding Dover RSU, as of the Effective Time.

 

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(c) Dover Performance Shares Held by Apergy Employees. Immediately prior to the Effective Time: (i) each ongoing performance period related to an outstanding Dover Performance Share held by an Apergy Employee shall be terminated and (ii) each such outstanding Dover Performance Share held by an Apergy Employee that relates to a performance period ending after the Effective Time shall be cancelled.

5.4 General. All of the adjustments described in this Article V shall be effected in accordance with Sections 424 and 409A of the Code, to the extent subject thereto.

5.5 Non-U.S. Grants/Awards. In making the adjustments as described in this Article V, the Parties shall use commercially reasonable efforts to preserve, at and after the Effective Time, the value and tax treatment accorded each equity award granted to non-U.S. employees under the Dover Equity Plans and the Apergy Long Term Incentive Plan, as applicable.

5.6 Adoption of Plan. Prior to the Effective Time, Apergy shall have adopted, or shall have caused a member of the Apergy Group to have adopted, the Apergy Long Term Incentive Plan.

5.7 Administration. Each of Dover and Apergy shall establish an appropriate administration system in order to handle exercises and delivery of shares of common stock in an orderly manner and provide reasonable levels of service for equity award holders.

5.8 Registration. The Parties shall use commercially reasonable efforts to maintain effective registration statements with the Commission with respect to the awards described in this Article V, to the extent any such registration statement is required by applicable Law.

5.9 No Effect on Subsequent Awards. The provisions of this Article V shall have no effect on the terms and conditions of equity and equity-based awards granted following the Effective Time by Dover or Apergy, including any such equity and equity-based awards granted pursuant to any Dover Equity Plan or the Apergy Long Term Incentive Plan, as applicable.

ARTICLE VI

GENERAL AND ADMINISTRATIVE

6.1 Sharing of Participant Information. To the maximum extent permitted under applicable Law, Dover and Apergy shall share, and shall cause the members of its respective Group to share, with each other and their respective agents and vendors all participant information reasonably necessary for the efficient and accurate administration of each of the Dover Benefit Plans and the Apergy Benefit Plans. Dover and Apergy and their respective authorized agents shall, subject to applicable laws on confidentiality, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other Party or any member of its Group, to the extent necessary for such administration. Until the Plan Separation Date, all participant information was provided

 

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in the manner and medium applicable to Participating Companies in the Dover Benefit Plans generally, and thereafter until the time at which the Parties subsequently determine, all participant information has been and shall be provided in a manner and medium that are compatible with the data processing systems of Dover as in effect as of the Plan Separation Date, unless otherwise agreed to by Dover and Apergy.

6.2 Audit Rights with Respect to Information Provided. Each of Dover and Apergy, and their respective duly authorized representatives, shall have the right to conduct reasonable audits with respect to all information provided to it by the other Party. The Parties shall cooperate to determine the procedures and guidelines for conducting audits under this Section 6.2, which shall require reasonable advance notice by the auditing party. The auditing Party shall have the right to make copies of any records at its expense, subject to applicable Law.

6.3 Fiduciary Matters. Dover and Apergy each acknowledge that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other party for any Liabilities caused by the failure to satisfy any such responsibility.

6.4 Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any Third Party (such as a vendor or Governmental Entity) and such consent is withheld, Dover and Apergy shall use commercially reasonable efforts to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such Third Party to consent, Dover and Apergy shall negotiate in good faith to implement the provision in a mutually satisfactory manner. The phrase “commercially reasonable efforts” as used herein shall not be construed to require the incurrence of any non-routine or unreasonable expense or liability or the waiver of any right.

6.5 Confidentiality of Employee Information. Except as otherwise set forth in this Agreement, all records, information and data relating to Employees shall, in each case, be subject to the confidentiality provisions of the Separation Agreement and any other applicable agreement and applicable Law, and the provisions of this Section 6.5 shall be in addition to, and not in derogation of, the provisions of the Separation Agreement governing Confidential Information, including Sections 7.5 and 8.6 of the Separation Agreement.

6.6 Cooperation. The Parties agree to use commercially reasonable efforts to cooperate with respect to sharing, retaining, and maintaining data and records that are necessary or appropriate to further the purposes of this Section 6.6 and to administer its respective Benefit Plans to the extent consistent with this Agreement and applicable Law, and the Parties agree to cooperate as long as is reasonably necessary to further the purposes of this Section 6.6. No Party shall charge another Party a fee for such cooperation.

 

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6.7 Subsequent Transfers of Employment. To the extent that the employment of any individuals transfers between any member of the Dover Group and any member of the Apergy Group in the twenty-four (24) month period following the Effective Time, the Parties shall use their reasonable efforts to effect the provisions of this Agreement with respect to the compensation and benefits of such individuals following such transfer, it being understood that (i) it may not be possible to replicate the effect of such provisions under such circumstances and (ii) neither Dover nor Apergy shall be bound by the provisions of this Section 6.7 to assume any Liabilities or transfer any Assets. Notwithstanding the foregoing, for compensation subject to the provisions of Section 409A of the Code, any such subsequent transfer shall be a separation from service from the applicable employer for purposes of such compensation, and the consequences of such separation from service shall be determined in accordance with the terms of the applicable plan or agreement.

ARTICLE VII

GENERAL PROVISIONS

7.1 Complete Agreement. This Agreement, the Separation Agreement and the other Ancillary Agreements, and the exhibits, schedules, and annexes hereto and thereto, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and shall supersede all previous negotiations, commitments, and writings with respect to such subject matter. In the event of any conflict between the terms and conditions of the body of this Agreement and the terms and conditions of any Schedule, the terms and conditions of such Schedule shall control. Notwithstanding anything to the contrary in this Agreement, the Separation Agreement, or any other Ancillary Agreement, in the case of any conflict between the provisions of the Separation Agreement and the provisions of any Ancillary Agreement, the provisions of the Separation Agreement shall control; provided, however, that in relation to (i) any matters concerning Taxes, the Tax Matters Agreement shall prevail over the Separation Agreement and any other Ancillary Agreement, (ii) any matters governed by this Agreement, this Agreement shall prevail over the Separation Agreement or any other Ancillary Agreement, and (iii) the provision of support and other services after the Effective Time by the Apergy Group to the Dover Group, and vice versa, the Transition Services Agreement shall prevail over the Separation Agreement or any other Ancillary Agreement. It is the intention of the Parties that the Transfer Documents shall be consistent with the terms of this Agreement, the Separation Agreement and the other Ancillary Agreements. The Parties agree that the Transfer Documents are not intended and shall not be considered in any way to enhance, modify or decrease any of the rights or obligations of Dover, Apergy, or any member of their respective Groups from those contained in this Agreement, the Separation Agreement, and the other Ancillary Agreements.

7.2 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Party. Execution of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic copy of a signature shall be deemed to be, and shall have the same effect as, executed by an original signature.

 

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7.3 Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Effective Time and remain in full force and effect in accordance with their applicable terms.

7.4 Notices. All notices, requests, claims, demands, and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt unless the day of receipt is not a Business Day, in which case it shall be deemed to have been duly given or made on the next Business Day) by delivery in person, by overnight courier service, by facsimile, or by email with receipt confirmed or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 7.4):

If to Dover:

Dover Corporation

3005 Highland Parkway

Downers Grove, Illinois 60515

Attn:

Facsimile:

Email:

If to Apergy:

Apergy Corporation

[address]

Attn:

Facsimile:

Email:

7.5 Termination. Notwithstanding any provision to the contrary, this Agreement shall be of no further force and effect and shall be null and void ab initio if the Separation Agreement is terminated at any time prior to the Effective Time in accordance with Section 10.10 thereof. In the event of such termination, no Party, nor any of its officers, directors, or employees shall have any liability to any other Party or any other Person. After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by each of the Parties.

7.6 Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and the Parties shall endeavor in good-faith negotiations to replace the invalid, illegal, or unenforceable provisions with valid, legal, and enforceable provisions, the economic effect of which comes as close as possible to that of the invalid, illegal, or unenforceable provisions.

 

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7.7 Assignment; No Third-Party Beneficiaries. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors (by merger, acquisition of assets or otherwise) and permitted transferees and assigns to the same extent as if such successors or permitted transferees and assigns had been an original party to the Agreement. Notwithstanding the foregoing, this Agreement shall not be assignable, in whole or in part, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be null and void; provided, that (i) a Party may assign any or all of its rights and obligations under this Agreement to any of its Affiliates, but no such assignment shall release the assigning Party from any liability or obligation under this Agreement, and (ii) a Party may assign this Agreement in whole in connection with a bone fide third-party merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets, and upon the effectiveness of such assignment under this clause (ii), the assigning Party shall be released from all of its obligations under this Agreement if the surviving entity of such merger or the transferee of such Assets shall agree in writing, in form and substance reasonably satisfactory to the other Party, to be bound by the terms of this Agreement as if named as a “Party” hereto. This Agreement is solely for the benefit of the Parties and their respective Affiliates after the Effective Time and their respective permitted successors and assigns, and is not intended to confer upon any Person except the Parties and their respective Affiliates after the Effective Time, and their respective permitted successors and assigns, any rights or remedies hereunder, and there are no third-party beneficiaries of this Agreement and nothing in this Agreement, express or implied, (A) shall confer upon Third Parties any remedy, claim, liability, reimbursement, cause of action, or other right in excess of those existing without reference to this Agreement, (B) shall confer any right to employment or continued employment for any period or terms of employment, (C) shall be interpreted to prevent or restrict the Parties from modifying or terminating any Apergy Benefit Plan or Dover Benefit Plan or the employment or terms of employment of any Apergy Employee or Dover Employee, or (D) shall establish, modify or amend any Apergy Benefit Plan or Dover Benefit Plan covering an Apergy Participant or Dover Participant, any collective bargaining agreements, national collective bargaining agreements, or the terms and conditions of employment applicable to an Apergy Employee or a Dover Employee.

7.8 Governing Law. This Agreement shall be governed by and construed in accordance with the internal Laws, and not the Laws governing conflicts of Laws (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law), of the State of New York.

7.9 Consent to Jurisdiction. Subject to the provisions of Article VIII of the Separation Agreement, each of the Parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the U.S. District Court for the Southern District of New York (together, the “New York Courts”), for purposes of any Action to compel arbitration or for provisional relief in aid of arbitration in accordance with Article VIII of the Separation Agreement or for provisional relief to prevent irreparable harm, and to the non-exclusive jurisdiction of the New York Courts for the enforcement of any award issued thereunder. Each of the Parties further agrees that service of any process, summons, notice, or document by U.S. registered mail to such Party’s respective address set forth in

 

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Section 7.4 shall be effective service of process for any Action in the New York Courts with respect to any matters to which it has submitted to jurisdiction in this Section 7.9. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any Action arising out of this Agreement or the transactions contemplated hereby in the New York Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action brought in any such court has been brought in an inconvenient forum.

7.10 Dispute Resolution. The resolution of any dispute between the Parties with respect to this Agreement shall be governed by the provisions of the Separation Agreement with respect to the resolution of disputes, including the provisions of Article VIII of the Separation Agreement.

7.11 Specific Performance. The Parties agree that irreparable damage may occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to seek (i) an injunction or injunctions to enforce specifically the terms and provisions hereof in any arbitration in accordance with Article VIII of the Separation Agreement, (ii) provisional or temporary injunctive relief in accordance therewith in any New York Court, and (iii) enforcement of any such award of an arbitral tribunal or a New York Court in any court of the U.S., or any other any court or tribunal sitting in any state of the U.S. or in any foreign country that has jurisdiction, this being in addition to any other remedy or relief to which they may be entitled.

7.12 Amendment. This Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties. The failure of any Party to require strict performance by any other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof.

7.13 Rules of Construction.

References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Any action to be taken by the board of directors of a Party may be taken by a committee of the board of directors of such Party if properly delegated by the board of directors of such Party to such committee. Unless the context otherwise requires:

(i) the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation”,

(ii) references in this Agreement to Articles, Sections, Annexes, Exhibits, and Schedules shall be deemed references to Articles and Sections of, and Annexes, Exhibits, and Schedules to, this Agreement,

(iii) the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section, or provision of this Agreement,

 

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(iv) the words “written request” when used in this Agreement shall include email,

(v) the term “commercially reasonable efforts” means efforts which are commercially reasonable to enable a Party, directly or indirectly, to satisfy a condition to, or otherwise assist in, the consummation of a desired result and which do not require the performing Party to expend funds or assume Liabilities other than expenditures and Liabilities which are customary and reasonable in nature and amount in the context of a series of related transactions similar to the Distribution,

(vi) the words “shall” and “will” are used interchangeably and have the same meaning,

(vii) the word “or” shall not be exclusive,

(viii) relative to the determination of any period of time, “from” means “from and including,” “to” means “to, but excluding” and “through” means “through and including”,

(ix) whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified,

(x) reference to any Law (including statutes and ordinances) means such Law (including any and all rules and regulations promulgated thereunder) as amended, modified, codified, or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability,

(xi) references in this Agreement to any time shall be to New York City, New York time unless otherwise expressly provided herein, and

(xii) as described in Section 7.1, to the extent that the terms and conditions of any Schedule hereto conflicts with the express terms of the body of this Agreement, the terms of such Schedule shall control; it being understood that the Parties intend to include in the Schedules hereto any exceptions to the general rules described in the body of this Agreement and to give full effect to such exceptions, with respect to the matters expressly set forth therein.

The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

7.14 Authorization. Each of the Parties hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such Party, that this Agreement constitutes a legal, valid, and binding obligation of each such Party enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

 

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7.15 Schedules. The Schedules attached hereto are incorporated herein by reference and shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.

7.16 Subsidiaries. Each of the Parties shall cause (or with respect to an Affiliate that is not a Subsidiary, shall use commercially reasonable efforts to cause) to be performed, and hereby guarantee the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such Party or by any Business Entity that becomes a Subsidiary or Affiliate of such Party at and after the Effective Time. This Agreement is being entered into by Dover and Apergy on behalf of themselves and the members of their respective Groups (i.e., the Dover Group and the Apergy Group, respectively). This Agreement shall constitute a direct obligation of each such entity and shall be deemed to have been readopted and affirmed on behalf of any Business Entity that becomes a Subsidiary or Affiliate of such Party at and after the Effective Time. Either Party shall have the right, by giving notice to the other Party, to require that any Subsidiary of the other Party execute a counterpart to this Agreement to become bound by the provisions of this Agreement applicable to such Subsidiary.

7.17 No Circumvention. The Parties agree not to directly or indirectly take any actions, act in concert with any Person who takes an action, or cause or allow any member of any such Party’s Group to take any actions (including the failure to take a reasonable action) intended to, or such that the resulting effect is to, materially undermine the effectiveness of any of the provisions of this Agreement, the Separation Agreement, or any other Ancillary Agreement (including adversely affecting the rights or ability of any Party to successfully pursue indemnification, contribution, or payment pursuant to Article VI of the Separation Agreement).

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names by a duly authorized officer as of the date first written above.

 

DOVER CORPORATION
By:     
  Name:
  Title:

 

[Signature Page to Employee Matters Agreement]


APERGY CORPORATION
By:     
  Name:
  Title:

 

[Signature Page to Employee Matters Agreement]

EX-99.1
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Exhibit 99.1

 

LOGO

Dear Dover Corporation Stockholder:

I am pleased to inform you that on April 18, 2018, the Board of Directors of Dover Corporation approved the distribution of all of the shares of common stock of Apergy Corporation, a wholly-owned subsidiary of Dover, to Dover stockholders. Apergy holds entities conducting our upstream oil and gas business within our Energy segment. Upon completion of the spin-off, Apergy will be a stand-alone, publicly traded company that is a leading provider of highly engineered technologies that help companies drill for and produce oil and gas efficiently and safely around the world. Dover will remain a market leader in delivering innovative equipment and components, specialty systems, consumable supplies, software and digital solutions, and support services.

We believe the separation will enhance the long-term performance of both businesses and create lasting value for our stockholders. The transaction furthers Dover’s strategy to streamline our portfolio and focus and invest in our core platforms of market-leading businesses competing in attractive industrial markets that offer lower volatility and strong growth prospects. At the same time, as a pure-play upstream energy business with dedicated leadership, Apergy will be well positioned to leverage its already strong businesses and trusted brands, take advantage of favorable industry fundamentals and growth opportunities within its markets, and align its structure and capital allocation strategy with a dedicated investor base.

The separation will be in the form of a pro rata distribution of all of the outstanding shares of Apergy’s common stock to holders of Dover’s common stock. Each Dover stockholder will receive one share of Apergy’s common stock for every two shares of Dover’s common stock held as of 5:00 p.m., New York time, on April 30, 2018, the record date for the distribution. Stockholder approval of the distribution is not required, and you do not need to take any action to receive shares of Apergy’s common stock to which you are entitled as a Dover stockholder as of the record date. In addition, you do not need to pay any consideration or surrender or exchange your Dover common stock in order to receive shares of Apergy’s common stock.

We expect that, for U.S. federal income tax purposes, the distribution of shares of Apergy’s common stock in the separation will be tax-free to Dover stockholders, except with respect to cash received in lieu of fractional shares.

I encourage you to read the attached information statement, which is being provided to all holders of Dover’s common stock as of 5:00 p.m., New York time, on April 30, 2018. The information statement describes the separation in detail and contains important business and financial information about Apergy.

As ever, we remain committed to building long-term stockholder value. This spin-off is a positive step for our businesses, our stockholders and our customers.

Sincerely,

Robert A. Livingston

President and Chief Executive Officer

Dover Corporation


Table of Contents

LOGO

Dear Future Apergy Stockholder:

I am delighted to welcome you as a future stockholder of our company, Apergy Corporation, which will soon begin independently operating as a leading provider of highly engineered technologies that help companies drill for and produce oil and gas efficiently and safely around the world.

As part of Dover, we have built Apergy into a set of businesses that we believe are among the leaders in their markets, differentiated by their technology and commitment to innovation, customer service and trusted brands. As an independent company, we believe we are well positioned for continued success, benefiting from favorable industry trends; substantial presence in growing basins, segments and regions; recurring revenue enhancing the stability of our results; a proven business model driving strong relative performance across market cycles; a strong brand portfolio and reputation for quality, performance and service; and a dedicated management team with a proven track record of success.

I encourage you to learn more about Apergy by reading the attached information statement. Apergy’s common stock has been authorized for listing, subject to official notice of issuance, on the New York Stock Exchange under the symbol “APY.”

Although we will be operating independently, we are very proud of our historical connection to Dover, and excited about the great future we see ahead of us as a stand-alone entity. We are truly excited with our prospects and believe that we will continue to create value for our customers and our new stockholders.

Sincerely,

Sivasankaran Somasundaram

President & Chief Executive Officer

Apergy Corporation


Table of Contents

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended.

 

Preliminary and Subject to Completion, dated April 11, 2018

INFORMATION STATEMENT

Apergy Corporation

This information statement is being furnished in connection with the distribution by Dover Corporation (“Dover”) to its stockholders of all of the outstanding shares of common stock of Apergy Corporation (“Apergy”), a wholly owned subsidiary of Dover that will hold directly or indirectly certain entities, assets and liabilities conducting Dover’s upstream oil and gas business within its Energy segment. To implement the distribution, Dover will distribute all of the shares of Apergy common stock on a pro rata basis to the Dover stockholders in a manner that is intended to be tax-free in the United States, except to the extent of cash received in lieu of fractional shares.

If you are a holder of Dover common stock as of 5:00 p.m., New York time, on April 30, 2018, the record date for the distribution, you will be entitled to receive one share of Apergy common stock for every two shares of Dover common stock that you hold as of such record date. The distribution of shares will be made in book-entry form only. Dover will not distribute any fractional shares of Apergy common stock. Instead, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the spin-off. Apergy expects that the distribution will be effective as of 12:01 a.m., New York time, on May 9, 2018. We refer to the effective time of the distribution as the “distribution date.” Immediately after the distribution becomes effective, Apergy will be an independent, publicly traded company.

No vote of Dover stockholders is required for the distribution. Therefore, you are not being asked for a proxy, and you are requested not to send Dover a proxy, in connection with the distribution. You do not need to pay any consideration, exchange or surrender your existing common stock of Dover or take any other action to receive your shares of Apergy common stock.

There is no current trading market for Apergy common stock, although Apergy expects that a limited market, commonly known as a “when-issued” trading market, will develop at least one trading day prior to the record date for the distribution, and Apergy expects “regular-way” trading of Apergy common stock to begin on the distribution date. As discussed under “The Separation and Distribution—Trading Between the Record Date and Distribution Date,” if you sell your Dover common stock in the “regular-way” market after the record date and before the Apergy distribution, you also will be selling your right to receive shares of Apergy common stock in connection with the distribution. Apergy’s common stock has been authorized for listing, subject to official notice of issuance, on the New York Stock Exchange under the symbol “APY.”

We are an “emerging growth company” as defined under the Federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for future filings. See “Summary—Implications of Being an Emerging Growth Company.

 

 

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 35.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is April         , 2018.

A Notice of Internet Availability of Information Statement Materials containing instructions describing how to access this Information Statement was first mailed to Dover stockholders on or about April         , 2018.


Table of Contents

TABLE OF CONTENTS

 

     Page  

SUMMARY

     1  

RISK FACTORS

     35  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     55  

DIVIDEND POLICY

     56  

CAPITALIZATION

     57  

SELECTED HISTORICAL COMBINED FINANCIAL DATA

     58  

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

     59  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     66  

BUSINESS

     88  

MANAGEMENT

     104  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     130  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     138  

THE SEPARATION AND DISTRIBUTION

     140  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     146  

DESCRIPTION OF APERGY CAPITAL STOCK

     150  

WHERE YOU CAN FIND MORE INFORMATION

     155  

INDEX TO COMBINED FINANCIAL STATEMENTS

     F-1  

Presentation of Information

Unless otherwise indicated or context otherwise requires, all references in this information statement to “Apergy Corporation,” “Apergy,” “we,” “us,” “our” and “our company” refer (i) prior to the consummation of the reorganization described herein, to the Apergy businesses, consisting of entities, assets and liabilities conducting Dover’s upstream oil and gas business within its Energy segment and reflected in the combined financial statements included herein; and (ii) after the reorganization, to Apergy Corporation (f/k/a Wellsite Corporation) and its consolidated subsidiaries. References in this information statement to “Dover” refer to Dover Corporation, a Delaware corporation, and its consolidated subsidiaries (other than Apergy Corporation and its combined subsidiaries), unless the context otherwise requires or as otherwise specified herein.

This information statement is being furnished solely to provide information to Dover stockholders who will receive shares of Apergy common stock in the distribution. It is not and is not to be construed as an inducement or encouragement to buy or sell any of Apergy’s securities or any securities of Dover. This information statement describes Apergy’s business, Apergy’s relationship with Dover and how the spin-off affects Dover and its stockholders, and provides other information to assist you in evaluating the benefits and risks of holding or disposing of Apergy common stock that you will receive in the distribution. You should be aware of certain risks relating to the spin-off, Apergy’s business and ownership of Apergy common stock, which are described under the section entitled “Risk Factors.”

 

i


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SUMMARY

The following is a summary of information discussed in this information statement. This summary may not contain all the details concerning the separation or other information that may be important to you. To better understand Apergy’s separation from Dover and Apergy’s businesses and financial position, you should carefully review this entire information statement. This information statement describes the businesses to be transferred to Apergy by Dover in the separation as if the transferred businesses were Apergy’s businesses for all historical periods described. References in this information statement to Apergy’s historical assets, liabilities, products, businesses or activities are generally intended to refer to the historical assets, liabilities, products, businesses or activities of the transferred businesses as the businesses were conducted as part of Dover and its subsidiaries (or any prior owners) prior to the separation.

Apergy

Apergy is a leading provider of highly engineered technologies that help companies drill for and produce oil and gas efficiently and safely around the world. Our products include a full range of equipment and technologies that enable efficient drilling and safe and efficient production throughout the lifecycle of a well. Our principal products consist of artificial lift equipment and solutions, including electric submersible pump systems (“ESP”), rod pumping systems (“Rod Lift”), gas lift systems, progressive cavity pump systems (“PCP”) and plunger lift systems, as well as polycrystalline diamond cutters (“PDCs”) for drilling. We also provide a comprehensive automation offering consisting of equipment, software and Industrial Internet (“IIoT”) solutions for downhole monitoring, wellsite productivity enhancement and asset integrity management. Our expansive automation offering includes quartz pressure transducers and hybrid electronics, artificial lift controllers and optimization software, monitoring and predictive diagnostic instruments, and software for reciprocating machinery. Our products and technologies enhance our customers’ drilling and production economics.

Apergy’s products are used by a broad spectrum of customers in the global oil and gas industry, including national oil and gas companies, large integrated and independent oil and gas companies, all of the major oilfield equipment and services providers, and pipeline companies. We compete across major oil and gas markets globally with a particular strength in the North American onshore market. Our products are particularly well suited for unconventional/shale oil and gas markets. While our products are used in both the oil and gas markets, over 75% of our revenues come from oil markets.

The quality, innovative technology and performance of our technologies drive improved cost-effectiveness, productivity, efficiency and safety for our customers. We believe our strong market share in our core markets and our long-term customer relationships are due to our focus on technological advancement, product reliability and our commitment to superior customer service across the organization. Our long-term customer relationships and the consumable nature of many of our products also enable us to benefit from recurring revenues throughout the lifecycle of a producing well. We believe we are also differentiated from competitors through our proven business model focused on high customer intimacy, innovative technology and application engineering.

Our Industry

We principally operate in the oil and gas drilling and production industry and provide a broad range of technologies and products that enhance oilfield efficiency, improve productivity, maximize reserve recovery and increase asset value. Demand for our products is impacted by overall global demand for oil and gas, which is expected to benefit from a variety of long-term fundamental trends.

According to the U.S. Energy Information Administration’s International Energy Outlook 2017 (the “EIA International Energy Outlook”), global economic expansion, coupled with a growing population, will help drive



 

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up global energy consumption by about 41% by the year 2050. The majority of this growth is forecast to come from China, India and other Asian nations. Increasing urbanization and a significant expansion of the middle class globally is expected to contribute to higher personal and commercial transportation needs, rising electricity in homes and greater industrial energy demand. For these reasons, the EIA International Energy Outlook projects that demand for petroleum and other liquid fuels will grow by 28% from 2015 through 2050, while demand for natural gas will increase by 69% and natural gas will overtake coal as the world’s second largest fuel source during this period.

As new technology has unlocked resources previously considered too costly to produce, unconventional oil and natural gas reservoirs, particularly in the United States, have become a larger part of the global energy supply landscape. Technological developments in horizontal drilling and hydraulic fracturing have enabled exploration and production (“E&P”) companies to access the vast hydrocarbon reserves contained in the unconventional oil and natural gas reservoirs of the United States. In addition, North America is expected to become the largest liquefied natural gas (“LNG”) exporter due to growing demand for LNG from Asia and Europe. As a result, the United States, an oil importer for decades, is on pace to become a net exporter of oil in the near-term.

The oil and gas industry has traditionally been volatile and is influenced by long-term, short-term and cyclical trends, including oil and gas supply and demand, current and projected oil and gas prices, and the level of upstream spending by E&P companies. As a result, demand for our technologies and products depends primarily upon the level of expenditures by our customers in the oil and natural gas industry, particularly those within the United States. A rapid increase in supply over a seven year period from 2008 to 2015 contributed to a decline in oil and gas prices and reduced customer spending levels from year-end 2014 through 2016. In November 2016, May 2017 and November 2017, certain oil producing nations and the Organization of the Petroleum Exporting Countries (“OPEC”) agreed to limit production of crude oil with the goal of raising oil prices. The agreement has been extended most recently through the end of 2018. Oil prices have rebounded meaningfully in 2017 and have begun to stabilize, resulting in an increase in our customers’ spending and demand for Apergy’s technologies and products. Although there remains a risk that oil prices and activity levels could deteriorate from current levels, we believe that the outlook for our businesses over the long-term is favorable. Increasing global demand for oil and gas as well as continued depletion of existing reservoirs will drive continued investment in the drilling and completion of new wells. In addition, productivity and efficiency are becoming increasingly important in the oil and gas industry as operators focus on improving per-well economics, driven by a flattening of the West Texas Intermediate crude oil (“WTI”) forward price curve, and the North American onshore oil and gas industry moving from an exploration phase into a more mature production phase.

Technology has become increasingly critical to oil and natural gas producers as a result of the maturity of the world’s oil and natural gas reservoirs, the acceleration of production decline, the focus on complex well designs and the oil and gas industry’s aging workforce. While the aggregate number of wells drilled per year has fluctuated relative to market conditions, E&P companies, on a proportional basis, have increased expenditures on technology in an effort to improve reservoir performance, increase oil and gas recovery and lower the cost per barrel produced over the life of a well. Our customers continue to seek, test and use production-enabling technologies at an increasing rate. We have invested substantially in building our technology offerings, which help us to provide more efficient tools and solutions to produce oil and natural gas. Apergy’s portfolio of data collection, automation, and remote monitoring solutions are intended to improve reliability and drive down costs. We believe our efficiency enhancing products contribute to a reduction in the breakeven cost of unconventional development for our E&P customers. We believe our business will benefit as operators increasingly focus on optimizing production and improving per-well economics.



 

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Business Segments

Our business is organized into two reportable segments: Production & Automation Technologies and Drilling Technologies. The following chart provides an overview of our two segments.

 

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Production & Automation Technologies

Our Production & Automation Technologies segment generated revenues of $781.9 million in 2017, representing 77% of our total 2017 revenues. Production & Automation Technologies facilitates the efficient, safe and cost effective extraction of oil and gas. We design, manufacture, market and service a full range of artificial lift equipment, end-to-end automation solutions, as well as other production equipment. A portion of Production & Automation Technologies revenue is derived from activity-based consumable products, as customers routinely replace items such as sucker rods, plunger lifts and pump parts. We believe that the combination of our artificial lift equipment and our end-to-end proprietary automation solutions helps oil and gas operators lower production costs and optimize well efficiency by enabling them to monitor, predict and optimize performance. Our products are sold under a collection of premier brands, which we believe are recognized by customers as leaders in their market spaces, including Harbison-Fischer, Norris, Alberta Oil Tool, Oil Lift Technology, PCS Ferguson, Pro-Rod, Upco, Accelerated, Norriseal-Wellmark, Quartzdyne, Spirit, Theta, Timberline and Windrock.

Within our Production & Automation Technologies segment, we offer artificial lift technologies, automation technologies and other production equipment.



 

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Artificial Lift Technologies

We believe artificial lift equipment is mission-critical to oil and gas operators as a means to increase pressure within the reservoir and improve oil and gas production. Artificial lift is a key technology for increasing oil and gas production throughout the lifecycle of a producing well and is therefore directly linked to operator economics. Apergy offers a full suite of artificial lift solutions to meet the varying needs of operators as oil production volume levels decline over the lifecycle of a producing well, as demonstrated in the figure below. Apergy’s comprehensive offering provides our customers with cost effective solutions tailored to a well’s specific characteristics and production volumes. Apergy is particularly strong within key U.S. basins where artificial lift technologies are prevalent. According to Spears & Associates (“Spears”), an industry research consultant, the U.S. is the world’s largest lift market, followed by Canada, and artificial lift technologies are used in approximately 95% of all producing wells in North America. We believe that our offerings also have significant international potential, as production rates continue to decline in existing wells in regions such as the Middle East, South America and Eastern Europe. Our artificial lift technologies represented approximately 77% of our Production & Automation Technologies segment revenues in 2017.

 

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Automation Technologies

Our proprietary automation solutions are aimed at creating an end-to-end production optimization platform that enables oil and gas operators to monitor, predict and optimize well performance and drive improved return on investment during the production process. Apergy is a leading provider of productivity tools and performance management software for artificial lift and asset integrity management. Our software has modular architecture



 

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that enables specific solutions to be tailored to meet exact customer needs. Real-time data is used by our customers to drive decisions, enhance well servicing and obtain an accurate picture of the well’s functioning over time, resulting in a more connected, digital wellsite that not only operates more efficiently but is also safer and more secure. Our automation technologies represented approximately 10% of our Production & Automation Technologies segment revenues in 2017.

 

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Automation solutions touch multiple parts of the wellsite and allow an operator centralized monitoring and control. Smart instrumentation and hardware at the wellsite have sensing capabilities that allow the capture of data. Once captured, that data is communicated to a cloud based IIoT infrastructure platform where it can be analyzed and used to drive insights for customers. We believe that the combination of Apergy’s automation technologies and its strong artificial lift presence enables Apergy to drive the continued adoption of automation technologies by its customers. Apergy sees automation adoption as a key secular trend in the oil and gas industry, particularly in the current lower oil price environment where operators are focused on lowering the cost per barrel produced over the lifecycle of a well.

Automation technologies bring together multiple layers of equipment, sensors and software. A site may employ a full-scale solution (e.g., a fully connected wellsite using Apergy equipment and software) or a more application specific solution (e.g., a controller used for diagnostics on an ESP lift).



 

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Other Production Equipment

Apergy also offers other production equipment including chemical injection systems, flow control valves, oil and water separation, gas conditioning, process heating and pressure vessel products. These products are complementary to our artificial lift and automation technologies offerings and are used by customers in the production of oil and gas. Apergy’s other production equipment allows Apergy to build its share of customers’ wallets and enhances our ability to cross-sell products across the production equipment portfolio. Our other production equipment offerings represented approximately 13% of our Production & Automation Technologies segment revenues in 2017.

Drilling Technologies

Our Drilling Technologies segment generated revenues of $227.7 million in 2017, representing 23% of our total 2017 revenues. In operation for over 30 years, Drilling Technologies provides highly specialized products used in drilling oil and gas wells. We design, manufacture and market PDCs for use in oil and gas drill bits under the US Synthetic brand. Our proprietary PDCs are based on years of innovation and intellectual property development in material science applications including the production of highly stable synthetic diamonds, known as “polycrystalline diamonds.” US Synthetic has historically filed new patents at a rate of over 50 patents per year and has previously received the prestigious Shingo Prize for operational excellence. We believe our highly engineered PDCs are distinguished by their quality, rate of penetration and longevity. PDCs are a relatively small cost to the oil and gas operator in the context of overall drilling costs, but are critical to successful drilling. As a result, we believe our customers value the quality and performance of US Synthetic PDCs over less expensive alternatives because a lower quality PDC can cause unnecessary and expensive drilling delays. Over 95% of our PDCs are custom designed to meet unique customer requirements and are finished to exact customer specification to ensure optimal performance. PDCs are utilized in both vertical and horizontal drilling and need to be replaced as they wear out during the drilling process.



 

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The following graphic illustrates where they key products of our Production & Automation Technologies and Drilling Technologies segments are used at a wellsite.

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Apergy’s Strengths

We believe that the following strengths position us well to achieve our primary business objective of creating value for all of our stakeholders, including our customers, employees and stockholders:

Attractive businesses benefiting from favorable industry trends in oil and gas.

We believe that increasing global demand for oil and gas and steady depletion of existing reservoirs will continue to drive investment in the drilling and completion of new wells, despite the current oversupply. The EIA International Energy Outlook forecasts that global tight gas, shale gas and coalbed methane production will grow by 3.6% per annum through 2050, driven primarily by demand in the United States. Additionally, the EIA International Energy Outlook projects that global tight oil production will more than double between 2015 and 2040, growing from 5.0 million barrels of oil per day (“Mmb/d”) in 2015 to 10.3 Mmb/d in 2040. At the same time, we believe the current oil price environment supports increased investment to maximize productivity from existing oil fields and increase the efficiency of oilfield operations. We believe operators’ continued focus on improving per-well economics, driven by a flattening of the WTI forward price curve, and the North American



 

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onshore oil and gas industry moving from an exploration phase into a more mature production phase, will increase demand for our artificial lift and wellsite automation solutions.

Substantial presence in growing basins, segments and regions.

84% of our revenue for the year ended December 31, 2017 was generated in North America, where the onshore rig activity was the highest growth region in the oil and gas industry in 2017, achieving a 70% year-over-year increase. Onshore unconventional oil and gas production is expected to continue to grow in North America through 2050, according to the U.S. Energy Information Administration’s 2018 Annual Outlook (the “EIA Annual Outlook”). Apergy has established positions in key North American unconventional basins, such as the Permian, Eagle Ford and Bakken basins, that are expected to experience continued growth in the coming years. We have also been expanding our presence in key international markets, including the Middle East, Latin America and Australia.

Significant recurring revenue enhances the stability of our results.

Historically, approximately 40% of our revenue is recurring. This includes replacement hardware, such as rod pumps and sucker rods, which replace previously deployed equipment in established producing wells. It also includes equipment service revenue, as well as ongoing revenue connected with our automation offering, particularly subscription-based revenue for automated well monitoring and management. We believe this recurring revenue enhances the predictability and stability of our revenue and cash flow, and helps to mitigate the impact of down market cycles.

Proven business model driving strong relative performance across market cycles.

We have built our business through differentiated technology and application engineering, high customer intimacy and superior customer service, continuous new product innovation and a culture of continuous improvement. We have also focused on delivering products and solutions that are non-commoditized and that we believe are critical to an oil or gas producer’s efficiency and profitability. Through this consistent approach, we have achieved strong relative operating results across market cycles, especially during down cycles, demonstrating the resilience of our business model. Despite the recent oil and gas market downturn, we achieved significant adjusted free cash flow (a non-GAAP measure) during 2015 and 2016, in part through proactive working capital management. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview and Outlook—Key Performance Indicators and Other Performance Measures” for a definition of adjusted free cash flow.

Industry leadership with strong brand portfolio and reputation for quality, performance and service.

Our products are sold under a collection of premier brands with strong reputations for quality, performance and service in the industry. These brands include Norris, Harbison-Fischer, Accelerated, PCS Ferguson, Oil Lift Technology, Norriseal-Wellmark, Spirit, Quartzdyne, Theta, Windrock and US Synthetic. Our heritage in the oil field equipment industry extends over 60 years. We believe the quality of our brands has enabled us to achieve a strong Net Promoter Score (a measure of customer satisfaction based on customer surveys), which we believe is among the highest in the artificial lift market.

Comprehensive artificial lift portfolio in an attractive market segment.

Artificial lift is one of the fastest growing segments in oilfield equipment, as spending for artificial lift per well has outpaced other areas of growth. According to Spears, the global artificial lift market was approximately $8.3 billion in 2016 and grew approximately 6% in 2017. During the previous oil and gas upcycle from 2009 to



 

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2014, the artificial lift market grew at an average annual rate of approximately 19%, according to Spears. Additionally, according to Spears, artificial lift spending per active rig has grown at an average annual rate of almost 8% between 2006 and 2017. We believe we are well positioned to benefit from this favorable trend with a broad portfolio of artificial lift solutions to drive productivity throughout the lifecycle of the well, including ESP, Rod Lift, PCP, plunger lift, hydraulic and jet lift systems.

Our automation business is well positioned to capitalize on increasing adoption of digital applications by our customers.

As our customers increasingly focus on maximizing the productivity and efficiency of existing wells, we believe they will continue to adopt automation technologies at the wellsite and that our business is well positioned to capitalize on this trend. We believe technology has become increasingly important to the oil and natural gas marketplace as a result of the maturity of the world’s oil and natural gas reservoirs, the acceleration of production decline, the focus on complex well designs and the oil and gas industry’s aging workforce. In the current lower oil price environment, our customers are focused on lowering the cost per barrel produced over the lifecycle of a well and have begun to seek, test and use production-enabling technologies at an increasing rate. We believe that our strong domain expertise, customer access and innovative hardware and proprietary optimization software offer advantages in this regard.

We are an award-winning global leader in PDCs for oil and gas drilling and an important partner to customers in achieving drilling productivity.

Our US Synthetic business has over thirty years of experience in the development and production of PDCs and has achieved a strong leadership position in the industry primarily due to our expertise in diamond science technology and our ongoing commitment to innovation, quality and superior customer service. We custom design PDCs to the specific characteristics of the unique geological formations in which our customers are drilling. We are able to analyze the needs of our customers and deliver customized solutions in a reliable and timely manner, enabling our customers to operate more efficiently and reduce their total drilling costs. US Synthetic is a recognized leader in lean manufacturing and engineering. Currently US Synthetic remains the only upstream oilfield equipment company to receive the Shingo Prize for operational excellence.

Strong operating system that delivers sustainable performance.

We utilize an operating system that we believe distinguishes us from our peers. Our operating system is built on a foundation of a strong Continuous Improvement (“CI”) program that drives relentless focus on business process improvements and eliminating waste. Key focus areas of our operating system include strategic planning, organic growth, pricing, productivity, strategic sourcing and talent management. Our operating system has enabled us to deliver attractive margin and cash flow performance. We also believe this operating system allows us to integrate new businesses effectively and deliver value.

Executive management team with proven track record of success.

Our senior management team will be led by Sivasankaran (“Soma”) Somasundaram, who will serve as our President and Chief Executive Officer (“CEO”). Other members of Apergy’s senior management team include Jay A. Nutt, Senior Vice President and Chief Financial Officer, Paul E. Mahoney, President, Production and Automation Technologies, Robert K. Galloway, President, Drilling Technologies, Syed (“Ali”) Raza, Senior Vice President and Chief Digital Officer and Shankar Annamalai, Senior Vice President Operations. Our senior management team consists of proven industry operators, with an average of 24 years of relevant experience. We believe our senior leadership team has the extensive operational, financial and managerial experience needed to effectively navigate the key opportunities and challenges facing our business today and have been responsible for developing and executing our success to date. For more information regarding the executive officers of Apergy, see “Management.”



 

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Apergy’s Strategies

Our goal is to continue to create stockholder value and to become the leader at the wellsite, driving customer productivity and efficiency. We intend to achieve this goal by executing the following strategies:

Expand market coverage and increase market share in growing unconventional basins.

Onshore unconventional oil and gas production is expected to continue to grow in North America. The EIA International Energy Outlook projects global tight gas, shale gas and coalbed methane production to grow by 3.6% per annum through 2050, driven primarily by the United States. According to the EIA Annual Outlook, shale output in the U.S. is expected to increase by approximately 130% over this period, while U.S. tight oil output will grow by approximately 74%. As a result, North America is projected to become a major exporter of natural gas during this period. Apergy has established positions with customers that operate in key North American unconventional basins, such as the Permian, Eagle Ford and Bakken basins, that are expected to experience continued growth in the coming years. We intend to expand our market coverage and increase our share in these markets by leveraging our existing customer relationships, sales and service infrastructure and new product initiatives. Key elements of the strategy will include expanding sales coverage, key account management to drive cross selling, targeted product launches to capture market share, data analytics to drive increased customer penetration opportunities and educational programs to drive awareness of our technology differentiation.

Capitalize on increasing customer adoption of automation solutions to drive wellsite productivity.

We believe our customers will increasingly adopt automation solutions to drive productivity and efficiency in the coming years. Technology has become increasingly critical to the oil and natural gas marketplace as a result of the maturity of the world’s oil and natural gas reservoirs, the acceleration of production decline, the focus on complex well designs and the oil and gas industry’s aging workforce. While the aggregate number of wells being drilled per year has fluctuated relative to market conditions, E&P companies have increased expenditures on technology in an effort to improve reservoir performance, increase oil and gas recovery and to lower the cost per barrel produced over the life of a well. Customers continue to seek, test and use production-enabling technologies at an increasing rate. We have invested a substantial amount of our time and resources into building our technology offerings, which help us to provide our customers with more efficient tools to produce oil and natural gas. Apergy’s proprietary automation solutions improve reliability and drive down costs. We offer a full range of automation solutions consisting of equipment, software and full end-to-end IIoT solutions to meet specific customer needs. We believe our automation solutions contribute to a reduction in the breakeven cost of unconventional development, improving the efficient use of capital and operating budgets of our E&P customers. We believe our business will benefit as operators increasingly focus on optimizing production and improving per-well economics. We intend to leverage our extensive customer access and deep domain expertise in these applications to capitalize on this growth trend.

Continue to innovate and expand our product offerings.

We intend to continue our strong track record of developing and launching new and innovative products that drive improved cost-effectiveness, productivity, efficiency and safety for our customers. We operate in a market that is characterized by rapidly changing technology and frequent new product introductions. As a result, we maintain an active research, development and engineering program with a focus on solving customer challenges and developing innovative technologies to improve customer efficiency and profitability. We believe maintaining a robust innovation pipeline will allow us to continue to win market share and increase our penetration in key markets and with key customers. In the near-term, we expect to launch several new products that will help our customers gain efficiency, reduce operating costs and improve safety. Key focus areas for innovation and new



 

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product launches include increasing the performance of our artificial lift systems, developing new digital platforms for our production management and asset integrity management solutions, increasing the drilling productivity of our PDC cutters and developing diamond bearings for new applications.

Continue to expand our global reach.

As producing wells in the Middle East continue to age and deplete and shale-based production continues to expand in areas like South America, our globally recognized brands, market ready products and application knowledge offer the opportunity for international market penetration and growth. We believe there will be a substantial opportunity in the coming years to leverage our technologies currently used in unconventional oil and gas production in North America in targeted international markets. To capitalize on these opportunities, we are focused on expanding our operations and capabilities in targeted global markets such as the Middle East, Latin America and Australia, regions which we believe have aging wells and significant unconventional resource development potential. For example, we recently completed an acquisition in Argentina that will give us access to the market and enable us to capitalize on shale developments in that country. We have begun to win tenders in these markets and we expect to continue to build on these successes in the future, especially as these international markets move towards adopting artificial lift and automation technologies.

Continue to drive margin expansion and adjusted free cash flow generation through operational excellence.

We remain focused on driving margin expansion and adjusted free cash flow generation as the oil and gas markets continue to recover. We have a demonstrated track record of strong relative performance through market cycles, including remaining adjusted free cash flow positive throughout the recent oil and gas downturn. We are committed to continuing operational excellence and driving strong performance by utilizing our differentiated operating system. We plan to achieve this through a rigorous focus on improving productivity in our facilities, reducing material costs by strategic sourcing in best value countries, reducing working capital through effective inventory, receivables and payables management and eliminating waste in our processes through lean and CI principles. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview and Outlook—Key Performance Indicators and Other Performance Measures” for a definition of adjusted free cash flow.

Expand our technology and product portfolio through selective acquisitions.

In addition to our organic growth initiatives, we may choose to pursue select strategic acquisition opportunities as part of our growth strategy. We benefit from a track record of successfully growing our earnings and technology offering through selective acquisitions. For example, over the last cycle, we expanded our comprehensive artificial lift platform through several acquisitions, including Harbison-Fischer, Oil Lift Technology, PCS Ferguson, and Accelerated. Most recently, we completed the acquisition of an Argentina-based supplier of progressive cavity pump products and services in October of 2017. We have historically employed a disciplined approach to acquisitions focused on opportunities where we believe we can achieve an attractive return on our investment. These have included opportunities that (i) increased our exposure to the most important growth trends in the industry, (ii) added key products and technologies, (iii) enhanced our market position, (iv) expanded our geographic scope and/or (v) provided the opportunity to realize synergies while strengthening our capabilities. To the extent we choose to pursue acquisition opportunities, as part of our disciplined approach, we intend to focus on those that we believe will be accretive to earnings while consistent with our goal to maintain a strong and flexible balance sheet and healthy credit profile. In order to preserve the tax-free nature of the spin-off, we must execute any such transactions in compliance with the tax matters agreement. As a result, the ability of Apergy to engage in, among other things, certain mergers and equity transactions could be limited or restricted for a two-year period following the spin-off. See “Risk Factors—Risks Related to the Separation—Apergy may not be able to engage in certain corporate transactions after the separation.”



 

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Summary Risk Factors

There are a number of risks related to Apergy’s business and the spin-off and related transactions, including:

 

    Trends in oil and natural gas prices may affect the drilling and production activity, profitability and financial stability of Apergy’s customers and therefore the demand for, and profitability of, Apergy’s products and services, which could have a material adverse effect on Apergy’s business, results of operations and financial condition.

 

    Apergy might be unable to compete successfully with other companies in its industry.

 

    If Apergy is unable to develop new products and technologies, its competitive position may be impaired, which could materially and adversely affect its sales and market share.

 

    Apergy could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of raw materials (including energy) or if Apergy is unable to obtain raw materials.

 

    Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing and the potential for related litigation could result in increased costs and additional operating restrictions or delays for Apergy’s customers, which could reduce demand for Apergy’s products and negatively impact Apergy’s business, financial condition and results of operations.

 

    Apergy’s growth and results of operations may be adversely affected if it is unsuccessful in its capital allocation and acquisition program.

 

    Apergy’s products are used in operations that are subject to potential hazards inherent in the oil and natural gas industry and, as a result, Apergy is exposed to potential liabilities that may affect its financial condition and reputation.

 

    Apergy’s customers’ industries are undergoing continuing consolidation that may impact Apergy’s results of operations.

 

    Apergy is subject to information technology, cybersecurity and privacy risks.

 

    Apergy and its customers are subject to extensive environmental and health and safety laws and regulations that may increase Apergy’s costs, limit the demand for Apergy’s products and services or restrict Apergy’s operations. In addition, future regulations, or more stringent enforcement of existing regulations, could increase those costs and liabilities, which could adversely affect Apergy’s results of operations.

 

    Apergy is subject to risks relating to its existing international operations and expansion into new geographical markets.

 

    Apergy’s business, profitability and reputation could be adversely affected by domestic and foreign governmental and public policy changes, risks associated with emerging markets, changes in statutory tax rates and unanticipated outcomes with respect to tax audits.

 

    Failure to attract, retain and develop personnel for key management could have an adverse effect on Apergy’s results of operations, financial condition and cash flows.

 

    The credit risks of Apergy’s customer base could result in losses.

 

    Apergy’s revenue, operating profits and cash flows could be adversely affected if it is unable to protect or obtain patent and other intellectual property rights.

 

    Climate change legislation and regulatory initiatives could result in increased compliance costs for Apergy and its customers.


 

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    Apergy may not achieve some or all of the expected benefits of the separation, and the separation may adversely affect Apergy’s business.

 

    Apergy has no history operating as an independent publicly traded company, and Apergy’s historical and pro forma financial information is not necessarily representative of the results that it would have achieved as a separate, publicly traded company and therefore may not be a reliable indicator of its future results.

These and other risks related to our business and the spin-off are discussed in greater detail under the heading “Risk Factors” in this information statement. You should read and consider all of these risks carefully.

The Separation and Distribution

On December 7, 2017, Dover announced its intention to pursue a plan to separate entities conducting its upstream oil and gas business within its Energy segment from the remainder of its businesses.

In furtherance of this plan, on April 18, 2018, Dover’s Board of Directors approved the distribution of all of Apergy’s issued and outstanding shares of common stock on the basis of one share of Apergy common stock for every two shares of Dover common stock held as of 5:00 p.m., New York time, on April 30, 2018, the record date for the distribution.

Apergy’s Post-Separation Relationship with Dover

Apergy will enter into a separation and distribution agreement with Dover, which is referred to in this information statement as the “Separation and Distribution Agreement.” In connection with the separation, Apergy will enter into various other agreements to effect the separation and provide a framework for its relationship with Dover after the separation. These other agreements will include a transition services agreement, a tax matters agreement, and an employee matters agreement. These agreements will provide for the allocation between Apergy and Dover of Dover’s and Apergy’s assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after Apergy’s separation from Dover, and will govern certain relationships between Apergy and Dover after the separation. For additional information regarding the Separation and Distribution Agreement and other transaction agreements, see the sections entitled “Risk Factors—Risks Related to the Separation” and “Certain Relationships and Related Person Transactions.”

Reasons for the Separation

Apergy currently is a wholly owned subsidiary of Dover that was formed to hold certain entities, assets and liabilities conducting Dover’s upstream oil and gas business within its Energy segment. The separation of Apergy from Dover and the distribution of Apergy’s common stock are intended to provide you with equity investments in two separate companies that will be able to focus on each of their respective businesses. Dover’s Board of Directors believes that separating the Apergy businesses from the remainder of Dover’s businesses is in the best interests of Dover and its stockholders for a number of reasons, including that:

 

    The separation will allow each company to more effectively pursue its own distinct operating priorities and strategies, and will enable the management of both companies to pursue separate opportunities for long-term growth and profitability, and to recruit, retain and motivate employees pursuant to compensation policies which are appropriate for their respective lines of business.

 

    The separation will permit each company to concentrate its financial resources solely on its own operations, providing greater flexibility to invest capital in its business in a time and manner appropriate for its distinct strategy and business needs. This will facilitate a more efficient allocation of capital.


 

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    Dover’s Board of Directors believes that Dover’s businesses and Apergy’s businesses appeal to different types of investors with different industry focuses, investment goals and risk profiles. Dover and Apergy have different investment and business characteristics, including different opportunities for growth, capital structures, business models and financial returns. The separation will enable investors to evaluate the merits, performance and future prospects of each company’s businesses and to invest in each company separately based on these distinct characteristics.

 

    The separation will create an independent equity structure that will afford Apergy direct access to capital markets and will facilitate the ability to capitalize on its unique growth opportunities and effect future acquisitions utilizing, among other types of consideration, shares of its common stock. Furthermore, an independent structure should enable each company to provide equity incentive compensation arrangements for its key employees that are directly related to the market performance of each company’s common stock. Dover’s Board of Directors believes such equity-based compensation arrangements should provide enhanced incentives for performance, and improve the ability for each company to attract, retain and motivate qualified personnel.

Dover’s Board of Directors also considered a number of potentially negative factors in evaluating the separation, including the following:

 

    Apergy estimates that its annual post-separation corporate overhead costs and public company expenses will be approximately $35 million, which is approximately $12 million higher than the expenses allocated from Dover in the combined financial statements for the year ended December 31, 2017. This increase is due to estimated incremental costs required to operate as a stand-alone public company and anticipated dissynergies due to operational separation and loss of scale. For example, as a current part of Dover, Apergy takes advantage of Dover’s size and consolidated purchasing power in procuring certain goods and services (including professional services). After the separation, as a separate, independent entity, Apergy may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those Dover obtained prior to the separation. Apergy may also incur costs for certain functions previously performed by or shared with Dover, such as accounting, tax, finance, legal, human resources, information technology, back-office services, other general and administrative functions and regional management, that are higher than the amounts reflected in Apergy’s historical financial statements, which could cause Apergy’s profitability to decrease. The impact of certain costs and dissynergies of operational separation are difficult to quantify, and Apergy’s estimate of annual post-separation corporate overhead costs and public company expenses involves significant risks, judgments, uncertainties and assumptions that could cause actual results to differ materially from management’s estimates. See “Cautionary Statement Concerning Forward-Looking Statements.”

 

    The actions required to separate Dover’s and Apergy’s respective businesses could disrupt Apergy’s operations. For example, the energy and focus required to complete the separation could require substantial time and attention from Apergy’s management team, thereby distracting management’s attention from the management and operations of Apergy’s business.

 

    In addition to the increase in anticipated annual post-separation corporate overhead costs and public company expenses from historical allocations, certain costs and liabilities that were otherwise less significant to Dover as a whole will be more significant for Apergy as a stand-alone company. This is due to the smaller relative size of Apergy as compared to Dover.

 

    Apergy expects to incur certain one-time costs in connection with the transition to being a stand-alone public company of approximately $38.2 million. The estimated costs include: (a) $10.2 million for tax liabilities due to Dover under the tax matters agreement; (b) $16.1 million of costs relating to entering into new financing arrangements; and (c) $11.9 million of accounting, tax, legal and other professional service costs, recruiting and relocation costs associated with hiring key senior management personnel new to Apergy, costs to separate information systems and rebranding costs.


 

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    Apergy may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others: (a) the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing Apergy’s business; (b) following the separation, Apergy may be more susceptible to market fluctuations and other events particular to one or more of Apergy’s products than if it were still a part of Dover; and (c) following the separation, Apergy’s business will be less diversified than Dover’s business prior to the separation.

 

    The ability of Apergy to engage in certain mergers and equity transactions could be limited or restricted for a two-year period following the spin-off in order to preserve the tax-free nature of the spin-off. See “Risk Factors—Risks Related to the Separation—Apergy may not be able to engage in certain corporate transactions after the separation.”

Notwithstanding these costs and risks, and taking into account the factors discussed above, Dover’s Board of Directors concluded that a separation provided the best opportunity to achieve the above benefits and enhance stockholder value.

As part of its review of strategic alternatives for the separation of its upstream energy businesses, Dover’s Board of Directors considered a number of options, including a tax-free spin-off, sale or other strategic combination. Upon completing this assessment, Dover’s Board of Directors determined that a tax-free spin-off was the option that would create the best long-term results for the businesses and the most value for shareholders.

For more information, see the sections entitled “The Separation and Distribution—Reasons for the Separation” and “Risk Factors” included elsewhere in this information statement.

Description of New Indebtedness of Apergy

Following the effectiveness of the registration statement of which this information statement forms a part, but prior to the completion of the distribution, Apergy expects to incur approximately $703.5 million in new indebtedness (net of original issue discount and deferred financing costs). The indebtedness is expected to comprise a mix of a seven year senior secured term loan, eight year senior notes and a partially drawn five year senior secured revolving credit facility. The proceeds of this borrowing will be paid to Dover. The actual mix of Apergy’s debt as between the senior secured term loan, senior notes and senior secured revolving credit facility borrowings, and the amount of cash proceeds received, are directly related to and will depend on a number of factors, including market conditions at the time Apergy incurs the debt. Apergy does not expect to determine the actual mix of its debt until the pricing of the offering of the senior notes, which will occur following the effectiveness of the registration statement of which this information statement forms a part. Given Apergy’s desire to preserve flexibility, and the uncertainty regarding the ultimate mix of its debt, Apergy does not believe that its current estimate of the mix would be useful to investors. When such information is available, Apergy will include the material terms of its new indebtedness in a Current Report on Form 8-K that will be filed with the SEC prior to the distribution date. See the sections entitled “Capitalization” and “Unaudited Pro Forma Combined Financial Information.”

Apergy’s Material Separation Payments and Costs

It is anticipated that the only material payments to be made by Apergy to Dover in connection with the separation will relate to any payments to be made as part of the reorganization step plan, which is expected to include the use of proceeds from new third party debt expected to be incurred by Apergy. As described above, the proceeds of this borrowing will be paid to Dover. See the sections entitled “Capitalization” and “Unaudited Pro Forma Combined Financial Information.”

Dover has informed Apergy that Dover expects to incur and pay one-time costs associated with the separation, including legal and advisory costs, of approximately $60 million. In connection with the spin-off,



 

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Apergy expects to incur certain one-time costs of approximately $38.2 million. The estimated costs include: (a) $10.2 million for tax liabilities due to Dover under the tax matters agreement; (b) $16.1 million of costs relating to entering into new financing arrangements; and (c) $11.9 million of accounting, tax, legal and other professional service costs, recruiting and relocation costs associated with hiring key senior management personnel new to Apergy, costs to separate information systems and rebranding costs.

Implications of Being an Emerging Growth Company

As a company with less than $1.07 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies that are not emerging growth companies. These provisions include:

 

    the inclusion of three years of selected historical financial information rather than five years in this information statement;

 

    reduced disclosure about our executive compensation arrangements;

 

    exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved; and

 

    exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company upon the earliest of: (1) the end of the fiscal year following the fifth anniversary of the spin-off; (2) the last day of the first fiscal year during which our annual gross revenue was $1.07 billion or more; (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (4) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have elected to take advantage of the provisions permitting reduced disclosure regarding executive compensation arrangements in this information statement, and we may choose to take advantage of some but not all of these reduced disclosure obligations in future filings. If we do, the information that we provide stockholders may be different than you might get from other public companies in which you hold stock.

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

Corporate Information

Apergy Corporation was incorporated in Delaware on October 10, 2017 under the name Wellsite Corporation and was renamed Apergy Corporation on February 2, 2018. Apergy Corporation was formed for the purpose of holding certain entities, assets and liabilities conducting Dover’s upstream oil and gas business within its Energy segment in connection with the separation and distribution described herein. Prior to the contribution of this business to Apergy Corporation, which will occur prior to the distribution, Apergy Corporation will have no operations. The address of Apergy’s principal executive offices is 2445 Technology Forest Blvd, Building 4, 9th Floor, The Woodlands, Texas 77381. Apergy’s telephone number is (281) 403-5772.

Apergy also maintains an Internet site at www.apergy.com. Apergy’s website and the information contained therein or connected thereto shall not be deemed to be incorporated herein, and you should not rely on any such information in making an investment decision.



 

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Questions And Answers About The Separation And Distribution

 

What is Apergy and why is Dover separating Apergy’s business and distributing Apergy’s stock?

Apergy currently is a wholly owned subsidiary of Dover that was formed to hold certain entities, assets and liabilities conducting Dover’s upstream oil and gas business within its Energy segment. The separation of Apergy from Dover and the distribution of Apergy common stock are intended to provide you with equity investments in two separate companies that will be able to focus on each of their respective businesses. Dover and Apergy expect that the separation will result in enhanced long-term performance of each business for the reasons discussed in the sections entitled “The Separation and Distribution—Background” and “The Separation and Distribution—Reasons for the Separation.”

 

Why am I receiving this document?

Dover is delivering this document to you because you are a holder of Dover common stock. If you are a holder of Dover common stock as of 5:00 p.m., New York time, on April 30, 2018, the record date for the distribution, you will be entitled to receive one share of Apergy common stock for every two shares of Dover common stock that you hold at 5:00 p.m., New York time, on such date. This document will help you understand how the separation and distribution will affect your investment in Dover and your investment in Apergy after the separation.

 

How will the separation of Apergy from Dover work?

The separation will be accomplished through a series of transactions in which (i) the equity interests of the entities that hold certain assets and liabilities conducting Dover’s upstream oil and gas business within its Energy segment will be transferred to Apergy, (ii) other assets and liabilities will be assigned to or assumed by Apergy and (iii) Dover will then distribute all of the outstanding shares of common stock of Apergy to Dover’s stockholders on a pro rata basis as a distribution.

 

Why is the separation of Apergy structured as a distribution?

Dover believes that a tax-free distribution of shares in the United States of Apergy to the Dover stockholders is an efficient way to separate its upstream energy businesses in a manner that will create long-term value for Dover, Apergy and their respective stockholders.

 

What is the record date for the distribution?

The record date for the distribution is April 30, 2018.

 

When will the distribution occur?

It is expected that the distribution will be effective as of 12:01 a.m., New York time, on May 9, 2018 and all of the shares of Apergy common stock will be distributed by Dover on May 9, 2018 to holders of record of Dover common stock as of 5:00 p.m., New York time, on April 30, 2018, the record date. However, no assurance can be provided as to the timing of the distribution or that all conditions to the distribution will be met.


 

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What do stockholders need to do to participate in the distribution?

Stockholders of Dover as of the record date will not be required to take any action to receive Apergy common stock in the distribution, but you are urged to read this entire information statement carefully. No stockholder approval of the distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or surrender your existing Dover common stock or take any other action to receive your shares of Apergy common stock. Please do not send in your Dover stock certificates.

 

Will I have appraisal rights in connection with the separation and distribution?

No. Holders of Dover common stock are not entitled to appraisal rights in connection with the separation and distribution.

 

Will I receive physical certificates representing shares of Apergy common stock following the separation?

No. Following the separation, Apergy will not issue physical certificates representing shares of Apergy common stock. If you own Dover common stock as of 5:00 p.m., New York time, on the record date, Dover, with the assistance of Computershare Inc. and Computershare Trust Company, N.A., which together are the distribution agent, will electronically distribute shares of Apergy common stock to you or to your brokerage firm on your behalf by way of direct registration form. “Direct registration form” refers to a method of recording share ownership when no physical share certificates are issued to stockholders, as is the case in this distribution. Computershare Inc. or Computershare Trust Company, N.A. will mail you a book-entry account statement that reflects your shares of Apergy common stock, or your bank or brokerage firm will credit your account for the shares.

 

  Following the distribution, stockholders whose shares are held in book-entry form may request that their shares of Apergy common stock held in book-entry form be transferred to a brokerage or other account at any time, without charge.

 

How many shares of Apergy common stock will I receive in the distribution?

Dover will distribute to you one share of Apergy common stock for every two shares of Dover common stock held by you as of the record date. Based on approximately 154.5 million shares of Dover common stock outstanding as of December 31, 2017, a total of approximately 77.4 million shares of Apergy common stock will be distributed. For additional information on the distribution, see “The Separation and Distribution.”


 

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Will Apergy issue fractional shares of its common stock in the distribution?

No. Apergy will not issue fractional shares of its common stock in the distribution. Fractional shares that Dover stockholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to those stockholders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares. The receipt of cash in lieu of fractional shares will be taxable to the recipient stockholders for U.S. federal income tax purposes as described in the section entitled “Material U.S. Federal Income Tax Consequences.”

 

What are the conditions to the distribution?

The distribution is subject to the satisfaction, or Dover’s waiver, of a number of conditions, including, among others:

 

    The U.S. Securities and Exchange Commission (“SEC”) will have declared effective the registration statement of which this information statement forms a part, and no stop order relating to the registration statement will be in effect.

 

    The New York Stock Exchange (“NYSE”) will have approved the listing of Apergy’s common stock, subject to official notice of issuance.

 

    Dover will have received either (i) a private letter ruling (the “IRS Ruling”) from the Internal Revenue Service (the “IRS”) together with an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”), and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code or (ii) an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code.

 

    All permits, registrations and consents required under the securities or blue sky laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the distribution will have been received.

 

   

No order, injunction, or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the



 

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consummation of the separation, distribution or any of the related transactions will be in effect, pending, threatened or issued.

 

    The reorganization and separation of the Dover and Apergy businesses prior to the distribution will have been effectuated in all material respects.

 

    The Board of Directors of Dover will have declared the distribution and approved all related transactions.

 

    Apergy and Dover will have entered into certain agreements in connection with the separation and distribution and Apergy will have entered into certain financing arrangements prior to or concurrent with the distribution.

 

    All governmental approvals necessary to consummate the distribution will have been received.

 

    The Board of Directors of Dover will have received an opinion from an independent appraisal firm confirming the solvency of Dover and Apergy after the distribution and Dover’s compliance with surplus requirements under Delaware law. Dover has engaged Houlihan Lokey Capital, Inc. to provide this opinion.

 

    No events or developments shall have occurred or exist that, in the sole and absolute judgment of the Dover Board of Directors, make it inadvisable to effect the distribution or would result in the distribution and related transactions not being in the best interest of Dover or its stockholders.

 

  Dover and Apergy cannot assure you that any or all of these conditions will be met and Dover may waive any of the conditions to the distribution to the extent such waiver is permitted by applicable law. The fulfillment of the foregoing conditions does not create any obligations on Dover’s part to effect the distribution, and Dover’s Board of Directors has reserved the right, in its sole discretion, to abandon, or modify or change the terms of, the distribution, including by accelerating or delaying the timing of the consummation of all or part of the distribution, at any time prior to the distribution date. For a more complete discussion of all of the conditions to the distribution, see the section entitled “The Separation and Distribution—Conditions to the Distribution.”

 

What is the expected date of completion of the separation?

The completion and timing of the separation are dependent upon a number of conditions. It is expected that the distribution will be effective as of 12:01 a.m., New York time, on May 9, 2018 and the shares of Apergy common stock will be distributed by Dover on May 9, 2018 to the holders of record of common stock of Dover at 5:00 p.m., New York time, on April 30, 2018, the record date. However, no assurance can be provided as to the timing of the separation or that all conditions to the separation will be met.


 

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Can Dover decide to cancel the distribution of Apergy common stock even if all the conditions have been met?

Yes. Until the distribution has occurred, Dover has the unilateral and sole and exclusive right to terminate the distribution for any reason, even if all of the conditions are satisfied. See the section entitled “The Separation and Distribution—Conditions to the Distribution.”

 

What if I want to sell my Dover common stock or my Apergy common stock?

You should consult with your financial advisors, such as your stockbroker, bank or tax advisor.

 

What is “regular-way” and “ex-distribution” trading?

Beginning at least one trading day before the record date and continuing through the close of trading on the day prior to the distribution date, it is expected that there will be two markets in Dover common stock: a “regular-way” market and an “ex-distribution” market. Shares of Dover common stock that trade in the “regular-way” market will trade with an entitlement to shares of Apergy common stock distributed pursuant to the distribution. Shares that trade in the “ex-distribution” market will trade without an entitlement to shares of Apergy common stock distributed pursuant to the distribution.

 

  If you decide to sell any common stock of Dover before the distribution date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your common stock of Dover with or without your entitlement to Apergy common stock pursuant to the distribution.

 

Where will I be able to trade shares of Apergy common stock?

Apergy’s common stock has been authorized for listing, subject to official notice of issuance, on the NYSE under the symbol “APY.” Apergy anticipates that trading in shares of its common stock will begin on a “when-issued” basis at least one trading day before the record date and will continue through the close of trading on the day prior to the distribution date and that “regular-way” trading in Apergy common stock will begin on the distribution date. If trading begins on a “when-issued” basis, you may purchase or sell Apergy common stock through the close of trading on the day prior to the distribution date, but your transaction will not settle until after the distribution date. Apergy cannot predict the trading prices for its common stock before, on or after the distribution date.

 

What will happen to the listing of common stock of Dover?

Dover common stock will continue to trade on the NYSE under the symbol “DOV” after the distribution.


 

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Will the number of shares of Dover common stock that I own change as a result of the distribution?

No. The number of shares of Dover common stock that you own will not change as a result of the distribution.

 

What are the material U.S. federal income tax consequences of the contribution and the distribution?

It is a condition to the completion of the distribution that Dover receive either (i) the IRS Ruling together with an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code, and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code or (ii) an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code. Accordingly, and so long as the distribution so qualifies, for U.S. federal income tax purposes, no gain or loss will be recognized by you, and no amount will be included in your income, upon the receipt of shares of Apergy’s common stock pursuant to the distribution. You will, however, recognize gain or loss for U.S. federal income tax purposes with respect to cash received in lieu of a fractional share of Apergy’s common stock.

 

  For more information regarding the potential U.S. federal income tax consequences to Apergy, Dover and to you of the separation and distribution, see the section entitled “Material U.S. Federal Income Tax Consequences.”

 

What are the material state, local and foreign income tax consequences of the separation and distribution?

The IRS Ruling and opinion of Dover’s tax counsel will not address the state, local or foreign income tax consequences of the separation and the distribution. You should consult your tax advisor about the particular state, local and foreign tax consequences of the distribution to you, which consequences may differ from those described in the section entitled “Material U.S. Federal Income Tax Consequences.”

 

How will I determine my tax basis in the Apergy shares I receive in the distribution?

For U.S. federal income tax purposes, your aggregate tax basis in the shares of Dover common stock that you hold and the Apergy common stock received in the distribution (including any fractional share interest in Apergy common stock for which cash is received) will equal the aggregate tax basis in the shares of Dover common stock



 

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held by you immediately before the distribution, allocated between your Dover common stock and the Apergy common stock (including any fractional share interest in Apergy common stock for which cash is received) you receive in the distribution in proportion to the relative fair market value of each on the distribution date.

 

  You should consult your tax advisor about the particular consequences of the distribution to you, including the application of federal, state, local and foreign tax laws.

 

What will Apergy’s relationship be with Dover following the separation?

Following the separation and distribution, the relationship between Apergy and Dover will be governed by, among others, a separation and distribution agreement, a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements will provide for the allocation between Apergy and Dover of Dover’s and Apergy’s assets, employees, liabilities and obligations (including employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after Apergy’s separation from Dover. For additional information regarding these agreements, see the sections entitled “Risk Factors—Risks Related to the Separation” and “Certain Relationships and Related Person Transactions.”

 

Who will manage Apergy after the separation?

Apergy benefits from having in place a management team with an extensive background in the business of serving the oil and gas drilling and production industry. Led by Sivasankaran Somasundaram, who will be Apergy’s President and CEO after the separation, Apergy’s management team possesses deep knowledge of, and extensive experience in, its industry. In addition to Mr. Somasundaram, other members of Apergy’s senior management team include:

 

    Jay A. Nutt, Senior Vice President and Chief Financial Officer

 

    Paul E. Mahoney, President, Production and Automation Technologies

 

    Robert K. Galloway, President, Drilling Technologies

 

    Syed Raza, Senior Vice President and Chief Digital Officer

 

    Shankar Annamalai, Senior Vice President Operations

For more information regarding Apergy’s management, see “Management.”

 

Are there risks associated with owning Apergy common stock?

Yes. Ownership of Apergy common stock is subject to both general and specific risks relating to Apergy’s business, the industry in which it operates, its ongoing contractual relationships with Dover and its status



 

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as a separate, publicly traded company. Ownership of Apergy common stock is also subject to risks relating to the separation. These risks are described in the “Risk Factors” section of this information statement. You are encouraged to read that section carefully.

 

Does Apergy plan to pay dividends?

The timing, declaration, amount of and payment of any dividends following the separation by Apergy is within the discretion of its Board of Directors and will depend upon many factors, including Apergy’s financial condition, earnings, capital requirements of its operating subsidiaries, restrictions under debt agreements or other contractual obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by its Board of Directors. Moreover, if Apergy determines to pay any dividend in the future, there can be no assurance that it will continue to pay such dividends or the amount of such dividends. See “Dividend Policy.”

 

Will Apergy incur any debt prior to or at the time of the distribution?

Following the effectiveness of the registration statement of which this information statement forms a part, but prior to the completion of the distribution, Apergy expects to incur approximately $703.5 million in new indebtedness (net of original issue discount and deferred financing costs). The indebtedness is expected to comprise a mix of a seven year senior secured term loan, eight year senior notes and a partially drawn five year senior secured revolving credit facility. The proceeds of this borrowing will be paid to Dover. The actual mix of Apergy’s debt as between the senior secured term loan, senior notes and senior secured revolving credit facility borrowings, and the amount of cash proceeds received, are directly related to and will depend on a number of factors, including market conditions at the time Apergy incurs the debt. Apergy does not expect to determine the actual mix of its debt until the pricing of the offering of the senior notes, which will occur following the effectiveness of the registration statement of which this information statement forms a part. Given Apergy’s desire to preserve flexibility, and the uncertainty regarding the ultimate mix of its debt, Apergy does not believe that its current estimate of the mix would be useful to investors. When such information is available, Apergy will include the material terms of its new indebtedness in a Current Report on Form 8-K that will be filed with the SEC prior to the distribution date. See the sections entitled “Capitalization” and “Unaudited Pro Forma Combined Financial Information.”

 

Who will be the distribution agent, transfer agent, and registrar for the Apergy common stock?

The distribution agent for Apergy’s common stock will be Computershare Inc. and Computershare Trust Company, N.A. The transfer agent and registrar for Apergy’s common stock will be



 

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Computershare Trust Company, N.A. For questions relating to the transfer or mechanics of the stock distribution, you should contact:

 

  Computershare Investor Services

P.O. Box 505000

Louisville, KY 40233

(888) 567-8341

 

  If your shares of Dover common stock are held by a bank, broker or other nominee, you may call the Corporate Secretary of Dover at (630) 541-1540.

 

Where can I find more information about Dover and Apergy?

Before the distribution, if you have any questions relating to Dover’s business performance, you should contact:

 

  Dover Corporation

Investor Relations

3005 Highland Parkway

Downers Grove, Illinois 60515

 

  After the distribution, Apergy stockholders who have any questions relating to Apergy should contact Apergy at:

 

  Apergy Corporation

Investor Relations

2445 Technology Forest Blvd

Building 4, 9th Floor

The Woodlands, Texas 77381



 

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Summary Of The Separation And Distribution

 

Distributing company

Dover Corporation, a Delaware corporation. After the distribution, Dover will not own any shares of Apergy’s common stock.

 

Distributed company

Apergy Corporation, a Delaware corporation, is a wholly owned subsidiary of Dover that was formed in 2017 and that, at the time of the distribution, will hold, through its subsidiaries, certain entities, assets and liabilities conducting Dover’s upstream oil and gas business within its Energy segment. After the distribution, Apergy will be an independent, publicly traded company.

 

Record date

The record date for the distribution is April 30, 2018.

 

Distribution date

It is expected that the distribution will be effective as of 12:01 a.m., New York time, on May 9, 2018 and all of the shares of Apergy common stock will be distributed by Dover on May 9, 2018 to holders of record of Dover common stock as of 5:00 p.m., New York time, on April 30, 2018, the record date. However, no assurance can be provided as to the timing of the distribution or that all conditions to the distribution will be met.

 

Distributed securities

All of the shares of Apergy common stock owned by Dover, which will be 100% of Apergy’s common stock outstanding immediately prior to the distribution. Based on the approximately 154.5 million shares of Dover’s common stock outstanding on December 31, 2017, and applying the distribution ratio of one share of Apergy common stock for every two shares of Dover common stock, Dover will distribute approximately 77.4 million shares of Apergy common stock to Dover stockholders who hold Dover’s common stock as of the record date. The number of shares that Dover will distribute to its stockholders will be reduced to the extent that cash payments are to be made in lieu of the issuance of fractional shares of Apergy common stock, as described below.

 

  Following the effectiveness of the registration statement of which this information statement forms a part, but prior to the completion of the distribution, Apergy will effect a stock dividend, stock split or reclassification so that Dover holds a number of shares of Apergy common stock equal to the number to be distributed by Dover to its stockholders.

 

Distribution ratio

Each holder of Dover common stock will receive one share of Apergy common stock for every two shares of Dover common stock held as of 5:00 p.m., New York time, on April 30, 2018, the record date. Cash will be distributed in lieu of fractional shares, as described below.

 

Fractional shares

Dover will not distribute any fractional shares of Apergy common stock to Dover stockholders. Fractional shares that Dover stockholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent.



 

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The aggregate net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to those stockholders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares. The receipt of cash in lieu of fractional shares will be taxable to the recipient stockholders for U.S. federal income tax purposes as described in the section entitled “Material U.S. Federal Income Tax Consequences.”

 

Distribution method

Apergy common stock will be issued only by direct registration form. “Direct registration form” refers to a method of recording share ownership when no physical share certificates are issued to stockholders, as is the case in this distribution.

 

Conditions to the distribution

The distribution is subject to the satisfaction, or Dover’s waiver, of a number of conditions, including, among others:

 

    The SEC will have declared effective the registration statement of which this information statement forms a part, and no stop order relating to the registration statement will be in effect.

 

    The NYSE will have approved the listing of Apergy’s common stock, subject to official notice of issuance.

 

    Dover will have received either (i) the IRS Ruling together with an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code, and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code or (ii) an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code.

 

    All permits, registrations and consents required under the securities or blue sky laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the distribution will have been received.

 

    No order, injunction, or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions will be in effect, pending, threatened or issued.

 

    The reorganization and separation of the Dover and Apergy businesses prior to the separation and distribution will have been effectuated in all material respects.


 

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    The Board of Directors of Dover will have declared the distribution and approved all related transactions.

 

    Apergy and Dover will have entered into certain agreements in connection with the separation and distribution and Apergy will have entered into certain financing arrangements prior to or concurrent with the separation.

 

    All governmental approvals necessary to consummate the distribution will have been received

 

    The Board of Directors of Dover will have received an opinion from an independent appraisal firm confirming the solvency of Dover and Apergy after the distribution and Dover’s compliance with surplus requirements under Delaware law. Dover has engaged Houlihan Lokey Capital, Inc. to provide this opinion.

 

    No events or developments shall have occurred or exist that, in the sole and absolute judgment of the Dover Board of Directors, make it inadvisable to effect the distribution or would result in the distribution and related transactions not being in the best interest of Dover or its stockholders.

 

  Dover and Apergy cannot assure you that any or all of these conditions will be met and Dover may waive any of the conditions to the distribution to the extent such waiver is permitted by applicable law. The fulfillment of the foregoing conditions does not create any obligations on Dover’s part to effect the distribution, and Dover’s Board of Directors has reserved the right, in its sole discretion, to abandon, or modify or change the terms of, the distribution, including by accelerating or delaying the timing of the consummation of all or part of the distribution, at any time prior to the distribution date. For a more complete discussion of all of the conditions to the distribution, see the section entitled “The Separation and Distribution—Conditions to the Distribution.”

 

Apergy’s post-separation relationship with Dover

Following the separation and distribution, Apergy and Dover will operate separately, each as an independent public company. Prior to the separation and distribution, Apergy and Dover will enter into agreements that will govern their relationship after the distribution, including, among others, a separation and distribution agreement, a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements will provide for the allocation between Apergy and Dover of Dover’s and Apergy’s assets, employees, liabilities and obligations (including employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after Apergy’s separation from Dover.

 

 

Forms of the primary separation agreements have been filed as exhibits to the registration statement on Form 10 of which this information statement is a part, and a summary of these agreements are contained in the section entitled “Certain Relationships and Related Person Transactions.” The terms of the agreements described in the section



 

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entitled “Certain Relationships and Related Person Transactions” that will be in effect following the separation have not yet been finalized; changes to these agreements, some of which may be material, may be made prior to Apergy’s separation from Dover. No changes may be made after Apergy’s separation from Dover without Apergy’s consent. For additional risks associated with these agreements, see the section entitled “Risk Factors—Risks Related to the Separation.”

 

Description of Apergy’s capital stock

Apergy’s amended and restated certificate of incorporation and amended and restated by-laws will contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with Apergy’s Board of Directors rather than to attempt a hostile takeover. These provisions include, among others:

 

    the inability of Apergy’s stockholders to call a special meeting or act by written consent;

 

    rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;

 

    the right of Apergy’s Board of Directors to issue preferred stock without stockholder approval;

 

    the division of Apergy’s Board of Directors into three approximately equal classes of directors until the third annual meeting of stockholders following the separation, after which directors will be elected annually;

 

    a provision that stockholders may only remove directors for cause while Apergy’s Board of Directors is classified;

 

    the exclusive ability of Apergy’s directors, rather than stockholders, to fill vacancies (including those resulting from an enlargement of the Board of Directors) on Apergy’s Board of Directors;

 

    a provision that Apergy’s Board of Directors is expressly authorized to make, alter, or repeal Apergy’s amended and restated by-laws and that its stockholders may only amend its bylaws or amend certain provisions of its amended and restated certificate of incorporation with the approval of 80% or more of all of the outstanding shares of its capital stock entitled to vote, provided, however that, effective as of the completion of the third annual meeting of stockholders following the separation, the provision relating to the 80% voting threshold will be of no force and effect, and stockholders may thereafter amend Apergy’s amended and restated bylaws or certain provisions of its amended and restated certificate of incorporation with the approval of a majority of all of the outstanding shares of its capital stock entitled to vote; and

 

   

Apergy will be subject to Section 203 of the Delaware General Corporation Law (“DGCL”) which provides that, subject to limited



 

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exceptions, persons that (without prior board approval) acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or its affiliate becomes the holder of more than 15 percent of the corporation’s outstanding voting stock.

 

  For additional information regarding the material terms of Apergy’s capital stock that will be contained in the amended and restated certificate of incorporation and by-laws, see the section entitled “Description of Apergy Capital Stock.”

 

Stock exchange listing

Apergy’s common stock has been authorized for listing, subject to official notice of issuance, on the NYSE under the symbol “APY”.

 

Apergy’s material separation payments and costs

It is anticipated that the only material payments to be made by Apergy to Dover in connection with the separation will relate to any payments to be made as part of the reorganization step plan, which is expected to include the use of proceeds from new third party debt incurred by Apergy. As described above, the proceeds of this borrowing will be paid to Dover. See the sections entitled “Capitalization” and “Unaudited Pro Forma Combined Financial Information.”

 

  Dover has informed Apergy that Dover expects to incur and pay one-time costs associated with the separation, including legal and advisory costs, of approximately $60 million. In connection with the spin-off, Apergy expects to incur certain one-time costs of approximately $38.2 million. The estimated costs include: (a) $10.2 million for tax liabilities due to Dover under the tax matters agreement; (b) $16.1 million of costs relating to entering into new financing arrangements; and (c) $11.9 million of accounting, tax, legal and other professional service costs, recruiting and relocation costs associated with hiring key senior management personnel new to Apergy, costs to separate information systems and rebranding costs.

 

Dividend policy

The timing, declaration, amount of and payment of any dividends following the separation by Apergy is within the discretion of its Board of Directors and will depend upon many factors, including Apergy’s financial condition, earnings, capital requirements of its operating subsidiaries, restrictions under debt agreements or other contractual obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by its Board of Directors. Moreover, if Apergy determines to pay any dividend in the future, there can be no assurance that it will continue to pay such dividends or the amount of such dividends. See the section entitled “Dividend Policy.”


 

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Transfer agent

The transfer agent for Apergy’s common stock will be Computershare Trust Company, N.A.

 

U.S. federal income tax consequences

It is a condition to the completion of the distribution that Dover receive either (i) the IRS Ruling together with an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code, and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code or (ii) an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code. Accordingly, and so long as the distribution so qualifies, for U.S. federal income tax purposes, no gain or loss will be recognized by you, and no amount will be included in your income, upon the receipt of shares of Apergy’s common stock pursuant to the distribution. You will, however, recognize gain or loss for U.S. federal income tax purposes with respect to cash received in lieu of a fractional share of Apergy’s common stock. For more information regarding the potential U.S. federal income tax consequences to Apergy, Dover and to you of the separation and distribution, see the section entitled “Material U.S. Federal Income Tax Consequences.”


 

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Summary Historical And Unaudited Pro Forma Combined Financial Information

Set forth below are summary historical financial and other data. The combined balance sheet data as of December 31, 2017 and 2016, the combined statements of earnings data and the combined statements of cash flows data for the years ended December 31, 2017, 2016 and 2015 have been derived from Apergy’s audited financial statements included elsewhere in this information statement, with the exception of basic and diluted earnings per share and weighted average number of shares used in calculating earnings per share presented in the Per share section for the years ended December 31, 2017, 2016 and 2015, which are presented on a pro forma basis. The combined balance sheet data as of December 31, 2015 has been derived from Apergy’s audited financial statements that are not included in this information statement. The historical financial data includes costs of Apergy’s businesses, which include the allocation of certain corporate expenses from Dover. Apergy believes these allocations were made on a reasonable basis. The summary financial information may not be indicative of Apergy’s future performance as an independent company. It should be read in conjunction with the discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the unaudited pro forma combined financial statements and corresponding notes, the audited combined financial statements and corresponding notes included elsewhere in this information statement.

Also set forth below are summary unaudited pro forma statements of earnings data for the twelve-month period ended December 31, 2017, which assume that the separation occurred as of January 1, 2017. The summary unaudited pro forma balance sheet data as of December 31, 2017 assumes that the separation occurred as of December 31, 2017. The pro forma adjustments are based upon available information and assumptions that Apergy believes are reasonable. The summary unaudited pro forma financial information does not purport to represent what the financial position or results of operations of Apergy would have been if Apergy had operated as an independent company during the periods presented or if the transactions described therein had actually occurred as of the dates indicated, nor does it project the financial position at any future date or the results of operations for any future period. Please see the notes to the unaudited pro forma combined financial statements included elsewhere in this information statement for a discussion of adjustments reflected in the pro forma combined financial statements.

 

     Pro Forma     Historical  
(Dollars in thousands)    Year Ended
December 31,
2017
    Year Ended
December 31,
2017
    Year Ended
December 31,
2016
    Year Ended
December 31,
2015
 

Statements of Earnings Data:

        

Revenue

   $ 1,009,591     $ 1,009,591     $ 751,337     $ 1,076,680  

Cost of goods and services

     648,243       648,243       510,842       693,702  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     361,348       361,348       240,495       382,978  

Selling, general and administrative expenses

     262,398       262,398       250,576       294,062  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings (loss)

     98,950       98,950       (10,081     88,916  

Other expense, net

     45,070       9,666       8,753       11,651  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before (benefit from) provision for income taxes

     53,880       89,284       (18,834     77,265  

(Benefit from) provision for income taxes

     (35,475     (22,284     (8,043     24,131  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     89,355       111,568       (10,791     53,134  
  

 

 

   

 

 

   

 

 

   

 

 

 

Less: Net earnings attributable to noncontrolling interest

     930       930       1,851       1,436  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Company

   $ 88,425     $ 110,638     $ (12,642   $ 51,698  
  

 

 

   

 

 

   

 

 

   

 

 

 


 

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     Pro Forma      Historical  
(Dollars in thousands)    Year Ended
December 31,
2017
     Year Ended
December 31,
2017
    Year Ended
December 31,
2016
    Year Ended
December 31,
2015
 

Per share:

         

Earnings (loss) per share:

         

Basic (1)

   $ 1.14        $ (0.16   $ 0.66  

Diluted (1)

   $ 1.12        $ (0.16   $ 0.66  

Weighted average number of shares used in calculating earnings (loss) per share:

         

Basic (1)

     77,842          77,842       77,842  

Diluted (1)

     78,872          78,872       78,872  

Balance Sheet Data (at period end):

         

Cash and cash equivalents

   $ 23,712      $ 23,712     $ 26,027     $ 10,417  

Property, plant and equipment, net

     211,832        211,832       201,747       232,886  

Total assets

     1,908,699        1,904,775       1,850,895       1,983,379  

Total current liabilities

     161,421        151,065       112,694       127,954  

Total Parent Company equity

     918,616        1,635,285       1,546,322       1,639,865  

Total equity

     923,365        1,640,034       1,551,353       1,644,993  

Statements of Cash Flows Data:

         

Net cash provided by operating activities

      $ 62,394     $ 128,580     $ 207,903  

Net cash used in investing activities

        (31,983     (26,899     (26,333

Net cash used in financing activities

        (33,003     (85,981     (194,977

Other Data:

         

Adjusted Working Capital (2)

      $ 304,789     $ 257,763     $ 310,025  

Adjusted Free Cash Flow (3)

      $ 63,097     $ 81,004     $ 108,916  

Production & Automation Technologies:

         

Segment earnings (loss)

      $ 24,889     $ (21,687   $ 58,446  

Adjusted segment EBITDA (4)

      $ 131,739     $ 90,677     $ 180,808  

Adjusted segment EBITDA margin (4)

        16.8     14.2     19.8

Bookings (5)

      $ 792,817     $ 625,149     $ 869,947  

Book-to-bill ratio (5)

        1.01     .98     .95

Drilling Technologies:

         

Segment earnings

      $ 74,317     $ 8,397     $ 26,819  

Adjusted segment EBITDA (4)

      $ 86,267     $ 23,250     $ 45,679  

Adjusted segment EBITDA margin (4)

        37.9     20.5     27.8

Bookings (5)

      $ 232,796     $ 118,433     $ 160,756  

Book-to-bill ratio (5)

        1.02     1.05     0.98

 

(1) For the year ended December 31, 2017, basic and diluted earnings per share represent pro forma net earnings attributable to Company divided by pro forma weighted average basic and diluted shares, respectively. For the years ended December 31, 2016 and 2015, basic and diluted earnings per share represent historical net earnings (loss) attributable to Company divided by pro forma weighted average basic and diluted shares, respectively. Pro forma weighted average basic and diluted shares are based on the weighted average shares of Apergy’s common stock assumed to be outstanding on the distribution date, which is based on the weighted average basic and diluted shares outstanding of Dover’s common stock during 2017, assuming a distribution ratio of one share of Apergy common stock for every two shares of Dover common stock outstanding. This calculation may not be indicative of Apergy’s actual common stock outstanding on the distribution date as there may be transactions that will impact Dover’s outstanding common stock, such as share repurchases, that will impact the actual number of shares distributed.


 

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(2) Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview and Outlook—Key Performance Indicators and Other Performance Measures” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Disclosures” for the definition of Adjusted Working Capital.
(3) Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview and Outlook—Key Performance Indicators and Other Performance Measures,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Disclosures” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Liquidity and Capital Resources—Adjusted Free Cash Flow” for the definition of Adjusted Free Cash Flow and reconciliation to cash flow provided by operating activities, which we believe is the most closely comparable GAAP financial measure.
(4) Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview and Outlook—Key Performance Indicators and Other Performance Measures,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Results of Operations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Disclosures” for the definitions of Adjusted segment EBITDA and Adjusted segment EBITDA margin.
(5) Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview and Outlook—Key Performance Indicators and Other Performance Measures” for a description of Bookings and Book-to-bill ratio.


 

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RISK FACTORS

You should carefully consider the following risks and other information in this information statement in evaluating Apergy and Apergy’s common stock. Any of the following risks could materially and adversely affect Apergy’s business, financial condition, results of operations and cash flows. The risk factors generally have been separated into three groups: risks related to Apergy’s business, risks related to the separation and risks related to Apergy’s common stock.

Risks Related to Apergy’s Business

Trends in oil and natural gas prices may affect the drilling and production activity, profitability and financial stability of Apergy’s customers and therefore the demand for, and profitability of, Apergy’s products and services, which could have a material adverse effect on Apergy’s business, results of operations and financial condition.

The oil and gas industry is cyclical in nature and experiences periodic downturns of varying length and severity. Most recently, the oil and gas industry experienced a significant downturn in 2015 and 2016. Apergy’s ability to manage periodic industry downturns is important to its business, results and prospects. Demand for Apergy’s energy products and services is sensitive to the level of drilling and production activity of, and the corresponding capital spending by, oil and natural gas companies. The level of drilling and production activity is directly affected by trends in oil and natural gas prices, which are influenced by numerous factors affecting the supply and demand for oil and gas, including:

 

    worldwide economic activity;

 

    the level of exploration and production activity;

 

    interest rates and the cost of capital;

 

    environmental regulation;

 

    federal, state and foreign policies regarding exploration and development of oil and gas;

 

    the ability and/or desire of OPEC and other major producers to set and maintain production levels and pricing;

 

    governmental regulations regarding future oil and gas exploration and production;

 

    the cost of exploring and producing oil and gas;

 

    the pace of adoption and cost of developing alternative energy sources;

 

    the availability, expiration date and price of onshore and offshore leases;

 

    the discovery rate of new oil and gas reserves in onshore and offshore areas;

 

    the success of drilling for oil and gas in unconventional resource plays such as shale formations;

 

    alternative opportunities to invest in onshore exploration and production opportunities;

 

    domestic and global political and economic uncertainty, socio-political unrest and instability, terrorism or hostilities;

 

    technological advances; and

 

    weather conditions.

Oil and gas prices and the level of drilling and production activity have been characterized by significant volatility in recent years. In particular, the prices of oil and natural gas were highly volatile in 2014 and 2015 and declined dramatically. Prices of oil began to recover in late 2016 but there can be no assurance that increases will

 

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continue. Apergy expects continued volatility in both crude oil and natural gas prices, as well as in the level of drilling and production related activities. Even the perception of longer-term lower oil and natural gas prices can reduce or defer major capital expenditures by Apergy’s customers in the oil and gas industry. A significant downturn in the industry could result in the reduction in demand for Apergy’s products and services, and could have a material adverse effect on Apergy’s business, results of operations, financial condition and cash flows.

Apergy might be unable to compete successfully with other companies in its industry.

The markets in which Apergy operates are highly competitive. The principal competitive factors in Apergy’s markets are customer service, product quality and performance, price, breadth of product offering, market expertise and innovation. In some of Apergy’s product and service offerings, it competes with the oil and natural gas industry’s largest oilfield service providers. These large national and multi-national companies may have longer operating histories, greater financial, technical, and other resources, greater brand recognition, and a stronger presence in geographic markets than Apergy. In addition, Apergy competes with many smaller companies capable of competing effectively on a regional or local basis. Apergy’s competitors may be able to respond more quickly to new or emerging technologies and services, and changes in customer requirements. Many contracts are awarded on a bid basis, which further increases competition based on price. As a result of competition, Apergy may lose market share or be unable to maintain or increase prices for its present services, or to acquire additional business opportunities, which could have a material adverse effect on Apergy’s business, results of operations, financial condition and cash flows.

If Apergy is unable to develop new products and technologies, its competitive position may be impaired, which could materially and adversely affect its sales and market share.

The markets in which Apergy operates are characterized by changing technologies and introductions of new products and services. As a result, Apergy’s success is dependent upon its ability to develop or acquire new services and products on a cost-effective basis, to introduce them into the marketplace in a timely manner and to protect and maintain critical intellectual property assets related to these developments. Difficulties or delays in research, development or production of new products and technologies, or failure to gain market acceptance of new products and technologies, may significantly reduce future revenues and materially and adversely affect Apergy’s competitive position. While Apergy intends to continue committing substantial financial resources and effort to the development of new services and products, Apergy may not be able to successfully differentiate its services and products from those of its competitors. Apergy’s customers may not consider its proposed services and products to be of value to them or may not view them as superior to Apergy’s competitors’ services and products. In addition, competitors or customers may develop new technologies, which address similar or improved solutions to Apergy’s existing technology. Further, Apergy may not be able to adapt to evolving markets and technologies, develop new products, achieve and maintain technological advantages or protect technological advantages through intellectual property rights. If Apergy does not compete successfully, its business, results of operations, financial condition and cash flows could be materially adversely affected.

Apergy could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of raw materials or if Apergy is unable to obtain raw materials.

Apergy purchases raw materials, sub-assemblies and components for use in its manufacturing operations, which exposes Apergy to volatility in prices for certain commodities. Significant price increases for these commodities could adversely affect Apergy’s operating profits. While Apergy generally attempts to mitigate the impact of increased raw material prices by endeavoring to make strategic purchasing decisions, broaden its supplier base and pass along increased costs to customers, there may be a time delay between the increased raw material prices and the ability to increase the prices of products, or Apergy may be unable to increase the prices of products due to a competitor’s pricing pressure or other factors. In addition, while raw materials are generally available now, the inability to obtain necessary raw materials could affect Apergy’s ability to meet customer commitments and satisfy market demand for certain products. Certain of Apergy’s product lines depend on a

 

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limited number of third-party suppliers and vendors. The ability of these third parties to deliver raw materials may be affected by events beyond Apergy’s control. Consequently, a significant price increase in raw materials, or their unavailability, may result in a loss of customers and adversely impact Apergy’s business, results of operations, financial condition and cash flows.

Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing and the potential for related litigation could result in increased costs and additional operating restrictions or delays for Apergy’s customers, which could reduce demand for Apergy’s products and negatively impact Apergy’s business, financial condition and results of operations.

Environmental laws and regulations could limit Apergy’s customers’ exploration and production activities. Although Apergy does not directly engage in hydraulic fracturing activities, it provides products and services to hydraulic fracturing operators in the oil and natural gas industry. Hydraulic fracturing is a widely used industry production technique that is used to recover oil and/or natural gas from dense subsurface rock formations. The process involves the injection of water, proppants and chemicals, under pressure, into the formation to fracture the surrounding rock and stimulate production. The hydraulic fracturing process is typically regulated by state or local governmental authorities. However, the practice of hydraulic fracturing has become controversial in some areas and is undergoing increased scrutiny. Several federal agencies, regulatory authorities, and legislative entities are investigating the potential environmental impacts of hydraulic fracturing and whether additional regulation may be necessary. The U.S. Congress has from time to time considered, but has not yet adopted, legislation to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the process. The U.S. Environmental Protection Agency (“EPA”) has issued a number of regulations in recent years that may affect hydraulic fracturing; however, the Trump administration has more generally indicated an interest in scaling back or rescinding regulations that inhibit the development of the U.S. oil and gas industry. It is difficult to predict the extent to which proposed regulations will be implemented or the outcome of any related litigation.

In addition, various state and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing through additional permitting requirements, operational restrictions, disclosure requirements and temporary or permanent bans on hydraulic fracturing in certain areas such as environmentally sensitive watersheds. For example, many states have imposed disclosure requirements on hydraulic fracturing well owners and operators regarding the chemicals used in hydraulic fracturing. Some local governments have adopted and others may seek to adopt ordinances prohibiting or regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities within their jurisdictions. Concerns have been raised that hydraulic fracturing may also contribute to seismic activity and in response to these concerns, regulators in some states, including Texas, are seeking to impose additional requirements. Increased regulation and attention given to induced seismicity could lead to greater opposition to, and litigation concerning, oil and natural gas activities utilizing hydraulic fracturing or injection wells for waste disposal.

The adoption of new laws or regulations at the federal, state, or local levels imposing reporting obligations on, or otherwise limiting or delaying, the hydraulic fracturing process could make it more difficult to complete oil and gas wells, increase Apergy’s customers’ costs of compliance and doing business, and otherwise adversely affect the hydraulic fracturing services they perform, which could negatively impact demand for Apergy’s products and services. In addition, heightened political, regulatory and public scrutiny of hydraulic fracturing practices, including lawsuits, could expose Apergy or its customers to increased legal and regulatory proceedings, which could be time-consuming, costly or result in substantial legal liability or significant reputational harm. Apergy could be directly affected by adverse litigation, or indirectly affected if the cost of compliance or the risks of liability limit the ability or willingness of Apergy’s customers to operate. Such costs and scrutiny could directly or indirectly, through reduced demand for Apergy’s products and services, have a material adverse effect on its business, results of operations, financial condition and cash flows.

 

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Apergy’s growth and results of operations may be adversely affected if it is unsuccessful in its capital allocation and acquisition program.

If Apergy fails to allocate its capital appropriately, in respect of either its acquisition program or organic growth in its operations, it could be overexposed in certain markets and geographies and unable to expand into adjacent products or markets. Apergy expects to pursue a strategy of acquiring value creating add-on businesses that broaden its existing position and global reach thereby complementing its existing businesses. However, there can be no assurance that Apergy will be able to continue to find suitable businesses to purchase, that Apergy will be able to acquire such businesses on acceptable terms, or that all closing conditions will be satisfied with respect to any pending acquisition. If Apergy is unsuccessful in its acquisition efforts, then its ability to continue to grow could be adversely affected. In addition, Apergy faces the risk that a completed acquisition may underperform relative to expectations. Apergy may not achieve the synergies originally anticipated, may become exposed to unexpected liabilities or may not be able to sufficiently integrate completed acquisitions into its current business and growth model. These factors could potentially have an adverse impact on Apergy’s business, results of operations, financial condition and cash flows.

Apergy’s products are used in operations that are subject to potential hazards inherent in the oil and natural gas industry and, as a result, Apergy is exposed to potential liabilities that may affect its financial condition and reputation.

Apergy’s products are used in potentially hazardous drilling, completion and production applications in the oil and natural gas industry where an accident or a failure of a product can potentially have catastrophic consequences. Risks inherent to these applications, such as equipment malfunctions and failures, equipment misuse and defects, explosions, blowouts and uncontrollable flows of oil, natural gas or well fluids and natural disasters can cause personal injury, loss of life, suspension of operations, damage to formations, damage to facilities, business interruption and damage to or destruction of property, surface water and drinking water resources, equipment and the environment. In addition, Apergy provides certain services that could cause, contribute to or be implicated in these events. If Apergy’s products or services fail to meet specifications or are involved in accidents or failures, Apergy could face warranty, contract or other litigation claims, which could expose Apergy to substantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, and pollution and other environmental damages. Apergy may agree to indemnify its customers against specific risks and liabilities. While Apergy maintains insurance protection against some of these risks, and seeks to obtain indemnity agreements from its customers requiring the customers to hold Apergy harmless from some of these risks, Apergy’s insurance and contractual indemnity protection may not be sufficient or effective enough to protect it under all circumstances or against all risks. The defense of these lawsuits may require significant expenses and divert management’s attention, and Apergy may be required to pay damages that could adversely affect its business, results of operations, financial condition and cash flows. In addition, the frequency and severity of such incidents could affect insurability and relationships with customers, employees and regulators. In particular, Apergy’s customers may elect not to purchase its products or services if they view its safety record as unacceptable, which could cause Apergy to lose customers and substantial revenues.

Apergy’s customers’ industries are undergoing continuing consolidation that may impact Apergy’s results of operations.

The oil and gas industry is rapidly consolidating and, as a result, some of Apergy’s largest customers have consolidated and are using their size and purchasing power to seek economies of scale and pricing concessions. This consolidation may result in reduced capital spending by some of Apergy’s customers or the acquisition of one or more of Apergy’s primary customers, which may lead to decreased demand for Apergy’s products and services. Apergy cannot assure you that it will be able to maintain its level of sales to a customer that has consolidated or replace that revenue with increased business activity with other customers. As a result, the acquisition of one or more of Apergy’s primary customers may have a significant negative impact on Apergy’s

 

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business, results of operations, financial condition or cash flows. Apergy is unable to predict what effect consolidations in the industry may have on price, capital spending by its customers, its selling strategies, its competitive position, its ability to retain customers or its ability to negotiate favorable agreements with its customers.

Apergy is subject to information technology, cybersecurity and privacy risks.

Apergy depends on various information technologies throughout its company to store and process information and support its business activities. Apergy also manufactures and sells hardware and software to provide monitoring, controls and optimization of customer critical assets in oil and gas production and distribution. Apergy also provides services to maintain these systems and to enable higher return through their business and technical domain knowledge. Additionally, Apergy’s operations rely upon partners, vendors and other third-party providers of information technology software and services. If these technologies, systems, products or services are damaged, cease to function properly, are breached due to employee error, malfeasance, system errors, or other vulnerabilities, or are subject to cybersecurity attacks, such as those involving unauthorized access, malicious software and/or other intrusions, including by criminals, nation states or insiders, Apergy or its partners, vendors or other third parties could experience production downtimes, operational delays, other detrimental impacts on its operations or ability to provide products and services to its customers, the compromising of confidential, proprietary or otherwise protected information, including personal and customer data, destruction, corruption, or theft of data, security breaches, other manipulation, disruption, misappropriation or improper use of its systems or networks, financial losses from remedial actions, loss of business or potential liability, adverse media coverage, legal claims or legal proceedings, including regulatory investigations and actions, and/or damage to its reputation. While Apergy attempts to mitigate these risks by employing a number of measures, including employee training, technical security controls and maintenance of backup and protective systems, Apergy’s and its partners’, vendors’ and other third-parties’ systems, networks, products and services remain potentially vulnerable to known or unknown cybersecurity attacks and other threats, any of which could have a material adverse effect on Apergy’s business, results of operations, financial condition and cash flows.

Apergy and its customers are subject to extensive environmental and health and safety laws and regulations that may increase Apergy’s costs, limit the demand for Apergy’s products and services or restrict Apergy’s operations. In addition, future regulations, or more stringent enforcement of existing regulations, could increase those costs and liabilities, which could adversely affect Apergy’s results of operations.

Apergy’s operations and the operations of its customers are subject to numerous and complex federal, state, local and foreign laws and regulations relating to the protection of human health, safety and the environment. These laws and regulations affect Apergy’s customers by limiting or curtailing their exploration, drilling and production activities, the products and services Apergy designs, markets and sells and the facilities where Apergy manufactures its products. For example, Apergy’s operations and the operations of its customers are subject to numerous and complex laws and regulations that, among other things, may regulate the management and disposal of hazardous and non-hazardous wastes; may require acquisition of environmental permits related to its operations; may restrict the types, quantities and concentrations of various materials that can be released into the environment; may limit or prohibit operation activities in certain ecologically sensitive and other protected areas; may regulate specific health and safety criteria addressing worker protection; may require compliance with operational and equipment standards; may impose testing, reporting and record-keeping requirements; and may require remedial measures to mitigate pollution from former and ongoing operations. Sanctions for noncompliance with such laws and regulations may include revocation of permits, corrective action orders, administrative or civil penalties, criminal prosecution and the imposition of injunctions to prohibit certain activities or force future compliance.

Some environmental laws and regulations provide for joint and several strict liability for remediation of spills and releases of hazardous substances. In addition, Apergy or its customers may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances, as well as

 

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damage to natural resources. These laws and regulations may expose Apergy or its customers to liability for the conduct of or conditions caused by others, or for Apergy’s acts or for the acts of Apergy’s customers that were in compliance with all applicable laws and regulations at the time such acts were performed. Any of these laws and regulations could result in claims, fines or expenditures that could be material to Apergy’s business, results of operations, financial condition and cash flows.

Environmental laws and regulations, and the interpretation and enforcement thereof, change frequently, and have tended to become more stringent over time. New laws and regulations may have a material adverse effect on Apergy’s customers by limiting or curtailing their exploration, drilling and production activities, which may adversely affect Apergy’s operations by limiting demand for Apergy’s products and services. Additionally, the implementation of new laws and regulations may have a material adverse effect on Apergy’s operating results by requiring Apergy to modify its operations or products or shut down some or all of its facilities.

Apergy is subject to risks relating to its existing international operations and expansion into new geographical markets.

Approximately 24%, 26% and 25% of Apergy’s revenues for 2017, 2016 and 2015, respectively, were derived outside the United States. Apergy continues to focus on penetrating global markets as part of its overall growth strategy and expects sales from outside the United States to continue to represent a significant portion of its revenues. Apergy’s international operations and its global expansion strategy are subject to general risks related to such operations, including:

 

    political, social and economic instability and disruptions;

 

    government export controls, economic sanctions, embargoes or trade restrictions;

 

    the imposition of duties and tariffs and other trade barriers;

 

    limitations on ownership and on repatriation or dividend of earnings;

 

    transportation delays and interruptions;

 

    labor unrest and current and changing regulatory environments;

 

    increased compliance costs, including costs associated with disclosure requirements and related due diligence;

 

    difficulties in staffing and managing multi-national operations;

 

    limitations on Apergy’s ability to enforce legal rights and remedies; and

 

    access to or control of networks and confidential information due to local government controls and vulnerability of local networks to cyber risks.

If Apergy is unable to successfully manage the risks associated with expanding its global business or adequately manage operational risks of its existing international operations, the risks could have a material adverse effect on Apergy’s growth strategy involving expansion into new geographical markets, its reputation, its business, results of operations, financial condition and cash flows.

Apergy’s business, profitability and reputation could be adversely affected by domestic and foreign governmental and public policy changes, risks associated with emerging markets, changes in statutory tax rates and unanticipated outcomes with respect to tax audits.

Apergy’s domestic and international sales and operations are subject to risks associated with changes in laws, regulations and policies (including environmental and employment regulations, export/import laws, tax policies such as export subsidy programs and research and experimentation credits, carbon emission regulations and other similar programs). Failure to comply with any of the foregoing could result in civil and criminal,

 

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monetary and non-monetary penalties as well as damage to Apergy’s reputation. In addition, Apergy cannot provide assurance that its costs of complying with new and evolving regulatory reporting requirements and current or future laws, including environmental protection, employment, data security, data privacy and health and safety laws, will not exceed Apergy’s estimates. In addition, Apergy has made investments in certain countries, including Argentina, Australia, Bahrain, Colombia, Oman and Kenya, and may in the future invest in other countries, any of which may carry high levels of currency, political, compliance, or economic risk. While these risks or the impact of these risks are difficult to predict, any one or more of them could adversely affect Apergy’s business and reputation.

Apergy is subject to taxation in a number of jurisdictions. Accordingly, Apergy’s effective tax rate is impacted by changes in the mix among earnings in countries with differing statutory tax rates, changes in the valuation allowance of deferred tax assets, disagreements with taxing authorities with respect to the interpretation of tax laws and regulations and changes in tax laws. The amount of income taxes and other taxes paid could be adversely impacted by changes in statutory tax rates and laws (which have been and may in the future be under active consideration in various jurisdictions) and are subject to ongoing audits by domestic and international authorities. If these changes or audits result in assessments different from amounts estimated, then Apergy’s business, results of operations, financial condition and cash flows may be adversely affected by unfavorable tax adjustments. In addition, changes in various laws and regulations could have a material negative effect on our customers, resulting in lower demand for our products and services.

Failure to attract, retain and develop personnel for key management could have an adverse effect on Apergy’s results of operations, financial condition and cash flows.

Apergy’s growth, profitability and effectiveness in conducting its operations and executing its strategic plans depend in part on its ability to attract, retain and develop qualified personnel, align them with appropriate opportunities for key management positions and support for strategic initiatives. Additionally, during periods of increased investment in the oil and gas industry, competition to hire may increase and the availability of qualified personnel may be reduced. If Apergy is unsuccessful in its efforts to attract and retain qualified personnel, its business, results of operations, financial condition and cash flows could be adversely affected, its market share and competitive position could be adversely affected and/or Apergy could miss opportunities for growth and efficiencies.

The credit risks of Apergy’s customer base could result in losses.

Many of Apergy’s customers are oil and gas companies that have faced or may in the future face liquidity constraints during adverse commodity price environments like the recent industry downturn. These customers impact Apergy’s overall exposure to credit risk as they are also affected by prolonged changes in economic and industry conditions. If a significant number of Apergy’s customers experience a prolonged business decline or disruptions, Apergy may incur increased exposure to credit risk and bad debts.

Apergy’s revenue, operating profits and cash flows could be adversely affected if it is unable to protect or obtain patent and other intellectual property rights.

Apergy owns patents, trademarks, licenses and other forms of intellectual property related to its products and continuously invests in research and development that may result in innovations and general intellectual property rights. Apergy employs various measures to develop, maintain and protect its intellectual property rights. These measures may not be effective in capturing intellectual property rights, and they may not prevent Apergy’s intellectual property from being challenged, invalidated, or circumvented, particularly in countries where intellectual property rights are not highly developed or protected. Unauthorized use of Apergy’s intellectual property rights could adversely impact its competitive position and have a negative impact on its business, results of operations, financial condition and cash flows.

 

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Climate change legislation and regulatory initiatives could result in increased compliance costs for Apergy and its customers.

Numerous proposals have been made and are likely to continue to be made at various levels of government to monitor and limit emissions of greenhouse gases (“GHGs”). Past sessions of the U.S. Congress considered, but did not enact, legislation to address climate change. The EPA and other federal agencies under the previous administration issued regulations that aim to reduce GHG emissions; however, the Trump administration has more generally indicated an interest in scaling back or rescinding regulations addressing GHG emissions, including those affecting the U.S. oil and gas industry. It is difficult to predict the extent to which such policies will be implemented or the outcome of any related litigation. Any regulation of GHG emissions could result in increased compliance costs or additional operating restrictions for Apergy or its customers and limit or curtail exploration, drilling and production activities of Apergy’s customers, which could directly or indirectly, through reduced demand for Apergy’s products and services, adversely affect Apergy’s business, results of operations, financial condition and cash flows.

The loss of a significant customer could have an adverse impact on Apergy’s financial results.

Apergy’s customers represent some of the largest operators in the oil and gas drilling and production markets, including major integrated, large independent and foreign national oil and gas companies, as well as oil field equipment and service providers. In 2017, Apergy’s top 10 customers represented approximately 34% of total revenues, and no single customer accounted for more than 10% of Apergy’s revenues. While Apergy is not dependent on any one customer or group of customers, the loss of one or more of Apergy’s significant customers could have an adverse effect on its business, results of operations, financial condition and cash flows.

Apergy’s results may be impacted by current domestic and international economic conditions and uncertainties.

Apergy may be adversely affected by disruptions in the financial markets or declines in economic activity both domestically and internationally in those countries in which it operates. These circumstances will also impact Apergy’s suppliers and customers in various ways which could have an impact on Apergy’s business operations, particularly if global credit markets are not operating efficiently and effectively to support industrial commerce.

Apergy is subject to risk due to the volatility of global energy prices and regulations that impact drilling and production, with overall demand for Apergy’s products and services impacted by depletion rates, global economic conditions and related energy demands.

Negative changes in worldwide economic and capital market conditions are beyond Apergy’s control, are highly unpredictable and can have an adverse effect on Apergy’s business, results of operations, financial condition, cash flows and cost of capital.

A significant decline in the future economic outlook of Apergy’s business and expected future cash flows could result in goodwill or intangible asset impairment charges which would negatively impact its results of operations.

Apergy has significant goodwill and intangible assets. The valuation and classification of these assets and the assignment of useful lives involve significant judgments and the use of estimates. The testing of goodwill and intangibles for impairment requires significant use of judgment and assumptions, particularly as it relates to the determination of fair market value. A decrease in the long-term economic outlook and future cash flows of Apergy’s business could significantly impact asset values and potentially result in the impairment of intangible assets, including goodwill. Although fair values currently exceed carrying values for each reporting unit, the value of Apergy’s business was unfavorably impacted by the steep declines in revenue and order rates during

 

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2015 and 2016 as drilling and production activity fell due to unfavorable oil prices and lower U.S. rig counts. Future economic declines could result in charges relating to impairments that could have a material adverse effect on Apergy’s results of operations in future periods.

Apergy’s reputation, ability to do business and results of operations may be impaired by improper conduct by any of its employees, agents, or business partners.

While Apergy strives to maintain high standards, Apergy cannot provide assurance that its internal controls and compliance systems will always protect it from acts committed by its employees, agents, or business partners that would violate United States and/or non-United States laws or fail to protect Apergy’s confidential information, including the laws governing payments to government officials, bribery, fraud, anti-kickback and false claims, competition, export and import compliance, money laundering and data privacy, as well as the improper use of proprietary information or social media. Any such violations of law or improper actions could subject Apergy to civil or criminal investigations in the United States and in other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and related stockholder lawsuits, could lead to increased costs of compliance and could damage Apergy’s reputation, its business, results of operations, financial condition and cash flows.

Apergy’s exposure to exchange rate fluctuations on cross-border transactions and the translation of local currency results into U.S. dollars could negatively impact its results of operations.

Apergy conducts a portion of its business outside of the United States, and fluctuations in currency exchange rates could have a significant impact on its reported results of operations, financial condition and cash flows, which are presented in U.S. dollars. For example, although foreign currency exchange rates had an impact of less than 1% on Apergy’s revenue during the last three years, they had a slightly favorable impact on Apergy’s revenue for the year ended December 31, 2017 and a slightly unfavorable impact on Apergy’s revenue for each of the years ended December 31, 2016 and 2015. Cross-border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange effects. Accordingly, significant changes in currency exchange rates, principally the Canadian Dollar, Australian Dollar and Colombian Peso, could cause fluctuations in the reported results of Apergy’s business that could negatively affect its results of operations. Additionally, the strengthening of the U.S. dollar potentially exposes Apergy to competitive threats from lower cost producers in other countries. Apergy’s sales are translated into U.S. dollars for reporting purposes. The strengthening of the U.S. dollar could result in unfavorable translation effects as the results of foreign locations are translated into U.S. dollars.

Customer requirements and new regulations may increase Apergy’s expenses and impact the availability of certain raw materials, which could adversely affect its revenue and operating profits.

Apergy’s business uses parts or materials that are impacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requirement for disclosure of the use of “conflict minerals” mined in the Democratic Republic of the Congo and adjoining countries. It is possible that some of Apergy’s customers will require “conflict free” metals in products purchased from Apergy. Apergy is in the process of determining the country of origin of certain metals used by its business, as required by the Dodd-Frank Act. The supply chain due diligence and verification of sources may require several years to complete based on the current availability of smelter origin information and the number of vendors. Apergy may not be able to complete the process in the time frame required because of the complexity of its supply chain. Other governmental social responsibility regulations also may impact Apergy’s suppliers, manufacturing operations and operating profits.

The need to find alternative sources for certain raw materials or products because of customer requirements and regulations may impact Apergy’s ability to secure adequate supplies of raw materials or parts, lead to supply shortages, or adversely impact the prices at which its business can procure compliant goods.

 

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Adverse and unusual weather conditions could have an adverse impact on Apergy’s business.

Apergy’s business could be materially and adversely affected by severe weather conditions. Hurricanes, tropical storms, flash floods, blizzards, cold weather and other severe weather conditions could result in evacuation of personnel, curtailment of services, damage to equipment and facilities, interruption in transportation of products and materials, and loss of productivity. For example, certain of Apergy’s manufactured products and components are manufactured at a single facility, and disruptions in operations or damage to any such facilities could reduce Apergy’s ability to produce products and satisfy customer demand. If Apergy’s customers are unable to operate or are required to reduce operations due to severe weather conditions, and as a result curtail purchases of Apergy’s products and services, Apergy’s business could be adversely affected.

Risks Related to the Separation

Apergy may not achieve some or all of the expected benefits of the separation, and the separation may adversely affect Apergy’s business.

Apergy may not be able to achieve the full strategic and financial benefits expected to result from the separation, or such benefits may be delayed or not occur at all. The separation and distribution is expected to provide the following benefits, among others:

 

    The separation will allow each company to more effectively pursue its own distinct operating priorities and strategies, and will enable the management of both companies to pursue separate opportunities for long-term growth and profitability, and to recruit, retain and motivate employees pursuant to compensation policies which are appropriate for their respective lines of business.

 

    The separation will permit each company to concentrate its financial resources solely on its own operations, providing greater flexibility to invest capital in its business in a time and manner appropriate for its distinct strategy and business needs.

 

    Dover’s Board of Directors believes that Dover’s businesses and Apergy’s businesses appeal to different types of investors with different industry focuses, investment goals and risk profiles; as such, the separation will enable investors to evaluate the merits, performance and future prospects of each company’s businesses and to invest in each company separately based on these distinct characteristics.

 

    The separation will create an independent equity structure that will afford Apergy direct access to capital markets and will facilitate the ability to capitalize on its unique growth opportunities and effect future acquisitions utilizing, among other types of consideration, shares of its common stock.

Apergy may not achieve these and other anticipated benefits for a variety of reasons, including, among others: (a) the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing Apergy’s business; (b) following the separation, Apergy’s stock price may be more susceptible to market fluctuations and other events particular to one or more of Apergy’s products than if it were still a part of Dover; and (c) following the separation, Apergy’s business will be less diversified than Dover’s business prior to the separation. If Apergy fails to achieve some or all of the benefits expected to result from the separation, or if such benefits are delayed, the business, results of operations, financial condition and cash flows of Apergy could be adversely affected.

Apergy has no history operating as an independent publicly traded company, and Apergy’s historical and pro forma financial information is not necessarily representative of the results that it would have achieved as a separate, publicly traded company and therefore may not be a reliable indicator of its future results.

Apergy is being spun-off from Dover, its parent company, and has no operating history as a separate publicly traded company. The historical information about Apergy in this information statement refers to Apergy’s business as part of Dover. Apergy’s historical and pro forma financial information included in this information statement is derived from the financial statements and accounting records of Dover. Accordingly, the

 

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historical and pro forma financial information included in this information statement does not necessarily reflect the financial condition, results of operations or cash flows that Apergy would have achieved as a separate, publicly traded company during the periods presented or those that Apergy will achieve in the future primarily as a result of the factors described below:

 

    Apergy will need to make significant investments to replicate or outsource certain systems, infrastructure and functional expertise after its separation from Dover. These initiatives to develop Apergy’s independent ability to operate without access to Dover’s existing operational and administrative infrastructure will be costly to implement. Apergy may not be able to operate its business efficiently or at comparable costs, and its profitability may decline; and

 

    generally, Apergy has relied upon Dover for working capital requirements and other cash requirements. Subsequent to the separation, Dover will not be providing Apergy with funds to finance Apergy’s working capital or other cash requirements. After the separation, Apergy’s access to and cost of debt financing may be different from the historical access to and cost of debt financing under Dover. Differences in access to and cost of debt financing may result in differences in the interest rate charged to Apergy on financings, as well as the amounts of indebtedness, types of financing structures and debt markets that may be available to Apergy, which could have an adverse effect on Apergy’s business, financial condition and results of operations and cash flows.

For additional information about the past financial performance of Apergy’s business and the basis of presentation of the historical combined financial statements and the unaudited pro forma combined financial statements of Apergy’s business, see the sections entitled “Unaudited Pro Forma Combined Financial Statements,” “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and accompanying notes included elsewhere in this information statement.

Dover may fail to perform under various transaction agreements that will be executed as part of the separation or Apergy may fail to have necessary systems and services in place when certain of the transaction agreements expire.

Apergy and Dover will enter into certain agreements, such as the separation and distribution agreement, a transition services agreement and those other agreements discussed in greater detail in the section entitled “Certain Relationships and Related Person Transactions—Agreements with Dover,” which will provide for the performance of services by each company for the benefit of the other for a period of time after the separation. Apergy will rely on Dover to satisfy its performance and payment obligations under these agreements. If Dover is unable to satisfy its obligations under these agreements, including its indemnification obligations, Apergy could incur operational difficulties or losses.

If Apergy does not have in place its own systems and services, does not have agreements with other providers of these services when the transitional or long-term agreements terminate, or if Apergy does not implement the new systems or replace Dover’s services successfully, Apergy may not be able to operate its business effectively, which could disrupt its business and have a material adverse effect on its business, results of operations, financial condition and cash flows. These systems and services may also be more expensive to install, implement and operate, or less efficient than the systems and services Dover is expected to provide during the transition period.

Potential indemnification liabilities to Dover pursuant to the separation and distribution agreement could materially and adversely affect Apergy’s business, financial condition, results of operations and cash flows.

The separation and distribution agreement, among other things, provides for indemnification obligations designed to make Apergy financially responsible for substantially all liabilities that may exist relating to its business activities, whether incurred prior to or after the separation. If Apergy is required to indemnify Dover under the circumstances set forth in the separation and distribution agreement, Apergy may be subject to substantial liabilities.

 

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In connection with Apergy’s separation from Dover, Dover will indemnify Apergy for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure Apergy against the full amount of such liabilities, or that Dover’s ability to satisfy its indemnification obligation will not be impaired in the future.

Pursuant to the separation and distribution agreement and certain other agreements with Dover, Dover will agree to indemnify Apergy for certain liabilities as discussed further in “Certain Relationships and Related Person Transactions—Agreements with Dover.” However, third parties could also seek to hold Apergy responsible for any of the liabilities that Dover has agreed to retain, and there can be no assurance that the indemnity from Dover will be sufficient to protect Apergy against the full amount of such liabilities, or that Dover will be able to fully satisfy its indemnification obligations. In addition, Dover’s insurers may attempt to deny coverage to Apergy for liabilities associated with certain occurrences of indemnified liabilities prior to the separation. Moreover, even if Apergy ultimately succeeds in recovering from Dover or such insurance providers any amounts for which Apergy is held liable, Apergy may be temporarily required to bear these losses. Each of these risks could negatively affect Apergy’s business, results of operations, financial condition and cash flows.

Apergy will be subject to continuing contingent liabilities of Dover following the separation.

After the separation, there will be several significant areas where the liabilities of Dover may become Apergy’s obligations. For example, under the Code and the related rules and regulations, each corporation that was a member of the Dover U.S. consolidated group during a taxable period or portion of a taxable period ending on or before the effective time of the distribution is jointly and severally liable for the U.S. federal income tax liability of the entire Dover U.S. consolidated group for that taxable period. Consequently, Apergy could be required to pay the entire amount of Dover’s consolidated U.S. federal income tax liability for a prior period, which could be substantial and in excess of the amount allocated to Apergy under the tax matters agreement between it and Dover. For a discussion of the tax matters agreement, see the section entitled “Certain Relationships and Related Person Transactions—Agreements with Dover—Tax Matters Agreement.” Other provisions of federal law establish similar liability for other matters, including laws governing tax-qualified pension plans as well as other contingent liabilities.

If the distribution, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, you and Dover could be subject to significant tax liability and, in certain circumstances, Apergy could be required to indemnify Dover for material taxes pursuant to indemnification obligations under the tax matters agreement.

A condition to the distribution is the receipt by Dover of (i) the IRS Ruling together with an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code, and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code or (ii) an opinion of McDermott Will & Emery LLP, tax counsel to Dover, substantially to the effect that, among other things, the contribution and the distribution, taken together, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Code and the distribution will qualify as a tax-free distribution to Dover’s shareholders under Section 355 of the Code. Dover has received the IRS Ruling. The IRS Ruling relies on, and the opinion of tax counsel will rely on, certain facts and assumptions, and certain representations and undertakings from Dover and Apergy, including those regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, Dover and its stockholders may not be able to rely on the IRS Ruling or the opinion, and could be subject to significant tax liabilities. Notwithstanding the IRS Ruling and the opinion of tax counsel, the IRS could determine on audit that the distribution is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion. For more information regarding the tax opinion, see the section entitled “Material U.S. Federal Income

 

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Tax Consequences.” In addition, Dover and Apergy intend for certain related transactions to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law.

If the distribution is determined to be taxable for U.S. federal income tax purposes, Dover and its stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities. For example, if the distribution fails to qualify for tax-free treatment, Dover would for U.S. federal income tax purposes be treated as if it had sold the Apergy common stock in a taxable sale for its fair market value, and Dover’s stockholders who are subject to U.S. federal income tax would be treated as receiving a taxable distribution in an amount equal to the fair market value of the Apergy common stock received in the distribution. In addition, if certain related transactions fail to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law, Dover (and, under the tax matters agreement described below, Apergy) could incur significant tax liabilities under U.S. federal, state, local and/or foreign tax law, respectively.

Under the tax matters agreement between Dover and Apergy, Apergy would generally be required to indemnify Dover for taxes incurred by Dover that arise as a result of Apergy’s taking or failing to take, as the case may be, certain actions that result in the distribution failing to meet the requirements of a tax-free distribution under Section 355 of the Code or of such related transactions failing to qualify for tax-free treatment. Also, under the tax matters agreement, Apergy would generally be required to indemnify Dover for one-half of taxes and other liabilities incurred by Dover if the distribution fails to meet the requirements of a tax-free distribution under Section 355 of the Code for reasons other than an act or failure to act on the part of Apergy or Dover, and therefore Apergy might be required to indemnify Dover for such taxes and liabilities due to circumstances and events not within the control of Apergy. Under the tax matters agreement, Apergy is also required to indemnify Dover for one-half of certain taxes incurred as a result of the restructuring activities undertaken to effectuate the distribution, whether payable upon filing tax returns related to the restructuring and distribution or upon a subsequent audit of those returns. Apergy’s indemnification obligations to Dover under the tax matters agreement are not limited by a maximum amount. If Apergy is required to indemnify Dover under the circumstances set forth in the tax matters agreement, Apergy may be subject to substantial liabilities, which could materially adversely affect its business, results of operations, financial condition and cash flows.

Under the tax matters agreement between Dover and Apergy, Dover may, in its sole discretion, make protective elections under Section 336(e) of the Code for Apergy and some or all of its domestic subsidiaries with respect to the distribution. If, notwithstanding the IRS Ruling and the opinion of tax counsel, the distribution fails to qualify as tax-free under Section 355 of the Code, the Section 336(e) elections would generally cause deemed sales of the assets of Apergy and its electing subsidiaries, causing the Dover group to recognize a gain to the extent the fair market value of the assets exceeded the basis of Apergy and its electing subsidiaries in such assets. In such case, to the extent that Dover is responsible for the resulting transaction taxes, Apergy generally would be required under the tax matters agreement to make periodic payments to Dover equal to the tax savings arising from a “step up” in the tax basis of Apergy’s assets.

Apergy may not be able to engage in certain corporate transactions after the separation.

To preserve the tax-free treatment to Dover and its stockholders of the contribution and the distribution and certain related transactions, under the tax matters agreement that Apergy will enter into with Dover, Apergy is restricted from taking any action following the distribution that prevents the distribution and related transactions from being tax-free for U.S. federal income tax purposes. Under the tax matters agreement, for the two-year period following the distribution, Apergy may be prohibited, except in certain circumstances, from:

 

    entering into any transaction resulting, when combined with prior transactions, in the acquisition of 40% or more of its stock or substantially all of its assets, whether by merger or otherwise;

 

    merging, consolidating or liquidating;

 

    issuing equity securities representing 40% or more of its stock, subject to certain exceptions and adjustments;

 

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    repurchasing its capital stock in excess of specified amounts;

 

    ceasing to actively conduct its business or disposing of more than 25% of the assets used in in its actively conducted business; and

 

    engaging in certain internal transactions.

These restrictions may limit Apergy’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its stockholders or that might increase the value of its business. In addition, under the tax matters agreement, Apergy may be required to indemnify Dover against all or a portion of such tax liabilities as a result of the acquisition of Apergy’s stock or assets, even if it did not participate in or otherwise facilitate the acquisition. For more information, see the section entitled “Certain Relationships and Related Person Transactions—Agreements with Dover—Tax Matters Agreement.”

The spin-off and related internal restructuring transactions may expose Apergy to potential liabilities arising out of state and federal fraudulent conveyance laws and legal dividend requirements.

If Dover files for bankruptcy or is otherwise determined or deemed to be insolvent under federal bankruptcy laws, a court could deem the spin-off or certain internal restructuring transactions undertaken by Dover in connection with the separation to be a fraudulent conveyance or transfer. Fraudulent conveyances or transfers are defined to include transfers made or obligations incurred with the actual intent to hinder, delay or defraud current or future creditors or transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the debtor insolvent, inadequately capitalized or unable to pay its debts as they become due. A court could void the transactions or impose substantial liabilities upon Apergy, which could adversely affect Apergy’s financial condition and its results of operations. Among other things, the court could require Apergy’s stockholders to return to Dover some or all of the shares of its common stock issued in the spin-off, or require Apergy to fund liabilities of other companies involved in the restructuring transactions for the benefit of creditors.

The distribution of Apergy’s common stock is also subject to review under state corporate distribution statutes. Under the DGCL, a corporation may only pay dividends to its stockholders either (i) out of its surplus (net assets minus capital) or (ii) if there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Although Dover intends to make the distribution of Apergy’s common stock entirely out of surplus, Apergy cannot assure you that a court will not later determine that some or all of the distribution to Dover stockholders was unlawful.

After the separation, certain of Apergy’s executive officers and directors may have actual or potential conflicts of interest because of their previous or continuing positions at Dover.

Because of their current or former positions with Dover, certain of Apergy’s expected executive officers and directors own equity interests in Dover. Following the separation, even though Apergy’s Board of Directors will consist of a majority of directors who are independent, and Apergy’s expected executive officers who are currently employees of Dover will cease to be employees of Dover upon the separation, some of Apergy’s executive officers and directors will continue to have a financial interest in shares of Dover’s common stock. Continuing ownership of shares of Dover’s common stock and equity awards could create, or appear to create, potential conflicts of interest if Apergy and Dover pursue the same corporate opportunities or face decisions that could have different implications for Dover and Apergy.

Apergy may have received better terms from unaffiliated third parties than the terms it will receive in its agreements with Dover.

The agreements Apergy will enter into with Dover in connection with the separation, including the separation and distribution agreement, transition services agreement, tax matters agreement and employee

 

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matters agreement were prepared in the context of Apergy’s separation from Dover while Apergy was still a wholly owned subsidiary of Dover. Accordingly, during the period in which the terms of those agreements were prepared, Apergy did not have an independent Board of Directors or a management team that was independent of Dover. As a result, the terms of those agreements may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties. Arm’s-length negotiations between Dover and an unaffiliated third party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third party. For more information, see the section entitled “Certain Relationships and Related Person Transactions—Agreements with Dover.”

Some contracts and other assets which will need to be transferred or assigned from Dover or its affiliates to Apergy in connection with Apergy’s separation from Dover may require the consent or involvement of a third party. If such consent is not given, Apergy may not be entitled to the benefit of such contracts and other assets in the future, which could negatively impact its financial condition and future results of operations.

The separation and distribution agreement and certain local transfer agreements, as applicable, provide that in connection with Apergy’s separation from Dover, a number of contracts with third parties and other assets are to be transferred or assigned from Dover or its affiliates to Apergy. However, the transfer or assignment of certain of these contracts or assets may require providing guarantees or the consent of a third party to such a transfer or assignment. Similarly, in some circumstances, Apergy and another business unit of Dover may be joint beneficiaries of contracts, and Apergy may need to enter into a new agreement with the third party to replicate the existing contract or assign the portion of the existing contract related to the Apergy business. It is possible that some parties may use the requirement of a guarantee or consent or the fact that the separation is occurring to seek more favorable contractual terms from Apergy or to seek to terminate the contract. If Apergy is unable to provide a guarantee or obtain such consents on commercially reasonable and satisfactory terms or if the contracts are terminated, it may be unable to obtain some of the benefits, assets and contractual commitments which are intended to be allocated to it as part of its separation from Dover. The failure to timely complete the assignment of existing contracts or assets, or the negotiation of new arrangements, or a termination of any of those arrangements, could negatively impact Apergy’s financial condition and future results of operations. In addition, where Apergy does not intend to provide a guarantee or obtain consent from third party counterparties based on its belief that no guarantee or consent is required, the third party counterparties may challenge a transfer of assets on the basis that the terms of the applicable commercial arrangements require that a guarantee be provided or the third party counterparty’s consent is obtained. Apergy may incur substantial litigation and other costs in connection with any such claims and, if Apergy does not prevail, its ability to use these assets could be adversely impacted.

Apergy expects to incur new indebtedness at or prior to the distribution, and the degree to which Apergy will be leveraged following completion of the distribution may have a material adverse effect on its business, financial condition or results of operations and cash flows.

Apergy has historically relied upon Dover for working capital requirements and other cash requirements. After the distribution, Apergy will not be able to rely on the earnings, assets or cash flow of Dover and Dover will not provide funds to finance Apergy’s working capital or other cash requirements. As a result, after the distribution, Apergy will be responsible for servicing its own debt, and obtaining and maintaining sufficient working capital and other funds to satisfy its cash requirements. Following the effectiveness of the registration statement of which this information statement forms a part, but prior to the completion of the distribution, Apergy expects to incur approximately $703.5 million in new indebtedness (net of original issue discount and deferred financing costs). The proceeds of this borrowing will be paid to Dover. The actual mix of Apergy’s debt as between the senior secured term loan, senior notes and senior secured revolving credit facility borrowings, and the amount of cash proceeds received, are directly related to and will depend on a number of factors, including market conditions at the time Apergy incurs the debt. While Apergy is confident that it will able to consummate the financing transactions on terms it considers satisfactory, there can be no assurances that any such financing transactions will be completed in the timeframe or size indicated, on terms that Apergy considers acceptable, or

 

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at all. Apergy does not expect to determine the actual mix of its debt until the pricing of the offering of the senior notes, which will occur following the effectiveness of the registration statement of which this information statement forms a part. Given Apergy’s desire to preserve flexibility, and the uncertainty regarding the ultimate mix of its debt, Apergy does not believe that its current estimate of the mix would be useful to investors. When such information is available, Apergy will include the material terms of its new indebtedness in a Current Report on Form 8-K that will be filed with the SEC prior to the distribution date. Additionally, after the separation, Apergy’s access to and cost of debt financing may be different from the historical access to and cost of debt financing under Dover. Differences in access to and cost of debt financing may result in differences in the interest rate charged to Apergy on financings, as well as the amounts of indebtedness, types of financing structures and debt markets that may be available to it.

Apergy’s ability to make payments on and to refinance its indebtedness, including the debt incurred pursuant to the distribution, as well as any future debt that it may incur, will depend on its ability to generate cash in the future from operations, financings or asset sales and the tax consequences of its repatriation of overseas cash. Apergy’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond Apergy’s control. If Apergy is not able to repay or refinance its debt as it becomes due, it may be forced to sell assets or take other disadvantageous actions, including (i) reducing financing in the future for working capital, capital expenditures and general corporate purposes or (ii) dedicating an unsustainable level of its cash flow from operations to the payment of principal and interest on its indebtedness. In addition, Apergy’s ability to withstand competitive pressures and to react to changes in the oil and gas industry could be impaired. The lenders who hold such debt could also potentially accelerate amounts due, which could potentially trigger a default or acceleration of any of Apergy’s other debt.

In addition, Apergy may increase its debt or raise additional capital following the distribution, subject to restrictions in its debt agreements. If Apergy’s cash flow from operations is less than it anticipates, or if its cash requirements are more than it expects, Apergy may require more financing. However, debt or equity financing may not be available to Apergy on terms acceptable to it, if at all. If Apergy incurs additional debt or raises equity through the issuance of preferred stock, the terms of the debt or preferred stock issued may give the holders rights, preferences and privileges senior to those of holders of Apergy’s common stock, particularly in the event of liquidation. The terms of the debt may also impose additional and more stringent restrictions on Apergy’s operations than it currently has. If Apergy raises funds through the issuance of additional equity, your percentage ownership in Apergy would be diluted. If Apergy is unable to raise additional capital when needed, it could affect its financial condition, which could negatively affect your investment in Apergy. Also, regardless of the terms of Apergy’s debt or equity financing, the amount of stock that it can issue may be limited because the issuance of its stock may cause the distribution to be a taxable event for Dover under Section 355(e) of the Code, and under the tax matters agreement, Apergy could be required to indemnify Dover for the resulting tax. See the section entitled “Risk Factors—Risks Related to the Separation—Apergy may not be able to engage in certain corporate transactions after the separation.”

Until the distribution occurs, Dover has the sole discretion to change the terms of the distribution in ways which may be unfavorable to Apergy.

Until the distribution occurs, Dover will have the sole and absolute discretion to determine and change the terms of the distribution, including the establishment of the record date and distribution date. These changes could be unfavorable to Apergy. In addition, Dover may decide at any time not to proceed with the separation.

Apergy’s accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which it will be subject following the distribution.

Apergy’s financial results previously were included within the consolidated results of Dover, and Apergy believes that its financial reporting and internal controls were appropriate for a subsidiary of a public company. However, Apergy was not directly subject to the reporting and other requirements of the Exchange Act. As a

 

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