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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-9750.
SOTHEBY'S HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-2478409
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
500 NORTH WOODWARD AVENUE, SUITE 100
BLOOMFIELD HILLS, MICHIGAN 48304
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (810) 646-2400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE><CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- --------------------------------------------- ---------------------------------------------
<S> <C>
Class A Limited Voting Common Stock, New York Stock Exchange
$0.10 Par Value London Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIODS THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES ....X... NO ........
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
As of March 11, 1996, the aggregate market value of the 38,754,147 shares of
Class A Limited Voting Common Stock held by non-affiliates of the registrant was
$561,935,132, based upon the closing price ($14.50) on the New York Stock
Exchange composite tape on such date. (For this computation, the registrant has
excluded the market value of all shares of its Class A Limited Voting Common
Stock reported as beneficially owned by executive officers and directors of the
registrant; such exclusion shall not be deemed to constitute an admission that
any such person is an "affiliate" of the registrant.) As of March 11, 1996,
there were outstanding 38,792,335 shares of Class A Limited Voting Common Stock
(the "Class A Common Stock") and 17,278,667 shares of Class B Common Stock (the
"Class B Common Stock"), freely convertible into 17,278,667 shares of Class A
Common Stock. There is no public market for the registrant's Class B Common
Stock, which is held by affiliates and non-affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended December 31,
1995 (the "Annual Report") are incorporated by reference into Parts I and II.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Sotheby's Holdings, Inc. (together with its subsidiaries, unless the context
otherwise requires, the "Company") is the world's preeminent auctioneer of fine
arts, antiques and collectibles, offering property in over 70 collecting
categories, among them paintings, jewelry, decorative arts and books. The
worldwide auction business is conducted through a division known as "Sotheby's"
and consists of three principal operating units: Sotheby's North and South
America ("Sotheby's, Inc."), Sotheby's Europe and Sotheby's Asia. In addition to
auctioneering, the Company is engaged in art-related financing activities, the
marketing and brokering of luxury real estate and art education and restoration.
The Company believes it is one of the world's leaders in art-related
financing activities. The Company lends money secured by consigned art in order
to facilitate clients' bringing property to auction. In addition, a portion of
the Company's loan portfolio consists of loans to collectors, dealers and
museums secured by collections not presently intended for sale.
The Company, through its subsidiary, Sotheby's International Realty, Inc.,
is engaged in the marketing and brokering of luxury residential real estate.
The Company was incorporated in Michigan in August 1983. In October 1983,
the Company purchased Sotheby Parke Bernet Group Limited, which was then a
publicly held company listed on the International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited (the "London Stock Exchange") and
which, through its predecessors, had been engaged in the auction business since
1744. In 1988, the Company sold shares of Class A Common Stock to the public.
The Class A Common Stock is listed on the New York Stock Exchange (the "NYSE")
and the London Stock Exchange.
THE AUCTION BUSINESS
Transactions in the international art market are effected through numerous
dealers, the two major auction houses and smaller auction houses and also
directly between collectors. Although dealers and smaller auction firms do not
generally report sales, the Company believes that dealers account for the
majority of the volume of transactions in the international art market.
The Company and Christies International Plc, a United Kingdom publicly held
company ("Christies"), are the two largest art auction houses in the world. The
Company conducted aggregate auction sales in 1995 of $1.67 billion
(approximately B.P.1.05 billion). Christies' aggregate auction sales in 1995
were approximately $1.47 billion (B.P.931 million reported). The auction sales
of the next largest art auction house, Phillips International Auctioneers and
Valuers, were approximately $155 million (B.P.98 million reported) for the year
ended December 31, 1995.
The Company auctions a wide variety of property, including fine arts,
jewelry, decorative arts and rare books. In an approximate breakdown of 1995
auction sales by type of property, fine arts accounted for approximately $832
million, or 50%, of auction sales; decorative arts accounted for approximately
$445 million, or 27%, of auction sales; and jewelry, rare books and other
property accounted for approximately $388 million, or 23%, of auction sales.
Most of the objects auctioned by the Company are unique items, and their
value, therefore, can only be estimated prior to sale. The Company's principal
role as an auctioneer is to identify, evaluate, appraise and authenticate works
of art through its international staff of specialists, to stimulate purchaser
interest through professional marketing techniques and to match sellers and
buyers through the auction process.
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In its role as auctioneer, the Company generally functions as an agent
accepting property on consignment from its selling clients. The Company conducts
its auctions as agent of the consignor, billing the buyer for property
purchased, receiving payment from the buyer and remitting to the consignor the
consignor's portion of the buyer's payment. In certain situations, the Company
releases property sold at auction to buyers, primarily dealers, before the
Company receives payment. In such event, the Company will pay the seller the net
sale proceeds for that property at the time that payment, pursuant to the
consignment, is due the seller, even if the Company has not received payment
from the buyer.
In addition, on certain occasions, the Company will assure the consignor a
minimum price in connection with the sale of property. The Company must perform
under its assurances only in the event that (a) the property fails to sell at
auction and the consignor prefers to be paid the minimum price rather than
retain ownership of the unsold property, resulting in the Company's purchase of
the property at the minimum price; or (b) the property sells for less than the
minimum amount and the Company must pay the difference between the sale price at
auction and the amount of the assurance. See Note N to the Consolidated
Financial Statements in the Annual Report.
All buyers pay a premium (known as the buyer's premium) to the Company on
auction purchases. The buyer's premium in North America is 15% of the hammer
price on all items sold for $50,000 or less and if the property is sold for more
than $50,000, 15% of the first $50,000 and 10% of the remainder of the purchase
price. Generally, similar structures apply throughout most of the remainder of
Sotheby's auction operations. Beginning in 1995, as changes in value added sales
taxes were implemented throughout Europe, the Company's commissions were
adjusted to reflect such changes. The Company also charges sellers a selling
commission, which until September 1995, was frequently negotiated on a per lot
basis. As of September 1995, in most jurisdictions in which the Company
operates, the Company instituted a commission fee schedule which applies to
sales above $100,000 in most collecting categories. For sales under $100,000,
commissions continue to be charged on a per lot basis. Under the new schedule, a
seller will pay a commission equal to the lesser of (a) the fee schedule rate
applicable to a particular consignment; (b) the fee schedule rate based upon the
total amount of property sold by the seller through the Company and its
subsidiaries during the previous calendar year; and (c) the fee schedule rate
based upon the total amount of property sold to date by the seller through the
Company and its subsidiaries during the current calendar year. The applicable
rate schedule paid by a seller varies, with different rate schedules for private
parties, art dealers and museums.
The Company's operating revenues are significantly influenced by a number of
factors not within the Company's control, including: the overall strength of the
international economy and financial markets and, in particular, the economies of
the United States, the United Kingdom, and the major countries of continental
Europe and Asia (principally Japan and Hong Kong); political conditions in
various nations; the presence of export and exchange controls; taxation of sales
and donation of auctioned property; competition; and the amount of property
being consigned to art auction houses.
The Company's business is seasonal, with peak revenues and operating income
occurring in the second and fourth quarters of each year as a result of the
traditional spring and fall art auction seasons. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition-- Seasonality" in
the Annual Report.
THE AUCTION MARKET
Competition in the international art market is intense. A fundamental
challenge facing any auctioneer or dealer is to obtain high quality and valuable
property for sale. The Company's primary auction competitor is Christies.
The owner of a work of art wishing to sell it has three options: sale or
consignment to, or private brokerage by, an art dealer; consignment to, or
private sale by, an auction house; or private sale to a collector or museum
without the use of an intermediary. The more valuable the property, the more
2
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likely it is that the owner will consider more than one option and will solicit
proposals from more than one potential purchaser or agent, particularly if the
seller is a fiduciary representing an estate or trust.
A complex array of factors may influence the seller's decision. These
factors include: the level of expertise of the dealer or auction house with
respect to the property; the extent of the prior relationship, if any, between
the seller and the firm; the reputation and historic level of achievement by a
firm in attaining high sale prices in the property's specialized category; the
amount of cash offered by a dealer or other purchaser to purchase the property
outright compared with the estimates given by auction houses; the time that will
elapse before the seller will receive sale proceeds; the desirability of a
public auction in order to achieve the maximum possible price (a particular
concern for fiduciary sellers); the amount of commission proposed by dealers or
auction houses to sell a work on consignment; the cost, style and extent of
presale marketing and promotion to be undertaken by a firm; recommendations by
third parties consulted by the seller; personal interaction between the seller
and the firm's staff; and the availability and extent of related services, such
as a tax or insurance appraisal and short-term financing. The Company's ability
to obtain high quality and valuable property for sale depends, in part, on the
relationships that certain employees of the Company, particularly its senior art
specialists or management, have established with potential sellers.
It is not possible to measure the entire international art market or to
reach any conclusions regarding overall competition because dealers and smaller
auction firms frequently do not publicly report annual sales totals. Based on
the reported sales of the Company and Christies, the Company has been the world
leader in auction sales of art and related objects during each of the last 10
years.
Regulation
Regulation of the auction business varies from jurisdiction to jurisdiction.
In many jurisdictions, the Company is subject to laws and regulations which are
not directed solely toward the auction business, including but not limited to
import and export regulations and value added sales taxes. Such regulations do
not impose a material impediment to the worldwide business of the Company.
In February 1990, certain members of the Assembly of the State of New York,
the jurisdiction where the Company's principal U.S. auctions are held, initiated
an inquiry with respect to the business practices of auction houses, museums and
art dealers, including the Company. Each year since 1990, certain Assemblymen
have reintroduced proposed legislation which, if enacted, could substantially
alter the manner in which the Company's auction business in New York is
conducted. To date, no legislation has been enacted by the State of New York.
Occasionally, the Company acts as a principal in connection with the sale of
property. For example, the Company acts as a principal through its investment in
Acquavella Modern Art (the "Partnership" or "AMA"), a partnership consisting of
a wholly-owned subsidiary of the Company and Acquavella Contemporary Art, Inc.
("ACA"). The Company accounts for its investment in AMA under the equity method
of accounting in the Consolidated Financial Statements. The net assets of the
Partnership consist principally of inventory. The Company reflects its 50%
interest in the net assets of the Partnership as investment in partnership,
which totalled $38.8 million and $44.3 million at December 31, 1995 and 1994,
respectively. According to the terms of the Partnership agreement, each partner
has a 50% interest in the earnings of the Partnership, but all cash available
for distribution was initially distributed to the Company until the Company
received $270.3 million, together with a return equal to the prime rate (as
defined). Cash distributions now are being made on a 50-50 basis. To the extent
that the Partnership requires working capital, the Company has agreed to lend
the same to the Partnership. Any amounts loaned to the Partnership by the
Company would bear interest, compounded monthly, at the prime rate, plus 1%.
As of December 31, 1995, no such amounts were outstanding. See Note F to the
Consolidated Financial Statements in the Annual Report.
3
<PAGE>
In 1995, a wholly-owned subsidiary of the Company acquired property, a
portion of the purchase price for which is contingent on profits from sales of
the property. Some of the property is being sold at auction by the Company. The
Company has also entered into agreements with certain European art dealers to
sell the remainder of the acquired property.
The Company provides financing secured by works of art and other personal
property owned by its clients. The Company's financing activities are conducted
through its wholly-owned direct and indirect subsidiaries.
The Company generally makes two types of secured loans: (1) advances secured
by consigned property to borrowers who are contractually committed, in the near
term, to sell the property at auction; and (2) general purpose loans to
collectors, museums or dealers secured by property not presently intended for
sale. The loans are generally made with full recourse to the borrower. In
certain instances, consignor advances are made with recourse limited to the
works of art consigned for sale and pledged as security for the loan. The
consignor advance allows a consignor to receive funds shortly after consignment
for an auction that will occur several weeks or months in the future, while
preserving for the benefit of the consignor the potential of the auction
process. The general purpose secured loans allow the Company to establish or
enhance a mutually beneficial relationship with dealers and collectors. These
loans generally have a maturity of one year. The majority of the Company's loans
are variable interest rate loans. At December 31, 1995, $101.5 million of the
total $144.2 million loan portfolio was due within one year.
The Company regularly reviews its loan portfolio. Each loan is analyzed
based on the current estimated realizable value of collateral securing the loan.
For financial statement purposes, the Company establishes reserves for certain
loans that the Company believes are under-collateralized and with respect to
which the under-collateralized amount may not be collectible from the borrower.
See Note D to the Consolidated Financial Statements in the Annual Report.
The Company funds its financing activities through internally generated
funds, through the issuance of U.S. commercial paper and through its bank credit
lines. See "Management's Discussion and Analysis of Results of Operations and
Financial Condition--Liquidity and Capital Resources" and Note H to the
Consolidated Financial Statements in the Annual Report.
A considerable number of traditional lending sources offer conventional
loans at a lower cost to borrowers than those offered by the Company. However,
the Company believes that only Christies and a few other lenders are as willing
to accept works of art as sole collateral. The Company believes that its
financing alternatives are attractive to clients who wish to obtain liquidity
from their art assets.
LUXURY REAL ESTATE ACTIVITIES
Sotheby's International Realty, Inc. ("SIR") was founded in 1976 as an
outgrowth of Sotheby's auction activities and in response to the requests of
major clients to market estates and other real property that required exposure
beyond a local market. SIR responds to the needs of its clients by (a) acting as
an exclusive marketing agent providing services to 175 licensed real estate
brokerage offices worldwide and (b) operating its own real estate brokerage
offices in Manhattan, Southampton, East Hampton, Palm Beach and Beverly Hills.
Competition
SIR's primary competitors are small, local real estate brokerage firms that
deal exclusively with luxury real estate and the "distinctive property"
divisions of large regional and national real estate firms. Competition in the
luxury real estate business takes many forms, including competition in price,
marketing expertise and the provision of personalized service to sellers and
buyers.
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Regulation
The real estate brokerage business is subject to regulation in most
jurisdictions in which SIR operates. Typically, individual real estate brokers
and brokerage firms are subject to licensing requirements. SIR is registered to
conduct business in 31 states and maintains real estate brokerage licenses in 12
states. In other jurisdictions, SIR acts as an exclusive marketing agent
providing services to licensed real estate brokers.
PERSONNEL
At December 31, 1995, the Company had 1,577 employees: 657 located in North
America; 654 in the United Kingdom and 266 in the rest of the world. The
following table provides a breakdown of employees by operational areas as of
December 31, 1995:
OPERATIONAL AREA NUMBER OF EMPLOYEES
- ------------------------------------------------------- -------------------
Auction................................................ 1,423
Other.................................................. 154
-----
Total............................................ 1,577
-----
-----
The Company regards its relations with its employees as good.
ITEM 2. PROPERTIES
Sotheby's, Inc. is headquartered at 1334 York Avenue, New York, New York
(the "York Property"). The Company also leases office and warehouse space in
four other locations in the New York City area, and leases office and exhibition
space in several other major cities throughout the United States, including Los
Angeles, San Francisco, Chicago and Palm Beach.
The Company currently leases the York Property, comprising approximately
160,500 square feet, from an unaffiliated party under a 30-year lease expiring
in 2009, which contains an option to extend the term for an additional 30 years
until July 31, 2039. The lease also grants the Company a right of first refusal
with respect to the sale of the York Property.
York Avenue Development, Inc. ("York"), a wholly-owned subsidiary of
Sotheby's, Inc., has the right to purchase the fee interest in the York Property
by exercising certain options available through January 31, 1999 and during the
months of August 1999, August 2004 and July 2009.
The Company considers various alternatives for the realization of the value
of the right to purchase the fee interest in the York Property. Additionally,
the Company is studying how best to satisfy its demand for additional office and
auction space.
Under an agreement (as amended, the "Financing and Guarantee Agreement")
among Sotheby's, Inc., York and Taubman York Avenue Associates, Inc.
("Associates"), Associates has agreed that it will assist York in developing and
financing a new, mixed-use tower (the "New Tower") over the existing four-story
building on the York Property, should a decision be made to proceed with such
development. Sotheby's, Inc. has structured the transaction to isolate the
financial exposure of the Company with respect to development of the New Tower
in one subsidiary, namely, York. Associates assigned all of its assets and
liabilities to York Avenue Advisors, Inc. ("Advisors"), pursuant to an
Assignment and Assumption of Financing and Guarantee Agreement, dated as of June
1, 1995, and a Bill of Sale and Assignment and Assumption Agreement (regarding
Contracts, General Intangibles, Receivables, and other Assets and Liabilities),
dated as of June 1, 1995. The grantor trust of A. Alfred Taubman, the Company's
Chairman and largest shareholder, is the sole shareholder of Advisors and was
the sole shareholder of Associates. See Note J to the Consolidated Financial
Statements in the Annual Report.
Sotheby's, Inc. also assigned to York its rights and obligations under a
project services agreement dated November 8, 1985 (the "Project Services
Agreement") between Sotheby's, Inc. and The
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Taubman Company ("TTC"), which is an affiliate of A. Alfred Taubman. Under the
Project Services Agreement, TTC agreed to develop the New Tower on behalf of
Sotheby's, Inc. and to provide consultation and advice to Sotheby's, Inc. in
connection with the development of the New Tower, should a decision be made to
proceed with the development.
In connection with the development of the York Property, York had incurred
certain pre-development costs which had been financed in part by a demand note
payable to Associates. During the first quarter of 1995, York fully repaid this
demand note to Associates. See Note H to the Consolidated Financial Statements
in the Annual Report.
SIR leases approximately 10,900 square feet of office space at 980 Madison
Avenue, New York, New York, from unaffiliated parties under leases expiring in
2001. SIR also leases satellite office space at a number of locations, totalling
another 14,700 square feet.
The Company's U.K. operations are centered at New Bond Street, London, where
the main salesrooms and administrative offices of Sotheby's (U.K.) are located.
Additional salesrooms are located in close proximity to the New Bond Street
location. The total net usable floor area amounts to approximately 124,000
square feet. The Company owns or holds long-term leasehold interests in
approximately 75% of these properties by area, the balance being held on leases
with remaining terms of less than 20 years. In addition, warehouse space is
leased at King's House in West London. The Company also owns a salesroom in
Sussex where it conducts auctions.
The Company also leases office space in various locations throughout
continental Europe, including Amsterdam, Frankfurt, Geneva, Madrid, Milan,
Munich, Paris and Zurich; and in Asia, including Hong Kong, Seoul, Singapore,
Taipei and Tokyo; and in South America.
In management's opinion, the Company's worldwide premises are generally
adequate for the current conduct of its business. However, the Company
evaluates, on an ongoing basis, the adequacy of its premises for the
requirements of the present and future conduct of its business, with particular
focus on its major auction locations. The Company has explored different options
for new auction facilities in New York City, but there is no assurance that a
change will be made. If there is a change, the Company would use capital
resources, and the Company believes that it has adequate capital resources
available from operations, commercial paper and existing credit facilities.
ITEM 3. LEGAL PROCEEDINGS
The Company becomes involved from time to time in various claims and
lawsuits incidental to the ordinary course of its business. The Company does not
believe that the outcome of any such pending claims or proceedings will have a
material effect upon its business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
Market Information
The principal U.S. market for the Company's Class A Common Stock is the New
York Stock Exchange (symbol: BID). The Class A Common Stock is also traded on
the London Stock Exchange.
The Company also has a Class B Common Stock, convertible on a share for
share basis into Class A Common Stock. There is no public market for the Class B
Common Stock. Per share cash dividends are equal for the Class A and Class B
Common Stock.
The quarterly price ranges on the New York Stock Exchange of the Class A
Common Stock and dividends per share for 1995 and 1994 are shown in the
following schedules:
<TABLE><CAPTION>
1995
------------- CASH DIVIDEND
QUARTER ENDED HIGH LOW DECLARED
- ------------------------------------------------ ------------ ------------ -------------
<S> <C> <C> <C>
March 31........................................ 12 5/8 10 3/8 $0.06
June 30......................................... 14 1/4 12 $0.06
September 30.................................... 14 3/4 12 1/2 $0.06
December 31..................................... 15 3/8 13 1/8 $0.06
<CAPTION>
1994
------------- CASH DIVIDEND
QUARTER ENDED HIGH LOW DECLARED
- ------------------------------------------------ ------------ ------------ -------------
<S> <C> <C> <C>
March 31........................................ 19 1/2 15 3/8 $0.06
June 30......................................... 18 3/8 11 7/8 $0.06
September 30.................................... 13 1/4 12 $0.06
December 31..................................... 13 10 3/4 $0.06
</TABLE>
The number of holders of record of the Class A Common Stock as of March 11,
1996 was 1,337. The number of holders of record of the Class B Common Stock as
of March 11, 1996 was 33.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 19 of the Annual Report are incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Management's Discussion and Analysis of Results of Operations and Financial
Condition on pages 20 through 24 of the Annual Report is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements on pages 25 through 38 of the Annual
Report are incorporated herein by reference.
The Independent Auditors' Report on page 39 of the Annual Report is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
All directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their successors are elected and
qualified. Officers of the Company are appointed by the Board of Directors and
serve at the discretion of the Board. As of March 11, 1996, the directors and
executive officers of the Company (including certain officers of certain
principal subsidiaries and divisions) are as follows:
<TABLE><CAPTION>
NAME AGE PRESENT TITLE
---- --- -------------
<S> <C> <C>
A. Alfred Taubman......................... 71 Chairman
Max M. Fisher............................. 87 Vice Chairman
Lord Camoys............................... 55 Deputy Chairman
Diana D. Brooks........................... 45 President and Chief Executive Officer;
Director
Viscount Blakenham........................ 58 Director
Walter J. P. Curley....................... 73 Director
The Rt. Hon. The Earl of Gowrie........... 56 Director
The Marquess of Hartington................ 51 Director
George Bailey............................. 42 Managing Director, Sotheby's Europe
Kevin A. Bousquette....................... 38 Senior Vice President and Chief Financial
Officer
Simon de Pury............................. 44 Chairman, Sotheby's Europe; Director
William F. Ruprecht....................... 40 Managing Director, Sotheby's North and
South America
R. Julian de la M. Thompson............... 54 Chairman, Sotheby's Asia; Director
Henry Wyndham............................. 42 Chairman, Sotheby's (U.K.)
Mitchell Zuckerman........................ 49 President, Sotheby's Financial Services,
Inc.
</TABLE>
Mr. Taubman is a private investor. Since 1983, Mr. Taubman has been the
largest shareholder and Chairman of the Company. He is Chairman of Taubman
Centers, Inc., a company engaged in the regional retail shopping center
business. Mr. Taubman serves as a member of the Board of Directors of Live
Entertainment of Canada, Inc., a producer of theatrical productions. He also
serves as a Director of Hollinger International Inc., a publisher of English
language newspapers. He was the principal indirect owner of Woodward & Lothrop
Incorporated and John Wanamaker Philadelphia and, until January 1996, was a
Director of Woodward & Lothrop Incorporated and Woodward & Lothrop Holdings,
Inc., both of which filed for bankruptcy protection under Chapter 11 of the
United States Bankruptcy Code in January 1994. The plan of reorganization of
both companies was confirmed by the bankruptcy court in December 1995.
Mr. Fisher is a private investor and has been Vice Chairman of the Company
since 1986 and a director of the Company since 1983. Mr. Fisher is a director of
Comerica, Inc., a bank holding company.
Lord Camoys became a director of the Company in October 1993 and assumed the
role of Deputy Chairman of the Company effective April 1, 1994. Since 1989, he
has been Deputy Chairman of Barclays de Zoete Wedd Holdings Limited, the
international investment banking arm of Barclays Group. Lord Camoys is a
director of 3i Group plc, an investment group, and Perpetual Group plc and is
Deputy Chairman of National Provident Institution.
Ms. Brooks has been President and Chief Executive Officer of the Company
since April 1994. From March 1993 until April 1994, Ms. Brooks served as
President and Chief Executive Officer of Sotheby's, the Company's worldwide
auction business. Since prior to 1990, Ms. Brooks has served the Company in
various senior executive positions. Ms. Brooks has been a director of the
Company since 1992.
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Lord Blakenham became a director of the Company in 1987. Since 1961, he has
served in various executive positions with Pearson plc, a British media company
that serves worldwide information, education and entertainment markets and which
has a substantial interest in the three Lazard investment banking firms. He has
been Executive Chairman of Pearson plc since 1983. Lord Blakenham is a Managing
Director of Lazard Brothers & Co., Limited, an investment banking firm, and the
non-executive Chairman of MEPC, plc, a commercial real estate investment and
development company.
Mr. Curley has been a director of the Company since April 1993. From 1989 to
March 1993, Mr. Curley served as U.S. Ambassador to France. Mr. Curley is a
director of American Exploration Company, an oil and gas exploration and
development company, and The France Growth Fund, a closed end investment
company. He is also a member of the International Advisory Committee of
Compagnie Financiere de Paribas, an international bank, Chairman of the French
American Foundation, President of the Curley Land Company, a family real estate
company, and a Trustee of the Frick Collection.
Lord Gowrie has been a director of the Company since 1985 and served as
chairman of Sotheby's International from 1985 through 1987. From 1987 through
1993, Lord Gowrie served as chairman of Sotheby's Europe, which then encompassed
the United Kingdom, Europe, Asia and Australia. Lord Gowrie was appointed
Chairman of the Arts Council, effective April 1994, serves as a director of the
Ladbroke Group PLC, an entertainment and leisure company, and is a director of
Guiness Mahon Holdings, PLC, a merchant bank.
The Marquess of Hartington became a director of the Company in September
1994. He serves as a director of a number of private companies, including the
management of Chatsworth and estates in Derbyshire, Yorkshire and Sussex.
Between 1989 and July 1994, he was Senior Steward (Chairman) of the Jockey Club.
In June 1993, he was appointed Chairman of the British Horseracing Board.
Mr. Bailey was appointed Managing Director of Sotheby's Europe in January
1994. From 1992 through 1993, he served as director of business development,
Sotheby's Europe. From 1987 to 1992, Mr. Bailey was the director of operations,
Sotheby's (U.K.).
Mr. Bousquette has been Senior Vice President and Chief Financial Officer of
the Company since March 1993. From 1985 to 1992, Mr. Bousquette was an executive
at Kohlberg Kravis Roberts & Co., L.P., a merchant banking firm, and a limited
partner of KKR Associates, L.P.
Mr. de Pury was appointed Chairman of Sotheby's Europe in January 1994. He
served as Deputy Chairman of Sotheby's Europe from 1992 through 1993. From 1988
to 1991, he served as Deputy Chairman of Sotheby's (U.K.), directly responsible
for European development. Mr. de Pury joined the Company in 1975. From 1975 to
1979, he performed several functions within the Company, among them opening the
Geneva office. He rejoined the Company in 1986 as Managing Director, Sotheby's
International, Inc., responsible for all continental European offices. He has
been a director of the Company since 1995.
Mr. Ruprecht was appointed Executive Vice President and Managing Director of
Sotheby's, Inc. in February 1994. From 1992 to February 1995, Mr. Ruprecht
served as Director of Marketing for the Company worldwide and also oversaw a
number of specialist departments. From 1986 to 1992, he served as Director of
Marketing for Sotheby's, Inc.
Mr. Thompson has been a director of the Company since 1983 and Chairman of
Sotheby's Asia since 1992. From 1988 to 1991 he was Deputy Chairman of Sotheby's
(U.K.), directly responsible for development in Asia.
Mr. Wyndham became Chairman of Sotheby's (U.K.) in February 1994. Since
1988, he was a partner of the St. James Art Group, an art dealing business.
Mr. Zuckerman has been President of Sotheby's Financial Services, Inc. since
1988.
Based on the Company's review of the filings made by the Company's directors
and officers under Section 16 of the Securities and Exchange Act of 1934, all
transactions in and beneficial ownership of the Company's equity securities were
reported in a timely manner, except that Patricia Carberry was
9
S1
<PAGE>
approximately three weeks late in filing a Form 3 to disclose her becoming the
Controller and Chief Accounting Officer of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid to the Chief Executive
Officer and each of the four most highly compensated executive officers
(collectively, the "Named Executive Officers") of the Company during 1995 for
each of the last three years.
SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- ------------
SHARES
UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS ALL OTHER
POSITION YEAR SALARY BONUS(5) COMPENSATION (#) COMPENSATION(14)
- ----------------------- ---- -------- -------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Diana D. Brooks........ 1995 $500,000 $351,050(6) $ 7,920(11) 200,000 $ 37,299
President and Chief 1994 500,000 276,000(6) 7,200(11) 250,000 35,150
Executive Officer 1993 400,000 233,000(6) 8,640(11) 250,000 34,250
Simon de Pury (1)...... 1995 $418,883 $179,025 $ 21,739(12) 20,000 $ 53,895
Chairman, Sotheby's 1994 322,142 160,000(7) 10,597(11) 66,000 47,480
Europe 1993 243,180 190,000(7) 0 100,000 30,469
1995 $343,000 $177,000 $ 0 20,000 $ 24,397
Kevin A. Bousquette(2) 1994 330,000 104,000 6,000(11) 0 20,450
Senior Vice President 1993 239,808 70,000 0 150,000 7,500
and Chief Financial
Officer
Henry Wyndham(3)....... 1995 $206,716 $222,900(9) $ 74,400(13) 40,000 $ 4,939
Chairman, Sotheby's 1994 183,960 137,390(9) 46,400(13) 75,000 4,404
(U.K.) 1993 0 150,000(10) 0 0 0
William F. 1995 $260,000 $177,000 $ 0 17,500 $ 19,977
Ruprecht(4).......... 1994 225,000 157,500(8) 0 8,000 17,656
Managing Director, 1993 200,000 165,000(8) 0 0 17,455
Sotheby's North and
South America
</TABLE>
- ------------
(1) Mr. de Pury served as Deputy Chairman of Sotheby's Europe in 1993. He
assumed the position of Chairman of Sotheby's Europe on January 1, 1994.
(2) Mr. Bousquette joined the Company in March 1993.
(3) Mr. Wyndham joined the Company as Chairman, Sotheby's (U.K.), effective
January 1994.
(4) Mr. Ruprecht was appointed Executive Vice President and Managing Director
of Sotheby's North and South America in February 1994.
(5) 1995 bonus amounts include cash paid in 1996 in respect of 1995
performance.
(6) The 1995 bonus amount includes a deferred bonus of $21,050 paid for
services rendered in connection with the acquisition of Pierre Matisse
Gallery Corporation ("Matisse") and the management of AMA. The 1994 bonus
amount includes a payment of $30,000, representing the balance of a special
bonus awarded to senior officers to reflect the fact that salaries had been
frozen since January 1990 and a deferred bonus of $46,000 paid for services
rendered in connection with the acquisition of Matisse and the management
of AMA. The 1993 bonus amount includes a payment of $60,000 representing
part of such special bonus and a deferred bonus of $23,000 paid for
services rendered in connection with the acquisition of Matisse and the
management of AMA.
(Footnotes continued on following page)
10
<PAGE>
(Footnotes continued from preceding page)
(7) The 1994 bonus amount includes a payment of $60,000, representing the
balance of a special bonus awarded to senior officers to reflect the fact
that salaries had been frozen since January 1990. The 1993 bonus amount
also includes a payment of $60,000, representing part of such special bonus
awarded.
(8) The 1994 bonus amount includes a payment of $37,500, representing the
balance of a special bonus awarded to senior officers to reflect the fact
that salaries had been frozen since January 1990. The 1993 bonus amount
also includes a payment of $75,000, representing part of such special bonus
awarded.
(9) The 1994 and 1995 bonus amounts include a supplemental payment of $45,990
to be paid each of the first three years of Mr. Wyndham's employment, in
accordance with the terms of his employment agreement.
(10) The 1993 bonus amount is a one-time signing bonus per Mr. Wyndham's
employment agreement.
(11) Car allowance.
(12) Car Leasing and Maintenance Fees.
(13) Housing and Travel allowance.
(14) The amounts disclosed in this column for 1995 include:
(a) Company contributions of the following amounts under the Retirement
Savings Plan: $7,500 on behalf of Ms. Brooks, $7,357 on behalf of Mr.
Bousquette and $7,443 on behalf of Mr. Ruprecht.
(b) Company contributions of the following amounts under benefit
equalization agreements: $29,799 on behalf of Ms. Brooks, $17,040 on
behalf of Mr. Bousquette and $12,534 on behalf of Mr. Ruprecht.
(c) a Company contribution under the Switzerland plans of $53,895 on behalf
of Mr. de Pury.
(d) a Company contribution under the U.K. pension plan of $4,939 on behalf
of Mr. Wyndham.
The following table sets forth information regarding option grants under the
Company's 1987 Stock Option Plan, including its U.K. Sub-plan ("the Plan") to
the Named Executive Officers in 1995:
OPTION GRANTS IN 1995
<TABLE><CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(4)
--------------------------------------------------- -----------------------
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
GRANTED 1995 SHARE(3) DATE 5% 10%
---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Diana D. Brooks.............. 200,000(1) 16.4% $ 10.875 2/8/05 $3,542,846 $5,641,390
Simon de Pury................ 20,000(1) 1.6% $ 10.875 2/8/05 $ 354,285 $ 564,139
Kevin A. Bousquette.......... 20,000(1) 1.6% $ 10.875 2/8/05 $ 354,285 $ 564,139
Henry Wyndham................ 40,000(2) 3.3% $ 10.875 2/8/05 $ 708,569 $1,128,278
William F. Ruprecht.......... 17,500(1) 1.4% $ 10.875 2/8/05 $ 309,999 $ 493,622
</TABLE>
- ------------
(1) These options will vest and become exercisable to the extent of one-fifth of
the number of shares subject to the option on each of the first, second,
third, fourth and fifth anniversary of the date of grant.
(2) These options will vest and become exercisable to the extent of three-fifths
of the number of shares subject to the option on the third anniversary of
the date of grant and to the extent of an additional
(Footnotes continued on following page)
11
<PAGE>
(Footnotes continued from preceding page)
one-fifth of the number of the shares subject to the option on each of the
fourth and fifth anniversaries of the date of grant.
(3) The exercise price of each option is the fair market value of the underlying
shares as of the date of grant. Only options to purchase shares of Class B
Common Stock may be granted under the Plan. Because Class B Common Stock is
convertible into Class A Common Stock and there is no public market for the
Class B Common Stock, the fair market value of an option is the NYSE closing
price per share of the Class A Common Stock on the last business day before
the option grant.
(4) The actual value, if any, that may be realized by each individual will
depend on the closing price of the Class A Common Stock on the NYSE on the
day preceding the exercise date. The option term for these option grants is
ten years. The appreciation rates used in the table are provided to comply
with Item 402(c) of Regulation S-K and do not necessarily reflect the views
of management as to the potential realizable value of options.
The following table provides information on option exercises in 1995 by the
Named Executive Officers and year-end option values for unexercised options held
by the Named Executive Officers:
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
<TABLE><CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Diana D. Brooks.................. 0 $0 228,000 550,000 $ 230,250 $ 871,875
Simon de Pury.................... 0 $0 77,867 142,133 $ 80,917 $ 129,333
Kevin A. Bousquette.............. 0 $0 60,000 110,000 $ 105,000 $ 225,000
Henry Wyndham.................... 0 $0 0 115,000 $ 0 $ 135,000
William F. Ruprecht.............. 0 $0 59,600 51,900 $ 162,250 $ 139,563
</TABLE>
See Note K to the Consolidated Financial Statements in the Annual Report for
additional information about the Plan.
Retirement Savings Plan
The Company has a Retirement Savings Plan (the "Retirement Savings Plan")
for employees of the Company and its subsidiaries in the United States.
Employees are eligible to participate in the Retirement Savings Plan as of the
first day of the month following completion of a 90-day waiting period
commencing on the date of employment. Company contributions to the Retirement
Savings Plan made on behalf of the Named Executive Officers have been included
in the Summary Compensation Table.
U.K. Pension Plan
Sotheby's (U.K.) maintains a funded defined benefit pension plan for its
employees who are U.K. residents.
PENSION TABLE
YEARS OF SERVICE
REMUNERATION --------------------------------------------------
(B.P.) 15 20 25 30 35
- ------------ ------ ------ ------ ------ ------
40,000 10,000 13,333 16,667 20,000 23,333
60,000 15,000 20,000 25,000 30,000 35,000
80,000 19,650 26,200 32,750 39,300 45,850
12
<PAGE>
Henry Wyndham is the only Named Executive Officer who participates in the
plan and has two credited years of service with the Company.
Pension benefits under the plan for employees contributing 4% of salary are
1/60th of the employee's final pensionable salary for every year of service up
to a maximum of 40 years. For participants contributing 2% of salary, the
benefits accrue at half of the rate indicated above. Benefits are paid monthly
commencing at retirement, which is at age 60, although the Company may elect to
continue employment of the individual after that date, and if the Company
agrees, the employee may elect to make further contributions until the age of
65. The compensation covered by the plan is the employee's pensionable earnings
(subject to the limitation described below), which includes "Salary", but
excludes "Bonus" and "Other Annual Compensation" disclosed in the Summary
Compensation Table.
The plan also provides for a death benefit in the amount of four times the
employee's base salary at the time of death plus the refund of the employee's
contributions to the plan and provides for a pension to be paid to the
employee's spouse of 33 1/3%, or proportionately less if the employee has
elected to contribute at the reduced rate, of the employee's base salary at the
date of death.
The above table sets forth the estimated annual benefits (in pounds
sterling) payable upon retirement under the plan assuming the employee
contributes at 4% of base salary. Current Inland Revenue regulations limit the
pensionable salary with respect to which pension benefits may be based to a
maximum of B.P.78,600.
Switzerland Plan
In accordance with the requirements of Swiss law, Sotheby's AG, the
Company's Swiss operating subsidiary, established in 1985 a fully insured
pension plan (the "First Swiss Plan") for its full-time employees whose salaries
exceed 23,280 Swiss francs ("SF"), up to a fixed ceiling of SF 116, 400. There
are two elements of the First Swiss Plan: a savings element (the "Savings
Plan"), and a risk element (the "Risk Plan"). Employees are eligible to join the
Savings Plan as of the January 1 following attainment of age 24 and the Risk
Plan as of the January 1 following attainment of age 17.
Under the Savings Plan, an individual retirement account is established for
each participating employee. Each year, the account is credited with a
percentage of the employee's adjusted salary, which is the employee's annual
salary excluding bonuses and other allowances reduced by SF 23,280. Longer
serving employees were made eligible for additional Company contributions in
respect of service with the Company prior to 1985. The percentage of adjusted
salary credited to the account ranges from 7% to 30%, depending on the
employee's age, sex and past service. The Company pays 70% of this total
contribution, with the remainder paid by employees. The account is also credited
with interest at a rate fixed by the Swiss government's executive branch.
At retirement age, which is age 65 for men and age 62 for women, the
employees' account is convertible, at the employee's election, to a life
annuity, with provisions for contingent widow's pension of 60% of the retiree's
benefit and immediate pensions of 20% of the retiree's benefit for certain
children of the retiree.
The Risk Plan provides disability and death benefits to employees, their
widows and certain of their children. Benefits are generally a percentage of the
amount credited to the employee's account, excluding interest. Benefits under
the Risk Plan are funded by insurance premiums, all of which are paid by the
Company.
Sotheby's A.G. has also established a second pension plan (the "Second Swiss
Plan") which is non-compulsory and only has a savings element. These benefits
are based on the amount by which an employee's total salary exceeds SF 116,400.
The Company pays approximately 74% of the total contribution, with the remainder
paid by employees.
Mr. de Pury is the only Named Executive Officer who participates in the
First Swiss Plan and the Second Swiss Plan. A total of SF 61,979 ($53,895)
contributed in 1995 by the Company on behalf of Mr. de Pury is included in the
Summary Compensation Table.
13
<PAGE>
Bonuses
The Company's officers are eligible to receive incentive bonuses. Bonuses
are recommended by management and approved by the Audit and Compensation
Committee of the Board of Directors (the "Committee"). Actual awards are a
function of the Company's after-tax worldwide profit and the individual's
performance. Every supervisor conducts an employee review. As part of the
review, the supervisor and the employee will determine future objectives
against which the employee's performance will be measured. In addition, the
program allows the Committee the discretion to address exceptional performance
and unusual circumstances.
Benefit Equalization Agreements
The total annual contributions to the Company's Retirement Savings Plan are
subject to certain limitations under the Internal Revenue Code of 1986, as
amended, and the Employee Retirement Income Security Act of 1974, as amended,
for each participant. Officers (generally senior vice presidents and above) of
the Company and its U.S. subsidiaries who are affected by such limitations may
enter into agreements pursuant to which their salaries will be reduced, and the
Company will maintain accounts on their behalf, in the amount of the difference
between (i) the aggregate amount of contributions that would have been made to
the Retirement Savings Plan in the absence of the limitations, and (ii) the
aggregate amount of contributions actually made to the plan. Amounts deferred
are credited with the same earnings yield credited to contributions made to the
fixed income fund maintained under the Retirement Savings Plan. Benefits under
these unfunded agreements are paid to a participant one year following the
participant's termination of employment with the Company, unless the participant
elects to defer receipt of payment. Amounts deferred by the Named Executive
Officers of the Company pursuant to benefit equalization agreements in 1995 have
been included in the Summary Compensation Table.
COMPENSATION OF DIRECTORS
Each director of the Company who is not an executive officer of the Company
receives an annual retainer fee of $20,000, plus a fee of $1,000 for each Board
meeting attended by such director, and a fee of $500 for each committee meeting
($1,000 for the chairman of the committee) attended by such director, in
addition to reimbursement of expenses. Beginning in early 1996, each director
who is not an executive officer of the Company will receive additional annual
compensation of 750 shares of the Company's Class A Common Stock.
CERTAIN EMPLOYMENT ARRANGEMENTS
In October 1993, the Company entered into an agreement with Henry Wyndham
regarding his employment as Chairman of Sotheby's (U.K.), which began on
February 1, 1994. At that time, Mr. Wyndham received a bonus of B.P.100,000. Mr.
Wyndham's annual salary will be up to B.P.130,000 for the first three years, and
thereafter not less than B.P.130,000. In addition, for each of the first three
years, Mr. Wyndham will receive a non-pensionable salary supplement of
B.P.30,000 per year.
The Company has entered into an employment agreement with Lord Camoys,
pursuant to which he serves as the Company's Deputy Chairman. Under the
agreement, Lord Camoys received an initial grant under the 1987 Stock Option
Plan with respect to 50,000 shares. The rate of Lord Camoys's base salary under
the agreement during each of 1994 and 1995 was B.P.100,000, of which B.P.66,667
was paid for 1994, a proration resulting from Lord Camoys commencing employment
on April 1, 1995. Lord Camoys was not paid a bonus in 1994 or 1995. He also
receives an annual travel allowance of B.P.10,000. The agreement expires in
1998.
The Company had an employment agreement with Lord Gowrie, which expired at
the end of 1995. Under that agreement, Lord Gowrie was required to devote
one-third of his work time to providing consulting services to the Company. His
base annual salary and miscellaneous compensation was B.P.55,000. Lord Gowrie
was not paid a bonus in 1994 or 1995. Because Lord Gowrie was employed by the
Company upon expiration of the agreement, the Company is required under the
employment agreement to make a one-time additional contribution to his pension
fund of B.P.97,000. Effective as of January 1, 1996, the Company has entered
into a consulting agreement with Lord Gowrie pursuant to which his 1996 base
annual salary will be B.P.20,000.
14
<PAGE>
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 11, 1996,
regarding the beneficial ownership of the Company's Class A and Class B Common
Stock by its directors, executive officers and 5% shareholders. The Company has
relied upon information supplied by its officers, directors and certain
shareholders and upon information contained in filings with the Securities and
Exchange Commission. Each share of Class B Common Stock is freely convertible
into one share of Class A Common Stock. Accordingly, under the applicable rules
of the Securities and Exchange Act of 1934, holders of Class B Common Stock are
deemed to own an equal number of shares of Class A Common Stock. For purposes of
the calculation of the percentage of each class that each Named Executive
Officer, director and 5% shareholder beneficially owns, the number of shares of
such class deemed to be outstanding is the sum of all outstanding shares of such
class, plus the number of shares that such beneficial owner has, or is deemed to
have, the right to acquire by the exercise of options and/or conversion.
CLASS A AND CLASS B COMMON STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND 5% SHAREHOLDERS
<TABLE><CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------ ------------------------
DIRECTORS, EXECUTIVE OFFICERS AND NUMBER OF PERCENT OF NUMBER OF PERCENT
5% SHAREHOLDERS SHARES CLASS SHARES OF CLASS
- ---------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
A. Alfred Taubman................. 13,199,616(1) 25.4% 13,199,516(2) 76.4%
200 E. Long Lake Road
Bloomfield Hills, MI 48304
Max M. Fisher..................... 2,509,545(3) 6.1% 2,509,545(4) 14.5%
2700 Fisher Building
Detroit, MI 48202
Lord Camoys....................... 3,500 * *
c/o Sotheby's
34-35 New Bond Street
London W1 2AA England
Diana D. Brooks................... 431,500(5) 1.1% 431,500(6) 2.4%
c/o Sotheby's, Inc.
1334 York Avenue
New York, New York 10021
Viscount Blakenham................ 0 * 0 *
Pearson P.L.C.
Millbank Tower, Millbank
London SW1P 4QZ England
Kevin A. Bousquette............... 73,000(7) * 64,000(8) *
c/o Sotheby's, Inc.
1334 York Avenue
New York, New York 10021
Ambassador Walter J.P. Curley..... 1,000 * 0 *
450 Park Avenue
Suite 2104
New York, New York 10022
The Rt. Hon. The Earl of Gowrie... 28,000(9) * 28,000(10) *
c/o Sotheby's
34-35 New Bond Street
London W1 2AA England
The Marquess of Hartington........ 0 * 0 *
Beamsley Hall
Bolton Abbey, Skipton
North Yorkshire, BD23 6HD
England
</TABLE>
15
<PAGE>
<TABLE><CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------ ------------------------
DIRECTORS, EXECUTIVE OFFICERS AND NUMBER OF PERCENT OF NUMBER OF PERCENT
5% SHAREHOLDERS SHARES CLASS SHARES OF CLASS
- ---------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Simon de Pury..................... 119,734(11) * 119,734(12) *
c/o Sotheby's
13 Quai du Mont Blanc
CH-12-01 Geneva, Switzerland
William F. Ruprecht............... 68,700(13) * 68,700(14) *
c/o Sotheby's, Inc.
1334 York Avenue
New York, New York 10021
R. Julian de la M. Thompson....... 108,000(15) * 108,000(16) *
c/o Sotheby's
34-35 New Bond Street
London W1 2AA England
Henry Wyndham..................... 0 * 0 *
c/o Sotheby's
34-35 New Bond Street
London, W1 2AA England
FMR Corp.......................... 4,719,400(17) 12.2% 0 *
82 Devonshire Street
Boston, MA 02109
GeoCapital Corporation............ 2,517,724(18) 6.5% 0 *
767 Fifth Avenue
New York, New York 10153
Portfolio D Investors, LP and
Other Related Parties........... 2,983,600(19) 7.7% 0 *
201 Main Street, Suite 2600
Fort Worth, Texas 76102
NewSouth Capital Management,
Inc............................. 2,107,136(20) 5.4% 0 *
755 Crossover Lane, Suite 233
Memphis, TN 38117
Directors and Executive
Officers.......................... 16,698,580(21) 30.1% 16,649,892(21) 92.2%
as a Group......................
</TABLE>
- ------------
* Represents less than 1%.
(1) Mr. Taubman owns, as trustee of his grantor trust, 100 shares of Class A
Common Stock. This figure also includes 9,730,886 shares of Class A Common
Stock that he has, or is deemed to have, the right to acquire by converting
shares of Class B Common Stock that Mr. Taubman owns as trustee of his
grantor trust and also includes 3,468,630 shares of Class A Common Stock
that he has the right to acquire by converting shares of Class B Common
Stock owned by Taubman Investments Limited Partnership, as to which he has
sole voting and dispositive control.
(2) This figure includes 9,730,886 shares of Class B Common Stock owned by Mr.
Taubman and 3,468,630 shares of Class B Common Stock owned by Taubman
Investments Limited Partnership, as to which Mr. Taubman has sole voting
and dispositive control. This figure excludes 792,830 shares owned by
Judith Taubman, his wife. Mr. Taubman disclaims beneficial ownership of all
shares of Class B Common Stock owned by Judith Taubman. Mr. Taubman and
Taubman Investments Limited Partnership have pledged all of their shares of
Class B Common Stock to a bank. If the bank were to foreclose on the
pledges, a change in control of the Company could take place under certain
circumstances. In the opinion of Mr. Taubman, the chances of a foreclosure
on the pledges are remote.
(3) This figure includes 1,840,921 shares of Class A Common Stock that Mr.
Fisher has, or is deemed to have, the right to acquire by converting shares
of Class B Common Stock. See footnote 4 below. Mr. Fisher disclaims
beneficial ownership of all shares of Class A Common Stock other than
(Footnotes continued on following page)
16
<PAGE>
(Footnotes continued from preceding page)
1,830,161 shares relating to the shares of Class B Common Stock held by him
as trustee of his grantor trust. See footnote 4 below.
(4) This figure includes 10,760 shares of Class B Common Stock owned by various
family trusts of which Mr. Fisher is a co-trustee and 1,830,161 shares of
Class B Common Stock that Mr. Fisher holds as trustee of his grantor trust.
This figure also includes 668,624 shares owned by Martinique Hotel, Inc., a
corporation owned by Mr. Fisher's family. This figure also excludes 56,519
shares of Class B Common Stock owned by various family trusts of which Mr.
Fisher's wife is a co-trustee. Mr. Fisher disclaims beneficial ownership of
all shares other than those held by him as trustee of his grantor trust.
(5) This figure includes 88,500 shares of Class A Common Stock that Ms. Brooks
has the right to acquire by converting shares of Class B Common Stock and
343,000 shares of Class A Common Stock that she has the right to acquire by
exercising options for shares of Class B Common Stock and converting those
shares.
(6) Ms. Brooks owns 88,500 shares of Class B Common Stock. This figure also
includes 343,000 shares of Class B Common Stock that Ms. Brooks has the
right to acquire by exercising options.
(7) Mr. Bousquette owns 9,000 shares of Class A Common Stock. This figure also
includes 64,000 shares of Class A Common Stock that Mr. Bousquette has the
right to acquire by exercising options for shares of Class B Common Stock
and converting those shares.
(8) This figure includes 64,000 shares of Class B Common Stock that Mr.
Bousquette has the right to acquire by exercising options.
(9) This figure represents 28,000 shares of Class A Common Stock that Lord
Gowrie has the right to acquire by exercising options for shares of Class B
Common Stock and converting those shares.
(10) This figure represents 28,000 shares of Class B Common Stock that Lord
Gowrie has the right to acquire by exercising options.
(11) This figure represents 119,734 shares of Class A Common Stock that Mr. de
Pury has the right to acquire by exercising options for shares of Class B
Common Stock and converting those shares.
(12) This figure represents 119,734 shares of Class B Common Stock that Mr. de
Pury has the right to acquire by exercising options.
(13) This figure represents 68,700 shares of Class A Common Stock that Mr.
Ruprecht has the right to acquire by exercising options for shares of Class
B Common Stock and converting those shares.
(14) This figure includes 68,700 shares of Class B Common Stock that Mr.
Ruprecht has the right to acquire by exercising options.
(15) Mr. Thompson owns 75,000 shares of Class B Common Stock. This figure
includes 75,000 shares of Class A Common Stock that Mr. Thompson has the
right to acquire by converting shares of Class B Common Stock and also
includes 33,000 shares of Class A Common Stock that he has the right to
acquire by exercising options for shares of Class B Common Stock and
converting those shares.
(16) This figure includes 33,000 shares of Class B Common Stock that Mr.
Thompson has the right to acquire by exercising options.
(17) This information is based on a Schedule 13G, dated February 14, 1996, filed
with the Securities and Exchange Commission.
(18) This figure includes shares held in third parties' accounts over which
GeoCapital Corporation has investment discretion. This information is based
on a Form 13F, dated January 23, 1996, filed with the Securities and
Exchange Commission.
(19) This figure consists of the total number of shares of Class A Common Stock
owned by the following persons or entities: Trinity I Fund, L.P., TF
Investors, L.P., Thomas M. Taylor, Portfolio D Investors, L.P., Portfolio
Associates, Inc., Portfolio Partners, L.P., The Bass Management Trust, Sid
R. Bass, Lee M. Bass, and E.P. Bass. The foregoing information (including
the tabular data) is based on a Schedule 13D, dated January 26, 1996, filed
with the Securities and
(Footnotes continued on following page)
17
<PAGE>
(Footnotes continued from preceding page)
Exchange Commission. The listed persons and entities making the Schedule
13D filing have stated that neither the fact of this filing nor anything
contained therein shall be deemed to be an admission by the reporting
persons that a "group" exists within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934.
(20) This figure includes shares held in third parties' accounts over which
NewSouth Capital Management, Inc. has investment discretion. This
information is based on a Schedule 13G, dated February 13, 1996, filed by
NewSouth Capital Management, Inc. with the Securities and Exchange
Commission.
(21) See above notes.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loan Programs
The Company maintains two U.S. bank loan programs which are available to
certain employees at the discretion of the Chief Executive Officer. The first
program allows U.S. employees to borrow from a bank on a demand note basis and
pay an interest rate equal to the prime rate. Under the second program, prior to
December 1995, the Company would directly lend money to certain employees for a
term of 15 years to purchase or refinance a residence at an interest rate of the
prime rate minus 1.0% to 2.0%. For loans under this program exceeding $400,000,
the approval of the Audit and Compensation Committee of the Board of Directors
is required. In December 1995, this program was refinanced and replaced by a
bank loan program providing comparable loan terms and interest rates to the
prior Company direct loan program. All payment obligations under both U.S. bank
loan programs are guaranteed by the Company, and all loans under both programs
are repayable when an employee leaves the Company. At March 11, 1996, Mitchell
Zuckerman, an executive officer, had guaranteed borrowings outstanding under the
first program of $12,499, and $179,999 of borrowings under the second program.
At March 11, 1996, William Ruprecht, another executive officer, had borrowings
outstanding under the second program of $833,472. In addition, in the United
Kingdom, the Company has guaranteed a portion of a bank mortgage loan to Henry
Wyndham, an executive officer. The amount of the Company's guarantee is
$276,500.
In October 1993, Sotheby's (U.K.), a subsidiary of the Company, entered into
an agreement with Henry Wyndham Fine Art Ltd. ("Fine Art"), an art dealing
business in which Henry Wyndham, who has since become Chairman of Sotheby's
(U.K.), has a substantial equity interest. Under the agreement, Sotheby's (U.K.)
agreed to purchase from Fine Art various paintings outright, as well as Fine
Art's partial interest in another painting. Under the terms of the agreement,
Sotheby's (U.K.) paid Fine Art B.P.150,000 ($225,450) as an advance for a
portion of its interest in such painting in February 1994. On February 1, 1995,
the advance began to bear interest and will continue to do so until Fine Art
exercises its right to sell its remaining interest in such painting to Sotheby's
(U.K.) for B.P.180,000 ($281,170). The original cost to Fine Art of its
ownership-interest in such painting was approximately B.P.300,000 ($450,900).
However, the fair market value of such interest is deemed by the Company to be
in excess of the purchase price. The various purchase prices were determined by
the Company with reference to recent sale prices of comparable property.
In addition to the above-described transactions, the Company has entered
into agreements with its largest shareholder and certain of his affiliates
regarding the proposed development of the York Property. See "Properties" and
Notes H and J to the Consolidated Financial Statements in the Annual Report. See
also Notes D, M and N to the Consolidated Financial Statements for additional
related party disclosures.
18
<PAGE>
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K.
<TABLE>
<C> <S>
14(a)(1) The following consolidated financial statements of Sotheby's Holdings,
Inc. and subsidiaries, included in the annual report of the registrant
to its shareholders for the year ended December 31, 1995, are
incorporated by reference in Item 8:
Consolidated Statements of Income--Years ended December 31, 1995, 1994
and 1993
Consolidated Balance Sheets--December 31, 1995 and 1994
Consolidated Statements of Cash Flows--Years ended December 31, 1995,
1994 and 1993
Consolidated Statement of Changes in Shareholders' Equity--Years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements--December 31, 1995
14(a)(2) The following is a list of the consolidated financial statement
schedules of Sotheby's Holdings, Inc. and subsidiaries and the
Independent Auditors' Report required by Item 14(d):
Independent Auditors' Report on Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts
14(a)(3)
3(a) Amended and Restated Articles of Incorporation of Sotheby's Holdings,
Inc., as amended, incorporated herein by reference to Exhibit 4(b) to
Registration Statement No. 33-26008.
3(b) Restated By-Laws of Sotheby's Holdings, Inc., as amended, incorporated
herein by reference to Exhibit 3(b) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1988, SEC File No. 1-9750,
on file at the Washington D.C. office of the Securities and Exchange
Commission (the "1988 Form 10-K").
4 See Exhibits 3(a) and 3(b).
10(a) Issuing and Paying Agency Agreement, dated February 15, 1989, between
Sotheby's Inc. and the Chase Manhattan Bank, N.A. relating to the
issuance of short-term notes ("U.S. Notes") in the U.S. Commercial
Paper market, incorporated herein by reference to Exhibit 10(g) to
the 1988 Form 10-K, SEC File No. 1-9750, on file at the Washington,
D.C. office of the Securities and Exchange Commission.
10(b) U.S. Commercial Paper Dealer Agreement, dated February 15, 1989,
between Sotheby's, Inc. and Chase Securities, Inc. relating to the
issuance of the U.S. Notes, incorporated herein by reference to
Exhibit 10(h) to the 1988 Form 10-K, SEC File No. 1-9750, on file
at the Washington, D.C. office of the Securities and Exchange
Commission.
10(c) U.S. Commercial Paper Dealer Agreement, dated February 15, 1989,
between Sotheby's, Inc. and Merrill Lynch Money Markets, Inc. relating
to the issuance of the U.S. Notes, incorporated herein by reference to
the Exhibit 10(i) of the 1988 Form 10-K, SEC File No. 1-9750, on file at
the Washington, D.C. office of the Securities and Exchange Commission.
10(d) Lease, dated as of July 25, 1979, among The Benenson Capital Company,
Lawrence A. Benenson, Raymond E. Benenson (collectively, "Benenson")
to Sotheby Parke Bernet Inc., and amendments thereto, all relating to
1334 York Avenue, New York, New York (the "York Avenue Property"),
incorporated herein by reference to Exhibit 10(g) to Registration
Statement No. 33-17667.
10(e) Option Agreement with Form of Exchange Agreement, dated July 25, 1979,
among Benenson and 089 Nosidam Corp. (as nominee of Sotheby Parke
Bernet Inc.) assignments thereof and amendments thereto, all relating
to the York Avenue Property, incorporated herein by reference to
Exhibit 10(h) to Registration Statement No. 33-17667.
10(f) Exchange Agreement, dated October 27, 1986, among Benenson and York
Avenue Development, Inc., and Letter, dated October 27, 1986, from
Benenson to Sotheby's, Inc. and York Avenue Development, Inc.,
concerning zoning matters and security relating to the York Avenue
Property, incorporated herein by reference to Exhibit 10(i) to
Registration Statement No. 33-17667.
10(g) Guarantee, made November 6, 1986, by A. Alfred Taubman in favor of
Benenson relating to the York Avenue Property (the "Taubman
Guarantee"), incorporated herein by reference to Exhibit 10(j)
to Registration Statement No. 33-17667.
</TABLE>
19
<PAGE>
<TABLE>
<C> <S>
10(h) Letter from Sotheby's, Inc. and York Avenue Development, Inc., dated
October 27, 1986, agreeing to indemnify A. Alfred Taubman from all
liabilities, damages, losses and judgments arising under the Taubman
Guarantee, incorporated herein by reference to Exhibit 10(k) to
Registration Statement No. 33-17667.
10(i) Project Services Agreement (the "Project Agreement"), dated
November 8, 1985, between Sotheby's, Inc. and The Taubman Company,
Inc. relating to the proposed development of the York Avenue Property,
incorporated herein by reference to Exhibit 10(1) to Registration
Statement No. 33-17667.
10(j) Financing and Guarantee Agreement (with exhibits) (the "Financing and
Guarantee Agreement"), dated as of October 1, 1987, among Sotheby's
Inc., York Avenue Development, Inc., and Taubman York Avenue
Associates, Inc., relating to the proposed development of the York
Avenue Property, incorporated herein by reference to Exhibit 10(m)
to Registration Statement No. 33-17667.
10(k) Letter Agreement, from Sotheby's, Inc. to York Avenue Development, Inc.
and Taubman York Avenue Associates, Inc., dated August 18, 1988,
amending the Financing and Guarantee Agreement.
10(l) Assignment and Assumption of Financing and Guarantee Agreement, by
and between Taubman York Avenue Associates, Inc. and York Avenue
Advisors, Inc., dated as of June 1, 1995.
10(m) Bill of Sale and Assignment and Assumption Agreement (regarding
Contracts, General Intangibles, Receivables, and other Assets and
Liabilities), by and between Taubman York Avenue Associates, Inc.
and York Avenue Advisors, Inc. dated as of June 1, 1995.
10(n) Memorandum of Option Agreement, dated January 31, 1981, among Benenson
and 089 Nosidam Corp., relating to the York Avenue Property,
incorporated herein by reference to Exhibit 10(hh) to Registration
Statement No. 33-17667.
10(o) Letter Agreement, dated October 27, 1986, among Benenson and York
Avenue Development, Inc. relating to the York Avenue Property,
incorporated herein by reference to Exhibit 10(ii) to Registration
Statement No. 33-17667.
10(p) Assignment, Assumption Agreement and Release, dated as of
October 1, 1987, among Sotheby's Inc., York Avenue Development,
Inc. and the Taubman Company, Inc. relating to the assignment of
the Project Agreement, incorporated herein by reference to
Exhibit 10(jj) to Registration Statement No. 33-17667.
10(q)* Sotheby's Inc. 1988 Benefit Equalization Plan, incorporated herein
by reference to Exhibit 10(t) to Registration Statement No. 33-17667.
10(r)* Sotheby's Holdings, Inc. 1987 Stock Option Plan as amended and restated
effective June 1, 1994 incorporated herein by reference to
Exhibit 10(o) to the 1994 Form 10-K.
10(s) Agreement of Partnership of Acquavella Modern Art, dated May 29, 1990,
between Sotheby's Nevada, Inc. and Acquavella Contemporary Art, Inc.,
incorporated herein by reference to Exhibit 10(b) to the Form 8-K,
filed on June 7, 1990, SEC, File No. 1-9750, on file at the Washington,
D.C. office of the Securities and Exchange Commission.
10(t) Amendment, dated as of April 19, 1991, between The Benenson Capital
Company, Lawrence A. Benenson and Raymond E. Benenson and York Avenue
Development, Inc. to Amendment to Option Agreement and to Related
Agreements, incorporated herein by reference to Exhibit 10(kk) to the
Company's Annual Report on Form 10K, for the year ended
December 31, 1991, SEC File No. 1-9750.
10(u) Credit Agreement dated as of August 3, 1994, among Sotheby's Holdings,
Inc., Sotheby's Inc., Oatshare Limited, Sotheby's, and Chemical Bank,
incorporated herein by reference to Exhibit 4 to the Second Quarter
Form 10-Q for 1994.
10(v)* Letter Agreement, dated October 25, 1993, between Sotheby's (U.K.) and
Henry Wyndham setting forth certain terms and agreements of his
employment, incorporated herein by reference to Exhibit 10(u) to the
1994 Form 10-K.
10(w)* Letter Agreement, dated October 13, 1993, between Sotheby's (U.K.) and
Henry Wyndham Fine Art Ltd., an art dealing business, setting forth
certain terms and agreements of the purchase of inventory, incorporated
herein by reference to Exhibit 10(v) to the 1994 Form 10-K.
10(x) Guarantee Agreement, dated June 2, 1994, from Sotheby's Holdings, Inc.
to Henry Wyndham, incorporated herein by reference to Exhibit 10(w) to
the 1994 Form 10-K.
10(y) Letter, dated April 21, 1995, from Sotheby's Holdings, Inc. to Coutts
and Co., setting forth an increased guarantee by the Company on Henry
Wyndham's behalf.
</TABLE>
20
<PAGE>
<TABLE>
<C> <S>
10(z)* Letter Agreement, dated October 27, 1993, between Sotheby's Holdings,
Inc. and Lord Camoys setting forth certain terms and agreements of his
employment, incorporated herein by reference to Exhibit 10(x) to the
1994 Form 10-K.
10(aa)* Letter Agreement, dated December 21, 1993, between Sotheby's (U.K.)
and The Rt. Hon. The Earl of Gowrie setting forth certain terms and
agreements of his employment, incorporated herein by reference to
Exhibit 10(y) to the 1994 Form 10-K.
10(bb)* Letter, dated March 25, 1996, from George Bailey, Managing Director,
Sotheby's Europe, to The Rt. Hon. The Earl of Gowrie setting forth
certain terms and agreements concerning of his consulting arrangement.
(13) Annual Report to Shareholders for the year ended December 31, 1995
(21) Subsidiaries of the Registrant
(23) Consent of Deloitte & Touche LLP
(24) Powers of Attorney
(27) Financial Data Schedule
</TABLE>
- ------------
* A compensatory agreement or plan required to be filed pursuant to Item 14(c)
of Form 10-K.
(14)(b) Current Reports on Form 8-K--None.
(14)(c) The list of exhibits filed with this report is set forth in response to
Item 14(a)(3). The required exhibit index has been filed with the
exhibits.
(14)(d) The financial statement schedules of the Company listed in response to
Item 14(a)(2) are filed pursuant to this Item 14(d).
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
SOTHEBY'S HOLDINGS, INC.:
We have audited the consolidated financial statements of Sotheby's Holdings,
Inc. and subsidiaries as of December 31, 1995 and 1994, and for each of the
three years in the period ended December 31, 1995 and have issued our report
thereon dated February 28, 1996; such consolidated financial statements and
report are included in your 1995 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedule of Sotheby's Holdings, Inc. and subsidiaries listed
in Item 14. This consolidated financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such consolidated financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
February 28, 1996
22
<PAGE>
<TABLE>
SCHEDULE II
SOTHEBY'S HOLDINGS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------- ---------- ------------------------ ---------- --------
ADDITIONS
BALANCE
BALANCE AT CHARGED TO CHARGED TO AT END
BEGINNING COST AND OTHER OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------------------------------------- ---------- ---------- ---------- ---------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Valuation reserve deducted in the balance
sheet from the asset to which it
applies:
Accounts and notes receivable:
1995 Allowance for doubtful
accounts........................... $ 10,165 $2,902 $ 604 $1,093 $12,578
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
1994 Allowance for doubtful
accounts........................... $ 10,596 $4,196 -- $4,627 $10,165
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
1993 Allowance for doubtful
accounts........................... $ 12,930 $5,499 -- $7,833 $10,596
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
Inventory:
1995 Realizable value allowance...... $ 14,995 $4,965 $2,666 $1,614 $21,012
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
1994 Realizable value allowance...... $ 14,334 $1,921 -- $1,260 $14,995
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
1993 Realizable value allowance...... $ 18,637 $4,055 -- $8,358 $14,334
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
</TABLE>
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SOTHEBY'S HOLDINGS, INC.
By: /s/ DIANA D. BROOKS
..................................
Diana D. Brooks
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE><CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------- ----------------------------- ---------------
<S> <C> <C>
* Chairman of the Board March 29, 1996
...........................................
A. Alfred Taubman
* Vice Chairman of the Board March 29, 1996
...........................................
Max M. Fisher
* Deputy Chairman of the March 29, 1996
........................................... Board
Lord Camoys
/s/ DIANA D. BROOKS President, Chief Executive March 29, 1996
........................................... Officer and Director
Diana D. Brooks
/s/ KEVIN A. BOUSQUETTE Senior Vice President and March 29, 1996
........................................... Chief Financial Officer
Kevin A. Bousquette
* Director March 29, 1996
...........................................
Viscount Blakenham
* Chairman, Sotheby's Europe March 29, 1996
........................................... and Director
Simon De Pury
* Director March 29, 1996
...........................................
Walter J. P. Curley
* Director March 29, 1996
...........................................
The Rt. Hon. The Earl of Gowrie
* Director March 29, 1996
...........................................
The Marquess of Hartington
* Director March 29, 1996
...........................................
R. Julian de la M. Thompson
/s/ PATRICIA CARBERRY Vice President, Controller March 29, 1996
........................................... and Chief Accounting
Patricia Carberry Officer
*By: /s/ KEVIN A. BOUSQUETTE March 29, 1996
.......................................
Kevin A. Bousquette
As Attorney-in-Fact
</TABLE>
24
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
3(a) Amended and Restated Articles of Incorporation of Sotheby's Holdings,
Inc., as amended, incorporated herein by reference to Exhibit 4(b) to
Registration Statement No. 33-26008.
3(b) Restated By-Laws of Sotheby's Holdings, Inc., as amended, incorporated
herein by reference to Exhibit 3(b) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1988, SEC File No. 1-9750,
on file at the Washington D.C. office of the Securities and Exchange
Commission (the "1988 Form 10-K").
4 See Exhibits 3(a) and 3(b).
10(a) Issuing and Paying Agency Agreement, dated February 15, 1989, between
Sotheby's Inc. and the Chase Manhattan Bank, N.A. relating to the
issuance of short-term notes ("U.S. Notes") in the U.S. Commercial
Paper market, incorporated herein by reference to Exhibit 10(g) to
the 1988 Form 10-K, SEC File No. 1-9750, on file at the Washington,
D.C. office of the Securities and Exchange Commission.
10(b) U.S. Commercial Paper Dealer Agreement, dated February 15, 1989,
between Sotheby's, Inc. and Chase Securities, Inc. relating to the
issuance of the U.S. Notes, incorporated herein by reference to
Exhibit 10(h) to the 1988 Form 10-K, SEC File No. 1-9750, on file
at the Washington, D.C. office of the Securities and Exchange
Commission.
10(c) U.S. Commercial Paper Dealer Agreement, dated February 15, 1989,
between Sotheby's, Inc. and Merrill Lynch Money Markets, Inc. relating
to the issuance of the U.S. Notes, incorporated herein by reference to
the Exhibit 10(i) of the 1988 Form 10-K, SEC File No. 1-9750, on file at
the Washington, D.C. office of the Securities and Exchange Commission.
10(d) Lease, dated as of July 25, 1979, among The Benenson Capital Company,
Lawrence A. Benenson, Raymond E. Benenson (collectively, "Benenson")
to Sotheby Parke Bernet Inc., and amendments thereto, all relating to
1334 York Avenue, New York, New York (the "York Avenue Property"),
incorporated herein by reference to Exhibit 10(g) to Registration
Statement No. 33-17667.
10(e) Option Agreement with Form of Exchange Agreement, dated July 25, 1979,
among Benenson and 089 Nosidam Corp. (as nominee of Sotheby Parke
Bernet Inc.) assignments thereof and amendments thereto, all relating
to the York Avenue Property, incorporated herein by reference to
Exhibit 10(h) to Registration Statement No. 33-17667.
10(f) Exchange Agreement, dated October 27, 1986, among Benenson and York
Avenue Development, Inc., and Letter, dated October 27, 1986, from
Benenson to Sotheby's, Inc. and York Avenue Development, Inc.,
concerning zoning matters and security relating to the York Avenue
Property, incorporated herein by reference to Exhibit 10(i) to
Registration Statement No. 33-17667.
10(g) Guarantee, made November 6, 1986, by A. Alfred Taubman in favor of
Benenson relating to the York Avenue Property (the "Taubman
Guarantee"), incorporated herein by reference to Exhibit 10(j)
to Registration Statement No. 33-17667.
</TABLE>
25
S2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
10(h) Letter from Sotheby's, Inc. and York Avenue Development, Inc., dated
October 27, 1986, agreeing to indemnify A. Alfred Taubman from all
liabilities, damages, losses and judgments arising under the Taubman
Guarantee, incorporated herein by reference to Exhibit 10(k) to
Registration Statement No. 33-17667.
10(i) Project Services Agreement (the "Project Agreement"), dated
November 8, 1985, between Sotheby's, Inc. and The Taubman Company,
Inc. relating to the proposed development of the York Avenue Property,
incorporated herein by reference to Exhibit 10(1) to Registration
Statement No. 33-17667.
10(j) Financing and Guarantee Agreement (with exhibits) (the "Financing and
Guarantee Agreement"), dated as of October 1, 1987, among Sotheby's
Inc., York Avenue Development, Inc., and Taubman York Avenue
Associates, Inc., relating to the proposed development of the York
Avenue Property, incorporated herein by reference to Exhibit 10(m)
to Registration Statement No. 33-17667.
10(k) Letter Agreement, from Sotheby's, Inc. to York Avenue Development, Inc.
and Taubman York Avenue Associates, Inc., dated August 18, 1988,
amending the Financing and Guarantee Agreement.
10(l) Assignment and Assumption of Financing and Guarantee Agreement, by
and between Taubman York Avenue Associates, Inc. and York Avenue
Advisors, Inc., dated as of June 1, 1995.
10(m) Bill of Sale and Assignment and Assumption Agreement (regarding
Contracts, General Intangibles, Receivables, and other Assets and
Liabilities), by and between Taubman York Avenue Associates, Inc.
and York Avenue Advisors, Inc. dated as of June 1, 1995.
10(n) Memorandum of Option Agreement, dated January 31, 1981, among Benenson
and 089 Nosidam Corp., relating to the York Avenue Property,
incorporated herein by reference to Exhibit 10(hh) to Registration
Statement No. 33-17667.
10(o) Letter Agreement, dated October 27, 1986, among Benenson and York
Avenue Development, Inc. relating to the York Avenue Property,
incorporated herein by reference to Exhibit 10(ii) to Registration
Statement No. 33-17667.
10(p) Assignment, Assumption Agreement and Release, dated as of
October 1, 1987, among Sotheby's Inc., York Avenue Development,
Inc. and the Taubman Company, Inc. relating to the assignment of
the Project Agreement, incorporated herein by reference to
Exhibit 10(jj) to Registration Statement No. 33-17667.
10(q)* Sotheby's Inc. 1988 Benefit Equalization Plan, incorporated herein
by reference to Exhibit 10(t) to Registration Statement No. 33-17667.
10(r)* Sotheby's Holdings, Inc. 1987 Stock Option Plan as amended and restated
effective June 1, 1994 incorporated herein by reference to
Exhibit 10(o) to the 1994 Form 10-K.
10(s) Agreement of Partnership of Acquavella Modern Art, dated May 29, 1990,
between Sotheby's Nevada, Inc. and Acquavella Contemporary Art, Inc.,
incorporated herein by reference to Exhibit 10(b) to the Form 8-K,
filed on June 7, 1990, SEC, File No. 1-9750, on file at the Washington,
D.C. office of the Securities and Exchange Commission.
10(t) Amendment, dated as of April 19, 1991, between The Benenson Capital
Company, Lawrence A. Benenson and Raymond E. Benenson and York Avenue
Development, Inc. to Amendment to Option Agreement and to Related
Agreements, incorporated herein by reference to Exhibit 10(kk) to the
Company's Annual Report on Form 10K, for the year ended
December 31, 1991, SEC File No. 1-9750.
10(u) Credit Agreement dated as of August 3, 1994, among Sotheby's Holdings,
Inc., Sotheby's Inc., Oatshare Limited, Sotheby's, and Chemical Bank,
incorporated herein by reference to Exhibit 4 to the Second Quarter
Form 10-Q for 1994.
10(v)* Letter Agreement, dated October 25, 1993, between Sotheby's (U.K.) and
Henry Wyndham setting forth certain terms and agreements of his
employment, incorporated herein by reference to Exhibit 10(u) to the
1994 Form 10-K.
10(w)* Letter Agreement, dated October 13, 1993, between Sotheby's (U.K.) and
Henry Wyndham Fine Art Ltd., an art dealing business, setting forth
certain terms and agreements of the purchase of inventory, incorporated
herein by reference to Exhibit 10(v) to the 1994 Form 10-K.
10(x) Guarantee Agreement, dated June 2, 1994, from Sotheby's Holdings, Inc.
to Henry Wyndham, incorporated herein by reference to Exhibit 10(w) to
the 1994 Form 10-K.
10(y) Letter, dated April 21, 1995, from Sotheby's Holdings, Inc. to Coutts
and Co., setting forth an increased guarantee by the Company on Henry
Wyndham's behalf.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
10(z)* Letter Agreement, dated October 27, 1993, between Sotheby's Holdings,
Inc. and Lord Camoys setting forth certain terms and agreements of his
employment, incorporated herein by reference to Exhibit 10(x) to the
1994 Form 10-K.
10(aa)* Letter Agreement, dated December 21, 1993, between Sotheby's (U.K.)
and The Rt. Hon. The Earl of Gowrie setting forth certain terms and
agreements of his employment, incorporated herein by reference to
Exhibit 10(y) to the 1994 Form 10-K.
10(bb)* Letter, dated March 25, 1996, from George Bailey, Managing Director,
Sotheby's Europe, to The Rt. Hon. The Earl of Gowrie setting forth
certain terms and agreements concerning of his consulting arrangement.
(13) Annual Report to Shareholders for the year ended December 31, 1995
(21) Subsidiaries of the Registrant
(23) Consent of Deloitte & Touche LLP
(24) Powers of Attorney
(27) Financial Data Schedule
</TABLE>
- ------------
* A compensatory agreement or plan required to be filed pursuant to Item 14(c)
of Form 10-K.
27
S3
EXHIBIT 10(k)
[SOTHEBY'S LETTERHEAD]
August 18, 1988
York Avenue Development, Inc.
1334 York Avenue
New York, New York 10021
Attention: Michael L. Ainslie
Taubman York Avenue Associates, Inc.
200 East Long Lake Road
Bloomfield Hills, Michigan 48303-0200
Attention: Robert C. Larson
Gentlemen:
We refer to the Financing and Guarantee Agreement (the "Agreement"),
dated as of October 1, 1987, among Sotheby's, Inc. ("Sotheby's"), York
Avenue Development, Inc. ("York") and Taubman York Avenue Associates, Inc.
("Taubman") with respect to the proposed construction of a mixed-use tower
at 1334 York Avenue, New York, New York (the "Project"), and each of us
agrees as follows:
1. If York is unable to obtain third party financing, as may be
required in connection with the pre-development and construction phases of
the Project, Sotheby's shall have the right (but not the obligation) to
loan York all funds which are otherwise unavailable through such third
party financing, and York shall (but, in each case, only with the prior
written approval of Taubman, which may be withheld by Taubman for any
reason or for no reason) borrow such funds from Sotheby's. In the case of
any such borrowing from Sotheby's, York shall pay interest to Sotheby's at
a rate equal to not more than Sotheby's "cost of funds" provided such rate
is acceptable to Taubman in its sole and absolute judgment. If all of the
terms and conditions of such loans from Sotheby's to York are acceptable to
Taubman, in its sole and absolute judgment, Taubman shall guarantee the
repayment of such loans.
2. If Taubman loans funds to York under the Agreement, York has
agreed to pay interest on such loans at the rate of one percent in excess
of The Chase Manhattan Bank's prime commercial lending rate.
Notwithstanding this agreed upon interest rate, if, in lieu of York
obtaining financing from an institutional lender or, as provided in
paragraph 1 of this letter, from Sotheby's in connection with the
construction phase of the Project, Taubman loans funds to York for the
construction of the Project and such funds were borrowed by Taubman for the
purpose of loaning such borrowed funds to York for the construction of the
Project, York shall pay interest on such loans from Taubman at a rate equal
to Taubman's "cost of funds".
3. For the purpose of this letter, "cost of funds" means all costs
to Taubman or Sotheby's, as the case may be, of obtaining such funds from a
third party including, without limitation, interest, fees, premiums,
penalties, taxes and attorney's fees and disbursements.
<PAGE>
York Avenue Development, Inc.
Taubman York Avenue Associates, Inc.
August 18, 1988
Page 2
The Agreement, except as hereby modified, is in all respects ratified
and confirmed and remains in full force and effect.
Very truly yours,
Agreed to: SOTHEBY'S, INC.
YORK AVENUE DEVELOPMENT, INC. By: /s/Diana D. Brooks
------------------
Diana D. Brooks,
By: /s/Michael L. Ainslie President
---------------------
Michael L. Ainslie
President
Dated: August 18, 1988
--
TAUBMAN YORK AVENUE ASSOCIATES, INC.
By: /s/Robert C. Larson
-------------------
Robert C. Larson,
President
Dated: August 18, 1988
EXHIBIT 10(l)
ASSIGNMENT AND ASSUMPTION OF FINANCING AND GUARANTEE AGREEMENT
--------------------------------------------------------------
THIS ASSIGNMENT AND ASSUMPTION OF FINANCING AND GUARANTEE AGREEMENT
(this "Assignment") is made and entered into as of this 1st day of June,
1995, by and between TAUBMAN YORK AVENUE ASSOCIATES, INC., a New York
corporation, having an address at 200 East Long Lake Road, Bloomfield
Hills, Michigan 48304 ("Assignor"), and YORK AVENUE ADVISORS, INC., a New
York corporation, having an address at 200 East Long Lake Road, Bloomfield
Hills, Michigan 48304 ("Assignee").
In consideration of the mutual promises and agreements contained in
this Assignment and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto.
Assignor and Assignee hereby agree as follows:
1. Assignor hereby transfers, conveys and assigns to Assignee all
of Assignor's right, title and interest in, to and under that certain
Financing and Guarantee Agreement, dated as of October 1,1987, among
Sotheby's Inc. a New York corporation ("Sotheby's"), York Avenue
Development, Inc. a New York corporation ("York"), and Assignor, as
amended by Letter Agreement, dated August 18, 1988, among Sotheby's, York,
and Assignor, (as amended, the "Financing and Guarantee Agreement") attached
hereto as Exhibit A and made a part hereof.
2. Assignee hereby accepts the transfer, conveyance and assignment
of all of Assignor's right, title and interest in, to and under the
Financing and Guarantee Agreement. In consideration thereof, Assignee
hereby (i) assumes all of the obligations and liabilities of Assignor under
the Financing and Guarantee Agreement, as well as all future liabilities
and obligations accruing under the Financing and Guarantee Agreement, from
and after the date
<PAGE>
hereof, (ii) agrees to be bound by the terms and provisions of the
Financing and Guarantee Agreement, as if Assignee were an original party
thereto, (iii) agrees to timely perform all of the obligations of Assignor
under the Financing and Guarantee Agreement, and (iv) agrees to indemnify,
defend and hold Assignor harmless from and against any losses or damages
arising from or pertaining to Assignee's failure from and after the date
hereof to carry out its obligations and liabilities under the Financing and
Guarantee Agreement.
3. Assignor hereby represents and warrants to Assignee that
Assignor has not assigned or encumbered its interest in the Financing and
Guarantee Agreement prior to this Assignment.
4. Assignor and Assignee hereby agree to promptly execute any and
all further documentation that may hereafter be required in order to
effectuate the assignment and assumption set forth herein.
5. This Assignment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
6. This Assignment may be executed in two (2) or more counterparts,
all of which as so executed shall constitute one (1) Assignment, binding on
all of the parties hereto, notwithstanding that all the parties are not
signatory to the original or the same counterpart; provided, however, that
no provision of this Assignment shall become effective and binding unless
and until all parties hereto have duly executed this Assignment, at which
time this Assignment shall then become effective and binding as of the date
first above written.
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<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment and Assumption of Financing and Guarantee Agreement as of the
date first above written.
TAUBMAN YORK AVENUE ASSOCIATES, INC.,
a New York corporation
By: /s/ A. Alfred Taubman
-------------------------------
Its: Chairman of the Board
------------------------------
"Assignor"
YORK AVENUE ADVISORS, INC.,
a New York Corporation
By:/s/ A. Alfred Taubman
--------------------------------
Its: Chairman of the Board
------------------------------
"Assignee"
<PAGE>
EXHIBIT A
---------
FINANCING AND GUARANTEE AGREEMENT
---------------------------------
AGREEMENT, made as of the 1st day of October, 1987, among SOTHEBY'S,
INC., a Michigan corporation ("Sotheby's"), YORK AVENUE DEVELOPMENT, INC.
("York"), a New York corporation and a wholly-owned subsidiary of
Sotheby's, and TAUBMAN YORK AVENUE ASSOCIATES, INC., a New York
corporation, having as its shareholder(s), initially, A. Alfred Taubman
("AAT") and, thereafter, at his election, one or more of the present
shareholders of Sotheby's Holdings, Inc. and such other persons and/or
entities as may be designated by AAT (such corporation, together with its
successors and assigns, is hereinafter referred to as "Taubman").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Lease, dated July 25, 1979, between The
Benenson Capital Company, Raymond E. Benenson and Lawrence A. Benenson
(collectively, "Benenson") and Sotheby's, as amended to the date hereof
(the "Lease"), Sotheby's is the lessee of certain real property (the
"Property") located at 1334 York Avenue, New York, New York, together with
a four (4) story building constructed thereon (the "Existing Building");
WHEREAS, York, at its sole cost and expense, presently desires to
develop the Property by constructing a new, mixed-use tower (the "New
Tower") over the Existing Building, and it is York's present intention that
the New Tower will contain both commercial and residential condominium
units (the "Project");
WHEREAS, when the Project is completed, it is presently intended that
York will retain fee ownership of a commercial condominium unit to be
composed of all or a portion of the area comprising the Existing Building
and the first floor of the New Tower (the "Commercial Area"), and the
Commercial Area shall be leased by York to Sotheby's,
<PAGE>
pursuant to the terms of the Lease, as the same may hereafter be amended
from time to time;
WHEREAS, Sotheby's presently desires to make the Sotheby's
Improvements (as defined in Section 4.1) to the Commercial Area, as more
particularly described in this Agreement;
WHEREAS, to permit the development of the Project, York acquired from
Benenson the rights (the "Purchase Rights") to purchase the fee interest to
the Property;
WHEREAS, as a condition to York's acquisition of the Purchase Rights,
Benenson required certain of the obligations of York under the purchase
documents to be guaranteed (the "Purchase Guarantee") by a person
satisfactory to Benenson;
WHEREAS, Sotheby's was willing to provide the Purchase Guarantee, but
Benenson would not accept the Purchase Guarantee from Sotheby's unless
Benenson was permitted to examine Sotheby's most recent financial
statements;
WHEREAS, since Sotheby's was not willing to deliver such financial
statements to Benenson, Sotheby's requested AAT to personally provide the
Purchase Guarantee, and AAT agreed to do so;
WHEREAS, in partial consideration for AAT's providing the Purchase
Guarantee, Sotheby's and York provided AAT with a letter (the "Indemnity
Letter"), pursuant to which Sotheby's and York indemnified AAT from any and
all losses and/or damages incurred by AAT as a result of his execution and
delivery of the Purchase Guarantee;
WHEREAS, since Sotheby's is in the auction business and not in the
business of developing real estate, Sotheby's board of directors has determined
that it would not be in Sotheby's best interest to be at risk under any
construction loans, or otherwise, in connection with the construction and
development of the Project for any liabilities except (i) pre-development
costs ("Sotheby's Pre-Development Costs") in the amount of Two Million Four
Hundred Twelve Thousand Seven Hundred Seventy-One Dollars ($2,412,771),
(ii) all costs and expenses incurred by Sotheby's in connection with the
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<PAGE>
Sotheby's Improvements and (iii) as otherwise specifically provided in this
Agreement; and
WHEREAS, York is not of sufficient financial standing to accomplish
the intended development and has, therefore, requested Taubman to provide
financial backing as may be required to develop the Project, and Taubman
has agreed to do so in accordance with the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, Sotheby's, York and Taubman hereby agree as follows:
ARTICLE I
---------
SCOPE OF TAUBMAN'S OBLIGATIONS
------------------------------
Section 1.1. Subject to the terms and conditions of this Agreement,
-----------
Taubman (and the shareholders of Taubman, as required) shall
(a) provide the Purchase Guarantee;
(b) provide any guarantees of payment and/or of completion (the
"Construction Guarantees" that may be required by any construction lender
in connection with financing the construction and development of the
Project;
(c) provide any guarantees (the "Zoning Guarantees") that may be
required in connection with obtaining proper zoning or zoning bonuses for
the Project;
(d) provide any guarantees (the "Condominium Guarantees") that may be
required in connection with the conversion of the Property to condominium
ownership;
(e) provide any guarantees (the "Credit Guarantees") that may be
required in connection with any "credit enhancers" (including, without
limitation, letters of credit) that may be required or appropriate in
connection with financing the construction and development of the Project;
(f) loan to York all funds which are otherwise unavailable through,
by way of example and not of limitation, third-party financing, as may be
required in connection with the pre-development and construction phases of
the Project (including,
-3-
<PAGE>
without limitation, funds to pay for the cost of the Cladding Work (as
defined in Section 3.2(a)), the First Floor Work (as defined in Section
3.2(a)) and the York Relocation Work (as defined in Section 4.1)), but not
including funds to pay for any fees, costs, expenses or other items which
are billed by, and/or attributable to the services provided by, the
Sotheby's Consultants (as defined in Section 4.3) in connection with the
construction of the Sotheby's Improvements, such loans (1) to be in such
amounts as may be determined by Taubman, (2) to be made in accordance with
the terms and conditions of the promissory note attached hereto as Exhibit
"A", (3) to be guaranteed in accordance with the terms of the non-recourse
guarantee attached hereto as Exhibit "B" (the "Non-Recourse Guarantee"),
and (4) to be secured in accordance with the terms of (i) the non-recourse
pledge agreement attached hereto as Exhibit "C" (the "Pledge Agreement"),
(ii) prior to the time York becomes the fee owner of the Property, the
collateral assignment of contract rights (security agreement) attached
hereto as Exhibit "D" (the "Security Agreement"), and (iii) after the time
York becomes the fee owner of the Property, the fee mortgage attached
hereto as Exhibit "E" (the "Mortgage"); and
(g) provide consultation and advice to York in connection with the
negotiation of the York Development Documents (as defined in Section
5.1(e)).
Section 1.2. This Agreement shall not be deemed to create, as
-----------
between Sotheby's (and York) and Taubman, the relationship of employer-
employee, agency, joint venture or partnership. Neither Sotheby's (and
York) nor Taubman by virtue of this Agreement shall have the right or
authority to act for or to bind the other in any way or to sign the name of
the other or to represent that the other is in any way responsible for the
acts or omissions of the other.
-4-
<PAGE>
ARTICLE II
----------
TAUBMAN'S FEE
-------------
Section 2.1. (a) For the obligations to be undertaken by Taubman
-----------
pursuant to this Agreement, York shall pay Taubman a fee equal to (i)
ninety percent (90%) of the first Fifteen Million Dollars ($15,000,000) of
Project Profits (as defined in, or determined in accordance with, Section
2.l(b)) and (ii) seventy-five percent (75%) of any Project Profits in
excess of Fifteen Million Dollars ($15,000,000). Subject to the provisions
of Section 3.5, such fee shall be paid in such manner and at such time as
may be determined by Taubman.
(b) For the purpose of this Agreement, the term "Project
Profits" means all of the Property Profits or the Residential Units Profits
(each as defined in the Exchange Agreement, dated October 27, 1986, between
Benenson and York (the "Exchange Agreement")), as the case may be, not paid
to Benenson thereunder, and, if for any reason the Exchange Agreement is
not in effect, the term "Project Profits" shall be determined by the
Project accountants (who shall be selected by Taubman) based upon the
definitions set forth in the Exchange Agreement.
Section 2.2. (a) Any and all fees, costs, expenses or other items
-----------
which are billed by, and/or attributable to the services provided by, the
York Consultants (as defined in' Section 5.l(f)) in connection with the
construction and development of the Project shall be deemed to be costs of
the Project in determining Project Profits.
(b) Any and all fees, costs, expenses or other items which are
billed by, and/or attributable to the services provided by, the Sotheby's
Consultants in connection with the construction of the Sotheby's
Improvements shall be the direct obligations of Sotheby's, and shall not be
obligations of Taubman and/or York.
Section 2.3. Any and all fees, costs and expenses payable for any
-----------
"credit enhancers" (including, without limitation, any letters of credit)
shall be deemed to be costs of the Project in determining Project Profits.
-5-
<PAGE>
ARTICLE III
-----------
THE PROJECT
-----------
Section 3.1. All decisions with respect to the Project, including,
-----------
without limitation, the decision whether or not to construct the Project,
shall be solely within the control of Taubman, and, except as otherwise
provided in this Agreement, Taubman shall have no liability to Sotheby's or
York (or any other person) if construction of the Project is not commenced
or any option relating to the Purchase Rights is not exercised; provided,
however, if construction of the Project is not commenced on or before
September 30, 1997, this Agreement shall terminate and, except for
liabilities arising hereunder prior to October 1, 1997, no party shall have
any claim against any other party under this Agreement.
Section 3.2. (a) Subject to the provisions of this Agreement with
-----------
respect to Taubman's rights relating to the development of the Project
(including, without limitation, Sections 3.1, 5.1 and 6.1), York, at its
sole cost and expense, shall be responsible for constructing and developing
the Project, including, without limitation (i) re-cladding the exterior of
the Existing Building and cladding the exterior of the first floor of the
New Tower (the "Cladding Work"), (ii) constructing the shell of the first
floor of the New Tower (the "First Floor Work"), and (iii) performing the
York Relocation Work.
(b) Sotheby's shall not be required to pay for any costs
relating to the Project including, without limitation, the cost incurred by
York for the (i) Cladding Work, (ii) the First Floor Work, and (iii) the
York Relocation Work.
Section 3.3. Sotheby's shall at all times be entitled to occupy the
-----------
Commercial Area.
Section 3.4. If York fails to perform or cause to be performed any
-----------
of its duties or obligations under this Agreement, Taubman may at any time
notify York of the specific failure(s) to comply with this Agreement. If
such failure(s) are not corrected
-6-
<PAGE>
immediately after receipt of such notice, in addition to any other rights
and remedies provided by law, Taubman shall have the right, but not the
obligation, to correct such failure(s) and to assume the responsibility for
performing all of such duties and obligations. In order to effectuate any
such correction of such failure(s), Taubman shall have the right and
easement to enter upon the Property to perform any of such duties and
obligations, such right and easement to be the same as that granted under
Section 8.3.
Section 3.5. (a) Available Cash (as defined in Section 3.5(b)) from
-----------
the Project shall be distributed by York, first, to Sotheby's and Taubman
until (x) Sotheby's Pro-Development Costs and (y) all loans made by Taubman
to York, together with interest thereon to the date of distribution, have
been repaid in full distributions to Taubman and Sotheby's pursuant hereto
being made in the proportion that the then outstanding balance of Sotheby's
Pro-Development Costs or Taubman's loans, as the case may be, bears to the
then outstanding balance of (A) Sotheby's Pre-Development Costs plus (B)
Taubman's loans and, then, in payment of Taubman's fee, as provided in
Section 2.1.
(b) "Available Cash" shall mean (1) cash from the sale or lease
of residential condominium units and, at Taubman's direction, excess
proceeds from any financing(s), less (2) the following items relating
solely to the Project: the aggregate of the reasonable reserves established
by Taubman for working capital needs, payments to Benenson under the
Exchange Agreement, real property taxes, repayment of any debt, selling
expenses and capital improvements.
Section 3.6. York shall maintain at such place or places as it may
-----------
designate, complete and accurate books of account and records relating to
the Project, showing costs, expenditures, receipts, profits and losses and
shall provide for such other matters and information as Taubman deems
necessary, together with copies of all York Development Documents.
-7-
<PAGE>
Section 3.7. Sotheby's shall pay all real estate taxes and
-----------
assessments attributable to the Commercial Area and the common area
maintenance costs allocated to the Commercial Area.
Section 3.8. For the purpose of this Agreement, the term "Project"
-----------
shall not include the Sotheby's Improvements.
ARTICLE IV
----------
SOTHEBY'S IMPROVEMENTS
----------------------
Section 4.1. For the purpose of this Agreement, the term "Sotheby's
-----------
Improvements" means (a) all interior alterations to the Commercial Area,
and (B) the relocation of the main entrance to the Existing Building;
provided, however, with respect to such relocation, the term "Sotheby's
Improvements" shall not include (1) the construction of the new entrance,
including the fenestrations where such entrance is to be located, and (2)
the canopy above such entrance (items (1) and (2) being referred to herein
as the "York Relocation Work").
Section 4.2. (a) Except as provided in Section 4.2(b), all
-----------
decisions in connection with the planning, design, development,
construction and installation of the Sotheby's Improvements shall be solely
within the control of Sotheby's, and Sotheby's shall be solely responsible
for the cost of the Sotheby's Improvements.
(b) Taubman shall have the right to approve all plans and
specifications (and all changes thereto) relating to the relocation of the
main entrance to the Existing Building, such approval not to be
unreasonably withheld or delayed (it being understood and agreed that
Taubman shall not be responsible for any defects in such plans or
specifications or in the improvements constructed in accordance therewith).
Section 4.3. Sotheby's shall have the right (without Taubman's
-----------
approval) to select and retain independent architects, engineers and
consultants (the "Sotheby's Consultants") who shall have the
responsibilities delegated to them by Sotheby's.
-8-
<PAGE>
Section 4.4. York shall keep in full force and effect, and shall
-----------
not, without the prior written consent of Taubman, amend, modify, or
otherwise alter the terms of, that certain Project Services Agreement,
dated November 8, 1985, between Sotheby's and The Taubman Company, Inc.
ARTICLE V
---------
CONDITIONS PRECEDENT TO TAUBMAN'S OBLIGATIONS
---------------------------------------------
Section 5.1. Taubman shall not be obligated (i) to provide the
-----------
Construction Guarantees, the Zoning Guarantees, the Condominium Guarantees
and/or the Credit Guarantees or (ii) to loan any funds to York unless each
of the following conditions have been satisfied prior to the time Taubman
is to provide any of such items (provided, however, Taubman shall have the
right to waive any one or more of such conditions, which waiver to be
evidenced by a signed writing):
(a) Taubman shall have approved the construction lender(s) in
connection with financing the construction and development of the
Project and the terms and conditions of such financing;
(b) York shall have acquired the fee title to the Property, and
Taubman and its counsel shall have approved the form and
substance of all agreements, documents and other instruments
executed in connection with such acquisition;
(c) the deed(s) executed by Benenson, in form and content acceptable
to Taubman and its counsel, vesting fee title to the Property in
York shall have been properly recorded in New York County;
(d) the Property shall be properly zoned for the intended use,
purpose and scope of the Project;
(e) Taubman and its counsel shall have approved the form and
substance of all documents, agreements and other instruments
(including, without limitation, loan agreements, mortgages,
notes, letters of credit and guarantees)
-9-
<PAGE>
executed by any party in connection with the development,
construction or financing of the Project, the obtaining of proper
zoning for the Project, the conversion of the Property to
condominium ownership, the sale of residential and commercial
condominium units at the Property and/or the items referred to in
the preamble of this Section 5.1 (such documents, agreements and
other instruments are collectively referred to as the "York
Development Documents");
(f) Taubman shall have approved all contractors, sub-contractors,
architects, engineers and other third-party consultants
(collectively, the "York Consultants") employed or to be employed
by York in connection with the development of the Project and,
without limiting the generality of paragraph (e) of this Section
5.1, Taubman and its counsel shall have approved the form and
substance of all agreements or contracts with respect to the York
Consultants;
(g) Taubman shall have approved all plans and specifications (as
approved, the "York Plans") with respect to the construction and
development of the Project (it being understood and agreed that
Taubman shall not be responsible for any defects in the York
Plans, or in the building or other improvements constructed or
made in accordance therewith);
(h) York shall have obtained and shall have delivered to Taubman
evidence satisfactory to Taubman that York has good and
marketable fee title to the Property, free of any encumbrances or
other exceptions to title other than those approved by Taubman,
which evidence may include, at Taubman's request, a copy of an
owner's title insurance policy approved by the New York State
Insurance Department, in form and substance reasonably
satisfactory to Taubman and issued by a title insurance company
reasonably acceptable to Taubman and evidence of payment of the
premiums therefor;
-10-
<PAGE>
(i) York shall have obtained and shall have delivered to Taubman a
copy of a11 policies of insurance which Taubman reasonably
requires York to maintain in connection with the development of
the Project, each in form and substance reasonably satisfactory
to Taubman and issued by a company or companies reasonably
acceptable to Taubman, and Taubman shall have received evidence
of payment of the premiums therefor;
(j) York shall have furnished Taubman with performance and labor and
material payment bonds, in the full amount of the cost of
construction of the Project, with a surety company authorized to
do business in the State of New York and reasonably acceptable to
Taubman;
(k) all representations and warranties contained in the York
Development Documents shall be true (i) on and as of the date the
York Development Documents were executed and (ii) on and as of
the date Taubman provides the guarantees and/or loans funds to
York, and there shall exist no condition, event or act which
would constitute an event of default under the York Development
Documents or which would, with notice or lapse of time, or both,
constitute such an event of default;
(l) Taubman shall have approved a budget with respect to the
construction and development of the Project, which budget shall
break down the project development costs in such detail as
reasonably requested by Taubman;
(m) York shall have consulted with Taubman with respect to, and
Taubman shall have approved (i) a plan for the marketing and sale
of commercial and residential condominium units at the Property,
(ii) the broker(s) for such marketing and sale, and their fees,
and (iii) the selling prices and the other terms of sale of such
units; and
(n) Taubman shall have approved all other documents reasonably
required by Taubman in connection with the development and
financing of the Project
-11-
<PAGE>
and the marketing and sale of commercial and/or residential
condominium units at the Property.
ARTICLE VI
----------
COVENANTS OF YORK
-----------------
Section 6.1. Until such time as the Project is completed, all loans
-----------
by Taubman to York have been repaid in full, all guarantees provided by
Taubman under this Agreement have been terminated, and Taubman has received
its entire fee under this Agreement, York hereby covenants with Taubman
that:
(a) all construction work performed by, or caused to be
performed by, York on the Property shall be diligently and
expeditiously performed to completion in accordance with the
York Plans in a first-class workmanlike manner, in
accordance with good construction practices, all applicable
laws, ordinances, rules and regulations and insurance
requirements and otherwise in accordance with the terms of
the York Development Documents and this Agreement;
(b) York will perform all of its obligations under the York
Development Documents in accordance with the terms thereof
and shall not, without the prior written consent of Taubman,
amend, alter, extend or otherwise modify the terms of any
York Development Document or any other document or item
approved by Taubman under this Agreement (including, without
limitation, any budget or sales and marketing plan);
(c) York shall not make any changes in the York Plans without
Taubman's prior written approval;
(d) York shall require the York Consultants to perform their
work in accordance with the terms of their respective
contracts and agreements and shall not, without Taubman's
prior written approval, amend, modify or alter the
responsibilities of any of the York Consultants under any
such contract or agreement;
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<PAGE>
(e) York shall maintain all insurance policies required by
Taubman under Section 5.1(i), and any additional policies of
insurance reasonably required by Taubman, each in form and
substance reasonably satisfactory to Taubman and issued by a
company or companies reasonably acceptable to Taubman, in
amounts reasonably acceptable to Taubman, and shall deliver
to Taubman evidence of payment of premiums therefor;
(f) York shall deliver to Taubman, for its approval, all
documents and instruments required to be executed and/or
filed in connection with the creation of condominium units
in the Project;
(g) York shall deliver to Taubman, for its approval, all
documents and instruments required to be executed and/or
filed in connection with obtaining proper zoning for the
Property;
(h) York shall deliver to Taubman copies of all documents,
instruments, statements, or notices required to be or
otherwise delivered pursuant to the York Development
Documents;
(i) York shall promptly pay and discharge all demands for
payment relating to the construction of the Project and take
all other steps to avoid the assertion of claims against the
Property or the improvements constructed thereon, and in the
event any lien is filed against the Property or the
improvements located thereon, York shall, at Taubman's
request, discharge such lien within the later of (i) sixty
(60) days after the filing thereof and (ii) five (5) days
after such request;
(j) Taubman shall have the right to enter the Property and
inspect the improvements constructed thereon and the work of
construction at all times and examine the books, records,
accounting data and other documents of York pertaining to
construction of the Project, and make extracts and copies
-13-
<PAGE>
of the same, and the books, records, accounting data and
documents of York shall be available to Taubman at York's
principal place of business during normal business hours;
(k) York shall not, without the prior written consent of Taubman
(i) make any expenditure not provided for in a budget
approved by Taubman or (ii) market or sell the commercial
and residential condominium units at the Property other than
in accordance with a marketing and sales plan and a
condominium offering plan approved by Taubman;
(l) York shall not, without the prior written consent of
Taubman, do any act and/or execute any document (including,
without limitation, exercising any right to become the fee
owner of the Property, changing the selling prices of the
commercial and residential condominium units at the Property
or entering into any agreement or arrangement with any
construction lender(s), the York Consultants or broker(s))
that would have required Taubman's approval or consent if
the performance of such act and/or the execution of such
document would have required Taubman's approval or consent
under Section 5.1;
(m) York shall not engage in any business other than the
business of acquiring the fee interest from Benenson,
developing the Project, leasing the Commercial Area to
Sotheby's, marketing and selling residential and commercial
condominium units and taking such other action as shall be
necessary or desirable to perform all obligations required
to be performed by York pursuant to the terms of this
Agreement, and York shall preserve its corporate existence
and good standing and all its material rights, privileges
and franchises necessary and desirable in the conduct of its
business;
(n) York shall pay and discharge (i) all taxes, assessments and
government charges or levies imposed on it or its income or
profits or any of its
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<PAGE>
properties prior to the date on which penalties attach
thereto and (ii) all lawful claims which, if unpaid, might
cause a lien or charge to be created against any of its
properties, except any such tax, assessment, charge or levy
the payment of which is being contested in good faith by
appropriate proceedings and for which it has made adequate
reserves on its books;
(o) York shall comply with the requirements of all applicable
laws, regulations and orders of any governmental authority,
a violation of which could affect the Project or York's
business or financial condition, except any such law,
regulation or order which is being contested by it in good
faith by appropriate proceedings; provided however, that
such contest will not cause harm to York or the Project if
York shall fail to prevail in such contest;
(p) York shall furnish to Taubman, promptly after knowledge
thereof shall have come to the attention of York, written
notice of any threatened or pending litigation, arbitral or
governmental or administrative proceeding against York which
could adversely affect the Project or York's business or
properties;
(q) York shall, upon the request of Taubman, give any
representative of Taubman access during normal business
hours to, and permit such representative to inspect, all
properties belonging to it and permit such representative,
to examine, copy and make extracts from, all books, records
and documents in its possession relating to its affairs, as
such representative may reasonably require;
(r) York shall obtain (and, once obtained, maintain) all
authorizations, licenses, consents or approvals as shall now
or hereafter be necessary or desirable in the opinion of
Taubman under applicable law or regulation in connection
with the making and performance of this Agreement and with
respect to the Project, and will promptly furnish copies
thereof to Taubman;
-15-
<PAGE>
(s) York will not create or permit to exist any lien or
encumbrance (including any charge upon assets purchased
under conditional sales or other title retention agreements)
upon any of its assets whether now owned or hereafter
acquired; provided, however, that this restriction shall not
apply to nor prevent the creation or existence of (i) liens
in favor of Taubman, (ii) liens for taxes not yet due or
which are being contested in good faith by appropriate
proceedings, and (iii) liens referred to in Schedule "A"
hereto;
(t) York shall not make or have outstanding any loan or advance
to, or own or acquire any stock or securities of, or any
interest in, or make any capital contribution to, any person
(other than Taubman);
(u) York shall not merge or consolidate with, or liquidate into,
any other corporation;
(v) York will not make capital expenditures, except as permitted
in this Agreement;
(w) York shall not create, incur, assume or suffer to exist any
indebtedness, except as permitted in this Agreement;
(x) York shall not assume, guarantee, endorse, or otherwise
become liable for the obligation of any person (other than
Taubman), whether by guarantee, letter of credit, pledge,
security agreements or otherwise, except by endorsement of
negotiable instruments for deposit or collection in the
ordinary course of business and except as permitted in this
Agreement;
(y) York shall not sell, lease, transfer or otherwise dispose of
any of its assets (including, without limitation, assets
held by it as lessee and shares of stock), except as
permitted under this Agreement; and
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<PAGE>
(z) except for amounts equal to base rental payments received
from Sotheby's under the Lease (and only after receipt by
York of such base rental payments), York shall not pay or
declare any dividend on any class of its stock, or make any
other distribution on account of any class of its stock, or
redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its stock.
ARTICLE VII
-----------
INDEMNITIES AND RELEASES
------------------------
Section 7.1. (a) Sotheby's shall defend, indemnify and hold
-----------
harmless Taubman from, against and in respect of any and all claims,
demands, actions, suits or causes of action resulting from, and pay all
costs, expenses, losses or damages sustained, incurred or resulting from,
(i) any non-compliance or breach by Sotheby's of any provision contained in
this Agreement and (ii) the construction of the Sotheby's Improvements.
(b) York shall defend Taubman against any and all claims,
demands, actions, suits or proceedings arising out of or in connection
with, and indemnify and hold harmless Taubman from any and all liabilities,
damages, losses and judgments arising (i) from any non-compliance or breach
by York of any provision contained in this Agreement, (ii) the construction
of the Project and (iii) under or in connection with, the Construction
Guarantees, the Zoning Guarantees, the Condominium Guarantees and/or the
Credit Guarantees. York shall also pay and reimburse Taubman in respect of
any and all costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by Taubman under such
guarantees.
(c) Taubman shall defend, Indemnify and hold harmless Sotheby's
from, against and in respect of any and all claims, demands, actions, suits
or causes of action resulting from, and pay all costs, expenses, losses or
damages sustained, incurred or resulting from, (i) any non-compliance or
breach by Taubman of any provision contained in this Agreement and (ii) the
construction of the Project; provided, however, (A) in no
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<PAGE>
event shall Taubman be liable to Sotheby's under this Section 7.1(c) or any
other provision of this Agreement for consequential damages (including,
without limitation, losses to works of art or other objects auctioned by
Sotheby's or loss of profits) and (B) all liabilities of Taubman hereunder
shall be deemed to be costs of the Project for the purpose of determining
the Project Profits.
(d) Each party shall look first to any insurance in its favor
before making any claim against any other party, and, to the extent
possible without additional cost, each party shall obtain, for each policy
of such insurance, provisions permitting waiver of any claim against any
other party for loss or damage within the scope of the insurance, and each
party, to such extent permitted, for itself and its insurers waives all
such insured claims against any other party.
Section 7.2. Sotheby's is hereby released from any and all
-----------
obligations under the Indemnity Letter.
Section 7.3. York's obligations under this Agreement shall be
-----------
guaranteed by the Non-Recourse Guarantee and secured by the Pledge
Agreement, the Security Agreement and the Mortgage.
ARTICLE VIII
------------
EASEMENTS
---------
Section 8.1. York shall grant to Sotheby's, and Sotheby's shall grant
-----------
to York (for the benefit of York and the owners of residential condominium
units in the Project), such vehicular and pedestrian easements as may be
required in connection with the Project, in Taubman's reasonable judgment,
for the purposes of (i) vehicular ingress-and egress, (ii) parking of motor
vehicles, (iii) unobstructed vehicular passage and circulation, (iv)
pedestrian ingress and egress and (v) unobstructed pedestrian passage and
circulation.
Section 8.2. (a) York shall grant to Sotheby's, and Sotheby's shall
-----------
grant to York (for the benefit of York and the owners of residential
condominium units in the Project), such utility easements as may be
required in connection with the Project, in Taubman's
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<PAGE>
judgment, including, without limitation, for the purpose of connecting to
and using utility facilities, and constructing, installing, maintaining,
repairing, enlarging, replacing, relocating and/or removing any such
connections, provided that no such use and/or connection shall be utilized
or allowed in a manner which unreasonably burdens the grantor's premises,
results in interference with the use and/or operations of the improvements
thereon, unreasonably inconveniences the occupants thereof or adversely
affects the fire insurance rating standard of such improvements.
(b) York shall, if requested by Taubman, dedicate and/or convey
to the City of New York or any other governmental entity, or to any public
utility company providing utility service to the Project, all or any
portion of the utility facilities for the purposes for which they are
intended, provided that the service provided to Sotheby's by the utility
facilities to be dedicated shall not be diminished or adversely affected in
any way. If, in connection with the dedication and/or conveyance of the
utility facilities, York needs or desires Sotheby's to join in the
execution of any applications, deeds or other documents, Sotheby's shall do
so, upon any request therefor. Upon any dedication and/or conveyance of the
utility facilities (or any portion thereof), the easement granted under
Section 8.2(a) shall terminate (to the extent of the utility facilities so
dedicated or conveyed) without the payment of any consideration to the
grantee thereof or any other persons on account of the termination of such
easement. In the event that any such dedication and/or conveyance of the
utility facilities (or any portion thereof) is reversed or abandoned, the
easement rights set forth in Section 8.2(a) shall automatically be revived.
Section 8.3. York shall grant to Sotheby's, and Sotheby's shall grant
-----------
to York, such construction easements as may be required in connection with
the Project, in Taubman's reasonable Judgment, for purposes of, in the case
of York, constructing the Project and, in the case of Sotheby's,
constructing the Sotheby's Improvements.
Section 8.4. Nothing contained in this Article VIII including,
-----------
without limitation, the grant of any or all easements under this Article
VIII, shall be deemed to constitute a
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<PAGE>
dedication of any property, or any portion or portions thereof, to any
governmental body or agency or to the general public, or be construed to
create any rights in or for the benefit of any space lessee of any part of
the Project (other than Sotheby's), it being the intention of the parties
that this Agreement shall be strictly limited to and for the purpose set
forth in this Agreement. The parties may, however, extend the benefit of
the easements granted under this Article VIII to occupants of the Project,
but such grant shall be subject to the provisions of this Agreement.
ARTICLE IX
----------
COOPERATION; ETC.
-----------------
Section 9.1. Taubman, York and Sotheby's shall cooperate fully with
-----------
one another with respect to the development, financing and construction of
the Project and the construction of the Sotheby's Improvements, and each
party shall use reasonable efforts to cause its architects, engineers,
contractors and subcontractors to cooperate and coordinate with the other
party's architects, engineers, contractors and subcontractors, to the
extent reasonably practicable to achieve the completion of the Project and
the objectives and commitments set forth in this Agreement. Each party
shall make reasonable efforts to perform its construction so as not to (i)
cause any unnecessary increase in the cost of construction to the other
parties, and (ii) unreasonably interfere with the construction of the other
parties and/or any other construction being performed on the Property or
any part thereof, and each party shall at all times take any and all safety
measures reasonably required to protect the other parties and all occupants
from injury or damage caused by or resulting from the performance of its
construction. Taubman shall give Sotheby's, not less than ninety (90) days
prior notice of the commencement of construction of the Project, and
Taubman and York shall use their respective best efforts to assure that the
construction of the Project shall be performed in such manner so as to
minimize any interference with Sotheby's operations. During the period of
construction of the Project, Taubman and York shall use their respective
best
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<PAGE>
efforts (a) to keep Sotheby's regularly and fully informed with respect to
construction schedules (and updates thereto) and the progress of the
construction work, and (b) to give advance notice to Sotheby's of any
deliveries or unusual circumstances that might adversely affect Sotheby's
operations.
Section 9.2. Without limiting the generality of Section 9.1,
-----------
Sotheby's and York shall, within ten (10) days after a request by Taubman
therefor, join in, execute, acknowledge, and authorize the timely delivery
and/or recordation of any and all documents, declarations, deed
restrictions and other instruments which are required under the zoning
resolution of the City of New York (the "ZRCNY") and other applicable land
use, building and environmental laws, rules and regulations to apply for,
and to obtain from the governmental agency with jurisdiction thereover
approval of, any actions, permits, licenses, consents and authorizations
for construction of the Project, including, without limitation, a change in
the zoning map applicable to the Property, a variance from or a special
permit or authorization pursuant to the ZRCNY, and excavation and
foundation and building permits from the New York City Department of
Buildings.
Section 9.3. Without limiting the generality of Section 9.1, in
-----------
connection with the conversion and/or development of all or a portion of
the Property to condominium and/or cooperative ownership, Sotheby's and
York shall, within ten (10) days after a request by Taubman therefor, join
in, execute, acknowledge, and authorize the timely delivery and/or
recordation of any and all documents and instruments (including, without
limitation, offering plans, declarations, certifications and affidavits and
documents relating to the maintenance and repair of common areas) that may
be required and/or appropriate in connection with the creation of
condominium and/or cooperative units or required under any applicable
statutes or regulations relating to such conversion and/or development of
the Property. Taubman, in its sole discretion, shall determine the initial
number of members Sotheby's and/or York shall have on the condominium
association board of directors.
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<PAGE>
Section 9.4. Without limiting the generality of Section 9.1,
-----------
Sotheby's shall, within ten (10) days after a request therefor by Taubman,
execute, acknowledge, and authorize the timely delivery and/or recordation
of any and all documents and instruments that may be required to evidence
the subordination of the Lease (a) to any Declaration of Condominium filed
in respect of the Project and (b) to the lien of any mortgage(s) in favor
of any lender(s) in connection with financing the development of the
Project; provided, however, Sotheby's obligation under clause (b) of this
Section 9.4 in respect of such documents and instruments shall be
conditioned upon the receipt by Sotheby's of the standard form non-
disturbance agreement of such lender(s).
Section 9.5. Without limiting the generality of Section 9.1, at
-----------
Taubman's request, York shall (i) exercise any and all of its rights to
become the fee owner of the Property and (ii) enter into the York
Development Documents.
Section 9.6. Except for Sotheby's in respect of the Sotheby's
-----------
Improvements, nothing contained in this Article IX shall be deemed to give
Sotheby's or York the right to consent to or approve any plans and
specifications, construction schedules, marketing plans, financing
arrangements and cost estimates in connection with the development of the
Project or any matters relating thereto.
Section 9.7. Without the prior written consent of Taubman, neither
-----------
Sotheby's nor York shall (i) submit any design plans or other plans or any
other documents relating to the Project to any person, or (ii) make any
commitments to such person with respect thereto.
Section 9.8. Taubman will (a) subordinate the Mortgage to the lien
-----------
of any construction lender, or discharge the Mortgage, to the extent
required by such lender and (b) subordinate the Mortgage to any Declaration
of Condominium filed in respect of the Project.
Section 9.9. After York becomes the fee owner of the Property, York
-----------
and Sotheby's shall attend the Lease (a) in any manner as may reasonably be
required by any
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<PAGE>
construction lender, and (b) to provide for annual base rental payments
which shall be One Dollar ($1.00) provided that the Lease continues to be
in all other respects a "triple net" lease. Sotheby's shall have the right
to purchase the commercial condominium unit referred to in the third
WHEREAS clause for One Dollar ($1.00).
ARTICLE X
---------
MISCELLANEOUS
-------------
Section 10.1. All notices, requests, consents and other
------------
communications which are required or permitted by this Agreement shall be
in writing and shall either be delivered in person or sent by ordinary
mail, postage pre-paid, and addressed as follows:
If to Sotheby's: Sotheby's Holdings, Inc.
c/o Sotheby's, Inc.
1334 York Avenue
New York, New York 10021
Attention: Michael L. Ainslie
If to York: York Avenue Development, Inc.
1334 York Avenue
New York, New York 10021
Attention: Michael L. Ainslie
If to Taubman: Taubman York Avenue Associates, Inc.
200 East Long Lake Road
Bloomfield Hills, Michigan 48303-0200
Attention: A. Alfred Taubman
With a copy to: Jeffrey H. Miro, Esq.
Miro Miro & Weiner
500 North Woodward Avenue, Suite 200
Bloomfield Hills, Michigan 48303-0908
or to such other address as may be designated from time to time by any
party hereto by written notice pursuant to this Section 10.1. Notices,
requests, consents, and other communications shall be deemed to be given
when delivered, if personally delivered, or three (3) days after mailing,
if mailed in accordance with the provisions of this Section 10.1.
Section 10.2. (a) Neither Sotheby's nor York shall assign or
------------
transfer, in any manner (through the transfer of stock, or otherwise), this
Agreement or any of its rights or duties
-23-
<PAGE>
hereunder or any interest herein, by operation of law or otherwise, without
the prior written consent of Taubman.
(b) Taubman shall have the right to assign or transfer, in any
manner, this Agreement or any of its rights or duties hereunder or any
interest herein, without the prior written consent of either Sotheby's or
York.
Section 10.3. This Agreement may not be changed, modified, altered or
------------
amended except by a writing executed by each of the parties hereto.
Section 10.4. As used herein, the singular shall include the plural
------------
and vice versa, and any gender shall include all genders as the context may
require.
Section 10.5. This Agreement shall be governed by and construed in
------------
accordance with the laws of the State of New York.
Section 10.6. Subject to the provisions of Section 10.2, the
------------
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Section 10.7. The failure of any party hereto to enforce, or the
------------
delay by any party in enforcing, any of its rights hereunder shall not be
deemed a continuing waiver or a modification hereof, and each party may,
within the time provided by applicable law, commence appropriate legal
proceedings to enforce any and all of such rights. All rights and remedies
provided for herein shall be cumulative and in addition to any other rights
or remedies any such party may have at law or in equity.
Section 10.8. The captions of this Agreement are inserted only as a
------------
matter of convenience and for reference. They do not define, limit or
describe the scope or intent of this Agreement, and they shall not affect
the interpretation of this Agreement. All exhibits and schedules which are
mentioned in this Agreement are made a part hereof.
Section 10.9. The provisions of this Agreement are for the exclusive
------------
benefit of the parties and not for the benefit of any other person. Except
as otherwise provided in this Agreement, this Agreement shall not be deemed
to have conferred any rights, express or
-24-
<PAGE>
implied, upon any third person. Nothing in this Agreement shall be
construed to create any rights in or for the benefit of any space lessee
(except Sotheby's) of any part of the Project.
Section 10.10. (a) If any party shall bring an action or proceeding
-------------
(including, without limitation, any cross-complaint, counterclaim or third
party claim) against any other party or parties by reason of the breach or
alleged violation of any covenant, term or obligation of this Agreement, or
for the enforcement of any provision of this Agreement, or otherwise
arising out of this Agreement, the prevailing party in such action or
proceeding shall be entitled to its costs and expenses of suit including,
without limitation, reasonable attorneys' fees and disbursements, which
shall be payable whether or not such action is prosecuted to judgment.
"Prevailing party" within the meaning of this Section 10.10 shall include,
without limitation, a party who dismisses an action for recovery under this
Agreement in exchange for payment of the sums allegedly due, performance of
covenants allegedly breached or consideration substantially equal to the
relief sought in the action.
(b) If any party is required to initiate or defend any action or
proceeding with a third party (including, without limitation, any cross-
complaint, counterclaim or third party claim) because of any other party's
breach of or failure to enforce this Agreement, or otherwise arising out of
this Agreement, and such party is the prevailing party in such action or
proceeding, then such party shall be entitled to reasonable attorneys' fees
and disbursements from such other party.
(c) Attorneys' fees under this Section 10.10 shall include,
without limitation, attorneys' fees on any appeal and, in addition, a party
entitled to attorneys' fees shall be entitled to all other reasonable costs
and expenses incurred in connection with such action.
Section 10.11. For the purpose of this Agreement, the term "person"
-------------
shall mean any individual, partnership, corporation, business trust, joint
stock company, trust,
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<PAGE>
unincorporated association, joint venture, governmental authority or other
entity of whatever nature.
Section 10.12. The invalidation of any of the provisions contained in
-------------
this Agreement, or of the application thereof to any person, by judgment or
court order shall in no way affect any of the other provisions of this
Agreement or the application thereof to any other person or circumstance
and this Agreement shall remain in effect.
Section 10.13. This Agreement may be signed in two or more
-------------
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties here to has executed this
Agreement as of the date and year first above written.
SOTHEBY'S, INC.
By
----------------------------
Mitchell Zuckerman,
Senior Vice President
YORK AVENUE DEVELOPMENT, INC.
By
----------------------------
Michael L. Ainslie,
` President
TAUBMAN YORK AVENUE ASSOCIATES, INC.
By
----------------------------
Robert C. Larson,
President
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<PAGE>
SOTHEBY'S LETTERHEAD
August 18, 1988
York Avenue Development, Inc.
1334 York Avenue
New York, New York 10021
Attention: Michael L. Ainslie
Taubman York Avenue Associates, Inc.
200 East Long Lake Road
Bloomfield Hills, Michigan 48303-0200
Attention: Robert C. Larson
Gentlemen:
We refer to the Financing and Guarantee Agreement (the "Agreement"),
dated as of October 1, 1987, among Sotheby's, Inc. ("Sotheby's"), York
Avenue Development, Inc. ("York") and Taubman York Avenue Associates, Inc.
("Taubman") with respect to the proposed construction of a mixed-use tower
at 1334 York Avenue, New York, New York (the "Project"), and each of us
agrees as follows:
1. If York is unable to obtain third party financing, as may be
required in connection with the pre-development and construction phases of
the Project, Sotheby's shall have the right (but not the obligation) to loan
York all funds which are otherwise unavailable through such third party
financing, and York shall (but, in each ease, only with the prior written
approval of Taubman, which may be withheld by Taubman for any reason or for
no reason) borrow such funds from Sotheby's. In the ease of any such
borrowing from Sotheby's, York shall pay interest to Sotheby's at a rate
equal to not more than Sotheby's "cost of funds" provided such rate is
acceptable to Taubman in its sole and absolute judgment. If all of the
terms and conditions of such loans from Sotheby's to York are acceptable to
Taubman, in its sole and absolute judgment, Taubman shall guarantee the
repayment of such loans.
2. If Taubman loans funds to York under the Agreement, York has
agreed to pay interest on such loans at the rate of one percent in excess
of The Chase Manhattan Bank's prime commercial lending rate.
Notwithstanding this agreed upon interest rate, if, in lieu of York
obtaining financing from an institutional lender or, as provided in
paragraph 1 of this letter, from Sotheby's in connection with the
construction phase of 'the Project, Taubman loans funds to York for the
construction of the Project and such funds were borrowed by Taubman for the
purpose of loaning such borrowed funds to York for the construction of the
Project, York shall pay interest on such loans from Taubman at a rate equal
to Taubman's "cost of funds".
3. For the purpose of this letter, "cost of funds" means all costs
to Taubman or Sotheby's, as the case may be, of obtaining such funds from a
third party including, without limitation, interest, fees, premiums,
penalties, taxes and attorney's fees and disbursements.
<PAGE>
York Avenue Development, Inc.
Taubman York Avenue Associates, Inc.
August 18, 1988
Page 2
The Agreement, except as hereby modified, is in all respects ratified
and confirmed and remains in full force and effect.
Very truly yours,
Agreed to: SOTHEBY'S, INC.
YORK AVENUE DEVELOPMENT, INC. By: /s/ Diana D. Brooks
---------------------------
Diana D. Brooks,
By: /s/Michael L. Ainslie President
-------------------------
Michael L. Ainslie,
President
Dated: August 18, 1988
--
TAUBMAN YORK AVENUE ASSOCIATES, INC.
By: /s/ Robert C. Larson
-------------------------
Robert C. Larson
President
Dated: August 18, 1988
--
EXHIBIT 10(m)
BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT
----------------------------------------------------
(REGARDING CONTRACTS, GENERAL INTANGIBLES, RECEIVABLES AND
OTHER ASSETS AND LIABILITIES)
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment") is made
and entered into as of this 1st day of June, 1995, by and between TAUBMAN
YORK AVENUE ASSOCIATES, INC. a New York corporation, having an address at
200 East Long Lake Road, Bloomfield Hills, Michigan 48304 ("Assignor"), and
YORK AVENUE ADVISORS, INC., having an address at 712 Fifth Avenue, 38th
floor, New York, New York 10019, Attention: Robert S. Taubman ("Assignee").
In consideration of the mutual promises and agreements contained in
this Assignment and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto,
Assignor and Assignee hereby agree as follows:
1. Assignor hereby grants quit claims, sells, conveys, transfers
and assigns to Assignee, its successors and assigns, all of Assignor's
right, title and interest in, to and under any and all contracts,
agreements, general intangibles, receivables, and other assets owned by
Assignor or in which Assignor has an interest: TO HAVE AND TO HOLD the same
unto said Assignee, its successors and assigns, forever (All of Assignor's
contracts, agreements, general intangibles, receivables, and other assets
are collectively referred to as the "Assets");
2. Assignee hereby accepts the conveyance, transfer, and assignment
of all of Assignor's right, title and interest in, to and under the Assets.
Assignee hereby assumes any and all liabilities and obligations of Assignor
with respect to the Assets from and after the date hereof, specifically
including, without limitation, all current and accrued liabilities of
Assignor, as well as all future liabilities and obligations accruing, with
respect to the Assets. (All of Assignor's liabilities and obligations
relating to the Assets are collectively referred to as the "Liabilities").
Assignee hereby agrees to (i) be bound by the terms and provisions of any
<PAGE>
contracts or other agreements relating to the Assets and/or Liabilities as
if Assignee were the original party thereto, (ii) timely perform all of the
obligations and liabilities of Assignor with respect to the Assets and
Liabilities from and after the date hereof, and (iii) indemnify, defend and
hold Assignor harmless from and against any losses or damages arising from
or pertaining to the Assets being conveyed hereunder and/or the Liabilities
being assumed by Assignee hereunder from and after the date hereof.
3. Assignor and Assignee hereby agree to promptly execute any and
all further documentation that may hereafter be required in order to
effectuate any of the assignments and assumptions set forth herein.
4. This Assignment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
5. This Assignment may be executed in two (2) or more counterparts,
all of which as so executed shall constitute one (1) Assignment, binding on
all of the parties hereto, notwithstanding that all the parties are not
signatory to the original or the same counterpart; provided, however, that
no provision of this Assignment shall become effective and binding unless
and until all parties hereto have duly executed this Assignment, at which
time this Assignment shall then become effective and binding as of the date
first above written.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this Bill of
Sale and Assignment and Assumption Agreement as of the date first above
written.
TAUBMAN YORK AVENUE ASSOCIATES, INC.,
a New York Corporation
By: /s/ A. Alfred Taubman
-------------------------------------
Its: Chairman of the Board
------------------------------------
"Assignor"
YORK AVENUE ADVISORS, INC.,
a New York corporation
By: /s/ A. Alfred Taubman
-----------------------------------
Its: Chairman of the Board
-----------------------------------
"Assignee"
EXHIBIT 10(y)
[SOTHEBYS LETTERHEAD]
April 21, 1995
Mr A.G Hazell
Coutts and Co.
15 Lombard Street
London EC3V 9AU
Dear Mr. Hazell,
In regards to the Henry Wyndham loan, as we discussed, I am happy to
confirm that the existing Sotheby's Guarantee may cover the additional
funding of B.P. 15,000. The Sotheby's Guarantee remains intact at the level
originally agreed upon.
Thank you very much for your help in regards to this matter.
Best regards,
/s/ Susan Alexander
- -------------------------
Susan Alexander
Senior Vice President
Director, Human Resources
Exhibit 10(bb)
SOTHEBY'S
FOUNDED 1744
34-35 New Bond Street, London W1A 2AA
Telephone: (0171) 408 5877
Telefax: (0171) 408 5065
25 March 1996
The Rt. Hon. The Earl of Gowrie
Chairman
The Arts Council of England
14 Great Peter Street
London
SW1P 3NQ
Dear Grey:
I am writing to confirm our recent conversation in which we agreed that
Sotheby's would pay you a fee of 20,000 (pound sterling) per annum. This
would be in addition to your Holdings Board fee.
You have kindly offered to provide your help and advice and to generate sales of
$1 million in the year.
I propose that we review the arrangement at the end of the year and in the
meantime I am having a formal contract prepared which I will forward to you when
it is ready. I suggest that you invoice us quarterly in arrears but am very
happy to pay monthly if you would prefer. Either way I will arrange for a
payment to be made for the first three months. Perhaps you would let me have an
invoice that sets out payment instructions.
I trust that the above accurately reflects our agreement.
With good wishes.
Yours sincerely
/s/ George Bailey
George Bailey
George Bailey
Managing Director
Sotheby's London: Referenced in the above address
No. 1222607
EXHIBIT 13
[PHOTO]
Sotheby's Holdings, Inc.
--------------------------------------
1995 Annual Report
<PAGE>
Argentina Australia Austria Belgium Brazil
Canada Channel Islands China Cyprus Czech Republic
Denmark Finland France Germany Greece Holland
Hong Kong Hungary Iceland India Indonesia
Ireland Israel Italy Japan Jordan Korea
Liechtenstein Luxembourg Malaysia Mexico Monaco
Norway Northern Ireland Portugal Scotland And Border Counties
Singapore Spain Sweden Switzerland Syria
Taiwan United Kingdom United States Venezuela
<PAGE>
TABLE OF CONTENTS
2 Financial Information
4 Letter to Shareholders
6 Global Resources
9 Expertise and Knowledge
10 Growth and Profitability
14 Future Opportunities
17 Client Development
40 Sotheby's Holdings, Inc., Directors and Officers
40 Worldwide Auction Locations
41 Sotheby's Worldwide Management
42 Shareholder Information
FINANCIAL SECTION
19 Selected Financial Data
20 Management's Discussion and Analysis
of Results of Operations and Financial Condition
25 Consolidated Statements of Income
26 Consolidated Balance Sheets
27 Consolidated Statements of Cash Flows
28 Consolidated Statements of Changes in
Shareholders' Equity
29 Notes to Consolidated Financial
Statements
39 Independent Auditors' Report
39 Report of Management
39 Audit and Compensation Committee
Chairman's Letter
cover
- --------------
Simon de Pury, Chairman of
Sotheby's Europe, conducting
the sale in New York of the
Joseph H. Hazen Collection,
highlighted by Vincent van
Gogh's sous-bois (in
background). At left stands
Alexander Apsis, Head of the
Impressionist and Modern Art
Department in New York.
<PAGE>
FINANCIAL HIGHLIGHTS
SOTHEBY'S
FRANCHISE
Sotheby's franchise today
extends to 45 countries
worldwide with 18 auction
locations. In 1995 we
held over 500 auctions
worldwide in 76
collecting categories.
We sold approximately
169,000 lots with an
aggregate average lot
price of $9,800 and
79% of the total lots
sold were below $5,000.
Over the last ten years
our sales have exceeded
$16 billion and we have
sold 1.7 million lots.
Our specialist staff
numbers approximately 400
and our specialist
department heads have an
average of nearly 20
years experience with
Sotheby's.
AUCTION SALES NET INCOME
($ in millions) ($ in millions)
$1,665.4 $32.6
95 95
$1,330.0 $20.3
94 94
[GRAPH] [GRAPH]
$1,325.3 $19.3
93 93
$1,131.6 $13.1
92 92
$1,104.4 $4.0
91 91
AUCTION REVENUES: EXPENSES:
TOTAL AND AS A PERCENT TOTAL AND AS A PERCENT
OF AUCTION SALES OF AUCTION SALES
($ IN MILLIONS) ($ IN MILLIONS)
$284.1 $256.0
95 95
$233.5 $226.6* 17.6%
94 94 94
$229.9 $218.9
93 93
[GRAPH] [GRAPH]
$196.1 $219.3
92 92
$189.6 $211.4
91 91
* 17.1% * 15.4%
95 95
* 17.6% * 17.0%
94 94
[GRAPH] [GRAPH]
* 17.3% * 16.5%
93 93
* 17.3% * 19.4%
92 92
* 17.2% * 18.1%
91 91
2
<PAGE>
EARNINGS PER SHARE RETURN ON
SHAREHOLDERS' EQUITY
$0.58 15.4%
95 95
$0.36 10.4%
94 94
$0.35 9.7%
93 93
[GRAPH] [GRAPH]
$0.07 1.6%
92 92
$0.25% 4.7%
91 91
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
YEAR ENDED DECEMBER 31
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1995 1994 1993 1992 1991
STATEMENT OF OPERATIONS DATA
<S> <C> <C> <C> <C> <C>
AUCTION SALES $1,665,378 $ 1,330,001 $1,325,334 $1,131,601 $1,104,391
AUCTION REVENUES 284,051 233,451 229,886 196,142 189,640
TOTAL REVENUES 312,880 259,663 249,676 223,799 236,413
OPERATING INCOME 56,841 33,033 30,785 4,453 25,045
NET INCOME $ 32,582 $ 20,259 $ 19,294 $ 3,960 $ 13,114
EARNINGS PER SHARE $ 0.58 $ 0.36 $ 0.35 $ 0.07 $ 0.25
BALANCE SHEET
NET DEBT (CASH) $ 3,103 $ 1,416 $ (53,257) $ 5,157 $ 54,400
SHAREHOLDERS' EQUITY 227,482 211,052 194,632 198,195 246,328
</TABLE>
20 YEAR AUCTION SALES AND ANNUAL GROWTH RATE
<TABLE>
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3,000
2,500
2,000
12.02%
1,500
1,000
500
'75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95
</TABLE>
[ ] Actual auction sales /\ Trend line equals average annual growth
rate of 12.02%
GEOGRAPHIC DISTRIBUTION DEPARTMENTAL DISTRIBUTION
OF AUCTION SALES IN 1995 OF AUCTION SALES IN 1995
16% Jewelry
22% Impressionist and
Modern Art
50% North America
($826 million)
7% Old Masters
30% United Kingdom
($506 million)
5% Contemporary Art
16% Other Paintings
and Fine Arts
17% Continental Europe
($280 million)
6% Furniture
3% Asia
($53 million)
21% Other
Decorative Arts
7% Books and Other
3
<PAGE>
TO OUR SHAREHOLDERS
1995 was an excellent year for our shareholders. Auction sales increased by
25% to $1.67 billion, our strongest sales performance since 1990 and the
fourth highest in the Company's history. This growth was driven by the
highest level of Impressionist and Modern art sales in five years, which
increased by 94% to $363 million, as well as the highest level of Jewelry
sales ever, which were up 38% to $253 million. Single-owner collections and
house sales were particularly strong during the year, among them the landmark
15-day house sale of the Grand Ducal Collections of the House of Baden, the
Donald and Jean Stralem Collection, the Joseph H. Hazen Collection, Property
from the IBM International Foundation and the New-York Historical Society.
The strong growth in auction sales contributed to a 61% increase in net
income, to $32.6 million, and in earnings per share, which were
$0.58.
These strong financial results led to additional market
value created for Sotheby's shareholders. Our stock price ended
[PHOTO] at $14.25, compared to the price of $11.50 at the beginning
of the year. This represented a $154 million increase in the
total market value of Sotheby's stock. This increased market
value, combined with the cash returned to shareholders (through
dividends and share repurchases), generated a total 1995 return
to shareholders of $172 million. Additionally, as a further result of the
Company's strong 1995 financial performance, the Board of Directors voted in
February 1996 to increase the quarterly dividend to $0.08 per share in 1996.
We continued to build a foundation for the future by instituting in
September 1995 an important pricing change-a non-negotiable seller's commission
schedule that is a fixed scale of charges which are applicable to all
consignors. The schedule of rates applies to all consignments and provides a
benefit to clients for their prior or current year's patronage. We hope this
change will have an important impact on future earnings.
Today, the Sotheby's franchise extends to 45 countries worldwide and
conducts more than 500 auctions each year in 76 collecting categories. Our
international management team now operates as an integrated and cohesive group
that understands the complexities of the global art market. With the
cooperation fostered by
[ARTWORK]
(above)
..............
Vincent van Gogh's lush forest scene, sous-bois, painted one month before the
artist took his own life, sold for $27 million. This was the highlight of the
Joseph H. Hazen Collection sale, which brought a total of $51.8 million, the
tenth highest single-owner sale total in auction history.
(right)
This four-color gold carillon snuff box made in Switzerland, 1785, brought
$132,066 at the historic house sale of the Grand Ducal
Collections of Baden. It was purchased by an American private collector.
4
<PAGE>
this team we are well positioned to take full advantage of
the increased internationalization of the art market by
sharing crucial client information that better enables [PHOTO]
us to understand our clients and more effectively match
buyers and sellers at our auctions throughout the world.
Our ability to anticipate and meet our clients' needs will,
we believe, help create more stability and depth in the international art market
and ensure our future prosperity.
As the art market becomes increasingly international, we will continue
to take advantage of opportunities in developing markets throughout the
world. The recently announced change in French policy is to enact legislation,
which will allow foreign auctioneers to begin conducting auctions in France in
1998. Consequently, the Paris auction market, which had 1995 sales of $600
million, is an important growth opportunity for us.
We are pleased to welcome Richard E. Oldenburg, who joined us in 1995 as
the Chairman of Sotheby's North and South America. With his vast experience,
most recently as Director of The Museum of Modern Art, he is an important
addition to our management team. We would also like to acknowledge our gratitude
to two members of our Board of Directors who resigned during the past year,
Michael L. Ainslie and Leslie H. Wexner. Michael served as President and Chief
Executive Officer for ten years, during which time he led the Company to the
highest level of profitability and auction sales in its history. Leslie had
been a contributing Board Director since 1983.
We look forward to Sotheby's future with great enthusiasm. In the
ever-expanding world art market we remain committed to generating attractive
financial returns for our shareholders. Central to achieving this goal are
two key factors: providing excellent service to our clients throughout the
world, and maintaining the stimulating and rewarding environment needed to
attract and retain talented and dedicated employees. We are very grateful
to our clients, employees and shareholders for their important contributions
to the growth and success of our franchise, Sotheby's.
/s/ A. Alfred Taubman /s/ Diana D. Brooks
A. Alfred Taubman Diana D. Brooks
Chairman President and Chief Executive Officer
SOTHEBY'S HOLDINGS, INC.
BOARD OF DIRECTORS
(seated left to right)
......................
Max M. Fisher,
Vice Chairman
A. Alfred Taubman,
Chairman
Diana D. Brooks,
President and Chief Executive Officer
(standing left to right)
.........................
The Marquess of Hartington,
Ambassador Walter J. P. Curley,
The Rt.Hon. The Earl of Gowrie,
Viscount Michael Blakenham,
Simon de Pury
(not pictured)
..............
R. Julian de la M. Thompson,
Lord Camoys,
Deputy Chairman
5
<PAGE>
THE INTERNATIONALIZATION OF SOTHEBY'S
When Sotheby's moved into its current London salerooms on New
Bond Street in 1917, the firm had reached a turning point in its
[PHOTO] history .The demand for sales of books and literary property,
which had been Sotheby's forte since its founding in 1744, was
now exceeded by the demand for sales of paintings and other
works of art. As a new era began, Sotheby's prepared for a larger role in an
expanding world art market.
Today, Sotheby's is truly a global franchise. With offices in 45
countries and salerooms in 18 locations, Sotheby's provides services on a
worldwide basis, moving swiftly and surely to meet the expanding needs of a
diverse, multi-cultural clientele.
The auction season at Sotheby's is one of constant renewal and
preparation. In 1995, 169,000 lots encompassing 76 collecting categories were
sold in over 500 auctions in 13 countries worldwide. The complexities of doing
business on this scale are enormous.
Sotheby's ability to master these complexities was dramatically
demonstrated in 1995 with the auction of Property from the Grand Ducal
Collections of Baden, which took place at the baronial Neues Schloss in the spa
town of Baden-Baden in south-west Germany. Conducted at the request of
HRH The Margrave of Baden, the sale involved 25,000 objects including
furniture, works of art, porcelain, paintings and many other treasures
spanning 400 years of collecting by the family. A small army of 250 Sotheby's
personnel from around the world converged on Neues Schloss to photograph,
research and catalogue this extraordinary collection for the magnificent
seven-volume sale catalogue, which was the cornerstone of an intensive
international marketing and promotional campaign. The 15-day auction
attracted unprecedented media attention, and 58,000 people descended on
Baden-Baden to view the exhibition. The final auction sale total of $54.7
million (excluding private sales to the German Government) was more than
double the pre-sale high estimate, making this the largest house sale in
history.
[PHOTO]
The success of this landmark auction in many ways sums up the depth and
reach of Sotheby's global resources. These resources enable us to respond
innovatively to complex opportunities throughout the world. As the art market
becomes increasingly international, we will continue to broaden and
strengthen our global franchise, building-as we have done consistently
throughout our long history-a solid foundation for the future.
Global
Resources
(above)
........................
This majestic landscape, tahitiennes pres d'un ruisseau, painted by Paul Gauguin
in 1893, sold for $8.7 million in our London auction of Impressionist and Modern
art. The painting had remained in the same French family collection since 1934
and had not been seen in public since 1949.
(below)
........................
The top lot of the house sale of the Grand Ducal Collections of Baden was
this rare tea table made for king gustav III of sweden in 1780 by the court
cabinetmaker Georg Haupt. It sold for $1 million.
6
<PAGE>
[PHOTO]
Sotheby's global resources were successfully mobilized in
the record-breaking sale of the Grand Ducal Collections in
Baden-Baden, Germany.
<PAGE>
[PHOTO]
The role of a Sotheby's specialist is to continually
gain new knowledge and expertise in order to better
serve clients.
<PAGE>
EXPERIENCE AND RELATIONSHIPS: THE CORE OF OUR BUSINESS
Sotheby's operates in a unique market. The relationship between the Company
and its clients is one based very much on expertise and knowledge. Indeed,
client relationships are the core of our business, requiring that we
constantly advise buyers and sellers alike on the value,
[PHOTO] authenticity and condition of works of art, as well as on market
conditions and collecting trends. Our specialist staff of 400 people
is immersed daily in a wide range of activities, including numerous
visits by hopeful sellers bearing art to be valued; correspondence with private
collectors, dealers and museum curators throughout the world; research and
study; travel to examine property and meet new clients; and in preparation and
planning for upcoming auctions.
Experience and continuity are crucial to our success. Sotheby's
worldwide leadership team, including our Chief Executive Officer, Chairmen and
Managing Directors, has an average of 22 years experience in the art world.
Major Department Heads have an average of nearly 20 years longevity, many
having trained with predecessors who themselves worked at Sotheby's for decades.
In this way expertise passes from one generation to another, reinforced by the
continual training and development of younger specialist staff. This development
is further enhanced by the sheer volume and diversity of property passing
through our doors, offering incomparable opportunities for learning.
Auctioneering also has a venerable tradition at Sotheby's. We are
particularly proud of our talented international team of auctioneers, many of
whom are multi-lingual. In addition to their expertise and extensive client
contacts, they have vast experience in conducting the most complicated of
auction sales in diverse collecting fields.
In 1995 Sotheby's was presented with a number of highly challenging
auctions, requiring expertise of extraordinary breadth. Among these was the
sale of Old Master paintings, paperweights and other decorative arts from the
New-York Historical Society. Through a complicated process, the Society was
granted permission by the New York State Attorney General to deaccession
certain works of art. This enabled the focus of the Society's permanent
collection to be refined and much-needed funds to be raised. This
unprecedented auction, calling upon all of Sotheby's legal, financial, adminis
trative, public relations, marketing and scholarly resources, yielded an
impressive $17.6 million. The sale's complexity, while great, was more than
matched by Sotheby's unique capabilities.
EXPERTISE AND
KNOWLEDGE
(below)
This detail of an important assyrian relief fragment, from the
distinguished collection of Mr. and Mrs. Klaus G. Perls, sold for $5.7 million,
more than five times its low estimate of $1 million,
in a New York sale of Antiquities and Islamic art.
[PHOTO]
(above left)
..............
The magnificent painted birth salver of lorenzo de medici by Lo Scheggia,
honoring the birth of one of the greatest art collectors of the Italian
Renaissance, was sold for $2.2 million during the auction of Old Master
paintings from the Collection of the New-York Historical Society. It was
acquired by the Metropolitan Museum of Art, thus remaining in a
prestigious New York public institution.
9
<PAGE>
1995 - A YEAR OF STRONG WORLDWIDE PERFORMANCE
Sotheby's worldwide auction sales in 1995 totaled $1.67
billion, an increase of 25% over 1994. To put this
performance in perspective, since 1991 auction sales
have increased by 51%, a compound growth rate of 11%
[PHOTO] annually. This 11% sales growth rate was achieved
through an average annual growth of 27% in Impressionist
and Modern art, 19% in Jewelry and 8% in all other collecting fields.
Our increase in auction sales during 1995, coupled with the careful
control of expense growth, resulted in our significantly increased earnings this
year. Indeed, our net income in 1995 reached $32.6 million, or $0.58 per share,
an increase of 61% compared to 1994. In the past five years, Sotheby's net
income has increased by 148%, a compound annual growth rate of 26%, which is
more than twice the growth rate of auction sales. This increased profitability
demonstrates the operating leverage of the auction business.
The $335 million increase in our auction sales in 1995 was driven by our
two largest departments, Impressionist and Modern art and Jewelry, as well as
by strong single-owner sales.
Our 1995 sales of Impressionist and Modern art, both in New York and
London, were outstanding. The spring auctions in New York totaled $124.2
million, demonstrating a renewed vitality in this market. The highlight of
this series was the Donald and Jean Stralem Collection, which generated $65.2
million, the highest total for any single-owner sale in five years and the
seventh highest of all time. Our spring Impressionist and Modern art sales in
London were also very strong, bringing $54.2 million. Our fall series of
sales in New York and London were the most successful since 1990. The New
York fall sales series totaled $129.4 million, with five pictures selling for
more than $5 million and 24 lots selling for more than $1 million. The
highlight was the Collection of Joseph H. Hazen, which made $51.8 million.
Our London fall sales series, featuringPaul Gauguin's, FEMME AU BORD DE LA
RIVIeRE, which sold for $5.0 million, generated a total of $38.3 million,
bringing to a close a year of enormous success, and improvement, in this
market.
Sotheby's worldwide Jewelry sales during the year were $252.7 million,
the highest total ever and a healthy 38% increase
GROWTH AND
PROFITABILITY
(below)
...................
Weighing 100.10 carats, this magnificent diamond, one of the rarest in the
world, sold for $16.5 million in Geneva, making it the world's single most
expensive precious stone ever to be sold at auction. This pear-shaped stone was
renamed by its buyer, Sheik Ahmed H. Fitaihi, "the star of the season".
[PHOTO]
(above)
...................
Arshile Gorky's scent of apricots on the fields, painted in 1944, sold for
$4.0 million, establishing a record for the artist. It was the highlight of
our New York Contemporary art sales, which brought a total of $26.4 million.
10
<PAGE>
[PHOTO]
Sotheby's 25% increase in auction sales in 1995
yielded a 61% earnings increase over 1994.
<PAGE>
over the previous year's total. The highpoint of the year was
our spring sale in Geneva, which brought $49.2 million, an
increase of more than 100% over the same sale in 1994. This
[ARTWORK] success was augmented by our fall Jewelry sales in New York,
which sold for $42.2 million, the second-highest total for a
Jewelry sale there. That sale featured one of the finest private
collections of jewelry ever to be seen at auction, that sold for $9.2 million
amid vigorous international competition.
Single-owner collections are the centerpiece of any auction season.
Sotheby's has historically been the leader in this field, having achieved 16
of the top 20 all-time single-owner sale totals. In 1995 Sotheby's continued
its dominance, holding a number of sales which were landmarks in their
collecting categories.
While Sotheby's has offered many corporate collections in its history,
the sale of Property from the IBM International Foundation, offered in New York,
was surely among the greatest collections of its kind ever sold. It included
a number of outstanding American paintings, drawings and watercolors as well
as a superb group of Latin American paintings. With many works soaring above
the high estimate and several artists' records broken, the IBM Collection
totaled $31.2 million. While this historic collection has now been dispersed,
Sotheby's provides ongoing curatorial assistance to IBM for its many
remaining works of art.
Another highlight was the sale in London of 55 Old Master
paintings from the renowned Bentinck-Thyssen Collection, which
[PHOTO] brought $12.4 million. The star of the collection, Rembrandt's
Cupid Blowing a Soap Bubble, sold for $5.9 million. The sale
represented a unique opportunity to buy works from one
of the greatest art collections assembled in the first half of the 20th
century.
Surely one of the most fascinating collection sales of the year was held
in London and involved nearly 600 works by the Surrealist artist Man Ray,
spanning every stage of his 60-year career. Buyers and bidders from around
the world seized the opportunity to purchase these objects from the artist's
studio in Paris. The sale brought $6.3 million, surpassing all expectations.
Other single-owner collections of distinction in 1995 took place in such
fields as Americana,
(above)
Painted in 1942, Frida Kahlo's self-portrait with monkey and parrot was among
the stars of the New York sale of Property from The IBM International
Foundation. Sold for $3.2 million, it established a record for any Latin
American painting.
(below)
portrait of angel fernandez de soto by Pablo Picasso, one of the last works from
the artist's Blue Period, brought $29.2 million, the highest price paid for any
painting at auction since 1990.
12
<PAGE>
Art Nouveau, automobiles, animation art, books, Chinese
porcelain, English furniture, European sculpture, Greek and
[PHOTO] Roman coins, Indian and Southeast Asian art, Japanese netsuke,
Judaica, Pre-Columbian art and silver.
In addition to our strong auction performance worldwide in 1995,
Sotheby's continued to grow its Financial Services and International Realty
businesses. During the year we took two important steps to broaden Sotheby's
Realty presence. We opened a direct brokerage office in Beverly Hills, where we
have recently moved into new and enlarged auction company premises. This new
brokerage office represents a significant expansion of our Realty business in
the United States, and it positions us for continued expansions to Mexico and
the Pacific region. This new office will also allow our Realty and auction
businesses to work more closely in this region. Also during the year we
opened a Realty office in Hong Kong, which will give us a greater presence in
Asia and position us for expansion throughout the Pacific Region.
Sotheby's Financial Services continued to expand its loan portfolio in
1995, generating important consignments for our auctions. We believe that the
Financial Services business is an integral part of our auction business, and
we continue to view this as an important service for our clients throughout
the world, giving us a competitive advantage in the auction market.
We continue to seek promising opportunities for bringing new business to
our firm. An example from 1995 was our acquisition of the Joseph R. Ritman
Collection, which Sotheby's purchased in a venture with two leading European
dealers. The Ritman Collection consisted of Old Master paintings, Rembrandt
etchings and several hundred pieces of silver, jewelry, glass and rugs.
During the year a significant portion of the collection's
inventory was sold at auction and through private transactions.
Sotheby's and the dealers intend to sell the balance of this
exceptional collection in the same manner. This innovative [PHOTO]
venture contributed to our profitability in 1995 and is expected
to make a further addition to 1996 results. In the future we will
take advantage of similar opportunities, where appropriate and when
consistent with our financial capabilities.
(left)
..............
this historic and important diamond necklace, circa 1900, decorated with a
fringe of 28 old-mine diamonds weighing a total of approximately 65 carats, sold
for $244,500 in New York. Made in part from diamonds from the great comb a
pampilles of the French Crown Jewels, the necklace came from an important
Private Collection and was sold to a Hong Kong buyer.
(below)
............
Sotheby's sale in New York of 74 Tiffany Lamps from the Mecom Collection
included this virginia creeper lamp which sold for $1.1 million, an auction
record for a single Tiffany lamp.
13
<PAGE>
CHARTING NEW TERRITORY
In 1955 "Sotheby's of London" came to New York, opening an
[PHOTO] "outpost" in a law office in the Wall Street area and thus
laying the foundation for Sotheby's future operations in the
United States. To prove the wisdom of that initiative, our
auction sales in North America in 1995 totaled $826 million-50% of our worldwide
sales total. In the same deliberate manner we continue to pursue growth
opportunities worldwide, taking advantage of the synergies inherent in our
complementary businesses. These efforts are backed by a cohesive management team
and innovative marketing.
The United States continues to hold great promise for Sotheby's growth.
With its large population of wealthy individuals, it offers the potential of
many new buyers entering the auction market. To seize this opportunity, we have
introduced new collecting categories, improved client information systems,
enhanced our educational programs, expanded our real estate operations and
explored other complementary businesses, all as a means of broadening our client
base.
In Europe, 1995 saw a number of growth developments for
Sotheby's. The success of the auction in Baden-Baden confirmed our [PHOTO]
preeminence in house sales while widening our opportunity to hold more sales
throughout Europe. France, in particular, with its $600 million Paris auction
market, holds great promise. Recently announced government policy in France,
when enacted into legislation, will allow Sotheby's to begin holding auctions
there in 1998, ending the protected monopoly that has been in place for more
than four centuries. Through our experienced team in place throughout France,
and especially with our strong presence in Paris, enhanced by our new and larger
office premises, we are now ideally positioned to take the greatest advantage of
this immense opportunity.
Asia also holds growth potential for Sotheby's. Presently, Asia is more
important as a source of potential buyers for our sales worldwide. As part of
our effort in Asia, in 1995 we held our first auction in Hong Kong of Western
Jewelry and our first exhibition in Beijing. However, Asia is also important
as a source of potential sellers, notably in Japan, where reportedly over
$15 billion of art was imported between 1985-1994. We remain
[PHOTO] responsive to the changing economic and business conditions
throughout Asia and are committed to making responsible
investments in the region which will earn an appropriate return.
FUTURE
OPPORTUNITIES
(above)
.............
This magnificent Old Master painting, the finding of moses, sold for $7.8
million in London. Commissioned by Charles I from Italian artist Orazio
Gentileschi, the painting had hung in Castle Howard in Yorkshire for nearly two
centuries.
(right)
............
George Bellows' lyrical urban landscape, easter snow, depicting fashionably-
dressed holiday strollers in a snow-covered New York park, sold for $2.9 million
in the New York auction of American paintings from the IBM International
Foundation.
(below)
............
The top lot of Sotheby's sale in Hong Kong of Important Jadeite and Precious
Stone Jewelry was this MAGNIFICENT JADEITE BANGLE which made $1.3 million, the
highest price paid for a single piece of jewelry of its kind at auction.
14
<PAGE>
[PHOTO]
In many markets of the world, Sotheby's is ideally
positioned for potential future growth.
<PAGE>
[PHOTO]
Through new collecting fields like wine, Sotheby's
continually builds its worldwide client base.
<PAGE>
BRINGING NEW CLIENTS TO SOTHEBY'S
A company's image is crucial to its success. Traditionally,
Sotheby's has been perceived as a rarefied, exclusive world, one
[ARTWORK] peopled largely by the affluent and famous in search of
expensive objects. The truth of the matter is quite different.
In 1995, 79% of the lots sold at Sotheby's brought less than
$5,000, a figure well within the means of many individuals who
do not currently participate in the auction process. Attracting these potential
new clients, therefore, is an important component of Sotheby's growth strategy.
One of the most effective means of client development is through
innovative new sales. We have been conducting wine sales in London for 25 years,
and we continue to hold them in New York, working in partnership with the
leading wine merchant Sherry-Lehmann. Interest in wine collecting has mushroomed
in recent years. Our specialist staff has therefore cultivated many new clients
for the firm through an intensive program of wine tastings and seminars in
support of our wine auctions on both sides of the Atlantic.
Three noteworthy collections offered during the year which attracted
widespread interest, not only from new buyers but from the media, were those
of prominent interior designers Robert H. Metzger, Dorothy "Sister" Parish
and Ralph Lauren. Each of these collections was presented with great style
and flair in our New York salerooms, and the public viewings drew large
crowds. Amid highly-competitive bidding, all three collections exceeded their
high estimate. These successes were greatly enhanced by the participation of
many new collectors who were experiencing their first sale at Sotheby's.
Other innovative auctions of 1995 included our first-ever sale of
Contemporary Indian art, which took place in New York, and our first auction
devoted exclusively to Irish art, which took place in London. Both sales drew
an enthusiastic international response from a large group of first-time
auction bidders.
Sotheby's Institute's educational programs, both in New York and London,
as well as our worldwide book publishing activities, further enhance our efforts
to attract new clients. During the past year we launched a Sotheby's site on
the World Wide Web. We believe it will help us to reach well beyond our
traditional client base in providing comprehensive information about the
diverse auctions we hold around the world, while also providing
service-oriented insights on the auction process and on collecting.
[ARTWORK]
CLIENT
DEVELOPMENT
(left)
...........
The resounding appeal of Ralph Lauren's impeccable flair and signature style
drew many new buyers to Sotheby's New York saleroom for the auction of Property
from the Ralph Lauren Collection. This Gobelins Tapestry, les deux taureaux,
sold for $321,500, quadrupling its high estimate.
(below)
...........
A world record for the artist was established at Sotheby's first Irish sale
when Walter Frederick Osborne's spoilt pets, from the Estate of Mr. and Mrs.
Reginald Toms, brought $432,770. This innovative sale of Irish art included
some of the finest examples of paintings and antiques that Ireland has
produced and brought together a large international group of bidders, many of
them new to the auction world.
17
<PAGE>
[PHOTO]
Perhaps the most effective means of bringing new clients to Sotheby's is
through the personal efforts of our senior management and specialists. They
convey, in the most effective manner possible, the solid foundation of
knowledge, expertise and service on which our business is built. As the world
art market expands and diversifies in the coming years, we will continue to
emphasize new client initiatives as a major part of our growth strategy.
THE NAME SOTHEBY'S conjures up vivid images in the mind of the public. It is a
company whose interests and activities are a source of fascination to many.
We believe that this franchise value-which is a very old and honored one in
the art world-must be constantly reinvigorated by great auctions. Epitomizing
this belief is the sale we will be conducting in April 1996 of Property from
the Estate of Jacqueline Kennedy Onassis. This will be a historic auction,
illuminating the life and achievements of one of the most alluring and
extraordinary women of the 20th century. It will draw the attention of the
world and bring many new clients into our business. We believe that the sale
will also demonstrate, as did our sale in Baden last year, the strength and
cohesion of Sotheby's global resources. We eagerly look forward to this sale
as another important step into the future of Sotheby's franchise.
We are mindful of the strength of our franchise. While being vigilant to
protect it, we also will continue to seek opportunities to capitalize on its
enormous value without diluting Sotheby's name.
[PHOTO]
(above)
...........
An extraordinary group of pictures, objects and photographs by Man Ray, from the
artist's Paris studio, were sold by Sotheby's London. le beau temps, a painting
which constituted the climax of Man Ray's Surrealist period, established a
record for the artist when it sold for $833,730.
(below)
...........
This stradivarius violin was sold in London for $603,210 in an auction of
Musical Instruments. The violin, last played more than 30 years ago, was
bought by a German mother for her daughter, a child prodigy.
18
<PAGE>
<TABLE>
Sotheby's Holdings, Inc. and Subsidiaries
SELECTED FINANCIAL DATA
<CAPTION>
Year ended December 31
(Thousands of dollars, except per share data) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Auction sales $1,665,378 $1,330,001 $ 1,325,334 $1,131,601 $1,104,391
Auction revenues1 284,051 233,451 229,886 196,142 189,640
Total revenues1 $ 312,880 $ 259,663 $ 249,676 $ 223,799 $ 236,413
Operating income1 56,841 33,033 30,785 4,453 25,045
Income before taxes 54,303 33,765 32,157 6,491 21,498
Net income $ 32,582 $ 20,259 $ 19,294 $ 3,960 $ 13,114
Earnings per share $ 0.58 $ 0.36 $ 0.35 $ 0.07 $ 0.25
Cash dividends declared per share $ 0.24 $ 0.24 $ 0.42 $ 0.60 $ 0.95
- --------------------------------------------------------------------------------------------------------------
As at December 31
(Thousands of dollars) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
Working capital1 $ 101,394 $ 70,031 $ 75,276 $ 121,055 $ 181,782
Total assets 600,104 557,084 559,356 577,657 650,286
Commercial paper 38,000 27,500 34,000 86,400 82,670
Net debt (cash)2 3,103 1,416 (53,257) 5,157 54,400
Shareholders' equity 227,482 211,052 194,632 198,195 246,328
- --------------------------------------------------------------------------------------------------------------
</TABLE>
AUCTION SALES REPRESENT SALES AT THE HAMMER PRICE PLUS BUYER'S PREMIUM.
1 PRIOR YEAR AMOUNTS HAVE BEEN RESTATED TO CONFORM TO CURRENT YEAR'S
PRESENTATION.
2 SHORT TERM BORROWINGS AND COMMERCIAL PAPER LESS CASH AND CASH EQUIVALENTS.
19
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
Auction sales for Sotheby's Holdings, Inc. (together with its subsidiaries, the
"Company") totaled $1,665.4 million during 1995, an increase of $335.4 million,
or 25%, over the prior year. The increase in worldwide sales was primarily due
to an increase in sales of Impressionist and Modern art as well as Jewelry, with
most of the growth contributed by single-owner and other non-recurring sales.
Auction sales recorded by the Company's foreign operations were positively
affected by translation to U.S. dollars which increased auction sales by $41.7
million, or 3%.
Following is a geographical breakdown of the Company's auction sales for 1995
and 1994:
(Thousands of dollars) 1995 1994
-----------------------------------------------------
North America $ 825,788 $ 666,301
Europe 786,277 608,291
Asia 53,313 55,409
-----------------------------------------------------
Total $1,665,378 $1,330,001
-----------------------------------------------------
The growth in auction sales in North America of $159.5 million, or 24%, during
1995 was driven largely by sales of Impressionist and Modern art, with much of
this growth coming from single-owner and estate collections. Jewelry also
contributed to sales growth in North America. Sales in Europe, which for the
purposes of this discussion consists of the United Kingdom ("U.K.") and
continental Europe ("the Continent"), increased $178.0 million, or 29%, in 1995.
Excluding the impact of translating foreign currencies into U.S. dollars, sales
in Europe increased $136.5 million, or 22%. Sales in the U.K. improved $76.1
million, or 24%, when compared to the prior year. Excluding the favorable impact
of currency movements, sales in the U.K. increased $64.9 million primarily due
to Impressionist and Modern art and Old Master paintings sales. Sales on the
Continent grew $101.9 million during 1995; excluding foreign currency movements
sales grew $71.6 million principally due to the sale of the Grand Ducal
collections of Baden in Germany as well as Jewelry sales in Switzerland. Asian
sales declined $2.1 million, or 4%, in the current year, largely as a result of
general economic uncertainties in the Hong Kong market, softening in key
collecting categories as well as competitive pressures.
Worldwide revenues from auction operations ("Auction") of $284.1 million
increased $50.6 million, or 22%, over 1994. This increase was largely due to
commission revenue (which consists of buyer's premium, seller's commission and
expense recoveries). The increase in commissions was due to the increase in
sales volume discussed above. Rates earned on commissions were down year-to-year
due to a change in the relative mix of sales toward property with higher average
lot values which yield lower average commission rates. In addition, competitive
pricing pressures which existed prior to the implementation, in September of
1995, of the Company's new seller's commission schedule contributed to the
decline in commission rates. Auction revenues benefited from increases in other
non-commission auction revenue categories. Excluding the impact of translating
revenues outside North America into U.S. dollars, Auction revenues increased 19%
when compared to the prior year.
Other revenues include revenues from art-related financing activities, real
estate operations, other auction-related services and principal activities.
Other revenues increased $2.6 million when compared to 1994 due mostly to an
increase in revenues from financing activities offset, in part, by a decrease in
revenues from principal activities. Revenues from financing activities totaled
$13.8 million during 1995, an increase of $4.6 million compared to $9.2 million
in 1994. This increase was principally due to an increase in the average rate
charged to borrowers and, to a lesser extent, to an increase in the average
outstanding loan portfolio balances. Average rates charged to borrowers
increased to 9.2% in 1995 from 7.3% in 1994. The outstanding loan portfolio
averaged $148.2 million in 1995 compared to $126.4 million in 1994. Principal
activities include: net gains (losses) on sales of inventory (including
inventory obtained as a result of the auction process as well as inventory
obtained for investment purposes); the Company's share of earnings from its
investment in Acquavella Modern Art ("AMA"); net income (loss) earned
from guarantees; and provisions for write-downs of inventory to estimated
net realizable value. The decrease in revenues from principal activities was
principally due to write-downs on inventory to estimated net realizable value.
Movements in foreign currencies did not have a material impact on other
revenues.
20
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
Direct costs of services (consisting largely of catalogue production and
distribution costs as well as corporate and sale marketing expenses) totaled
$60.0 million during 1995, an increase of $10.8 million, or 22%, over 1994.
Excluding movements in exchange rates, direct costs increased $9.0 million, or
18%, essentially due to the increase in auction sales. Excluding movements in
foreign currencies, direct costs as a percentage of auction sales declined to
3.5% in 1995 from 3.7% in 1994.
All other expenses (which consist of salaries and related costs, general and
administrative expenses and depreciation and amortization) increased $18.6
million, or 11%; excluding the impact of foreign currency movements, these
expenses increased by 8%. Two significant factors in the growth were increased
incentive compensation and a $2.1 million increase in depreciation due to a
change in the estimated useful lives for computer hardware (see Note B to the
Consolidated Financial Statements). Excluding these factors and the impact of
foreign currency movements, all other expenses increased approximately 5%. This
increase was primarily due to salary increases.
Interest income totaled $3.2 million in 1995 compared to $4.9 million in 1994.
This decrease was a result of lower average cash balances. Interest expense
totaled $5.9 million in 1995 compared to $4.0 million in 1994. This increase was
due to a higher average level of short-term and commercial paper borrowings in
Europe and North America, respectively, as well as higher average interest rates
on commercial paper borrowings compared to 1994.
Operating income of $56.8 million in 1995 increased $23.8 million, or 72%,
compared to operating income of $33.0 million for 1994. The increase was largely
attributable to the increased auction sales discussed above.
The consolidated effective tax rate was 40% for the years ended December 31,
1995 and 1994 (see Note I to the Consolidated Financial Statements).
Net income for 1995 was $32.6 million, a 61% increase when compared to net
income of $20.3 million for 1994. Movements in foreign currencies did not have a
material impact on 1995 net income. Earnings per share increased from $0.36 per
share in 1994 to $0.58 per share in 1995.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1993
Auction sales for the Company totaled $1,330.0 million during 1994, an increase
of $4.7 million over the prior year. Decreases in sales of Impressionist and
Modern art as well as Jewelry were offset by combined growth of 13% in sales
from other collecting categories. Auction sales recorded by the Company's
foreign operations were positively affected by translation to U.S. dollars which
increased auction sales by $21.9 million, or 2%.
Following is a geographical breakdown of the Company's auction sales for 1994
and 1993:
(Thousands of dollars) 1994 1993
- ----------------------------------------------------------
North America $ 666,301 $ 654,984
Europe 608,291 627,475
Asia 55,409 42,875
- ----------------------------------------------------------
Total $1,330,001 $1,325,334
21
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
Sales in the U.K. and North America improved modestly during 1994, with sales
growth of $41.7 million (11%) and $11.3 million (2%), respectively. Auction
sales totaled $430.4 million in the U.K. for 1994 compared to $388.7 million in
the prior year. Excluding the impact of foreign currency movements, sales in the
U.K. increased by $28.8 million, or 7%. Sales growth in the U.K. resulted
largely from sales of Old Master paintings in London. The modest increase in
North American auction sales was principally due to improvements in a broad
range of collecting categories as well as single-owner sales offset, in part, by
a decline in the sale of Impressionist and Modern art. Sales in Asia grew by
$12.5 million, or 29%, as a result of increased sales in Hong Kong and Taiwan.
Sales on the Continent declined $60.9 million, or 26%, during 1994. Excluding
the favorable impact of currency movements, sales on the Continent declined
$69.2 million, or 29%, due mostly to lower Jewelry sales in Switzerland.
Worldwide revenues from Auction increased $3.6 million, or 2%, compared to the
prior year. Auction revenues were positively affected by increased commissions.
The increase in commissions is largely due to a change in the relative mix of
sales toward property with lower average values which yield higher average
commission rates. Reductions in other non-commission auction revenue categories
partially offset the impact of the increased commissions. Excluding the impact
of translating revenues outside North America into U.S. dollars, Auction
revenues were essentially flat when compared to the prior year.
Other revenues increased $6.4 million, to $26.2 million in 1994 from $19.8
million in 1993. This increase was due to principal activities, real estate and
financing activities. Principal activities contributed $0.1 million in 1994
compared to a loss of $2.6 million in 1993. The year-to-year increase is mostly
due to lower levels of inventory provisions for writedowns to estimated net
realizable value. Real estate revenues totaled $11.5 million in 1994, an
increase of $1.7 million compared to revenue of $9.8 million in 1993. This
increase reflects a higher level of property sales when compared to the prior
year. Revenues from financing activities increased to $9.2 million in 1994 from
$7.6 million in 1993 due to an increase in the average outstanding loan
portfolio as well as higher rates of interest earned on outstanding loans. The
outstanding loan portfolio averaged $126.4 million in 1994 compared to $113.5
million in 1993. Average rates charged to borrowers increased to 7.3% in 1994
from 6.7% in 1993.
Direct costs of services increased to $49.2 million in 1994 from $47.1 million
in 1993, an increase of 5%. Most of this increase was due to foreign currency
movements. Excluding movements in foreign currencies, direct costs of services
as a percentage of auction sales was 3.7% in 1994 compared to 3.6% in 1993.
All other expenses increased $5.6 million in 1994 compared to 1993. Excluding
the impact of foreign currency movements these expenses increased $3.4 million.
This increase was primarily due to an increase of $6.4 million in salaries and
related costs, excluding exchange rate movements, which was largely due to
salary increases following several years of very restrained compensation growth
and, to a lesser extent, modest increases in staff. Offsetting this increase was
a decrease in general and administrative expenses which, excluding the effect of
exchange rate movements, declined $3.1 million during 1994. This decrease
reflects lower levels of various provisions for reserves in 1994 when compared
to 1993 as well as continued cost control efforts.
Operating income of $33.0 million in 1994 increased $2.2 million compared to
operating income of $30.8 million for 1993. Excluding the favorable impact of
currency movements, operating income increased $1.4 million when compared to
1993.
The Company's income taxes for the year ended December 31, 1994 increased $0.6
million due to the slightly higher level of earnings in 1994 when compared to
1993. Higher earnings during 1994 in certain jurisdictions were offset by lower
earnings in others.
Net income for 1994 was $20.3 million, a 5% increase when compared to net income
of $19.3 million for 1993. Excluding favorable movements in foreign currencies,
net income increased less than 1%. Earnings per share increased from $0.35 per
share in 1993 to $0.36 per share in 1994. The percentage increase in earnings
per share was slightly less than the 5% increase in net income due to an
increase in the number of weighted average shares in 1994 when compared to 1993.
22
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
LIQUIDITY AND CAPITAL RESOURCES
The Company's net debt position (total debt, which includes short-term
borrowings and commercial paper, less cash and cash equivalents) totaled $3.1
million at December 31, 1995, compared to $1.4 million at December 31, 1994 and
a net cash position of $53.3 million at December 31, 1993. Working capital
(current assets less current liabilities) at December 31, 1995 was $101.4
million, compared to $70.0 million and $75.3 million at December 31, 1994 and
1993, respectively.
The Company's client loan portfolio increased to $144.2 million at December 31,
1995 from $133.6 million and $102.0 million at December 31, 1994 and 1993,
respectively. These amounts include $42.7 million, $34.9 million and $19.3
million of loans which have a maturity of more than one year at December 31,
1995, 1994, and 1993, respectively.
The Company relies on internally generated funds and borrowings to meet its
financing requirements. The Company may issue up to $200 million of short-term
notes pursuant to its U.S. commercial paper program, of which $38.0 million was
issued and outstanding at December 31, 1995. The Company supports any short-term
notes issued under its U.S. commercial paper program with committed credit
facilities. As of August 3, 1994, the Company entered into a Bank Credit
Agreement which provides $300 million of committed available financing to
January 31, 1998. Prior to August 3, 1994, the Company had $175 million
available under committed revolving credit facilities. (See Note H to the
Consolidated Financial Statements).
During 1995, the Company's primary sources of liquidity were derived from
operations and supplemented by available cash balances and commercial paper
borrowings. The most significant cash uses in 1995 were shareholder dividends
and net funding of the client loan portfolio of $9.8 million. The company paid
dividends to shareholders of $13.4 million in 1995 (of which $3.4 million was
declared and paid in 1995 with respect to 1994). In the first quarter of 1996,
the company declared and paid dividends of $4.5 million in respect of the fourth
quarter of 1995. In February 1996, the Board of Directors voted to increase the
quarterly dividend to $0.08 per share in 1996 from $0.06 per share in 1995 due
to the Company's strong 1995 financial performance and balance sheet.
During 1994, the Company's primary sources of liquidity were derived from
available cash balances supplemented by short-term borrowings and operations.
The most significant cash uses during 1994 were net funding of the client loan
portfolio ($48.1 million) and shareholder dividends. The Company paid dividends
to shareholders of $13.4 million in 1994 (of which $3.3 million was declared and
paid in 1994 with respect to 1993).
In 1993, cash generated from operations of $70.3 million and net collections on
the client loan portfolio of $16.7 million were the major sources of liquidity
for the Company; the most significant uses were net repayments of commercial
paper borrowing of $52.4 million and shareholder dividends of $23.2 million.
Capital expenditures, consisting primarily of office and auction facility
refurbishment and the acquisition of computer equipment, totaled $8.4 million
for 1995, $7.9 million for 1994 and $8.3 million for 1993.
In certain instances, consignor advances are made with recourse limited only to
the works of art consigned for sale and pledged as security for the loan. As of
December 31, 1995, no such advances were outstanding. From time to time, the
Company has off-balance sheet commitments which include short-term commitments
to consignors that property will sell at a minimum price and legally binding
lending commitments in conjunction with the client loan program (see
Notes M and N to the Consolidated Financial Statements). The Company does not
believe that material liquidity risk exists relating to these commitments.
OUTLOOK
The Company believes that operating cash flows will be adequate to meet normal
working capital requirements and that the commercial paper program and credit
facilities will continue to be adequate to fund the Company's client loan
program, peak working capital requirements and other short-term commitments to
consignors.
The Company evaluates, on an ongoing basis, the adequacy of its premises for the
requirements of the present and future conduct of its business. Any significant
alteration to its principal auction premises may require use of additional
capital which the Company believes is adequately available.
23
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
SEASONALITY
The worldwide art auction market has two principal selling seasons, spring and
fall. During the summer and winter, auction sales are considerably lower. The
table below demonstrates that at least 80% of the Company's auction sales are
derived from the second and fourth quarters of the year (see Note O to the
Consolidated Financial Statements).
Percentage of Annual Auction Sales
----------------------------------
1995 1994 1993
- -------------------------------------------
January-March 11% 12% 10%
April-June 39 40 38
July-September 7 8 6
October-December 43 40 46
- -------------------------------------------
100% 100% 100%
- -------------------------------------------
FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March of 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which must be adopted by the Company in 1996. This standard requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset in question may not
be recoverable. Management is currently in the process of analyzing the impact
that adoption of this standard will have on the Company's financial statements.
In October of 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which will be effective for the Company beginning January 1,
1996. This new standard requires companies to measure employee stock
compensation plans based on the fair value method of accounting. However, the
statement allows the alternative of continued use of Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," with
proforma disclosure of net income and earnings per share determined as if the
fair value based method had been applied in measuring compensation cost. The
impact of this standard on the proforma amounts has not yet been determined.
24
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME Sotheby's Holdings, Inc. and Subsidiaries
<CAPTION>
Year ended December 31
(Thousands of dollars, except per share data) 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES Auction $ 284,051 $ 233,451 $ 229,886
(NOTE B) Other (Notes E and F) 28,829 26,212 19,790
--------------------------------------------------------------------------------
Total revenues 312,880 259,663 249,676
- ------------------------------------------------------------------------------------------------
EXPENSES Direct costs of services 59,978 49,211 47,056
Salaries and related costs (Note L) 105,285 93,829 86,286
General and administrative (Note J) 79,548 75,146 77,255
Depreciation and amortization (Notes B and G) 11,228 8,444 8,294
--------------------------------------------------------------------------------
Total expenses 256,039 226,630 218,891
--------------------------------------------------------------------------------
Operating income 56,841 33,033 30,785
--------------------------------------------------------------------------------
Interest income 3,176 4,909 5,233
Interest expense (Note H) 5,850 4,013 4,281
Other income (expense) 136 (164) 420
--------------------------------------------------------------------------------
Income before taxes 54,303 33,765 32,157
Income taxes (Note I) 21,721 13,506 12,863
--------------------------------------------------------------------------------
Net Income $ 32,582 $ 20,259 $ 19,294
--------------------------------------------------------------------------------
Earnings Per Share $ 0.58 $ 0.36 $ 0.35
--------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
25
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS Sotheby's Holdings, Inc. and Subsidiaries
<CAPTION>
As at December 31
(Thousands of dollars) 1995 1994
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT Cash and cash equivalents $ 40,713 $ 34,987
ASSETS Accounts and notes receivable, net of allowance
for doubtful accounts of $12,578 and $10,165 (Note D)
Accounts receivable 215,221 180,521
Notes receivable 98,711 96,364
Other 21,200 13,442
---------------------------------------------------------------------------------------
Total accounts and notes receivable, net 335,132 290,327
---------------------------------------------------------------------------------------
Inventory, net (Note E) 22,798 20,330
Deferred income taxes (Note I) 8,434 12,053
Prepaid expenses (Note L) 11,936 12,053
---------------------------------------------------------------------------------------
Total current assets 419,013 369,750
- -------------------------------------------------------------------------------------------------------
NON-CURRENT Notes receivable (Note D) 42,670 34,930
ASSETS Properties, less allowance for depreciation
and amortization of $63,898 and $53,464 (Notes G and J) 65,320 66,825
Intangible assets, less allowance for
amortization of $13,986 and $12,859 28,123 29,054
Investment in partnership (Note F) 38,801 44,281
Other assets (Note M) 6,177 12,244
---------------------------------------------------------------------------------------
Total Assets $ 600,104 $ 557,084
---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------
CURRENT Due to consignors (Notes D and M) $224,223 $199,758
LIABILITIES Short-term borrowings (Note H) 5,816 8,903
Accounts payable and accrued liabilities 67,579 60,428
Deferred revenues 5,709 6,173
Accrued income taxes (Note I) 14,292 24,457
--------------------------------------------------------------------------------------
Total current liabilities 317,619 299,719
- -------------------------------------------------------------------------------------------------------
LONG-TERM Commercial paper (Note H) 38,000 27,500
LIABILITIES Deferred income taxes (Note I) 15,801 18,423
Other long-term obligations 1,202 390
--------------------------------------------------------------------------------------
Total Liabilities 372,622 346,032
- -------------------------------------------------------------------------------------------------------
SHAREHOLDERS' Common stock, $.10 par value
EQUITY (NOTE K) Authorized shares - 125,000,000 of Class A and 75,000,000 of Class B
Issued and outstanding shares 38,466,478 and 36,730,771 of Class A,
and 17,278,667 and 19,093,071 of Class B at December
31, 1995 and 1994, respectively 5,575 5,582
Additional paid-in capital 81,051 83,538
Retained earnings 155,688 136,517
Foreign currency translation adjustments (14,832) (14,585)
--------------------------------------------------------------------------------------
Total Shareholders' Equity 227,482 211,052
--------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 600,104 $ 557,084
--------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
26
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS Sotheby's Holdings, Inc. and Subsidiaries
<CAPTION>
Year ended December 31
(Thousands of dollars) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING Net income $ 32,582 $ 20,259 $ 19,294
ACTIVITIES --------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,228 8,444 8,294
Deferred income taxes 997 (2,211) 1,227
Tax benefit of stock option exercises 250 805 930
Asset provisions 7,868 6,117 9,554
Other 429 (1,242) 1,148
--------------------------------------------------------------------------------------------------
Change in assets and liabilities:
Decrease (increase) in prepaid expenses 117 (173) 1,805
Increase in accounts receivable (44,607) (8,035) (9,079)
Decrease (increase) in inventory (8,860) 2,202 1,206
Decrease (increase) in other assets 6,066 1,505 (1,576)
Increase (decrease) in due to consignors 24,465 (6,115) 34,538
Decrease in accrued income taxes (5,865) (8,898) (4,345)
Increase (decrease) in other current liabilities 8,187 (2,835) 7,263
--------------------------------------------------------------------------------------------------
Net cash provided by operating activities 32,857 9,823 70,259
- ----------------------------------------------------------------------------------------------------------------------
INVESTING Increase in notes receivable (100,350) (128,523) (119,915)
ACTIVITIES Collections of notes receivables 90,535 80,383 136,581
Capital expenditures (8,384) (7,897) (8,344)
Decrease in investment in partnership 1,180 1,376 1,264
--------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (17,019) (54,661) 9,586
- ----------------------------------------------------------------------------------------------------------------------
FINANCING Increase (decrease) in commercial paper 10,500 (6,500) (52,400)
ACTIVITIES Increase (decrease) in short-term borrowings (3,087) 4,320 114
Proceeds from exercise of stock options 1,495 2,256 2,052
Repurchase of common stock (4,239) -- --
Dividends paid (13,411) (13,379) (23,199)
--------------------------------------------------------------------------------------------------
Net cash used by financing activities (8,742) (13,303) (73,433)
Effect of exchange rate changes on cash (1,370) 1,288 (275)
--------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 5,726 (56,853) 6,137
Cash and cash equivalents at beginning of year 34,987 91,840 85,703
--------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 40,713 $ 34,987 $ 91,840
--------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
27
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES Sotheby's Holdings, Inc. and Subsidiaries
IN SHAREHOLDERS' EQUITY
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION
(THOUSANDS OF DOLLARS) STOCK CAPITAL EARNINGS ADJUSTMENT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ 5,483 $ 77,594 $133,542 $(18,424)
----------------------------------------------------------------------------------------
Stock options exercised 67 1,985
Tax benefit associated with exercise
of stock options 930
Foreign currency translation (2,640)
Net income 19,294
Dividends (23,199)
- -----------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 $ 5,550 $ 80,509 $129,637 $(21,064)
----------------------------------------------------------------------------------------
Stock options exercised 32 2,224
Tax benefit associated with exercise
of stock options 805
Foreign currency translation 6,479
Net income 20,259
Dividends (13,379)
- -----------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 $ 5,582 $ 83,538 $136,517 $(14,585)
----------------------------------------------------------------------------------------
Stock options exercised 22 1,473
Tax benefit associated with exercise
of stock options 250
Repurchase of common stock (29) (4,210)
Foreign currency translation (247)
Net income 32,582
Dividends (13,411)
- -----------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 $ 5,575 $ 81,051 $155,688 $(14,832)
----------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
28
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: ORGANIZATION AND BUSINESS
Sotheby's Holdings, Inc. together with its subsidiaries (the "Company") conducts
auctions and private sales of fine art, jewelry and decorative art. Auction
activities occur primarily in New York and London, but are also conducted
elsewhere in North America, Europe and Asia. In addition, the Company is engaged
in art-related financing activities and in marketing and brokering luxury real
estate.
NOTE B: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements include the
accounts of Sotheby's Holdings, Inc. and its wholly-owned subsidiaries. The
Company's investment in Acquavella Modern Art ("AMA") is accounted for
under the equity method.
REVENUE RECOGNITION Auction commission revenue is generally recognized at the
date of the related sale less estimates for allowances. Subscription revenue
from auction catalogues is recognized over the twelve-month period of the
subscription from the date of receipt of the proceeds. Other revenues include
revenues from financing activities, real estate operations, other auction-
related services and principal activities. Principal activities include net
gains (losses) on sales of inventories, the Company's earnings from its
investment in AMA, net income (loss) earned from guarantees, and provisions for
write-downs of inventories to estimated net realizable value. Other revenues are
generally recognized at the time service is rendered or revenue is earned by the
Company.
PROPERTIES Properties, consisting primarily of buildings and improvements,
furniture and fixtures and equipment, are stated on the cost basis. Depreciation
is computed principally on the straight-line method over estimated useful lives
for financial reporting purposes and by accelerated methods for income tax
purposes. Leaseholds and leasehold improvements are amortized over the lesser of
the life of the lease or the estimated useful life of the improvement.
Amortization of leased assets is included in depreciation and amortization
expense. During the fourth quarter of 1995, the Company changed its estimate of
the useful lives for computer hardware. These changes were made to better
reflect the estimated periods during which these assets will remain in service.
This change had the effect of increasing depreciation expense in 1995 by
approximately $2.1 million.
General and administrative expenses include repairs and maintenance and the cost
of computer software in the year of purchase.
DIRECT COSTS OF SERVICES Direct costs of services primarily include the costs of
obtaining and marketing property for auctions.
CASH EQUIVALENTS Cash equivalents are liquid investments, comprised primarily of
bank and time deposits with an original maturity of three months or less. These
investments are carried at cost, which approximates market value.
FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents,
accounts receivable, short-term borrowings, due to consignors, accounts payable
and accrued liabilities, and commercial paper are a reasonable estimate of their
fair value. The fair value of notes receivable is estimated using the current
rates at which similar loans would be made to borrowers for the same remaining
maturities.
INVENTORY Inventory consists of objects obtained incidental to the auction
process as well as for investment purposes. Inventory is valued at the lower of
cost or management's estimate of net realizable value.
INTANGIBLE ASSETS Intangible assets include goodwill, lease rights and
subscriber lists. Goodwill is being amortized over forty years. The amounts
assigned to the other intangible assets are amortized on a straight-line basis
over the estimated useful lives not to exceed twenty-five years.
EARNINGS PER SHARE Earnings per share is based on the weighted average number of
outstanding shares of common stock and common stock equivalents (stock options).
Weighted average number of shares for the earnings per share computation were as
follows: 1995-56,424,467, 1994-56,158,933; and 1993-55,861,424. Fully diluted
earnings per share, assuming the maximum dilutive effect of stock options, has
not been presented because the effects are not material. Weighted average number
of shares for the fully diluted earnings per share computations were as follows:
1995-56,446,638; 1994-56,158,933; and 1993-55,909,007.
29
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
FOREIGN CURRENCY TRANSLATION Assets and liabilities of foreign subsidiaries are
translated at year-end rates of exchange. Income statement amounts are
translated using weighted average monthly exchange rates for the year. Gains and
losses resulting from translating foreign currency financial statements are
accumulated in a separate component of shareholders' equity until the subsidiary
is sold or substantially liquidated.
RECLASSIFICATIONS Certain amounts in the 1994 and 1993 financial statements have
been reclassified to conform with the 1995 presentation.
RISKS AND UNCERTAINTIES The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NOTE C: GEOGRAPHIC DATA
In the following table North America includes the United States and Canada;
Europe includes the United Kingdom and continental Europe; and Asia primarily
includes operations in Hong Kong, Taiwan, Japan and Australia.
Year Ended December 31
(Thousands of dollars) 1995 1994 1993
- -----------------------------------------------------------------
REVENUES North America $ 153,900 $ 133,770 $127,142
Europe 147,324 115,622 114,413
Asia 11,656 10,271 8,121
--------------------------------------------------
Total $ 312,880 $ 259,663 $249,676
- -----------------------------------------------------------------
OPERATING North America $ 39,699 $ 31,408 $ 28,047
INCOME (LOSS) Europe 26,476 10,096 10,993
Asia (2,809) (1,679) (744)
Corporate (6,525) (6,792) (7,511)
--------------------------------------------------
Total $ 56,841 $ 33,033 $ 30,785
- -----------------------------------------------------------------
IDENTIFIABLE North America $ 311,934 $ 326,975 $291,361
ASSETS Europe 263,916 205,859 258,883
Asia 24,254 24,250 9,112
--------------------------------------------------
Total $ 600,104 $ 557,084 $559,356
--------------------------------------------------
NOTE D: ACCOUNTS AND NOTES RECEIVABLE AND DUE TO CONSIGNORS
Accounts and notes receivable consist of the following:
As at December 31
(Thousands of dollars) 1995 1994
- --------------------------------------------------------------
Accounts and other receivables $ 246,151 $ 201,836
Allowance for doubtful accounts (9,730) (7,873)
- --------------------------------------------------------------
236,421 193,963
- --------------------------------------------------------------
Notes receivable 144,229 133,586
Allowance for doubtful accounts (2,848) (2,292)
- --------------------------------------------------------------
141,381 131,294
- --------------------------------------------------------------
Total $ 377,802 $ 325,257
- --------------------------------------------------------------
30
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
Accounts receivable included $1.6 million and $1.9 million at December 31, 1995
and 1994, respectively, relating to the purchase of art objects at auction by
employees, officers, directors and other related parties.
Under the standard terms and conditions of the Company's auction sales, the
Company is not obligated to pay consignors if it has not been paid by the
purchaser. If the purchaser defaults on payment, the Company has the right to
cancel the sale and return the property to the owner, re-offer the property at
public auction or contact other bidders to negotiate a private sale.
In certain situations, when the purchaser takes possession of the property
before payment is made, the Company is liable to the seller for the net sale
proceeds. As of December 31, 1995 and 1994, accounts receivable included
approximately $90.6 million and $85.9 million, respectively, of such sales. As
of February 28, 1996, $81.2 million of the amount outstanding at December 31,
1995 had been paid. Amounts outstanding at December 31, 1994 which remained
outstanding at December 31, 1995 totaled $1.4 million. Management believes that
adequate allowances have been established to provide for potential losses on
these amounts.
The average interest rates charged on notes receivables were 9.2% and 7.3% at
December 31, 1995, and 1994, respectively. The estimated fair value of notes
receivable was $140.1 million and $129.8 million at December 31, 1995 and 1994,
respectively.
Approximately 32% of the Company's loan portfolio at December 31, 1995 was
extended to one borrower. The Company's general policy in relation to secured
loans is to obtain collateral with a low estimated auction value equivalent to
or greater than 200% of the secured loan. The low auction estimate of the
collateral for this secured loan exceeded the Company's general policy
requirements at December 31, 1995. No other individual loan amounted to more
than 5% of total assets. At December 31, 1995, approximately 40% of the
estimated value of collateral securing the Company's notes receivable was
Impressionist and Modern art.
Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan." Adoption
of this standard did not have a material impact on the Company's financial
statements. Interest income on impaired loans is recognized to the extent cash
is received. Where there is doubt regarding the ultimate collectibility of
principal for impaired loans, cash receipts, whether designated as principal or
interest, are thereafter applied to reduce the recorded investment in the loan.
Following are the changes in the allowance for credit losses relating to notes
receivable for the twelve months ended December 31, 1995 and 1994:
Year ended December 31
(Thousands of dollars) 1995 1994
- -------------------------------------------------------------------------------
Allowance for credit losses at December 31, 1994 and 1993 $2,292 $ 3,614
Provisions 1,003 309
Writeoffs - (1,666)
Other (447) 35
- -------------------------------------------------------------------------------
Allowance for credit losses at December 31, 1995 and 1994 $2,848 $ 2,292
- -------------------------------------------------------------------------------
NOTE E: INVENTORY
Inventory consists principally of objects obtained incidental to the auction
process primarily as a result of honoring authenticity claims of purchasers,
purchasers defaulting on accounts receivable after the consignor has been paid
and purchasing property at the minimum price guaranteed by the Company.
The inventory and related allowances to adjust the cost of inventory to
management's estimated net realizable value are as follows:
As at December 31
(Thousands of dollars) 1995 1994
- -------------------------------------------------------------------------
Inventory, at cost $43,810 $35,325
Net realizable value allowances (21,012) (14,995)
- -------------------------------------------------------------------------
Total $22,798 $20,330
- -------------------------------------------------------------------------
31
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
NOTE F: INVESTMENT IN PARTNERSHIP
On May 23, 1990, the Company purchased the common stock of the Pierre Matisse
Gallery Corporation ("Matisse") for approximately $153 million. The assets of
Matisse consisted of a collection of fine art (the "Matisse inventory"). Upon
consummation of the purchase, the Company contributed the Matisse inventory to
AMA and entered into the AMA partnership agreement with Acquavella Contemporary
Art, Inc. to sell the Matisse inventory. The Company accounts for its investment
in AMA under the equity method of accounting in the Consolidated Financial
Statements, including its share of AMA's income in other revenue. The total net
assets of the partnership consist principally of the inventory described above.
The Company reflects its 50% interest in the net assets of the partnership as
investment in partnership in the Consolidated Balance Sheets, which totaled
$38.8 million and $44.3 million at December 31, 1995 and 1994, respectively.
According to the terms of the partnership agreement, each partner has a 50%
interest in the earnings of AMA, and all cash available for distribution was
initially distributed to the Company until the Company received $270.3 million,
together with a return equal to the prime rate (as defined). Cash distributions
now are being made on a 50-50 basis. Cash distributed to the Company in
accordance with the partnership agreement totaled $282.9 million through
December 31, 1995. To the extent that the partnership requires working capital,
the Company has agreed to lend the same to the partnership. As of December 31,
1995, no such amounts were outstanding.
NOTE G: PROPERTIES
Properties consist of the following:
As at December 31
(Thousands of dollars) 1995 1994
- -------------------------------------------------------------------------
Land $ 170 $ 170
Building and building improvements 33,309 32,893
Leaseholds and leasehold improvements 38,123 36,774
Furniture, fixtures and equipment 52,247 45,217
Other 5,369 5,235
- -------------------------------------------------------------------------
129,218 120,289
- -------------------------------------------------------------------------
Less: Accumulated depreciation (63,898) (53,464)
- -------------------------------------------------------------------------
Total $ 65,320 $ 66,825
- -------------------------------------------------------------------------
NOTE H: CREDIT ARRANGEMENTS
Short-term borrowings consist of the following:
As at December 31
(Thousands of dollars) 1995 1994
- -------------------------------------------------------------------------
Bank lines of credit $5,816 $5,266
Note payable - 3,622
Other short-term obligations - 15
- -------------------------------------------------------------------------
Total $5,816 $8,903
- -------------------------------------------------------------------------
BANK LINES OF CREDIT At December 31, 1995 and 1994, $5.8 million and $5.3
million, respectively, were outstanding under lines of credit at weighted
average annual interest rates of 4.58% and 6.57%, respectively.
NOTE PAYABLE York Avenue Development, Inc. ("York") had signed a demand note
payable to Taubman York Avenue Associates, Inc. (see Note J). Interest on the
original note was calculated at prime plus 1%. During the fourth quarter of
1994, the note was renegotiated and the interest rate was retroactively reduced
to prime minus 1/2%. The note was paid in full and cancelled in January 1995.
COMMERCIAL PAPER The Company may issue up to $200 million in notes under its
U.S. commercial paper program. At December 31, 1995 and 1994, commercial paper
borrowings amounting to $38.0 million and $27.5 million, respectively, have been
classified on the Consolidated Balance Sheets as long-term liabilities based on
the Company's ability to maintain or refinance these obligations on a long-term
basis. The notes do not bear interest but are issued at a discount, which is
negotiated by the Company and purchaser prior to each issuance. The weighted
average annual interest rates on these notes was 6.06% and 6.21% with average
maturities of 27.5 and 18.8 days at December 31, 1995 and 1994, respectively.
32
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
BANK CREDIT FACILITIES During 1994 the Company entered into a $300 million Bank
Credit Agreement (the "Credit Agreement"). Borrowings under the Credit Agreement
are permitted through January 31, 1998 in either U.S. dollars or U.K. pounds
sterling. Under the terms of the Credit Agreement, interest is calculated based
on the London Interbank Offering Rate ("LIBOR") and a facility fee of 0.15% per
annum is charged on the amount of the commitment. Commitment fees totaled $0.5
million and $0.2 million for the years ended December 31, 1995 and 1994,
respectively. The Credit Agreement contains certain financial covenants
including limitations on the Company's ability to incur debt but contains no
restriction on the payment of dividends. However, the Company is required to
maintain consolidated tangible net worth, as defined, of at least $150 million.
At December 31, 1995, consolidated tangible net worth, as defined, was $214.2
million.
Prior to August 1994, the Company had an aggregate of $175 million available
under various Bank Credit Facilities. Borrowings under these facilities were
based on one of several interest rates, at the option of the Company. Commitment
fees on the unused portion of the facilities totaled $0.2 million and $0.4
million for the years ended December 31, 1994, and 1993, respectively.
Interest paid on borrowings totaled $4.5 million, $4.1 million and
$4.5 million in the years ended December 31, 1995, 1994 and 1993, respectively.
NOTE I: INCOME TAXES
Year ended December 31
(Thousands of dollars) 1995 1994 1993
- --------------------------------------------------------------------------
INCOME BEFORE Domestic $ 28,235 $ 19,880 $ 17,180
TAXES Foreign 26,068 13,885 14,977
------------------------------------------------------
Total $ 54,303 $ 33,765 $ 32,157
- --------------------------------------------------------------------------
INCOME TAXES Federal $ 5,890 $ 5,401 $ 3,877
CURRENT State and local 4,611 3,090 3,340
Foreign 10,223 7,226 4,419
------------------------------------------------------
20,724 15,717 11,636
- --------------------------------------------------------------------------
INCOME TAXES Federal (932) (1,070) 1,227
DEFERRED Foreign 1,929 (1,141) -
------------------------------------------------------
997 (2,211) 1,227
------------------------------------------------------
Total $ 21,721 $ 13,506 $ 12,863
------------------------------------------------------
As required by SFAS No.109, the components of deferred income tax assets and
liabilities are disclosed below:
As at December 31
(Thousands of dollars) 1995 1994
- --------------------------------------------------------------------------------
CURRENT Taxable loss carryforwards $ - $ 2,922
DEFERRED TAX Asset provisions and accrued liabilities 8,434 9,131
ASSETS ------------------------------------------------------------
Total $ 8,434 $ 12,053
- --------------------------------------------------------------------------------
NON-CURRENT Basis difference in partnership assets $13,570 $ 15,667
DEFERRED TAX Depreciation 2,231 2,756
LIABILITIES ------------------------------------------------------------
Total $15,801 $ 18,423
------------------------------------------------------------
33
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
The effective tax rate varied from the statutory rate as follows:
<TABLE><CAPTION>
Year ended December 31
1995 1994 1993
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local taxes, net of federal tax benefit 5.5 6.0 6.8
Foreign taxes at rates greater (less) than U.S. rates 3.6 3.6 (2.6)
Taxable foreign source income 1.5 (0.9) 4.9
Other (5.6) (3.7) (4.1)
- --------------------------------------------------------------------------------------
Effective income tax rate 40.0% 40.0% 40.0%
- --------------------------------------------------------------------------------------
</TABLE>
Undistributed earnings of foreign subsidiaries included in consolidated retained
earnings at December 31, 1995 and 1994 amounted to $18.2 million and $12.7
million, respectively. Such amounts are considered to be reinvested indefinitely
or will be distributed from income that would not incur a significant tax
consequence and, therefore, no provision has been made for taxes that would be
payable upon distribution of these earnings.
Total income tax payments, net of refunds, during 1995, 1994 and 1993 were $12.3
million, $4.7 million and $9.2 million, respectively.
NOTE J: LEASE COMMITMENTS
The Company conducts its business on premises leased in various locations under
long-term operating leases expiring through 2060. Net rental payments under
operating leases amounted to $12.0 million, $11.3 million and $11.1 million,
respectively, for the years ended December 31, 1995, 1994 and 1993.
Properties under capital leases, which relate primarily to computer and office
equipment, are not material. Future minimum lease payments under noncancelable
operating leases in effect at December 31, 1995 are as follows:
(Thousands of dollars) OPERATING LEASES
- -----------------------------------------------------------------------
1996 $10,497
1997 9,606
1998 8,472
1999 6,276
2000 6,152
Thereafter 49,639
- -----------------------------------------------------------------------
Total future minimum lease payments $90,642
- -----------------------------------------------------------------------
In addition to the above rentals, under the terms of certain of the leases, the
Company pays real estate taxes, utility costs and other increases based on a
price-level index.
Operating leases include a lease expiring in 2009 (which can be extended until
2039) on the North American headquarters building in New York City (the "York
Property"). York Avenue Development, Inc. ("York"), a wholly-owned subsidiary of
Sotheby's, Inc. (itself a wholly-owned subsidiary of the Company), holds a
purchase option on the York Property. The option can be exercised anytime until
January 31, 1999 for $11 million plus a profit-sharing arrangement of from $5
million to $10 million. Thereafter, on defined dates in 1999, 2004 and 2009, the
option is exercisable for ten times the rent at the date the option is
exercised, subject to certain limitations.
34
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
Sotheby's Inc. and York have reached an agreement with Taubman York Avenue
Associates, Inc. ("Associates") under which Associates will assist York in
developing and financing a new mixed-use tower (the "New Tower") over the
existing four-story building on the York Property, if the Company chooses to
develop the New Tower. This agreement has been assigned to York Avenue
Advisors, Inc. ("Advisors") as of June 1, 1995. Associates was and Advisors
is controlled by the largest shareholder and Chairman of the Company. Under
the Agreement:
(i)York will be responsible at its sole cost and expense for
developing the New Tower (but without recourse to the
Company or any of its other subsidiaries);
(ii)The investment of Sotheby's, Inc. in the development of
the New Tower totaled $4.3 million at December 31, 1995.
(iii)Associates will lend funds and provide certain
guarantees, including guarantees that may be required by any
construction lender in order to provide the necessary
resources for the development of the New Tower; and
(iv)York will indemnify Associates against liabilities
arising from the construction of the New Tower and
any guarantees given by Associates.
If the New Tower is developed, under the agreement with Associates, Sotheby's,
Inc. will either acquire a condominium to be composed of the existing building
and the first floor of the New Tower (the "Condominium") for $1.00 or lease the
Condominium from York for $1.00 per year under a long-term lease. In addition,
York is entitled to receive 10% of the first $15.0 million of the cash profits
(as defined) plus 25% of any cash profits in excess of $15.0 million from the
development of the New Tower. Associates will receive the remainder of the cash
profits from the development of the New Tower.
If construction does not begin on or before September 30, 1997, Associates'
arrangements with Sotheby's Inc. and York will terminate.
NOTE K: SHAREHOLDERS' EQUITY
COMMON STOCK AND PUBLIC OFFERING Effective May 13, 1988, 11,006,214 shares of
Class A Limited Voting Common Stock ("Class A Common Stock") were sold in an
initial public offering by the Company's shareholders. Effective June 30, 1992,
an additional 11,000,000 shares of Class A Common Stock were sold in a secondary
public offering by certain of the Company's shareholders. The Class A Common
Stock is traded on stock exchanges in both the United States and the United
Kingdom.
Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to ten votes. Both classes of Common Stock
share equally in cash dividend distributions.
PREFERRED STOCK In addition to Class A and B Common Stock outstanding, the
Company has the authority to issue 50,000,000 shares of Preferred Stock, no par
value. No such shares were issued and outstanding at December 31, 1995 and 1994.
1987 STOCK OPTION PLAN At December 31, 1995, the Company has reserved 9,490,000
shares of Class B Common Stock for issuance in connection with the 1987 Stock
Option Plan (the "Plan").
Pursuant to the Plan, options are granted with an exercise price equal to or
greater than fair market value at the date of grant. For options granted through
September 1992, options vest and become exercisable ratably during each of the
fourth, fifth and sixth years after the date of grant. For options granted
subsequent to September 1992, options vest and become exercisable ratably in
each of the second, third, fourth, fifth and sixth years after the date of grant
(except in the U.K. where options vest three-fifths in the fourth year and
one-fifth in each of the fifth and sixth years after the date of grant). The
options are exercisable into shares of Class B Common Stock, which are either
authorized but unissued shares or reacquired shares. The shares of Class B
Common Stock issued upon exercise are convertible into an equivalent number of
shares of Class A Common Stock.
35
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
At December 31, 1995 and 1994, there were outstanding options for the purchase
of 6,296,565 and 5,514,915 shares, respectively, at prices ranging from $1.50 to
$22.62 per share. Stock option transactions during 1995, 1994 and 1993 are
summarized as follows (shares in thousands):
<TABLE><CAPTION>
OPTIONS OUTSTANDING
SHARES RESERVED FOR -----------------------------
ISSUANCE UNDER THE PLAN SHARES PRICES
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Initial grant September 1, 1987 12,507 7,628 $ 1.50
- ----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1992 6,703 3,817 $ 1.50-22.62
Options granted 2,350 $12.50-13.38
Options canceled (273) $10.50-15.50
Options exercised (664) (664) $ 1.50-13.38
Increase in shares reserved 4,000
- ----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 10,039 5,230 $ 1.50-22.62
Options granted 933 $12.25-18.00
Options canceled (320) $ 1.50-16.50
Options exercised (328) (328) $ 1.50-15.50
- ----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 9,711 5,515 $ 1.50-22.62
Options granted 1,217 $10.87-14.12
Options canceled (214) $10.87-16.50
Options exercised (221) (221) $1.50-13.375
- ----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 9,490 6,297 $ 1.50-22.62
- ----------------------------------------------------------------------------------------
</TABLE>
In February 1996, the Company approved an additional aggregate grant of 500,000
options pursuant to the 1987 stock option plan.
STOCK REPURCHASE PROGRAMS In November of 1995, the Company announced a stock
repurchase program to acquire up to 1,000,000 shares of its outstanding Class A
Common Stock in the open market. As of December 31, 1995, 299,300 shares had
been repurchased under this program. During 1990, the Company authorized a stock
repurchase program (the "repurchase program") to acquire up to 3,000,000 shares
of its outstanding Class A Common Stock through open market or other
transactions. As of December 31, 1994, 1,000,000 shares had been repurchased
under this program, which has been discontinued by the Company.
NOTE L: PENSION ARRANGEMENTS
The Company has a U.S. defined contribution plan that covers employees after 90
days of service. The Company contributes 2% of each participant's compensation
to the plan. In addition, participants may elect to contribute between 2% and
12% of their compensation, up to the maximum amount allowable under IRS
regulations, on a pre-tax basis. Employee savings are matched by a Company
contribution of up to an additional 3% of the participant's compensation.
Effective May 1, 1996 the Company will match employee savings up to an
additional 6% (instead of 3%) of the participant's compensation. The Company's
contributions amounted to $1.7 million, $1.5 million and $1.4 million for the
years ended December 31, 1995, 1994 and 1993, respectively.
The Company also has a defined benefit pension plan covering employees in the
United Kingdom. The U.K. pension plan covers substantially all U.K. employees
and contributions to the plan are funded annually.
The components of the net pension expense for the U.K. pension plan are as
follows:
<TABLE><CAPTION>
Year ended December 31
(Thousands of dollars) 1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 2,874 $ 3,031 $ 2,582
Interest cost on projected benefit obligations 5,169 4,837 4,546
Actual return on plan assets (11,622) (2,485) (20,327)
Net amortization and deferral 3,664 (4,417) 14,105
- ---------------------------------------------------------------------------------
Net pension expense $ 85 $ 966 $ 906
- ---------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
The funded status of the U.K. plan is as follows:
<TABLE><CAPTION>
As at December 31
(Thousands of dollars) 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated vested benefit obligations $ 64,653 $ 61,428
Effect of future salary increases 5,049 4,497
- ---------------------------------------------------------------------------------------------
Total projected benefit obligations 69,702 65,925
- ---------------------------------------------------------------------------------------------
Plan assets at fair market value, primarily stocks and bonds 95,452 85,739
- ---------------------------------------------------------------------------------------------
Excess of plan assets over projected benefit obligations 25,750 19,814
Unrecognized net transition asset (3,249) (3,741)
Unrecognized prior service cost 3,046 3,342
Unrecognized net gain (22,351) (16,773)
- ---------------------------------------------------------------------------------------------
Prepaid pension cost recognized in consolidated balance sheet $ 3,196 $ 2,642
- ---------------------------------------------------------------------------------------------
</TABLE>
The weighted-average discount rate used in determining actuarial values for the
U.K. pension plan was 8.0% in 1995 and 1994; the increase in future compensation
levels was 7.0% in 1995 and 1994; and the expected weighted-average long-term
rate of return on plan assets was 9.0% in 1995 and 1994.
NOTE M: RELATED PARTY TRANSACTIONS
Effective in 1995, members of the Board of Directors, the Advisory Board and
employees are charged a 2% seller's commission on property sold at auction for
their benefit; prior to 1995, no seller's commission was charged. Due to
consignors included $0.4 million and $4.2 million at December 31, 1995 and 1994,
respectively, relating to the sale of art objects at auction by employees,
officers, directors and other related parties. In addition, prior to December,
1995, the Company had a loan program whereby the Company would lend money to
certain officers and staff for a term of 15 years to purchase a residence under
notes bearing interest at an annual rate equal to 1 to 2 percentage points below
the prime rate. Outstanding under this program were loans amounting to $1.1
million and $5.2 million at December 31, 1995 and 1994, respectively. In
December 1995, the majority of the loans under this program were refinanced and
replaced by a bank loan program providing comparable loan terms and interest
rates. All repayment obligations under this bank loan program are guaranteed by
the Company. This program is available to employees at the Chief Executive
Officer's discretion. All loans are repayable when an employee leaves the
Company. The amount of guarantees outstanding was $4.3 million at December 31,
1995. See Notes D, H, J and N for additional related party disclosure.
NOTE N: COMMITMENTS AND CONTINGENCIES
LEGAL ACTIONS The Company, in the normal course of business, is a defendant in
various legal actions.
LENDING AND OTHER CONTINGENCIES In conjunction with the client loan program, the
Company enters into legally binding arrangements to lend, on a collateralized
basis, to potential consignors and other individuals who have collections of
fine art or other objects. Unfunded commitments to extend additional credit were
approximately $13.6 million and $25.7 million at December 31, 1995 and December
31, 1994, respectively.
The Company has another bank loan guarantee program available to certain
employees at the Chief Executive Officer's discretion whereby the employee
borrows directly from a bank on a demand note basis and pays an annual interest
rate equal to the prime rate. All of the repayment obligations of the employee
are guaranteed by the Company and repayable when an employee leaves the Company.
These obligations totaled $2.0 million at December 31, 1995. In the U.K., the
Company has guaranteed a portion of an employee mortgage loan. The amount of the
guarantee was $0.3 million at December 31, 1995.
37
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
On certain occasions, the Company will guarantee to the consignor a minimum
price in connection with the sale of property at auction. The Company must
perform under its guarantee only in the event that (a) the property fails to
sell at auction and the consignor prefers to be paid the minimum price rather
than retain ownership of the unsold property, resulting in the Company's
purchase of the property at the minimum price; or (b) the property sells for
less than the minimum price and the Company must pay the difference between the
sale price at auction and the amount of the guarantee. At December 31, 1995 and
February 28, 1996, there were no outstanding guarantees covering property to be
sold at auction. Under the guarantees, the Company participates in a share of
the proceeds if the property under guarantee sells above a minimum price. In
addition, the Company had an outstanding guarantee of up to $8.0 million at
December 31, 1995 relating to property which is not art.
In the opinion of management, the commitments and contingencies described above
currently are not expected to have a material adverse effect on the Company's
financial statements.
NOTE O: QUARTERLY RESULTS (UNAUDITED)
<TABLE><CAPTION>
(Thousands of dollars, except per share data) FIRST SECOND THIRD FOURTH
<S> <C> <C> <C> <C>
1995 Auction sales $175,681 $655,799 $123,574 $710,324
--------------------------------------------------------------------------------------------------
Auction revenues $ 35,551 $100,940 $ 27,849 $119,711
Other revenues 6,903 7,613 7,640 6,673
--------------------------------------------------------------------------------------------------
Total revenues 42,454 108,553 35,489 126,384
--------------------------------------------------------------------------------------------------
Operating income (11,630) 40,731 (18,738) 46,478
Net Income (Loss) $ (6,954) $ 23,669 $(11,662) $ 27,529
Earnings (Loss) Per Share $ (0.12) $ 0.42 $ (0.21) $ 0.48
--------------------------------------------------------------------------------------------------
(Thousands of dollars, except per share data) FIRST SECOND THIRD FOURTH
1994 Auction sales $161,281 $530,799 $105,154 $532,767
--------------------------------------------------------------------------------------------------
Auction revenues $ 33,236 $ 86,580 $ 24,210 $ 89,425
Other revenues 5,913 6,859 6,241 7,199
--------------------------------------------------------------------------------------------------
Total revenues 39,149 93,439 30,451 96,624
--------------------------------------------------------------------------------------------------
Operating income (9,274) 32,237 (19,100) 29,170
Net Income (Loss) $ (5,087) $ 19,065 $(11,499) $ 17,780
Earnings (Loss) Per Share $ (0.09) $ 0.34 $ (0.21) $ 0.31
--------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of Sotheby's Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Sotheby's
Holdings, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Sotheby's Holdings, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
February 28, 1996
REPORT OF MANAGEMENT
The Company's consolidated financial statements were prepared by management,
which is responsible for their integrity and objectivity. The financial
statements have been prepared in accordance with generally accepted accounting
principles and, as such, include amounts based on management's best estimates
and judgments.
Management is further responsible for maintaining a system of internal control
structure and related policies and procedures designed to provide reasonable
assurance that assets are adequately safeguarded and that the accounting records
reflect transactions executed in accordance with management's authorization.
<TABLE>
<S> <C> <C>
/s/ Diana D. Brooks /s/ Kevin A. Bousquette /s/ Patricia Carberry
Diana D. Brooks Kevin A. Bousquette Patricia Carberry
President and Senior Vice President and Vice President, Controller and
Chief Executive Officer Chief Financial Officer Chief Accounting Officer
</TABLE>
AUDIT AND COMPENSATION COMMITTEE CHAIRMAN'S LETTER
The Audit and Compensation Committee (the "Committee") of the Board of Directors
consisted of four independent Directors. Information as to these persons, as
well as the scope of duties of the Committee, is provided in the Proxy
Statement. During 1995, the Committee met five times and reviewed with Deloitte
& Touche LLP, the Director of the Internal Audit Department and management the
various audit activities and plans, together with the results of selected
internal audits. The Committee also reviewed the reporting of consolidated
financial results and the adequacy of internal controls. The Committee
recommended the appointment of Deloitte & Touche LLP as independent public
accountants and considered factors related to their independence. Deloitte &
Touche LLP and the Director of the Internal Audit Department met privately with
the Committee on occasion to encourage confidential discussion as to any
auditing matters.
/s/ Max M. Fisher
Max M. Fisher
Chairman,
Audit and Compensation Committee
39
<PAGE>
<TABLE>
Sotheby's Holdings, Inc. and Subsidiaries
SOTHEBY'S HOLDINGS, INC.
BOARD OF DIRECTORS CORPORATE OFFICERS ADVISORY BOARD
................... .................. .................
<S> <C> <C> <C>
A. Alfred Taubman, Diana D. Brooks, Patricia Carberry, Giovanni Agnelli
Chairman President and Chief Vice President, Controller and
Executive Officer Chief Accounting Officer Her Royal Highness The
Max M. Fisher, Infanta Pilar de Borbon,
Vice Chairman Kevin A. Bousquette, Richard J. Cody, Duchess of Badajoz
Senior Vice President and Vice President and
Lord Camoys, Chief Financial Officer Director of Taxes Ann Getty
Deputy Chairman
Susan Alexander, Jeffrey J. Pierne, Alexis Gregory
Diana D. Brooks, Senior Vice President, Vice President,
President and Human Resources Investor Relations and Anne Ford Johnson
Chief Executive Officer Assistant Treasurer
John S. Brittain, Jr., Sir Quo-Wei Lee
Viscount Michael Blakenham, Senior Vice President
Executive Chairman, and Treasurer Graham D. Llewellyn
Pearson PLC
Suzanne McMillan, John L. Marion
Ambassador Walter J. P. Curley, Senior Vice President,
Chairman, The French Marketing The Hon. Sir Angus
American Foundation Ogilvy, K.C.V.O.
Diana Phillips,
Simon de Pury, Senior Vice President, Carroll Petrie
Chairman, Sotheby's Europe Public Relations
William Pitt
The Rt. Hon. The Earl of Gowrie, Marjorie E. Stone,
Chairman,The Arts Council Senior Vice President and Mrs. Charles H. Price
General Counsel
The Marquess of Hartington Prof. Dr. Werner
Schmalenbach
R. Julian de la M. Thompson,
Chairman, Sotheby's Asia Baron Hans Heinrich
Thyssen-Bornemisza
de Kaszon
<CAPTION>
WORLDWIDE AUCTION LOCATIONS
<S> <C> <C> <C> <C>
SOTHEBY'S NORTH AND Brazil Ireland Munich * Spain
SOUTH AMERICA Rio de Janeiro Dublin Stuttgart Barcelona
................... Sao Paulo Madrid *
United States Channel Islands Greece
Atlanta Mexico Guernsey, C.I. Sweden
Baltimore Mexico City Holland Gothenburg
Beverly Hills * Monterrey Austria Amsterdam * Stockholm
Boston Graz
Chicago Venezuela Klagenfurt Hungary Switzerland
Dallas Caracas Vienna Budapest Basel
Fort Worth Geneva *
Honolulu Belgium Iceland Lugano
Houston SOTHEBY'S EUROPE Brussels Reykjavik Zurich *
Miami ..................
Minneapolis United Kingdom Cyprus India Syria
New Orleans Cheltenham Nicosia Bombay
New York * Chester New Delhi SOTHEBY'S ASIA
North Carolina Derbyshire Czech Republic ................
Palm Beach Devon Prague Indonesia Australia
Philadelphia Hampshire Melbourne *
Puerto Rico Harrogate Denmark Israel Sydney *
St. Louis Kent Copenhagen Tel Aviv *
San Francisco Lincolnshire China
Seattle London * Finland Italy Shanghai
Tampa Norfolk Helsinki Florence
Virginia Suffolk Milan * Hong Kong *
Washington, D.C. Sussex * France Rome
Wiltshire Bordeaux Turin Japan
Canada Yorkshire Montpellier Tokyo
Toronto * Paris Jordan
Vancouver Scotland and Strasbourg Korea
Victoria, B.C. Border Counties Liechtenstein Seoul
Edinburgh Germany
Argentina Glasgow Berlin Luxembourg Malaysia
Buenos Aires Newcastle-upon-Tyne Cologne Kuala Lumpur
Frankfurt Monaco *
Northern Ireland Hamburg Singapore *
Newtonards, Co. Down Karlsruhe Norway
Lower Saxony Oslo Taiwan
Taipei *
Portugal
Lisbon
</TABLE>
* 18 Salesrooms, 45 Countries
40
<PAGE>
<TABLE>
Sotheby's Holdings, Inc. and Subsidiaries
SOTHEBY'S WORLDWIDE MANAGEMENT
<S> <C> <C> <C>
NORTH AND SOUTH David N. Redden, Melanie Clore, Colin Mackay,
AMERICA BOARD OF Senior Vice President, Senior Director, Senior Director,
DIRECTORS Worldwide Head of Books and Head of Impressionist and Head of Chinese Works of Art,
...................... Manuscripts and Collectibles Modern Art Sotheby's London
Diana D. Brooks, Stuart Siegel, Daniella Luxembourg, Suzanne Mitchell,
President and President, Sotheby's Senior Director, Senior Vice President, Japanese
Chief Executive Officer, International Realty and Deputy Chairman, Business Development,
Sotheby's Holdings, Inc. Senior Vice President, Sotheby's Switzerland Sotheby's North America
Regional Operations
Richard E. Oldenburg, Paul J. Mack, John Tancock,
Chairman, William W. Stahl, Jr., Senior Director, Senior Vice President,
Sotheby's North and South Senior Vice President, Head of Furniture and Books Impressionist and Modern Art,
America Head of Decorative Arts Sotheby's North America and
James Miller, Japan
William F. Ruprecht, Marjorie E. Stone, Senior Director,
Managing Director, Senior Vice President, Business Development Suzanne Tory,
Sotheby's North and South General Counsel, Operations Director,
America Sotheby's Holdings, Inc. James Stourton, Sotheby's Asia
Senior Director,
John D. Block, George Wachter, Head of European Business Yarman Vachha,
Executive Vice President, Senior Vice President, Development Finance and Operations
Head of Jewelry and Precious Head of Fine Arts Director,
Objects Michel Strauss, Sotheby's Asia
Mitchell Zuckerman, Senior Director,
C. Hugh Hildesley, President, Impressionist and Rita Wong,
Executive Vice President, Sotheby's Financial Services Modern Art Managing Director,
Client Development Sotheby's Taiwan
EUROPE Simon Taylor,
Warren P. Weitman, Jr., BOARD OF DIRECTORS Senior Director, SOTHEBY'S
Executive Vice President, .................... Head of Paintings FINANCIAL
Worldwide Head of Business Simon de Pury, SERVICES
Development Chairman, R. Julian de la M. ............
Sotheby's Europe Thompson, Mitchell Zuckerman,
Robert C. Woolley, Chairman, President
Executive Vice President, Henry Wyndham, Sotheby's Asia
Decorative Arts Chairman, SOTHEBY'S
Sotheby's United Kingdom ASIA INTERNATIONAL
Susan Alexander, BOARD OF DIRECTORS REALTY
Senior Vice President, George Bailey, .................. ..................
Worldwide Head of Managing Director, R. Julian de la M. Stuart N. Siegel,
Human Resources, Sotheby's Europe Thompson, President
Sotheby's Holdings, Inc. Chairman,
Diana D. Brooks, Sotheby's Asia
Kevin A. Bousquette, President and
Senior Vice President and Chief Executive Officer, Tetsuji Shibayama,
Chief Financial Officer, Sotheby's Holdings, Inc. Managing Director,
Sotheby's Holdings, Inc. Sotheby's Japan
Princess de Beauvau Craon,
Suzanne McMillan, Chairman, Diana D. Brooks,
Senior Vice President, Sotheby's France President and
Worldwide Head of Chief Executive Officer,
Marketing, David W. Bennett, F.G.A., Sotheby's Holdings, Inc.
Sotheby's Holdings, Inc. Senior Director,
Head of Jewelry and Robert Bleakley,
Thierry Millerand, Precious Objects Chairman,
Worldwide Senior Expert, Sotheby's Australia
European Furniture
Lisa Hubbard,
Diana Phillips, Senior Vice President,
Senior Vice President, Head of Jewelry and Precious
Worldwide Head of Objects
Public Relations,
Sotheby's Holdings, Inc.
</TABLE>
41
<PAGE>
Sotheby's Holdings, Inc. and Subsidiaries
SHAREHOLDERS INFORMATION
COMMON STOCK PRICE
The quarterly price ranges and dividends per share of Class A Common Stock in
1995 and 1994 were as follows:
CASH DIVIDENDS
HIGH LOW PER SHARE
---------------------- ----------------- ---------------
(Quarter) 1995 1994 1995 1994 1995 1994
- --------------------------------------------------------------------------------
First $ 12 5\8 $ 19 1\2 $ 10 3\8 $15 3\8 $ 0.06 $ 0.06
Second 14 1\4 18 3\8 12 11 7\8 0.06 0.06
Third 14 3\4 13 1\4 12 1\2 12 0.06 0.06
Fourth 15 3\8 13 13 1\8 10 3\4 0.06 0.06
The Company also has Class B Common Stock convertible on a share-for-share basis
into Class A Common Stock. There is no public market for the Class B Common
Stock. Cash dividends are payable equally on the Class A and B Common Stock.
The number of holders of record of the Class A Common Stock as of March 11, 1996
was 1,337. The number of holders of record of the Class B Common Stock as of
March 11, 1996 was 33.
ADMINISTRATIVE OFFICES
c/o Sotheby's Service Corporation
301 Merritt 7
Norwalk, Connecticut 06851
TRANSFER AGENTS
Mellon Securities Trust Company
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
The Royal Bank of Scotland plc
Registrar's Department
P.O. Box 82
Caxton House, Redcliffe Way
Bristol BS99 7NH England
COMMON STOCK INFORMATION
Sotheby's Holdings, Inc. Class A Common Stock is listed on the New York
Stock Exchange (symbol: BID) and the London Stock Exchange.
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at Sotheby's, 34-35 New Bond
Street, London, on Wednesday, June 19, 1996 at 10:00 a.m.
FORM 10-K AND SHAREHOLDER INFORMATION
The 1995 annual report filed with the Securities and Exchange Commission and
other investor information may be obtained by writing to:
Investor Relations U.K. Corporate Secretary's Office
Sotheby's Sotheby's
1334 York Avenue 34-35 New Bond Street
New York, New York 10021 London W1A 2AA
Tel: (212) 606-7507 Tel: 071-408-5257
CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
42
<PAGE>
COPYRIGHTS
<TABLE>
<S> <C> <C>
PAGE 9: THE BIRTH SALVER PAGE 12: PABLO PICASSO'S EDITORIAL AND DESIGN
OF LORENZO DE' MEDICI BY ANGEL FERNANDEZ DE SOTO.
LO SCHEGGIA: THE Copy Rights 1996 ESTATE SOTHEBY'S,
METROPOLITAN MUSEUM OF ART. OF PABLO PICASSO/ARTISTS NEW YORK, NY
PURCHASE, IN MEMORY OF SIR RIGHTS SOCIETY PAGE 18:
JOHN POPE-HENNESSY: MAN RAY'S, LE BEAU TEMPS. PHOTOGRAPHY
ROGERS FUND, THE ANNENBERG Copy Rights MAN RAY TRUST, 1996.
FOUNDATION, DRUE HEINZ PHILIP PERKIS
FOUNDATION, ANNETTE DE LA
RENTA, MR. AND MRS. FRANK E. SASHA GUSOV
RICHARDSON, AND THE VINCENT
ASTOR FOUNDATION GIFTS, WARREN SALOWE
WRIGHTSMAN AND GWYNNE ANDREWS
FUNDS, SPECIAL FUNDS,
AND GIFT OF THE CHILDREN OF
MRS. HARRY PAYNE WHITNEY,
GIFT OF MR. AND MRS. JOSHUA
LOGAN, AND OTHER GIFTS AND
BEQUESTS, BY EXCHANGE,
1995. (1995.7)
</TABLE>
<PAGE>
SOTHEBY'S
-------------
FOUNDED 1744
Exhibit 21
SUBSIDIARIES OF SOTHEBY'S HOLDINGS, INC.
The subsidiaries of Sotheby's Holdings, Inc., which are wholly owned
except where indicated, are as follows:
JURISDICTION OF
INCORPORATION
---------------
Sotheby's Holdings, Inc. Michigan
Sotheby Parke Bernet Stamp Auction, Inc. Connecticut
Sotheby's Asia, Inc. Michigan
Sotheby's Japan Ltd. Japan
Sotheby's Hong Kong Ltd. Hong Kong
Sotheby's Australia Pry Ltd. (50.25%) Australia
Sotheby's Asia Ltd. Bermuda
Sotheby's Monaco S.A.M. Monaco
Sotheby's Taiwan Ltd. Taiwan
Sotheby's Australia Pry Ltd. (49.75%) Australia
Sotheby's Art Sales Corp. New York
Sotheby's (Canada), Inc. Canada
Sotheby's Financial Services, Inc. Nevada
SFS California, Inc. Nevada
Sotheby's International Realty, Inc. Michigan
Sotheby's International Realty New York
Affiliates, Inc.
Sotheby's International Realty Michigan
of Colorado, Inc.
Sotheby's International Realty Ltd. United Kingdom
Sotheby's Service Corporation Delaware
SPTC, Inc. Nevada
Sotheby's Nevada, Inc. Nevada
Acquavella Modern Art (50%) Nevada
SFS Holdings, Inc. Delaware
Fine Art Insurance Ltd. Bermuda
York Warehouse, Inc. New York
Sotheby's, Inc. New York
Sotheby's Jersey Ltd. Jersey
Sotheby's Fine Art S.L. Spain
Sotheby's Peel y Asociados S.A. Spain
Etablissement Sotheby Liechtenstein
Oatshare Limited United Kingdom
International Art & Antique Loss United Kingdom
Register Ltd. (20%)
Sotheby's International Travel United Kingdom
Limited
Sotheby's United Kingdom
Art Development (India) Ltd. United Kingdom
Sotheby's India Pvt. Ltd. United Kingdom
(50%)
Lexbourne Limited (50%) United Kingdom
Sotheby's London United Kingdom
Sotheby's Educational Studies United Kingdom
Ltd.
Sotheby's Espana S.A. Spain
Suitlast Ltd. United Kingdom
Sotheby's Financial Services Ltd. United Kingdom
<PAGE>
Sotheby Parke Bernet, Inc. Delaware
Advisory Services S.A. (1%) Argentina
Sotheby Parke Bernet Nederland B.V. Netherlands
Sotheby Mak van Waay B.V. Netherlands
Sotheby's Israel, Ltd. Israel
Sotheby's A.G. Switzerland
Sotheby's Scandinavia A.B., Sweden
Sotheby's Italia S.R.L. Italy
Sotheby's Deutschland GmbH West Germany
Sotheby's Kunstauktionen G.m.b.H Austria
Sotheby's Hungary Ltd. Hungary
Sotheby's France S.A.R.L. France
Sotheby's Holdings International, Inc. Michigan
Sotheby's Special Sales, Inc. Delaware
Advisory Services S.A. (99%) Argentina
York Avenue Development, Inc. New York
York Storage, Inc. New York
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
No. 33-26008 of Sotheby's Holdings, Inc. on Form S-8 of our reports dated
February 28, 1996, appearing in and incorporated by reference in, the Annual
Report on Form 10-K of Sotheby's Holdings, Inc. for the year ended December 31,
1995.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
March 29, 1996
Exhibit 24
POWER OF ATTORNEY
The undersigned, a Director of Sotheby's Holdings, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Diana
D. Brooks and Kevin A. Bousquette, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Each such attorney
or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 21st day of February, 1996.
---- --------
/S/ VISCOUNT BLAKENHAM
------------------------------------
VISCOUNT BLAKENHAM
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Sotheby's Holdings, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Diana
D. Brooks and Kevin A. Bousquette, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Each such attorney
or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 21st day of February, 1996.
---- --------
/S/ SIMON DE PURY
------------------------------------
SIMON DE PURY
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Sotheby's Holdings, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Diana
D. Brooks and Kevin A. Bousquette, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Each such attorney
or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 28th day of February, 1996.
---- --------
/S/ A. ALFRED TAUBMAN
------------------------------------
A. ALFRED TAUBMAN
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Sotheby's Holdings, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Diana
D. Brooks and Kevin A. Bousquette, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Each such attorney
or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 13th day of February, 1996.
---- --------
/S/ WALTER J.P. CURLEY
------------------------------------
WALTER J.P. CURLEY
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Sotheby's Holdings, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Diana
D. Brooks and Kevin A. Bousquette, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Each such attorney
or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 20th day of February, 1996.
---- --------
/S/ R. JULIAN DE LA M. THOMPSON
------------------------------------
R. JULIAN DE LA M. THOMPSON
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Sotheby's Holdings, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Diana
D. Brooks and Kevin A. Bousquette, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Each such attorney
or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 19th day of February, 1996.
---- --------
/S/ MAX M. FISHER
------------------------------------
MAX M. FISHER
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Sotheby's Holdings, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Diana
D. Brooks and Kevin A. Bousquette, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Each such attorney
or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 26th day of February, 1996.
---- --------
/S/ THE RT. HON. THE EARL OF GOWRIE
------------------------------------
THE RT. HON. THE EARL OF GOWRIE
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Sotheby's Holdings, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Diana
D. Brooks and Kevin A. Bousquette, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Each such attorney
or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 22nd day of February, 1996.
---- --------
/S/ LORD CAMOYS
------------------------------------
LORD CAMOYS
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Sotheby's Holdings, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Diana
D. Brooks and Kevin A. Bousquette, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Each such attorney
or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 22nd day of February, 1996.
---- --------
/S/ THE MARQUESS OF HARTINGTON
------------------------------------
THE MARQUESS OF HARTINGTON
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December 31, 1995
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0
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September 30, 1995
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0
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RESTATED FINANCIAL DATA SCHEDULE
June 30, 1995
(in thousands of dollars, except per share amounts)
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
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<RECEIVABLES> 379,450
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<BONDS> 10,000
0
0
<COMMON> 5,589
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE
March 31, 1995
(in thousands of dollars, except per share amounts)
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
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0
0
<COMMON> 5,584
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE
December 31, 1994
(in thousands of dollars, except per share amount)
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 34,987
<SECURITIES> 0
<RECEIVABLES> 325,257
<ALLOWANCES> 10,165
<INVENTORY> 20,330
<CURRENT-ASSETS> 404,680
<PP&E> 66,825
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<TOTAL-ASSETS> 557,084
<CURRENT-LIABILITIES> 299,719
<BONDS> 27,500
0
0
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