<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/)
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or 240.14a-12
SOTHEBY'S HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
SOTHEBY'S HOLDINGS, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD APRIL 29, 1999
To the Shareholders of
SOTHEBY'S HOLDINGS, INC.
The Annual Meeting of Shareholders of SOTHEBY'S HOLDINGS, INC. (the
"Company") will be held on Thursday, April 29, 1999, at Sotheby's, 34-35 New
Bond Street, London, England, at 10 o'clock in the forenoon, local time, for the
following purposes:
1. To elect ten (10) directors to serve until the next annual meeting
of shareholders and until their successors are elected and qualified;
2. To approve an amendment to the Sotheby's Holdings, Inc. 1997 Stock
Option Plan;
3. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the year ending December 31, 1999; and
4. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 1, 1999 as
the record date for determining the shareholders that are entitled to notice of,
and to vote at, the annual meeting or any adjournment or postponements thereof.
By Order of the Board of Directors
A. ALFRED TAUBMAN, Chairman
Bloomfield Hills, Michigan
March 29, 1999
SHAREHOLDERS WHO DO NOT INTEND TO BE PRESENT AT THE MEETING IN PERSON ARE
REQUESTED TO SIGN AND DATE THE ENCLOSED PROXY AND TO RETURN IT IN THE
ACCOMPANYING ENVELOPE IN ORDER THAT THE NECESSARY QUORUM MAY BE ASSURED. ANY
PROXY MAY BE REVOKED IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT
AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE MEETING.
<PAGE>
SOTHEBY'S HOLDINGS, INC.
500 N. WOODWARD AVENUE
SUITE 100
BLOOMFIELD HILLS, MICHIGAN 48304
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies (each, a "Proxy") by and on behalf of the Board of Directors of
Sotheby's Holdings, Inc. (the "Company"), for use at the annual meeting of
shareholders and at any adjournment or adjournments thereof (the "Meeting") to
be held, for the purposes set forth in the accompanying Notice of Annual
Meeting, on Thursday, April 29, 1999, at Sotheby's, 34-35 New Bond Street,
London, England ("Sotheby's U.K."), at 10 o'clock in the forenoon, local time.
The Company expects to mail this Proxy Statement on or about March 29, 1999.
Valid Proxies will be voted as specified thereon at the Meeting. Any
shareholder giving a Proxy in the accompanying form retains the power to revoke
the Proxy, by written notice to the Company, at any time prior to its exercise.
In addition, attendance at the Meeting will not constitute a revocation of a
Proxy unless the shareholder affirmatively indicates at the Meeting that such
shareholder intends to vote the shares in person.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1998,
including financial statements audited by Deloitte & Touche LLP, independent
auditors, and their report thereon dated February 23, 1999, is being mailed with
this Proxy Statement to each of the Company's shareholders of record at the
close of business on March 1, 1999. IN ADDITION, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WILL BE SENT TO ANY SHAREHOLDER, WITHOUT
CHARGE, UPON WRITTEN REQUEST TO INVESTOR RELATIONS, C/O SOTHEBY'S, INC., 1334
YORK AVENUE, NEW YORK, NEW YORK 10021.
VOTING SECURITIES
The holders of record of shares of Class A Limited Voting Common Stock, par
value $0.10 per share (the "Class A Common Stock"), or shares of Class B Common
Stock, par value $0.10 per share (the "Class B Common Stock," and together with
the Class A Common Stock, the "Common Stock"), of the Company at the close of
business on March 1, 1999, are entitled to vote at the Meeting. On that date,
there were outstanding and entitled to vote 40,332,278 shares of Class A Common
Stock, entitled to one vote per share, and 16,995,299 shares of Class B Common
Stock, entitled to ten votes per share. At the Meeting, the holders of Class A
Common Stock, voting as a class, will elect three directors, and the holders of
Class B Common Stock, voting as a class, will elect the remaining seven
directors.
With respect to all matters that may properly come before the Meeting (other
than the election of directors), holders of Common Stock will vote as a single
class.
Unless contrary instructions are indicated on the Proxy, all shares of
Common Stock represented by valid Proxies received pursuant to this solicitation
(and not revoked before they are voted) will be voted:
(1) FOR the election of the nominees for directors named in the Proxy;
(2) FOR the approval of an amendment to the Sotheby's Holdings, Inc.
1997 Stock Option Plan. A composite copy of such plan is attached to this
Proxy Statement as ANNEX A; and
(3) FOR the ratification of the appointment of Deloitte & Touche LLP as
the Company's independent auditors.
<PAGE>
Other than the election of directors, all matters that may properly come
before the Meeting require the affirmative vote of a majority of the votes cast
at the Meeting. Holders of Class A Common Stock elect three directors by a
plurality of the votes cast by such holders at the Meeting, and holders of Class
B Common Stock elect seven directors by a plurality of the votes cast by such
holders at the Meeting.
Where brokers are prohibited from exercising discretionary authority for
beneficial owners who have not provided voting instructions for a particular
matter, those shares ("Non-Voting Shares") will not be included in the vote
totals for that matter but will be counted for determining the presence of a
quorum. Consequently, Non-Voting Shares will not affect the determination of
whether a matter is approved.
Shares voted to abstain regarding a particular matter ("Abstaining Shares")
will not be counted in determining whether a matter is approved. Accordingly,
Abstaining Shares will not affect the determination of whether a matter is
approved.
The Company knows of no business other than that set forth above to be
transacted at the Meeting, but if other matters requiring a vote do arise, it is
the intention of the persons named in the Proxy to vote in accordance with their
judgment on such matters.
ELECTION OF DIRECTORS
Ten (10) directors are to be elected at the Meeting to serve until the next
annual meeting and until their respective successors have been elected and
qualified. Directors are elected by a plurality of the votes cast at the
Meeting.
The shares of Class A Common Stock represented by the enclosed Proxy, if
given and unless otherwise specified, will be voted by the persons named as
proxies for the election of the following individuals nominated by the Board of
Directors:
<TABLE>
<CAPTION>
YEAR FIRST ELECTED
NAME AGE A DIRECTOR
- ---------------------------------------------------------------------- --- -------------------
<S> <C> <C>
Walter J.P. Curley.................................................... 76 1993
Max M. Fisher......................................................... 90 1983
A. Alfred Taubman..................................................... 75 1983
</TABLE>
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. From 1993 to 1997,
Mr. Curley was a director of American Exploration Company, an oil and gas
exploration and development company, and of Fiduciary Trust International. Mr.
Curley, who was U.S. Ambassador to Ireland, was also a member of the
International Advisory Committee of Compagnie Financiere de Paribas, an
international bank, Chairman of the French American Foundation, and a director
of New York Life Insurance, Crane Company, and the New Yorker Magazine. He
currently serves as director of The France Growth Fund, a closed-end investment
company, President of the Curley Land Company, a family real estate company, and
Trustee of the Frick Collection.
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 Incorporated, a bank holding company.
Mr. Taubman is a private investor. Since 1983, Mr. Taubman has been 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 Livent Inc., a producer of theatrical works. He also
serves as a director of Hollinger International Inc., a publisher of newspapers.
2
<PAGE>
The shares of Class B Common Stock represented by the enclosed Proxy, if
given and unless otherwise specified, will be voted by the persons named as
proxies for the election of the following individuals nominated by the Board of
Directors:
<TABLE>
<CAPTION>
YEAR FIRST ELECTED
NAME AGE A DIRECTOR
- ---------------------------------------------------------------------- --- -------------------
<S> <C> <C>
Conrad Black.......................................................... 54 1997
Viscount Blakenham.................................................... 61 1987
Diana D. Brooks....................................................... 48 1992
The Marquess of Hartington............................................ 54 1994
Henry R. Kravis....................................................... 55 1996
Jeffrey H. Miro....................................................... 56 1998
Sharon Percy Rockefeller.............................................. 54 1998
</TABLE>
Mr. Black became a director of the Company in February 1997. He is the
Chairman and Chief Executive Officer of Hollinger Inc. and its subsidiary,
Hollinger International Inc., a publisher of newspapers, and the Chairman of
Telegraph Group Limited. Mr. Black is also Chairman and Chief Executive Officer
of Southam Inc., Chairman of Argus Corporation Ltd., and serves as a director of
the Canadian Imperial Bank of Commerce, Brascan Limited, and Livent Inc. He also
is a member of the advisory boards of The National Interest, Gulfstream
Aerospace Corporation, and The Council on Foreign Relations.
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 that
has a substantial interest in the three Lazard investment banking firms. He was
Executive Chairman of Pearson plc from 1983 until 1997 and served as the
non-executive Chairman of MEPC plc, a commercial real estate investment and
development company, from 1993 to 1998. He is currently Chairman of the Board of
Trustees of the Royal Botanic Gardens Kew, a director of LaFarge SA, the
UK-Japan 2000 Group, and a member of the Toshiba Corporation International
Advisory Group.
Mrs. Brooks was appointed President and Chief Executive Officer of the
Company in April 1994. From March 1993 until April 1994, Mrs. Brooks served as
President and Chief Executive Officer of Sotheby's, a division that conducts the
Company's worldwide auction business. She has been Chief Executive Officer of
Sotheby's, Inc. since 1990 and President of Sotheby's, Inc., responsible for
North and South American operations, since 1987. Mrs. Brooks joined the Company
in 1979 and has been a director of the Company since 1992. Mrs. Brooks is a
director of Morgan Stanley Dean Witter & Co., a global financial services firm.
The Marquess of Hartington became a director of the Company in September
1994 and assumed the role of Deputy Chairman of the Company, effective April 15,
1996. He serves as a director of a number of private companies.
Mr. Kravis became a director of the Company in October 1996. He co-founded
Kohlberg Kravis Roberts & Co., a merchant banking firm, in 1976 and currently
serves as a director of Accuride Corporation, Amphenol Corporation, Borden,
Inc., The Boyd's Collection Ltd., Bruno's, Inc., Evenflo Company Inc., The
Gillette Company, IDEX Corporation, Kinder Care Learning Centers, Inc., KSL
Recreation Corporation, Newsquest plc, Owens-Illinois, Inc., PRIMEDIA Inc.,
Randall's Food Markets, Inc., Regal Cinemas, Inc., RELTEC Corporation, Safeway,
Inc., and Spalding Holdings Corporation. Mr. Kravis is a member of the Council
on Foreign Relations. He also serves on the boards of trustees of the
Metropolitan Museum of Art, Central Park Conservancy, Mount Sinai Hospital,
Claremont McKenna College, The Fund for New York City Public Education, The New
York City Partnership, Columbia Graduate School of Business, and The Vail Valley
Foundation. Mr. Kravis is Chairman of the Board of Public Television Channel
13/New York and the New York City Investment Fund.
3
<PAGE>
Mr. Miro became a director of the Company in April 1998. Since 1981, he has
served as Chairman of the law firm of Miro Weiner & Kramer, with offices in
Bloomfield Hills, Michigan and New York, New York. In addition, Mr. Miro is an
Adjunct Professor of Law at the University of Michigan Law School. Mr. Miro
serves as a director of M/I Schottenstein Homes, a national home building
company.
Mrs. Rockefeller became a director of the Company in April 1998. She is
President and Chief Executive Officer of WETA TV/FM public stations in
Washington, D.C., a position she has held since 1989, and has been a member of
the board of directors of WETA since 1985. She has served as a director of
PepsiCo, Inc. since 1986. Mrs. Rockefeller is a member of the board of directors
of the Public Broadcasting Service, Washington, D.C. and was a member of the
board of directors of the Corporation for Public Broadcasting from 1979 until
1992. She is also a member of the Trustee's Council of the National Gallery of
Art, the Kennedy Center Community Board, the National Cathedral, Washington
D.C.'s Board of Trade and Economic Club, and the George Washington University
Board of Trustees. She has served as a member of the boards of Stanford
University and the University of Chicago. Mrs. Rockefeller is also active in
Rockefeller Family Boards and Foundations.
It is not contemplated that any of the nominees will be unable or unwilling
to serve; however, if any nominee is unable or unwilling to serve, it is
intended that the shares represented by the Proxy, if given and unless otherwise
specified therein, will be voted for a substitute nominee or nominees designated
by the Board of Directors.
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 10, 1999 by its directors,
executive officers, and 5% shareholders. In compiling the table, 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 (the "Exchange Act"), 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 (as such term is defined under the caption
"Compensation of Executive Officers"), 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, performance shares 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 NUMBER OF PERCENT NUMBER OF PERCENT
AND 5% SHAREHOLDERS SHARES OF CLASS SHARES OF CLASS
- ------------------------------ --------------- -------- --------------- --------
<S> <C> <C> <C> <C>
Baron Capital Group........... 23,527,700 58.3% 0 *
767 Fifth Avenue, 49(th) Floor
New York, New York 10153
The Honorable Conrad M. 4,250(1) * 0 *
Black.......................
Telegraph Group Ltd.
1 Canada Square
Canary Wharf
London E14 5DT England
Viscount Blakenham............ 5,000(2) * 0 *
1 St. Leonard's Studios
Smith Street
London SW3 4EN England
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
-------------------------- --------------------------
DIRECTORS, EXECUTIVE OFFICERS NUMBER OF PERCENT NUMBER OF PERCENT
AND 5% SHAREHOLDERS SHARES OF CLASS SHARES OF CLASS
- ------------------------------ --------------- -------- --------------- --------
<S> <C> <C> <C> <C>
Diana D. Brooks............... 954,800(3) 2.2% 953,300(4) 5.1%
Sotheby's, Inc.
1334 York Avenue
New York, New York 10021
Ambassador Walter J.P. 5,320 * 0 *
Curley......................
450 Park Avenue
Suite 2104
New York, New York 10022
Max M. Fisher................. 2,443,045(5) 5.7% 2,438,045(6) 14.3%
3011 West Grand Boulevard
27(th) Floor
Detroit, MI 48202
GeoCapital Corporation........ 2,185,305 5.4% 0 *
767 Fifth Avenue
New York, New York 10153
The Marquess of Hartington.... 15,700(7) * 0 *
Sotheby's
34-35 New Bond Street
London, W1 2AA England
Henry R. Kravis............... 4,250(8) * 0 *
Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
Jeffrey H. Miro............... 9,695(9) * 0 *
Miro Weiner & Kramer
500 North Woodward Avenue
Suite 100
Bloomfield Hills, MI 48304
Sharon Percy Rockefeller...... 4,295 * 0 *
WETA TV/26 and FM 90.9
P.O. Box 2626
Washington, DC 20013
William F. Ruprecht........... 56,500(10) * 56,500(11) *
Sotheby's, Inc.
1334 York Avenue
New York, New York 10021
Stuart N. Siegel.............. 0 * 0 *
Sotheby's International Realty
980 Madison Avenue
New York, New York 10021
A. Alfred Taubman............. 13,246,428(12) 24.7% 13,241,328(13) 77.9%
200 E. Long Lake Road
Bloomfield Hills, MI 48304
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
-------------------------- --------------------------
DIRECTORS, EXECUTIVE OFFICERS NUMBER OF PERCENT NUMBER OF PERCENT
AND 5% SHAREHOLDERS SHARES OF CLASS SHARES OF CLASS
- ------------------------------ --------------- -------- --------------- --------
<S> <C> <C> <C> <C>
Robin Woodhead................ 19,520(14) * 19,520(15) *
Sotheby's
34-35 New Bond Street
London, W1 2AA England
Mitchell Zuckerman............ 24,500(16) * 24,500(17) *
Sotheby's, Inc.
1334 York Avenue
New York, New York 10021
Directors and................. 17,102,503(18) 29.8% 17,042,393(18) 93.1%
Executive Officers as a Group
</TABLE>
- ------------------------
* Represents less than 1%.
(1) This figure represents 3,404 shares of Class A Common Stock that Mr. Black
owns, as well as 846 Deferred Stock Units, which automatically convert to an
equal number of shares of Class A Common Stock if Mr. Black terminates
service on the board.
(2) This figure represents 3,305 shares of Class A Common Stock that Viscount
Blakenham owns, as well as 1,695 Deferred Stock Units, which automatically
convert to an equal number of shares of Class A Common Stock if Viscount
Blakenham terminates service on the board.
(3) This figure includes 53,300 shares of Class A Common Stock that Mrs. Brooks
has the right to acquire by converting shares of Class B Common Stock,
850,000 shares of Class A Common Stock that she has the right to acquire
upon exercising options granted under the Company's 1987 Stock Option Plan,
as amended (the "1987 Plan"), and the 1997 Stock Option Plan, as amended
(the "1997 Plan"), for shares of Class B Common Stock and converting such
shares, 50,000 shares of Class A Common Stock that she has the right to
acquire upon exercising purchase rights granted under the Company's
Performance Share Purchase Plan (the "Performance Plan") for shares of Class
B Common Stock and converting such shares, and 1,500 shares of Class A
Common Stock owned by her son.
(4) In addition to 53,300 shares of Class B Common Stock that Mrs. Brooks owns,
this figure includes 850,000 shares of Class B Common Stock that she has the
right to acquire by exercising options under the 1987 and 1997 Plans and
50,000 shares of Class B Common Stock that Mrs. Brooks has the right to
acquire by exercising purchase rights granted under the Performance Plan.
(5) In addition to 3,305 shares of Class A Common Stock and 1,695 Deferred Stock
Units, which automatically convert to an equal number of shares of Class A
Common Stock if Mr. Fisher terminates service on the board, that Mr. Fisher
owns as trustee of his grantor trust, this figure includes 2,438,045 shares
of Class A Common Stock that Mr. Fisher has the right to acquire by
converting shares of Class B Common Stock. Mr. Fisher disclaims beneficial
ownership of all shares of Class A Common Stock other than the 3,305 shares
of Class A Common Stock, the 1,695 Deferred Stock Units, which automatically
convert to shares of Class A Common Stock if Mr. Fisher terminates service
on the board, and the 1,830,161 shares relating to the shares of Class B
Common Stock held by him as trustee of his grantor trust. See footnote 6
below.
(6) 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 597,124 shares owned by Martinique Hotel, Inc., a
corporation owned by Mr. Fisher's family. This figure excludes 12,550 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.
6
<PAGE>
(7) This figure represents 14,005 shares of Class A Common Stock that The
Marquess of Hartington owns, as well as 1,695 Deferred Stock Units, which
automatically convert to an equal number of shares of Class A Common Stock
if The Marquess of Hartington terminates service on the board.
(8) This figure represents 2,555 shares of Class A Common Stock that Mr. Kravis
owns, as well as 1,695 Deferred Stock Units, which automatically convert to
an equal number of shares of Class A Common Stock if Mr. Kravis terminates
service on the board.
(9) This figure represents 1,695 Deferred Stock Units owned by Mr. Miro, which
automatically convert to an equal number of shares of Class A Common Stock
if Mr. Miro terminates service on the board, as well as 8,000 shares of
Class A Common Stock owned by his wife and children.
(10) This figure includes 31,500 shares of Class A Common Stock that Mr.
Ruprecht has the right to acquire upon exercising options granted under the
1987 and 1997 Plans for shares of Class B Common Stock and converting such
shares and 25,000 shares of Class A Common Stock that he has the right to
acquire upon exercising purchase rights granted under the Performance Plan
for shares of Class B Common Stock and converting such shares.
(11) This figure includes 31,500 shares of Class B Common Stock that Mr.
Ruprecht has the right to acquire by exercising options under the 1987 and
1997 Plans and 25,000 shares of Class B Common Stock that he has the right
to acquire by exercising purchase rights granted under the Performance Plan.
(12) In addition to 5,100 shares of Class A Common Stock that Mr. Taubman owns
as trustee of his grantor trust, this figure includes 9,772,698 shares of
Class A Common Stock that he has 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, over which shares he has sole
voting and dispositive control.
(13) This figure includes 9,772,698 shares of Class B Common Stock that Mr.
Taubman owns as trustee of his grantor trust and 3,468,630 shares of Class B
Common Stock owned by Taubman Investments Limited Partnership, over which
shares Mr. Taubman has sole voting and dispositive control. This figure
excludes 792,830 shares of Class B Common Stock owned by Judith Taubman, his
wife. Mr. Taubman disclaims beneficial ownership of all shares of Class B
Common Stock owned by Judith Taubman.
(14) This figure represents 19,520 shares of Class A Common Stock that Mr.
Woodhead has the right to acquire by exercising options granted under the
1997 Plan for shares of Class B Common Stock and converting such shares.
(15) This figure represents 19,520 shares of Class B Common Stock that Mr.
Woodhead has the right to acquire by exercising options granted under the
1997 Plan.
(16) This figure represents 24,500 shares of Class A Common Stock that Mr.
Zuckerman has the right to acquire by exercising options granted under the
1987 and 1997 Plans for shares of Class B Common Stock and converting such
shares.
(17) This figure represents 24,500 shares of Class B Common Stock that Mr.
Zuckerman has the right to acquire by exercising options granted under the
1987 and 1997 Plans.
(18) See above notes.
7
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
Officers of the Company are appointed by the Board of Directors and serve at
the discretion of the Board. The executive officers of the Company (including
certain officers of certain principal subsidiaries and divisions) are listed
below as well as biographical information for each person, unless that person
has been nominated for a director position, in which case such executive
officer's biography is contained under the caption "Election of Directors":
<TABLE>
<CAPTION>
NAME AGE PRESENT TITLE
- --------------------------- --- ------------------------------------------------------------------------------
<S> <C> <C>
George Bailey.............. 45 Managing Director, Sotheby's Europe
Diana D. Brooks............ 48 President and Chief Executive Officer
Donaldson C. Pillsbury..... 58 Senior Vice President, General Counsel and Secretary
William F. Ruprecht........ 43 Managing Director, Sotheby's North and South America
William S. Sheridan........ 45 Senior Vice President and Chief Financial Officer
Stuart N. Siegel........... 43 President and Chief Executive Officer, Sotheby's International Realty
Susan L. Solomon........... 47 Executive Vice President and Chief Executive, sothebys.com
Robin Woodhead............. 47 Executive Vice President and Chief Executive, Sotheby's Europe
Henry Wyndham.............. 45 Chairman, Sotheby's Europe
Deborah Zoullas............ 46 Executive Vice President
Mitchell Zuckerman......... 52 President, Sotheby's Financial Services, Inc. and Sotheby's Ventures, LLC
</TABLE>
Mr. Bailey has been Managing Director of Sotheby's Europe since 1994. From
1992 through 1993, he served as director of business development, Sotheby's
Europe.
Mr. Pillsbury joined the Company as Senior Vice President and General
Counsel in January 1998. From 1993 until January 1998, he was Senior Counsel to
the law firm Davis Polk & Wardwell; from 1973 until 1993 he was a partner of
that firm. He also is the Chairman of the Board of The Chamber Music Society of
Lincoln Center and a Director of Lincoln Center for the Performing Arts, Inc.
Mr. Ruprecht was appointed Executive Vice President and Managing Director of
Sotheby's, Inc. in February 1994. From 1992 to February 1994, 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. Sheridan was appointed Senior Vice President and Chief Financial Officer
of the Company in November 1996. From 1987 until November 1996, Mr. Sheridan was
a partner at the accounting and consulting firm of Deloitte & Touche LLP. Mr.
Sheridan serves as a director of Standard Commercial Corporation.
Mr. Siegel, President and Chief Executive Officer of Sotheby's International
Realty, was appointed President and Managing Director in 1991 and has been with
Sotheby's International Realty since 1981.
Ms. Solomon joined the Company as Executive Vice President and Chief
Executive of sothebys.com in December 1998. From 1997 through 1998, Ms. Solomon
served as Chairman and Chief Executive Officer of Lancit Media Productions, a
producer of children's television programming. From 1994 to 1997, Ms. Solomon
was with the Sony Corporation of America, where she served until 1996 as Chief
Executive Officer, President and Founder of Sony Worldwide Networks, a
multimedia communications network including satellite broadcast, digital cable
radio and online services. In 1996, she was appointed Senior Vice President of
Corporate Development for Sony. Prior to joining Sony, Ms. Solomon was Executive
Vice President of MacAndrews & Forbes's media holding subsidiary.
8
<PAGE>
Mr. Woodhead was appointed Executive Vice President and Chief Executive of
Sotheby's Europe in December 1998, and was Co-Managing Director, Sotheby's
Europe from January until December 1998. From 1992 until 1997, he was the Chief
Executive of the London Commodity Exchange.
Mr. Wyndham was appointed Chairman of Sotheby's Europe in November 1997, and
was Chairman of Sotheby's (U.K.) from February 1994 until October 1997. From
1988 until 1994, he was a partner of the St. James Art Group, an art dealing
business.
Ms. Zoullas joined the Company as Executive Vice President in December 1998.
From 1996 until 1998, she was an Advisory Director of the investment banking
firm Morgan Stanley & Co. Incorporated and from 1988 until 1996 she was a
Managing Director of that firm.
Mr. Zuckerman has been President of Sotheby's Financial Services, Inc. since
1988 and Sotheby's Ventures, LLC since 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon the Company's review of the filings made by the Company's
directors and officers under Section 16 of the Exchange Act, all transactions in
and beneficial ownership of the Company's equity securities were reported in a
timely manner, except that a Form 5 was inadvertently filed late to report
option grants in 1997 under the 1997 Plan to George Bailey, Diana D. Brooks,
Patricia Carberry, William F. Ruprecht, William S. Sheridan, Henry Wyndham and
Mitchell Zuckerman, a Form 4 was inadvertently filed late to report two sales of
Class A Common Stock by Mr. Bailey in 1998, and an option grant in 1997 under
the 1997 Plan to Kevin A. Bousquette, who resigned as an officer and director of
the Company in April 1998, has not been reported.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company met six times during 1998. The Board
of Directors has an Executive Committee which met once during 1998. Until April
1998, the Board of Directors had an Audit and Compensation Committee which met
twice during 1998. The Audit and Compensation Committee consisted of Mr. Fisher,
Mr. Black, Viscount Blakenham, Mr. Curley, and Mr. Kravis. In April 1998 the
Board established a separate Audit Committee and Compensation Committee. During
1998, a Section 162(m) Sub-Committee of the Compensation Committee (the "Section
162(m) Sub-Committee") was also established. The Audit Committee met once and
the Compensation Committee met twice during the remainder of 1998. As of
December 31, 1998, the Executive Committee consisted of Mr. Taubman, Mr. Fisher,
and Mrs. Brooks, the Audit Committee consisted of Mr. Black, Viscount Blakenham,
Mr. Curley, and Mrs. Rockefeller, the Compensation Committee consisted of Mr.
Fisher, Mr. Kravis, and Mr. Miro, and the Section 162(m) Sub-Committe consisted
of Mr. Fisher and Mr. Kravis. Each of the directors attended at least 75% of the
meetings of the Board and the committees of the Board on which he or she served
during the applicable time period.
9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation of the Chief Executive
Officer and each of the other four most highly compensated executive officers
(collectively, the "Named Executive Officers" and, individually, a "Named
Executive Officer") of the Company during each of the last three years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------------- SHARES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (2) COMPENSATION OPTIONS (5) (7)
- ------------------------------------------------------- ---- -------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Diana D. Brooks........................................ 1998 $600,550 $670,000(3) $12,960(4) 850,000(6) $ 96,726
President and Chief 1997 $550,000 $588,400(3) $12,000(4) 450,000 $ 88,457
Executive Officer 1996 $525,000 $557,800(3) $12,240(4) 50,000 $ 51,240
William F. Ruprecht.................................... 1998 $330,000 $222,000 $ 0 50,000(6) $ 39,178
Managing Director, 1997 $315,000 $152,852 $ 0 112,000 $ 39,525
Sotheby's North and 1996 $300,000 $181,563 $ 0 25,000 $ 29,260
South America
Stuart N. Siegel....................................... 1998 $278,000 $205,000 $12,000(4) 17,500(6) $ 36,600
President and Chief 1997 $255,000 $180,000 $12,000(4) 56,000 $ 31,869
Executive Officer, 1996 $247,200 $144,612 $12,000(4) 8,000 $ 11,174
Sotheby's International Realty
Robin Woodhead(1)...................................... 1998 $409,368 $150,000 $ 6,374(4) 150,000(6) $ 89,176
Executive Vice President and Chief Executive,
Sotheby's Europe
Mitchell Zuckerman..................................... 1998 $290,000 $285,000 $14,400(4) 17,500(6) $ 40,520
President Sotheby's Financial 1997 $248,333 $207,800 $14,400(4) 57,500 $ 31,891
Services, Inc. and Sotheby's 1996 $226,600 $150,310 $14,400(4) 10,000 $ 22,112
Ventures, LLC
</TABLE>
- ------------------------
(1) Mr. Woodhead joined the Company in January 1998.
(2) Bonus amounts in each year include cash paid in the following year in
respect of the previous year's performance.
(3) The 1998, 1997 and 1996 bonus amounts include a deferred bonus of $20,000,
$13,400 and $43,300, respectively, paid for services rendered in connection
with the acquisition of Pierre Matisse Gallery Corporation and the
management of Acquavella Modern Art.
(4) Car allowance.
(5) The number of shares underlying options refers to option grants under the
1987 and 1997 Plans and the Performance Plan.
(6) See footnote 2 of the "Option Grants in 1998" Table.
(7) The amounts disclosed in this column for 1998 include:
(a) Company contributions of the following amounts under the Company's
Retirement Savings Plan, a qualified defined contribution plan: $11,325 on
behalf of Mrs. Brooks; $12,650 on behalf of Mr. Ruprecht; $12,800 on behalf
of Mr. Siegel; and $13,050 on behalf of Mr. Zuckerman.
10
<PAGE>
(b) Company accruals of the following amounts under the Company's
Benefit Equalization Plan, a non-qualified plan: $83,747 on behalf of Mrs.
Brooks; $26,528 on behalf of Mr. Ruprecht; $23,800 on behalf of Mr. Siegel;
and $27,470 on behalf of Mr. Zuckerman.
(c) Company contributions of $11,514 to the Company's U.K. Pension Plan
and $74,385 to a supplemental pension plan on behalf of Mr. Woodhead.
(d) Company payments of life insurance premiums: $1,654 on behalf of
Mrs. Brooks and $3,277 on behalf of Mr. Woodhead.
U.K. PENSION PLAN
Sotheby's (U.K.) maintains a funded defined benefit pension plan for its
employees who are U.K. residents. Robin Woodhead is the only Named Executive
Officer who participates in the plan. Mr. Woodhead has one credited year of
service with the Company.
Standard 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 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. Through March 31, 2001, the contribution rates have been decreased by 50% to
take advantage of a surplus in the scheme fund. 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 of 33 1/3% of the
employee's base salary at the date of death to be paid to the employee's spouse,
or proportionately less if the employee has elected to contribute at the reduced
rate.
The table below 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 L87,600.
PENSION TABLE
<TABLE>
<CAPTION>
Remuneration Years of Service
- ------------------------------------ -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
(L) 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.............................. 20,000 26,666 33,333 40,000 46,666
</TABLE>
BONUSES
The Company's officers are eligible to receive incentive bonuses. Bonuses
are recommended by management and approved by the Compensation Committee. Actual
awards are a function of the Company's after-tax worldwide profit and each
individual's performance. Every supervisor conducts an employee review. As part
of the review, the supervisor and the employee determine future objectives
against which the employee's performance will be measured. In addition, the
program allows the Compensation Committee the discretion to address exceptional
performance and unusual circumstances.
11
<PAGE>
BENEFIT EQUALIZATION PLAN
UNITED STATES. The total annual contributions by the employee and employer
to the Company's Retirement Savings Plan, which is the Company's U.S. qualified
defined contribution plan, are subject to certain limitations imposed by the
Internal Revenue Code. Officers of the rank of senior vice president 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 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.
Amounts contributed by the Company on behalf of the Named Executive Officers of
the Company pursuant to benefit equalization agreements in 1998 have been
included in the Summary Compensation Table and are accrued for in the Company's
balance sheet.
UNITED KINGDOM. The total benefits which may be provided from the Company's
U.K. qualified defined benefit Pension Plan are subject to certain limitations
under applicable law for each participant. For Mr. Woodhead, an agreement has
been entered into whereby the maximum allowable benefit under the Plan will be
supplemented so as to provide a total pension of 2.667% of his salary for each
year of service, this pension being payable from age 60. Under the Company's
agreement with Mr. Woodhead, the intention is that one-third of this benefit
will be funded by Mr. Woodhead and two-thirds will be funded by the Company.
Retirement benefits before or after age 60, and other options that apply, will
be as far as possible identical to the normal terms of the U.K. qualified
pension plan.
The Company maintains a provision on its balance sheet in an amount
sufficient to account for the difference between the aggregate value of the
benefits that would have accrued in respect of Mr. Woodhead under the U.K.
qualified plan in the absence of the limitations mentioned above and the
aggregate value of the benefits actually available in respect of Mr. Woodhead
within the U.K. qualified plan.
12
<PAGE>
STOCK OPTIONS
The following tables set forth information regarding option grants under the
Company's 1997 Plan and the Company's Performance Plan to the Named Executive
Officers in 1998:
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SHARES OPTIONS FAIR MARKET PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE VALUE OF OPTION TERM (5)
OPTIONS EMPLOYEES PRICE PER UNDERLYING EXPIRATION ---------------------------------
GRANTED IN 1998 (3) SHARE (4) SHARES DATE 0% 5% 10%
---------- ----------- --------- ----------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Diana D. Brooks............... 50,000(1) 15.9% $ 5.04 $20.125 2/16/08 $754,250 $1,387,075 $ 2,357,953
400,000(2) 12.8% $20.125 $20.125 2/16/08 $ 0 $5,062,602 $12,829,627
400,000(2) 12.8% $ 24.25 $ 24.25 12/15/08 $ 0 $6,100,278 $15,459,302
William F. Ruprecht........... 20,000(1) 6.3% $ 5.04 $20.125 2/16/08 $301,700 $ 554,830 $ 943,181
30,000(2) 1.0% $ 24.25 $ 24.25 12/15/08 $ 0 $ 457,521 $ 1,159,448
Stuart N. Siegel.............. 7,500(1) 2.4% $ 5.04 $20.125 2/16/08 $113,138 $ 208,061 $ 353,693
10,000(2) 0.3% $ 24.25 $ 24.25 12/15/08 $ 0 $ 152,507 $ 386,483
Robin Woodhead................ 100,000(2) 3.2% $20.125 $20.125 2/16/08 $ 0 $1,265,650 $ 3,207,407
50,000(2) 1.6% $ 24.25 $ 24.25 12/15/08 $ 0 $ 762,535 $ 1,932,413
Mitchell Zuckerman............ 7,500(1) 2.4% $ 5.04 $20.125 2/16/08 $113,138 $ 208,061 $ 353,693
10,000(2) 0.3% $ 24.25 $ 24.25 12/15/08 $ 0 $ 152,507 $ 386,483
</TABLE>
- ------------------------
(1) These options were granted under the Performance Plan and will be
exercisable upon the fulfillment of certain performance criteria based on
the Company's earnings per share and return on equity as well as fulfillment
of time vesting requirements established by the Compensation Committee. The
options, which have a three-year performance period, time vest, regardless
of achieving performance criteria, in one-third increments on each of the
third, fourth, and fifth anniversaries of the date of grant. If the
performance goal has been achieved at the time these options begin time
vesting, the options will become exercisable when the time vesting
requirement is met. If the performance goal is not achieved by the end of
the performance period, the options will not become exercisable upon time
vesting. Rather, the designated performance goal will automatically be
adjusted by a predetermined amount and the performance period will be
extended one year. Upon achievement of the adjusted performance goal, the
options will be exercisable to the extent that they have time vested. If the
adjusted performance goal is not achieved by the end of the fifth year after
the date of grant, the options will expire. During the term of each
Performance Plan option, the option accrues dividend equivalents which are
payable to the option holder when the option becomes exercisable. Generally,
the exercise of awards made to executive officers of the Company under the
Performance Plan and the 1997 Plan, the continued eligibility for such
awards under these plans, and the accelerated vesting of certain
performance-based purchase rights are subject to each executive officer's
agreement to provide six (6) months' notice of any voluntary termination of
employment, and not to compete with the Company in the auction business for
a period of six (6) months following the date of termination.
(2) In addition to special grants from time to time, the Company normally grants
options to officers and employees once a year in connection with year-end
performance reviews. Under this policy, options were granted to certain
officers and employees in conjunction with 1997 year-end performance reviews
at the February 1998 meeting of the Audit and Compensation Committee of the
Board of Directors. The Company accelerated this process for year-end 1998,
and option grants in conjunction with 1998 performance reviews were approved
by the Section 162(m) Sub-Committee in December 1998. Accordingly, the 1998
figures (in the above table) reflect option grants made in respect of both
1997 and 1998 performance reviews. Option grants at the February 1999
Compensation Committee
13
<PAGE>
meeting were limited to special situations and did not include any normal
grants made in connection with 1998 performance reviews or any grants to any
of the Named Executive Officers. All grants made in 1998 were made under the
1997 Plan, and the 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 anniversaries of the date of the
grant; provided that all options (other than the 100,000 share grant to Mr.
Woodhead) will vest immediately upon a "change in control" (as defined in
the 1997 Plan). Generally, the exercise of awards made to executive officers
of the Company under the Performance Plan and the 1997 Plan, the continued
eligibility for such awards under these plans, and the accelerated vesting
of certain performance-based purchase rights are subject to each executive
officer's agreement to provide six (6) months' notice of any voluntary
termination of employment, and not to compete with the Company in the
auction business for a period of six (6) months following the date of
termination.
(3) This figure is calculated by dividing the total number of options granted
under a plan to the individual by the total number of options granted under
that plan to all employees.
(4) The exercise price of each option under the Performance Plan is 25% of the
fair market value of the underlying shares, determined as of the date of
grant. The exercise price of each option under the 1997 Plan is the fair
market value of the underlying shares as of the date of grant. Only options
to purchase Class B Common Stock may be granted under the 1997 Plan and the
Performance 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, for
purposes of the 1997 Plan and the Performance Plan, the fair market value of
the stock underlying an option is the New York Stock Exchange ("NYSE")
closing price per share of the Class A Common Stock on the last business day
before the option grant.
(5) 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 is ten years for options
granted under the 1997 Plan and ten years under the Performance Plan (seven
years for options granted to U.K. residents), as indicated in the
"Expiration Date" column. 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.
AGGREGATE OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UN-EXERCISABLE EXERCISABLE UN-EXERCISABLE
- ----------------------------------- ----------- -------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Diana D. Brooks.................... 48,000(1) $504,000 680,000 1,250,000 $12,034,375 $15,515,000
0(2) $ 0 0 150,000 $ 0 $ 4,149,000
William F. Ruprecht................ 96,500(1) $965,750 26,400 118,600 $ 360,450 $ 1,450,175
0(2) $ 0 0 57,000 $ 0 $ 1,579,470
Stuart N. Siegel................... 32,600(1) $193,438 0 59,400 $ 0 $ 786,600
0(2) $ 0 0 13,500 $ 0 $ 368,460
Robin Woodhead..................... 0(1) $ 0 0 150,000 $ 0 $ 1,575,000
Mitchell Zuckerman................. 11,500(1) $ 90,688 18,000 64,000 $ 264,125 $ 876,875
0(2) $ 0 0 15,000 $ 0 $ 410,025
</TABLE>
- ------------------------
(1) Information in this row concerns option grants under the 1987 Plan and the
1997 Plan only.
(2) Information in this row concerns option grants under the Performance Plan
only.
14
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is responsible to the Board of Directors for
advising the Board with respect to compensation matters and employee benefit
plans of the Company. This function was handled by the Audit and Compensation
Committee, which in April 1998 was split into two separate committees, the Audit
Committee and the Compensation Committee. Also, in 1998, a Section 162(m)
Sub-Committee was established for puposes of granting options and administering
performance criteria with respect to Named Executive Officers under the 1997
Plan and the Performance Plan. The Compensation Committee has authority to grant
options under the 1997 Plan and the Performance Plan to all individuals other
than the Named Executive Officers. As of December 31, 1998, none of the members
of the Compensation Committee or the Section 162(m) Sub-Committee participated
in any of the plans administered by such committee.
PHILOSOPHY
The Company has a long-standing philosophy of establishing compensation
levels that are designed to both attract and retain executives with outstanding
leadership ability and experience and be competitive in the market.
Compensation for executive officers is comprised of three major components:
salary, cash bonuses and equity-based incentives.
The Compensation Committee considers the following factors in determining an
executive officer's total compensation, including equity-based incentives: (i)
Company performance, (ii) individual performance and job responsibilities, (iii)
historical compensation levels and stock option grants by the Company and (iv)
recommendations of management.
COMPENSATION DEDUCTIBILITY
The Compensation Committee has taken into consideration Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), and related
regulations as they relate to compensation paid to the Named Executive Officers.
In order to preserve the deductibility for federal income tax purposes of
certain compensation in excess of $1 million that may be paid to the Named
Executive Officers, the applicable requirements of Section 162(m) of the Code
("Section 162(m)") have been incorporated into the 1997 Plan and the Performance
Plan. With respect to the Named Executive Officers, the Section 162(m)
Sub-Committee, comprised solely of two outside directors (as defined in Section
162(m)), establishes option grants and otherwise takes actions relating to the
Named Executive Officers under the 1997 Plan and the Performance Plan.
ANNUAL COMPENSATION
SALARY
The Compensation Committee sets base salaries for executives that both
reflect the job responsibilities of each individual and are consistent with base
salaries paid for competitive positions in the market.
ANNUAL CASH INCENTIVES
The Company's bonus program for all bonus-eligible employees, including the
Chief Executive Officer ("CEO") and the other Named Executive Officers, is based
upon the achievement of both Company and individual objectives. Positions within
the Company have been separated into salary grades, with bonus opportunities
gradually increased through the grades. Within each grade there is a range of
bonus targets. The bonus amount is subject to the overall approval of the
Compensation Committee with respect to all
15
<PAGE>
participants, and to the specific approval of the Compensation Committee with
regard to senior management. Targets are set each year by senior management.
Targets and bonus opportunities are communicated to employees each year.
Every supervisor conducts an employee review. However, as part of the
review, the supervisor and the employee will determine future objectives against
which the employee's performance will be measured. A certain percentage of an
employee's bonus target is based upon individual performance; the remaining
percentage is based on worldwide Company performance. If all objectives are met,
the employee can receive up to 100% of the bonus target amount. If performance
exceeds the established objectives, the Compensation Committee has the
discretion to address such circumstances.
For 1998, all bonus plan participants eligible for a bonus received bonuses
that reflected 80% achievement of the worldwide Company performance target. In
addition, certain individuals who surpassed their individual performance
objectives were awarded bonuses that reflected performance exceeding the
established objectives.
LONG-TERM COMPENSATION
STOCK OPTIONS
The purpose of the Company's 1987 Plan, which expired in July 1997, the 1997
Plan, and the Performance Plan is to provide employees with long-term incentives
that link their interests with the interests of shareholders. In addition, the
1987 Plan's, the 1997 Plan's, and the Performance Plan's vesting schedules
encourage key employees to continue in the employ of the Company.
Stock option grants to the Named Executive Officers are based on each
individual's current and expected future contribution to the Company, as well as
competitive market practice and related factors listed above.
CEO COMPENSATION
The Section 162(m) Sub-Committee and the Compensation Committee meet,
independently of the Board, to review the CEO's performance, determine annual
and long-term compensation for the CEO, and set the CEO's bonus target.
THE COMPENSATION COMMITTEE
MAX M. FISHER, CHAIRMAN
HENRY R. KRAVIS
JEFFREY H. MIRO
16
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return on its Class A Common Stock (for the five year period from December 31,
1993 to December 31, 1998) with the cumulative return of the Standard & Poor's
MidCap 400 Stock Index ("S&P Midcap 400") and the Company's Peer Group ("Peer
Group").
The Company and Christie's International ("Christie's") are the two largest
art auction houses in the world. Based on the unique nature of the international
art auction business, Christie's was historically deemed to be the Company's
most appropriate peer for Performance Graph purposes. However, during 1998
Christie's was taken private. As a result, the Company has created a new peer
group that now includes: The Neiman-Marcus Group, Inc.; Nordstrom, Inc.; Saks
Holdings, Inc.; and Tiffany & Co. The Company believes the members of this peer
group to be purveyors of luxury goods appealing to a segment of the population
consistent with the Company's own clientele.
The graph reflects an investment of $100 in the Company's Class A Common
Stock, the S&P MidCap 400, which includes the Company, and the Company's Peer
Group, respectively, on December 31, 1993, and a reinvestment of dividends at
the average of the closing stock prices at the beginning and end of each
quarter.
FIVE YEAR CUMULATIVE TOTAL RETURN
OF SOTHEBY'S, PEER GROUP, AND THE S&P MIDCAP 400
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SOTHEBY'S PEER GROUP S&P MIDCAP 400
<S> <C> <C> <C>
Dec-93 100 100 100
Dec-94 76 106 96
Dec-95 96 133 126
Dec-96 128 162 150
Dec-97 132 210 199
Dec-98 229 243 237
</TABLE>
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sotheby's...................................................... $ 100 $ 76 $ 96 $ 128 $ 132
Peer Group..................................................... $ 100 $ 106 $ 133 $ 162 $ 210
S&P MidCap 400................................................. $ 100 $ 96 $ 126 $ 150 $ 199
<CAPTION>
12/31/98
-----------
<S> <C>
Sotheby's...................................................... $ 229
Peer Group..................................................... $ 243
S&P MidCap 400................................................. $ 237
</TABLE>
17
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of December 31, 1998, the Compensation Committee of the Company consisted
of Max M. Fisher, Henry R. Kravis, and Jeffrey H. Miro. In 1998, the Company
retained, and continues to retain in 1999, the law firm of Miro Weiner & Kramer,
of which Mr. Miro is Chairman.
CERTAIN EMPLOYMENT AND COMPENSATION ARRANGEMENTS
In April 1996, the Company entered into a consulting agreement, effective
April 15, 1996, with the Marquess of Hartington, which has required him to
devote approximately two days per week to providing consulting services to the
Company. Under this agreement, the Marquess of Hartington is reimbursed for
expenses and was paid a consulting fee at a rate of L50,000 per year until June
1, 1997. On June 1, 1997, the fee was increased to a rate of L100,000 per year
to reflect an increase in the Marquess of Hartington's time commitment and an
expansion of his responsibilities. In June 1998, the Marquess of Hartington's
time commitment was reduced and his pay was adjusted to L65,000 per year.
The Company retains the law firm of Miro Weiner & Kramer, of which Jeffrey
H. Miro is Chairman, to provide legal services to the Company.
In 1998, the Section 162(m) Sub-Committee provided for immediate vesting
upon a change in control of the Company of 400,000 options granted to Mrs.
Brooks on April 29, 1997 and 400,000 options granted to her on February 17,
1998. See ANNEX A for the definition of "change in control."
CERTAIN TRANSACTIONS
LOAN PROGRAMS
The Company maintains two U.S. bank loan programs which are available on a
selective basis 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 interest at the prime rate. Under the second program,
certain executives may borrow from a bank 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%.
Under all programs, any loan exceeding $400,000 requires the approval of either
the Compensation Committee or the Executive Committee of the Board of Directors.
All payment obligations under both U.S. bank loan programs are guaranteed by the
Company, and all loans under both programs are repayable in full when an
employee leaves the Company. As of March 10, 1999, Stuart Siegel and Mitchell
Zuckerman, Named Executive Officers, had borrowings outstanding under these loan
programs of $140,000 and $169,000, respectively.
PURCHASE OF ASSETS
In October 1993, Sotheby's (U.K.) entered into an agreement with Henry
Wyndham Fine Art Ltd. ("Fine Art"), an art dealing business in which Henry
Wyndham, currently Chairman of Sotheby's Europe, has a substantial equity
interest. Under the agreement, the Company agreed to purchase various paintings
from Fine Art, as well as Fine Art's partial interest in another painting. Under
the terms of the agreement, the Company paid Fine Art L150,000 (approximately,
$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
continued to do so until Fine Art repaid the advance in full, together with all
accrued interest, in December 1998. The original cost to Fine Art of its
ownership interest in such painting was approximately L300,000 (approximately
$480,300).
COMPENSATION OF DIRECTORS
Until April 1998, each non-employee director of the Company received an
annual retainer fee of the equivalent of $10,000 in shares of the Company's
Class A Common Stock, which the director could have elected to receive in cash,
and 1,500 shares of the Company's Class A Common Stock. Each non-employee
director also received 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. Except as noted, all of the foregoing fees were paid in cash.
18
<PAGE>
Effective April 30, 1998, and pursuant to the Sotheby's Holdings, Inc. 1998
Stock Compensation Plan For Non-Employee Directors (the "Director Plan"), each
non-employee director will receive an annual retainer of 2,260 shares of the
Company's Class A Common Stock, the receipt of which may be deferred until the
director terminates service on the Company's Board. All deferred stock
compensation will accrue dividend equivalents. The Company's directors will
continue to receive expense reimbursements and the per meeting cash fees
described above.
APPROVAL OF AN AMENDMENT TO THE SOTHEBY'S HOLDINGS, INC.
1997 STOCK OPTION PLAN
On April 30, 1996, the Board of Directors adopted the 1997 Plan, which was
approved by the shareholders on June 19, 1996 and became effective as of January
1, 1997.
In order to retain valued employees, to continue to attract the finest
executives and, in particular, for the reasons set forth under "Board
Recommendation" below, the Compensation Committee (the "Committee") believes
that certain modifications to the 1997 Plan are necessary and desirable.
The Committee has approved a Third Amendment to the 1997 Plan (the "Third
Amendment"), subject to shareholder approval at the Meeting, which (i) increases
the aggregate number of shares of Class B Common Stock available for issuance
upon the exercise of options under the 1997 Plan (each an "Option" and,
collectively, the "Options" ) from six million (6,000,000) shares to ten million
nine hundred thousand (10,900,000) shares and (ii) increased, for 1998 only, the
per employee share limit under the 1997 Plan from 400,000 shares to 800,000
shares of Class B Common Stock.
The principal features of the 1997 Plan, as proposed to be amended, are
summarized below.
PRINCIPAL FEATURES OF THE 1997 PLAN
ADMINISTRATION. The 1997 Plan is administered by the Committee (and with
respect to certain matters, the Section 162(m) Sub-Committee) which presently
consists of three directors of the Company. The Committee has all powers and
discretion necessary and appropriate to administer the 1997 Plan and to control
its operation.
ELIGIBLE PARTICIPANTS. Under the 1997 Plan, all employees of the Company
and its subsidiaries are eligible to receive grants. As of March 10, 1999, there
were approximately 1,900 persons employed by the Company and its subsidiaries
who would be eligible to participate in the 1997 Plan.
NUMBER OF SHARES SUBJECT TO THE 1997 PLAN, MAXIMUM AWARDS. A total of
6,000,000 shares of Class B Common Stock were reserved for issuance pursuant to
the 1997 Plan. Under the terms of the 1997 Plan, a single participant may not
receive Options covering more than 400,000 shares of Class B Common Stock during
any single fiscal year. Any shares subject to an Option that is forfeited will
again be available for grant under the 1997 Plan. If approved by the
shareholders of the Company, the Third Amendment would increase the number of
shares of Class B Common Stock reserved for issuance from 6,000,000 to
10,900,000 and increase, for 1998 only, the per employee share limit from
400,000 shares to 800,000 shares of Class B Common Stock.
OPTION GRANTS. Each Option granted under the 1997 Plan is evidenced by a
written agreement between the Company and the person to whom the grant is made
(the "Optionee"). The Option Agreement specifies the exercise price, the vesting
period, the expiration date of the Option, the number of shares subject to the
Option and such other terms and conditions as the Committee, in its discretion,
determines. No consideration is paid by participants for the grant of an Option
under the 1997 Plan. Only Options to acquire shares of Class B Common Stock of
the Company may be granted under the 1997 Plan, although under certain
circumstances, an Optionee may receive shares of Class A Common Stock upon
exercise. The Class B Common Stock has no public market, but is freely
convertible on a share-for-share basis into Class A Common Stock, which is
publicly traded.
In order to permit Optionees who are residents of the United Kingdom (the
"U.K.") to take advantage of certain capital gains treatment available in the
U.K. for options granted under plans
19
<PAGE>
approved by the U.K. Inland Revenue, the 1997 Plan provides that any Option
granted to a U.K. resident will be granted under, and subject to the special
provisions of Article 12 of the 1997 Plan (referred to herein as the "U.K.
Sub-Plan") to the extent that the grant of such Option to an Optionee would not
cause the aggregate exercise prices of such Optionee's outstanding unexercised
Options, following such grant, to exceed L30,000. Options granted to a U.K.
resident that exceed this L30,000 limit are granted as separate options under,
and subject to, only those provisions of the 1997 Plan other than the U.K.
Sub-Plan (i.e., those provisions applicable to all Options granted to non-U.K.
residents).
OPTION TERM. All Options granted under the 1997 Plan have a term of ten
years, unless terminated earlier by reason of an Optionee's ceasing to be an
employee of the Company or pursuant to another provision of the 1997 Plan.
EXERCISE PRICE. The Committee establishes the exercise price for each
Option granted, subject to the limitation that the exercise price may not be
less than the fair market value of the underlying shares, determined as of the
date of grant. As of the close of business on March 1, 1999, the fair market
value of the Class A Common Stock was $27.0625 per share.
VESTING. The 1997 Plan provides that, except in the case of the death,
disability, or retirement of an Optionee, each Option granted under the 1997
Plan (other than Options granted to a U.K. resident under the U.K. Sub-Plan)
vests incrementally at the rate of 20% per year, beginning on the first
anniversary of the date of grant, provided the Optionee remains in the employ of
the Company. Except in the case of the death, disability, or retirement of an
Optionee, each Option granted under the U.K. Sub-Plan vests and becomes
exercisable three years following the date of grant to the extent of 60% of the
number of shares subject to such Option, four years following the date of grant
to the extent of 80% of the shares subject to such Option, and five years after
the date of grant to the extent of 100% of the shares subject to such Option,
provided the Optionee remains in the employ of the Company.
In the event an Optionee ceases to be an employee for any reason other than
disability or retirement, the Optionee may exercise the Option at any time
within one year after his termination of employment, to the extent the Option is
vested as of the date of such termination of employment. Notwithstanding the
foregoing, in the event an Optionee's employment with the Company is terminated
for cause, all outstanding Options held by the Optionee will be immediately
forfeited. Under no circumstances may an Option be exercised after the
expiration of its original term of ten years (seven years with respect to
Options granted under the U.K. Sub-Plan).
ACCELERATION OF VESTING IN CERTAIN EVENTS. In the event an Optionee's
employment with the Company is terminated by reason of his death, disability, or
retirement, any Options held by the employee will become immediately vested.
Such Options may be exercised in the case of an Optionee's death, at any time
within one year from the date of death and, in the case of an Optionee's
Disability or Retirement, at any time within two years of the relevant event.
The 1997 Plan also provides that the Committee, in its discretion, may
accelerate the vesting of an Option at any time more than six months after the
date of grant, except with respect to Options granted under the U.K. Sub-Plan.
Options granted on or after October 29, 1998, vest immediately upon a change in
control of the Company. Certain Options previously granted to Diana D. Brooks
also vest immediately upon a change in control of the Company (see Certain
Employment and Compensation Arrangements). See ANNEX A for the definition of
"change in control."
EXERCISE OF OPTIONS. Options granted under the 1997 Plan, once vested, are
exercisable during the term of the Option, subject to such restrictions and
conditions as the Committee may determine in its discretion. An Option may be
exercised by giving written notice of the exercise to the Company specifying the
number of full shares of Class B Common Stock to be purchased and tendering
payment of the purchase price to the Company. Generally, the exercise price due
upon exercise of any Option is paid to the Company in cash. However, the
Committee, in its discretion, may permit an Optionee (other than for Options
granted under the U.K. Sub-Plan) to pay the exercise price by tendering
previously acquired shares of Common Stock or by providing irrevocable
instructions to a broker/dealer to sell (or margin) a
20
<PAGE>
sufficient number of the shares being acquired and deliver the sale (or margin
loan) proceeds directly to the Company to pay the exercise price.
PLAN TERM. The 1997 Plan will remain in effect until terminated by the
Board of Directors.
AMENDMENT. The Committee may, in its discretion, alter or amend the 1997
Plan, and the Board of Directors may terminate the 1997 Plan or any part
thereof, at any time and for any reason. However, to the extent required or
desirable to maintain the 1997 Plan's qualification under Rule 16b-3 under the
Exchange Act or Section 162(m), any such amendment would be subject to
shareholder approval.
CHANGES IN CORPORATE STRUCTURE. In the event of any merger, reorganization,
consolidation, recapitalization, liquidation, stock dividend, split-up, share
combination or other change in the corporate structure of the Company affecting
the Common Stock, such adjustment will be made in the number and class of shares
which may be delivered under the 1997 Plan, and in the number and class of or
price of shares subject to outstanding grants under the 1997 Plan, as the
Committee, in its discretion, determines to be appropriate to prevent dilution
or diminution of grants under the 1997 Plan.
UNITED STATES INCOME TAX CONSEQUENCES
GENERAL. Options awarded under the 1997 Plan are nonqualified stock
options. Generally, an employee will not recognize any income for federal income
tax purposes at the time the employee is granted an Option under the 1997 Plan.
However, upon the exercise of the Option, the employee generally will realize
ordinary income for federal income tax purposes measured by the excess of the
then fair market value of the shares over the exercise price. The income
realized by an employee will be subject to tax withholding by the Company by
payment in cash. Upon the subsequent sale of any such shares by the employee,
any difference between the sales price and the exercise price, to the extent not
recognized as ordinary income as provided above, will be treated as capital gain
or loss. Generally, the Company will be entitled to a federal income tax
deduction, in the same amount as the ordinary income realized by employees with
respect to Option exercises under the 1997 Plan, in the year in which the
Options are exercised.
Optionees (except with respect to Options granted under the U.K. Sub-Plan)
may be permitted by the Committee to pay all or a portion of the exercise price
of an Option using previously acquired shares of Common Stock. If an Option is
exercised and payment is made in previously acquired shares, there is no gain or
loss recognized by the Optionee on the surrender of the previously acquired
shares. The Optionee's basis in the newly acquired shares will be split so that
(i) a number of shares equal to the number of shares transferred to pay the
exercise price will have a cost basis equal to the basis of such transferred
shares and (ii) the remainder of the new shares will have a cost basis equal to
the fair market value of those shares on the exercise date (i.e., the date on
which ordinary income equal to such fair market value is realized).
SECTION 162(M). Subject to certain exceptions, Section 162(m) places a $1
million annual limit on a corporation's tax deduction for compensation paid to a
"covered employee." A "covered employee" is defined as the corporation's chief
executive officer and the other four highest paid officers named in its proxy
statement. Compensation in excess of $1 million will, however, continue to be
tax deductible by a corporation if such compensation satisfies the applicable
requirements under Section 162(m) for "performance-based compensation" (the
"Performance Exception"). The 1997 Plan incorporates the requirements for the
Performance Exception applicable to stock options. As a result, it is
anticipated that the Company will continue to be able to maximize the tax
deductibility of the compensation attributable to Options granted under the 1997
Plan.
The foregoing summary of the effect of United States income taxation upon
the employee and the Company with respect to awards under the 1997 Plan does not
purport to be complete, and reference should be made to the applicable
provisions of the Code. In addition, this summary does not discuss the
provisions of the income tax laws of any municipality, state or foreign country
in which the employee may reside.
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<PAGE>
OPTIONS RECEIVED UNDER THE 1997 PLAN
Under the 1997 Plan, the following persons have received the listed number
of Options since the 1997 Plan's inception:
<TABLE>
<CAPTION>
TOTAL NUMBER OF
OPTIONS GRANTED
NAME OF GROUP UNDER THE 1997 PLAN
- --------------------------------------------------------------------------------------------- -------------------
<S> <C>
Diana D. Brooks.............................................................................. 1,200,000
William F. Ruprecht.......................................................................... 130,000
Stuart N. Siegel............................................................................. 60,000
Robin Woodhead............................................................................... 150,000
Mitchell Zuckerman........................................................................... 60,000
All current executive officers as a group.................................................... 2,002,500
All current directors who are not executive officers as a group.............................. 0
Associates of directors, executive officers and director nominees as a group................. 0
Other persons who received or are to receive 5% of such options.............................. 0
All employees, including current officers who are not executive officers, as a group......... 2,773,970
</TABLE>
The number of Options which will be received by the foregoing persons after
the 1997 Plan has been amended as contemplated herein is not presently
determinable.
BOARD RECOMMENDATION
The Board of Directors believes that stock-based incentives are important in
attracting and retaining the services of outstanding personnel and in
encouraging such employees to have greater stock ownership in the Company,
thereby aligning their interests closely with those of shareholders. At present,
only approximately 1,100,000 shares remain available for option grants under the
1997 Plan, and the Board believes that making an additional 4,900,000 shares
available for this purpose as provided in the Third Amendment is necessary and
appropriate in futherance of the foregoing objectives. The Board also believes
that it was appropriate to award Diana D. Brooks options to purchase 400,000
shares in conjunction with her 1998 year-end performance review, necessitating
an increase in the annual per employee limit under the 1997 Plan to 800,000
shares for 1998 only, as provided in the Third Amendment.
For the foregoing reasons, the Board recommends that shareholders vote FOR
adoption of the Third Amendment to the 1997 Plan.
REQUIRED APPROVAL
The affirmative vote of a majority of the votes cast at the Meeting by the
holders of Class A Common Stock and the holders of Class B Common Stock, voting
as a single class, is required for approval of the Third Amendment to the 1997
Plan.
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<PAGE>
INDEPENDENT AUDITORS
Deloitte & Touche LLP, has been the independent auditors for the Company
since 1983. The Board of Directors has selected Deloitte & Touche LLP as the
independent auditors for 1999. Although shareholder approval of the appointment
is not required by law and is not binding on the Board of Directors, the Board
will take the appointment of Deloitte & Touche LLP under advisement if such
appointment is not approved by the affirmative vote of a majority of the votes
cast at the Meeting.
The Company expects that representatives of Deloitte & Touche LLP will be
present at the Meeting and will be afforded an opportunity to make a statement
if they desire to do so. The Company also expects such representatives of
Deloitte & Touche LLP to be available at that time to respond to appropriate
questions addressed to the officer presiding at the Meeting.
PROPOSALS OF SECURITY HOLDERS
Any shareholder proposal intended to be presented for consideration at the
annual meeting to be held in 2000 must be received by the Company at 500 N.
Woodward Avenue, Suite 100, Bloomfield Hills, Michigan 48304 by the close of
business on December 30, 1999. If the date of such meeting is changed by more
than 30 days from the date such meeting is scheduled to be held, the proposal
must be received by the Company at a reasonable time before the solicitation of
proxies for such meeting is made. Proposals should be sent to the attention of
the Secretary. A person may submit only one proposal for inclusion in the proxy
materials, and under certain circumstances enumerated in the Securities and
Exchange Commission's rules relating to the solicitation of proxies, the Company
may be entitled to omit the proposal and any statement in support thereof (which
in the aggregate may not exceed 500 words in length) from its proxy statement
and form of proxy.
COSTS OF PROXY SOLICITATION
The cost of preparing, assembling and mailing the proxy material will be
borne by the Company. The Company will also request persons, firms and
corporations holding shares in their names or in the names of their nominees,
which shares are beneficially owned by others, to send the proxy material to,
and to obtain Proxies from, such beneficial owners and will reimburse such
holders for their reasonable expenses in doing so.
23
<PAGE>
ANNEX A
SOTHEBY'S HOLDINGS, INC.
1997 STOCK OPTION PLAN
EFFECTIVE JANUARY 1, 1997
COMPOSITE PLAN DOCUMENT
(INCORPORATES AMENDMENTS AND PROPOSED
AMENDMENTS THROUGH APRIL 29, 1999)
<PAGE>
SOTHEBY'S HOLDINGS, INC.
1997 STOCK OPTION PLAN
COMPOSITE PLAN DOCUMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
ARTICLE 1 BACKGROUND AND PURPOSE OF THE PLAN; ADOPTION OF THE PLAN; TERM..................................
1
1.1 Purpose of the Plan........................................................................... 1
1.2 Adoption and Term............................................................................. 1
ARTICLE 2 DEFINITIONS.................................................................................. 1
ARTICLE 3 ADMINISTRATION.................................................................................. 4
3.1 Administration................................................................................ 4
3.2 Expenses of Administration.................................................................... 5
3.3 Indemnification............................................................................... 5
ARTICLE 4 SHARES OF COMMON STOCK SUBJECT TO THE PLAN...................................................... 5
4.1 Shares Subject to the Plan.................................................................... 5
4.2 Shares of Common Stock Subject to Expired or Terminated Options............................... 5
ARTICLE 5 PARTICIPATION................................................................................... 6
ARTICLE 6 OPTIONS......................................................................................... 6
6.1 Power to Grant Options........................................................................ 6
6.2 Option Grants to UK Employees................................................................. 6
6.3 Modification, Extension, and Renewal of Options............................................... 6
6.4 Optionee to Have No Rights as a Shareholder................................................... 6
ARTICLE 7 TERMS AND CONDITIONS OF OPTIONS................................................................. 7
7.1 Option Agreements............................................................................. 7
7.2 Plan Provisions Control Option Terms.......................................................... 7
7.3 Conditions for Exercise (Vesting)............................................................. 7
7.4 Prohibition Against Exercise of Out-of-the-Money Options...................................... 7
7.5 Expiration Date............................................................................... 7
7.6 Acceleration of Exercise Time................................................................. 7
7.7 Termination of Employment (Except by Reason of Death, Disability or Retirement) Within One
Year After Date of Grant.................................................................... 8
7.8 Termination of Employment (Except by Reason of Death, Disability or Retirement) More Than One
Year After Date of Grant.................................................................... 8
7.9 Death of Optionee............................................................................. 8
7.10 Disability of Optionee........................................................................ 9
7.11 Retirement of Optionee........................................................................ 9
7.12 Exercise Procedures........................................................................... 9
7.13 Payment of the Exercise Price................................................................. 9
7.14 Taxes......................................................................................... 9
7.15 Surrender of Options.......................................................................... 9
7.16 Prohibition Against Exercise of Option Within Six (6) Months of Date of Grant................. 9
7.17 Restrictions on Ownership of Class B Common Stock; Incorporation by Reference of Articles of
Incorporation............................................................................... 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
7.18 Issuance of Class A Common Stock.............................................................. 10
ARTICLE 8 AMENDMENT AND TERMINATION OF THE PLAN; REORGANIZATIONS AND RECAPITALIZATIONS OF THE
CORPORATION..................................................................................... 10
8.1 Amendment of the Plan......................................................................... 10
8.2 Termination of the Plan....................................................................... 10
8.3 Reorganizations and Recapitalizations of the Corporation...................................... 10
ARTICLE 9 COMPLIANCE WITH OTHER LAWS AND REGULATIONS................................................... 11
9.1 Registration or Qualification of Securities................................................... 11
9.2 Representation................................................................................ 12
9.3 Exchange of Certificates...................................................................... 12
ARTICLE 10 RESTRICTIONS ON TRANSFER....................................................................... 12
ARTICLE 11 GENERAL PROVISIONS............................................................................. 12
11.1 No Right to Continued Employment.............................................................. 12
11.2 Beneficiaries or Representatives of an Optionee............................................... 13
11.3 Elimination of Fractional Shares.............................................................. 13
11.4 Name of Plan.................................................................................. 13
11.5 Inspection of Records......................................................................... 13
11.6 Statement to Optionee......................................................................... 13
11.7 Word Meanings................................................................................. 13
11.8 Section Titles................................................................................ 13
11.9 Severability.................................................................................. 13
11.10 Compliance with Section 16(b) of the Securities Exchange Act.................................. 13
11.11 Compliance with Code Section 162(m)........................................................... 14
11.12 Strict Construction........................................................................... 14
11.13 Choice of Law................................................................................. 14
ARTICLE 12 UK SUB-PLAN; OPTIONS GRANTED TO UNITED KINGDOM RESIDENTS....................................... 14
12.1 Definitions................................................................................... 14
12.2 Eligibility................................................................................... 15
12.3 Limitation on Grants Under the UK Sub-Plan.................................................... 15
12.4 Limitations on Exercise....................................................................... 15
12.5 Exercise Price................................................................................ 15
12.6 Death of an Optionee.......................................................................... 15
12.7 Modification of Options....................................................................... 15
12.8 Amendments.................................................................................... 15
12.9 Share Certificates and Taxes.................................................................. 15
12.10 Share Reserves................................................................................ 15
12.11 Vesting....................................................................................... 15
12.12 No Acceleration of Vesting.................................................................... 15
12.13 Exercise Price to be Paid in Cash............................................................. 15
12.14 No Surrender in Exchange for Cash............................................................. 16
</TABLE>
ii
<PAGE>
SOTHEBY'S HOLDINGS, INC. 1997 STOCK OPTION PLAN
COMPOSITE PLAN DOCUMENT
ARTICLE 1
BACKGROUND AND PURPOSE OF THE PLAN; ADOPTION OF THE PLAN; TERM
1.1 PURPOSE OF THE PLAN. The Sotheby's Holdings, Inc. 1997 Stock Option
Plan, as the same may be amended from time to time (the "Plan"), is intended to
provide a means by which employees of the Corporation and its Subsidiaries can
acquire and maintain stock ownership, thereby promoting their commitment to the
success of the Corporation; to provide an incentive to employees to remain in
the employ of the Corporation and its Subsidiaries; and to attract new employees
with outstanding qualifications.
Options granted under the Plan are not intended to be "incentive stock
options," as defined in section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or to provide any United States income tax benefits to any
Optionee.
1.2 ADOPTION AND TERM. The Plan has been approved by the Board of
Directors of the Corporation and, subject to the approval of a majority of the
voting power of the shareholders of the Corporation, is effective January 1,
1997. The Plan will remain in effect until terminated or abandoned by action of
the Board of Directors.
ARTICLE 2
DEFINITIONS
In the Plan, whenever the context so indicates, the singular or plural
number, and the masculine, feminine or neuter gender shall each be deemed to
include the other, the terms "he," "his," and "him" shall refer to an Optionee,
and the capitalized terms shall have the following meanings:
2.1 "ARTICLES OF INCORPORATION" means the Amended and Restated Articles of
Incorporation of the Corporation, as the same may be amended from time to time.
2.2 "BENEFICIARY" means (i) an individual, trust, or estate, who or which,
by will or by operation of the laws of descent and distribution, succeeds to the
rights and obligations of an Optionee under the Plan and the Option Agreement
upon the Optionee's death; or (ii) an individual who, as a result of designation
by an Optionee, succeeds to the rights and obligations of such Optionee under
the Plan and the Option Agreement upon such Optionee's death.
2.3 "BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
2.4 "BUSINESS DAY" means any Day on which the New York Stock Exchange is
open for trading.
2.5 "CLASS A COMMON STOCK" means the Class A Limited Voting Common Stock
of the Corporation, par value $0.10 per share, entitling every holder thereof,
on all matters submitted to a vote of the shareholders of the Corporation, to
cast one vote for each share standing in his name.
2.6 "CLASS B COMMON STOCK" means the Class B Common Stock of the
Corporation, par value $0.10 per share, entitling every holder thereof, on all
matters submitted to a vote of the shareholders of the Corporation, to cast 10
votes for each share standing in his name.
2.7 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time (or any corresponding provisions of succeeding law).
2.8 "COMMON STOCK" means the Class A Common Stock and the Class B Common
Stock.
1
<PAGE>
2.9 "CONFIDENTIAL INFORMATION" means, with respect to the Corporation and
its Subsidiaries, any confidential information regarding the financial
situations and particular needs of the Corporation and its Subsidiaries as well
as of, or relating to, their customers and clients (including, without
limitation, consignors, buyers and principals), the identity of such Persons,
client lists, documents and information regarding the Corporation's and any
Subsidiary's sales data, marketing, operational and appraisal techniques,
contracts, pricing, costs and profits, and any other information maintained as
proprietary or as trade secrets or as confidential.
2.10 "CORPORATION" means Sotheby's Holdings, Inc., a Michigan corporation,
and any successor in interest to the business of the Corporation that has, by
agreement, adopted the Plan.
2.11 "COMPENSATION COMMITTEE" or "COMMITTEE" means the Audit and
Compensation Committee established by the Board of Directors, or such other
committee as the Board may establish and assign the responsibility of
administering this Plan; provided, however, that the Committee shall be
comprised solely of two or more members of the Board, as determined by the Board
from time to time, each of whom shall be (i) a "disinterested person" as that
term is defined and interpreted pursuant to Rule 16b-3 promulgated under Section
16 of the Exchange Act and (ii) an "outside director" as that term is defined
and interpreted pursuant to section 162(m) of the Code and the regulations
thereunder.
2.12 "DATE OF EXERCISE", with respect to an Option, means the date on
which such Option is exercised pursuant to the Plan.
2.13 "DATE OF GRANT", with respect to an Option, means the date on which
the Compensation Committee grants such Option pursuant to the Plan.
2.14 "DAY" means each calendar day, including Saturdays, Sundays, and
legal holidays; provided, however, that if the Day on which a period of time for
consent or approval or other action ends is not a Business Day, such period
shall end on the next Business Day.
2.15 "DISABILITY" or "DISABLED" means, with respect to an Employee, a
physical or mental condition resulting from any medically determinable physical
or mental impairment that renders such Employee incapable of engaging in any
substantial gainful employment and that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of not less
than three hundred sixty-five (365) Days. Notwithstanding the foregoing, an
Employee shall not be deemed to be Disabled as a result of any condition that:
(a) was contracted, suffered, or incurred while such Employee was
engaged in, or resulted from such Employee having engaged in, a felonious
activity;
(b) resulted from an intentionally self-inflicted injury or an addiction
to drugs, alcohol, or substances which are not administered under the
direction of a licensed physician as part of a medical treatment plan; or
(c) resulted from service in the Armed Forces of the United States for
which such Employee received a disability benefit or pension from the United
States, or from service in the armed forces of any other country
irrespective of any disability benefit or pension.
The Disability of an Employee and the date upon which an Employee ceases to
be employed by reason of Disability shall be determined by the Compensation
Committee in accordance with uniform principles consistently applied, upon the
basis of such evidence as the Compensation Committee deems necessary and
desirable, and its good faith determination shall be conclusive for all purposes
of this Plan and the relevant Option Agreement. The Compensation Committee shall
have the right to require an Employee to submit to an examination by a physician
or physicians and to submit to such reexaminations as the Compensation Committee
shall require in order to make a determination concerning the Employee's
physical or mental condition; provided, however, that (i) an Employee may not be
required to undergo a medical examination more often than once each one hundred
eighty (180) Days nor at any time
2
<PAGE>
after the normal date of the Employee's Retirement, and (ii) the fees and
expenses of any such medical examination(s) shall be considered expenses of
administering the Plan. If any Employee engages in any occupation or employment
(except for rehabilitation as determined by the Compensation Committee) for
remuneration or profit, which activity would be inconsistent with the finding of
Disability, or if the Compensation Committee determines on the basis of a
medical examination that an Employee no longer has a Disability, or if an
Employee refuses to submit to any medical examination properly requested by the
Compensation Committee, then in any such event, the Employee shall be deemed to
have recovered from such Disability.
2.16 "EMPLOYEE" means an individual who is and continues to be employed
(within the meaning of section 3401 of the Code and the regulations promulgated
thereunder) by the Corporation or a Subsidiary (while a corporation continues to
be a Subsidiary) including officers (whether or not they may also be directors)
of the Corporation or a Subsidiary. An Employee shall cease to be an Employee
upon the voluntary or involuntary termination of his employment with the
Corporation or a Subsidiary for any reason, including death, Disability,
Retirement, or with or without cause. Whether an authorized leave of absence, or
an absence due to military or government service, Disability, or any other
reason, constitutes a cessation of employment shall be determined by the
Compensation Committee, in its sole discretion.
2.17 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
2.18 "EXERCISE PRICE", with respect to an Option, means the price per
share at which an Optionee may exercise his Option to acquire all or a portion
of the shares of Common Stock that are the subject of such Option, as determined
by the Compensation Committee on the Date of Grant. Notwithstanding the
foregoing, in no event shall the Exercise Price of any Option Stock be less than
the Fair Market Value of such Option Stock, determined as of the Date of Grant.
2.19 "FAIR MARKET VALUE" means the value of each share of Option Stock,
determined for a particular date as follows:
(a) if the Class B Common Stock is listed or admitted for trading on any
United States national securities exchange, the value of each share of
Option Stock shall be the closing price per share of Class B Common Stock on
such exchange (or, if listed on more than one United States exchange, the
principal said exchange) on the relevant Valuation Date hereunder;
(b) if the Class B Common Stock is not traded on any United States
national securities exchange, but is quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System (the "NASDAQ System") or
any similar system of automated dissemination of quotations of prices in
common use, the value of each share of Option Stock shall be the price per
share equal to the mean between the closing high bid and the low asked
quotations on such system on the relevant Valuation Date hereunder;
(c) if neither clause (a) nor clause (b) of this definition is
applicable with respect to the Class B Common Stock, but either clause (a)
or clause (b) is applicable with respect to the Class A Common Stock, the
value of each share of Option Stock shall be the closing price as described
in clause (a) above or the mean between the closing high bid and the low
asked quotations as described in clause (b) above, respectively, of the
Class A Common Stock, as the case may be; or
(d) if neither paragraph (a) nor paragraph (b) nor paragraph (c) of this
definition is applicable, the value of each share of Option Stock shall be
the fair market value as determined by the Committee, in good faith and in
accordance with uniform principles consistently applied, on the last day of
the relevant Fiscal Year immediately preceding the relevant date hereunder.
Such uniform principles shall be the same principles applied by the Shares
Valuation Division of the UK Inland Revenue as of the date the Committee
makes such good faith determination of the fair market value of each share
of Option Stock.
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2.20 "FISCAL YEAR" means the fiscal year of the Corporation.
2.21 "FRACTIONAL SHARE" means a portion of, or less than the whole of, a
share of Common Stock.
2.22 "OPTION" means any stock option granted pursuant to the Plan.
2.23 "OPTION AGREEMENT" is defined in Section 7.1 hereof.
2.24 "OPTIONEE" means an Employee or a former Employee who has received an
Option.
2.25 "OPTION STOCK" means those shares of Class B Common Stock made the
subject of any Option granted pursuant to the Plan.
2.26 "PERSON" or "PERSONS" means an individual, a partnership (general or
limited), corporation, joint venture, business trust, cooperative, association,
or other form of business organization, whether or not regarded as a legal
entity under applicable law, a trust (inter vivos or testamentary), an estate of
a deceased, insane, or incompetent person, a quasi-governmental entity, a
government or any agency, authority, political subdivision, or other
instrumentality thereof, or any other entity.
2.27 "PLAN" is defined in Section 1.1 hereof.
2.28 "REPORTING PERSON" means any and all Employees subject to Section 16
of the Exchange Act.
2.29 "RETIREMENT" means the termination of employment by an Employee after
the attainment of the age of sixty-five (65) years or upon such earlier date as
required by local law or as otherwise determined or approved by the Compensation
Committee.
2.30 "SUBSIDIARY" means any corporation at least 50% of the total combined
voting power of which is owned by the Corporation or another Subsidiary.
2.31 "TERMINATION FOR CAUSE" means termination of employment by reason of
an Optionee's action or repeated acts, including without limitation, the
commission of a felony, fraud, willful misconduct or the unauthorized use of
Confidential Information, which has resulted, or is likely to result, in damage
to the Corporation, as determined by the Compensation Committee in its sole and
absolute discretion.
2.32 "TRANSFER" means any assignment, sale, transfer, conveyance, mortgage
or other encumbrance, pledge, or other disposition or act of alienation, whether
voluntary or involuntary, or by operation of law.
2.33 "UK" or "UNITED KINGDOM" means the United Kingdom of Great Britain
and Northern Ireland.
2.34 "VALUATION DATE" means, with respect to an Option, the Business Day
immediately preceding either the Date of Grant of such Option or the Date of
Exercise, as applicable. Whenever reference is made to a Valuation Date, it
shall mean, with respect to the Common Stock, as at the close of trading on such
Valuation Date, and with respect to any other item, midnight in Detroit,
Michigan at the end of such Valuation Date.
ARTICLE 3
ADMINISTRATION
3.1 ADMINISTRATION. The Plan shall be administered by the Committee in
accordance with this Article 3. Subject to the terms and conditions of the Plan,
the Committee shall have the sole discretionary authority:
(a) to authorize the granting of Options;
(b) to select any Reporting Persons who are to be granted Options under
the Plan and to determine, subject to the limitations provided in Section
6.1 hereof, the number of shares of Option Stock to be granted to each
Reporting Person;
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(c) to prescribe, subject to the limitation set forth in the last
sentence of Section 2.18, the Exercise Price of Options granted under the
Plan;
(d) to construe and interpret the Plan;
(e) to establish and modify administrative rules for the Plan;
(f) to impose such conditions and restrictions with respect to Options,
not inconsistent with the terms of the Plan, as it determines appropriate;
(g) to execute or cause to be executed Option Agreements;
(h) to cancel Options and to substitute new Options with the consent of
an Optionee; and
(i) generally, to exercise such power and perform such other acts in
connection with the Plan and the Options and to make all determinations
under the Plan as it may deem necessary or advisable or as required,
provided or contemplated hereunder.
Action taken or not taken by the Compensation Committee on one or more
occasions shall be without obligation to take or not take such action on any
other occasion(s).
The Committee may delegate to one or more Persons any of its powers, other
than its power to authorize the granting of Options, hereinbefore or hereinafter
provided or conferred, or designate one or more Persons to do or perform those
matters to be done or performed by the Compensation Committee, including
administration of the Plan. Notwithstanding the foregoing, the Committee may not
delegate a power if the delegation of such power would cause the Plan to fail to
satisfy the plan administration requirements set forth in Rule 16b-3(c)
promulgated under the Exchange Act or section 162(m) of the Code and the
regulations promulgated thereunder. Any Person or Persons delegated or
designated by the Committee shall be subject to the same obligations and
requirements imposed on the Committee and its members under the Plan.
3.2 EXPENSES OF ADMINISTRATION. The Corporation shall pay all costs and
expenses of administering the Plan.
3.3 INDEMNIFICATION. The Committee, members of the Committee, and each
Person or Persons designated or delegated by the Committee, and the
shareholders, directors and officers of the Corporation, shall be entitled to
indemnification and reimbursement from the Corporation for any action or any
failure to act in connection with services performed by or on behalf of the
Committee for the benefit of the Corporation to the fullest extent provided or
permitted by the Corporation's Articles of Incorporation and by any insurance
policy or other agreement intended for the benefit of the Committee as a
committee of the Board of Directors or otherwise, or by any applicable law.
ARTICLE 4
SHARES OF COMMON STOCK SUBJECT TO THE PLAN
4.1 SHARES SUBJECT TO THE PLAN. The Option Stock to be made the subject of
Options granted under the Plan shall be shares of the Corporation's authorized
but unissued or reacquired Class B Common Stock. Subject to adjustment as
provided in Section 8.3 hereof, the aggregate number of shares of Class B Common
Stock that may be issued by the Corporation under the exercise of Options under
the Plan is 10,900,000 shares of Class B Common Stock. The aggregate number of
shares of Option Stock outstanding at any time shall not exceed the relevant
number of shares of Class B Common Stock remaining available for issuance under
the Plan. After termination of the Plan, the number of shares of Class B Common
Stock reserved for purposes of the Plan from time to time shall be only such
number of shares as are issuable under then outstanding Options.
4.2 SHARES OF COMMON STOCK SUBJECT TO TERMINATED OR EXPIRED OPTIONS. In
the event that any outstanding Option is surrendered, expires or is terminated
for any reason before it shall have been fully
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exercised, all shares of Option Stock allocable to the unexercised portion of
such Option shall again be available for Options subsequently granted under the
Plan.
ARTICLE 5
PARTICIPATION
All Employees shall be eligible to receive grants of Options under the Plan.
The Optionees shall be such individuals as the Compensation Committee may select
from among the Employees (who may include officers). In making such selections,
the Committee may take into account the nature of the services rendered by such
Employees, their present and potential contributions to the Corporation's
success, and such other factors as the Committee in its discretion shall deem
relevant.
ARTICLE 6
OPTIONS
6.1 POWER TO GRANT OPTIONS. The maximum aggregate number of shares of
Common Stock with respect to which Options may be granted to any one Employee
during a Fiscal Year shall be limited to 400,000 shares. For the 1998 Fiscal
Year only, the maximum aggregate number of shares of Common Stock with respect
to which Options may be granted to any one Employee during a Fiscal Year shall
be limited to 800,000 shares. For purposes of calculating the number of shares
with respect to which Options have been granted to an Employee for any Fiscal
Year, any shares subject to an Option that is granted and subsequently cancelled
or surrendered during such Fiscal Year shall continue to be counted against the
maximum number of shares which may be granted to such Employee pursuant to the
Plan during such Fiscal Year. Notwithstanding the foregoing, to the extent an
adjustment is made to the number of shares subject to an Option to reflect a
change in the corporate capitalization of the Corporation, the additional
shares, if any, subject to such Option shall not be counted against the maximum
number of shares for which Options may be granted to the applicable Optionee.
Subject to this maximum share limitation, the Committee may grant to such
Employees as the Committee may select, in accordance with Article 5 hereof,
Options entitling the Optionee to purchase shares of Common Stock from the
Corporation in such quantity, and on such terms and subject to such conditions
not inconsistent with the terms of the Plan, as may be established by the
Compensation Committee at the time of grant or pursuant to applicable resolution
of the Compensation Committee.
6.2 OPTION GRANTS TO UK EMPLOYEES. Any Options granted under the Plan to
an Employee who is a resident of the United Kingdom on the Date of Grant of such
Option shall be granted by the Committee first under the UK Sub-Plan (Article
12) to the extent such grant will take effect under Section 12.3 of the UK
Sub-Plan. Any portion of an Option granted to a UK resident which does not take
effect under the UK Sub-Plan as a result of the limitations provided in Section
12.3 thereof, shall be granted as a separate option under the Plan, subject only
to the provisions of Articles 1 through 11 of the Plan and not subject to
Article 12.
6.3 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. The Compensation
Committee may modify, extend, or renew outstanding Options, or accept the
cancellation or surrender of outstanding Options (to the extent not previously
exercised) for the granting of new Options in substitution therefor.
Notwithstanding the foregoing, no modification of an Option shall, without the
consent of the Optionee, alter or impair any rights or obligations under any
Option previously granted.
6.4 OPTIONEE TO HAVE NO RIGHTS AS A SHAREHOLDER. An Optionee, or a
transferee of an Optionee, shall have no rights as a shareholder of the
Corporation with respect to the shares of Common Stock made subject to an Option
unless and until such Optionee exercises such Option and is issued the shares
purchased thereby. No adjustments shall be made for distributions, allocations,
or other rights with respect to any shares of Common Stock prior to the exercise
of such Option.
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ARTICLE 7
TERMS AND CONDITIONS OF OPTIONS
7.1 OPTION AGREEMENTS. The terms of any Option shall be as set forth in a
written stock option agreement (an "Option Agreement") in such form as the
Committee shall from time to time determine. Each Option Agreement shall comply
with and be subject to the terms and conditions of the Plan and such other terms
and conditions as the Committee may deem appropriate. No Person shall have any
rights under any Option granted under the Plan unless and until the Corporation
and the Optionee have executed an Option Agreement setting forth the grant and
the terms and conditions of the Option.
7.2 PLAN PROVISIONS CONTROL OPTION TERMS. The terms of the Plan shall
govern all Options granted under the Plan, and in no event shall the
Compensation Committee have the power to grant any Option under the Plan which
is contrary to any of the provisions of the Plan. In the event that any
provision of an Option granted under the Plan shall conflict with any term in
the Plan as constituted on the Date of Grant of such Option, the term in the
Plan constituted on the Date of Grant of such Option shall control.
7.3 CONDITIONS FOR EXERCISE (VESTING). Except in the case of the death,
Disability, or Retirement of an Optionee, and subject to the provisions of
Section 7.6 hereof, no portion of an Option granted under the Plan may be
exercised until the Optionee has completed one (1) year of employment with the
Corporation after the Date of Grant of such Option. Except in the case of the
death, Disability, or Retirement of an Optionee, and provided that an Optionee
has completed one (1) year of employment with the Corporation after the Date of
Grant of an Option, each Option granted under this Plan shall become exercisable
(I.E., it shall "vest") as follows:
(a) Each Option granted under this Plan shall become vested and
exercisable (i) on the first (1st) anniversary of the Date of Grant of such
Option, to the extent of twenty percent (20%) of the shares made subject to
such Option; and (ii) on each of the second (2nd) through fifth (5th)
anniversaries of the Date of Grant of such Option, to the extent of an
additional twenty percent (20%) of the shares made subject to such Option.
(b) For purposes of this Section 7.3, in determining the "shares made
subject to such Option," account shall be taken of any adjustments made to
the shares as described in Section 8.3 hereof after the Date of Grant of the
Option, such that the number of shares of Class B Common Stock with respect
to which an Optionee's Option is vested shall be redetermined at the time of
an adjustment, and the number of shares of Class B Common Stock with respect
to which an Optionee's Option becomes vested on any anniversary date shall
be determined by reference to the number of shares of Class B Common Stock
then subject to such Option, taking any adjustments previously made into
account.
7.4 PROHIBITION AGAINST EXERCISE OF OUT-OF-THE-MONEY OPTIONS. The exercise
of any Option shall not be permitted if the Fair Market Value per share of Class
B Common Stock that would be acquired upon such exercise, determined as of the
Date of Exercise, is less than the Exercise Price of such Option.
7.5 EXPIRATION DATE. Notwithstanding any other provision of the Plan, no
Option shall be exercisable after the tenth (10th) anniversary date of the Date
of Grant of such Option.
7.6 ACCELERATION OF EXERCISE TIME.
(a) Notwithstanding anything to the contrary in the Plan, including
Sections 7.3, 7.7 and 7.8 hereof, the Compensation Committee, in its
discretion, may allow the exercise, in whole or in part, at any time more
than six (6) months after the Date of Grant of any Option held by an
Optionee, which Option has not previously become exercisable.
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(b) In the event of a Change in Control (as defined below), Options
granted on or after October 29, 1998 shall become 100% vested and
exercisable on the later of (i) the date of the Change in Control, or (ii)
the six (6) month anniversary of the Date of Grant of the Option.
(c) For purposes of the Plan, a Change in Control shall mean the date
upon which:
(i) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (a "Person"), other than members of
the Taubman Family (as defined below), shall become, directly or
indirectly, the beneficial owner (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of Common Stock of the
Corporation enabling such Person to elect a majority of the
members of the Board of Directors of the Corporation; or
(ii) after the date upon which A. Alfred Taubman, individually, as
trustee or in any other capacity, cannot elect, for any reason,
a majority of the members of the Board of Directors (the
"Triggering Date"), the individuals who, as of the Triggering
Date, constitute the Board (the "Incumbent Board") cease for
any reason within any period of 18 consecutive months to
constitute at least a majority of the members of the Board;
provided, however, that any individual becoming a director
subsequent to the Triggering Date whose election, or nomination
for election by the Corporation's shareholders, was approved by
a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though the
individual were a member of the Incumbent Board.
(d) For purposes of the Plan, the term "Taubman Family" shall mean (i)
A. Alfred Taubman, any lineal descendants, spouses, lineal descendants or
spouses, or spouses of lineal descendants of A. Alfred Taubman, a trust for
the benefit of any of the foregoing (including without limitation, the A.
Alfred Taubman Restated Revocable Trust (as the same may be amended)), the
estate(s) of any of the foregoing, and (ii) any person, more than 50% of the
voting stock, voting securities, partnership interests, limited liability
company interests or other beneficial ownership and control of which is and
remains owned and controlled by one or more of the persons described in the
foregoing clause (i).
7.7 TERMINATION OF EMPLOYMENT (EXCEPT BY REASON OF DEATH, DISABILITY, OR
RETIREMENT) WITHIN ONE YEAR AFTER DATE OF GRANT. Except in the case of the
death, Disability, or Retirement of an Optionee, if an Optionee ceases to be an
Employee for any reason within one (1) year after the Date of Grant to such
Optionee of an Option under the Plan, such Optionee's right to exercise such
Option or any part thereof shall be forfeited immediately and permanently.
7.8 TERMINATION OF EMPLOYMENT (EXCEPT BY REASON OF DEATH, DISABILITY, OR
RETIREMENT) MORE THAN ONE YEAR AFTER DATE OF GRANT. Except in the case of the
death, Disability, or Retirement of an Optionee, if an Optionee ceases to be an
Employee for any reason more than one (1) year after the Date of Grant to such
Optionee of an Option under the Plan, such Optionee shall have the right,
subject to the restrictions of Sections 7.4 and 7.5 hereof, to exercise such
Option, in full or in part, at any time within one (1) year after his or her
termination of employment, but only to the extent that, on the date of such
termination of employment, such Optionee's right to exercise such Option had
vested pursuant to the terms of Section 7.3 hereof and had not previously been
exercised. Notwithstanding the foregoing, including without limitation Section
7.3 or Section 7.6 hereof, an Option shall cease to be exercisable and shall be
forfeited immediately and permanently on the date of an Optionee's cessation of
employment if such cessation is a Termination For Cause (as defined in Section
2.31 hereof).
7.9 DEATH OF OPTIONEE. In the event an Optionee ceases to be an Employee
at any time by reason of his death and has not fully exercised his Options, then
any outstanding Options of such Optionee shall vest immediately and fully, and
the executor, administrator, or other personal representative of the Optionee's
estate, or the trustee of any trust receiving such Options as a result of such
Optionee's death, or any heir,
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successor, assign, or other transferee of the Optionee receiving such Options by
will or by the laws of descent and distribution, shall have the right, subject
to the restrictions of Sections 7.4 and 7.5 hereof, to exercise such Options, in
full or in part, at any time within one (1) year after the date of the
Optionee's death.
7.10 DISABILITY OF OPTIONEE. In the event an Optionee ceases to be an
Employee at any time by reason of Disability and has not fully exercised his
Options, then any outstanding Option(s) of such Optionee shall vest immediately
and fully, and such Optionee or his guardian or other legal representative,
shall have the right, subject to the restrictions of Sections 7.4 and 7.5
hereof, to exercise such Options, in full or in part, at any time within two (2)
years after the date of the Optionee's termination of employment by reason of
Disability.
7.11 RETIREMENT OF OPTIONEE. If an Optionee ceases to be an Employee at
any time by reason of Retirement and has not fully exercised his Options, then
any Options of such Optionee shall vest immediately and fully, and such Optionee
shall have the right, subject to the restrictions of Sections 7.4 and 7.5
hereof, to exercise such Options, in full or in part, at any time within two (2)
years after the date of the Optionee's Retirement.
7.12 EXERCISE PROCEDURES. Each Option granted under the Plan shall be
exercised by providing written notice to the Compensation Committee, together
with payment of the Exercise Price, which notice and payment must be received by
the Compensation Committee on or before the earlier of (i) the date such Option
expires pursuant to Section 7.5 hereof, and (ii) the last date on which such
Option may be exercised as provided in Sections 7.8 through 7.11 hereof, as
applicable.
7.13 PAYMENT OF THE EXERCISE PRICE. The Exercise Price times the number of
the shares of Option Stock to be purchased upon exercise of an Option granted
under the Plan shall be paid in full at the time of exercise: (i) in cash or by
certified check, in United States dollars; (ii) in the discretion of the
Committee, by the delivery of shares of Common Stock with a Fair Market Value at
the time of exercise equal to the Exercise Price times the number of shares of
Option Stock being purchased; or (iii) in the discretion of the Committee, by
delivery to the Corporation or its designated agent of an executed irrevocable
exercise form together with irrevocable instructions to a broker/dealer to sell
(or margin) a sufficient number of the shares and deliver the sale (or margin
loan) proceeds directly to the Corporation to pay the aggregate Exercise Price,
or (iv) in the discretion of the Committee, a combination of the methods
described in (i), (ii) and (iii).
7.14 TAXES. The Corporation shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment in cash in United States
dollars from an Optionee or Beneficiary in lieu of withholding) the amount of
any withholding or other tax required by law to be withheld or paid by the
Corporation with respect to any amount payable and/or shares of Common Stock
issuable under such Optionee's Option, and the Corporation may defer payment or
issuance of the shares of Common Stock upon such Optionee's exercise of an
Option unless indemnified to its satisfaction against any liability for such
tax. The amount of any such withholding shall be determined by the Corporation.
7.15 SURRENDER OF OPTIONS. Any Option granted under the Plan may be
surrendered to the Corporation for cancellation on such terms as the Committee
and the Optionee agree, including, but not limited to, terms which provide that
upon such surrender the Corporation shall pay to the Optionee cash or shares of
Common Stock or a combination of cash and shares of Common Stock.
7.16 PROHIBITION AGAINST EXERCISE OF OPTION WITHIN SIX (6) MONTHS OF DATE
OF GRANT. Notwithstanding any other provision of the Plan, no Option which, but
for this Section 7.16, is exercisable shall be exercised within six (6) months
from the Date of Grant.
7.17 RESTRICTIONS ON OWNERSHIP OF CLASS B COMMON STOCK; INCORPORATION BY
REFERENCE OF ARTICLES OF INCORPORATION. Ownership of Class B Common Stock is
subject to all of the restrictions contained in the Articles of Incorporation,
including the automatic conversion of Class B Common Stock to Class A
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Common Stock. The relevant provisions of the Articles of Incorporation are
hereby incorporated by reference.
7.18 ISSUANCE OF CLASS A COMMON STOCK. This Section 7.18 applies if at any
time that shares of any class of the Corporation's capital stock are listed on a
national securities exchange, the rules of such exchange or of any governmental
agency of the United States of America require the delisting of such shares if
the Corporation issues shares of Class B Common Stock. In that event, upon the
exercise of outstanding Options granted under the Plan (including Options
granted pursuant to Article 12 of the Plan), the Corporation shall treat a
notice of exercise as a notice to the Corporation to deliver the same number of
shares of Class A Common Stock as the number of shares of Class B Common Stock
that the Corporation would otherwise have been required to deliver. Accordingly,
the Plan shall be operated first on the basis that an Option granted under the
Plan is simply in respect of shares of Class B Common Stock and shall in
addition be operated on the basis that the relevant Option is instead in respect
of Class A Common Stock.
ARTICLE 8
AMENDMENT AND TERMINATION OF THE PLAN; REORGANIZATIONS AND
RECAPITALIZATIONS OF THE CORPORATION
8.1 AMENDMENT OF THE PLAN. The Compensation Committee may from time to
time suspend or discontinue the Plan or revise or amend the Plan in any respect
whatsoever; provided, however, that to the extent necessary and desirable to
comply with Rule 16b-3 under the Exchange Act and with section 162(m) of the
Code (or any other applicable law or regulation, including the requirements of
any stock exchange on which the Common Stock is listed or quoted), shareholder
approval of any plan amendment shall be obtained in such a manner and to such a
degree as is required by the applicable law or regulation. In the event of a
revision or amendment to the Plan, all outstanding Options shall be adjusted to
be consistent with the terms and provisions of the Plan, as revised or amended,
and in such manner as the Compensation Committee may deem equitable or as may be
required pursuant to applicable law; provided, however, that except with the
written consent of an Optionee or as otherwise specifically provided herein with
respect to a replacement plan, no amendment, suspension, termination or
modification of the Plan shall alter or impair the rights of an Optionee under
any Option previously granted to such Optionee under the Plan.
8.2 TERMINATION OF THE PLAN. The Compensation Committee, with the approval
or at the direction of the Board of Directors, and the Board of Directors shall
have the right and power to terminate the Plan at any time, and no Option shall
be granted under the Plan after the termination of the Plan. The termination of
the Plan shall not have any other effect, and any Option outstanding at the time
of the termination of the Plan may be exercised after termination of the Plan,
at any time prior to the expiration date of such Option and to the same extent
and subject to the same terms and conditions, as provided in Article 7 hereof,
that would have applied to such Option if the Plan had not been terminated.
8.3 REORGANIZATIONS AND RECAPITALIZATIONS OF THE CORPORATION.
(a) The existence of this Plan and Options granted hereunder shall not
affect in any way the right or power of the Corporation or its shareholders
to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or
its business, or any merger or consolidation of the Corporation, or any
issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting the shares or the rights thereof, or the dissolution or
liquidation of the Corporation, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding, whether
of a similar character or otherwise.
(b) Except as hereinafter provided, the issue by the Corporation of
shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services, either upon
direct sale or upon exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Corporation convertible into
such shares or other securities, shall not
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affect, and no adjustment by reason thereof shall be made with respect to,
the number of shares subject to Options granted hereunder.
(c) The shares with respect to which Options may be granted hereunder
are shares of Class B Common Stock of the Corporation as presently
constituted, but if, and whenever, prior to the delivery by the Corporation
of all of the shares which are subject to the Options or rights granted
hereunder, the Corporation shall effect a subdivision or consolidation of
shares or other capital readjustments, the payment of a stock dividend or
other increase or reduction of the number of outstanding shares of either
Class A or Class B Common Stock or both, without receiving compensation
therefor in money, services or property, the number of shares subject to the
Plan shall be proportionately adjusted and the number of shares with respect
to which Options granted hereunder may thereafter be exercised shall:
(i) in the event of an increase in the number of outstanding shares,
be proportionately increased, and the cash consideration (if
any) payable per share shall be proportionately reduced; and
(ii) in the event of a reduction in the number of outstanding
shares, be proportionately reduced, and the cash consideration
(if any) payable per share shall be proportionately increased.
(d) If the Corporation merges with one or more corporations, or
consolidates with one or more corporations and the Corporation shall be the
surviving corporation, thereafter, upon any exercise of Options granted
hereunder, the recipient shall, at no additional cost (other than the
Exercise Price and any tax withholding amounts) be entitled to receive
(subject to any required action by shareholders) in lieu of the number of
shares as to which such Options shall then be exercisable the number and
class of shares of stock or other securities to which the recipient would
have been entitled pursuant to the terms of the agreement of merger or
consolidation, if immediately prior to such merger or consolidation the
recipient had been the holder of record of the number of shares of Class B
Common Stock of the Corporation equal to the number of shares as to which
such Options shall be exercisable. A reorganization, merger or consolidation
in which the Corporation is not the surviving corporation, or a liquidation
or dissolution of the Corporation, shall automatically and without any
further action cause any outstanding Options which have not yet become
exercisable in accordance with Article 7 to terminate and be cancelled as of
the effective date of such reorganization, merger or consolidation, or
dissolution or liquidation of the Corporation, unless the agreement of
reorganization, merger or consolidation otherwise provides.
(e) To the extent that any of the adjustments described in subparagraphs
(c) and (d) of this Section 8.3 relate to securities of the Corporation,
such adjustments shall be made by the Committee, whose determination shall
be conclusive and binding on all persons, subject to obtaining the agreement
of the Corporation's auditors to such adjustments.
ARTICLE 9
COMPLIANCE WITH OTHER LAWS AND REGULATIONS
9.1 REGISTRATION OR QUALIFICATION OF SECURITIES. The Plan, the grant and
exercise of Options under the Plan, and the obligation of the Corporation to
sell and deliver shares of Common Stock under such Options shall be subject to
all applicable federal and state laws, rules, and regulations and to such
approvals by any government or regulatory agency as may be required. Each Option
shall be subject to the requirement that if at any time the Compensation
Committee shall determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby under any securities exchange or
under any state or federal law or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue or purchase of shares thereunder,
such Option may not be exercised in whole or in part unless and until such
listing,
11
<PAGE>
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Compensation Committee.
Stock certificates evidencing such shares acquired under the Plan pursuant to an
unregistered transaction shall bear the following restrictive legend and such
other restrictive legends as are required or deemed advisable under the
provisions of any applicable law:
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE 'ACT'). ANY TRANSFER OF SUCH SECURITIES WILL BE
INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH
TRANSFER OR, IN THE OPINION OF COUNSEL FOR THE ISSUER, SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT."
Any determination by the Corporation and its counsel in connection with any
of the matters set forth in this Section 9.1 shall be conclusive and binding on
all Persons.
9.2 REPRESENTATION. The Compensation Committee may require that any Person
who is granted an Option under the Plan represent and agree in writing that if
the shares of Common Stock made subject to the Option are issuable under an
exemption from registration requirements, the shares will be "restricted"
securities which may be resold only in compliance with the applicable securities
laws, and that such Person is acquiring the shares issued upon exercise of an
Option for investment purposes and not with a view toward distribution.
9.3 EXCHANGE OF CERTIFICATES. If, in the opinion of the Corporation and
its counsel, any legend placed on a stock certificate representing shares of
Class B Common Stock sold under the Plan is no longer required, the holder of
such certificate shall be entitled to exchange such certificate for a
certificate representing the same number of such shares but lacking such legend.
ARTICLE 10
RESTRICTIONS ON TRANSFER
10.1 RESTRICTIONS ON TRANSFER. An Optionee's rights and interests under
the Plan may not be assigned or transferred other than by will or the laws of
descent and distribution, and during the lifetime of an Optionee, only the
Optionee personally (or the Optionee's personal representative) may exercise the
Optionee's rights under the Plan. No purported assignment or transfer of an
Option granted under the Plan, whether voluntary or involuntary, by operation of
law or otherwise, shall vest in the purported transferee or assignee any
interest or right therein whatsoever but immediately upon any such purported
assignment or transfer, or any attempt to make the same, such Option thereunder
shall terminate and become of no further effect. An Optionee's Beneficiary may
exercise the Optionee's rights to the extent they are exercisable under the Plan
following the death of the Optionee.
ARTICLE 11
GENERAL PROVISIONS
11.1 NO RIGHT TO CONTINUED EMPLOYMENT. No Employee or any other Person
shall have any claim or right to be granted an Option under the Plan. Neither
the adoption and maintenance of the Plan nor the granting of Options pursuant to
the Plan shall be deemed to constitute a contract of employment between the
Corporation and any Employee or to be a condition of the employment of any
Person. The Plan and any Option granted under the Plan shall not confer upon any
Optionee any right with respect to continued employment by the Corporation, nor
shall they interfere in any way with the right of the Corporation to terminate
the employment of any Optionee at any time, and for any reason, with or without
cause, it being acknowledged, unless expressly provided otherwise in writing,
that the employment of any Optionee is and continues to be "at will."
12
<PAGE>
11.2 BENEFICIARIES OR REPRESENTATIVES OF AN OPTIONEE. The Compensation
Committee may require such proper proof of death and such evidence of the right
of any Person other than an Optionee to exercise any Option granted under the
Plan, as the Compensation Committee deems necessary or advisable. The
Compensation Committee's determination of death or Disability and of the right
of any Person other than an Optionee to exercise an Option shall be conclusive.
The Compensation Committee, in its discretion, may require from any Person,
other than an Optionee, exercising any Option under the Plan, such security and
indemnity as the Compensation Committee, in its discretion, deems necessary or
advisable. The issuance of and acceptance of any shares of Common Stock upon the
exercise of an Option hereunder, shall constitute a complete acquittance and
discharge of full liability of the Corporation under the Plan, and the
Compensation Committee shall be entitled to demand a receipt and/or acquittance
in full satisfaction of all claims against the Corporation.
11.3 ELIMINATION OF FRACTIONAL SHARES. If under any provision of the Plan
that requires a computation of the number of shares of Option Stock subject to
an Option, the number so computed is not a whole number of shares of Option
Stock, such number of shares of Option Stock shall be rounded down to the next
whole number.
11.4 NAME OF PLAN. This Plan shall be known as "Sotheby's Holdings, Inc.
1997 Stock Option Plan."
11.5 INSPECTION OF RECORDS. Copies of the Plan, records reflecting each
Optionee's Options, and any other documents and records that an Optionee is
entitled by law to inspect shall be open to inspection by the Optionee and his
duly authorized representative(s) at the office of the Corporation at any
reasonable business hour.
11.6 STATEMENT TO OPTIONEES. Within a reasonable time after the last day
of each Fiscal Year, the Committee shall furnish to each Optionee a statement
setting forth the Optionee's total number of shares of the Option Stock made the
subject of an Option(s) under the Plan, the date on which such Option(s)
was/were granted, the Fair Market Value of such shares as of the date of the
grant, the Fair Market Value of such shares as of the last day of such Fiscal
Year, and such other information as the Committee shall deem advisable to
furnish.
11.7 WORD MEANINGS. The words such as "herein," "hereinafter," "hereof,"
and "hereunder" refer to this Plan as a whole and not merely to a subdivision in
which such words appear unless the context otherwise requires.
11.8 SECTION TITLES. Section titles are for descriptive purposes only and
shall not control or alter the meaning of the Plan as set forth in the text.
11.9 SEVERABILITY. Whenever possible, each provision in the Plan and every
Option at any time granted under the Plan shall be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of the
Plan or any Option at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then, (i) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law, and (ii) all other provisions of
the Plan and every other Option at any time granted under the Plan shall remain
in full force and effect.
11.10 COMPLIANCE WITH SECTION 16(B) OF THE SECURITIES EXCHANGE ACT. With
respect to Reporting Persons, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act and in all events the Plan shall be construed in accordance with
Rule 16b-3. To the extent any provision of the Plan or action by the
Compensation Committee fails to so comply, it shall be deemed null and void to
the extent permitted by law and deemed advisable by the Compensation Committee.
The Compensation Committee, in its absolute discretion, may bifurcate the Plan
so as to restrict, limit or condition the use of any provision of the Plan to
participants who are officers
13
<PAGE>
or directors of the Corporation, subject to Section 16 of the Exchange Act
without so restricting, limiting or conditioning the Plan with respect to other
participants.
11.11 COMPLIANCE WITH CODE SECTION 162(M). This Plan is intended to comply
with all applicable provisions of section 162(m) of the Code. To the extent any
provision of the Plan or action by the Compensation Committee fails to so
comply, it shall be deemed null and void to the extent permitted by law and
deemed advisable by the Compensation Committee.
11.12 STRICT CONSTRUCTION. No rule of strict construction shall be implied
against the Compensation Committee, the Corporation or any other Person in the
interpretation of any of the terms of the Plan, any Option granted under the
Plan or any rule or procedure established by the Compensation Committee.
11.13 CHOICE OF LAW. All determinations made and actions taken pursuant to
the Plan shall be governed by the internal laws of the State of Michigan and
construed in accordance therewith.
ARTICLE 12
UK SUB-PLAN; OPTIONS GRANTED TO UNITED KINGDOM RESIDENTS
All Options granted under this Article 12 (also referred to as the "UK
SUB-PLAN") to an employee who is a resident of the United Kingdom shall comply
with the terms of this UK Sub-Plan. In the event any other provision of the Plan
conflicts with a provision of this Article 12, the provision in Article 12 shall
control with respect to any Option granted under Article 12 (I.E., under the UK
Sub-Plan). No other Option granted under the Plan shall be subject to the
provisions of this Article 12.
12.1 DEFINITIONS. The following terms shall have the following meanings
for purposes of this UK Sub-Plan:
(a) "ASSOCIATED COMPANY" has the meaning as in Section 416 of the Taxes
Act.
(b) "COMPANY" means Sotheby's Holdings, Inc.
(c) "CONTROL" has the meaning as in Section 840 of the Taxes Act.
(d) "FAIR MARKET VALUE" means the fair market value of the relevant
shares at the relevant date, as determined in accordance with the provisions
of Part VIII of the UK Taxation of Chargeable Gains Act 1992 and agreed with
the Shares Valuation Division of the UK Inland Revenue.
(e) "OUTSTANDING OPTIONS" means all Options granted under this UK
Sub-Plan, and all options granted under any other scheme approved under
Schedule 9 and established by the Company or any Associated Company thereof,
which have not been exercised and have not lapsed at the relevant time.
(f) "L" or "POUNDS" means pounds sterling, the lawful currency of the
United Kingdom.
(g) "SCHEDULE 9" means Schedule 9 to the Taxes Act.
(h) "SHARES" means shares of Class B Common Stock in the Company, which
satisfy the provisions of paragraphs 10 through 14 of Schedule 9.
(i) "STERLING EQUIVALENT" means, in relation to U.S. dollars, the amount
obtained from applying the mid-market rate of exchange for spot sterling at
the close of business in New York on the relevant date to the relevant
amount; and in relation to any other currency, the amount of sterling
required to purchase the relevant amount of that currency at the mid-market
spot rate of exchange for that currency at the close of business in London
on the relevant date.
(j) "TAXES ACT" means the Income and Corporation Taxes Act 1988 of the
United Kingdom.
(k) "YEAR OF ASSESSMENT" means a year beginning in any 6 April and
ending on the following 5 April.
14
<PAGE>
12.2 ELIGIBILITY. An Option under the UK Sub-Plan may be granted only to a
UK resident who is a director or employee of the Company or a Subsidiary; who is
required to devote to his duties not less than 25 hours (or in the case of an
employee not a director of the Company or a Subsidiary, 20 hours) per week
(excluding meal breaks); and who is not precluded by paragraph 8 of Schedule 9
from participating in the UK Sub-Plan.
12.3 LIMITATION ON GRANTS UNDER THE UK SUB-PLAN. Any Option granted under
the UK Sub-Plan to a UK resident shall be limited and take effect so that
immediately following such grant the aggregate Exercise Prices of shares subject
to such person's Outstanding Options (converted to their Sterling Equivalents at
the date of such grant) shall not exceed thirty thousand pounds (L30,000).
12.4 LIMITATIONS ON EXERCISE. No Option granted under the UK Sub-Plan may
be exercised if at the time of the proposed exercise the person is precluded by
paragraph 8 of Schedule 9 from participating in the UK Sub-Plan.
12.5 EXERCISE PRICE. The Exercise Price of any Option granted under the UK
Sub-Plan shall not be manifestly less than the Fair Market Value at the date the
Option is granted or the nominal value of the Shares.
12.6 DEATH OF AN OPTIONEE. On the death of an employee, any unexercised
Option granted to him under the UK Sub-Plan may be exercised after his death by
his personal representatives only.
12.7 MODIFICATION OF OPTIONS. No modification (as referred to in Section
6.3 of the Plan) or adjustment (as referred to in Section 8.3(c), (d) or (e) of
the Plan) may be made to Options granted under the UK Sub-Plan without the prior
consent of the Board of the UK Inland Revenue. Any adjustment (as referred to in
Section 8.3(c), (d) or (e) of the Plan) which affects Options granted under the
UK Sub-Plan may only be made following a variation of the share capital of the
Corporation. Notwithstanding the provisions of Section 6.3 of the Plan, no
Option granted under the UK Sub-Plan may be cancelled or surrendered in
consideration of the grant of any new Options.
12.8 AMENDMENTS. No revision or amendment (as referred to in Section 8.1
of the Plan) to the UK Sub-Plan shall have effect unless approved by the Board
of the UK Inland Revenue.
12.9 SHARE CERTIFICATES AND TAXES. The Company shall within 30 days of
receipt of all documents, information and payments which are due on exercise of
an Option issue to the employee exercising the Option certificates representing
the number of Shares purchased on exercise, and shall pay all original issue or
transfer taxes and all other fees and expenses incidental to such delivery.
12.10 SHARE RESERVES. The Company shall maintain sufficient Shares to meet
all Outstanding Options under the UK Sub-Plan and all Shares in respect of which
any Option is exercisable under the UK Sub-Plan shall rank equally and rateably
with all issued Shares of the same class in the Company.
12.11 VESTING. Except in the case of the death, Disability, or Retirement
of an Optionee, each Option granted under the UK Sub-Plan shall become
exercisable (i) on the third (3rd) anniversary date of the Date of Grant of such
Option, to the extent of sixty percent (60%) of the number of shares made
subject to such Option; (ii) on the fourth anniversary date of the Date of Grant
of such Option, to the extent of eighty percent (80%) of the number of shares
made subject to such Option; and (iii) on the fifth (5th) anniversary date of
the Date of Grant of such Option to the extent of one hundred percent (100%) of
the number of shares made subject to such Option.
12.12 NO ACCELERATION OF VESTING. The Committee shall not exercise its
discretion under Section 7.6 of the Plan to accelerate the vesting of any Option
granted under the UK Sub-Plan.
12.13 EXERCISE PRICE TO BE PAID IN CASH. The provisions of Section
7.13(ii), (iii) and (iv) shall not apply to any Option granted under the U.K.
Sub-Plan.
15
<PAGE>
12.14 NO SURRENDER IN EXCHANGE FOR CASH. Notwithstanding the provisions of
Section 7.15, no Option granted under the UK Sub-Plan shall be capable of
surrender in exchange for cash.
To record the adoption of the Plan, the Corporation has caused the execution
hereof as of this 8th day of May, 1996.
SOTHEBY'S HOLDINGS, INC.,
a Michigan corporation
By:
- --------------------------------------------------------------------------------
Its: President and Chief Executive
Officer
16
<PAGE>
SOTHEBY'S HOLDINGS, INC.
CLASS A LIMITED VOTING COMMON STOCK
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS - APRIL 29, 1999
The undersigned hereby appoints each of A. ALFRED TAUBMAN and DIANA D.
BROOKS, with full power of substitution, to represent the undersigned at the
annual meeting of shareholders of Sotheby's Holdings, Inc., on Thursday, April
29, 1999, at Sotheby's, 34-35 New Bond Street, London, England, at 10 o'clock in
the forenoon local time, and at any adjournment thereof, and to vote at such
meeting the shares of Class A Limited Voting Common Stock that the undersigned
would be entitled to vote if personally present in accordance with the following
instructions and to vote in their judgement upon all other matters which may
properly come before the meeting and any adjournment thereof.
If at least one of the above named Proxies shall be present in person or by
substitution at such meeting or at any adjournment thereof, said Proxy or
Proxies, as the case may be, so present and voting, either in person or by
substitution, shall exercise all of the powers hereby given. The undersigned
hereby revokes any proxy heretofore given to vote at such meeting.
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
<TABLE>
<S><C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3. IF NO DIRECTION IS GIVEN, THE SHARES Please mark /X/
WILL BE VOTED FOR PROPOSALS 1, 2, AND 3. SUCH SHARES WILL BE VOTED IN THE PROXIES' DISCRETION UPON SUCH your votes as
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. indicated in
this example
1. Election of Directors Election by Holders of Class A Limited Voting Common Stock of Walter J.P. Curley,
Max M. Fisher, and A. Alfred Taubman as directors.
FOR all Nominees WITHHOLD
listed (except as AUTHORITY To withhold authority to vote for any individual nominee, write that nominee's
marked to the to vote for all name on the space provided below.
contrary to the right) Nominees
/ / / / ----------------------------------------------------------------------------------
2. Approval of an amendment to the Sotheby's 3. Ratification of the appointment of
Holdings, Inc. 1997 Stock Option Plan. Deloitte & Touche LLP as independent Please sign exactly as name appears
auditors for 1999. hereon. When shares are held by joint
tenants, both should sign. When signing
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN as attorney, executor, administrator,
/ / / / / / / / / / / / trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by
President or other authorized officer.
If a partnership, please sign in full
partnership name by authorized person.
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
Dated: , 1999
---------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.
- ------------------------------------------------------------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
</TABLE>
Dear Shareholders of Sotheby's Holdings, Inc.:
Enclosed you will find material regarding the Company's 1999 Annual Meeting
of Shareholders. The notice of the Annual Meeting and proxy statement
describe the formal business to be transacted at the meeting, as summarized
on the attached proxy card.
Whether or not you expect to attend the Annual Meeting, please complete and
return promptly the attached proxy card in the accompanying envelope, which
requires no postage if mailed in the United States. As a shareholder, please
remember that your vote is important to us. We look forward to hearing from
you.
<PAGE>
SOTHEBY'S HOLDINGS, INC.
CLASS B COMMON STOCK
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS - APRIL 29, 1999
The undersigned hereby appoints each of A. ALFRED TAUBMAN and DIANA D.
BROOKS, with full power of substitution, to represent the undersigned at the
annual meeting of shareholders of Sotheby's Holdings, Inc., on Thursday, April
29, 1999, at Sotheby's, 34-35 New Bond Street, London, England, at 10 o'clock in
the forenoon local time, and at any adjournment thereof, and to vote at such
meeting the shares of Class B Common Stock that the undersigned would be
entitled to vote if personally present in accordance with the following
instructions and to vote in their judgement upon all other matters which may
properly come before the meeting and any adjournment thereof.
If at least one of the above named Proxies shall be present in person or by
substitution at such meeting or at any adjournment thereof, said Proxy or
Proxies, as the case may be, so present and voting, either in person or by
substitution, shall exercise all of the powers hereby given. The undersigned
hereby revokes any proxy heretofore given to vote at such meeting.
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
<TABLE>
<S><C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3. IF NO DIRECTION IS GIVEN, THE SHARES Please mark /X/
WILL BE VOTED FOR PROPOSALS 1, 2, AND 3. SUCH SHARES WILL BE VOTED IN THE PROXIES' DISCRETION UPON SUCH your votes as
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. indicated in
this example
1. Election of Directors Election by Holders of Class B Common Stock of Conrad Black, Viscount Blakenham,
Diana D. Brooks, The Marquess of Hartington, Henry R. Kravis, Jeffrey H. Miro, and
Sharon Percy Rockefeller as directors.
FOR all Nominees WITHHOLD
listed (except as AUTHORITY To withhold authority to vote for any individual nominee, write that nominee's
marked to the to vote for all name on the space provided below.
contrary to the right) Nominees
/ / / / ----------------------------------------------------------------------------------
2. Approval of an amendment to the Sotheby's 3. Ratification of the appointment of
Holdings, Inc. 1997 Stock Option Plan. Deloitte & Touche LLP as independent Please sign exactly as name appears
auditors for 1999. hereon. When shares are held by joint
tenants, both should sign. When signing
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN as attorney, executor, administrator,
/ / / / / / / / / / / / trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by
President or other authorized officer.
If a partnership, please sign in full
partnership name by authorized person.
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
Dated: , 1999
---------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.
- ------------------------------------------------------------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
</TABLE>
Dear Shareholders of Sotheby's Holdings, Inc.:
Enclosed you will find material regarding the Company's 1999 Annual Meeting of
Shareholders. The notice of the Annual Meeting and proxy statement describe the
formal business to be transacted at the meeting, as summarized on the attached
proxy card.
Whether or not you expect to attend the Annual Meeting, please complete and
return promptly the attached proxy card in the accompanying envelope, which
requires no postage if mailed in the United States. As a shareholder, please
remember that your vote is important to us. We look forward to hearing from you.
