1 | NAME OF REPORTING PERSON
Taikang Insurance Group, Inc.
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2
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
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[ ] (a) |
☒ (b)
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3
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SEC USE ONLY
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4
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SOURCE OF FUNDS
OO
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5
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
☐
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6
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CITIZENSHIP OR PLACE OF ORGANIZATION
People's Republic of China
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NUMBER OF SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
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7
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SOLE VOTING POWER
7,939,661
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8
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SHARED VOTING POWER
0
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9
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SOLE DISPOSITIVE POWER
7,939,661
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10
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SHARED DISPOSITIVE POWER
0
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11
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,939,661
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12
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
☐
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13
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.99%
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14
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TYPE OF REPORTING PERSON
IC
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Shares Deemed to be
Beneficially Owned By: |
Nature of
Ownership |
Percentage
of Class |
Taikang Insurance Group, Inc.:
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7,939,661
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Sole Voting and Sole Dispositive Power
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14.99%
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Exhibit A - |
Executive Officers and Control Persons of the Reporting Person – incorporated by reference to Exhibit A included with the Reporting Person’s initial Statement on Schedule 13D as filed on July 27, 2016.
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Exhibit B - |
Transactions in Securities of the Issuer during the Past Sixty Days by the Reporting Person – incorporated by reference to Exhibit B included with the Reporting Person’s initial Statement on Schedule 13D as filed on July 27, 2016.
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Exhibit C - |
Letter of Agreement between Taikang Insurance Group, Inc. and Sotheby’s – incorporated by reference to Exhibit C included with the Reporting Person’s Amendment No. 1 to the Statement on Schedule 13D as filed on September 12, 2016.
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Exhibit D - |
Support Agreement, dated November 4, 2016, by and between Sotheby’s and Taikang Insurance Group
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Exhibit E -
Exhibit F -
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Press Release of Sotheby’s dated November 7, 2016, announcing the appointment of Linus Cheung to the Board
Transactions in Securities of the Issuer during the Past Sixty Days by the Reporting Person
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Taikang Insurance Group, Inc.
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Date: November 11, 2016
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By: /s/ Yeung Ying Kit
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Name: YEUNG YING KIT
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Title: Senior Compliance Officer
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1.
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Board Matters.
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1.
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The Company and Taikang agree as follows:
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1.
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From time to time and subject to applicable law and the execution by Taikang of a customary confidentiality agreement (including customary restrictions on trading in securities of the Company while in the possession of material non-public information concerning the Company), Taikang may invite the management and directors of the Company to meet with Taikang to discuss the Company's business and potential opportunities for Taikang to provide advice and assistance to the Company;
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2.
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The Board of Directors of the Company (the “Board”) shall take all action necessary to appoint Linus Cheung (the “New Independent Director”) to the Board effective contemporaneously with the execution of this Agreement;
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3.
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the Company’s slate of nominees for election as directors of the Company at the Company’s 2017 Annual Meeting (the “2017 Annual Meeting”) shall include the New Independent Director;
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4.
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the Company will use its reasonable best efforts to cause the election of the New Independent Director to the Board at the 2017 Annual Meeting (including recommending that the Company’s shareholders vote in favor of the election of the New Independent Director (along with all other Company nominees) and otherwise supporting him for election in a manner no less rigorous and favorable than the manner in which the Company supports its other nominees in the aggregate);
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5.
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should the New Independent Director resign from the Board or be rendered unable to, or refuse to, be appointed to, or for any other reason fail to serve or not be serving on, the Board (other than in connection with the Company delivering a Notice of Intent Not to Nominate (as hereinafter defined)), the Company and Taikang will use reasonable best efforts to identify a mutually acceptable replacement for the New Independent Director having similar stature and qualifications, and who would constitute an independent director of the Board under the applicable New York Stock Exchange independence rules and who is not otherwise materially affiliated with or related to Taikang or any of its direct or indirect controlling equity holders (a “Replacement”). Subject to the Replacement, prior to his or her appointment to the Board, providing to the Company a written confirmation of his or her willingness to serve as a director if so appointed or elected, a completed D&O Questionnaire substantially in the Company’s customary form and such other documents as are customarily required from the Company’s other directors, and meeting with representatives of the Nominating and Corporate Governance Committee of the Board in accordance with the practices of the Board and the Nominating and Corporate Governance Committee, the Company shall take all necessary action to appoint the Replacement to the Board as promptly as reasonably practicable. Any Replacement who becomes a Board member in replacement of the New Independent Director shall be deemed thereafter to be the New Independent Director for all purposes under this Agreement; and
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6.
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for any annual meeting of Company shareholders subsequent to the 2017 Annual Meeting at which the New Independent Director is nominated by the Company and agrees to serve, the Company shall use commercially reasonable efforts to cause the election of the New Independent Director so nominated by the Company (including recommending that the Company’s shareholders vote in favor of the election of the New Independent Director, including the New Independent Director in the Company’s proxy statement for such annual meeting of Company shareholders and otherwise supporting the New Independent Director for election in a manner no less rigorous and favorable than the manner in which the Company supports its other nominees in the aggregate).
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2.
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The Company and Taikang understand and agree that, at all times while serving as a member of the Board, the New Independent Director will be required to comply with all policies, procedures, processes, codes, rules, standards and guidelines applicable to Board members, including the Company’s code of business conduct and ethics, securities trading policies, anti-hedging policies, Regulation FD-related policies, director confidentiality policies and corporate governance guidelines, and preserve the confidentiality of Company business and information, including discussions or matters considered in meetings of the Board or Board committees. Compliance with such policies, procedures, processes, codes, rules, standards and guidelines shall be the sole responsibility of the New Independent Director.
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2.
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Standstill.
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1.
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Without limiting the Company’s obligations under Section 1, the Company shall promptly notify Taikang in writing of the Board’s decision, if any, not to (i) appoint a Replacement should the New Independent Director resign from the Board or be rendered unable to, or refuse to, be appointed to, or for any other reason fail to serve or not be serving on, the Board (which Notice shall be deemed to have been given if a Replacement has not been appointed 90 days following the date on which a New Independent Director has ceased to serve as a director so long as Taikang has used, throughout such 90 day period, its reasonable best efforts to identify a mutually acceptable Replacement in accordance with Section 1(a)(iv)) or (ii) nominate the New Independent Director for election at any annual meeting of shareholders (which written notice, if any, shall in any event not be delivered any later than 60 days prior to the advance notice deadline for making director nominations at such upcoming annual meeting) (the “Notice of Intent Not to Nominate”).
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2.
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For purposes of this Agreement, the “Standstill Period” shall mean the period from the date of this Agreement until 12:01 a.m. on the next business day after the earliest to occur of (A) Taikang receives a Notice of Intent Not to Nominate; (B) the third anniversary of the date of this Agreement; and (C) such other date as mutually agreed in writing by the parties.
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3.
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During the Standstill Period, Taikang shall not, directly or indirectly, and shall cause each of its controlled Affiliates (such controlled Affiliates, collectively with Taikang and individually, the “Taikang Affiliates”) not to, directly or indirectly:
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1.
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except pursuant to a Qualifying Offer (as defined below), solicit proxies or written consents of stockholders or conduct any other type of referendum (binding or non-binding) with respect to, or from the holders of, the Voting Securities (as defined below), or become a “participant” (as such term is defined in Instruction 3 to Item 4 of Schedule 14A promulgated under the Exchange Act) in or assist any Third Party (as defined herein) in any “solicitation” of any proxy, consent or other authority (as such terms are defined under the Exchange Act) to vote any shares of the Voting Securities (other than such encouragement, advice or influence that is consistent with Company management’s recommendation in connection with such matter);
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2.
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except pursuant to a Qualifying Offer, encourage, advise or influence any other person or assist any Third Party in so encouraging, assisting or influencing any person with respect to the giving or withholding of any proxy, consent or other authority to vote or in conducting any type of referendum (other than such encouragement, advice or influence that is consistent with Company management’s recommendation in connection with such matter);
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3.
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except pursuant to a Qualifying Offer, form or join in a partnership, limited partnership, syndicate or other group, including a “group” as defined under Section 13(d) of the Exchange Act, with respect to the Voting Securities or otherwise support or participate in any effort by a Third Party with respect to the matters set forth in clause (i) herein;
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4.
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except pursuant to a Qualifying Offer, present at any annual meeting or any special meeting of the Company’s stockholders or through action by written consent any proposal for consideration for action by stockholders or seek the removal of any member of the Board or (except as explicitly permitted by this Agreement with respect to a Replacement or with the Board’s prior approval (which may be given or withheld in the Board’s sole discretion)) propose any nominee for election to the Board or seek representation on the Board;
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5.
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except pursuant to a Qualifying Offer, other than in (A) a block sale that, to Taikang’s knowledge, will not result in the purchaser and its affiliates (or any “group” with respect to the Voting Securities that includes the purchaser or any of its affiliates) having Beneficial Ownership of more than 4.90% of the Voting Securities or (B) Rule 144 open market broker sale transactions where the identity of the purchaser is not known or (iii) in underwritten widely dispersed public offerings, sell, offer or agree to sell directly or indirectly, through swap or hedging transactions or otherwise, the securities of the Company or any rights decoupled from the underlying securities held by Taikang to any person or entity not a party to this agreement (a “Third Party”) that would knowingly result in such Third Party, together with its Affiliates, owning, controlling or otherwise having any beneficial or other ownership interest in the aggregate of 5.00% or more of the shares of Common Stock outstanding at such time or would increase the beneficial or other ownership interest of any Third Party who, together with its Affiliates, has a beneficial or other ownership interest in the aggregate of 5.00% or more of the shares of Common Stock outstanding at such time, except in each case in a transaction approved by the Board; provided, however, that an affiliate of Taikang shall not be deemed to be a Third Party for purposes of this Agreement so long as such affiliate accedes to all of Taikang’s obligations under this Agreement.
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6.
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except pursuant to a Qualifying Offer, grant any proxy, consent or other authority to vote with respect to any matters (other than to the named proxies included in the Company’s proxy card for any annual meeting or special meeting of stockholders) or deposit any Voting Securities of the Company in a voting trust or subject them to a voting agreement or other arrangement of similar effect with respect to any annual meeting except as provided in Section 2(d) below, special meeting of stockholders or action by written consent (excluding customary brokerage accounts, margin accounts, prime brokerage accounts and the like);
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7.
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make, or cause to be made, any public statement or announcement that relates to and constitutes an ad hominem attack on, or relates to and otherwise disparages, the Company, its officers or its directors, or who serves on or following the date of this Agreement as an officer or director of the Company: (i) in any document or report filed with or furnished to the SEC or any other governmental agency, (ii) in any press release or other publicly available format, or (iii) to any analyst, journalist or member of the media (including without limitation, in a television, radio, newspaper or magazine interview) (and the Company agrees that this Section 2(c)(viii) shall apply mutatis mutandis to the Company and its directors and officers with respect to Taikang); provided, however, that neither Taikang, any affiliate of Taikang, the Company and its directors and officers shall not be prohibited from making any statement that on the advice of counsel is required to be made pursuant to applicable law or (x) to respond to any legal or regulatory process or proceeding, (y) to respond to, or participate in discussions with, any supervising regulators, or (z) to give testimony or file any documents required in any legal or regulatory proceeding.
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8.
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other than (x) litigation by Taikang to enforce the provisions of this Agreement and (y) remaining as a member of a class in connection with any class action litigation initiated by a Third Party without Taikang’s encouragement or support, institute, solicit, assist or join, as a party, any litigation, arbitration or other proceeding against or involving the Company or any of its current or former directors or officers (including derivative actions);
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9.
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without the prior approval of the Board, separately or in conjunction with any other person or entity in which it is or proposes to be either a principal, partner or financing source or is acting or proposes to act as broker or agent for compensation, propose (publicly, privately or to the Company) or participate in, effect or seek to effect, any tender offer or exchange offer, merger, acquisition, reorganization, restructuring, recapitalization or other business combination involving the Company or a material amount of the assets or businesses of the Company (collectively, an “Extraordinary Transaction”) or encourage, initiate or support any other Third Party in any such activity; provided, that Taikang may commence or participate in any tender offer or exchange offer, or a combination thereof, in each such case, that is made for all of the shares of Common Stock outstanding at such time at the same per-share consideration, the consummation of which is conditioned upon acceptance by a majority of the outstanding shares of Common Stock (calculated on a fully diluted basis), so long as the Company and its stockholders receive an irrevocable, legally binding written commitment from Taikang (or the Third Party making the offer) to consummate, as promptly as practicable upon the successful completion of such offer, a second step transaction to acquire at the same per-share consideration actually paid pursuant to the offer, all of the shares of Common Stock not purchased in the offer, subject to any applicable stockholders’ statutory appraisal rights (such an offer, a “Qualifying Offer”). Notwithstanding the foregoing, the Company agrees that Taikang shall not be deemed to be in breach of this Agreement in the event that the New Independent Director receives an unsolicited inquiry regarding a potential transaction proposed by a third party, does not engage in any negotiations or substantive discussions without the prior approval of the Board and promptly apprises the Company’s lead independent director of the foregoing if required by his or her fiduciary duties to the Company;
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10.
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except pursuant to a Qualifying Offer, purchase or cause to be purchased or otherwise acquire or agree to acquire Beneficial Ownership of any Voting Securities, if in any such case, immediately after the taking of such action, Taikang would, in the aggregate, collectively beneficially own, or have an economic interest in, an amount that would equal or exceed 15.00% of the then outstanding shares of Common Stock, or such higher amount as otherwise approved by the Board in its sole discretion, provided however, that if any Third Party acquires beneficial ownership in a greater percentage of the then outstanding shares of Common Stock:
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1.
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in a transaction that is not approved by the Board, Taikang may acquire the minimum number of additional shares of Common Stock necessary to result in Taikang’s percentage interest being greater than such Third Party’s percentage interest; or
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2.
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in a new issuance of Voting Securities to a Third Party that is approved by the Board or other Board approved transaction (in each case where such approval is not granted solely to avoid triggering Taikang’s right under the foregoing subclause (1)), for the avoidance of doubt, Taikang may acquire from Third Parties, privately or in the open market, a number of additional Voting Securities to result in Taikang’s percentage interest being equal to 15.00%. In the case of a new issuance, the Company may consider in good faith (in the Company’s sole discretion) to offer to Taikang the ability to participate in the new issuance on such terms and conditions as the Company may determine in its sole discretion.
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For the avoidance of doubt, this subsection (x) shall not restrict Taikang from Beneficially Owning, directly or indirectly, more than 15.00% of the then outstanding shares of Common Stock (or any higher amount approved by the Board in its sole discretion or pursuant to subclause (x)(1)) following and solely as a result of the reduction in the number of shares of Common Stock outstanding resulting from a share repurchase (or similar transaction) by the Company.
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11.
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except pursuant to a Qualifying Offer, enter into any negotiations, agreements, arrangements or understandings with any Third Party with respect to the matters set forth in this Section 2; or
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12.
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except pursuant to a Qualifying Offer, request, directly or indirectly, any amendment or waiver of the foregoing in a manner that would reasonably likely require public disclosure by Taikang or the Company.
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4.
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Until the end of the Standstill Period, the Taikang Affiliates shall cause all Voting Securities owned by them directly or indirectly, whether owned of record or Beneficially Owned, as of the record date for any annual or special meeting of stockholders or in connection with any solicitation of shareholder action by written consent (each a “Shareholders Meeting”) within the Standstill Period, in each case that are entitled to vote at any such Shareholders Meeting, to be present for quorum purposes and to be voted, at all such Shareholders Meetings or at any adjournments or postponements thereof, for all directors nominated by the Board for election at such Shareholders Meeting.
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3.
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Expiration of the Company’s Obligations. Notwithstanding anything to the contrary in this Agreement, if at any time after the date hereof, the Taikang Affiliates cease collectively to Beneficially Own an aggregate Net Long Position in at least 3,959,331 shares (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like) of Common Stock as of such date the Company shall have no further obligations under Sections 1 or 2 of this Agreement. Taikang shall keep the Company regularly apprised of the Net Long Position of the Taikang Affiliates to the extent that Taikang is no longer subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and such position differs from the ownership positions publicly reported on Taikang’s Schedule 13D and amendments thereto. For purposes of this Agreement: the term “Net Long Position” shall mean such shares of Common Stock Beneficially Owned, directly or indirectly, that constitute such person’s net long position as defined in Rule 14e-4 under the Exchange Act mutatis mutandis, provided that “Net Long Position” shall not include any shares as to which such person does not have the right to vote or direct the vote; and the terms “person” or “persons” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability or unlimited liability company, joint venture, estate, trust, association, organization or other entity of any kind or nature.
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