CERTAIN PORTIONS OF THIS AGREEMENT, FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED, HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. SECTIONS OF THIS AGREEMENT WHERE PORTIONS HAVE BEEN OMITTED
HAVE BEEN IDENTIFIED IN THE TEXT.

EXHIBIT 10.2

SOTHEBY’S RESTRICTED STOCK UNIT PLAN

PERFORMANCE SHARE UNIT AGREEMENT

          THIS AGREEMENT, entered into effective as of the 9th day of February,
2010 between SOTHEBY’S, a Delaware corporation (the “Corporation”), and WILLIAM
F. RUPRECHT (the “Participant”).

WITNESSETH:

          WHEREAS, the Board of Directors of the Corporation (the “Board”) has
established the Sotheby’s Restricted Stock Unit Plan, as amended (the “Plan”) in
order to provide employees of the Corporation with an opportunity to acquire
shares of the Corporation’s Common Stock, as an inducement to remain in the
service of the Corporation or a Subsidiary and to promote the Participant’s
commitment to the success of the Corporation during such service.

          WHEREAS, Section 6.2 of the Plan provides that the Corporation may
grant Restricted Stock or Restricted Stock Unit Awards subject to attainment of
performance goals (“Performance Share Units” or “PSUs”), as determined by the
Compensation Committee at the time of grant.

          WHEREAS, the Board has determined that it would be in the best
interests of the Corporation and its shareholders to award Performance Share
Units with financial performance objectives which appropriately address
corporate operating and retention objectives, foster a long term focus on the
Company’s business and align management with shareholder interests.

          WHEREAS, the Board has approved the award of 99,503 Performance Share
Units to Participant subject to the execution of this Agreement.

          NOW, THEREFORE, it is agreed as follows:

          1.          Definitions and Incorporation. The terms used in this
Agreement shall have the meanings given to such terms in the Plan, unless a term
is specifically defined

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in the Employment Arrangement, dated March 31, 2006 (as previously amended, the
“Arrangement”), between the Corporation and the Participant in which case the
Employment Arrangement language shall control. The Plan is hereby incorporated
in and made an integral part of this Agreement as if fully set forth herein. In
the event of any inconsistency between any provision of the Plan and any
provision of this Agreement, the provision of the Plan shall prevail unless the
Agreement states that it is intended to differ from the Plan as authorized
thereby with respect to a specific issue. The Participant hereby acknowledges
that he or she has received a copy of the Plan and agrees to comply with the
terms and conditions of the Plan and this Agreement.

          2.          Award of Performance Share Units. Pursuant to the Plan,
the Corporation hereby grants to the Participant effective February 9, 2010, an
award of 99,503 Performance Share Units. If vested, each Performance Share Unit
will be payable in one share of Common Stock of the Corporation.

          3.          Performance Objectives and Vesting. The Performance Share
Units will be eligible for vesting based upon annual achievement of the
Corporation’s 2010 pre-tax earnings threshold of $[**]* (the “Annual Target”).
Participant acknowledges and agrees that the Annual Target is extremely
confidential and subject to the provisions of Participant’s confidentiality
agreement with the Corporation.

          (a)          Performance Share Units Eligible for Vesting Each Year.
Pending satisfaction of the performance requirements, Performance Share Units
will vest ratably, 25% each year, over a four year period as follows:

 

 

 

Vesting Date

 

Cumulative Performance
Share Units
Eligible for Vesting

 

 

 

 

 

 

March 15, 2011

 

24,875 PSUs

 

 

 

March 15, 2012

 

24,876 PSUs

 

 

 

March 15, 2013

 

24,876 PSUs

 

 

 

March 15, 2014

 

24,876 PSUs

          The Annual Target will be used to determine the actual Performance
Share Unit level of vesting for each year in the four year vesting period listed
above. The Vesting

 

 

 

 

 

 

 

*

CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

2

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Date shall also be the payment date. Registration in the Participant’s name in
book entry form of the shares of Common Stock underlying vested Performance
Share Units will occur within ninety (90) days of the payment date.

          (b)          Vesting Percentage Based on Pre-Tax Earnings Achievement.
The annual vesting calculation will be based on the Corporation’s actual pre-tax
earnings for the calendar year preceding the Vesting Date (the “Performance
Period”). The eligible

          Performance Share Units will vest at three possible vesting levels of
pre-tax earnings achievement in accordance with the following schedule:

 

 

 

 

·

100% vesting if the Annual Target is achieved or exceeded

 

·

75% vesting if 2/3 of the Annual Target is achieved

 

·

50% vesting if 1/3 of the Annual Target is achieved.

          (c)          Rollover of Unvested Units and Rollover of Excess Pre-Tax
Earnings or Loss. If the Annual Target is not fully achieved in any of the first
three Performance Periods, the unvested Performance Share Units will rollover to
the next year and, if applicable, each subsequent year in the four year vesting
period, on the following basis:

          (i) If the actual pre-tax earnings required for 50% vesting is not
achieved, the pre-tax earnings achieved will be rolled over to the next year (or
a subsequent year in the four year vesting period) and will count towards
achievement of the Annual Target for that year.
          (ii) If the actual pre-tax earnings for a year exceed any of the
vesting levels, any pre-tax earnings in excess of the applicable vesting level
will be rolled over to the next year (or a subsequent year in the four year
vesting period) and will count towards achievement of the Annual Target for that
year.
          (iii) If the Corporation incurs a loss (i.e. no actual pre-tax
earnings) in any year of the vesting period, the amount of the loss will carry
over to subsequent years in the vesting period. The amount of the loss will be
subtracted from the actual pre-tax earnings for those years to determine whether
the Annual Targets have been partially or fully achieved.
          (iv) To recapture any unvested Performance Share Units in subsequent
years, the pre-tax earnings in those subsequent years (including any rollover
pre-tax earnings or loss) must exceed the Annual Target for the year by the
cumulative shortfall between the pre-tax earnings credited towards vesting and
the total Annual Targets to date (“Cumulative Credited Earnings Shortfall”). The
number of units recaptured shall be determined using the vesting calculation set
forth in Section 3(b) but in no event can a Participant exceed the cumulative
performance share units eligible for vesting in the schedule set forth in
section 3(a).
          (v) After calculating the 4th vesting period using the forgoing
criteria, the participants will have a further opportunity to recapture all or
some of the unvested units at the end of the 4th Performance Period. This
opportunity will be available if any pre-tax earnings (including any rollover
earnings from prior periods) have not been used to

3

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achieve any vesting level over the 4 Performance Periods (“Excess Earnings”).
When this situation applies, the participant will receive a pro-rated number of
units determined as follows: The total number of remaining unvested units
multiplied by a fraction, the numerator of which shall be the amount of such
Excess Earnings and the denominator of which shall be the Cumulative Credited
Earnings Shortfall, if any.

Please refer to Exhibit A attached to this Agreement for examples of how this
Award may vest as described in this Section.

          4.          Voting and Dividend Rights. Except as otherwise determined
by the Compensation Committee or required by applicable law, the Participant
shall not have the right to vote the underlying shares of stock subject to a
Performance Share Unit Award until the Performance Share Units have vested and
the shares have been delivered to the Participant as provided in Section 6.3 of
the Plan. The Participant will have the right to receive dividend equivalents on
unvested Performance Share Units with respect to the equivalent number of shares
underlying the Performance Share Unit Award. Such dividend equivalents will
accrue throughout the vesting period of the Award but will only be paid to the
Participant as the Performance Share Units vest. Dividend equivalents, to the
extent they are accrued and payable, shall be paid no later than ninety (90)
days after the Vesting Date. Such dividend equivalents shall be taxed to the
Participant in accordance with applicable law. All distributions, if any,
received by the Participant with respect to Performance Share Units awarded
herein as a result of any stock split, stock distributions, combination of
shares, or other similar transaction shall be subject to the restrictions of the
Plan and this Agreement.

          5.          Termination of Employment-Generally. Except as
specifically provided in Sections 6, 7, and 8 below, in the event a Participant
separates from service prior to 100% vesting, the Participant’s rights with
respect to Performance Share Units which are not vested shall be forfeited
immediately and permanently. The Participant shall not be entitled to claim any
compensation or indemnification of any kind whatsoever on the basis of said
forfeiture.

          6.          PSU Termination Event With Respect to Participant. If the
performance requirements associated with the Performance Share Units are
achieved in or following the year in which a PSU Termination Event occurs, the
Participant shall vest in the percentage of Performance Share Units eligible for
vesting in accordance with the time vesting and performance criteria set forth
in Section 3 of this Agreement for those remaining vesting periods,
notwithstanding the occurrence of such PSU Termination Event.

A “PSU Termination Event” means any of the following:

 

 

 

 

(i)

termination by the Corporation without Cause (as defined in the Arrangement);

4

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(ii)

termination by Participant for Good Reason (as defined in the Arrangement); or

 

 

 

 

(iii)

failure of the Corporation on or before December 31, 2010 to offer to continue
Participant’s employment arrangement with the Corporation under the terms stated
in clause (iii) of the provision titled “Termination of Employment- End of Term”
of the Arrangement.

          7.          Retirement of a Participant, In the event a Participant
separates from service due to Retirement as defined in the Plan, if the
performance requirements associated with the Participant’s Performance Share
Units are achieved for the year in which the Participant retires, the
Participant shall vest in the percentage of Performance Share Units eligible for
vesting in accordance with the time vesting and performance criteria set forth
in Section 3 of this Agreement. Any excess pre-tax earnings for the year of
Retirement shall not roll over to a subsequent year in the vesting period. It is
intended that this Section of this Agreement shall control instead of the
automatic vesting in Section 7.3 of the Plan upon Retirement of the Participant.

          8.          Death or Disability of a Participant. In the event a
Participant separates from service due to death or Disability as defined in the
Plan, if the performance requirements associated with the Participant’s
Performance Share Units are achieved in or following the year in which the
Participant retires, the Participant or the Participant’s beneficiary shall
vest, in the percentage of Performance Share Units eligible for vesting in
accordance with the time vesting and performance criteria set forth in Section 3
of this Agreement for those remaining vesting periods. It is intended that this
Section of this Agreement shall control instead of the automatic vesting in
Section 7.3 of the Plan upon death or Disability of the Participant.

          9.          Securities Law Requirements.

          (a)          Regardless of whether the offering and sale of the shares
of Common Stock under the Plan have been registered under the United States
Securities Act of 1933 (the “Act”) or have been registered or qualified under
the securities laws of any state, the Corporation may impose restrictions upon
the sale, pledge, or other transfer of such shares (including the placement of
appropriate legends on stock certificates) if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Act, the securities laws
of any state, or any other law. In the event that the sale of such shares under
the Plan is not registered under the Act but an exemption is available which
requires an investment representation or other representation, the Participant
shall be required to represent that such shares are being acquired for
investment, and not with a view to the sale or distribution thereof, and to make
such other representations as are deemed necessary or appropriate by the
Corporation and its counsel.

5

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          (b)          Stock certificates evidencing such shares awarded 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 paragraph shall be conclusive as to
all binding persons.

          10.          Rights as an Employee. Nothing in the Plan or this
Agreement shall be construed to give the Participant or any person the right to
remain in the employment of the Corporation or a Subsidiary or to affect the
right of the Corporation or Subsidiary to terminate the Participant’s or such
other person’s employment at any time with or without cause, it being
acknowledged, unless expressly provided otherwise in a writing signed by the
Participant and the Corporation, that the Participant’s employment is “at will.”

          11.          Inspection of Records. Copies of the Plan, records
reflecting the Participant’s Performance Share Unit award(s), and any other
documents and records which the Participant is entitled by law to inspect shall
be open to inspection by the Participant and his or her duly authorized
representative(s) at the office of the Corporation at any reasonable business
hour.

          12.          Notices. Any notice to the Corporation contemplated by
this Agreement shall be addressed to the attention of the Corporation’s Human
Resource Department at 1334 York Avenue, New York, New York 10021; and any
notice to the Participant shall be addressed to him or her at the address on
file with the Corporation on the date hereof or at such other address as he or
she may hereafter designate in writing.

          13.          Interpretation. The interpretation, construction,
performance, and enforcement of this Agreement and of the Plan shall lie within
the sole discretion of the Committee, and the Committee’s determinations shall
be conclusive and binding on all interested persons.

          14.          Choice of Law. This Agreement, and all rights and
obligations hereunder, shall be governed by the laws of the State of New York.

6

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           IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, in the case of the Corporation by its duly authorized officer, as of
the day and year first above written.

 

 

 

 

 

 

SOTHEBY’S

 

 

 

 

 

By:

 

/S/ SUSAN ALEXANDER

 

 

 

 

 

 

 

 

Its:

 

EVP, Worldwide Head of HR

 

 

 

 

 

Dated:

 February 16, 2010

 

 

 

 

By:

 

/S/ WILLIAM F. RUPRECHT

 

 

 

 

 

 

 

     Participant’s Signature

 

 

 

Dated: February 16, 2010

7

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SCHEDULE 1

 

 

 

Employee:

 

William F. Ruprecht

 

 

 

Date of Grant:

 

February 9, 2010

 

 

 

Performance Share Units Awarded:

 

99,503

 

 

 

2010 Pre-Tax Earnings Threshold

 

          [**]**

 

 

 

RIGHT TO EXERCISE

Subject to the terms of the Plan and the performance requirements and other
conditions set forth in this Agreement, the Performance Share Units awarded
subject to this Agreement shall vest as follows:

 

 

Cumulative Number of

 

Performance Share Units Vested

Vesting Date    

 

 

24,875 (25% of units)

(March 15, 2011)

 

 

49,751 (50% of units)

(March 15, 2012)

 

 

74,627 (75% of units)

(March 15, 2013)

 

 

99,503 (100% of units)

(March 15, 2014)

*2010 Pre-Tax Earnings Threshold applies for each year in the four year vesting
schedule listed above.

 

 

 

 

 

 

 

**

CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

8

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Hypothetical PSU Award Example

 

 

 

 

 

Example Award
(no. of PSUs)

Value at $25

Vesting Levels of 4 Year Award

 

 

50%

75%

100%

4,000

$100,000

500

750

1,000

Hypothetical Annual Target Pre-Tax Earnings

 

 

Annual Target:

30 m

 

Hypothetical Pre-Tax Earnings

1st Vest Date - Assumes pre-tax earnings of 15 m achieved

2nd Vest Date - Assumes pre-tax earnings of 45 m achieved

3rd Vest Date - Assumes pre-tax earnings of 35 m achieved

4th Vest Date - Assumes pre-tax earnings of 20 m achieved

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1st Vest

2nd Vest

3rd Vest

4th Vest

Pro-rated Calculation **

Cumulative Total

 

Pre-Tax
Earnings
Threshold

Pre-Tax
Earnings
Achieved

No. of
Units

Pre-Tax
Earnings
Threshold

Pre-Tax
Earnings Achieved

No. of
Units

Pre-Tax Earnings Threshold

Pre-Tax Earnings Achieved

No. of
Units

Pre-Tax Earnings Threshold

Pre-Tax Earnings Achieved

No. of
Units

Pre-Tax Earnings Threshold

Pre-Tax Earnings Achieved

No. of
Units

Pre-Tax Earnings Achieved

No. of Vested Units

50% Vesting Level

10 m

15 m

500

10 m

 

500

10 m

 

500

10 m

 

500

 

 

 

115 m

3,875

75% Vesting Level

20 m

 

750

20 m

 

750

20 m

 

750

20 m

20 m

750

 

 

 

100% Vesting Level

30 m

 

1,000

30 m

30 m

1,000

30 m

35 m

1,000

30 m

 

1,000

 

 

 

Cumulative Credited Earnings Shortfall

 

 

 

20 m

15 m

 

 

 

 

 

 

 

10 m

 

 

Cumulative Unvested Units Rollover

 

 

 

 

 

500

 

 

 

 

 

 

 

 

250

Excess Earnings Rollover

 

 

 

 

5 m

 

 

 

 

 

5 m

 

 

5 m

 

Pro-rated 4th Vest **

 

 

 

 

 

 

 

 

 

 

 

 

 

 

125

Pre-Tax Earnings Used and Vested Units:

 

10 m

500

 

50 m

1,500

 

30 m

1,000

 

20 m

750

 

5 m

125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative Earnings Required for 100% Vestings

30 m

 

 

60 m

 

 

90 m

 

 

120 m

 

 

 

 

 

 

 

Cumulative Actual Earnings Achieved

 

15 m

 

 

60 m

 

 

95 m

 

 

115 m

 

 

 

 

 

 

 

 

 

 

** 4th Vest - Pro-rated Calculation

 

Excess Earnings Rollover:

5 m

Cumulative Credited Earnings Shortfall:

10 m

Earnings Excess (%)

50%

 

 

Total Unvested Units:

250

Additional Prorated Units Earned:

125

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