Exhibit 10.1.

SOTHEBY’S RESTRICTED STOCK UNIT PLAN

FORM OF PERFORMANCE SHARE UNIT AGREEMENT

          THIS AGREEMENT, entered into effective as of the ___ day of
____________ between SOTHEBY’S, a Delaware corporation (the “Corporation”), and
________________________________ (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 ____ 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. 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.

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          2. Award of Performance Share Units. Pursuant to the Plan, the
Corporation hereby grants to the Participant effective February 9, 2010, an
award of _______ 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

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______________

 

______________ PSUs

 

 

 

______________

 

______________ PSUs

 

 

 

______________

 

______________ PSUs

 

 

 

______________

 

______________ 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 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.

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          (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 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

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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. Except as specifically provided in
Sections 6 and 7 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. 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.

          7. 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 death or Disability occurs,
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.

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          8. 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.

          (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.

          9. 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.”

          10. 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.

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          11. 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.

          12. 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.

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

          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: 

 

 

 

 

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Its: 

 

 

 

 

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Dated:  

 

 

 

 

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By: 

 

 

 

 

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Participant’s Signature

 

 

 

 

 

 

Dated:  

 

 

 

 

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SCHEDULE 1

 

 

 

Employee:

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Date of Grant:

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Performance Share Units Awarded:

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_______ Pre-Tax Earnings Threshold

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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

 

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______ (25% of units)

 

______________

 

 

 

 

______ (50% of units)

______________

 

 

 

 

 

______ (75% of units)

______________

 

 

 

 

 

______ (100% of units)

______________

 

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

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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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