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

 
	

 


 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 
	
 ______________

 	
  

 	
 ______________ 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. 

 


2





          (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 


3





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. 


4





          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. 


5





          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: 

 	
  

 	
  

 
	
  

 	
  

 	

 


 	
  

 






	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Its: 

 	
  

 	
  

 
	
  

 	
  

 	

 


 	
  

 






	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Dated:
  

 	
  

 	
  

 
	
  

 	
  

 	

 


 	
  

 






	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
  

 	
  

 
	
  

 	
  

 	

 


 	
  

 
	
  

 	
  

 	
 Participant’s Signature

 	
  

 






	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Dated:
  

 	
  

 	
  

 
	
  

 	
  

 	

 


 	
  

 


6






SCHEDULE 1


	
  

 	
  

 	
  

 
	
 Employee:

 	
 


 	
  

 
	
 Date
 of Grant:

 	
 

 	
  

 
	
 Performance
 Share Units Awarded:

 	
 

 	
  

 
	
 _______ 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

 
	
  

 	

 


 	
  

 	

 


 
	
  

 
	
 ______ (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. 


7






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