EXHIBIT
10.1


EXECUTION
COPY


September 1, 2010


William F. Ruprecht 

President and Chief Executive Officer

Sotheby’s

1334 York Avenue

New York, New York 10021


Dear Bill,


          The
attached Terms of Employment together with its Exhibits (the “Terms”) sets
forth our mutual understanding with respect to the terms of your continuing
employment by Sotheby’s (“Sotheby’s” or the “Company”) for the period September
1, 2010 through August 31, 2014 and any extended period in accordance with the
Terms. With respect to the Terms, you and Sotheby’s hereby agree as follows:


	
  

 	
  

 
	
  

 	
 Should your employment be terminated at any of the
 times and under any of the circumstances specified in the Terms, you and
 Sotheby’s each undertakes and agrees to comply with all of the provisions of
 the Terms relating to the circumstances of such termination of employment. In
 particular, Sotheby’s agrees to make any and all payments and perform any and
 all other obligations required under the caption “Termination of Employment”
 in the Terms under the circumstances of such termination of employment and
 you agree to comply with the undertakings set forth under the captions
 “Restrictive Covenants” and “Release” in the Terms that are applicable to
 such termination of employment.

 



          This
Letter Agreement and the Terms (collectively, the “Letter Agreement”)
supersedes any and all existing agreements between you and Sotheby’s, including
without limitation the Employment Agreement dated as of March 31, 2006, as
amended. Concurrently with signing this Letter Agreement, you shall enter into
a Confidentiality Agreement with Sotheby’s (“Confidentiality Agreement”).


          This
Letter Agreement shall be binding upon and inure to your benefit and to the
benefit of your successors as well as to the benefit of Sotheby’s and its
permitted successors and assigns. Neither this Letter Agreement nor any of the
rights of the parties hereunder may be assigned by either party hereto except
that Sotheby’s may assign its rights and obligations hereunder to a corporation
or other entity into which it is merged or that acquires substantially all of
its assets. Any assignment or transfer of the Letter Agreement in violation of
the foregoing provisions will be void.


          This
Letter Agreement will be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and/or to be performed
in that State, without regard to any choice of law provisions thereof.





          Any
dispute, controversy or claim arising out of or relating to this Letter
Agreement or breach (collectively, a “Claim”) thereof shall be settled by
arbitration in New York City in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association by a
single arbitrator. The arbitrator’s award shall be final and binding upon both
parties, and judgment upon the award may be entered in any court of competent
jurisdiction in any state of the United States or country or application may be
made to such court for a judicial acceptance of the award and such enforcement
as the law of such jurisdiction may require or allow. The losing party in such
arbitration shall be liable for any costs, including attorney’s fees. If there
is a dispute as to which party lost, or if a party shall have prevailed on one
or more but not all of the issues subject to arbitration, costs and fees shall
be allocated by the arbitrator.


          If
this Letter Agreement correctly sets forth your understanding with Sotheby’s
regarding the terms of your employment by Sotheby’s, please acknowledge your
agreement by signing in the space indicated below.


	
  

 	
  

 	
  

 
	
  

 	
 Very truly yours,

 
	
  

 	
  

 
	
  

 	
 SOTHEBY’S

 
	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
 /s/ Michael I. Sovern

 
	
  

 	
  

 	

 


 
	
  

 	
  

 	
 Name: Michael I. Sovern

 
	
  

 	
  

 	
 Title: Chairman of the Sotheby’s Board of Directors

 



ACCEPTED AND AGREED

THE 2ND DAY OF SEPTEMBER, 2010:


	
  

 	
  

 
	
 /s/ William F. Ruprecht

 	
  

 
	

 


 	
  

 
	
 William F. Ruprecht

 



2






TERMS OF EMPLOYMENT FOR

WILLIAM F. RUPRECHT (“EXECUTIVE”)


	
  

 	
  

 	
  

 	
  

 
	
 Position/Duties:

 	
  

 	
 Executive
 will serve as CEO, President and member of the Board of Directors.

 
	
  

 	
  

 	
  

 	
  

 
	
 Term:

 	
  

 	
 Four-year
 term commencing effective September 1, 2010, with annual extensions after August
 31, 2014 unless Executive or Sotheby’s provides written notice to the other
 party no later than March 31, 2014, or five months prior to the end of any
 subsequent annual extension (the “Term”).

 
	
  

 	
  

 	
  

 	
  

 
	
 Base Compensation:

 	
  

 	
 $700,000 per
 year, subject to increase but not decrease (other than a decrease made with
 respect to all senior executives’ base compensation), plus reimbursement for
 business and travel expenses in accordance with the Company’s standard
 procedures.

 
	
  

 	
  

 	
  

 	
  

 
	
 Cash Bonus Compensation:

 	
  

 	
 Annual
 target bonus of $1,400,000. Executive’s bonus will not exceed 200% of target
 bonus. Performance and other metrics for Executive’s bonus to be set annually
 by the Compensation Committee, and communicated to Executive in accordance
 with a process consistent with past practice. Executive’s bonus will be
 payable during the year following the year in which the bonus is earned and
 at the same time as bonuses are payable to other Company executives generally
 but no later than March 15 of the year following for which the bonus is
 earned.

 
	
  

 	
  

 	
  

 	
  

 
	
 Annual PSU Awards:

 	
  

 	
 Executive
 shall be entitled to annual grants of performance share units (“PSUs”) prior
 to March 31 in each year during the Term. The fair market value of
 performance share units granted in each year beginning with 2011 will vary
 from $3,500,000 to $4,500,000 in the discretion of the Compensation Committee
 based on Company performance and Executive’s individual performance. The
 number of performance share units to be included in each grant will be
 determined based upon the closing price of the Company’s common stock on the
 New York Stock Exchange on the last trading day prior to the grant.
 Executive’s annual performance share unit 

 


i









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 grants shall
 vest ratably in equal annual installments over 4 years subject to attainment
 of performance goals.

 
	
  

 	
  

 	
  

 	
  

 
	
 Prior Restricted Stock 

 or Restricted Stock 

 Unit
 Awards (other than 

 VCP
 Shares and PSUs):

 	
  

 	
 In the event
 of a Change of Control (as defined in
 Exhibit B), the restrictions on all shares of restricted stock outstanding on the date of this Letter
 Agreement will lapse and all
 restricted stock units outstanding on the date of this Letter Agreement will
 become fully vested, free and clear of all restrictions, as provided in the
 Company’s Amended and Restated Restricted Stock Unit Plan. Executive shall
 have the rights of a holder of restricted stock or restricted stock units, as
 applicable, under the Company’s Amended and Restated Restricted Stock Unit
 Plan, including the right to receive dividends or dividend equivalents on
 unvested grants.

 
	
  

 	
  

 	
  

 	
  

 
	
 Value Creation Plan:

 	
  

 	
 Any unvested
 shares of restricted stock held by Executive under Sotheby’s Value Creation
 Plan (“VCP Shares”) will vest subject to the satisfaction of certain
 performance criteria, as described in Exhibit A. Executive shall have the
 right to vote such shares and the right to receive any dividends with respect
 to such shares whether or not such shares are vested unless and until they
 are forfeited.

 
	
  

 	
  

 	
  

 	
  

 
	
 Benefits:

 	
  

 	
 Executive
 shall be eligible to participate in all benefit plans maintained by or on
 behalf of the Company for its most senior executives or in which such senior
 executives participate and shall receive all fringe benefits and vacations
 for which the Executive’s level of employment makes him eligible.

 
	
  

 	
  

 	
  

 	
  

 
	
 Additional Benefits:

 	
  

 	
 Executive
 shall be eligible for an annual business development allowance of at least
 $25,000, to be reimbursed each calendar year during the Term.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Executive
 shall also receive an annual automobile allowance of $25,000, an annual club
 membership allowance of $20,000, and an annual financial planning allowance
 of $15,000, to be paid each calendar year during the Term.

 


ii









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 In
 consideration of Executive foregoing continuation of certain benefits to
 which Executive was entitled under his Employment Agreement dated as of
 March 31, 2006, as amended, Executive shall be paid $250,000 promptly
 after signing this Letter Agreement.

 
	
  

 	
  

 	
  

 	
  

 
	
 Termination of Employment:

 	
  

 	
 Death or Disability.
 Upon a termination of Executive’s employment during the Term due to death or
 Disability (as defined in Exhibit B), the Executive or his estate, as the
 case may be, shall be entitled to (i) $2,000,000; (ii) all accrued but unpaid
 base salary and benefits to the date of employment termination, including,
 but not limited to, any earned but unpaid annual cash bonus for the calendar
 year prior to death or Disability and entitlements under the Company’s
 retirement, disability and life insurance plans; (iii) continuing eligibility
 for vesting of unvested PSUs but solely in accordance with the time vesting
 and performance criteria set forth in the PSU award agreement for remaining
 vesting periods; (iv) an immediate lapse of all restrictions on all other
 shares of restricted stock outstanding on the date of this Letter Agreement
 and full vesting of all restricted stock units outstanding on the date of
 this Letter Agreement (other than the VCP Shares and PSUs); and (v) lapse of
 restrictions on VCP Shares to the extent provided in Exhibit A.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 For Cause/Without Good Reason.
 If the Executive’s employment is terminated by the Company for Cause (as
 defined in Exhibit B) or by the Executive without Good Reason (as defined in
 Exhibit B), the Executive shall receive all accrued but unpaid base salary
 and benefits to the date of employment termination. Executive will not be
 entitled to receive any bonus, whether or not accrued but unpaid.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Without Cause/Good Reason Termination.
 If the Executive’s employment is terminated by the Company without Cause or
 by the Executive for Good Reason during the Term, the Executive shall be
 entitled to the following:

 


iii









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (1)

 	
 all accrued
 but unpaid base salary through the date of termination, plus $4,000,000
 (which shall offset any benefits payable under the Company’s Severance Plan),
 payable in a lump sum;

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (2)

 	
 all accrued
 but unpaid entitlements and benefits from the Company, including, but not
 limited to, entitlements under the Company’s retirement, disability and life
 insurance plans and any earned but unpaid annual cash bonus for the calendar
 year prior to termination of employment;

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (3)

 	
 at the
 Company’s expense, full benefit coverage for the Executive, his spouse and
 other eligible dependents under all of the Company’s medical, dental, vision
 and life insurance plans for three years, including any benefits under the
 Consolidated Omnibus Budget Reconciliation Act of 1985 as amended (“COBRA”)
 provided by the Company from the date of Executive’s termination, provided
 that (i) any such benefit provided by the Company in any year will not be
 affected by the amount of any such benefit provided by the Company in other
 years, subject to any maximum benefit limitation under the terms of the
 Company’s medical plan, (ii) under no circumstances will the Executive be
 permitted to liquidate or exchange any such benefit for cash or any other
 benefit, and (iii) the reimbursement of an eligible expense is made on or
 before the last day of the Executive’s taxable year following the taxable
 year in which the expense was incurred; and provided further that if the
 Company’s medical, dental, vision or life insurance programs do not permit
 continuation of coverage for three years after termination of an employee’s
 employment, the Executive shall obtain comparable insurance for himself, his
 spouse and his dependents at the Company’s expense; and, provided further,
 that if the Executive has the right to receive benefit coverage from another
 employer, such coverage 

 


iv









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 will be
 offset against the Company’s obligation to provide benefit coverage;

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (4)

 	
 continuing
 eligibility for vesting of unvested PSUs but solely in accordance with the
 time vesting and performance criteria set forth in the PSU award agreement
 for remaining vesting periods and with shares earned on vested PSUs being
 delivered by Executive to be held by the Company subject to compliance by
 Executive with the Restrictive Covenants and with the Company returning the
 shares to the Executive upon satisfaction of the Restrictive Covenants, provided
 that during any such period that such shares are held by the Company, the
 Executive may enter into hedging transactions with respect to such shares,
 unless prohibited by Company policy adopted in accordance with applicable law
 or regulation and provided that Executive is not in possession of material
 undisclosed information regarding the Company. In the event of a material
 breach by Executive of the Restrictive Covenants, the shares shall be
 forfeited and Executive shall also pay to the Company the value of any such
 shares withheld to pay taxes on the delivery of PSU award shares to the
 Executive;

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (5)

 	
 an immediate
 lapse of all restrictions on all other shares of restricted stock outstanding
 on the date of this Letter Agreement and full vesting of all restricted stock
 units outstanding on the date of this Letter Agreement (other than the VCP
 Shares and PSUs); and

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (6)

 	
 lapse of
 restrictions on the VCP Shares to the extent provided in Exhibit A.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 End of Term. If
 the Company notifies the Executive no later than five months prior to the end
 of the Term (including any annual extension) that the Executive’s employment
 will be terminated at the end of the Term, the Executive shall be entitled to
 receive (i) all accrued but unpaid entitlements under the Company’s
 retirement, disability and life insurance 

 


v









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 plans and
 any earned but unpaid annual cash bonus for the calendar year prior to
 termination of employment; (ii) continuing eligibility for vesting of
 unvested PSUs but solely in accordance with the time vesting and performance
 criteria set forth in the PSU award agreement for remaining vesting periods
 and with shares earned on vested PSUs being delivered by Executive to be held
 by the Company subject to compliance by Executive with the Restrictive
 Covenants and with the Company returning the shares to the Executive upon
 satisfaction of the Restrictive Covenants, provided that during any such
 period that such shares are held by the Company, the Executive may enter into
 hedging transactions with respect to such shares, unless prohibited by
 Company policy adopted in accordance with applicable law or regulation and
 provided that Executive is not in possession of material undisclosed
 information regarding the Company, and provided, further, that in the event
 of a material breach by Executive of the Restrictive Covenants, the shares
 shall be forfeited and Executive shall also pay to the Company the value of
 shares withheld to pay taxes on the delivery of the PSU award shares to the Executive;
 (iii) an immediate lapse of all restrictions on all other shares of
 restricted stock outstanding on the date of this Letter Agreement and full
 vesting of all restricted stock units outstanding on the date of this Letter
 Agreement (other than PSUs); and (iv) at the Company’s expense, full benefit
 coverage for the Executive, his spouse and other eligible dependents under
 all of the Company’s medical, dental, vision and life insurance plans for
 three years from the end of the Term, including any COBRA benefits provided
 by the Company, provided that (1) any such benefit provided by the Company in
 any year will not be affected by the amount of any such benefit provided by
 the Company in any other years, subject to any maximum benefit limitation
 under the terms of the Company’s medical plan, (2) under no circumstances
 will the Executive be permitted to liquidate or exchange any such benefit for
 cash or any other benefit, and (3) the reimbursement of an eligible expense
 is made on or before the last day of 

 


vi









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 the
 Executive’s taxable year following the taxable year in which the expense was
 incurred; and provided further that, if the Company’s medical, dental, vision
 or life insurance programs do not permit continuation of coverage for three
 years after the end of the Term, the Executive shall obtain comparable
 insurance for himself, his spouse and his dependents at the Company’s
 expense; and provided further that, if the Executive has the right to receive
 benefit coverage from another employer, such coverage will be offset against
 the Company’s obligation to provide such coverage.

 
	
  

 	
  

 	
  

 	
  

 
	
 409A Compliance:

 	
  

 	
 To the
 extent that any amount payable or benefit to be provided under these Terms
 constitutes an amount payable or benefit to be provided under a “nonqualified
 deferred compensation plan” (as defined in Section 409A of the Internal
 Revenue Code) upon a “separation from service” (as defined in Section 409A),
 and to the extent that the Executive is deemed to be a “specified employee”
 (as that term is defined in Section 409A and pursuant to procedures
 established by the Company) on the “separation from service” date, then,
 notwithstanding any other provision in this Agreement to the contrary, such
 payment or benefit provision will not be made to the Executive during the six
 month period immediately following his “separation from service” date.
 Instead, on the 15th day following the six month anniversary of the
 Executive’s “separation from service” date, all amounts that would have been
 paid or provided to the Executive during that six-month period, but were not
 paid or provided because of this provision, will be paid or provided to the
 Executive at that time, with any cash payment to be made in a single sum with
 interest at the Applicable Federal Rate (Short-Term) determined pursuant to
 Section 1274 of the Internal Revenue Code. This six month delay will cease to
 be applicable if the Executive “separates from service” due to death or if he
 dies before the six-month period has lapsed.

 
	
  

 	
  

 	
  

 	
  

 
	
 Confidentiality

 by Agreement; Policies:

 	
  

 	
 As a
 condition to Executive’s continued employment by the Company, Executive shall
 continue to be 

 


vii









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 bound by the
 Confidentiality Agreement, Auction Rules, Compliance Policies, Code of
 Business Conduct and Ethics, Conflict of Interest Policy, House Rules and
 other compliance and human resources policies and other policies that the
 Company may adopt from time to time that apply to other senior executives
 generally.

 
	
  

 	
  

 	
  

 	
  

 
	
 Equitable Remedies:

 	
  

 	
 The Company
 shall be entitled to enjoin a violation by Executive of any provision of this
 Letter Agreement. Executive acknowledges that the damages suffered by the
 Company as a result of any violation of this Letter Agreement may be
 difficult to ascertain. Accordingly, the Executive agrees that in the event
 of a breach of this Letter Agreement by him, the Company shall be entitled to
 specific performance by injunctive relief of the Executive’s obligations to
 the Company. The equitable remedies referred to above shall not be deemed to
 be exclusive of any other remedies available to the Company, including to
 enforce the performance or observation of the covenants and agreements
 contained herein.

 
	
  

 	
  

 	
  

 	
  

 
	
 Clawback:

 	
  

 	
 Nothing in
 this Letter Agreement shall preclude the Company from recouping, or refusing
 to pay, any cash or equity incentive-based compensation paid or payable to
 the Executive in the event of a restatement of the Company’s financial
 statements pursuant to applicable law or regulation or Company policy adopted
 consistent with applicable law or regulation.

 
	
  

 	
  

 	
  

 	
  

 
	
 Restrictive Covenants:

 	
  

 	
 In
 consideration of the compensation provided to Executive hereunder, Executive
 agrees until twelve months after the termination of his employment with the
 Company to be bound by a covenant not to compete with the Company in certain
 jurisdictions and not to solicit employees of the Company or certain of its
 clients on the terms set forth in Exhibit C. Executive also agrees to
 comply with his nondisparagement covenant set forth in the release attached
 hereto as Exhibit D. In the event of a material breach by Executive of any of
 the foregoing covenants, the Company shall not be required to pay to
 Executive any of the amounts set forth under “Termination of Employment”
 above, other than 

 


viii









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 earned but
 unpaid entitlements under benefit plans and earned but unpaid salary, and any
 outstanding equity awards shall be forfeited. If the Company had paid any
 such amounts in cash, the Executive promptly shall repay the amounts with
 interest from the date of payment by the Company to the date of repayment at
 the Applicable Federal Rate (Short-Term) determined pursuant to Section 1274
 of the Internal Revenue Code. If the Company paid any such amounts in shares,
 the shares shall be returned by the Executive to the Company or, if the
 Executive no longer owns the shares, the Executive shall pay to the Company
 in cash the greater of (i) the fair market value of the shares on the date
 initially delivered to the Executive in payment of the equity award or (ii)
 the fair market value on the date that the Executive later disposed of the
 shares, together with interest from the date of delivery of the shares by the
 Company to the Executive in payment of his equity award to the date of
 repayment at the Applicable Federal Rate (Short-Term) determined pursuant to
 Section 1274 of the Internal Revenue Code. The foregoing obligation of the
 Executive to make repayment to the Company shall also apply to any amounts
 withheld by the Company from the amounts paid under “Termination of Employment”
 in order to satisfy related tax withholding obligations.

 
	
  

 	
  

 	
  

 	
  

 
	
 Release:

 	
  

 	
 Any payments
 payable to Executive upon termination of his employment other than unpaid
 base salary shall only be payable if the Executive delivers to the Company a
 release, in the form attached hereto as Exhibit D (the “Release”), of all of
 his claims (except with regard to claims for payments or benefits
 specifically payable or providable hereunder which are not yet paid as of the
 effective date of the Release, claims for vested accrued benefits, claims
 under COBRA, claims relating to any rights of indemnification under the
 Company’s certificate of incorporation or by-laws or claims under any
 directors and officers liability insurance policy) occurring up to the
 effective date of the Release with regard to the Company and its respective
 past or present officers, directors and employees. The Company will pay the
 benefits provided to him under 

 


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 this Letter
 Agreement upon termination of his employment on the 60th day following the
 Executive’s effective date of termination or (i) with respect to the annual
 cash bonus, continued vesting of PSUs, and continued coverage under medical,
 dental, vision and life insurance plans, at such later date specified in
 these Terms, and (ii) with respect to entitlements under retirement,
 disability and life insurance plans, at such time set forth in the plans
 governing such programs, provided that the Executive has delivered the
 Release to the Company and the statutory period during which the Executive is
 entitled to revoke the Release has expired on or before the 60th day
 following termination, subject to the requirements of “409A Compliance,”
 above.

 
	
  

 	
  

 	
  

 	
  

 
	
 Withholding Taxes:

 	
  

 	
 All amounts
 payable under these Terms shall be subject to applicable withholding taxes.

 


x






Exhibit A


          The
restrictions on 60% of the VCP Shares have lapsed and, subject to the
satisfaction of the performance criteria described below, the restrictions on
the remaining 40% of the VCP Shares (“Remaining VCP Shares”) will lapse on
March 31, 2011 (the “2011 Vesting Date”). Restrictions will lapse on the 2011
Vesting Date if either (i) the compound annual growth rate (“CAGR”) in
Sotheby’s common stock, including dividends, shall have been equal to or
greater than 7.2% per annum from April 1, 2006 through March 31, 2011 or (ii)
the cumulative CAGR of the Company’s net income shall have been equal to or
greater than 10% through the year ended December 31, 2010 as compared with the
Company’s net income for the year ended December 31, 2005. If Executive’s
employment is terminated prior to the 2011 Vesting Date as a result of a Change
in Control, by the Company without Cause, by the Employee with Good Reason, or
as a result of Executive’s death or Disability, (i) if the performance criteria
for the 2011 Vesting Date have already been satisfied as of the date of
termination of employment, the restrictions on the Remaining VCP Shares that
would otherwise have lapsed on the 2011 Vesting Date will lapse immediately and
(ii) if the performance criteria have not yet been satisfied for the 2011
Vesting Date, but have been satisfied for one or more full 12-month periods
prior to the date of termination of employment, then the restrictions on a
fraction of the Remaining VCP Shares shall lapse immediately, the numerator of
such fraction being the number of full 12-month periods for which the
performance criteria have been satisfied and the denominator of such fraction
being 5, with payment to be made on the 2011 Vesting Date. 


          For
purposes of measuring the CAGR in Sotheby’s common stock, the value of such
common stock as of April 1, 2006 shall be the daily average closing price of
Sotheby’s common stock on the New York Stock Exchange for the period January 3
through March 31, 2006 and the value of such common stock at the end of each
measurement period shall be the daily average of the closing price of Sotheby’s
common stock on the New York Stock Exchange during the 30 calendar days prior
to the end of such measurement period. 


          The
cumulative CAGR in the Company’s net income for any measurement period will be
deemed to be equal to or greater than 10% if (i) the actual cumulative net
income (net of any net loss) of the Company for such period equals or exceeds
(ii) what the Company’s cumulative net income would have been had the CAGR of
its net income during such measurement period been 10% as compared with the
Company’s net income for the year ended December 31, 2005. 


          For
purposes hereof, net income shall be determined in accordance with generally
accepted accounting principles in the United States (“GAAP”); provided,
however, that consistent with the Company’s objective to reward Executive based
on the normalized operating performance of the Company, the Compensation
Committee shall have the discretion to adjust the Company’s net income to
account for extraordinary or unforeseen 


i





Exhibit A (cont’d)


business
events or developments during any measurement period, including, but not
limited to, income or loss from discontinued operations, gains or losses from
the sale of significant assets or business units, restructurings, asset
impairments, unusual adjustments to tax valuation reserves, special charges,
extraordinary items as defined by GAAP, material changes in GAAP, or other
non-recurring events. Notwithstanding the foregoing, no adjustment shall
increase the amount of compensation otherwise payable if such increase is
prohibited by Code Section 162(m). 


ii





Exhibit B


“Cause” means:



	
  

 	
  

 
	
  (1)

 	
 the
 Executive’s fraud or willful malfeasance in the performance of his duties, or
 his gross negligence in the performance of his duties which is materially
 injurious to the Company; or 

 
	
  

 	
  

 
	
  (2)

 	
 the
 Executive’s conviction of a crime that was a felony in the United States or
 the United Kingdom or a crime of equivalent gravity in any other jurisdiction
 (a “Felony Crime”), or conduct for which the Executive receives amnesty,
 immunity or its equivalent from an authorized law enforcement authority,
 which conduct would otherwise have been likely to result in the prosecution
 of charges against the Executive by such authorized law enforcement authority
 for commission of a Felony Crime; or 

 
	
  

 	
  

 
	
  (3)

 	
 any material
 breach of the Restrictive Covenants or the provisions of the Company’s Code
 of Business Conduct and Ethics captioned “Conflicts of Interest,” “Corporate
 Opportunities” or “Insider Trading.” 

 



          The
Executive shall have thirty (30) days following the receipt of notice from the
Company of the existence of circumstances constituting Cause to correct such
circumstances to the extent correctable. Any notice of termination for Cause
must be given within sixty (60) days following the Chairman of the Board of
Directors learning of circumstances constituting Cause. During such thirty (30)
day period, the Executive shall be given an opportunity, together with his
counsel, to be heard before the Board of Directors of the Company and the
Executive shall only be deemed to have been terminated for Cause if no less
than 60% of the members of the Board of Directors determine in good faith that
the Executive was guilty of conduct set forth in clauses (1), (2) or (3) above.



“Change of
Control” shall have the meaning set forth in the Company’s Amended and Restated
Restricted Stock Unit Plan. 


“Disability”
means a determination by the Company in accordance with applicable law that, as
a result of a physical or mental illness, the Executive has been unable to
perform the essential functions of his job, for a period of at least 90
consecutive calendar days, with or without reasonable accommodation that does
not present an undue burden on the Company. 


“Good Reason”
means: 


	
  

 	
  

 
	
  (1)

 	
 reduction of
 the Executive’s base salary below $700,000 per year (other than a reduction
 made with respect to all senior executives’ base salary) or reduction at any
 time during the Term of his target bonus below $1,400,000; 

 


i





Exhibit B (cont’d)


	
  

 	
  

 
	
  (2)

 	
 failure by
 the Company to award the Executive at least $3,500,000 in performance share
 units prior to March 31 in any year during the Term; 

 
	
  

 	
  

 
	
  (3)

 	
 the
 Company’s assignment of duties to the Executive which are a material
 diminution of his duties; 

 
	
  

 	
  

 
	
  (4)

 	
 the
 Company’s removal of the Executive from his positions of Chief Executive
 Officer and/or President and/or the Company’s removal of the Executive or
 failure to nominate the Executive, and support in good faith the Executive’s
 election, as a member of the Board of Directors of the Company; 

 
	
  

 	
  

 
	
  (5)

 	
 the
 Company’s requirement that the Executive relocate the Executive’s office or
 perform more than one third of his duties during any calendar year more than
 fifty (50) miles outside of New York, New York without the Executive’s prior
 consent; 

 
	
  

 	
  

 
	
  (6)

 	
 the
 Company’s failure to provide timely the Executive with compensation and
 benefits at the agreed levels; 

 
	
  

 	
  

 
	
  (7)

 	
 the failure
 of any successor to the Company to assume the obligations of the Company
 under any agreement between the Company and the Executive; 

 
	
  

 	
  

 
	
  (8)

 	
 the failure
 of the Company to maintain directors and officers liability insurance for the
 benefit of the Executive on a basis no less favorable than the basis on which
 it generally maintains such insurance for the benefit of other executives of
 the Company; 

 



provided,
however, that the Company shall have thirty (30) days following the receipt of
notice from the Executive of the existence of circumstances constituting Good
Reason to correct such circumstances. Any notice of termination for Good Reason
must be given within thirty (30) days following the Executive learning of
circumstances constituting Good Reason. 


ii





Exhibit C


          In
consideration of the compensation provided to Executive under this Letter
Agreement, and because the Executive has specialized, unique confidential
knowledge vital to the Company, the Executive agrees that, during the
Restricted Period (defined below), he will not, without the consent of the
Company, directly or indirectly, consult for, become employed by, provide
services to, or solicit or accept any funds, loans or other consideration from:



	
  

 	
  

 	
  

 
	
  

 	
 (i)

 	
 Christie’s,
 Bonham’s, or Phillips de Pury & Company or any affiliate or successor of
 any of those entities anywhere in the world; or 

 
	
  

 	
  

 	
  

 
	
  

 	
 (ii)

 	
 another
 entity engaged in conducting auctions, dealing in or making private sales of,
 and collecting or advising with respect to, any collecting category forming
 part of the Art Business anywhere the Company has an office, affiliation or
 has done business within the twelve month period immediately preceding the
 termination of the Executive’s employment. 

 



          For
purposes of this Agreement, the Art Business involves auctions, dealing in or
making private sales of, and collecting or advising with respect to, the
collecting categories that comprise the Company’s core businesses at the time
of termination. For purposes of this Agreement, the “Restricted Period” is
during the course of the Executive’s employment and the period of twelve (12)
months after the termination of the Executive’s employment. 


          In
addition to the foregoing, during the Restricted Period, the Executive agrees
that he will not, either alone or in concert with others, and will not cause
another to in any such case directly or indirectly, 


	
  

 	
  

 	
  

 
	
  

 	
 (1)

 	
 to recruit,
 solicit or induce any Sotheby’s employees to terminate their employment with
 Sotheby’s; 

 
	
  

 	
  

 	
  

 
	
  

 	
 (2)

 	
 to solicit
 the Art Business of, do Art Business with, or seek to do Art Business with,
 any Client of the Company (as defined herein); 

 
	
  

 	
  

 	
  

 
	
  

 	
 (3)

 	
 to encourage
 or assist any competitor of the Company to solicit or service any Client of
 the Company; or 

 
	
  

 	
  

 	
  

 
	
  

 	
 (4)

 	
 otherwise to
 induce any Client of the Company to cease doing Art Business with, or lessen
 its Art Business with, the Company. 

 



          The
term “Client” means any Level 1, 2 or 3 client of the Company as currently
referred to by the Company or as such category may be referred to at the time
of Executive’s termination of employment. 


i





Exhibit C (cont’d)


          If
at any time there is a judicial determination by any court of competent
jurisdiction that the time period, geographical scope, or any other restriction
contained in this Exhibit C is unenforceable against the Executive, the
provisions of this Exhibit C shall not be deemed void but shall be deemed
amended to apply as to such maximum time period, geographical scope and to such
other maximum extent as the court may judicially determine or indicate to be
enforceable.


ii






Exhibit D


AGREEMENT AND RELEASE


          1.
Parties. The parties to this Agreement and Release are William F.
Ruprecht (“Ruprecht”) and Sotheby’s and its subsidiaries, related or affiliated
entities or any entities in which any of them has an interest (“Sotheby’s”).


          2.
Consideration.


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 As
 consideration for this Agreement and Release, Ruprecht will receive the full
 amount to which he is entitled pursuant to the Letter Agreement dated
 September 1, 2010 between Sotheby’s and Ruprecht and the Terms of Employment
 attached thereto (collectively, the “Agreement”), a copy of which is attached
 hereto as Exhibit 1.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 Ruprecht
 agrees that the consideration provided in this Agreement and Release:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (i)

 	
 exceeds any
 payment, benefit or other thing of value to which he might otherwise be
 entitled under any policy, plan or procedure of Sotheby’s; and

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (ii)

 	
 is in full
 discharge of any and all of Sotheby’s liabilities and obligations to him,
 whether written or oral.

 



          3.
Agreement. Ruprecht acknowledges and reaffirms his obligations pursuant
to the Agreement, including that for good and valuable consideration, the
receipt of which is hereby acknowledged, Ruprecht agrees to comply with the
provisions of Exhibit C to the Agreement. 


          4.
Ruprecht Release.


	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 For good and
 valuable consideration, the receipt of which is hereby acknowledged, Ruprecht
 for himself and for his heirs, executors, administrators, trustees, legal
 representatives and assigns (hereinafter collectively referred to as
 “Ruprecht Releasors”), hereby forever releases and discharges Sotheby’s, or
 any of Sotheby’s past, present or future parent entities, partners,
 subsidiaries, affiliates, divisions, employee benefit and/or pension plans or
 funds, insurers, successors and assigns and any of its or their past, present
 or future officers, directors, attorneys, agents, trustees, administrators,
 employees, or assigns (whether acting as agents for Sotheby’s or in their
 individual capacities) (collectively referred to as “Sotheby’s 

 


i





Exhibit D (cont’d)


	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Releasees”)
 from any and all claims, debts, liabilities, demands, obligations, liens,
 promises, acts, agreements, costs, expenses, damages, actions and causes of
 action, of any kind whatsoever (upon any legal or equitable theory, whether
 contractual, common-law, statutory, federal, state, local, or otherwise),
 except for claims for vested benefits, whether known or unknown, by reason of
 any act, omission, transaction or occurrence which Ruprecht Releasors ever
 had, now have or hereafter can, shall or may have against Sotheby’s Releasees
 up to and including the Agreement Effective Date as defined in Subparagraph
 11(c) below. This release does not apply to claims by Ruprecht Releasors with
 regard to payments or benefits specifically payable or providable hereunder
 which are not yet paid as of the Agreement Effective Date, claims for vested
 accrued benefits, claims under COBRA, claims relating to any rights of
 indemnification under the Company’s certificate of incorporation or by-laws
 or claims under any directors and officers liability insurance policy.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Without
 limiting the generality of the foregoing, Ruprecht Releasors hereby release
 and discharge Sotheby’s Releasees from:

 






	
  

 	
  

 	
  

 
	
  

 	
 (i)

 	
 any and all
 claims relating to Ruprecht’s employment by Sotheby’s, the terms and
 conditions of such employment, any employee benefits related to his
 employment and/or his termination from such employment;

 
	
  

 	
  

 	
  

 
	
  

 	
 (ii)

 	
 any and all
 claims of employment discrimination and/or retaliation under any federal,
 state or local statute or ordinance, including without limitation, any and
 all claims under Title VII of the Civil Rights Act of 1964, as amended; the
 Age Discrimination in Employment Act; the Americans with Disabilities Act; the
 Worker Adjustment and Retraining Notification Act; the Family and Medical
 Leave Act of 1993; the Employee Retirement Income Security Act; the Equal Pay
 Act; the New York State Human Rights Law; and the New York City Human Rights
 Law;

 
	
  

 	
  

 	
  

 
	
  

 	
 (iii)

 	
 any and all
 claims for wrongful discharge and/or breach of contract or any claims related
 to compensation or benefits, including claims for bonus or deferred payments;

 
	
  

 	
  

 	
  

 
	
  

 	
 (iv)

 	
 any and all
 claims for defamation, libel or slander against any of the Sotheby’s Releasees; and

 
	
  

 	
  

 	
  

 
	
  

 	
 (v)

 	
 any and all
 claims for attorneys’ fees, costs, disbursements and the like;

 


ii





Exhibit D (cont’d)


	
  

 	
  

 	
  

 
	
  

 	
  

 	
 which
 Ruprecht Releasors ever had, now have or hereafter can, shall or may have
 against Sotheby’s Releasees for, upon or by reason of any act, omission,
 transaction or occurrence up to and including the Agreement Effective Date as
 defined in Subparagraph 11(c) below.

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 Ruprecht
 agrees, to the extent consistent with law, that he will not commence,
 maintain, prosecute or participate (except as compelled by legal process) in
 any action or proceeding of any kind (judicial or administrative) against
 Sotheby’s Releasees, arising out of any act, omission, transaction or
 occurrence occurring up to and including the Agreement Effective Date as
 defined in Subparagraph 11(c) below.

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 Ruprecht
 further agrees, to the extent consistent with law, that he will not seek or
 accept any award or settlement from any source or proceeding with respect to
 any claim or right covered by Subparagraphs 4(a) and 4(b) and that this
 Agreement and Release shall act as a bar to recovery in any such proceedings.

 



          5.
Sotheby’s Release. For good and valuable consideration, the receipt of
which is hereby acknowledged, Sotheby’s hereby forever releases and discharges
Ruprecht and his heirs, executors, administrators, trustees, legal
representatives and assigns (hereinafter collectively referred to as “Ruprecht
Releasees”) from any and all claims, debts, liabilities, demands, obligations,
liens, promises, acts, agreements, costs, expenses, damages, actions and causes
of actions, of any kind whatsoever (upon any legal or equitable theory, whether
contractual, common law, statutory, federal, state, local or otherwise)
(collectively, “Claims”), by reason of any act, omission, transaction, or
occurrence which Sotheby’s ever had, now has or hereafter can, shall or may
have against Ruprecht Releasees up to and including the Agreement Effective
Date as defined in Subparagraph 11(c) below; provided, however, that the
provisions of this Paragraph 5 shall not apply to Claims arising out of facts
or circumstances that were known to Ruprecht and which he had not disclosed to
the Worldwide General Counsel of Sotheby’s prior to the date that Sotheby’s
signs this Agreement; and provided, further, however, that the provisions of
this Paragraph 5 shall not apply to any claims of Sotheby’s to recoup from, or
refuse to pay to, Ruprecht any equity or cash incentive-based compensation as a
result of a restatement of Sotheby’s financial statements as required by law or
regulation or Company policy adopted consistent with applicable law or
regulation.


          6.
Confidentiality. Ruprecht acknowledges that this Agreement and Release
and all terms and conditions thereof shall be kept strictly confidential and
shall not be disclosed by Ruprecht to anyone, except to the extent required by
law, and except that Ruprecht may disclose the terms of this Agreement and
Release to his spouse and his attorney and/or his tax or financial advisor, who
shall each be instructed by Ruprecht that this Agreement and Release and its
terms are to be kept confidential.


iii





Exhibit D (cont’d)


          7.
Covenant of No Pending Claim. Ruprecht warrants that he has not
commenced or filed any litigations, administrative charges or other proceedings
against Sotheby’s.


          8.
No Representations. Neither party hereto, nor any agent or
representative thereof, has made any statement or representation to the other
party regarding any fact relied upon by such other party in entering into this
Agreement and Release.


          9.
Adequate Investigation and Binding Effect. Ruprecht has made such
investigation of the facts pertaining to this Agreement and Release and all
matters pertaining hereto as he deems necessary. This Agreement and Release
shall inure to the benefit of and may be enforced by the parties to this
Agreement and Release, and shall be final and binding upon Ruprecht, his
executors, administrators, legatees or any other successor in interest, and
upon Sotheby’s and its successors.


          10.
Non-Assignment of Claims. Ruprecht warrants and represents that he has
not assigned nor in any way conveyed, transferred or encumbered all or any
portion of the claims or rights covered by this Agreement and Release nor are
any such rights or claims endorsed by operation of law or decree or otherwise,
and acknowledges and agrees that this warranty and representation is an
essential and material term of this Agreement and Release.


          11.
Review and Revocation Period. 


	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 Ruprecht
 shall have twenty-one (21) days from the date of receipt of this Agreement
 and Release, or until ________, 201___, to consider the terms and conditions
 of this Agreement and Release. Ruprecht may accept this Agreement and Release
 by signing it and returning it to Ms. Susan Alexander or her successor as
 Worldwide Head of Human Resources, Sotheby’s, 1334 York Avenue, New York, New
 York 10021. 

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 After
 signing this Agreement and Release, Ruprecht shall have seven (7) days to
 revoke this Agreement and Release by indicating his desire to do so in
 writing (i) addressed to Ms. Susan Alexander (or such successor) at the
 address listed above and (ii) received by Ms. Alexander (or such successor)
 no later than 5:00 p.m. on the seventh (7th) day following the date Ruprecht
 signs this Agreement and Release.

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 The
 effective date of this Agreement and Release shall be the eighth (8th) day
 following Ruprecht’s signing of this Agreement and Release (the “Agreement
 Effective Date”) provided Ruprecht does not revoke this Agreement and Release
 during the revocation period.

 



          12.
Knowing and Voluntary Waiver. Ruprecht understands and acknowledges
that: (a) he has carefully read this Agreement and Release in its entirety; (b)
he has had an 


iv





Exhibit D (cont’d)


opportunity to
consider fully the terms of this Agreement and Release for twenty-one (21)
days; (c) he has been advised by Sotheby’s in writing to consult with an
attorney of his choosing in connection with this Agreement and Release; (d) he
fully understands the significance of all of the terms and conditions of this
Agreement and Release; (e) he has discussed it with his independent legal
counsel, or has had a reasonable opportunity to do so; (f) he has had answered
to his satisfaction any questions he has asked with regard to the meaning and
significance of any of the provisions of this Agreement and Release; (g) he is
signing this Agreement and Release voluntarily and of his own free will and
assents to all the terms and conditions contained herein; and (h) the amounts
being paid hereunder are in excess of those amounts to which he would be
entitled if he did not sign this Agreement and Release.


          13.
Non-Disparagement. Each party hereto agrees that such party will not
disparage (or induce or encourage others to disparage) the other party hereto
(including, in the case of Sotheby’s, any present directors or executive
officers with respect to any events relating to Ruprecht’s employment with
Sotheby’s including, without limitation, disclosing the facts or circumstances
surrounding his termination from employment with Sotheby’s, unless required by
law) or Ruprecht’s criticizing Sotheby’s business strategy. For the purposes of
this Agreement and Release, the term “disparage” means any comments or
statements which would adversely affect in any manner: (i) the conduct of
Ruprecht while employed by Sotheby’s or the conduct of Sotheby’s business; or
(ii) the business reputation or relationships of Ruprecht or of Sotheby’s
(and/or any of its past or present directors, officers, agents, trustees,
administrators, attorneys or employees).


          14.
The Company’s Proprietary Information. 


	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 Ruprecht
 acknowledges and reaffirms his obligations pursuant to the Confidentiality
 Agreement signed by him on September 2, 2010 (the “Confidentiality
 Agreement”). Confidential Information as defined in that Confidentiality
 Agreement includes information or communications relating to the
 organization, plans, status, strategy and structure of Sotheby’s.
 Additionally, Confidential Information includes, but is not limited to,
 information in written, graphic, recorded, photographic or any machine
 readable form or that is or was orally conveyed to Ruprecht. A copy of this Confidentiality
 Agreement is attached hereto as Exhibit 2.

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 If Ruprecht
 has not already done so, he shall return to Sotheby’s all Sotheby’s property
 in his possession including, but not limited to, credit cards, building
 passes, airline tickets, computers, laptops, facsimile machines, portable
 telephones and other wireless devices no later than his termination date;
 provided that Ruprecht (as well as the Company) shall be entitled to retain a
 copy of his Outlook contacts (or such other form of contact information, as
 may be applicable).

 


v






Exhibit D (cont’d)


	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 If Ruprecht
 has not already done so, he shall deliver to Sotheby’s all correspondence,
 documents, papers and other media containing information about the accounts,
 clients, interests, or business of Sotheby’s together with all copies in his
 possession no later than his termination date. 

 



          15.
Execution. This Agreement and Release shall not be binding unless signed
by both Ruprecht and an authorized representative of Sotheby’s, and neither
Ruprecht nor Sotheby’s shall have any obligation to sign this Agreement and
Release. 


          16.
Cooperation with Sotheby’s. Ruprecht agrees to cooperate with Sotheby’s
at its request in connection with any and all claims against Sotheby’s that are
brought or commenced by any individual or entity concerning matters of which
Ruprecht has or may have knowledge. Such cooperation shall include, but not be
limited to, meeting with Sotheby’s employees and/or otherwise assisting
Sotheby’s employees, attorneys or other representatives, testifying at any
trial or proceeding without the need for Sotheby’s to serve Ruprecht with a
subpoena, and in any other lawful ways that Sotheby’s deems appropriate. 


          17.
Non-Admission of Liability. No party hereto admits or acknowledges the
existence of any liability or wrongdoing. This Agreement and Release is not in
any respect, nor for any purpose, to be deemed or construed to be, or in any
way used as evidence of, an admission or concession of any liability or
wrongdoing whatsoever on the part of any person or entity. 


          18.
Severability. The terms and provisions of this Agreement and Release are
acknowledged by all parties to be required for the reasonable protection of
others. If any of the provisions, terms, clauses or waivers or releases of
claims or rights contained in this Agreement and Release are declared unlawful,
unenforceable, or ineffective in a legal forum of competent jurisdiction, then
such provisions, terms, clauses, or waivers or releases of claims or rights
shall be deemed severable, such that all other provisions, terms, clauses, and
waivers and releases of claims or rights contained in this Agreement and
Release shall remain valid and binding upon the parties. 


          19.
Integration. This Agreement and Release constitutes a single, integrated
written contract expressing the entire agreement of the parties hereto relative
to the subject matter hereof. With the exception of the Agreement and the
Confidentiality Agreement, the provisions and obligations of which are ongoing,
all prior and contemporaneous discussions and negotiations have been and are
merged and integrated into and are superseded by this Agreement and Release. 


          20.
Jurisdiction. In the event of a dispute hereunder, the parties agree to
submit to the exclusive jurisdiction of the state courts of and federal courts
sitting in the State of New York. The parties hereto submit themselves to the
exclusive jurisdiction and venue of the appropriate state or federal court
sitting in the Borough of Manhattan, County of New York, 


vi






Exhibit D (cont’d)


State of New
York for purposes of any claim, dispute or action arising from or related in
any way to this Agreement and Release. 


IN WITNESS
WHEREOF, this Agreement and Release has been duly executed by the undersigned
on dates indicated below. 


	
  

 	
  

 	
  

 
	
 Dated:

 	
 SOTHEBY’S

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Susan
 Alexander

 
	
  

 	
  

 	

 


 
	
  

 	
 Name: 

 	
 Susan
 Alexander

 
	
  

 	
 Title:

 	
 Executive
 Vice President and

 
	
  

 	
  

 	
    Worldwide
 Head of Human Resources

 






	
  

 	
  

 	
  

 
	
 ACCEPTED AND
 AGREED TO:

 
	
  

 	
  

 	
  

 
	
 /s/ William
 F. Ruprecht

 	
  

 
	

 


 
	
 William F.
 Ruprecht

 	
  

 
	
  

 	
  

 	
  

 
	
 Dated: 

 	
 September 2,
 2010

 	
  

 


vii