EXECUTION COPY


EXHIBIT 10.1       


AMENDMENT NO. 4 TO CREDIT AGREEMENT


                    This
AMENDMENT NO. 4 TO CREDIT AGREEMENT (this “Amendment”), dated as of
November 23, 2010, by and among Sotheby’s, a Delaware corporation (“Parent”),
Sotheby’s, Inc., a New York corporation (“Sotheby’s, Inc.”), Sotheby’s Financial Services, Inc., a Nevada
corporation (“SFS Inc.”), Sotheby’s Financial Services California, Inc.,
a Nevada corporation (“SFS California”), Oberon, Inc., a Delaware
corporation (“Oberon”), Theta, Inc., a Delaware corporation (“Theta”),
Sotheby’s Ventures, LLC, a New York limited liability company (“Ventures LLC”),
Oatshare Limited, a company registered in England (“Oatshare”),
Sotheby’s, a company registered in England (“Sotheby’s U.K.”), and
Sotheby’s Financial Services Limited, a company registered in England (“SFS
Ltd.” and, collectively with
Parent, Sotheby’s, Inc., SFS Inc., SFS California, Oberon, Theta, Ventures LLC,
Oatshare and Sotheby’s U.K., the “Borrowers”), General Electric
Capital Corporation, a Delaware corporation (in its individual capacity, “GE
Capital”), as a Lender and as Agent for the Lenders and the Fronting Lender
(in such capacity, the “Agent”), and the other Lenders signatory hereto,
amends that certain Credit Agreement, dated as of August 31, 2009 (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), by and among the Borrowers, other Credit Parties signatory
thereto, the Agent, the Fronting Lender, and the Lenders. Capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed
to such terms in Annex A to the Credit Agreement. 


RECITALS


                    A.         The
Borrowers have requested that the Lenders amend the Credit Agreement as set
forth herein.


                    B.         The
Agent and the Lenders have agreed, on the terms and conditions set forth below,
to so amend the Credit Agreement.


AGREEMENT


                    NOW,
THEREFORE, in consideration of the continued performance by the Borrowers and
each other Credit Party of their respective promises and obligations under the
Credit Agreement and the other Loan Documents, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Borrowers, the other Credit Parties signatory hereto, the Lenders and the
Agent hereby agree as follows:


                    1.          Amendments
to Credit Agreement. Subject to the satisfaction of the conditions
precedent set forth in Paragraph 3 of this Amendment, the Credit
Agreement and the Annexes thereto are each hereby amended as set forth in the
redlined document attached as Exhibit A hereto.


                    2.          Amendment
to U.S. Security Agreement. Subject to the satisfaction of the conditions
precedent set forth in Paragraph 3 of this Amendment, Agent is hereby
directed and 





authorized to immediately enter into, on behalf of itself and the
Lenders, an amendment to the U.S. Security Agreement in the form of Exhibit
B hereto.


                    3.           Effectiveness
of this Amendment; Conditions Precedent. The provisions of this Amendment
shall be deemed to have become effective as of the date of this Amendment, but
such effectiveness shall be expressly conditioned upon:


                    (a)          Agent’s
receipt of a counterpart of this Amendment executed and delivered by duly
authorized officers of each Borrower, each Credit Party, each Lender, the
Fronting Lender and Agent;


                    (b)          Agent’s
receipt of each of the items listed on Exhibit C hereto; and


                    (c)          Agent’s
receipt, on behalf of each Lender, of an amendment fee equal to 0.375% of such
Lender’s Commitment as of the date hereof.


                    4.           Miscellaneous.


                    (a)          Headings.
The various headings of this Amendment are inserted for convenience of
reference only and shall not affect the meaning or interpretation of this
Amendment or any provisions hereof.


                    (b)          Counterparts.
This Amendment may be executed by the parties hereto in several counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument. Delivery of an executed
counterpart of a signature page to this Amendment by facsimile or other
electronic transmission shall be effective as delivery of a manually executed
counterpart thereof.


                    (c)          Interpretation.
No provision of this Amendment shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party’s having or being deemed to have structured,
drafted or dictated such provision.


                    (d)          Representations,
Warranties and Covenants. Each Credit Party hereby represents and warrants
that, as of the date hereof:


            (i)           this
Amendment and the Credit Agreement as amended by this Amendment, constitute the
legal, valid and binding obligations of such Credit Party, enforceable against
it in accordance with their respective terms except as enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditor’s rights generally or by equitable principles relating
to enforceability;


             (ii)          its
execution, delivery and performance of this Amendment and its performance of
the Credit Agreement as amended by this Amendment, to the extent a party
thereto, have been duly authorized by all necessary corporate action and do
not: (1) contravene the terms of any of such Credit Party’s charter, bylaws or
operating agreement, as applicable, (2) violate any law or regulation, or any
order or decree of any court or Governmental Authority; (3) conflict with or
result in the breach or termination of, constitute 


2





a default under or accelerate or permit the acceleration of any
performance required by, any indenture, mortgage, deed of trust, lease, agreement
or other instrument to which any Sotheby Entity is a party or by which any
Sotheby Entity or any of its property is bound, (4) result in the creation or
imposition of any Lien upon any of the property of any Sotheby Entity other
than those in favor of Agent, on behalf of itself and the other Secured
Parties, pursuant to the Loan Documents; or (5) require the consent or approval
of any Governmental Authority or any other Person that has not already been
obtained; and


            (iii)         after
giving effect to this Amendment, (1) no Default or Event of Default has
occurred and is continuing and (2) all of the representations and warranties of
such Credit Party contained in the Credit Agreement and in each other Loan
Document to which it is a party (other than representations and warranties
which, in accordance with their express terms, are made only as of an earlier
specified date) are true and correct as of the date of such Credit Party’s
execution and delivery hereof or thereof as though made on and as of such date.


                    (e)          Governing
Law. THIS
AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE.


                    (f)          Effect.
Upon the effectiveness of this Amendment, each reference in the Credit
Agreement to “this Agreement,” “hereunder,” “hereof” or words of like import
shall mean and be a reference to the Credit Agreement as amended hereby and
each reference in the other Loan Documents to the Credit Agreement,
“thereunder,” “thereof,” or words of like import shall mean and be a reference
to the Credit Agreement as amended hereby. Except as expressly provided in this
Amendment, all of the terms, conditions and provisions of the Credit Agreement
and the other Loan Documents shall remain the same. This Amendment shall
constitute a Loan Document for purposes of the Credit Agreement.


                    (g)          No
Novation or Waiver. Except as specifically set forth in this Amendment, the
execution, delivery and effectiveness of this Amendment shall not (a) limit,
impair, constitute a waiver by, or otherwise affect any right, power or remedy
of, the Agent or any Lender under the Credit Agreement or any other Loan
Document, (b) constitute a waiver of any provision in the Credit Agreement or
in any of the other Loan Documents or of any Default or Event of Default that
may have occurred and be continuing or (c) alter, modify, amend or in any way
affect any of the terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or in any of the other Loan Documents, all of
which are ratified and affirmed in all respects and shall continue in full
force and effect.


                    (h)          Agent’s
Expenses. The Borrowers hereby jointly and severally agree to promptly
reimburse Agent for all of the reasonable out-of-pocket expenses, including,
without limitation, attorneys’ and paralegals’ fees, it has heretofore or
hereafter incurred or incurs in connection with the preparation, negotiation
and execution of this Amendment.


******


3





                    IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day
and year first above written.



	
  

 	
  

 
	
 SOTHEBY’S,

 
	
 a Delaware corporation

 
	
  

 	
  

 
	
 By: 

 	
      /s/
 Michael L. Gillis

 
	
 Name:
 Michael L. Gillis

 
	
 Title: SVP,
 Treasurer

 
	
  

 
	
 SOTHEBY’S, INC.

 
	
  

 
	
 By:

 	
      /s/
 Michael L. Gillis

 
	
 Name:
 Michael L. Gillis

 
	
 Title: SVP,
 Treasurer

 
	
 :

 
	
  

 
	
 SOTHEBY’S FINANCIAL
 SERVICES, INC.

 
	
 SOTHEBY’S FINANCIAL
 SERVICES CALIFORNIA, INC.

 
	
 OBERON, INC.

 
	
 THETA, INC.

 
	
 SOTHEBY’S VENTURES,
 LLC

 
	
  

 
	
 By:

 	
      /s/
 Michael L. Gillis

 
	
 Name:
 Michael L. Gillis

 
	
 Title: SVP,
 Treasurer

 









	
  

 	
  

 
	
 OATSHARE LIMITED

 
	
  

 	
  

 
	
 By: 

 	
      /s/
 William S. Sheridan

 
	
 Name:
 William S. Sheridan

 
	
 Title: EVP
 & Chief Financial Officer

 
	
  

 
	
 SOTHEBY’S,

 
	
 a company registered in England

 
	
  

 	
  

 
	
 By:

 	
      /s/
 William S. Sheridan

 
	
 Name:
 William S. Sheridan

 
	
 Title: EVP
 & Chief Financial Officer

 
	
  

 
	
 SOTHEBY’S FINANCIAL
 SERVICES LIMITED

 
	
  

 	
  

 
	
 By:

 	
      /s/
 William S. Sheridan

 
	
 Name:
 William S. Sheridan

 
	
 Title: EVP
 & Chief Financial Officer

 






Signature Page to

Amendment No. 4









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 GENERAL ELECTRIC CAPITAL

 
	
  

 	
  

 	
 CORPORATION, as
 the Agent, the Fronting

 
	
  

 	
  

 	
 Lender and a
 Lender

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
      /s/
 Daniel T. Eubanks

 
	
  

 	
  

 	
 Name: Daniel
 T. Eubanks

 
	
  

 	
  

 	
 Title: Duly
 Authorized Signatory

 


Signature Page to

Amendment No. 4









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 HSBC BANK PLC, as
 a Lender

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
      /s/
 Paul Hagger

 
	
  

 	
  

 	
 Name: Paul
 Hagger

 
	
  

 	
  

 	
 Title:
 Global Relationship Manager

 


Signature Page to

Amendment No. 4









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 HSBC BANK USA, NATIONAL 

 
	
  

 	
  

 	
 ASSOCIATION, as a
 Lender

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
      /s/
 Randolph Cates

 
	
  

 	
  

 	
 Name:
 Randolph E. Cates

 
	
  

 	
  

 	
 Title:
 Senior Relationship Manager

 


Signature Page to

Amendment No. 4









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 JPMORGAN CHASE BANK, N.A.,

 
	
  

 	
  

 	
 as a Lender

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
      /s/
 Jennifer Heard

 
	
  

 	
  

 	
 Name:
 Jennifer Heard

 
	
  

 	
  

 	
 Title:
 Account Executive

 


Signature Page to

Amendment No. 4









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 THE PRIVATEBANK AND TRUST 

 
	
  

 	
  

 	
 COMPANY, as a
 Lender

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
      /s/
 Mitchell B. Rasky

 
	
  

 	
  

 	
 Name:
 Mitchell B. Rasky

 
	
  

 	
  

 	
 Title:
 Managing Director

 


Signature Page to

Amendment No. 4









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 TD BANK, N.A., as
 a Lender

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
      /s/
 Steven A. Caffrey

 
	
  

 	
  

 	
 Name: Steven
 A. Caffrey

 
	
  

 	
  

 	
 Title: Vice
 President

 


Signature Page to

Amendment No. 4









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 BANK OF AMERICA, N.A., as
 a Lender

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
      /s/
 Edwin B. Cox, Jr. 

 
	
  

 	
  

 	
 Name: Edwin
 B. Cox, Jr.

 
	
  

 	
  

 	
 Title:
 Senior Vice President

 


Signature Page to

Amendment No. 4









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 COMERICA BANK, as
 a Lender

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
      /s/
 Chris Rice

 
	
  

 	
  

 	
 Name: Chris
 Rice

 
	
  

 	
  

 	
 Title:
 Assistant Vice President

 


Signature Page to

Amendment No. 4









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 ISRAEL DISCOUNT BANK OF NEW 

 
	
  

 	
  

 	
 YORK, as a Lender

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
      /s/
 Richard Tripaldi

 
	
  

 	
  

 	
 Name:
 Richard Tripaldi

 
	
  

 	
  

 	
 Title: First
 Vice President

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By:

 	
      /s/
 Michael Paul

 
	
  

 	
  

 	
 Name:
 Michael Paul

 
	
  

 	
  

 	
 Title: Senior
 Vice President

 


Signature Page to

Amendment No. 4





Acknowledged and Agreed
 as of the date first above written:


SOTHEBYS.COM LLC,
as a Credit Party


	
  

 	
  

 	
  

 
	
 By: 

 	
      /s/
 William S. Sheridan

 	
  

 
	
 Name: William
 S. Sheridan

 	
  

 
	
 Title: EVP
 & Chief Financial Officer

 	
  

 



SOTHEBY’S FINE ART
HOLDINGS, INC.

SOTHEBY’S ASIA, INC.

SOTHEBY’S RES, INC.

SPTC, INC.

SOTHEBY PARKE BERNET, INC.

YORK AVENUE DEVELOPMENT, INC.

SOTHEBY’S THAILAND, INC.

SOTHEBY’S HOLDINGS INTERNATIONAL, INC.

SOTHEBY’S NEVADA, INC.

SOTHEBYS.COM AUCTIONS, INC.

SIBS, LLC,

each as a Credit Party


	
  

 	
  

 	
  

 
	
 By: 

 	
      /s/
 Michael L. Gillis

 	
  

 
	
 Name:
 Michael L. Gillis

 	
  

 
	
 Title: SVP,
 Treasurer

 	
  

 



72ND AND YORK, INC.,
as a Credit Party


	
  

 	
  

 	
  

 
	
 By: 

 	
      /s/
 Richard Buckley

 	
  

 
	
 Name:

 	
  

 
	
 Title:

 	
  

 



CATALOGUE
DISTRIBUTION COMPANY LIMITED, as a Credit Party


	
  

 	
  

 	
  

 
	
 By: 

 	
      /s/
 William S. Sheridan

 	
  

 
	
 Name:
 William S. Sheridan

 	
  

 
	
 Title: EVP
 & Chief Financial Officer

 



SOTHEBY’S SHIPPING
LIMITED, as a Credit Party


	
  

 	
  

 	
  

 
	
 By: 

 	
      /s/
 William S. Sheridan

 	
  

 
	
 Name:
 William S. Sheridan

 	
  

 
	
 Title: EVP
 & Chief Financial Officer

 


Signature Page to

Amendment No. 4





EXHIBIT
A


Credit Agreement


See attached.





EXHIBIT
B


Amendment No. 1 to U.S. Security Agreement


See attached.





EXHIBIT
C


List of Closing Documents


See attached.








	
  

 
	
 EXHIBIT A

 
	
  

 
	 

 


CREDIT AGREEMENT*


Dated as of August 31, 2009



among



SOTHEBY’S,

a Delaware corporation

SOTHEBY’S, INC.,

SOTHEBY’S FINANCIAL SERVICES, INC.,

SOTHEBY’S FINANCIAL SERVICES CALIFORNIA, INC.,

OBERON, INC.,

THETA, INC.,

SOTHEBY’S VENTURES, LLC,

OATSHARE LIMITED,

SOTHEBY’S, 

a company registered in England, and 

SOTHEBY’S FINANCIAL SERVICES LIMITED,

as Borrowers,



THE OTHER CREDIT PARTIES SIGNATORY HERETO,

as Credit Parties,



THE LENDERS SIGNATORY HERETO

FROM TIME TO TIME,

as Lenders,



GENERAL ELECTRIC CAPITAL CORPORATION,

as Agent and a Lender



and



GE CAPITAL MARKETS, INC. and HSBC BANK PLC,

as Joint Lead Arrangers and Joint Bookrunners


	 

 
	
 * THIS IS A CONFORMED DOCUMENT WHICH HAS BEEN PREPARED SOLELY FOR REFERENCE
 PURPOSES. THIS DOCUMENT HAS NO LEGAL EFFECT. NOTHING HEREIN SHALL BE
 CONSTRUED TO EVIDENCE THE INTENT OF ANY PARTY AS TO ITS INTERPRETATION OF ANY
 PROVISION OF THE CREDIT AGREEMENT REFERRED TO ABOVE OR ANY AMENDMENT THERETO.

 









TABLE OF CONTENTS


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 Page

 
	
  

 	
  

 	
  

 	
  

 	 

 
	
 1.

 	
 AMOUNT AND TERMS
 OF CREDIT

 	
  

 	
 1

 	
  

 
	
  

 
	
  

 	
 1.1

 	
 Credit
 Facilities.

 	
  

 	
 1

 	
  

 
	
  

 	
 1.2

 	
 Letters of
 Credit.

 	
  

 	
 78

 	
  

 
	
  

 	
 1.3

 	
 Prepayments;
 Commitment Reductions.

 	
  

 	
 78

 	
  

 
	
  

 	
 1.4

 	
 Use of
 Proceeds.

 	
  

 	
 1112

 	
  

 
	
  

 	
 1.5

 	
 Interest and
 Applicable Margins.

 	
  

 	
 1112

 	
  

 
	
  

 	
 1.6

 	
 Eligible Art
 Loans.

 	
  

 	
 1415

 	
  

 
	
  

 	
 1.7

 	
 Eligible Art
 Inventory.

 	
  

 	
 1617

 	
  

 
	
  

 	
 1.8

 	
 Cash
 Management Systems.

 	
  

 	
 1819

 	
  

 
	
  

 	
 1.9

 	
 Fees.

 	
  

 	
 1819

 	
  

 
	
  

 	
 1.10

 	
 Receipt of
 Payments.

 	
  

 	
 1819

 	
  

 
	
  

 	
 1.11

 	
 Application
 and Allocation of Payments.

 	
  

 	
 1920

 	
  

 
	
  

 	
 1.12

 	
 Loan Account
 and Accounting.

 	
  

 	
 2021

 	
  

 
	
  

 	
 1.13

 	
 Indemnity.

 	
  

 	
 2021

 	
  

 
	
  

 	
 1.14

 	
 Access.

 	
  

 	
 2122

 	
  

 
	
  

 	
 1.15

 	
 Taxes.

 	
  

 	
 2223

 	
  

 
	
  

 	
 1.16

 	
 Capital
 Adequacy; Increased Costs; Illegality.

 	
  

 	
 2627

 	
  

 
	
  

 	
 1.17

 	
 Credit
 Support.

 	
  

 	
 2829

 	
  

 
	
  

 	
 1.18

 	
 Conversion
 to Dollars and Sterling.

 	
  

 	
 2829

 	
  

 
	
  

 	
 1.19

 	
 Judgment
 Currency; Contractual Currency.

 	
  

 	
 2930

 	
  

 
	
  

 	
 1.20

 	
 Currency of
 Account.

 	
  

 	
 3031

 	
  

 
	
 2. 

 	
 CONDITIONS
 PRECEDENT

 	
  

 	
 3031

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 2.1

 	
 Conditions
 to the Initial Loans.

 	
  

 	
 3031

 	
  

 
	
  

 	
 2.2

 	
 Further
 Conditions to Each Loan.

 	
  

 	
 32

 	
  

 
	
 3.

 	
 REPRESENTATIONS
 AND WARRANTIES

 	
  

 	
 3334

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 3.1

 	
 Corporate
 Existence; Compliance with Law.

 	
  

 	
 3334

 	
  

 
	
  

 	
 3.2

 	
 Executive
 Offices, Collateral Locations, FEIN.

 	
  

 	
 3335

 	
  

 
	
  

 	
 3.3

 	
 Corporate
 Power, Authorization, Enforceable Obligations.

 	
  

 	
 3435

 	
  

 
	
  

 	
 3.4

 	
 Financial
 Disclosures.

 	
  

 	
 3435

 	
  

 
	
  

 	
 3.5

 	
 Material
 Adverse Effect.

 	
  

 	
 3536

 	
  

 
	
  

 	
 3.6

 	
 Ownership of
 Property; Liens.

 	
  

 	
 3637

 	
  

 
	
  

 	
 3.7

 	
 Labor
 Matters.

 	
  

 	
 3637

 	
  

 
	
  

 	
 3.8

 	
 Ventures,
 Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.

 	
  

 	
 3637

 	
  

 
	
  

 	
 3.9

 	
 Government
 Regulation.

 	
  

 	
 3738

 	
  

 
	
  

 	
 3.10

 	
 Margin
 Regulations.

 	
  

 	
 3738

 	
  

 
	
  

 	
 3.11

 	
 Taxes.

 	
  

 	
 3738

 	
  

 
	
  

 	
 3.12

 	
 ERISA.

 	
  

 	
 3839

 	
  

 
	
  

 	
 3.13

 	
 Litigation.

 	
  

 	
 3940

 	
  

 



i









	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 3.14

 	
 Brokers.

 	
  

 	
 3940

 	
  

 
	
  

 	
 3.15

 	
 Intellectual
 Property.

 	
  

 	
 3940

 	
  

 
	
  

 	
 3.16

 	
 Full
 Disclosure.

 	
  

 	
 4041

 	
  

 
	
  

 	
 3.17

 	
 Environmental
 Matters.

 	
  

 	
 4041

 	
  

 
	
  

 	
 3.18

 	
 Insurance.

 	
  

 	
 4142

 	
  

 
	
  

 	
 3.19

 	
 Deposit.

 	
  

 	
 4142

 	
  

 
	
  

 	
 3.20

 	
 [Reserved].

 	
  

 	
 4142

 	
  

 
	
  

 	
 3.21

 	
 Bonding;
 Licenses.

 	
  

 	
 4142

 	
  

 
	
  

 	
 3.22

 	
 Solvency.

 	
  

 	
 4142

 	
  

 
	
  

 	
 3.23

 	
 Sale-Leasebacks.

 	
  

 	
 4243

 	
  

 
	
  

 	
 3.24

 	
 U.S.
 Money-Laundering and Terrorism Regulatory Matters.

 	
  

 	
 4243

 	
  

 
	
  

 	
 3.25

 	
 Lending and
 Auction Regulatory Matters.

 	
  

 	
 4344

 	
  

 
	
 4.

 	
 FINANCIAL
 STATEMENTS AND INFORMATION

 	
  

 	
 4344

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 4.1

 	
 Reports and
 Notices.

 	
  

 	
 4344

 	
  

 
	
  

 	
 4.2

 	
 Communication
 with Accountants.

 	
  

 	
 4344

 	
  

 
	
 5.

 	
 AFFIRMATIVE
 COVENANTS

 	
  

 	
 44

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 5.1

 	
 Maintenance
 of Existence and Conduct of Business.

 	
  

 	
 4445

 	
  

 
	
  

 	
 5.2

 	
 Payment of
 Charges.

 	
  

 	
 4445

 	
  

 
	
  

 	
 5.3

 	
 Books and
 Records.

 	
  

 	
 4445

 	
  

 
	
  

 	
 5.4

 	
 Insurance;
 Damage to or Destruction of Collateral.

 	
  

 	
 4546

 	
  

 
	
  

 	
 5.5

 	
 Compliance
 with Laws.

 	
  

 	
 4647

 	
  

 
	
  

 	
 5.6

 	
 Supplemental
 Disclosure.

 	
  

 	
 4647

 	
  

 
	
  

 	
 5.7

 	
 Intellectual
 Property.

 	
  

 	
 4647

 	
  

 
	
  

 	
 5.8

 	
 Environmental
 Matters.

 	
  

 	
 47

 	
  

 
	
  

 	
 5.9

 	
 Landlords’
 Agreements, Bailee Letters and Real Estate Purchases.

 	
  

 	
 4748

 	
  

 
	
  

 	
 5.10

 	
 Lending and
 Auction Regulatory Matters.

 	
  

 	
 4849

 	
  

 
	
  

 	
 5.11

 	
 Further
 Assurances.

 	
  

 	
 4849

 	
  

 
	
  

 	
 5.12

 	
 Art Loans
 and Art Inventory.

 	
  

 	
 4849

 	
  

 
	
  

 	
 5.13

 	
 Money-Laundering
 and Terrorism Regulatory Matters.

 	
  

 	
 4950

 	
  

 
	
  

 	
 5.14

 	
 New
 Subsidiaries.

 	
  

 	
 50

 	
  

 
	
  

 	
 5.15

 	
 Immaterial
 Subsidiaries.

 	
  

 	
 5051

 	
  

 
	
  

 	
 5.16

 	
 York Avenue
 Transactions.

 	
  

 	
 5051

 	
  

 
	
  

 	
 5.17

 	
 Auction
 Guaranties.

 	
  

 	
 5051

 	
  

 
	
  

 	
 5.18

 	
 Data
 Protection Matters.

 	
  

 	
 5051

 	
  

 
	
 6.

 	
 NEGATIVE
 COVENANTS

 	
  

 	
 5152

 	
  

 
	
  

 
	
  

 	
 6.1

 	
 Mergers,
 Subsidiaries, Etc.

 	
  

 	
 5152

 	
  

 
	
  

 	
 6.2

 	
 Investments;
 Loans and Revolving Credit Advances.

 	
  

 	
 5152

 	
  

 
	
  

 	
 6.3

 	
 Indebtedness.

 	
  

 	
 5253

 	
  

 
	
  

 	
 6.4

 	
 Employee
 Loans and Affiliate Transactions.

 	
  

 	
 5455

 	
  

 
	
  

 	
 6.5

 	
 Capital
 Structure and Business.

 	
  

 	
 5456

 	
  

 
	
  

 	
 6.6

 	
 Guaranteed
 Indebtedness.

 	
  

 	
 5556

 	
  

 
	
  

 	
 6.7

 	
 Liens.

 	
  

 	
 5556

 	
  

 
	
  

 	
 6.8

 	
 Sale of
 Stock and Assets.

 	
  

 	
 5657

 	
  

 
	
  

 	
 6.9

 	
 ERISA.

 	
  

 	
 5657

 	
  

 



ii









	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 6.10

 	
 Financial
 Covenants.

 	
  

 	
 5658

 	
  

 
	
  

 	
 6.11

 	
 Hazardous
 Materials.

 	
  

 	
 5658

 	
  

 
	
  

 	
 6.12

 	
 Sale
 Leasebacks.

 	
  

 	
 5658

 	
  

 
	
  

 	
 6.13

 	
 Restricted
 Payments.

 	
  

 	
 5658

 	
  

 
	
  

 	
 6.14

 	
 Change of
 Corporate Name, State of Incorporation or Location; Change of Fiscal Year.

 	
  

 	
 5759

 	
  

 
	
  

 	
 6.15

 	
 No
 Impairment of Intercompany Transfers.

 	
  

 	
 5859

 	
  

 
	
  

 	
 6.16

 	
 Real Estate
 Purchases.

 	
  

 	
 5859

 	
  

 
	
  

 	
 6.17

 	
 Changes
 Relating to Material Contracts.

 	
  

 	
 5860

 	
  

 
	
  

 	
 6.18

 	
 Use of Proceeds.

 	
  

 	
 60

 	
  

 
	
 7.

 	
 TERM

 	
  

 	
 5860

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 7.1

 	
 Termination.

 	
  

 	
 5860

 	
  

 
	
  

 	
 7.2

 	
 Survival of
 Obligations Upon Termination of Financing Arrangements.

 	
  

 	
 5960

 	
  

 
	
 8.

 	
 EVENTS OF
 DEFAULT; RIGHTS AND REMEDIES

 	
  

 	
 5961

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 8.1

 	
 Events of
 Default.

 	
  

 	
 5961

 	
  

 
	
  

 	
 8.2

 	
 Remedies.

 	
  

 	
 6163

 	
  

 
	
  

 	
 8.3

 	
 Waivers by
 Credit Parties.

 	
  

 	
 6163

 	
  

 
	
 9.

 	
 ASSIGNMENT
 AND PARTICIPATIONS; APPOINTMENT OF AGENT

 	
  

 	
 6263

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 9.1

 	
 Assignment
 and Participations.

 	
  

 	
 6264

 	
  

 
	
  

 	
 9.2

 	
 Appointment
 of Agent.

 	
  

 	
 6567

 	
  

 
	
  

 	
 9.3

 	
 Agent’s
 Reliance, Etc.

 	
  

 	
 6568

 	
  

 
	
  

 	
 9.4

 	
 GE Capital
 and Affiliates.

 	
  

 	
 6668

 	
  

 
	
  

 	
 9.5

 	
 Lender
 Credit Decision.

 	
  

 	
 6668

 	
  

 
	
  

 	
 9.6

 	
 Indemnification.

 	
  

 	
 6769

 	
  

 
	
  

 	
 9.7

 	
 Successor
 Agent and Fronting Lender.

 	
  

 	
 6769

 	
  

 
	
  

 	
 9.8

 	
 Setoff and
 Sharing of Payments.

 	
  

 	
 6870

 	
  

 
	
  

 	
 9.9

 	
 Advances;
 Payments; Non-Funding Lenders; Information; Actions in Concert.

 	
  

 	
 6971

 	
  

 
	
  

 	
 9.10

 	
 Release of
 Guarantors or Collateral.

 	
  

 	
 7479

 	
  

 
	
 10.

 	
 SUCCESSORS
 AND ASSIGNS

 	
  

 	
 7579

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.1

 	
 Successors
 and Assigns.

 	
  

 	
 7579

 	
  

 
	
 11.

 	
 MISCELLANEOUS

 	
  

 	
 7579

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 11.1

 	
 Complete
 Agreement; Modification of Agreement.

 	
  

 	
 7579

 	
  

 
	
  

 	
 11.2

 	
 Amendments
 and Waivers.

 	
  

 	
 7580

 	
  

 
	
  

 	
 11.3

 	
 Fees and
 Expenses.

 	
  

 	
 7781

 	
  

 
	
  

 	
 11.4

 	
 No Waiver.

 	
  

 	
 7883

 	
  

 
	
  

 	
 11.5

 	
 Remedies.

 	
  

 	
 7983

 	
  

 
	
  

 	
 11.6

 	
 Severability.

 	
  

 	
 7983

 	
  

 
	
  

 	
 11.7

 	
 Conflict of
 Terms.

 	
  

 	
 7983

 	
  

 
	
  

 	
 11.8

 	
 Confidentiality.

 	
  

 	
 7983

 	
  

 
	
  

 	
 11.9

 	
 GOVERNING
 LAW.

 	
  

 	
 7984

 	
  

 



iii









	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 11.10

 	
 Notices.

 	
  

 	
 8085

 	
  

 
	
  

 	
 11.11

 	
 Section
 Titles.

 	
  

 	
 8185

 	
  

 
	
  

 	
 11.12

 	
 Counterparts.

 	
  

 	
 8186

 	
  

 
	
  

 	
 11.13

 	
 WAIVER OF
 JURY TRIAL.

 	
  

 	
 8186

 	
  

 
	
  

 	
 11.14

 	
 Press
 Releases and Related Matters.

 	
  

 	
 8286

 	
  

 
	
  

 	
 11.15

 	
 Reinstatement.

 	
  

 	
 8286

 	
  

 
	
  

 	
 11.16

 	
 Advice of
 Counsel.

 	
  

 	
 8287

 	
  

 
	
  

 	
 11.17

 	
 No Strict
 Construction.

 	
  

 	
 8287

 	
  

 
	
  

 	
 11.18

 	
 PATRIOT Act.

 	
  

 	
 8387

 	
  

 
	
 12.

 	
 CROSS-GUARANTY

 	
  

 	
 8387

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 12.1

 	
 Cross-Guaranty.

 	
  

 	
 8387

 	
  

 
	
  

 	
 12.2

 	
 Waivers by
 Borrowers.

 	
  

 	
 8488

 	
  

 
	
  

 	
 12.3

 	
 Benefit of
 Guaranty.

 	
  

 	
 8488

 	
  

 
	
  

 	
 12.4

 	
 Waiver of
 Subrogation, Etc.

 	
  

 	
 8489

 	
  

 
	
  

 	
 12.5

 	
 Subordination
 by U.K. Borrowers.

 	
  

 	
 8589

 	
  

 
	
  

 	
 12.6

 	
 Election of
 Remedies.

 	
  

 	
 8590

 	
  

 
	
  

 	
 12.7

 	
 Liability
 Cumulative.

 	
  

 	
 8690

 	
  

 



iv





INDEX OF APPENDICES


	
  

 	
  

 	
  

 
	
 Annex A
 (Recitals)

 	
 -

 	
 Definitions

 
	
 Annex B (Section
 1.2)

 	
 -

 	
 Letters of
 Credit 

 
	
 Annex C (Section
 1.8)

 	
 -

 	
 Cash
 Management System

 
	
 Annex D (Section
 2.1(a))

 	
 -

 	
 Closing
 Checklist

 
	
 Annex E (Section
 4.1(a))

 	
 -

 	
 Financial
 Statements and Projections -- Reporting

 
	
 Annex F (Section
 4.1(b))

 	
 -

 	
 Collateral
 Reports

 
	
 Annex G (Section
 6.10)

 	
 -

 	
 Financial
 Covenants

 
	
 Annex H (Section
 9.9(a))

 	
 -

 	
 Lenders’
 Wire Transfer Information

 
	
 Annex I (Section
 11.10)

 	
 -

 	
 Notice
 Addresses

 
	
 Annex J
 (from Annex A -

 	
 -

 	
  

 
	
 Commitments definition)

 	
  

 	
 Commitments
 as of Closing Date

 
	
  

 	
  

 	
  

 
	
 Exhibit
 1.1(a)(i)

 	
 -

 	
 Form of
 Notice of Revolving Credit Advance

 
	
 Exhibit 1.1(a)(ii)-A

 	
 -

 	
 Form of
 Revolving Note (U.S. Borrowers)

 
	
 Exhibit
 1.1(a)(ii)-B

 	
 -

 	
 Form of
 Revolving Note (U.K. Borrowers)

 
	
 Exhibit
 1.1(a)(ii)-C

 	
 -

 	
 Form of
 Fronting Lender Note

 
	
 Exhibit
 1.1(b)(ii)-A

 	
 -

 	
 Form of
 Swing Line Note (U.S. Borrowers)

 
	
 Exhibit
 1.1(b)(ii)-B

 	
 -

 	
 Form of
 Swing Line Note (U.K. Borrowers)

 
	
 Exhibit
 1.5(e)

 	
 -

 	
 Form of
 Notice of Conversion/Continuation

 
	
 Exhibit
 4.1(A)

 	
 -

 	
 Form of
 Borrowing Base Certificate

 
	
 Exhibit
 4.1(B)

 	
 -

 	
 Form of Art
 Loan Receivables Report

 
	
 Exhibit
 4.1(C)

 	
 -

 	
 Form of Art
 Inventory Report

 
	
 Exhibit
 9.1(a)

 	
 -

 	
 Form of
 Assignment Agreement

 
	
 Exhibit B

 	
 -

 	
 Application
 for Standby Letter of Credit

 
	
 Exhibit C

 	
 -

 	
 Form of
 Compliance Certificate

 
	
 Schedule 1.1

 	
 -

 	
 Agent’s
 Representatives

 
	
 Schedule 1.5

 	
 -

 	
 Mandatory
 Cost

 
	
 Disclosure
 Schedule 1.4

 	
 -

 	
 Sources and
 Uses; Funds Flow Memorandum

 
	
 Disclosure
 Schedule 3.1

 	
 -

 	
 Type of
 Entity; State of Organization

 
	
 Disclosure
 Schedule 3.2

 	
 -

 	
 Executive
 Offices, Collateral Locations, FEIN

 
	
 Disclosure
 Schedule 3.4(a)

 	
 -

 	
 Financial
 Statements

 
	
 Disclosure
 Schedule 3.4(b)

 	
 -

 	
 Projections

 
	
 Disclosure
 Schedule 3.6

 	
 -

 	
 Real Estate
 and Leases

 
	
 Disclosure
 Schedule 3.7

 	
 -

 	
 Labor
 Matters

 
	
 Disclosure
 Schedule 3.8

 	
 -

 	
 Ventures,
 Subsidiaries and Affiliates; Outstanding Stock

 
	
 Disclosure
 Schedule 3.11

 	
 -

 	
 Tax Matters

 
	
 Disclosure
 Schedule 3.12(a)

 	
 -

 	
 ERISA Plans

 
	
 Disclosure
 Schedule 3.12(c)

 	
 -

 	
 U.K. Pension
 Plans

 
	
 Disclosure
 Schedule 3.13(a)

 	
 -

 	
 Litigation

 
	
 Disclosure
 Schedule 3.14

 	
 -

 	
 Brokers

 
	
 Disclosure
 Schedule 3.15

 	
 -

 	
 Intellectual
 Property

 



v









	
  

 	
  

 	
  

 
	
 Disclosure
 Schedule 3.17

 	
 -

 	
 Hazardous
 Materials

 
	
 Disclosure
 Schedule 3.18

 	
 -

 	
 Insurance

 
	
 Disclosure
 Schedule 3.19

 	
 -

 	
 Deposit and
 Disbursement Accounts

 
	
 Disclosure
 Schedule 3.21

 	
 -

 	
 Bonds;
 Patent, Trademark Licenses

 
	
 Disclosure
 Schedule 5.15

 	
 -

 	
 Immaterial
 Subsidiaries

 
	
 Disclosure
 Schedule 5.16

 	
 -

 	
 York Avenue
 Lender Recourse

 
	
 Disclosure
 Schedule 6.3

 	
 -

 	
 Indebtedness

 
	
 Disclosure
 Schedule 6.4(a)

 	
 -

 	
 Transactions
 with Affiliates

 
	
 Disclosure
 Schedule 6.7

 	
 -

 	
 Existing
 Liens

 



vi





                    This
CREDIT AGREEMENT (this “Agreement”), dated as of August 31, 2009, among
Sotheby’s, a Delaware corporation (“Parent”), Sotheby’s, Inc., a New
York corporation (“Sotheby’s, Inc.”), Sotheby’s Financial Services,
Inc., a Nevada corporation (“SFS Inc.”), Sotheby’s Financial Services
California, Inc., a Nevada corporation (“SFS California”), Oberon, Inc.,
a Delaware corporation (“Oberon”), Theta, Inc., a Delaware corporation
(“Theta”), Sotheby’s Ventures, LLC, a New York limited liability company
(“Ventures LLC” and, collectively with Parent, Sotheby’s, Inc., SFS
Inc., SFS California, Oberon and Theta, the “U.S. Borrowers”), Oatshare
Limited, a company registered in England (“Oatshare”), Sotheby’s, a
company registered in England (“Sotheby’s U.K.”), and Sotheby’s
Financial Services Limited, a company registered in England (“SFS Ltd.”
and, collectively with Oatshare and Sotheby’s U.K., the “U.K. Borrowers”
and, collectively with the U.S. Borrowers, the “Borrowers”); the other
Credit Parties signatory hereto; General Electric Capital Corporation, a
Delaware corporation (in its individual capacity, “GE Capital”), for
itself, as a Lender and as Fronting Lender, and as Agent for the Lenders and
the Fronting Lender (in such capacity, “Agent”), and the other Lenders
signatory hereto from time to time.


RECITALS


                    WHEREAS,
Borrowers have requested that Lenders extend revolving credit facilities to
Borrowers of up to Two Hundred Million Dollars ($200,000,000) in the aggregate
to provide (a) working capital financing for Borrowers, (b) funds for other
general corporate purposes of Borrowers and (c) funds for other purposes
permitted hereunder; and for these purposes, Lenders are willing to make
certain loans and other extensions of credit to Borrowers of up to such amount
upon the terms and conditions set forth herein; and


                    WHEREAS,
Borrowers have agreed to secure all of the Secured Obligations by granting to
Agent, for the benefit of Agent and the other Secured Parties, a security
interest in and lien upon all of their existing and after-acquired personal
property; and


                    WHEREAS,
capitalized terms used in this Agreement shall have the meanings ascribed to
them in Annex A and, for purposes of this Agreement and the other Loan
Documents, the rules of construction set forth in Annex A shall govern.
All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, “Appendices”) hereto, or expressly identified to this
Agreement, are incorporated herein by reference, and taken together with this
Agreement, shall constitute but a single agreement. These Recitals shall be
construed as part of the Agreement.


                    NOW,
THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:


	
  

 	
  

 
	
 1.

 	
 AMOUNT AND TERMS
 OF CREDIT

 






	
  

 	
  

 	
  

 
	
  

 	
 1.1

 	
 Credit
 Facilities.

 
	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 Revolving
 Credit Facility.

 



                              (i)          Subject
to the terms and conditions hereof, (a) each Lender agrees to make available,
from time to time until the Commitment Termination Date, its Pro Rata Share 


1





of advances
(each, a “Dollar Revolving Credit Advance”) in Dollars to U.S. Borrowers
and (b) except as otherwise provided in the last sentence of this paragraph,
each of the Sterling Lenders and the Fronting Lender agrees to make available,
from time to time until the Commitment Termination Date, its Pro Rata Share
(or, in the case of the Fronting Lender, the Fronted Percentage) of advances
(each a “Sterling Revolving Credit Advance”) in Sterling to the U.K.
Borrowers. Each Non-Sterling Lender shall purchase an undivided participation
interest in each such Sterling Revolving Credit Advance from the Fronting
Lender in accordance with Section 9.9(e)(i). The Fronting Lender shall
not be required to, and shall not, fund its share of any Sterling Revolving
Credit Advance at any time that any condition precedent set forth in Section
2.2 is not satisfied if the Fronting Lender shall have received at least
one Business Day’s prior written notice from Non-Sterling Lenders having
Commitments equal to or greater than 66 2/3% of the Fronted Percentage
instructing it not to fund its share of a Sterling Revolving Credit Advance.
The Pro Rata Share of the aggregate Revolving Loan of any Lender shall not at
any time exceed its separate Commitment. The obligations of each Lender to make
Loans or purchase participation interests therein under this Agreement shall be
several and not joint. Until the Commitment Termination Date, Borrowers may
borrow, repay and reborrow under this Section 1.1(a); provided,
that (i) the amount of any Revolving Credit Advance to be made at any time to a
U.S. Borrower shall not exceed U.S. Borrowing Availability at such time and
(ii) the Dollar Equivalent of the amount of any Revolving Credit Advance to be
made at any time to a U.K. Borrower shall not exceed U.K. Borrowing
Availability at such time. The Dollar Equivalent of each outstanding Revolving
Credit Advance, Swing Line Advance and Letter of Credit Obligation shall be
recalculated hereunder on each date on which it shall be necessary to determine
the Revolving Loan Outstandings, as determined by Agent in its sole discretion;
provided, that Agent shall recalculate the Dollar Equivalent of the
Revolving Loan Outstandings at least one time each calendar month and otherwise
in accordance with Section 1.18. U.S. Borrowing Availability or U.K.
Borrowing Availability, or both, may be reduced by Reserves imposed by Agent in
its sole reasonable credit judgment. Each Revolving Credit Advance shall be made
on notice by Borrower Representative to one of the representatives of Agent
identified in Schedule 1.1 at the address specified therein. Any such
notice must be given no later than (x) 11:00 a.m. (New York time) on the
Business Day of the proposed Revolving Credit Advance, in the case of an Index
Rate Loan in Dollars or (y) 11:00 a.m. (New York time) on the date which is
three (3) Business Days prior to the proposed Revolving Credit Advance, in the
case of a LIBOR Loan. Each such notice (a “Notice of Revolving Credit
Advance”) must be given in writing (by telecopy or overnight courier)
substantially in the form of Exhibit 1.1(a)(i), and shall include the
information required in such Exhibit and such other information as may be
required by Agent. If any Borrower desires to have any Revolving Credit Advance
be made as a LIBOR Loan, Borrower Representative must comply with Section
1.5(e). A Revolving Credit Advance may not be drawn in Sterling if Agent
determines at any time prior to 12:00 p.m. (New York time) on the date of such
proposed Revolving Credit Advance that by reason of any change in currency
availability, unusual instability in currency exchange rates or exchange
controls it is, or will be, impracticable for such Revolving Credit Advance to
be made in the Sterling. In such event, the proposed Revolving Credit Advance
shall be made in Dollars.


                              (ii)          Except
as provided in Section 1.12, each Borrower shall execute and deliver to
each Lender a note to evidence the Commitment of, and Revolving Credit Advances
made by, that Lender. Each note shall be in the principal amount of the
Commitment of the applicable Lender, dated the Closing Date (or such later date
as such Lender becomes


2





party to this
Agreement pursuant to Section 9.1(a) or modifies its Commitment pursuant
to Section 9.1(a)) and substantially in the form of Exhibit
1.1(a)(ii)-A (in the case of the U.S. Borrowers) or Exhibit 1.1(a)(ii)-B
(in the case of the U.K. Borrowers) (each a “Revolving Note” and, collectively,
the “Revolving Notes”). Each Revolving Note shall represent the joint
and several obligation of the applicable Borrowers to pay the amount of the
applicable Lender’s Commitment or, if less, such Lender’s Pro Rata Share of the
aggregate unpaid principal amount of all Revolving Credit Advances made to the
U.S. Borrowers or the U.K. Borrowers, as applicable, together with interest
thereon as prescribed in Section 1.5. In addition, each U.K. Borrower
shall execute and deliver to the Fronting Lender a note to evidence the
obligation of, and Sterling Revolving Credit Advances made by, the Fronting
Lender. Such note shall be in the principal amount of the Sterling Subfacility
Limit dated the Closing Date (or such later date as such Person shall become the
Fronting Lender pursuant to Section 9.7(b)) and substantially in the
form of Exhibit 1.1(a)(ii)-C (the “Fronting Lender Note”). The
Fronting Lender Note shall represent the joint and several obligation of the
U.K. Borrowers to pay the Fronted Percentage of the aggregate unpaid principal
amount of all Sterling Revolving Credit Advances made to the U.K. Borrowers,
together with interest thereon as prescribed in Section 1.5. The entire
unpaid balance of the aggregate Revolving Loan and all other non-contingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date.


                              (iii)          Anything
in this Agreement to the contrary notwithstanding, at the request of Borrower
Representative, in its discretion Agent may (but shall have absolutely no
obligation to), make Revolving Credit Advances (i) to U.S. Borrowers on behalf
of Lenders in Dollars in amounts that cause the sum of (a) the aggregate
outstanding balance of the Revolving Credit Advances and Swing Line Advances
outstanding to the U.S. Borrowers plus (b) the Dollar Equivalent of the
outstanding amount of Letter of Credit Obligations incurred for the benefit of
the U.S. Borrowers to exceed the U.S. Borrowing Base or (ii) to U.K. Borrowers
on behalf of the Sterling Lenders and the Fronting Lender in Sterling in
amounts that cause the sum of (a) the Dollar Equivalent of the aggregate
outstanding balance of the Revolving Credit Advances and Swing Line Advances
outstanding to the U.K. Borrowers plus (b) the Dollar Equivalent of the
outstanding amount of Letter of Credit Obligations incurred for the benefit of
the U.K. Borrowers to exceed the U.K. Borrowing Base (any such excess Revolving
Credit Advances are herein referred to collectively as “Overadvances”); provided,
that (A) no such event or occurrence shall cause or constitute a waiver of
Agent’s, Swing Line Lender’s, Fronting Lender’s or Lenders’ right to refuse to
make any further Overadvances, Swing Line Advances or Revolving Credit
Advances, or incur any Letter of Credit Obligations, as the case may be, at any
time that an Overadvance exists and (B) no Overadvance shall result in a
Default or Event of Default based on Borrowers’ failure to comply with Section
1.3(b)(ii) for so long as Agent permits such Overadvance to be outstanding,
but solely with respect to the amount of such Overadvance. In addition,
Overadvances may be made even if the conditions to lending set forth in Section
2 have not been met. All Overadvances shall constitute Index Rate Loans (in
the case of Overadvances denominated in Dollars) or LIBOR Loans having a
one-month LIBOR Period (in the case of Overadvances denominated in Sterling),
shall bear interest at the Default Rate and shall be payable on the earlier of
demand or the Commitment Termination Date. Except as otherwise provided in Section
1.11(b), the authority of Agent to make Overadvances is limited to an
aggregate amount not to exceed a Dollar Equivalent of $15,000,000 at any time,
shall not cause the Dollar Equivalent of the aggregate Revolving Loan to exceed
the Maximum Amount,


3





and may be
revoked prospectively by a written notice to Agent signed by the Requisite
Lenders; provided, that Overadvances made other than for the purpose of
protecting or preserving the Collateral shall not remain outstanding for more
than sixty (60) days without the written consent of Requisite Lenders. Agent
shall use commercially reasonable efforts to provide notice to Lenders
following the making of an Overadvance (unless one or more Overadvances are
already outstanding as of the date of such Overadvance).


                   
           (iv)   
     From the Fourth Amendment
Effective Date until March 1, 2014, the Borrowers may request that any
additional Person(s) may become party hereto as a Lender and provide additional
Commitments or any Lender may agree to increase its Commitment (any such Person
or Lender, an “Increase Lender”) pursuant to a joinder agreement (an
“Incremental Joinder”) in form and substance reasonably acceptable to Agent; provided that (A) the aggregate
amount of all such additional Commitments or increases in the Commitments of
the Increase Lenders under this Section 1.1(a)(iv) does not exceed $50,000,000
and (B) no Default or Event of Default has occurred and is continuing. The
Incremental Joinder may, without the consent of any other Lenders, effect such
amendments to this Agreement and the other Loan Documents as may be necessary
or appropriate, in the reasonable opinion of Agent and the Borrowers, to effect
the provisions of this Section 1.1(a)(iv). The consent of Agent (not to be
unreasonably withheld or delayed in the case of any Qualified Assignee) shall
be required prior to the addition of any Person as a Lender or the increase of the
Commitment of any Lender pursuant to this Section 1.1(a)(iv). Each Increase
Lender shall accept an assignment from the existing Lenders (and the Fronting
Lender, as applicable), and each such existing Lender (and the Fronting Lender,
as applicable) shall make a ratable assignment to such Increase Lender, of an
interest in the Revolving Loan Outstandings such that, after giving effect
thereto, the Revolving Loan Outstandings shall be held ratably by the Lenders
(including the Increase Lenders). Assignments pursuant to the immediately
preceding sentence shall be automatic after giving effect to any addition of
any Person as a Lender or any increase of the Commitment of any Lender, in
either case pursuant to this Section 1.1(a)(iv), and shall be made in exchange
for the principal amount assigned plus accrued and unpaid interest thereon and
any accrued and unpaid Fees in respect thereof. In addition, each applicable
Borrower shall pay any LIBOR breakage costs due to any existing Lender in
accordance with Section 1.13(b) (with any payment to any existing Lender in
respect of the assignment of any principal amount of any Loan pursuant to this
Section 1.1(a)(iv) being treated as a repayment of a Loan for purposes of such
Section 1.13(b)).


                    (b)      Swing
Line Facility.


                              (i)          Agent
shall notify the Swing Line Lender upon Agent’s receipt of any Notice of
Revolving Credit Advance in respect of a Revolving Credit Advance (a) to be
denominated in Dollars and to bear interest by reference to the Dollar Index
Rate or (b) to be denominated in Sterling and to bear interest by reference to
the Sterling Index Rate. Subject to the terms and conditions hereof, the Swing
Line Lender may, but shall have no duty to, in accordance with any such notice,
make available from time to time until the Commitment Termination Date advances
(each, a “Swing Line Advance”) (a) in Dollars to the U.S. Borrowers or
(b) in Sterling to the U.K. Borrowers. The provisions of this Section 1.1(b)
shall not relieve Lenders or the Fronting Lender of their obligations to make
Revolving Credit Advances under Section 1.1(a); provided, that if
the Swing Line Lender makes a Swing Line Advance pursuant to any such notice,
such Swing Line Advance shall be in lieu of any Revolving Credit Advance that


4





otherwise may
be made by the Lenders or the Fronting Lender pursuant to such notice. The
aggregate amount of Swing Line Advances outstanding shall not exceed at any
time the Swing Line Availability as of such time. Until the Commitment
Termination Date, the Borrowers may from time to time borrow, repay and
reborrow under this Section 1.1(b). Each Swing Line Advance shall be
made pursuant to a Notice of Revolving Credit Advance delivered to Agent by
Borrower Representative on behalf of the applicable Borrower in accordance with
Section 1.1(a). Any such notice must be given no later than (x) 3:00
p.m. (New York time) on the Business Day of the proposed Swing Line Advance, in
the case of a Swing Line Advance in Dollars or (y) 10:00 a.m. (New York time)
on the date which is two (2) Business Days prior to the proposed Swing Line
Advance, in the case of a Swing Line Advance in Sterling. Unless the Swing Line
Lender has received at least one Business Day’s prior written notice from
Requisite Lenders instructing it not to make a Swing Line Advance, the Swing
Line Lender shall, notwithstanding the failure of any condition precedent set
forth in Sections 2.2, be entitled to fund that Swing Line Advance, and
to have each Lender make Revolving Credit Advances in accordance with Section
1.1(b)(iii) or 1.1(b)(iv), as applicable, or purchase participating
interests in accordance with Section 1.1(b)(v). If any Lender shall fail
to make available to Agent its Pro Rata Share (or, in the case of any Swing
Line Advance in Sterling, the Fronting Lender shall fail to make available the
Fronted Percentage) of any Revolving Credit Advance in accordance with Section
1.1(b)(iii) or 1.1(b)(iv), as applicable, Borrowers shall repay the
outstanding principal amount of the portion of the Swing Line Loan then
outstanding due to such failure upon demand therefor by Agent.


                              (ii)          Each
Borrower shall execute and deliver to the Swing Line Lender a promissory note
to evidence the Swing Line Commitment. Such note shall be in the principal
amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing
Date and substantially in the form of Exhibit 1.1(b)(ii)-A (in the case
of the U.S. Borrowers) or Exhibit 1.1(b)(ii)-B (in the case of the U.K.
Borrowers) (each, a “Swing Line Note” and, collectively, the “Swing
Line Notes”). Each Swing Line Note shall represent the joint and several
obligation of the applicable Borrowers to pay the amount of the Swing Line
Commitment or, if less, the aggregate unpaid principal amount of all Swing Line
Advances made to the U.S. Borrowers or the U.K. Borrowers, as applicable,
together with interest thereon as prescribed in Section 1.5. The entire
unpaid balance of the Swing Line Loan and all other noncontingent Obligations
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date if not sooner paid in full.


                              (iii)          The
Swing Line Lender, at any time and from time to time no less frequently than
once weekly, shall on behalf of the Borrower Representative (and the Borrower
Representative hereby irrevocably authorizes the Swing Line Lender to so act on
its behalf) request each Lender (including the Swing Line Lender) to make
available to the U.S. Borrowers its Pro Rata Share of a Revolving Credit
Advance in Dollars equal to the principal amount of the portion of the Swing
Line Loan denominated in Dollars and outstanding on the date such notice is
given (the “Refunded Dollar Swing Line Loan”). Unless any of the events
described in Sections 8.1(g) or 8.1(h) has occurred (in which
event the procedures of Section 1.1(b)(v) shall apply) and regardless of
whether the conditions precedent set forth in this Agreement to the making of a
Revolving Credit Advance are then satisfied, each Lender shall disburse
directly to Agent its Pro Rata Share of such Revolving Credit Advance on behalf
of the Swing Line Lender prior to 3:00 p.m. (New York time) in immediately
available funds in Dollars on the Business 


5





Day next
succeeding the date that notice is given. The proceeds of each such Revolving
Credit Advance shall be immediately paid to the Swing Line Lender and applied
to repay the Refunded Dollar Swing Line Loan.


                              (iv)          The
Swing Line Lender, at any time and from time to time no less frequently than
once weekly, shall on behalf of the Borrower Representative (and the Borrower
Representative hereby irrevocably authorizes the Swing Line Lender to so act on
its behalf) request each Sterling Lender (including the Swing Line Lender, as
applicable) and the Fronting Lender to make available to the U.K. Borrowers its
Pro Rata Share (or, in the case of the Fronting Lender, the Fronted Percentage)
of a Revolving Credit Advance in Sterling equal to the principal amount of the
portion of the Swing Line Loan denominated in Sterling and outstanding on the
date such notice is given (the “Refunded Sterling Swing Line Loan”).
Unless any of the events described in Sections 8.1(g) or 8.1(h)
has occurred (in which event the procedures of Section 1.1(b)(v) shall
apply) and regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then satisfied, each
Sterling Lender and the Fronting Lender shall disburse directly to Agent its
Pro Rata Share (or, in the case of the Fronting Lender, the Fronted Percentage)
of such Revolving Credit Advance on behalf of the Swing Line Lender prior to
3:00 p.m. (New York time) in immediately available funds in Sterling on the
second Business Day next succeeding the date that notice is given. The proceeds
of each such Revolving Credit Advance shall be immediately paid to the Swing
Line Lender and applied to repay the Refunded Sterling Swing Line Loan. Each
Non-Sterling Lender shall purchase an undivided participation interest in each
such Sterling Revolving Credit Advance from the Fronting Lender in accordance
with Section 9.9(e)(i). 


                              (v)          If,
prior to refunding a portion of the Swing Line Loan with a Revolving Credit
Advance pursuant to Section 1.1(b)(iii) or 1.1(b)(iv), one of the
events described in Sections 8.1(g) or 8.1(h) has occurred, then,
subject to the provisions of Section 1.1(b)(vi) below:


	
  

 	
  

 
	
  

 	
           (A)                              in
 the case of any portion of the Swing Line Loan denominated in Dollars, each
 Lender shall, on the date such Revolving Credit Advance was to have been made
 pursuant to Section 1.1(b)(iii), purchase from the Swing Line Lender
 an undivided participation interest in the Swing Line Loan in an amount equal
 to its Pro Rata Share of such portion of the Swing Line Loan. Upon request,
 each Lender shall promptly transfer to the Swing Line Lender, in immediately
 available funds in Dollars, the amount of each such participation interest;
 or

 
	
  

 	
  

 
	
  

 	
           (B)                              in
 the case of any portion of the Swing Line Loan denominated in Sterling, each
 Sterling Lender and the Fronting Lender shall, on the date such Revolving
 Credit Advance was to have been made pursuant to Section 1.1(b)(iv),
 purchase from the Swing Line Lender an undivided participation interest in
 the Swing Line Loan in an amount equal to its Pro Rata Share (or, in the case
 of the Fronting Lender, the Fronted Percentage) of such portion of the Swing
 Line Loan. Upon request, each Sterling Lender and the Fronting Lender shall
 promptly transfer to the Swing Line Lender, in immediately available funds in
 Sterling, the amount of each such participation interest. Each Non-Sterling
 Lender shall purchase an undivided participation interest in 

 



6









	
  

 	
  

 
	
  

 	
 each such
 participation interest purchased by the Fronting Lender in accordance with Section
 9.9(e)(i).

 



                              (vi)          Each
Lender’s and the Fronting Lender’s obligation to make Revolving Credit Advances
in accordance with Sections 1.1(b)(iii) and 1.1(b)(iv) and to
purchase participation interests in accordance with Section 1.1(b)(v)
shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense or
other right that such Lender or the Fronting Lender may have against the Swing
Line Lender, any Borrower or any other Person for any reason whatsoever; (B)
the occurrence or continuance of any Default or Event of Default; (C) any
inability of any Borrower to satisfy the conditions precedent to borrowing set
forth in this Agreement at any time or (D) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing. If any Lender
or the Fronting Lender does not make available to Agent or the Swing Line
Lender, as applicable, the amount required pursuant to Sections 1.1(b)(iii),
1.1(b)(iv) or 1.1(b)(v), as the case may be, the Swing Line Lender shall be
entitled to recover such amount on demand from such Lender or the Fronting
Lender, as applicable, together with interest thereon for each day from the
date of non-payment until such amount is paid in full (x) in the case of any
portion of the Swing Line Loan denominated in Dollars, at the Federal Funds
Rate for the first two Business Days and at the Dollar Index Rate thereafter or
(y) in the case of any portion of the Swing Line Loan denominated in Sterling,
at the Sterling Index Rate.


                    (c)     Reliance
on Notices; Appointment of Borrower Representative. Agent shall be entitled
to rely upon, and shall be fully protected in relying upon, any Notice of
Revolving Credit Advance, Notice of Conversion/Continuation or similar notice
believed by Agent to be genuine. Agent may assume that each Person executing
and delivering any notice in accordance herewith was duly authorized, unless
the responsible individual acting thereon for Agent has actual knowledge to the
contrary. Each Borrower hereby designates Parent as its representative and
agent on its behalf for the purposes of issuing Notices of Revolving Credit
Advances and Notices of Conversion/Continuation, giving instructions with
respect to the disbursement of the proceeds of the Loans, selecting interest
rate options, requesting Letters of Credit, giving and receiving all other
notices and consents hereunder or under any of the other Loan Documents and
taking all other actions (including in respect of compliance with covenants) on
behalf of any Borrower or Borrowers under the Loan Documents. Borrower
Representative hereby accepts such appointment. Agent and each Lender may
regard any notice or other communication pursuant to any Loan Document from
Borrower Representative as a notice or communication from all Borrowers, and
may give any notice or communication required or permitted to be given to any
Borrower or Borrowers hereunder to Borrower Representative on behalf of such
Borrower or Borrowers. Each Borrower agrees that each notice, election,
representation and warranty, covenant, agreement and undertaking made on its
behalf by Borrower Representative shall be deemed for all purposes to have been
made by such Borrower and shall be binding upon and enforceable against such
Borrower to the same extent as if the same had been made directly by such
Borrower.


7





                    1.2          Letters
of Credit.


                    Subject
to and in accordance with the terms and conditions contained herein and in Annex
B, Borrower Representative, on behalf of the applicable Borrower (and any
Subsidiary thereof that may be a co-applicant on any applicable Letter of
Credit), shall have the right to request, and Lenders agree to incur, or
purchase participations in, Letter of Credit Obligations.


                    1.3          Prepayments;
Commitment Reductions. 


                    (a)          Voluntary
Prepayments; Reductions in Commitments. 


                                   (i)          Borrower
Representative shall notify Agent (and, in the case of prepayment of a Swing
Line Loan, the Swing Line Lender) by telephone confirmed in writing of any
prepayment of a Loan hereunder (i) in the case of a LIBOR Loan, not later than
4:00 p.m. (New York time) on the date which is three (3) Business Days before
the date of such prepayment, and (ii) in the case of an Index Rate Loan, not
later than 11:00 a.m. (New York time) on the date of such prepayment. Each such
notice shall be irrevocable and shall specify the prepayment date and the
principal amount of each Loan or portion thereof to be prepaid. Promptly
following receipt of any such notice, Agent shall provide notice to Lenders
thereof. Each partial prepayment of any Loan shall be in a minimum amount of
(i) if denominated in Dollars, $5,000,000 or an integral multiple of $1,000,000
in excess of such amount or (ii) if denominated in Sterling, £3,000,000 or an
integral multiple of £500,000 in excess of such amount. 


                                   (ii)          Borrowers
may at any time, on at least five (5) days’ prior written notice by Borrower
Representative to Agent of the intent of the Borrowers to effect such a
reduction and at least two (2) days’ prior written notice by Borrower
Representative to Agent of the exact date on which such reduction shall occur,
permanently reduce (but not terminate) the Commitment; provided, that
(A) any such reduction shall be in a minimum amount of $5,000,000 and integral
multiples of $1,000,000 in excess of such amount, (B) the Commitment shall not
be reduced to an amount less than the greater of (i) $75,000,000, and (ii) the
sum of (x) the Dollar Equivalent of the amount of the aggregate Revolving Loan
then outstanding and (y) the Dollar Equivalent of the Swing Line Loan then
outstanding, and (C) after giving effect to such reductions, Borrowers shall
comply with Sections 1.3(b)(i) and (ii). In addition, Borrowers may at
any time, on at least ten (10) days’ prior written notice by Borrower
Representative to Agent of the intent of the Borrowers to effect such a
termination and at least two (2) days’ prior written notice by Borrower Representative
to Agent of the exact date on which such termination shall occur, terminate the
Commitment; provided, that upon such termination, all Loans and other
Obligations shall be immediately due and payable in full and all Letter of
Credit Obligations shall be cash collateralized or otherwise satisfied in
accordance with Annex B hereto. Any reduction or termination of the Commitment
must be accompanied by payment of the Fee required by Section 1.9(c), if
any, plus the payment of any LIBOR funding breakage costs in accordance with Section
1.13(b). Upon any such reduction or termination of the Commitment, each
Borrower’s right to request Revolving Credit Advances, or request that Letter
of Credit Obligations be incurred on its behalf, or request Swing Line Advances,
shall simultaneously be permanently reduced or terminated, as the case may be; provided,
that a permanent reduction of the Commitment below $100,000,000 shall require a
corresponding pro  


8





rata reduction
in the Sterling Subfacility Limit and the L/C Sublimit to the extent of such
reduction below $100,000,000.


                    (b)          Mandatory
Prepayments.


                                  (i)          If
at any time the aggregate outstanding balance of the Revolving Loan and the
Swing Line Loan exceeds the Maximum Amount, Borrowers shall immediately repay
the aggregate outstanding Revolving Credit Advances and Swing Line Advances to
the extent required to eliminate such excess. If any such excess remains after
repayment in full of the aggregate outstanding Revolving Credit Advances and
Swing Line Advances, Borrowers shall provide cash collateral for the Letter of
Credit Obligations in the manner set forth in Annex B to the extent of
such remaining excess. If at any time the Dollar Equivalent of the aggregate
outstanding principal balance of Revolving Credit Advances and Swing Line
Advances outstanding to the U.K. Borrowers and the Dollar Equivalent of the
outstanding Letter of Credit Obligations incurred on behalf of the U.K.
Borrowers, in the aggregate, exceed the Sterling Subfacility Limit, the U.K.
Borrowers shall, at Agent’s request, immediately repay such Revolving Credit
Advances and Swing Line Advances to the extent required to eliminate such
excess. If any such excess remains after repayment in full of the aggregate
outstanding principal balance of such Revolving Credit Advances and Swing Line
Advances, the U.K. Borrowers shall, at Agent’s request, provide cash collateral
for such Letter of Credit Obligations in the manner set forth in Annex B to the
extent of such remaining excess. 


                                  (ii)          If
at any time the aggregate outstanding balance of the Revolving Credit Advances
and Swing Line Advances outstanding to the U.S. Borrowers and the Dollar Equivalent
of the Letter of Credit Obligations incurred on behalf of the U.S. Borrowers,
in the aggregate, exceed the U.S. Borrowing Base, the U.S. Borrowers shall
immediately repay such outstanding Revolving Credit Advances and Swing Line
Advances to the extent required to eliminate such excess. If any such excess
remains after repayment in full of such outstanding Revolving Credit Advances
and Swing Line Advances, the U.S. Borrowers shall provide cash collateral for
such Letter of Credit Obligations in the manner set forth in Annex B to
the extent of such remaining excess. If at any time the Dollar Equivalent of
the aggregate outstanding balance of the Revolving Credit Advances and Swing
Line Advances outstanding to the U.K. Borrowers and the Dollar Equivalent of
the Letter of Credit Obligations incurred on behalf of the U.K. Borrowers, in
the aggregate, exceed the U.K. Borrowing Base, the U.K. Borrowers shall
immediately repay such outstanding Revolving Credit Advances and Swing Line
Advances to the extent required to eliminate such excess. If any such excess
remains after repayment in full of the aggregate outstanding principal balance
of such Revolving Credit Advances and Swing Line Advances, the U.K. Borrowers
shall, at Agent’s request, provide cash collateral for such Letter of Credit
Obligations in the manner set forth in Annex B to the extent of such
remaining excess. Notwithstanding the foregoing, any Overadvance made pursuant
to Section 1.1(a)(iii) shall be repaid in accordance with Section
1.1(a)(iii).


                                  
(iii)       Subject
to Section 1.3(c), immediately upon receipt by any Sotheby Entity of any
cash proceeds of any asset disposition, the applicable Borrower (which is the
Borrower that received such cash proceeds or, if such cash proceeds are
received by a Sotheby Entity other than a Borrower, which is the Borrower that
is the most direct holder of Stock of such Sotheby Entity) shall prepay the
Secured Obligations (and cash collateralize the 


9





Letter of
Credit Obligations, as applicable) in an amount equal to all of such proceeds,
net of (A) commissions and other reasonable and customary transaction costs,
fees and expenses properly attributable to such transaction and payable by
Sotheby Entities in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior
Liens on such asset (to the extent such Liens constitute Permitted Encumbrances
hereunder), if any, and (D) an appropriate reserve for income taxes in
accordance with GAAP in connection therewith. Any such prepayment shall be
applied in accordance with Section 1.3(d) or (e), as applicable.
The following shall not be subject to mandatory prepayment under this clause
(iii): (1) proceeds of sales of Inventory in the ordinary course of
business; (2) asset dispositions giving rise to proceeds having a Dollar
Equivalent of less than $1,000,000 in the aggregate for any Fiscal Year; and
(3) asset disposition proceeds with respect to Equipment or Fixtures that are
reinvested in Equipment or Fixtures within one hundred and eighty (180) days of
receipt thereof; provided, that the Borrower Representative notifies Agent of
its intent to reinvest at the time such proceeds are received and when such
reinvestment occurs.


                                  
(iv)          Subject
to Section 1.3(c), if any Sotheby Entity issues Stock to any entity
other than another Sotheby Entity, no later than the Business Day following the
date of receipt of any cash proceeds thereof, the applicable Borrower (which is
the Borrower that received such cash proceeds or, if such cash proceeds are
received by a Sotheby Entity other than a Borrower, which is the Borrower that
is the most direct holder of Stock of such Sotheby Entity) shall prepay the
Secured Obligations (and cash collateralize Letter of Credit Obligations, as
applicable) in an amount equal to all such proceeds, net of underwriting
discounts and commissions and other reasonable costs paid to non-Affiliates in
connection therewith. Any such prepayment shall be applied in accordance with Section
1.3(d) or (e), as applicable. The following shall not be subject to
prepayment under this clause (iv) up to a Dollar Equivalent of
$1,000,000 in the aggregate for any Fiscal Year: (1) proceeds of Stock
issuances to employees of any Sotheby Entity and (2) proceeds of Stock
issuances to Persons that hold Stock of Parent as of the Closing Date.


                    (c)          Adjustments
to Mandatory Prepayment Amounts. The Borrowers shall be required to make
any prepayment otherwise payable pursuant to Sections 1.3(b)(iii),
1.3(b)(iv) or 5.4 only to the extent that the amount of such prepayment
exceeds (i) in the case of the U.S. Borrowers, the U.S. Borrowing Availability
as of the date of such required prepayment or (ii) in the case of the U.K.
Borrowers, the U.K. Borrowing Availability as of the date of such required
prepayment, in each case as set forth in a Borrowing Base Certificate delivered
as of the date of such required prepayment. In addition, if, after giving
effect to the previous sentence, any U.K. Borrower shall be required to make a
prepayment pursuant to Sections 1.3(b)(iii), 1.3(b)(iv) or 5.4 in excess
of the outstanding principal balance of the Revolving Credit Advances and Swing
Line Advances outstanding to the U.K. Borrowers and the Letter of Credit
Obligations incurred on behalf of the U.K. Borrowers, in the aggregate, as of
such date, then the U.S. Borrowers shall be jointly and severally liable to
make a prepayment of the Loans (and cash collateralize the Letter of Credit
Obligations) (in addition to any prepayment made by such U.K. Borrower pursuant
to Sections 1.3(b)(iii), 1.3(b)(iv) or 5.4, as applicable) in an amount
equal to (i) the amount of such excess minus (ii) the U.S. Borrowing
Availability as of the date of such required prepayment as set forth in a
Borrowing Base Certificate delivered to Agent.


10





                    (d)          Application
of Mandatory Prepayments by U.S. Borrowers. Subject to the terms of the Collateral
Documents, any prepayments made by any U.S. Borrower pursuant to Sections
1.3(b)(iii) or (iv) or Section 5.4 shall be applied as follows: first,
to Fees and reimbursable expenses of Agent then due and payable pursuant to any
of the Loan Documents; second, to interest then due and payable on Swing
Line Advances outstanding to the U.S. Borrowers; third, to the principal
balance of Swing Line Advances outstanding to the U.S. Borrowers until the same
have been paid in full; fourth, to interest then due and payable on
Revolving Credit Advances outstanding to the U.S. Borrowers; fifth, to
the principal balance of Revolving Credit Advances outstanding to the U.S.
Borrowers until the same have been paid in full; sixth, to any Letter of
Credit Obligations incurred on behalf of the U.S. Borrowers to provide cash
collateral therefor in the manner set forth in Annex B, until all such Letter
of Credit Obligations have been fully cash collateralized in the manner set
forth in Annex B; seventh, to any other Obligations owing by the U.S.
Credit Parties; eighth, to interest then due and payable on Swing Line
Advances outstanding to the U.K. Borrowers; ninth, to the principal
balance of Swing Line Advances outstanding to the U.K. Borrowers until the same
have been paid in full; tenth, to interest then due and payable on the
Revolving Credit Advances outstanding to the U.K. Borrowers; eleventh,
to the principal balance of the Revolving Credit Advances outstanding to the
U.K. Borrowers until the same have been paid in full; twelfth, to any
Letter of Credit Obligations incurred on behalf of the U.K. Borrowers to
provide cash collateral therefor in the manner set forth in Annex B,
until all such Letter of Credit Obligations have been fully cash collateralized
in the manner set forth in Annex B; thirteenth, to any other
Obligations owing by the U.K. Credit Parties; and, last, to any amounts
then due and payable by the Credit Parties in respect of Bank Product and
Hedging Obligations. The Commitment shall not be permanently reduced by the
amount of any such prepayments.  


                    (e)          Application
of Mandatory Prepayments by U.K. Borrowers. Subject to the terms of the
Collateral Documents, any prepayments made by any U.K. Borrower pursuant to Sections
1.3(b)(iii) or (iv) or Section 5.4 above shall be applied as
follows: first, to Fees and reimbursable expenses of Agent then due and
payable pursuant to any of the Loan Documents in respect of the Revolving Loans
made to the U.K. Borrowers; second, to interest then due and payable on
Swing Line Advances outstanding to the U.K. Borrowers; third, to the
principal balance of Swing Line Advances outstanding to the U.K. Borrowers
until the same have been paid in full; fourth, to interest then due and
payable on Revolving Credit Advances outstanding to the U.K. Borrowers; fifth,
to the principal balance of Revolving Credit Advances outstanding to the U.K.
Borrowers until the same have been paid in full; sixth, to any Letter of
Credit Obligations incurred on behalf of the U.K. Borrowers to provide cash
collateral therefor in the manner set forth in Annex B, until all such Letter
of Credit Obligations have been fully cash collateralized in the manner set
forth in Annex B; seventh, to any other Obligations owing by the
U.K. Credit Parties; and, last, to any amounts then due and payable by
the U.K. Credit Parties in respect of Bank Product and Hedging Obligations.
Neither the Commitment nor the Sterling Subfacility Limit shall be permanently
reduced by the amount of any such prepayments. 


                    (f)          No
Implied Consent. Nothing in this Section 1.3 shall be construed to
constitute Agent’s or any Lender’s consent to any transaction that is not
permitted by other provisions of this Agreement or the other Loan Documents.


11





                     (g)          Application
to Revolving Credit Advances. Any prepayment made on any outstanding
Revolving Credit Advances pursuant to Sections 1.1(a)(i), 1.3(b) or 5.4
shall be applied as follows: first, to such Revolving Credit Advances
that are Index Rate Loans; and second, to such Revolving Credit Advances
that are LIBOR Loans, in the order of the LIBOR Loans with the shortest LIBOR
Periods to the LIBOR Loans with the longest LIBOR Periods. Application to
specific Advances pursuant to this Section 1.3(g) shall not affect the
calculation of the indemnities, if any, owing to the Lenders pursuant to Section
1.13(b).


                     1.4          Use
of Proceeds.


                     Borrowers
shall utilize the proceeds of the Loans solely for the financing of Borrowers’
ordinary working capital and general corporate needs. Disclosure Schedule
(1.4) contains a description of Borrowers’ sources and uses of funds as of
the Closing Date, including any Loans and Letter of Credit Obligations to be
made or incurred on that date, and a funds flow memorandum detailing how funds
from each source are to be transferred to particular uses.


                     1.5          Interest
and Applicable Margins. 


                     (a)          Borrowers
shall pay interest to Agent, for the ratable benefit of Lenders and the
Fronting Lender in accordance with the various Loans being made by each Lender
and the Fronting Lender, in arrears on each applicable Interest Payment Date,
at the following rates: (i) with respect to the Dollar Revolving Credit
Advances, the Dollar Index Rate plus the Applicable Dollar Revolver Index
Margin per annum or, at the election of Borrower Representative, the applicable
Dollar LIBOR Rate plus the Applicable Dollar Revolver LIBOR Margin per annum,
(ii) with respect to the Sterling Revolving Credit Advances, the applicable
Sterling LIBOR Rate plus the Applicable Sterling Revolver LIBOR Margin per
annum plus the Mandatory Cost, (iii) with respect to Swing Line Advances
denominated in Dollars, the Dollar Index Rate plus the Applicable Dollar
Revolver Index Margin per annum and (iv) with respect to Swing Line Advances
denominated in Sterling, the Sterling Index Rate plus the Applicable Sterling
Revolver Index Margin per annum.


                     As
of the ClosingFourth Amendment Effective
Date, the Applicable Margins are as follows:


	
  

 	
  

 	
  

 
	
    Applicable Dollar Revolver Index Margin

 	
  

 	
 3.001.50%

 
	
    Applicable
 Dollar Revolver LIBOR Margin

 	
  

 	
 4.002.50%

 
	
    Applicable
 Sterling Revolver Index Margin

 	
  

 	
 3.001.50%

 
	
    Applicable
 Sterling Revolver LIBOR Margin

 	
  

 	
 4.002.50%

 
	
    Applicable
 L/C Margin

 	
  

 	
 4.002.50%

 
	
    Applicable
 Unused Line Fee Margin

 	
  

 	
 1.000.625%

 



12





                     The
Applicable Margins shall be adjusted by reference to the following grids:


	
  

 	
  

 	
  

 
	
    If the Usage for such Business Day is:

 	
  

 	
 Level of 

 Applicable Margins:

 
	
    < 25% 

 	
  

 	
 Level I

 
	
    >25%
 but < 75%

 	
  

 	
 Level II

 
	
    >75%

 	
  

 	
 Level III

 






	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Applicable Margins

 
	
  

 	
  

 	
 Level I

 	
  

 	
 Level II

 	
  

 	
 Level III

 
	
    Applicable
 Dollar Revolver Index Margin

 	
  

 	
 3.001.50%

 	
  

 	
 3.251.75%

 	
  

 	
 3.502.00%

 
	
    Applicable
 Dollar Revolver LIBOR Margin

 	
  

 	
 4.002.50%

 	
  

 	
 4.252.75%

 	
  

 	
 4.503.00%

 
	
    Applicable
 Sterling Revolver Index Margin

 	
  

 	
 3.001.50%

 	
  

 	
 3.251.75%

 	
  

 	
 3.502.00%

 
	
    Applicable
 Sterling Revolver LIBOR Margin

 	
  

 	
 4.002.50%

 	
  

 	
 4.252.75%

 	
  

 	
 4.503.00%

 
	
    Applicable
 L/C Margin

 	
  

 	
 4.002.50%

 	
  

 	
 4.252.75%

 	
  

 	
 4.503.00%

 



                    Adjustments
in the Applicable Margins shall be implemented each Business Day. If an Event
of Default has occurred and is continuing at the time any reduction in such
Applicable Margins is to be implemented, that reduction shall be deferred until
the first Business Day following the date on which such Event of Default is
waived or cured.


                    (b)          If
any payment on any Loan becomes due and payable on a day other than a Business
Day, the maturity thereof will be extended to the next succeeding Business Day
(except as set forth in the definition of LIBOR Period) and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension.


                    (c)          All
computations of Fees calculated on a per annum basis and interest on all Loans
denominated in Dollars shall be made by Agent on the basis of a 360-day year,
in each case for the actual number of days occurring in the period for which
such interest and Fees are payable. All computations of interest on all Loans
denominated in Sterling shall be made by Agent on the basis of a 365-day year
for the actual number of days occurring in the period for which such interest
is payable. The Dollar Index Rate and the Sterling Index Rate are floating
rates determined for each day. Each determination by Agent of an interest rate
and Fees hereunder shall be presumptive evidence of the correctness of such
rates and Fees.


                    (d)          So
long as an Event of Default has occurred and is continuing under Section
8.1(a), (g) or (h) or so long as any other Event of Default has occurred
and is continuing and at the election of Agent (or upon the written request of
Requisite Lenders) confirmed by written notice from Agent to Borrower
Representative, the interest rates applicable to the Loans and the Letter of
Credit Fees shall be increased by two percentage points (2%) per annum above
the rates of interest or the rate of such Fees otherwise applicable hereunder
(the “Default Rate”), and all outstanding Obligations shall bear
interest at the Default Rate applicable to such 


13





Obligations.
Interest and Letter of Credit Fees at the Default Rate shall accrue from the
initial date of such Event of Default until that Event of Default is cured or
waived and shall be payable upon demand.


                    (e)          Subject
to the conditions precedent set forth in Section 2.2, Borrower
Representative shall have the option to (i) request that any Revolving Credit
Advance denominated in Dollars be made as a LIBOR Loan, (ii) convert at any
time all or any portion of the outstanding Revolving Loan denominated in
Dollars from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan
denominated in Dollars to an Index Rate Loan, subject to payment of LIBOR
breakage costs in accordance with Section 1.13(b) if such conversion is
made prior to the expiration of the LIBOR Period applicable thereto, or (iv)
continue all or any portion of the outstanding Revolving Loan as a LIBOR Loan
upon the expiration of the applicable LIBOR Period and the succeeding LIBOR
Period of that continued portion of the outstanding Revolving Loan shall commence
on the first day after the last day of the LIBOR Period of the portion of the
outstanding Revolving Loan to be continued. Any portion of the outstanding
Revolving Loan to be made or continued as, or converted into, a LIBOR Loan must
be in a minimum amount of (i) if denominated in Dollars, $5,000,000 or an
integral multiple of $1,000,000 in excess of such amount or (ii) if denominated
in Sterling, £3,000,000 or an integral multiple of £500,000 in excess of such
amount. Any such election must be made by 11:00 a.m. (New York time) on the
third Business Day prior to (1) the date of any proposed Revolving Credit
Advance which is to be made as a LIBOR Loan, (2) the end of each LIBOR Period
with respect to any LIBOR Loans to be continued as such, or (3) the date on
which Borrower Representative wishes to convert any Index Rate Loan to a LIBOR
Loan for a LIBOR Period designated by Borrower Representative in such election.
If no election is received with respect to a LIBOR Loan by 11:00 a.m. (New York
time) on the third Business Day prior to the end of the LIBOR Period with
respect thereto (or if a Default or an Event of Default has occurred and is
continuing or if the additional conditions precedent set forth in Section
2.2 shall not have been satisfied), (i) if such LIBOR Loan is denominated
in Dollars, such LIBOR Loan shall be converted to an Index Rate Loan at the end
of its LIBOR Period and (ii) if such LIBOR Loan is denominated in Sterling,
such LIBOR Loan shall be continued as a LIBOR Loan having a LIBOR Period of one
month. Borrower Representative must make such election by notice to Agent in
writing, by telecopy or overnight courier. In the case of any conversion or
continuation, such election must be made pursuant to a written notice (a “Notice
of Conversion/Continuation”) in the form of Exhibit 1.5(e).
Notwithstanding anything in this Section 1.5(e) or Agreement to the
contrary, conversions and continuations of Index Rate Loans and LIBOR Loans
hereunder shall not result in refinancings or repayments of such portions of
the outstanding Revolving Loan, but only repricings of such continuously
outstanding portions of the outstanding Revolving Loan.


                    (f)          Notwithstanding
anything to the contrary set forth in this Section 1.5, if a court of
competent jurisdiction determines in a final order that the rate of interest
payable hereunder exceeds the highest rate of interest permissible under law
(the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable hereunder shall be equal to
the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that 


14





would have
been received had the interest rate payable hereunder been (but for the
operation of this paragraph) the interest rate payable since the Closing Date
as otherwise provided in this Agreement. In no event shall the total interest
received by any Lender pursuant to the terms hereof exceed the amount that such
Lender could lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate.


                    1.6          Eligible
Art Loans.


                    All
of the Art Loans owned by each Borrower and reflected in the most recent
Borrowing Base Certificate delivered by the Borrower Representative to Agent
shall be “Eligible Art Loans” for purposes of this Agreement, except any
Art Loans to which any of the exclusionary criteria set forth below applies.
Agent shall have the right to establish, modify or eliminate Reserves against
Eligible Art Loans from time to time in its sole reasonable credit judgment. In
addition, Agent reserves the right, at any time and from time to time after the
Closing Date, to adjust any of the criteria set forth below and to establish
new criteria, and to adjust advance rates with respect to Eligible Art Loans,
in its reasonable credit judgment, reflecting changes in the collectibility or
realization values of such Art Loans arising or discovered by Agent after the
Closing Date subject to the approval of Supermajority Lenders in the case of
adjustments or new criteria or changes in advance rates which have the effect
of making more credit available; provided that, for purposes of clarity,
Agent will not be required at any time to obtain any approval from any Lenders
or any other Person(s) for the establishment, modification or elimination of
any Reserves against Eligible Art Loans. Eligible Art Loans shall not include
any Art Loan of any Borrower:


                    (a)          with
respect to which (i) such Borrower shall not have conducted (x) appropriate
UCC, tax lien and judgment searches (or applicable equivalent) against the
applicable Art Loan Debtor or (y) in the case of any Art Loan Debtor located in
the United Kingdom, appropriate bankruptcy, winding up and company searches
against the applicable Art Loan Debtor or (ii) the results of such searches
shall have indicated any material risk with respect to the applicable Art Loan
Debtor or the Works of Art securing repayment of such Art Loan;


                    (b)          with
respect to which (i) such Art Loan and the related security interest are not
governed by a loan and security agreement reasonably acceptable to Agent in
form and substance, or (ii) any material terms of the related loan and security
agreement and/or any other related documentation are not binding and
enforceable;


                    (c)          with
respect to which any payment under the related loan agreement (or any other Art
Loan outstanding to such related Art Loan Debtor) has been deemed by such
Borrower to be non-accrual;


                    (d)          that
is subject to any litigation challenging the validity or enforceability of such
Art Loan or any related documentation, unless (i) such Borrower has notified
Agent of such litigation, and (ii) Agent has determined in its reasonable
judgment, pursuant to a written notice to such Borrower (not to be unreasonably
withheld or delayed), that such litigation does not constitute good faith litigation;


15





                    (e)          (i)
that is not denominated in Dollars, Canadian Dollars, Sterling, Euros, Swiss
Francs or an Alternative Art Loan Currency or (ii) if such Art Loan is
denominated in an Alternative Art Loan Currency, unless Agent shall have
otherwise agreed, a Credit Party (in the case of any U.K. Borrower) or a U.S.
Credit Party (in the case of any U.S. Borrower) shall have not entered into a
Rate Management Transaction reasonably acceptable to Agent (x) having a
notional amount substantially equal to the outstanding principal balance of
such Art Loan at all times until the maturity of such Art Loan and (y) directly
mitigating the risk associated with changes in the exchange rate between the
currency in which such Art Loan is denominated and Dollars (in the case of any
Art Loan owned by a U.S. Borrower) or Sterling (in the case of any Art Loan
owned by a U.K. Borrower) at all times until the maturity of such Art Loan;


                    (f)          that
was not generated in the ordinary course of the applicable Borrower’s business;



                    (g)          unless
Agent shall have otherwise agreed, that by its terms is not due and payable
within 18 months; provided that, Art Loans that by their terms are due
and payable after 18 months but within 24 months shall not be excluded as
“Eligible Art Loans” pursuant to this clause to the extent the outstanding
principal balance of such Eligible Art Loans does not exceed $100,000,000 in
the aggregate;


                    (h)          to
the extent that any defense, counterclaim, setoff or dispute (other than any
dispute described in clause (d) above or in clauses (h) or (i) of the
definition of “Eligible Art Loan Collateral”) is asserted as to repayment by
the relevant Art Loan Debtor of such Art Loan or as to any failure by any
Sotheby Entity to fund any unfunded commitment of such Sotheby Entity to make
future Art Loans to the relevant Art Loan Debtor, unless (i) such Borrower has
notified Agent of such defense, counterclaim, setoff or dispute, and (ii) Agent
has determined in its reasonable judgment, pursuant to a written notice to such
Borrower (not to be unreasonably withheld or delayed), that such defense,
counterclaim, setoff or dispute is not asserted in good faith;


                    (i)          that
(i) is not subject to a first priority lien in favor of Agent, on behalf of the
Secured Parties, or (ii) is subject to any Lien of any Person other than Agent,
except Permitted Encumbrances;


                    (j)          with
respect to which the Art Loan Debtor is a director, officer, other employee or
Affiliate of any Sotheby Entity, unless Agent shall have determined, in its
sole discretion, that such Art Loan shall constitute an Eligible Art Loan
notwithstanding the provisions of this clause (j);


                    (k)          that
is the obligation of an Art Loan Debtor that is the United States government or
a political subdivision thereof, or any state, county or municipality or
department, agency or instrumentality thereof;


                    (l)          to
the extent by which the outstanding principal balance of such Art Loan exceeds
fifty percent (50%) of the aggregate Estimated Value of the Works of Art
securing repayment of such Art Loan that constitute Eligible Art Loan
Collateral;


16





                    (m)          in
the case of an Art Loan Debtor that is not an individual, such Borrower has not
obtained confirmation of authorization of the incurrence of such Art Loan by
such Person and the individuals executing documents on its behalf;


                    (n)          with
respect to which (i) a petition is filed by or against the related Art Loan
Debtor under any bankruptcy law or any other federal, state or foreign
(including any provincial) receivership, insolvency relief or other law or laws
for the relief of debtors or (ii) the related Art Loan Debtor makes a general
assignment for the benefit of creditors;


                    (o)          to
the extent any Sotheby Entity is liable for goods sold or services rendered by
the applicable Art Loan Debtor to such Sotheby Entity, but only to the extent
of the potential offset;


                    (p)          with
respect to which (i) any of the documentation evidencing such Art Loan is not
in the possession of such Borrower or Agent or (ii) any of the representations
or warranties in this Agreement and the other Loan Documents pertaining to such
Art Loan is untrue;


                    (q)          to
the extent such Art Loan exceeds any credit limit with respect to any Art Loan
Debtor established by Agent, in its reasonable credit judgment, taking into
account the nature and value of the Works of Art securing such Art Loan and
after consultation with the Borrower Representative; or


                    (r)          with
respect to which the initial outstanding principal amount, if owned by a U.S.
Borrower, is less than $25,000.


                    1.7          Eligible
Art Inventory. 


                    All
of the Art Inventory owned by the Borrowers and reflected in the most recent
Borrowing Base Certificate delivered by each Borrower to Agent shall be “Eligible
Art Inventory” for purposes of this Agreement, except any Art Inventory to
which any of the exclusionary criteria set forth below applies. Agent shall
have the right to establish, modify or eliminate Reserves against Eligible Art
Inventory from time to time in its sole reasonable credit judgment. In
addition, Agent reserves the right, at any time and from time to time after the
Closing Date, to adjust of the criteria set forth below and to establish new
criteria and to adjust advance rates with respect to Eligible Art Inventory, in
its reasonable credit judgment reflecting changes in the salability or
realization values of Art Inventory arising or discovered by Agent after the
Closing Date, subject to the approval of Supermajority Lenders in the case of
adjustments or new criteria or changes in advance rates which have the effect
of making more credit available; provided that, for purposes of clarity,
Agent will not be required at any time to obtain any approval from any Lenders
or any other Person(s) for the establishment, modification or elimination of
any Reserves against Eligible Art Inventory. Eligible Art Inventory shall not
include any Art Inventory of any Borrower that:


                    (a)          is
owned by such Borrower as part of a joint venture or profit/loss sharing
arrangement or otherwise is not owned solely by such Borrower, unless (i) Agent
shall have otherwise agreed, or (ii) such Borrower has ultimate control of the
disposition of such Art 


17





Inventory, in
which case such Art Inventory shall be eligible to constitute Eligible Art
Inventory to the extent of such Borrower’s ownership interest therein;


                    (b)          other
than as permitted by clause (a) above, is not owned by such Borrower
free and clear of all Liens and rights of any other Person, except the Liens in
favor of Agent, on behalf of the Secured Parties, and Permitted Encumbrances as
set forth in clause (e) of the definition thereof (subject to Reserves
satisfactory to Agent);


                    (c)          (i)
if such Art Inventory is not (x) located in a Permitted Inventory Country or
(y) in transport between such countries or (ii) if such Art Inventory is
located in a Permitted Inventory Country, such Borrower shall not have taken
each action reasonably required by Agent with respect to such Work of Art
located in such Permitted Inventory Country in order to protect the interests
of Agent therein under the laws of such Permitted Inventory Country;


                    (d)          is
not held by such Borrower (i) at a location owned by a Sotheby Entity, or (ii)
unless Reserves satisfactory to Agent have been established (A) at a location
in which a Sotheby Entity has obtained a leasehold interest with respect to
which, unless otherwise agreed by Agent, the lessor has executed a landlord
waiver, in form and substance reasonably acceptable to Agent, or (B) at a
warehouse, storage facility or other third-party location (including, without
limitation, the Geneva free port) with respect to which, unless otherwise
agreed by Agent, such third party has executed a bailee letter in form and
substance reasonably acceptable to Agent;


                    (e)          is
subject to any litigation challenging the rights of such Borrower in such Art
Inventory, unless (i) such Borrower has notified Agent of such litigation, and
(ii) Agent has determined in its reasonable judgment, pursuant to a written
notice to such Borrower (not to be unreasonably withheld or delayed), that such
litigation does not constitute good faith litigation;


                    (f)          is
placed on consignment with any Person, unless (i) such consignment constitutes
a Permitted Consignment with respect to such Art Inventory, or (ii)(x) such
Borrower has notified Agent of such consignment and (y) Agent has determined in
its reasonable judgment, pursuant to a written notice to such Borrower (not to
be unreasonably withheld or delayed), that such Borrower has taken all actions
reasonably required by Agent with respect to such Art Inventory in order to
protect the interests of Agent therein under all applicable laws;


                    (g)          is
not subject to a first priority lien in favor of Agent on behalf of the Secured
Parties, subject to Permitted Encumbrances as set forth in clause (e) of
the definition thereof (subject to Reserves satisfactory to Agent);


                    (h)          if
the value of such Art Inventory exceeds $250,000, has not been the subject of a
search by such Borrower in the Art Loss Register; or


                    (i)          breaches
any of the representations or warranties pertaining to Art Inventory set forth
in the Loan Documents.


18





                    1.8          Cash Management Systems.


                    Within
90 days after the Closing Date (or such later date as Agent shall consent to in
writing), the Credit Parties will establish and will maintain until the
Termination Date the cash management systems described in Annex C (the “Cash
Management Systems”).


                    1.9          Fees.


                    (a)          Borrowers
shall pay to GE Capital an annual collateral monitoring fee equal to $150,000100,000 per year
payable on the Closing Date and annually in advance on each anniversary thereof
prior to the Termination Date.


                    (b)          As
additional compensation for the Lenders, Borrowers shall pay to Agent, for the
ratable benefit of the Lenders, in arrears, on the first Business Day of each
month prior to the Commitment Termination Date and on the Commitment
Termination Date, a Fee for Borrowers’ non use of available funds in an amount
in Dollars equal to the Applicable Unused Line Fee Margin per annum (calculated
on the basis of a 360 day year for actual days elapsed) multiplied by the
difference between (x) the Maximum Amount (as it may be increased or reduced
from time to time) and (y) the average for the period of the daily closing
balances of the aggregate Revolving Loan and the Swing Line Loan outstanding
during the period for which such Fee is due.


                    (c)          If
Borrowers reduce or terminate the Commitment prior to the second anniversary of
the ClosingFourth Amendment Effective
Date, whether voluntarily or involuntarily and whether before or after
acceleration of the Obligations, Borrowers shall pay to Agent, for the benefit
of Lenders as liquidated damages and compensation for the costs of being
prepared to make funds available hereunder, an amount in Dollars equal to (i)
if such reduction or termination occurs prior to the first anniversary of the ClosingFourth Amendment Effective
Date, 1.0% multiplied by the amount of such reduction of the Commitment or (ii)
if such reduction or termination occurs after the first anniversary of the ClosingFourth Amendment Effective
Date and prior to the second anniversary of the ClosingFourth Amendment Effective Date, 0.50% multiplied
by the amount of such reduction of the Commitment. The Borrowers agree that such
fee is a reasonable calculation of Lenders’ lost profits in view of the
difficulties and impracticality of determining actual damages resulting from an
early termination of the Commitment.


                    (d)          Borrowers
shall pay to Agent, for the ratable benefit of Lenders, the Letter of Credit
Fee as provided in Annex B.


                    1.10       Receipt
of Payments.


                    Borrowers
shall make each payment under this Agreement not later than 2:00 p.m. (New York
time) on the day when due in immediately available funds in Dollars or
Sterling, as applicable, to the applicable Collection Account. For purposes of
computing interest and Fees and determining Borrowing Availability as of any
date, all payments shall be deemed received on the Business Day on which
immediately available funds therefore are received in the Collection Account
prior to 2:00 p.m. New York time. Payments received after 2:00 p.m. New 


19





York time on
any Business Day or on a day that is not a Business Day shall be deemed to have
been received on the following Business Day.


                    1.11       Application
and Allocation of Payments. 


                    (a)          So
long as no Event of Default has occurred and is continuing, (i) payments
matching specific scheduled payments then due shall be applied to those
scheduled payments; (ii) voluntary prepayments shall be applied in accordance
with the provisions of Section 1.3(a); and (iii) mandatory prepayments
shall be applied as set forth in Section 1.3(d) or 1.3(e), as
applicable. All payments and prepayments applied to the Revolving Loan shall be
applied ratably to the portion thereof held by each Lender as determined by its
Pro Rata Share. As to (x) any other payment, (y) all payments made when an
Event of Default has occurred and is continuing or following the Commitment
Termination Date and (z) all proceeds of Collateral, each Borrower hereby
irrevocably waives the right to direct the application of any and all such
payments received from or on behalf of such Borrower and proceeds of
Collateral, and all such payments and proceeds of Collateral shall be applied
to amounts then due and payable in the following order, subject to the terms of
the Collateral Documents: (1) to Fees and reimbursable expenses of Agent
hereunder; (2) to interest on the Swing Line Loan; (3) to principal payments on
the Swing Line Loan; (4) to interest on the Revolving Loan; (5) to principal
payments on the Revolving Loan and to provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B; (6) to all other
Obligations owing by the Credit Parties, including expenses of Lenders to the
extent reimbursable under Section 11.3; and (7) to amounts owing in
respect of Bank Product and Hedging Obligations; provided, that any
payment by a U.K. Credit Party shall be applied only to the Secured Obligations
of the U.K. Credit Parties according to the preceding order of priority.


                    (b)          Agent
is authorized to, and at its sole election may, charge to the Revolving Loan
balance on behalf of each Borrower and cause to be paid all Fees, expenses,
Charges, costs (including insurance premiums in accordance with Section
5.4(a)) and interest and principal, other than principal of the Revolving
Loan, owing by Borrowers under this Agreement or any of the other Loan
Documents if and to the extent Borrowers fail to pay promptly any such amounts
as and when due, even if the Dollar Equivalent of the amount of such charges
would exceed the applicable Borrowing Availability at such time; provided,
such action shall not cause the Dollar Equivalent of the aggregate Revolving
Loan to exceed the Maximum Amount. At Agent’s option and to the extent
permitted by law, any charges so made shall constitute a Revolving Credit
Advance made in the applicable currency and part of the Revolving Loan
hereunder.


                    (c)          Notwithstanding
any contrary provision herein, if, at the time of the receipt of any prepayment
or payment on the Obligations, (i) any Non-Sterling Lender shall have failed to
make available to the Fronting Lender any amount required pursuant to Section
9.9(e)(i) upon demand therefor by the Fronting Lender and (ii) the
Borrowers shall have failed to repay, pursuant to Section 9.9(e)(ii),
the outstanding principal amount of the portion of the Revolving Loan or Letter
of Credit Obligation then outstanding to the Fronting Lender in which such
Non-Sterling Lender was required to purchase a participation interest, then
such prepayment or payment shall be applied first to the portion of the
Revolving Loan or Letter of Credit Obligations then outstanding to the Fronting
Lender in which such Non-Sterling Lender was 


20





required to
purchase such participation interest, until the same (together with any
interest due and payable thereon) shall have been paid in full.


                    1.12       Loan
Account and Accounting.


                    Agent
shall maintain a loan account (the “Loan Account”) on its books to
record: all Revolving Credit Advances and Swing Line Advances, all payments
made by Borrowers, and all other debits and credits as provided in this
Agreement with respect to the Loans or any other Obligations. All entries in
the Loan Account shall be made in accordance with Agent’s customary accounting
practices as in effect from time to time. The balance in the Loan Account, as
recorded on Agent’s most recent printout or other written statement, shall,
absent manifest error, be presumptive evidence of the amounts due and owing to
Agent and Lenders by each Borrower; provided that any failure to so
record or any error in so recording shall not limit or otherwise affect any
Borrower’s duty to pay the Obligations. Agent shall render to Borrower
Representative a monthly accounting of transactions with respect to the Loans
setting forth the balance of the Loan Account as to each Borrower for the
immediately preceding month. Unless Borrower Representative notifies Agent in
writing of any objection to any such accounting (specifically describing the
basis for such objection), within thirty (30) days after the date thereof, each
and every such accounting shall be presumptive evidence of all matters
reflected therein. Only those items expressly objected to in such notice shall
be deemed to be disputed by Borrowers. Notwithstanding any provision herein
contained to the contrary, any Lender may elect (which election may be revoked)
to dispense with the issuance of Notes to that Lender and may rely on the Loan
Account as evidence of the amount of Obligations from time to time owing to it.


                    1.13       Indemnity.



                    (a)          Each
Credit Party shall jointly and severally indemnify and hold harmless each of
Agent, Lenders, the Fronting Lender and their respective Affiliates, and each
such Person’s respective officers, directors, employees, attorneys, agents and
representatives (each, an “Indemnified Person”), from and against any
and all suits, actions, proceedings, claims, damages, losses, liabilities and
expenses (including reasonable attorneys’ fees and disbursements and other
costs of investigation or defense, including those incurred upon any appeal)
that may be instituted or asserted against or incurred by any such Indemnified
Person as the result of credit having been extended, suspended or terminated
under this Agreement and the other Loan Documents and the administration of
such credit, and in connection with or arising out of the transactions
contemplated hereunder and thereunder and any actions or failures to act in
connection therewith, including any and all Environmental Liabilities and legal
costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively, “Indemnified
Liabilities”); provided, that no such Credit Party shall be liable
for any indemnification to an Indemnified Person to the extent that any such
suit, action, proceeding, claim, damage, loss, liability or expense results
from that Indemnified Person’s gross negligence or willful misconduct as
determined in a final, non-appealable judgment by a court of competent
jurisdiction. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY
OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY 


21





THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY
OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. It is understood and
agreed that, notwithstanding anything to the contrary set forth in this Section 1.13(a), no U.K. Credit Party shall have
any obligation to any Indemnified Person with respect to Indemnified
Liabilities relating to Obligations of any U.S. Credit Party.


                    (b)          To
induce Lenders to provide the LIBOR Loan option on the terms provided herein,
if (i) any LIBOR Loans are repaid in whole or in part prior to the last day of
any applicable LIBOR Period (whether that repayment is made pursuant to any
provision of this Agreement or any other Loan Document or occurs as a result of
acceleration, by operation of law or otherwise); (ii) any Borrower shall
default in payment when due of the principal amount of or interest on any LIBOR
Loan; (iii) any Borrower shall refuse to accept any borrowing of, or shall
request a termination of, any borrowing of, conversion into or continuation of,
LIBOR Loans after Borrower Representative has given notice requesting the same
in accordance herewith; (iv) any Borrower shall fail to make any prepayment of
a LIBOR Loan after Borrower Representative has given a notice thereof in
accordance herewith; or (v) any assignment shall occur pursuant to Section 1.16(d), then Borrowers shall jointly and
severally indemnify and hold harmless each Lender from and against all losses,
costs and expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (excluding loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. For the purpose of
calculating amounts payable to a Lender under this subsection, each Lender
shall be deemed to have actually funded its portion of the relevant LIBOR Loan
(or its participation interest in such LIBOR Loan) through the purchase of a
deposit bearing interest at the Dollar LIBOR Rate or the Sterling LIBOR Rate,
as applicable, in an amount equal to the amount of such portion of such LIBOR
Loan (or such participation, as applicable) and having a maturity comparable to
the relevant LIBOR Period; provided, that
each Lender may fund each of its interests in LIBOR Loans (or its
participations in LIBOR Loans) in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this subsection. This covenant shall survive the termination of this Agreement
and the payment of the Notes and all other amounts payable hereunder. As promptly
as practicable under the circumstances, each Lender shall provide Borrower
Representative with its written calculation of all amounts payable pursuant to
this Section 1.13(b), and such calculation
shall be binding on the parties hereto unless Borrower Representative shall
object in writing within ten (10) Business Days of receipt thereof, specifying
the basis for such objection in detail.


                    1.14        Access.


                    Each
Credit Party shall, during normal business hours, from time to time upon three
(3) Business Days’ prior notice as frequently as Agent reasonably determines to
be appropriate (except as otherwise provided): (a) provide Agent and any of its
officers, employees and agents access to its properties, facilities, advisors,
officers and employees and to the Collateral (including, without limitation, in
order to prepare an appraisal or similar report), (b) permit Agent, and any of
its officers, employees and agents, to inspect, audit and make extracts 


22





from any Sotheby Entity’s books and records, and (c)
permit Agent, and its officers, employees and agents, not more than two (2)
times during any twelve-month period beginning on the date hereof or any
anniversary thereof (unless an Event of Default has occurred and is continuing,
in which case such limitation shall not apply), to inspect, review, evaluate,
and make test verifications and counts of the Collateral of any Credit Party; provided,
that (i) Agent shall conduct at least one (1) field exam described in the
foregoing clause (c) during each twelve-month period and (ii) unless an
Event of Default has occurred and is continuing, not more than two such field
exams during any twelve-month period shall be at the cost and expense of the
Credit Parties. If an Event of Default has occurred and is continuing, each
such Credit Party shall provide such access to Agent and to each Lender at all
times and without advance notice. Furthermore, so long as any Event of Default
has occurred and is continuing, each Credit Party shall provide Agent and each
Lender with access to their suppliers and customers to the extent such access
is within the rights and powers of such Credit Party. Each Credit Party shall
make available to Agent and its counsel reasonably promptly originals or copies
of all books and records that Agent may reasonably request. Each Credit Party
shall deliver any document or instrument necessary for Agent, as it may from
time to time reasonably request, to obtain records from any service bureau or
other Person that maintains records for such Credit Party, and shall maintain
duplicate records or supporting documentation on media, including computer
tapes and discs owned by such Credit Party. Agent will give Lenders at least
five (5) days’ prior written notice of regularly scheduled audits.
Representatives of other Lenders may accompany Agent’s representatives on
regularly scheduled audits at no charge to Borrowers.


                    1.15         Taxes. 


                    (a)            Tax gross-up. 


                                    (i)          Each
Credit Party shall make all payments to be made by it under the Loan Documents
without any Tax Deduction, unless a Tax Deduction is required by law.


                    
              
(ii)          The Borrower
Representative shall promptly upon becoming aware that a Credit Party must make
a Tax Deduction (or that there is any change in the rate or the basis of a Tax
Deduction) notify Agent accordingly. Similarly, a Lender shall notify Agent
promptly on becoming so aware in respect of any payment to that Lender pursuant
to any Loan Document. If Agent receives such notification from a Lender it
shall promptly notify the Borrower Representative.


                                   
(iii)        Subject to paragraph (iv) below, if a Tax Deduction is
required by law to be made by any Credit Party, the amount of the payment due
from such Credit Party shall be increased to an amount which (after making any
Tax Deduction) leaves an amount equal to the payment which would have been due
if no Tax Deduction had been required.


23





                                    
(iv)        A Credit Party is
not required to make an increased payment to a Lender under paragraph (iii) above for a Tax Deduction in
respect of tax imposed by the United Kingdom or the United States of America
(as the case may be) on a payment of interest on a Loan, if on the date on
which the payment falls due:


	
  

 	
  

 	
  

 
	
  

 	
             (A)
                      the
 payment could have been made to the relevant Lender without a Tax Deduction
 if the Lender had been a Qualifying Lender, but on that date that Lender is
 not or has ceased to be a Qualifying Lender other than as a result of any
 change after the date it became a Lender under this Agreement in (or in the
 interpretation, administration, or application of) any law or Treaty, or any
 published practice or concession of any relevant taxing authority;

 
	
  

 	
  

 
	
  

 	
             (B)
                      with
 respect to any payment to be made by a U.K. Credit Party, (i) the relevant
 Lender is a Qualifying Lender solely by virtue of paragraph (i)(B) of
 the definition of Qualifying Lender, (ii) an officer of H.M. Revenue &
 Customs has given (and not revoked) a direction (a “Direction”) under
 section 931 of the Income Tax Act 2007 which relates to that payment and that
 Lender has received from the Credit Party making the payment a certified copy
 of that Direction, and (iii) the payment could have been made to the relevant
 Lender without a Tax Deduction in the absence of that Direction;

 
	
  

 	
  

 
	
  

 	
             (C)
                      with
 respect to any payment to be made by a U.K. Credit Party, the relevant Lender
 is a Treaty Lender and the Credit Party making the payment is able to
 demonstrate that the payment could have been made to the Lender without the Tax
 Deduction had that Lender complied with its obligations under paragraph (vii) below; 

 
	
  

 	
  

 
	
  

 	
             (D)

                      the
 relevant Lender is a Qualifying Lender solely by virtue of paragraph
 (i)(B) of the definition of Qualifying Lender and:

 






	
  

 	
  

 	
  

 
	
  

 	
 (i)

 	
 the relevant Lender has not given a Tax Confirmation
 to the Borrower Representative (on behalf of the U.K. Credit Parties); and

 
	
  

 	
  

 	
  

 
	
  

 	
 (ii)

 	
 the payment could have been made to the Lender
 without any Tax Deduction if the Lender had given a Tax Confirmation to the
 Borrower Representative (on behalf of the U.K. Credit Parties), on the basis
 that the Tax Confirmation would have enabled the U.K. Credit Parties to have
 formed a reasonable belief that the payment was an “excepted payment” for the
 purpose of section 930 of the Income Tax Act 2007; or

 





	
  

 	
  

 
	
  

 	
             (E)              with
 respect to any payments to be made by a U.S. Credit Party, the Tax is (i)
 assessed on a Lender under (x) the law of the jurisdiction in which that
 Lender is incorporated or, if different, the jurisdiction (or jurisdictions)
 in which that Lender is treated as resident for tax purposes or (y) under the
 law of

 








24
















 	
  

 	
  

 
	
  

 	
 the jurisdiction in which that Lender’s facility
 office is located in respect of amounts received or receivable in that
 jurisdiction and (ii) imposed on or calculated by reference to the net income
 received or receivable (but not any sum deemed to be received or receivable)
 by that Lender.

 



                                   (v)          If
any Credit Party is required to make a Tax Deduction, such Credit Party shall
make such Tax Deduction and any payment required in connection with such Tax
Deduction within the time allowed and in the minimum amount required by law.


             
                      (vi)         Within
thirty days of making either a Tax Deduction or any payment required in
connection with a Tax Deduction, the Credit Party making such Tax Deduction
shall deliver to Agent for the applicable Lender either a statement under
section 975 of the Income Tax Act 2007 or other evidence reasonably
satisfactory to such Lender that such Tax Deduction has been made or (as
applicable) any appropriate payment paid to the relevant taxing authority.


                   
              (vii)          A
Treaty Lender shall, if so requested by Borrower Representative (on behalf of
the U.K. Credit Parties), as soon as reasonably practicable, complete and file
with the appropriate tax authority an application for authorization by that tax
authority to make that payment without a Tax Deduction. The Borrower
Representative (on behalf of the U.K. Credit Parties) shall, thereafter, be
responsible for dealing with such authority in relation to the processing of
such application (and the Treaty Lender shall provide such cooperation as is
reasonably necessary to complete any further procedural formalities required to
obtain authorization).


                  
              (viii)          A
U.K. Non-Bank Lender shall promptly notify Agent who shall notify the U.K.
Credit Parties if there is any change in the position from that set out in the
Tax Confirmation.


             
                     (ix)          Each
Lender which becomes a party to this Agreement after the date of this Agreement
(such Lender, a “New Lender”) shall indicate, in the Assignment
Agreement which it executes on becoming a party, and for the benefit of Agent
and without liability to any Credit Party, which of the following categories it
falls in:


                                   (A)          not
a Qualifying Lender;


                                   (B)          a
Qualifying Lender (other than a Treaty Lender); or


                                   (C)          a
Treaty Lender.


If a New Lender fails to indicate its status in
accordance with this paragraph (ix), then such New Lender shall be
treated for the purposes of this Agreement (including by each U.K. Credit
Party) as if it is not a Qualifying Lender until such time as it notifies Agent
which category applies (and Agent, upon receipt of such notification, shall
inform the Borrower Representative on behalf of the U.K. Credit Parties). For
the avoidance of doubt, an Assignment Agreement shall not be invalidated by any
failure of a Lender to comply with this paragraph (ix).


25






                             (b)          Tax
 indemnity.


              
                       
    (i)          The
Credit Parties shall (within three Business Days of demand by Agent) pay (or
procure payment) to a Protected Party an amount equal to the loss, liability or
cost which that Protected Party determines will be or has been (directly or
indirectly) suffered for or on account of Tax by that Protected Party in
respect of any Loan Document.


	
  

 	
  

 
	
  

 	
                (ii)         Paragraph (b)(i) above shall not apply:

 
	
  

 	
  

 
	
  

 	
                (A)                        with
 respect to any Tax (i) assessed on a Lender under (x) the law of the
 jurisdiction in which that Lender is incorporated or, if different, the
 jurisdiction (or jurisdictions) in which that Lender is treated as resident
 for tax purposes or (y) under the law of the jurisdiction in which that
 Lender’s facility office is located in respect of amounts received or
 receivable in that jurisdiction and (ii) imposed on or calculated by
 reference to the net income received or receivable (but not any sum deemed to
 be received or receivable) by that Lender; and

 
	
  

 	
  

 
	
  

 	
                (B)                        to
 the extent a loss, liability or cost (i) is compensated for by an increased
 payment under Section 1.15(a) or (ii) would have been compensated for by an
 increased payment under Section 1.15(a)
 but was not so compensated solely because one of the exclusions in Section 1.15(a)(iv) applied.

 



                  
                        (iii)        A
Protected Party making, or intending to make, a claim under paragraph (i) above shall promptly notify Agent
of the event which will give, or has given, rise to the claim, following which
Agent shall notify the Borrower Representative.


                  
                        (iv)        A
Protected Party shall, on receiving a payment from a Credit Party under this Section 1.15(b), notify Agent.


                
           (c)          Tax Credit. If a Credit Party makes a Tax Payment
and the relevant Lender determines that:


                  
                        (i)          a
Tax Credit is attributable either to an increased payment of which that Tax
Payment forms part, or to that Tax Payment; and


                  
                        (ii)          that
Lender has obtained, utilized and retained that Tax Credit,


the Lender shall pay an amount to the applicable
Credit Party which that Lender determines will leave it (after that payment) in
the same after-Tax position as it would have been in had the Tax Payment not
been required to be made by such Credit Party.


               
            (d)         Stamp Taxes. The Credit Parties shall pay, and
within three Business Days of demand, indemnify each Lender against any cost,
loss, or liability that a Lender incurs in relation to all stamp duty,
registration and other similar Taxes payable in respect of the Loan Documents.


26





                     (e)          Value Added Tax. 


                                     (i)          All
amounts expressed in the Loan Documents to be payable by any Credit Party to a
Lender or Agent which (in whole or in part) constitute the consideration for a
supply or supplies for VAT purposes shall be deemed to be exclusive of VAT. If
VAT is or becomes chargeable on any supply made by any Lender or Agent to any
Credit Party in connection with any Loan Document, such Credit Party shall pay
to such Lender or Agent, as applicable, (in addition to and at the same time as
paying the consideration for such supply) an amount equal to the amount of such
VAT (and such Lender shall promptly provide an appropriate VAT invoice to the
relevant Credit Party).


                                     (ii)        Where
any Loan Document requires any Credit Party to reimburse or indemnify a Lender
or Agent for any cost or expense, such Credit Party shall reimburse or
indemnify (as the case may be) such Lender or Agent, as applicable, for the
full amount of such cost or expense, including such part thereof as represents
VAT, except to the extent that such Lender or Agent, as applicable, reasonably
determines that it is entitled to credit or repayment in respect of such VAT.


                                     (iii)        Any
reference in this Section 1.15(e) to any Credit Party shall, at any time
when such Credit Party is treated as a member of a group for VAT purposes,
include (where appropriate and unless the context otherwise requires) a
reference to the representative member of such group at such time (the term
“representative member” to have the same meaning as in the Value Added Tax Act
1994).


                    1.16          Capital Adequacy; Increased Costs; Illegality. 


                    (a)            If
any law, treaty, governmental (or quasi governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or similar
requirements or compliance by any Lender (including, as applicable, as L/C
Issuer) with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law),
in each case, adopted after the Closing Date, from any central bank or other
Governmental Authority increases or would have the effect of increasing the
amount of capital, reserves or other funds required to be maintained by such
Lender and thereby reducing the rate of return on such Lender’s capital as a consequence
of its obligations hereunder, then Borrowers shall from time to time upon
demand by such Lender (with a copy of such demand to Agent) pay to Agent, for
the account of such Lender, additional amounts sufficient to compensate such
Lender for such reduction. A certificate as to the amount of that reduction and
showing the basis of the computation thereof submitted by such Lender to
Borrower Representative and to Agent shall be presumptive evidence of the
matters set forth therein.


                    (b)            If,
due to either (i) the introduction of or any change in any law or regulation
(or any change in the interpretation thereof) or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), in each case adopted after the
Closing Date, there shall be any increase in the cost to any Lender (including,
as applicable, as L/C Issuer) of agreeing to make or making, funding or
maintaining any Loan or Letter of Credit (or any participation in any Loan or
Letter of Credit purchased pursuant to Section
9.9(e)(i)), then Borrowers shall from time to time, upon demand 


27





by such Lender (with a
copy of such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower
Representative and to Agent by such Lender, shall be presumptive evidence of
the matters set forth therein. Each Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, the affected Lender shall, to the
extent not inconsistent with such Lender’s internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrowers pursuant to this Section 1.16(b). For the avoidance of doubt, Sections
1.16(a) and 1.16(b) shall not apply to Taxes which shall be exclusively
governed by Section 1.15.


                    (c)          (i)
Notwithstanding anything to the contrary contained herein, if the introduction
of or any change in any law or regulation (or any change in the interpretation
thereof) shall make it unlawful, or any central bank or other Governmental
Authority shall assert that it is unlawful, for any Lender to agree to make or
to make or to continue to fund or maintain any LIBOR Loan (or a participation
interest in any LIBOR Loan), then, unless that Lender is able to make or to
continue to fund or to maintain such LIBOR Loan (or participation interest, as
applicable) at another branch or office of that Lender without, in that
Lender’s reasonable opinion, materially adversely affecting it, its Loans or
its participation interests in Loans or the income obtained therefrom, on
notice thereof and demand therefor by such Lender to Borrower Representative
through Agent, (i) the obligation of such Lender to agree to make or to make or
to continue to fund or maintain LIBOR Loans (or participation interests in
LIBOR Loans) shall terminate and (ii) each Borrower shall forthwith prepay in
full all outstanding LIBOR Loans owing by such Borrower to such Lender (or to
the Fronting Lender, to the extent of the participation interests in LIBOR
Loans of the Fronting Lender held by such Lender, and the Fronting Lender shall
pay such amounts to such Lender in respect of such participation interests),
together with interest accrued thereon, unless Borrower Representative on
behalf of such Borrower, within five (5) Business Days after the delivery of
such notice and demand, converts all LIBOR Loans into Index Rate Loans.


                                   (ii)          If
Agent shall have determined in good faith that for any reason adequate and
reasonable means do not exist for ascertaining the Dollar LIBOR Rate or the
Sterling LIBOR Rate, as applicable, for any requested LIBOR Period with respect
to a proposed LIBOR Loan or that the Dollar LIBOR Rate or the Sterling LIBOR
Rate, as applicable, applicable pursuant to Section 1.5(a) for any
requested LIBOR Period with respect to a proposed LIBOR Loan does not
adequately and fairly reflect the cost to the Lenders of funding such Loan,
Agent will forthwith give notice of such determination to Borrower
Representative and each Lender. Thereafter, the obligation of the Lenders to
make or maintain LIBOR Loans hereunder shall be suspended until Agent revokes
such notice in writing. Upon receipt of such notice, Borrower Representative
may revoke any Notice of Revolving Credit Advance or Notice of
Conversion/Continuation then submitted by it. If Borrower Representative does
not revoke such notice, Lenders shall make, convert or continue the Loans, as
proposed by Borrower Representative, in the amount specified in the applicable
notice submitted by Borrower Representative, but such Loans shall be made,
converted or continued as Index Rate Loans.


                    (d)          Within
thirty (30) days after receipt by Borrower Representative of written notice and
demand from any Lender (an “Affected Lender”)
for payment of additional amounts 


28





or increased costs as
provided in Sections 1.15(a), 1.16(a) or 1.16(b),
Borrower Representative may, at its option, notify Agent and such Affected
Lender of its intention to replace the Affected Lender. So long as no
Default or Event of Default has occurred and is continuing, Borrower
Representative, with the consent
of Agent, may obtain, at Borrowers’ expense, a
replacement Lender (“Replacement Lender”) for the Affected Lender,
 which
Replacement Lender must be reasonably satisfactory to Agentso long as (i) no Default or Event of Default has occurred and is
continuing, and (ii) Agent has consented to such
replacement (such consent not to be unreasonably withheld or delayed if such
Replacement Lender constitutes a Qualified Assignee). If Borrowers obtain a
Replacement Lender within ninety (90) days following notice of their intention
to do so, the Affected Lender must sell and assign its outstanding Loans,
Letter of Credit Obligations and Commitments to such Replacement Lender for an
amount equal to the outstanding principal balance of all Loans held by the
Affected Lender and all accrued interest and Fees with respect thereto through
the date of such sale and such assignment shall not require the payment of an
assignment fee to Agent; provided, that
Borrowers shall have reimbursed such Affected Lender for the additional amounts
or increased costs that it is entitled to receive under this Agreement through
the date of such sale and assignment. Notwithstanding the foregoing, Borrowers
shall not have the right to obtain a Replacement Lender if the Affected Lender
rescinds its demand for increased costs or additional amounts within 15 days
following its receipt of Borrowers’ notice of intention to replace such
Affected Lender. Furthermore, if Borrowers give a notice of intention to
replace and do not so replace such Affected Lender within ninety (90) days
thereafter, Borrowers’ rights under this Section
1.16(d) shall terminate with respect to such Affected Lender and
Borrowers shall promptly pay all increased costs or additional amounts demanded
by such Affected Lender pursuant to Sections 1.15(a),
1.16(a) and 1.16(b). Notwithstanding the foregoing, with respect
to a Lender that is a Non-Funding Lender or an Impacted Lender, Agent may, but
shall not be obligated to, obtain a Replacement Lender and execute an
Assignment Agreement on behalf of such Non-Funding Lender or Impacted Lender at
any time with three (3) Business Days’ prior notice to such Lender (unless
notice is not practicable under the circumstances) and cause such Lender’s
Loans, participations and Commitments to be sold and assigned, in whole or in
part, at par.


                    1.17          Credit Support.


                    All
Loans to each U.S. Borrower and all of the other Obligations of the each U.S.
Borrower arising under this Agreement and the other Loan Documents shall
constitute one general obligation of the U.S. Borrowers secured, until the
Termination Date, by all of the Collateral covered under the U.S. Collateral
Documents. All Loans to each U.K. Borrower and all of the other Obligations of
each U.K. Borrower arising under this Agreement and the other Loan Documents
shall constitute one general obligation of the U.K. Borrowers secured, until
the Termination Date, by all of the Collateral covered under the U.K.
Collateral Documents.


                     1.18          Conversion to Dollars and Sterling.


                     (a)            Except
as expressly set forth herein, all valuations or computations of monetary
amounts set forth in this Agreement shall include the Dollar Equivalent of
Sterling or any other applicable currency. All currency conversions to be made
under this Agreement shall be made in accordance with the following procedure:


29





                                     (i)           Conversions
to Dollars shall occur in accordance with prevailing exchange rates, as
determined by Agent or the Fronting Lender, as applicable, in its reasonable
discretion, on the applicable date.


                                     (ii)          Conversions
to Sterling shall occur in accordance with prevailing exchange rates, as
determined by Agent or the Fronting Lender, as applicable, in its reasonable
discretion, on the applicable date.


                                     (iii)          The
Dollar Equivalent of each of the Revolving Credit Advances, Swing Line Advances
and Letter of Credit Obligations denominated in currencies other than Dollars
shall be re-calculated on (a) so long as the Aggregate Borrowing Availability
equals or exceeds $5,000,000, the first Business Day of each month and (b)
otherwise, the first Business Day of each week.


                     (b)            All
valuations or computations of monetary amounts set forth in any Borrowing Base
Certificate, any Art Inventory Report, any Art Loan Receivables Report or any
other report, certificate, Financial Statement or other document delivered by
any Credit Party to Agent hereunder shall be made in accordance with GAAP and
the ordinary business practices of the Credit Parties as of the Closing Date; provided, that any such report or document shall
set forth the conversion factors used with respect to any foreign currencies.


                     1.19          Judgment Currency; Contractual Currency.


                     (a)            If,
for the purpose of obtaining or enforcing judgment against any Credit Party in
any court in any jurisdiction, it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section
1.19 referred to as the “Judgment Currency”)
an amount due under any Loan Document in any currency (the “Obligation Currency”) other than the Judgment
Currency, the conversion shall be made at the rate of exchange prevailing on
the Business Day immediately preceding (i) the date of actual payment of the
amount due, in the case of any proceeding in the courts of any jurisdiction
that will give effect to such conversion being made on such date, or (ii) the
date on which the judgment is given, in the case of any proceeding in the
courts of any other jurisdiction (the applicable date as of which such
conversion is made pursuant to this Section 1.19
being hereinafter referred to as the “Judgment
Conversion Date”). 


                     (b)            If,
in the case of any proceeding in the court of any jurisdiction referred to in Section 1.19(a), there is a change in the rate of
exchange prevailing between the Judgment Conversion Date and the date of actual
receipt for value of the amount due, the applicable Credit Party shall pay such
additional amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment Currency,
when converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of the Judgment Currency stipulated in the judgment or judicial
order at the rate of exchange prevailing on the Judgment Conversion Date. Any
amount due from a Credit Party under this Section
1.19(b) shall be due as a separate debt and shall not be affected by
judgment being obtained for any other amounts due under or in respect of any of
the Loan Documents. 


30





                     (c)          The
term “rate of exchange” in this Section 1.19
means the rate of exchange at which Agent would, on the relevant date at or
about noon (New York City time), be able to sell the Obligation Currency
against the Judgment Currency to prime banks.


                     (d)          Any
amount received or recovered by Agent in respect of any sum expressed to be due
to them (whether for itself or on behalf of any other person) from any Credit
Party under this Agreement or under any of the other Loan Documents in a
currency other than the currency (the “contractual currency”) in which such sum
is so expressed to be due (whether as a result of, or from the enforcement of,
any judgment or order of a court or tribunal of any jurisdiction, the
winding-up of a Borrower or otherwise) shall only constitute a discharge of
such Borrower to the extent of the amount of the contractual currency that
Agent is able, in accordance with its usual practice, to purchase with the
amount of the currency so received or recovered on the date of receipt or
recovery (or, if later, the first date on which such purchase is practicable).
If the amount of the contractual currency so purchased is less than the amount
of the contractual currency so expressed to be due, such Borrower shall
indemnify Agent against any loss sustained by it as a result, including the
cost of making any such purchase other than losses resulting from the gross
negligence or willful misconduct of the Person seeking such indemnification.


                     1.20        Currency of Account. 


                     Dollars
are the currency of account and payment for each and every sum at any time due
from the Borrowers hereunder; provided,
that: 


               
                    (i)          unless
expressly provided elsewhere in this Agreement, each repayment of a Revolving
Credit Advance or a part thereof advanced in Sterling shall be made in
Sterling; 


                
                   (ii)         each
payment of interest in respect of principal, or any other sum, denominated in
Sterling shall be made in Sterling; 


                   
                (iii)        each
payment in respect of costs and expenses incurred in Sterling shall be made in
Sterling; and 


                
                   (iv)        any
other amount expressed to be payable in Sterling shall be paid in Sterling.


2.          CONDITIONS PRECEDENT


                     2.1          Conditions to the Initial Loans.


                     Neither
any Lender nor the Fronting Lender shall be obligated to make any Loan or incur
any Letter of Credit Obligations on the Closing Date, or to take, fulfill, or
perform any other action hereunder, until the following conditions have been
satisfied or provided for in a manner reasonably satisfactory to Agent, or
waived in writing by Agent:


                     (a)          Credit Agreement; Loan Documents. Each Loan
Document delivered on the date hereof or counterparts thereof shall have been
duly executed and delivered by 


31





Borrowers,
each other Credit Party, Agent and Lenders party thereto; and Agent shall have
received such documents, instruments, agreements and legal opinions as Agent
shall reasonably request in connection with the transactions contemplated by
this Agreement and the other Loan Documents, including all those listed in the
Closing Checklist attached hereto as Annex D,
each in form and substance reasonably satisfactory to Agent.


                    (b)          Repayment of Prior Lender Obligations; Satisfaction of
Outstanding L/Cs. (i) Agent shall have received evidence
satisfactory to Agent that all of the Prior Lender Obligations have been repaid
in full by the Borrowers and all Liens upon any of the property of Borrowers or
any of their Subsidiaries in favor of the Prior Agent have been terminated; and
(ii) all letters of credit issued or guaranteed under the Prior Credit
Agreement shall have been terminated, cash collateralized, or supported by a
Letter of Credit issued pursuant to Annex B, as mutually agreed upon by Agent,
Borrowers and Prior Agent.


                    (c)          Approvals. Agent shall have received (i)
satisfactory evidence that the Sotheby Entities have obtained all required
consents and approvals of all Persons including all requisite Governmental
Authorities, to the execution, delivery and performance of this Agreement and
the other Loan Documents or (ii) an officer’s certificate in form and substance
reasonably satisfactory to Agent affirming that no such consents or approvals
are required (other than those that have been obtained).


                    (d)          Opening Availability. After giving effect to any
Reserves to be established on the Closing Date and any initial Revolving Credit
Advances made to Borrowers and the incurrence of any initial Letter of Credit
Obligations, Borrowers shall have Aggregate Borrowing Availability of at least
$90,000,000 as of the Closing Date. 


                    (e)           Payment of Fees. Borrowers shall have paid the
Fees required to be paid on the Closing Date (including, without limitation,
those specified in Section 1.9) and shall
have reimbursed Agent for all fees, costs and expenses of closing presented as
of the Closing Date.


                    (f)          Capital Structure: Other Indebtedness. The
capital structure of each Sotheby Entity and the terms and conditions of all
Indebtedness of each Sotheby Entity shall be acceptable to Agent in its sole
discretion.


                    (g)          Due Diligence. Agent shall have completed its
business and legal due diligence with results reasonably satisfactory to Agent.


                    (h)          Other Indebtedness. All Obligations and all Liens
granted under the Loan Documents shall constitute permitted indebtedness and
permitted Liens, as applicable, under the Senior Note Indenture and the
Convertible Note Indenture.


                    (i)          No Material Adverse Change. Since December 31,
2008, (i) no material adverse change has occurred in the business, financial or
other condition of Parent and its Subsidiaries taken as a whole, the industry
in which Parent and its Subsidiaries operates, or the collateral which will be
subject to the security interest granted to Agent and Lenders or in the
prospects of Parent and its Subsidiaries taken as a whole, (ii) no litigation
has commenced that, in the reasonable judgment of Agent, has a material risk of
being determined adversely to the applicable Sotheby Entity and that, if so determined,
would have a material adverse impact on 


32





Parent and its Subsidiaries taken as a whole, their
business, or their ability to repay the Loans, (iii) no litigation has
commenced that would challenge the transactions under consideration and (iv) there
has occurred no material increase in the liabilities, liquidated or contingent,
of Parent and its Subsidiaries taken as a whole, or a material decrease in the
assets of Parent and its Subsidiaries taken as a whole.


                    2.2          Further Conditions to Each Loan.


                    Except
as otherwise expressly provided herein, neither any Lender nor the Fronting
Lender shall be obligated to fund any Advance, convert or continue any portion
of the outstanding Revolving Loan as a LIBOR Loan or incur any Letter of Credit
Obligation, if, as of the date thereof:


                    (a)          any
representation or warranty by any Credit Party contained herein or in any other
Loan Document is untrue or incorrect as of such date as determined by Agent or
Requisite Lenders (or in the case of a representation or warranty that is
expressly made as of an earlier date, is untrue or incorrect as of such earlier
date), except for changes therein expressly permitted or expressly contemplated
by this Agreement, and Agent or Requisite Lenders have determined not to make
such Advance, convert or continue any portion of the outstanding Revolving Loan
as LIBOR Loan or incur such Letter of Credit Obligation as a result of the fact
that such warranty or representation is untrue or incorrect; 


                    (b)          
any Default or Event of Default has occurred and is continuing or would result
after giving effect to any Advance, the incurrence of any Letter of Credit
Obligation, or the conversion or continuation of any portion of the outstanding
Revolving Loan into, or as, a LIBOR Loan, and Agent or Requisite Lenders shall
have determined not to make any Advance, convert or continue any portion of the
outstanding Revolving Loan as a LIBOR Loan or incur any Letter of Credit
Obligation as a result of that Default or Event of Default;


                    (c)          after
giving effect to any Advance (or the incurrence of any Letter of Credit
Obligations), (i) the Dollar Equivalent of the outstanding principal amount of
the aggregate Revolving Loan would exceed the Maximum Amount less the then
outstanding principal amount of the Swing Line Loan, (ii) the aggregate
outstanding principal balance of Revolving Credit Advances and Swing Line
Advances made to U.S. Borrowers and the Dollar Equivalent of the Letter of
Credit Obligations incurred for the benefit of the U.S. Borrowers would, in the
aggregate, exceed the U.S. Borrowing Base, (iii) the Dollar Equivalent of the
outstanding amount of the Letter of Credit Obligations would exceed the L/C
Sublimit, (iv) the aggregate outstanding principal amount of the Swing Line
Loan would exceed Swing Line Availability or (v) the Dollar Equivalent of the
aggregate outstanding principal balance of Revolving Credit Advances made to
U.K. Borrowers and the Dollar Equivalent of the outstanding amount of the
Letter of Credit Obligations incurred for the benefit of the U.K. Borrowers
would, in the aggregate, exceed either the Sterling Subfacility Limit or the
U.K. Borrowing Base; or


                    (d)          notwithstanding
the provisions of Annex F, the Borrowers
shall not have delivered to Agent a Borrowing Base Certificate, Art Inventory
Report and Art Loan Receivables Report (accompanied in each case by such
supporting detail and documentation as shall be 


33





requested by Agent in its reasonable discretion), in
each case prepared as of (i) with respect to any Advance to be made or Letter
of Credit Obligation to be incurred during the first thirteen days of any Fiscal
Month, the last of day of the second preceding Fiscal Month or (ii) with
respect to any Advance to be made or Letter of Credit Obligation to be incurred
during the remainder of any Fiscal Month, the last day of the preceding Fiscal
Month; 


                 
   (e)     
  during
the Availability Test Period, after giving effect to any Advance (or the
incurrence of any Letter of Credit Obligations), Aggregate Borrowing
Availability would be less than $50,000,000; or 


                  

  (f)      
  during
the Liquidity Test Period, after giving effect to any Advance (or the
incurrence of any Letter of Credit Obligations), the aggregate outstanding
principal balance of the Revolving Loan would exceed the Liquidity Test Period
Maximum Amount.


The request and acceptance by any Borrower of the
proceeds of any Advance, the incurrence of any Letter of Credit Obligations or
the conversion or continuation of any portion of the outstanding Revolving Loan
into, or as, a LIBOR Loan shall be deemed to constitute, as of the date
thereof, (i) a representation and warranty by Borrowers that the conditions in
this Section 2.2 have been satisfied and
(ii) a reaffirmation by Borrowers of the cross-guaranty provisions set forth in
Section 12 and of the granting and
continuance of Agent’s Liens, on behalf of itself and the other Secured
Parties, pursuant to the Collateral Documents.


3.          REPRESENTATIONS AND WARRANTIES


                    To
induce Lenders and the Fronting Lender to make the Loans and to incur Letter of
Credit Obligations (and to purchase participation interests in the Loans and
Letter of Credit Obligations hereunder), the Credit Parties, jointly and
severally, make the following representations and warranties to Agent and each
Lender with respect to all Sotheby Entities, each and all of which shall
survive the execution and delivery of this Agreement.


                    3.1          Corporate Existence; Compliance with Law. 


                    (a)          Each
Credit Party (i) is a corporation, limited liability company or limited
partnership (or, in the case of Sotheby’s U.K., an unlimited liability company)
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization set forth in Disclosure Schedule (3.1); (ii) is duly qualified
to conduct business and is in good standing in each other jurisdiction where
its ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not result in
exposure to losses or liabilities which could reasonably be expected to have a
Material Adverse Effect; (iii) has the requisite power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease and to conduct its
business as now conducted or proposed to be conducted; and (iv) is in
compliance with its charter and bylaws or partnership or operating agreement,
as applicable.


                    (b)          Each
Sotheby Entity (i) subject to specific representations regarding Environmental
Laws, has and will maintain in full force and effect all material licenses
(including, for the avoidance of doubt, a license under the Consumer Credit Act
1974 and the


34





Consumer Credit Act 2006 (collectively, as each may be
amended, extended or re-enacted from time to time, the “CCA”)), permits,
consents, permissions, registrations, or approvals from or by, and has made all
material filings with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; and (ii) subject to specific representations set forth
herein regarding ERISA, Environmental Laws, tax and other laws, is in
compliance with all applicable provisions of law, rule, regulation or guidance,
except where the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.


                    3.2          Executive Offices, Collateral Locations, FEIN.


                    As
of the Closing Date, each U.S. Credit Party’s name as it appears in official
filings in its jurisdiction of incorporation or organization, jurisdiction of
incorporation or organization, organization type, organization number, if any,
issued by its jurisdiction incorporation or organization, and the current
location of each U.S. Credit Party’s chief executive office and the warehouses
and premises at which any Collateral is located are set forth in Disclosure Schedule (3.2), none of such locations
has changed within the four (4) months preceding the Closing Date and each U.S.
Credit Party has only one jurisdiction of incorporation or organization. In
addition, Disclosure Schedule (3.2) lists
the federal employer identification number of each U.S. Credit Party.


                    3.3          Corporate Power, Authorization, Enforceable Obligations.


                    The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person’s power; (b) have been duly authorized by all necessary
corporate, limited liability company, limited partnership or unlimited
liability company action; (c) do not contravene any provision of any Sotheby
Entity’s charter, bylaws or partnership or operating agreement as applicable;
(d) do not violate any law or regulation, or any order or decree of any court
or Governmental Authority; (e) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which any Sotheby Entity is a
party or by which any Sotheby Entity or any of its property is bound,
including, without limitation, the Senior Note Indenture, the Convertible Note
Indenture or the York Avenue Lease Documents; (f) do not result in the creation
or imposition of any Lien upon any of the property of any Sotheby Entity other
than those in favor of Agent, on behalf of itself and the other Secured
Parties, pursuant to the Loan Documents; and (g) do not require the consent or
approval of any Governmental Authority or any other Person. Each of the Loan
Documents shall be duly executed and delivered by each Credit Party and each
such Loan Document shall constitute a legal, valid and binding obligation of
such Credit Party enforceable against it in accordance with its terms.


                    3.4          Financial Disclosures.


                    Except
for the Projections, all Financial Statements concerning the Borrowers and
their Subsidiaries that are referred to below (i) in the case of all Financial
Statements concerning Parent and its Subsidiaries on a consolidated basis, have
been prepared in accordance with 


35





GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to unaudited
Financial Statements, for the absence of footnotes and normal year-end audit
adjustments) and (ii) present fairly in all material respects the financial
position of the Persons covered thereby as at the dates thereof and the results
of their operations and cash flows for the periods then ended.


                    (a)          Financial Statements. The following Financial
Statements attached hereto as Disclosure Schedule
(3.4(a)) have been delivered on the date hereof:


                                   (i)          The
audited consolidated (with respect to Parent and its Subsidiaries) balance
sheets at December 31, 2007 and 2008 and the related consolidated statements of
income and cash flows for the Fiscal Years then ended, which consolidated
Financial Statements shall have been certified by Deloitte & Touche LLP,
and the unaudited consolidating balance sheets and related consolidating
statements of income of Parent and the Borrowers for such Fiscal Years.


                                   (ii)          The
unaudited consolidated balance sheet at June 30, 2009, and the related
statement(s) of income and cash flows of Parent and its Subsidiaries for the
Fiscal Quarter then ended, and the unaudited consolidating balance sheets and related
consolidating statement of income of Parent and the Borrowers for such Fiscal
Quarter.


                                   (iii)          The
unaudited consolidated balance sheet at June 30, 2009, and the related
statement of income of Parent and its Subsidiaries for the Fiscal Month then
ended and the portion of the Fiscal Year then ended, and the unaudited
consolidating balance sheets and related consolidating statement of income of
Parent and the Borrowers for such Fiscal Month and such portion of such Fiscal
Year.


                    (b)          Projections. The Projections delivered on the
date hereof and attached hereto as Disclosure Schedule
(3.4(b)) have been prepared by the Borrowers in light of the past
operations of their businesses and reflect projections for the three-year
period beginning on January 1, 2009 on a quarterly basis for the years 2009 and
2010 and on a year-by-year basis thereafter. The Projections are based upon the
same accounting principles as those used in the preparation of the financial
statements described above and the estimates and assumptions stated therein,
all of which the Borrowers believe to be reasonable and fair in light of
current conditions and current facts known to the Borrowers and, as of the
Closing Date, reflect the Borrowers’ good faith and reasonable estimates of the
future financial performance of Parent and its Subsidiaries for the period set
forth therein. The Projections are not a guaranty of future performance, and
actual results may differ from the Projections.


                    (c)          Debt Disclosure. As of the Closing Date, after
giving effect to the Refinancing, no Sotheby Entity is liable on any “Credit
Facilities” (as defined in the Senior Note Indenture) other than pursuant to
this Agreement.


                    3.5          Material Adverse Effect.


                    Between
December 31, 2008 and the Closing Date: (a) except as reflected on the
unaudited Financial Statements described in Section
3.4(a)(ii), no Sotheby Entity has incurred any obligations,
contingent or noncontingent liabilities, liabilities for Charges, long-term
leases 


36





or unusual forward or long-term commitments that,
alone or in the aggregate, could reasonably be expected to have a Material
Adverse Effect, (b) no contract, lease or other agreement or instrument has
been entered into by any Sotheby Entity or has become binding upon any Sotheby
Entity’s assets and no law or regulation applicable to any Sotheby Entity has
been adopted that has had or could reasonably be expected to have a Material
Adverse Effect, and (c) no Sotheby Entity is in default and to the best of
Borrowers’ knowledge no third party is in default under any material contract,
lease or other agreement or instrument, that alone or in the aggregate could
reasonably be expected to have a Material Adverse Effect. Since December 31,
2008 no event has occurred, that alone or together with other events, could
reasonably be expected to have a Material Adverse Effect.


                    3.6          Ownership of Property; Liens.


                    As
of the Closing Date, Disclosure Schedule (3.6)
lists all of the real property owned, leased, subleased, occupied, or used by
any Credit Party (the “Real Estate”) and
discloses which Credit Party is the owner, lessee, licensee or occupier of such
Real Estate. Except as a result of Permitted Encumbrances, each Credit Party
owns good and marketable freehold or fee simple title to all of its owned Real
Estate, and valid and marketable leasehold interests in all of its leased Real
Estate. Copies of all such leases or a summary of terms thereof reasonably
satisfactory to Agent have been made available to Agent. Disclosure
Schedule (3.6) further describes any Real Estate with respect to
which any Credit Party is a lessor, sublessor or assignor as of the Closing
Date. Except as a result of Permitted Encumbrances, each Credit Party also has
title to, or valid leasehold interests in, all of its personal property and
assets. As of the Closing Date, none of the properties and assets of any
Sotheby Entity are subject to any Liens other than Permitted Encumbrances, and
there are no facts, circumstances or conditions known to any Sotheby Entity
that may result in any Liens (including Liens arising under Environmental Laws)
other than Permitted Encumbrances. Disclosure Schedule
(3.6) also describes any purchase options, rights of first refusal
or other similar contractual rights pertaining to any Real Estate.


                    3.7          Labor Matters.


                    Except
as set forth on Disclosure Schedule 3.7, as
of the Closing Date (a) there are no strikes, lockouts or slowdowns against any
Credit Party pending or, to the knowledge of any Credit Party, threatened; (b)
the hours worked by and payments made to employees of each Credit Party have
not been in violation of the Fair Labor Standards Act or any other applicable
Federal, state, local or foreign law dealing with such matters except where
such violation could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect; (c) all material payments due
from any Credit Party, or for which any claim may be made against any Credit
Party, on account of wages and employee health and welfare insurance and other
benefits, have been paid or accrued as a liability on the books of such Credit
Party; and (d) there are no complaints, charges, claims or other causes of
action against any Credit Party pending or, to the knowledge of any Credit
Party, threatened to be filed with any Governmental Authority or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment by any Credit Party of any individual,
which if adversely determined could reasonably be expected to have a Material
Adverse Effect.


37





                    3.8          Ventures,
Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.


                    Except
as set forth in Disclosure Schedule (3.8), as of the Closing Date, no
Sotheby Entity has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person (other than Art Loan/Inventory Joint
Ventures), or is an Affiliate of any other Person. All of the issued and
outstanding Stock of each Sotheby Entity is owned by each of the Stockholders
and in the amounts set forth in Disclosure Schedule (3.8). Except as set
forth in Disclosure Schedule (3.8), there are no outstanding rights to
purchase, options, warrants or similar rights or agreements pursuant to which
any Sotheby Entity may be required to issue, sell, repurchase or redeem any of
its Stock or other equity securities or any Stock or other equity securities of
its Subsidiaries. All outstanding Indebtedness and Guaranteed Indebtedness of
each Credit Party as of the Closing Date (except for the Obligations) is
described in Section 6.3 (including Disclosure Schedule (6.3)). 


                    3.9          Government
Regulation.


                    No
Sotheby Entity is an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company,” as such
terms are defined in the Investment Company Act of 1940. The making of the
Loans by Lenders to Borrowers, the incurrence of the Letter of Credit
Obligations on behalf of Borrowers and the application of the proceeds thereof
and repayment thereof will not violate any provision of any such statute or any
rule, regulation or order issued by the Securities and Exchange Commission.


                    3.10          Margin
Regulations.


                    No
Sotheby Entity is engaged, nor will
it engage, principally or as one of its important activities,
in the business of purchasing
or selling Margin Stock or extending credit for the purpose
of “purchasing”
or “carrying” any “margin stock” as such terms are defined
in Regulation U of the Federal Reserve Board as now and from time to time
hereafter in effect (such securities being referred to herein as “Margin
Stock”)carrying
Margin Stock. No Sotheby Entity owns any Margin Stock (other
than Stock of Parent, to the
extent it constitutes Margin Stock, in an amount that does
not exceed 25% of the assets of Parent
and its Subsidiaries), and none of the proceeds of the Loans or other
extensions of credit under this Agreement will be used, directly or indirectly, 
for the purpose of purchasing or carrying any Margin Stock (other than Stock of Parent
repurchased in accordance with Section 6.13), for the purpose of reducing or retiring any
Indebtedness that was originally incurred to purchase or carry any Margin Stock
or for any other purpose that might cause any of the Loans or other extensions
of credit under this Agreement to be considered a “purpose credit” within the
meaning of Regulations T, U or X of the Federal Reserve Board. No Sotheby
Entity will take or permit to be taken any action that might cause any Loan
Document to violate any regulation of the Federal Reserve Board.the Credit Parties).


                    3.11          Taxes.


                    All
Federal and other material tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Sotheby Entity 


38





have been
filed, or will be timely filed, with the appropriate Governmental Authority,
and all Charges have been paid excluding Charges or other amounts being
contested in accordance with Section 5.2(b) and unless the failure to so file
or pay could not reasonably be expected to result in a Material Adverse Effect.
Disclosure Schedule (3.11) sets forth as of the Closing Date those taxable
years for which any Sotheby Entity’s tax returns are currently being audited by
the IRS or any other applicable Governmental Authority, and any assessments or
threatened assessments in connection with such audit, or otherwise currently
outstanding where the amount of such assessments, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Except as described in Disclosure Schedule (3.11), as of the Closing Date, no
Sotheby Entity has executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any material Charges.
None of the Sotheby Entities and their respective predecessors are liable for
any Charges: (a) under any agreement (including any tax sharing agreements) or
(b) to each Sotheby Entity’s knowledge, as a transferee. As of the Closing
Date, no Sotheby Entity has agreed or been requested to make any adjustment
under IRC Section 481(a), by reason of a change in accounting method or
otherwise, which would reasonably be expected to have a Material Adverse
Effect.


                    3.12          ERISA.


                    (a)            Disclosure
Schedule (3.12(a)) lists, as of the Closing Date, all Plans subject to
Section 412 of the IRC or Section 302 of ERISA, including all Title IV Plans,
all Multiemployer Plans, and all Retiree Welfare Plans. Copies of all such
listed Plans, together with a copy of the latest form IRS/DOL 5500-series and
related actuarial reports, as applicable, for each such Plan, have been made
available to Agent. Except with respect to Multiemployer Plans, each Qualified
Plan has been determined by the IRS to qualify under Section 401(a) of the IRC,
the trusts created thereunder have been determined to be exempt from tax under
the provisions of Section 501(a) of the IRC, and nothing has occurred that
would cause the loss of such qualification or tax exempt status. Each Plan is
in compliance in all material respects with the applicable provisions of ERISA,
the IRC and its terms, including the timely filing of all reports required
under the IRC or ERISA. Neither any Sotheby Entity nor ERISA Affiliate has
failed to make any material contribution or pay any material amount due as required
by either Section 412 of the IRC or Section 302 of ERISA or the terms of any
such Plan. Neither any Sotheby Entity nor ERISA Affiliate has failed to make a
contribution payment on or before the applicable due date which could result in
the imposition of a lien under Section 430(k) of the IRC or Section 303(k) of
ERISA. No “prohibited transaction,” as defined in Section 406 of ERISA and
Section 4975 of the IRC, has occurred with respect to any Plan, that would
subject any Sotheby Entity to a material tax on prohibited transactions imposed
by Section 502(i) of ERISA or Section 4975 of the IRC. 


                    (b)            Except
as set forth in Disclosure Schedule (3.12(a)): (i) no Title IV Plan has
any material Unfunded Pension Liability; (ii) no ERISA Event has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the knowledge
of any Sotheby Entity, threatened material claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted
against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no
Sotheby Entity or ERISA Affiliate has incurred or reasonably expects to incur
any material liability as a result of a complete or partial withdrawal from a
Multiemployer 


39





Plan; (v)
within the last five years no Title IV Plan of any Sotheby Entity or ERISA
Affiliate has been terminated, whether or not in a “standard termination” as
that term is used in Section 4041 of ERISA, nor has any Title IV Plan of any
Sotheby Entity or any ERISA Affiliate (determined at any time within the last
five years) with material Unfunded Pension Liabilities been transferred outside
of the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA)
of any Sotheby Entity or ERISA Affiliate (determined at such time), (vi) except
in the case of any ESOP, Stock of all Credit Parties and their ERISA Affiliates
makes up, in the aggregate, no more than 10% of fair market value of the assets
of any Plan measured on the basis of fair market value as of the latest
valuation date of any Plan; and (vii) no liability under any Title IV Plan has
been satisfied with the purchase of a contract from an insurance company that
is not rated AAA by Standard & Poor’s Ratings Group or an equivalent rating
by another nationally recognized rating agency.


                    (c)            Disclosure
Schedule (3.12(c)) lists, as of the Closing Date, all pension plans or
arrangements operating in the United Kingdom through which any Sotheby Entity
currently contributes or could be required to contribute (the “U.K. Pension
Plans”). There are no amounts which are treated under Section 75 of the
United Kingdom Pensions Act 1995 as due to any other pension scheme operated in
the United Kingdom in which any Sotheby Entity has been a participating
employer. Disclosure Schedule (3.12(c)) separately identifies which of
the U.K. Pension Plans is a defined benefit plan and which is a defined
contribution plan. All of the U.K. Pension Plans are registered pension schemes
as defined in chapter 2 of part 4 of the United Kingdom Finance Act 2004. There
is no plan of any U.K. Credit Party (or, to the knowledge of the U.K. Credit
Parties, of any other Person having the power to amend or terminate any U.K.
Pension Plan) to amend or terminate any U.K. Pension Plan or otherwise do any
act or omission so as to give rise to any claim by the trustees of that plan
whether under the related trust deed or rules of that plan or under Section 75
of the United Kingdom Pensions Act 1995. Contributions have been made to the
U.K. Pension Plans as required under their relevant schedule of contributions
and recovery plan (if any) in force from time to time as those terms are
defined in Part 3 of the United Kingdom Pensions Act 2004 in all material
respects. There are no facts or circumstances which may give rise to the
Pensions Regulator issuing, or to the knowledge of any Sotheby Entity
threatening to issue, a Financial Support Directive or a Contribution Notice
with respect to any U.K. Pension Plans.


                    3.13          Litigation.


                    No
action, claim, lawsuit, demand, investigation or proceeding is now pending or,
to the knowledge of any Sotheby Entity, threatened against any Sotheby Entity,
before any Governmental Authority or before any court or any arbitrator or
panel of arbitrators (collectively, “Litigation”), (a) that challenges
any Credit Party’s right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) that
has a reasonable risk of being determined adversely to any Sotheby Entity and
that, if so determined, could reasonably be expected to have a Material Adverse
Effect. Except as set forth on Disclosure Schedule (3.13(a)), as of the
Closing Date there is no Litigation pending or, to any Sotheby Entity’s
knowledge, threatened, that seeks damages in excess of $2,500,000 or injunctive
relief against, or alleges criminal misconduct of, any Sotheby Entity.


40





                    3.14          Brokers.


                    Except
as set forth on Disclosure Schedule 3.14, no broker or finder brought
about the obtaining, making or closing of the Loans, and no Sotheby Entity or
Affiliate thereof has any obligation to any Person in respect of any finder’s
or brokerage fees in connection therewith.


                    3.15          Intellectual
Property.


                    As
of the Closing Date, each Sotheby Entity owns or has rights to use all
Intellectual Property necessary to continue to conduct its business as now
conducted by it or presently proposed to be conducted by it, and each Patent,
Trademark, registered Copyright and License owned by the Credit Parties is
listed, together with the related application or registration number, as
applicable, and the owner thereof, in Disclosure Schedule (3.15). Each
Sotheby Entity conducts its business and affairs without infringement of or
interference with any Intellectual Property of any other Person in any material
respect. Except as set forth in Disclosure Schedule (3.15), no Credit Party is
aware of any material infringement claim by any other Person with respect to
any Intellectual Property owned by the Credit Parties.


                    3.16          Full
Disclosure.


                    No
information contained in this Agreement, any of the other Loan Documents,
Financial Statements or Collateral Reports or other written reports from time
to time prepared by any Sotheby Entity and delivered hereunder or any written
statement prepared by any Sotheby Entity and furnished by or on behalf of any
Sotheby Entity to Agent or any Lender pursuant to the terms of this Agreement
contains or will, at the time of delivery thereof, contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Projections delivered hereunder
are based upon the estimates and assumptions stated therein, all of which
Borrowers believed at the time of delivery to be reasonable and fair in light
of current conditions and current facts known to Borrowers as of such delivery
date, and reflect Borrowers’ good faith and reasonable estimates of the future
financial performance of Borrowers and of the other information projected
therein for the period set forth therein. The Projections are not a guaranty of
future performance and actual results may differ from those set forth in the
Projections. The Liens granted to Agent, on behalf of itself and the other
Secured Parties, pursuant to the Collateral Documents will at all times be
valid, fully perfected first priority security interests in the Collateral
described therein (except as otherwise set forth in the Collateral Documents),
subject, as to priority, only to Permitted Encumbrances that would be prior to
Liens in favor of Agent as a matter of law.


                    3.17          Environmental
Matters.


                    
(a) Except as set forth in Disclosure Schedule (3.17), as of the Closing
Date: (i) the owned Real Estate is, and, to the knowledge of the Credit
Parties, the leased Real Estate is, in each case, free of contamination from
any Hazardous Material except for such contamination that would not adversely
impact the value or marketability of such Real Estate and that would not result
in Environmental Liabilities that could reasonably be expected to have a
Material 


41





Adverse
Effect; (ii) no Sotheby Entity has caused or suffered to occur any material
Release of Hazardous Materials on, at, in, under, above, to, from or about any
of its Real Estate; (iii) the Sotheby Entities are and have been in compliance
with all Environmental Laws, except for such noncompliance that would not
result in Environmental Liabilities which could reasonably be expected to have
a Material Adverse Effect; (iv) the Sotheby Entities have obtained, and are in
compliance with, all Environmental Permits required by Environmental Laws for
the operations of their respective businesses as presently conducted or as
proposed to be conducted, except where the failure to so obtain or comply with
such Environmental Permits would not result in Environmental Liabilities that
could reasonably be expected to have a Material Adverse Effect; (v) no Sotheby
Entity is involved in operations or knows of any facts, circumstances or
conditions, including any Releases of Hazardous Materials, that are likely to
result in any Environmental Liabilities of such Sotheby Entity which could
reasonably be expected to have a Material Adverse Effect; (vi) there is no
Litigation arising under or related to any Environmental Laws, Environmental
Permits or Hazardous Material that seeks damages, penalties, fines, costs or
expenses that could reasonably be expected to have a Material Adverse Effect or
injunctive relief against, or that alleges criminal misconduct by, any Sotheby
Entity; (vii) no notice has been received by any Sotheby Entity identifying it
as a “potentially responsible party” or requesting information under CERCLA or
analogous state statutes, and to the knowledge of the Sotheby Entities, there
are no facts, circumstances or conditions that may result in any Sotheby Entity
being identified as a “potentially responsible party” under CERCLA or analogous
state statutes; and (viii) the Sotheby Entities have made available to Agent
copies of all existing environmental reports, reviews and audits and all
written information pertaining to actual or potential Environmental
Liabilities, in each case relating to any Sotheby Entity.


                    (b)            Each
Credit Party hereby acknowledges and agrees that Agent (i) is not now, and has
not ever been, in control of any of the Real Estate or any Credit Party’s
affairs, and (ii) does not have the capacity through the provisions of the Loan
Documents or otherwise to influence any Credit Party’s conduct with respect to
the ownership, operation or management of any of its Real Estate or compliance
with Environmental Laws or Environmental Permits.


                    3.18          Insurance.


                    Disclosure
Schedule (3.18) lists all insurance policies of any nature maintained, as
of the Closing Date, for current occurrences by each Credit Party, as well as a
summary of the terms of each such policy.


                    3.19          Deposit.



                    Disclosure
Schedule (3.19) lists all banks and other financial institutions at which
any Credit Party maintains deposit or other accounts, and such Schedule
correctly identifies the name, address and telephone number of each depository,
the name in which the account is held, a description of the purpose of the
account, the complete account number therefor and whether such account contains
amounts payable to consignors representing proceeds of the sale of consigned
Works of Art.


42





                    3.20          [Reserved].


                    3.21          Bonding;
Licenses.


                    Except
as set forth on Disclosure Schedule (3.21) or entered into in the ordinary
course of business, as of the Closing Date, no Sotheby Entity is a party to
or bound by any surety bond agreement or bonding requirement with respect to
products or services sold by it or any trademark or patent license agreement
with respect to products sold by it.


                    3.22          Solvency.


                    Both
before and after giving effect to (a) the Loans and Letter of Credit
Obligations to be made or incurred on the Closing Date or such other date as
Loans and Letter of Credit Obligations requested hereunder are made or
incurred, (b) the disbursement of the proceeds of such Loans pursuant to the
instructions of Borrower Representative; (c) the Refinancing; and (d) the
payment and accrual of all transaction costs in connection with the foregoing,
(i) each Credit Party is and will be Solvent and (ii) Parent and its
Subsidiaries, on a consolidated basis, are and will be Solvent.


                    3.23          Sale-Leasebacks.


                    No
Sotheby Entity is a party to any sale-leaseback, synthetic lease or similar
transaction involving any of its assets.


                    3.24          U.S.
Money-Laundering and Terrorism Regulatory Matters.


                    (a)            No
Sotheby Entity or any Affiliate of any Sotheby Entity, nor any of their
respective officers or directors or any of their respective brokers, investors
or other agents acting or benefiting in any capacity in connection with Loans,
is a Prohibited Person.


                    (b)            No
Sotheby Entity or any Affiliate of any Sotheby Entity, nor any of their
respective officers or directors (i) to such Sotheby Entity’s knowledge after
due inquiry, has conducted or will conduct any business or has engaged or will
engage in any transaction or dealing with any Prohibited Person, including
making or receiving any contribution of funds, goods or services to or for the
benefit of any Prohibited Person, (ii) to such Sotheby Entity’s knowledge after
due inquiry, has dealt or will deal in, or otherwise has engaged or will engage
in any transaction relating to, any Prohibited Person or any property or
interests in property blocked pursuant to the Executive Order or (iii) has
engaged or will engage in or has conspired or will conspire to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding,
or attempts to violate, any of the requirements or prohibitions set forth in
the Executive Order or the PATRIOT Act.


                    (c)            Each
Sotheby Entity and its Affiliates, and their respective officers and directors
are in full compliance with all applicable orders, rules and regulations issued
by, and recommendations of, the U.S. Department of the Treasury and OFAC
pursuant to IEEPA, the PATRIOT Act, other legal requirements relating to
sanctions, money laundering or terrorism and any executive orders related
thereto.


43





                    (d)            Each
Borrower has established an anti-money laundering and/or economic sanctions
program and/or procedures in accordance with all applicable laws, rules and
regulations of its own jurisdiction including, without limitation, where
applicable, the PATRIOT Act. Each Borrower applies its anti-money laundering
program and/or procedures to all Art Loan Debtors.


                    (e)            Each
Borrower has taken appropriate due diligence efforts to know each Art Loan
Debtor to which it has advanced, or committed to advance, Art Loans, including
whether such Art Loan Debtor is a Prohibited Person. Each Borrower has taken
appropriate due diligence efforts to know if any such Art Loan Debtor is a
“Senior Foreign Political Figure” (as defined in the PATRIOT Act) and, to the
extent that any Art Loan Debtor is a Senior Foreign Political Figure, has
disclosed such information to Agent.


                    (f)            Each
Borrower does not believe, and after appropriate due diligence, has no reason
to believe, that any of its Art Loan Debtors is a “Prohibited Foreign Shell
Bank” (as defined in the PATRIOT Act), or is named on any available lists of
known or suspected terrorists, terrorist organizations or of other sanctioned
person issued by the United States government and/or the government(s) of any
jurisdiction(s) in which such Borrower is doing business.


                    (g)            Each
Sotheby Entity has adopted reasonable procedures in accordance with applicable
law as of the Closing Date to elicit information that substantiates the
statements contained in this Section 3.25.


                    3.25          Lending
and Auction Regulatory Matters.


                    (a)            Except
as set forth in Disclosure Schedule (3.13(a)), each Credit Party that
makes or owns Art Loans is in material compliance with, and each Art Loan has
been made and remains in material compliance with, all applicable provisions of
federal, state, local and foreign laws imposed upon lenders with respect to
consumer or commercial lending, usury or other limitations on interest, finance
charges, or other charges, finance company or other lender licensing, consumer
or commercial credit disclosure, consumer or commercial credit collection
practices, and similar laws and regulations. 


                    (b)            Sotheby’s,
Inc. and each other Credit Party that conducts auctions in the City of New York
is in material compliance with, and each employee thereof who conducts auction
in New York City maintains a valid license under, the City of New York’s
Auctioneer Rules (Title 20, Chapter 2, Subchapter 13) and any applicable
similar laws of other jurisdictions. Sotheby’s U.K. and each other Credit Party
which conducts auctions in the United Kingdom is in material compliance with,
and maintains valid licenses (if required) under, all laws, regulations and
auctioneer’s licensing requirements applicable in the United Kingdom, if any.


4.          FINANCIAL STATEMENTS AND INFORMATION


                    4.1          Reports
and Notices. 


                    (a)           Each
Credit Party hereby agrees that from and after the Closing Date and until the
Termination Date, it shall deliver to Agent or to Agent and Lenders, as
required, the 


44





Financial
Statements, notices, Projections and other information at the times, to the
Persons and in the manner set forth in Annex E.


                    (b)           Each
Credit Party hereby agrees that, from and after the Closing Date and until the
Termination Date, it shall deliver to Agent or to Agent and Lenders, as
required, the various Collateral Reports (including Borrowing Base Certificates
in the form of Exhibit 4.1(A), Art Loan Receivables Reports in the form
of Exhibit 4.1(B), and Art Inventory Reports in the form of Exhibit 4.1(C))
at the times, to the Persons and in the manner set forth in Annex F and Section
2.2(d).


                    4.2          Communication
with Accountants.


                    Each
Credit Party authorizes (a) Agent and (b) so long as an Event of Default has
occurred and is continuing, each Lender, to communicate directly with its
independent certified public accountants, including Deloitte & Touche LLP,
and authorizes such accountants and advisors to (and, upon Agent’s request
therefor, shall request that such accountants and advisors) communicate to
Agent and each Lender information relating to any Sotheby Entity with respect
to the business, results of operations and financial condition of any Sotheby
Entity.


5.          AFFIRMATIVE COVENANTS


                    Each
Credit Party jointly and severally agrees as to all Sotheby Entities that from
and after the date hereof and until the Termination Date:


                    5.1          Maintenance
of Existence and Conduct of Business.


                    Each
Sotheby Entity shall: do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate, partnership, limited liability
company or unlimited liability company existence and its material rights and
franchises, except as otherwise permitted under Section 6.1; continue to
conduct its business substantially as now conducted or as otherwise permitted
hereunder; at all times maintain, preserve and protect all of its assets and
properties used or useful in the conduct of its business, and keep the same in
good repair, working order and condition in all material respects (taking into
consideration ordinary wear and tear) and from time to time make, or cause to
be made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices.


                    5.2          Payment
of Charges. 


                    (a)           Subject
to Section 5.2(b), each Sotheby Entity shall pay and discharge or cause
to be paid and discharged promptly all Charges payable by it, including (i)
Charges imposed upon it, its income and profits, or any of its property (real,
personal or mixed) and all Charges with respect to tax, social security and
unemployment withholding with respect to its employees, (ii) lawful claims for
labor, materials, supplies and services or otherwise, and (iii) all storage or
rental charges payable to warehousemen or bailees, in each case, before any
thereof shall become past due, in each case, except where the failure to pay or
discharge such Charges would not result in aggregate liabilities in excess of
$2,500,000.


45





                    (b)           Each
Sotheby Entity may in good faith contest, by appropriate proceedings, the
validity or amount of any Charges or claims described in Section 5.2(a);
provided, that (i) adequate reserves with respect to such contest are
maintained on the books of such Sotheby Entity, in accordance with GAAP; (ii)
no Lien shall be imposed to secure payment of such Charges (other than payments
to warehousemen and/or bailees) that is superior to any of the Liens securing
the Obligations and such contest is maintained and prosecuted continuously and
with diligence and operates to suspend collection or enforcement of such
Charges; (iii) none of the Collateral becomes subject to forfeiture or loss as
a result of such contest; and (iv) such Sotheby Entity shall promptly pay or
discharge such contested Charges or claims and all additional charges,
interest, penalties and expenses, if any, if such contest is terminated or
discontinued adversely to such Sotheby Entity.


                    5.3          Books
and Records.


                    Each
Sotheby Entity shall keep adequate books and records with respect to its
business activities in which proper entries, reflecting all financial
transactions, are made. Parent shall keep adequate books and records with
respect to the business activities of Parent and its Subsidiaries on a consolidated
basis in which proper entries, reflecting all financial transactions, are made
in accordance with GAAP and on a basis consistent with the Financial Statements
attached as Disclosure Schedule (3.4(a)).


                    5.4          Insurance;
Damage to or Destruction of Collateral.


                    (a)           The
Sotheby Entities shall, at their sole cost and expense, maintain policies of
insurance with financially sound and reputable insurance companies in such
amounts, and covering such risks, as is consistent with sound business practice
and customary for their industry. In the case of the Credit Parties, such
policies of insurance (or the loss payable and additional insured endorsements
delivered to Agent) shall contain provisions pursuant to which the insurer
agrees to provide thirty (30) days prior written notice to Agent in the event
of any non-renewal, cancellation or amendment of any such insurance policy. If
any Sotheby Entity at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above, or to pay all premiums
relating thereto, Agent may at any time or times thereafter obtain and maintain
such policies of insurance and pay such premiums and take any other action with
respect thereto that Agent deems advisable. Agent shall have no obligation to
obtain insurance for any Sotheby Entity or pay any premiums therefor. By doing
so, Agent shall not be deemed to have waived any Default or Event of Default
arising from any Sotheby Entity’s failure to maintain such insurance or pay any
premiums therefor. All sums so disbursed, including reasonable attorneys’ fees,
court costs and other charges related thereto, shall be payable on demand by
Borrowers to Agent and shall be additional Obligations hereunder secured by the
Collateral.


                    (b)           If
reasonably requested by Agent, each Sotheby Entity shall deliver to Agent from
time to time a report of a reputable insurance broker, reasonably satisfactory
to Agent, with respect to its insurance policies.


                    (c)           Each
Credit Party shall deliver to Agent, in form and substance reasonably
satisfactory to Agent, endorsements to (i) all “All Risk,” Lender Single
Interest (“LSI”) and Fine 


46





Arts property
policies of insurance (including, to the extent permitted under the York Avenue
Lease Documents and York Avenue Loan Documents, the business interruption
insurance of such Credit Party), in each case, naming Agent, on behalf of
itself and the other Secured Parties, as a loss payee, and (ii) all general,
automotive, and umbrella liability policies of insurance, in each case, naming
Agent, on behalf of itself and the other Secured Parties, as additional
insured. Each Credit Party irrevocably makes, constitutes and appoints Agent
(and all officers, employees or agents designated by Agent), so long as any
Default or Event of Default has occurred and is continuing or the anticipated
insurance proceeds exceed the Dollar Equivalent of $1,000,000, as such Credit
Party’s true and lawful agent and attorney in fact for the purpose of making,
settling and adjusting claims under such “All Risk” property policies of
insurance, endorsing the name of such Credit Party on any check or other item
of payment for the proceeds of such “All Risk” policies of insurance and for
making all determinations and decisions with respect to such “All Risk”
policies of insurance. Agent shall have no duty to exercise any rights or
powers granted to it pursuant to the foregoing power-of-attorney. Borrower
Representative shall promptly notify Agent of any loss, damage, or destruction
to the Collateral in the amount of $1,000,000 or more, whether or not covered
by insurance. After deducting from such proceeds (i) the expenses incurred by
Agent in the collection or handling thereof, and (ii) amounts required to be
paid to creditors (other than Lenders) having Permitted Encumbrances, Agent (A)
may, except to the extent such proceeds are not required to be applied to
prepay the Secured Obligations pursuant to Section 1.3(c), at its
option, (x) apply any such proceeds to the reduction of the Secured Obligations
in accordance with Section 1.3(d) or (e), as applicable, or (y) permit
or require the applicable Credit Party to use such money, or any part thereof,
to replace, repair, restore or rebuild the Collateral in a diligent and
expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction and (B) shall, to the
extent such proceeds are not required to be applied to prepay the Secured
Obligations pursuant to Section 1.3(c), remit such proceeds to the
applicable Credit Party.


                    5.5          Compliance
with Laws.


                    Each
Sotheby Entity shall comply with all federal, state, local and foreign laws,
rules and regulations applicable to it, including those relating to ERISA,
labor, money laundering, counter-terrorist financing, consumer or commercial
lending (including, for the avoidance of doubt, the CCA and the rules and
regulations from time to time in effect thereunder or in connection therewith),
usury, limitations on interest, finance charges or other charges, finance
company licensing, consumer or commercial credit disclosure, debt collection,
auctioneers, Environmental Laws and Environmental Permits, except to the extent
that the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.


                    5.6          Supplemental
Disclosure.


                    From
time to time as may be reasonably requested by Agent (which request will not be
made more frequently than once each year absent the occurrence and continuance
of an Event of Default) or at Credit Parties’ election, the Credit Parties
shall supplement each Disclosure Schedule hereto, or any representation herein
or in any other Loan Document, with respect to any matter hereafter arising
that, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule or as an 


47





exception to
such representation or that is necessary to correct any information in such
Disclosure Schedule or representation which has been rendered inaccurate
thereby (and, in the case of any supplements to any Disclosure Schedule, such
Disclosure Schedule shall be appropriately marked to show the changes made
therein); provided that (a) no such supplement to any such Disclosure Schedule
or representation shall amend, supplement or otherwise modify any Disclosure
Schedule or representation, or be or be deemed a waiver of any Default or Event
of Default resulting from the matters disclosed therein, except as consented to
by Agent and Requisite Lenders in writing, and (b) no supplement shall be required
or permitted as to representations and warranties that relate solely to the
Closing Date.


                    5.7          Intellectual
Property.


                    Each
Sotheby Entity will conduct its business and affairs without infringement of or
interference with any Intellectual Property of any other Person in any material
respect and shall comply in all material respects with the terms of its
Licenses.


                    5.8          Environmental
Matters.


                    Each
Sotheby Entity shall and shall cause each Person within its control to: (a)
conduct its operations and keep and maintain its Real Estate in compliance with
all Environmental Laws and Environmental Permits other than noncompliance that
could not reasonably be expected to have a Material Adverse Effect; (b)
implement any and all investigation, remediation, removal and response actions
that are appropriate or necessary to maintain the value and marketability of
the Real Estate or to otherwise comply with Environmental Laws and
Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to or from any of its Real Estate in all material
respects; (c) notify Agent promptly after such Sotheby Entity becomes aware of
any violation of Environmental Laws or Environmental Permits or any Release on,
at, in, under, above, to or from any Real Estate that is reasonably likely to
result in Environmental Liabilities that could reasonably be expected to have a
Material Adverse Effect; and (d) promptly forward to Agent a copy of any order,
notice, request for information or any communication or report received by such
Sotheby Entity in connection with any such violation or Release or any other
matter relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities that could
reasonably be expected to have a Material Adverse Effect, in each case whether
or not the Environmental Protection Agency or any Governmental Authority has
taken or threatened any action in connection with any such violation, Release
or other matter. If Agent at any time has a reasonable basis to believe that
there may be a violation of any Environmental Laws or Environmental Permits by
any Sotheby Entity or any Environmental Liability arising thereunder, or a
Release of Hazardous Materials on, at, in, under, above, to or from any of its
Real Estate, that, in each case, could reasonably be expected to have a
Material Adverse Effect, then each Sotheby Entity shall, upon Agent’s written
request (i) cause the performance of such environmental audits including
subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrowers’ expense, as Agent may from time to time
reasonably request, subject to any leases, which shall be conducted by
reputable environmental consulting firms reasonably acceptable to Agent and
shall be in form and substance reasonably acceptable to Agent, and (ii) permit
Agent or its representatives to have access to all Real Estate for the 


48





purpose of
conducting such environmental audits and testing as Agent deems appropriate,
including subsurface sampling of soil and groundwater. Borrowers shall
reimburse Agent for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.


                    5.9          Landlords’
Agreements, Bailee Letters and Real Estate Purchases.


                    Within
ninety (90) days of the Closing Date (or such later date as Agent shall consent
to in writing), with respect to each leased property indicated on Disclosure
Schedule (3.6), each Credit Party shall use commercially reasonable efforts
to obtain a landlord’s agreement, in form and substance reasonably satisfactory
to Agent, from the applicable lessor with respect to each such indicated
locations. After the Closing Date, if any Credit Party proposes to lease during
any Fiscal Year any real property locations or warehouse spaces (or renew an
existing lease of any real property locations or warehouse spaces, or alter the
use of any leased location to materially increase the Collateral stored or
located at such location) where Collateral having a book value the Dollar
Equivalent of which is greater than $1,000,000 in the aggregate will be stored
or located, such Credit Party shall first notify Agent thereof and, upon
request of Agent, provide to Agent a landlord agreement or bailee letter, as
appropriate, with respect to such location, in form and substance reasonably
satisfactory to Agent. Each Credit Party shall timely and fully pay and perform
its obligations under all leases and other agreements with respect to each
leased location or public warehouse where any Collateral is or may be located.
To the extent otherwise permitted hereunder, if any Credit Party proposes to
acquire a fee ownership interest in Real Estate after the Closing Date, such
Credit Party shall first notify Agent thereof and, upon request of Agent,
provide to Agent a mortgage or deed of trust granting Agent a first priority
security interest on such Real Estate, together with environmental audits,
mortgage title insurance commitment, real property survey, local counsel
opinion(s), supplemental casualty insurance and flood insurance, and such other
documents, instruments or agreements reasonably requested by Agent, in each
case, in form and substance reasonably satisfactory to Agent.


                    5.10          Lending
and Auction Regulatory Matters. 


                    (a)            Each
Credit Party remains in material compliance with all applicable provisions of
federal, state, local and foreign laws imposed upon lenders with respect to
consumer or commercial lending, usury or other limitations on interest, finance
charges or other charges, finance companies, finance company or other lender
licensing, consumer or commercial credit disclosure, consumer or commercial
credit collection practices, and similar laws and regulations. 


                    (b)            Sotheby’s,
Inc. and each other Credit Party that conducts auctions in the City of New York
shall remain in material compliance with, and maintain a valid license under,
the City of New York’s Auctioneer Rules (Title 20, Chapter 2, Subchapter 13)
and any applicable similar laws of other jurisdictions. Sotheby’s U.K. and each
other Credit Party that conducts auctions in the United Kingdom shall remain in
material compliance with, and maintain valid licenses under, all laws,
regulations and auctioneer’s licensing requirements applicable in the United
Kingdom, if any. 


49





                    5.11          Further
Assurances.


                    Each
Credit Party agrees that it shall and shall cause each other Sotheby Entity to,
at such Credit Party’s expense and upon the reasonable request of Agent, duly
execute and deliver, or cause to be duly executed and delivered, to Agent such
further instruments and do and cause to be done such further acts as may be
necessary or proper in the reasonable opinion of Agent to carry out more
effectively the provisions and purposes of this Agreement and each Loan
Document.


                    5.12          Art
Loans and Art Inventory.


                    Each
Borrower shall (a) in connection with the acquisition of each Work of Art as
Art Inventory, conduct appropriate diligence with respect to such Work of Art
(including, as applicable, searches of such Work of Art in the Art Loss
Register) consistent with past practices, and (b) in connection with each Art
Loan made or to be made by it, (i) apply credit standards and loan to
collateral value requirements, (ii) conduct appropriate diligence with respect
to the applicable Work(s) of Art (including, as applicable, searches of such
Work(s) of Art in the Art Loss Register), (iii) follow practices with respect
to documentation, perfection and protection of security interests and (iv)
follow practices with respect to classification of Art Loans as non-accrual, as
such standards, requirements and practices are generally applied and followed
in the Borrowers’ art lending business prior to the Closing Date.


                    5.13          Money-Laundering
and Terrorism Regulatory Matters. 


                    (a)            Each
Sotheby Entity shall remain in compliance in all material respects with all
applicable orders, rules and regulations applicable to it, including those
issued by the U.S. Department of the Treasury and OFAC pursuant to IEEPA, the
PATRIOT Act, other legal requirements relating to sanctions, money laundering
or terrorism and any executive orders related thereto.


                    (b)            Each
Sotheby Entity is advised that, by law, Agent and the Lenders may be obligated
to “freeze its account”, either by prohibiting additional Revolving Credit
Advances or Letter of Credit Obligations, declining any withdrawal, redemption
or transfer request(s) with respect to any deposit account under the control of
Agent or the Lenders and/or segregating assets, in compliance with government
regulations, and Agent and the Lenders may also be required to report such
action to governmental or regulatory authorities, including OFAC.


                    (c)            Each
Borrower shall maintain an anti-money laundering, counter-terrorist financing
and/or economic sanctions program and/or procedures in accordance with all
applicable laws, rules and regulations of its own jurisdiction including,
without limitation, where applicable, the PATRIOT Act and the Money Laundering
Regulations 2007. Each Borrower shall apply its anti-money laundering and
counter-terrorist financing program and/or procedures to all Art Loan Debtors
and shall take appropriate steps in accordance with the laws of its own
jurisdiction to ensure that all required relevant documentation is retained,
including identification related to such Art Loan Debtors in accordance with
its anti-money laundering, counter-terrorist financing and/or economic
sanctions program. Each Borrower shall adopt appropriate policies, procedures
and internal controls to be compliant in all material respects with any
additional laws, 


50





rules or
regulations relating to money laundering and/or counter-terrorist financing,
including the PATRIOT Act, to which it may become subject.


                    (d)            Each
Borrower shall take appropriate due diligence efforts to know each Art Loan
Debtor to which it shall advance, or commit to advance, Art Loans, including
whether such Art Loan Debtor is a Prohibited Person. Each Borrower shall take
appropriate due diligence efforts to know if any such Art Loan Debtor is a
“Senior Foreign Political Figure” (as defined in the PATRIOT Act) and, to the
extent that any investor is a Senior Foreign Political Figure, shall disclose
such information to Agent.


                    (e)            Each
Sotheby Entity will notify or report unusual or suspicious activity to the
extent required by the laws or requirements of its own jurisdiction including,
where applicable, the PATRIOT Act.


                    (f)            Each
Sotheby Entity shall deliver to Agent any certification or other evidence
requested from time to time by Agent in its sole discretion, confirming such
Sotheby Entity’s compliance with this Section 5.13 and the
representations and warranties made by such Sotheby Entity pursuant to Section
3.25.


                    5.14          New
Subsidiaries.


                    Upon
(i) any Person becoming a Subsidiary of any Credit Party or (ii) any Subsidiary
of any Credit Party becoming a Domestic Subsidiary or a Foreign Subsidiary organized
under the laws of England, (a) if such Person is a Domestic Subsidiary or a
Foreign Subsidiary organized under the laws of England, such Person shall
become party to this Agreement as a Credit Party by executing a joinder
agreement and delivering, along with such executed joinder agreement, such
organizational and authorization documentation and legal opinions as are
reasonably requested by Agent, in each case, in form and substance reasonably
satisfactory to Agent; (b) if such Person is a Domestic Subsidiary, such Person
shall become party to the Domestic Subsidiary Guaranty, the U.S. Security
Agreement, the U.S. Pledge Agreement and such further Collateral Documents as
Agent shall reasonably request; (c) if such Person is a Foreign Subsidiary organized
under the laws of England, such Person shall become party to a Guaranty with
respect to the Obligations of the U.K. Borrowers and such Collateral Documents
as Agent shall reasonably request; and (d) the outstanding Stock of such Person
shall be pledged to Agent, for the benefit of the Secured Parties, pursuant to
such Collateral Documents as Agent shall reasonably request; provided,
that, (i) so long as SPTC Delaware shall not create, incur, assume or permit to
exist any Indebtedness or Guaranteed Indebtedness or any Lien on or with
respect to any of its properties or assets (whether now owned or hereafter
acquired), SPTC Delaware shall not be required to execute or become a party to
any Loan Documents, and (ii) the York Avenue Owner shall not be required to
execute or become a party to any Loan Documents.


                    5.15          Immaterial
Subsidiaries.


                    Each
Immaterial Subsidiary (i) as of the Closing Date, owns assets having a book
value of which the Dollar Equivalent is less than $100,000 and (ii) had
earnings during the 2008 Fiscal Year of which the Dollar Equivalent was less
than $100,000.


51





                    5.16          York
Avenue Transactions.


                    Except
as set forth on Disclosure Schedule (5.16), the York Avenue Lender has
no recourse to Parent or any of its Subsidiaries or any assets of Parent or any
of its Subsidiaries pursuant to the York Avenue Loan Agreement or any other
York Avenue Loan Document.


                    5.17          Auction
Guaranties.


                    Each
Sotheby Entity shall comply with the provisions of the Auction Guaranty Side
Letter.


                    5.18          Data
Protection Matters.


                    To
the extent and at all times that any Data Protection Laws will be applicable as
a result of any Credit Party’s performance hereunder, such Credit Party will be
in compliance in all material respects with all such Data Protection Laws
including, without limitation, having obtained valid consents where necessary
from any Persons whose Personal Data is provided in performance of this
Agreement for (a) such Personal Data to be processed for the purposes required
by each Credit Party in performance of this Agreement; (b) such Personal Data
to be disclosed to Agent or any Lender, or any agent or subcontrator of Agent
or any Lender, and to be processed by Agent or any Lender for the purposes
required in performance of this Agreement; and (c) the transfer of such
Personal Data to Agent or any Lender in a country outside of the European
Economic Area. The form of any data protection consent shall be subject to
prior approval of Agent, who may require such amendments as it may consider
necessary in order to comply with Data Protection Laws and who may require,
upon reasonable prior notice, such other reasonable actions be taken by each
Credit Party, including entering into the European Union’s standard contractual
clauses for the transfer of personal data to third countries, to ensure
compliance with Data Protection Laws. Each Credit Party shall not, by any act
or omission, place Agent or any Lender in breach of any Data Protection Laws.


6.          NEGATIVE COVENANTS


                    Each
Credit Party jointly and severally agrees as to all Sotheby Entities that from
and after the date hereof until the Termination Date:


                    6.1          Mergers,
Subsidiaries, Etc.


                    No
Sotheby Entity shall directly or indirectly, by operation of law or otherwise,
(a) acquire, liquidate or dissolve any Subsidiary or (b) merge with,
consolidate with, acquire all or substantially all of the assets or Stock of,
or otherwise combine with or acquire, any Person, except that any Sotheby
Entity may merge with another Sotheby Entity; provided, that (i) Borrower Representative
shall be the survivor of any such merger to which it is a party, (ii) any
Borrower shall be the survivor of any such merger with any Sotheby Entity that
is not a Borrower and (iii) any Guarantor shall be the survivor of any such
merger with any Sotheby Entity that is not a Credit Party; provided, further,
that any Sotheby Entity may dissolve or liquidate any Subsidiary thereof that
is not a Borrower.


52






                    6.2          Investments;
Loans and Revolving Credit Advances.


                    Except
as otherwise expressly permitted by this Section 6, no Sotheby Entity
shall make or permit to exist any investment in, or make, accrue or permit to
exist loans or advances of money to, any Person, through the direct or indirect
lending of money, holding of securities or otherwise, except that: 


	
  

 	
  

 
	
  

 	
           (a)
           Borrowers may
 hold investments comprised of notes payable, or stock or other securities
 issued by Account Debtors to any Borrower pursuant to negotiated agreements
 with respect to settlement of such Account Debtor’s Accounts in the ordinary
 course of business consistent with past practices; 

 
	
  

 	
  

 
	
  

 	
           (b)
           each Sotheby
 Entity may (i) maintain its existing investments in its Subsidiaries and
 joint ventures as of the Closing Date, (ii) make investments after the
 Closing Date in any Credit Party, or (iii) if such Sotheby Entity is not a
 Credit Party, make investments after the Closing Date in any other Sotheby
 Entity (other than any Immaterial Subsidiary); 

 
	
  

 	
  

 
	
  

 	
           (c)
           (i) any Borrower
 may enter into Art Loan/Inventory Joint Ventures and (ii) the Sotheby
 Entities may make investments after the Closing Date not to exceed a Dollar
 Equivalent of $5,000,000 in the aggregate in joint ventures (other than Art
 Loan/Inventory Joint Ventures) and other Sotheby Entities (other than any
 Immaterial Subsidiary) to the extent investments in such other Sotheby
 Entities are not permitted pursuant to the foregoing clause (b) or Section
 6.3(a)(vii)); 

 
	
  

 	
  

 
	
  

 	
           (d)
           so long as Agent
 has not delivered an Activation Notice with respect to any Blocked Account of
 a Sotheby Entity and no Default or Event of Default has occurred and is
 continuing, such Sotheby Entity may make investments in Cash Equivalent
 Investments; 

 
	
  

 	
  

 
	
  

 	
           (e)
           subject to
 applicable regulatory authorizations, any Borrower may make, or commit to
 make, Art Loans; 

 
	
  

 	
  

 
	
  

 	
           (f)
           the Sotheby
 Entities may make investments in York Avenue Owner in an aggregate amount in
 any Fiscal Year not in excess of the amount of Capital Expenditures permitted
 under paragraph (a) of Annex G for such Fiscal Year, less the
 aggregate amount of any Capital Expenditures made by Parent and its
 Subsidiaries during such Fiscal Year;

 
	
  

 	
  

 
	
  

 	
           (g)
           the trustee of
 the grantor trust established for purposes of setting aside assets to meet
 obligations of Sotheby’s, Inc. under the Sotheby’s Deferred Benefits
 Compensation Plan may make investments in connection with such plan; 

 
	
  

 	
  

 
	
  

 	
           (h)          in
 connection with the Australia Sale, Sotheby’s Asia, Inc. and Sotheby’s Asia
 Ltd. may contribute their respective ownership interests in Sotheby’s
 Australia Pty. Ltd. to a newly-formed Dutch Subsidiary; and

 



53









	
  

 	
  

 
	
  

 	
           (h)          the
 Sotheby Entities may make other investments (other than in any Immaterial
 Subsidiary or the York Avenue Owner) not exceeding $7,500,000 in the
 aggregate at any time outstanding.

 



                    6.3          Indebtedness.



                    (a)          No
Sotheby Entity shall create, incur, assume or permit to exist any Indebtedness,
except (without duplication):


                                   (i)          the
Senior Notes;


                                   (ii)         the
Convertible Notes;


                                   (iii)       obligations
(contingent or otherwise) under the Convertible Note Hedge Agreements and the
York Avenue Loan Documents;


                                   (iv)       Indebtedness
secured by purchase money security interests and Capital Leases permitted in Section
6.7(e);


                                   (v)        the
Loans and the other Obligations;


                                   (vi)       existing
Indebtedness described in Disclosure Schedule (6.3) and refinancings
thereof or amendments or modifications thereto that do not have the effect of
increasing the principal amount thereof or reducing the average life thereof
and that are otherwise on terms and conditions no less favorable to any Sotheby
Entity, Agent or any Lender, as determined by Agent, than the terms of the
Indebtedness being refinanced, amended or modified;


                                   (vii)      Indebtedness
consisting of intercompany loans and advances made by any Sotheby Entity to any
other Sotheby Entity (other than any Immaterial Subsidiary); provided, that:
(A) in the case of any intercompany loan or advance owing to any Credit Party,
from and after the date 120 days after the Closing Date, any Sotheby Entity
receiving the proceeds of such loan or advance shall have executed and
delivered to the applicable Credit Party a demand note (collectively, the “Intercompany
Notes”) to evidence any such intercompany Indebtedness owing at any time by
such Sotheby Entity, which Intercompany Notes shall be in form and substance
reasonably satisfactory to Agent and shall be pledged and delivered to Agent
pursuant to the applicable Collateral Document as additional collateral
security for the applicable Secured Obligations; (B) each Sotheby Entity shall
record all intercompany transactions on its books and records in a manner
reasonably satisfactory to Agent; (C) the obligations of each Credit Party
under any such intercompany loans and advances shall be subordinated to the
Obligations of such Credit Party hereunder and under the other Loan Documents
in a manner reasonably satisfactory to Agent; (D) with respect to any
intercompany loan or advance made after the Closing Date, at the time any such
intercompany loan or advance is made by any Sotheby Entity to any other Sotheby
Entity and after giving effect thereto, (i) each such Sotheby Entity shall be
Solvent or (ii)(x) such intercompany loan or advance shall be made in the
ordinary course of business, (y) if the Sotheby Entity making such intercompany
loan or advance is a Credit Party, such Credit Party shall be Solvent and (z)
the Sotheby Entity receiving such intercompany loan or advance shall have no
Funded Debt (except as permitted 


54





hereby) other
than intercompany loans or advances outstanding to other Sotheby Entities; and
(E) no Default or Event of Default would occur and be continuing after giving
effect to any such proposed intercompany loan or advance;


                                   (viii)       Indebtedness
arising in respect of surety bonds, guaranties and letters of credit with
respect to obligations of the Foreign Subsidiaries incurred in the ordinary
course of business that are not Funded Debt;


                                   (ix)         Indebtedness
arising under Rate Management Transactions; provided, that such Rate
Management Transactions are (or were) entered into in the ordinary course of such
Sotheby Entity’s business for the purpose of mitigating risks associated with
liabilities, commitments, investments, assets, earnings or properties held or
reasonably anticipated by such Sotheby Entity and not for purposes of
speculation;


                                   (x)          Indebtedness
arising under overdraft credit lines extended to various Sotheby Entities in
the ordinary course of business, which indebtedness arising under overdraft
credit lines extended to the Credit Parties shall not at any time exceed, in
the aggregate at any one time outstanding, the lesser of (A) $15,000,000 and
(B) the aggregate amount of overdraft credit lines extended to the Credit
Parties at such time; and


                                 
 (xi)         Other unsecured Indebtedness in
an aggregate principal amount not exceeding $10,000,000 at any one time
outstanding.


                    (b)          No
Sotheby Entity shall, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of any Indebtedness prior to its scheduled maturity, other
than (i) the Obligations; (ii) Indebtedness secured by a Permitted Encumbrance
if the asset securing such Indebtedness has been sold or otherwise disposed of
in accordance with SectionsSection 6.8;
(iii) Indebtedness permitted by Section 6.3(a)(vi) upon any refinancing
thereof in accordance with Section 6.3(a)(vi); (iv) Indebtedness
incurred pursuant to repayment by any Sotheby Entity of intercompany loans and
advances outstanding to any Sotheby Entity, (v) so long as (x) no Default or
Event of Default has occurred and is continuing or would occur as a result
thereof, and (y) Parent shall have provided to Agent prior to the date thereof
pro forma financial statements demonstrating that the Fixed Charge Coverage
Ratio, as of the end of the most recently completed Fiscal Quarter for which
Agent and Lenders have received Financial Statements pursuant hereto, shall be
equal to or greater than 1.15 to 1.00 (calculated on a pro forma basis as if
such purchase had occurred during such Fiscal Quarter), Indebtedness incurred pursuant to Permitted Convertible Note
Transactions or purchases, redemptions, defeasances or
prepayments of Convertible
Notes or Senior Notes by Parent; and (vi) so long as no Revolving Loans are
outstanding hereunder as of the date of any such transaction, Indebtedness in an aggregate cash amount not
to exceed $10,000,000.any purchases, redemptions, defeasances or prepayments of
Convertibles Notes or Senior Notes by Parent; and (vii) any adjustment of the
Convertible Note Hedge Agreements (and related cash payments by Parent to the
Convertible Note Hedge Counterparties) in connection with any purchase,
redemption, defeasance or prepayment of the Convertible Notes described in the
foregoing clauses (v) and (vi).


55





                    6.4          Employee
Loans and Affiliate Transactions. 


                    (a)          Except
as disclosed in Disclosure Schedule 6.4(a), no Sotheby Entity shall
enter into or be a party to any transaction with any other Sotheby Entity or
any Affiliate thereof except in the ordinary course of and pursuant to the
reasonable requirements of such Sotheby Entity’s business and, in the case of
any transaction with any Affiliate thereof (other than another Sotheby Entity),
upon fair and reasonable terms that are no less favorable to such Sotheby
Entity than would be obtained in a comparable arm’s length transaction with a
Person not an Affiliate of such Sotheby Entity.


                    (b)          No
Sotheby Entity shall enter into any lending or borrowing transaction with any
employees of any Sotheby Entity, except (i) loans to its respective employees
in the ordinary course of business consistent with past practices for travel
and entertainment expenses, relocation costs and similar purposes and stock
option financing, up to a maximum of a Dollar Equivalent of $1,500,000 in the
aggregate at any one time outstanding, (ii) Art Loans to employees of any
Sotheby Entity in the ordinary course of business pursuant to fair and
reasonable terms that are no less favorable to such Sotheby Entity making such
Art Loan than would be obtained in a comparable arm’s length transaction with a
Person not an employee of, or otherwise affiliated with, any Sotheby Entity, up
to a maximum of a Dollar Equivalent of $25,000,000 in the aggregate at any one
time outstanding and (iii) other loans to its respective employees, up to a
maximum of a Dollar Equivalent of $1,500,0003,000,000 in the
aggregate at any one time outstanding. 


                    6.5          Capital
Structure and Business.


                    If
all or part of a Sotheby Entity’s Stock is pledged to Agent, that Sotheby
Entity shall not issue additional Stock unless, upon issuance thereof, such
Stock is immediately pledged (and any related security certificates delivered)
by the holder thereof to Agent pursuant to the applicable Collateral Documents.
No Sotheby Entity shall amend its charter or bylaws in a manner that would
adversely affect Agent or Lenders or such Sotheby Entity’s duty or ability to
repay the Obligations. No Sotheby Entity shall engage in any business other
than the businesses currently engaged in by it or businesses reasonably related
thereto.


                    6.6          Guaranteed
Indebtedness.


                    No
Sotheby Entity shall create, incur, assume or permit to exist any Guaranteed
Indebtedness except (a) by endorsement of instruments or items of payment for
deposit to the general account of any Sotheby Entity, and (b) for Guaranteed
Indebtedness incurred for the benefit of any other Sotheby Entity if the
primary obligation with respect thereto is not prohibited by this Agreement.


                    6.7          Liens.


                    No
Sotheby Entity shall create, incur, assume or permit to exist any Lien on or
with respect to its Accounts or any of its other properties or assets (whether
now owned or hereafter acquired) except for: 


                    (a)
Permitted Encumbrances; 


56









	
  

 	
  

 
	
  

 	
            (b)
 Liens created pursuant to the York Avenue Loan Documents;

 
	
  

 	
  

 
	
  

 	
           
 (c) Liens (i) in existence on the date hereof, (ii) if such property or
 assets are owned by a Credit Party, summarized on Disclosure Schedule (6.7)
 and (iii) securing the Indebtedness described on Disclosure Schedule (6.3)
 and refinancings, extensions and renewals thereof, including extensions or
 renewals of any such Liens; provided, that the principal amount of the
 Indebtedness so secured is not increased and the Lien does not attach to any
 other property; 

 
	
  

 	
  

 
	
  

 	
           
 (d) Liens securing payment of obligations described in Section 6.3(a)(iv);
 provided, that such Liens shall not attach to any property other than cash on
 deposit with, or under the control of, the holder of such Indebtedness; and

 
	
  

 	
  

 
	
  

 	
           
 (e) Liens created after the date hereof by conditional sale or other title
 retention agreements (including Capital Leases) or in connection with
 purchase money Indebtedness with respect to Equipment and Fixtures acquired
 by any Sotheby Entity in the ordinary course of business, involving the
 incurrence of an aggregate amount of purchase money Indebtedness and Capital
 Lease Obligations of not more than a Dollar Equivalent of $1,500,000
 outstanding at any one time for all such Liens (provided that such Liens
 attach only to the assets subject to such purchase money debt and such
 Indebtedness is incurred within forty-five (45) days following such purchase
 and does not exceed 100% of the purchase price of the subject assets); 

 
	
  

 	
  

 
	
  

 	
            (f) Liens securing Indebtedness
 permitted pursuant to Section 6.3(a)(ix); provided, that such obligations are
 secured solely with cash and Cash Equivalent Investments;

 
	
  

 	
  

 
	
  

 	
            (g) licenses and sublicenses
 permitted pursuant to Section 6.8(g); and

 
	
  

 	
  

 
	
  

 	
            (h) Liens not otherwise
 permitted above on (i) cash and Cash Equivalents or (ii) assets not
 constituting Collateral, in each case, so long as the aggregate amount of
 obligations secured by such Liens does not exceed $10,000,000; 

 



provided, that no U.K. Credit Party shall
create, incur, assume or permit to exist any Lien on or with respect to its
Real Estate other than Permitted Encumbrances described in clauses (a), (g)
or (h) of the definition thereof. In addition, no Credit Party shall
become a party to any agreement, note, indenture or instrument, or take any
other action after the Closing Date that would prohibit the creation of a Lien
on any of its properties or other assets in favor of Agent, on behalf of itself
and the other Secured Parties, as additional collateral for the applicable
Secured Obligations, except operating leases, Capital Leases, Licenses or
agreements relating to purchase money Indebtedness which prohibit Liens upon
the assets that are subject thereto.


                    6.8          Sale
of Stock and Assets.


                    No
Sotheby Entity shall sell, transfer, convey, assign or otherwise dispose of any
of its properties or other assets, including the Stock of any of its
Subsidiaries (whether in a public or a private offering or otherwise) or any of
its Accounts, other than (a) the sale of Inventory in the ordinary course of
business, (b) the sale or other disposition by a Sotheby Entity of 


57





Equipment or
Fixtures that are obsolete or no longer used or useful in such Sotheby Entity’s
business and having a book value not exceeding the Dollar Equivalent of
$1,000,000 in the aggregate in any Fiscal Year; (c) the sale or other
disposition of other Equipment and
Fixturesassets
having a book value not exceeding the Dollar Equivalent of $2,500,000 in the
aggregate in any Fiscal Year; (d) the sale or other disposition of any asset by
a Credit Party to any other Credit Party; (e) the sale or other disposition of
any asset by any Sotheby Entity that is not a Credit Party to any other Sotheby
Entity; and (f)
subject to Agent’s prior written approval of the sale documentation thereof and
the completion of such sale on or prior to March 31, 2010, the sale of all or
substantially all of the assets or Stock of Sotheby’s Australia Pty. Ltd. for
an aggregate cash amount not less than the Dollar Equivalent of $1,500,000 (the
“Australia Sale”);
and (g) licenses or sublicenses granted to others in the ordinary course of
business which do not (i) interfere in any material respect with the business
of the Sotheby Entities or (ii) secure any Indebtedness.


                    6.9          ERISA.


                    No
Sotheby Entity shall, or shall cause or permit any ERISA Affiliate to, cause or
permit to occur (i) an event that could result in the imposition of a Lien
under Section 430 of the IRC or Section 303 or 4068 of ERISA or (ii) an ERISA
Event to the extent such ERISA Event would reasonably be expected to result in
taxes, penalties and other liabilities in an aggregate amount in excess of
$2,500,000 in the aggregate.


                    6.10          Financial
Covenants.


                    Borrowers
shall not breach or fail to comply with any of the Financial Covenants.


                    6.11          Hazardous
Materials.


                    No
Sotheby Entity shall cause or permit a Release of any Hazardous Material on,
at, in, under, above, to or from any of the Real Estate where such Release
would (a) violate in any respect, or form the basis for any Environmental
Liabilities under, any Environmental Laws or Environmental Permits, except as
could not reasonably be expected to have a Material Adverse Effect or (b)
otherwise materially adversely impact the value or marketability of any of the
Real Estate or any of the Collateral.


                    6.12          Sale
Leasebacks.


                    No
Sotheby Entity shall engage in any sale leaseback, synthetic lease or similar
transaction involving any of its assets.


                    6.13          Restricted
Payments.


                    No
Sotheby Entity shall make any Restricted Payment, except:


	
  

 	
  

 
	
  

 	
           (a)
 intercompany loans and advances between Sotheby Entities to the extent
 permitted by Sections 6.2 and 6.3; 

 



58











	
  

 	
  

 
	
  

 	
           (b)
 dividends and distributions by Subsidiaries of any Sotheby Entity paid to
 such Sotheby Entity; 

 
	
  

 	
  

 
	
  

 	
           (c)
 employee loans permitted under Section 6.4(b);

 
	
  

 	
  

 
	
  

 	
           (d)
 payments of principal and interest of intercompany loans and advances made in
 accordance with Section 6.3; 

 
	
  

 	
  

 
	
  

 	
           (e)
 Permitted Convertible Note Transactions; 

 
	
  

 	
  

 
	
  

 	
           (f)
 if (i) no Event of Default has occurred and is continuing or would occur as a
 result thereof, (ii) Parent shall have provided to Agent prior to the date
 thereof pro forma financial statements demonstrating that the Fixed Charge
 Coverage Ratio, as of the end of the most recently completed Fiscal Quarter
 for which Agent and Lenders have received Financial Statements pursuant
 hereto, shall be equal to or greater than 1.15 to 1.00 (calculated on a pro
 forma basis as if such purchase had occurred during such Fiscal Quarter), and
 (iii) after giving effect to such repurchase, Margin Stock shall not
 constitute more than 25% of the assets of Parent and its Subsidiariesthe Credit Parties, Parent may repurchase Stock of Parent; and 

 
	
  

 	
  

 
	
  

 	
           (g)
 if no Event of Default has occurred and is continuing or would occur as a
 result thereof, Parent may make dividends or distributions on its Stock in an
 aggregate amount (the “Maximum Distribution Amount”) not to exceed, in
 any Fiscal Quarter, the lesser of (i) $0.050.10
 per share of Stock and (ii) $4,000,0008,000,000; provided
 that, if Parent shall have provided to Agent prior to the date thereof pro
 forma financial statements demonstrating that the Fixed Charge Coverage
 Ratio, as of the end of the most recently completed Fiscal Quarter for which
 Agent and Lenders have received Financial Statements pursuant hereto, shall
 be equal to or greater than the level specified in paragraph (b) of Annex
 G with respect to such Fiscal Quarter (calculated on a pro forma basis as
 if such dividend or distribution had occurred during such Fiscal Quarter; provided
 that to the extent such pro forma calculation would otherwise include dividends
 or distributions made by Parent in five Fiscal Quarters, such pro forma
 calculation shall only include dividends or distributions made by Parent in
 the four Fiscal Quarters in which the highest aggregate amount of dividends
 or distributions were made), Parent may make dividends or distributions on
 its Stock in excess of the Maximum Distribution Amount.

 



                    6.14          Change
of Corporate Name, State of Incorporation or Location; Change of Fiscal Year.


                    No
U.S. Credit Party shall (a) change its name as it appears in official filings
in the state of its incorporation or other organization, (b) change its chief
executive office or principal place of business or the location of its records
concerning the Collateral, (c) change the type of entity that it is, (d) change
its organization identification number, if any, issued by its state of
incorporation or other organization, or (e) change its jurisdiction of
incorporation or organization or incorporate or organize in any additional
jurisdictions, in each case, without at least thirty (30) days (or such shorter
period as Agent shall consent to in writing) prior written 


59





notice to
Agent and after Agent’s written acknowledgment that any reasonable action
requested by Agent in connection therewith, including to continue the
perfection of any Liens in favor of Agent, on behalf of Lenders, in any
Collateral, has been completed or taken; provided, that any such new location
shall be in the continental United States. No Sotheby Entity shall change its
Fiscal Year.


                    6.15          No
Impairment of Intercompany Transfers.


                    No
Sotheby Entity shall directly or indirectly enter into or become bound by any
agreement, instrument, indenture or other obligation (other than this Agreement
and the other Loan Documents) that could directly or indirectly restrict,
prohibit or require the consent of any Person with respect to the payment of
dividends or distributions or the making or repayment of intercompany loans by
a Subsidiary of any Sotheby Entity to any Sotheby Entity or between Sotheby
Entities.


                    6.16          Real
Estate Purchases. 


                    No
Credit Party shall purchase or acquire or commit to purchase or acquire (a) a
fee simple or freehold ownership interest in real estate (x) with an aggregate
purchase price in excess of the Dollar Equivalent of $5,000,000, or (y) that
would cause the purchase prices of all such purchases by all Credit Parties
since the Closing Date to exceed, in aggregate, the Dollar Equivalent of
$25,000,000, or (b) a leasehold interest in real estate with a term in excess
of forty (40) years that would cause the aggregate premium or rent of all such
acquisitions of all Credit Parties since the Closing Date for the terms of all
such leasehold interests to exceed, in aggregate, the Dollar Equivalent of
$25,000,000.


                    6.17          Changes
Relating to Material Contracts.


                    No
Sotheby Entity shall (a) change or amend the terms of the Senior Note Indenture
or the Senior Notes in a
manner materially adverse to the Lenders, (b) change or amend
the terms of the Convertible Note Indenture, the Convertible Notes, any
Convertible Note Hedge Agreement or any Convertible Note Warrant in a manner materially adverse to
the Lenders, (c) change or amend any York Avenue Lease
Document in a manner adverse to the interests of Agent and Lenders in any
material respect or (d) except as set forth on Schedule 5.23, permit the
York Avenue Lender to have recourse to Parent or any of its Subsidiaries, or
any assets of Parent or any of its Subsidiaries, pursuant to the York Avenue
Loan Agreement or any other York Avenue Loan Document; provided, that no change or
amendment described in the foregoing clauses (a) and (b) shall: (i) increase
the interest rate on the Convertible Notes or Senior Notes; (ii) accelerate the
dates upon which payments of principal or interest are due under the
Convertible Notes or Senior Notes; (iii) increase the principal amount of the
Convertible Notes or Senior Notes above the original principal amount thereof;
(iv) change any event of default, in a manner adverse to the Credit Parties, or
add or make more restrictive any covenant with respect to the Convertible Notes
or Senior Notes or (v) change the redemption or prepayment provisions of the
Convertible Notes or Senior Notes.


60





                    6.18           Use of Proceeds.


                    No
Sotheby Entity shall use any
portion of the Loan proceeds, directly or indirectly,
to
purchase or carry Margin
Stock (other than Stock of Parent, to
the extent it constitutes Margin Stock,
repurchased in accordance with Section
6.13) or repay or otherwise refinance Indebtedness of any Sotheby Entity or
others incurred to purchase or carry Margin Stock. No Sotheby Entity shall own
any Margin Stock (other than Stock of Parent, to the extent it constitutes
Margin Stock, in an amount that does not exceed 25% of the assets of the Credit
Parties).


7.          TERM


                    7.1          Termination.


                    The
financing arrangements contemplated hereby shall be in effect until the
Commitment Termination Date, and the Loans and all other Obligations shall be
automatically due and payable in full on such date.


                    7.2          Survival
of Obligations Upon Termination of Financing Arrangements.


                    Except
as otherwise expressly provided for in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Credit Parties or the rights of Agent, the Lenders and
the Fronting Lender relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated, or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent,
each Lender and the Fronting Lender, all as contained in the Loan Documents,
shall not terminate or expire, but rather shall survive any such termination or
cancellation and shall continue in full force and effect until the Termination
Date; provided, that the provisions of Section 11, the payment
obligations under Sections 1.15 and 1.16, and the indemnities contained
in the Loan Documents shall survive the Termination Date.


8.          EVENTS OF DEFAULT; RIGHTS AND REMEDIES


                    8.1          Events
of Default.


                    The
occurrence of any one or more of the following events (regardless of the reason
therefor) shall constitute an “Event of Default” hereunder:


                    (a)          Any
Borrower (i) fails to make any payment of principal of, or interest on, or Fees
owing in respect of, the Loans or any of the other Obligations when due and
payable, or (ii) fails to pay or reimburse Agent or Lenders for any expense
reimbursable hereunder or under any other Loan Document within ten (10) days
following Agent’s demand for such reimbursement or payment of expenses.


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                    (b)          Any
Sotheby Entity fails or neglects to perform, keep or observe any of the
provisions of Sections 1.4, 1.8, 1.14, 5.4(a), 5.17 or 6, or any of the
provisions set forth in Annexes C or H, respectively.


                    (c)          Any
Borrower fails or neglects to perform, keep or observe any of the provisions of
Section 4.1 or any provisions set forth in Annexes E or F,
respectively, and the same shall remain unremedied for five (5) Business Days
or more.


                    (d)          Any
Sotheby Entity fails or neglects to perform, keep or observe any other
provision of this Agreement or of any of the other Loan Documents (other than
any provision embodied in or covered by any other clause of this Section 8.1)
and the same shall remain unremedied for twenty (20) days or more.


                    (e)          A
default or breach occurs under any Material Indebtedness Contract that is not
cured within any applicable grace period therefor, and such default or breach
(i) involves the failure to make any payment when due in respect of any Indebtedness
or Guaranteed Indebtedness evidenced by such Material Indebtedness Contract, or
(ii) causes, or permits any holder of Indebtedness or Guaranteed Indebtedness
evidenced by such Material Indebtedness Contract or a trustee to cause,
Indebtedness or Guaranteed Indebtedness evidenced by such Material Indebtedness
Contract to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or cash collateral in respect thereof to be
demanded, in each case, regardless of whether such right is exercised, by such
holder or trustee.


                    (f)          Any
information contained in any Borrowing Base Certificate is untrue or incorrect
in any respect (other than (i) inadvertent, immaterial errors not exceeding
$1,000,000 (or, if such inaccuracy results from a single error with respect to
an individual Art Loan or individual item of Art Inventory, $5,000,000) in the
aggregate in any Borrowing Base Certificate, (ii) errors understating either
Borrowing Base or (iii) inadvertent errors occurring when Aggregate Borrowing
Availability continues to exceed $15,000,000 after giving effect to the
correction of such errors), or any representation or warranty herein or in any
Loan Document or in any written statement, report, Financial Statement or
certificate (other than a Borrowing Base Certificate) made or delivered to
Agent or any Lender by any Credit Party is untrue or incorrect in any material
respect as of the date when made or deemed made.


                    (g)          A
case or proceeding is commenced against any Sotheby Entity (other than an Immaterial
Subsidiary) seeking a decree or order in respect of such
Sotheby Entity (i) under the Bankruptcy Code, or any other applicable federal,
state or foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, administrator, liquidator, assignee, trustee or sequestrator (or
similar official) for such Sotheby Entity or for any substantial part of any
such Sotheby Entity’s assets, or (iii) ordering the winding up or liquidation
of the affairs of such Sotheby Entity, and such case or proceeding shall remain
undismissed or unstayed for sixty (60) days or more or a decree or order
granting the relief sought in such case or proceeding is granted by a court of
competent jurisdiction.


                    (h)          Any
Sotheby Entity (other than
an Immaterial Subsidiary) (i) files a petition seeking relief
under the Bankruptcy Code, or any other applicable federal, state or foreign
bankruptcy or other similar law, (ii) consents to or fails to contest in a
timely and


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appropriate
manner the institution of proceedings thereunder or the filing of any such
petition or the appointment of or taking possession by a custodian, receiver,
administrator, liquidator, assignee, trustee or sequestrator (or similar
official) for such Sotheby Entity or for any substantial part of any such
Sotheby Entity’s assets, (iii) makes an assignment for the benefit of
creditors, (iv) takes any action in furtherance of any of the foregoing; or (v)
admits in writing its inability to, or is generally unable to, pay its debts as
such debts become due.


                    (i)          A
final judgment or judgments for the payment of money in excess of a Dollar
Equivalent of $10,000,000 in the aggregate at any time are outstanding against
one or more of the Sotheby Entities (which judgments are not covered by
insurance policies as to which liability has been accepted by the insurance
carrier), and the same are not, within thirty (30) days (or, in the case of any
Sotheby Entity that is not Parent, a Domestic Subsidiary or a Foreign
Subsidiary organized under the laws of England, sixty (60) days) after the
entry thereof, discharged or execution thereof stayed or bonded pending appeal,
or such judgments are not discharged prior to the expiration of any such stay.


                    (j)          Any
material provision of any Loan Document for any reason ceases to be valid,
binding and enforceable in accordance with its terms (or any Sotheby Entity
shall challenge the enforceability of any Loan Document or shall assert in
writing, or engage in any action or inaction based on any such assertion, that
any provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms), or any Lien
created under any Loan Document ceases to be a valid and perfected first
priority Lien (except as otherwise permitted herein or therein) in any of the
Collateral purported to be covered thereby.


                    (k)          Any
Change of Control occurs.


                    (l)          Any
Sotheby Entity or the York Avenue Owner violates any of the covenants contained
in the York Avenue Loan Documents relating to the single purpose entity status
of the York Avenue Owner or its corporate separateness from Parent and its
Subsidiaries and such violation results in recourse liability to Parent or any
Subsidiary thereof.


                    (m)          On any date during the Liquidity
Test Period, the Liquidity Amount shall be less than $75,000,000.


                    8.2          Remedies.



                    (a)          If
any Event of Default has occurred and is continuing, Agent may (and at the
written request of the Requisite Lenders shall), without notice, (i) suspend
the Revolving Loan facility with respect to additional Advances and/or the
incurrence of additional Letter of Credit Obligations, whereupon any additional
Advances and additional Letter of Credit Obligations shall be made or incurred
in Agent’s sole discretion (or in the sole discretion of the Requisite Lenders,
if such suspension occurred at their direction) so long as such Default or
Event of Default is continuing; or (ii) reduce the Commitment from time to
time. 


                    (b)          If
any Event of Default has occurred and is continuing, Agent may (and at the
written request of the Requisite Lenders shall), without notice: (i) terminate
the Revolving Loan facility with respect to further Advances or the incurrence
of further Letter of Credit


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Obligations;
(ii) reduce the Commitment from time to time; (iii) declare all or any portion
of the Obligations, including all or any portion of any Loan, to be forthwith
due and payable, and require that the Letter of Credit Obligations be cash
collateralized in the manner set forth in Annex B, all without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by Borrowers and each other Credit Party; or (iv) exercise any
rights and remedies provided to Agent under the Loan Documents or at law or
equity, including all remedies provided under the Code; provided, that
upon the occurrence of an Event of Default specified in Sections 8.1(g) or
(h), the Commitments shall be immediately terminated and all of the
Obligations, including the aggregate Revolving Loan, shall become immediately
due and payable without declaration, notice or demand by any Person.


                    8.3          Waivers
by Credit Parties.


                    Except
as otherwise provided for in this Agreement or by applicable law, each Credit
Party waives (including for purposes of Section 12): (a) presentment, demand
and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all Loan
Documents, (b) all rights to notice and a hearing prior to Agent’s taking
possession or control of, or to Agent’s replevy, attachment or levy upon, the
Collateral or any bond or security that might be required by any court prior to
allowing Agent to exercise any of its remedies, except as may be required by
applicable law, and (c) the benefit of all valuation, appraisal, marshaling and
exemption laws.


9.          ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT


                    9.1          Assignment
and Participations.


                    (a)          Subject
to the terms of this Section 9.1, any Lender may make an assignment to
an assignee of, or sell participations in, at any time or times, the Loan
Documents, the Loans, the Letter of Credit Obligations and any Commitment or
any portion thereof or interest therein, including any Lender’s rights, title,
interests, remedies, powers or duties thereunder. Any assignment by a Lender
shall: (i) require the consent of Agent (which consent shall not be
unreasonably withheld or delayed with respect to a Qualified Assignee) and the
execution of an assignment agreement (an “Assignment Agreement”)
substantially in the form attached hereto as Exhibit 9.1(a) and
otherwise in form and substance reasonably satisfactory to, and acknowledged
by, Agent; (ii) be conditioned on such assignee Lender representing to the
assigning Lender and Agent that it is purchasing the applicable Loans or
interests therein to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof; (iii) after giving
effect to any such partial assignment, the assignee Lender shall have
Commitments in an amount at least equal to $5,000,000 and the assigning Lender
shall have retained Commitments in an amount at least equal to $5,000,000; (iv)
include a payment to Agent of an assignment fee of $3,500; and (v) so long as
no Event of Default has occurred and is continuing, require the consent of
Borrower Representative, which shall not be unreasonably withheld or delayed; provided
that no such consent shall be required for an assignment to a Qualified
Assignee. Agent’s refusal to
consent to an assignment by a Non-Funding Lender who is a Non-Funding Lender
due to clause (a) of the definition of Non-Funding Lender (unless in connection
with such assignment, such Non-Funding Lender cures, or causes the cure of, its


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Non-Funding Lender status as contemplated in
Section 9.9(d)(v)) shall not be deemed to be unreasonable. Agent’s refusal to
consent to an assignment by any Lender to any Person that would be a
Non-Funding Lender or an Impacted Lender, or the imposition of conditions or
limitations (including limitations on voting) upon assignments to such Persons,
shall not be deemed to be unreasonable. In
the case of an assignment by a Lender under this Section 9.1, the
assignee shall have, to the extent of such assignment, the same rights,
benefits and obligations as all other Lenders hereunder. The assigning Lender
shall be relieved of its obligations hereunder with respect to its Commitments
or assigned portion thereof from and after the date of such assignment. Each
Borrower hereby acknowledges and agrees that any assignment shall give rise to
a direct obligation of Borrowers to the assignee and that the assignee shall be
considered to be a “Lender”. In all instances, each Lender’s liability to make
Loans or purchase participation interests therein hereunder shall be several
and not joint and shall be limited to such Lender’s Pro Rata Share of the
applicable Commitment. In the event Agent or any Lender assigns or otherwise
transfers all or any part of its interest in the Obligations, Agent or any such
Lender shall so notify Borrowers and Borrowers shall, upon the request of Agent
or such Lender, execute new Notes in exchange for the Notes, if any, being
assigned. Notwithstanding the foregoing provisions of this Section 9.1(a),
any Lender may at any time pledge its interest in the Obligations and such
Lender’s rights under this Agreement and the other Loan Documents to a Federal
Reserve Bank, and any Lender that is an investment fund may assign its interest
in the Obligations and such Lender’s rights under this Agreement and the other
Loan Documents to another investment fund managed by the same investment
advisor; provided, that no such pledge to a Federal Reserve Bank shall
release such Lender from such Lender’s obligations hereunder or under any other
Loan Document.


                    (b)          Any
participation by a Lender of all or any part of its Commitments shall be made
with the understanding that all amounts payable by Borrowers hereunder shall be
determined as if that Lender had not sold such participation, and that the
holder of any such participation shall not be entitled to require such Lender
to take or omit to take any action hereunder except actions directly affecting
(i) any reduction in the principal amount of, or interest rate or Fees payable
with respect to, any Loan in which such holder participates, (ii) any extension
of the scheduled amortization of the principal amount of any Loan in which such
holder participates or the final maturity date thereof, and (iii) any release
of Agent’s Lien on all or substantially all of the Collateral (other than in
accordance with the terms of this Agreement, the Collateral Documents or the
other Loan Documents). Solely for purposes of Sections 1.13, 1.15, 1.16 and
9.8, each Borrower acknowledges and agrees that a participation shall give
rise to a direct obligation of Borrowers to the participant and the participant
shall be considered to be a “Lender”. Except as set forth in the preceding
sentence no Credit Party shall have any obligation or duty to any participant.
Neither Agent nor any Lender (other than the Lender selling a participation)
shall have any duty to any participant and may continue to deal solely with the
Lender selling a participation as if no such sale had occurred.


                    (c)          Except
as expressly provided in this Section 9.1, no Lender shall, as between
Borrowers and that Lender, or Agent and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.


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                    (d)          Each
Credit Party shall assist any Lender permitted to sell assignments or
participations under this Section 9.1 as reasonably required to enable
the assigning or selling Lender to effect any such assignment or participation,
including the execution and delivery of any and all agreements, notes and other
documents and instruments as shall be requested and, if requested by Agent, the
preparation of informational materials for, and the participation of management
in meetings with, potential assignees or participants. Each Credit Party shall
certify the correctness, completeness and accuracy of all descriptions of the Sotheby
Entities and their respective affairs contained in any selling materials
provided by them and all other information provided by them and included in
such materials, except that the Projections shall only be certified by
Borrowers as having been prepared by Borrowers in compliance with the
representations contained in Section 3.4(b).


                    (e)          Any
Lender may furnish any information concerning Sotheby Entities in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such
Lender shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 11.8.


                    (f)          So
long as no Event of Default has occurred and is continuing, no Lender shall
assign or sell participations in any portion of its Loans or Commitment to a
potential Lender or participant, if, as of the date of the proposed assignment
or sale, the assignee Lender or participant would be subject to capital
adequacy or similar requirements under Section 1.16(a), increased costs
under Section 1.16(b), an inability to fund LIBOR Loans under Section
1.16(c), or withholding taxes in accordance with Section 1.15(a). 


                    (g)          Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”),
may grant to a special purpose funding vehicle (an “SPC”), identified as
such in writing by the Granting Lender to Agent and Borrowers, the option to
provide to Borrowers all or any part of any Loans that such Granting Lender
would otherwise be obligated to make to Borrowers pursuant to this Agreement; provided
that (i) nothing herein shall constitute a commitment by any SPC to make any
Loan; and (ii) if an SPC elects not to exercise such option or otherwise fails
to provide all or any part of such Loan, the Granting Lender shall be obligated
to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC
hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if such Loan were made by such Granting Lender. No SPC shall be
liable for any indemnity or similar payment obligation under this Agreement
(all liability for which shall remain with the Granting Lender). Any SPC may
(i) with notice to, but without the prior written consent of, Borrowers and
Agent and without paying any processing fee therefor assign all or a portion of
its interests in any Loans to the Granting Lender or to any financial
institutions (consented to by Borrowers and Agent) providing liquidity and/or
credit support to or for the account of such SPC to support the funding or
maintenance of Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of any surety, guarantee or credit or liquidity enhancement to such
SPC. This Section 9.1(g) may not be amended without the prior written
consent of each Granting Lender, all or any of whose Loans are being funded by
an SPC at the time of such amendment. For the avoidance of doubt, the Granting
Lender shall for all purposes, including without limitation, the approval of
any amendment or waiver of any provision of any Loan Document or the obligation
to pay any


66





amount
otherwise payable by the Granting Lender under the Loan Documents, continue to
be the Lender of record hereunder.


                    (h)          In
the case of an assignment by a Non-Sterling Lender to a Sterling Lender of any
interest in the Revolving Loan Outstandings, such Sterling Lender shall
purchase the portion of the Revolving Loan outstanding to the Fronting Lender
to the extent of the participation interest therein of such Non-Sterling Lender
making such assignment for a purchase price, in Sterling, equal to such
outstanding amount, and the Fronting Lender shall pay the Dollar Equivalent as
of such date of such amount to such Non-Sterling Lender in payment of such
participation interest. In the case of an assignment by a Sterling Lender to a
Non-Sterling Lender of any interest in the Revolving Loan Outstandings, the
Fronting Lender shall purchase the portion of the Revolving Loan outstanding to
such Sterling Lender which is subject to such assignment, and such Non-Sterling
Lender shall purchase an undivided participation interest in the Revolving Loan
Outstandings from the Fronting Lender for a purchase price in Dollars equal to
the Dollar Equivalent as of such date of such portion assigned.


                    (i)          Any
Non-Sterling Lender may become a Sterling Lender hereunder upon delivery of
notice to Agent, the Fronting Lender and the Borrower Representative. Upon
delivery of such notice by such Lender, without any further action whatsoever
(i) such Lender shall be deemed to have purchased from the Fronting Lender a
portion of the Revolving Loan Outstandings held by the Fronting Lender equal to
such Lender’s participation interests therein, (ii) the Fronting Lender shall
be deemed to have repaid such participation interests to such Lender and shall
have no further obligations to such Lender hereunder, (iii) such Lender shall
constitute a Sterling Lender for all purposes hereunder, including, without
limitation, the Commitment to make Sterling Revolving Credit Advances pursuant
to Section 1.1(a)(i) and (iv) the Fronted Percentage, and the obligation
of the Fronting Lender to make Sterling Revolving Credit Advances pursuant to Section
1.1(a)(i), shall be reduced accordingly.


                    9.2          Appointment
of Agent.


                    GE
Capital is hereby appointed to act on behalf of all Lenders and the Fronting
Lender as Agent under this Agreement and the other Loan Documents. The
provisions of this Section 9.2 are solely for the benefit of Agent,
Lenders and the Fronting Lender and no Sotheby Entity nor any other Person
shall have any rights as a third party beneficiary of any of the provisions
hereof. Except as expressly set forth in the U.K. Collateral Documents, in
performing its functions and duties under this Agreement and the other Loan
Documents, Agent shall act solely as an agent of Lenders and the Fronting
Lender and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for any Sotheby
Entity or any other Person. Agent shall have no duties or responsibilities
except for those expressly set forth in this Agreement and the other Loan
Documents. Except as expressly set forth in the U.K. Collateral Documents, the
duties of Agent shall be mechanical and administrative in nature and Agent
shall not have, or be deemed to have, by reason of this Agreement, any other
Loan Document or otherwise a fiduciary relationship in respect of any Lender or
the Fronting Lender. Except as expressly set forth in this Agreement and the
other Loan Documents, Agent shall not have any duty to disclose, and shall not
be liable for failure to disclose, any information relating to any Sotheby
Entity or any of their respective Subsidiaries or any Account Debtor that is
communicated to or obtained by GE Capital or any of its Affiliates in 


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any capacity.
Neither Agent nor any of its Affiliates nor any of their respective officers,
directors, employees, agents or representatives shall be liable to any Lender
or the Fronting Lender for any action taken or omitted to be taken by it
hereunder or under any other Loan Document, or in connection herewith or
therewith, except for damages caused by its or their own gross negligence or
willful misconduct as determined in a final, non-appealable judgment by a court
of competent jurisdiction.


                    If
Agent shall request instructions from Requisite Lenders, Supermajority Lenders
or all affected Lenders with respect to any act or action (including failure to
act) in connection with this Agreement or any other Loan Document, then Agent
shall be entitled to refrain from such act or taking such action unless and
until Agent shall have received instructions from Requisite Lenders,
Supermajority Lenders or all affected Lenders, as the case may be, and Agent
shall not incur liability to any Person by reason of so refraining. Agent shall
be fully justified in failing or refusing to take any action hereunder or under
any other Loan Document (a) if such action would, in the opinion of Agent, be
contrary to law or the terms of this Agreement or any other Loan Document, (b)
if such action would, in the opinion of Agent, expose Agent to Environmental
Liabilities or (c) if Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Without limiting the
foregoing, no Lender or the Fronting Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions
of Requisite Lenders, Supermajority Lenders or all affected Lenders, as
applicable.


                    9.3          Agent’s
Reliance, Etc.


                    Neither
Agent nor any of its Affiliates nor any of their respective directors,
officers, agents or employees shall be liable for any action taken or omitted
to be taken by it or them under or in connection with this Agreement or the
other Loan Documents, except for damages caused by its or their own gross
negligence or willful misconduct as determined in a final, non-appealable
judgment by a court of competent jurisdiction. Without limiting the generality
of the foregoing, Agent: (a) may treat the payee of any Note as the holder
thereof until Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form reasonably satisfactory to Agent; (b)
may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement
or the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto; and (f) shall incur no liability under or in
respect of this Agreement or the other Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.


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                    9.4          GE
Capital and Affiliates.


                    With
respect to its Commitments hereunder, GE Capital shall have the same rights and
powers under this Agreement and the other Loan Documents as any other Lender
and may exercise the same as though it were not Agent; and the term “Lender” or
“Lenders” shall, unless otherwise expressly indicated, include GE Capital in
its individual capacity. GE Capital and its Affiliates may lend money to,
invest in, and generally engage in any kind of business with, any Sotheby
Entity, any of their Affiliates and any Person who may do business with or own
securities of any Sotheby Entity or any such Affiliate, all as if GE Capital
were not Agent and without any duty to account therefor to Lenders. GE Capital
and its Affiliates may accept fees and other consideration from any Sotheby
Entity for services in connection with this Agreement or otherwise without
having to account for the same to Lenders. Each Lender acknowledges the
potential conflict of interest between GE Capital as a Lender holding
disproportionate interests in the Loans and GE Capital as Agent.


                    9.5          Lender
Credit Decision.


                    Each Lender
acknowledges that it has, independently and without reliance upon Agent or any
other Lender and based on the Financial Statements referred to in Section
3.4(a) and such other documents and information as it has deemed
appropriate, made its own credit and financial analysis of the Sotheby Entities
and its own decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement. Each Lender acknowledges the potential
conflict of interest of each other Lender as a result of Lenders holding
disproportionate interests in the Loans, and expressly consents to, and waives
any claim based upon, such conflict of interest.


                    9.6          Indemnification.


                    Lenders
agree to indemnify Agent (to the extent not reimbursed by Credit Parties and
without limiting the obligations of Credit Parties hereunder), ratably
according to their respective Pro Rata Shares, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by, or asserted against Agent in any way relating
to or arising out of this Agreement or any other Loan Document or any action
taken or omitted to be taken by Agent in connection therewith; provided,
that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent’s gross negligence or willful
misconduct as determined in a final, non-appealable judgment by a court of
competent jurisdiction. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including reasonable counsel fees) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Credit Parties.


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                    9.7          Successor
Agent and Fronting Lender. 


                    (a)          Agent
may resign at any time by giving not less than thirty (30) days’ prior written
notice thereof to Lenders and Borrower Representative. Upon any such
resignation, the Requisite Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Requisite
Lenders and shall have accepted such appointment within thirty (30) days after
the resigning Agent’s giving notice of resignation, then the resigning Agent
may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender,
if a Lender is willing to accept such appointment, or otherwise shall be a
commercial bank or financial institution or a subsidiary of a commercial bank
or financial institution if such commercial bank or financial institution is
organized under the laws of the United States of America or of any State
thereof and has a combined capital and surplus of at least $300,000,000. If no
successor Agent has been appointed pursuant to the foregoing, within thirty
(30) days after the date such notice of resignation was given by the resigning
Agent, such resignation shall become effective and the Requisite Lenders shall
thereafter perform all the duties of Agent hereunder until such time, if any,
as the Requisite Lenders appoint a successor Agent as provided above. Any
successor Agent appointed by Requisite Lenders hereunder shall be subject to
the approval of Borrower Representative, such approval not to be unreasonably
withheld or delayed; provided that such approval shall not be required
if a Default or an Event of Default has occurred and is continuing. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the resigning Agent. Upon the earlier of the
acceptance of any appointment as Agent hereunder by a successor Agent or the
effective date of the resigning Agent’s resignation, the resigning Agent shall
be discharged from its duties and obligations under this Agreement and the
other Loan Documents, except that any indemnity rights or other rights in favor
of such resigning Agent shall continue. After any resigning Agent’s resignation
hereunder, the provisions of this Section 9 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was acting as
Agent under this Agreement and the other Loan Documents.


                    (b)          The
Fronting Lender may resign at any time by giving sixty (60) days prior written
notice thereof to Agent, the Non-Sterling Lenders and the Borrowers; provided,
such resignation shall not become effective until the date upon which a
replacement Fronting Lender reasonably acceptable to Agent and Non-Sterling
Lenders having aggregate Commitments equal to greater than 50% of the Fronted
Percentage and, so long as no Default or Event of Default has occurred and is
continuing, to the Borrowers, has been selected and has assumed the rights and
obligations of a Fronting Lender hereunder. If no successor Fronting Lender
shall have been so appointed and shall have accepted such appointment within
thirty (30) days after the resigning Fronting Lender’s giving of notice of
resignation, then the resigning Fronting Lender may, on behalf of the
Non-Sterling Lenders, appoint a successor Fronting Lender, which shall be a
financial institution having a rating of not less than A or its equivalent by
Standard & Poor’s, and having otherwise the ability to fund the Sterling
Revolving Credit Advances (and the parties hereto agree to use reasonable
efforts to appoint a successor Fronting Lender which will not cause an increase
in the tax withholding liability for the Borrowers). Upon the acceptance of any
appointment as Fronting Lender hereunder by a successor Fronting Lender, such
successor Fronting Lender shall thereupon succeed to and become vested with all
the rights, powers, privileges, duties and obligations of the resigning
Fronting Lender, and the


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resigning
Fronting Lender shall be discharged from its duties and obligations hereunder.
After any resigning Fronting Lender’s resignation, the provisions of this
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was
acting as Fronting Lender.


                    9.8          Setoff
and Sharing of Payments.


                    In
addition to any rights now or hereafter granted under applicable law and not by
way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default and subject to Section 9.9(f), each
Lender is hereby authorized at any time or from time to time, without prior
notice to any Credit Party or to any Person other than Agent, any such notice
being hereby expressly waived, to offset and to appropriate and to apply any
and all balances held by it at any of its offices for the account of any Credit
Party (regardless of whether such balances are then due to such Credit Party)
and any other properties or assets at any time held or owing by that Lender or
that holder to or for the credit or for the account of any Credit Party against
and on account of any of the Obligations that are not paid when due; provided,
that (i) the Lender exercising such offset rights shall give notice thereof to
the affected Credit Party promptly after exercising such rights, and (ii) any
balances, properties or assets of a U.K. Credit Party shall be offset,
appropriated or applied only to or against the Obligations of the U.K. Credit
Parties. Any Lender exercising a right of setoff or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender’s or holder’s Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
offset or otherwise received with each other Lender or holder in accordance
with their respective Pro Rata Shares (other than offset rights exercised by
any Lender with respect to Sections 1.13, 1.15 or 1.16). Each Lender’s
obligation under this Section 9.8 shall be in addition to and not in
limitation of its obligations to purchase a participation in an amount equal to
its Pro Rata Share of the Swing Line Loan under Section 1.1. Each Credit
Party agrees, to the fullest extent permitted by law, that (a) any Lender may
exercise its right to offset with respect to amounts in excess of its Pro Rata
Share of the Obligations and may sell participations in such amounts so offset
to other Lenders and holders and (b) any Lender so purchasing a participation
in the Loans made or other Obligations held by other Lenders or holders may
exercise all rights of offset, bankers’ lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other Obligations in the amount of such
participation. Notwithstanding the foregoing, if all or any portion of the
offset amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of offset, the purchase of participations
by that Lender shall be rescinded and the purchase price restored without
interest. If a Non-Funding Lender receives
any payment described in the second sentence of this Section 9.8, such Lender
shall turn over such payments to Agent in an amount that would satisfy the cash
collateral requirements set forth in Section 9.9(d).


                    9.9          Advances;
Payments; Non-Funding Lenders; Information; Actions in Concert. 


                    (a)          Revolving
Credit Advances; Payments.


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                              (i)          Lenders
shall refund or participate in the Swing Line Loan in accordance with clauses
(iii), (iv) and (v) of Section 1.1(b). If (i) the Swing Line Lender
declines to make a Swing Line Advance, (ii) Swing Line Availability is zero or
(iii) Agent shall receive a Notice of Revolving Credit Advance in respect of a
Revolving Credit Advance to be made as a LIBOR Loan, Agent shall notify
Lenders, promptly after receipt of a Notice of Revolving Credit Advance and in
any event prior to 1:00 p.m. (New York time) on the date such Notice of
Revolving Credit Advance is received, by telecopy, telephone or other similar
form of transmission. 


                              (ii)          In
the case of any Revolving Credit Advance to be denominated in Dollars, each
Lender shall make the amount of such Lender’s Pro Rata Share of such Revolving
Credit Advance available to Agent in same day funds in Dollars by wire transfer
to Agent’s account as set forth in Annex H not later than 3:00 p.m. (New
York time) on the requested funding date, in the case of an Index Rate Loan,
and not later than 11:00 a.m. (New York time) on the requested funding date, in
the case of a LIBOR Loan. In the case of any Revolving Credit Advance to be
denominated in Sterling, each Sterling Lender and the Fronting Lender shall
make the amount of such Lender’s Pro Rata Share (or, in the case of the
Fronting Lender, the Fronted Percentage) of such Revolving Credit Advance
available to Agent in same day funds in Sterling by wire transfer to Agent’s
account as set forth in Annex H not later than 3:00 p.m. (New York time)
on the requested funding date, in the case of an Index Rate Loan, and not later
than 11:00 a.m. (New York time) on the requested funding date, in the case of a
LIBOR Loan. After receipt of such wire transfers (or, in Agent’s sole
discretion, before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Revolving Credit Advance to Borrower.
All payments by each Lender pursuant to this Section 9.9(a) shall be
made without setoff, counterclaim or deduction of any kind.


                              (iii)          On
each Business Day (each, a “Settlement Date”), Agent shall advise each
Lender and the Fronting Lender by telephone or telecopy of the amount to be
disbursed to such Person in accordance with this Section 9.9(a)(iii).
Provided that each Lender has funded all payments or Advances required to be
made by it and has purchased all participations required to be purchased by it
under this Agreement and the other Loan Documents as of such Settlement Date,
Agent shall pay to each Lender and the Fronting Lender (i) in the case of any Sterling
Lender, such Lender’s Pro Rata Share of principal, interest and Fees received
by Agent from the Borrowers on such Settlement Date (or, in the case of amounts
denominated in Sterling, (x) with respect to principal, on the date one
Business Day prior to such Settlement Date and (y) with respect to all other
amounts, on the date two Business Days prior to such Settlement Date) (as
determined in accordance with Section 1.10) for the benefit of Lenders with
respect to each applicable Loan, (ii) in the case of any Non-Sterling Lender,
(A) such Lender’s Pro Rata Share of principal and interest received by Agent
from the Borrowers on such Settlement Date (as determined in accordance with Section
1.10) for the benefit of Lenders with respect to the portion of the
Revolving Loan Outstanding denominated in Dollars, (B) its Pro Rata Share of
Fees (other than Letter of Credit Fees denominated in Sterling) received by
Agent from the Borrowers on such Settlement Date (as determined in accordance
with Section 1.10) for the benefit of Lenders and (C) an amount in
Dollars equal to the Dollar Equivalent (calculated as of such Settlement Date)
of its Pro Rata Share of Letter of Credit Fees denominated in Sterling received
by Agent from the Borrowers on the second Business Day preceding such
Settlement Date; and (iii) in the case of the Fronting Lender, the Fronted
Percentage of principal and interest


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received by
Agent from the Borrowers (A) with respect to principal, on the date one
Business Day prior to such Settlement Date and (B) with respect to all other
amounts, on the date two Business Days prior to such Settlement Date (as
determined in accordance with Section 1.10) for the benefit of the Lenders and
the Fronting Lender with respect to the portion of the Revolving Loan
Outstandings denominated in Sterling. To the extent that any Lender or the Fronting Lender (a “Non-Funding
Lender”) has failed to fund any payment or Advance required to be made by
it hereunder or failed to make any purchase of a participation interest
required to be purchased hereunder, Agent shall be entitled to set off any such
funding short fall (other than any short-fall arising from a failure to
purchase any participation interest required to be purchased by it pursuant to Section
9.9(e)(i), if any amount shall be outstanding to the Fronting Lender in
respect of the Revolving Loan Outstandings related to such participation
interest) against that Non-Funding Lender’s share of all payments received from
Borrowers. Such payments shall be made by wire transfer to
such Lender’s or the Fronting Lender’s account (as specified by such Lender in
Annex H or the applicable Assignment Agreement) not later than 5:00 p.m. (New
York time) on each Settlement Date.


                    (b)          Availability
of Lender’s Pro Rata Share. Agent may assume that each Lender and the
Fronting Lender will make its Pro Rata Share or the Fronted Percentage, as
applicable, of each Revolving Credit Advance available to Agent on each funding
date. If such Pro Rata Share or the Fronted Percentage, as applicable, is not,
in fact, paid to Agent by such Lender when due, Agent will be entitled to
recover such amount on demand from such Lender or the Fronting Lender, as
applicable, without setoff, counterclaim or deduction of any kind. If any
Lender or the Fronting Lender fails to pay the amount of its Pro Rata Share or
the Fronted Percentage forthwith upon Agent’s demand, Agent shall promptly
notify Borrower Representative and Borrowers shall immediately repay such
amount to Agent. Nothing in this Section 9.9(b) or elsewhere in this
Agreement or the other Loan Documents shall be deemed to require Agent to
advance funds on behalf of any Lender or the Fronting Lender or to relieve any
Lender or the Fronting Lender from its obligation to fulfill its Commitments or
obligations hereunder or to prejudice any rights that Borrowers may have
against any Lender or the Fronting Lender as a result of any default by such
Lender or the Fronting Lender hereunder. To the extent that Agent advances funds
to any Borrower on behalf of any Lender or the Fronting Lender and is not
reimbursed therefor on the same Business Day as such Advance is made, Agent
shall be entitled to retain for its account all interest accrued on such
Advance until reimbursed by the applicable Lender or the Fronting Lender, as
applicable.


                    (c)          Return
of Payments.


                                   (i)          If
Agent pays an amount to a Lender or the Fronting Lender under this Agreement in
the belief or expectation that a related payment has been or will be received
by Agent from Borrowers and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender or the Fronting
Lender, as applicable, on demand without setoff, counterclaim or deduction of
any kind.


                                   (ii)          If
Agent determines at any time that any amount received by Agent under this
Agreement must be returned to any Borrower or paid to any other Person pursuant
to any insolvency law or otherwise, then, notwithstanding any other term or
condition of this Agreement or any other Loan Document, Agent will not be
required to distribute any portion


73





thereof to any
Lender or the Fronting Lender. In addition, each Lender and the Fronting Lender
will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender or the Fronting Lender, together with interest at
such rate, if any, as Agent is required to pay to any Borrower or such other Person,
without setoff, counterclaim or deduction of any kind.


                                    (iii)          If
the Fronting Lender pays an amount to a Non-Sterling Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by the Fronting Lender from Agent and such related payment is not
received by the Fronting Lender, then the Fronting Lender will be entitled to
recover such amount from such Non-Sterling Lender on demand without setoff,
counterclaim or deduction of any kind.


                                    (iv)          If
the Fronting Lender determines at any time that any amount received by the
Fronting Lender under this Agreement must be returned to any Borrower or paid
to any other Person pursuant to any insolvency law or otherwise (or paid to
Agent pursuant to paragraph (ii) above), then, notwithstanding any other
term or condition of this Agreement or any other Loan Document, the Fronting
Lender will not be required to distribute any portion thereof to any Non-Sterling
Lender. In addition, each Non-Sterling Lender will repay to the Fronting Lender
on demand any portion of such amount that the Fronting Lender has distributed
to such Non-Sterling Lender, together with interest at such rate, if any, as
the Fronting Lender is required to pay to any Borrower, any such other Person
or Agent, without setoff, counterclaim or deduction of any kind.


                      (d)           Non-Funding Lenders.


                                      (i)          (d) Non-Funding LendersResponsibility. The failure of any
Non-Funding Lender to make any Revolving Credit Advance or, Letter of Credit Obligation or any payment
required by it, or to make any payment required by it
hereunder,
or to fund any  purchase of any
participation to be made or purchasedfunded by it on
the date specified therefor shall not relieve any other Lender (each such other
Lender, an “Other Lender”) of its obligations to make such Revolving Credit Advance orloan, fund the
purchase of any such
participation, or make any
other payment required hereunder on such date, butand neither any Other Lender nor AgentAgent nor, other than as expressly
set forth herein, any other Lender shall be responsible for
the failure of any Non-Funding Lender to make a Revolving Credit Advance,loan, fund the
purchase of a
participation or make any other payment required hereunder. Notwithstanding anything set forth herein
to the contrary, a Non-Funding Lender shall not have any voting or consent
rights under or with respect to any Loan Document or constitute a “Lender” or a “Lender” (or be included in the
calculation of “Requisite Lenders” or “Supermajority Lenders” hereunder) for any voting or consent rights under or with respect to any Loan Document until such time as such Lender no longer
constitutes a Non-Funding Lender. At Borrower Representative’s request, Agent
or a Person
reasonably acceptable to Agent shall have the right with Agent’s consent
and in Agent’s sole discretion (but shall have no obligation) to purchase from
any Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at
Agent’s request, sell and assign to Agent or such Person, all of its interests
in the Obligations and the Commitments held by that Non-Funding Lender for an
amount equal to the principal balance of all Loans and participations held by
such Non-Funding Lender and all accrued interest and fees with respect thereto
through the date of sale, such purchase and sale to be consummated pursuant to
an executed Assignment Agreement..


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                                (ii)           Reallocation. If any Lender is a
Non-Funding Lender, all or a portion of such Non-Funding Lender’s Letter of
Credit Obligations (unless such Lender is the L/C Issuer that issued such
Letter of Credit), reimbursement obligations with respect to Swing Loans and,
as applicable, participation funding obligations under Section 9.9(e)(i) shall,
at Agent’s election at any time or upon any L/C Issuer’s, the Swing Line
Lender’s or the Fronting Lender’s written request delivered to Agent (whether
before or after the occurrence of any Default or Event of Default), be
reallocated to and assumed or funded by the Lenders that are not Non-Funding
Lenders or Impacted Lenders pro rata in accordance with their Pro Rata Shares
of the aggregate Commitments of all Lenders (calculated as if the Non-Funding
Lender’s Pro Rata Share was reduced to zero and each other Lender’s Pro Rata
Share had been increased proportionately); provided, that no Lender shall be
reallocated any such amounts or be required to fund any amounts that would
cause the sum of its outstanding Revolving Credit Advances, outstanding Letter
of Credit Obligations, amounts of its participations in Swing Line Advances,
its pro rata share of unparticipated amounts in Swing Line Advances and amounts
of its participations pursuant to Section 9.9(e)(i) to exceed its Commitment.
Upon any such reallocation of a participation funding obligation under Section
9.9(e)(i) to a Sterling Lender, such Sterling Lender shall pay the outstanding
principal balance thereof to the Fronting Lender, and any such amounts paid by
any Sterling Lender to the Fronting Lender shall be deemed to constitute a
Revolving Credit Advance or the purchase of an undivided interest in a Swing
Line Advance, as applicable, and, to the extent necessary to effectuate the
foregoing, the Fronting Lender shall be deemed to have sold, and such Sterling
Lender shall be deemed to have purchased, Revolving Credit Advances and
participations in Swing Line Advances from the Fronting Lender. At any time any
Lender is a Non-Funding Lender, at Agent’s election at any time or upon any L/C
Issuer’s, the Swing Line Lender’s or the Fronting Lender’s written request
delivered to Agent (whether before or after the occurrence of any Default or
Event of Default), participating interests in any newly made Swing Line Loan or
Sterling Revolving Credit Advance or any newly issued or modified Letter of
Credit will be allocated among non-Defaulting Lenders in a manner consistent
with this Section 9.9(d)(ii).


                    
           (iii)
          
Voting Rights. Notwithstanding anything set forth herein to the contrary, including
Section 9.1, a Non-Funding Lender shall not have any voting or consent
rights under or with respect to any Loan Document or constitute a “Lender” (or
be, or have its Loans, participations and Commitments, included in the
determination of “Requisite Lenders”, or “Lenders directly affected” pursuant
to Section 11.2) for any voting or consent rights under or with respect to
any Loan Document; provided, that (A) the Commitment of a
Non-Funding Lender may not be increased, (B) the principal of a Non-Funding
Lender’s Loans may not be reduced and (C) the interest rate applicable to
Obligations owing to a Non-Funding Lender may not be reduced in such a manner
that by its terms affects such Non-Funding Lender more adversely than other
Lenders, in each case without the consent of such Non-Funding Lender. Moreover,
for the purposes of determining Requisite Lenders, the Loans, participations and
Commitments held by Non-Funding Lenders shall be excluded from the total Loans,
participations and Commitments outstanding.


                    
           (iv)
          Borrower
Payments to a Non-Funding
Lender. Agent shall be authorized to use all payments received by Agent for the
benefit of any Non-Funding Lender pursuant to this Agreement to pay in full the
Aggregate Excess Funding Amount to the appropriate Secured Parties.
Following such payment in full of the Aggregate Excess Funding


75





Amount, Agent
shall be entitled to hold such funds as cash collateral in a non-interest
bearing account up to an amount equal to such Non-Funding Lender’s unfunded
Commitment and to use such amount to pay such Non-Funding Lender’s funding
obligations hereunder until the Obligations are paid in full in cash, all
Letter of Credit Obligations have been discharged or cash collateralized and
all Commitments have been terminated. Upon any such unfunded obligations owing
by a Non-Funding Lender becoming due and payable, Agent shall be authorized to
use such cash collateral to make such payment on behalf of such Non-Funding
Lender. With respect to such Non-Funding Lender’s failure to fund Revolving
Credit Advances, purchase participations in Letters of Credit or Letter of Credit
Obligations or fund participations pursuant to Section 9.9(e)(i), any amounts
applied by Agent to satisfy such funding shortfalls shall be deemed to
constitute a Revolving Credit Advance or amount of the participation required
to be funded and, if necessary to effectuate the foregoing, the other Lenders
shall be deemed to have sold, and such Non-Funding Lender shall be deemed to
have purchased, Revolving Credit Advances or participation interests from the
other Lenders until such time as the aggregate amount of the Revolving Credit
Advances, participations in Letters of Credit and Letter of Credit Obligations
and participations under Section 9.9(e)(i) are held by the Lenders in
accordance with their Pro Rata Shares of the aggregate Commitments of the Lenders.
Any amounts owing by a Non-Funding Lender to Agent which are not paid when due
shall accrue interest at the interest rate applicable during such period to
Index Rate Loans. In the event that Agent is holding cash collateral of a
Non-Funding Lender that cures pursuant to clause (v) below or ceases to be a
Non-Funding Lender pursuant to the definition of Non-Funding Lender, Agent
shall return the unused portion of such cash collateral to such Lender. The
“Aggregate Excess Funding Amount” of a Non-Funding Lender shall be the
aggregate amount of (A) all unpaid obligations owing by such Lender to Agent,
L/C Issuers, Swing Line Lender, Fronting Lender and other Lenders under the
Loan Documents, including such Lender’s pro rata share of all Revolving Loans,
Letter of Credit Obligations and Swing Line Loans and such Lender’s
participations pursuant to Section 9.9(e)(i), plus, without duplication, (B)
all amounts of such Non-Funding Lender’s Commitment reallocated to other
Lenders pursuant to Section 9.9(d)(ii).


                                (v)           Cure. A Lender may cure its status
as a Non-Funding Lender under clause (a) of the definition of Non-Funding
Lender if such Lender (A) fully pays to Agent, on behalf of the applicable
Secured Parties, the Aggregate Excess Funding Amount, plus all interest due
thereon and (B) timely funds the next Revolving Credit Advance required to be
funded by such Lender or makes the next reimbursement required to be made by
such Lender. Any such cure shall not relieve any Lender from liability for
breaching its contractual obligations hereunder.


                                (vi)           Fees. A Lender that is a
Non-Funding Lender pursuant to clause (a) of the definition of Non-Funding
Lender shall not earn and shall not be entitled to receive, and the Borrowers
shall not be required to pay, such Lender’s portion of the Fee set forth in
Section 1.9(b) during the time such Lender is a Non-Funding Lender pursuant to
clause (a) thereof. In the event that any reallocation of Letter of Credit
Obligations occurs pursuant to Section 9.9(d)(ii), during the period of time
that such reallocation remains in effect, the Letter of Credit Fee payable with
respect to such reallocated portion shall be payable to (A) all Lenders based
on their pro rata share of such reallocation or (B) to the L/C Issuer for any
remaining portion not reallocated to any other Lenders. A Non-Sterling Lender
that is a Non-Funding Lender pursuant to clause (a) of the definition of
Non-Funding Lender shall not earn and shall


76





not be entitled to receive, and the Fronting
Lender shall not be required to pay, such Lender’s portion of the Applicable
Margin set forth in clause (a) of the first sentence of Section 9.9(e)(iii)
during the time such Non-Sterling Lender is a Non-Funding Lender pursuant to
clause (a) thereof (and such portion of the Applicable Margin shall be retained
by the Fronting Lender).


                    (e)          Non-Sterling
Lenders. 


                                  (i)          Participation
Interests. On any date upon which the Fronting Lender shall be required to
(i) make available the Fronted Percentage of any Sterling Revolving Credit
Advance pursuant to Section 1.1(a), Section 1.1(b)(iv) or
pursuant to paragraph (b)(ii) of Annex B or (ii) purchase a
participation interest in a Swing Line Advance denominated in Sterling pursuant
to Section 1.1(b)(v), each Non-Sterling Lender shall on such date be
deemed to have irrevocably and unconditionally purchased from the Fronting
Lender an undivided participation interest in such Advance in an amount equal
to its Pro Rata Share of such Advance. The purchase price of any such
participation interest shall be an amount, in Dollars, equal to the Dollar
Equivalent of such Pro Rata Share as of the date payment by such Non-Sterling
Lenders of such purchase price is required hereunder; provided, however,
that such purchase price need not be funded by any Non-Sterling Lender unless
and until the Fronting Lender, in its discretion, shall have made a demand
therefor in writing to Agent (which Agent shall promptly forward to each
Non-Sterling Lender) with respect to each such participation interest following
the occurrence of any Default or Event of Default or a good faith determination
by the Fronting Lender that the portion of the interest it receives and retains
on such Sterling Revolving Credit Advances and Swing Line Loans does not
adequately and fairly reflect the cost to the Fronting Lender of funding such
amounts. Payment of such purchase price in respect of any such participation
interest shall be made by each Non-Sterling Lender in immediately available
funds by wire transfer to the Fronting Lender’s account as set forth in Annex
H not later than 2:00 p.m. (New York time) on the Business Day immediately
following the date such demand is delivered to Agent with respect to then
outstanding Advances and on each applicable purchase date thereafter with
respect to any subsequent Advances, in the case of Advances made as Index Rate
Loans, and not later than 10:00 a.m. (New York time) on the Business Day
immediately following the date such demand is delivered to Agent with respect
to then outstanding Advances and on each applicable purchase date thereafter
with respect to any subsequent Advances, in the case of Advances made as LIBOR
Loans. On any date upon which the Fronting Lender shall be required to purchase
an undivided interest and participation in any Letter of Credit Obligation in
respect of a Letter of Credit issued for the benefit of a U.K. Borrower
pursuant to paragraph (b)(v) of Annex B, immediately and without
further action whatsoever, each Non-Sterling Lender shall be deemed to have
irrevocably and unconditionally purchased from the Fronting Lender an undivided
interest and participation in such participation interest. Each Non-Sterling
Lender shall fund its participation in all payments made under such Letters of
Credit in the same manner as provided in the first sentence of this Section
9.9(e)(i) with respect to Sterling Revolving Credit Advances, each of which
Sterling Revolving Credit Advances shall be in an amount equal to the Sterling
Equivalent of such payment as of the date thereof.


                                  (ii)          Obligation
of Non-Sterling Lenders. Each Non-Sterling Lender’s obligation to purchase
participation interests (and to fund the purchase price thereof) in accordance
with Section 9.9(e)(i) shall be absolute and unconditional and shall not
be affected by any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right that


77





such
Non-Sterling Lender may have against the Fronting Lender, Agent, any Borrower
or any other Person for any reason whatsoever; (B) the occurrence or
continuance of any Default or Event of Default; (C) any inability of any
Borrower to satisfy the conditions precedent to borrowing set forth in this
Agreement at any time or (D) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. 


                  
            (iii)         
 Payments
to Non-Sterling Lenders. On each Settlement Date (or, if the Fronting
Lender shall not be acting as Agent, on the Business Day following each
Settlement Date), the Fronting Lender shall advise each Non-Sterling Lender by
telephone or telecopy of the amount to be disbursed to such Person in
accordance with this Section 9.9(e)(iii). Except with respect to any Non-Sterling
Lender that is a Non-Funding
Lenderas
set forth in Section 9.9(d), (a) prior to the funding of the
purchase price of the participation interests of the Non-Sterling Lenders in
Advances made by the Fronting Lender in accordance with Section 9.9(e)(i), the
Fronting Lender shall pay to each Non-Sterling Lender the Dollar Equivalent
(calculated as of the date of such payment by the Fronting Lender) of such
Lender’s Pro Rata Share of the Applicable Margin paid by the Borrowers on the
second Business Day preceding such Settlement Date for the benefit of the
Lenders and the Fronting Lender with respect to interest on the portion of the
Revolving Loan Outstandings denominated in Sterling (to the extent such amounts
have actually been received by the Fronting Lender) less a portion of such
Applicable Margin equal to one-half of one percent (0.50%) per annum (or such
other amount as the Fronting Lender and such Non-Sterling Lender shall agree)
of such Non-Sterling Lender’s Pro Rata Share of the Revolving Loan Outstandings
denominated in Sterling, the latter amount being retained by the Fronting
Lender for its own account in compensation for the Fronting Lender’s
willingness to bear the foreign exchange rate fluctuation risk with respect to
such Revolving Loan Outstandings and (b) at all times after the funding of the
purchase price of the participation interests of the Non-Sterling Lenders in
Advances made by the Fronting Lender in accordance with Section 9.9(e)(i),
the Fronting Lender shall pay to each Non-Sterling Lender the Dollar Equivalent
(calculated as of the date of such payment by the Fronting Lender) of such
Lender’s Pro Rata Share of interest and principal paid by the Borrowers on the
second Business Day preceding such Settlement Date for the benefit of the
Lenders and the Fronting Lender with respect to the portion of the Revolving
Loan Outstandings denominated in Sterling (to the extent such amounts have
actually been received by the Fronting Lender). To the extent that any Non-Sterling Lender has failed to pay
the purchase price, when due, of any participation interest required to be
purchased by pursuant to Section 9.9(e)(i), the Fronting Lender shall be
entitled to set off the funding short fall against that Non-Sterling Lender’s
share of all payments received by the Fronting Lender. Such
payments shall be made by wire transfer to such Non-Sterling Lender’s account
(as specified by such Lender in Annex H or the applicable Assignment
Agreement) not later than 5:00 p.m. (New York time) on each applicable
Settlement Date (or, if the Fronting Lender shall not be acting as Agent, on
the Business day following each Settlement Date).


                              (iv)          Availability
of Non-Sterling Lender’s Pro Rata Share. The Fronting Lender may assume
that each Non-Sterling Lender will make its Pro Rata Share of each Sterling
Revolving Credit Advance available to the Fronting Lender on each date on which
such Non-Sterling Lender is required to pay the purchase price of its
participation interests therein pursuant to the terms hereof. If any
Non-Sterling Lender does not make available to the Fronting Lender any amount
required pursuant to Section 9.9(e)(i), the Fronting Lender shall be
entitled to


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recover such
amount on demand from such Non-Sterling Lender, together with interest thereon
for each day from the date of non-payment until such amount is paid in full at
the Federal Funds Rate for the first two Business Days and at the Dollar Index
Rate thereafter. If any Non-Sterling Lender shall fail to make available to the
Fronting Lender any amount required pursuant to Section 9.9(e)(i),
Borrowers shall immediately repay the outstanding principal amount of the
portion of the Revolving Loan or Letter of Credit Obligation then outstanding
to the Fronting Lender in which such Non-Sterling Lender was required to
purchase a participation interest, upon demand therefor by the Fronting Lender.


                                    (v)           Non-Funding Lender.
Notwithstanding anything else to the contrary herein, if any Non-Sterling
Lender is a Non-Funding Lender or Impacted Lender, the Fronting Lender shall
not be obligated to fund any Revolving Credit Advance unless (x) the
Non-Funding Lender or Impacted Lender has been replaced in accordance with
Section 1.16(d), (y) the participation funding obligations of such Non-Funding
Lender or Impacted Lender under Section 9.9(e)(i) have been cash collateralized
in a manner satisfactory to the Fronting Lender, or (z) the Commitments of the
other Lenders have been increased by an amount sufficient to satisfy Agent that
all future Revolving Credit Advances by the Fronting Lender will be covered by
all Non-Sterling Lenders that are not Non-Funding Lenders or Impacted Lenders.


                    (f)           Dissemination
of Information. Agent shall use reasonable efforts to provide Lenders with
any notice of Default or Event of Default received by Agent from, or delivered
by Agent to, any Credit Party, with notice of any Event of Default of which
Agent has actually become aware and with notice of any action taken by Agent
following any Event of Default; provided, that Agent shall not be liable to any
Lender for any failure to do so, except to the extent that such failure is
attributable to Agent’s gross negligence or willful misconduct as determined in
a final, non-appealable judgment by a court of competent jurisdiction. Lenders
acknowledge that Borrowers are required to provide Financial Statements and
Collateral Reports to Lenders in accordance with Annexes E and F hereto
and agree that Agent shall have no duty to provide the same to Lenders.


                    (g)           Actions
in Concert. Anything in this Agreement to the contrary notwithstanding,
each Lender hereby agrees with each other Lender that no Lender shall take any
action to protect or enforce its rights arising out of this Agreement or the
Notes (including exercising any rights of setoff) without first obtaining the
prior written consent of Agent and Requisite Lenders, it being the intent of
Lenders that any such action to protect or enforce rights under this Agreement
and the Notes shall be taken in concert and at the direction or with the
consent of Agent or Requisite Lenders.


                      (h)           Procedures. Agent is hereby
authorized by each Credit Party and each other Secured Party to establish
procedures (and to amend such procedures from time to time) to facilitate
administration and servicing of the Loans and other matters incidental thereto.
Without limiting the generality of the foregoing, Agent is hereby authorized to
establish procedures to make available or deliver, or to accept, notices,
documents and similar items on, by posting to or submitting and/or completion
on, E-Systems.


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                    9.10          Release
of Guarantors or Collateral. Each Lender hereby authorizes Agent to release
the following:


                    (a)             any
Subsidiary of any Sotheby Entity from its guaranty of any Obligation of any
Credit Party if all of the Stock of such Subsidiary owned by any Credit Party
is sold in a sale permitted under the Loan Documents (including pursuant to a
waiver or consent), to the extent that, after giving effect to such sale, such
Subsidiary would not be required to guaranty any Obligations pursuant to any
Loan Documents; and


                    (b)             any
Lien held by Agent for the benefit of the Secured Parties against (i) any
Collateral that is sold by a Credit Party in a sale permitted by the Loan
Documents (including pursuant to a valid waiver or consent), and (ii) all of
the Collateral and all Loan Parties, upon satisfaction of the conditions for
such release pursuant to Section 11.2(e).


Each Lender
hereby authorizes Agent, and Agent hereby agrees, upon receipt of reasonable
advance notice from the Borrower Representative, to execute and deliver or file
such documents and to perform other actions reasonably necessary to release the
guaranties and Liens when and as directed in this Section 9.10.


10.          SUCCESSORS AND ASSIGNS


                    10.1          Successors
and Assigns.


                    This
Agreement and the other Loan Documents shall be binding on and shall inure to
the benefit of each Credit Party, Agent, Lenders and their respective
successors and assigns (including, in the case of any Credit Party, a
debtor-in-possession on behalf of such Credit Party), except as otherwise
provided herein or therein. No Credit Party may assign, transfer, hypothecate
or otherwise convey its rights, benefits, obligations or duties hereunder or
under any of the other Loan Documents without the prior express written consent
of Agent and Lenders. Any such purported assignment, transfer, hypothecation or
other conveyance by any Credit Party without the prior express written consent
of Agent and Lenders shall be void. The terms and provisions of this Agreement
are for the purpose of defining the relative rights and obligations of each
Credit Party, Agent and Lenders with respect to the transactions contemplated
hereby and no Person shall be a third party beneficiary of any of the terms and
provisions of this Agreement or any of the other Loan Documents.


11.          MISCELLANEOUS


                    11.1          Complete
Agreement; Modification of Agreement.


                    The
Loan Documents constitute the complete agreement between the parties with
respect to the subject matter thereof and may not be modified, altered or
amended except as set forth in Section 11.2. Any letter of interest,
commitment letter, fee letter or confidentiality agreement, if any, between any
Credit Party and Agent or any Lender or any of their respective Affiliates,
predating this Agreement and relating to a financing of substantially similar
form, purpose or effect shall be superseded by this Agreement.


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                    11.2          Amendments
and Waivers. 


                    (a)             Except
for actions expressly permitted to be taken by Agent, no amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan
Document, or any consent to any departure by any Credit Party therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Agent and Borrowers, and by Requisite Lenders, Supermajority Lenders or all
affected Lenders, as applicable. Except as set forth in clauses (b) and (c)
below, all such amendments, modifications, terminations or waivers requiring
the consent of any Lenders shall require the written consent of Requisite
Lenders.


                    (b)             No
amendment, modification, termination or waiver of or consent with respect to
any provision of this Agreement or any other Loan Document shall, unless in
writing and signed by Agent and Supermajority Lenders: (i) increase the
percentage advance rates set forth in the definition of either Borrowing Base,
(ii) modify any criteria set forth in Section 1.6 or 1.7 in a
manner that would have the effect of making more credit available or (iii)
increase the Sterling Subfacility Limit.


                    (c)             No
amendment, modification, termination or waiver with respect to any provision of
this Agreement or any other Loan Document shall, unless in writing and signed
by Agent and each Lender directly affected thereby: (i) increase the principal
amount of any Lender’s Commitment (which action shall be deemed to directly
affect all Lenders) (other
than any increase pursuant to Section 1.1(a)(iv)); (ii)
reduce the principal of, rate of interest on or Fees payable with respect to
any Loan or Letter of Credit Obligations of any affected Lender; (iii) extend
any scheduled payment date (other than payment dates of mandatory prepayments
under Sections 1.3(b)(iii) and (iv)) or final maturity date of the
principal amount of any Loan of any affected Lender; (iv) waive, forgive,
defer, extend or postpone any payment of interest or Fees as to any affected
Lender; (v) release any Guaranty (other than in connection with any sale of
assets by a Sotheby Entity permitted pursuant to Section 6.8 or
consented to by Requisite Lenders or Supermajority Lenders, as applicable,
pursuant to this Section 11.2) or, except as otherwise permitted herein
or in the other Loan Documents, release, or permit any Credit Party to sell or
otherwise dispose of, all or substantially all of the Collateral (which action
shall be deemed to directly affect all Lenders and the L/C Issuer); (vi) change
the percentage of the Commitments or of the aggregate unpaid principal amount
of the Loans that shall be required for Lenders or any of them to take any
action hereunder; (vii) amend or waive Section 1.11(a); and (viii) amend
or waive this Section 11.2 or the definitions of the terms “Requisite
Lenders” or “Supermajority Lenders” insofar as such definitions affect the
substance of this Section 11.2. Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent, the Fronting
Lender or L/C Issuer under this Agreement or any other Loan Document, including
any release of any Guaranty or Collateral requiring a writing signed by all
Lenders and, in the case of the L/C Issuer, any increase in the L/C Sublimit,
shall be effective unless in writing and signed by Agent, the Fronting Lender
or L/C Issuer, as the case may be, in addition to Lenders required hereinabove
to take such action. Each amendment, modification, termination or waiver shall
be effective only in the specific instance and for the specific purpose for
which it was given. No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document.
No amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note.
No notice to or demand on any Sotheby Entity in


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any case shall
entitle such Sotheby Entity or any other Sotheby Entity to any other or further
notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this Section
11.2 shall be binding upon each holder of the Notes at the time outstanding
and each future holder of the Notes. 


                    (d)          If,
in connection with any proposed amendment, modification, waiver or termination
(a “Proposed Change”):


                                  (i)          requiring
the consent of all affected Lenders, the consent of Requisite Lenders is
obtained, but the consent of other Lenders whose consent is required is not
obtained (any such Lender whose consent is not obtained as described in this
clause (i) and in clause (ii) below being referred to as a “Non-Consenting
Lender”); or


                                  (ii)          requiring
the consent of Supermajority Lenders, the consent of Requisite Lenders is
obtained, but the consent of Supermajority Lenders is not obtained;


then, so long
as Agent is not a Non-Consenting Lender, at Borrower Representative’s request,
Agent or a Person reasonably acceptable to Agent shall have the right with
Agent’s consent and in Agent’s sole discretion (but shall have no obligation)
to purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders
agree that they shall, upon Agent’s request, sell and assign to Agent or such
Person, all of the Loans and Commitments of such Non-Consenting Lenders for an
amount equal to the principal balance of all Loans held by the Non-Consenting
Lenders and all accrued interest and Fees with respect thereto through the date
of sale, such purchase and sale to be consummated pursuant to an executed
Assignment Agreement.


                    (e)          Upon
payment in full in cash and performance of all of the Obligations (other than
indemnification Obligations), termination of the Commitments and a release of
all claims against Agent and Lenders, and so long as no suits, actions,
proceedings or claims are pending or threatened against any Indemnified Person
asserting any damages, losses or liabilities that are Indemnified Liabilities,
Agent shall deliver to Borrowers termination statements, mortgage releases and
other documents necessary or appropriate to evidence the termination of the
Liens securing payment of the Obligations.


                    11.3         Fees
and Expenses.


                    Borrowers
shall reimburse (i) Agent for all fees, costs and expenses (including the
reasonable fees and expenses of all of its counsel, advisors, consultants and
auditors) and (ii) Agent (and, with respect to clauses (b), (c) and (d)
below, all Lenders and the Fronting Lender) for all fees, costs and expenses,
including the reasonable fees, costs and expenses of counsel or other advisors
(including environmental and management consultants and appraisers), incurred
in connection with the negotiation, preparation and filing and/or recordation
of the Loan Documents and incurred in connection with:


                    (a)          any
amendment, modification or waiver of, consent with respect to, or termination
of, any of the Loan Documents or advice in connection with the syndication and
administration of the Loans made pursuant hereto or its rights hereunder or
thereunder;


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                    (b)          any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Agent, any Lender, the Fronting Lender, any Sotheby Entity or any other Person
and whether as a party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against any or all of the
Sotheby Entities or any other Person that may be obligated to Agent, any Lender
or the Fronting Lender by virtue of the Loan Documents; including any such
litigation, contest, dispute, suit, proceeding or action arising in connection
with any work-out or restructuring of the Loans during the pendency of one or
more Events of Default; provided, that in the case of reimbursement of
counsel for Lenders or the Fronting Lender other than Agent, such reimbursement
shall be limited to one counsel for all such Lenders and the Fronting Lender; provided,
further, that no Person shall be entitled to reimbursement under this clause
(b) in respect of any litigation, contest, dispute, suit, proceeding or
action to the extent any of the foregoing results from such Person’s gross
negligence or willful misconduct as determined in a final, non-appealable
judgment by a court of competent jurisdiction;


                    (c)          any
attempt to enforce any remedies of Agent against any or all of the Credit
Parties or any other Person that may be obligated to Agent, any Lender or the
Fronting Lender by virtue of any of the Loan Documents, including any such
attempt to enforce any such remedies in the course of any work-out or
restructuring of the Loans during the pendency of one or more Events of
Default; provided, that in the case of reimbursement of counsel for
Lenders and the Fronting Lender other than Agent, such reimbursement shall be
limited to one counsel for all such Lenders and the Fronting Lender;


                    (d)          any
workout or restructuring of the Loans during the pendency of one or more Events
of Default; provided, that in the case of reimbursement of counsel for
Lenders and the Fronting Lender other than Agent, such reimbursement shall be
limited to one counsel for all such Lenders and the Fronting Lender; and


                    (e)          efforts
to (i) monitor the Loans or any of the other Obligations, (ii) evaluate,
observe or assess any of the Sotheby Entities or their respective affairs, and
(iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or
otherwise dispose of any of the Collateral;


including, as
to each of clauses (a) through (e) above, all reasonable attorneys’ and
other professional and service providers’ fees arising from such services and
other advice, assistance or other representation, including those in connection
with any appellate proceedings, and all expenses, costs, charges and other fees
incurred by such counsel and others in connection with or relating to any of
the events or actions described in this Section 11.3, all of which shall
be payable, on demand, by Borrowers to Agent. Without limiting the generality
of the foregoing, such expenses, costs, charges and fees may include: fees,
costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court
costs and expenses; photocopying and duplication expenses; court reporter fees,
costs and expenses; long distance telephone charges; air express charges;
telegram or telecopy charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal or other advisory services.


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                    11.4          No
Waiver.


                    Agent’s
or any Lender’s failure, at any time or times, to require strict performance by
the Sotheby Entities of any provision of this Agreement or any other Loan
Document shall not waive, affect or diminish any right of Agent or such Lender
thereafter to demand strict compliance and performance herewith or therewith.
Any suspension or waiver of an Event of Default shall not suspend, waive or
affect any other Event of Default whether the same is prior or subsequent
thereto and whether the same or of a different type. Subject to the provisions
of Section 11.2, none of the undertakings, agreements, warranties,
covenants and representations of any Sotheby Entity contained in this Agreement
or any of the other Loan Documents and no Default or Event of Default by any
Sotheby Entity shall be deemed to have been suspended or waived by Agent or any
Lender, unless such waiver or suspension is by an instrument in writing signed
by an officer of or other authorized employee of Agent and the applicable
required Lenders, and directed to Borrowers specifying such suspension or
waiver.


                    11.5          Remedies.


                    Agent’s
and Lenders’ rights and remedies under this Agreement shall be cumulative and
nonexclusive of any other rights and remedies that Agent or any Lender may have
under any other agreement, including the other Loan Documents, by operation of
law or otherwise. Recourse to the Collateral shall not be required.


                    11.6          Severability.


                    Wherever
possible, each provision of this Agreement and the other Loan Documents shall
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement or any other Loan Document shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement or such other Loan Document.


                    11.7          Conflict
of Terms.


                    Except
as otherwise provided in this Agreement or any of the other Loan Documents by
specific reference to the applicable provisions of this Agreement, if any
provision contained in this Agreement conflicts with any provision in any of
the other Loan Documents, the provision contained in this Agreement shall
govern and control.


                    11.8          Confidentiality.


                    Agent
and each Lender agree to use commercially reasonable efforts (equivalent to the
efforts Agent or such Lender applies to maintaining the confidentiality of its
own confidential information) to maintain as confidential all confidential
information provided to them by the Sotheby Entities and designated as
confidential for a period of two (2) years following receipt thereof, except
that Agent and any Lender may disclose such information (a) to Persons employed
or engaged by Agent or such Lender; (b) to any bona fide assignee or
participant or potential assignee or participant that has agreed to comply with
the covenant contained in this Section 11.8 (and any such bona fide
assignee or participant or potential 


84





assignee or
participant may disclose such information to Persons employed or engaged by
them as described in clause (a) above); (c) as required or requested by
any Governmental Authority or reasonably believed by Agent or such Lender to be
compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of Agent’s or such Lender’s counsel, is required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any Litigation to which Agent or such
Lender is a party; or (f) that ceases to be confidential through no fault of Agent
or any Lender.


                    11.9          GOVERNING
LAW.


                    EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT
PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN
NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT
AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS; PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF NEW YORK COUNTY; PROVIDED FURTHER, THAT NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT
PARTY AT THE ADDRESS SET FORTH IN ANNEX H OF THIS AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY’S ACTUAL
RECEIPT THEREOF OR FIVE (5)


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DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS,
PROPER POSTAGE PREPAID.


                    11.10          Notices.


                    (a)          Addresses.
All notices, demands, requests, directions and other communications required or
expressly authorized to be made by this Agreement shall, whether or not
specified to be in writing but unless otherwise expressly specified to be given
by any other means, be given in writing and (i) addressed to (A) the party to
be notified and sent to the address or facsimile number indicated in Annex I,
or (B) otherwise to the party to be notified at its address specified on the
signature page of any applicable Assignment Agreement, (ii) posted to
Intralinks® (to the extent such system is available and set up by or
at the direction of Agent prior to posting) in an appropriate location by
uploading such notice, demand, request, direction or other communication to
www.intralinks.com, faxing it to 866-545-6600 with an appropriate bar-coded fax
coversheet or using such other means of posting to Intralinks® as
may be available and reasonably acceptable to Agent prior to such posting,
(iii) posted to any other E-System set up by or at the direction of Agent in an
appropriate location or (iv) addressed to such other address as shall be
notified in writing (A) in the case of Borrower Representative, Agent and Swing
Line Lender, to the other parties hereto and (B) in the case of all other
parties, to Borrower Representative and Agent. Transmission by electronic mail
(including E-Fax, even if transmitted to the fax numbers set forth in clause
(i) above) shall not be sufficient or effective to transmit any such notice
under this clause (a) unless such transmission is an available means to
post to any E-System.


                    (b)          Effectiveness.
All communications described in clause (a) above and all other notices,
demands, requests and other communications made in connection with this
Agreement shall be effective and be deemed to have been received (i) if
delivered by hand, upon personal delivery, (ii) if delivered by overnight
courier service, one Business Day after delivery to such courier service, (iii)
if delivered by mail, when deposited in the mails, (iv) if delivered by
facsimile (other than to post to an E-System pursuant to clause (a)(ii)
or (a)(iii) above), upon sender’s receipt of confirmation of proper
transmission, and (v) if delivered by posting to any E-System, on the later of
the date of such posting in an appropriate location and the date access to such
posting is given to the recipient thereof in accordance with the standard
procedures applicable to such E-System. Failure or delay in delivering copies
of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower Representative or Agent) designated
in Annex I to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice.


                    11.11          Section
Titles.


                    The
Section titles and Table of Contents contained in this Agreement are and shall
be without substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto.


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                    11.12          Counterparts.


                    This
Agreement may be executed in any number of separate counterparts, each of which
shall collectively and separately constitute one agreement.


                    11.13          WAIVER
OF JURY TRIAL.


                    BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.


                    11.14          Press
Releases and Related Matters.


                    Each
Credit Party executing this Agreement agrees that neither it nor its Affiliates
will in the future issue any press releases or other public disclosure using
the name of GE Capital or its affiliates or referring to this Agreement or the
other Loan Documents without the prior written consent of GE Capital (not to be
unreasonably withheld) unless (and only to the extent that) such Credit Party
or Affiliate is required to do so under law and then, in any event, such Credit
Party or Affiliate will consult with GE Capital before issuing such press
release or other public disclosure. Each Credit Party consents to the
publication by Agent or any Lender of advertising material relating to the
financing transactions contemplated by this Agreement using Borrower’s name,
product photographs, logo or trademark. Agent consents to the disclosure by the
Credit Parties in their public securities filings and Financial Statements of
the identity and role of Agent under this Agreement. Agent reserves the right
to provide to industry trade organizations information necessary and customary
for inclusion in league table measurements.


                    11.15          Reinstatement.


                    This
Agreement shall remain in full force and effect and continue to be effective
should any petition be filed by or against any Credit Party for liquidation or
reorganization, should any Credit Party become insolvent or make an assignment
for the benefit of any creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of any Credit Party’s assets, and
shall continue to be effective or to be reinstated, as the case may be, if at
any time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise
be restored or returned by any 


87





obligee of the
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.


                    11.16          Advice
of Counsel.


                    Each
of the parties represents to each other party hereto that it has discussed this
Agreement and, specifically, the provisions of Sections 11.9 and 11.13,
with its counsel.


                    11.17          No
Strict Construction.


                    The
parties hereto have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.


                    11.18          PATRIOT
Act.


                    Each
Lender that is subject to the PATRIOT Act and Agent (for itself and not on
behalf of any Lender) hereby notifies Borrowers that pursuant to the requirements
of the PATRIOT Act, it is required to obtain, verify and record information that
identifies Borrowers, which information includes the name and address of each
Borrower and other information that will allow such Lender or Agent, as
applicable, to identify such Borrower in accordance with the PATRIOT Act. Each
Borrower shall, promptly following a request by Agent or any Lender, provide
all documentation and other information that Agent or such Lender requests in
order to comply with its ongoing obligations under applicable “know your
customer” and anti-money laundering rules and regulations, including the
PATRIOT Act.


12.          CROSS-GUARANTY


                    12.1          Cross-Guaranty.


                    Each
U.S. Borrower hereby agrees that such U.S. Borrower is jointly and severally
liable for, and hereby absolutely and unconditionally guarantees to Agent and
Lenders and their respective successors and assigns, the full and prompt
payment (whether at stated maturity, by acceleration or otherwise) and
performance of, all Secured Obligations owed or hereafter owing to Agent and
Lenders by each other U.S. Borrower and each U.K. Borrower. Each U.K. Borrower
hereby agrees that such U.K. Borrower is jointly and severally liable for, and
hereby absolutely and unconditionally guarantees to Agent and Lenders and their
respective successors and assigns, the full and prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of, all Secured
Obligations owed or hereafter owing to Agent and Lenders by each other U.K.
Borrower; it being understood that the U.K. Borrowers shall have no liability,
direct or indirect, for the Secured Obligations of the U.S. Borrowers or the
other U.S. Credit Parties hereunder or under any of the Loan Documents. Each
Borrower agrees that its guaranty obligation hereunder is a continuing guaranty
of payment and performance and not of


88





collection,
that its obligations under this Section 12 shall not be discharged until
payment and performance, in full, of the Secured Obligations (in the case of
any U.S. Borrower) or the Secured Obligations of the U.K. Borrowers (in the
case of any U.K. Borrower) has occurred, and that its obligations under this Section
12 shall be absolute and unconditional, irrespective of, and unaffected by,



                    (a)          the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement, any other Loan Document or any other agreement,
document or instrument to which any Borrower is or may become a party;


                    (b)          the
absence of any action to enforce this Agreement (including this Section 12)
or any other Loan Document or the waiver or consent by Agent and Lenders with
respect to any of the provisions thereof;


                    (c)          the
existence, value or condition of, or failure to perfect its Lien against, any
security for the Secured Obligations or any action, or the absence of any
action, by Agent and Lenders in respect thereof (including the release of any
such security); 


                    (d)          the
insolvency of any Sotheby Entity; or


                    (e)          any
other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor.


Each U.S.
Borrower shall be regarded, and shall be in the same position, as principal
debtor with respect to the Secured Obligations guaranteed hereunder. Each U.K.
Borrower shall be regarded, and shall be in the same position, as principal
debtor with respect to the Secured Obligations of the other U.K. Borrower
guaranteed hereunder.


                    12.2          Waivers
by Borrowers.


                    Each
Borrower expressly waives all rights it may have now or in the future under any
statute, or at common law, or at law or in equity, or otherwise, to compel
Agent or Lenders to marshal assets or to proceed in respect of the Secured
Obligations guaranteed hereunder by such Borrower against any other Credit
Party, any other party or against any security for the payment and performance
of such Secured Obligations before proceeding against, or as a condition to
proceeding against, such Borrower. It is agreed among each Borrower, Agent and
Lenders that the foregoing waivers are of the essence of the transaction
contemplated by this Agreement and the other Loan Documents and that, but for
the provisions of this Section 12 and such waivers, Agent and Lenders
would decline to enter into this Agreement.


                    12.3          Benefit
of Guaranty.


                    Each
Borrower agrees that the provisions of this Section 12 are for the
benefit of Agent and Lenders and their respective successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between
any other Borrower and Agent or Lenders, the obligations of such other Borrower
under the Loan Documents. 


89





                    12.4
          Waiver of
Subrogation, Etc. 


                    Notwithstanding
anything to the contrary in this Agreement or in any other Loan Document, and
except as set forth in the Contribution Agreement, each Borrower hereby expressly
and irrevocably waives any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off and any
and all defenses available to a surety, guarantor or accommodation co-obligor.
Each Borrower acknowledges and agrees that this waiver is intended to benefit
Agent and Lenders and shall not limit or otherwise affect such Borrower’s
liability hereunder or the enforceability of this Section 12, and that Agent,
Lenders and their respective successors and assigns are intended third party
beneficiaries of the waivers and agreements set forth in this Section 12.4. 



                    12.5          Subordination
by U.K. Borrowers. 


                    Each
U.K. Borrower agrees that any and all claims of such U.K. Borrower against any
other Borrower or any Guarantor (each an “Obligor”) with respect to any
“Intercompany Indebtedness” (as hereinafter defined), any endorser, obligor or
any other guarantor of all or any part of the Secured Obligations, or against any
of its properties shall be subordinate and subject in right of payment to the
prior payment, in full and in cash, of all Secured Obligations of such Obligor.
Notwithstanding any right of any U.K. Borrower to ask, demand, sue for, take or
receive any payment from any Obligor, all rights, liens and security interests
of such U.K. Borrower, whether now or hereafter arising and howsoever existing,
in any assets of any other Obligor shall be and are subordinated to the rights
of Agent and the Lenders in those assets. No U.K. Borrower shall have any right
to possession of any such asset or to foreclose upon any such asset, whether by
judicial action or otherwise, until the Termination Date (in the case of the
assets of any Obligor that is a U.S. Credit Party) or the U.K. Termination Date
(in the case of the assets of any Obligor that is a U.K. Credit Party). If all
or any part of the assets of any Obligor, or the proceeds thereof, are subject
to any distribution, division or application to the creditors of such Obligor,
whether partial or complete, voluntary or involuntary, and whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit
of creditors or any analogous procedure or step in any jurisdiction or any
other action or proceeding, or if the business of any such Obligor is dissolved
or if substantially all of the assets of any such Obligor are sold, then, and
in any such event (such events being herein referred to as an “Insolvency
Event”), any payment or distribution of any kind or character, either in
cash, securities or other property, which shall be payable or deliverable upon
or with respect to any indebtedness of any Obligor to any U.K. Borrower (“Intercompany
Indebtedness”) shall be paid or delivered directly to Agent for application
to the Secured Obligations in accordance with the Loan Documents. Should any
payment, distribution, security or instrument or proceeds thereof be received
by the applicable U.K. Borrower upon or with respect to such Intercompany Indebtedness
after any Insolvency Event and prior to the Termination Date (in the case of
any Intercompany Indebtedness of a U.S. Credit Party) or the U.K. Termination
Date (in the case of any Intercompany Indebtedness of a U.K. Credit Party),
such U.K. Borrower shall receive and hold the same in trust, as trustee, for
the benefit of Agent and the Lenders and shall forthwith deliver the same to
Agent in precisely the form received (except for the endorsement or assignment
of such U.K. Borrower where necessary), for application to the Secured
Obligations in accordance with the Loan Documents, and, until so delivered, the
same shall be held in trust by such U.K. Borrower as the property of Agent and
the Lenders. If any such U.K. Borrower fails to make 


90





any such
endorsement or assignment to Agent, Agent or any of its officers or employees
is irrevocably authorized to make the same. Each U.K. Borrower agrees that
until the Termination Date (in the case of any claim against an Obligor that is
a U.S. Credit Party) or the U.K. Termination Date (in the case of any claim
against an Obligor that is a U.K. Credit Party), such U.K. Borrower will not
assign or transfer to any Person (other than Agent, a Borrower or another
Guarantor in accordance with the terms of the Loan Documents) any claim such
U.K. Borrower has or may have against any Obligor. 


                    12.6          Election
of Remedies. 


                    If
Agent or any Lender may, under applicable law, proceed to realize its benefits
under any of the Loan Documents giving Agent or such Lender a Lien upon any
Collateral, whether owned by any Borrower or by any other Person, either by
judicial foreclosure or by non judicial sale or enforcement, Agent or any
Lender may, at its sole option, determine which of its remedies or rights it
may pursue without affecting any of its rights and remedies under this Section
12. If, in the exercise of any of its rights and remedies, Agent or any Lender
shall forfeit any of its rights or remedies, including its right to enter a
deficiency judgment against any Borrower or any other Person, whether because
of any applicable laws pertaining to “election of remedies” or the like, each
Borrower hereby consents to such action by Agent or such Lender and waives any
claim based upon such action, even if such action by Agent or such Lender shall
result in a full or partial loss of any rights of subrogation that each
Borrower might otherwise have had but for such action by Agent or such Lender.
Any election of remedies that results in the denial or impairment of the right
of Agent or any Lender to seek a deficiency judgment against any Borrower shall
not impair any other Borrower’s obligation to pay the full amount of the
Secured Obligations guaranteed hereunder by such Borrower. In the event Agent
or any Lender shall bid at any foreclosure or trustee’s sale or at any private
sale permitted by law or the Loan Documents, Agent or such Lender may bid all
or less than the amount of the Secured Obligations and the amount of such bid
need not be paid by Agent or such Lender but shall be credited against the
Secured Obligations. The amount of the successful bid at any such sale, whether
Agent, Lender or any other party is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Secured
Obligations shall be conclusively deemed to be the amount of the Secured
Obligations guaranteed by the applicable Borrowers under this Section 12,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agent
or any Lender might otherwise be entitled but for such bidding at any such
sale.  


                    12.7          Liability
Cumulative. 


                    The liability
of Borrowers under this Section 12 is in addition to and shall be
cumulative with all liabilities of each Borrower to Agent and Lenders under
this Agreement and the other Loan Documents to which such Borrower is a party
or in respect of any Secured Obligations or obligation of the other Borrowers,
without any limitation as to amount, unless the instrument or agreement
evidencing or creating such other liability specifically provides to the
contrary. 


91





 [Remainder of page
intentionally left blank.] 


92





                    IN
WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above. 


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 SOTHEBY’S,

 	
  

 	
  

 	
 OATSHARE LIMITED

 	
  

 
	
 a Delaware
 corporation

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
      /s/ Michael
 L. Gillis

 	
  

 	
  

 	
 By:

 	
  

 	
  

 
	
  

 	 

 	
  

 	
  

 	
  

 	 

 	
  

 
	
 Name:
 Michael L. Gillis

 	
  

 	
  

 	
 Name: 

 	
  

 
	
 Title: SVP,
 Treasurer

 	
  

 	
  

 	
 Title:

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 SOTHEBY’S, INC.

 	
  

 	
  

 	
 SOTHEBY’S,

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 a company
 registered in England

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
  

 	
 By:

 	
  

 	
  

 
	
  

 	 

 	
  

 	
  

 	
  

 	 

 	
  

 
	
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 Title:

 	
  

 	
  

 	
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 SOTHEBY’S FINANCIAL SERVICES,

 	
  

 	
  

 	
 SOTHEBY’S FINANCIAL SERVICES

 	
  

 
	
 INC.

 	
  

 	
  

 	
 LIMITED

 	
  

 
	
 SOTHEBY’S FINANCIAL SERVICES

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 CALIFORNIA, INC.

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 OBERON, INC.

 	
  

 	
  

 	
 By:

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	 

 	
  

 
	
 THETA, INC.

 	
  

 	
  

 	
 Name:

 	
  

 
	
 SOTHEBY’S VENTURES, LLC

 	
  

 	
  

 	
 Title:

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	 

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Name:

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Title:

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 


Signature Page to
 Credit Agreement









	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 GENERAL ELECTRIC CAPITAL 

 
	
  

 	
  

 	
 CORPORATION, as Agent, Lender and 

 
	
  

 	
  

 	
 Fronting
 Lender 

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By:

 	
  

 	
  

 
	
  

 	
  

 	
  

 	 

 	
  

 
	
  

 	
  

 	
  

 	
 Duly Authorized Signatory

 	
  

 






Signature Page to 

Credit Agreement









	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 [_____________], as
 Lender

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By:

 	
  

 	
  

 
	
  

 	
  

 	
  

 	 

 	
  

 
	
  

 	
  

 	
 Name:

 	
  

 
	
  

 	
  

 	
 Title:

 	
  

 


Signature Page to 

Credit Agreement





                    The
following Persons are signatories to this Agreement in their capacity as Credit
Parties and not as Borrowers. 


	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 SOTHEBY’S FINE ART HOLDINGS, INC. 

 
	
  

 	
  

 	
 SOTHEBY’S ASIA, INC. 

 
	
  

 	
  

 	
 YORK WAREHOUSE, INC. 

 
	
  

 	
  

 	
 SPTC, INC. 

 
	
  

 	
  

 	
 SOTHEBY PARKE BERNET, INC. 

 
	
  

 	
  

 	
 YORK AVENUE DEVELOPMENT, INC. 

 
	
  

 	
  

 	
 SOTHEBY’S THAILAND, INC. 

 
	
  

 	
  

 	
 SOTHEBY’S HOLDINGS INTERNATIONAL, INC. 

 
	
  

 	
  

 	
 SOTHEBY’S NEVADA, INC. 

 
	
  

 	
  

 	
 SOTHEBYS.COM LLC 

 
	
  

 	
  

 	
 SOTHEBYS.COM AUCTIONS, INC. 

 
	
  

 	
  

 	
 SIBS, LLC 

 
	
  

 	
  

 	
 SUNRISE LIQUORS & WINES, INC. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By:

 	
  

 	
  

 
	
  

 	
  

 	
  

 	 

 	
  

 
	
  

 	
  

 	
 Name:

 	
  

 
	
  

 	
  

 	
 Title: 

 	
  

 


Signature Page to 

Credit Agreement 





ANNEX A (Recitals)

to
CREDIT AGREEMENT


DEFINITIONS


                    Capitalized
terms used in the Loan Documents shall have (unless otherwise provided
elsewhere in the Loan Documents) the following respective meanings, and all
references to Sections, Exhibits, Schedules or Annexes in the following
definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to
the Agreement: 


                    
“Acceptable Cash Equivalents” has the meaning ascribed to it in Annex
B. 


                    
“Account Debtor” means any Person who may become obligated to any
Sotheby Entity under, with respect to, or on account of, an Account, Chattel
Paper (including, without limitation, an Art Loan) or General Intangibles
(including a payment intangible). 


                    
“Accounting Changes” has the meaning ascribed thereto in Annex G.



                    
“Accounts” means all “accounts,” as such term is defined in the Code,
now owned or hereafter acquired by any Sotheby Entity, including (a) all
accounts receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper or
Instruments), (including any such obligations that may be characterized as an
account under the Code), (b) all of each Sotheby Entity’s rights in, to and
under all purchase orders or receipts for goods or services, (c) all of each
Sotheby Entity’s rights to any goods represented by any of the foregoing
(including unpaid sellers’ rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods),
(d) all rights to payment due to any Sotheby Entity for property sold, leased,
licensed, assigned or otherwise disposed of, for a policy of insurance issued
or to be issued, for a secondary obligation incurred or to be incurred, for
energy provided or to be provided, for the use or hire of a vessel under a
charter or other contract, arising out of the use of a credit card or charge
card, or for services rendered or to be rendered by such Sotheby Entity or in
connection with any other transaction (whether or not yet earned by performance
on the part of such Sotheby Entity), (e) all health care insurance receivables
and (f) all collateral security of any kind, given by any Account Debtor or any
other Person with respect to any of the foregoing. 


                    
“Activation Event” shall mean, as of any date when the aggregate
Revolving Loan then outstanding and the aggregate Swing Line Loan then
outstanding, in the aggregate, shall be greater than zero, the occurrence of
either of the following: (i) an Event of Default shall have occurred and shall
have been continuing for at least three (3) Business Days as of such date or
(ii) the Liquidity Amount shall be less than $25,000,000 as of such date. 


                    
“Activation Notice” means a notice from Agent given to a Relationship
Bank on or after the occurrence of an Activation Event pursuant to a Blocked
Account Agreement, under which Blocked Account Agreement such Relationship Bank
shall have agreed to honor instructions solely received from Agent concerning
the related Blocked Account(s) upon the receipt of such notice. 


A-1 





                    
“Advance” means any Revolving Credit Advance or Swing Line Advance, as
the context may require. 


                    
“Affiliate” means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary
voting power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person, (c)
each of such Person’s executive officers (as such term is defined in the rules
of the Securities and Exchange Commission), directors, joint venturers and
partners and (d) in the case of Borrowers, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of any
Borrower. For the purposes of this definition, “control” of a Person
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise; provided, however,
that the term “Affiliate” shall specifically exclude Agent and each
Lender. 


                    
“Agent” means GE Capital, in its capacity as Agent for Lenders, or its
successor appointed pursuant to Section 9.7(a). 


                    
“Agreement” means the Credit Agreement dated as of the Closing Date by
and among Borrowers, the other Sotheby Entities party thereto, GE Capital, as
Agent and a Lender, and the other Lenders from time to time party thereto, as
the same may be amended, supplemented, restated or otherwise modified from time
to time. 


                    
“Aggregate Borrowing Availability” means, as of any date of
determination, the lesser of (a) an amount equal to (i) the Maximum Amount minus
(ii) the aggregate Revolving Loan then outstanding minus (iii) the
aggregate Swing Line Loan then outstanding and (b) an amount equal to the sum
of (i) the U.S. Borrowing Availability as of such date and (ii) the U.K.
Borrowing Availability as of such date. 


                    
“Alternative Art Loan Currency” means Hong Kong Dollars and any other
currency approved by Agent (other than Dollars, Canadian Dollars, Sterling,
Euros or Swiss Francs); provided, that no currency shall be an
Alternative Art Loan Currency if it is not freely transferable and freely
convertible into Dollars and Sterling in the London foreign exchange market as
determined by Agent. 


                    
“Alternative L/C Currency” means any currency approved by the L/C Issuer
with respect to the incurrence of Letter of Credit Obligations in such currency
(other than Dollars, Sterling, Euros or Swiss Francs); provided, that no
currency shall be an Alternative L/C Currency if it is not freely transferable
and freely convertible into Dollars and Sterling in the London foreign exchange
market as determined by the L/C Issuer. 


                    
“Appendices” has the meaning ascribed to it in the recitals to the
Agreement. 


                    “Applicable
Dollar Revolver Index Margin” means the per annum interest rate margin from
time to time in effect and payable in addition to the Dollar Index Rate
applicable to the Revolving Loan, as determined by reference to Section
1.5(a). 


A-2 





                    
“Applicable Dollar Revolver LIBOR Margin” means the per annum interest
rate from time to time in effect and payable in addition to the Dollar LIBOR
Rate applicable to the Revolving Loan, as determined by reference to Section
1.5(a). 


                    
“Applicable L/C Margin” means the per annum fee from time to time in
effect and payable with respect to outstanding Letter of Credit Obligations, as
determined by reference to Section 1.5(a). 


                    
“Applicable Margins” means collectively the Applicable L/C Margin, the
Applicable Unused Line Fee Margin, the Applicable Dollar Revolver Index Margin,
the Applicable Dollar Revolver LIBOR Margin, the Applicable Sterling Revolver
Index Margin, and the Applicable Sterling Revolver LIBOR Margin. 


                    
“Applicable Sterling Revolver Index Margin” means the per annum interest
rate margin from time to time in effect and payable in addition to the Sterling
Index Rate applicable to Swing Line Loans, as determined by reference to Section
1.5(a). 


                    
“Applicable Sterling Revolver LIBOR Margin” means the per annum interest
rate from time to time in effect and payable in addition to the Sterling LIBOR
Rate applicable to the Revolving Loan, as determined by reference to Section
1.5(a). 


                    
“Applicable Unused Line Fee Margin” means 1.000.625%. 


                    
“Art Inventory” shall mean all Inventory of Borrowers consisting of
Works of Art. 


                    
“Art Inventory Report” means a report to be delivered from time to time
by Borrowers in the form attached to the Agreement as Exhibit 4.1(C). 


                    
“Art Loan Debtor” means an Account Debtor liable on an Art Loan. 


                    
“Art Loan/Inventory Joint Ventures” means any joint ventures,
profit/loss sharing arrangements, or similar contractual arrangements entered
into by any Borrower in the ordinary course of business in connection with any
Art Inventory or Art Loan. 


                    
“Art Loan Receivables Report” means a report to be delivered from time
to time by the Borrowers in the form attached to the Agreement as Exhibit
4.1(B). 


                    
“Art Loans” shall mean loans made by the Borrowers to customers of
Parent and its Subsidiaries to finance the purchase or carrying of, or in
anticipation of the potential sale of, or secured by, Works of Art. 


                    
“Assignment Agreement” has the meaning ascribed to it in Section
9.1(a). 


                    
“Auction Guaranty Side Letter” shall mean that certain letter agreement,
by and among Agent and the Credit Parties, dated as of the Closing Date, relating
to auction guaranties, as the same may be amended, restated, supplemented or
otherwise modified from time to time. 


A-3 





                    
“Australia Sale” has the meaning ascribed to it in Section 6.8. 


                    
 “Availability Test Period” means
the period (a) commencing on the first day of the Conversion Period and (b)
continuing until the earlier of (i) the commencement of the Liquidity Test
Period and (ii) the end of the Conversion Period. 


                    
“Available U.K. Art Loan Balance” means the Dollar Equivalent of the
aggregate outstanding principal balance of all Eligible Art Loans owned by U.K.
Borrowers minus (a) the amount, if any, by which the Dollar Equivalent
of the aggregate outstanding principal balance of all Eligible Venture Loans
owned by U.K. Borrowers exceeds an amount equal to $10,000,000 less the Dollar
Equivalent of the outstanding principal balance of Eligible Venture Loans
included in the Available U.S. Art Loan Balance minus (b) the amount, if
any, by which the Dollar Equivalent of the outstanding principal balance of
Unhedged U.K. Art Loans exceeds 25% of the Dollar Equivalent of the aggregate
outstanding principal balance of all Eligible Art Loans owned by the U.K.
Borrowers. 


                    
“Available U.S. Art Loan Balance” means the Dollar Equivalent of the
aggregate outstanding principal balance of all Eligible Art Loans owned by U.S.
Borrowers minus (a) the amount, if any, by which the Dollar Equivalent
of the aggregate outstanding principal balance of all Eligible Venture Loans
owned by U.S. Borrowers exceeds $10,000,000 minus (b) the amount, if
any, by which the Dollar Equivalent of the outstanding principal balance of
Unhedged U.S. Art Loans exceeds 25% of the Dollar Equivalent of the aggregate
outstanding principal balance of all Eligible Art Loans owned by the U.S.
Borrowers. 


                    
“Bank Product and Hedging Obligations” means any and all obligations of
any Sotheby Entity, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), to any Lender or any
affiliate of any Lender under or in respect of (i) any and all Rate Management
Transactions, (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Management Transactions and (iii) any
and all Bank Products. 


                    
“Bank Products” means any of the following services provided to any
Sotheby Entity: (i) commercial credit card services, (ii) cash management and
other treasury management services (including, without limitation, controlled
disbursements, automated clearinghouse transactions, return items, and
interstate depository network services) and (iii) foreign exchange related
services. 


                    
“Bankruptcy Code” means the provisions of Title 11 of the United States
Code, 11 U.S.C. §§101 et seq.  


                    
“Blocked Accounts” has the meaning ascribed to it in Annex C. 


                    
“Blocked Account Agreement” has the meaning ascribed to it in Annex C.



                    
“Borrower Representative” means Parent, in its capacity as Borrower
Representative pursuant to the provisions of Sections 1.1(c) and 1.2. 


A-4 





                    
“Borrowers” has the meaning ascribed thereto in the preamble to the
Agreement. 


                    
“Borrowing Availability” means either the U.S. Borrowing Availability or
the U.K. Borrowing Availability, as the context may require. 


                    
“Borrowing Base” means either the U.S. Borrowing Base or the U.K.
Borrowing Base, as the context may require. 


                    
“Borrowing Base Certificate” means a certificate to be executed and
delivered from time to time by the Borrowers in the form attached to the
Agreement as Exhibit 4.1(A). 


                    
“Business Day” means any day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in the State of New York
and in reference to LIBOR Loans shall mean any such day that is also a LIBOR
Business Day. 


                    
“Canadian Dollars” means the lawful currency of Canada. 


                    
“Capital Expenditures” means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto that have a useful life of
more than one year and that are required to be capitalized under GAAP. 


                    
“Capital Lease” means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person. 


                    
“Capital Lease Obligation” means, with respect to any Capital Lease of
any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease. 


                    
“Cash Collateral Account” has the meaning ascribed to it Annex B.



                    
“Cash Equivalent Investments” means (i) marketable direct obligations
issued or unconditionally guaranteed by the United States of America or any
agency thereof or, in the case of any Foreign Subsidiary, guaranteed by any
other member country of O.E.C.D. or any agency thereof, in each case maturing
within one year from the date of acquisition thereof, (ii) commercial paper or
other marketable debt securities maturing no more than one year from the date
of creation thereof and currently having the highest rating obtainable from
either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.,
(iii) certificates of deposit maturing no more than one year from the date of
creation thereof issued by commercial banks incorporated under the laws of the
United States of America or, in the case of any Foreign Subsidiary, under the
laws of any other member country of O.E.C.D., each having combined capital,
surplus and undivided profits of not less than $300,000,000 and having a senior
unsecured rating of “A” or better by an internationally recognized rating
agency or an equivalent rating from a nationally recognized rating agency of
the country in which such commercial bank is incorporated (an “A Rated Bank”),
(iv) time deposits maturing no more than thirty (30) days from the date of
creation 


A-5 





thereof with A
Rated Banks and (v) mutual funds that invest primarily in one or more of the
investments described in clauses (i) through (iv) above and currently
have an investment grade rating from either Standard & Poor’s Ratings Group
or Moody’s Investors Service, Inc. 


                    
“Cash Management Systems” has the meaning ascribed to it in Section
1.8. 


                    
“CCA” has the meaning ascribed to it in Section 3.1(b). 


                    
“CFC” means a Person that is a controlled foreign corporation under
Section 957 of the IRC. 


                    
“Change of Control” means either of the following: (a) any person or
group of persons (within the meaning of the Securities Exchange Act of 1934)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 30% or more of the aggregate ordinary voting power
represented by all of the issued and outstanding shares of capital Stock of
Parent; or (b) during any period of twelve consecutive calendar months,
individuals who at the beginning of such period constituted the board of
directors of Parent (together with any new directors whose election by the
board of directors of Parent or whose nomination for election by the
Stockholders of Parent was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office. 


                    
“Charges” means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Sotheby Entity, (d) any
Sotheby Entity’s ownership or use of any properties or other assets, or (e) any
other aspect of any Sotheby Entity’s business. 


                    
“Chattel Paper” means any “chattel paper,” as such term is defined in
the Code, including electronic chattel paper, now owned or hereafter acquired
by any Sotheby Entity. 


                    
“Closing Checklist” means the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement, the other Loan Documents and the
transactions contemplated thereunder, substantially in the form attached hereto
as Annex D. 


                    
“Closing Date” means August 31, 2009. 


                    
“Code” means the Uniform Commercial Code as the same may, from time to
time, be enacted and in effect in the State of New York; provided, that
to the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Agent’s or any Lender’s Lien on any
Collateral is governed by the Uniform Commercial 


A-6 





Code as
enacted and in effect in a jurisdiction other than the State of New York, the
term “Code” shall mean the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority or remedies and for purposes
of definitions related to such provisions. 


                    
“Collateral” means the property covered by the U.S. Collateral Documents
and the U.K. Collateral Documents and any other property, real or personal,
tangible or intangible, now existing or hereafter acquired, that may at any
time be or become subject to a security interest or Lien in favor of Agent, on
the Secured Parties, to secure the Secured Obligations. 


                    
“Collateral Documents” means the U.S. Collateral Documents and the U.K.
Collateral Documents. 


                    
“Collateral Reports” means the reports with respect to the Collateral
referred to in Annex F.  


                    
“Collection Account” means (i) with respect to payments in Dollars, that
certain account of Agent, account number 50279513 in the name of Agent at
Deutsche Bank Trust Company Americas in New York, New York ABA No. 021 001 033
or (ii) with respect to payments in Sterling, account number 00282596 in the name of Agent at
Barclays Bank in London, or in each case such other account as may be specified
in writing by Agent as the “Collection Account” for the applicable payments. 


                    
“Commitment Termination Date” means the earliest of (a) August 31, 2012,September 1, 2014, (b)
the date of termination of Lenders’ obligations to make Advances and to incur
Letter of Credit Obligations or permit existing Advances and Letter of Credit
Obligations to remain outstanding pursuant to Section 8.2(b), and (c)
the date of (i) indefeasible prepayment in full by Borrowers of the Loans and
all other outstanding Obligations and the cancellation and return (or stand-by
guarantee) of all Letters of Credit or the cash collateralization of all Letter
of Credit Obligations pursuant to Annex B and (ii) the permanent
reduction of all Commitments to zero dollars ($0). 


                    
“Commitments” means (a) as to any Lender, the commitment of such Lender
to make Revolving Credit Advances, incur Letter of Credit Obligations or
purchase participations therein as set forth on Annex J to the Agreement
or in the most recent Assignment Agreement executed by such Lender (including
without duplication the Swing Line Lender’s Swing Line Commitment as a subset
of its Commitment) and (b) as to all Lenders, the aggregate commitment of all
Lenders to make Revolving Credit Advances, incur Letter of Credit Obligations
or purchase participations therein (including without duplication the Swing
Line Lender’s Swing Line Commitment as a subset of its Commitment), which
aggregate commitment shall be Two Hundred Million Dollars ($200,000,000) on the
Closing Date, as such amount may be reduced or adjusted from time to time in
accordance with the Agreement. 


                    
“Compliance Certificate” has the meaning ascribed to it in Annex E.



                    
“Consolidated Net Tangible Assets” means, at any date of determination,
the aggregate amount of assets (less applicable reserves and other properly
deductible items) after 


A-7 





deducting
therefrom (a) total liabilities, (b) all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other like intangibles, and
(c) the aggregate principal amount of all Eligible Art Loans and the value of
all Eligible Art Inventory included in a Borrowing Base, all as set forth on
the books and records of Parent and its consolidated Subsidiaries and computed
in accordance with GAAP at such date. 


                    
“Contingency Reserve” means any contingency reserve established by
Parent and its Subsidiaries, on a consolidated basis, in accordance with GAAP,
except any contingency reserve established in respect of expenses incurred in
the ordinary course of business. 


                    
“Contracts” means all “contracts,” as such term is defined in the Code,
now owned or hereafter acquired by any Sotheby Entity, in any event, including
all contracts, undertakings, or agreements (other than rights evidenced by
Chattel Paper, Documents or Instruments) in or under which any Sotheby Entity
may now or hereafter have any right, title or interest, including any agreement
relating to the terms of payment or the terms of performance of any Account. 


                    
“Contribution Agreement” means the Contribution, Indemnification and
Subordination Agreement, dated as of the Closing Date, among the U.S. Credit
Parties and Agent. 


                    
“Contribution Notice” means a notice issued by the Pensions Regulator in
accordance with section 38 of the Pensions Act 2004 (as amended) of the United
Kingdom. 


                    
“Control Letter” means a letter agreement between Agent and (i) the
issuer of uncertificated securities with respect to uncertificated securities
in the name of any Credit Party, (ii) a securities intermediary with respect to
securities, whether certificated or uncertificated, securities entitlements and
other financial assets held in a securities account in the name of any Credit
Party, (iii) a futures commission merchant or clearing house, as applicable,
with respect to commodity accounts and commodity contracts held by any Credit
Party, whereby, among other things, the issuer, securities intermediary or
futures commission merchant limits any security interest in the applicable
financial assets in a manner reasonably satisfactory to Agent, acknowledges the
security interest of Agent, on behalf of itself and the other Secured Parties,
on such financial assets, and agrees to follow the instructions or entitlement
orders of Agent without further consent by the affected Credit Party. 


                    
  “Conversion Period” means the
period (i) commencing on December 15, 2012 (unless the Convertible Notes shall
have been have been converted or otherwise discharged in full prior to such
date) and (ii) continuing until the date on which all of the Convertible Notes
shall have been converted or otherwise discharged in full. 


                    
“Convertible Note Hedge Agreements” means those certain agreements and
confirmations relating to the hedge transactions entered into among Parent and
the Convertible Note Hedge Counterparties in connection with the issuance of
the Convertible Notes. 


                    
“Convertible Note Hedge Counterparties” means those Persons, other than
Parent, that are parties to Convertible Note Hedge Agreements. 


A-8 





                    
“Convertible Note Indenture” means that certain Indenture, dated as of
June 17, 2008, governing the Convertible Notes, as amended, restated,
supplemented or otherwise modified from time to time. 


                    
“Convertible Notes” means Parent’s 3.125% Convertible Senior Notes due
2013, in an aggregate principal amount outstanding on the date hereof of
$200,000,000, issued pursuant to the Convertible Note Indenture. 


                    
“Convertible Note Warrants” means those certain warrants for common
stock of Parent issued by Parent to the Convertible Note Hedge Counterparties
in connection with the Convertible Note Hedge Agreements. 


                    
“Copyright License” means any and all rights now owned or hereafter
acquired by any Sotheby Entity under any written agreement granting any right
to use any Copyright or Copyright registration. 


                    
“Copyright Security Agreements” means the Copyright Security Agreements
made in favor of Agent, on behalf of itself and the other Secured Parties, by
each applicable Credit Party. 


                    
“Copyrights” means all of the following now owned or hereafter adopted
or acquired by any Sotheby Entity: (a) all copyrights and General Intangibles
of like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright
Office or in any similar office or agency of the United States, any state or
territory thereof, or any other country or any political subdivision thereof,
and (b) all reissues, extensions or renewals thereof. 


                    
“Credit Party” means any Borrower or any Guarantor, and “Credit
Parties” shall mean all such Persons, collectively. 


                    
“Current Fiscal Year” has the meaning ascribed to it in Annex G. 


                    
“Data Protection Laws” means any applicable data protection or privacy
laws or regulations including all laws and regulations implementing in the
United Kingdom the European Union’s Data Protection Directive 95/46/EC and the
European Union’s Privacy and Electronic Communications Directive 2002/58/EC. 


                    
“Default” means any event that, with the passage of time or notice or
both, would, unless cured or waived, become an Event of Default. 


                    
“Default Rate” has the meaning ascribed to it in Section 1.5(d). 


                    
“Deposit Accounts” means all “deposit accounts” as such term is defined
in the Code, now or hereafter held in the name of any Credit Party. 


                    
“Direction” has the meaning ascribed to it in Section 1.15(a). 


A-9 





                    
“Disclosure Schedules” means the Schedules prepared by Borrowers and
denominated as Disclosure Schedules (1.4) through (6.7) in the table of
contents to the Agreement. 


                    
“Documents” means all “documents,” as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, wherever located. 


                    
“Dollar Equivalent” means, with respect to any amount denominated in
Dollars, such amount of Dollars, and with respect to any amount denominated in
a currency other than Dollars, the amount of Dollars, as of any date of
determination, into which such other currency (as the context may require) can
be converted in accordance with Section 1.18. 


                    
“Dollar Index Rate” means, for any day, a rate per annum equal to the
highest of (a) the rate last quoted by The Wall Street Journal as the “Prime
Rate” in the United States or, if The Wall Street Journal ceases to quote such
rate, the highest per annum interest rate published by the Federal Reserve
Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest
Rates) as the “bank prime loan” rate or, if such rate is no longer quoted
therein, any similar rate quoted therein (as determined by Agent) or in any
similar release by the Federal Reserve Board (as determined by Agent), (b) the
sum of 3.00.50% per annum and the
Federal Funds Rate, and (c) the sum of (x) the Dollar LIBOR Rate, as defined
herein, calculated for each such day based on a LIBOR Period of three months
determined two (2) Business Days prior to such day (which Dollar LIBOR Rate shall not be less than 2.00% per
annum) plus (y) the excess of the Applicable Dollar Revolver
LIBOR Margin over the Applicable Dollar Revolver Index Margin, in each
instance, as of such day. Any change in the Dollar Index Rate due to a change
in any of the foregoing shall be effective on the effective date of such change
in the “bank prime loan” rate, the Federal Funds Rate or the Dollar LIBOR Rate
for a LIBOR Period of three months. 


                    
“Dollar LIBOR Rate” means for each LIBOR Period with respect to a LIBOR
Loan denominated in Dollars, the
highest of (a) the offered rate per annum for deposits of
Dollars for such LIBOR Period that appears on Reuters Screen LIBOR01 Page as of
11:00 A.M. (London, England time) two (2) Business Days prior to the first day
in such LIBOR Period, (b) if such
LIBOR Period is for a duration less than three months, the offered rate per
annum for deposits of Dollars for a three-month LIBOR Period commencing on the
first day in such LIBOR Period that appears on Reuters Screen LIBOR01 Page as
of 11:00 A.M. (London, England time) two (2) Business Days prior to the first
day in such LIBOR Period and (c) 2.00% per annum. If any. If the offered rate
described in the foregoing clause (a) or (b)sentence
does not exist, such rate will be the rate of interest per annum, as determined
by Agent (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which
deposits of Dollars in immediately available funds are offered at 11:00 A.M.
(London, England time) two (2) Business Days prior to the first day in such
LIBOR Period by major financial institutions reasonably satisfactory to Agent
in the London interbank market for a LIBOR Period of the applicable duration
for the applicable principal amount on such date of determination. 


                    
“Dollar Revolving Credit Advance” has the meaning ascribed to it in Section
1.1(a)(i). 


A-10 





                    “Dollars”
or “$” means lawful currency of the United States of America.  


                    
“Domestic Subsidiary” means any Subsidiary of Parent incorporated or
organized under the laws of the United States of America, any state thereof or
the District of Columbia. 


                    
“Domestic Subsidiary Guarantor” means a Domestic Subsidiary that does
not constitute a U.S. Borrower or an Immaterial Subsidiary. 


                    
“Domestic Subsidiary Guaranty” means that certain Guaranty, dated as of
the Closing Date, executed by each Domestic Subsidiary Guarantor in favor of
Agent, for the benefit of Agent and the Lenders. 


                    
“Due-to-Consignor Amount” means, on any date of determination, the
aggregate amount of cash received and held by all Sotheby Entities that is
payable to consignors as of such day as a result of the sale of such
consignors’ Works of Art by a Sotheby Entity (net of the aggregate outstanding
amount of all principal, accrued interest and other related amounts as of such
day with respect to any Art Loans secured by such Works of Art). 


                    
“Due-to-Consignor Disbursement Account” means such account as Borrower
Representative and Agent may agree upon from time to time pursuant to a written
agreement. 


                    “Due-to-Consignor
Reserve” means, at any time, a reserve equal to the positive difference, if
any, of (a) 100% of the amounts payable to consignors in respect of consigned
items sold to third parties by the Sotheby Entities at such time minus
(b) an amount equal to (i) the aggregate balance of accounts receivable of the
Sotheby Entities (determined in accordance with GAAP) at such time plus
(ii) the aggregate amount of cash of the Sotheby Entities (as determined in
accordance with GAAP) at such time minus (c) the amount of such cash
subject to a Lien (or held in a deposit or securities account subject to a
Lien) in favor of any Person other than (i) Agent or a (ii) consignor to whom
such cash is due to be paid in respect of the sale of a Work of Art consigned
by such Person to the Sotheby Entities for sale minus (d) without
duplication of the foregoing clause (c), the amount of such cash subject to any
restriction on withdrawal from the deposit or securities account in which such
cash is held.  


                    
“Due-to-Consignor Statement” has the meaning ascribed to it in Annex
E. 


                    
“EBITDA” means, with respect to Parent and its Subsidiaries, on a
consolidated basis, for any fiscal period, without duplication, an amount equal
to (a) consolidated net income of such Persons for such period determined in
accordance with GAAP, minus (b) the sum of (i) income tax credits, (ii)
gain from extraordinary items for such period and (iii) any non-recurring
non-cash gains, in each case, to the extent included in the calculation of
consolidated net income of such Persons for such period in accordance with
GAAP, but without duplication, plus (c) the sum of (i) the provision for
income taxes with respect to such fiscal period, (ii) Interest Expense with
respect to such period, (iii) loss from extraordinary items for such period,
(iv) for the Fiscal Quarter ended December 31, 2008, auction guaranty losses as
previously described to Agent not to exceed $11,000,000 in the aggregate, (v)
depreciation and amortization for such period, (vi) the amount of any deduction
to consolidated net income as a result of any grant of any Stock (including
restricted stock and stock options) and (vii) other non-recurring expenses
which either (A) do not represent a cash item in such fiscal period or any
future period (in each case, of or by 


A-11 





Parent and its
Subsidiaries for such fiscal period) or (B) do not exceed $25,000,000 in the
aggregate (when added to all other amounts determined under this subclause
(B)), in each case, to the extent included in the calculation of
consolidated net income of such Persons for such period in accordance with
GAAP, but without duplication. For purposes of this definition, the following
items shall be excluded in determining consolidated net income of such Persons:
(1) the income (or deficit) of any other Person accrued prior to the date it
became a Subsidiary of, or was merged or consolidated into, any such Person or
any of such Persons’ Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which any such Person has an ownership
interest, except to the extent any such income has actually been received by
such Person in the form of cash dividends or distributions; (3) the
undistributed earnings of any Subsidiary of any such Person to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of any contractual
obligation or requirement of law applicable to such Subsidiary; (4) any net
gain from the collection of the proceeds of life insurance policies; (5) any
net gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of any such Person; (6) in the case of a
successor to any such Person by consolidation or merger or as a transferee of
its assets, any earnings of such successor prior to such consolidation, merger
or transfer of assets; and (7) any deferred credit representing the excess of
equity in any Subsidiary of any such Person at the date of acquisition of such
Subsidiary over the cost to such Person of the investment in such Subsidiary. 


                    “E-Fax”
means any system used to receive or transmit faxes electronically. 


                    
“Eligible Art Loan” has the meaning ascribed to it in Section 1.6.



                    
“Eligible Art Loan Collateral” shall mean, with respect to any Art Loan
of any Borrower, a Work of Art: 


	
  

 	
  

 
	
  

 	
           (a)
 in which such Borrower has a first priority security interest securing
 repayment of such Art Loan that is perfected in each applicable jurisdiction
 (i) by the filing of a financing statement pursuant to the UCC or (ii) by
 physical possession of such Work of Art by such Borrower or its agent at all
 times; 

 
	
  

 	
  

 
	
  

 	
           (b)
 unless otherwise agreed by Agent, with respect to which, if such Borrower has
 a security interest in such Work of Art that is perfected by physical
 possession by a Person acting as an agent of such Borrower (which Person may
 be another Sotheby Entity) or otherwise in the physical possession of any
 Person other than such Borrower, (i) such Person has executed a bailee
 letter, (ii) Reserves satisfactory to Agent have been established, or (iii)
 other arrangements have been entered into, in form and substance reasonably
 acceptable to Agent; 

 
	
  

 	
  

 
	
  

 	
           (c)
 that is (i) (x) located in a Permitted Art Loan Country or (y) in transport
 between such countries and (ii) if located in a Permitted Art Loan Country,
 such Borrower shall have taken all actions reasonably required by Agent with
 respect to such Work of Art in order to protect the interests of such
 Borrower and Agent therein under the laws of such Permitted Art Loan Country;
 

 



A-12 









	
  

 	
  

 
	
  

 	
           (d)
 that, if held by such Borrower, is held (i) at a location owned by a Sotheby
 Entity, or (ii) unless Reserves satisfactory to Agent have been established
 (A) at a location in which a Sotheby Entity has obtained a leasehold interest
 with respect to which, unless otherwise agreed by Agent, the lessor has
 executed a landlord waiver, in form and substance reasonably acceptable to
 Agent, or (B) at a warehouse, storage facility or other third-party location
 (including, without limitation, the Geneva free port, but not including the
 location of any agent described in paragraph (b) of this definition)
 with respect to which, unless otherwise agreed by Agent, such third party has
 executed a bailee letter in form and substance reasonably acceptable to
 Agent; 

 
	
  

 	
  

 
	
  

 	
           (e)
 that is (i) in the physical possession of such Borrower, (ii) in the physical
 possession of an agent described in paragraph (b) of this definition
 or (iii) unless Reserves satisfactory to Agent have been established, in the
 actual physical possession of the applicable Art Loan Debtor at a location
 owned by such Art Loan Debtor; 

 
	
  

 	
  

 
	
  

 	
           (f)
 that is (i) adequately insured by such Borrower or the applicable Art Loan
 Debtor and (ii) if such Work of Art is insured by the applicable Art Loan
 Debtor, subject to a valid loss payable endorsement in favor of such Borrower
 with respect to such Work of Art; 

 
	
  

 	
  

 
	
  

 	
           (g)
 with respect to which the applicable Art Loan Debtor is not the original
 artist or creator; 

 
	
  

 	
  

 
	
  

 	
           (h)
 with respect to which the validity, enforceability, perfection or priority of
 such Borrower’s security interest in such Work of Art is not subject to any
 litigation, other than litigation with respect to which (i) such Borrower has
 notified Agent of such litigation, and (ii) Agent has determined in its
 reasonable judgment, pursuant to a written notice to such Borrower (not to be
 unreasonably withheld or delayed), that such litigation does not constitute
 good faith litigation; 

 
	
  

 	
  

 
	
  

 	
           (i)
 with respect to which the rights of the related Art Loan Debtor in such Work
 of Art are not subject to litigation, unless (i) such Borrower notifies Agent
 of such litigation, and (ii) Agent has determined in its reasonable judgment,
 pursuant to a written notice to such Borrower (not to be unreasonably
 withheld or delayed), that such litigation does not have a material risk of
 being determined adversely to such Borrower; and 

 
	
  

 	
  

 
	
  

 	
           (j)          if
 the value of such Work of Art exceeds $250,000, has been the subject of a
 search by such Borrower in the Art Loss Register. 

 



                    “Eligible
Art Inventory” has the meaning ascribed to it in Section 1.7. 


                    
“Eligible Venture Loan” means a Venture Loan that is an Eligible Art Loan.



                    
“Environmental Laws” means all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards and regulations,
now or hereafter in effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree, order or judgment, imposing liability or standards of
conduct for or relating to the regulation and protection of human health,
safety, the environment 


A-13 





and natural
resources (including ambient air, surface water, groundwater, wetlands, land
surface or subsurface strata, wildlife, aquatic species and vegetation).
Environmental Laws include the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”);
the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. §§
5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. §§
6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et
seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal
Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the
Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.); and the
Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and any and all
regulations promulgated thereunder, and all analogous state, local and foreign
counterparts or equivalents and any transfer of ownership notification or
approval statutes. 


                    “Environmental
Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs, operation and maintenance
costs, losses, damages, punitive damages, property damages, natural resource
damages, consequential damages, treble damages, costs and expenses (including
all reasonable fees, disbursements and expenses of counsel, experts and
consultants), fines, penalties, sanctions and interest incurred as a result of
or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law, arising under or
related to any Environmental Laws, Environmental Permits, or in connection with
any Release or threatened Release or presence of a Hazardous Material whether
on, at, in, under or from any real or personal property. 


                    
“Environmental Permits” means all permits, licenses, authorizations,
certificates, approvals or registrations required for the operations of any
Sotheby Entity by any Governmental Authority under any Environmental Laws. 


                    
“Equipment” means all “equipment,” as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, wherever located and, in
any event, including all such Credit Party’s machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor,
all substitutes for any of the foregoing, fuel therefor, and all manuals,
drawings, instructions, warranties and rights with respect thereto, and all
products and proceeds thereof and condemnation awards and insurance proceeds
with respect thereto. 


                    
“ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulations promulgated thereunder. 


A-14 





                    
“ERISA Affiliate” means, with respect to any Sotheby Entity, any trade
or business (whether or not incorporated) that, together with such Sotheby
Entity, are treated as a single employer within the meaning of Sections 414(b),
(c), (m) or (o) of the IRC. 


                    
“ERISA Event” means, with respect to any Sotheby Entity or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to
a Title IV Plan; (b) the withdrawal of any Sotheby Entity or ERISA Affiliate
from a Title IV Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(c) the complete or partial withdrawal of any Sotheby Entity or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (e) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Sotheby
Entity or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within thirty
(30) days; (g) any other event or condition that would reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Title IV Plan or Multiemployer
Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA;
(h) the termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245
of ERISA; or (i) the loss of a Qualified Plan’s qualification or tax exempt
status; or (j) the termination of a Plan described in Section 4064 of ERISA. 


                    
“ESOP” means a Plan that is intended to satisfy the requirements of
Section 4975(e)(7) of the IRC. 


                    
“Estimated Value” means, as of any date of determination, with respect
to any Work of Art, the most recent estimate of value of such Work of Art, as
determined from time to time by the applicable Borrower in accordance with Section
5.12. 


                    
“E-System” means any electronic system, including Intralinks® and any
other Internet or extranet-based site, whether such electronic system is owned,
operated or hosted by Agent, any of its Affiliates, or any of such Person’s
respective officers, directors, employees, attorneys, agents and
representatives or any other Person, providing for access to data protected by
passcodes or other security system. 


                    
“Euro” means the single currency of Participating Member States. 


                    
“Event of Default” has the meaning ascribed to it in Section 8.1.



                    
“Executive Order” means Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, and relating to Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism. 


                    
“Fair Labor Standards Act” means the Fair Labor Standards Act, 29 U.S.C.
§201 et seq.  


                    
“Federal Funds Rate” means, for any day, a floating rate equal to the
weighted average of the rates on overnight Federal funds transactions among
members of the Federal 


A-15 





Reserve
System, as determined by Agent in its sole discretion, which determination
shall be final, binding and conclusive (absent manifest error). 


                    
“Federal Reserve Board” means the Board of Governors of the Federal
Reserve System. 


                    
“Fees” means any and all fees payable to Agent or any Lender pursuant to
the Agreement or any of the other Loan Documents. 


                    
“Financial Covenant Compliance Period” means each period (i) commencing
on any date on or after December 31,
2009 on  which (a)(1) the average daily Aggregate
Borrowing Availability for the
previous 30 consecutive Business Days shall be less than
$50,000,000 for a period ofand (2) the average daily Liquidity Amount
for the previous 30 consecutive Business Days, shall be less than $100,000,000, (b)(1) Aggregate Borrowing
Availability shall be less than $30,000,000 on such date and (2) the Liquidity Amount shall be less than $50,000,000
on such date, or (c) Aggregate Borrowing Availability shall be less than $20,000,000 on such date (unless the outstanding principal balance of
the Revolving Loan shall
be zero on such date) or (d) the average daily outstanding
principal balance of the Revolving Loan for the previous 30 consecutive Business Days
shall exceed $90,000,000 for a
period of 30 consecutive Business Days100,000,000 and (ii) continuing until
the date on which (x) average daily Aggregate Borrowing Availability
shall have been equal to
or greater than $50,000,000 for a period of 30 consecutive Business Days
following the
commencement of such
Financial Covenant Compliance Period, and (y) the average daily outstanding principal balance of
the Revolving Loan shall
have been equal to or less than $90,000,000 for a period of 30 consecutive
Business Days following the commencement of such Financial Covenant Compliance
Periodfirst date
occurring at least 30 Business Days after the commencement of such period that does not satisfy any
of the criteria set forth in the foregoing clause (i). 


                    
“Financial Covenants” means the financial covenants set forth in Annex
G. 


                    
“Financial Officer” means, with respect to any Person, the Chief
Financial Officer, Treasurer or Controller thereof or another officer thereof
of similar seniority and responsibility. 


                    
“Financial Statements” means the consolidated and consolidating income
statements, statements of cash flows and balance sheets of Borrowers delivered
in accordance with Section 3.4 and Annex E. 


                    
“Financial Support Direction” means a direction issued by the Pensions
Regulator in accordance with section 43 of the Pensions Act 2004 (as amended)
of the United Kingdom. 


                    
“Fiscal Month” means any of the monthly accounting periods of Parent. 


                    
“Fiscal Quarter” means any of the quarterly accounting periods of Parent
ending on March 31, June 30, September 30 or December 31 of each year. 


                    
“Fiscal Year” means any of the annual accounting periods of Parent
ending on December 31 of each year. 


A-16 





                    
“Fixed Charges” means, with respect to Parent and its Subsidiaries, on a
consolidated basis, for any fiscal period, an amount equal to (a) the aggregate
of all Interest Expense with respect to such period plus (b) scheduled payments
of principal with respect to Indebtedness during such period plus (c)
dividends and distributions on the Stock of Parent paid in cash during such
period (but not to exceed $3,300,000 for the Fiscal Quarter ended March 31,
2009) plus (d) payments with respect to purchases of any Senior Notes or
repurchases of any Stock of Parent, in each case, during such period minus
(e) discounts on the Senior Notes, the Convertible Notes, and the amounts owed
under the York Avenue Loan Agreement, in each case, to the extent included as
Interest Expense during such period on a non-cash basis minus (f)
amounts included in Interest Expense for such period in respect of amortization
of (i) closing fees incurred in conjunction with this Agreement and any fees
related to amendments or termination of the Prior Credit Agreement and (ii)
interest accrued on amounts payable on the unfunded senior management benefit
plan of Parent and its Subsidiaries, in each case, of or by Parent and its
Subsidiaries on a consolidated basis for such period.  


                    
“Fixed Charge Coverage Ratio” means, with respect to Parent and its
Subsidiaries, on a consolidated basis, for any four Fiscal Quarter period, the
ratio of (I) the sum of (a) EBITDA for each of such four Fiscal Quarters minus
(b) Capital Expenditures during such four Fiscal Quarters (excluding
$85,000,000 expended pursuant to the York Avenue Loan Documents during the
Fiscal Quarter ended March 31, 2009) minus (c) cash income taxes paid
during such Fiscal Quarters net of income tax refunds to (II) the aggregate
Fixed Charges for such four Fiscal Quarters. 


                    
“Fixtures” means all “fixtures” as such term is defined in the Code, now
owned or hereafter acquired by any Sotheby Entity. 


                    
“Foreign Subsidiary” means any Subsidiary of Parent that is not a
Domestic Subsidiary. 


                    
 “Fourth Amendment
Effective Date” means November [__], 2010. 


                    
“Fronted Percentage” means, as of any date of determination, the
percentage obtained by dividing (i) the aggregate Commitments of the
Non-Sterling Lenders as of such date by (ii) aggregate Commitments of all
Lenders as of such date. 


                    
“Fronting Lender” means GE Capital, in its capacity as Fronting Lender,
or its successor appointed pursuant to Section 9.7(b). 


                    
“Fronting Lender Note” has the meaning ascribed to it in Section
1.1(a)(ii). 


                    
“Funded Debt” means, with respect to any Person, without duplication,
all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person’s
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long term debt, revolving credit and short term debt extendible
beyond one year at the option 


A-17 





of the debtor,
and also including, in the case of Borrowers, the Obligations and, without duplication,
Guaranteed Indebtedness consisting of guaranties of Funded Debt of other
Persons. 


                    
“GAAP” means generally accepted accounting principles in the United
States of America consistently applied, as such term is further defined in Annex
G to the Agreement. 


                    
“GE Capital” means General Electric Capital Corporation, a Delaware
corporation. 


                    
“General Intangibles” means all “general intangibles,” as such term is
defined in the Code, now owned or hereafter acquired by any Sotheby Entity,
including all right, title and interest that such Sotheby Entity may now or
hereafter have in or under any Contract, all payment intangibles, customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, deposit, checking and
other bank accounts, rights to receive tax refunds and other payments, rights
to receive dividends, distributions, cash, Instruments and other property in
respect of or in exchange for pledged Stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of such
Sotheby Entity or any computer bureau or service company from time to time
acting for such Sotheby Entity. 


                    
“Goods” means all “goods” as defined in the Code, now owned or hereafter
acquired by any Sotheby Entity, wherever located, including embedded software
to the extent included in “goods” as defined in the Code, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals. 


                    
“Governmental Authority” means any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government. 


                    “Guaranteed
Indebtedness” means as to any Person, any obligation of such Person
guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease,
dividend, or other obligation (including, without limitation, any obligation
described in Section 6.3(a)(vii)) (the “primary obligation”) of any
other Person (the “primary obligor”) in any manner, including any
obligation or arrangement of such Person to (a) purchase or repurchase any such
primary obligation, (b) advance or supply funds (i) for the purchase or payment
of any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c)  


A-18 





purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, (d) protect the beneficiary of such
arrangement from loss (other than product warranties given in the ordinary
course of business) or (e) indemnify the owner of such primary obligation
against loss in respect thereof. The amount of any Guaranteed Indebtedness at
any time shall be deemed to be an amount equal to the lesser at such time of
(x) the stated or determinable amount of the primary obligation in respect of
which such Guaranteed Indebtedness is incurred and (y) the maximum amount for
which such Person may be liable pursuant to the terms of the instrument
embodying such Guaranteed Indebtedness, or, if not stated or determinable, the
maximum reasonably anticipated liability (assuming full performance) in respect
thereof. 


                    
“Guaranties” means, collectively, the Domestic Subsidiary Guaranty and
any other guaranty executed by any Guarantor in favor of Agent, for the benefit
of Agent and Lenders, in respect of all or a portion of the Obligations. 


                    
“Guarantors” means the Domestic Subsidiary Guarantors, the U.K.
Subsidiary Guarantors and each other Person, if any, that executes a guaranty
or other similar agreement in favor of Agent, for the benefit of Agent and
Lenders, in connection with the transactions contemplated by the Agreement and
the other Loan Documents. 


                    
“Hazardous Material” means any substance, material or waste that is
regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined as
a “solid waste,” “hazardous waste,” “hazardous material,” “hazardous
substance,” “extremely hazardous waste,” “restricted hazardous waste,”
“pollutant,” “contaminant,” “hazardous constituent,” “special waste,” “toxic
substance” or other similar term or phrase under any Environmental Laws, or (b)
petroleum or any fraction or by product thereof, asbestos, polychlorinated
biphenyls (PCB’s), or any radioactive substance. 


                    
“Hong Kong Dollars” means the lawful currency of Hong Kong. 


                    
“IEEPA” means the International Emergency Economic Power Act, 50 U.S.C.
§ 1701 et. seq. 


                    
“Immaterial Subsidiary” means  (a)  any Domestic Subsidiary or any
Foreign Subsidiary organized under the laws of England, in each case listed on
Disclosure Schedule (5.15), unless such entity shall have executed a Guaranty
and such Collateral Documents as Agent shall reasonably request  or (b) for purposes of Section 8.1(g)
or (h), any Sotheby Entity that (i) is not a Credit Party, (ii) owns assets
having a book value of which the Dollar Equivalent is less than $100,000 and
(iii) had earnings during the most recently completed Fiscal Year of which the
Dollar Equivalent was less than $100,000.  


                    
 “Impacted Lender” means
any Lender that fails to provide Agent, within three (3) Business Days
following Agent’s written request, satisfactory assurance that such Lender will
not become a Non-Funding Lender.


                    
“Indebtedness” means, with respect to any Person, without duplication,
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property 


A-19 





payment for
which is deferred 6 months or more, but excluding obligations to trade
creditors incurred in the ordinary course of business that are unsecured and
not overdue by more than 6 months unless being contested in good faith, (b) all
reimbursement and other obligations with respect to letters of credit, bankers’
acceptances and surety bonds, whether or not matured, (c) all obligations
evidenced by notes, bonds, debentures or similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Dollar
Index Rate as in effect on the Closing Date) of future rental payments under
all synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in
each case whether contingent or matured, (g) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement
designed to alter the risks of that Person arising from fluctuations in
currency values or interest rates, in each case whether contingent or matured,
(h) all Indebtedness referred to above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien upon or in property or other assets (including accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness, and (i) the Obligations.



                    
“Indemnified Liabilities” has the meaning ascribed to it in Section
1.13. 


                    
“Indemnified Person” has the meaning ascribed to in Section 1.13.



                    
“Index Rate Loan” means the Swing Line Loan or any portion of the
Revolving Loan bearing interest by reference to the Dollar Index Rate or the
Sterling Index Rate, as applicable. 


                    
“Insolvency Event” has the meaning ascribed to in Section 12.5. 


                    
“Instruments” means all “instruments,” as such term is defined in the
Code, now owned or hereafter acquired by any Sotheby Entity, wherever located,
and, in any event, including all certificated securities, all certificates of
deposit, and all promissory notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper. 


                    
“Intellectual Property” means any and all Licenses, Patents, Copyrights,
Trademarks, and the goodwill associated with such Trademarks. 


                    
“Intercompany Indebtedness” has the meaning ascribed to in Section
12.5. 


                    
“Interest Expense” means, with respect to any Person for any fiscal
period, the sum of (a) all interest, premium payments, debt discount, fees,
charges and related expenses in connection with borrowed money (excluding
capitalized interest) or in connection with the deferred purchase price of the
assets, in each case, to the extent treated as interest in accordance with GAAP
and (b) the portion of rent expense under Capital Leases that is treated as
interest in accordance with GAAP, in each case, of or by Parent and its
Subsidiaries for such fiscal period. 


A-20 





                    
“Interest Income” means, with respect to Parent and its Subsidiaries, on
a consolidated basis, for any fiscal period, an amount equal to the
consolidated interest income of such Persons for such period, determined in
accordance with GAAP. 


                    
“Interest Payment Date” means (a) as to any Index Rate Loan, the first
Business Day of each month to occur while such Loan is outstanding, and (b) as
to any LIBOR Loan, the last day of the applicable LIBOR Period; provided,
that in the case of any LIBOR Period greater than three months in duration,
interest shall be payable at three-month intervals and on the last day of such
LIBOR Period; provided, further, that, in addition to the
foregoing, each of (x) the date upon which all of the Commitments have been
terminated and the Loans have been paid in full and (y) the Commitment
Termination Date shall be deemed to be an “Interest Payment Date” with respect
to any interest that has then accrued under the Agreement; provided, further,
that with respect to any Revolving Credit Advance denominated in Sterling, (i)
the first Interest Payment Date to occur after the Closing Date with respect
thereto shall be March 1, 2010 (or such earlier date as Agent shall specify
upon prior written notice to Borrowers and Lenders) and (ii) any interest that
would have been payable on any day prior to such date without giving effect to clause
(i) of this proviso shall be added to the outstanding principal balance of
the Loan on which such interest accrued and shall thereafter accrue interest in
accordance with Section 1.5. 


                    
“Inventory” means all “inventory,” as such term is defined in the Code,
now owned or hereafter acquired by any Sotheby Entity, wherever located, and in
any event including inventory, merchandise, goods and other personal property
that are held by or on behalf of any Sotheby Entity for sale or lease or are
furnished or are to be furnished under a contract of service, or that
constitute raw materials, work in process, finished goods, returned goods, or
materials or supplies of any kind, nature or description used or consumed or to
be used or consumed in such Sotheby Entity’s business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
all supplies and embedded software. 


                    
“Investment Property” means all “investment property” as such term is
defined in the Code now owned or hereafter acquired by any Sotheby Entity,
wherever located, including (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Sotheby Entity,
including the rights of any Sotheby Entity to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts of any Sotheby
Entity; (iv) all commodity contracts of any Sotheby Entity; and (v) all
commodity accounts held by any Sotheby Entity. 


                    
“IRC” means the Internal Revenue Code of 1986 and all regulations
promulgated thereunder. 


                    
“IRS” means the Internal Revenue Service. 


                    
“Judgement Conversion Date” has the meaning ascribed to it in Section
1.19(a). 


                    
“Judgement Currency” has the meaning ascribed to it in Section
1.19(a). 


A-21 





                    
“L/C Issuer” has the meaning ascribed to it in Annex B.  


                    
“L/C Sublimit” has the meaning ascribed to it in Annex B.  


                    
“Lenders” means GE Capital, the other Lenders named on the signature pages of
the Agreement and, if any such Lender shall decide to assign all or any portion
of the Obligations, such term shall include any assignee of such Lender.  


                    
“Letter of Credit Fee” has the meaning ascribed to it in Annex B.  


                    
“Letter of Credit Obligations” means all outstanding obligations incurred by
Agent and Lenders at the request of Borrower Representative, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance of Letters of Credit by GE Capital or another L/C Issuer or the
purchase of a participation as set forth in Annex B with respect to any
Letter of Credit. The amount of such Letter of Credit Obligations shall equal
the maximum amount that may be payable at such time or at any time thereafter
by the Lenders thereupon or pursuant thereto.  


                    
“Letters of Credit” means standby letters of credit issued for the account of
any Borrower (and any Subsidiary thereof that may be a co-applicant on any such
Letter of Credit) by any L/C Issuer, and bankers’ acceptances issued by any
Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations.  


                    
“Letter-of-Credit Rights” means “letter-of-credit rights” as such term is
defined in the Code, now owned or hereafter acquired by any Sotheby Entity,
including rights to payment or performance under a letter of credit, whether or
not such Sotheby Entity, as beneficiary, has demanded or is entitled to demand
payment or performance.  


                    
“LIBOR Business Day” means a Business Day on which banks in the City of London
are generally open for interbank or foreign exchange transactions.  


                    
“LIBOR Loan” means any portion of the Revolving Loan bearing interest by reference
to a Dollar LIBOR Rate or a Sterling LIBOR Rate, as applicable.  


                    
“LIBOR Period” means, with respect to any LIBOR Loan, each period commencing on
a LIBOR Business Day selected by Borrower Representative pursuant to the
Agreement and ending one, two or three months thereafter, as selected by
Borrower Representative’s irrevocable notice to Agent as set forth in Section
1.5(e); provided, that the foregoing provision relating to LIBOR
Periods is subject to the following:  


	
  

 	
  

 
	
  

 	
           (a)          if
 any LIBOR Period would otherwise end on a day that is not a LIBOR Business
 Day, such LIBOR Period shall be extended to the next succeeding LIBOR
 Business Day unless the result of such extension would be to carry such LIBOR
 Period into another calendar month in which event such LIBOR Period shall end
 on the immediately preceding LIBOR Business Day; 

 
	
  

 	
  

 
	
  

 	
           (b)          any
 LIBOR Period that would otherwise extend beyond the Commitment Termination
 Date shall end two (2) LIBOR Business Days prior to such date; 

 



A-22 









	
  

 	
  

 
	
  

 	
           (c)          any
 LIBOR Period that begins on the last LIBOR Business Day of a calendar month
 (or on a day for which there is no numerically corresponding day in the
 calendar month at the end of such LIBOR Period) shall end on the last LIBOR
 Business Day of a calendar month; and 

 
	
  

 	
  

 
	
  

 	
           (d)          Borrower
 Representative shall select LIBOR Periods so that there shall be no more than
 5 separate LIBOR Loans in existence at any one time. 

 



                    “License”
means any Copyright License, Patent License, Trademark License or other license
of rights or interests now held or hereafter acquired by any Sotheby Entity. 


                    
“Lien” means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction). 


                    
“Liquidity Amount” means, as of any date of determination, the sum of
(a) the Aggregate Borrowing Availability as of such date and (b) the
Unrestricted Cash Amount as of such date. 


                    
 “Liquidity Test Period”
means the period (i) commencing on the initial date during the Conversion
Period on which Aggregate Borrowing Availability shall be less than $50,000,000
and (ii) continuing until the end of the Conversion Period. 


                    
 “Liquidity Test Period
Maximum Amount” means the aggregate outstanding principal balance of the
Revolving Loan as of the commencement of the Liquidity Test Period. 


                    
“Litigation” has the meaning ascribed to it in Section 3.13(a). 


                    
“Loan Account” has the meaning ascribed to it in Section 1.12. 


                    
“Loan Documents” means the Agreement, the Notes, the Collateral
Documents, the Contribution Agreement, the Master Standby Agreement, the
Auction Guaranty Side Letter, and all other agreements, instruments, documents
and certificates identified in the Closing Checklist executed and delivered to,
or in favor of, Agent or any Lenders and including all other fee letters,
pledges, powers of attorney, consents, assignments, contracts, notices, letter
of credit agreements and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Credit Party, or any employee of any
Credit Party, and delivered to Agent or any Lender in connection with the
Agreement or the transactions contemplated thereby. Any reference in the
Agreement or any other Loan Document to a Loan Document shall include all
appendices, exhibits or schedules thereto, and all amendments, restatements,
supplements or other modifications thereto, and shall refer to the Agreement or
such Loan Document as the same may be in effect at any and all times such
reference becomes operative. 


                    
“Loans” means the Revolving Loan and the Swing Line Loan. 


A-23 






                    “Mandatory
Cost” is described in Schedule 1.5.  


                    
“Margin Stock” has the
meaning ascribed to in Section 3.10.means “margin stock” as such term is defined in
Regulation T, U or X of the Federal Reserve Board. 


                    
“Master Standby Agreement” means the Master Agreement for Standby
Letters of Credit dated as of the Closing Date among Borrowers, as
Applicant(s), and GE Capital, as issuer. 


                    
“Material Adverse Effect” means a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of the
Sotheby Entities considered as a whole, (b) any Borrower’s ability to pay any
of the Loans or any of the other Obligations in accordance with the terms of
the Agreement, (c) the Collateral (including Works of Art securing repayment of
Art Loans) or Agent’s Liens, on behalf of itself and the other Secured Parties,
on the Collateral or the priority of such Liens, or (d) Agent’s or any Lender’s
rights and remedies under the Agreement and the other Loan Documents. 


                    
“Material Indebtedness Contracts” means, collectively, (a) the Senior
Note Indenture and the Senior Notes, (b) the Convertible Note Indenture and the
Convertible Notes, (c) the York Avenue Loan Agreement, and (d) any other
contract, agreement or other instrument to which any Sotheby Entity is a party
evidencing any Indebtedness or Guaranteed Indebtedness (other than the
Obligations) of such Sotheby Entity having a Dollar Equivalent in excess of
$10,000,000 in the aggregate (including (x) undrawn committed or available
amounts and (y) amounts owing to all creditors under any combined or syndicated
credit arrangements). 


                    
“Maximum Amount” means, as of any date of determination, an amount equal
to the Commitment of all Lenders as of such date. 


                    
“Maximum Distribution Amount” has the meaning assigned to it in Section
6.13(g). 


                    
“Maximum Lawful Rate” has the meaning assigned to it in Section
1.5(f). 


                    
“Multiemployer Plan” means a “multiemployer plan” as defined in Sections
3(37) or 4001(a)(3) of ERISA, and to which any Sotheby Entity or ERISA
Affiliate is making, is obligated to make or has made or been obligated to
make, contributions on behalf of participants who are or were employed by any
of them. 


                    
“New Lender” has the meaning ascribed to it in Section 1.15(a)(ix).



                    
“Non-Consignor Art Loan” means any Art Loan made by a Borrower with
respect to which the related Art Loan Debtor has not consigned any of the Works
of Art securing repayment of such Art Loan to the Borrower for sale. 


                    
“Non-Funding Lender” has the
meaning ascribed to it in Section 9.9(a)(iii). 


                    
“Non-Funding Lender” means
any Lender that has (a) failed to fund any payments required to be made by it
under the Loan Documents within two (2) Business Days after any such payment is
due (excluding expense and similar reimbursements that are subject to


A-24 






good faith disputes), (b) given written
notice (and Agent has not received a revocation in writing), to a Borrower,
Agent, any Lender, or any L/C Issuer or has otherwise publicly announced (and
Agent has not received notice of a public retraction) that such Lender believes
it will fail to fund payments or purchases of participations required to be
funded by it under the Loan Documents or one or more other syndicated credit
facilities, (c) failed to fund, and not cured, loans, participations, advances,
or reimbursement obligations under one or more other syndicated credit
facilities, unless subject to a good faith dispute, or (d) any Lender that has
(i) become subject to a voluntary or involuntary case under the Bankruptcy Code
or any similar bankruptcy laws, (ii) a custodian, conservator, receiver or
similar official appointed for it or any substantial part of such Person’s
assets, or (iii) made a general assignment for the benefit of creditors, been
liquidated, or otherwise been adjudicated as, or determined by any Governmental
Authority having regulatory authority over such Person or its assets to be,
insolvent or bankrupt, and for clause (d), and Agent has determined that such
Lender is reasonably likely to fail to fund any payments required to be made by
it under the Loan Documents. 


                    “Non-Sterling
Lender” shall mean each Lender designated in Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Lender as
a “Non-Sterling Lender”, unless such Lender shall have become a Sterling Lender
pursuant to Section 9.1(i). 


                    “Notes”
means, collectively, the Revolving Notes, the Fronting Lender Note and the
Swing Line Notes. 


                    “Notice
of Conversion/Continuation” has the meaning ascribed to it in Section
1.5(e). 


                    “Notice
of Revolving Credit Advance” has the meaning ascribed to it in Section
1.1(a). 


                    “Oatshare”
has the meaning ascribed to it in the preamble to the Agreement. 


                    “Oberon”
has the meaning ascribed to it in the preamble to the Agreement. 


                    “Obligation
Currency” has the meaning ascribed to it in Section 1.19(a). 


                    “Obligations”
means all loans, advances, debts, liabilities and obligations for the
performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or such
amounts are liquidated or determinable) owing by any Credit Party to Agent, any
Lender or any L/C Issuer, and all covenants and duties regarding such amounts,
of any kind or nature, present or future, whether or not evidenced by any note,
agreement, letter of credit agreement or other instrument, arising under the
Agreement or any of the other Loan Documents. This term includes all principal,
interest (including all interest that accrues after the commencement of any
case or proceeding by or against any Credit Party in bankruptcy, whether or not
allowed in such case or proceeding), Fees, expenses, attorneys’ fees and any
other sum chargeable to any Credit Party under the Agreement or any of the
other Loan Documents. This term does not include any Bank Product and Hedging
Obligations. 


A-25 





                    “Obligor”
has the meaning ascribed to it in Section 12.5. 


                    “O.E.C.D.”
means the Organisation for Economic Co-operation and Development as
contemplated by the Convention on the Organisation for Economic Co-operation
and Development of December 14, 1960, as amended from time to time. 


                    “OFAC”
means the U.S. Department of Treasury’s Office of Foreign Asset Control. 


                    “Overadvance”
has the meaning ascribed to it in Section 1.1(a)(iii). 


                    “Parent”
has the meaning ascribed to it in the preamble to the Agreement. 


                    “Participating
Member State” means any member state which adopts the euro unit of the
single currency pursuant to the Treaty of Rome. 


                    “Patent
License” means rights under any written agreement now owned or hereafter
acquired by any Sotheby Entity granting any right with respect to any invention
on which a Patent is in existence. 


                    “Patents”
means all of the following in which any Sotheby Entity now holds or hereafter
acquires any interest: (a) all letters patent of the United States or of any
other country, all registrations and recordings thereof, and all applications
for letters patent of the United States or of any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State, or any other country, and (b) all reissues, continuations, continuations
in part or extensions thereof. 


                    “PATRIOT
Act” means the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law
107-56) (The USA PATRIOT Act). 


                    “PBGC”
means the Pension Benefit Guaranty Corporation. 


                    “Pension
Plan” means a Plan described in Section 3(2) of ERISA. 


                    “Permitted
Art Loan Country” means (a) the United States of America, (b) England, (c)
Wales, and (d) any other country with respect to which Agent, in its sole
discretion in consultation with Lenders, shall have determined (and notified
the Borrowers in writing) that Works of Art securing repayment of an Art Loan
may be located in such country without causing such Works of Art to fail to
constitute Eligible Art Loan Collateral pursuant to clause (c) of the definition
thereof, it being understood that Agent may withdraw such determination at
any time in its sole discretion with respect to any country (other than the
United States of America, England, and Wales) and thereafter such country shall
not constitute a Permitted Art Loan Country. 


                    “Permitted
Consignment” means a “consignment” (as defined in Section 9-102(a)(20) of
the UCC) governed under the laws of the United States of America (or any State 


A-26 





thereof) of
Art Inventory by a Borrower to a Person, with respect to which consignment,
such Borrower has taken all of the following actions: 


                    (a)          conducted
UCC searches against such Person in all applicable jurisdictions; 


                    (b)          filed a UCC-1
financing statement in the applicable jurisdiction, naming such Borrower as
consignor and such Person as consignee, and providing an adequate description
of such Art Inventory for the collateral description; 


                    (c)          if applicable,
taken all actions required pursuant to, and otherwise satisfied the
requirements set forth in, Section 9-324(b) of the UCC in order to maintain a
security interest in such Art Inventory that has priority over all conflicting
security interests in such Art Inventory; 


                    (d)          provided
evidence to Agent, in form and substance reasonably satisfactory to Agent, of
such Borrower’s completion of the actions described in clauses (a) through (c),
as applicable, of this definition; and 


                    (e)          taken any
additional actions reasonably requested by Agent from time to time with respect
to such Art Inventory within ten (10) Business Days (or such later date as
Agent shall consent to in writing) of Agent’s request therefor in order to
protect the interests of Agent therein under all applicable laws. 


                    “Permitted
Convertible Note Transactions” means any of the following:  


	
  

 	
  

 
	
  

 	
           (a)
          upon the conversion
of any Convertible Notes in accordance with their terms, (i) the issuance by
Parent of common stock solely to the extent required by the Convertible Notes
Indenture, or (ii) the issuance by Parent of common stock and payment by
Parent of cash to the holders of such Convertible Notes in an aggregate
amount not in excess of the applicable conversion obligation; provided, that
the amount of cash payable under the foregoing clause (ii) shall not exceed
an amount equal to the aggregate outstanding principal amount of such
Convertible Notes plus the amount received by Parent from the Convertible
Note Hedge Counterparties upon such conversion;  

 
	
  

 	
  

 
	
  

 	
           (b)
           the issuance by
 Parent of common stock to the Convertible Note Hedge Counterparties (i)
 pursuant to the terms of the Convertible Note Warrants and (ii) to the extent
 required by the Convertible Note Hedge Agreements; and 

 
	
  

 	
  

 
	
  

 	
           (c)
            (i) cash
 payments by Parent to the Convertible Note Hedge Counterparties upon any
 termination of the Convertible Note Warrants in an amount not in excess of
 that required by the Convertible Note Warrants and (ii) cash payments by
 Parent to the Convertible Note Hedge Counterparties upon termination of the
 Convertible Note Hedge Agreements; and 

 
	
  

 	
  

 
	
  

 	
           (d)
           repayment of the
 outstanding principal balance of the Convertible Notes in cash on the
 scheduled maturity date therefor or otherwise in accordance with Section
 6.3(b). 

 






A-27 





                    “Permitted Encumbrances” means the following
encumbrances: (a) Liens for taxes or assessments or other governmental Charges
not yet due and payable or which are being contested in accordance with Section 5.2(b); (b) pledges or deposits of money
securing statutory obligations under workmen’s compensation, unemployment
insurance, social security or public liability laws or similar legislation
(excluding Liens under ERISA); (c) pledges or deposits of money securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which any Sotheby Entity is a party as lessee made in the ordinary course of
business; (d) inchoate and unperfected workers’, mechanics’ or similar liens
arising in the ordinary course of business, so long as such Liens attach only
to Equipment, Fixtures and/or Real Estate; (e) carriers’, warehousemen’s,
suppliers’ or other similar possessory liens arising in the ordinary course of
business and securing liabilities in an outstanding aggregate amount not in
excess of a Dollar Equivalent of $2,500,000 at any time, so long as such Liens
attach only to Inventory; (f) deposits securing, or in lieu of, surety, appeal
or customs bonds in proceedings to which any Sotheby Entity is a party; (g) any
attachment or judgment lien not constituting an Event of Default under Section 8.1(i); (h) zoning restrictions,
easements, licenses, or other restrictions on the use of any Real Estate or
other minor irregularities in title (including leasehold title) thereto, so long
as the same do not materially impair the use, value, or marketability of such
Real Estate; (i) any Lien in favor of a consignor on a segregated deposit
account established for the benefit of such consignor and into which only
proceeds of Works of Art consigned by such consignor to a Sotheby Entity for
sale (including such Sotheby’s Entity’s commissions on such sales) are
deposited; provided, that if such consignor
is an Art Loan Debtor, such Lien shall constitute a “Permitted Encumbrance”
only if an agreement among the applicable Borrower, such consignor and the
applicable account bank expressly states that amounts received in such deposit
account shall be transferred first, without any further consent of any Person,
to the applicable Borrower until the related Art Loan is repaid in full prior
to any such amounts being transferred to such consignor; (j) presently existing
or hereafter created Liens in favor of Agent, on behalf of Secured Parties,
pursuant to the Loan Documents; (k) other than with respect to any Blocked
Account or Cash Collateral Account, any lien or banker’s right of set-off or
combination of accounts arising by operation of law or in accordance with
standard terms of banking; (l) Liens expressly permitted under clauses (c) and (d)
of Section 6.7 of the Agreement, and (m)
Liens arising in the ordinary course of business in favor of consignors
securing Works of Art of such consignors that are consigned to a Sotheby Entity
for sale.


                    “Permitted Inventory Country” means (a) the United
States of America, (b) England, (c) Wales, and (d) any other country with
respect to which Agent, in its sole discretion in consultation with Lenders,
shall have determined (and notified the Borrowers in writing) that Art
Inventory may be located in such country without causing such Art Inventory to
fail to constitute Eligible Art Inventory pursuant to Section 1.7(c), it
being understood that Agent may withdraw such determination at any time in its
sole discretion with respect to any country (other than the United States,
England and Wales) and thereafter such country shall not constitute a Permitted
Inventory Country.


                    “Person” means any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public
benefit corporation, other entity or government (whether federal, state,
county, city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).


A-28





                    “Personal
Data” shall have the same meaning set forth in the Data Protection Laws. 


                    “Plan” means, at any time, an “employee benefit
plan”, as defined in Section 3(3) of ERISA, that any Sotheby Entity or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to or
has maintained, contributed to or had an obligation to contribute to at any
time within the past 7 years on behalf of participants who are or were employed
by any Sotheby Entity or ERISA Affiliate. “Plan” shall not include any pension
or retirement plan or arrangement operating in the United Kingdom.


                    “Prior Agent” means Bank of America, N.A., in its
capacity as administrative agent under the Prior Credit Agreement.


                    “Prior Credit Agreement” means that certain
Amended and Restated Credit Agreement, dated as of November 14, 2005, among
Parent, the Company, Oatshare, Sotheby’s U.K., the Prior Lenders and the Prior
Agent, as amended from time to time.


                    “Prior Lender Obligations” means the obligations
of Parent and its Subsidiaries arising under or in connection with the Prior
Credit Agreement.


                    “Prior Lenders” shall mean the financial
institutions party to the Prior Credit Agreement as lenders or as issuing bank.


                    “Proceeds” means “proceeds,” as such term is
defined in the Code, including (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Sotheby Entity from time to time
with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Sotheby Entity from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Sotheby Entity against third parties (i) for past, present or future infringement
of any Patent or Patent License, or (ii) for past, present or future
infringement or dilution of any Copyright, Copyright License, Trademark or
Trademark License, or for injury to the goodwill associated with any Trademark
or Trademark License, (d) any recoveries by any Sotheby Entity against third
parties with respect to any litigation or dispute concerning any of the
Collateral including claims arising out of the loss or nonconformity of,
interference with the use of, defects in, or infringement of rights in, or
damage to, Collateral, (e) all amounts collected on, or distributed on account
of, other Collateral, including dividends, interest, distributions and
Instruments with respect to Investment Property and pledged Stock, and (f) any
and all other amounts, rights to payment or other property acquired upon the
sale, lease, license, exchange or other disposition of Collateral and all
rights arising out of Collateral.


                    “Prohibited Person” means any Person:


	
  

 	
  

 
	
  

 	
           (a)          listed
 in the Annex to, or otherwise subject to the provisions of, the Executive
 Order;

 



A-29









	
  

 	
  

 
	
  

 	
           (b)          that
 is owned or controlled by, or acting for or on behalf of, any person or
 entity that is listed in the Annex to, or is otherwise subject to the
 provisions of, the Executive Order; 

 
	
  

 	
  

 
	
  

 	
           (c)          with
 whom Agent or any Lender is prohibited from dealing or otherwise engaging in
 any transaction by any terrorism or money laundering legal requirements,
 including the PATRIOT Act and the Executive Order;

 
	
  

 	
  

 
	
  

 	
           (d)          that
 commits, threatens or conspires to commit or supports “terrorism” as defined
 in the Executive Order;

 
	
  

 	
  

 
	
  

 	
           (e)          that
 is named as a “specifically designated national (SDN)” on the most current
 list published by OFAC at its official website
 (http://www.treas.gov.ofac/t11sdn.pdf) or at any replacement website or other
 replacement official publication of such list or is named on any other U.S.
 or foreign government or regulatory list issued after September 11, 2001;

 
	
  

 	
  

 
	
  

 	
           (f)          that
 is covered by IEEPA, OFAC or any other law, regulation or executive order
 relating to the imposition of economic sanctions against any country, region
 or individual pursuant to United States law or United Nations resolution; or

 
	
  

 	
  

 
	
  

 	
           (g)          that
 is an affiliate (including any principal, officer, immediate family member or
 close associate) of a person or entity described in one or more of clauses (a) – (f)
 of this definition.

 



                    “Projections” means Parent’s forecasted
consolidated: (a) balance sheets; (b) profit and loss statements; and (c) cash
flow statements, in each case prepared on a basis consistent with the
historical Financial Statements of Parent, together with appropriate supporting
details and a statement of underlying assumptions.


                    “Pro Rata Share” means with respect to all matters
relating to any Lender, (A) the percentage obtained by dividing (i) the
Commitment of that Lender by (ii) the aggregate Commitments of all Lenders, and
(B) on and after the Commitment Termination Date, the percentage obtained by
dividing (i) the sum of (a) Dollar Equivalent of the aggregate outstanding
principal balance of the Loans held by that Lender and (b) in the case of a
Non-Sterling Lender, the Dollar Equivalent of the aggregate outstanding
principal balance of the participation interests purchased by such Lender from
the Fronting Lender by (ii) the sum of (a) the Dollar Equivalent of the
outstanding principal balance of the Loans held by all Lenders and (b) the
Dollar Equivalent of the aggregate outstanding principal balance of the
participation interests purchased by all Non-Sterling Lenders from the Fronting
Lender, in each case as any such percentages may be adjusted by assignments
permitted pursuant to Section 9.1 or other
adjustments to the Commitments pursuant to the Agreement.


                    “Protected Party” means a Lender which is or will
be, for or on account of Tax, subject to any liability or required to make any
payment in relation to a sum received or receivable (or any sum deemed for the
purposes of Tax to be received or receivable) under any Loan Document.


A-30





                    “Qualified Assignee” means (a) any Lender, any Affiliate
of any Lender and, with respect to any Lender that is an investment fund that
invests in commercial loans, any other investment fund that invests in
commercial loans and that is managed or advised by the same investment advisor
as such Lender or by an Affiliate of such investment advisor, and (b) any
commercial bank, savings and loan association or savings bank or any other
entity which is an “accredited investor” (as defined in Regulation D under the
Securities Act of 1933) which extends credit or buys loans as one of its
businesses, including insurance companies, mutual funds, lease financing
companies and commercial finance companies, in each case, which has a rating of
BBB or higher from S&P and a rating of Baa2 or higher from Moody’s at the
date that it becomes a Lender and which, through its applicable lending office,
is capable of lending to Borrowers without the imposition of any withholding or
similar taxes; provided, that, except as
otherwise agreed by Agent, no Person proposed to become a Lender after the
Closing Date and determined by Agent to be acting in the capacity of a vulture
fund or distressed debt purchaser shall be a Qualified Assignee, and, unless
otherwise agreed by Agent, no Person or Affiliate of such Person proposed to
become a Lender after the Closing Date and that holds Senior Notes, Convertible
Notes, or Stock issued by any Sotheby Entity shall be a Qualified Assignee.


                    “Qualifying Lender” means:


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (i)

 	
 in respect
 of a payment made by a U.K. Credit Party, a Lender which is beneficially
 entitled to interest or other amounts payable to that Lender in respect of an
 advance under this Agreement or the other Loan Documents and is:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (A)

 	
 a Lender:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (1)

 	
 which is a
 bank (as defined for the purpose of section 879 of the Income Tax Act 2007)
 making an advance under this Agreement or the other Loan Documents; or

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (2)

 	
 in respect
 of an advance made under this Agreement by a person that was a bank (as
 defined for the purpose of section 879 of the Income Tax Act 2007) at the
 time that that advance was made,

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 and which is
 within the charge to United Kingdom corporation tax as respects any payments
 of interest made in respect of that advance; or

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (B)

 	
 a Lender
 which is:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (1)

 	
 a company
 resident in the United Kingdom for United Kingdom tax purposes;

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (2)

 	
 a
 partnership each member of which is:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 (a)

 	
 a company
 resident in the United Kingdom for United Kingdom tax purposes; or

 



A-31









	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 (b)

 	
 a company
 not so resident in the United Kingdom which carries on a trade in the United
 Kingdom through a permanent establishment and which brings into account in
 computing its chargeable profits (within the meaning of section 19 of the
 Corporation Tax Act 2009) the whole of any share of interest (or other
 amounts) payable in respect of that advance that falls to it by reason of
 Part 17 of the Corporation Tax Act 2009;

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (3)

 	
 a company
 not so resident in the United Kingdom which carries on a trade in the United
 Kingdom through a permanent establishment and which brings into account
 interest payable in respect of that advance in computing its chargeable
 profits (within the meaning of section 19 of the Corporation Tax Act 2009);
 or

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (C)

 	
 a Treaty
 Lender.

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (ii)

 	
 in respect
 of a payment made by a U.S. Credit Party which would be required under the
 Code to pay United States source interest in connection with this Agreement
 or the other Loan Documents, a Lender which is:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (A)

 	
 created or
 organized under the laws of the United States of America or of any state
 (including the District of Columbia) thereof; provided, that such
 Lender has delivered (in a timely fashion and without undue delay) to
 Borrower Representative and Agent two original copies of IRS Form W-9 (or
 successor form) properly prepared and executed;

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (B)

 	
 a Treaty
 Lender with respect to the United States of America that is entitled to
 receive payments under any Loan Document without deduction or withholding of
 any United States federal income Taxes, provided such Lender has delivered
 (in a timely fashion and without undue delay) to Borrower Representative and
 Agent two duly completed original copies of IRS Form W-8BEN (or any successor
 form) providing that it is a resident of a foreign country with which the
 United States of America has an income tax treaty and claiming eligibility
 for benefits of an income tax treaty to which the United States of America is
 a party and a complete exemption from U.S. withholding tax under such treaty;
 or

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (C)

 	
 entitled to
 receive payments under any Loan Document without deduction or withholding of
 any United States federal income Taxes as a result of such payments being
 effectively connected with the conduct by such Lender of a trade or business
 within the United States of America, provided such Lender has delivered (in a
 

 



A-32









	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 timely
 fashion and without undue delay) to the Credit Party Representative and Agent
 two original copies of either (1) IRS Form W-8ECI (or any successor form) certifying
 that the payments made pursuant to any Loan Document are effectively
 connected with the conduct by that Lender of a trade or business within the
 United States of America or (2) such other applicable form prescribed by the
 IRS certifying as to such Lender’s entitlement to exemption from United
 States withholding tax with respect to all payments to be made to such Lender
 under any Loan Document.

 



                    “Qualified Plan” means a Pension Plan that is
intended to be tax qualified under Section 401(a) of the IRC.


                    “Rate Management Transaction” means any
transaction (including an agreement with respect thereto) now existing or
hereafter entered by a Sotheby Entity that is a rate swap, basis swap, forward
rate transaction, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of these transactions) or any combination thereof, whether linked to one or
more interest rates, foreign currencies, or equity prices.


                    “Real Estate” has the meaning ascribed to it in Section 3.6.


                    “Refinancing” means the repayment in full by
Parent and the applicable Subsidiaries of Parent of the Prior Lender
Obligations on the Closing Date.


                    “Refunded Dollar Swing Line Loan” has the meaning
ascribed to it in Section 1.1(b)(iii).


                    “Refunded Sterling Swing Line Loan” has the
meaning ascribed to it in Section 1.1(b)(iv).


                    “Related Person” has the meaning ascribed to it in
Annex C.


                    “Relationship Bank” has the meaning ascribed to it
in Annex C.


                    “Release” means any release, threatened release,
spill, emission, leaking, pumping, pouring, emitting, emptying, escape,
injection, deposit, disposal, discharge, dispersal, dumping, leaching or
migration of Hazardous Material in the indoor or outdoor environment.


                    “Replacement Lender” has the meaning ascribed to
it in Section 1.16(d).


                    “Requisite Lenders” means Lenders having, in the
aggregate, (a) more than 50% of the Commitments of all Lenders, or (b) if the
Commitments have been terminated, interests in the Outstandings constituting
greater than 50% of (i) the aggregate outstanding amount of all Loans held by
the Lenders and (ii) the aggregate outstanding amount of all participation
interests purchased by all Non-Sterling Lenders from the Fronting Lender.


A-33





                    “Reserves” means the Due-to-Consignor Reserve and
such other reserves against Eligible Art Loans, Eligible Art Inventory, U.S.
Borrowing Availability or U.K. Borrowing Availability that Agent may, in its
sole reasonable credit judgment, establish from time to time. Without limiting
the generality of the foregoing, Reserves established to ensure the payment of
accrued Interest Expenses, Indebtedness, Bank Product and Hedging Obligations
or other scheduled liabilities shall be deemed to be a reasonable exercise of
Agent’s credit judgment. For purposes of clarity, Agent will not be required at
any time to obtain any approval from any Sotheby Entity, any Lenders or any
other Person(s) for the establishment, modification or elimination of any
Reserves (other than the Due-to-Consignor Reserve).


                    “Restricted Payment” means, with respect to any
Sotheby Entity (a) the declaration or payment of any dividend or the incurrence
of any liability to make any other payment or distribution of cash or other
property or assets in respect of Stock; (b) any payment on account of the purchase,
redemption, defeasance, sinking fund or other retirement of such Sotheby
Entity’s Stock or any other payment or distribution made in respect thereof,
either directly or indirectly; (c) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire Stock of such Sotheby Entity now or
hereafter outstanding; (d) any payment of a claim for the rescission of the
purchase or sale of, or for material damages arising from the purchase or sale
of, any shares of such Sotheby Entity’s Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (e) any payment, loan, contribution, or other transfer
of funds or other property to any Stockholder of Parent other than (i) payments
of compensation in the ordinary course of business to Stockholders who are
employees of such Person and (ii) payments made in connection with the
consignment of property for sale in the ordinary course of business; and (f)
any payment of management fees (or other fees of a similar nature) by a
Borrower or Guarantor to any Stockholder of such Person or its Affiliates that
is not a Borrower or Guarantor unless (i) such fees are paid in the ordinary
course of business of such Borrower or Guarantor, as applicable, and (ii) such
payment is not made following the occurrence and during the continuance of an
Event of Default.


                    “Retiree Welfare Plan” means, at any time, a
welfare plan (within the meaning of Section 3(1) of ERISA) that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant’s termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC or other
similar state law and at the sole expense of the participant or the beneficiary
of the participant.


                    “Revolving Credit Advance” means either a Dollar
Revolving Credit Advance or a Sterling Revolving Credit Advance.


                    “Revolving Loan” and “Revolving
Loan Outstandings” mean, at any time, the sum of (i) the Dollar
Equivalent of the aggregate amount of Revolving Credit Advances outstanding to
the Borrowers plus (ii) the Dollar
Equivalent of the aggregate Letter of Credit Obligations incurred on behalf of
the Borrowers. Unless the context otherwise requires, references to the
outstanding principal balance of the Revolving Loan shall include the
outstanding balance of Letter of Credit Obligations.


                    “Revolving Note” has the meaning ascribed to it in
Section 1.1(a)(ii).


A-34





                    “Secured Obligations” means, collectively, (i) the
Obligations and (ii) the Bank Product and Hedging Obligations.


                    “Secured Parties” means the holders of the Secured
Obligations from time to time.


                    “Senior Note Indenture” means that certain
Indenture, dated as of June 17, 2008, governing the Senior Notes, as amended,
restated, supplemented or otherwise modified from time to time.


                    “Senior Notes” means Parent’s 7.75% Senior Notes
due 2015, in an aggregate principal amount outstanding on the date hereof of
$128,250,000, issued pursuant to the Senior Note Indenture.


                    “SFS California” has the meaning ascribed to it in
the preamble to the Agreement.


                    “SFS Inc.” has the meaning ascribed to it in the
preamble to the Agreement.


                    “SFS Ltd.” has the meaning ascribed to it in the
preamble to the Agreement.


                    “Software” means all “software” as such term is
defined in the Code, now owned or hereafter acquired by any Sotheby Entity,
other than software embedded in any category of Goods, including all computer
programs and all supporting information provided in connection with a
transaction related to any program.


                    “Solvent” means (i) with respect to any Person
other than a Foreign Subsidiary organized under the laws of England, on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including contingent liabilities,
of such Person; (b) the present fair salable value of the assets of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts as they become absolute and matured; (c) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay as such debts and liabilities
mature; and (d) such Person is not engaged in a business or transaction, and is
not about to engage in a business or transaction, for which such Person’s
property would constitute an unreasonably small capital and (ii) with respect
to any Foreign Subsidiary organized under the laws of England, on a particular
date, (a) such Foreign Subsidiary is unable, or has admitted its inability, to
pay its debts as they fall due, has suspended making payments on any of its debts
or, by reason of actual or anticipated financial difficulties, has commenced
negotiations with one or more of its creditors with a view to rescheduling any
of its indebtedness, (b) the value of the assets of such Foreign Subsidiary is
less than its liabilities (taking into account contingent and prospective
liabilities) or (c) a moratorium has been declared in respect of any
indebtedness of such Foreign Subsidiary. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can be reasonably be expected
to become an actual or matured liability.


                    “Sotheby Entity” means any Borrower or any
Subsidiary of any Borrower, and “Sotheby Entities”
shall mean all such Persons, collectively.


A-35





                    “Sotheby’s
Deferred Benefits Compensation Plan” means the Sotheby’s Deferred Benefits
Compensation Plan, dated as of January 1, 2007.


                    “Sotheby’s, Inc.” has the meaning ascribed to it
in the preamble to the Agreement.


                    “Sotheby’s U.K.” has the meaning ascribed to it in
the preamble to the Agreement.


                    “SPTC
Delaware” means SPTC Delaware LLC, a Delaware limited liability company,
and each other “Eligible SPV” (as such term is defined in the SPTC Delaware
Trademark License Agreement).


                    “SPTC
Delaware Trademark License Agreement” means the Trademark License Agreement
dated as of February 17, 2004 and entered into by and among SPTC, Inc., as
licensor, Parent, as guarantor, Monticello Licensee Corporation, as licensee,
and Cendant Corporation, as guarantor.


                    “Sterling” or “£”
means the lawful currency of Great Britain and Northern Ireland.


                    “Sterling Equivalent” means, with respect to any
amount denominated in Sterling, such amount of Sterling, and with respect to
any amount denominated in a currency other than Sterling, the amount of
Sterling, as of any date of determination, into which such other currency (as
the context may require) can be converted in accordance with Section 1.18.


                    “Sterling Index Rate” means, for any day, the
higher of (a) a floating rate equal to the rate publicly quoted from time to
time by The Wall Street Journal as the
“prime rate” for Britain (or, if The Wall Street
Journal ceases quoting a rate of the type described, the prime rate
for Sterling generally posted by Britain’s largest banks) and (b) 3.001.00%
per annum. Each change in any interest rate provided for in the Agreement based
upon the Sterling Index Rate shall take effect at the time of such change in
the Sterling Index Rate.


                    “Sterling Lender” shall mean each Lender (i)
designated in Annex J to the Agreement or
in the most recent Assignment Agreement executed by such Lender as a “Sterling
Lender” or (ii) that shall have become a Sterling Lender pursuant to Section 9.1(i).


                    “Sterling
LIBOR Rate” means for each LIBOR Period with respect to a LIBOR Loan
denominated in Sterling, the highest of (a) the offered rate per annum
for deposits of Sterling for such LIBOR Period that appears on Reuters Screen
LIBOR01 Page as of 11:00 A.M. (London, England time) two (2) Business Days
prior to the first day in such LIBOR Period, (b) if such LIBOR Period is for
a duration less than three months, the offered rate per annum for deposits of
Sterling for a three-month LIBOR Period commencing on the first day in such
LIBOR Period that appears on Reuters Screen LIBOR01 Page as of 11:00 A.M.
(London, England time) two (2) Business Days prior to the first day in such
LIBOR Period and (c) 2.00% per annum. If any. If the
offered rate described in the foregoing clause (a) or (b)sentence
does not exist, such rate will be the rate of interest per annum, as determined
by Agent (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which
deposits of Sterling in immediately available funds are offered at 11:00 A.M.
(London, England time) two (2) Business Days prior to 


A-36





the first day
in such LIBOR Period by major financial institutions reasonably satisfactory to
Agent in the London interbank market for a LIBOR Period of the applicable duration
for the applicable principal amount on such date of determination.


                    “Sterling Revolving Credit Advance” has the
meaning ascribed to it in Section 1.1(a)(i).


                    “Sterling Subfacility Limit” means $50,000,000, as
such amount may be reduced pursuant to Section 1.3(a).


                    “Stock” means all shares, options, warrants,
general or limited partnership interests, membership interests or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other “equity security” (as such
term is defined in Rule 3a11 1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934).


                    “Stockholder” means, with respect to any Person,
each holder of Stock of such Person.


                    “Subsidiary” means, with respect to any Person, (a)
any corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of 50% or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries of
such Person shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than 50% or of which
any such Person is a general partner or may exercise the powers of a general
partner. Unless the context otherwise requires, each reference to a Subsidiary
shall be a reference to a Subsidiary of a Borrower. Notwithstanding the
foregoing, the York Avenue Owner shall not be deemed to be a Subsidiary of
Parent or any of its Subsidiaries for purposes of this Agreement other than
with respect to Section 4, Section 6.10, Sections 8.1(e), (g),
(h) and (i) and Annex E and Annex G.


                    “Supermajority Lenders” means Lenders having (a)
75.0% or more of the Commitments of all Lenders, or (b) if the Commitments have
been terminated, interests in the Outstandings constituting 75.0% or more of
(i) the aggregate outstanding amount of the Loans held by the Lenders and (ii)
the aggregate outstanding amount of all participation interests purchased by
all Non-Sterling Lenders from the Fronting Lender.


                    “Supporting Obligations” means all “supporting
obligations” as such term is defined in the Code, including letters of credit
and guaranties issued in support of Accounts, Chattel Paper, Documents, General
Intangibles, Instruments, or Investment Property.


                    “Swing Line Advance” has the meaning ascribed to
it in Section 1.1(b)(i).


A-37






                    “Swing Line Availability” means, as of any date of
determination, the least of (a) the Swing Line Commitment, (b) the Maximum
Amount minus the aggregate Revolving Loan
then outstanding and (c) an amount equal to (i) the U.S. Borrowing Base as of
such date minus (ii) the aggregate
outstanding principal balance of the Revolving Credit Advances made to the U.S.
Borrowers as of such date minus (iii) the
Dollar Equivalent of the aggregate Letter of Credit Obligations incurred on
behalf of the U.S. Borrowers as of such date.


                    “Swing Line Commitment” means, as to the Swing
Line Lender, the commitment of the Swing Line Lender to make Swing Line
Advances as set forth on Annex J to the
Agreement, which commitment constitutes a subfacility of the Commitment of the
Swing Line Lender.


                    “Swing Line Lender” means GE Capital.


                    “Swing Line Loan” means, as the context may
require, at any time, the aggregate amount of Swing Line Advances outstanding
to any Borrower or to all Borrowers.


                    “Swing Line Note” has the meaning ascribed to it
in Section 1.1(b)(ii).


                    “Swiss Franc” means the lawful currency of
Switzerland.


                    “Tax” means taxes, levies, imposts, deductions,
Charges or withholdings imposed by any Governmental Authority, and all
liabilities with respect thereto.


                    “Tax Confirmation” means a confirmation by a
Lender that the person beneficially entitled to interest or other amounts
payable to that Lender under this Agreement or the other Loan Documents is:


	
  

 	
  

 
	
  

 	
           (a)          a
 company resident in the United Kingdom for United Kingdom tax purposes;

 
	
  

 	
  

 
	
  

 	
           (b)          a
 partnership each member of which is (i) a company so resident in the United
 Kingdom or (ii) a company not so resident in the United Kingdom which carries
 on a trade in the United Kingdom through a permanent establishment and which
 brings into account in computing its chargeable profits (within the meaning
 of section 19 of the Corporation Tax Act 2009) the whole of any share of that
 interest or other amount payable that falls to it by reason of Part 17 of the
 Corporation Tax Act 2009; or

 
	
  

 	
  

 
	
  

 	
           (c)          a
 company not so resident in the United Kingdom which carries on a trade in the
 United Kingdom through a permanent establishment and which brings into
 account that interest or other amount payable in computing the chargeable
 profits (within the meaning of section 19 of the Corporation Tax Act 2009) of
 that company.

 



                    “Tax Credit” means a credit against, relief or
remission for, or repayment of, any Tax.


                    “Tax Deduction” means a deduction or withholding
for or on account of Tax from a payment under any Loan Document.


A-38





                    “Tax Payment” means either the increase in a
payment made by a Credit Party to a Lender under Section
1.15(a) or a payment under Section 1.15(b).


                    “Termination Date” means the date on which (a) the
Loans have been indefeasibly repaid in full, (b) all other Obligations under
the Agreement and the other Loan Documents have been completely discharged, (c)
all Letter of Credit Obligations have been cash collateralized, canceled or
backed by standby letters of credit in accordance with Annex
B, and (d) the Commitment Termination Date shall have occurred.


                    “Theta” has the meaning ascribed to it in the
preamble to the Agreement.


                    “Title IV Plan” means a Pension Plan (other than a
Multiemployer Plan), that is subject to Title IV of ERISA or Section 412 of the
IRC, and that any Sotheby Entity or ERISA Affiliate maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or were
employed by any of them.


                    “Trademark License” means rights under any written
agreement now owned or hereafter acquired by any Sotheby Entity granting any
right to use any Trademark.


                    “Trademark Security Agreements” means the
Trademark Security Agreements made in favor of Agent, on behalf of Lenders, by
each applicable Credit Party.


                    “Trademarks” means all of the following now owned
or hereafter existing or adopted or acquired by any Sotheby Entity: (a) all
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles
of like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill
associated with or symbolized by any of the foregoing.


                    “Transfer
Account” has the meaning ascribed thereto in Annex
C.


                    “Treaty” has the meaning ascribed to it in the
definition of “Treaty State”.


                    “Treaty Lender” means a Lender which:


	
  

 	
  

 
	
  

 	
           (a)          is
 treated as a resident of a Treaty State for the purposes of a Treaty;

 
	
  

 	
  

 
	
  

 	
           (b)          in
 the case of a U.S. source interest payment made by a U.S. Credit Party, is
 the beneficial owner of the payment within the meaning of the income tax
 treaty between the United States and the country of the Lender’s residence
 referred to in clause (a) above and meets the requirement of the
 provisions dealing with limitation on benefits if such treaty contains such a
 provision; and

 



A-39









	
  

 	
  

 
	
  

 	
           (c)          does
 not carry on a business in the jurisdiction in which the applicable Credit
 Party is resident through a permanent establishment with which that Lender’s
 participation in the Loans is effectively connected.

 



                    “Treaty of Rome” means the treaty establishing the
European Community being the Treaty of Rome as amended from time to time.


                    “Treaty State” means a jurisdiction having a
double taxation agreement (a “Treaty”) with
the United Kingdom or the United States of America (as the case may be) which
makes provision for full exemption from tax imposed by the United Kingdom or,
as the case may be, the United States of America, on interest.


                    “UCC” means the Uniform Commercial Code as in
effect from time to time in each applicable jurisdiction.


                    “U.K. Borrowers” has the meaning ascribed to it in
the preamble to the Agreement.


                    “U.K. Borrowing Availability” means, as of any
date of determination, the lesser of (a) an amount equal to (i) the Maximum
Amount minus (ii) the aggregate Revolving
Loan then outstanding minus (iii) the
aggregate Swing Line Loan then outstanding and (b)(i) the lesser of (x) the
Sterling Subfacility Limit and (y) the U.K. Borrowing Base as of such date minus (ii) the Dollar Equivalent of the aggregate
outstanding principal balance of the Revolving Credit Advances and Swing Line
Advances made to U.K. Borrowers as of such date minus
(iii) the Dollar Equivalent of the aggregate Letter of Credit Obligations
incurred for the benefit of the U.K. Borrowers as of such date.


                    “U.K. Borrowing Base” means, as of any date of
determination, an amount equal to (a) 85% of the Available U.K. Art Loan
Balance as of such date plus (b) the U.K. Eligible Art Inventory
Component as of such date plus (c) the U.K. CNTA Component as of such
date minus (d) Reserves established by Agent at such time.


                    “U.K.
CNTA Component” means, as of any date of determination, an amount equal to
the lesser of (i) 15% of Consolidated Net Tangible Assets as of the end of the
Fiscal Month preceding the last Fiscal Month for which Financial Statements
were required to be delivered, and (ii) $20,000,000, or such lower amount as
shall be specified by the Borrower Representative in the most recent Borrowing
Base Certificate.


                    “U.K. Collateral Documents” means the deeds of
charge and charges over shares executed by the U.K. Credit Parties on the
Closing Date, all Local Law Collateral Documents in respect of the Stock of
First-Tier Foreign CFC Subsidiaries that are U.K. Subsidiaries, and all similar
agreements entered into by the U.K. Credit Parties guaranteeing payment of the
Obligations of the U.K. Borrowers, or granting a Lien upon property as security
for payment of the Secured Obligations of the U.K. Credit Parties.


                    “U.K. Credit Parties” means the U.K. Borrowers and
the U.K. Subsidiary Guarantors.


A-40





                    “U.K.
Eligible Art Inventory Component” means, as of any date of determination,
an amount equal to the lesser of (i) 30% of the value of Eligible Art Inventory
of the U.K. Borrowers as of such date, valued at the lower of cost and market
value (determined in accordance with GAAP), and (ii) $50,000,000, or such lower
amount as shall be specified by the Borrower Representative in the most recent
Borrowing Base Certificate.


                    “U.K. Non-Bank Lender” means where a Lender
becomes a party to this Agreement after the Closing Date, a Lender that gives a
Tax Confirmation in the Assignment Agreement that it executes on becoming a
party to this Agreement.


                    “U.K. Pension Plans” has the meaning ascribed to
it in Section 3.12(c).


                    “U.K. Subsidiary Guarantors” means each Subsidiary
of Parent organized under the laws of England that is not a U.K. Borrower or an
Immaterial Subsidiary.


                    “U.K. Termination Date” means the date on which
(i) all Loans to the U.K. Borrowers have been indefeasibly repaid in full, (b)
all other Obligations of the U.K. Borrowers have been completely discharged,
(c) all Letter of Credit Obligations incurred on behalf of the U.K. Borrowers
have been cash collateralized, canceled or backed by standby letters of credit
in accordance with Annex B and (d) the
Commitment Termination Date shall have occurred.


                    “Unfunded Pension Liability” means, at any time,
the aggregate amount, if any, of the sum of (a) the amount by which the present
value of all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for a period of
five (5) years following a transaction which might reasonably be expected to be
covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that
could be avoided by any Sotheby Entity or any ERISA Affiliate as a result of
such transaction.


                    “Unhedged U.K. Art Loan” means an Eligible Art
Loan owned by a U.K. Borrower (i) that is denominated in Dollars, Canadian
Dollars, Euros or Swiss Francs and (ii) unless Agent shall otherwise agree,
with respect to which such U.K. Borrower shall not have entered into a Rate
Management Transaction reasonably acceptable to Agent (x) having a notional
amount substantially equal to the outstanding principal balance of such Art
Loan at all times until the maturity of such Art Loan and (y) directly mitigating
the risk associated with changes in the exchange rate between the currency in
which such Art Loan is denominated and Sterling at all times until the maturity
of such Art Loan.


                    “Unhedged U.S. Art Loan” means an Eligible Art
Loan owned by a U.S. Borrower (i) that is denominated in Sterling, Canadian
Dollars, Euros or Swiss Francs and (ii) unless Agent shall otherwise agree,
with respect to which such U.S. Borrower shall not have entered into a Rate
Management Transaction reasonably acceptable to Agent (x) having a notional
amount substantially equal to the outstanding principal balance of such Art
Loan at all times until the maturity of such Art Loan and (y) directly
mitigating the risk associated with changes in the exchange rate between the
currency in which such Art Loan is denominated and Dollars at all times until
the maturity of such Art Loan.


A-41





                    “Unrestricted Cash Amount” means, as of any date
of determination, the greater of (a) zero and (b) the aggregate amount of cash
of the Credit Parties as of such date (determined in accordance with GAAP),
excluding (without duplication) any cash (i) owing to consignors in respect of
Works of Art consigned by such Persons to the Credit Parties for sale, (ii)
subject to a Lien (or held in a deposit or securities account subject to a
Lien) in favor of any Person other than Agent and (iii) subject to any
restriction on withdrawal from the deposit or securities account in which such
cash is being held.


                    “Usage”
means, as of any date, an amount (stated as a percentage) equal to (a) the
outstanding principal balance of the Revolving Loan and Swing Line Loan as of
the end of the preceding Business Day (after giving effect to Advances funded
or Letters of Credit incurred, or any payments made, on such preceding Business
Day) divided by (b) the Maximum Amount.


                    “U.S. Borrowers” has the meaning ascribed to it in
the preamble to the Agreement.


                    “U.S. Borrowing Availability” means, as of any
date of determination, the lesser of (a) an amount equal to (i) the Maximum
Amount minus (ii) the aggregate Revolving
Loan then outstanding minus (iii) the
aggregate Swing Line Loan then outstanding and (b) an amount equal to (i) the
U.S. Borrowing Base as of such date minus
(ii) the aggregate outstanding principal balance of the Revolving Credit
Advances and Swing Line Advances made to U.S. Borrowers as of such date minus (iii) the Dollar Equivalent of the
aggregate Letter of Credit Obligations incurred for the benefit of the U.S.
Borrowers as of such date.


                    “U.S. Borrowing Base” means, as of any date of
determination, an amount equal to (a) 85% of the Available U.S. Art Loan
Balance as of such date plus (b) the U.S. Eligible Art Inventory
Component as of such date plus (c) the U.S. CNTA Component as of such
date minus (d) Reserves established by Agent at such time


                    “U.S.
Eligible Art Inventory Component” means, as of any date of determination,
an amount equal to the lesser of (a) 30% of the value of Eligible Art Inventory
of the U.S. Borrowers as of such date, valued at the lower of cost and market
value (determined in accordance with GAAP), and (b)(i) $50,000,000 minus
(ii) the U.K. Eligible Art Inventory Component as of such date.


                    “U.S.
CNTA Component” means, as of any date of determination, an amount equal to
(a) the lesser of (i) 15% of Consolidated Net Tangible Assets as of the end of
the Fiscal Month preceding the last Fiscal Month for which Financial Statements
were required to be delivered, and (ii) $20,000,000 minus (b) the U.K.
CNTA Component as of such date.


                    “U.S. Collateral Documents” means the Domestic
Subsidiary Guaranty, the U.S. Security Agreement, the U.S. Pledge Agreement,
the Trademark Security Agreements, the Copyright Security Agreements, all Local
Law Collateral Documents and all similar agreements entered into by the U.S.
Credit Parties or First-Tier Foreign CFC Subsidiaries guaranteeing payment of the
Obligations or granting a Lien upon property as security for payment of the
Secured Obligations.


A-42





                    “U.S. Credit Parties” means each U.S. Borrower and
each Domestic Subsidiary Guarantor.


                    “U.S. Pledge Agreement” means that certain Pledge
Agreement, dated as of the Closing Date, executed by each U.S. Credit Party in
favor of Agent, for the benefit of Agent and the Lenders.


                    “U.S. Security Agreement” means that certain
Security Agreement, dated as of the Closing Date, executed by each U.S. Credit
Party in favor of Agent, for the benefit of Agent and the Lenders


                    “VAT” means the Tax imposed by the Value Added Tax
1994 together with any similar sales or turnover taxes whether in the United
Kingdom or elsewhere.


                    “Venture Loan” means an Art Loan made to finance
the purchase of a Work of Art in conjunction with a dealer, which art is being
purchased for resale pursuant to a profit and loss sharing agreement with the
dealer.


                    “Ventures LLC” has the meaning ascribed to it in
the preamble to the Agreement.


                    “Welfare
Plan” means a Plan described in Section 3(1) of ERISA.


                    “Work of Art” shall mean any item of Goods of a
type purchased, sold, taken as collateral for an Art Loan, or consigned to the
Credit Parties for sale, in each case in the ordinary course of the Credit
Parties’ business.


                    “Working
Time Regulations” means the Working Time Regulations 1998 (as amended) of
the United Kingdom implementing the Council Directive 93/104/EC and Council
Directive 94/33/EC of the European Union.


                    “York
Avenue Lease” means that certain Lease, dated February 7, 2003, between
York Avenue Owner (as successor to 1334 York Avenue L.P.), as landlord, and
Sotheby’s, Inc., as tenant, as amended, restated, supplemented or otherwise
modified from time to time.


                    “York
Avenue Lease Documents” means the York Avenue Lease, the York Avenue
Guaranty and each document executed in connection therewith or otherwise
related thereto.


                    “York
Avenue Lease Guaranty” means that certain Guaranty of Lease, dated as of
February 7, 2003, between Parent and York Avenue Owner (as successor to 1334
York Avenue L.P.), as amended, restated, supplemented or otherwise modified
from time to time.


                    “York
Avenue Lender” means the “Lender” as defined in the York Avenue Loan
Agreement.


                    “York
Avenue Loan Agreement” means that certain Loan Agreement, dated as of June
22, 2005, between the York Avenue Owner (as successor to 1334 York Avenue L.P.)
and 


A-43





Bank of
America, N.A., as amended, restated, supplemented or otherwise modified from
time to time.


                    “York
Avenue Loan Documents” means the York Avenue Loan Agreement and all
documents executed in connection therewith or otherwise related thereto.


                    “York
Avenue Owner” means 1334 York Avenue L.L.C.


                    Rules
of construction with respect to accounting terms used in the Agreement or the
other Loan Documents shall be as set forth in Annex G.
All other undefined terms contained in any of the Loan Documents shall, unless
the context indicates otherwise, have the meanings provided for by the Code to
the extent the same are used or defined therein; in the event that any term is
defined differently in different Articles or Divisions of the Code, the
definition contained in Article or Division 9 shall control. Unless otherwise
specified, references in the Agreement or any of the Appendices to a Section,
subsection or clause refer to such Section, subsection or clause as contained
in the Agreement. The words “herein,” “hereof” and “hereunder” and other words
of similar import refer to the Agreement as a whole, including all Annexes,
Exhibits and Schedules, as the same may from time to time be amended, restated,
modified or supplemented, and not to any particular section, subsection or
clause contained in the Agreement or any such Annex, Exhibit or Schedule.


                    Wherever
from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
feminine and neuter genders. The words “including”, “includes” and “include”
shall be deemed to be followed by the words “without limitation”; the word “or”
is not exclusive; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Sotheby Entity, such words are
intended to signify that such Sotheby Entity has actual knowledge or awareness
of a particular fact or circumstance or that such Sotheby Entity, if it had
exercised reasonable diligence, would have known or been aware of such fact or
circumstance. Unless otherwise set forth therein, for purposes of Section 1.15 (and the definitions of the
capitalized terms used therein), a reference to “determines” or “determined”
shall mean a determination made in the absolute discretion of the person making
the determination.


A-44





ANNEX B (Section 1.2)

to

CREDIT
AGREEMENT



LETTERS
OF CREDIT


                    (a)          Issuance. Subject to the terms and conditions of
the Agreement, Agent and Lenders agree to incur, from time to time prior to the
Commitment Termination Date, upon the request of Borrower Representative on
behalf of the applicable Borrower (and any Subsidiary that may be a
co-applicant therewith) and for such Borrower’s (and such Subsidiary’s, as
applicable) account, Letter of Credit Obligations by causing Letters of Credit
denominated in Dollars, Sterling, Euros, Swiss Francs or any Alternative L/C
Currency to be issued by GE Capital or a Subsidiary thereof or a bank or other
legally authorized Person selected by or acceptable to Agent in its sole
discretion (each, an “L/C Issuer”) for such
U.S. Borrower’s account and guaranteed by Agent; provided,
that if the L/C Issuer is a Lender, then such Letters of Credit shall not be
guaranteed by Agent but rather each Lender shall, subject to the terms and
conditions hereinafter set forth, purchase (or be deemed to have purchased)
risk participations in all such Letters of Credit issued with the written
consent of Agent, as more fully described in paragraph
(b)(ii) below. The Dollar Equivalent of the aggregate amount of all
such Letter of Credit Obligations shall not at any time exceed the lesser of
(i) an amount equal to Ten Million Dollars ($10,000,000) (the “L/C Sublimit”) and (ii) the Maximum Amount less
the Dollar Equivalent of the aggregate outstanding principal balance of the
Revolving Credit Advances and the Swing Line Loan. The Dollar Equivalent of the
aggregate amount of all such Letter of Credit Obligations incurred for the
benefit of the U.S. Borrowers shall not at any time exceed the U.S. Borrowing
Base less the aggregate outstanding principal balance of the Revolving Credit
Advances and Swing Line Advances made to U.S. Borrowers. The Dollar Equivalent
of the aggregate amount of all such Letter of Credit Obligations incurred for
the benefit of the U.K. Borrowers shall not at any time exceed an amount equal
to (i) the lesser of (x) the Sterling Subfacility Limit and (y) the U.K.
Borrowing Base less (ii) the Dollar
Equivalent of the outstanding principal balance of the Revolving Credit
Advances made to the U.K. Borrowers. No such Letter of Credit shall have an
expiry date that is more than one year following the date of issuance thereof,
unless otherwise determined by Agent, in its sole discretion (including with
respect to customary evergreen provisions), and neither Agent nor Lenders shall
be under any obligation to incur Letter of Credit Obligations in respect of, or
purchase risk participations in, any Letter of Credit having an expiry date
that is later than the Commitment Termination Date. 


                    (b)          Revolving Credit Advances Automatic; Participations.



                                   (i)          In
the event that Agent or any Lender shall make any payment on or pursuant to any
Letter of Credit Obligation incurred for the benefit of a U.S. Borrower,
regardless of whether a Default or Event of Default has occurred and is
continuing and notwithstanding any Borrower’s failure to satisfy the conditions
precedent set forth in Section 2, such
payment shall then be deemed automatically to constitute a Revolving Credit
Advance to the applicable U.S. Borrower under Section
1.1(a) of the Agreement in Dollars in an amount equal to the Dollar
Equivalent of such payment as of the date thereof, and each Lender shall be
obligated to pay its Pro Rata Share thereof in accordance with the Agreement. 


B-1





                                   (ii)          In
the event that Agent, any Lender or the Fronting Lender shall make any payment
on or pursuant to any Letter of Credit Obligation incurred for the benefit of a
U.K. Borrower, regardless of whether a Default or Event of Default has occurred
and is continuing and notwithstanding any Borrower’s failure to satisfy the
conditions precedent set forth in Section 2,
such payment shall then be deemed automatically to constitute a Revolving
Credit Advance to the applicable U.K. Borrower under Section
1.1(a) of the Agreement in Sterling in an amount equal to the
Sterling Equivalent of such payment as of the date thereof, and each Sterling
Lender and the Fronting Lender shall be obligated to pay its Pro Rata Share
(or, in the case of the Fronting Lender, the Fronted Percentage) thereof in
accordance with the Agreement. 


                                   (iii)          The
failure of any Lender or the Fronting Lender to make available to Agent for
Agent’s own account its Pro Rata Share (or, in the case of the Fronting Lender,
the Fronted Percentage) of any such Revolving Credit Advance or payment by
Agent under or in respect of a Letter of Credit shall not relieve any other
Lender or the Fronting Lender of its obligation hereunder to make available to
Agent its Pro Rata Share or the Fronted Percentage thereof, but neither any
Lender nor the Fronting Lender shall be responsible for the failure of any
other Lender or the Fronting Lender to make available such Person’s share of
any such payment.


                                   (iv)          If
it shall be illegal or unlawful for any U.S. Borrower to incur Revolving Credit
Advances as contemplated by paragraph (b)(i)
above because of an Event of Default described in Sections
8.1(g) or (h) or otherwise or if it shall be illegal or unlawful for
any Lender to be deemed to have assumed a ratable share of the reimbursement
obligations owed to an L/C Issuer, or if the L/C Issuer is a Lender, then (A)
immediately and without further action whatsoever, each Lender shall be deemed
to have irrevocably and unconditionally purchased from Agent (or such L/C
Issuer, as the case may be) an undivided interest and participation equal to
such Lender’s Pro Rata Share (based on the Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding for the
benefit of the U.S. Borrowers and (B) thereafter, immediately upon issuance of
any Letter of Credit for the benefit of a U.S. Borrower, each Lender shall be
deemed to have irrevocably and unconditionally purchased from Agent (or such
L/C Issuer, as the case may be) an undivided interest and participation equal
to such Lender’s Pro Rata Share (based on the Commitments) of the Letter of
Credit Obligations with respect to such Letter of Credit on the date of such
issuance. Each Lender shall fund its participation in all payments made under
any Letters of Credit issued for the benefit of a U.S. Borrower, in the same
manner as provided in the Agreement with respect to Dollar Revolving Credit
Advances, each of which Dollar Revolving Credit Advances shall be in an amount
equal to the Dollar Equivalent of such payment as of the date thereof.


                                   (v)          If
it shall be illegal or unlawful for any U.K. Borrower to incur Revolving Credit
Advances as contemplated by paragraph (b)(ii)
above because of an Event of Default described in Sections
8.1(g) or (h) or otherwise or if
it shall be illegal or unlawful for any Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to an L/C Issuer, or if the
L/C Issuer is a Lender, then (A) immediately and without further action
whatsoever, each Sterling Lender and the Fronting Lender shall be deemed to have
irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as
the case may be) an undivided interest and participation equal to such Lender’s
Pro Rata Share (based on the Commitments) (or, in the case of the Fronting
Lender, equal to the Fronted Percentage) of the Letter of Credit  


B-2





Obligations in
respect of all Letters of Credit then outstanding for the benefit of the U.K.
Borrowers and (B) thereafter, immediately upon issuance of any Letter of Credit
for the benefit of a U.K. Borrower, each Sterling Lender and the Fronting
Lender shall be deemed to have irrevocably and unconditionally purchased from
Agent (or such L/C Issuer, as the case may be) an undivided interest and
participation equal to such Lender’s Pro Rata Share (based on the Commitments)
(or, in the case of the Fronting Lender, equal to the Fronted Percentage) of
the Letter of Credit Obligations
with respect to such Letter of Credit on the date of such issuance. Each
Sterling Lender and the Fronting Lender shall fund its participation in all
payments made under any Letters of Credit issued for the benefit of a U.K.
Borrower, in the same manner as provided in the Agreement with respect to
Sterling Revolving Credit Advances, each of which Sterling Revolving Credit
Advances shall be in an amount equal to the Sterling Equivalent of such payment
as of the date thereof.


                    (c)          Cash Collateral.


                                   (i)          If
Borrowers are required to provide cash collateral for any Letter of Credit
Obligations pursuant to the Agreement, including Section
8.2 of the Agreement, prior to the Commitment Termination Date, each
Borrower will pay to Agent for the ratable benefit of itself and Lenders, with
respect to each Letter of Credit outstanding for the benefit of such Borrower,
cash or cash equivalents acceptable to Agent (“Acceptable
Cash Equivalents”) in the currency in which such Letter of Credit is
denominated in an amount equal to 105% of the maximum amount then available to
be drawn under such Letter of Credit. Such funds or Acceptable Cash Equivalents
shall be held by Agent in a cash collateral account (each, a “Cash Collateral Account”) maintained at a bank or
financial institution acceptable to Agent. Each Cash Collateral Account shall
be in the name of the applicable Borrower(s) and shall be pledged to, and
subject to the control of, Agent, on behalf of itself and the other Secured
Parties, in a manner satisfactory to Agent. Each U.S. Borrower hereby pledges
and grants to Agent, on behalf of itself and the other Secured Parties, a
security interest in all such funds and Acceptable Cash Equivalents held from
time to time in any Cash Collateral Account established in the name of such
U.S. Borrower and all proceeds thereof, as security for the payment of all
amounts due in respect of the Letter of Credit Obligations and Secured
Obligations, whether or not then due. The Agreement, including this Annex B, shall constitute a security agreement
under applicable law. 


                                   (ii)          If
any Letter of Credit Obligations, whether or not then due and payable, shall
for any reason be outstanding on the Commitment Termination Date, Borrowers
shall either (A) provide cash collateral therefor in the manner described above,
or (B) cause all such Letters of Credit and guaranties thereof, if any, to be
canceled and returned, or (C) deliver a stand-by letter (or letters) of credit
in guaranty of such Letter of Credit Obligations, which stand-by letter (or
letters) of credit shall be of like tenor, currency and duration (plus thirty
(30) additional days) as, and in an amount equal to 105% of, the aggregate
maximum amount then available to be drawn under, the Letters of Credit to which
such outstanding Letter of Credit Obligations relate and shall be issued by a
Person, and shall be subject to such terms and conditions, as are be
satisfactory to Agent in its sole discretion.


                                   (iii)          From
time to time after funds are deposited in the Cash Collateral Account by any
Borrower, whether before or after the Commitment Termination Date, Agent 


B-3





may apply such
funds or Acceptable Cash Equivalents then held in the Cash Collateral Account
to the payment of any amounts, and in such order as Agent may elect, as shall
be or shall become due and payable by such Borrower to Agent and Lenders with
respect to such Letter of Credit Obligations of such Borrower and, upon the
satisfaction in full of all Letter of Credit Obligations of such Borrower, to any
other Secured Obligations then due and payable.


                                   (iv)          No
Borrower nor any Person claiming on behalf of or through any Borrower shall
have any right to withdraw any of the funds or Acceptable Cash Equivalents held
in the Cash Collateral Account, except that upon the termination of all Letter
of Credit Obligations and the payment of all amounts payable by Borrowers to
Agent and Lenders in respect thereof, any funds remaining in the Cash
Collateral Account shall be applied to other Secured Obligations then due and
owing and upon payment in full of such Secured Obligations, any remaining
amount shall be paid to Borrowers or as otherwise required by law. Interest
earned on deposits in the Cash Collateral Account shall be held as additional
collateral.


                    (d)          Fees and Expenses. U.S. Borrowers agree to pay to
Agent for the benefit of Lenders, as compensation to such Lenders for Letter of
Credit Obligations incurred hereunder for the benefit of U.S. Borrowers, (i)
all costs and expenses incurred by Agent or any Lender on account of such
Letter of Credit Obligations, and (ii) for each month during which any such
Letter of Credit Obligation shall remain outstanding, a fee in Dollars in an
amount equal to the Applicable L/C Margin from time to time in effect
multiplied by the Dollar Equivalent of the maximum amount available from time
to time to be drawn under each applicable Letter of Credit. U.K. Borrowers
agree to pay to Agent for the benefit of Lenders, as compensation to such
Lenders for Letter of Credit Obligations incurred hereunder for the benefit of
the U.K. Borrowers, (i) all costs and expenses incurred by Agent or any Lender
on account of such Letter of Credit Obligations, and (ii) for each month during
which any such Letter of Credit Obligation shall remain outstanding, a fee in
Sterling in an amount equal to the Applicable L/C Margin from time to time in
effect multiplied by the Sterling Equivalent of the maximum amount available
from time to time to be drawn under each applicable Letter of Credit. The
foregoing fees (collectively, the “Letter of Credit Fee”) shall be paid
to Agent for the benefit of the Lenders in arrears, on the first Business Day
of each month and on the Commitment Termination Date. In addition, Borrowers
shall pay to any L/C Issuer, on demand, such fees, charges and expenses of such
L/C Issuer in respect of the issuance, negotiation, acceptance, amendment,
transfer and payment of such Letter of Credit or otherwise payable pursuant to
the application and related documentation under which such Letter of Credit is
issued.


                    (e)          Request for Incurrence of Letter of Credit Obligations.
Borrower Representative shall give Agent at least two (2) Business Days’ prior
written notice requesting the incurrence of any Letter of Credit Obligation.
The notice shall be accompanied by the form of the Letter of Credit (which
shall be acceptable to the L/C Issuer) and a completed Application for Standby
Letter of Credit in the form of Exhibit B.
Notwithstanding anything contained herein to the contrary, Letter of Credit
applications by Borrower Representative and approvals by Agent and the L/C
Issuer may be made and transmitted pursuant to electronic codes and security
measures mutually agreed upon and established by and among Borrower
Representative, Agent and the L/C Issuer. 


B-4





                    (f)          Obligation Absolute. The obligation of Borrowers
to reimburse Agent and Lenders for payments made with respect to any Letter of
Credit Obligation shall be absolute, unconditional and irrevocable, without
necessity of presentment, demand, protest or other formalities, and the
obligations of each Lender to make payments to Agent with respect to Letters of
Credit shall be unconditional and irrevocable. Such obligations of Borrowers
and Lenders shall be paid strictly in accordance with the terms hereof under
all circumstances including the following:


                                   (i)          any
lack of validity or enforceability of any Letter of Credit or the Agreement or
the other Loan Documents or any other agreement;


                                   (ii)          the
existence of any claim, setoff, defense or other right that any Borrower or any
of their respective Affiliates or any Lender may at any time have against a
beneficiary or any transferee of any Letter of Credit (or any Persons or
entities for whom any such transferee may be acting), Agent, any Lender, or any
other Person, whether in connection with the Agreement, the Letter of Credit,
the transactions contemplated herein or therein or any unrelated transaction
(including any underlying transaction between any Borrower or any of their
respective Affiliates and the beneficiary for which the Letter of Credit was
procured);


                                   (iii)          any
draft, demand, certificate or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;


                                   (iv)          payment
by Agent (except as otherwise expressly provided in paragraph
(g)(ii)(C) below) or any L/C Issuer under any Letter of Credit or
guaranty thereof against presentation of a demand, draft or certificate or
other document that does not comply with the terms of such Letter of Credit or
such guaranty;


                                   (v)          any
other circumstance or event whatsoever, that is similar to any of the
foregoing; or


                                   (vi)          the
fact that a Default or an Event of Default has occurred and is continuing.


                    (g)          Indemnification; Nature of Lenders’ Duties.


                                   (i)          In
addition to amounts payable as elsewhere provided in the Agreement, Borrowers
hereby agree to pay and to protect, indemnify, and save harmless Agent and each
Lender from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys’ fees and
allocated costs of internal counsel) that Agent or any Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the issuance of any
Letter of Credit or guaranty thereof, or (B) the failure of Agent or any Lender
seeking indemnification or of any L/C Issuer to honor a demand for payment
under any Letter of Credit or guaranty thereof as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority, in each case other than to the
extent solely as a result of the gross negligence or willful misconduct of
Agent or such Lender (as determined by a court of competent jurisdiction in a
final, non-appealable judgment). It is understood and agreed that,
notwithstanding anything to the contrary 


B-5





herein, no
U.K. Credit Party shall have any obligation hereunder with respect to any
indemnification liabilities that are Obligations of any U.S. Credit Party.


                                   (ii)          As
between Agent and any Lender and Borrowers, Borrowers assume all risks of the
acts and omissions of, or misuse of any Letter of Credit by beneficiaries, of
any Letter of Credit. In furtherance and not in limitation of the foregoing, to
the fullest extent permitted by law, neither Agent nor any Lender shall be
responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document issued by any party in connection with the
application for and issuance of any Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, that
may prove to be invalid or ineffective for any reason; (C) failure of the
beneficiary of any Letter of Credit to comply fully with conditions required in
order to demand payment under such Letter of Credit; provided,
that in the case of any payment by Agent under any Letter of Credit or guaranty
thereof, Agent shall be liable to the extent such payment was made solely as a
result of its gross negligence or willful misconduct (as determined by a court
of competent jurisdiction in a final, non-appealable judgment) in determining
that the demand for payment under such Letter of Credit or guaranty thereof
complies on its face with any applicable requirements for a demand for payment
under such Letter of Credit or guaranty thereof; (D) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they may be in cipher; (E)
errors in interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order to make a payment
under any Letter of Credit or guaranty thereof or of the proceeds thereof; (G)
the credit of the proceeds of any drawing under any Letter of Credit or
guaranty thereof; and (H) any consequences arising from causes beyond the
control of Agent or any Lender. None of the above shall affect, impair, or prevent
the vesting of any of Agent’s or any Lender’s rights or powers hereunder or
under the Agreement.


                                   (iii)          Nothing
contained herein shall be deemed to limit or to expand any waivers, covenants
or indemnities made by Borrowers in favor of any L/C Issuer in any letter of
credit application, reimbursement agreement or similar document, instrument or
agreement between or among Borrowers and such L/C Issuer, including a Master
Standby Agreement entered into with Agent.


B-6





ANNEX C (Section 1.8)

to

CREDIT AGREEMENT



CASH MANAGEMENT SYSTEM


                    Each
Sotheby Entity shall, and shall cause its Subsidiaries to, establish and
maintain the Cash Management Systems described below:


                    (a)          Within
90 days of the Closing Date (or such later date as Agent shall consent to in
writing) and until the Termination Date, each Credit Party shall (i) cause each
of its Deposit Accounts (other than the Due-to-Consignor Disbursement Accounts
and its payroll accounts) to be subject to a tri-party blocked account
agreement (each such tri-party blocked account agreement, a “Blocked Account
Agreement”, and each such Deposit Account subject to a Blocked Account
Agreement, a “Blocked Account”) among the financial institution at which
such Deposit Account is maintained (each, a “Relationship
Bank”), such Credit Party, and Agent, for the benefit of itself and
the Secured Parties, which Blocked Account Agreement shall be in form and
substance reasonably acceptable to Agent, and (ii) deposit or cause to be
deposited, and cause the other Sotheby Entities to deposit or cause to be
deposited, promptly, and in any event no later than the first Business Day
after the date of receipt thereof, all cash, checks, drafts or other similar
items of payment relating to or constituting Collateral into one or more
Blocked Accounts.


                    (b)          Following
the occurrence of any Activation Event, Agent may (and, at the direction of
Required Lenders, shall) deliver an Activation Notice to any or all
Relationship Banks with respect to any or all Blocked Accounts, and each
Relationship Bank that has received an Activation Notice shall be instructed to
transfer, on each Business Day, all amounts on deposit in all applicable
Blocked Accounts to one or more accounts specified by Agent (such accounts,
collectively, the “Transfer Account”). 


                    (c)          Following
the transfer of funds to the Transfer Account on each Business Day pursuant to clause
(b) above, Agent shall (unless Agent decides otherwise in its sole
discretion) transfer, on each Business Day, from the Transfer Account (i) to
the applicable Collection Account (or such other Blocked Account as Agent shall
agree), all amounts in the Transfer Account other than such amounts as may be
identified by Agent, in its reasonable estimation, that represent any portion
of the Due-to-Consignor Amount as of such Business Day, and (ii) to the
applicable Due-to-Consignor Disbursement Account, all amounts in the Transfer
Account as may be identified by Agent, in its reasonable estimation, that
represent any portion of the Due-to-Consignor Amount as of such Business Day.


                    (d)          So
long as no Default or Event of Default has occurred and is continuing or Agent
shall have otherwise agreed, the Borrowers may amend Disclosure
Schedule (3.19) to add or replace a Relationship Bank or Blocked
Account; provided, that (i) Agent shall
have consented in writing in advance to the opening of such account with the
relevant bank and (ii) prior to the time of the opening of such account, the
applicable Borrower and such bank shall have executed and delivered to Agent a
Blocked Account Agreement with respect to such account. 


C-1





                    (e)          The
Borrowers shall close any of their Blocked Accounts (and establish replacement
accounts in accordance with clause (d) above) promptly and in any event
within thirty (30) days following notice from Agent that the creditworthiness
of any Relationship Bank holding such an account is no longer acceptable in
Agent’s reasonable judgment, or as promptly as practicable and in any event
within sixty (60) days following notice from Agent that the operating
performance, funds transfer or availability procedures or performance with
respect to accounts of the Relationship Bank holding such accounts or Agent’s
liability under any Blocked Account Agreement with respect to such Relationship
Bank is no longer acceptable in Agent’s reasonable judgment.


                    (f)          The
Blocked Accounts shall be cash collateral accounts, with all cash, checks and
other similar items of payment in such accounts securing payment of some or all
of the Loans and other Secured Obligations in accordance with the applicable
Collateral Document, and in which each applicable Borrower shall have granted a
security interest to Agent, on behalf of itself and the other Secured Parties,
pursuant to the applicable Collateral Document.


                    (g)          All
amounts deposited in any Collection Account shall be deemed received by Agent
in accordance with Section 1.10 and shall
be applied (and allocated) by Agent in accordance with Section
1.11. In no event shall any amount be so applied unless and until
such amount shall have been credited in immediately available funds to the
applicable Collection Account.


                    (h)          Each
Borrower shall and shall cause its Affiliates, officers, employees, agents,
directors or other Persons acting for or in concert with such Borrower (each a
“Related Person”) to (i) hold in trust for
Agent, for the benefit of itself and the other Secured Parties, all checks,
cash and other items of payment delivered by the applicable Art Loan Debtor
(other than pursuant to the sale of Works of Art securing repayment of such Art
Loan) and received by such Borrower or any such Related Person in respect of
any Art Loan or delivered by the applicable purchaser and received by such
Borrower or any such Related Person in respect of the sale or disposition of
any Art Inventory and (ii) within one (1) Business Day after receipt by such
Borrower or any such Related Person of any such checks, cash or other items of
payment, deposit the same into a Blocked Account of such Borrower. Each
Borrower on behalf of itself and each Related Person thereof acknowledges and
agrees that all cash, checks or other items of payment constituting proceeds of
Art Loans or Art Inventory are part of the Collateral. Following delivery of an
Activation Notice, proceeds of the sale or other disposition of any Art Loans
or Art Inventory shall be deposited directly to the applicable Blocked Account
within two (2) Business Days after the receipt thereof by any Sotheby Entity.


C-2





ANNEX D (Section 2.1(a))

to

CREDIT
AGREEMENT


See attached.


C-1





ANNEX E (Section
4.1(a))

to

CREDIT
AGREEMENT



FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING


                    Borrowers
shall deliver or cause to be delivered to Agent or to Agent and Lenders, as
indicated, the following:


                    (a)          Monthly
Financials. To Agent and Lenders, within thirty (30) days after the end of
each Fiscal Month beginning with the Fiscal Month ending August 31, 2009 (or
within forty-five (45) days (or sixty-five (65) days for December) after the
end of each Fiscal Month ending on or about the last day of each June,
September, December, January and March thereafter), financial information
regarding Borrowers and their Subsidiaries, certified by a Financial Officer of
Borrower Representative, consisting of consolidated (with respect to Parent and
its Subsidiaries) and consolidating (i) unaudited balance sheets as of the
close of such Fiscal Month and the related statements of income and
(consolidated) cash flows (relating solely to depreciation, amortization and capital
expenditures) for that portion of the Fiscal Year ending as of the close of
such Fiscal Month; (ii) unaudited statements of income, if available, on a
consolidated basis for such Fiscal Month, setting forth in comparative form the
figures for the corresponding period in the prior year, all prepared in
accordance with GAAP (subject to normal year-end adjustments); (iii) a
calculation of the Due-to-Consignor Amount as of the last day of that Fiscal
Month, which calculation shall separately identify (A) the aggregate amount of
cash received and held by all Sotheby Entities that is payable to consignors as
of such day as a result of the sale of such consignors’ Works of Art by a
Sotheby Entity, and (B) the aggregate outstanding amount of all principal, accrued
interest, and other related amounts as of such day with respect to any Art
Loans secured by such Works of Art, and (iv) a calculation of the aggregate
unfunded commitment of the Borrowers to make future Art Loans as of the last
day of that Fiscal Month. Such financial information shall be accompanied by
the certification of a Financial Officer of Borrower Representative 
(i) that (i) such financial information presents fairly (in the case of the consolidated Financial
Statements with respect to Parent and its Subsidiaries, in accordance with GAAP
(subject to normal year-end adjustments)) the financial position and results of
operations of Borrowers and their Subsidiaries, on a consolidated (with respect
to Parent and its Subsidiaries) and consolidating basis, in each case as at the
end of such Fiscal Month and for that portion of the Fiscal Year then ended and (ii), (ii) if the Revolving Loan
Outstandings and the outstanding balance of the Swing Line Loan, in the
aggregate, are greater than zero as of the last day of such Fiscal Month, (x)
setting forth the Unrestricted Cash Amount and Liquidity Amount as of the end
of such Fiscal Month and (y) that no Financial Covenant Compliance Period
commenced during such Fiscal Month or, if a Financial Covenant Compliance
Period commenced during such Fiscal Month, describing the date and cause of
such commencement, (iii) that any other information presented
is true, correct and complete in all material respects and (iv)
that there was no Default or Event of Default in existence as of such time or,
if a Default or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default or Event of
Default. 


                    (b)          Quarterly
Financials. To Agent and Lenders, within forty-five (45) days after the end
of each Fiscal Quarter, consolidated (with respect to Parent and its
Subsidiaries) and 


E-1





consolidating
financial information, certified by a Financial Officer of Borrower
Representative, including (i) unaudited balance sheets as of the close of such
Fiscal Quarter and the related statements of income and (consolidated) cash
flow for that portion of the Fiscal Year ending as of the close of such Fiscal
Quarter and (ii) unaudited statements of income for such Fiscal Quarter, in
each case setting forth in comparative form the figures for the corresponding
period in the prior year. All such consolidated Financial Statements shall be
prepared in accordance with GAAP (subject to normal year-end adjustments). Such
financial information shall be accompanied by (A) during any Financial Covenant
Compliance Period, a statement substantially in the form of Exhibit C
(each, a “Compliance Certificate”) showing the calculations used in
determining compliance with each of the Financial Covenants that is tested on a
quarterly basis and (B) thea certification of a Financial Officer of Borrower Representative 

 (i) that (i) such financial
information presents fairly (in the case of the consolidated Financial
Statements with respect to Parent and its Subsidiaries, in accordance with GAAP
(subject to normal year-end adjustments)) the financial position, results of
operations and statements of cash flows of Borrowers and their Subsidiaries, on
both a consolidated (with respect to Parent and its Subsidiaries) and
consolidating basis, as at the end of such Fiscal Quarter and for that portion
of the Fiscal Year then ended and
(ii, (ii)
setting forth the Unrestricted Cash Amount and Liquidity Amount as of the end
of such Fiscal Quarter, (iii) that no Financial Covenant Compliance Period
commenced during such Fiscal Quarter or, if a Financial Covenant Compliance
Period commenced during such Fiscal Quarter, describing the date and cause of
such commencement, (iv) any other information presented is true,
correct and complete in all material respects and (v) that there
was no Default or Event of Default in existence as of such time or, if a
Default or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default or Event of
Default.


                    (c)          Operating
Plan. To Agent and Lenders, as soon as available, but not later than
forty-five (45) days after the end of each Fiscal Year, an annual operating plan
for Parent and its Subsidiaries on a consolidated basis for the following
Fiscal Year, which (i) includes a statement of all of the material assumptions
on which such plan is based, (ii) includes quarterly balance sheets, income
statements and statements of cash flows for the following year and (iii)
integrates sales, gross profits, operating expenses, operating profit, cash
flow projections, U.S. Borrowing Availability and U.K. Borrowing Availability
projections, all prepared on the same basis and in similar detail as that on
which operating results are reported (and in the case of cash flow projections,
representing management’s good faith estimates of future financial performance
based on historical performance), and including plans for personnel, Capital
Expenditures and facilities. The income statements contained in such annual
operating plan shall be approved by the Board of Directors of Parent.


                    (d)          Annual
Audited Financials. To Agent and Lenders, within ninety (90) days after the
end of each Fiscal Year, audited consolidated (with respect to Parent and its
Subsidiaries) and unaudited consolidating Financial Statements, consisting of
balance sheets, statements of income and (consolidated) statements of retained
earnings and cash flows, setting forth in comparative form in each case the
figures for the previous Fiscal Year, which Financial Statements shall be
prepared in accordance with GAAP and certified without qualification, by an
independent certified public accounting firm of national standing or otherwise
acceptable to Agent. Such Financial Statements shall be accompanied by (i) a
statement prepared in reasonable detail showing the calculations used in
determining compliance with each of the 


E-2





Financial
Covenants, (ii) a report from such accounting firm to the effect that, in
connection with their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default has occurred with
respect to the Financial Covenants (or specifying those Defaults and Events of
Default that they became aware of), it being understood that such audit
examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, and (iii) the certification of a Financial Officer of Borrowers that
(x) such financial information presents fairly (in the case of the consolidated
Financial Statements with respect to Parent and its Subsidiaries, in accordance
with GAAP) the financial position, results of operations and statements of cash
flows of Borrowers and their Subsidiaries, on both a consolidated (with respect
to Parent and its Subsidiaries) and consolidating basis, as at the end of such
Fiscal Year and for the period then ended, and (y) there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.


                    (e)          Initial
Compliance Certificate. To Agent and Lenders, within two (2) Business Days
of the commencement of any Financial Covenant Compliance Period, to the extent
a Compliance Certificate has not already been delivered with respect to such
Financial Covenant Compliance Period pursuant to clause (b) above, a
Compliance Certificate, certified by a Financial Officer of Borrower
Representative, showing the calculations used in determining compliance with
each of the Financial Covenants that is tested on a quarterly basis.


                    (e)          Management
Letters. To Agent, within five (5) Business Days after receipt thereof by
Parent, copies of all management letters, exception reports or similar letters
or reports received by Parent from its independent certified public
accountants, except to the extent such accountants shall restrict the ability
of Parent to deliver such documents to Agent.


                    (f)          Default
Notices. To Agent and Lenders, as soon as practicable, and in any event
within five (5) Business Days after an executive officer of any Borrower has
actual knowledge of the existence of any Default, Event of Default or other
event that has had a Material Adverse Effect, telephonic or telecopied notice
specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given
telephonically, shall be promptly confirmed in writing on the next Business
Day.


                    (g)          Due-to-Consignor
Statements. To Agent, (i) on a bi-weekly basis at any time the Liquidity
Amount shall be less than $50,000,000 and (ii) on each Business Day on which a
Default or Event of Default has occurred and is continuing or on which the
Liquidity Amount shall be less than $25,000,000, a statement (such statement, a
“Due-to-Consignor Statement”) certified by a Financial Officer of
Borrower Representative, providing a calculation of the Due-to-Consignor Amount
as of the date on which such statement is delivered, which calculation shall
separately identify (i) the aggregate amount of cash received and held by all
Sotheby Entities that is payable to consignors as of such Business Day as a
result of the sale of such consignors’ Works of Art by a Sotheby Entity, and
(ii) the aggregate outstanding amount of all principal, accrued interest, and
other related amounts as of such Business Day with respect to any Art Loans
secured by such Works of Art. 


E-3





                    
(h)          SEC
Filings and Press Releases. To Agent and Lenders, promptly upon their
becoming available, copies of: (i) all Financial Statements, reports, notices
and proxy statements made publicly available by Parent to its security holders;
(ii) all regular and periodic reports and all registration statements and
prospectuses, if any, filed by Parent with any securities exchange or with the
Securities and Exchange Commission or any governmental or private regulatory
authority in any jurisdiction; and (iii) all press releases and other
statements made available by Parent to the public concerning material changes
or developments in the business of any such Person.


                    
(i)          Debt
and Equity Notices. To Agent, as soon as practicable, copies of all
material written notices given or received by any Sotheby Entity or the York
Avenue Owner with respect to the Senior Notes, the Convertible Notes, the
Convertible Note Hedge Agreements, the Convertible Note Warrants, the York
Avenue Lease or the York Avenue Loan Agreement, and, within two (2) Business
Days after any Sotheby Entity obtains knowledge of any matured or unmatured
event of default with respect to the Senior Notes, the Convertible Notes, the
Convertible Note Hedge Agreements, the Convertible Note Warrants, the York
Avenue Lease or the York Avenue Loan Agreement, notice of such event of
default.


                    
(j)          Supplemental
Schedules. To Agent, supplemental disclosures, if any, required by Section
5.6.


                    
(k)          Litigation.
To Agent in writing, as soon as practicable upon learning thereof, notice of
any Litigation commenced or threatened in writing 
against any Sotheby Entity that (i) seeks damages in excess of $2,500,000,10,000,000, (ii)
seeks injunctive relief that
could reasonably be expected to have a Material Adverse Effect,
(iii) is asserted or instituted
 against any Plan, its fiduciaries or its
assets or against any Sotheby Entity or ERISA Affiliate in connection with any
Plan, (iv) alleges criminal misconduct by any
Sotheby Entity, (viv) alleges the
violation of any law regarding, or seeks remedies in connection with, any
Environmental Liabilities, (vi)
involves any product recall or (viiv) alleges, or seeks remedies in connection with,
any violation of any antitrust law or similar law of any jurisdiction
(in
each case, other than any such Litigation that (x) is not commenced or
threatened by a Governmental Authority and (y) has been reasonably determined
by the applicable Sotheby Entity to be frivolous and without merit). To Agent
in writing, as soon as practicable upon learning thereof, notice of any
Litigation commenced or threatened against any Plan, its fiduciaries or its assets or against
any Sotheby Entity or ERISA Affiliate in connection with any Plan.


                    
(l)          Insurance
Notices. To Agent, disclosure of losses or casualties required by Section
5.4. 


                    
(m)        Lease
Default Notices. To Agent, (i) within two (2) Business Days after receipt
thereof, copies of any and all default notices received under or with respect
to any leased location or public warehouse where Collateral (including any Work
of Art securing repayment of any Art Loan) is located, and (ii) such other
notices or documents as Agent may reasonably request.


E-4





                    (n)
          Hedging
Agreements. To Agent, within five (5) Business Days after its request
therefor, copies of any interest rate, commodity or currency hedging agreements
or amendments thereto entered into by any Sotheby Entity.


                    (o)
          U.K.
Pension Plans. To Agent in writing, promptly upon learning thereof, notice
of (i) any Litigation commenced or threatened against any Sotheby Entity in
relation to the U.K. Pensions Plans or (ii) any requirement to materially
increase funding levels of the U.K. Pension Plans.


                    (p)          Unfunded
Commitments. To Agent in writing, promptly upon the occurrence thereof, (i)
any failure by any Sotheby Entity to fund any unfunded commitment to make
future Art Loans upon satisfaction of the conditions precedent to such funding
obligation or (ii) any dispute between any Sotheby Entity and any Art Loan
Debtor regarding the obligation of any Sotheby Entity to make an Art Loan
pursuant to any such unfunded commitment.


                    (q)          Other
Documents. To Agent and Lenders, such other financial and other information
respecting any Sotheby Entity’s business or financial condition as Agent or any
Lender shall from time to time reasonably request.


            
        (r)          Liquidity
Amount. At any time the Aggregate Borrowing Availability shall be less than
$50,000,000, promptly upon the reasonable request of Agent, a certification of
a Financial Officer of Borrower Representative (i) setting forth the
Unrestricted Cash Amount and Liquidity Amount as of the date specified in such
request (which date shall be a Business Day no earlier than one Business Day
after the date of such request) and (ii) that no Financial Covenant Compliance
Period has commenced since the previous such certification or, if a Financial
Covenant Compliance Period has commenced, describing the date and cause of such
commencement.


            
        (s)          Liquidity
Test Period. During the Liquidity Test Period, on bi-weekly basis, within two
(2) Business Days of the end of each applicable calendar week, a certification
of a Financial Officer of Borrower Representative setting forth the
Unrestricted Cash Amount and Liquidity Amount as of the end of such calendar
week.


E-5





ANNEX F (Section
4.1(b))

to

CREDIT
AGREEMENT


COLLATERAL REPORTS


                    Borrowers
shall deliver or cause to be delivered the following:


                    (a)          To
Agent, upon its request, and in any event no less frequently than fourteen (14)
days (or if the 14th day of any Fiscal Month is not a Business Day,
the next succeeding Business Day) after the end of (i) if the Revolving Loan
Outstandings and the outstanding balance of the Swing Line Loan, in the
aggregate, are greater than zero as of the last day of such Fiscal Month, each
Fiscal Month or (ii) otherwise, each Fiscal Quarter, each of the following
reports, each of which shall be prepared by the Borrowers as of the last day of
the immediately preceding Fiscal Month or Fiscal Quarter, as applicable, or the
date two (2) days prior to the date of any such request:


	
  

 	
  

 
	
  

 	
                     
 (i)          a
 Borrowing Base Certificate, accompanied by such supporting detail and
 documentation as shall be requested by Agent in its reasonable discretion; 

 
	
  

 	
  

 
	
  

 	
                    
  (ii)         an
 Art Inventory Report, accompanied by such supporting detail and documentation
 as shall be requested by Agent in its reasonable discretion; and

 
	
  

 	
  

 
	
  

 	
                    
  (iii)         an
 Art Loan Receivables Report, accompanied by such supporting detail and
 documentation as shall be requested by Agent in its reasonable discretion.

 
	
  

 	
  

 
	
                    (b)          To
 Agent, in connection with any inspection or audit pursuant to Section 1.14
 of the Agreement and, otherwise, within five (5) Business Days (or such later
 date as Agent shall consent to in writing) of its request:

 
	
  

 	
  

 
	
  

 	
                    
  (i)            a
 reconciliation of the Art Inventory Report and Art Loans Receivables Report to
 the most recent Borrowing Base Certificate, general ledger and monthly
 Financial Statements delivered pursuant to Annex E, in each case
 accompanied by such supporting detail and documentation as shall be requested
 by Agent in its reasonable discretion;

 
	
  

 	
  

 
	
  

 	
                   
   (ii)          a
 reconciliation of the outstanding Loans as set forth in the monthly Loan
 Account statement provided by Agent to each Borrower’s general ledger and
 monthly Financial Statements delivered pursuant to Annex E, in each
 case accompanied by such supporting detail and documentation as shall be
 requested by Agent in its reasonable discretion;

 
	
  

 	
  

 
	
                     (c)          To
 Agent, at the time of delivery of each of the quarterly Financial Statements
 delivered pursuant to Annex E, a list of any applications for the
 registration of any Patent, Trademark or Copyright filed by any Sotheby
 Entity with the United States Patent and Trademark Office, the United States
 Copyright Office or any similar office or agency in the prior Fiscal Quarter,
 except any Trademark registered by a Sotheby Entity at the direction of the 

 



F-1





purchaser of
Sotheby’s International Realty, Inc., a Michigan corporation, as contemplated
by Disclosure Schedule (3.15).


                    (d)          Each
Borrower, at its own expense, shall delivermake available
to Agent upon reasonable request
the results of each physical verification, if any, that such Borrower or any of
its Subsidiaries may in their discretion have made, or caused any other Person
to have made on their behalf, of all or any portion of the Collateral
(including, without limitation, any Works of Art securing repayment of Art
Loans and any Art Inventory) (and, if a Default or an Event of Default has
occurred and is continuing, each Borrower shall, upon the request of Agent,
conduct, and deliver the results of, such physical verifications as Agent may
require). 


                    (e)          Such
other reports, statements and reconciliations with respect to the Borrowing
Bases, Collateral or Obligations of any or all of the Credit Parties as Agent
shall from time to time request in its reasonable discretion.


F-2





ANNEX G (Section 6.10)

to

CREDIT
AGREEMENT


FINANCIAL COVENANTS


                    Borrowers
shall not breach or fail to comply with any of the following financial
covenants, each of which shall be calculated in accordance with GAAP
consistently applied:


                    (a)          Maximum
Capital Expenditures. During each Fiscal Year, Parent and its Subsidiaries
on a consolidated basis shall not make Capital Expenditures (other than
portions of such Capital Expenditures financed by the Lenders hereunder) during
such Fiscal Year in excess of the
amount set forth below opposite such Fiscal Year:$25,000,000. Notwithstanding the foregoing, to
the extent that Parent and its Subsidiaries on a consolidated basis make
Capital Expenditures of less than $25,000,000 during any Fiscal Year (the
“Current Fiscal Year”), the aggregate amount available for Parent and its
Subsidiaries to make Capital Expenditures during the immediately subsequent
Fiscal Year pursuant to this clause (a) shall be increased by an amount equal
to the lesser of (x) the excess of $25,000,000 over the amount of Capital
Expenditures made by Parent and its Subsidiaries on a consolidated basis during
the Current Fiscal Year, and (y) $12,500,000.


	
  

 	
  

 
	
  

 	
  

 
	
  

 	
  

 
	
 Fiscal Year

 	
 Maximum Capital 

 Expenditure

 
	
  

 	
  

 
	
 2009

 	
 $17,000,000

 
	
 2010

 	
 $22,000,000

 
	
 Any subsequent Fiscal Year

 	
 $17,000,000

 



Notwithstanding the
foregoing, (i) Capital Expenditures of Parent and its Subsidiaries made
prior to the Closing Date during the 2009 Fiscal Year in connection with the
purchase of Real Estate located at 1334 York Avenue, New York, New York 10021,
in an aggregate amount not to exceed $88,000,000, shall not be counted toward
the aggregate amount available for Parent and its Subsidiaries to make Capital
Expenditures during the 2009 Fiscal Year, and (ii) to
the extent that Parent and its Subsidiaries on a consolidated basis make
Capital Expenditures of less than $17,000,000 during any Fiscal Year (the “Current
Fiscal Year”), the aggregate amount available for Parent and its
Subsidiaries to make Capital Expenditures during the immediately subsequent
Fiscal Year pursuant to this clause (a) shall be increased by an amount
equal to the lesser of (x) the excess of $17,000,000
over the amount of Capital Expenditures made by Parent and its Subsidiaries on
a consolidated basis during the Current Fiscal Year, and (y) $8,500,000.


                    
(b)          Minimum
Fixed Charge Coverage Ratio. During each Financial Covenant Compliance
Period, Parent and its Subsidiaries shall have on a consolidated basis at the
end of the most recently ended Fiscal Quarter for which Financial Statements
are required to be delivered to Agent and Lenders pursuant to Annex E, a
Fixed Charge Coverage Ratio for the 


G-1





four Fiscal-Quarter
period then ended of not less than the ratio set forth below opposite such
Fiscal Quarter:


                      (b)          Minimum
Fixed Charge Coverage Ratio. During each Financial Covenant Compliance Period,
Parent and its Subsidiaries shall have on a consolidated basis at the end of
the most recently ended Fiscal Quarter for which Financial Statements are
required to be delivered to Agent and Lenders pursuant to Annex E, a Fixed
Charge Coverage Ratio for the four Fiscal-Quarter period then ended of not less
than the ratio set forth below opposite such Fiscal Quarter:


	
  

 	
  

 
	
 Fiscal Quarter Ended 

 	
Minimum Fixed 

Charge Coverage 

Ratio 

 
	



 	



 
	
  

 	
  

 
	
 December 31, 2009

 	
 1.00:1.00

 
	
 March 31, 2010

 	
 1.05:1.00

 
	
 Any subsequent Fiscal Quarter

 	
 1.15:1.00

 



                    (c)          Minimum
EBITDA. During each Financial Covenant Compliance Period, Parent and its
Subsidiaries shall have on a consolidated basis at the end of the most recently
ended Fiscal Quarter for which Financial Statements are required to be
delivered to Agent and Lenders pursuant to Annex E, EBITDA for the
12-month period then ended of not less than the amount set forth below opposite
such Fiscal Quarter:


	
  

 	
  

 
	
 Fiscal Quarter Ended 

 	
 Minimum EBITDA 

 
	



 	



 
	
  

 	
  

 
	
 December 31, 2009

 	
 $60,000,000

 
	
 March 31, 2010

 	
 $65,000,000

 
	
 June 30, 2010

 	
 $75,000,000

 
	
 September 30, 2010

 	
 $75,000,000

 
	
 December 31, 2010

 	
 $80,000,000

 
	
 Any subsequent Fiscal Quarter

 	
 $100,000,000

 




                    Unless
otherwise specifically provided herein, any accounting term used in the
Agreement shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP consistently applied. That certain items or computations are
explicitly modified by the phrase “in accordance with GAAP” shall in no way be
construed to limit the foregoing. If any “Accounting Changes” (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrowers, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrowers’ and their Subsidiaries’ financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made; provided,
however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders. “Accounting
Changes” means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or 


G-2





opinion by the
Financial Accounting Standards Board of the American Institute of Certified
Public Accountants (or successor thereto or any agency with similar functions),
(ii) changes in accounting principles concurred in by any Borrower’s certified
public accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17
and EITF 88-16, and the application of the accounting principles set forth in
FASB 109, including the establishment of reserves pursuant thereto and any
subsequent reversal (in whole or in part) of such reserves; and (iv) the
reversal of any reserves established as a result of purchase accounting adjustments.
All such adjustments resulting from expenditures made subsequent to the Closing
Date (including capitalization of costs and expenses or payment of pre-Closing
Date liabilities) shall be treated as expenses in the period the expenditures
are made and deducted as part of the calculation of EBITDA in such period. If
Agent, Borrowers and Requisite Lenders agree upon the required amendments, then
after appropriate amendments have been executed and the underlying Accounting
Change with respect thereto has been implemented, any reference to GAAP
contained in the Agreement or in any other Loan Document shall, only to the
extent of such Accounting Change, refer to GAAP, consistently applied after
giving effect to the implementation of such Accounting Change. If Agent,
Borrowers and Requisite Lenders cannot agree upon the required amendments
within thirty (30) days following the date of implementation of any Accounting
Change, then all Financial Statements delivered and all calculations of
financial covenants and other standards and terms in accordance with the
Agreement and the other Loan Documents shall be prepared, delivered and made
without regard to the underlying Accounting Change. For purposes of Section
8.1, a breach of a Financial Covenant contained in this Annex G
shall be deemed to have occurred as of any date of determination by Agent or as
of the last day of any specified measurement period, regardless of when the
Financial Statements reflecting such breach are delivered to Agent. Notwithstanding any other
provision contained the Agreement, all terms of an accounting or financial
nature used in the Agreement shall be construed, and all computations of
amounts and ratios referred to in Section 6 of the Agreement or this Annex G
shall be made, without giving effect to any election under Accounting Standards
Codification 825-10 (or any other Financial Accounting Standard having a
similar result or effect) to value any Indebtedness or other liabilities of any
Sotheby Entity at “fair value.”


G-3





ANNEX H (Section
9.9(a))

to

CREDIT AGREEMENT


WIRE TRANSFER INFORMATION


	
  

 	
  

 
	
 Dollars

 	
  

 
	
  

 	
  

 
	
 Name:

 	
 General
 Electric Capital Corporation

 
	
  

 	
  

 
	
 Bank:

 	
 Deutsche
 Bank Trust Company Americas

 
	
  

 	
  

 
	
  

 	
 New York,
 New York

 
	
  

 	
  

 
	
 ABA #:

 	
 021001033

 
	
  

 	
  

 
	
 Account #:

 	
 50279513

 
	
  

 	
  

 
	
 Account Name:

 	
 GECC CFS CIF
 Collection Account

 
	
  

 	
  

 
	
 Reference:

 	
 CFK 1731 /
 Sotheby’s Inc.

 
	
  

 	
  

 
	
 Sterling

 	
  

 
	
  

 	
  

 
	
 Name:

 	
 General
 Electric Capital Corporation

 



H-1









	
  

 	
  

 
	
 Bank:

 	
 Barclays
 Bank

 
	
  

 	
  

 
	
  

 	
 London,
 England

 
	
  

 	
  

 
	
 Account #:

 	
 00282596

 
	
  

 	
  

 
	
 Reference:

 	
 CFK 1731 /
 Sotheby’s Inc.

 



H-2





ANNEX I (Section 11.10)

to
CREDIT AGREEMENT



NOTICE ADDRESSES 


	
  

 	
  

 
	
 (A)

 	
 If to Agent
 or GE Capital, at

 
	
  

 	
  

 
	
  

 	
 General
 Electric Capital Corporation

 
	
  

 	
 10 Riverview
 Drive

 
	
  

 	
 Danbury, CT
 06810

 
	
  

 	
 Attention:
 Sotheby’s Account Manager

 
	
  

 	
 Telecopier
 No.: (203) 749-4307

 
	
  

 	
 Telephone
 No.: (203) 749-6231

 
	
  

 	
  

 
	
  

 	
 with a copy
 to:

 
	
  

 	
  

 
	
  

 	
 General
 Electric Capital Corporation

 
	
  

 	
 201 Merritt
 Seven

 
	
  

 	
 Norwalk,
 Connecticut 06856

 
	
  

 	
 Attention:
 Corporate Counsel - Commercial Finance

 
	
  

 	
 Telecopier
 No.: (203) 229-5810

 
	
  

 	
 Telephone
 No.: (203) 956-4379

 
	
  

 	
  

 
	
 (B)

 	
 If to any
 Borrower, to Borrower Representative, at

 
	
  

 	
  

 
	
  

 	
 Sotheby’s 

 
	
  

 	
 1334 York
 Avenue

 
	
  

 	
 New York, NY
 10021

 
	
  

 	
 Attention:
 Chief Financial Officer

 
	
  

 	
 Telecopier
 No.: (212) 606-7372

 
	
  

 	
 Telephone
 No.: (212) 606-7107

 
	
  

 	
  

 
	
  

 	
 with a copy
 to:

 
	
  

 	
  

 
	
  

 	
 Sotheby’s 

 
	
  

 	
 1334 York
 Avenue

 
	
  

 	
 New York, NY
 10021

 
	
  

 	
 Attention:
 General Counsel

 
	
  

 	
 Telecopier
 No.: (212) 606-7574

 
	
  

 	
 Telephone
 No.: (212) 894-1439

 



I-1





ANNEX J (from Annex A - Commitments definition)

to

CREDIT
AGREEMENT 


	
  

 	
  

 	
  

 
	
 Commitment

 	
 Sterling/Non-Sterling 

 Lender

 	
 Lender(s)

 
	
 $50,000,000

 	
 Sterling Lender

 	
 General Electric Capital Corporation

 
	
 $40,000,000

 	
 Sterling Lender

 	
 HSBC Bank plc

 
	
 $10,000,000

 	
 Sterling Lender

 	
 HSBC Bank USA, National Association

 
	
 $25,000,000

 	
 Sterling Lender

 	
 JPMorgan Chase Bank, N.A.

 
	
 $25,000,000

 	
 Non-Sterling Lender

 	
 The PrivateBank and Trust Company

 
	
 $20,000,000

 	
 Non-Sterling Lender

 	
 TD Bank, N.A.

 
	
 $10,000,000

 	
 Sterling Lender

 	
 Bank of America, N.A.

 
	
 $10,000,000

 	
 Sterling Lender

 	
 Comerica Bank

 
	
 $10,000,000

 	
 Sterling Lender

 	
 Israel Discount Bank of New York

 
	
 $200,000,000

 	
  

 	
 Total

 
	
  

 	
  

 	
  

 
	
 Swing Line Commitment

 	
  

 	
 Lender

 
	
 $15,000,000

 	
  

 	
 General Electric Capital Corporation

 



J-2





EXECUTION COPY


SCHEDULE 1.5


MANDATORY COST


	
  

 	
  

 
	
 1.

 	
 The Mandatory Cost is an addition to the interest rate to compensate
 Sterling Lenders for the cost of compliance with (a) the requirements of the
 Bank of England and/or the Financial Services Authority (or, in either case,
 any other authority which replaces all or any of its functions) or (b) the
 requirements of the European Central Bank. Each reference herein shall, at
 the option of the Fronting Lender, include the Fronting Lender.

 
	
  

 	
  

 
	
 2.

 	
 On the first day of each LIBOR Period for each Sterling Revolving
 Credit Advance (or as soon as possible thereafter) Agent shall calculate, as
 a percentage rate, a rate (the “Associated Costs Rate”) for each
 Sterling Lender, in accordance with the paragraphs set out below. The
 Mandatory Cost will be calculated by Agent as a weighted average of the
 Sterling Lenders’ Associated Costs Rates (weighted in proportion to the
 percentage participation of each Sterling Lender in the relevant Sterling
 Revolving Credit Advance) and will be expressed as a percentage rate per
 annum.

 
	
  

 	
  

 
	
 3.

 	
 The Associated Costs Rate for any Sterling Lender lending from a
 Facility Office in a Participating Member State will be the percentage
 notified by that Sterling Lender to Agent. This percentage will be certified
 by that Sterling Lender in its notice to Agent to be its reasonable
 determination of the cost (expressed as a percentage of that Sterling
 Lender’s participation in all Sterling Revolving Credit Advances made from
 that Facility Office) of complying with the minimum reserve requirements of
 the European Central Bank in respect of Sterling Revolving Credit Advances
 made from that Facility Office.

 
	
  

 	
  

 
	
 4.

 	
 The Associated Costs Rate for any Sterling Lender lending from a
 Facility Office in the United Kingdom will be calculated by Agent as follows:

 
	
  

 	
  

 



	
  

 	
  

 	
  

 
	
  

 	
 

 	
    per cent. per annum

 






	
  

 	
  

 	
  

 
	
  

 	
 Where:

 
	
  

 	
  

 
	
  

 	
 A

 	
 is the percentage of Eligible Liabilities (assuming these to be in
 excess of any stated minimum) which that Sterling Lender is from time to time
 required to maintain as an interest free cash ratio deposit with the Bank of
 England to comply with cash ratio requirements.

 
	
  

 	
  

 	
  

 
	
  

 	
 B

 	
 is the percentage rate of interest (excluding the Applicable Sterling
 Revolver LIBOR Margin and the Mandatory Cost and, if the Sterling Revolving
 Credit Advance is an Unpaid Sum, the additional rate of interest specified in
 Section 1.5(d)) payable for the relevant LIBOR Period on the Sterling
 Revolving Credit Advance.

 













	
  

 	
  

 	
  

 
	
  

 	
 C

 	
 is the percentage (if any) of Eligible Liabilities which that
 Sterling Lender is required from time to time to maintain as interest bearing
 Special Deposits with the Bank of England.

 
	
  

 	
  

 	
  

 
	
  

 	
 D

 	
 is the percentage rate per annum payable by the Bank of England to
 Agent on interest bearing Special Deposits.

 
	
  

 	
  

 	
  

 
	
  

 	
 E

 	
 is designed to compensate Sterling Lenders for amounts payable under
 the Fees Rules and is calculated by Agent as being the average of the most
 recent rates of charge supplied by the Reference Banks to Agent pursuant to paragraph
 7 below and expressed in pounds per £1,000,000.

 
	
  

 	
  

 	
  

 
	
 5.

 	
 For the purposes of this Schedule:

 
	
  

 	
  

 
	
  

 	
 (a)

 	
 “Eligible Liabilities” and “Special Deposits” have the
 meanings given to them from time to time under or pursuant to the Bank of
 England Act 1998 of the United Kingdom or (as may be appropriate) by the Bank
 of England.

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 “Facility Office” means the office or offices notified by a
 Sterling Lender to Agent in writing on or before the date it becomes a
 Sterling Lender (or, following that date, by not less than five Business
 Days’ written notice) as the office or offices through which it will perform
 its obligations under this Agreement.

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 “Fees Rules” means the rules on periodic fees contained in the
 Financial Services Authority Supervision Manual or such other law or
 regulation as may be in force from time to time in respect of the payment of
 fees for the acceptance of deposits.

 
	
  

 	
  

 	
  

 
	
  

 	
 (d)

 	
 “Fee Tariffs” means the fee tariffs specified in the Fees
 Rules under the activity group A.1 Deposit acceptors (ignoring any minimum
 fee or zero rated fee required pursuant to the Fees Rules but taking into
 account any applicable discount rate).

 
	
  

 	
  

 	
  

 
	
  

 	
 (e)

 	
 “Participating Member State” means any member state of the
 European Union that adopts or has adopted the euro as its lawful currency in
 accordance with legislation of the European Union relating to economic and
 monetary union.

 
	
  

 	
  

 	
  

 
	
  

 	
 (f)

 	
 “Reference Banks” means, in relation to Mandatory Cost, the principal
 London offices of HSBC Bank plc and/or such other bank or banks as may be
 designated by Agent in its reasonable discretion.

 
	
  

 	
  

 	
  

 
	
  

 	
 (g)

 	
 “Tariff Base” has the meaning given to it in, and will be
 calculated in accordance with, the Fees Rules.

 
	
  

 	
  

 	
  

 
	
  

 	
 (h)

 	
 “Unpaid Sum” means any sum due and payable but unpaid by any
 Borrower under the Sterling Revolving Credit Advance Documents.

 
	
  

 	
  

 	
  

 
	
 6.

 	
 In application of the above formulae, A, B, C and D will be included
 in the formulae as percentages (i.e. 5 per cent. will be included in the
 formula as 5 and not as 0.05). A 

 


4









	
  

 	
  

 	
  

 
	
  

 	
 negative result obtained by subtracting D from B shall be taken as
 zero. The resulting figures shall be rounded to four decimal places.

 
	
  

 	
  

 
	
 7.

 	
 If requested by Agent, each Reference Bank shall, as soon as
 practicable after publication by the Financial Services Authority, supply to
 Agent, the rate of charge payable by that Reference Bank to the Financial
 Services Authority pursuant to the Fees Rules in respect of the relevant
 financial year of the Financial Services Authority (calculated for this
 purpose by that Reference Bank as being the average of the Fee Tariffs
 applicable to that Reference Bank for that financial year) and expressed in
 pounds per £1,000,000 of the Tariff Base of that Reference Bank.

 
	
  

 	
  

 
	
 8.

 	
 Each Sterling Lender shall supply any information required by Agent
 for the purpose of calculating its Associated Costs Rate. In particular, but
 without limitation, each Sterling Lender shall supply the following
 information on or prior to the date on which it becomes a Sterling Lender:

 
	
  

 	
  

 
	
  

 	
 (a)

 	
 the jurisdiction of its Facility Office; and

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 any other information that Agent may reasonably require for such
 purpose.

 
	
  

 	
  

 	
  

 
	
  

 	
 Each Sterling Lender shall promptly notify Agent of any change to the
 information provided by it pursuant to this paragraph.

 
	
  

 	
  

 
	
 9.

 	
 The percentages of each Sterling Lender for the purpose of A and C
 above and the rates of charge of each Reference Bank for the purpose of E
 above shall be determined by Agent based upon the information supplied to it
 pursuant to paragraphs 7 and 8 above and on the assumption
 that, unless a Sterling Lender notifies Agent to the contrary, each Sterling
 Lender’s obligations in relation to cash ratio deposits and Special Deposits
 are the same as those of a typical bank from its jurisdiction of
 incorporation with a Facility Office in the same jurisdiction as its Facility
 Office.

 
	
  

 	
  

 
	
 10.

 	
 Agent shall have no liability to any person if such determination
 results in an Associated Costs Rate which over or under compensates any
 Sterling Lender and shall be entitled to assume that the information provided
 by any Sterling Lender or Reference Bank pursuant to paragraphs 3, 7
 and 8 above is true and correct in all respects. 

 
	
  

 	
  

 
	
 11.

 	
 Agent shall distribute the additional amounts received as a result of
 the Mandatory Cost to the Sterling Lenders on the basis of the Associated
 Costs Rate for each Sterling Lender based on the information provided by each
 Sterling Lender and each Reference Bank pursuant to paragraphs 3, 7
 and 8 above.

 
	
  

 	
  

 
	
 12.

 	
 Any determination by Agent pursuant to this Schedule in relation to a
 formula, the Mandatory Cost, an Associated Costs Rate or any amount payable
 to a Sterling Lender shall, in the absence of manifest error, be conclusive
 and binding on all parties hereto.

 
	
  

 	
  

 
	
 13.

 	
 Agent may from time to time, after consultation with the Company and
 the relevant Sterling Lenders, determine and notify to all parties hereto any
 amendments which are required to be made to this Schedule in order to comply
 with any change in law, regulation 

 


5









	
  

 	
  

 
	
  

 	
 or any requirements from time to time imposed by the Bank of England,
 the Financial Services Authority or the European Central Bank (or, in any
 case, any other authority which replaces all or any of its functions) and any
 such determination shall, in the absence of manifest error, be conclusive and
 binding on all parties.

 


6





EXHIBIT B


AMENDMENT NO. 1 TO SECURITY AGREEMENT


                    This
AMENDMENT NO. 1 TO SECURITY AGREEMENT (this “Amendment”), dated as of
November 23, 2010, is by and among Sotheby’s, a Delaware corporation (the “Company”),
the other “Grantors” (as hereinafter defined) party hereto, and General
Electric Capital Corporation, a Delaware corporation (“GE Capital”), in
its capacity as the Agent (in such capacity, the “Agent”). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to such terms in that certain Security Agreement, dated as of August
31, 2009 (as amended, restated, supplemented or otherwise modified from time to
time, the “Security Agreement”), by and among the Company, the Domestic
Subsidiaries of the Company party thereto (together with the Company, the “Grantors”)
and the Agent.


RECITALS


                    A.          The
Grantors have requested that the Agent amend the Security Agreement as set
forth herein.


                    B.          The
Agent has agreed, on the terms and conditions set forth below, to so amend the
Security Agreement.


AGREEMENT


                    NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Grantors and the Agent hereby agree as
follows:


                    5.          Amendments
to Security Agreement. Subject to the satisfaction of the conditions
precedent set forth in Paragraph 2 of this Amendment, the Security
Agreement is hereby amended as follows:


	
  

 	
  

 	
  

 
	
  

 	
           (a)          The
 definition of “Excluded Collateral” in Section 1(b) of the
 Security Agreement is hereby amended and restated to read as follows:

 
	
  

 	
  

 	
  

 
	
  

 	
               “Excluded
 Collateral” means, collectively, (a) Margin Stock consisting of Stock of
 Parent, (b) each liquor license owned by 72ND and York, Inc. (f/k/a Sunrise
 Liquors & Wines, Inc.), if the grant of a security interest therein
 pursuant to this Security Agreement or any other Loan Document would violate,
 or be rendered ineffective by, any applicable law, and (c) each Work of Art
 that has been consigned to a Grantor, until such time as such Grantor obtains
 title to such Work of Art, and the proceeds of any such consigned Work of Art
 to the extent such proceeds are payable by such Grantor to the applicable
 consignor.

 
	
  

 	
  

 
	
  

 	
           (b)          Section
 4(j) of the Security Agreement is hereby amended and restated to read as
 follows:

 


7









	
  

 	
  

 
	
  

 	
             (j)           [Reserved]

 	
  

 


                    6.           Effectiveness
of this Amendment; Conditions Precedent. The provisions this Amendment
shall be deemed to have become effective as of the date of this Amendment, but
such effectiveness shall be expressly conditioned upon the Agent’s receipt of a
counterpart of this Amendment executed and delivered by duly authorized
officers of each Grantor and the Agent.


                    7.           Miscellaneous.


                    (a)          Headings.
The various headings of this Amendment are inserted for convenience of
reference only and shall not affect the meaning or interpretation of this
Amendment or any provisions hereof.


                    (b)          Counterparts.
This Amendment may be executed by the parties hereto in several counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument. Delivery of an executed
counterpart of a signature page to this Amendment by facsimile transmission
shall be effective as delivery of a manually executed counterpart thereof.


                    (c)          Interpretation.
No provision of this Amendment shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party’s having or being deemed to have structured,
drafted or dictated such provision.


                    (d)          Representations,
Warranties and Covenants. Each Grantor hereby represents and warrants that,
as of the date hereof:


                    (i)          this
Amendment and the Security Agreement as amended by this Amendment, constitute
the legal, valid and binding obligations of such Grantor, enforceable against
it in accordance with their respective terms except as enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditor’s rights generally or by equitable principles relating
to enforceability;


                    (ii)          its
execution, delivery and performance of this Amendment and its performance of
the Security Agreement as amended by this Amendment, to the extent a party
thereto, have been duly authorized by all necessary corporate action and do
not: (1) contravene the terms of any of such Grantor’s charter, bylaws or
operating agreement, as applicable, (2) violate any law or regulation, or any
order or decree of any court or Governmental Authority, (3) conflict with or
result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which any Sotheby Entity is a party or by which any Sotheby Entity or any of
its property is bound, (4) result in the creation or imposition of any Lien
upon any of the property of any Sotheby Entity other than those in favor of the
Agent, on behalf of itself and the other Secured Parties, pursuant to the Loan
Documents, or (5) require the consent or approval of any Governmental Authority
or any other Person that has not already been obtained; and


8





                    (iii)          after
giving effect to this Amendment, (1) no “Default” or “Event of Default” under
the Credit Agreement has occurred and is continuing and (2) all of the
representations and warranties of such Grantor contained in the Security
Agreement and in each other Loan Document to which it is a party (other than
representations and warranties which, in accordance with their express terms,
are made only as of an earlier specified date) are true and correct as of the
date of such Grantor’s execution and delivery hereof or thereof as though made
on and as of such date.


                    (e)          Governing
Law. THIS
AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE.


                    (f)          Effect.
Upon the effectiveness of this Amendment, each reference in the Security
Agreement to “this Agreement,” “hereunder,” “hereof” or words of like import
shall mean and be a reference to the Security Agreement as amended hereby and
each reference in the other Loan Documents to the Security Agreement,
“thereunder,” “thereof,” or words of like import shall mean and be a reference
to the Security Agreement as amended hereby. Except as expressly provided in
this Amendment, all of the terms, conditions and provisions of the Security
Agreement and the other Loan Documents shall remain the same. This Amendment
shall constitute a Loan Document.


                    (g)          No
Novation or Waiver. Except as specifically set forth in this Amendment, the
execution, delivery and effectiveness of this Amendment shall not (a) limit,
impair, constitute a waiver by, or otherwise affect any right, power or remedy
of, the Agent or any Lender under the Security Agreement or any other Loan
Document, (b) constitute a waiver of any provision in the Security Agreement or
in any of the other Loan Documents or of any “Default” or “Event of Default”
under the Credit Agreement that may have occurred and be continuing or (c)
alter, modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Security Agreement or in
any of the other Loan Documents, all of which are ratified and affirmed in all
respects and shall continue in full force and effect.


                    (h)          Agent’s
Expenses. The Grantors hereby jointly and severally agree to promptly
reimburse the Agent for all of the reasonable out-of-pocket expenses,
including, without limitation, attorneys’ and paralegals’ fees, it has
heretofore or hereafter incurred or incurs in connection with the preparation,
negotiation and execution of this Amendment.


******


9





                    IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day
and year first above written.




	
  

 	
  

 
	
 SOTHEBY’S,

 
	
 a Delaware corporation

 
	
  

 	
  

 
	
 By:

 	
  

 
	
 Name:

 
	
 Title: 

 
	
  

 	
  

 
	
 SOTHEBY’S, INC.

 
	
  

 
	
 By:

 	
  

 
	
 Name:

 
	
 Title: 

 
	
  

 	
  

 
	
 SOTHEBYS.COM LLC

 
	
  

 
	
 By:

 	
  

 
	
 Name: 

 
	
 Title: 

 
	
  

 	
  

 
	
 72ND AND YORK, INC.

 
	
  

 
	
 By:

 	
  

 
	
 Name: 

 
	
 Title:

 







	
  

 	
  

 
	
 SOTHEBY’S FINE ART HOLDINGS, INC.

 	
  

 
	
 SOTHEBY’S FINANCIAL SERVICES, INC.

 	
  

 
	
 SOTHEBY’S FINANCIAL SERVICES CALIFORNIA,
 INC.

 	
  

 
	
 OBERON, INC.

 	
  

 
	
 THETA, INC.

 	
  

 
	
 SOTHEBY’S VENTURES, LLC

 	
  

 
	
 SOTHEBY’S ASIA, INC.

 	
  

 
	
 SPTC, INC.

 	
  

 
	
 SOTHEBY PARKE BERNET, INC.

 	
  

 
	
 YORK AVENUE DEVELOPMENT, INC.

 	
  

 
	
 SOTHEBY’S THAILAND, INC.

 	
  

 
	
 SOTHEBY’S HOLDINGS INTERNATIONAL, INC.

 	
  

 
	
 SOTHEBY’S NEVADA, INC.

 	
  

 
	
 SOTHEBYS.COM AUCTIONS, INC.

 	
  

 
	
 SIBS, LLC

 	
  

 
	
 SOTHEBY’S RES, INC.

 	
  

 






	
  

 	
  

 
	
 By:

 	
  

 
	
 Name:

 
	
 Title:

 








Signature Page to

Amendment No. 1
to Security Agreement









	
  

 	
  

 	
  

 
	
  

 	
 GENERAL ELECTRIC CAPITAL

 
	
  

 	
 CORPORATION, as
 the Agent

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
 Name:

 
	
  

 	
 Title:

 









EXHIBIT
C


AMENDMENT
NO. 4 TO CREDIT AGREEMENT


among


SOTHEBY’S
AND CERTAIN SUBSIDIARIES

THEREOF, THE LENDERS PARTY THERETO AND GENERAL

ELECTRIC CAPITAL CORPORATION, AS AGENT


November 23, 2010


LIST OF CLOSING DOCUMENTS1


                     8.          AMENDMENT DOCUMENTS


                    (a)          Amendment
No. 4 to Credit Agreement, dated as of November 23, 2010 (“Amendment No. 4”),
among Sotheby’s, a Delaware corporation (“Parent”), Sotheby’s, Inc., a
New York corporation (“Sotheby’s, Inc.”), Sotheby’s Financial Services,
Inc., a Nevada corporation (“SFS Inc.”), Sotheby’s Financial Services
California, Inc., a Nevada corporation (“SFS California”), Oberon, Inc.,
a Delaware corporation (“Oberon”), Theta, Inc., a Delaware corporation (“Theta”),
Sotheby’s Ventures, LLC, a New York limited liability company (“Ventures LLC”
and, collectively with Parent, Sotheby’s, Inc., SFS Inc., SFS California,
Oberon and Theta, the “U.S. Borrowers”), Oatshare Limited, a company
registered in England (“Oatshare”), Sotheby’s, a company registered in
England (“Sotheby’s U.K.”), and Sotheby’s Financial Services Limited, a
company registered in England (“SFS Ltd.” and, collectively with
Oatshare and Sotheby’s U.K., the “U.K. Borrowers” and, collectively with
the U.S. Borrowers, the “Borrowers”); the other Credit Parties signatory
thereto; General Electric Capital Corporation, a Delaware corporation (in its
individual capacity, “GE Capital”), for itself, as a Lender, and as
Agent for the Lenders (in such capacity, “Agent”), and the other
Lenders.


                    (b)          Amendment
No. 1 to Security Agreement, dated as of November 23, 2010, among the U.S.
Credit Parties and Agent.


                    (c)          Reaffirmation,
dated as of November 23, 2010, by the Credit Parties.


                    (d)          Letter
of Affirmation, dated as of November 23, 2010, by the U.K. Credit Parties.


                    9.          CORPORATE
DOCUMENTS


	
  

 	
  

 
	
  

 	
  

 
	
 1          Each
 capitalized term used herein and not defined herein shall have the meaning
 assigned to such term in the Credit Agreement. Items appearing in bold and italics shall be prepared
 and/or provided by the Borrowers and/or Borrowers’ counsel.

 









                    (a)          Certificate of the Secretary or an
Assistant Secretary of each U.S. Credit Party certifying (i) that there have
been no changes in the Articles or Certificate of Incorporation, Certificate of
Formation or other charter document of such U.S. Credit Party, as attached
thereto and as certified as of a recent date by the secretary of state (or the
equivalent thereof) of its jurisdiction of organization, if applicable, since
the date of the certification thereof by such secretary of state (or equivalent
thereof), if applicable, (ii) that the By-Laws, Operating Agreement, or other
applicable organizational document of such U.S. Credit Party as in effect on
the Closing Date remains in full force and effect, and has not been modified
rescinded or amended since the Closing Date, (iii) resolutions of the Board of
Directors or other governing body of such U.S. Credit Party authorizing the
execution, delivery and performance of Amendment No. 4, and (iv) the names and
true signatures of the incumbent officers of such U.S. Credit Party authorized
to sign Amendment No. 4.


                    (b)          Good Standing Certificates (or the
equivalent thereof) for each U.S. Credit Party from the Secretary of State (or
the equivalent thereof) of its respective jurisdiction of organization.


                    (c)          Formalities Certificate for each
U.K. Credit Party certifying (i) a specimen signature of each person authorized
on behalf of such U.K. Credit Party to execute or witness the execution of any
Loan Documents to which it is party or to sign or send any document or notice
in connection with Amendment No. 4, (ii) that each copy document of such U.K.
Credit Party attached thereto is correct, complete and in full force and effect
as at a date no earlier than the date of Amendment No. 4, and (iii) resolutions
of the governing body of such U.K. Credit Party authorizing the execution,
delivery and performance of Amendment No. 4.


                    10.          OPINIONS


                    (a)          Opinion of Weil, Gotshal & Manges LLP, special
counsel to the Credit Parties, regarding matters of New York law.


                    (b)          Opinion
of Sidley Austin LLP, counsel to Agent, regarding matters of English law. 


                    11.          UCC
DOCUMENTS


                    (a)          UCC,
tax and judgment lien, and name variation search reports naming each Credit
Party from the appropriate offices in relevant jurisdictions.


                    12.          CLOSING
CERTIFICATES


                    (a)          Certificate of the Chief Financial
Office of Parent stating that, as of the date of such certificate, (a) the
representations and warranties of the Credit Parties set forth in the Credit
Agreement and in the other Loan Documents are true and correct, except to the
extent that such representations and warranties specifically refer to an
earlier date, in which case they were true and correct in all material respects
as of such earlier date, (b) no Default or Event of Default has occurred and is
continuing, and (c) before and after giving effect to the transactions
contemplated by Amendment No. 4, each Credit Party will be Solvent.