Document:

EXHIBIT 10.3

 

 

 

SOTHEBY’S

 

DEFERRED COMPENSATION PLAN

 

 

SOTHEBY’S

DEFERRED COMPENSATION PLAN

 

Sotheby’s, Inc. hereby adopts this Sotheby’s Deferred Compensation Plan (the “Plan”), effective as of January 1, 2007, as a restatement and merger of its previously established nonqualified deferred compensation arrangements.  Specifically, the Company (as defined below) previously established the Sotheby’s, Inc. 1988 Benefit Equalization Plan (the “1988 Plan”) and the Sotheby’s, Inc. 2005 Benefit Equalization Plan (the “2005 Plan,” and collectively with the 1988 Plan, the “Prior Plans”) to provide deferred compensation in excess of limits imposed under the Sotheby’s, Inc. Retirement Savings Plan (the “Qualified Plan”) to a select group of management and highly compensated employees.  Any liabilities associated with the Prior Plans shall be assumed by this Plan as of the date of merger and restatement.

Notwithstanding anything herein to the contrary, all amounts credited to participants hereunder that were not earned and vested as of December 31, 2004 shall be subject to the terms and conditions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).  Further, nothing in this Plan shall, or is intended to, constitute a “material modification” of the terms of the 1988 Plan so as to subject amounts that were earned and vested as of December 31, 2004 to the provisions of Section 409A of the Code.  

 

IN WITNESS WHEREOF, the merger and restatement of the Plan, the 1998 Plan and the 2005 Plan is adopted this 21st  day of December, 2006.

 

SOTHEBY’S, INC.

 

 

	 	By:	 	/s/ Susan Alexander	   	 
	 	 	 	Susan Alexander	 
	 	 	:	 	 
	 	 	Its	Executive Vice President,	 
	 	 	 	Human Resources	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

 

 

	
            1.
 	
            Definitions
 

(a)          “1988 Plan” shall mean the Sotheby’s, Inc. 1988 Benefit Equalization Plan.

(b)          “2005 Plan” shall mean the Sotheby’s, Inc. 2005 Benefit Equalization Plan.

(c)          “Account” shall mean the account of Employee Deferrals and Company Deferrals and hypothetical earnings thereon, credited with respect to each Eligible Employee and established solely as a bookkeeping entry.  Within the Account, two sub-accounts shall be maintained:  (i) a “Pre-2005 Account,” which shall consist of all amounts earned and vested as of December 31, 2004 (and all hypothetical earnings thereon), and (ii) a “Post-2004 Account,” which shall consist of all amounts that were not earned and vested as of December 31, 2004 (and all hypothetical earnings thereon).  

(d)          “Base Salary” shall mean an employee’s annual base salary rate during the Deferral Period.

(e)          “Beneficiary” shall be the individual designated to receive the Eligible Employee’s benefit upon his death prior to receiving his Account balance, as determined under Section 10.  

(f)           “Board” shall mean the Board of Directors of Sotheby’s or any committee or committee members of the Board to which the Board has delegated authority with respect to the Plan.

(g)
          “Cause” shall mean the Eligible Employee has (i) willfully engaged in conduct which is materially injurious to the Company, monetarily or otherwise; (ii) misappropriated (including the unauthorized use of disclosure of confidential or proprietary information of the Company) or embezzled with respect to the Company; or (iii) was convicted of, pleaded guilty to, or confessed to, any fraud, conversion, misappropriation, embezzlement, or felony affecting the Company, (iv) violated the non-compete terms of a notice and/or non-competition agreement entered into with the Company, or (v) engaged in any other action that would constitute “cause” or any similar term as defined under any applicable employment agreement entered into
with the Company.

(h)
          “Change of Control” means for purposes of the Plan, the date upon which:

(i)          any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”), shall become, directly or indirectly, the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of common stock of Sotheby’s (the “Corporation”) enabling such Person to elect a majority of the members of the Board of Directors of the Corporation; or 

 (ii)         the individuals who constitute the Board of Directors of the Corporation (the “Incumbent Board”) cease for any reason within any period of 12 

 

consecutive months to constitute at least a majority of the members of the Board of Directors of the Corporation; provided, however, that any individual becoming a director whose election, or nomination for election by the Corporation’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though the individual were a member of the Incumbent Board.

(i)           “Code” shall mean the Internal Revenue Code of 1986, as amended.

(j)           “Committee” shall mean the Sotheby’s, Inc. Retirement Savings Administrative Committee.

(k)          “Company” shall mean Sotheby’s, Inc. and each United States parent, subsidiary or related entity that participates in the Qualified Plan.

(l)           “Company Deferrals” shall mean the amount of Matching Allocations and Profit Sharing Allocations allocated to an Eligible Employee’s Account and the hypothetical earnings attributable thereto.

(m)          “Deferral Period” shall mean each calendar year.

(n)          “Director Compensation” shall mean the annual cash retainer or fees paid to a Member of the Board.

(o)          “Disability” or “Disabled” shall mean the Eligible Employee is, by reason of a medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under the Company’s disability benefits plans.

(p)          “Eligible Employee” shall mean, for any calendar year:

(i)           employees
  of the Company with titles of Senior Vice President or higher;

(ii)          Members of the Board; and

(iii)         any
  other employee of the Company that is specifically selected by the Committee
  for participation and notified in writing of such selection.

An Eligible Employee shall not be permitted to participate in the Plan unless and until he completes all forms or documentation (including insurance consent forms, if required by the Committee) required to be completed by the Committee even where the Eligible Employee chooses not to make Employee Deferrals.

Notwithstanding the foregoing, an Eligible Employee shall not include any individual (i) designated by the Company as an independent contractor and not as an employee at the time of any determination, (ii) being paid by or through an employee leasing company or other third party agency, (iii) designated by the Company as a freelance worker and not as an employee at the time of any determination, (iv) classified by the Company as a seasonal, occasional, limited duration, or temporary employee, 

 

during the period the individual is so paid or designated, or (v) designated by the Company as a leased employee, during the period the individual is so paid or designated; any such individual shall not be an Eligible Employee even if he is later retroactively reclassified as a common-law employee of the Company during all or any part of such period pursuant to applicable law or otherwise.

(q)          “Employee Deferrals” shall mean the amounts an Eligible Employee elects to defer each Deferral Period pursuant to Section 2(a) of this Plan and the hypothetical earnings attributable thereto that are allocated to the Eligible Employee’s Account. 

(r)           “Incentive Compensation” shall mean cash compensation received from the Sotheby’s Annual Incentive Bonus Plan or the Sotheby’s Holdings, Inc. Executive Bonus Plan (or, at the sole discretion of the Committee, any other incentive compensation arrangement maintained by the Company that qualifies as “performance-based compensation” within the meaning of Section 409A of the Code and the regulations and rulings issued thereunder.  Notwithstanding the foregoing, the Company’s Private Treaty Incentive Plan is not considered Incentive Compensation under the Plan.).

(s)           “Matching Allocations” shall mean the credits described in Section 3(a) that are allocated to an Eligible Employee’s Account contingent on his Employee Deferrals for a given Deferral Period.

(t)           “Plan” shall mean this Sotheby’s Deferred Compensation Plan as described herein.

(u)          “Prior Plans” shall mean the 1988 Plan and 2005 Plan, collectively.

(v)          “Profit Sharing Allocations” shall mean the discretionary credits described in Section 3(b) that are allocated to an Eligible Employee’s Account and are not contingent on the Eligible Employee’s deferral of compensation for a given Deferral Period.

(w)         “Qualified Plan” shall mean the Sotheby’s, Inc. Retirement Savings Plan, as amended from time to time.

(x)          “Scheduled Distribution Date” shall mean the first day of any month prior to the Eligible Employee’s Separation from Service that is at least two years following the end of the Deferral Period in which Base Salary, Director Compensation, or Incentive Compensation would otherwise have been paid to the Eligible Employee. 

(y)          “Separation from Service” means an Eligible Employee’s separation from service with the Company within the meaning of section 409A of the Code and the regulations issued thereunder.

	
            2.
 	
            Employee Deferrals – Time of Election and Amount of Deferral
 

(a)          Base
  Salary/Director Compensation. Prior to each Deferral
  Period, each Eligible Employee for that Deferral Period may elect, irrevocably
  in writing (subject to Sections 7(e) and 9(c)(iii), on forms prescribed by the
  Committee, to defer (in whole 

 

integer percentages) receipt of the Base Salary or Director Compensation he would otherwise have received during the Deferral Period.  

 

Such deferral shall be limited to no more than 80% of Base Salary or 100% of Director Compensation.  Further, such deferrals for any pay period in which compensation would otherwise have been paid shall be reduced by the amount of compensation deferred by the Eligible Employee for such pay period under the Qualified Plan.  Subject to Sections 7(e) and 9(c)(iii), all deferral elections hereunder shall remain in effect for subsequent Deferral Periods unless affirmatively changed by an Eligible Employee during the Company’s annual open enrollment period.

 

 (b)        Incentive Compensation.  Prior to June 30th of each Deferral Period, each Eligible Employee for that Deferral Period may elect, irrevocably in writing (subject to Sections 7(e) and 9(c)(iii), on forms prescribed by the Committee, to defer (in whole integer percentages) receipt of all or a portion of the Incentive Compensation he would otherwise have received during the following calendar year that was attributable to service during the Deferral Period.  Subject to Sections 7(e) and 9(c)(iii), all deferral elections hereunder shall remain in effect for subsequent Deferral Periods unless affirmatively changed by an Eligible Employee during the Company’s annual incentive compensation enrollment period.

 

 (c)         Newly-Eligible Employees.  Notwithstanding the foregoing, any individual who first becomes an Eligible Employee after a Deferral Period has commenced shall be permitted to make the elections referenced in Sections 2(a) and 2(b) during the thirty day period commencing with his becoming an Eligible Employee, provided that only compensation earned following such election may be deferred by the Eligible Employee.  Unless otherwise determined by the Committee, newly-hired Eligible Employees as described under Section 1(p(i) shall become eligible to participate in the Plan upon becoming eligible to make elective deferrals under the Qualified Plan.

 

 (d)        Withholding.  The Company has the right to require the Eligible Employee to reduce the amount of his desired deferral by the amount of payroll taxes, income taxes, benefit plan contributions or other amounts required to be withheld or paid on such deferral.

 

	
            3.
 	
            Company Deferrals
 

(a)         Matching Allocations.  An Eligible Employee (other than a non-employee Member of the Board) who elects to defer Base Salary, Director Compensation and/or Incentive Compensation pursuant to Section 2 shall be eligible to receive Matching Allocations from the Company pursuant to the formula and allocated at such times as set forth in the Qualified Plan; provided, however, that the limitations imposed on such contributions under the Qualified Plan pursuant to Sections 401(m), 401(a)(17), and 402(g) of the Code shall not apply.  The Matching Allocations credited to an Eligible Employee’s Account shall be reduced during each pay period by the amount of matching contributions credited to the Eligible Employee’s account under the Qualified Plan for such period.

 (b)         Profit Sharing Allocations.  Each Deferral Period, the Company may, in its sole and absolute discretion, make a Profit Sharing Allocation to an Eligible Employee’s 

 

Account, regardless of his election to defer Base Salary and/or Incentive Compensation hereunder.  Such discretionary allocation shall only be made for Eligible Employees actively engaged by the Company as of December 31st of the Deferral Period for which the allocation is being made.  The amount and allocation formula may be based upon a percentage of compensation, overall Company performance, or such other factors as the Company deems appropriate, in its sole discretion.   The Profit Sharing Allocations credited to an Eligible Employee’s Account shall be reduced during each pay period by the amount of profit sharing contributions credited to the Eligible Employee’s account under the Qualified Plan for such period.

 (c)         Discretionary Allocations.  The Company may, in its sole and absolute discretion, make additional allocations to any Eligible Employee’s Account at any time and for any reason.

	
            4.
 	
            Election of Form and Timing of Payment
 

(a)         Initial Election.  At the time an Eligible Employee elects to defer Base Salary, Director Compensation and/or Incentive Compensation for a particular Deferral Period, he shall also elect in writing, on forms prescribed by the Committee, the time (either a Scheduled Distribution Date or Separation from Service) and the form of payment (as permitted under Section 7) for the portion of his Account attributable to the Employee Deferrals for such Deferral Period.  Such elections may be modified by the Eligible Employee only to the extent permitted by Sections 7 and 4(b).

 

 (b)         Subsequent Elections.  To the extent permitted under Section 7, an election as to the form and/or timing of a benefit may only be modified by the Eligible Employee in accordance with the following rules: (i) no such subsequent election shall be effective unless made at least twelve months before the date payments would otherwise have commenced, and (ii) all amounts with respect to which the subsequent election is effective shall be or begin to be paid no earlier than the fifth anniversary of the date such amounts were previously payable (or in the case of a series of annual installments, the fifth anniversary of the date the first such installment was previously payable) (unless deferred to Separation from Service).

 

	
            5.
 	
            Eligible Employee Accounts
 

(a)         Credits to Accounts.  An Eligible Employee’s Account shall be credited with the amounts of his deferred Base Salary, Director Compensation and/or Incentive Compensation within three business days after the compensation would otherwise have been paid to the Eligible Employee, or as soon as administratively practicable thereafter.  Matching Allocations shall be credited to Eligible Employees Accounts at the same time they would have been credited had they been provided under the Qualified Plan, or as soon as administratively practicable thereafter.  Profit Sharing Allocations shall be credited at the time or times specified by the Committee, in its sole discretion.

(b)         Notional Earnings on Accounts.

 (i)          An Eligible Employee’s Account shall be credited with notional earnings in accordance with the “Earnings Crediting Options” elected by the Eligible Employee from time to time.  Eligible Employees may allocate the deemed investment of 

 

their Accounts among the Earnings Crediting Options available under the Plan only in whole percentages.  Eligible Employees will be entitled to designate separately Earnings Crediting Options for: (i) any amounts payable upon a Separation from Service, and (ii) the amounts deferred during a Deferral Period that are payable on one or more Scheduled Distribution Dates.  The deemed rate of return, positive or negative, credited under each Earnings Crediting Option is based upon the actual investment performance of the corresponding investment portfolios made available as Earnings Crediting Options by the Committee, and shall equal the total return of such investment fund net of asset based charges, including, without limitation, money management fees, fund expenses and mortality and expense risk insurance contract charges, if any.  The Committee reserves the right, on a prospective basis, to add or delete
Earnings Crediting Options.

 (ii)         Earnings Crediting Options.  The Earnings Crediting Options available under the Plan shall consist of hypothetical investment alternatives which correspond to certain investment portfolios of various investment funds made available by the Committee.  Notwithstanding that the rates of return credited to Eligible Employees’ Accounts under the Earnings Crediting Options are based upon the actual performance of the corresponding portfolios of the investment funds, the Company shall not be obligated to invest Employee Deferrals or Employer Contributions in such portfolios or in any other investment funds.  To the extent that an Eligible Employee has not selected an Earnings Crediting Option with respect to all or a portion of his Account, the Company shall deem him to have elected the
Plan’s money market fund Earnings Crediting Option.

 (iii)       Changes in Earnings Crediting Options.  An Eligible Employee may change the Earnings Crediting Options to which his Account is deemed to be allocated in accordance with procedures established by the Committee.  

 (iv)       Valuation of Accounts.  The value of an Eligible Employee’s Account as of any date shall equal the amounts theretofore credited to such Account, including any earnings (positive or negative) deemed to be earned on such Account in accordance with Section 5(b)(i) through the day preceding such date, less the amounts theretofore deducted from such Account.

 (v)         Statement of Accounts.  The Committee shall provide to each Eligible Employee, not less frequently than quarterly, a statement in such form as the Committee deems desirable setting forth the balance standing to the credit of each Eligible Employee in his Account.

 (vi)        Distributions from Accounts.  Each Eligible Employee’s Account shall be debited by the amount of any distribution pursuant to Sections 7, 8, or 9 of this Plan as of the date such distribution is made.  Any distribution made to or on behalf of an Eligible Employee from his Account in an amount which is less than the entire balance of such Account shall be made pro rata from each of the Earnings Crediting Options to which such Account is then allocated.  

	
            6.
 	
            Vesting
 

Eligible Employees shall be fully vested in their Employee Deferrals at all times.  Eligible Employees shall vest in their Company Deferrals in accordance with the vesting 

 

schedule and rules set forth in the Qualified Plan, unless the Committee determines otherwise. 

Notwithstanding the foregoing:

 (a)         An Eligible Employee shall immediately vest upon the earlier occurrence of his death or Disability. 

 (b)        An Eligible Employee shall forfeit any Employer Contributions allocated to his Account after December 31, 2006 in the event Cause exists, as determined by the Committee in its sole and absolute discretion. 

	
            7.
 	
            Payment of Benefits – Employee Deferrals
 

(a)         Generally.  In accordance with the election procedures set forth in Section 4, Eligible Employees may elect with respect to Base Salary, Director Compensation, Annual Incentive Bonus Plan and/or Executive Bonus Plan for each Deferral Period to defer their compensation to either their Separation from Service (as described below) or a Scheduled Distribution Date.  Notwithstanding the foregoing, solely for the 2006 Plan Year, Eligible Employees may make separate distribution elections with respect to each type of deferred compensation (i.e., Base Salary, Annual Incentive Bonus Plan and Executive Bonus Plan).

 (b)         Separation from Service.  If an Eligible Employee fails to elect a distribution date for any portion of his Employee Deferrals, it shall be paid on, or as soon as practicable, following the six month anniversary of his Separation from Service.  

 (i)          Election as to Timing Irrevocable.  If, pursuant to Section 4, an Eligible Employee elects to receive a portion of his Employee Deferrals upon his Separation from Service, such election shall be irrevocable.  Further, if, pursuant to Section 7(c), an Eligible Employee elects to re-defer payment of benefits from a Scheduled Distribution Date to Separation from Service, such election shall be irrevocable.

 (ii)         Timing.  An Eligible Employee who elects to receive all or a portion of his Employee Deferrals upon Separation from Service shall, at the time he makes such election, elect whether to receive such Employee Deferrals upon the six month anniversary of the Separation from Service, or the January 31st following such Separation from Service (but only if such date is at least six months following the Separation from Service).  The election as to the timing of the payment upon Separation from Service shall be irrevocable and shall apply with respect to all amounts that have been or will be deferred by the Eligible Employee to Separation from Service.

 (iii)       Form of Benefit.  If an Eligible Employee fails to elect a form of distribution with respect to any portion of his Employee Deferrals, it shall be payable in a single lump sum payment.  Eligible Employees electing to receive all or a portion of their Employee Deferrals upon Separation from Service may elect to receive such amounts either in the form of a lump sum distribution or in annual installments of either five, ten or fifteen years.  All amounts payable upon a Separation from Service shall be paid in the same form of payment and, if in installments, according to the same installment schedule. Notwithstanding the foregoing, in the event that an Eligible Employee’s Post-2004 

 

Account balance is less than $10,000, it shall be paid in the form of a lump sum payment.  An Eligible Employee may elect to change the form of benefit payable upon a Separation from Service in accordance with the rules of Section 4(b).

 (c)         Scheduled In-Service Withdrawal.  Pursuant to Section 4, an Eligible Employee may elect to receive Employee Deferrals attributable to a Deferral Period on a Scheduled Distribution Date.  

 (i)          Timing.  Except as otherwise provided herein, Employee Deferrals deferred to a Scheduled Distribution Date shall be paid on or as soon as administratively practical following such date.  In the event the Eligible Employee experiences a Separation from Service prior to the Scheduled Distribution Date, any Employee Deferrals remaining in his Account shall be paid in a lump sum as soon as practicable following the six month anniversary of the Separation from Service.  An Eligible Employee who has elected to receive his Employee Deferrals on a Scheduled Distribution Date may subsequently elect to defer the payment of such benefit to Separation from Service or another future Scheduled Distribution Date in accordance with Section 4(b).

 (ii)         Form of Benefit.  If an Eligible Employee fails to elect a form of distribution with respect to any portion of his Employee Deferrals payable on a Scheduled Distribution Date, it shall be payable in a single lump sum.  Eligible Employees electing to receive a portion of their Employee Deferrals upon a Scheduled Distribution Date may elect to receive such amounts either in the form of a single lump sum or in annual installments of two, three, four or five years.  Such election may be modified in accordance with the election procedures set forth in Section 4(b).  Notwithstanding the foregoing, in the event that the amount that is to be paid or commence upon a Scheduled Distribution Date is less than $10,000, the distribution shall be paid in the form of a lump sum payment. 

 (d)        Death or Disability.  Notwithstanding anything contained in this Section 7 to the contrary, an Eligible Employee’s Employee Deferrals shall be paid in a lump sum to the Eligible Employee or his Beneficiary (in the event of his death) in the event he dies or incurs a Disability prior to receiving the balance of his Account.  Such payment shall be made as soon as practicable following the date of death or determination that a Disability exists.

 (e)         Hardship Withdrawals.  Notwithstanding the above, in the sole discretion of the Committee, all or a portion of an Eligible Employee’s Employee Deferrals may be paid in a lump sum in the case of an unforeseen emergency which arises from factors beyond the Eligible Employee’s control and creates a severe financial hardship that results from an illness or accident of the Eligible Employee, the Eligible Employee’s spouse or the Eligible Employee’s dependent (within the meaning of section 152(a) of the Code), loss of the Eligible Employee’s property due to casualty, or other similar extraordinary and unforeseeable circumstances, and that cannot reasonably be relieved by reimbursement from insurance or the Eligible Employee’s personal
resources, provided that an Eligible Employee shall not take part in any decision concerning such a distribution.  The amount payable may not exceed the lesser of the Employee Deferrals credited to the Eligible Employee’s Account or the amount needed by the Eligible Employee because of the hardship, plus amounts necessary to pay reasonably anticipated taxes resulting from the distribution, but after taking into account the extent to which the 

 

hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, or liquidation of the Eligible Employee’s assets (to the extent such liquidation would not itself cause severe financial hardship).  If less than the Eligible Employee’s full Account balance is paid, the amount shall be debited to the portion of the Eligible Employee’s Account that is attributable to Employee Deferrals for such calendar years as the Committee shall designate in its sole discretion.  

An Eligible Employee’s deferral election pursuant to Section 2 shall be immediately terminated upon receipt of a hardship withdrawal under this Section 7(e) and an Eligible Employee will not be eligible to recommence making elective deferrals until the following Deferral Period by making a new deferral election.    

	
            8.
 	
            Payment of Benefits – Company Deferrals
 

(a)         Timing of Payment.  All vested Company Deferrals in an Eligible Employee’s Account shall be paid as soon as practicable following the six month anniversary of an Eligible Employee’s Separation from Service, or the January 31st following the Eligible Employee’s Separation from Service (but only if such date is at least six months following the Separation from Service and the Eligible Employee has so elected such date under Section 7(b)(ii)).

 (b)         Form of Payment.  All amounts distributable pursuant to Section 8(a) shall be distributed in a single lump sum payment; provided that if the Eligible Employee has made Employee Deferrals (that are payable upon a Separation from Service), the amounts distributable under Section 8(a) shall be paid in the same form and according to the same schedule as elected with respect to such Employee Deferral. 

 (c)         Death or Disability.  Notwithstanding anything contained herein to the contrary, an Eligible Employee’s Company Deferrals shall be paid in a lump sum to the Eligible Employee or his Beneficiary (in the event of his death) in the event he dies or incurs a Disability, prior to receiving the balance of his Account.       

	
            9.
 	
            Prior Plan Provisions
 

(a)          Transfer of Prior Plans Balances.  Accounts shall be established under this Plan for the former participants in the Prior Plans who had accounts under those plans as of the effective date of the merger and restatement of the applicable plan into this Plan.  Amounts transferred from the 2005 Plan shall be placed in a Post-2004 Account for the Eligible Employee and shall be subject to the same rules and conditions as applicable to Post-2004 Accounts.  Eligible Employees with transferring 2005 Plan account balances will be required to make a new election as to the timing and form of payment with respect to such transferring account as set forth in Section 9(b).  Amounts transferred from the 1988 Plan shall be placed in a Pre-2005 Account for the Eligible Employee
and shall generally be subject to the terms and conditions hereof, except as indicated in Section 9(c).  The Earnings Crediting Options available under Article 5 shall apply to all such Prior Plans transferred accounts.  

(b)          Updated Elections for 2005 Plan.  By no later than December 31, 2006, or such later date as permitted under IRS Regulations, each Eligible Employee whose account under the 2005 Plan is merged into this Plan shall be required to submit an 

 

updated election form with respect to all amounts previously deferred under the 2005 Plan as to the timing and form of payment.  Such new election shall comport with the timing and form of benefit provisions contained in Section 7 hereof.  In the event that an Eligible Employee fails to make an election to change the form or timing of his 2005 Plan account balance, such transferred account balance shall be paid as a lump sum to the Eligible Employee as soon as practicable following the six month anniversary of his Separation from Service.

(c)          Grandfathering of Provisions of 1988 Plan.   Notwithstanding anything in this Plan to the contrary, Sections 4, 7, and 8 [and the distribution provisions of Section 12] of the Plan shall not apply to Pre-2005 Accounts and the following provisions shall apply.

 (i)          Form and Timing of Pre-2005 Account Benefit.  For each Eligible Employee that has a Pre-2005 Account, such benefits shall be paid to the Eligible Employee in a lump sum payment.  Payment shall be made one year following the last day of the month in which such Eligible Employee terminates employment with the Company, or as soon thereafter as is administratively practicable.  Notwithstanding the foregoing, the Company, in its sole discretion, may accelerate the distribution of an Eligible Employee’s Pre-2005 Account.

 (ii)         Installment Payment Option for Retirees.  Notwithstanding Section 9(c)(i) of the Plan, an Eligible Employee who terminates employment with the Company on or after attaining age 55 may elect to receive his Pre-2005 Account in the form of approximately equal annual installments payable over a ten (10) year period.  At the sole discretion of the Committee, an Eligible Employee who terminates employment with the Company on or after attaining age 50 and having completed at least fifteen (15) years of service may also elect to receive distribution of his Plan benefits in installment payments pursuant to this Section 9(c)(ii).  The election to receive installment payments must be made in the calendar year preceding the calendar year in which the lump sum distribution is scheduled to take place
pursuant to Section 9(c)(i).  Installments shall commence one year following the last day of the month in which the Eligible Employee terminated employment.  Effective for the Plan year commencing after the Eligible Employee’s employment termination date and continuing each Plan year until all Pre-2005 Account balances have been distributed, Plan benefits for an Eligible Employee who elects the installment distribution option will be credited earnings based on the Earnings Crediting Options selected by the Eligible Employee.  Notwithstanding the foregoing, the Committee, in its sole discretion, may accelerate the distribution of an Eligible Employee’s Pre-2005 Account balance.

 (iii)       In-Service “Haircut” Withdrawals.  An Eligible Employee may elect, in writing, to withdraw a designated amount of his Pre-2005 Account, provided, however, that an Eligible Employee who requests a withdrawal under this Section 9(c)(iii) shall incur a penalty pursuant to paragraph (A) or (B) below:

 (A)       the amount withdrawn shall be subject to a penalty (“haircut”) equal to ten percent (10%) of the amount withdrawn, which amount shall be forfeited from the Eligible Employee’s Pre-2005 Account notwithstanding any other provision of the Plan.  The minimum amount an Eligible Employee may withdraw is $50,000.

 

 (B)       the amount withdrawn shall be subject to a penalty (“haircut”) equal to five percent (5%) of the amount withdrawn, which amount shall be forfeited from the Eligible Employee’s Pre-2005 Account, and the Eligible Employee will be suspended from participating in the Plan for the twelve (12) month period following the date the withdrawal is received.  The minimum amount an Eligible Employee may withdraw is $50,000.

Subject to the permissibility of Section 9(c)(iii)(B) under Section 409A of the Code, the Eligible Employee requesting the withdrawal may select which penalty applies to the withdrawal and must complete the withdrawal form or any other form required by the Committee.  Only one withdrawal per calendar year is permitted.  If the suspension of participation described in Section 9(c)(iii)(B) would violate Section 409A of the Code, then the Eligible Employee requesting the in-service withdrawal shall be subject to Section 9(c)(iii)(A).  

The in-service withdrawal shall be paid to the Eligible Employee no later than the end of the calendar quarter following the calendar quarter in which the Committee receives the properly completed written request for withdrawal.  If an Eligible Employee terminates employment after a request is approved, but prior to distribution of the full amount approved, the approval of the request shall be automatically null and void and the benefits which the Eligible Employee is entitled to receive under the Plan shall be distributed in accordance with Section 9(c)(i) of the Plan.  

Subject to avoiding a “material modification” of the 1988 Plan under Code Section 409A, the Committee may from time to time change or adopt additional policies or rules governing minimum withdrawal amounts or percentages or the manner in which such distributions may be made so that the Plan may be conveniently administered and may comply with applicable tax laws.

	
            10.
 	
            Beneficiary Designation  
 

(a)         Beneficiary Designation.  The Beneficiary of each Eligible Employee shall be the beneficiary designated by such Eligible Employee under the Qualified Plan who shall be entitled to receive the amount, if any, payable under the Plan upon the Eligible Employee’s death.  However, an Eligible Employee may designate a Beneficiary different from his Beneficiary under the Qualified Plan by filing with the Committee a written designation of one or more persons as his Beneficiary.  If an Eligible Employee has designated a beneficiary under the 2005 Plan, that beneficiary designation shall apply to the Plan until such designation is changed or revoked.  An Eligible Employee may, from time to time, revoke or change his Beneficiary designation without the consent of any prior
Beneficiary by filing a new designation with the Plan.  The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Eligible Employee’s death, and in no event shall it be effective as of any date prior to such receipt.

 (b)         Failure to Designate Beneficiary.  If no such Beneficiary designation is in effect under this Plan or under the Qualified Plan at the time of an Eligible Employee’s death, or if no designated Beneficiary survives the Eligible Employee, or if such 

 

designation conflicts with the law, the Eligible Employee shall be deemed to have designated the following Beneficiaries (if then living) in the following order of priority:

(i)         The spouse of the Eligible Employee.

(ii)        The
  children of the Eligible Employee and the issue of any deceased child (by right
  of representation), including adopted children and issue, in equal shares.

(iii)       The
  parent or parents of the Eligible Employee in equal shares.

(iv)       The
  estate of the Eligible Employee.

If the Committee is in doubt as to the right of any person to receive such amount, the Committee may retain such amount, without liability for any earnings thereon, until the rights thereto are determined, or the Committee may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Plan and the Company therefore.

	
            11.
 	
            Source of Funds; Scope of Liability.  
 

This Plan shall be unfunded, and payments hereunder shall be made from the general assets of the Company.  Any such assets which may be set aside, earmarked or identified as being intended for the provision of payments hereunder shall remain an asset of the Company and shall be subject to the claims of its or their general creditors.  Each Eligible Employee shall be a general creditor of the Company to the extent of the value of his Account hereunder, but he shall have no right, title or interest in any specific asset that may be set aside or designated as intended to be applied to payments under this Plan.  Payments in accordance with the terms of this Plan shall completely discharge all obligations of the Company hereunder.

	
            12.
 	
            Amendment and Termination.  
 

The Plan may be amended, suspended, discontinued or terminated at any time by the Board; provided, however, that no such amendment, suspension, discontinuance or termination shall reduce or in any manner adversely affect the rights of any Eligible Employee with respect to benefits that are payable or may become payable under the Plan based upon the balance of the Eligible Employee’s Account as of the effective date of such amendment, suspension, discontinuance or termination.  The Committee may, at any time, also make such amendments to the Plan as it deems necessary and appropriate, in its sole discretion, without Board approval, provided that any such amendments to the Plan by the Committee may not materially increase the costs of the Plan to the Company or result in a material adverse affect on an Eligible Employee.  Notwithstanding anything to the contrary in this Section 12, if the Committee
determines that, in order to avoid current taxation of amounts deferred under the Plan or to comply with applicable law, additional restrictions must be placed on Eligible Employees’ rights under the Plan, then the Committee may, in its sole discretion, amend the Plan to impose such restrictions, and/or cease deferrals under the Plan with respect to all Plan Accounts, affected Accounts or the affected portions of Accounts.  If the Board terminates the Plan, Eligible Employees shall be entitled to a distribution of their benefit under the Plan if the termination is on account of a permitted distribution event under Prop. Treas. Reg. 

 

§1.409A-3(h)(2)(viii)(A), (B) or (C) and the requirements, as applicable, of such regulations are met with respect to the termination of the Plan and distribution of benefits hereunder.

	
            13.
 	
            Nonalienation of Benefits
 

Except as hereinafter provided with respect to marital disputes, none of the benefits or rights of an Eligible Employee or any Beneficiary of an Eligible Employee shall be subject to the claim of any creditor, and in particular, to the fullest extent permitted by law, all such benefits and rights shall be free from attachment, garnishment or any other legal or equitable process available to any creditor of the Eligible Employee or the Beneficiary.  Neither the Eligible Employee nor his Beneficiary shall have the right to alienate, anticipate, commute, pledge, encumber, or assign any of the payments which either of them may expect to receive, contingently or otherwise under this Plan.  In cases of marital dispute, the Company will observe the terms of the Plan unless and until ordered to do otherwise by a state or Federal court.  As a condition of participation, an Eligible Employee agrees to hold the Company
harmless from any claim that may arise out of the Company’s compliance with an order of any state or Federal court, whether such order effects a judgment of such court or is issued to enforce a judgment or order of another court.

	
            14.
 	
            Administration and Plan Interpretation  
 

(a)         Administration.  The Committee shall have full power and authority to interpret the Plan, to prescribe, amend and rescind any rules, forms and procedures as it deems necessary or appropriate for the proper administration of the Plan and to make any other determinations and to take any other such actions as it deems necessary or advisable in carrying out its duties under the Plan.  All action taken by the Committee arising out of, or in connection with, the administration of the Plan or any rules adopted thereunder, shall, in each case, lie within its sole discretion, and shall be final, conclusive and binding upon the Company, the Board, all Eligible Employees, all beneficiaries of Eligible Employees and all persons and entities having an interest therein, and the
enrollment agreement of each Eligible Employee shall constitute that Eligible Employee’s acknowledgement and acceptance of the Committee’s authority and discretion.  The Committee may from time to time adopt rules and regulations governing the operation of this Plan and may employ and rely on such employees of the Company, legal counsel, accountants, and agents, as it may deem advisable to assist in the administration of the Plan. 

 (b)         Compensation of Committee; Expenses.  Members of the Committee shall serve without compensation for their services unless otherwise determined by the Board.  All expenses of administering the Plan shall be paid by the Company.

 (c)         Indemnification.  To the maximum extent permitted by law, no member of the Committee shall be personally liable by reason of any contract or other instrument executed by him or on his behalf in his capacity as a member of the Committee or for any mistake of judgment made in good faith.  The Company shall indemnify and hold harmless, directly from its own assets (including the proceeds of any insurance policy the premiums of which are paid from the Company’s own assets), each member of the Committee and each other officer, employee, or director of the Company to whom any 

 

duty or power relating to the administration or interpretation of the Plan or to the management or control of the assets of the Company held in a “rabbi trust” or other Company account may be delegated or allocated, against any cost or expense (including counsel fees or liability including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud, bad faith, or gross negligence.

 (d)        Interpretations.  Any decisions, actions or interpretations to be made under the Plan by the Company, the Board or the Committee shall be made in its respective sole discretion, not as a fiduciary and need not be uniformly applied to similarly situated individuals and shall be final, binding and conclusive on all persons interested in the Plan.

	
            15.
 	
            Claims Procedure  
 

(a)          In the case of a claim for benefits, other than a claim involving disability benefits, that is wholly or partially denied, within 90 days (or 180 days in special cases if the Committee furnishes notice of the extension before the end of the initial 90-day period) after the claim has been filed the Committee will provide the person who filed the claim a written approval or denial of the claim.  In the case of a claim involving disability benefits that is wholly or partially denied, within 45 days after the claim is filed the Committee will provide the person who filed the claim a written approval or denial of the claim.  If special circumstances require an extension of time for processing the initial claim involving disability benefits, a written notice of an initial extension of up to 30
days will be provided to the claimant before the end of the initial 45-day period.  If, prior to the end of the initial 30-day extension period, the Committee determines that a decision cannot be rendered within that extension period, the determination period may be extended for up to an additional 30 days if the claimant is notified of the second extension before the end of the initial extension period.  A notice of the denial of a claim, in whole or in part, will set forth: 

(i)         the reason or reasons for the denial;

(ii)          reference to the specific Plan provisions upon which the denial is based;

(iii)        a description of any additional material needed before the claim can be considered and an explanation of why such material or information is necessary; and

(iv)         an explanation of the claim review procedure set forth below and the time limits applicable to appeals, including a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on appeal.

(b)          Within 60 days of the receipt of a notice denying a claim (or within 180 days if the claim involves disability benefits), the claimant or the claimant’s duly authorized representative may request, in writing, a full review of the claim by the Committee.  In connection with any such review, the claimant or the claimant’s authorized representative (1) will be provided, upon request and free of charge, 

 

reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits and (2) may submit issues and comments in writing to the Committee.  If the claim does not involve disability benefits, the Committee will make a decision within 60 days after the request for a review (or 120 days in the event of special circumstances if the Committee furnishes notice of the extension before the end of the initial 60-day period).  If the claim involves disability benefits, the Committee will make a decision within 45 days after the request for a review (or 90 days in the event of special circumstances if the Committee furnishes notice of the extension before the end of the initial 45-day period). The Committee’s decision will be binding on all parties.  A final notice of the denial of the claim on appeal, in whole or in part, will set forth:

(i)          the reason or reasons for the denial;

(ii)          reference to the specific Plan provisions upon which the denial is based;

(iii)        the claimant’s right to, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; and

(iv)         a statement of the claimant‘s right to bring a civil action under section 502(a) of ERISA.

	
            16.
 	
            No Contract of Employment
 

Nothing contained herein shall be construed as conferring upon any person the right to be employed or continue in the employ of the Company.

	
            17.
 	
            Notices  
 

All elections, designations, requests, notices, instructions, and other communications from an Eligible Employee, Beneficiary or other person to the Committee required or permitted under the Plan shall be in such form as is prescribed from time to time by the Committee, shall be mailed by first-class mail or delivered to such location as shall be specified by the Committee, and shall be deemed to have been given and delivered only upon actual receipt thereof at such location.

	
            18.
 	
            Offset
 

Notwithstanding anything herein to the contrary, if an Eligible Employee or his Beneficiary becomes entitled to a distribution of Plan benefits, and if at such time the Eligible Employee has outstanding any debt, obligation, or other liability representing an amount owing to the Company, then the Company may offset such amount owed to it against the amount of Plan benefits otherwise distributable.  Such determination shall be made by the Company in its sole discretion.

	
            19.
 	
            Distributions to Minors or Incompetents
 

If the Committee shall find that any person to whom any amount is or was payable hereunder is unable to care for his affairs because of illness or accident, or has died, then the Company, if it so elects, may direct that any payment due him or his Beneficiary 

 

(unless a prior claim therefore has been made by a duly appointed legal representative) or any part thereof be paid or applied for the benefit of such person or for the benefit of his spouse, children or other dependents, an institution maintaining or having custody of such person, any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Company may deem proper.  Any such payment shall be in complete discharge of the liability of the Committee and the Company.

	
            20.
 	
            Successor Employer
 

This Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns, the Eligible Employee, his Beneficiaries and his estate.  Nothing in this Plan shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Plan and all obligations of the Company hereunder.  Upon such a consolidation, merger or transfer of assets and assumption, the term “Company” shall refer to such other corporation and this Plan shall continue in full force and effect.

	
            21.
 	
            Withholding Taxes
 

The Company may make such provisions and take such action as it may deem necessary or appropriate for the withholding of any taxes which the Company is required by any law or regulation of any governmental authority, whether Federal, state or local, to withhold in connection with any benefits under the Plan, including, but not limited to, the withholding of appropriate sums from any amount otherwise payable to the Eligible Employee (or his Beneficiary).  Each Eligible Employee, however, shall be responsible for the payment of all individual tax liabilities relating to any such benefits.

	
            22.
 	
            Missing Eligible Employees
 

In the event that the Committee is unable to locate an Eligible Employee or Beneficiary within two years following the date the Eligible Employee was to commence receiving payment, the entire amount credited to the Eligible Employee’s Accounts shall be forfeited.  If, after such forfeiture, the Eligible Employee or Beneficiary later claims such benefit, such benefit shall be reinstated without interest or earnings from the date payment was to commence pursuant to Sections 7, 8, or 9.

	
            23.
 	
            Section 409A
 

With respect to any amounts not earned and vested as of December 31, 2004, the Plan is intended to comply with the applicable requirements of section 409A of the Code and its corresponding regulations and related guidance, and shall be administered in accordance with section 409A of the Code to the extent section 409A of the Code applies to the Plan.  Notwithstanding anything in the Plan to the contrary, elections to defer Base Salary, Director Compensation and/or Incentive Compensation to the Plan, and distributions from the Plan, may only be made in a manner and upon an event permitted by section 409A of the Code.  To the extent that any provision of the Plan would cause a conflict with the requirements of section 409A of the Code, or would cause the administration of the Plan to fail to satisfy the requirements of section 409A of the Code, such provision shall be deemed null and void to the extent
permitted by applicable law.  

 

All amounts held in Pre-2005 Accounts shall not be subject to the requirements of Section 409A of the Code and any change to the 1988 Plan that results from this merger and restatement that constitutes a “material modification” under Section 409A of the Code shall be disregarded and the original terms of the 1988 Plan shall apply.

	
            24.
 	
            Mandatory Delay in Payment
 

Notwithstanding anything herein to the contrary, if the Committee reasonably anticipates that the Company will lose or be limited in taking a tax deduction for the payment of any benefit payable from a Post-2004 Account on a Scheduled Distribution Date as a result of the application of Section 162(m) of the Code, the Committee shall delay such payment until the earliest date at which it reasonably anticipates that the deduction of the payment of the benefit will not be limited or eliminated by application of Section 162(m) of the Code or the six month anniversary of the date the Eligible Employee separates from service.        

	
            25.
 	
            Applicable Law
 

This Plan shall be construed under the laws of the State of New York.EXHIBIT 10.21

 

March 31, 2006

 

William F. Ruprecht 

President and Chief Executive Officer

Sotheby’s Holdings, Inc.

1334 York Avenue

New York, New York 10021

 

Dear Bill,

 

The attached Terms of Employment together with its Exhibits (the “Terms”) sets forth our mutual understanding with respect to the terms of your employment by Sotheby’s Holdings, Inc. (“Sotheby’s”) for the period April 1, 2006 through March 31, 2011.  With respect to the Terms, you and Sotheby’s hereby agree as follows:

 

	
             
 	
            1.
 	
            As soon as practicable after approval by Sotheby’s shareholders of an Amended and Restated Restricted Stock Plan increasing the number of shares of restricted stock available for grant under that Plan, which is presently scheduled for May 8, 2006, Sotheby’s agrees to make a grant to you of shares of restricted stock in the amount and otherwise on the terms and subject to the conditions specified under the caption “Value Creation Plan” in the Terms.
 

 

	
             
 	
            2.
 	
            Should your employment be terminated at any of the times and under any of the circumstances specified in the Terms, you and Sotheby’s each undertakes and agrees to comply with all of the provisions of the Terms relating to the circumstances of such termination of employment.  In particular, Sotheby’s agrees to make any and all payments and perform any and all other obligations required under the captions “Termination of Employment”, “Change of Control” and “Golden Parachute Excise Tax Gross-up” in the Terms under the circumstances of such termination of employment and you agree to comply with the undertakings set forth under the captions “Restrictive Covenants” and “Release” in the Terms that are applicable to such termination of employment.
 

 

	
             
 	
            3.
 	
            Sotheby’s agrees to pay or reimburse you for legal fees as provided under the caption “Legal Fees” in the Terms, promptly after receipt of an invoice therefor.
 

 

This letter agreement and the Terms (collectively, the “Letter Agreement”) will, as of April 1, 2006, supersede any and all existing agreements between you and Sotheby’s, including without limitation the Employment Agreement dated as of July 1, 2003 by and between Sotheby’s and you, but excluding the Confidentiality Agreement dated March 31, 2006 between Sotheby’s and you.

 

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

 

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

 

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

 

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

 

  	  
	 	 Very
          truly yours,

	 	 	 
	 	 	SOTHEBY’S HOLDINGS,
        INC.
	 	 	 
	 	 	 
	 	By: 	/s/
        Michael I. Sovern	 
	 	 	Michael I. Sovern, Chairman
	 	 	of the Board

 

 

 

ACCEPTED AND AGREED:

 

/s/ William F. Ruprecht        

            William F. Ruprecht

 

 

TERMS OF EMPLOYMENT FOR

WILLIAM F. RUPRECHT ("EXECUTIVE")

 

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

 

	
            Term:
 	
            Five-year term commencing effective as of April 1, 2006 (the “Term”).
 

 

	
            Base Compensation:
 	
            $700,000 per year plus reimbursement for business and travel expenses in accordance with the Company's standard procedures.
 

 

	
            Cash Bonus Compensation:
 	
            Annual target bonus of 150% of Executive's annual base salary during the year in which the compensation is accrued. Executive’s bonus will not exceed 200% of target bonus. Performance and other metrics for Executive’s bonus are set forth in Exhibit A.  Executive’s bonus will be payable at the same time as bonuses are payable to other Company executives generally.
 

 

	
            Executive Bonus Plan:
 	
            During the Term, Executive shall not be eligible to participate in the Executive Bonus Plan (“EBP”).
 

 

	
            Annual Restricted 

Stock Awards:
 	
            Executive shall be entitled to annual grants of restricted stock prior to March 31 in each year during the Term, beginning in 2006.  The fair market value of restricted stock granted in 2006 will be $2,050,000.  The fair market value of restricted stock granted in each subsequent year will vary from $1,700,000 to $ 2,200,000 depending on the payout ratio under the EBP in that year, as set forth in Exhibit B.  The number of shares of restricted stock to be included in each grant will be determined based on the closing price of the Company’s common stock on the New York Stock Exchange on the last trading day prior to the grant.  If there is no payout under the EBP in any year Executive shall be awarded restricted stock with a fair market value of a minimum of $1,400,000, up to a maximum of $1,700,000, at the discretion of the Compensation Committee.
Executive’s annual restricted stock grants shall vest ratably in equal annual instalments over 4 years. In the event of a Change of Control (as defined in Exhibit D), all shares of restricted stock awarded as annual grants hereunder or owned by the Executive prior to the commencement of the Term will become vested, free and clear of all restrictions, as provided in the Company’s Restricted Stock Plan.  As provided in the Company’s Restricted Stock Plan, Executive shall have the right to vote such shares and the right to receive any dividends with respect to such shares whether or not such shares are vested.
 

 

	
            Value Creation Plan:
 	
            Executive will be entitled to a grant of 300,000 shares of restricted stock (the “VCP Shares”) as soon as practicable after the beginning of the Term, which will vest subject to the satisfaction of certain performance 
 

 

criteria, as described in Exhibit C.  As provided in the Company’s Restricted Stock Plan, Executive shall have the right to vote such shares and the right to receive any dividends with respect to such shares whether or not such shares are vested.

 

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

 

	
            Additional Benefits:
 	
            Executive shall be eligible for a business development allowance of at least $25,000 for each calendar year during the Term of his employment and the Company shall pay for the Executive's use of a car and driver consistent with past practice during the Term of his employment.
 

 

	
            Termination of Employment:
 	
            Death or Disability.  Upon a termination of Executive’s employment during the Term due to death or Disability (as defined in Exhibit D), the Executive or his estate, as the case may be, shall be entitled to (i) $2,000,000; (ii) all accrued but unpaid base salary and benefits to the date of employment termination, including, but not limited to, entitlements under the Company’s retirement, disability and life insurance plans; (iii) immediate vesting of all outstanding unvested stock options; (iv) a lapse of all restrictions on all outstanding restricted stock awards other than the VCP Shares; and (v) lapse of restrictions on VCP Shares to the extent provided in Exhibit C.
 

 

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

 

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

 

	
             
 	
            (1)
 	
            all accrued but unpaid base salary through the date of termination, plus $3,500,000, payable in a lump sum; 
 

 

	
             
 	
            (2)
 	
            all accrued but unpaid entitlements and benefits from the Company, including, but not limited to, entitlements under the Company’s retirement, disability and life insurance plans;
 

 

 

	
             
 	
            (3)
 	
            at the Company's expense, full benefit coverage for the Executive, his spouse and other eligible dependents under all of the Company’s medical, dental, life insurance, disability, accidental death and dismemberment and other Executive welfare plans and programs for three years from the date of Executive’s termination, provided that if the Company’s health and welfare programs do not permit continuation of coverage for three years after termination of an employee’s employment, the Executive shall obtain comparable insurance for himself, his spouse and his dependents at the Company’s expense; and, provided further, that if the Executive has the right to receive benefit coverage from another employer, such coverage will be offset against the Company’s obligation to provide benefit coverage;
 

 

	
             
 	
            (4)
 	
            immediate vesting of all outstanding unvested stock options; 
 

 

	
             
 	
            (5)
 	
            an immediate lapse of all restrictions on restricted stock awards other than the VCP Shares; and
 

 

	
             
 	
            (6)  
 	 immediate
          lapse of restrictions on the VCP Shares to the extent provided in Exhibit
          C.
 

 

	
             
 	
            End of Term.  If the Executive’s employment is terminated by the Company without Cause or by the Executive with or without Good Reason at or after the end of the Term, the Executive shall be entitled to receive (i) $2,000,000 in partial consideration for his non-compete agreement set forth in Exhibit F, (ii) all accrued and unpaid entitlements and benefits from the Company, including, but not limited to, accrued but unpaid entitlements under the Company’s retirement, disability and life insurance plans, and (iii) if the Company does not, on or before December 31, 2010, offer to continue the Executive’s employment for at least 1 year with an annual base salary and cash bonus opportunity at least equal to what he is then receiving (but without any understanding regarding restricted stock or other equity awards), then, in addition to any shares with
respect to which restrictions have already lapsed, there shall be an additional lapse of restrictions on a number of shares of restricted stock (other than the VCP Shares) equal to the difference between (x) the number of such shares with respect to each annual Restricted Stock Award on which restrictions would have lapsed through the date of termination had each Annual Restricted Stock Award originally vested in three equal annual instalments commencing on the first anniversary of the applicable grant date and (y) the number of shares of restricted stock granted pursuant to such Annual Restricted Stock Award on which restrictions have actually lapsed through the date of termination (without regard to this accelerated vesting).
 

 

	
            Change of Control:
 	
            If a Change of Control occurs and Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason prior to the earlier of three (3) years after the Change of Control or the end of the Term, the Executive shall receive compensation and benefits   as if his employment were terminated by the Company without Cause in the absence of a Change of Control, except that he will receive a lump sum payment of $4,000,000 instead of $3,000,000, which payment will be in lieu of any payment to which he might otherwise be entitled under the Company’s severance plan.
 

 

	
            Golden Parachute

Excise Tax Gross-Up:
 	
            The Company agrees to make payments in respect of any excise taxes under the circumstances and on the terms set forth in Exhibit E.
 

 

	
            Restrictive Covenants:
 	
            In consideration of Executive’s increased salary, bonus opportunity, equity based compensation and other remuneration hereunder, Executive agrees until twelve months after the termination of his employment with the Company to be bound by a covenant not to compete with the Company in certain jurisdictions and not to solicit employees of the Company or certain of it’s clients with whom the Executive has had dealings on the terms set forth in Exhibit F.
 

 

	
            Release:
 	
            Any payments payable to Executive upon termination of his employment other than unpaid compensation shall only be payable if the Executive delivers to the Company a release, in the form attached hereto as Exhibit G, of all of his claims (except with regard to claims for payments or benefits specifically payable or providable hereunder which are not yet paid as of the effective date of the release, claims for vested accrued benefits, claims under the consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), claims relating to any rights of indemnification under the Company’s certificate of incorporation or by-laws or claims under any directors and officers liability insurance policy) occurring up to the release date with regard to the Company and its respective past or present officers, directors and employees..
 

 

	
            Legal Fees:
 	
            Fees paid to negotiate and draft agreement to be paid or reimbursed by the Company, up to a maximum of $10,000.
 

 

Exhibit A

 

Executive’s cash bonus in each year during the term shall be determined by the Compensation Committee in its sole discretion. 50% of his bonus shall be based on the degree to which the Company has achieved the Management Objectives or Company Objectives approved by the Board of Directors for that year and 50% of his bonus shall be based on the performance of the Executive in respect of non-financial objectives established by the Compensation Committee in consultation with the Chairman of the Board at the beginning of each year.  For 2006, the non-financial objectives are:

 

1. Develop the competence and capacity of the management talent pool  

 

A. Recruit and integrate external talent into 3 senior management roles to develop management talent pool for succession planning. New hires must have potential to move laterally as well as at least one level above the immediate role. 

 

B. Implement management development plans for key high potential managers and begin coaching using an internal and/or external coach for each.

 

C. Pilot and evaluate a 360 feedback process integrated with the management development process for CEO and other selected managers.

 

D. Continue support and participation in Leadership Development Program.

 

  2. Increase loyalty among buyers

 

A. Be a visible role model for providing preferred and continuous relationship support to buyers with whom you play an active role.

 

B. Otherwise actively sponsor and support the Client Management Strategy.

 

3. Develop a strategic plan for the Company and increase organizational alignment (clarity about what needs to be done, and commitment based on the compelling nature of the potential benefits to the business and to the employee) around the strategy of the Company and the action needed to achieve it. Create a greater degree of shared knowledge among experts/business-getters. Accomplish both of these through improved personal and organizational leadership communication.

 

Exhibit A (cont’d)

 

A. Develop a company-wide communication program of quarterly meetings/emails that increases alignment around strategic objectives, improves the understanding and appreciation of the worldwide business (highlight new initiatives, financial issues reported in earnings releases, recent successes/disappointments, upcoming sales/events, process improvements) and acknowledges outstanding contributions.

 

B. Create and evaluate quarterly forums of experts/business getters to improve business getting and information sharing: discuss changes in the marketplace, new tactics, and deployment of new internal client systems.

 

Exhibit B 

 

If the payout multiple under the EBP in any year during the Term is at the minimum multiple established by the Compensation Committee for that year (the “Minimum Multiple”), the Executive shall receive a restricted stock award with a fair market value of $1,700,000 as of the date of grant.  If the payout multiple under the EBP in any year is at the maximum multiple established by the Compensation Committee for that year (the “Maximum Multiple”), the Executive shall receive a restricted stock award with a fair market value of $2,200,000 as of the date of grant.  If the payout multiple under the EBP in any year is any other multiple (other than zero), such multiple being calculated taking into account the aggregate cap on EBP payouts (the “Actual Multiple”), the Executive shall receive a restricted stock award with a fair market value of $1,700,000 as of the
date of grant plus an additional amount determined pursuant to the following formula:

 

(Actual Multiple – Minimum Multiple)

	
            ----------------------------------------------
 	
            X  
 	
            ($2,200,000 - $1,700,000)
 

(Maximum Multiple – Minimum Multiple)

 

Exhibit C

 

Subject to the satisfaction of the performance criteria described below, the restrictions on 60% of the VCP Shares will lapse on the third anniversary of the date of grant (the “2009 Vesting Date”) and the restrictions on the remaining 40% of the VCP Shares will lapse on March 31, 2011 (the “2011 Vesting Date”).  Restrictions will lapse on the 2009 Vesting Date if either (i) the compound annual growth rate (“CAGR”) in Sotheby’s common stock, including dividends, shall have been equal to or greater than 7.2% per annum from April 1, 2006 through March 31, 2009 or (ii) the cumulative CAGR of the Company’s net income shall have been equal to or greater than 10% per annum through the year ended December 31, 2008 as compared with the Company’s net income for the year ended December 31, 2005.  Restrictions will lapse on the 2011 Vesting Date if either
(i) the CAGR in Sotheby’s common stock, including dividends, shall have been equal to or greater than 7.2% per annum from April 1, 2006 through March 31, 2011 or (ii) the cumulative CAGR of the Company’s net income shall have been equal to or greater than 10% through the year ended December 31, 2010 as compared with the Company’s net income for the year ended December 31, 2005.  If the performance criteria for the 2009 Vesting Date shall not have been satisfied by that date, but the performance criteria for the 2011 Vesting Date are satisfied, then restrictions on 100% of the VCP Shares will lapse on the 2011 Vesting Date.  If Executive’s employment is terminated prior to the 2011 Vesting Date as a result of a Change in Control, by the Company without Cause, by the Employee with Good Reason, or as a result of Executive’s death or Disability, (i) if the performance criteria for either or both of the 2009 Vesting Date or the 2011 Vesting Date have already been
satisfied as of the date of termination of employment, the restrictions on the VCP Shares that would otherwise have lapsed on the applicable measurement date will lapse immediately and (ii) if the performance criteria have not yet been satisfied for either the 2009 Vesting Date or the 2011 Vesting Date, but have been satisfied for one or more full 12-month periods prior to the date of termination of employment, then the restrictions on a fraction of the VCP Shares shall lapse immediately, the numerator of such fraction being the number of full 12-month periods for which the performance criteria have been satisfied and the denominator of such fraction being 5.

 

If Executive’s employment is terminated on or after March 31, 2009 and before the 2009 Vesting Date as a result of a Change of Control, by the Company without Cause, by the Employee with Good Reason or as a result of death or Disability, the Company shall on the 2009 Vesting Date pay to the Executive or his estate, as the case may be, an amount in cash equal to the fair market value on the 2009 Vesting Date of any VCP Shares that would have vested on the 2009 Vested Date but for such termination of employment.

 

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

 

Exhibit C (cont’d)

 

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

 

For purposes hereof, net income shall be determined in accordance with generally accepted accounting principles in the United States (“GAAP”); provided, however, that consistent with the Company’s objective to reward Executive based on the normalized operating performance of the Company, the Compensation Committee shall have the discretion to adjust the Company’s net income to account for extraordinary or unforeseen business events or developments during any measurement period, including, but not limited to, income or loss from discontinued operations, gains or losses from the sale of significant assets or business units, restructurings, asset impairments, unusual adjustments to tax valuation reserves, special charges, extraordinary items as defined by GAAP, material changes in GAAP, or other non-recurring events.  Notwithstanding the foregoing, no adjustment shall
increase the amount of compensation otherwise payable if such increase is prohibited by Code Section 162(m).

 

Exhibit D

 

“Cause” means:

 

	
             
 	
            (1)
 	
            the Executive's fraud or willful malfeasance in the performance of his duties, or his gross negligence in the performance of his duties which is materially injurious to the Company; or
 

 

	
             
 	
            (2)
 	
            the Executive's conviction of a crime that was a felony in the United States or the United Kingdom or a crime of equivalent gravity in any other jurisdiction (a "Felony Crime"), or conduct for which the Executive receives amnesty, immunity or its equivalent from an authorized law enforcement authority, which conduct would otherwise have been likely to result in the prosecution of charges against the Executive by such authorized law enforcement authority for commission of a Felony Crime;
 

 

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

 

“Change of Control” shall have the meaning set forth in the Company’s 1997 Stock Option Plan, as amended.

 

“Disability” means a determination by the Company in accordance with applicable law that, as a result of a physical or mental illness, the Executive is unable to perform the essential functions of his job with or without reasonable accommodation that does not present an undue burden on the Company.

 

“Good Reason” means:

 

	
             
 	
            (1) 
 	
            reduction of the Executive’s base salary below $700,000 per year or reduction of his target bonus below 150% of his then current base salary at any time during the Term;
 

 

	
             
 	
            (2) 
 	
            failure by the Company to award the Executive at least $1,400,000 (or such greater amount as required by Exhibit B) in restricted stock prior to March 31 in any year during the Term;
 

 

Exhibit D (cont’d)

 

	
             
 	
            (3) 
 	
            the Company’s assignment of duties to the Executive which are a material diminution of his duties;
 

 

	
             
 	
            (4) 
 	
            the Company’s removal of the Executive from his positions of Chief Executive Officer and/or President and/or the Company’s removal of the Executive or failure to nominate the Executive, and support in good faith the Executive’s election, as a member of the Board of Directors of the Company;
 

 

	
             
 	
            (5) 
 	
            the Company’s requirement that the Executive relocate the Executive’s office or perform more than one third of his duties during any calendar year more than fifty (50) miles outside of New York, New York without the Executive’s prior consent;
 

 

	
             
 	
            (6) 
 	
            the Company’s failure to provide timely the Executive with compensation and benefits at the agreed levels; 
 

 

	
             
 	
            (7)
 	
            the failure of any successor to the Company to assume the obligations of the Company under any agreement between the Company and the Executive; and 
 

 

	
             
 	
            (8)
 	
            the failure of the Company to maintain directors and officers liability insurance for the benefit of the Executive on a basis no less favorable than the basis on which it generally maintains such insurance for the benefit of other executives of the Company;
 

 

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

 

Exhibit E

 

If it is determined by the Company on or prior to the date the applicable payments and/or benefits are paid or thereafter by the Internal Revenue Service (the "IRS") pursuant to an IRS audit of the Executive's federal income tax return(s) (an "Audit"), that any payment or benefit provided to the Executive under these Terms of Employment would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any interest or pena1ties with respect to such excise tax (such excise tax, together with any interest or penalties thereon, is herein referred to as the "Excise Tax"), then the Company shall pay (either directly to the IRS as tax withholdings or to the Executive as a reimbursement of any amount of taxes, interest and penalties paid by the Executive to the IRS) both the Excise Tax and an additional cash payment (a "Gross-Up Payment") in an
amount that will place the Executive in the same after-tax economic position that the Executive would have enjoyed if the payment or benefit had not been subject to the Excise Tax. The amount of the Gross-Up Payment shall be calculated by the Company's regular independent auditors based on the amount of the Excise Tax paid by the Company as determined by the Company or the IRS, and assuming that the Executive pays taxes in the highest marginal tax brackets. If the amount of the Excise Tax determined by the IRS is greater than an amount previously determined by the Company, the Company's auditors shall recalculate the amount of the Gross-Up Payment. The Executive shall promptly notify the Company of any IRS assertion during an Audit that an Excise Tax is due with respect to any payment or benefit, but the Executive shall be under no obligation to defend against such claim by the IRS unless the Company requests, in writing, that the Executive undertake the defense of such IRS claim on
behalf of the Company and at the Company's sole expense. In such event, the Company may elect to control the conduct to a final determination through counsel of it own choosing and at its sole expense, of any audit, administrative or judicial proceeding involving an asserted liability relating to the Excise Tax, and the Executive shall not settle, compromise or concede such asserted Excise Tax and the Executive shall cooperate with the Company in each phase of any contest.

 

Exhibit F

 

In consideration of the Executive’s increased salary, bonus opportunity, equity based compensation and other remuneration hereunder, and because the Executive has specialized, unique confidential knowledge vital to the Company, the Executive agrees that, during the Restricted Period (defined below), he will not, without the consent of the Company, in New York, England, France or Switzerland engage directly or indirectly in the live or on-line Art Auction Business or in any other business in which the Company is actively engaged or is actively seeking to become engaged as of the time the Executive's employment terminates or in the business of acting as a dealer in any collecting category forming part of the Art Auction Business (a "Competing Business"), whether such engagement by the Executive is as an officer, director, proprietor, employee, partner, owner, consultant, advisor, agent, sales
representative or other participation. For purposes of this Agreement, the Art Auction Business involves auctions of property in the collecting categories that the Company offers for sale in its core business at the time of termination. For purposes of this Agreement, the "Restricted Period" is during the course of the Executive's employment and the period of twelve (12) months after the termination of the Executive's employment.

 

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

 

	
             
 	
            (1)
 	
            to recruit, solicit or induce any Sotheby's employees to terminate their employment with Sotheby's;
 

 

	
             
 	
            (2)
 	
            to solicit the business of, do business with, or seek to do business with, any Client of the Company (as defined herein);
 

 

	
             
 	
            (3)
 	
            to encourage or assist any Competing Business to solicit or service any Client of the Company; or
 

 

	
             
 	
            (4)
 	
            otherwise to induce any Client of the Company to cease doing business with, or lessen its business with, the Company.
 

 

The term "Client" includes any client for which the Executive is designated as the Key Client Contact or Other Contact on Sotheby’s Client Development System (CDS) or in its Client Loyalty Group (CLG), but shall not otherwise include clients of Sotheby's with whom the Executive has had no dealings on behalf of the Company, or clients he developed and maintained without any support or assistance, whether financial or otherwise, from the Company, but shall in any event include any person who has or has had business with the Company with whom the Executive did have dealings as well as, insofar as property that was at any time owned by such person is concerned, that person's estate, heirs and/or immediate family.

 

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

 

 

Exhibit G

 

AGREEMENT AND RELEASE

 

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

 

	
            2.
 	
            Consideration.  
 

 

	
             
 	
            (a)
 	
            As consideration for this Agreement and Release, Ruprecht will receive the full amount to which he is entitled pursuant to the letter agreement dated March 31, 2006 between Sotheby’s and Ruprecht and the Terms of Employment attached thereto (collectively, the “Agreement”), a copy of which is attached hereto as Exhibit 1.
 

 

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

 

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

 

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

 

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

 

	
            4.
 	
            Ruprecht Release.  
 

 

	
             
 	
            (a)
 	
            For good and valuable consideration, the receipt of which is hereby acknowledged, Ruprecht for himself and for his heirs, executors, administrators, trustees, legal representatives and assigns (hereinafter collectively referred to as “Ruprecht Releasors”), hereby forever releases and discharges Sotheby’s, or any of Sotheby’s past, present or future parent entities, partners, subsidiaries, affiliates, divisions, employee benefit and/or pension plans or funds, insurers, successors and assigns and any of its or their past, present or future officers, directors, attorneys, agents, trustees, administrators, employees, or assigns (whether acting as agents for Sotheby’s or in their individual capacities) (collectively referred to as “Sotheby’s Releasees”) from any and all claims, debts, liabilities, demands, obligations, liens,
promises, acts, agreements, costs, expenses, damages, actions and causes of action, of any kind whatsoever (upon any 
 

 

legal or equitable theory, whether contractual, common-law, statutory, federal, state, local, or otherwise), except for claims for vested benefits, whether known or unknown, by reason of any act, omission, transaction or occurrence which Ruprecht Releasors ever had, now have or hereafter can, shall or may have against Sotheby’s Releasees  up to and including the Agreement Effective Date as defined in Subparagraph 11(c) below.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

	
            5.
 	
            Sotheby’s Release.  For good and valuable consideration, the receipt of which is hereby acknowledged, Sotheby’s hereby forever releases and discharges Ruprecht and his heirs, executors, administrators, trustees, legal representatives and assigns (hereinafter collectively referred to as “Ruprecht Releasees”) from any and all claims, debts, liabilities, demands, obligations, liens, promises, acts, agreements, costs, expenses, damages, actions and causes of actions, of any kind whatsoever (upon any legal or equitable theory, whether contractual, common law, statutory, federal, state, local or otherwise) (collectively, “Claims”), by reason of any act, omission, transaction, or occurrence which Sotheby’s ever had, now has or hereafter can, shall or may have against Ruprecht Releasees up to and including
the Agreement Effective Date as defined in Subparagraph 11(c) below; provided, however, that the provisions of this Paragraph 5 shall only apply to Claims arising out of facts or circumstances that were known to Ruprecht and of which the Chairman of the Board, Chairman of the Audit Committee, Worldwide General Counsel or Worldwide Head of Human Resources of Sotheby’s had actual knowledge as of the date of this Agreement.
 

 

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

 

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

 

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

 

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

 

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

 

agrees that this warranty and representation is an essential and material term of this Agreement and Release.

 

	
            11.
 	
            Review and Revocation Period.  
 

 

	
             
 	
            (a)
 	
            Ruprecht shall have twenty-one (21) days from the date of receipt of this Agreement and Release, or until ________, 200___, to consider the terms and conditions of this Agreement and Release.  Ruprecht may accept this Agreement and Release by signing it and returning it to Ms. Susan Alexander or her successor as Worldwide Head of Human Resources, Sotheby’s, Inc., 1334 York Avenue, New York, New York 10021.  
 

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

 

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

 

	
            12.
 	
            Knowing and Voluntary Waiver.  Ruprecht understands and acknowledges that:  (a) he has carefully read this Agreement and Release in its entirety; (b) he has had an opportunity to consider fully the terms of this Agreement and Release for twenty-one (21) days; (c) he has been advised by Sotheby’s in writing to consult with an attorney of his choosing in connection with this Agreement and Release; (d) he fully understands the significance of all of the terms and conditions of this Agreement and Release; (e) he has discussed it with his independent legal counsel, or has had a reasonable opportunity to do so; (f) he has had answered to his satisfaction any questions he has asked with regard to the meaning and significance of any of the provisions of this Agreement and Release; (g) he is signing this Agreement and Release voluntarily
and of his own free will and assents to all the terms and conditions contained herein; and (h) the amounts being paid hereunder are in excess of those amounts to which he would be entitled if he did not sign this Agreement and Release.
 

 

	
            13.
 	
            Non-Disparagement.  Each party hereto agrees that such party will not disparage (or induce or encourage others to disparage) the other party hereto (including, in the case of Sotheby’s, any of its past or present directors, officers, agents, trustees, administrators, attorneys or employees) with respect to any events relating to Ruprecht’s employment with Sotheby’s including, without limitation, disclosing the facts or circumstances surrounding his termination from employment with Sotheby’s or Ruprecht’s criticizing Sotheby’s business strategy.  For the purposes of this Agreement and Release, the term “disparage” means any comments or statements 
 

 

which would adversely affect in any manner: (i) the conduct of Ruprecht while employed by Sotheby’s or the conduct of Sotheby’s business; or (ii) the business reputation or relationships of Ruprecht or of Sotheby’s (and/or any of its past or present directors, officers, agents, trustees, administrators, attorneys or employees).

 

	
            14.
 	
            The Company’s Proprietary Information. 
 

 

	
             
 	
            (a)
 	
            Ruprecht acknowledges and reaffirms his obligations pursuant to the Confidentiality Agreement signed by him on March 31, 2006 (the “Confidentiality Agreement”).  Confidential Information as defined in that Confidentiality Agreement includes information or communications relating to the organization, plans, status, strategy and structure of Sotheby’s.  Additionally, Confidential Information includes, but is not limited to, information in written, graphic, recorded, photographic or any machine readable form or that is or was orally conveyed to Ruprecht.  A copy of this Confidentiality Agreement is attached hereto as Exhibit 2.
 

 

	
             
 	
            (b)
 	
            If Ruprecht has not already done so, he shall return to Sotheby’s all Sotheby’s property in his possession including, but not limited to, credit cards, building passes, airline tickets, computers, laptops, facsimile machines, paging devices and portable telephones no later than his termination date.
 

 

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

 

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

 

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

 

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

 

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

 

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

 

	
            20.
 	
            Jurisdiction.  In the event of a dispute hereunder, the parties agree to submit to the exclusive jurisdiction of the state courts of and federal courts sitting in the State of New York. The parties hereto submit themselves to the exclusive jurisdiction and venue of the appropriate state or federal court sitting in the Borough of Manhattan, County of New York, State of New York for purposes of any claim, dispute or action arising from or related in any way to this Agreement and Release.
 

 

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

 

	
            Dated:  
 

	
             
 	
            SOTHEBY’S HOLDINGS, INC.
 

 

	
             
 	
            By:
 	
            /s/ Susan Alexander
 

	
             
 	
            Name:
 	
            Susan Alexander
 

	
             
 	
            Title:  
 	
            Executive Vice President and
 

Worldwide Head of 

	
             
 	
            Human Resources
 

ACCEPTED AND AGREED TO:

 

/s/ William F. Ruprecht      

William F. Ruprecht 

 

	
            Dated:
 	
            March 31, 2006

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