Exhibit 10(b)
EMPLOYMENT AGREEMENT
AGREEMENT (the "Agreement") dated as of July 10, 2001, by and
between Sotheby's Holdings, Inc. (the "Company" or "Sotheby's") and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to continue to employ the Executive
under the terms and conditions specified herein, and the Executive desires to be
so employed by the Company.
NOW, THEREFORE, in consideration of the mutual promises and
conditions herein set forth, the parties hereto agree as follows:
1. TERM. The term of this Agreement (the "Term") shall commence on
January 1, 2001 and shall continue, unless terminated in accordance with
Paragraph 4 herein or as otherwise provided in this Agreement, until December
31, 2003.
2. DUTIES AND AUTHORITY. During the Term, the Executive agrees to
continue to serve the Company, and the Company agrees to continue to employ the
Executive, as Chief Executive Officer and President and to continue to nominate
him as a member of the Board of Directors of the Company and support, in good
faith, his election as a member of the Board of Directors of the Company. In
serving in the aforementioned positions, the Executive shall have such authority
and responsibility as are customarily attendant to such positions and as may be
specified from time to time by the Board of Directors of the Company. The
Executive shall report directly to the Board of Directors of the Company. Except
as otherwise permitted by the Company, the Executive shall devote substantially
all of his business time (excluding periods of vacation and sick leave) and
efforts to the performance of his functions and responsibilities for the Company
and its affiliates.
3. COMPENSATION AND BENEFITS. In full consideration for all services
rendered by the Executive during the Term, the Executive will receive the
following compensation and benefits:
(a) BASE SALARY. The Executive shall receive an annual base
salary of not less than five hundred thousand dollars ($500,000) (the "Base
Salary") payable in accordance with the customary payroll practices of the
Company. During the Term, the Executive's Base Salary will be reviewed by the
Compensation Committee of the Board of Directors of the Company and may be
adjusted upward (but not downward) to reflect the Executive's performance and
responsibilities.
(b) ANNUAL INCENTIVE COMPENSATION. During the Term, the
Executive shall be eligible to receive annual incentive compensation ("Annual
Incentive Compensation"). The Executive's annual incentive target shall be one
hundred percent (100%) of the Executive's
Base Salary during the year in which the compensation is accrued, payable at
such times as such Annual Incentive Compensation is paid to other executives of
the Company as determined by the Compensation Committee in its sole discretion.
(c) RETENTION BONUS. The Executive shall receive a one-time
retention bonus ("Retention Bonus") in the amount of one million dollars
($1,000,000) payable as follows: (i) five hundred thousand dollars ($500,000) on
February 1, 2002 and (ii) five hundred thousand dollars ($500,000) on September
1, 2002, provided, however, that Executive remains continuously employed by the
Company at the date such payments are to be made. This bonus shall not be
subject to renewal after the Term nor shall it be included in any calculation
pursuant to Subparagraph 3(k) or Paragraph 5.
(d) STOCK OPTIONS. For 2002 and 2003, the Executive shall be
granted options pursuant to the Company's Stock Option Plan (the "Stock Option
Plan") in accordance with the Company's annual practice. If a Change of Control
occurs before the Executive's 250,000 options issued in February 2001 or the
stock options granted during 2002 or 2003 (if any) have become exercisable under
the Stock Option Plan, then the Executive shall be paid in cash the difference
between the exercise price of any such options and the price per share for
Sotheby's shares in the Change of Control transaction.
(e) EXPENSE REIMBURSEMENT. The Company will reimburse the
Executive for ordinary and necessary business and travel expenses incurred in
the performance of the Executive's duties in accordance with the Company's
standard procedures in effect for the senior most executives of the Company.
(f) BENEFITS. The Executive shall be eligible to continue to
participate in all benefit plans now or hereafter 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 in accordance with the
Company's policies and the terms of such plans. Such benefits shall not be
reduced, unless they are reduced in the same manner for all other senior
executives of the Company.
(g) SPECIAL PAYMENT. The Executive shall be eligible to
continue to receive the special payment made to him on September 1, 2000 if it
is determined by the Company, in its sole discretion, to continue it and for as
long thereafter as the Company decides is appropriate.
(h) BUSINESS DEVELOPMENT ALLOWANCE. The Executive will be
eligible for a business development allowance of at least $25,000 for each
calendar year during the Term.
(i) CAR ALLOWANCE. During the Term, the Company will pay for
the Executive's use of a car and driver for business purposes.
(j) CONFIDENTIALITY AGREEMENT; SOTHEBY'S RULES AND POLICIES.
As a condition to the Executive's continued employment by the Company, he shall
continue to be bound by the Company's Confidentiality Agreement, Auction Rules,
Compliance Policy, and the
Conflict of Interest Policy and House Rules (collectively, the "Rules and
Policies"). The Executive acknowledges that he has read, understood and signed
each of the foregoing. Nevertheless, if any provision of the Rules or Policies
expressly contradicts any provision in this Agreement, the provisions of this
Agreement shall govern.
(k) SOTHEBY'S, INC. SEVERANCE PLAN. In the event that the
Executive is terminated under such conditions that make him eligible for
benefits under the Sotheby's, Inc. Severance Plan, such benefits shall be paid
under the terms of that plan in effect on the execution date of this Agreement
regardless of whether that plan is modified during the Term of this Agreement
unless the modification results in an enhanced benefit to the Executive, in
which case he would receive the enhanced benefit.
(l) MISCELLANEOUS. All bonus payments set forth in
Subparagraphs 3(c), 3(g), 3(h), and 3(k) and all termination payments made
pursuant to Paragraph 5 shall not be included for benefit contribution purposes
under any qualified or non-qualified retirement plan including but not limited
to the 401(k) plan or Benefit Equalization Plan. These bonus and termination
payments are also not part of the bonus calculation in the event the Executive
is entitled to benefits under the Sotheby's, Inc. Severance Plan.
4. TERMINATION OF THE EXECUTIVE'S EMPLOYMENT.
(a) DEATH. Executive's employment shall terminate immediately
upon his death.
(b) DISABILITY. Executive's employment shall terminate upon
Executive's "Disability." For purposes of this Agreement, "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.
(c) BY THE COMPANY. The Board of Directors of the Company may
terminate the Executive's employment at any time during the Term, with or
without "Cause" (as defined below), upon written notice by the Company to the
Executive, and the Executive's employment will terminate on the date notice is
given or, if specified in the notice, within sixty days after the date notice is
given.
For purposes of this Agreement, "Cause" means:
(1) the Executive's fraud, willful malfeasance or
gross negligence in the performance of his duties
which is materially injurious to the Company; or
(2) the Executive's conviction of 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.
(d) BY THE EXECUTIVE. The Executive may terminate his
employment with the Company at any time during the Term, with or without "Good
Reason" (as defined below), upon thirty (30) days prior written notice to the
Company. For purposes of this Agreement, "Good Reason" means:
(1) a material breach of this Agreement by the
Company;
(2) the Company's assignment of duties to the
Executive which are a material diminution of his
duties;
(3) 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;
(4) 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 thirty-five (35) miles outside of
New York, New York without the Executive's prior
written consent;
(5) the Company's failure to provide timely the
Executive with compensation and the benefits at
the levels required herein; or
(6) termination of the Executive's employment within
twelve (12) months of a Change of Control (as
defined in the Stock Option Plan) but not earlier
than six (6) months after the Change of Control.
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.
5. SEVERANCE PAYMENT.
(a) WITHOUT CAUSE AND GOOD REASON TERMINATION. If during the
Term the Company terminates the Executive's employment without Cause or the
Executive terminates his employment for Good Reason, all compensation payable to
the Executive under Paragraph 3 hereof will cease as of the effective date of
notice of such termination (the "Termination Date") and the Executive will be
entitled to the following:
(1) All accrued but unpaid Base Salary through the
Termination Date plus the Executive's then current
Base Salary through the Term, payable in a lump
sum;
(2) Annual Incentive Compensation payable in a lump
sum, as if the Executive remained employed through
the end of the Term, in an annualized amount equal
to his annual incentive target as most recently
determined pursuant to Subparagraph 3(a) prior to
the Termination Date;
(3) All previously earned and accrued (but unpaid)
entitlements and benefits from the Company,
including any such entitlements and benefits as an
Executive under this Agreement or under the
Company's pension, disability and life insurance
plans, policies and programs, if any;
(4) Full benefit coverage for the Executive, his
spouse and other eligible dependents under all of
the Company's life insurance, disability,
accidental death and dismemberment and other
Executive welfare programs, plans and policies
(including, but not limited to, health and dental
insurance plans and policies but excluding the
benefits provided pursuant to Subparagraphs 3(h)
and (i)) for the remainder of the Term provided
that if the Company Health and Welfare Programs do
not permit continuation of coverage for the
remainder of the Term, the Company will reimburse
the Executive, on an after tax basis, for the cost
of obtaining comparable coverage;
(5) Immediate vesting of all outstanding unvested
stock options. To the extent the Executive is
prohibited from exercising the stock options
granted in February 2001 or during 2002 and 2003
(if any) under the Stock Option Plan, he shall be
paid cash in lieu of exercising such options; and
(6) On, or within fifteen (15) days following the
Termination Date, payment of any portion of the
Retention Bonus described in Paragraph 3(c) not
paid as of the Termination Date.
The amounts set forth in Paragraph 5(a)(1)-(4) above are in addition
to any payments to which the Executive may be entitled pursuant to the Company's
Severance Plan, if applicable.
(b) TERMINATION FOR CAUSE OR TERMINATION BY THE EXECUTIVE
WITHOUT GOOD REASON. If the Executive's employment is terminated by the Company
for Cause or by Executive without Good Reason, Executive shall receive Base
Salary through the date of termination to the extent not theretofore paid, all
benefits accrued to the date of termination that are not forfeited under the
terms of the plans, and (i) if the Executive terminates his employment without
Good Reason, unpaid Annual Incentive Compensation accrued during the calendar
year prior to the calendar year in which the termination is effective or (ii) if
the Executive's employment is terminated by the Company for Cause and the
actions(s) or occurrence(s) constituting Cause took place in the year in which
the termination is effective, unpaid Annual Incentive Compensation accrued
during the calendar year prior to the calendar year in which the termination is
effective.
(c) TERMINATION DUE TO DEATH OR DISABILITY. In the event of
the Executive's death or Disability during the Term, Executive's employment will
terminate as of the date of the Executive's death or Disability and he (or his
Estate or beneficiaries as applicable) will receive (i) the sums set forth in
paragraphs 5(a)(3) and (5) and (ii) all compensation and benefits that the
Executive would have been paid, or to which he would have been entitled, had he
remained employed for one (1) year after the Termination Date, regardless of
whether the Term ends during that one (1) year period.
(d) EXPIRATION OF THE TERM. If the Company does not offer to
renew this Agreement at least six (6) months prior to the expiration of the Term
on terms at least as favorable as those in the final year of the Executive's
employment except that its Term need be no longer than two (2) years and such
agreement need not include the retention bonus in Paragraph 3(c). The Executive
shall, upon the expiration of the Term, be entitled to receive benefits under
the Company's Severance Plan as if he were entitled to receive such benefits
under the terms of the Plan.
(e) CHANGE OF CONTROL. If a "Change of Control" (as defined in
the Stock Option Plan) occurs and the Executive terminates his employment no
earlier than six (6) months following the Change of Control and no later than
twelve (12) months following the Change of Control, the Executive shall receive
compensation and benefits as if his employment was terminated by him for Good
Reason.
(f) RELEASE. Any payments payable pursuant to this Paragraph 5
other than unpaid compensation shall only be payable if the Executive delivers
to the Company a release, as required under the Sotheby's, Inc. Severance Plan,
of all 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") or claims relating to any
rights of indemnification under Paragraph 8(e)), occurring up to the release
date with regard to the Company and its respective past or present officers,
directors and employees in such form as reasonably requested by the Company.
6. NON-COMPETE AND NON-SOLICITATION AGREEMENT.
(a) Because of the importance of stability and confidentiality
during this time of uncertainty for the Company, 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, California, 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 (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 earlier of (i) six
(6) months after the end of the Term or (ii) twelve (12) months after the
termination of the Executive's employment.
(b) 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) recruit, solicit or induce any Sotheby's employees
to terminate their employment with Sotheby's;
(2) solicit the business of, do business with, or seek
to do business with, any Client of the Company (as
defined herein);
(3) encourage or assist any Competing Business to
solicit or service any Client of the Company; or
(4) otherwise induce any Client of the Company to
cease doing business with, or lessen its business
with, the Company.
(c) The term "Client" shall not include clients of Sotheby's
with whom the Executive had no dealings on behalf of Sotheby's, or clients he
developed and maintained without any support or assistance, whether financial or
otherwise, from Sotheby's, but shall 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.
(d) If at any time there is a judicial determination by any
court of competent jurisdiction that the time period, geographical scope, or any
other restriction contained in this Paragraph 6 is unenforceable against the
Executive, the provisions of this Paragraph 6 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.
7. LEGAL AND EQUITABLE REMEDIES. Sotheby's shall be entitled to
enjoin a violation by the Executive of any provision hereof. Moreover, the
parties hereto acknowledge that the damages suffered by Sotheby's as a result of
any violation of this Agreement may be difficult to ascertain. Accordingly, the
parties agree that in the event of a breach of this Agreement by the Executive,
Sotheby's shall be entitled to specific enforcement by injunctive relief of the
Executive's obligations to Sotheby's. The remedies referred to above shall not
be deemed to be exclusive of any other remedies available to Sotheby's,
including to enforce the performance or observation of the covenants and
agreements contained in this Agreement.
8. MISCELLANEOUS.
(a) NOTICE. Whenever notice is required hereunder, it shall be
given in writing and addressed to the Company at the main business office, and
to the Executive at the address reflected in the payroll records of the Company.
(b) ENTIRE AGREEMENT. This Agreement supersedes any and all
existing agreements between the Executive and the Company relating to the terms
and conditions of the Executive's employment.
(c) AMENDMENTS AND WAIVERS. No provisions of this Agreement
may be amended, modified, waived or discharged except as agreed to in writing by
the Executive and the Company. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion will not be considered a
waiver thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(d) SUCCESSORS. This Agreement shall be binding upon and inure
to the benefit of the Executive and the Company and its successors and permitted
assigns. Neither this Agreement nor any of the rights of the parties hereunder
may be assigned by either party hereto except that the Company may assign its
rights and obligations hereunder to a corporation or other entity that acquires
substantially all of its assets. Any assignment or transfer of this Agreement in
violation of the foregoing provisions will be void.
(e) INDEMNIFICATION. The Executive shall be indemnified and
held harmless by the Company, or its successors or assigns, from and against any
losses, claims, damages, liabilities or actions, to the fullest extent permitted
by law.
(f) GOVERNING LAW. This 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.
(g) ARBITRATION. Any dispute, controversy or claim arising out
of or relating to this Agreement, or breach thereof (other than an action or
proceeding for an injunction or other equitable relief pursuant to Paragraph 7
hereof), 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 an enforcement as the law of such jurisdiction may require or
allow. The losing party in such arbitration shall be liable for any costs,
including attorneys' fees. If there is a dispute as to which party lost, costs
and fees shall be allocated by the arbitrator.
(h) TAX GROSS-UP. Notwithstanding anything herein to the
contrary, 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 this Agreement would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, or any interest
or penalties 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. 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.
(i) MITIGATION. The Executive shall have no duty to mitigate
any amounts payable or benefits provided under this Agreement.
(j) WITHHOLDINGS. The Company is authorized to withhold from
any benefit provided or payment due hereunder the amount of withholding taxes
due any federal, state, or local authority in respect of such benefit or payment
and to take such other action as may be necessary in the opinion of the Company
to satisfy all obligations for the payment of such withholding taxes.
(k) SEVERABILITY. If any provision of this Agreement is
invalid or unenforceable, the balance of this Agreement will remain in effect,
and if such provision is inapplicable to any person or circumstance, it will
nevertheless remain applicable to all other persons and circumstances.
(l) ATTORNEYS' FEES. At the request of the Executive, the
Company shall pay the Executive's reasonable attorneys' fees incurred by the
Executive in connection with preparation, execution and delivery of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
SOTHEBY'S HOLDINGS, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice Chairman of the Board
