EXHIBIT 10(q)
Employment Agreement
As of October 1, 2002
BY HAND
Xxxxxx Xxxxxx
Sotheby's International Realty, Inc.
00 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000
Dear Stuart:
This letter sets forth our understanding and agreement with respect to
your employment by Sotheby's, Inc. (together with all of its subsidiaries and
related entities, "Sotheby's" or the "Company"). This Agreement is being
provided to you because you are a key employee at the Company, perform highly
specialized and unique duties for the Company, and could do substantial harm to
the Company if you left its employment, particularly during this present period
of uncertainty for the Company. Consequently, Sotheby's is offering you the
following terms and financial enhancements to ensure your continued employment
with and loyalty to the Company, and so that you will focus fully and
exclusively on your job duties at Sotheby's during this period.
(1) Term of Employment.
a) You agree to continue as a full-time employee of Sotheby's and
Sotheby's agrees to continue to employ you full-time, subject
to the terms and conditions set forth herein (the
"Agreement"), for a period beginning on the date hereof and
ending on September 30, 2004, unless extended in writing by
both the Company and you or as otherwise provided in this
Agreement.
b) This Agreement may be terminated:
i) upon mutual written agreement of the Company and you;
ii) upon thirty (30) days' prior written notice by the
Company for Cause (as hereinafter defined), unless
such cause shall have been remedied during such
period; provided, however, such notice by the Company
must be given to you within sixty (60) days of the
Chief Executive Officer of the Company (the "Chief
Executive Officer") or Board of Directors of the
Company (the "Board") learning of circumstances
constituting Cause;
iii) upon thirty (30) days' prior written notice by you
for Good Reason (as hereinafter defined) given within
thirty (30) days of your learning of the
circumstances constituting Good Reason;
iv) at the option of the Company in the event of your
Permanent Disability (as hereinafter defined); or
v) automatically upon your death.
c) As used herein, the term "Cause" shall mean and be limited to:
i) conviction of a felony crime, or
ii) fraud, willful malfeasance or gross negligence in
performance of your duties which is materially
injurious to the Company.
The Chief Executive Officer shall determine whether the
occurrence or non-occurrence of an event constitutes Cause
within the meaning of this Agreement; however, at your
request, any such decision will be reviewed by the Executive
Committee of the Board of Directors of Sotheby's Holdings,
Inc.
d) As used herein, the term "Good Reason" shall mean, without
your express written consent, the occurrence of any of the
following events:
i) any material breach of this Agreement by the Company;
ii) your being required to relocate to a principal place
of business more than thirty-five (35) miles outside
New York, New York;
iii) any action by the Company that results in a material
diminution in your position (except in connection
with the termination of your employment for Cause or
as a result of your death or Permanent Disability or
temporarily as a result of your illness or other
absence);
iv) the failure of the Company's successor to assume this
Agreement in accordance with Paragraph 20; or
v) your voluntary resignation of employment with the
Company not earlier than nine (9) months nor later
than fifteen (15) months after a Change in Control
(as defined in the Company's 1997 Stock Option Plan).
provided, however, that (except in the case of clause (v)) the
Company shall have thirty (30) days following the receipt of
notice from you of the existence of circumstances constituting
Good Reason to correct such circumstances.
e) As used herein, the term "Permanent Disability" shall mean,
and be limited to,
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any physical or mental illness, disability or impairment that
has prevented you from continuing the performance of your
normal duties and responsibilities hereunder for a period in
excess of six (6) consecutive months. For purposes of
determining whether a Permanent Disability has occurred under
this Agreement, the written determination thereof by a
physician mutually acceptable to the Company and you or, if
you and the Company cannot agree upon a physician, by a
physician selected by agreement of a physician designated by
the Company and a physician designated by you, shall be
conclusive; provided, however that if such physicians cannot
agree upon a third physician within thirty (30) days, such
third physician shall be designated by the American
Arbitration Association.
(2) Title; Responsibilities. You shall continue to serve as President and
Chief Executive Officer of Sotheby's International Realty, Inc. In
addition to the foregoing, you agree to perform such other functions
and responsibilities as may be reasonably requested from time to time
by the Chief Executive Officer, to whom you shall report. Except as
otherwise permitted by the Company, in accordance with Paragraph 12,
during your employment with the Company, you shall devote substantially
all of your business time (excluding periods of vacation and sick
leave) and efforts to the performance of your functions and
responsibilities hereunder provided, however, that it shall not be a
violation of this Agreement for you to (a) serve on professional,
industry, civic or charitable boards, committees or organizations, and
attend conferences reasonably related to the Company's business
interests, (b) manage personal investments, or (c) serve on the boards
of directors of corporations not in competition with the Company, so
long as any such activities are approved in advance by the Chief
Executive Officer and do not interfere with or impair the performance
of your responsibilities pursuant to this Agreement.
(3) Compensation. In consideration for the services to be rendered by you
to Sotheby's, you shall receive during the term of this Agreement, the
following:
a) An annual base salary of $330,000, which shall be payable in
appropriate installments to conform with the regular payroll
dates for salaried personnel of Sotheby's. In the event your
employment continues beyond September 30, 2004, your base
salary shall be reviewed thereafter on an annual basis and
shall be subject to such adjustment as the Chief Executive
Officer shall determine; and
b) In addition to the annual base salary, you will be eligible
for an annual bonus composed of a 25% corporate portion and a
75% individual portion. Your 2002 total bonus target is
$330,000, of which the individual portion in an amount equal
to $250,000 is guaranteed to be paid to you by the Company no
later than April 30, 2003. The individual portion of your 2002
bonus may be adjusted upward as set forth in a certain
memorandum from Xx. Xxxxxxx X. Xxxxxxxx to you, dated May 10,
2002. Your bonus target in subsequent years will be
substantially consistent with the bonus targets of other
employees of the Company at a similar level of responsibility
and making a similar contribution to the Company, financial
and otherwise.
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(4) Retention Bonus. In recognition of your service with the Company during
a period of uncertainty for the Company and in order to preserve
stability and to assure your continued employment during this period of
uncertainty, and because it is essential that during this period you
focus fully and exclusively on your job duties for the Company, you
agree to the following undertakings during the term of this Agreement,
in exchange for the Retention Bonus (as hereinafter defined) set forth
in Subparagraph 4(b) below.
a) Employee Undertakings
i) You agree to reaffirm and abide by your acknowledged
fiduciary obligation to cooperate with the Company in
the event of and in connection with matters relating
to the Company including without limitation a
restructuring (any business or capital
restructuring), refinancing or sale of the Company or
a significant interest therein (including but not
limited to an actual or potential change of control)
including, but not limited to, your obligations to:
(a) not disparage the Company or its assets to
any third party;
(b) maintain your loyalty to the Company in all
respects, including without limitation,
compliance with Paragraph 13;
(c) provide full and complete active cooperation
and other assistance in promoting the
Company; and
(d) fully assist with any transition with
respect to any business or capital
restructuring, refinancing or sale of the
Company or a significant interest therein.
ii) During the term of this Agreement, you agree to
refrain from any substantive discussions, meetings or
communications of any kind whatsoever with any other
potential employer, including, but not limited to,
any real estate brokerage company or any other
company, organization or entity in which you would
perform similar duties and responsibilities to those
you have performed at Sotheby's, regarding
prospective employment for yourself during the term
of this Agreement. By entering into this Agreement,
and agreeing to the special undertakings set forth
herein, you agree that during the term of this
Agreement you are knowingly and voluntarily foregoing
the right to engage in such conduct in exchange for
the consideration set forth herein, and you
acknowledge the vital importance of these
undertakings to the Company during this period.
b) Retention Bonus
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In recognition of your service to the Company during a period
of uncertainty and in consideration of the foregoing
undertakings by you, and provided you do not breach this
Agreement in any material respect, and subject to Subparagraph
11(c), you will also receive a "retention bonus" in the amount
of $1,000,000 (the "Retention Bonus"). This payment will be
made in three (3) installments: $300,000 on January 15, 2003,
$300,000 on July 15, 2003 and $400,000 on January 15, 2004.
c) The bonus payments set forth in Subparagraph 4(b) 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 special
payments are also not part of the bonus calculation in the
event you are entitled to benefits under the Sotheby's, Inc.
Severance Plan.
d) If, at any time during the term of this Agreement, you breach
any of the undertakings set forth herein in any material
respect, you will return to the Company all of the Retention
Bonus you may have received pursuant to Subparagraph 4(b)
above, and will not thereafter be entitled to any further
Retention Bonus In addition, payment of the Retention Bonus
pursuant to Subparagraph 4(b) will not be made if, for any
reason, you are not employed by the Company on the date such
payment would otherwise be made, except as otherwise provided
in Subparagraphs 11(a) or 11(b) or 11(e).
(5) Stock Options. Your options will continue to vest pursuant to the
Sotheby's 1997 Stock Option Plan, and you will continue to be eligible
for further grants. The benefits provided in this Agreement are in
addition to any stock options you have already received.
(6) Benefits. You shall continue to be entitled, to the extent that your
position, title, tenure, salary, age, health and other qualifications
make you eligible, to participate in all employee benefit plans or
programs now in effect or hereafter adopted by Sotheby's, including
being in the employment category of an executive level corporate
officer for purposes of the Sotheby's, Inc. Severance Plan, medical,
dental, disability, life insurance, stock options and pension benefits.
Your participation in such plans or programs shall continue to be
subject to the provisions, rules and regulations applicable thereto.
Any benefits that you may become eligible for under the Sotheby's, Inc.
Severance Plan shall be in addition to the other benefits specified in
this Agreement. In the event you are entitled to benefits under the
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 you in which case
you would receive the enhanced benefit.
(7) Vacation. You shall continue to be entitled to annual vacation time,
with full pay, in accordance with the established policies of Sotheby's
now or hereafter in effect for similarly situated employees but in no
event less than the number of days to which you are presently entitled.
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(8) Expenses. You shall be authorized to incur reasonable and necessary
expenses incurred in connection with Sotheby's business, including
expenses for entertainment, travel and similar items in accordance with
Sotheby's travel and entertainment policy. Sotheby's will reimburse you
for all such expenses upon presentation by you monthly of an itemized
account of such expenditures. Such expenditures, however, shall be
subject at all times to the approval of Sotheby's in accordance with
Sotheby's expense reimbursement policy.
(9) Business Development Allowance. You will be eligible to continue your
current annual business development allowance of $12,000.
(10) Confidentiality Agreement; Sotheby's Rules and Policies. As a condition
to your continued employment by the Company, you 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"). You acknowledge that you have
read, understood and signed each of the foregoing.
(11) Compensation Upon Termination During the Term of this Agreement.
a) If during the term of this Agreement your employment by the
Company is terminated by you for Good Reason in accordance
with Subparagraph 1(b)(iii) hereof or by the Company without
Cause, the Company shall pay or provide you with the
following:
i) The sum of your base salary through the date of
termination to the extent not theretofore paid, any
declared and earned but unpaid bonus amount for the
fiscal year ended December 31 of the prior year and
reimbursement for any unreimbursed expenses incurred
through the date of termination in accordance with
Paragraph 8 ("Accrued Obligations");
ii) Continued payment of your base salary on a
semi-monthly basis from the date of termination
through the end of the term of this Agreement or the
date six (6) months after the effective date of your
termination, whichever is later;
iii) On, or within fifteen (15) days following the date of
termination, a pro-rated bonus equal to the product
of (x) the bonus payment set forth in Subparagraph
3(b) paid or earned and payable for the most recently
completed fiscal year of the Company and (y) a
fraction, the numerator of which is the number of
days in the current fiscal year through the date of
termination, and the denominator of which is 365 (the
"Pro-Rated Bonus"); and
iv) On, or within fifteen (15) days following the date of
termination, payment of any portion of the Retention
Bonus described in Subparagraph 4(b) not paid as of
the date of termination.
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In addition, you will not be obligated to return to the
Company any portion of the Retention Bonus you may have
received pursuant to Subparagraph 4(b) above. Notwithstanding
the foregoing, if during the term of this Agreement your
employment by the Company is terminated and as a result of
such termination you become eligible to receive payments
and/or benefits under the Sotheby's, Inc. Severance Plan, then
you shall not be entitled to receive the Pro-Rated Bonus in
accordance with the provisions of Subparagraph 11(a)(iii).
b) If during the term of this Agreement your employment by the
Company is terminated on account of your Permanent Disability
or your death, the Company shall pay or provide you (or, in
the event of your death, your estate) with the following:
i) Accrued Obligations;
ii) On, or within fifteen (15) days following the date of
termination, a Pro-Rated Bonus; and
iii) On, or within fifteen (15) days following the date of
termination, payment of any portion of the Retention
Bonus described in Subparagraph 4(b) not paid as of
the date of termination.
In addition, you (or, in the event of your death, your estate)
will not be obligated to return to the Company any portion of
the Retention Bonus you may have received pursuant to
Subparagraph 4(b) above.
c) If during the term of this Agreement your employment by the
Company is terminated by the Company for Cause, this Agreement
shall terminate without further obligation to you, except that
the Company shall pay or provide you with the sum of your base
salary through the date of termination to the extent not
theretofore paid. You will not be eligible for any bonus or
special payments, including those in Subparagraphs 3(b) and
4(b), after the date of termination of your employment.
d) If during the term of this Agreement your employment by the
Company is terminated in accordance with Subparagraphs 1(b)(i)
hereof, the Company shall pay or provide you with the amounts
mutually agreed on by the Company and you.
e) Any payments payable pursuant to this Paragraph 11 beyond the
Accrued Obligations shall only be payable if you deliver to
the Company a release, as similarly required under the
Sotheby's, Inc. Severance Plan, of all your claims (excluding
from such release 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
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Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") or claims relating to any rights of indemnification
under Paragraph 14) 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.
(12) Employment After Expiration of the Term of this Agreement.
a) If the Company does not offer to renew this Agreement within
60 days of receipt from you of a written request for such
renewal (which request shall be made not more than six (6)
months prior to September 30, 2004), on terms at least as
favorable as those in the final year of your employment
(except that its term need be no longer than one (1) year,
such agreement need not contain the provisions of this
Subparagraph (12)(a) and such agreement need not include the
Retention Bonus in Paragraph 4(b)), then you shall, upon the
expiration of this Agreement, be entitled to receive benefits
under the Severance Plan as if you were entitled to receive
such benefits under the terms of the plan.
b) After expiration of the term of this Agreement, and provided
that the Agreement is not extended or superseded by the mutual
written consent of the parties in accordance with Subparagraph
1(a), you will be an employee at-will; provided, however, that
(i) prior to resigning or retiring from the Company you will
provide the Company with a least six (6) months' written
notice of such resignation or retirement during which time the
provisions of Paragraphs 3(a), 4(a)(i) and 12 through 22 shall
continue, and (ii) prior to termination by the Company, the
Company will provide you with at least six (6) months' written
notice of termination during which time the provisions of
Paragraphs 3(a), 4(a)(i), 6, 10 and 12 through 22 shall
continue.
c) In any event, after notice is given either by you or the
Company pursuant to Subparagraph 12(b), you will remain an
employee through the 6-month notice period (the "Notice
Period"). After the expiration of the term of this Agreement,
and until the end of the Notice Period you will continue to
receive your base salary as set forth in Subparagraph 3(a),
and the provisions of Paragraphs 2, 4(a)(i), 5-8, 10, 12, 13
and 15 through 21 will remain in effect. It is at the sole
discretion of the Company whether you shall be required to
continue to perform services for the Company during the Notice
Period.
(13) 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
you have specialized, unique confidential knowledge vital to
the Company, you agree that during the term of this Agreement
(and regardless of whether your employment is terminated) and
during the period you remain employed by the Company
(including the Notice Period), and for a period of six (6)
months following the term of this Agreement
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or the Notice Period (as the case may be), you will not,
without the consent of the Company, directly or indirectly, in
New York, California or Connecticut engage directly or
indirectly in the real estate brokerage business, whether such
engagement by you is as an officer, director, proprietor,
employee, partner, owner, consultant, advisor, agent, sales
representative or other participation. Notwithstanding
anything contained herein to the contrary, the provisions of
this Subparagraph 13(a) shall not be deemed to prohibit your
mere ownership of less than five (5%) percent of the total
outstanding shares of all classes of securities of any
publicly held company.
b) In addition to the foregoing, during the term of this
Agreement and during the Notice Period, and for a period of
six (6) months following the term of this Agreement or the
Notice Period (as the case may be), you agree that you will
not, either alone or in concert with others, and will not
cause another to in any such case directly or indirectly,
i) recruit, solicit or induce any Sotheby's employees to
terminate their employment with Sotheby's;
ii) solicit the business of, do business with, or seek to
do business with, any client of the Company;
iii) encourage or assist any competitor of the Company to
solicit or service any client of the Company; or
iv) 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 you had no dealings on behalf of Sotheby's, or clients
you 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 you did have dealings as well as 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 13
is unenforceable against you, the provisions of this Paragraph
13 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.
(14) Indemnification. The Company shall maintain for your benefit director
and officer liability insurance in the same amount and to the same
extent as the Company covers similarly situated employees. In addition,
to the extent not covered by director and officer liability insurance,
you shall be indemnified by the Company against liability as
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an officer or director of the Company to the maximum extent permitted
by applicable law. Your rights under this Paragraph 14 shall continue
so long as you may be subject to such liability, whether or not this
Agreement may have terminated prior thereto
(15) Miscellaneous. You may not assign your rights or delegate your
obligations under this Agreement. Sotheby's shall be entitled to
withhold from any payments or deemed payments under this Agreement any
amount of withholding required by law. This Agreement constitutes the
entire agreement between you and Sotheby's concerning the subject
matter of your employment, with the exception of letters and documents
specifically referenced herein, and it supersedes all prior agreements
including, but not limited to, any prior notice and non-compete
agreements, written or oral, discussions, and negotiations on that
subject (other than the letters and documents specifically referenced
herein). Any waiver or amendment of any provision of this Agreement
must be done in writing and signed by both parties. At your request,
the Company shall pay your reasonable attorney's fees and disbursements
incurred by you in connection with the preparation, execution and
delivery of this Agreement not to exceed $3,000.
(16) Legal and Equitable Remedies. Sotheby's shall be entitled to enjoin a
violation by you 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
you, Sotheby's shall be entitled to specific enforcement by injunctive
relief of your 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.
(17) Severability. If at any time there is a judicial determination by any
court of competent jurisdiction that any provision of this Agreement is
unenforceable against you, the other provisions of this Agreement shall
not be rendered void but shall be deemed amended to apply as to such
maximum extent as the court may judicially determine or indicate to be
enforceable under New York law.
(18) Choice of Law/Choice of Forum. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of New
York irrespective of the principles of conflicts of law, and you
consent to the jurisdiction of the state and federal courts situated in
New York City for the purpose of adjudicating any dispute relating to
this Agreement.
(19) Binding on Successor Company. This Agreement shall remain in effect and
binding upon any successor or assign of Sotheby's including any entity
that (whether directly or indirectly, by purchase, merger,
reorganization, consolidation, acquisition of property or stock,
liquidation or otherwise) is the survivor of the Company or that
acquires the Company and/or substantially all the assets of the Company
in accordance with the operation of law, and such successor entity
shall be deemed the "Company" for purposes of this Agreement. In the
situations set forth in this Paragraph 19, if this Agreement is
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not assumed as a matter of law, the Company will require its assumption
by the successor entity.
(20) Representation by Counsel. The parties have each been represented by
counsel of their own choosing in negotiating this Agreement.
(21) Notices. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be delivered personally or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed
to you at the address set forth on the initial page of this Agreement,
with a copy to Xxxxx X. Xxxxx, Esq., Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx
LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 and to the Company at
Sotheby's, Inc., 0000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
General Counsel, or to such other address as either party may have
furnished to the other in writing in accordance herewith. Any such
notice shall be deemed given when so delivered personally, or, if
mailed, five (5) days after the date of deposit in the United States
mail, except that notice of change of address shall be effective only
upon receipt.
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Please review this Agreement carefully and, if it correctly states our
agreement, sign and return to me the enclosed copy.
Very truly yours,
SOTHEBY'S, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Xxxxxxx X. Xxxxxxxx
Chief Executive Officer
Read, accepted and agreed to as of the
1st day of September, 2002
/s/ Xxxxxx Xxxxxx
-----------------
Xxxxxx Xxxxxx
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