EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
February 6, 2001
BY HAND
Xxxxxxxx Xxxxxxxxx
Sotheby's Holdings, Inc.
0000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Dear Xxxxxxxx:
This letter sets forth our understanding and agreement with respect to your
employment by Sotheby's Holdings, 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 twenty-four (24) months after
the date hereof, 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) at the option of the Company, upon written notice to you for
Cause (as hereinafter defined);
iii) upon thirty (30) days' prior written notice by you for Good
Reason (as hereinafter defined) within thirty (30) days after
the existence of 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, in conjunction with the appropriate
supervisor, shall determine, in their sole discretion, whether the
occurrence or non-occurrence of an event constitutes Cause within the
meaning of this Agreement. Such determination shall be final, binding
and conclusive on the parties hereto.
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 failure by the Company to comply with the provisions of
Paragraphs 3 or 4 of the Agreement; provided, however, that
payment of the bonus amounts set forth in Subparagraph 4(b) from
an External Source shall not be deemed to be a failure of the
Company to comply with the provisions of Paragraph 4
constituting Good Reason;
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); or
iv) the failure of the Company's successor to assume this Agreement
in accordance with Paragraph 20;
provided, however, that 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, 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,
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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 of
Sotheby's Financial Services, Inc. and Sotheby's Ventures, LLC. In addition
to the foregoing, you agree to perform such other functions and
responsibilities as may be reasonably requested by Sotheby's from time to
time. 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.
(3) COMPENSATION. In consideration for the services to be rendered by you to
Sotheby's, you shall receive during the 24-month period of employment by
Sotheby's after your execution of this Agreement, the following:
a) An annual base salary of $385,000, 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 the 24-month period after your execution of this
Agreement, your base salary shall be reviewed thereafter on an annual
basis (the first such review to take place effective as of the 25th
month following the execution of this Agreement) and shall be subject
to such adjustment as your supervisor(s) shall determine; and
b) In addition to the annual base salary, you will be eligible for:
i) An annual bonus composed of a 25% worldwide corporate financial
performance target and a 75% individual performance target. Your
2001 total bonus target is $250,000. You will be guaranteed a
minimum bonus of $125,000 for each of 2001 and 2002.
ii) A private treaty bonus in the Company's discretion to reflect
private treaty transactions you have initiated in excess of your
departmental private treaty target.
iii) Continuation of the special annual payment made to you on
September 1, 2000 and, as determined by the Company in its sole
discretion, as long thereafter as is appropriate.
(4) ADDITIONAL COMPENSATION IN CONSIDERATION FOR SPECIAL UNDERTAKINGS DURING
THE 24-MONTH EMPLOYMENT PERIOD. In order to preserve stability and to
assure your continued employment during this period of uncertainty for the
Company, and because it is essential
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that during this period you focus fully and exclusively on your job duties
for the Company, you agree to the following undertakings during the
24-month period of employment by Sotheby's after execution of this
Agreement, in exchange for the Special Additional Consideration 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 in working
toward successful sale seasons and in otherwise assisting
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) For the period beginning on the date hereof and ending 24 months
after the date hereof, 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, an art auction house, art dealer 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
24-month employment period. By entering into this Agreement, and
agreeing to the special undertakings set forth herein, you agree
that for this 24-month period 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) Special Additional Consideration
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In consideration of the foregoing undertakings by you, the Company
shall provide the following special additional consideration provided
you do not breach this Agreement (except as stated in Subparagraph
11(c)):
i) With respect to the special cash bonus of $300,000 payable
February 28, 2002 and a leadership incentive bonus in the amount
of $350,000 payable on February 28, 2002 and $350,000 payable on
September 30, 2002, as set forth in my letters to you of May 10,
2000 and October 16, 2000, Sotheby's shall provide a Guarantee
(as hereinafter defined) of these payments. All other terms and
conditions of these bonus payments set forth in the May 10, 2000
and October 16, 2000 letters remain in effect.
ii) You will also receive an additional "commitment bonus" in the
third quarter of 2001 in the amount of $300,000. Further,
Sotheby's shall provide a Guarantee (as hereinafter defined) of
this payment.
iii) You will also receive an additional "retention bonus" in the
amount of $2,400,000, provided you do not breach this Agreement.
This payment will be made in three (3) installments: 20% on July
15, 2001, 20% on January 15, 2002 and 60% on January 15, 2003.
Further, Sotheby's shall provide a Guarantee (as hereinafter
defined) of these payments.
iv) Pursuant to the Sotheby's 1997 Stock Option Plan, an option to
purchase 83,333 shares at an exercise price of $27 per share
will be provided to you upon your execution of this Agreement.
c) The "Guarantee" mentioned in Subparagraph 4(b) shall refer to the
guarantee in the form attached hereto.
d) The bonus amounts set forth in Subparagraph 4(b) have been developed
based in part on the role you play in bringing business to the
Company.
e) All bonus payments set forth in Subparagraphs 3(b)(iii) and 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.
f) If, at any time during the 24-month employment period, you breach any
of the undertakings set forth herein, you will return to the Company
all of the "Special Additional Consideration" you may have received
pursuant to Subparagraph 4(b) above, and will not thereafter be
entitled to any further "Special Additional Consideration." In
addition, payment of the "Special Additional Consideration" pursuant
to Subparagraph 4(b) will not be made if, for any reason, you are not
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employed by the Company on the date such payment would otherwise be
made, except as otherwise provided in Subparagraphs 11(a) or 11(b).
(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 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
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 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.
(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) CAR ALLOWANCE. You will be eligible to continue your current annual car
allowance of $18,000 for 2001 and 2002.
(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 24-MONTH EMPLOYMENT PERIOD.
a) If during the 24-month employment period your employment by the
Company is
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terminated by you for Good Reason in accordance with Subparagraph
1(b)(iii) hereof, 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, 2001
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 24-month
employment period 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 payments set forth in Subparagraphs 3(b)(i) and 3(b)(ii)
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)(iii) not paid as of the date of
termination.
In addition, you will not be obligated to return to the Company any
portion of the "Special Additional Consideration" you may have
received pursuant to Subparagraph 4(b) above. Notwithstanding the
foregoing, if during the 24-month employment period 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 24-month employment period 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
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of any portion of the "retention bonus" described in
Subparagraph 4(b)(iii) 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 "Special
Additional Consideration" you may have received pursuant to
Subparagraph 4(b) above.
c) If during the 24-month employment period 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 24-month employment period 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 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 (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 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 24-MONTH EMPLOYMENT PERIOD.
a) After expiration of the 24-month employment period under the terms 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 following the
24-month period herein during which time the provisions of Paragraphs
3(a), 4(a)(i), 6, 10 and 12 through 22 shall continue.
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b) In any event, after notice is given either by you or the Company
pursuant to Subparagraph 12(a), you will remain an employee through
the 6-month notice period (the "Notice Period"). After the expiration
of the 24-month employment period provided for in this Agreement, 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 22 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 24-month period after you enter into this Agreement (and
regardless of whether your employment is terminated) and during the
period you remain employed by the Company (including the Notice
Period), you will not, without the consent of the Company, directly or
indirectly, in New York, California, England, France or Switzerland
engage directly or indirectly in the live or on-line auction business
or in any other business in which the Company is engaged, whether such
engagement by you is as an officer, director, proprietor, employee,
partner, owner, consultant, advisor, agent, sales representative or
other participation.
b) In addition to the foregoing, during the 24-month period after you
enter into this Agreement and during the Notice Period, 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
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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 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). Notwithstanding the foregoing, you
authorize Sotheby's to deduct your payment for your executive mortgage loan
and demand promissory note from your salary and bonus payment pursuant to
Subparagraphs 3(a) and 3(b)(i) herein, which you acknowledge is for your
benefit. All terms of your executive mortgage loan and demand promissory
note remain in full force and effect. Any waiver or amendment of any
provision of this Agreement must be done in writing and signed by both
parties.
(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
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apply as to such maximum extent as the court may judicially determine or
indicate to be enforceable under New York law.
(18) CONFIDENTIALITY. You shall not disclose this Agreement or the contents
thereof to anyone other than (i) your legal or financial advisor, provided
that you give to each such person to whom disclosure is made notice of the
confidentiality provisions of this Agreement and each agrees to keep the
existence, terms and conditions of this Agreement fully confidential or
(ii) except as required by law or with the prior written approval of
Sotheby's.
(19) 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.
(20) 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 20, if this Agreement is not assumed as a matter of law, the
Company will require its assumption by the successor entity.
(21) REPRESENTATION BY COUNSEL. The parties have each been represented by
counsel of their own choosing in negotiating this Agreement.
(22) 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 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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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 HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Xxxxxxx X. Xxxxxxxx
Chief Executive Officer
Read, accepted and agreed to this
7th day of February, 2001
/s/ Xxxxxxxx Xxxxxxxxx
----------------------
Xxxxxxxx Xxxxxxxxx
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