Severance Agreement

(1)

Severance Arrangements.

If at any time from the date of commencement of employment through December 31, 2009 (the “Applicable Period”), your employment by the Company is terminated by you for Good Reason or by the Company without Cause, the Company shall pay or provide you with the following:

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 prior calendar year and reimbursement for any unreimbursed expenses incurred through the date of termination (“Accrued Obligations”); and

(ii)

$1,000,000, which amount shall be in lieu of any other payment to which you might otherwise be entitled under the Company’s Severance Plan.

(b)

If during the Applicable 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 for any period prior to or after the date of termination of your employment.

(c)

Any payments payable pursuant to this Paragraph 1 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 any and 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 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 in such form as may be reasonably requested by the Company.

(2)

Certain Agreements. In consideration of the undertakings by the Company in Paragraph (1) and in the Offer Letter, you agree to be bound by the covenants and agreements set forth in Exhibit B.

(3)

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. Any waiver or amendment of any provision of this Agreement must be done in writing and signed by both parties.

(4)

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.

(5)

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 4 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 such enforcement as the law of such jurisdiction may require or allow.

(6)

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.

(7)

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.

(8)

Binding on Successor Company. This Agreement shall remain in effect and be 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, and such successor entity shall be deemed the “Company” for purposes of this Agreement.

(9)

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, 1334 York Avenue, New York, New York 10021, Attention: EVP, Human Resources 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.

/s/ SUSAN ALEXANDER

Susan Alexander
Executive Vice President and
Worldwide Head of Human Resources

(a)

conviction of a felony crime,

(b)

fraud, willful malfeasance, gross negligence, or any other act in connection with performance of your duties which is materially injurious to the Company.

(a)

failure by the Company to pay you a base salary of not less than $500,000, reduction of your annual incentive bonus target below $300,000 or discontinuance of your participation in Sotheby’s Executive Bonus Plan or a comparable plan which pays out based on the Company’s meeting certain financial performance goals determined annually by the Compensation Committee;

(b)

your being required to relocate to a principal place of business more than fifty (50) miles outside New York, New York without your express consent;

(c)

any action by the Company that results in a material diminution in your position without your express consent (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); and

(d)

failure of the Company to maintain directors and officers liability insurance for your benefit on a basis no less favorable than the basis on which it generally maintains such insurance for the benefit of other senior executives of the Company.