CREDIT AGREEMENT Dated as of August 31, 2009 among

EXHIBIT 10.1

Dated as of August 31, 2009

among

SOTHEBY’S,
a Delaware corporation
SOTHEBY’S, INC.,
SOTHEBY’S FINANCIAL SERVICES, INC.,
SOTHEBY’S FINANCIAL SERVICES CALIFORNIA, INC.,
OBERON, INC.,
THETA, INC.,
SOTHEBY’S VENTURES, LLC,
OATSHARE LIMITED,
SOTHEBY’S,
a company registered in England, and
SOTHEBY’S FINANCIAL SERVICES LIMITED,
as Borrowers,

THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,

THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,

GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and a Lender

and

GE CAPITAL MARKETS, INC. and HSBC BANK PLC,
as Joint Lead Arrangers and Joint Bookrunners

 

 

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ii

 

iii

 

iv

 

v

 

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                    This CREDIT AGREEMENT (this “ Agreement ”), dated as of August 31, 2009, among Sotheby’s, a Delaware corporation (“ Parent ”), Sotheby’s, Inc., a New York corporation (“ Sotheby’s, Inc .”), Sotheby’s Financial Services, Inc., a Nevada corporation (“ SFS Inc. ”), Sotheby’s Financial Services California, Inc., a Nevada corporation (“ SFS California ”), Oberon, Inc., a Delaware corporation (“ Oberon ”), Theta, Inc., a Delaware corporation (“ Theta ”), Sotheby’s Ventures, LLC, a New York limited liability company (“ Ventures LLC ” and, collectively with Parent, Sotheby’s, Inc., SFS Inc., SFS California, Oberon and Theta, the “ U.S. Borrowers ”), Oatshare Limited, a company registered in England (“ Oatshare ”), Sotheby’s, a company registered in England (“ Sotheby’s U.K. ”), and Sotheby’s Financial Services Limited, a company registered in England (“ SFS Ltd. ” and, collectively with Oatshare and Sotheby’s U.K., the “ U.K. Borrowers ” and, collectively with the U.S. Borrowers, the “ Borrowers ”); the other Credit Parties signatory hereto; General Electric Capital Corporation, a Delaware corporation (in its individual capacity, “ GE Capital ”), for itself, as a Lender and as Fronting Lender, and as Agent for the Lenders and the Fronting Lender (in such capacity, “ Agent ”), and the other Lenders signatory hereto from time to time.

RECITALS

                    WHEREAS, Borrowers have requested that Lenders extend revolving credit facilities to Borrowers of up to Two Hundred Million Dollars ($200,000,000) in the aggregate to provide (a) working capital financing for Borrowers, (b) funds for other general corporate purposes of Borrowers and (c) funds for other purposes permitted hereunder; and for these purposes, Lenders are willing to make certain loans and other extensions of credit to Borrowers of up to such amount upon the terms and conditions set forth herein; and

                    WHEREAS, Borrowers have agreed to secure all of the Secured Obligations by granting to Agent, for the benefit of Agent and the other Secured Parties, a security interest in and lien upon all of their existing and after-acquired personal property; and

                    WHEREAS, capitalized terms used in this Agreement shall have the meanings ascribed to them in Annex A and, for purposes of this Agreement and the other Loan Documents, the rules of construction set forth in Annex A shall govern. All Annexes, Disclosure Schedules, Exhibits and other attachments (collectively, “ Appendices ”) hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together with this Agreement, shall constitute but a single agreement. These Recitals shall be construed as part of the Agreement.

                    NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the parties hereto agree as follows:

1. AMOUNT AND TERMS OF CREDIT

                    1.1 Credit Facilities .

                    (a) Revolving Credit Facility .

                              (i) Subject to the terms and conditions hereof, (a) each Lender agrees to make available, from time to time until the Commitment Termination Date, its Pro Rata Share

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of advances (each, a “ Dollar Revolving Credit Advance ”) in Dollars to U.S. Borrowers and (b) except as otherwise provided in the last sentence of this paragraph, each of the Sterling Lenders and the Fronting Lender agrees to make available, from time to time until the Commitment Termination Date, its Pro Rata Share (or, in the case of the Fronting Lender, the Fronted Percentage) of advances (each a “ Sterling Revolving Credit Advance ”) in Sterling to the U.K. Borrowers. Each Non-Sterling Lender shall purchase an undivided participation interest in each such Sterling Revolving Credit Advance from the Fronting Lender in accordance with Section 9.9(e)(i) . The Fronting Lender shall not be required to, and shall not, fund its share of any Sterling Revolving Credit Advance at any time that any condition precedent set forth in Section 2.2 is not satisfied if the Fronting Lender shall have received at least one Business Day’s prior written notice from Non-Sterling Lenders having Commitments equal to or greater than 66 2/3% of the Fronted Percentage instructing it not to fund its share of a Sterling Revolving Credit Advance. The Pro Rata Share of the aggregate Revolving Loan of any Lender shall not at any time exceed its separate Commitment. The obligations of each Lender to make Loans or purchase participation interests therein under this Agreement shall be several and not joint. Until the Commitment Termination Date, Borrowers may borrow, repay and reborrow under this Section 1.1(a) ; provided , that (i) the amount of any Revolving Credit Advance to be made at any time to a U.S. Borrower shall not exceed U.S. Borrowing Availability at such time and (ii) the Dollar Equivalent of the amount of any Revolving Credit Advance to be made at any time to a U.K. Borrower shall not exceed U.K. Borrowing Availability at such time. The Dollar Equivalent of each outstanding Revolving Credit Advance, Swing Line Advance and Letter of Credit Obligation shall be recalculated hereunder on each date on which it shall be necessary to determine the Revolving Loan Outstandings, as determined by Agent in its sole discretion; provided , that Agent shall recalculate the Dollar Equivalent of the Revolving Loan Outstandings at least one time each calendar month and otherwise in accordance with Section 1.18 . U.S. Borrowing Availability or U.K. Borrowing Availability, or both, may be reduced by Reserves imposed by Agent in its sole reasonable credit judgment. Each Revolving Credit Advance shall be made on notice by Borrower Representative to one of the representatives of Agent identified in Schedule 1.1 at the address specified therein. Any such notice must be given no later than (x) 11:00 a.m. (New York time) on the Business Day of the proposed Revolving Credit Advance, in the case of an Index Rate Loan in Dollars or (y) 11:00 a.m. (New York time) on the date which is three (3) Business Days prior to the proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice (a “ Notice of Revolving Credit Advance ”) must be given in writing (by telecopy or overnight courier) substantially in the form of Exhibit 1.1(a)(i) , and shall include the information required in such Exhibit and such other information as may be required by Agent. If any Borrower desires to have any Revolving Credit Advance be made as a LIBOR Loan, Borrower Representative must comply with Section 1.5(e) . A Revolving Credit Advance may not be drawn in Sterling if Agent determines at any time prior to 12:00 p.m. (New York time) on the date of such proposed Revolving Credit Advance that by reason of any change in currency availability, unusual instability in currency exchange rates or exchange controls it is, or will be, impracticable for such Revolving Credit Advance to be made in the Sterling. In such event, the proposed Revolving Credit Advance shall be made in Dollars.

                              (ii) Except as provided in Section 1.12 , each Borrower shall execute and deliver to each Lender a note to evidence the Commitment of, and Revolving Credit Advances made by, that Lender. Each note shall be in the principal amount of the Commitment of the applicable Lender, dated the Closing Date (or such later date as such Lender becomes

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party to this Agreement pursuant to Section 9.1(a) or modifies its Commitment pursuant to Section 9.1(a) ) and substantially in the form of Exhibit 1.1(a)(ii)-A (in the case of the U.S. Borrowers) or Exhibit 1.1(a)(ii)-B (in the case of the U.K. Borrowers) (each a “ Revolving Note ” and, collectively, the “ Revolving Notes ”). Each Revolving Note shall represent the joint and several obligation of the applicable Borrowers to pay the amount of the applicable Lender’s Commitment or, if less, such Lender’s Pro Rata Share of the aggregate unpaid principal amount of all Revolving Credit Advances made to the U.S. Borrowers or the U.K. Borrowers, as applicable, together with interest thereon as prescribed in Section 1.5 . In addition, each U.K. Borrower shall execute and deliver to the Fronting Lender a note to evidence the obligation of, and Sterling Revolving Credit Advances made by, the Fronting Lender. Such note shall be in the principal amount of the Sterling Subfacility Limit dated the Closing Date (or such later date as such Person shall become the Fronting Lender pursuant to Section 9.7(b) ) and substantially in the form of Exhibit 1.1(a)(ii)-C (the “ Fronting Lender Note ”). The Fronting Lender Note shall represent the joint and several obligation of the U.K. Borrowers to pay the Fronted Percentage of the aggregate unpaid principal amount of all Sterling Revolving Credit Advances made to the U.K. Borrowers, together with interest thereon as prescribed in Section 1.5 . The entire unpaid balance of the aggregate Revolving Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date.

                              (iii) Anything in this Agreement to the contrary notwithstanding, at the request of Borrower Representative, in its discretion Agent may (but shall have absolutely no obligation to), make Revolving Credit Advances (i) to U.S. Borrowers on behalf of Lenders in Dollars in amounts that cause the sum of (a) the aggregate outstanding balance of the Revolving Credit Advances and Swing Line Advances outstanding to the U.S. Borrowers plus (b) the Dollar Equivalent of the outstanding amount of Letter of Credit Obligations incurred for the benefit of the U.S. Borrowers to exceed the U.S. Borrowing Base or (ii) to U.K. Borrowers on behalf of the Sterling Lenders and the Fronting Lender in Sterling in amounts that cause the sum of (a) the Dollar Equivalent of the aggregate outstanding balance of the Revolving Credit Advances and Swing Line Advances outstanding to the U.K. Borrowers plus (b) the Dollar Equivalent of the outstanding amount of Letter of Credit Obligations incurred for the benefit of the U.K. Borrowers to exceed the U.K. Borrowing Base (any such excess Revolving Credit Advances are herein referred to collectively as “ Overadvances ”); provided , that (A) no such event or occurrence shall cause or constitute a waiver of Agent’s, Swing Line Lender’s, Fronting Lender’s or Lenders’ right to refuse to make any further Overadvances, Swing Line Advances or Revolving Credit Advances, or incur any Letter of Credit Obligations, as the case may be, at any time that an Overadvance exists and (B) no Overadvance shall result in a Default or Event of Default based on Borrowers’ failure to comply with Section 1.3(b)(ii) for so long as Agent permits such Overadvance to be outstanding, but solely with respect to the amount of such Overadvance. In addition, Overadvances may be made even if the conditions to lending set forth in Section 2 have not been met. All Overadvances shall constitute Index Rate Loans (in the case of Overadvances denominated in Dollars) or LIBOR Loans having a one-month LIBOR Period (in the case of Overadvances denominated in Sterling), shall bear interest at the Default Rate and shall be payable on the earlier of demand or the Commitment Termination Date. Except as otherwise provided in Section 1.11(b) , the authority of Agent to make Overadvances is limited to an aggregate amount not to exceed a Dollar Equivalent of $15,000,000 at any time, shall not cause the Dollar Equivalent of the aggregate Revolving Loan to exceed the Maximum Amount,

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and may be revoked prospectively by a written notice to Agent signed by the Requisite Lenders; provided , that Overadvances made other than for the purpose of protecting or preserving the Collateral shall not remain outstanding for more than sixty (60) days without the written consent of Requisite Lenders. Agent shall use commercially reasonable efforts to provide notice to Lenders following the making of an Overadvance (unless one or more Overadvances are already outstanding as of the date of such Overadvance).

                    (b) Swing Line Facility .

                              (i) Agent shall notify the Swing Line Lender upon Agent’s receipt of any Notice of Revolving Credit Advance in respect of a Revolving Credit Advance (a) to be denominated in Dollars and to bear interest by reference to the Dollar Index Rate or (b) to be denominated in Sterling and to bear interest by reference to the Sterling Index Rate. Subject to the terms and conditions hereof, the Swing Line Lender may, but shall have no duty to, in accordance with any such notice, make available from time to time until the Commitment Termination Date advances (each, a “ Swing Line Advance ”) (a) in Dollars to the U.S. Borrowers or (b) in Sterling to the U.K. Borrowers. The provisions of this Section 1.1(b) shall not relieve Lenders or the Fronting Lender of their obligations to make Revolving Credit Advances under Section 1.1(a) ; provided , that if the Swing Line Lender makes a Swing Line Advance pursuant to any such notice, such Swing Line Advance shall be in lieu of any Revolving Credit Advance that otherwise may be made by the Lenders or the Fronting Lender pursuant to such notice. The aggregate amount of Swing Line Advances outstanding shall not exceed at any time the Swing Line Availability as of such time. Until the Commitment Termination Date, the Borrowers may from time to time borrow, repay and reborrow under this Section 1.1(b) . Each Swing Line Advance shall be made pursuant to a Notice of Revolving Credit Advance delivered to Agent by Borrower Representative on behalf of the applicable Borrower in accordance with Section 1.1(a) . Any such notice must be given no later than (x) 3:00 p.m. (New York time) on the Business Day of the proposed Swing Line Advance, in the case of a Swing Line Advance in Dollars or (y) 10:00 a.m. (New York time) on the date which is two (2) Business Days prior to the proposed Swing Line Advance, in the case of a Swing Line Advance in Sterling. Unless the Swing Line Lender has received at least one Business Day’s prior written notice from Requisite Lenders instructing it not to make a Swing Line Advance, the Swing Line Lender shall, notwithstanding the failure of any condition precedent set forth in Sections 2.2 , be entitled to fund that Swing Line Advance, and to have each Lender make Revolving Credit Advances in accordance with Section 1.1(b)(iii) or 1.1(b)(iv) , as applicable, or purchase participating interests in accordance with Section 1.1(b)(v) . If any Lender shall fail to make available to Agent its Pro Rata Share (or, in the case of any Swing Line Advance in Sterling, the Fronting Lender shall fail to make available the Fronted Percentage) of any Revolving Credit Advance in accordance with Section 1.1(b)(iii) or 1.1(b)(iv) , as applicable, Borrowers shall repay the outstanding principal amount of the portion of the Swing Line Loan then outstanding due to such failure upon demand therefor by Agent.

                              (ii) Each Borrower shall execute and deliver to the Swing Line Lender a promissory note to evidence the Swing Line Commitment. Such note shall be in the principal amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(b)(ii)-A (in the case of the U.S. Borrowers) or Exhibit 1.1(b)(ii)-B (in the case of the U.K. Borrowers) (each, a “ Swing Line Note ” and, collectively, the

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“ Swing Line Notes ”). Each Swing Line Note shall represent the joint and several obligation of the applicable Borrowers to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid principal amount of all Swing Line Advances made to the U.S. Borrowers or the U.K. Borrowers, as applicable, together with interest thereon as prescribed in Section 1.5 . The entire unpaid balance of the Swing Line Loan and all other noncontingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date if not sooner paid in full.

                              (iii) The Swing Line Lender, at any time and from time to time no less frequently than once weekly, shall on behalf of the Borrower Representative (and the Borrower Representative hereby irrevocably authorizes the Swing Line Lender to so act on its behalf) request each Lender (including the Swing Line Lender) to make available to the U.S. Borrowers its Pro Rata Share of a Revolving Credit Advance in Dollars equal to the principal amount of the portion of the Swing Line Loan denominated in Dollars and outstanding on the date such notice is given (the “ Refunded Dollar Swing Line Loan ”). Unless any of the events described in Sections 8.1(g) or 8.1(h) has occurred (in which event the procedures of Section 1.1(b)(v) shall apply) and regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Credit Advance are then satisfied, each Lender shall disburse directly to Agent its Pro Rata Share of such Revolving Credit Advance on behalf of the Swing Line Lender prior to 3:00 p.m. (New York time) in immediately available funds in Dollars on the Business Day next succeeding the date that notice is given. The proceeds of each such Revolving Credit Advance shall be immediately paid to the Swing Line Lender and applied to repay the Refunded Dollar Swing Line Loan.

                              (iv) The Swing Line Lender, at any time and from time to time no less frequently than once weekly, shall on behalf of the Borrower Representative (and the Borrower Representative hereby irrevocably authorizes the Swing Line Lender to so act on its behalf) request each Sterling Lender (including the Swing Line Lender, as applicable) and the Fronting Lender to make available to the U.K. Borrowers its Pro Rata Share (or, in the case of the Fronting Lender, the Fronted Percentage) of a Revolving Credit Advance in Sterling equal to the principal amount of the portion of the Swing Line Loan denominated in Sterling and outstanding on the date such notice is given (the “ Refunded Sterling Swing Line Loan ”). Unless any of the events described in Sections 8.1(g) or 8.1(h) has occurred (in which event the procedures of Section 1.1(b)(v) shall apply) and regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Credit Advance are then satisfied, each Sterling Lender and the Fronting Lender shall disburse directly to Agent its Pro Rata Share (or, in the case of the Fronting Lender, the Fronted Percentage) of such Revolving Credit Advance on behalf of the Swing Line Lender prior to 3:00 p.m. (New York time) in immediately available funds in Sterling on the second Business Day next succeeding the date that notice is given. The proceeds of each such Revolving Credit Advance shall be immediately paid to the Swing Line Lender and applied to repay the Refunded Sterling Swing Line Loan. Each Non-Sterling Lender shall purchase an undivided participation interest in each such Sterling Revolving Credit Advance from the Fronting Lender in accordance with Section 9.9(e)(i) .

                              (v) If, prior to refunding a portion of the Swing Line Loan with a Revolving Credit Advance pursuant to Section 1.1(b)(iii) or 1.1(b)(iv) , one of the events

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described in Sections 8.1(g) or 8.1(h) has occurred, then, subject to the provisions of Section 1.1(b)(vi) below:

                              (vi) Each Lender’s and the Fronting Lender’s obligation to make Revolving Credit Advances in accordance with Sections 1.1(b)(iii) and 1.1(b)(iv) and to purchase participation interests in accordance with Section 1.1(b)(v) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right that such Lender or the Fronting Lender may have against the Swing Line Lender, any Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of any Default or Event of Default; (C) any inability of any Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement at any time or (D) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If any Lender or the Fronting Lender does not make available to Agent or the Swing Line Lender, as applicable, the amount required pursuant to Sections 1.1(b)(iii), 1.1(b)(iv) or 1.1(b)(v) , as the case may be, the Swing Line Lender shall be entitled to recover such amount on demand from such Lender or the Fronting Lender, as applicable, together with interest thereon for each day from the date of non-payment until such amount is paid in full (x) in the case of any portion of the Swing Line Loan denominated in Dollars, at the Federal Funds Rate for the first two Business Days and at the Dollar Index Rate thereafter or (y) in the case of any portion of the Swing Line Loan denominated in Sterling, at the Sterling Index Rate.

                    (c) Reliance on Notices; Appointment of Borrower Representative . Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Revolving Credit Advance, Notice of Conversion/Continuation or similar notice believed by Agent to be genuine. Agent may assume that each Person executing and delivering any notice in accordance herewith was duly authorized, unless the responsible individual acting thereon for

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Agent has actual knowledge to the contrary. Each Borrower hereby designates Parent as its representative and agent on its behalf for the purposes of issuing Notices of Revolving Credit Advances and Notices of Conversion/Continuation, giving instructions with respect to the disbursement of the proceeds of the Loans, selecting interest rate options, requesting Letters of Credit, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Loan Documents. Borrower Representative hereby accepts such appointment. Agent and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from all Borrowers, and may give any notice or communication required or permitted to be given to any Borrower or Borrowers hereunder to Borrower Representative on behalf of such Borrower or Borrowers. Each Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative shall be deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as if the same had been made directly by such Borrower.

                    1.2 Letters of Credit .

                    Subject to and in accordance with the terms and conditions contained herein and in Annex B , Borrower Representative, on behalf of the applicable Borrower (and any Subsidiary thereof that may be a co-applicant on any applicable Letter of Credit), shall have the right to request, and Lenders agree to incur, or purchase participations in, Letter of Credit Obligations.

                    1.3 Prepayments; Commitment Reductions .

                    (a) Voluntary Prepayments; Reductions in Commitments .

                              (i) Borrower Representative shall notify Agent (and, in the case of prepayment of a Swing Line Loan, the Swing Line Lender) by telephone confirmed in writing of any prepayment of a Loan hereunder (i) in the case of a LIBOR Loan, not later than 4:00 p.m. (New York time) on the date which is three (3) Business Days before the date of such prepayment, and (ii) in the case of an Index Rate Loan, not later than 11:00 a.m. (New York time) on the date of such prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Loan or portion thereof to be prepaid. Promptly following receipt of any such notice, Agent shall provide notice to Lenders thereof. Each partial prepayment of any Loan shall be in a minimum amount of (i) if denominated in Dollars, $5,000,000 or an integral multiple of $1,000,000 in excess of such amount or (ii) if denominated in Sterling, £3,000,000 or an integral multiple of £500,000 in excess of such amount.

                              (ii) Borrowers may at any time, on at least five (5) days’ prior written notice by Borrower Representative to Agent of the intent of the Borrowers to effect such a reduction and at least two (2) days’ prior written notice by Borrower Representative to Agent of the exact date on which such reduction shall occur, permanently reduce (but not terminate) the Commitment; provided , that (A) any such reduction shall be in a minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of such amount, (B) the Commitment

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shall not be reduced to an amount less than the greater of (i) $75,000,000, and (ii) the sum of (x) the Dollar Equivalent of the amount of the aggregate Revolving Loan then outstanding and (y) the Dollar Equivalent of the Swing Line Loan then outstanding, and (C) after giving effect to such reductions, Borrowers shall comply with Sections 1.3(b)(i) and (ii) . In addition, Borrowers may at any time, on at least ten (10) days’ prior written notice by Borrower Representative to Agent of the intent of the Borrowers to effect such a termination and at least two (2) days’ prior written notice by Borrower Representative to Agent of the exact date on which such termination shall occur, terminate the Commitment; provided , that upon such termination, all Loans and other Obligations shall be immediately due and payable in full and all Letter of Credit Obligations shall be cash collateralized or otherwise satisfied in accordance with Annex B hereto. Any reduction or termination of the Commitment must be accompanied by payment of the Fee required by Section 1.9(c) , if any, plus the payment of any LIBOR funding breakage costs in accordance with Section 1.13(b) . Upon any such reduction or termination of the Commitment, each Borrower’s right to request Revolving Credit Advances, or request that Letter of Credit Obligations be incurred on its behalf, or request Swing Line Advances, shall simultaneously be permanently reduced or terminated, as the case may be; provided , that a permanent reduction of the Commitment below $100,000,000 shall require a corresponding pro rata reduction in the Sterling Subfacility Limit and the L/C Sublimit to the extent of such reduction below $100,000,000.

                    (b) Mandatory Prepayments .

                              (i) If at any time the aggregate outstanding balance of the Revolving Loan and the Swing Line Loan exceeds the Maximum Amount, Borrowers shall immediately repay the aggregate outstanding Revolving Credit Advances and Swing Line Advances to the extent required to eliminate such excess. If any such excess remains after repayment in full of the aggregate outstanding Revolving Credit Advances and Swing Line Advances, Borrowers shall provide cash collateral for the Letter of Credit Obligations in the manner set forth in Annex B to the extent of such remaining excess. If at any time the Dollar Equivalent of the aggregate outstanding principal balance of Revolving Credit Advances and Swing Line Advances outstanding to the U.K. Borrowers and the Dollar Equivalent of the outstanding Letter of Credit Obligations incurred on behalf of the U.K. Borrowers, in the aggregate, exceed the Sterling Subfacility Limit, the U.K. Borrowers shall, at Agent’s request, immediately repay such Revolving Credit Advances and Swing Line Advances to the extent required to eliminate such excess. If any such excess remains after repayment in full of the aggregate outstanding principal balance of such Revolving Credit Advances and Swing Line Advances, the U.K. Borrowers shall, at Agent’s request, provide cash collateral for such Letter of Credit Obligations in the manner set forth in Annex B to the extent of such remaining excess.

                              (ii) If at any time the aggregate outstanding balance of the Revolving Credit Advances and Swing Line Advances outstanding to the U.S. Borrowers and the Dollar Equivalent of the Letter of Credit Obligations incurred on behalf of the U.S. Borrowers, in the aggregate, exceed the U.S. Borrowing Base, the U.S. Borrowers shall immediately repay such outstanding Revolving Credit Advances and Swing Line Advances to the extent required to eliminate such excess. If any such excess remains after repayment in full of such outstanding Revolving Credit Advances and Swing Line Advances, the U.S. Borrowers shall provide cash collateral for such Letter of Credit Obligations in the manner set forth in Annex B to the extent

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of such remaining excess. If at any time the Dollar Equivalent of the aggregate outstanding balance of the Revolving Credit Advances and Swing Line Advances outstanding to the U.K. Borrowers and the Dollar Equivalent of the Letter of Credit Obligations incurred on behalf of the U.K. Borrowers, in the aggregate, exceed the U.K. Borrowing Base, the U.K. Borrowers shall immediately repay such outstanding Revolving Credit Advances and Swing Line Advances to the extent required to eliminate such excess. If any such excess remains after repayment in full of the aggregate outstanding principal balance of such Revolving Credit Advances and Swing Line Advances, the U.K. Borrowers shall, at Agent’s request, provide cash collateral for such Letter of Credit Obligations in the manner set forth in Annex B to the extent of such remaining excess. Notwithstanding the foregoing, any Overadvance made pursuant to Section 1.1(a)(iii) shall be repaid in accordance with Section 1.1(a)(iii) .

                              (iii) Subject to Section 1.3(c) , immediately upon receipt by any Sotheby Entity of any cash proceeds of any asset disposition, the applicable Borrower (which is the Borrower that received such cash proceeds or, if such cash proceeds are received by a Sotheby Entity other than a Borrower, which is the Borrower that is the most direct holder of Stock of such Sotheby Entity) shall prepay the Secured Obligations (and cash collateralize the Letter of Credit Obligations, as applicable) in an amount equal to all of such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Sotheby Entities in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens on such asset (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith. Any such prepayment shall be applied in accordance with Section 1.3(d) or (e) , as applicable. The following shall not be subject to mandatory prepayment under this clause (iii) : (1) proceeds of sales of Inventory in the ordinary course of business; (2) asset dispositions giving rise to proceeds having a Dollar Equivalent of less than $1,000,000 in the aggregate for any Fiscal Year; and (3) asset disposition proceeds with respect to Equipment or Fixtures that are reinvested in Equipment or Fixtures within one hundred and eighty (180) days of receipt thereof; provided, that the Borrower Representative notifies Agent of its intent to reinvest at the time such proceeds are received and when such reinvestment occurs.

                              (iv) Subject to Section 1.3(c) , if any Sotheby Entity issues Stock to any entity other than another Sotheby Entity, no later than the Business Day following the date of receipt of any cash proceeds thereof, the applicable Borrower (which is the Borrower that received such cash proceeds or, if such cash proceeds are received by a Sotheby Entity other than a Borrower, which is the Borrower that is the most direct holder of Stock of such Sotheby Entity) shall prepay the Secured Obligations (and cash collateralize Letter of Credit Obligations, as applicable) in an amount equal to all such proceeds, net of underwriting discounts and commissions and other reasonable costs paid to non-Affiliates in connection therewith. Any such prepayment shall be applied in accordance with Section 1.3(d) or (e) , as applicable. The following shall not be subject to prepayment under this clause (iv) up to a Dollar Equivalent of $1,000,000 in the aggregate for any Fiscal Year: (1) proceeds of Stock issuances to employees of any Sotheby Entity and (2) proceeds of Stock issuances to Persons that hold Stock of Parent as of the Closing Date.

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                    (c) Adjustments to Mandatory Prepayment Amounts . The Borrowers shall be required to make any prepayment otherwise payable pursuant to Sections 1.3(b)(iii), 1.3(b)(iv) or 5.4 only to the extent that the amount of such prepayment exceeds (i) in the case of the U.S. Borrowers, the U.S. Borrowing Availability as of the date of such required prepayment or (ii) in the case of the U.K. Borrowers, the U.K. Borrowing Availability as of the date of such required prepayment, in each case as set forth in a Borrowing Base Certificate delivered as of the date of such required prepayment. In addition, if, after giving effect to the previous sentence, any U.K. Borrower shall be required to make a prepayment pursuant to Sections 1.3(b)(iii), 1.3(b)(iv) or 5.4 in excess of the outstanding principal balance of the Revolving Credit Advances and Swing Line Advances outstanding to the U.K. Borrowers and the Letter of Credit Obligations incurred on behalf of the U.K. Borrowers, in the aggregate, as of such date, then the U.S. Borrowers shall be jointly and severally liable to make a prepayment of the Loans (and cash collateralize the Letter of Credit Obligations) (in addition to any prepayment made by such U.K. Borrower pursuant to Sections 1.3(b)(iii), 1.3(b)(iv) or 5.4 , as applicable) in an amount equal to (i) the amount of such excess minus (ii) the U.S. Borrowing Availability as of the date of such required prepayment as set forth in a Borrowing Base Certificate delivered to Agent.

                    (d) Application of Mandatory Prepayments by U.S. Borrowers . Subject to the terms of the Collateral Documents, any prepayments made by any U.S. Borrower pursuant to Sections 1.3(b)(iii) or (iv) or Section 5.4 shall be applied as follows: first , to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; second , to interest then due and payable on Swing Line Advances outstanding to the U.S. Borrowers; third , to the principal balance of Swing Line Advances outstanding to the U.S. Borrowers until the same have been paid in full; fourth , to interest then due and payable on Revolving Credit Advances outstanding to the U.S. Borrowers; fifth , to the principal balance of Revolving Credit Advances outstanding to the U.S. Borrowers until the same have been paid in full; sixth , to any Letter of Credit Obligations incurred on behalf of the U.S. Borrowers to provide cash collateral therefor in the manner set forth in Annex B , until all such Letter of Credit Obligations have been fully cash collateralized in the manner set forth in Annex B ; seventh , to any other Obligations owing by the U.S. Credit Parties; eighth , to interest then due and payable on Swing Line Advances outstanding to the U.K. Borrowers; ninth , to the principal balance of Swing Line Advances outstanding to the U.K. Borrowers until the same have been paid in full; tenth , to interest then due and payable on the Revolving Credit Advances outstanding to the U.K. Borrowers; eleventh , to the principal balance of the Revolving Credit Advances outstanding to the U.K. Borrowers until the same have been paid in full; twelfth , to any Letter of Credit Obligations incurred on behalf of the U.K. Borrowers to provide cash collateral therefor in the manner set forth in Annex B , until all such Letter of Credit Obligations have been fully cash collateralized in the manner set forth in Annex B ; thirteenth , to any other Obligations owing by the U.K. Credit Parties; and, last , to any amounts then due and payable by the Credit Parties in respect of Bank Product and Hedging Obligations. The Commitment shall not be permanently reduced by the amount of any such prepayments.

                    (e) Application of Mandatory Prepayments by U.K. Borrowers . Subject to the terms of the Collateral Documents, any prepayments made by any U.K. Borrower pursuant to Sections 1.3(b)(iii) or (iv) or Section 5.4 above shall be applied as follows: first , to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents in respect of the Revolving Loans made to the U.K. Borrowers; second , to interest then due and

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payable on Swing Line Advances outstanding to the U.K. Borrowers; third , to the principal balance of Swing Line Advances outstanding to the U.K. Borrowers until the same have been paid in full; fourth , to interest then due and payable on Revolving Credit Advances outstanding to the U.K. Borrowers; fifth , to the principal balance of Revolving Credit Advances outstanding to the U.K. Borrowers until the same have been paid in full; sixth , to any Letter of Credit Obligations incurred on behalf of the U.K. Borrowers to provide cash collateral therefor in the manner set forth in Annex B , until all such Letter of Credit Obligations have been fully cash collateralized in the manner set forth in Annex B ; seventh , to any other Obligations owing by the U.K. Credit Parties; and, last , to any amounts then due and payable by the U.K. Credit Parties in respect of Bank Product and Hedging Obligations. Neither the Commitment nor the Sterling Subfacility Limit shall be permanently reduced by the amount of any such prepayments.

                    (f) No Implied Consent . Nothing in this Section 1.3 shall be construed to constitute Agent’s or any Lender’s consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents.

                    (g) Application to Revolving Credit Advances . Any prepayment made on any outstanding Revolving Credit Advances pursuant to Sections 1.1(a)(i), 1.3(b) or 5.4 shall be applied as follows: first , to such Revolving Credit Advances that are Index Rate Loans; and second , to such Revolving Credit Advances that are LIBOR Loans, in the order of the LIBOR Loans with the shortest LIBOR Periods to the LIBOR Loans with the longest LIBOR Periods. Application to specific Advances pursuant to this Section 1.3(g) shall not affect the calculation of the indemnities, if any, owing to the Lenders pursuant to Section 1.13(b) .

                    1.4 Use of Proceeds .

                    Borrowers shall utilize the proceeds of the Loans solely for the financing of Borrowers’ ordinary working capital and general corporate needs. Disclosure Schedule (1.4) contains a description of Borrowers’ sources and uses of funds as of the Closing Date, including any Loans and Letter of Credit Obligations to be made or incurred on that date, and a funds flow memorandum detailing how funds from each source are to be transferred to particular uses.

                    1.5 Interest and Applicable Margins .

                    (a) Borrowers shall pay interest to Agent, for the ratable benefit of Lenders and the Fronting Lender in accordance with the various Loans being made by each Lender and the Fronting Lender, in arrears on each applicable Interest Payment Date, at the following rates: (i) with respect to the Dollar Revolving Credit Advances, the Dollar Index Rate plus the Applicable Dollar Revolver Index Margin per annum or, at the election of Borrower Representative, the applicable Dollar LIBOR Rate plus the Applicable Dollar Revolver LIBOR Margin per annum, (ii) with respect to the Sterling Revolving Credit Advances, the applicable Sterling LIBOR Rate plus the Applicable Sterling Revolver LIBOR Margin per annum plus the Mandatory Cost, (iii) with respect to Swing Line Advances denominated in Dollars, the Dollar Index Rate plus the Applicable Dollar Revolver Index Margin per annum and (iv) with respect to Swing Line Advances denominated in Sterling, the Sterling Index Rate plus the Applicable Sterling Revolver Index Margin per annum.

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                    As of the Closing Date, the Applicable Margins are as follows:

                    The Applicable Margins shall be adjusted by reference to the following grids:

 

                    Adjustments in the Applicable Margins shall be implemented each Business Day. If an Event of Default has occurred and is continuing at the time any reduction in such Applicable Margins is to be implemented, that reduction shall be deferred until the first Business Day following the date on which such Event of Default is waived or cured.

                    (b) If any payment on any Loan becomes due and payable on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

                    (c) All computations of Fees calculated on a per annum basis and interest on all Loans denominated in Dollars shall be made by Agent on the basis of a 360-day year, in each case for the actual number of days occurring in the period for which such interest and Fees are payable. All computations of interest on all Loans denominated in Sterling shall be made by Agent on the basis of a 365-day year for the actual number of days occurring in the period for which such interest is payable. The Dollar Index Rate and the Sterling Index Rate are floating

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rates determined for each day. Each determination by Agent of an interest rate and Fees hereunder shall be presumptive evidence of the correctness of such rates and Fees.

                    (d) So long as an Event of Default has occurred and is continuing under Section 8.1(a), (g) or (h) or so long as any other Event of Default has occurred and is continuing and at the election of Agent (or upon the written request of Requisite Lenders) confirmed by written notice from Agent to Borrower Representative, the interest rates applicable to the Loans and the Letter of Credit Fees shall be increased by two percentage points (2%) per annum above the rates of interest or the rate of such Fees otherwise applicable hereunder (the “ Default Rate ”), and all outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations. Interest and Letter of Credit Fees at the Default Rate shall accrue from the initial date of such Event of Default until that Event of Default is cured or waived and shall be payable upon demand.

                    (e) Subject to the conditions precedent set forth in Section 2.2 , Borrower Representative shall have the option to (i) request that any Revolving Credit Advance denominated in Dollars be made as a LIBOR Loan, (ii) convert at any time all or any portion of the outstanding Revolving Loan denominated in Dollars from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan denominated in Dollars to an Index Rate Loan, subject to payment of LIBOR breakage costs in accordance with Section 1.13(b) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all or any portion of the outstanding Revolving Loan as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued portion of the outstanding Revolving Loan shall commence on the first day after the last day of the LIBOR Period of the portion of the outstanding Revolving Loan to be continued. Any portion of the outstanding Revolving Loan to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of (i) if denominated in Dollars, $5,000,000 or an integral multiple of $1,000,000 in excess of such amount or (ii) if denominated in Sterling, £3,000,000 or an integral multiple of £500,000 in excess of such amount. Any such election must be made by 11:00 a.m. (New York time) on the third Business Day prior to (1) the date of any proposed Revolving Credit Advance which is to be made as a LIBOR Loan, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower Representative wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower Representative in such election. If no election is received with respect to a LIBOR Loan by 11:00 a.m. (New York time) on the third Business Day prior to the end of the LIBOR Period with respect thereto (or if a Default or an Event of Default has occurred and is continuing or if the additional conditions precedent set forth in Section 2.2 shall not have been satisfied), (i) if such LIBOR Loan is denominated in Dollars, such LIBOR Loan shall be converted to an Index Rate Loan at the end of its LIBOR Period and (ii) if such LIBOR Loan is denominated in Sterling, such LIBOR Loan shall be continued as a LIBOR Loan having a LIBOR Period of one month. Borrower Representative must make such election by notice to Agent in writing, by telecopy or overnight courier. In the case of any conversion or continuation, such election must be made pursuant to a written notice (a “ Notice of Conversion/Continuation ”) in the form of Exhibit 1.5(e) . Notwithstanding anything in this Section 1.5(e) or Agreement to the contrary, conversions and continuations of Index Rate Loans and LIBOR Loans hereunder shall not result in refinancings or repayments of such portions of

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the outstanding Revolving Loan, but only repricings of such continuously outstanding portions of the outstanding Revolving Loan.

                    (f) Notwithstanding anything to the contrary set forth in this Section 1.5 , if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the “ Maximum Lawful Rate ”), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided , however, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest that would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount that such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate.

                    1.6 Eligible Art Loans .

                    All of the Art Loans owned by each Borrower and reflected in the most recent Borrowing Base Certificate delivered by the Borrower Representative to Agent shall be “ Eligible Art Loans ” for purposes of this Agreement, except any Art Loans to which any of the exclusionary criteria set forth below applies. Agent shall have the right to establish, modify or eliminate Reserves against Eligible Art Loans from time to time in its sole reasonable credit judgment. In addition, Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any of the criteria set forth below and to establish new criteria, and to adjust advance rates with respect to Eligible Art Loans, in its reasonable credit judgment, reflecting changes in the collectibility or realization values of such Art Loans arising or discovered by Agent after the Closing Date subject to the approval of Supermajority Lenders in the case of adjustments or new criteria or changes in advance rates which have the effect of making more credit available; provided that, for purposes of clarity, Agent will not be required at any time to obtain any approval from any Lenders or any other Person(s) for the establishment, modification or elimination of any Reserves against Eligible Art Loans. Eligible Art Loans shall not include any Art Loan of any Borrower:

                    (a) with respect to which (i) such Borrower shall not have conducted (x) appropriate UCC, tax lien and judgment searches (or applicable equivalent) against the applicable Art Loan Debtor or (y) in the case of any Art Loan Debtor located in the United Kingdom, appropriate bankruptcy, winding up and company searches against the applicable Art Loan Debtor or (ii) the results of such searches shall have indicated any material risk with respect to the applicable Art Loan Debtor or the Works of Art securing repayment of such Art Loan;

                    (b) with respect to which (i) such Art Loan and the related security interest are not governed by a loan and security agreement reasonably acceptable to Agent in form and substance, or (ii) any material terms of the related loan and security agreement and/or any other related documentation are not binding and enforceable;

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                    (c) with respect to which any payment under the related loan agreement (or any other Art Loan outstanding to such related Art Loan Debtor) has been deemed by such Borrower to be non-accrual;

                    (d) that is subject to any litigation challenging the validity or enforceability of such Art Loan or any related documentation, unless (i) such Borrower has notified Agent of such litigation, and (ii) Agent has determined in its reasonable judgment, pursuant to a written notice to such Borrower (not to be unreasonably withheld or delayed), that such litigation does not constitute good faith litigation;

                    (e) (i) that is not denominated in Dollars, Canadian Dollars, Sterling, Euros, Swiss Francs or an Alternative Art Loan Currency or (ii) if such Art Loan is denominated in an Alternative Art Loan Currency, unless Agent shall have otherwise agreed, a Credit Party (in the case of any U.K. Borrower) or a U.S. Credit Party (in the case of any U.S. Borrower) shall have not entered into a Rate Management Transaction reasonably acceptable to Agent (x) having a notional amount substantially equal to the outstanding principal balance of such Art Loan at all times until the maturity of such Art Loan and (y) directly mitigating the risk associated with changes in the exchange rate between the currency in which such Art Loan is denominated and Dollars (in the case of any Art Loan owned by a U.S. Borrower) or Sterling (in the case of any Art Loan owned by a U.K. Borrower) at all times until the maturity of such Art Loan;

                    (f) that was not generated in the ordinary course of the applicable Borrower’s business;

                    (g) unless Agent shall have otherwise agreed, that by its terms is not due and payable within 18 months;

                    (h) to the extent that any defense, counterclaim, setoff or dispute (other than any dispute described in clause (d) above or in clauses (h) or (i) of the definition of “Eligible Art Loan Collateral”) is asserted as to repayment by the relevant Art Loan Debtor of such Art Loan or as to any failure by any Sotheby Entity to fund any unfunded commitment of such Sotheby Entity to make future Art Loans to the relevant Art Loan Debtor, unless (i) such Borrower has notified Agent of such defense, counterclaim, setoff or dispute, and (ii) Agent has determined in its reasonable judgment, pursuant to a written notice to such Borrower (not to be unreasonably withheld or delayed), that such defense, counterclaim, setoff or dispute is not asserted in good faith;

                    (i) that (i) is not subject to a first priority lien in favor of Agent, on behalf of the Secured Parties, or (ii) is subject to any Lien of any Person other than Agent, except Permitted Encumbrances;

                    (j) with respect to which the Art Loan Debtor is a director, officer, other employee or Affiliate of any Sotheby Entity, unless Agent shall have determined, in its sole discretion, that such Art Loan shall constitute an Eligible Art Loan notwithstanding the provisions of this clause (j) ;

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                    (k) that is the obligation of an Art Loan Debtor that is the United States government or a political subdivision thereof, or any state, county or municipality or department, agency or instrumentality thereof;

                    (l) to the extent by which the outstanding principal balance of such Art Loan exceeds fifty percent (50%) of the aggregate Estimated Value of the Works of Art securing repayment of such Art Loan that constitute Eligible Art Loan Collateral;

                    (m) in the case of an Art Loan Debtor that is not an individual, such Borrower has not obtained confirmation of authorization of the incurrence of such Art Loan by such Person and the individuals executing documents on its behalf;

                    (n) with respect to which (i) a petition is filed by or against the related Art Loan Debtor under any bankruptcy law or any other federal, state or foreign (including any provincial) receivership, insolvency relief or other law or laws for the relief of debtors or (ii) the related Art Loan Debtor makes a general assignment for the benefit of creditors;

                    (o) to the extent any Sotheby Entity is liable for goods sold or services rendered by the applicable Art Loan Debtor to such Sotheby Entity, but only to the extent of the potential offset;

                    (p) with respect to which (i) any of the documentation evidencing such Art Loan is not in the possession of such Borrower or Agent or (ii) any of the representations or warranties in this Agreement and the other Loan Documents pertaining to such Art Loan is untrue;

                    (q) to the extent such Art Loan exceeds any credit limit with respect to any Art Loan Debtor established by Agent, in its reasonable credit judgment, taking into account the nature and value of the Works of Art securing such Art Loan and after consultation with the Borrower Representative; or

                    (r) with respect to which the initial outstanding principal amount, if owned by a U.S. Borrower, is less than $25,000.

                    1.7 Eligible Art Inventory .

                    All of the Art Inventory owned by the Borrowers and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Agent shall be “ Eligible Art Inventory ” for purposes of this Agreement, except any Art Inventory to which any of the exclusionary criteria set forth below applies. Agent shall have the right to establish, modify or eliminate Reserves against Eligible Art Inventory from time to time in its sole reasonable credit judgment. In addition, Agent reserves the right, at any time and from time to time after the Closing Date, to adjust of the criteria set forth below and to establish new criteria and to adjust advance rates with respect to Eligible Art Inventory, in its reasonable credit judgment reflecting changes in the salability or realization values of Art Inventory arising or discovered by Agent after the Closing Date, subject to the approval of Supermajority Lenders in the case of adjustments or new criteria or changes in advance rates which have the effect of making more credit available; provided that, for purposes of clarity, Agent will not be required at any time to

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obtain any approval from any Lenders or any other Person(s) for the establishment, modification or elimination of any Reserves against Eligible Art Inventory. Eligible Art Inventory shall not include any Art Inventory of any Borrower that:

                    (a) is owned by such Borrower as part of a joint venture or profit/loss sharing arrangement or otherwise is not owned solely by such Borrower, unless (i) Agent shall have otherwise agreed, or (ii) such Borrower has ultimate control of the disposition of such Art Inventory, in which case such Art Inventory shall be eligible to constitute Eligible Art Inventory to the extent of such Borrower’s ownership interest therein;

                    (b) other than as permitted by clause (a) above, is not owned by such Borrower free and clear of all Liens and rights of any other Person, except the Liens in favor of Agent, on behalf of the Secured Parties, and Permitted Encumbrances as set forth in clause (e) of the definition thereof (subject to Reserves satisfactory to Agent);

                    (c) (i) if such Art Inventory is not (x) located in a Permitted Inventory Country or (y) in transport between such countries or (ii) if such Art Inventory is located in a Permitted Inventory Country, such Borrower shall not have taken each action reasonably required by Agent with respect to such Work of Art located in such Permitted Inventory Country in order to protect the interests of Agent therein under the laws of such Permitted Inventory Country;

                    (d) is not held by such Borrower (i) at a location owned by a Sotheby Entity, or (ii) unless Reserves satisfactory to Agent have been established (A) at a location in which a Sotheby Entity has obtained a leasehold interest with respect to which, unless otherwise agreed by Agent, the lessor has executed a landlord waiver, in form and substance reasonably acceptable to Agent, or (B) at a warehouse, storage facility or other third-party location (including, without limitation, the Geneva free port) with respect to which, unless otherwise agreed by Agent, such third party has executed a bailee letter in form and substance reasonably acceptable to Agent;

                    (e) is subject to any litigation challenging the rights of such Borrower in such Art Inventory, unless (i) such Borrower has notified Agent of such litigation, and (ii) Agent has determined in its reasonable judgment, pursuant to a written notice to such Borrower (not to be unreasonably withheld or delayed), that such litigation does not constitute good faith litigation;

                    (f) is placed on consignment with any Person, unless (i) such consignment constitutes a Permitted Consignment with respect to such Art Inventory, or (ii)(x) such Borrower has notified Agent of such consignment and (y) Agent has determined in its reasonable judgment, pursuant to a written notice to such Borrower (not to be unreasonably withheld or delayed), that such Borrower has taken all actions reasonably required by Agent with respect to such Art Inventory in order to protect the interests of Agent therein under all applicable laws;

                    (g) is not subject to a first priority lien in favor of Agent on behalf of the Secured Parties, subject to Permitted Encumbrances as set forth in clause (e) of the definition thereof (subject to Reserves satisfactory to Agent);

                    (h) if the value of such Art Inventory exceeds $250,000, has not been the subject of a search by such Borrower in the Art Loss Register; or

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                    (i) breaches any of the representations or warranties pertaining to Art Inventory set forth in the Loan Documents.

                    1.8 Cash Management Systems .

                    Within 90 days after the Closing Date (or such later date as Agent shall consent to in writing), the Credit Parties will establish and will maintain until the Termination Date the cash management systems described in Annex C (the “ Cash Management Systems ”).

                    1.9 Fees .

                    (a) Borrowers shall pay to GE Capital an annual collateral monitoring fee equal to $150,000 per year payable on the Closing Date and annually in advance on each anniversary thereof prior to the Termination Date.

                    (b) As additional compensation for the Lenders, Borrowers shall pay to Agent, for the ratable benefit of the Lenders, in arrears, on the first Business Day of each month prior to the Commitment Termination Date and on the Commitment Termination Date, a Fee for Borrowers’ non use of available funds in an amount in Dollars equal to the Applicable Unused Line Fee Margin per annum (calculated on the basis of a 360 day year for actual days elapsed) multiplied by the difference between (x) the Maximum Amount (as it may be increased or reduced from time to time) and (y) the average for the period of the daily closing balances of the aggregate Revolving Loan and the Swing Line Loan outstanding during the period for which such Fee is due.

                    (c) If Borrowers reduce or terminate the Commitment prior to the second anniversary of the Closing Date, whether voluntarily or involuntarily and whether before or after acceleration of the Obligations, Borrowers shall pay to Agent, for the benefit of Lenders as liquidated damages and compensation for the costs of being prepared to make funds available hereunder, an amount in Dollars equal to (i) if such reduction or termination occurs prior to the first anniversary of the Closing Date, 1.0% multiplied by the amount of such reduction of the Commitment or (ii) if such reduction or termination occurs after the first anniversary of the Closing Date and prior to the second anniversary of the Closing Date, 0.50% multiplied by the amount of such reduction of the Commitment. The Borrowers agree that such fee is a reasonable calculation of Lenders’ lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early termination of the Commitment.

                    (d) Borrowers shall pay to Agent, for the ratable benefit of Lenders, the Letter of Credit Fee as provided in Annex B .

                    1.10 Receipt of Payments .

                    Borrowers shall make each payment under this Agreement not later than 2:00 p.m. (New York time) on the day when due in immediately available funds in Dollars or Sterling, as applicable, to the applicable Collection Account. For purposes of computing interest and Fees and determining Borrowing Availability as of any date, all payments shall be deemed received on the Business Day on which immediately available funds therefore are received in the Collection Account prior to 2:00 p.m. New York time. Payments received after 2:00 p.m. New

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York time on any Business Day or on a day that is not a Business Day shall be deemed to have been received on the following Business Day.

                    1.11 Application and Allocation of Payments .

                    (a) So long as no Event of Default has occurred and is continuing, (i) payments matching specific scheduled payments then due shall be applied to those scheduled payments; (ii) voluntary prepayments shall be applied in accordance with the provisions of Section 1.3(a) ; and (iii) mandatory prepayments shall be applied as set forth in Section 1.3(d) or 1.3(e) , as applicable. All payments and prepayments applied to the Revolving Loan shall be applied ratably to the portion thereof held by each Lender as determined by its Pro Rata Share. As to (x) any other payment, (y) all payments made when an Event of Default has occurred and is continuing or following the Commitment Termination Date and (z) all proceeds of Collateral, each Borrower hereby irrevocably waives the right to direct the application of any and all such payments received from or on behalf of such Borrower and proceeds of Collateral, and all such payments and proceeds of Collateral shall be applied to amounts then due and payable in the following order, subject to the terms of the Collateral Documents: (1) to Fees and reimbursable expenses of Agent hereunder; (2) to interest on the Swing Line Loan; (3) to principal payments on the Swing Line Loan; (4) to interest on the Revolving Loan; (5) to principal payments on the Revolving Loan and to provide cash collateral for Letter of Credit Obligations in the manner described in Annex B ; (6) to all other Obligations owing by the Credit Parties, including expenses of Lenders to the extent reimbursable under Section 11.3 ; and (7) to amounts owing in respect of Bank Product and Hedging Obligations; provided , that any payment by a U.K. Credit Party shall be applied only to the Secured Obligations of the U.K. Credit Parties according to the preceding order of priority.

                    (b) Agent is authorized to, and at its sole election may, charge to the Revolving Loan balance on behalf of each Borrower and cause to be paid all Fees, expenses, Charges, costs (including insurance premiums in accordance with Section 5.4(a) ) and interest and principal, other than principal of the Revolving Loan, owing by Borrowers under this Agreement or any of the other Loan Documents if and to the extent Borrowers fail to pay promptly any such amounts as and when due, even if the Dollar Equivalent of the amount of such charges would exceed the applicable Borrowing Availability at such time; provided , such action shall not cause the Dollar Equivalent of the aggregate Revolving Loan to exceed the Maximum Amount. At Agent’s option and to the extent permitted by law, any charges so made shall constitute a Revolving Credit Advance made in the applicable currency and part of the Revolving Loan hereunder.

                    (c) Notwithstanding any contrary provision herein, if, at the time of the receipt of any prepayment or payment on the Obligations, (i) any Non-Sterling Lender shall have failed to make available to the Fronting Lender any amount required pursuant to Section 9.9(e)(i) upon demand therefor by the Fronting Lender and (ii) the Borrowers shall have failed to repay, pursuant to Section 9.9(e)(ii) , the outstanding principal amount of the portion of the Revolving Loan or Letter of Credit Obligation then outstanding to the Fronting Lender in which such Non-Sterling Lender was required to purchase a participation interest, then such prepayment or payment shall be applied first to the portion of the Revolving Loan or Letter of Credit Obligations then outstanding to the Fronting Lender in which such Non-Sterling Lender was

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required to purchase such participation interest, until the same (together with any interest due and payable thereon) shall have been paid in full.

                    1.12 Loan Account and Accounting .

                    Agent shall maintain a loan account (the “ Loan Account ”) on its books to record: all Revolving Credit Advances and Swing Line Advances, all payments made by Borrowers, and all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations. All entries in the Loan Account shall be made in accordance with Agent’s customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded on Agent’s most recent printout or other written statement, shall, absent manifest error, be presumptive evidence of the amounts due and owing to Agent and Lenders by each Borrower; provided that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower’s duty to pay the Obligations. Agent shall render to Borrower Representative a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account as to each Borrower for the immediately preceding month. Unless Borrower Representative notifies Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within thirty (30) days after the date thereof, each and every such accounting shall be presumptive evidence of all matters reflected therein. Only those items expressly objected to in such notice shall be deemed to be disputed by Borrowers. Notwithstanding any provision herein contained to the contrary, any Lender may elect (which election may be revoked) to dispense with the issuance of Notes to that Lender and may rely on the Loan Account as evidence of the amount of Obligations from time to time owing to it.

                    1.13 Indemnity .

                    (a) Each Credit Party shall jointly and severally indemnify and hold harmless each of Agent, Lenders, the Fronting Lender and their respective Affiliates, and each such Person’s respective officers, directors, employees, attorneys, agents and representatives (each, an “ Indemnified Person ”), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys’ fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) that may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit, and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Loan Documents (collectively, “ Indemnified Liabilities ”); provided , that no such Credit Party shall be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results from that Indemnified Person’s gross negligence or willful misconduct as determined in a final, non-appealable judgment by a court of competent jurisdiction. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY

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THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. It is understood and agreed that, notwithstanding anything to the contrary set forth in this Section 1.13(a) , no U.K. Credit Party shall have any obligation to any Indemnified Person with respect to Indemnified Liabilities relating to Obligations of any U.S. Credit Party.

                    (b) To induce Lenders to provide the LIBOR Loan option on the terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or occurs as a result of acceleration, by operation of law or otherwise); (ii) any Borrower shall default in payment when due of the principal amount of or interest on any LIBOR Loan; (iii) any Borrower shall refuse to accept any borrowing of, or shall request a termination of, any borrowing of, conversion into or continuation of, LIBOR Loans after Borrower Representative has given notice requesting the same in accordance herewith; (iv) any Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower Representative has given a notice thereof in accordance herewith; or (v) any assignment shall occur pursuant to Section 1.16(d) , then Borrowers shall jointly and severally indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing. Such indemnification shall include any loss (excluding loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained. For the purpose of calculating amounts payable to a Lender under this subsection, each Lender shall be deemed to have actually funded its portion of the relevant LIBOR Loan (or its participation interest in such LIBOR Loan) through the purchase of a deposit bearing interest at the Dollar LIBOR Rate or the Sterling LIBOR Rate, as applicable, in an amount equal to the amount of such portion of such LIBOR Loan (or such participation, as applicable) and having a maturity comparable to the relevant LIBOR Period; provided , that each Lender may fund each of its interests in LIBOR Loans (or its participations in LIBOR Loans) in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. As promptly as practicable under the circumstances, each Lender shall provide Borrower Representative with its written calculation of all amounts payable pursuant to this Section 1.13(b) , and such calculation shall be binding on the parties hereto unless Borrower Representative shall object in writing within ten (10) Business Days of receipt thereof, specifying the basis for such objection in detail.

                    1.14 Access .

                    Each Credit Party shall, during normal business hours, from time to time upon three (3) Business Days’ prior notice as frequently as Agent reasonably determines to be appropriate (except as otherwise provided): (a) provide Agent and any of its officers, employees and agents access to its properties, facilities, advisors, officers and employees and to the Collateral (including, without limitation, in order to prepare an appraisal or similar report), (b) permit Agent, and any of its officers, employees and agents, to inspect, audit and make extracts

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from any Sotheby Entity’s books and records, and (c) permit Agent, and its officers, employees and agents, not more than two (2) times during any twelve-month period beginning on the date hereof or any anniversary thereof (unless an Event of Default has occurred and is continuing, in which case such limitation shall not apply), to inspect, review, evaluate, and make test verifications and counts of the Collateral of any Credit Party; provided , that (i) Agent shall conduct at least one (1) field exam described in the foregoing clause (c) during each twelvemonth period and (ii) unless an Event of Default has occurred and is continuing, not more than two such field exams during any twelve-month period shall be at the cost and expense of the Credit Parties. If an Event of Default has occurred and is continuing, each such Credit Party shall provide such access to Agent and to each Lender at all times and without advance notice. Furthermore, so long as any Event of Default has occurred and is continuing, each Credit Party shall provide Agent and each Lender with access to their suppliers and customers to the extent such access is within the rights and powers of such Credit Party. Each Credit Party shall make available to Agent and its counsel reasonably promptly originals or copies of all books and records that Agent may reasonably request. Each Credit Party shall deliver any document or instrument necessary for Agent, as it may from time to time reasonably request, to obtain records from any service bureau or other Person that maintains records for such Credit Party, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Credit Party. Agent will give Lenders at least five (5) days’ prior written notice of regularly scheduled audits. Representatives of other Lenders may accompany Agent’s representatives on regularly scheduled audits at no charge to Borrowers.

                    1.15 Taxes .

                    (a) Tax gross-up .

                              (i) Each Credit Party shall make all payments to be made by it under the Loan Documents without any Tax Deduction, unless a Tax Deduction is required by law.

                              (ii) The Borrower Representative shall promptly upon becoming aware that a Credit Party must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify Agent accordingly. Similarly, a Lender shall notify Agent promptly on becoming so aware in respect of any payment to that Lender pursuant to any Loan Document. If Agent receives such notification from a Lender it shall promptly notify the Borrower Representative.

                              (iii) Subject to paragraph (iv) below, if a Tax Deduction is required by law to be made by any Credit Party, the amount of the payment due from such Credit Party shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

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                              (iv) A Credit Party is not required to make an increased payment to a Lender under paragraph (iii) above for a Tax Deduction in respect of tax imposed by the United Kingdom or the United States of America (as the case may be) on a payment of interest on a Loan, if on the date on which the payment falls due:

 

 

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                              (v) If any Credit Party is required to make a Tax Deduction, such Credit Party shall make such Tax Deduction and any payment required in connection with such Tax Deduction within the time allowed and in the minimum amount required by law.

                              (vi) Within thirty days of making either a Tax Deduction or any payment required in connection with a Tax Deduction, the Credit Party making such Tax Deduction shall deliver to Agent for the applicable Lender either a statement under section 975 of the Income Tax Act 2007 or other evidence reasonably satisfactory to such Lender that such Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

                              (vii) A Treaty Lender shall, if so requested by Borrower Representative (on behalf of the U.K. Credit Parties), as soon as reasonably practicable, complete and file with the appropriate tax authority an application for authorization by that tax authority to make that payment without a Tax Deduction. The Borrower Representative (on behalf of the U.K. Credit Parties) shall, thereafter, be responsible for dealing with such authority in relation to the processing of such application (and the Treaty Lender shall provide such cooperation as is reasonably necessary to complete any further procedural formalities required to obtain authorization).

                              (viii) A U.K. Non-Bank Lender shall promptly notify Agent who shall notify the U.K. Credit Parties if there is any change in the position from that set out in the Tax Confirmation.

                              (ix) Each Lender which becomes a party to this Agreement after the date of this Agreement (such Lender, a “ New Lender ”) shall indicate, in the Assignment Agreement which it executes on becoming a party, and for the benefit of Agent and without liability to any Credit Party, which of the following categories it falls in:

                              (A) not a Qualifying Lender;

                              (B) a Qualifying Lender (other than a Treaty Lender); or

                              (C) a Treaty Lender.

If a New Lender fails to indicate its status in accordance with this paragraph (ix) , then such New Lender shall be treated for the purposes of this Agreement (including by each U.K. Credit Party) as if it is not a Qualifying Lender until such time as it notifies Agent which category applies (and Agent, upon receipt of such notification, shall inform the Borrower Representative on behalf of the U.K. Credit Parties). For the avoidance of doubt, an Assignment Agreement shall not be invalidated by any failure of a Lender to comply with this paragraph (ix) .

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                    (b) Tax indemnity .

                              (i) The Credit Parties shall (within three Business Days of demand by Agent) pay (or procure payment) to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of any Loan Document.

                              (ii) Paragraph (b)(i) above shall not apply:

                              (iii) A Protected Party making, or intending to make, a claim under paragraph (i) above shall promptly notify Agent of the event which will give, or has given, rise to the claim, following which Agent shall notify the Borrower Representative.

                              (iv) A Protected Party shall, on receiving a payment from a Credit Party under this Section 1.15(b) , notify Agent.

                    (c) Tax Credit . If a Credit Party makes a Tax Payment and the relevant Lender determines that:

                              (i) a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part, or to that Tax Payment; and

                              (ii) that Lender has obtained, utilized and retained that Tax Credit,

the Lender shall pay an amount to the applicable Credit Party which that Lender determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by such Credit Party.

                    (d) Stamp Taxes . The Credit Parties shall pay, and within three Business Days of demand, indemnify each Lender against any cost, loss, or liability that a Lender incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of the Loan Documents.

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                    (e) Value Added Tax .

                              (i) All amounts expressed in the Loan Documents to be payable by any Credit Party to a Lender or Agent which (in whole or in part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to be exclusive of VAT. If VAT is or becomes chargeable on any supply made by any Lender or Agent to any Credit Party in connection with any Loan Document, such Credit Party shall pay to such Lender or Agent, as applicable, (in addition to and at the same time as paying the consideration for such supply) an amount equal to the amount of such VAT (and such Lender shall promptly provide an appropriate VAT invoice to the relevant Credit Party).

                              (ii) Where any Loan Document requires any Credit Party to reimburse or indemnify a Lender or Agent for any cost or expense, such Credit Party shall reimburse or indemnify (as the case may be) such Lender or Agent, as applicable, for the full amount of such cost or expense, including such part thereof as represents VAT, except to the extent that such Lender or Agent, as applicable, reasonably determines that it is entitled to credit or repayment in respect of such VAT.

                              (iii) Any reference in this Section 1.15(e) to any Credit Party shall, at any time when such Credit Party is treated as a member of a group for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term “representative member” to have the same meaning as in the Value Added Tax Act 1994).

                    1.16 Capital Adequacy; Increased Costs; Illegality .

                    (a) If any law, treaty, governmental (or quasi governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender (including, as applicable, as L/C Issuer) with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law), in each case, adopted after the Closing Date, from any central bank or other Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender’s capital as a consequence of its obligations hereunder, then Borrowers shall from time to time upon demand by such Lender (with a copy of such demand to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by such Lender to Borrower Representative and to Agent shall be presumptive evidence of the matters set forth therein.

                    (b) If, due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), in each case adopted after the Closing Date, there shall be any increase in the cost to any Lender (including, as applicable, as L/C Issuer) of agreeing to make or making, funding or maintaining any Loan or Letter of Credit (or any participation in any Loan or Letter of Credit purchased pursuant to Section 9.9(e)(i) ), then Borrowers shall from time to time, upon demand

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by such Lender (with a copy of such demand to Agent), pay to Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower Representative and to Agent by such Lender, shall be presumptive evidence of the matters set forth therein. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender’s internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to this Section 1.16(b) . For the avoidance of doubt, Sections 1.16(a) and 1.16(b) shall not apply to Taxes which shall be exclusively governed by Section 1.15 .

                    (c) (i) Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law or regulation (or any change in the interpretation thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any LIBOR Loan (or a participation interest in any LIBOR Loan), then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan (or participation interest, as applicable) at another branch or office of that Lender without, in that Lender’s reasonable opinion, materially adversely affecting it, its Loans or its participation interests in Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower Representative through Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans (or participation interests in LIBOR Loans) shall terminate and (ii) each Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing by such Borrower to such Lender (or to the Fronting Lender, to the extent of the participation interests in LIBOR Loans of the Fronting Lender held by such Lender, and the Fronting Lender shall pay such amounts to such Lender in respect of such participation interests), together with interest accrued thereon, unless Borrower Representative on behalf of such Borrower, within five (5) Business Days after the delivery of such notice and demand, converts all LIBOR Loans into Index Rate Loans.

                              (ii) If Agent shall have determined in good faith that for any reason adequate and reasonable means do not exist for ascertaining the Dollar LIBOR Rate or the Sterling LIBOR Rate, as applicable, for any requested LIBOR Period with respect to a proposed LIBOR Loan or that the Dollar LIBOR Rate or the Sterling LIBOR Rate, as applicable, applicable pursuant to Section 1.5(a) for any requested LIBOR Period with respect to a proposed LIBOR Loan does not adequately and fairly reflect the cost to the Lenders of funding such Loan, Agent will forthwith give notice of such determination to Borrower Representative and each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Loans hereunder shall be suspended until Agent revokes such notice in writing. Upon receipt of such notice, Borrower Representative may revoke any Notice of Revolving Credit Advance or Notice of Conversion/Continuation then submitted by it. If Borrower Representative does not revoke such notice, Lenders shall make, convert or continue the Loans, as proposed by Borrower Representative, in the amount specified in the applicable notice submitted by Borrower Representative, but such Loans shall be made, converted or continued as Index Rate Loans.

                    (d) Within thirty (30) days after receipt by Borrower Representative of written notice and demand from any Lender (an “ Affected Lender ”) for payment of additional amounts

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or increased costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b) , Borrower Representative may, at its option, notify Agent and such Affected Lender of its intention to replace the Affected Lender. So long as no Default or Event of Default has occurred and is continuing, Borrower Representative, with the consent of Agent, may obtain, at Borrowers’ expense, a replacement Lender (“ Replacement Lender ”) for the Affected Lender, which Replacement Lender must be reasonably satisfactory to Agent. If Borrowers obtain a Replacement Lender within ninety (90) days following notice of their intention to do so, the Affected Lender must sell and assign its outstanding Loans, Letter of Credit Obligations and Commitments to such Replacement Lender for an amount equal to the outstanding principal balance of all Loans held by the Affected Lender and all accrued interest and Fees with respect thereto through the date of such sale and such assignment shall not require the payment of an assignment fee to Agent; provided , that Borrowers shall have reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment. Notwithstanding the foregoing, Borrowers shall not have the right to obtain a Replacement Lender if the Affected Lender rescinds its demand for increased costs or additional amounts within 15 days following its receipt of Borrowers’ notice of intention to replace such Affected Lender. Furthermore, if Borrowers give a notice of intention to replace and do not so replace such Affected Lender within ninety (90) days thereafter, Borrowers’ rights under this Section 1.16(d) shall terminate with respect to such Affected Lender and Borrowers shall promptly pay all increased costs or additional amounts demanded by such Affected Lender pursuant to Sections 1.15(a), 1.16(a) and 1.16(b) .

                    1.17 Credit Support .

                    All Loans to each U.S. Borrower and all of the other Obligations of the each U.S. Borrower arising under this Agreement and the other Loan Documents shall constitute one general obligation of the U.S. Borrowers secured, until the Termination Date, by all of the Collateral covered under the U.S. Collateral Documents. All Loans to each U.K. Borrower and all of the other Obligations of each U.K. Borrower arising under this Agreement and the other Loan Documents shall constitute one general obligation of the U.K. Borrowers secured, until the Termination Date, by all of the Collateral covered under the U.K. Collateral Documents.

                    1.18 Conversion to Dollars and Sterling .

                    (a) Except as expressly set forth herein, all valuations or computations of monetary amounts set forth in this Agreement shall include the Dollar Equivalent of Sterling or any other applicable currency. All currency conversions to be made under this Agreement shall be made in accordance with the following procedure:

                              (i) Conversions to Dollars shall occur in accordance with prevailing exchange rates, as determined by Agent or the Fronting Lender, as applicable, in its reasonable discretion, on the applicable date.

                              (ii) Conversions to Sterling shall occur in accordance with prevailing exchange rates, as determined by Agent or the Fronting Lender, as applicable, in its reasonable discretion, on the applicable date.

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                              (iii) The Dollar Equivalent of each of the Revolving Credit Advances, Swing Line Advances and Letter of Credit Obligations denominated in currencies other than Dollars shall be re-calculated on (a) so long as the Aggregate Borrowing Availability equals or exceeds $5,000,000, the first Business Day of each month and (b) otherwise, the first Business Day of each week.

                    (b) All valuations or computations of monetary amounts set forth in any Borrowing Base Certificate, any Art Inventory Report, any Art Loan Receivables Report or any other report, certificate, Financial Statement or other document delivered by any Credit Party to Agent hereunder shall be made in accordance with GAAP and the ordinary business practices of the Credit Parties as of the Closing Date; provided , that any such report or document shall set forth the conversion factors used with respect to any foreign currencies.

                    1.19 Judgment Currency; Contractual Currency .

                    (a) If, for the purpose of obtaining or enforcing judgment against any Credit Party in any court in any jurisdiction, it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 1.19 referred to as the “ Judgment Currency ”) an amount due under any Loan Document in any currency (the “ Obligation Currency ”) other than the Judgment Currency, the conversion shall be made at the rate of exchange prevailing on the Business Day immediately preceding (i) the date of actual payment of the amount due, in the case of any proceeding in the courts of any jurisdiction that will give effect to such conversion being made on such date, or (ii) the date on which the judgment is given, in the case of any proceeding in the courts of any other jurisdiction (the applicable date as of which such conversion is made pursuant to this Section 1.19 being hereinafter referred to as the “ Judgment Conversion Date ”).

                    (b) If, in the case of any proceeding in the court of any jurisdiction referred to in Section 1.19(a) , there is a change in the rate of exchange prevailing between the Judgment Conversion Date and the date of actual receipt for value of the amount due, the applicable Credit Party shall pay such additional amount (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount actually received in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of the Judgment Currency stipulated in the judgment or judicial order at the rate of exchange prevailing on the Judgment Conversion Date. Any amount due from a Credit Party under this Section 1.19(b) shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of any of the Loan Documents.

                    (c) The term “rate of exchange” in this Section 1.19 means the rate of exchange at which Agent would, on the relevant date at or about noon (New York City time), be able to sell the Obligation Currency against the Judgment Currency to prime banks.

                    (d) Any amount received or recovered by Agent in respect of any sum expressed to be due to them (whether for itself or on behalf of any other person) from any Credit Party under this Agreement or under any of the other Loan Documents in a currency other than the currency (the “contractual currency”) in which such sum is so expressed to be due (whether

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as a result of, or from the enforcement of, any judgment or order of a court or tribunal of any jurisdiction, the winding-up of a Borrower or otherwise) shall only constitute a discharge of such Borrower to the extent of the amount of the contractual currency that Agent is able, in accordance with its usual practice, to purchase with the amount of the currency so received or recovered on the date of receipt or recovery (or, if later, the first date on which such purchase is practicable). If the amount of the contractual currency so purchased is less than the amount of the contractual currency so expressed to be due, such Borrower shall indemnify Agent against any loss sustained by it as a result, including the cost of making any such purchase other than losses resulting from the gross negligence or willful misconduct of the Person seeking such indemnification.

                    1.20 Currency of Account .

                    Dollars are the currency of account and payment for each and every sum at any time due from the Borrowers hereunder; provided , that:

                              (i) unless expressly provided elsewhere in this Agreement, each repayment of a Revolving Credit Advance or a part thereof advanced in Sterling shall be made in Sterling;

                              (ii) each payment of interest in respect of principal, or any other sum, denominated in Sterling shall be made in Sterling;

                              (iii) each payment in respect of costs and expenses incurred in Sterling shall be made in Sterling; and

                              (iv) any other amount expressed to be payable in Sterling shall be paid in Sterling.

2. CONDITIONS PRECEDENT

                    2.1 Conditions to the Initial Loans .

                    Neither any Lender nor the Fronting Lender shall be obligated to make any Loan or incur any Letter of Credit Obligations on the Closing Date, or to take, fulfill, or perform any other action hereunder, until the following conditions have been satisfied or provided for in a manner reasonably satisfactory to Agent, or waived in writing by Agent:

                    (a) Credit Agreement; Loan Documents . Each Loan Document delivered on the date hereof or counterparts thereof shall have been duly executed and delivered by Borrowers, each other Credit Party, Agent and Lenders party thereto; and Agent shall have received such documents, instruments, agreements and legal opinions as Agent shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including all those listed in the Closing Checklist attached hereto as Annex D , each in form and substance reasonably satisfactory to Agent.

                    (b) Repayment of Prior Lender Obligations; Satisfaction of Outstanding L/Cs . (i) Agent shall have received evidence satisfactory to Agent that all of the Prior Lender

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Obligations have been repaid in full by the Borrowers and all Liens upon any of the property of Borrowers or any of their Subsidiaries in favor of the Prior Agent have been terminated; and (ii) all letters of credit issued or guaranteed under the Prior Credit Agreement shall have been terminated, cash collateralized, or supported by a Letter of Credit issued pursuant to Annex B, as mutually agreed upon by Agent, Borrowers and Prior Agent.

                    (c) Approvals . Agent shall have received (i) satisfactory evidence that the Sotheby Entities have obtained all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents or (ii) an officer’s certificate in form and substance reasonably satisfactory to Agent affirming that no such consents or approvals are required (other than those that have been obtained).

                    (d) Opening Availability . After giving effect to any Reserves to be established on the Closing Date and any initial Revolving Credit Advances made to Borrowers and the incurrence of any initial Letter of Credit Obligations, Borrowers shall have Aggregate Borrowing Availability of at least $90,000,000 as of the Closing Date.

                    (e) Payment of Fees . Borrowers shall have paid the Fees required to be paid on the Closing Date (including, without limitation, those specified in Section 1.9 ) and shall have reimbursed Agent for all fees, costs and expenses of closing presented as of the Closing Date.

                    (f) Capital Structure: Other Indebtedness . The capital structure of each Sotheby Entity and the terms and conditions of all Indebtedness of each Sotheby Entity shall be acceptable to Agent in its sole discretion.

                    (g) Due Diligence . Agent shall have completed its business and legal due diligence with results reasonably satisfactory to Agent.

                    (h) Other Indebtedness . All Obligations and all Liens granted under the Loan Documents shall constitute permitted indebtedness and permitted Liens, as applicable, under the Senior Note Indenture and the Convertible Note Indenture.

                    (i) No Material Adverse Change . Since December 31, 2008, (i) no material adverse change has occurred in the business, financial or other condition of Parent and its Subsidiaries taken as a whole, the industry in which Parent and its Subsidiaries operates, or the collateral which will be subject to the security interest granted to Agent and Lenders or in the prospects of Parent and its Subsidiaries taken as a whole, (ii) no litigation has commenced that, in the reasonable judgment of Agent, has a material risk of being determined adversely to the applicable Sotheby Entity and that, if so determined, would have a material adverse impact on Parent and its Subsidiaries taken as a whole, their business, or their ability to repay the Loans, (iii) no litigation has commenced that would challenge the transactions under consideration and (iv) there has occurred no material increase in the liabilities, liquidated or contingent, of Parent and its Subsidiaries taken as a whole, or a material decrease in the assets of Parent and its Subsidiaries taken as a whole.

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                    2.2 Further Conditions to Each Loan .

                    Except as otherwise expressly provided herein, neither any Lender nor the Fronting Lender shall be obligated to fund any Advance, convert or continue any portion of the outstanding Revolving Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if, as of the date thereof:

                    (a) any representation or warranty by any Credit Party contained herein or in any other Loan Document is untrue or incorrect as of such date as determined by Agent or Requisite Lenders (or in the case of a representation or warranty that is expressly made as of an earlier date, is untrue or incorrect as of such earlier date), except for changes therein expressly permitted or expressly contemplated by this Agreement, and Agent or Requisite Lenders have determined not to make such Advance, convert or continue any portion of the outstanding Revolving Loan as LIBOR Loan or incur such Letter of Credit Obligation as a result of the fact that such warranty or representation is untrue or incorrect;

                    (b) any Default or Event of Default has occurred and is continuing or would result after giving effect to any Advance, the incurrence of any Letter of Credit Obligation, or the conversion or continuation of any portion of the outstanding Revolving Loan into, or as, a LIBOR Loan, and Agent or Requisite Lenders shall have determined not to make any Advance, convert or continue any portion of the outstanding Revolving Loan as a LIBOR Loan or incur any Letter of Credit Obligation as a result of that Default or Event of Default;

                    (c) after giving effect to any Advance (or the incurrence of any Letter of Credit Obligations), (i) the Dollar Equivalent of the outstanding principal amount of the aggregate Revolving Loan would exceed the Maximum Amount less the then outstanding principal amount of the Swing Line Loan, (ii) the aggregate outstanding principal balance of Revolving Credit Advances and Swing Line Advances made to U.S. Borrowers and the Dollar Equivalent of the Letter of Credit Obligations incurred for the benefit of the U.S. Borrowers would, in the aggregate, exceed the U.S. Borrowing Base, (iii) the Dollar Equivalent of the outstanding amount of the Letter of Credit Obligations would exceed the L/C Sublimit, (iv) the aggregate outstanding principal amount of the Swing Line Loan would exceed Swing Line Availability or (v) the Dollar Equivalent of the aggregate outstanding principal balance of Revolving Credit Advances made to U.K. Borrowers and the Dollar Equivalent of the outstanding amount of the Letter of Credit Obligations incurred for the benefit of the U.K. Borrowers would, in the aggregate, exceed either the Sterling Subfacility Limit or the U.K. Borrowing Base; or

                    (d) notwithstanding the provisions of Annex F , the Borrowers shall not have delivered to Agent a Borrowing Base Certificate, Art Inventory Report and Art Loan Receivables Report (accompanied in each case by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion), in each case prepared as of (i) with respect to any Advance to be made or Letter of Credit Obligation to be incurred during the first thirteen days of any Fiscal Month, the last of day of the second preceding Fiscal Month or (ii) with respect to any Advance to be made or Letter of Credit Obligation to be incurred during the remainder of any Fiscal Month, the last day of the preceding Fiscal Month.

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The request and acceptance by any Borrower of the proceeds of any Advance, the incurrence of any Letter of Credit Obligations or the conversion or continuation of any portion of the outstanding Revolving Loan into, or as, a LIBOR Loan shall be deemed to constitute, as of the date thereof, (i) a representation and warranty by Borrowers that the conditions in this Section 2.2 have been satisfied and (ii) a reaffirmation by Borrowers of the cross-guaranty provisions set forth in Section 12 and of the granting and continuance of Agent’s Liens, on behalf of itself and the other Secured Parties, pursuant to the Collateral Documents.

3. REPRESENTATIONS AND WARRANTIES

                    To induce Lenders and the Fronting Lender to make the Loans and to incur Letter of Credit Obligations (and to purchase participation interests in the Loans and Letter of Credit Obligations hereunder), the Credit Parties, jointly and severally, make the following representations and warranties to Agent and each Lender with respect to all Sotheby Entities, each and all of which shall survive the execution and delivery of this Agreement.

                    3.1 Corporate Existence; Compliance with Law .

                    (a) Each Credit Party (i) is a corporation, limited liability company or limited partnership (or, in the case of Sotheby’s U.K., an unlimited liability company) duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation or organization set forth in Disclosure Schedule (3.1) ; (ii) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (iii) has the requisite power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; and (iv) is in compliance with its charter and bylaws or partnership or operating agreement, as applicable.

                    (b) Each Sotheby Entity (i) subject to specific representations regarding Environmental Laws, has and will maintain in full force and effect all material licenses (including, for the avoidance of doubt, a license under the Consumer Credit Act 1974 and the Consumer Credit Act 2006 (collectively, as each may be amended, extended or re-enacted from time to time, the “ CCA ”)), permits, consents, permissions, registrations, or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; and (ii) subject to specific representations set forth herein regarding ERISA, Environmental Laws, tax and other laws, is in compliance with all applicable provisions of law, rule, regulation or guidance, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

                    3.2 Executive Offices, Collateral Locations, FEIN .

                    As of the Closing Date, each U.S. Credit Party’s name as it appears in official filings in its jurisdiction of incorporation or organization, jurisdiction of incorporation or

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organization, organization type, organization number, if any, issued by its jurisdiction incorporation or organization, and the current location of each U.S. Credit Party’s chief executive office and the warehouses and premises at which any Collateral is located are set forth in Disclosure Schedule (3.2) , none of such locations has changed within the four (4) months preceding the Closing Date and each U.S. Credit Party has only one jurisdiction of incorporation or organization. In addition, Disclosure Schedule (3.2) lists the federal employer identification number of each U.S. Credit Party.

                    3.3 Corporate Power, Authorization, Enforceable Obligations .

                    The execution, delivery and performance by each Credit Party of the Loan Documents to which it is a party and the creation of all Liens provided for therein: (a) are within such Person’s power; (b) have been duly authorized by all necessary corporate, limited liability company, limited partnership or unlimited liability company action; (c) do not contravene any provision of any Sotheby Entity’s charter, bylaws or partnership or operating agreement as applicable; (d) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which any Sotheby Entity is a party or by which any Sotheby Entity or any of its property is bound, including, without limitation, the Senior Note Indenture, the Convertible Note Indenture or the York Avenue Lease Documents; (f) do not result in the creation or imposition of any Lien upon any of the property of any Sotheby Entity other than those in favor of Agent, on behalf of itself and the other Secured Parties, pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person. Each of the Loan Documents shall be duly executed and delivered by each Credit Party and each such Loan Document shall constitute a legal, valid and binding obligation of such Credit Party enforceable against it in accordance with its terms.

                    3.4 Financial Disclosures .

                    Except for the Projections, all Financial Statements concerning the Borrowers and their Subsidiaries that are referred to below (i) in the case of all Financial Statements concerning Parent and its Subsidiaries on a consolidated basis, have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and (ii) present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended.

                    (a) Financial Statements . The following Financial Statements attached hereto as Disclosure Schedule (3.4(a) ) have been delivered on the date hereof:

                              (i) The audited consolidated (with respect to Parent and its Subsidiaries) balance sheets at December 31, 2007 and 2008 and the related consolidated statements of income and cash flows for the Fiscal Years then ended, which consolidated Financial Statements shall have been certified by Deloitte & Touche LLP, and the unaudited

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consolidating balance sheets and related consolidating statements of income of Parent and the Borrowers for such Fiscal Years.

                              (ii) The unaudited consolidated balance sheet at June 30, 2009, and the related statement(s) of income and cash flows of Parent and its Subsidiaries for the Fiscal Quarter then ended, and the unaudited consolidating balance sheets and related consolidating statement of income of Parent and the Borrowers for such Fiscal Quarter.

                              (iii) The unaudited consolidated balance sheet at June 30, 2009, and the related statement of income of Parent and its Subsidiaries for the Fiscal Month then ended and the portion of the Fiscal Year then ended, and the unaudited consolidating balance sheets and related consolidating statement of income of Parent and the Borrowers for such Fiscal Month and such portion of such Fiscal Year.

                    (b) Projections . The Projections delivered on the date hereof and attached hereto as Disclosure Schedule (3.4(b) ) have been prepared by the Borrowers in light of the past operations of their businesses and reflect projections for the three-year period beginning on January 1, 2009 on a quarterly basis for the years 2009 and 2010 and on a year-by-year basis thereafter. The Projections are based upon the same accounting principles as those used in the preparation of the financial statements described above and the estimates and assumptions stated therein, all of which the Borrowers believe to be reasonable and fair in light of current conditions and current facts known to the Borrowers and, as of the Closing Date, reflect the Borrowers’ good faith and reasonable estimates of the future financial performance of Parent and its Subsidiaries for the period set forth therein. The Projections are not a guaranty of future performance, and actual results may differ from the Projections.

                    (c) Debt Disclosure . As of the Closing Date, after giving effect to the Refinancing, no Sotheby Entity is liable on any “Credit Facilities” (as defined in the Senior Note Indenture) other than pursuant to this Agreement.

                    3.5 Material Adverse Effect .

                    Between December 31, 2008 and the Closing Date: (a) except as reflected on the unaudited Financial Statements described in Section 3.4(a)(ii) , no Sotheby Entity has incurred any obligations, contingent or noncontingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (b) no contract, lease or other agreement or instrument has been entered into by any Sotheby Entity or has become binding upon any Sotheby Entity’s assets and no law or regulation applicable to any Sotheby Entity has been adopted that has had or could reasonably be expected to have a Material Adverse Effect, and (c) no Sotheby Entity is in default and to the best of Borrowers’ knowledge no third party is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Since December 31, 2008 no event has occurred, that alone or together with other events, could reasonably be expected to have a Material Adverse Effect.

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                    3.6 Ownership of Property; Liens .

                    As of the Closing Date, Disclosure Schedule (3.6) lists all of the real property owned, leased, subleased, occupied, or used by any Credit Party (the “ Real Estate ”) and discloses which Credit Party is the owner, lessee, licensee or occupier of such Real Estate. Except as a result of Permitted Encumbrances, each Credit Party owns good and marketable freehold or fee simple title to all of its owned Real Estate, and valid and marketable leasehold interests in all of its leased Real Estate. Copies of all such leases or a summary of terms thereof reasonably satisfactory to Agent have been made available to Agent. Disclosure Schedule (3.6) further describes any Real Estate with respect to which any Credit Party is a lessor, sublessor or assignor as of the Closing Date. Except as a result of Permitted Encumbrances, each Credit Party also has title to, or valid leasehold interests in, all of its personal property and assets. As of the Closing Date, none of the properties and assets of any Sotheby Entity are subject to any Liens other than Permitted Encumbrances, and there are no facts, circumstances or conditions known to any Sotheby Entity that may result in any Liens (including Liens arising under Environmental Laws) other than Permitted Encumbrances. Disclosure Schedule (3.6) also describes any purchase options, rights of first refusal or other similar contractual rights pertaining to any Real Estate.

                    3.7 Labor Matters .

                    Except as set forth on Disclosure Schedule 3.7 , as of the Closing Date (a) there are no strikes, lockouts or slowdowns against any Credit Party pending or, to the knowledge of any Credit Party, threatened; (b) the hours worked by and payments made to employees of each Credit Party have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters except where such violation could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; (c) all material payments due from any Credit Party, or for which any claim may be made against any Credit Party, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Credit Party; and (d) there are no complaints, charges, claims or other causes of action against any Credit Party pending or, to the knowledge of any Credit Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Credit Party of any individual, which if adversely determined could reasonably be expected to have a Material Adverse Effect.

                    3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness .

                    Except as set forth in Disclosure Schedule (3.8) , as of the Closing Date, no Sotheby Entity has any Subsidiaries, is engaged in any joint venture or partnership with any other Person (other than Art Loan/Inventory Joint Ventures), or is an Affiliate of any other Person. All of the issued and outstanding Stock of each Sotheby Entity is owned by each of the Stockholders and in the amounts set forth in Disclosure Schedule (3.8) . Except as set forth in Disclosure Schedule (3.8) , there are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which any Sotheby Entity may be required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any Stock or other equity securities of its Subsidiaries. All outstanding Indebtedness and Guaranteed Indebtedness of each

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Credit Party as of the Closing Date (except for the Obligations) is described in Section 6.3 (including Disclosure Schedule (6.3) ).

                    3.9 Government Regulation .

                    No Sotheby Entity is an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940. The making of the Loans by Lenders to Borrowers, the incurrence of the Letter of Credit Obligations on behalf of Borrowers and the application of the proceeds thereof and repayment thereof will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission.

                    3.10 Margin Regulations .

                    No Sotheby Entity is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as “ Margin Stock ”). No Sotheby Entity owns any Margin Stock (other than Stock of Parent in an amount that does not exceed 25% of the assets of Parent and its Subsidiaries), and none of the proceeds of the Loans or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock (other than Stock of Parent repurchased in accordance with Section 6.13 ), for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any Margin Stock or for any other purpose that might cause any of the Loans or other extensions of credit under this Agreement to be considered a “purpose credit” within the meaning of Regulations T, U or X of the Federal Reserve Board. No Sotheby Entity will take or permit to be taken any action that might cause any Loan Document to violate any regulation of the Federal Reserve Board.

                    3.11 Taxes .

                    All Federal and other material tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by any Sotheby Entity have been filed, or will be timely filed, with the appropriate Governmental Authority, and all Charges have been paid excluding Charges or other amounts being contested in accordance with Section 5.2(b) and unless the failure to so file or pay could not reasonably be expected to result in a Material Adverse Effect. Disclosure Schedule (3.11) sets forth as of the Closing Date those taxable years for which any Sotheby Entity’s tax returns are currently being audited by the IRS or any other applicable Governmental Authority, and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding where the amount of such assessments, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Except as described in Disclosure Schedule (3.11) , as of the Closing Date, no Sotheby Entity has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any material Charges. None of the Sotheby Entities and their respective predecessors are liable for any Charges: (a) under any agreement (including any tax sharing agreements) or (b) to each Sotheby Entity’s knowledge, as a transferee. As of the

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Closing Date, no Sotheby Entity has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which would reasonably be expected to have a Material Adverse Effect.

                    3.12 ERISA .

                    (a) Disclosure Schedule (3.12(a) ) lists, as of the Closing Date, all Plans subject to Section 412 of the IRC or Section 302 of ERISA, including all Title IV Plans, all Multiemployer Plans, and all Retiree Welfare Plans. Copies of all such listed Plans, together with a copy of the latest form IRS/DOL 5500-series and related actuarial reports, as applicable, for each such Plan, have been made available to Agent. Except with respect to Multiemployer Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401(a) of the IRC, the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501(a) of the IRC, and nothing has occurred that would cause the loss of such qualification or tax exempt status. Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the IRC and its terms, including the timely filing of all reports required under the IRC or ERISA. Neither any Sotheby Entity nor ERISA Affiliate has failed to make any material contribution or pay any material amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan. Neither any Sotheby Entity nor ERISA Affiliate has failed to make a contribution payment on or before the applicable due date which could result in the imposition of a lien under Section 430(k) of the IRC or Section 303(k) of ERISA. No “prohibited transaction,” as defined in Section 406 of ERISA and Section 4975 of the IRC, has occurred with respect to any Plan, that would subject any Sotheby Entity to a material tax on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC.

                    (b) Except as set forth in Disclosure Schedule (3.12(a) ): (i) no Title IV Plan has any material Unfunded Pension Liability; (ii) no ERISA Event has occurred or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of any Sotheby Entity, threatened material claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Sotheby Entity or ERISA Affiliate has incurred or reasonably expects to incur any material liability as a result of a complete or partial withdrawal from a Multiemployer Plan; (v) within the last five years no Title IV Plan of any Sotheby Entity or ERISA Affiliate has been terminated, whether or not in a “standard termination” as that term is used in Section 4041 of ERISA, nor has any Title IV Plan of any Sotheby Entity or any ERISA Affiliate (determined at any time within the last five years) with material Unfunded Pension Liabilities been transferred outside of the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of any Sotheby Entity or ERISA Affiliate (determined at such time), (vi) except in the case of any ESOP, Stock of all Credit Parties and their ERISA Affiliates makes up, in the aggregate, no more than 10% of fair market value of the assets of any Plan measured on the basis of fair market value as of the latest valuation date of any Plan; and (vii) no liability under any Title IV Plan has been satisfied with the purchase of a contract from an insurance company that is not rated AAA by Standard & Poor’s Ratings Group or an equivalent rating by another nationally recognized rating agency.

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                    (c) Disclosure Schedule (3.12(c) ) lists, as of the Closing Date, all pension plans or arrangements operating in the United Kingdom through which any Sotheby Entity currently contributes or could be required to contribute (the “ U.K. Pension Plans ”). There are no amounts which are treated under Section 75 of the United Kingdom Pensions Act 1995 as due to any other pension scheme operated in the United Kingdom in which any Sotheby Entity has been a participating employer. Disclosure Schedule (3.12(c) ) separately identifies which of the U.K. Pension Plans is a defined benefit plan and which is a defined contribution plan. All of the U.K. Pension Plans are registered pension schemes as defined in chapter 2 of part 4 of the United Kingdom Finance Act 2004. There is no plan of any U.K. Credit Party (or, to the knowledge of the U.K. Credit Parties, of any other Person having the power to amend or terminate any U.K. Pension Plan) to amend or terminate any U.K. Pension Plan or otherwise do any act or omission so as to give rise to any claim by the trustees of that plan whether under the related trust deed or rules of that plan or under Section 75 of the United Kingdom Pensions Act 1995. Contributions have been made to the U.K. Pension Plans as required under their relevant schedule of contributions and recovery plan (if any) in force from time to time as those terms are defined in Part 3 of the United Kingdom Pensions Act 2004 in all material respects. There are no facts or circumstances which may give rise to the Pensions Regulator issuing, or to the knowledge of any Sotheby Entity threatening to issue, a Financial Support Directive or a Contribution Notice with respect to any U.K. Pension Plans.

                    3.13 Litigation .

                    No action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of any Sotheby Entity, threatened against any Sotheby Entity, before any Governmental Authority or before any court or any arbitrator or panel of arbitrators (collectively, “ Litigation ”), (a) that challenges any Credit Party’s right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) that has a reasonable risk of being determined adversely to any Sotheby Entity and that, if so determined, could reasonably be expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule (3.13(a) ), as of the Closing Date there is no Litigation pending or, to any Sotheby Entity’s knowledge, threatened, that seeks damages in excess of $2,500,000 or injunctive relief against, or alleges criminal misconduct of, any Sotheby Entity.

                    3.14 Brokers .

                    Except as set forth on Disclosure Schedule 3.14 , no broker or finder brought about the obtaining, making or closing of the Loans, and no Sotheby Entity or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.

                    3.15 Intellectual Property .

                    As of the Closing Date, each Sotheby Entity owns or has rights to use all Intellectual Property necessary to continue to conduct its business as now conducted by it or presently proposed to be conducted by it, and each Patent, Trademark, registered Copyright and License owned by the Credit Parties is listed, together with the related application or registration

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number, as applicable, and the owner thereof, in Disclosure Schedule (3.15) . Each Sotheby Entity conducts its business and affairs without infringement of or interference with any Intellectual Property of any other Person in any material respect. Except as set forth in Disclosure Schedule (3.15) , no Credit Party is aware of any material infringement claim by any other Person with respect to any Intellectual Property owned by the Credit Parties.

                    3.16 Full Disclosure .

                    No information contained in this Agreement, any of the other Loan Documents, Financial Statements or Collateral Reports or other written reports from time to time prepared by any Sotheby Entity and delivered hereunder or any written statement prepared by any Sotheby Entity and furnished by or on behalf of any Sotheby Entity to Agent or any Lender pursuant to the terms of this Agreement contains or will, at the time of delivery thereof, contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. The Projections delivered hereunder are based upon the estimates and assumptions stated therein, all of which Borrowers believed at the time of delivery to be reasonable and fair in light of current conditions and current facts known to Borrowers as of such delivery date, and reflect Borrowers’ good faith and reasonable estimates of the future financial performance of Borrowers and of the other information projected therein for the period set forth therein. The Projections are not a guaranty of future performance and actual results may differ from those set forth in the Projections. The Liens granted to Agent, on behalf of itself and the other Secured Parties, pursuant to the Collateral Documents will at all times be valid, fully perfected first priority security interests in the Collateral described therein (except as otherwise set forth in the Collateral Documents), subject, as to priority, only to Permitted Encumbrances that would be prior to Liens in favor of Agent as a matter of law.

                    3.17 Environmental Matters .

                    (a) Except as set forth in Disclosure Schedule (3.17) , as of the Closing Date: (i) the owned Real Estate is, and, to the knowledge of the Credit Parties, the leased Real Estate is, in each case, free of contamination from any Hazardous Material except for such contamination that would not adversely impact the value or marketability of such Real Estate and that would not result in Environmental Liabilities that could reasonably be expected to have a Material Adverse Effect; (ii) no Sotheby Entity has caused or suffered to occur any material Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate; (iii) the Sotheby Entities are and have been in compliance with all Environmental Laws, except for such noncompliance that would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect; (iv) the Sotheby Entities have obtained, and are in compliance with, all Environmental Permits required by Environmental Laws for the operations of their respective businesses as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Environmental Permits would not result in Environmental Liabilities that could reasonably be expected to have a Material Adverse Effect; (v) no Sotheby Entity is involved in operations or knows of any facts, circumstances or conditions, including any Releases of Hazardous Materials, that are likely to result in any Environmental Liabilities of such Sotheby Entity which could reasonably be expected to have a Material Adverse Effect; (vi) there is no Litigation arising under or related to any Environmental

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Laws, Environmental Permits or Hazardous Material that seeks damages, penalties, fines, costs or expenses that could reasonably be expected to have a Material Adverse Effect or injunctive relief against, or that alleges criminal misconduct by, any Sotheby Entity; (vii) no notice has been received by any Sotheby Entity identifying it as a “potentially responsible party” or requesting information under CERCLA or analogous state statutes, and to the knowledge of the Sotheby Entities, there are no facts, circumstances or conditions that may result in any Sotheby Entity being identified as a “potentially responsible party” under CERCLA or analogous state statutes; and (viii) the Sotheby Entities have made available to Agent copies of all existing environmental reports, reviews and audits and all written information pertaining to actual or potential Environmental Liabilities, in each case relating to any Sotheby Entity.

                    (b) Each Credit Party hereby acknowledges and agrees that Agent (i) is not now, and has not ever been, in control of any of the Real Estate or any Credit Party’s affairs, and (ii) does not have the capacity through the provisions of the Loan Documents or otherwise to influence any Credit Party’s conduct with respect to the ownership, operation or management of any of its Real Estate or compliance with Environmental Laws or Environmental Permits.

                    3.18 Insurance .

                     Disclosure Schedule (3.18) lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by each Credit Party, as well as a summary of the terms of each such policy.

                    3.19 Deposit .

                     Disclosure Schedule (3.19) lists all banks and other financial institutions at which any Credit Party maintains deposit or other accounts as of the Closing Date, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, the complete account number therefor and whether such account contains amounts payable to consignors representing proceeds of the sale of consigned Works of Art.

                    3.20 [Reserved] .

                    3.21 Bonding; Licenses .

                    Except as set forth on Disclosure Schedule (3.21) or entered into in the ordinary course of business, as of the Closing Date, no Sotheby Entity is a party to or bound by any surety bond agreement or bonding requirement with respect to products or services sold by it or any trademark or patent license agreement with respect to products sold by it.

                    3.22 Solvency .

                    Both before and after giving effect to (a) the Loans and Letter of Credit Obligations to be made or incurred on the Closing Date or such other date as Loans and Letter of Credit Obligations requested hereunder are made or incurred, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of Borrower Representative; (c) the Refinancing; and (d) the payment and accrual of all transaction costs in connection with the

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foregoing, (i) each Credit Party is and will be Solvent and (ii) Parent and its Subsidiaries, on a consolidated basis, are and will be Solvent.

                    3.23 Sale-Leasebacks .

                    No Sotheby Entity is a party to any sale-leaseback, synthetic lease or similar transaction involving any of its assets.

                    3.24 U.S. Money-Laundering and Terrorism Regulatory Matters .

                    (a) No Sotheby Entity or any Affiliate of any Sotheby Entity, nor any of their respective officers or directors or any of their respective brokers, investors or other agents acting or benefiting in any capacity in connection with Loans, is a Prohibited Person.

                    (b) No Sotheby Entity or any Affiliate of any Sotheby Entity, nor any of their respective officers or directors (i) to such Sotheby Entity’s knowledge after due inquiry, has conducted or will conduct any business or has engaged or will engage in any transaction or dealing with any Prohibited Person, including making or receiving any contribution of funds, goods or services to or for the benefit of any Prohibited Person, (ii) to such Sotheby Entity’s knowledge after due inquiry, has dealt or will deal in, or otherwise has engaged or will engage in any transaction relating to, any Prohibited Person or any property or interests in property blocked pursuant to the Executive Order or (iii) has engaged or will engage in or has conspired or will conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the requirements or prohibitions set forth in the Executive Order or the PATRIOT Act.

                    (c) Each Sotheby Entity and its Affiliates, and their respective officers and directors are in full compliance with all applicable orders, rules and regulations issued by, and recommendations of, the U.S. Department of the Treasury and OFAC pursuant to IEEPA, the PATRIOT Act, other legal requirements relating to sanctions, money laundering or terrorism and any executive orders related thereto.

                    (d) Each Borrower has established an anti-money laundering and/or economic sanctions program and/or procedures in accordance with all applicable laws, rules and regulations of its own jurisdiction including, without limitation, where applicable, the PATRIOT Act. Each Borrower applies its anti-money laundering program and/or procedures to all Art Loan Debtors.

                    (e) Each Borrower has taken appropriate due diligence efforts to know each Art Loan Debtor to which it has advanced, or committed to advance, Art Loans, including whether such Art Loan Debtor is a Prohibited Person. Each Borrower has taken appropriate due diligence efforts to know if any such Art Loan Debtor is a “Senior Foreign Political Figure” (as defined in the PATRIOT Act) and, to the extent that any Art Loan Debtor is a Senior Foreign Political Figure, has disclosed such information to Agent.

                    (f) Each Borrower does not believe, and after appropriate due diligence, has no reason to believe, that any of its Art Loan Debtors is a “Prohibited Foreign Shell Bank” (as defined in the PATRIOT Act), or is named on any available lists of known or suspected

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terrorists, terrorist organizations or of other sanctioned person issued by the United States government and/or the government(s) of any jurisdiction(s) in which such Borrower is doing business.

                    (g) Each Sotheby Entity has adopted reasonable procedures in accordance with applicable law as of the Closing Date to elicit information that substantiates the statements contained in this Section 3.25 .

                    3.25 Lending and Auction Regulatory Matters .

                    (a) Except as set forth in Disclosure Schedule (3.13(a)) , each Credit Party that makes or owns Art Loans is in material compliance with, and each Art Loan has been made and remains in material compliance with, all applicable provisions of federal, state, local and foreign laws imposed upon lenders with respect to consumer or commercial lending, usury or other limitations on interest, finance charges, or other charges, finance company or other lender licensing, consumer or commercial credit disclosure, consumer or commercial credit collection practices, and similar laws and regulations.

                    (b) Sotheby’s, Inc. and each other Credit Party that conducts auctions in the City of New York is in material compliance with, and each employee thereof who conducts auction in New York City maintains a valid license under, the City of New York’s Auctioneer Rules (Title 20, Chapter 2, Subchapter 13) and any applicable similar laws of other jurisdictions. Sotheby’s U.K. and each other Credit Party which conducts auctions in the United Kingdom is in material compliance with, and maintains valid licenses (if required) under, all laws, regulations and auctioneer’s licensing requirements applicable in the United Kingdom, if any.

4. FINANCIAL STATEMENTS AND INFORMATION

                    4.1 Reports and Notices .

                    (a) Each Credit Party hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent or to Agent and Lenders, as required, the Financial Statements, notices, Projections and other information at the times, to the Persons and in the manner set forth in Annex E .

                    (b) Each Credit Party hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver to Agent or to Agent and Lenders, as required, the various Collateral Reports (including Borrowing Base Certificates in the form of Exhibit 4.1(A) , Art Loan Receivables Reports in the form of Exhibit 4.1(B) , and Art Inventory Reports in the form of Exhibit 4.1(C) ) at the times, to the Persons and in the manner set forth in Annex F and Section 2.2(d) .

                    4.2 Communication with Accountants .

                    Each Credit Party authorizes (a) Agent and (b) so long as an Event of Default has occurred and is continuing, each Lender, to communicate directly with its independent certified public accountants, including Deloitte & Touche LLP, and authorizes such accountants and advisors to (and, upon Agent’s request therefor, shall request that such accountants and advisors)

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communicate to Agent and each Lender information relating to any Sotheby Entity with respect to the business, results of operations and financial condition of any Sotheby Entity.

5. AFFIRMATIVE COVENANTS

                    Each Credit Party jointly and severally agrees as to all Sotheby Entities that from and after the date hereof and until the Termination Date:

                    5.1 Maintenance of Existence and Conduct of Business .

                    Each Sotheby Entity shall: do or cause to be done all things necessary to preserve and keep in full force and effect its corporate, partnership, limited liability company or unlimited liability company existence and its material rights and franchises, except as otherwise permitted under Section 6.1 ; continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; at all times maintain, preserve and protect all of its assets and properties used or useful in the conduct of its business, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices.

                    5.2 Payment of Charges .

                    (a) Subject to Section 5.2(b) , each Sotheby Entity shall pay and discharge or cause to be paid and discharged promptly all Charges payable by it, including (i) Charges imposed upon it, its income and profits, or any of its property (real, personal or mixed) and all Charges with respect to tax, social security and unemployment withholding with respect to its employees, (ii) lawful claims for labor, materials, supplies and services or otherwise, and (iii) all storage or rental charges payable to warehousemen or bailees, in each case, before any thereof shall become past due, in each case, except where the failure to pay or discharge such Charges would not result in aggregate liabilities in excess of $2,500,000.

                    (b) Each Sotheby Entity may in good faith contest, by appropriate proceedings, the validity or amount of any Charges or claims described in Section 5.2(a) ; provided , that (i) adequate reserves with respect to such contest are maintained on the books of such Sotheby Entity, in accordance with GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other than payments to warehousemen and/or bailees) that is superior to any of the Liens securing the Obligations and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges; (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest; and (iv) such Sotheby Entity shall promptly pay or discharge such contested Charges or claims and all additional charges, interest, penalties and expenses, if any, if such contest is terminated or discontinued adversely to such Sotheby Entity.

                    5.3 Books and Records .

                    Each Sotheby Entity shall keep adequate books and records with respect to its business activities in which proper entries, reflecting all financial transactions, are made. Parent shall keep adequate books and records with respect to the business activities of Parent and its

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Subsidiaries on a consolidated basis in which proper entries, reflecting all financial transactions, are made in accordance with GAAP and on a basis consistent with the Financial Statements attached as Disclosure Schedule (3.4(a) ).

                    5.4 Insurance; Damage to or Destruction of Collateral .

                    (a) The Sotheby Entities shall, at their sole cost and expense, maintain policies of insurance with financially sound and reputable insurance companies in such amounts, and covering such risks, as is consistent with sound business practice and customary for their industry. In the case of the Credit Parties, such policies of insurance (or the loss payable and additional insured endorsements delivered to Agent) shall contain provisions pursuant to which the insurer agrees to provide thirty (30) days prior written notice to Agent in the event of any non-renewal, cancellation or amendment of any such insurance policy. If any Sotheby Entity at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay all premiums relating thereto, Agent may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto that Agent deems advisable. Agent shall have no obligation to obtain insurance for any Sotheby Entity or pay any premiums therefor. By doing so, Agent shall not be deemed to have waived any Default or Event of Default arising from any Sotheby Entity’s failure to maintain such insurance or pay any premiums therefor. All sums so disbursed, including reasonable attorneys’ fees, court costs and other charges related thereto, shall be payable on demand by Borrowers to Agent and shall be additional Obligations hereunder secured by the Collateral.

                    (b) If reasonably requested by Agent, each Sotheby Entity shall deliver to Agent from time to time a report of a reputable insurance broker, reasonably satisfactory to Agent, with respect to its insurance policies.

                    (c) Each Credit Party shall deliver to Agent, in form and substance reasonably satisfactory to Agent, endorsements to (i) all “All Risk,” Lender Single Interest (“LSI”) and Fine Arts property policies of insurance (including, to the extent permitted under the York Avenue Lease Documents and York Avenue Loan Documents, the business interruption insurance of such Credit Party), in each case, naming Agent, on behalf of itself and the other Secured Parties, as a loss payee, and (ii) all general, automotive, and umbrella liability policies of insurance, in each case, naming Agent, on behalf of itself and the other Secured Parties, as additional insured. Each Credit Party irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent), so long as any Default or Event of Default has occurred and is continuing or the anticipated insurance proceeds exceed the Dollar Equivalent of $1,000,000, as such Credit Party’s true and lawful agent and attorney in fact for the purpose of making, settling and adjusting claims under such “All Risk” property policies of insurance, endorsing the name of such Credit Party on any check or other item of payment for the proceeds of such “All Risk” policies of insurance and for making all determinations and decisions with respect to such “All Risk” policies of insurance. Agent shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. Borrower Representative shall promptly notify Agent of any loss, damage, or destruction to the Collateral in the amount of $1,000,000 or more, whether or not covered by insurance. After deducting from such proceeds (i) the expenses incurred by Agent in the collection or handling thereof, and (ii) amounts required to be paid to

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creditors (other than Lenders) having Permitted Encumbrances, Agent (A) may, except to the extent such proceeds are not required to be applied to prepay the Secured Obligations pursuant to Section 1.3(c) , at its option, (x) apply any such proceeds to the reduction of the Secured Obligations in accordance with Section 1.3(d) or (e) , as applicable, or (y) permit or require the applicable Credit Party to use such money, or any part thereof, to replace, repair, restore or rebuild the Collateral in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction and (B) shall, to the extent such proceeds are not required to be applied to prepay the Secured Obligations pursuant to Section 1.3(c) , remit such proceeds to the applicable Credit Party.

                    5.5 Compliance with Laws .

                    Each Sotheby Entity shall comply with all federal, state, local and foreign laws, rules and regulations applicable to it, including those relating to ERISA, labor, money laundering, counter-terrorist financing, consumer or commercial lending (including, for the avoidance of doubt, the CCA and the rules and regulations from time to time in effect thereunder or in connection therewith), usury, limitations on interest, finance charges or other charges, finance company licensing, consumer or commercial credit disclosure, debt collection, auctioneers, Environmental Laws and Environmental Permits, except to the extent that the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

                    5.6 Supplemental Disclosure .

                    From time to time as may be reasonably requested by Agent (which request will not be made more frequently than once each year absent the occurrence and continuance of an Event of Default) or at Credit Parties’ election, the Credit Parties shall supplement each Disclosure Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or that is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement to any such Disclosure Schedule or representation shall amend, supplement or otherwise modify any Disclosure Schedule or representation, or be or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Agent and Requisite Lenders in writing, and (b) no supplement shall be required or permitted as to representations and warranties that relate solely to the Closing Date.

                    5.7 Intellectual Property .

                    Each Sotheby Entity will conduct its business and affairs without infringement of or interference with any Intellectual Property of any other Person in any material respect and shall comply in all material respects with the terms of its Licenses.

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                    5.8 Environmental Matters .

                    Each Sotheby Entity shall and shall cause each Person within its control to: (a) conduct its operations and keep and maintain its Real Estate in compliance with all Environmental Laws and Environmental Permits other than noncompliance that could not reasonably be expected to have a Material Adverse Effect; (b) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws and Environmental Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to or from any of its Real Estate in all material respects; (c) notify Agent promptly after such Sotheby Entity becomes aware of any violation of Environmental Laws or Environmental Permits or any Release on, at, in, under, above, to or from any Real Estate that is reasonably likely to result in Environmental Liabilities that could reasonably be expected to have a Material Adverse Effect; and (d) promptly forward to Agent a copy of any order, notice, request for information or any communication or report received by such Sotheby Entity in connection with any such violation or Release or any other matter relating to any Environmental Laws or Environmental Permits that could reasonably be expected to result in Environmental Liabilities that could reasonably be expected to have a Material Adverse Effect, in each case whether or not the Environmental Protection Agency or any Governmental Authority has taken or threatened any action in connection with any such violation, Release or other matter. If Agent at any time has a reasonable basis to believe that there may be a violation of any Environmental Laws or Environmental Permits by any Sotheby Entity or any Environmental Liability arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to or from any of its Real Estate, that, in each case, could reasonably be expected to have a Material Adverse Effect, then each Sotheby Entity shall, upon Agent’s written request (i) cause the performance of such environmental audits including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at Borrowers’ expense, as Agent may from time to time reasonably request, subject to any leases, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Agent and shall be in form and substance reasonably acceptable to Agent, and (ii) permit Agent or its representatives to have access to all Real Estate for the purpose of conducting such environmental audits and testing as Agent deems appropriate, including subsurface sampling of soil and groundwater. Borrowers shall reimburse Agent for the costs of such audits and tests and the same will constitute a part of the Obligations secured hereunder.

                    5.9 Landlords’ Agreements, Bailee Letters and Real Estate Purchases .

                    Within ninety (90) days of the Closing Date (or such later date as Agent shall consent to in writing), with respect to each leased property indicated on Disclosure Schedule (3.6) , each Credit Party shall use commercially reasonable efforts to obtain a landlord’s agreement, in form and substance reasonably satisfactory to Agent, from the applicable lessor with respect to each such indicated locations. After the Closing Date, if any Credit Party proposes to lease during any Fiscal Year any real property locations or warehouse spaces (or renew an existing lease of any real property locations or warehouse spaces, or alter the use of any leased location to materially increase the Collateral stored or located at such location) where Collateral having a book value the Dollar Equivalent of which is greater than $1,000,000 in the

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aggregate will be stored or located, such Credit Party shall first notify Agent thereof and, upon request of Agent, provide to Agent a landlord agreement or bailee letter, as appropriate, with respect to such location, in form and substance reasonably satisfactory to Agent. Each Credit Party shall timely and fully pay and perform its obligations under all leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located. To the extent otherwise permitted hereunder, if any Credit Party proposes to acquire a fee ownership interest in Real Estate after the Closing Date, such Credit Party shall first notify Agent thereof and, upon request of Agent, provide to Agent a mortgage or deed of trust granting Agent a first priority security interest on such Real Estate, together with environmental audits, mortgage title insurance commitment, real property survey, local counsel opinion(s), supplemental casualty insurance and flood insurance, and such other documents, instruments or agreements reasonably requested by Agent, in each case, in form and substance reasonably satisfactory to Agent.

                    5.10 Lending and Auction Regulatory Matters .

                    (a) Each Credit Party remains in material compliance with all applicable provisions of federal, state, local and foreign laws imposed upon lenders with respect to consumer or commercial lending, usury or other limitations on interest, finance charges or other charges, finance companies, finance company or other lender licensing, consumer or commercial credit disclosure, consumer or commercial credit collection practices, and similar laws and regulations.

                    (b) Sotheby’s, Inc. and each other Credit Party that conducts auctions in the City of New York shall remain in material compliance with, and maintain a valid license under, the City of New York’s Auctioneer Rules (Title 20, Chapter 2, Subchapter 13) and any applicable similar laws of other jurisdictions. Sotheby’s U.K. and each other Credit Party that conducts auctions in the United Kingdom shall remain in material compliance with, and maintain valid licenses under, all laws, regulations and auctioneer’s licensing requirements applicable in the United Kingdom, if any.

                    5.11 Further Assurances .

                    Each Credit Party agrees that it shall and shall cause each other Sotheby Entity to, at such Credit Party’s expense and upon the reasonable request of Agent, duly execute and deliver, or cause to be duly executed and delivered, to Agent such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Agent to carry out more effectively the provisions and purposes of this Agreement and each Loan Document.

                    5.12 Art Loans and Art Inventory .

                    Each Borrower shall (a) in connection with the acquisition of each Work of Art as Art Inventory, conduct appropriate diligence with respect to such Work of Art (including, as applicable, searches of such Work of Art in the Art Loss Register) consistent with past practices, and (b) in connection with each Art Loan made or to be made by it, (i) apply credit standards and loan to collateral value requirements, (ii) conduct appropriate diligence with respect to the

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applicable Work(s) of Art (including, as applicable, searches of such Work(s) of Art in the Art Loss Register), (iii) follow practices with respect to documentation, perfection and protection of security interests and (iv) follow practices with respect to classification of Art Loans as non-accrual, as such standards, requirements and practices are generally applied and followed in the Borrowers’ art lending business prior to the Closing Date.

                    5.13 Money-Laundering and Terrorism Regulatory Matters .

                    (a) Each Sotheby Entity shall remain in compliance in all material respects with all applicable orders, rules and regulations applicable to it, including those issued by the U.S. Department of the Treasury and OFAC pursuant to IEEPA, the PATRIOT Act, other legal requirements relating to sanctions, money laundering or terrorism and any executive orders related thereto.

                    (b) Each Sotheby Entity is advised that, by law, Agent and the Lenders may be obligated to “freeze its account”, either by prohibiting additional Revolving Credit Advances or Letter of Credit Obligations, declining any withdrawal, redemption or transfer request(s) with respect to any deposit account under the control of Agent or the Lenders and/or segregating assets, in compliance with government regulations, and Agent and the Lenders may also be required to report such action to governmental or regulatory authorities, including OFAC.

                    (c) Each Borrower shall maintain an anti-money laundering, counter-terrorist financing and/or economic sanctions program and/or procedures in accordance with all applicable laws, rules and regulations of its own jurisdiction including, without limitation, where applicable, the PATRIOT Act and the Money Laundering Regulations 2007. Each Borrower shall apply its anti-money laundering and counter-terrorist financing program and/or procedures to all Art Loan Debtors and shall take appropriate steps in accordance with the laws of its own jurisdiction to ensure that all required relevant documentation is retained, including identification related to such Art Loan Debtors in accordance with its anti-money laundering, counter-terrorist financing and/or economic sanctions program. Each Borrower shall adopt appropriate policies, procedures and internal controls to be compliant in all material respects with any additional laws, rules or regulations relating to money laundering and/or counter-terrorist financing, including the PATRIOT Act, to which it may become subject.

                    (d) Each Borrower shall take appropriate due diligence efforts to know each Art Loan Debtor to which it shall advance, or commit to advance, Art Loans, including whether such Art Loan Debtor is a Prohibited Person. Each Borrower shall take appropriate due diligence efforts to know if any such Art Loan Debtor is a “Senior Foreign Political Figure” (as defined in the PATRIOT Act) and, to the extent that any investor is a Senior Foreign Political Figure, shall disclose such information to Agent.

                    (e) Each Sotheby Entity will notify or report unusual or suspicious activity to the extent required by the laws or requirements of its own jurisdiction including, where applicable, the PATRIOT Act.

                    (f) Each Sotheby Entity shall deliver to Agent any certification or other evidence requested from time to time by Agent in its sole discretion, confirming such Sotheby

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Entity’s compliance with this Section 5.13 and the representations and warranties made by such Sotheby Entity pursuant to Section 3.25 .

                    5.14 New Subsidiaries .

                    Upon (i) any Person becoming a Subsidiary of any Credit Party or (ii) any Subsidiary of any Credit Party becoming a Domestic Subsidiary or a Foreign Subsidiary organized under the laws of England, (a) if such Person is a Domestic Subsidiary, such Person shall become party to the Domestic Subsidiary Guaranty, the U.S. Security Agreement, the U.S. Pledge Agreement and such further Collateral Documents as Agent shall reasonably request; (b) if such Person is a Foreign Subsidiary organized under the laws of England, such Person shall become party to a Guaranty with respect to the Obligations of the U.K. Borrowers and such Collateral Documents as Agent shall reasonably request; and (c) the outstanding Stock of such Person shall be pledged to Agent, for the benefit of the Secured Parties, pursuant to such Collateral Documents as Agent shall reasonably request; provided , that, (i) so long as SPTC Delaware shall not create, incur, assume or permit to exist any Indebtedness or Guaranteed Indebtedness or any Lien on or with respect to any of its properties or assets (whether now owned or hereafter acquired), SPTC Delaware shall not be required to execute or become a party to any Loan Documents, and (ii) the York Avenue Owner shall not be required to execute or become a party to any Loan Documents.

                    5.15 Immaterial Subsidiaries .

                    Each Immaterial Subsidiary (i) as of the Closing Date, owns assets having a book value of which the Dollar Equivalent is less than $100,000 and (ii) had earnings during the 2008 Fiscal Year of which the Dollar Equivalent was less than $100,000.

                    5.16 York Avenue Transactions .

                    Except as set forth on Disclosure Schedule (5.16) , the York Avenue Lender has no recourse to Parent or any of its Subsidiaries or any assets of Parent or any of its Subsidiaries pursuant to the York Avenue Loan Agreement or any other York Avenue Loan Document.

                    5.17 Auction Guaranties .

                    Each Sotheby Entity shall comply with the provisions of the Auction Guaranty Side Letter.

                    5.18 Data Protection Matters .

                    To the extent and at all times that any Data Protection Laws will be applicable as a result of any Credit Party’s performance hereunder, such Credit Party will be in compliance in all material respects with all such Data Protection Laws including, without limitation, having obtained valid consents where necessary from any Persons whose Personal Data is provided in performance of this Agreement for (a) such Personal Data to be processed for the purposes required by each Credit Party in performance of this Agreement; (b) such Personal Data to be disclosed to Agent or any Lender, or any agent or subcontrator of Agent or any Lender, and to be processed by Agent or any Lender for the purposes required in performance of this Agreement;

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and (c) the transfer of such Personal Data to Agent or any Lender in a country outside of the European Economic Area. The form of any data protection consent shall be subject to prior approval of Agent, who may require such amendments as it may consider necessary in order to comply with Data Protection Laws and who may require, upon reasonable prior notice, such other reasonable actions be taken by each Credit Party, including entering into the European Union’s standard contractual clauses for the transfer of personal data to third countries, to ensure compliance with Data Protection Laws. Each Credit Party shall not, by any act or omission, place Agent or any Lender in breach of any Data Protection Laws.

6. NEGATIVE COVENANTS

                    Each Credit Party jointly and severally agrees as to all Sotheby Entities that from and after the date hereof until the Termination Date:

                    6.1 Mergers, Subsidiaries, Etc .

                    No Sotheby Entity shall directly or indirectly, by operation of law or otherwise, (a) acquire, liquidate or dissolve any Subsidiary or (b) merge with, consolidate with, acquire all or substantially all of the assets or Stock of, or otherwise combine with or acquire, any Person, except that any Sotheby Entity may merge with another Sotheby Entity; provided , that (i) Borrower Representative shall be the survivor of any such merger to which it is a party, (ii) any Borrower shall be the survivor of any such merger with any Sotheby Entity that is not a Borrower and (iii) any Guarantor shall be the survivor of any such merger with any Sotheby Entity that is not a Credit Party; provided , further , that any Sotheby Entity may dissolve or liquidate any Subsidiary thereof that is not a Borrower.

                    6.2 Investments; Loans and Revolving Credit Advances .

                    Except as otherwise expressly permitted by this Section 6 , no Sotheby Entity shall make or permit to exist any investment in, or make, accrue or permit to exist loans or advances of money to, any Person, through the direct or indirect lending of money, holding of securities or otherwise, except that:

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                    6.3 Indebtedness .

                    (a) No Sotheby Entity shall create, incur, assume or permit to exist any Indebtedness, except (without duplication):

                              (i) the Senior Notes;

                              (ii) the Convertible Notes;

                              (iii) obligations (contingent or otherwise) under the Convertible Note Hedge Agreements and the York Avenue Loan Documents;

                              (iv) Indebtedness secured by purchase money security interests and Capital Leases permitted in Section 6.7(e) ;

                              (v) the Loans and the other Obligations;

                              (vi) existing Indebtedness described in Disclosure Schedule (6.3) and refinancings thereof or amendments or modifications thereto that do not have the effect of

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increasing the principal amount thereof or reducing the average life thereof and that are otherwise on terms and conditions no less favorable to any Sotheby Entity, Agent or any Lender, as determined by Agent, than the terms of the Indebtedness being refinanced, amended or modified;

                              (vii) Indebtedness consisting of intercompany loans and advances made by any Sotheby Entity to any other Sotheby Entity (other than any Immaterial Subsidiary); provided , that: (A) in the case of any intercompany loan or advance owing to any Credit Party, from and after the date 120 days after the Closing Date, any Sotheby Entity receiving the proceeds of such loan or advance shall have executed and delivered to the applicable Credit Party a demand note (collectively, the “ Intercompany Notes ”) to evidence any such intercompany Indebtedness owing at any time by such Sotheby Entity, which Intercompany Notes shall be in form and substance reasonably satisfactory to Agent and shall be pledged and delivered to Agent pursuant to the applicable Collateral Document as additional collateral security for the applicable Secured Obligations; (B) each Sotheby Entity shall record all intercompany transactions on its books and records in a manner reasonably satisfactory to Agent; (C) the obligations of each Credit Party under any such intercompany loans and advances shall be subordinated to the Obligations of such Credit Party hereunder and under the other Loan Documents in a manner reasonably satisfactory to Agent; (D) with respect to any intercompany loan or advance made after the Closing Date, at the time any such intercompany loan or advance is made by any Sotheby Entity to any other Sotheby Entity and after giving effect thereto, (i) each such Sotheby Entity shall be Solvent or (ii)(x) such intercompany loan or advance shall be made in the ordinary course of business, (y) if the Sotheby Entity making such intercompany loan or advance is a Credit Party, such Credit Party shall be Solvent and (z) the Sotheby Entity receiving such intercompany loan or advance shall have no Funded Debt (except as permitted hereby) other than intercompany loans or advances outstanding to other Sotheby Entities; and (E) no Default or Event of Default would occur and be continuing after giving effect to any such proposed intercompany loan or advance;

                              (viii) Indebtedness arising in respect of surety bonds, guaranties and letters of credit with respect to obligations of the Foreign Subsidiaries incurred in the ordinary course of business that are not Funded Debt;

                              (ix) Indebtedness arising under Rate Management Transactions; provided , that such Rate Management Transactions are (or were) entered into in the ordinary course of such Sotheby Entity’s business for the purpose of mitigating risks associated with liabilities, commitments, investments, assets, earnings or properties held or reasonably anticipated by such Sotheby Entity and not for purposes of speculation;

                              (x) Indebtedness arising under overdraft credit lines extended to various Sotheby Entities in the ordinary course of business, which indebtedness arising under overdraft credit lines extended to the Credit Parties shall not at any time exceed, in the aggregate at any one time outstanding, the lesser of (A) $15,000,000 and (B) the aggregate amount of overdraft credit lines extended to the Credit Parties at such time; and

                              (xi) Other unsecured Indebtedness in an aggregate principal amount not exceeding $10,000,000 at any one time outstanding.

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                    (b) No Sotheby Entity shall, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Indebtedness prior to its scheduled maturity, other than (i) the Obligations; (ii) Indebtedness secured by a Permitted Encumbrance if the asset securing such Indebtedness has been sold or otherwise disposed of in accordance with Sections 6.8 ; (iii) Indebtedness permitted by Section 6.3(a)(vi) upon any refinancing thereof in accordance with Section 6.3(a)(vi) ; (iv) Indebtedness incurred pursuant to repayment by any Sotheby Entity of intercompany loans and advances outstanding to any Sotheby Entity, (v) so long as (x) no Default or Event of Default has occurred and is continuing or would occur as a result thereof, and (y) Parent shall have provided to Agent prior to the date thereof pro forma financial statements demonstrating that the Fixed Charge Coverage Ratio, as of the end of the most recently completed Fiscal Quarter for which Agent and Lenders have received Financial Statements pursuant hereto, shall be equal to or greater than 1.15 to 1.00 (calculated on a pro forma basis as if such purchase had occurred during such Fiscal Quarter), Indebtedness incurred pursuant to Permitted Convertible Note Transactions or purchases, redemptions, defeasances or prepayments of Senior Notes by Parent; and (vi) so long as no Revolving Loans are outstanding hereunder as of the date of any such transaction, Indebtedness in an aggregate cash amount not to exceed $10,000,000.

                    6.4 Employee Loans and Affiliate Transactions .

                    (a) Except as disclosed in Disclosure Schedule 6.4(a) , no Sotheby Entity shall enter into or be a party to any transaction with any other Sotheby Entity or any Affiliate thereof except in the ordinary course of and pursuant to the reasonable requirements of such Sotheby Entity’s business and, in the case of any transaction with any Affiliate thereof (other than another Sotheby Entity), upon fair and reasonable terms that are no less favorable to such Sotheby Entity than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate of such Sotheby Entity.

                    (b) No Sotheby Entity shall enter into any lending or borrowing transaction with any employees of any Sotheby Entity, except (i) loans to its respective employees in the ordinary course of business consistent with past practices for travel and entertainment expenses, relocation costs and similar purposes and stock option financing, up to a maximum of a Dollar Equivalent of $1,500,000 in the aggregate at any one time outstanding, and (ii) other loans to its respective employees, up to a maximum of a Dollar Equivalent of $1,500,000 in the aggregate at any one time outstanding.

                    6.5 Capital Structure and Business .

                    If all or part of a Sotheby Entity’s Stock is pledged to Agent, that Sotheby Entity shall not issue additional Stock unless, upon issuance thereof, such Stock is immediately pledged (and any related security certificates delivered) by the holder thereof to Agent pursuant to the applicable Collateral Documents. No Sotheby Entity shall amend its charter or bylaws in a manner that would adversely affect Agent or Lenders or such Sotheby Entity’s duty or ability to repay the Obligations. No Sotheby Entity shall engage in any business other than the businesses currently engaged in by it or businesses reasonably related thereto.

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                    6.6 Guaranteed Indebtedness .

                    No Sotheby Entity shall create, incur, assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement of instruments or items of payment for deposit to the general account of any Sotheby Entity, and (b) for Guaranteed Indebtedness incurred for the benefit of any other Sotheby Entity if the primary obligation with respect thereto is not prohibited by this Agreement.

                    6.7 Liens .

                    No Sotheby Entity shall create, incur, assume or permit to exist any Lien on or with respect to its Accounts or any of its other properties or assets (whether now owned or hereafter acquired) except for:

provided , that no U.K. Credit Party shall create, incur, assume or permit to exist any Lien on or with respect to its Real Estate other than Permitted Encumbrances described in clauses (a) , (g) or (h) of the definition thereof. In addition, no Credit Party shall become a party to any agreement, note, indenture or instrument, or take any other action after the Closing Date that would prohibit the creation of a Lien on any of its properties or other assets in favor of Agent, on behalf of itself and the other Secured Parties, as additional collateral for the applicable Secured Obligations, except operating leases, Capital Leases, Licenses or agreements relating to purchase money Indebtedness which prohibit Liens upon the assets that are subject thereto.

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                    6.8 Sale of Stock and Assets .

                    No Sotheby Entity shall sell, transfer, convey, assign or otherwise dispose of any of its properties or other assets, including the Stock of any of its Subsidiaries (whether in a public or a private offering or otherwise) or any of its Accounts, other than (a) the sale of Inventory in the ordinary course of business, (b) the sale or other disposition by a Sotheby Entity of Equipment or Fixtures that are obsolete or no longer used or useful in such Sotheby Entity’s business and having a book value not exceeding the Dollar Equivalent of $1,000,000 in the aggregate in any Fiscal Year; (c) the sale or other disposition of other Equipment and Fixtures having a book value not exceeding the Dollar Equivalent of $2,500,000 in the aggregate in any Fiscal Year; (d) the sale or other disposition of any asset by a Credit Party to any other Credit Party; (e) the sale or other disposition of any asset by any Sotheby Entity that is not a Credit Party to any other Sotheby Entity; and (f) subject to Agent’s prior written approval of the sale documentation thereof and the completion of such sale on or prior to March 31, 2010, the sale of all or substantially all of the assets or Stock of Sotheby’s Australia Pty. Ltd. for an aggregate cash amount not less than the Dollar Equivalent of $1,500,000 (the “ Australia Sale ”).

                    6.9 ERISA .

                    No Sotheby Entity shall, or shall cause or permit any ERISA Affiliate to, cause or permit to occur (i) an event that could result in the imposition of a Lien under Section 430 of the IRC or Section 303 or 4068 of ERISA or (ii) an ERISA Event to the extent such ERISA Event would reasonably be expected to result in taxes, penalties and other liabilities in an aggregate amount in excess of $2,500,000 in the aggregate.

                    6.10 Financial Covenants .

                    Borrowers shall not breach or fail to comply with any of the Financial Covenants.

                    6.11 Hazardous Materials .

                    No Sotheby Entity shall cause or permit a Release of any Hazardous Material on, at, in, under, above, to or from any of the Real Estate where such Release would (a) violate in any respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or Environmental Permits, except as could not reasonably be expected to have a Material Adverse Effect or (b) otherwise materially adversely impact the value or marketability of any of the Real Estate or any of the Collateral.

                    6.12 Sale Leasebacks .

                    No Sotheby Entity shall engage in any sale leaseback, synthetic lease or similar transaction involving any of its assets.

                    6.13 Restricted Payments .

                    No Sotheby Entity shall make any Restricted Payment, except:

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                    6.14 Change of Corporate Name, State of Incorporation or Location; Change of Fiscal Year .

                    No U.S. Credit Party shall (a) change its name as it appears in official filings in the state of its incorporation or other organization, (b) change its chief executive office or principal place of business or the location of its records concerning the Collateral, (c) change the type of entity that it is, (d) change its organization identification number, if any, issued by its state of incorporation or other organization, or (e) change its jurisdiction of incorporation or

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organization or incorporate or organize in any additional jurisdictions, in each case without at least thirty (30) days prior written notice to Agent and after Agent’s written acknowledgment that any reasonable action requested by Agent in connection therewith, including to continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been completed or taken; provided , that any such new location shall be in the continental United States. No Sotheby Entity shall change its Fiscal Year.

                    6.15 No Impairment of Intercompany Transfers .

      &