Exhibit 10.6
MORGANS HOTEL GROUP CO.
2011 OUTPERFORMANCE PLAN AWARD AGREEMENT
2011 OUTPERFORMANCE PLAN AWARD AGREEMENT made as of the date set forth on
Schedule A hereto by and among MORGANS HOTEL GROUP CO., a Delaware corporation
(the “Company”), MORGANS GROUP LLC, a Delaware limited liability company (the
“Operating Company”), and the party listed on Schedule A (the “Grantee”).
RECITALS
A. The Grantee is a senior management employee of the Company and provides
services to the Operating Company.
B. The Compensation Committee (the “Committee”) of the Board of Directors of the
Company (the “Board”) approved this and other 2011 outperformance plan (“2011
OPP”) awards pursuant to the Company’s Amended and Restated 2007 Omnibus
Incentive Plan (the “Incentive Plan”) to provide certain senior management
employees of the Company, including the Grantee, in connection with their
employment with the incentive compensation described in this Award Agreement
(this “Agreement”) and thereby provide additional incentive for them to promote
the progress and success of the business of the Company and its Affiliates. 2011
OPP awards were approved by the Committee pursuant to authority delegated to it
by the Board, including authority to make grants of stock-based performance
incentive awards. This Agreement evidences one award (this “Award”) in a series
of 2011 OPP awards and is subject to the terms and conditions set forth herein.
C. The Committee, effective as of the grant date specified in Schedule A hereto,
awarded to the Grantee the 2011 OPP participation percentage in the Total
Outperformance Pool (as defined herein), as set forth in Schedule A.
NOW, THEREFORE, the Company, the Operating Company, and the Grantee agree as
follows:
1. Administration.
This Award and all other 2011 OPP awards shall be administered by the Committee,
which in the administration of the 2011 OPP awards and this Award shall have all
the powers and authority it has in the administration of the Incentive Plan as
set forth in the Incentive Plan, but subject to this Agreement ; provided that
all powers of the Committee hereunder can be exercised by the full Board if the
Board so elects. The Committee, in its sole and absolute discretion, may provide
for lapse of forfeiture restrictions and/or accelerated vesting under this
Agreement of some or all of the Grantee’s unvested Award Participation that has
not previously been forfeited.
2. Definitions.
Capitalized terms used herein shall have the meanings set forth below:
“Accelerated Payment Change of Control” means a Transactional Change of Control
or a Change of Control within the meaning of subparagraph (iv) or (v) thereof.

 

 

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“Additional Share Baseline Value” means, with respect to each Additional Share,
the gross proceeds received by the Company or the Operating Company upon the
issuance of such Additional Share, which amount shall be deemed to equal, as
applicable:
(A) if such Additional Share is issued for cash in a public offering or private
placement, the gross price to the public or to the purchaser(s);
(B) if such Additional Share is issued in exchange for assets or securities of
another Person or upon the acquisition of another Person, the cash value imputed
to such Additional Share for purposes of such transaction by the parties
thereto, as determined in good faith by the Committee, or, if no such value was
imputed, the mean between the high and low sale prices of a Common Share on the
national securities exchange or established securities market on which the
Common Shares are listed on the date of issuance of such Additional Share, or,
if no sale of Common Shares is reported on such date, on the next preceding day
on which any sale shall have been reported; and
(C) if such Additional Share is issued upon conversion or exchange of equity or
debt securities of the Company, the Operating Company or any other Subsidiary of
the Company, which securities were not previously counted as either Initial
Shares or Additional Shares, the conversion or exchange price in effect as of
the date of conversion or exchange pursuant to the terms of the security being
exchanged or converted.
“Additional Shares” means, as of a particular date of determination, the number
of Common Shares, other than those held by the Company, to the extent such
Common Shares are issued after the Effective Date and on or before such date of
determination in a capital raising transaction, in exchange for assets or
securities or upon the acquisition of another Person, upon conversion or
exchange of equity or debt securities of the Company or any Subsidiary of the
Company, which securities were not previously counted as either Initial Shares
or Additional Shares, or through the reinvestment of dividends or other
distributions.
For the avoidance of doubt, “Additional Shares” shall exclude, without
limitation:
(i) Common Shares issued after the Effective Date upon exercise of stock options
or upon the exchange (directly or indirectly) of LTIP Units or other Units
issued to employees, non-employee directors, consultants, advisors or other
persons or entities as incentive or other compensation,
(ii) Common Shares awarded after the Effective Date to employees, non-employee
directors, consultants, advisors or other persons or entities as incentive or
other compensation for services provided or to be provided to the Company or any
of its Affiliates,
(iii) LTIP Units or other Units awarded after the Effective Date to employees,
non-employee directors, consultants, advisors or other persons or entities as
incentive or other compensation, and
(iv) any securities included in “Initial Shares.”
“Affiliate” means, with respect to the Company, any company or other trade or
business that controls, is controlled by or is under common control with the
Company within the meaning of Rule 405 of Regulation C under the Securities Act,
including, without limitation, any Subsidiary.

 

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“Award Common Units” means the units of membership interests in the Operating
Company referred to as “Membership Units” in the LLC Agreement into which the
Award LTIP Units may be converted in accordance with the terms of the LLC
Agreement.
“Award LTIP Units” means a series of LTIP Units established by the Operating
Company, with the rights, privileges, and preferences set forth in the
designations thereof included in an amendment to the LLC Agreement that may be
adopted hereafter by the Managing Member of the Operating Company in accordance
with Section 8(a), which designations shall be in the form set forth on
Exhibit A attached hereto.
“Award Participation” has the meaning set forth in Section 3.
“Baseline Value” means $8.87.
“Buyback Shares” means (without double-counting), as of a particular date of
determination, (A) Common Shares or (B) the Shares Amount for Units (assuming
that such Units were converted, exercised, exchanged or redeemed for Membership
Units as of such date at the applicable conversion, exercise, exchange or
redemption rate (or rate deemed applicable by the Committee if there is no such
stated rate) and such Common Units were then tendered to the Operating Company
for redemption pursuant to Section 4.2(e)(1) of the LLC Agreement as of such
date), other than Units held by the Company, in the case of each (A) and (B), to
the extent repurchased by the Company after the Effective Date and on or before
such date of determination in a stock buyback transaction or in a redemption of
Units for cash pursuant to Section 4.2(e)(1) of the LLC Agreement.
“Cause” means: (A) if the Grantee is or was a party to a Service Agreement prior
to such termination and “Cause” is defined therein, then “Cause” shall have the
meaning set forth in such definition, or (B) if the Grantee is not and was not
party to a Service Agreement prior to such termination or the Grantee’s Service
Agreement does not define “Cause” or a substantially equivalent term, then
“Cause” shall mean:
(i) the Grantee’s willful and continued failure to substantially perform his
duties with the Company (other than any such failure resulting from the
Grantee’s incapacity due to physical or mental illness or any such failure after
his issuance of a notice of termination for Good Reason), after a written demand
for substantial performance is delivered to the Grantee by the Board, which
demand specifically identifies the manner in which the Board believes that the
Grantee has not substantially performed his duties;
(ii) a material breach by Grantee of his Service Agreement;
(iii) the Grantee’s willful commission of an act of fraud, theft or dishonesty
resulting in economic, financial or material reputational injury to the Company;
(iv) the Grantee’s conviction of, or entry by the Grantee of a guilty or no
contest plea to, the commission of a felony; or
(v) the Grantee willfully engages in other misconduct materially injurious to
the Company.

 

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For purposes of this provision, no act or omission on the part of the Grantee
shall be considered “willful” unless it is done or omitted in bad faith or
without reasonable belief that the act or omission was in the best interests of
the Company. Any act or omission based upon a resolution duly adopted by the
Board or advice of counsel for the Company shall be conclusively presumed to
have been done or omitted in good faith and in the best interests of the
Company. The cessation of employment of the Grantee shall not be deemed to be
for Cause unless and until there shall have been delivered to the Grantee a copy
of a resolution duly adopted by the majority of the Board (excluding the
Grantee, if the Grantee is then a member of the Board) at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Grantee and the Grantee is given an opportunity, together with counsel, to be
heard before the Board) finding that, in the good faith opinion of the Board,
the Grantee is guilty of the conduct giving rise to Cause for termination, and
specifying the particulars thereof in detail.
“Change of Control” means:

  (i)   individuals who, on the Effective Date, constitute the Board (the
“Incumbent Directors”) cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director subsequent to the
Effective Date whose election or nomination for election was approved by a vote
of at least two-thirds of the Incumbent Directors then on the Board (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual initially
elected or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies by or on behalf of any person
other than the Board shall be an Incumbent Director; or

  (ii)   any “person” (as such term is defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
is or becomes, after the Effective Date, a “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the Company’s
then outstanding securities eligible to vote for the election of the Board (the
“Company Voting Securities”); provided, however, that an event described in this
paragraph (ii) shall not be deemed to be a Change of Control if any of following
becomes such a beneficial owner: (A) the Company or any majority-owned
subsidiary of the Company (provided that this exclusion applies solely to the
ownership levels of the Company or the majority-owned subsidiary), (B) any
tax-qualified, broad-based employee benefit plan sponsored or maintained by the
Company or any such majority-owned subsidiary, or (C) any underwriter
temporarily holding securities pursuant to an offering of such securities; or

  (iii)   the consummation of a merger, consolidation, share exchange or similar
form of transaction involving the Company or any of its subsidiaries, or the
sale of all or substantially all of the Company’s assets (a “Business
Transaction”), unless immediately following such Business Transaction (A) more
than 50% of the total voting power of the entity resulting from such Business
Transaction or the entity acquiring the Company’s assets in such Business
Transaction (the “Surviving Corporation”) is beneficially owned, directly or
indirectly, by the Company’s shareholders immediately prior to any such Business
Transaction, and (B) no person (other than the persons set forth in clauses (A),
(B), or (C) of paragraph (ii) above or any tax-qualified, broad-based employee
benefit plan of the Surviving Corporation or its affiliates) beneficially owns,
directly or indirectly, 30% or more of the total voting power of the Surviving
Corporation; or

 

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  (iv)   Board approval of a liquidation or dissolution of the Company, unless
the voting common equity interests of an ongoing entity (other than a
liquidating trust) are beneficially owned, directly or indirectly, by the
Company’s shareholders in substantially the same proportions as such
shareholders owned the Company’s outstanding voting common equity interests
immediately prior to such liquidation and such ongoing entity assumes all
existing obligations of the Company to the Grantee under this Agreement; or

  (v)   Approval by the shareholders of the Company or the Managing Member
and/or Non-Managing Members of the Operating Company of a dissolution or
liquidation of the Operating Company and satisfaction or effective waiver of all
material contingencies to such liquidation or dissolution.

“CoC Fraction” means, for application pursuant to the proviso clause in the
definition of “Final Baseline,” the number of calendar days that have elapsed
since the Effective Date to and including the date as of which a Change of
Control is consummated (or, with respect to a Transactional Change of Control,
the date of the Public Announcement of such Transactional Change of Control),
divided by 1,096.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Shares” means shares of the Company’s common stock, par value $0.01 per
share.
“Common Share Price” means, as of a particular date, the average of the Fair
Market Value of one Common Share over the thirty (30) consecutive trading days
ending on, and including, such date (or, if such date is not a trading day, the
most recent trading day immediately preceding such date); provided, however,
that if such date is the date of the Public Announcement of a Transactional
Change of Control, the Common Share Price as of such date shall be equal to the
fair market value, as determined by the Committee, of the total consideration
payable in the transaction that ultimately results in the Transactional Change
of Control for one Common Share.
“Continuous Service” means the continuous service, without interruption or
termination, as a an employee or director of Company or an Affiliate. Continuous
Service shall not be considered interrupted in the case of (among other things)
—
(A) any approved leave of absence,
(B) transfers among the Company and any Affiliate, or any successor, in any
capacity of director or employee, or
(C) any change in status as long as the individual remains in the service of the
Company or any Affiliate of the Company in the capacity of employee or director.
An approved leave of absence shall include sick leave, military leave, or any
other authorized personal leave.

 

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“Disability” means:
(A) if the Grantee is or was a party to a Service Agreement prior to the
applicable event, and “Disability” is defined therein, then “Disability” shall
have the meaning set forth in such definition, or
(B) if the Grantee is not and was not a party to a Service Agreement prior to
such event or the Grantee’s Service Agreement does not define “Disability” or a
substantially equivalent term, then “Disability” shall mean a disability which
renders the Grantee incapable of performing all of his or her material duties
for 180 business days during any consecutive twelve month period as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company and acceptable to the Grantee
or the Grantee’s legal representative or by the insurance company which insures
the Company’s long-term disability plan in which the Grantee is eligible to
participate.
“Effective Date” means March 20, 2011.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fair Market Value” means, as of any given date, the fair market value of a
security determined by the Committee using any reasonable method and in good
faith (such determination will be made in a manner that satisfies Section 409A
of the Code and in good-faith as required by Section 422(c)(1) of the Code);
provided that, with respect to a Common Share, “Fair Market Value” means the
value of such Common Share determined as follows: (A) if on the determination
date the Common Shares are listed on the New York Stock Exchange, The NASDAQ
Stock Market, Inc. or another national securities exchange or is publicly traded
on an established securities market, the Fair Market Value of a Common Share
shall be the closing price of the Common Shares on such exchange or in such
market (if there is more than one such exchange or market, the Committee shall
determine the appropriate exchange or market) on the determination date (or if
there is no such reported closing price, the Fair Market Value shall be the mean
between the high and low sale prices on such trading day) or, if no sale of
Common Shares is reported for such trading day, on the next preceding day on
which any sale shall have been reported; or (B) if the Common Shares are not
listed on such an exchange, quoted on such system or traded on such a market,
Fair Market Value of the Common Share shall be the value of the Common Shares as
determined by the Committee in good faith in a manner consistent with
Section 409A of the Code.
“Family Member” means a person who is a spouse, former spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or
sister-in-law, including adoptive relationships, of the Grantee, any person
sharing the Grantee’s household (other than a tenant or employee), a trust in
which any one or more of these persons have more than fifty percent of the
beneficial interest, a foundation in which any one or more of these persons (or
the Grantee) control the management of assets, and any other entity in which one
or more of these persons (or the Grantee) own more than fifty percent of the
voting interests.

 

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“Final Baseline” means, as of the Final Valuation Date, an amount representing
(without double-counting) the sum of:
(A) the Baseline Value multiplied by:
(i) the difference between (x) the Initial Shares and (y) all Buyback Shares
repurchased or redeemed between the Effective Date and the Final Valuation Date,
and then multiplied by
(ii) the sum of one hundred percent (100%) plus the Target Return Percentage;
plus
(B) with respect to each Additional Share issued after the Effective Date, the
Additional Share Baseline Value of such Additional Share, multiplied by the sum
of (i) one hundred percent (100%) plus (ii) the product of the Target Return
Percentage multiplied by a fraction (x) the numerator of which is the number of
days from the issuance of such Additional Share to and including the Final
Valuation Date and (y) the denominator of which is the number of days from and
including the Effective Date to and including the Final Valuation Date; plus
(C) with respect to each Buyback Share repurchased or redeemed after the
Effective Date, the Baseline Value, multiplied by the sum of (i) one hundred
percent (100%) plus (ii) the product of the Target Return Percentage multiplied
by a fraction (x) the numerator of which is the number of days from the
Effective Date to and including the date such Buyback Share was repurchased or
redeemed and (y) the denominator of which is the number of days from and
including the Effective Date to and including the Final Valuation Date;
provided that if the Final Valuation Date occurs prior to the third anniversary
of the Effective Date as a result of an Accelerated Payment Change of Control,
then for purposes of this definition in connection with the calculation of the
Total Outperformance Pool as of the Final Valuation Date, then the Target Return
Percentage to be used in such calculation shall be reduced to a percentage equal
to thirty percent (30%) multiplied by the CoC Fraction. If the Company
consummates multiple issuances of Additional Shares and/or repurchases of
Buyback Shares during any one monthly or quarterly period, such that it would be
impractical to track the precise issuance date and issuance price of each
individual Additional Share and/or repurchase or redemption date of each
individual Buyback Share, the Committee may in its good faith discretion approve
timing and calculation conventions (such as net-at-end-of-period or
average-during-the-period) reasonably designed to simplify the administration of
this Award.
“Final Valuation Date” means the earliest of: (A) the third anniversary of the
Effective Date; or (B) in the event of an Accelerated Payment Change of Control
that is not a Transactional Change of Control, the date on which such Change of
Control shall occur; or (C) in the event of a Transactional Change of Control
and subject to the consummation of such Transactional Change of Control, the
date of the Public Announcement of such Transactional Change of Control;
provided that if the Public Announcement occurs after 4pm New York City time or
otherwise so late in the trading day that the market cannot meaningfully react
on such day, then the Final Valuation Date shall mean the following trading day.

 

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“Good Reason” means: (A) if the Grantee is or was a party to a Service Agreement
prior to such termination, and “Good Reason” is defined therein, then “Good
Reason” shall have the meaning set forth in such Service Agreement, or (B) if
the Grantee is not and was not party to a Service Agreement prior to such
termination or the Grantee’s Service Agreement does not define “Good Reason” or
a substantially equivalent term, so long as the Grantee terminates his or her
employment within thirty (30) days after the Grantee has actual knowledge of the
occurrence, without the written consent of the Grantee, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Grantee to the Company, then “Good Reason” shall mean:
(i) the assignment to the Grantee of duties materially inconsistent with the
Grantee’s title, position, status, reporting relationships, authority, duties or
responsibilities as contemplated in his Service Agreement, or any other action
by the Company which results in a material diminution in the Grantee’s title,
position, status, reporting relationships, authority, duties or
responsibilities, other than insubstantial or inadvertent actions not taken in
bad faith which are remedied by the Company within fifteen (15) business days
after receipt of notice thereof given by the Grantee;
(ii) any material failure by the Company to comply with any of the provisions of
the Service Agreement, other than insubstantial or inadvertent failures not in
bad faith which are remedied by the Company promptly after receipt of notice
thereof given by the Grantee;
(iii) any failure by the Company to obtain the assumption of his Service
Agreement by a successor to all or substantially all of the business or assets
of the Company; or
(iv) if his Service Agreement provides that the Executive will be nominated for
election as a director of the Company, any failure by the Board to nominate the
Executive for election as a director of the Company in accordance with the
Service Agreement, or any failure of the Executive to be elected to be a member
of the Board; or
(v) any requirement that the Grantee’s principal place of employment be at a
location more than 50 miles from his principal place of employment on the date
of this Agreement, resulting in a material increase in distance from the
Grantee’s residence to his new place of employment;
“Initial Shares” means 32,642,795 Common Shares, which includes: (A) 30,311,503
Common Shares outstanding as of the Effective Date (other than currently
unvested restricted Common Shares previously granted to employees or other
persons or entities in exchange for services provided to the Company); plus
(B) 954,065 Common Shares representing the Shares Amount for all of the
Membership Units (other than LTIP Units and excluding Membership Units held by
the Company) outstanding as of the Effective Date assuming that all of such
Membership Units were tendered to the Operating Company for redemption pursuant
to Section4.2(e) of the LLC Agreement as of such date; plus (C) 1,377,227 Common
Shares representing the Shares Amount for all of the Membership Units into which
all LTIP Units outstanding as of the Effective Date could be converted without
regard to the book capital account associated with them (but only to the extent
such LTIP Units are currently vested), assuming that all of such Membership
Units were tendered to the Operating Company for redemption pursuant to
Section 4.2(e) of the LLC Agreement as of such date..
For the avoidance of doubt, Initial Shares (i) includes (x) currently vested
Common Shares and (y) currently vested LTIP Units previously granted to
employees or other persons or entities in exchange for services provided to the
Company, and (ii) excludes (x) all Common Shares issuable upon exercise of stock
options or upon the exchange (directly or indirectly) of unvested LTIP Units or
other unvested Units issued to employees, non-employee directors, consultants,
advisors or other persons or entities as incentive compensation, and
(y) currently unvested restricted Common Shares previously granted to employees,
non-employee directors, consultants, advisors or other persons or entities in
exchange for services provided to the Company.
“LLC Agreement” means the Amended and Restated Limited Liability Company
Agreement of the Operating Company, dated as of February 17, 2006, among the
Company, as managing member, and the non-managing members who are parties
thereto, as amended from time to time.
“LTIP Units” means LTIP Units, as such term is defined in the LLC Agreement.
“Membership Units” has the meaning set forth in the LLC Agreement.

 

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“Partial Service Factor” means a factor carried out to the sixth decimal to be
used in calculating the Grantee’s adjusted Participation Amount pursuant to
Section 4(b)(ii) hereof in the event of a Qualified Termination of the Grantee’s
Continuous Service prior to the Final Valuation Date or pursuant to Section 4(e)
in the event of a termination of the Grantee’s Continuous Service by reason of
death or Disability prior to the Final Valuation Date, determined as follows:
the number of calendar days that have elapsed since the Effective Date to and
including the effective date of such Qualified Termination or the date of death
or Disability, divided by 1,096; provided, however, that if, after the effective
date of such Qualified Termination or the date of death or Disability and before
the third anniversary of the Effective Date, an Accelerated Payment Change of
Control occurs, then there shall be subtracted from the foregoing denominator
(1,096) a number of days equal to the days that would elapse between the date as
of which the Accelerated Payment Change of Control is consummated (or, with
respect to a Transactional Change of Control, the date of the Public
Announcement of the Transactional Change of Control) and the third anniversary
of the Effective Date.
“Participation Amount” has the meaning set forth in Section 3.
“Participation Percentage” means the percentage (of the Total Outperformance
Pool) set forth opposite such term on Schedule A hereto
“Person” means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization, other
entity or “group” (as defined in the Exchange Act).
“Public Announcement” means, with respect to a Transactional Change of Control,
the earliest press release, filing with the SEC or other publicly available or
widely disseminated communication issued by the Company or another Person who is
a party to such transaction which discloses the consideration payable in and
other material terms of the transaction that ultimately results in the
Transactional Change of Control; provided, however, that if such consideration
is subsequently increased or decreased, then the term “Public Announcement”
shall be deemed to refer to the most recent such press release, filing or
communication disclosing a change in consideration whereby the final
consideration and material terms of the transaction that ultimately results in
the Transactional Change of Control are announced. For the avoidance of doubt,
the foregoing definition is intended to provide the Committee in the application
of the proviso clause in the definition of “Common Share Price” with the
information required to determine the fair market value of the consideration
payable in the transaction that ultimately results in the Transactional Change
of Control as of the earliest time when such information is publicly
disseminated, particularly if the transaction consists of an unsolicited tender
offer or a contested business combination where the terms of the transaction
change over time.
“Qualified Termination” has the meaning set forth in Section 4.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.

 

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“Service Agreement” means, as of a particular date, any employment, consulting
or similar service agreement then in effect between the Grantee, on the one
hand, and the Company or one of its Affiliates, on the other hand, as amended or
supplemented through such date, provided that, if no such agreement is then in
effect, “Service Agreement” shall mean any employment, consulting or similar
service agreement most recently in effect (on or after the Effective Date) prior
to such date, as amended or supplemented, between the Grantee, on the one hand,
and the Company or one of its Affiliates, on the other hand.
“Shares Amount” has the meaning set forth in the LLC Agreement.
“Subsidiary” means any “subsidiary corporation” of the Company within the
meaning of Section 424(f) of the Code.
“Target Return Percentage” means thirty percent (30%), representing a compound
annual growth rate of approximately nine percent (9%) per annum over a
three-year period, using annual compounding, except as otherwise defined for
purposes of the definition of Final Baseline in certain circumstances, as
described in the proviso clause of such definition.
“Total Outperformance Pool” means, as of the Final Valuation Date, a dollar
amount calculated as follows: (A) subtract the Final Baseline from the Total
Return, in each case as of the Final Valuation Date and (B) multiply the
resulting amount by ten percent (10%); provided that if the resulting amount is
a negative number, then the Total Outperformance Pool shall be zero.
“Total Return” means (without double-counting), as of the Final Valuation Date,
an amount equal to the sum of (A) the Total Shares as of such date of
determination multiplied by the Common Share Price as of such date, plus (B) an
amount equal to the sum of the total dividends and other distributions actually
declared between the Effective Date and the Final Valuation Date (excluding
dividends and distributions paid in the form of additional Common Shares) so
long as the “ex-dividend” date with respect thereto falls prior to the Final
Valuation Date, in respect of Common Shares (it being understood, for the
avoidance of doubt, that such total dividends and distributions shall be
calculated by multiplying the amount of each per share dividend or distribution
declared by the actual number of securities outstanding as of each record date
with respect to the applicable dividend or distribution payment date).
“Total Shares” means (without double-counting), as of the Final Valuation Date,
the sum of: (A) the Initial Shares, minus (B) all Buyback Shares repurchased or
redeemed between the Effective Date and the Final Valuation Date, plus (C) all
Additional Shares issued between the Effective Date and the Final Valuation
Date.
“Transactional Change of Control” means (A) a Change of Control described in
clause (ii) of the definition thereof where the “person” or “group” makes a
tender offer for Common Shares, or (B) a Change of Control described in clause
(iii) of the definition thereof; provided that if the applicable definition of
“Change of Control” (or similar term) in the applicable Service Agreement does
not track such clauses (ii) or (iii), then the term “Transactional Change of
Control” shall mean a Change of Control meeting the substantive criteria set
forth in such clauses, as reasonably determined in good faith by the Committee.
“Transfer” has the meaning set forth in Section 6.

 

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“Units” means all Membership Units that are eligible for the Redemption Right
(as defined in the LLC Agreement) and any other Membership Units, including LTIP
Units, with economic attributes substantially similar to such Membership Units
as determined by the Committee that are outstanding or are issuable upon the
conversion, exercise, exchange or redemption of any securities of any kind
convertible, exercisable, exchangeable or redeemable for Membership Units.
3. Outperformance Award; Vesting; Change of Control.
(a) The Operating Company hereby grants to the Grantee this Award consisting of
the Participation Percentage set forth on Schedule A hereto (the “Award
Participation”), which (A) will be subject to forfeiture to the extent provided
in this Section 3 and (B) will be subject to vesting as provided below in this
Section 3(a) and in Section 3(d) and Section 4. The Award will be made in the
form of Award LTIP Units as provided in Section 8, subject to the Company having
received confirmation that it is permitted under applicable stock exchange
listing rules to issue Award LTIP Units, on the terms contemplated herein, under
the Incentive Plan. The Company will use commercially reasonable efforts to
obtain such confirmation within 90 days following the Effective Date. If the
Company does not receive such confirmation within 90 days following the
Effective Date, the Company and the Operating Company shall amend this Award
Agreement to provide for an Award that is settled by a cash payment by the
Operating Company to Grantee equal to his Participation Amount within 45 days
following the Final Valuation Date. In the event Grantee receives Award LTIP
Units pursuant hereto, references herein to Grantee’s Award Participation shall
refer to Grantee’s Award LTIP Units and the provisions of Section 8 shall apply
in lieu of specified provisions of this Award Agreement. At any time prior to
the Final Valuation Date, the Committee may grant additional 2011 OPP awards
with such Participation Percentages (up to a total of 100% for all 2011
Participation Percentages granted or reserved) set forth therein as the
Committee may determine, in its sole discretion, The Award Participation shall
vest (i) on the Final Valuation Date if the Continuous Service of the Grantee
continues to that date or (ii) in accordance with Section 3(d), 4(b) and 4(d)
hereof.
(b) As soon as practicable following the Final Valuation Date, but as of the
Final Valuation Date, the Committee will:
(i) determine the Total Outperformance Pool (if any);
(ii) multiply (x) the Total Outperformance Pool calculated as of the Final
Valuation Date by (y) the Grantee’s Participation Percentage as of the Final
Valuation Date; and
(iii) if applicable (without double-counting), multiply the amount determined in
clause (ii) by the Partial Service Factor or the CoC Fraction.
The resulting amount is hereafter referred to as the “Participation Amount.” The
Committee will notify Grantee of his Participation Amount (if any) promptly
following the determination thereof. If Grantee has received his Award in the
form of Award LTIP Units, Section 8(b) will apply in lieu of the remainder of
this Section 3(b). If this Award Agreement has been amended, as provided in
Section 3(a), to provide for a payment in cash such notice will state whether
the Committee has elected to cause the Company to pay the Participation Amount
in cash or through the issuance of fully vested shares under one of the
Company’s equity incentive compensation plans, subject to compliance with
applicable laws and stock exchange listing requirements, or through a
combination of cash and shares. If the Participation Amount is to be paid using
shares, the shares will be valued at the Common Share Price as of the Final
Valuation Date and will be issued under the Incentive Plan and be registered on
a Form S-8. The Company shall pay Grantee’s Participation Amount within 45 days
following the Final Valuation Date.

 

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(c) Any Award Participation that does not become vested pursuant to
Section 3(a), Section 3(d), or Section 4 hereof shall, without payment of any
consideration by the Company, automatically and without notice be forfeited and
be and become null and void upon the termination of the Continuous Service of
Grantee prior to the Final Valuation Date (other than by reason of a Qualified
Termination, death or Disability), and neither the Grantee nor any of his or her
successors, heirs, assigns, or personal representatives will thereafter have any
further rights or interests in such unvested Award Participation.
(d) If there is a Change of Control, Grantee’s Award Participation shall vest
immediately and automatically upon the occurrence of such Change of Control.
(e) In the event of a Change of Control, the Committee will make any
determinations and certifications required by this Agreement and any provisions
necessary with respect to the lapse of forfeiture restrictions and/or
acceleration of vesting of this Award within a period of time that enables the
Company to take any action or make any deliveries or payments it is obligated to
make hereunder not later than the date of consummation of the Change of Control.
For avoidance of doubt, in the event of a Change of Control, the performance of
all calculations and actions pursuant to Section 3(b) hereof shall be
conditioned upon the final consummation of such Change of Control.
4. Termination of Grantee’s Continuous Service; Death and Disability.
(a) If the Grantee is or was a party to a Service Agreement and his or her
Continuous Service terminates, the provisions of Sections 4(b), 4(c), 4(d), and
4(e), hereof shall govern the treatment of the Grantee’s Award Participation
exclusively, unless the Service Agreement contains provisions that expressly
refer to this Section 4(a) and provides that those provisions of the Service
Agreement shall instead govern the treatment of the Grantee’s Award
Participation upon such termination. The foregoing sentence will be deemed an
amendment to any applicable Service Agreement to the extent required to apply
its terms consistently with this Section 4, such that, by way of illustration,
any provisions of the Service Agreement with respect to accelerated vesting or
payout or the lapse of forfeiture restrictions relating to the Grantee’s
incentive or other compensation awards in the event of certain types of
termination of the Grantee’s Continuous Service with the Company (such as, for
example, termination at the end of the term, termination without Cause by the
employer or termination for Good Reason by the employee) shall not be
interpreted as requiring that any calculations set forth in Section 3 hereof be
performed, or vesting occur with respect to this Award other than as
specifically provided in this Section 4.
(b) In the event of termination of the Grantee’s Continuous Service by (A) the
Company without Cause or (B) the Grantee for Good Reason (each a “Qualified
Termination”) prior to the Final Valuation Date, then the Grantee will not
forfeit the Award Participation upon such termination, but the following
provisions of this Section 4(b) shall modify the calculations required to
determine the Participation Amount and/or the vesting of the Award
Participation, as applicable, with respect to the Grantee only:
(i) the calculations provided in Section 3(b) hereof shall be performed as of
the Final Valuation Date, as if the Qualified Termination had not occurred;
(ii) the Participation Amount calculated pursuant to Section 3(b) shall be
multiplied by the applicable Partial Service Factor; and

 

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(iii) the Grantee’s Participation Amount as adjusted pursuant to Section
4(b)(ii) above shall no longer be subject to forfeiture pursuant to Section 3(c)
hereof; provided that, notwithstanding that no Continuous Service requirement
pursuant to Section 3(c) hereof will apply to the Grantee after the effective
date of a Qualified Termination, the Grantee will not have the right to Transfer
(as defined in Section 6 hereof) his or her Award Participation or request the
redemption of any Award Common Units until such dates as of which his or her
Participation Amount, as adjusted pursuant to Section 4(b)(ii) above, would have
become vested pursuant to Section 3(a) hereof absent a Qualified Termination.
For the avoidance of doubt, the purpose of this Section 4 (b)(iii) is to prevent
a situation where grantees of 2011 OPP awards who have had a Qualified
Termination would be able to realize the value of their Award Participation or
any Award Common Units (through Transfer) before other grantees of 2011 OPP
awards whose Continuous Service continues through the Final Valuation Date and
the date for payment of the Participation Amount.
(c) Notwithstanding the foregoing, in the event any payment to be made hereunder
after giving effect to this Section 4 is determined to constitute “nonqualified
deferred compensation” subject to Section 409A of the Code, then, to the extent
the Grantee is a “specified employee” under Section 409A of the Code subject to
the six-month delay thereunder, any such payments to be made during the
six-month period commencing on the Grantee’s “separation from service” (as
defined in Section 409A of the Code) shall be delayed until the expiration of
such six-month period.
(d) In the event of a termination of the Grantee’s Continuous Service as a
result of his or her death or Disability prior to the Final Valuation Date, the
Grantee will not forfeit the Award Participation, but the following provisions
of this Section 4(d) shall apply:
(i) the calculations provided in Section 3(b) hereof shall be performed as of
the Final Valuation Date, as if the Grantee’s death or Disability had not
occurred; and
(ii) the Participation Amount calculated pursuant to Section 3(b) shall be
multiplied by the applicable Partial Service Factor, and such adjusted amount
shall be deemed the Grantee’s Participation Amount for all purposes under this
Agreement; and
(iii) 100% of the Grantee’s Participation Amount as adjusted pursuant to Section
4(d)(ii) above shall no longer be subject to forfeiture pursuant to Section 3(c)
hereof and shall automatically and immediately vest as of the Final Valuation
Date.
(e) In the event of a termination of the Grantee’s Continuous Service prior to
the Final Valuation Date (other than (1) a Qualified Termination or (2) by
reason of death or Disability or (3) following a Change of Control), the Award
Participation, unless it shall, as of the date of such termination, both
(i) have ceased to be subject to forfeiture pursuant to Section 3(c) hereof, and
(ii) have vested pursuant to Section 3(a) hereof, shall, without payment of any
consideration by the Company, automatically and without notice terminate, be
forfeited and be and become null and void, and neither the Grantee nor any of
his or her successors, heirs, assigns, or personal representatives will
thereafter have any further rights or interests in such Award Participation.

 

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5. No Payments by Award Recipients.
No amount shall be payable to the Company by the Grantee at any time in respect
of this Agreement. The Grantee shall have no rights with respect to this
Agreement (and the Award evidenced hereby) unless he or she shall have accepted
this Agreement by signing and delivering to the Company a copy of this
Agreement. Upon acceptance of this Agreement by the Grantee, the Grantee’s Award
Participation shall constitute and shall be treated for all purposes as the
property of the Grantee, subject to the terms of this Agreement.
6. Restrictions on Transfer.
Except as otherwise permitted by the Committee, no portion of the Award
Participation or Award LTIP Units granted hereunder shall be sold, assigned,
transferred, pledged, hypothecated, given away or in any other manner disposed
of, encumbered, whether voluntarily or by operation of law (each such action a
“Transfer”), provided that vested Award Participation or vested Award LTIP Units
may be Transferred to (i) the Grantee’s Family Members by gift or pursuant to
domestic relations order in settlement of marital property rights or (ii) to an
entity in which fifty percent (50%) or more of the voting interests are owned by
Family Members (or the Grantee) in exchange for an interest in such entity,
provided that the transferee agrees in writing with the Company to be bound by
all the terms and conditions of this Agreement and that subsequent Transfers
shall be prohibited except those in accordance with this Section 6. All
Transfers of the Award Participation or any interest therein or Award LTIP Units
must be in compliance with all applicable securities laws (including, without
limitation, the Securities Act) and, in the case of the Award LTIP Units, the
LLC Agreement. Any attempted Transfer of an Award Participation or Award LTIP
Unit not in accordance with the terms and conditions of this Section 6 shall be
null and void, and the Company shall not reflect on its records any change in
record ownership of any Award Participation or Award LTIP Units as a result of
any such Transfer, shall otherwise refuse to recognize any such Transfer and
shall not in any way give effect to any such Transfer of any Award Participation
or Award LTIP Units. Except as provided expressly in this Section 6, this
Agreement is personal to the Grantee, is non-assignable and is not transferable
in any manner, by operation of law or otherwise, other than by will or the laws
of descent and distribution.
7. Changes in Capital Structure.
If (i) the Company shall at any time be involved in a merger, consolidation,
dissolution, liquidation, reorganization, exchange of shares, sale of all or
substantially all of the assets or stock of the Company or other transaction
similar thereto, (ii) any stock dividend, stock split, reverse stock split,
stock combination, reclassification, recapitalization, significant repurchases
of stock, or other similar change in the capital stock of the Company shall
occur, (iii) any extraordinary dividend or other distribution to holders of
Common Shares shall be declared and paid other than in the ordinary course, or
(iv) any other event shall occur that in each case in the good faith judgment of
the Committee necessitates action by way of appropriate equitable or
proportionate adjustment in the terms of this Award or this Agreement to avoid
distortion in the value of this Award, then the Committee shall take such action
as it deems necessary to maintain the Grantee’s rights hereunder so that they
are substantially proportionate to the rights existing under this Award prior to
such event, including, without limitation: (A) interpretations of or
modifications to any defined term in this Agreement; (B) adjustments in any
calculations provided for in this Agreement, and (C) substitution of other
awards or otherwise.

 

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8. Award LTIP Units
(a) Issuance of Award LTIP Units. In the event that, following the Effective
Date, the Company determines, in its sole discretion, that the applicable stock
exchange listing rules permit the Company to issue Award LTIP Units, the Company
shall promptly notify Grantee of such determination and shall issue to Grantee
the number of Award LTIP Units set forth on Schedule A hereto. The issuance of
such Award LTIP Units shall be conditioned upon the Grantee, unless the Grantee
is already a Non-Managing Member (as defined in the LLC Agreement), signing, as
a Non-Managing Member, and delivering to the Operating Company a counterpart
signature page to the LLC Agreement in the form provided by the Company. Upon
execution and delivery of such counterpart signature page by the Grantee, the
LLC Agreement shall be amended, at such time as set forth in the notice from the
Company, to establish the designations of the Award LTIP Units and to make other
necessary and appropriate amendments related to the creation of the series of
Award LTIP Units, and to reflect the issuance to the Grantee of the Award LTIP
Units and admission of Grantee as a Non-Managing Member of the Operating
Company. Thereupon, the Grantee shall have all the rights of a Non-Managing
Member of the Operating Company with respect to the number of Award LTIP Units
specified on Schedule A hereto, as set forth in the LLC Agreement (as so
amended), subject, however, to the restrictions, obligations and conditions
specified herein. Award LTIP Units constitute and shall be treated for all
purposes as the property of the Grantee, subject to the terms of this Agreement
and the LLC Agreement.
(b) Post-Final Valuation Date Adjustments. If Grantee’s Award is made in the
form of Award LTIP Units, then following determination of Grantee’s
Participation Amount pursuant to Section 3(b), the Committee shall divide the
resulting dollar amount by the Common Share Price calculated as of the Final
Valuation Date (appropriately adjusted to the extent that the “Unit Adjustment
Factor” (as defined in the LLC Agreement) is greater or less than 1.0). The
resulting number is hereafter referred to as the “Total OPP Unit Equivalent.” If
the Total OPP Unit Equivalent is smaller than the number of Award LTIP Units
previously issued to the Grantee, then the Grantee, as of the Final Valuation
Date, shall forfeit a number of Award LTIP Units equal to the difference without
payment of any consideration by the Operating Company. Thereafter, the term
Award LTIP Units will refer only to the Award LTIP Units that were not so
forfeited and neither the Grantee nor any of his or her successors, heirs,
assigns, or personal representatives will thereafter have any further rights or
interests in the Award LTIP Units that were so forfeited. If the Total OPP Unit
Equivalent is greater than the number of Award LTIP Units previously issued to
the Grantee, then, upon the performance of the calculations set forth in this
Section 8(b): (A) the Company shall cause the Operating Company to issue to the
Grantee, as of the Final Valuation Date, a number of additional Award LTIP Units
equal to the difference; (B) such additional Award LTIP Units shall be added to
the Award LTIP Units previously issued, if any, and thereby become part of this
Award; (C) the Company and the Operating Company shall take such corporate and
limited liability company action as is necessary to accomplish the grant of such
additional Award LTIP Units; and (D) thereafter the term Award LTIP Units will
refer collectively to the Award LTIP Units, if any, issued prior to such
additional grant plus such additional Award LTIP Units; provided that such
issuance will be subject to the Grantee executing and delivering such documents,
comparable to the documents executed and delivered in connection with the
original issuance of Award LTIP Units, as the Company or the Operating Company
reasonably request in order to comply with all applicable legal requirements,
including, without limitation, federal and state securities laws. If the Total
OPP Unit Equivalent is the same as the number of Award LTIP Units previously
issued to the Grantee, then there will be no change to the number of Award LTIP
Units under this Award pursuant to this Section 8(b).

 

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(c) Vesting and Forfeiture. The Award LTIP Units shall vest and be subject to
forfeiture on the same terms and conditions as the Award Participation, as set
forth in Sections 3(a), 3(c), 3(d) and 4.
(d) Distributions. The holder of the Award LTIP Units shall be entitled to
receive distributions with respect to such Award LTIP Units to the extent
provided for in the LLC Agreement (as amended in accordance with Section 8(a)).
The 2011 Award LTIP Unit Distribution Participation Date (as defined in the
designation of rights and preferences of such Award LTIP Units, attached hereto
as Exhibit A) with respect to Award LTIP Units in an aggregate number equal to
the Total OPP Unit Equivalent will be the Valuation Date.
9. Miscellaneous.
(a) Amendments. This Agreement may be amended or modified only with the consent
of the Company acting through the Committee; provided that any such amendment or
modification materially or adversely affecting the rights of the Grantee
hereunder must be consented to by the Grantee to be effective as against him.
Notwithstanding the foregoing, this Agreement may be amended in writing signed
only by the Company to correct any errors or ambiguities in this Agreement
and/or to make such changes that do not materially or adversely affect the
Grantee’s rights hereunder. This grant shall in no way affect the Grantee’s
participation or benefits under any other plan or benefit program maintained or
provided by the Company.
(b) Committee Determinations. The Committee will in good faith make the
determinations and certifications required by this Award as promptly as
reasonably practicable following the occurrence of the event or events
necessitating such determinations or certifications.
(c) Status of the Award and Award LTIP Units; Incentive Plan Matters. This Award
and the other 2011 OPP awards constitute other stock-based incentive
compensation awards by the Company under the Incentive Plan and incentive
compensation awards by the Operating Company. The Award LTIP Units are equity
interests in the Operating Company. Any Award LTIP Units issued pursuant to
Section 8 may, but need not, be issued as equity securities under the Incentive
Plan insofar as the 2011 OPP has been established as an incentive program of the
Operating Company. The Company may, under certain circumstances, have the right,
as set forth in the LLC Agreement, to issue shares of Common Stock in exchange
for Award Common Units into which Award LTIP Units may have been converted
pursuant to the LLC Agreement, subject to certain limitations set forth in the
LLC Agreement, and such shares of Common Stock may be issued under the Incentive
Plan if the Committee so determines, to the extent such issuance is permitted
under applicable stock exchange listing rules, as determined by the Committee in
its sole and absolute discretion. The Committee may, in its sole and absolute
discretion, determine whether and when Award LTIP Units issued pursuant to
Section 3 become part of the Incentive Plan, and upon and to the extent of such
determination this Award will be considered an award under the Incentive Plan.
The Grantee acknowledges that the Grantee will have no right to approve or
disapprove such determination by the Committee.

 

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(d) Grantee Representations; Registration.
(i) The Grantee hereby represents and warrants that (A) he or she understands
that he or she is responsible for consulting his or her own tax advisor with
respect to the application of the U.S. federal income tax laws, and the tax laws
of any state, local or other taxing jurisdiction to which the Grantee is or by
reason of this Award may become subject, to his or her particular situation;
(B) the Grantee has not received or relied upon business or tax advice from the
Company, the Operating Company or any of their respective employees, agents,
consultants or advisors, in their capacity as such; (C) the Grantee provides
services to the Operating Company on a regular basis and in such capacity has
access to such information, and has such experience of and involvement in the
business and operations of the Operating Company, as the Grantee believes to be
necessary and appropriate to make an informed decision to accept this Award;
(D) Award LTIP Units are subject to substantial risks; (E) the Grantee has been
furnished with, and has reviewed and understands, information relating to this
Award; (F) the Grantee has been afforded the opportunity to obtain such
additional information as he or she deemed necessary before accepting this
Award; and (G) the Grantee has had an opportunity to ask questions of
representatives of the Operating Company and the Company, or persons acting on
their behalf, concerning this Award.
(ii) The Grantee hereby acknowledges that: (A) there is no public market for
Award LTIP Units or Award Common Units and neither the Operating Company nor the
Company has any obligation or intention to create such a market; (B) sales of
Award LTIP Units and Award Common Units are subject to restrictions under the
Securities Act and applicable state securities laws; (C) because of the
restrictions on transfer or assignment of Award LTIP Units and Award Common
Units set forth in the LLC Agreement and in this Agreement, the Grantee may have
to bear the economic risk of his or her ownership of the LTIP Units covered by
this Award for an indefinite period of time; (D) shares of Common Stock issued
under the Incentive Plan in exchange for Award Common Units, if any, will be
covered by a Registration Statement on Form S-8 (or a successor form under
applicable rules and regulations of the Securities and Exchange Commission)
under the Securities Act, to the extent that the Grantee is eligible to receive
such shares under the Incentive Plan at the time of such issuance and such
Registration Statement is then effective under the Securities Act; (E) resales
of shares of Common Stock issued under the Incentive Plan in exchange for Award
Common Units, if any, shall only be made in compliance with all applicable
restrictions (including in certain cases “blackout periods” forbidding sales of
Company securities) set forth in the then applicable Company employee manual or
insider trading policy and in compliance with the registration requirements of
the Securities Act or pursuant to an applicable exemption therefrom.
(e) Section 83(b) Election. In connection with each separate issuance of Award
LTIP Units under this Award pursuant to Section 8, the Grantee hereby agrees to
make an election to include in gross income in the year of transfer the
applicable Award LTIP Units pursuant to Section 83(b) of the Code substantially
in the form attached hereto as Exhibit B and to supply the necessary information
in accordance with the regulations promulgated thereunder. The Grantee agrees to
file such election (or to permit the Operating Company to file such election on
the Grantee’s behalf) within thirty (30) days after the issuance of the Award
LTIP Units with the IRS Service Center where the Grantee files his or her
personal income tax returns, and to file a copy of such election with the
Grantee’s U.S. federal income tax return for the taxable year in which the Award
LTIP Units are awarded to the Grantee. So long as the Grantee holds any Award
LTIP Units, the Grantee shall disclose to the Operating Company in writing such
information as may be reasonably requested with respect to ownership of Award
LTIP Units as the Operating Company may deem reasonably necessary to ascertain
and to establish compliance with provisions of the Code applicable to the
Operating Company or to comply with requirements of any other appropriate taxing
authority.

 

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(f) Severability. If, for any reason, any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of this Agreement
not so held invalid, and each such other provision shall to the full extent
consistent with law continue in full force and effect. If any provision of this
Agreement shall be held invalid in part, such invalidity shall in no way affect
the rest of such provision not held so invalid, and the rest of such provision,
together with all other provisions of this Agreement, shall to the full extent
consistent with law continue in full force and effect.
(g) Governing Law. This Agreement is made under, and will be construed in
accordance with, the laws of State of New York, without giving effect to the
principles of conflict of laws of such State.
(h) No Obligation to Continue Position as an Employee. Neither the Company nor
any Affiliate is obligated by or as a result of this Agreement to continue to
have the Grantee as an employee, consultant or advisor and this Agreement shall
not interfere in any way with the right of the Company or any Affiliate to
terminate the Grantee’s Continuous Service at any time.
(i) Notices. Any notice to be given to the Company shall be addressed to the
Secretary of the Company at 475 Tenth Avenue, New York, New York 10018 and any
notice to be given the Grantee shall be addressed to the Grantee at the
Grantee’s address as it appears on the employment records of the Company, or at
such other address as the Company or the Grantee may hereafter designate in
writing to the other.
(j) Withholding and Taxes. No later than the date as of which an amount first
becomes includible in the gross income of the Grantee for income tax purposes or
subject to the Federal Insurance Contributions Act withholding with respect to
this Award, the Grantee will pay to the Company or, if appropriate, any of its
Affiliates, or make arrangements satisfactory to the Committee regarding the
payment of, any United States federal, state or local or foreign taxes of any
kind required by law to be withheld with respect to such amount. The obligations
of the Company under this Agreement will be conditional on such payment or
arrangements, and the Company and its Affiliates shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment otherwise due
to the Grantee.
(k) Headings. The headings of paragraphs hereof are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
(l) Counterparts. This Agreement may be executed in multiple counterparts with
the same effect as if each of the signing parties had signed the same document.
All counterparts shall be construed together and constitute the same instrument.
(m) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and any successors to the Company and the
Operating Company, on the one hand, and any successors to the Grantee, on the
other hand, by will or the laws of descent and distribution, but this Agreement
shall not otherwise be assignable or otherwise subject to hypothecation by the
Grantee.
(n) Section 409A. This Agreement shall be construed, administered and
interpreted in accordance with a good faith interpretation of Section 409A of
the Code. Any provision of this Agreement that is inconsistent with Section 409A
of the Code, or that may result in penalties under Section 409A of the Code,
shall be amended, with the reasonable cooperation of the Grantee, the Company
and the Operating Company, to the extent necessary to exempt it from, or bring
it into compliance with Section 409A of the Code.

 

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(o) Entire Agreement; Conflict. This Agreement (including the Incentive Plan and
the LLC Agreement to which it relates) constitutes the final, complete and
exclusive agreement between the Grantee and the Company with respect to the
subject matter hereof and replaces and supersedes any and all other agreements,
offers or promises, whether oral or written, between the parties concerning the
subject matter hereof. Except as expressly provided otherwise herein, in the
event of any conflict or inconsistency between the provisions of, or definitions
contained in, this Agreement (including the LLC Agreement to which it relates),
on the one hand, and Grantee’s Service Agreement, on the other hand, the terms
of the this Agreement ((including the LLC Agreement to which it relates) shall
govern.
[signature page follows]

 

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IN WITNESS WHEREOF, the undersigned have caused this Award Agreement to be
executed as of the date first above written.

            MORGANS HOTEL GROUP CO.
      By:           Name:           Title:           MORGANS GROUP LLC
      By:           Name:           Title:        

     
GRANTEE
   
 
   
 
Name:
   

 

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SCHEDULE A TO 2011 OUTPERFORMANCE PLAN AWARD AGREEMENT
Date of Award Agreement:                                                
               
Name of Grantee:                                                                
Participation Percentage:                                                
               
Grant Date:                                                                
Initial Grant of Award LTIP Units (if applicable)
Initials of Company representative:                       Initials of Grantee:
                      

 

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EXHIBIT A
MORGANS GROUP LLC
MEMBERSHIP UNIT DESIGNATION — 2011 OPP UNITS
The following are the terms of the 2011 OPP Units. Section references in this
Exhibit A refer to sections of the LLC Agreement and capitalized terms are used
as defined therein, unless stated otherwise.
1. LTIP Equivalence. Except as otherwise expressly provided in this Membership
Unit Designation, 2011 OPP Units shall be treated as LTIP Units, and shall have
the rights, privileges, restrictions, powers and duties applicable to LTIP Units
under the LLC Agreement, including without limitation the provisions of
Section 4.5.
2. Distributions.
(a) 2011 OPP Unit Distributions. Commencing from the Distribution Participation
Date (as defined below) established for any 2011 OPP Units in the applicable
award agreement, Holders of 2011 OPP Units shall be entitled to receive, if,
when and as authorized by the Managing Member, any distributions otherwise
payable with respect to LTIP Units and shall be treated as outstanding LTIP
Units for purposes of the distribution provisions of the LLC Agreement. For the
avoidance of doubt, for purposes of the first distribution to occur after the
Distribution Participation Date, 2011 OPP Units that become fully earned and
vested in accordance with the applicable Award Agreement on or before the first
day of the relevant quarterly period shall be treated as having been outstanding
for the full period. Prior to the Distribution Participation Date, 2011 OPP
Units shall be entitled to any distributions by the Operating Company (i) in
connection with an Adjustment Event as provided in Section 4.5(b), treating the
2011 OPP Units as outstanding LTIP Units, and (ii) if, when and as authorized by
the Managing Member out of funds or other property legally available for the
payment of distributions, distributions representing proceeds of a sale or other
disposition of all or substantially all of the assets of the Operating Company
in an amount per unit equal to the amount of any such distributions payable on
the Membership Units, provided that the amount of distributions to any Holder of
2011 OPP Units under this clause (ii) shall not exceed the positive balances of
the Capital Account of the Holder of such 2011 OPP Units to the extent
attributable to the ownership of such 2011 OPP Units.
(b) Distribution Participation Date. The “Distribution Participation Date” for
each 2011 OPP Unit will be either (i) with respect to 2011 OPP Units granted
pursuant to the Managing Member’s 2011 Outperformance Plan, as it may be amended
or supplemented from time to time or any successor plan under which additional
2011 OPP Units may be issued (the “Plan”), the applicable Final Valuation Date
(as defined in the Award Agreement of each Person granted 2011 OPP Units under
the Plan) or (ii) with respect to other 2011 OPP Units, such date as may be
specified in the Award Agreement or other documentation pursuant to which such
2011 OPP Units are issued.

 

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3. Allocations.
(a) Allocations of Net Income and Net Loss. Commencing with the portion of the
taxable year of the Operating Company that begins on the Distribution
Participation Date established for any 2011 OPP Units, such 2011 OPP Units shall
be allocated Net Income and Net Loss under Sections 6.1 and 6.2 in amounts per
2011 OPP Unit equal to the amounts allocated per Membership Unit (adjusted to
the extent required by Sections 6.3(b) through 6.3(g)). The Managing Member is
authorized in its discretion to delay or accelerate the participation of the
2011 OPP Units in allocations of Net Income and Net Loss, or to adjust the
allocations made after the Distribution Participation Date, so that the ratio of
(i) the total amount of Net Income or Net Loss allocated under Sections 6.1 and
6.2 with respect to each 2011 OPP Unit in the taxable year in which that 2011
OPP Unit’s Distribution Participation Date falls, to (ii) the total amount
distributed to that 2011 OPP Unit with respect to such period, is more nearly
equal to such ratio as computed for the Membership Units held by the Managing
Member.
(b) Special Allocations. 2011 OPP Units shall be treated as outstanding LTIP
Units (and the Holders thereof treated as Holders of LTIP Units) for all
purposes of Section 6.3(a).
4. Redemption.
(a) The Redemption Right provided to Non-Managing Members under
Section 4.2(e)(1) shall not apply with respect to 2011 OPP Units or Membership
Units into which they may be converted pursuant to the LLC Agreement until the
date that is one year and six months after the Final Valuation Date, after which
date the Redemption Right shall be available on the terms and conditions set
forth in the LLC Agreement.
(b) During the period beginning on the Final Valuation Date (as defined in the
applicable Award Agreement) and ending on the Business Day immediately preceding
the six month anniversary of the Final Valuation Date, the Operating Company
shall be entitled to redeem some or all of the 2011 OPP Units (or Membership
Units into which they were converted by the Holder) at a redemption price per
2011 OPP Unit or Membership Unit, payable in cash, equal to the Common Share
Price (as defined in the Applicable Award Agreement) as of the Final Valuation
Date (as defined in the applicable Award Agreement). From and after the one year
anniversary of the Final Valuation Date, for a period of six months, a Holder of
2011 OPP Units (or Membership Units into which they were converted by the
Holder) shall have the right to cause the Operating Company to redeem, some or
all of the 2011 OPP Units (or Membership Units into which they were converted by
the Holder), at a redemption price per 2011 OPP Unit or Membership Unit, payable
in cash, equal to the greater of (x) the Common Share Price (as defined in the
Applicable Award Agreement) as of the Final Valuation Date (as defined in the
applicable Award Agreement) and (y) the Cash Amount determined as of the date of
the notice of redemption. The Operating Company may exercise its redemption
right under this Section 4(b) by sending a notice to each Holder of 2011 OPP
Units (or Membership Units into which they were converted by the Holder) setting
forth the redemption date, which shall be no less than five (5) Business Days
after the date of such notice, and the number of 2011 OPP Units (or Membership
Units into which they were converted by the Holder) being redeemed and the
procedure to be followed by Holders of 2011 OPP Units or Membership Units that
are being redeemed. The Holder may exercise its redemption right under this
Section 4(b) by sending a notice to the Operating Company setting forth the
redemption date, which shall be no less than ten (10) Business Days after
receipt of such notice by the Managing Member, and the number of 2011 OPP Units
(or Membership Units into which they were converted by the Holder to be
redeemed). The Managing Member shall be entitled to acquire 2011 OPP Units (or
Membership Units into which they were converted by the Holder) pursuant to any
exercise by the Operating Company or the Holder of the foregoing redemption
rights (under this Section 4.2(b) or under Section 4.2(a)) in exchange for
issuance of a number of Common Shares, which will be issued under the Incentive
Plan and be registered on a Form S-8, with an aggregate value, based on the
Value of the Common Shares as of the date of the redemption notice, equal to the
applicable redemption price, provided that the Managing Member has determined,
in its sole discretion, that it is permitted to do so under applicable stock
exchange listing rules.

 

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5. Voting Rights.
(a) Voting with LTIP Units. Except as otherwise provided herein, 2011 OPP Units
and Non-Managing Members who hold 2011 OPP Units shall be treated as LTIP Units
and LTIP Unitholders, respectively, for all purposes of Section 14.3.
(b) Special Approval Rights. So long as any 2011 OPP Units remain outstanding,
the Operating Company shall not, without the affirmative vote of the
Non-Managing Members who hold at least two-thirds of the 2011 OPP Units
outstanding at the time, given in person or by proxy, either in writing or at a
meeting (voting separately as a class), amend, alter or repeal, whether by
merger, consolidation or otherwise, the provisions of the LLC Agreement
applicable to 2011 OPP Units so as to materially and adversely affect any right,
privilege or voting power of the 2011 OPP Units or the Non-Managing Members who
hold 2011 OPP Units as such, unless such amendment, alteration or repeal affects
equally, ratably and proportionately the rights, privileges and powers of the
holders of LTIP Units; but subject, in any case, to the following provisions:

  (i)   Any difference in effect between the LTIP Units and the 2011 OPP Units
that is required or reasonably desirable to implement the difference in the
distribution or redemption rights with respect to LTIP Units and 2011 OPP Units
shall not be deemed to have an effect that is not equal, ratable or
proportionate to the effect on the holders of LTIP Units;

  (ii)   Any creation or issuance of any Membership Units or of any class or
series of Membership Interest, whether ranking senior to, junior to, or on a
parity with the 2011 OPP Units with respect to distributions and the
distribution of assets upon liquidation, dissolution or winding up shall not be
deemed to have an effect that is not equal, ratable or proportionate to the
effect on the holders of LTIP Units; and

  (iii)   any waiver by the Operating Company of restrictions or limitations
applicable to any outstanding LTIP Units or 2011 OPP Units with respect to any
LTIP Unitholder or Unitholders or Holders of 2011 OPP Unit shall not be deemed
to materially and adversely alter, change, modify or amend the rights, powers or
privileges of the LTIP Units or 2011 OPP Units with respect to other Unitholders
or Holders.

 

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EXHIBIT B
ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF
TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B)
OF THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to Section 83(b) of the
Internal Revenue Code with respect to the property described below and supplies
the following information in accordance with the regulations promulgated
thereunder:
1. The name, address and taxpayer identification number of the undersigned are:
Name:                                          (the “Taxpayer”)
Address:                                         
Social Security No./Taxpayer Identification No.:  _____ 
2. Description of property with respect to which the election is being made:
The election is being made with respect to                      Award LTIP Units
in Morgans Group LLC (the “Operating Company”).
3. The date on which the Award LTIP Units were transferred is
                      _____, 2011. The taxable year to which this election
relates is calendar year 2011.
4. Nature of restrictions to which the Award LTIP Units are subject:

  (a)   With limited exceptions, until the Award LTIP Units vest, the Taxpayer
may not transfer in any manner any portion of the Award LTIP Units without the
consent of the Operating Company.

  (b)   The Taxpayer’s Award LTIP Units vest in accordance with the vesting
provisions described in Annex 1 attached hereto. Unvested Award LTIP Units are
forfeited in accordance with the vesting provisions described in Annex 1
attached hereto.

5. The fair market value at time of transfer (determined without regard to any
restrictions other than restrictions which by their terms will never lapse) of
the Award LTIP Units with respect to which this election is being made was
$_____ per Award LTIP Unit.
6. The amount paid by the Taxpayer for the Award LTIP Units was $0 per Award
LTIP Unit.
7. A copy of this statement has been furnished to the Operating Company and
Morgans Hotel Group Co.

     
Dated:                       , 2011
  Signature                                            

 

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ANNEX 1
Vesting Provisions of Award LTIP Units
The Award LTIP Units are subject to time-based and performance-based vesting
with the final vesting percentage equaling the product of the time-based vesting
percentage and the performance-based vesting percentage. Performance-based
vesting will be from 0% to 100% based on Morgan Hotel Group Co.’s (the
“Company’s”) per-share total return to shareholders for the period from
[                    ], 2011 to [                    ], 2014 (or earlier in
certain circumstances). Under the time-based vesting provisions, one hundred
percent (100%) of the Award LTIP Units will vest on the last day of the
performance period, provided that the Taxpayer remains an employee of the
Company or any of its affiliates through such date, subject to acceleration in
the event of certain extraordinary transactions or termination of the Taxpayer’s
service relationship with the Company under specified circumstances. Unvested
Award LTIP Units are subject to forfeiture in the event of failure to vest based
on the passage of time (subject to above-mentioned acceleration) or the
determination of the performance-based percentage.

 

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