Exhibit 10.20

 

INDEMNIFICATION AGREEMENT

 

INDEMNIFICATION AGREEMENT (this “Agreement”), dated February 17, 2006, between
Morgans Hotel Group LLC, a Delaware limited liability company (“MHG LLC”), and
Morgans Group LLC, a Delaware limited liability company (“Morgans Group LLC”).

 

RECITALS

 

WHEREAS, the Board of Directors of NorthStar Capital Investment Corp., a
Maryland corporation and the general partner of NorthStar Partnership, L.P., a
Delaware limited partnership that controls NorthStar Hospitality LLC, a Delaware
limited liability company that is the managing member of MHG LLC, has determined
that it is in the best interests of MHG LLC and its members to complete an
initial public offering (the “IPO”) of shares of Morgans Hotel Group Co., a
Delaware corporation (“MHG Co.”), which will be the managing member of Morgans
Group LLC;

 

WHEREAS, as a result of the IPO and the Formation and Structuring Transactions
(as defined below), Morgans Group LLC will no longer be a wholly-owned
subsidiary of MHG LLC; and

 

WHEREAS, in connection with the foregoing, the parties desire to set forth
certain agreements regarding releases and indemnification following the
separation.

 

NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, MHG LLC and Morgans Group LLC agree as follows:

 

ARTICLE I
DEFINITIONS

 

For the purpose of this Agreement the following capitalized terms shall have the
meanings specified herein.

 

“Action” means any demand, action, suit, countersuit, arbitration, inquiry,
proceeding or investigation by or before any federal, state, local, foreign or
international governmental authority or any arbitration or mediation tribunal.

 

“Assumed Liabilities” shall mean (i) all Liabilities relating to, arising out of
or in connection with the ownership, business or operations of the Transferred
Business, whether arising before, in connection with, on or after the effective
date of the Formation and Structuring Transactions, and (ii) all other
Liabilities of the MHG LLC Group which relates to acts or omissions of any such
parties relating to ownership, business or operations of the Transferred
Business or the Formation and Structuring Transactions and the other
transactions contemplated thereby prior to consummation of the Formation and
Structuring Transactions (including the IPO).  For the avoidance of doubt, the
term Assumed Liabilities shall include, without limitation, (i) all Liabilities
for income taxes,

 

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indemnification obligations and other contingent liabilities of MHG LLC and its
direct and indirect subsidiaries relating to the ownership, business or
operations of the Transferred Business relating to periods ending on or prior to
the effective date of the Formation and Structuring Transactions, including any
Liabilities relating to the agreement with or claims by the hotel designer
described in Note 5 to the Combined Financial Statements of Morgans Hotel Group
Co. Predecessor included in the Registration Statement on Form S-1 filed by MHG
Co. in connection with the IPO, (ii) all Liabilities for New York City or New
York State transfer taxes in connection with the transactions contemplated by
the Formation and Structuring Transactions or the IPO, including resulting from
any subsequent transfers of common stock of MHG Co. by the MHG LLC Group that
are aggregated with the transfers contemplated by the Formation and Structuring
Transactions or the IPO, and (iii) all Liabilities under that certain Agreement
of Lease, dated as of December 1997, by and between Adler Realty Company and ISH
Operating Corp., a wholly-owned subsidiary of Morgans Hotel Group Management
LLC; provided, however, that the amount of any Assumed Liability shall be
reduced by any benefits or amounts that are received by the MHG LLC after the
effective date of the Formation and Structuring Transactions, including any
insurance or other recoveries that are received by MHG LLC from third parties
relating to, arising out of or in connection with any Assumed Liability.

 

“Formation and Structuring Transactions” shall have the meaning assigned thereto
in the Registration Statement on Form S-1 filed by MHG Co. in connection with
the IPO.

 

“Indemnifying Party” has the meaning set forth in Section 2.5(a) hereof.

 

“Indemnitee” has the meaning set forth in Section 2.5(a) hereof.

 

“Information” means information, in written, oral, electronic or other tangible
or intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, computer data, disks, diskettes, tapes, computer
programs or other technical, financial, employee or business information or
data.

 

“IPO Closing Date” shall mean the date on which shares of common stock of MHG
Co. are issued pursuant to the IPO.

 

“Liabilities” means all debts, liabilities, guarantees, assurances, commitments
and obligations, whether fixed, contingent or absolute, asserted or unasserted,
matured or unmatured, liquidated or un-liquidated, accrued or not accrued, known
or unknown, due or to become due, whenever or however arising (including,
without limitation, whether arising out of any contract or tort based on
negligence or strict liability) and whether or not the same would be required by
generally accepted accounting principles and accounting policies to be reflected
in financial statements or disclosed in the notes thereto.  For purposes of any
indemnification hereunder, “Liabilities” shall be deemed also to include any and
all damages, claims, suits, judgments, fines, penalties, costs and expenses of
any kind or character, including attorney’s reasonable fees.

 

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“MHG LLC Group” or “MHG LLC Indemnitees” means MHG LLC and its wholly- and
partially-owned direct and indirect subsidiaries (other than members of the
Morgans Group LLC Group) and its and their respective members, affiliates,
managers, directors, officers and employees (in each case, other than members of
the Morgans Group LLC Group) after giving effect to the transactions
contemplated by the Formation and Structuring Transactions.  For purposes
hereof, “MHG LLC Group” and “MHG LLC Indemnities” shall include (i) NorthStar
Partnership, L.P., a Delaware limited partnership, (ii) any general or limited
partner of NorthStar Partnership, L.P., including, without limitation, NorthStar
Capital Investment Corp., a Maryland corporation and the general partner of
NorthStar Partnership, L.P., (iii) the Board of Directors of NorthStar Capital
Investment Corp., (iv) any direct or indirect member, investor or beneficial
owner of any equity interest in any partner of NorthStar Partnership, L.P. that
receives shares of common stock of MHG Co. initially held by NorthStar
Partnership, L.P., whether by distribution, redemption, exchange or otherwise,
(v) RSA Associates, L.P., a Delaware limited partnership, (vi) any general or
limited partner of RSA Associates, L.P., and (vii) any direct or indirect
member, investor or beneficial owner of any equity interest in any partner of
RSA Associates, L.P. that receives shares of common stock of MHG Co. initially
held by RSA Associates, L.P., whether by distribution, redemption, exchange or
otherwise.

 

“MHG Management Company” means Morgans Hotel Group Management LLC, a Delaware
limited liability company.

 

“Morgans Group LLC Group” or “Morgans Group LLC Indemnitees” means Morgans Group
LLC and its partially and wholly-owned direct and indirect subsidiaries and
their respective members, managers, officers and employees after giving effect
to the Formation and Structuring Transactions.

 

“Third Party Claim” has the meaning set forth in Section 2.5(a) of this
Agreement.

 

“Transferred Business” means:  the business and operations of Morgans Group LLC
and its partially and wholly-owned direct and indirect subsidiaries after giving
effect to the consummation of the Formation and Structuring Transactions,
including, without limitation, (i) MHG LLC’s interest in the ownership, business
and operations of the following hotel properties, whether conducted or occurring
prior to, on or after the effective date of the Formation and Structuring
Transactions:

 

(1)           Morgans;

(2)           Mondrian;

(3)           Royalton;

(4)           Delano;

(5)           Hudson;

(6)           Clift;

(7)           Sanderson;

(8)           St. Martins Lane; and

(9)           Shore Club,

 

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(ii) the ownership, business and operations of MHG Management Company, and (iii)
MHG LLC’s interest in the ownership, business and operations of the restaurant
joint ventures operating in the hotel properties named above.

 

ARTICLE II
MUTUAL RELEASES; INDEMNIFICATION

 

SECTION 2.1             RELEASE OF PRE-CLOSING CLAIMS.

 

(A)           MORGANS GROUP LLC RELEASE.  EXCEPT AS PROVIDED IN SECTION 2.1(C),
EFFECTIVE AS OF THE IPO CLOSING DATE, MORGANS GROUP LLC DOES HEREBY, FOR ITSELF
AND AS AGENT FOR EACH MEMBER OF THE MORGANS GROUP LLC GROUP, RELEASE AND FOREVER
DISCHARGE THE MHG LLC INDEMNITEES FROM ANY AND ALL ASSUMED LIABILITIES AND ANY
AND ALL OTHER LIABILITIES WHATSOEVER RELATED TO, ARISING FROM OR IN CONNECTION
WITH THE TRANSFERRED BUSINESS (WHETHER ARISING AT LAW OR IN EQUITY (INCLUDING
ANY RIGHT OF CONTRIBUTION), AND WHETHER ARISING UNDER ANY CONTRACT OR AGREEMENT,
BY OPERATION OF LAW OR OTHERWISE), EXISTING OR ARISING FROM ANY ACTS OR EVENTS
OCCURRING OR FAILING TO OCCUR OR ALLEGED TO HAVE OCCURRED OR TO HAVE FAILED TO
OCCUR OR ANY CONDITIONS EXISTING OR ALLEGED TO HAVE EXISTED ON OR BEFORE THE IPO
CLOSING DATE, INCLUDING, WITHOUT LIMITATION, ANY SUCH ACTS, EVENTS OR CONDITIONS
ON OR BEFORE THE IPO CLOSING DATE IN CONNECTION WITH THE FORMATION AND
STRUCTURING TRANSACTIONS, INCLUDING THE IPO, OTHER THAN ANY LIABILITIES
ATTRIBUTABLE TO SUCH MEMBER IN ITS CAPACITY AS A SELLING STOCKHOLDER IN THE IPO
OR ASSERTED BY ANOTHER MEMBER OF THE MHG LLC GROUP.

 

(B)           NO ACTIONS AS TO RELEASED CLAIMS.  MORGANS GROUP LLC AGREES, FOR
ITSELF AND AS AGENT FOR EACH MEMBER OF THE MORGANS GROUP LLC GROUP, NOT TO MAKE
ANY CLAIM OR DEMAND, OR COMMENCE ANY ACTION ASSERTING ANY CLAIM OR DEMAND,
INCLUDING ANY CLAIM OF CONTRIBUTION OR INDEMNIFICATION, AGAINST MHG LLC OR ANY
OTHER PERSON RELEASED PURSUANT TO SECTION 2.1(A), WITH RESPECT TO ANY
LIABILITIES RELEASED PURSUANT TO SECTION 2.1(A).

 

(C)           EXCLUDED LIABILITIES; NO IMPAIRMENT.  NOTHING CONTAINED HEREIN
SHALL RELEASE ANY CLAIMS UNDER, OR IMPAIR ANY RIGHT OF ANY PERSON TO ENFORCE,
THIS AGREEMENT OR THE IPO UNDERWRITING AGREEMENT.

 

SECTION 2.2             INDEMNIFICATION BY MORGANS GROUP LLC.  EXCEPT AS
OTHERWISE PROVIDED IN THIS AGREEMENT, MORGANS GROUP LLC SHALL INDEMNIFY, DEFEND
AND HOLD HARMLESS THE MHG LLC INDEMNITEES FROM AND AGAINST ANY AND ALL
LIABILITIES THAT ANY THIRD PARTY SEEKS TO IMPOSE UPON THE MHG LLC INDEMNITEES,
OR WHICH ARE IMPOSED UPON THE MHG LLC INDEMNITEES, IF AND TO THE EXTENT SUCH
LIABILITIES RELATE TO, ARISE OUT OF OR RESULT FROM ANY OF THE FOLLOWING ITEMS
(WITHOUT DUPLICATION):

 

(I)            THE ASSUMED LIABILITIES;

 

(II)           THE TRANSFERRED BUSINESS OR THE FORMATION AND STRUCTURING
TRANSACTIONS, INCLUDING THE IPO, OTHER THAN ANY LIABILITIES ATTRIBUTABLE TO SUCH

 

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MEMBER IN ITS CAPACITY AS A SELLING STOCKHOLDER IN THE IPO OR ASSERTED BY
ANOTHER MEMBER OF THE MHG LLC GROUP;

 

(III)          ANY BREACH BY ANY MEMBER OF THE MORGANS GROUP LLC GROUP OF THIS
AGREEMENT; AND

 

(IV)          ANY LIABILITIES OF THE MORGANS GROUP LLC GROUP.

 

In the event that any member of the Morgans Group LLC Group makes a payment to
the MHG LLC Indemnitees hereunder, and any of the MHG LLC Indemnitees
subsequently diminishes the Liabilities on account of which such payment was
made, either directly or through a third-party recovery, MHG LLC will promptly
repay (or will procure an MHG LLC Indemnitee to promptly repay) such member of
the Morgans Group LLC Group the amount by which the payment made by such member
of the Morgans Group LLC Group exceeds the actual cost to the MHG LLC Indemnitee
of the associated indemnified Liability; provided, however, that in the event
that any indemnified Liability that was diminished is subsequently reinstated
such that the net amount paid by such member of the Morgans Group LLC Group is
less than the amount of the reinstated Liability, such member of the Morgans
Group LLC Group shall pay the difference to MHG LLC or the MHG LLC Indemnitee,
as applicable.

 

SECTION 2.3             INDEMNIFICATION BY MHG LLC.  EXCEPT AS OTHERWISE
PROVIDED IN THIS AGREEMENT, MHG LLC SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS
THE MORGANS GROUP LLC INDEMNITEES FROM AND AGAINST ANY AND ALL LIABILITIES THAT
ANY THIRD PARTY SEEKS TO IMPOSE UPON THE MORGANS GROUP LLC INDEMNITEES, OR WHICH
ARE IMPOSED UPON THE MORGANS GROUP LLC INDEMNITEES, IF AND TO THE EXTENT SUCH
LIABILITIES RELATE TO, ARISE OUT OF OR RESULT FROM ANY OF THE FOLLOWING ITEMS
(WITHOUT DUPLICATION):

 

(I)            ANY BREACH BY ANY MEMBER OF THE MHG LLC GROUP OF THIS AGREEMENT;

 

(II)           ANY LIABILITIES OF THE MHG LLC GROUP (OTHER THAN THE ASSUMED
LIABILITIES); AND

 

(III)          ANY LIABILITY RESULTING FROM A CLAIM BY ONE MEMBER OF THE MHG LLC
GROUP AGAINST ANOTHER MEMBER OF THE MHG LLC GROUP.

 

In the event that any member of the MHG LLC Group makes a payment to the Morgans
Group LLC Indemnitees hereunder, and any of the Morgans Group LLC Indemnitees
subsequently diminishes the Liabilities on account of which such payment was
made, either directly or through a third-party recovery, Morgans Group LLC will
promptly repay (or will procure an Morgans Group LLC Indemnitee to promptly
repay) such member of the MHG LLC Group the amount by which the payment made by
such member of the MHG LLC Group exceeds the actual cost to the Morgans Group
LLC Indemnitee of the indemnified Liability; provided, however, that in the
event that any indemnified Liability that was diminished is subsequently
reinstated such that the net amount paid by such member of the MHG LLC Group is
less than the amount of the

 

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reinstated Liability, such member of the MHG LLC Group shall pay the difference
to Morgans Group LLC or the Morgans Group LLC Indemnitee, as applicable.

 

SECTION 2.4             INDEMNIFICATION OF SPECIFIC CLAIMS.  NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY:

 

(A)           INDEMNIFICATION BY MORGANS GROUP LLC.  MORGANS GROUP LLC SHALL
INDEMNIFY, DEFEND AND HOLD HARMLESS THE MHG LLC GROUP INDEMNITEES FROM AND
AGAINST ANY AND ALL LIABILITIES THAT ANY THIRD PARTY SEEKS TO IMPOSE UPON THE
MHG LLC GROUP INDEMNITEES, OR WHICH ARE IMPOSED UPON THE MHG LLC GROUP
INDEMNITEES, IF AND TO THE EXTENT SUCH LIABILITIES RELATE TO, ARISE OUT OF OR
RESULT FROM ANY OF THE FOLLOWING AGREEMENTS (COLLECTIVELY, THE “GUARANTEES AND
OTHER OBLIGATIONS”):

 

(I)            THE GUARANTY AGREEMENT, DATES AS OF AUGUST 28, 2000, BY MHG LLC
IN FAVOR OF CHEVRON, TCI, INC., AND

 

(II)           THE JOINT VENTURE AGREEMENT, DATED AS OF SEPTEMBER 7, 1999,
BETWEEN MHG LLC AND CHODOROW VENTURES LLC;

 

(III)          ANY OTHER GUARANTIES OR INDEMNIFICATION OBLIGATIONS GRANTED TO
THIRD PARTIES RELATING TO THE TRANSFERRED BUSINESS.

 

(B)           RELEASE. FOLLOWING THE DATE HEREOF, MORGANS GROUP LLC WILL USE ITS
REASONABLE BEST EFFORTS TO OBTAIN A COMPLETE RELEASE OF MHG LLC (AND ALL OTHER
MEMBERS OF THE MHG LLC GROUP IF APPLICABLE) FROM ALL LIABILITIES AND OBLIGATIONS
UNDER THE GUARANTEES AND OTHER OBLIGATIONS.  THE RELEASE RELATING TO SUCH
GUARANTEES SHALL BE IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO MHG LLC;
PROVIDED, HOWEVER, THAT MORGANS GROUP LLC SHALL NOT BE REQUIRED TO SPEND MORE
THAN A NOMINAL AMOUNT OF ITS OWN FUNDS TO OBTAIN SUCH RELEASE.

 

(C)           LIMITATIONS ON INDEMNIFICATION.   IN DETERMINING INDEMNIFICATION
PAYMENTS PURSUANT TO THIS SECTION 2.4, THE PARTIES SHALL MAKE APPROPRIATE
ADJUSTMENTS FOR RECOVERY OF TAX BENEFITS AND INSURANCE COVERAGE. A PARTY
ENTITLED TO INDEMNIFICATION PURSUANT TO THIS SECTION 2.4 SHALL USE ITS
COMMERCIALLY REASONABLE EFFORTS TO MITIGATE ANY DAMAGES FOR WHICH IT MAY BE
ENTITLED TO INDEMNIFICATION HEREUNDER. IF EACH PARTY OWES AN AMOUNT TO THE
OTHER, THE TWO AMOUNTS SHALL BE OFFSET AND NETTED AGAINST EACH OTHER AND ONLY
THE NET AMOUNT SHALL BE PAID.

 

SECTION 2.5             PROCEDURES FOR DEFENSE, SETTLEMENT AND INDEMNIFICATION
OF THIRD PARTY CLAIMS.

 

(A)           NOTICE OF CLAIMS.  IF AN MHG LLC INDEMNITEE OR A MORGANS GROUP LLC
INDEMNITEE, AS APPLICABLE (AN “INDEMNITEE”), RECEIVES NOTICE OR OTHERWISE LEARNS
OF THE ASSERTION BY A PERSON (INCLUDING ANY REGULATORY AUTHORITY) WHO IS NOT A
MEMBER OF THE MHG LLC GROUP OR THE MORGANS GROUP LLC GROUP OF ANY CLAIM OR OF
THE COMMENCEMENT BY ANY SUCH PERSON OF ANY ACTION (COLLECTIVELY, A “THIRD PARTY
CLAIM”) WITH RESPECT TO WHICH A PARTY (AN “INDEMNIFYING PARTY”) MAY BE OBLIGATED
TO PROVIDE INDEMNIFICATION TO SUCH INDEMNITEE PURSUANT TO SECTION 2.2, 2.3 OR
2.4, MHG LLC AND

 

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MORGANS GROUP LLC, AS APPLICABLE, WILL ENSURE THAT SUCH INDEMNITEE SHALL GIVE
SUCH INDEMNIFYING PARTY WRITTEN NOTICE THEREOF WITHIN THIRTY (30) DAYS AFTER
BECOMING AWARE OF SUCH THIRD PARTY CLAIM.  ANY SUCH NOTICE SHALL DESCRIBE THE
THIRD PARTY CLAIM IN REASONABLE DETAIL.  NOTWITHSTANDING THE FOREGOING, THE
DELAY OR FAILURE OF ANY INDEMNITEE OR OTHER PERSON TO GIVE NOTICE AS PROVIDED IN
THIS SECTION 2.5(A) SHALL NOT RELIEVE THE RELATED INDEMNIFYING PARTY OF ITS
OBLIGATIONS UNDER THIS ARTICLE II, EXCEPT TO THE EXTENT THAT SUCH INDEMNIFYING
PARTY IS ACTUALLY AND SUBSTANTIALLY PREJUDICED BY SUCH DELAY OR FAILURE TO GIVE
NOTICE; PROVIDED THAT THE FAILURE TO NOTIFY THE INDEMNIFYING PARTY SHALL NOT
RELIEVE IT FROM ANY LIABILITY THAT IT MAY HAVE TO AN INDEMNITEE OTHERWISE THAN
UNDER THIS ARTICLE II.

 

(B)           DEFENSE OF CLAIMS.  AN INDEMNIFYING PARTY SHALL RETAIN COUNSEL
REASONABLY SATISFACTORY TO THE INDEMNITEE AND SHALL MANAGE THE DEFENSE OF AND
MAY SETTLE OR COMPROMISE ANY THIRD PARTY CLAIM SO LONG AS SUCH SETTLEMENT OR
COMPROMISE CONTAINS A FULL AND UNCONDITIONAL RELEASE OF EACH INDEMNIFIED PARTY
AND DOES NOT INCLUDE ANY STATEMENT AS TO ANY ADMISSION OF FAULT, CULPABILITY OR
FAILURE TO ACT BY OR ON BEHALF OF ANY INDEMNITEE.  WITHIN THIRTY (30) DAYS AFTER
THE RECEIPT OF NOTICE FROM AN INDEMNITEE IN ACCORDANCE WITH SECTION 2.5(A) (OR
SOONER, IF THE NATURE OF SUCH THIRD PARTY CLAIM SO REQUIRES), THE INDEMNIFYING
PARTY SHALL NOTIFY THE INDEMNITEE THAT THE INDEMNIFYING PARTY WILL ASSUME
RESPONSIBILITY FOR MANAGING THE DEFENSE OF SUCH THIRD PARTY CLAIM.

 

(C)           DEFENSE BY INDEMNITEE.  IF AN INDEMNIFYING PARTY FAILS TO ASSUME
RESPONSIBILITY FOR MANAGING THE DEFENSE OF A THIRD PARTY CLAIM OR TO DILIGENTLY
DEFEND SUCH THIRD PARTY CLAIM, OR FAILS TO NOTIFY AN INDEMNITEE THAT IT WILL
ASSUME RESPONSIBILITY AS PROVIDED IN SECTION 2.5(B), SUCH INDEMNITEE MAY MANAGE
THE DEFENSE OF SUCH THIRD PARTY CLAIM AND MAY SETTLE SUCH THIRD PARTY CLAIM
WITHOUT THE CONSENT OF THE INDEMNIFYING PARTY.  IN ANY PROCEEDING RELATING TO A
THIRD PARTY CLAIM, ANY INDEMNITEE SHALL HAVE THE RIGHT TO RETAIN ITS OWN
COUNSEL, BUT THE FEES AND EXPENSES OF SUCH COUNSEL SHALL BE AT THE EXPENSE OF
SUCH INDEMNITEE UNLESS THE NAMED PARTIES TO ANY SUCH PROCEEDING (INCLUDING ANY
IMPLEADED PARTIES) INCLUDE BOTH THE INDEMNIFYING PARTY AND THE INDEMNITEE AND
REPRESENTATION OF BOTH PARTIES BY THE SAME COUNSEL WOULD BE INAPPROPRIATE DUE TO
ACTUAL OR POTENTIAL DIFFERING INTERESTS BETWEEN THEM.  IT IS UNDERSTOOD THAT THE
INDEMNIFYING PARTY SHALL NOT, IN RESPECT OF THE LEGAL EXPENSES OF ALL
INDEMNITEES IN CONNECTION WITH ANY THIRD PARTY CLAIM OR RELATED THIRD PARTY
CLAIMS IN THE SAME JURISDICTION, BE LIABLE FOR THE REASONABLY INCURRED FEES AND
EXPENSES OF MORE THAN ONE SEPARATE FIRM (IN ADDITION TO ANY LOCAL COUNSEL) FOR
ALL INDEMNITEES.

 

(D)           NO SETTLEMENT BY INDEMNITEE WITHOUT CONSENT.  UNLESS THE
INDEMNIFYING PARTY HAS FAILED TO MANAGE THE DEFENSE OF THE THIRD PARTY CLAIM IN
ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, OR HAS FAILED TO NOTIFY AN
INDEMNITEE THAT IT WILL ASSUME RESPONSIBILITY AS PROVIDED IN SECTION 2.5(B), NO
INDEMNITEE MAY SETTLE OR COMPROMISE ANY THIRD PARTY CLAIM WITHOUT THE CONSENT OF
THE INDEMNIFYING PARTY.

 

SECTION 2.6             ADDITIONAL MATTERS REGARDING INDEMNIFICATION.

 

(A)           SUBSTITUTION.  IN THE EVENT OF AN ACTION IN WHICH THE INDEMNIFYING
PARTY IS NOT A NAMED DEFENDANT, IF EITHER THE INDEMNITEE OR THE INDEMNIFYING
PARTY SHALL SO REQUEST, THE PARTIES SHALL ENDEAVOR TO SUBSTITUTE THE
INDEMNIFYING PARTY FOR THE NAMED

 

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DEFENDANT.  IF SUCH SUBSTITUTION OR ADDITION CANNOT BE ACHIEVED FOR ANY REASON
OR IS NOT REQUESTED, THE RIGHTS AND OBLIGATIONS OF THE PARTIES REGARDING
INDEMNIFICATION AND THE MANAGEMENT OF THE DEFENSE OF CLAIMS AS SET FORTH IN THIS
ARTICLE II SHALL NOT BE ALTERED.

 

(B)           SUBROGATION.  IN THE EVENT OF PAYMENT BY OR ON BEHALF OF ANY
INDEMNIFYING PARTY TO OR ON BEHALF OF ANY INDEMNITEE IN CONNECTION WITH ANY
THIRD PARTY CLAIM, SUCH INDEMNIFYING PARTY SHALL BE SUBROGATED TO AND SHALL
STAND IN THE PLACE OF SUCH INDEMNITEE, IN WHOLE OR IN PART BASED UPON WHETHER
THE INDEMNIFYING PARTY HAS PAID ALL OR ONLY PART OF THE INDEMNITEE’S LIABILITY,
AS TO ANY EVENTS OR CIRCUMSTANCES IN RESPECT OF WHICH SUCH INDEMNITEE MAY HAVE
ANY RIGHT, DEFENSE OR CLAIM RELATING TO SUCH THIRD PARTY CLAIM AGAINST ANY
CLAIMANT OR PLAINTIFF ASSERTING SUCH THIRD PARTY CLAIM OR AGAINST ANY OTHER
PERSON.  SUCH INDEMNITEE SHALL COOPERATE WITH SUCH INDEMNIFYING PARTY IN A
REASONABLE MANNER, AND AT THE COST AND EXPENSE OF SUCH INDEMNIFYING PARTY, IN
PROSECUTING ANY SUBROGATED RIGHT, DEFENSE OR CLAIM.

 

SECTION 2.7             SURVIVAL OF INDEMNITIES.  THE RIGHTS AND OBLIGATIONS OF
MHG LLC AND MORGANS GROUP LLC UNDER THIS ARTICLE II SHALL SURVIVE THE SALE OR
OTHER TRANSFER BY ANY PARTY OF ANY ASSETS OR BUSINESSES OR THE ASSIGNMENT BY IT
OF ANY LIABILITIES OR THE SALE BY ANY MEMBER OF THE MHG LLC GROUP OR THE MORGANS
GROUP LLC GROUP OF THE CAPITAL STOCK OR OTHER EQUITY INTERESTS OF ANY SUBSIDIARY
TO ANY PERSON.

 

SECTION 2.8             AGREEMENT FOR EXCHANGE OF INFORMATION.  SUBJECT TO
APPLICABLE CONFIDENTIALITY RESTRICTIONS AND SUBJECT TO PROVIDING THE
CONTEMPLATED INFORMATION ONLY TO THOSE PERSONS WHO REQUIRE SUCH INFORMATION IN
THE COURSE OF THEIR DUTIES, EACH OF MHG LLC AND MORGANS GROUP LLC AGREE TO
PROVIDE, OR CAUSE TO BE PROVIDED, TO EACH OTHER, AT ANY TIME AFTER THE IPO
CLOSING DATE, AS SOON AS REASONABLY PRACTICABLE AFTER WRITTEN REQUEST THEREFOR,
ANY INFORMATION IN THE POSSESSION OR UNDER THE CONTROL OF SUCH PARTY THAT THE
REQUESTING PARTY REASONABLY NEEDS:

 

(A)           TO COMPLY WITH REPORTING, DISCLOSURE, FILING OR OTHER REQUIREMENTS
IMPOSED ON THE REQUESTING PARTY BY A REGULATORY AUTHORITY HAVING JURISDICTION
OVER THE REQUESTING PARTY OR OTHERWISE REQUIRED BY LAW;

 

(B)           FOR USE IN ANY REGULATORY PROCEEDING, JUDICIAL PROCEEDING OR OTHER
PROCEEDING OR IN ORDER TO SATISFY AUDIT, ACCOUNTING, CLAIMS, REGULATORY,
LITIGATION OR OTHER SIMILAR REQUIREMENTS;

 

(C)           TO COMPLY WITH ITS OBLIGATIONS UNDER THIS AGREEMENT; OR

 

(D)           IN CONNECTION WITH THE ONGOING BUSINESSES OF MHG LLC OR MORGANS
GROUP LLC AS IT RELATES TO THE CONDUCT OF SUCH BUSINESSES, AS THE CASE MAY BE;

 

provided, however, that in the event that either party determines that any such
provision of Information could be commercially detrimental, violate any
applicable law or agreement, or waive any attorney-client privilege, the parties
shall take all reasonable measures to permit the compliance with such
obligations in a manner that avoids any such harm or consequence.

 

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SECTION 2.9             OTHER AGREEMENTS.

 

(A)           AGREEMENTS REGARDING RESTAURANT JV AGREEMENT.  MHG LLC HEREBY
AGREES, FOR THE BENEFIT OF MORGANS GROUP LLC, TO PROVIDE MORGANS GROUP LLC WITH
THE BENEFIT OF ANY OF ITS RIGHTS AND BENEFITS UNDER THE JOINT VENTURE AGREEMENT
(THE “RESTAURANT JV AGREEMENT”), DATED AS OF SEPTEMBER 7, 1999, BETWEEN MHG LLC
AND CHODOROW VENTURES LLC.  MORGANS GROUP LLC HEREBY AGREES, FOR THE BENEFIT OF
MHG LLC, TO FULFILL ALL OF THE OBLIGATIONS OF VENTURER A (AS DEFINED IN THE
RESTAURANT JV AGREEMENT) UNDER THE RESTAURANT JV AGREEMENT.  IN FURTHERANCE
THEREOF, MHG LLC HEREBY AGREES, IF NECESSARY PURSUANT TO THE TERMS OF THE
RESTAURANT JV AGREEMENT, TO TAKE ANY AND ALL ACTIONS AND GIVE ANY NOTICES
THEREUNDER, AND, IF REQUESTED BY MORGANS GROUP LLC, TO EXERCISE ANY RIGHTS AND
FULFILL ANY OBLIGATIONS OF VENTURER A THEREUNDER IN ORDER TO PERMIT MORGANS
GROUP LLC TO OBTAIN ALL OF THE RIGHTS AND BENEFITS OF VENTURER A THE RESTAURANT
JV AGREEMENT, IN ALL CASES AT THE EXPENSE OF MORGANS GROUP LLC.

 

(B)           OTHER AGREEMENTS.  MHG LLC AND MORGANS GROUP LLC AGREE TO EXECUTE
AND DELIVER, OR TO USE THEIR REASONABLE COMMERCIAL EFFORTS TO CAUSE TO BE
EXECUTED AND DELIVERED BY THE APPROPRIATE PARTIES, SUCH OTHER AGREEMENTS,
INSTRUMENTS AND OTHER DOCUMENTS AS MAY BE NECESSARY OR DESIRABLE IN ORDER TO
EFFECT THE PURPOSES OF THIS AGREEMENT AND THE FORMATION AND STRUCTURING
TRANSACTIONS.  THE PARTIES SHALL COOPERATE REASONABLY WITH EACH OTHER IN
CONNECTION WITH ANY STEPS REQUIRED TO BE TAKEN AS PART OF THEIR RESPECTIVE
OBLIGATIONS UNDER THIS AGREEMENT AND THE FORMATION AND STRUCTURING TRANSACTIONS,
AND SHALL (A) FURNISH UPON REQUEST TO EACH OTHER SUCH FURTHER INFORMATION; AND
(B) DO SUCH OTHER ACTS AND THINGS, ALL AS THE OTHER PARTY MAY REASONABLY REQUEST
FOR THE PURPOSE OF CARRYING OUT THE INTENT OF THIS AGREEMENT AND THE FORMATION
AND STRUCTURING TRANSACTIONS.

 

ARTICLE III
MISCELLANEOUS

 

SECTION 3.1             ENTIRE AGREEMENT.  THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SHALL SUPERSEDE ALL PRIOR WRITTEN AND ORAL AND ALL CONTEMPORANEOUS ORAL
AGREEMENTS AND UNDERSTANDINGS WITH RESPECT TO THE SUBJECT MATTER HEREOF.

 

SECTION 3.2             GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 3.3             NOTICES.  ALL NOTICES AND OTHER COMMUNICATIONS HEREUNDER
SHALL BE IN WRITING AND SHALL BE DEEMED TO HAVE BEEN DULY GIVEN WHEN DELIVERED
IN PERSON, BY FACSIMILE WITH CONFIRMATION OF RECEIPT, BY EXPRESS OR OVERNIGHT
MAIL DELIVERED BY A NATIONALLY RECOGNIZED AIR COURIER (DELIVERY CHARGES
PREPAID), OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID, RETURN RECEIPT
REQUESTED) AS FOLLOWS:

 

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if to MHG LLC:

 

Morgans Hotel Group LLC
c/o NorthStar Partnership, L.P.
527 Madison Avenue, 16th Floor
New York, New York 10022
Attn: Richard McCready
Facsimile: (212) 319-4557

 

if to Morgans Group LLC:

 

c/o Morgans Hotel Group Co.
475 Tenth Avenue
New York, New York 10018
Attn.:  Chief Financial Officer
Facsimile:  (212) 277-4260

 

or to such other address as the party to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.  Any
notice or communication delivered in person shall be deemed effective on
delivery.  Any notice or communication sent by facsimile or by overnight air
courier shall be deemed effective on the first Business Day following the day on
which such notice or communication was sent.  Any notice or communication sent
by registered or certified mail shall be deemed effective on the third Business
Day following the day on which such notice or communication was mailed.  As used
in this Section 3.3, “Business Day” means any day other than a Saturday, a
Sunday or a day on which banking institutions located in the State of New York
are authorized or obligated by law or executive order to close.

 

SECTION 3.4             PARTIES IN INTEREST.  THIS AGREEMENT AND THE OTHER
DOCUMENTS REFERRED TO HEREIN, SHALL BE BINDING UPON MHG LLC AND MORGANS GROUP
LLC AND INURE SOLELY TO THE BENEFIT OF THE MORGANS GROUP LLC GROUP AND THE MHG
LLC GROUP AND THEIR RESPECTIVE PERMITTED ASSIGNS, AND NOTHING IN THIS AGREEMENT,
EXPRESS OR IMPLIED, IS INTENDED TO CONFER UPON ANY OTHER PERSON ANY RIGHTS OR
REMEDIES OF ANY NATURE WHATSOEVER UNDER OR BY REASON OF THIS AGREEMENT.

 

SECTION 3.5             COUNTERPARTS.  THIS AGREEMENT AND THE OTHER DOCUMENTS
REFERRED TO HEREIN, MAY BE EXECUTED IN COUNTERPARTS, EACH OF WHICH SHALL BE
DEEMED TO BE AN ORIGINAL BUT ALL OF WHICH SHALL CONSTITUTE ONE AND THE SAME
AGREEMENT.

 

SECTION 3.6             ASSIGNMENT.  THE RIGHTS AND OBLIGATIONS IN THIS
AGREEMENT MAY NOT BE ASSIGNED OR DELEGATED BY ANY PARTY HERETO, IN WHOLE OR IN
PART, WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT OF THE OTHER PARTY HERETO.

 

SECTION 3.7             SEVERABILITY.  IF ANY TERM OR OTHER PROVISION OF THIS
AGREEMENT IS DETERMINED BY A NONAPPEALABLE DECISION BY A COURT, ADMINISTRATIVE
AGENCY OR ARBITRATOR TO BE INVALID, ILLEGAL OR INCAPABLE OF BEING ENFORCED BY
ANY RULE OF LAW OR PUBLIC POLICY, ALL OTHER CONDITIONS AND PROVISIONS OF THIS
AGREEMENT SHALL NEVERTHELESS REMAIN IN FULL FORCE

 

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AND EFFECT SO LONG AS THE ECONOMIC OR LEGAL SUBSTANCE OF THE TRANSACTIONS
CONTEMPLATED HEREBY IS NOT AFFECTED IN ANY MANNER MATERIALLY ADVERSE TO ANY
PARTY.  UPON SUCH DETERMINATION THAT ANY TERM OR OTHER PROVISION IS INVALID,
ILLEGAL OR INCAPABLE OF BEING ENFORCED, THE PARTIES HERETO SHALL NEGOTIATE IN
GOOD FAITH TO MODIFY THIS AGREEMENT SO AS TO EFFECT THE ORIGINAL INTENT OF THE
PARTIES AS CLOSELY AS POSSIBLE IN AN ACCEPTABLE MANNER TO THE END THAT
TRANSACTIONS CONTEMPLATED HEREBY ARE FULFILLED TO THE FULLEST EXTENT POSSIBLE.

 

SECTION 3.8             FAILURE OR INDULGENCE NOT WAIVER.  NO FAILURE OR DELAY
ON THE PART OF EITHER PARTY HERETO IN THE EXERCISE OF ANY RIGHT HEREUNDER SHALL
IMPAIR SUCH RIGHT OR BE CONSTRUED TO BE A WAIVER OF, OR ACQUIESCENCE IN, ANY
BREACH OF ANY REPRESENTATION, WARRANTY OR AGREEMENT HEREIN, NOR SHALL ANY SINGLE
OR PARTIAL EXERCISE OF ANY SUCH RIGHT PRECLUDE OTHER OR FURTHER EXERCISE THEREOF
OR OF ANY OTHER RIGHT.

 

SECTION 3.9             AMENDMENT.  NO CHANGE OR AMENDMENT WILL BE MADE TO THIS
AGREEMENT EXCEPT BY AN INSTRUMENT IN WRITING SIGNED ON BEHALF OF EACH OF THE
PARTIES TO THIS AGREEMENT.

 

SECTION 3.10           INTERPRETATION.  THE HEADINGS CONTAINED IN THIS AGREEMENT
ARE FOR REFERENCE PURPOSES ONLY AND SHALL NOT AFFECT IN ANY WAY THE MEANING OR
INTERPRETATION OF THIS AGREEMENT.  WHEN A REFERENCE IS MADE IN THIS AGREEMENT TO
AN ARTICLE OR A SECTION, SUCH REFERENCE SHALL BE TO AN ARTICLE OR SECTION OF
THIS AGREEMENT UNLESS OTHERWISE INDICATED.

 

[signature pages follow]

 

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WHEREFORE, the parties have signed this Agreement effective as of the date first
set forth above.

 

MORGANS HOTEL GROUP LLC

 

MORGANS GROUP LLC

 

 

 

 

 

By:

Morgans Hotel Group Co.,
its managing member

By:

/s/ W. Edward Scheetz

 

 

 

 

Name:

W. Edward Scheetz

 

By:

/s/ W. Edward Scheetz

 

 

Title:

Chief Executive Officer

 

 

Name:

W. Edward Scheetz

 

 

 

Title:

Chief Executive Officer

 

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