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,


 

















 


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


 


4

















 


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


 


6

















 


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


 


7

















 


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:


 


9

















 


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


 


10

















 


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]


 


11

















 


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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