Exhibit 10.28


 


MORGANS HOTEL GROUP CO.
 ANNUAL BONUS PLAN


 


1.                                       PURPOSE OF PLAN


 


The
purpose of the Morgans Hotel Group Co. Annual Bonus Plan (the “Plan”) is to
attract, retain and motivate selected employees of Morgans Hotel Group Co. (the
“Company”) and its subsidiaries
and affiliates who are executives and employees of the Company in order to
promote the Company’s long-term growth and profitability.


 


2.                                       ADMINISTRATION


 


The
Plan shall be administered by the Compensation Committee (the “Committee”) of
the Board of Directors (the “Board”) of the Company. The Committee shall have
complete control over the administration of the Plan and shall have the
authority in its sole and absolute discretion to: (i) exercise all of the
powers granted to it under the Plan; (ii) construe, interpret and implement the
Plan; (iii) prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations governing its own operations; (iv) make
all determinations necessary or advisable in administering the Plan (including,
without limitation, calculating the size of the bonus payable to each
participant); (v) correct any defect, supply any omission and reconcile
any inconsistency in the Plan; and (vi) amend the Plan to reflect changes in or
interpretations of applicable law, rules or regulations. The determination of
the Committee (or the Board, as applicable) on all matters relating to the Plan
and any amounts payable thereunder shall be final, binding and conclusive on
all parties. The Committee may allocate among its members and may delegate some
or all of its authority or administrative responsibility to such individual or
individuals who are not members of the Committee as it shall deem necessary or
appropriate.


 


Notwithstanding
anything to the contrary contained herein, the Board may, in its sole
discretion, at any time and from time to time, administer the Plan. The Board
shall have all of the authority and responsibility granted to the Committee
herein.


 


No
member of the Board or the Committee, nor any officer or employee of the
Company or any individual acting on behalf of the Board or the Committee, shall
be personally liable for any action, determination, or interpretation taken or
made in good faith with respect to the Plan, and all members of the Board or
the Committee and each and any officer or employee of the Company or any
individual acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.


 


3.                                       PARTICIPANTS


 


Eligibility
to participate in the Plan is limited to those executives and employees who, in
the Committee’s judgment based on the recommendations of the


 

















 


Company’s chief executive officer (the “CEO”), have an
influence on the Company’s long-term corporate performance. The Committee shall
designate the individual executives and employees eligible to participate in
the Plan for each performance period. At anytime during a performance period,
the Committee in its sole discretion may add executives and employees to the
Plan for that performance period or remove executives and employees from the
Plan for that performance period. Participation in any performance period does
not ensure participation in future performance periods. An individual’s active
participation in any performance period shall cease in the event that he or she
ceases to be employed by the Company during such period.


 


4.                                       PERFORMANCE PERIODS


 


Unless
otherwise determined by the Committee, the term over which performance shall be
measured shall be a single calendar year. The first performance period shall be
the 2006 calendar year and thereafter each performance period shall be one full
calendar year, unless otherwise determined by the Committee.


 


5.                                       PERFORMANCE GOALS


 


The
Committee shall establish in writing the performance goals for such performance
period. The Committee reserves the right, in its sole discretion, to adjust
performance goals to reflect such quantitative or qualitative considerations as
the Committee deems relevant.


 


6.                                       TARGET AND MAXIMUM BONUS OPPORTUNITIES


 


The
Committee shall establish the target bonus opportunity and maximum bonus
opportunity for each participant at the same time that it establishes the
performance goals for such performance period. In the event any participant is
added to the Plan, the Committee may set the target bonus opportunity and
maximum bonus opportunity for such person at that time.


 


7.                                       ACTUAL BONUS AMOUNT


 


Upon
the completion of each performance period, the Committee shall evaluate the
Company’s performance against the established performance goals and shall
determine the amount of bonuses payable to each participant. The Committee may,
in its sole discretion, increase or decrease the amount of the bonuses payable
to any participant to reflect such quantitative or qualitative considerations
as the Committee deems relevant. The actual bonus earned under the Plan shall
be payable in cash or, to the extent permissible by applicable law and at the
Committee’s sole discretion, in shares of stock of the Company or in equity
awards (which may be subject to vesting and transfer restrictions) with respect
to the shares of stock of the Company under one of the Company’s equity
compensation plans. The value of any such stock or equity awards and the terms
of any equity awards shall be determined by the Committee in its sole
discretion.


 


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A
participant whose active participation in the Plan ceases before the last day
of the performance period, or whose employment terminates before the bonus
amounts are paid under the Plan, shall not be entitled to a bonus hereunder.


 


8.                                       ADOPTION DATE AND EFFECTIVE DATE


 


The
Plan was adopted by the Board on                    ,
2006 and approved by the stockholders of the Company on                    ,
2006. The Plan shall become effective on the day prior to the date of the
consummation of the initial public offering of shares of common stock of the
Company (the “IPO Date”). In the event that the IPO Date has not occurred by
July 1, 2006, the Plan shall expire and be null and void without any force or
effect.


 


9.                                       AMENDMENT AND TERMINATION


 


The
Board may suspend or terminate the Plan, in whole or in part, at any time, and
may from time to time amend the Plan in such respects as the Board may deem
advisable.


 


10.                                 MISCELLANEOUS


 


(a)           The
establishment of the Plan shall not be construed as conferring any legal rights
upon any participant for a continuation of employment, nor shall it interfere
with the rights of the Company to discharge a participant and treat him or her
without regard to the effect which such treatment might have upon him or her as
a participant in this Plan.


 


(b)           The
Company shall have the right to deduct from any amounts otherwise payable to a
participant, whether pursuant to the Plan or otherwise, or otherwise collect
from the participant, any required minimum withholding taxes with respect to
benefits under the Plan.


 


(c)           The
Company, in its sole discretion, may assign the Plan and all obligations and
liabilities hereunder to any parent organization without any prior notice to or
consent of any participant. In the event of any assignment to any such parent
organization, such parent organization shall be treated as a successor to the
Company and shall exercise all rights of the Company under the Plan.


 


(d)           Subject
to any applicable law, no benefit under the Plan shall be subject in any manner
to, nor shall the Company be obligated to recognize, any purported
anticipation, alienation, sale, transfer (otherwise than by will or the laws of
descent and distribution), assignment, pledge, encumbrance or charge, and any
attempt to do so shall be void. No such benefit shall in any manner be liable
for or subject to garnishment, attachment, execution, or a levy, or liable for
or subject to the debts, contracts, liabilities, engagements or torts of the
participants.


 


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(e)           The
Plan shall not be construed as conferring on a participant any right, title, interest
or claim in or to any specific asset, reserve, account or property of any kind
possessed by the Company. To the extent that a participant or any such person
acquires a right to receive payments from the Company, such rights shall be no
greater than the rights of an unsecured general creditor.


 


(f)            ALL RIGHTS AND OBLIGATIONS UNDER THE PLAN SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICT OF LAWS.


 


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