Filed by Bowne Pure Compliance



 




Exhibit 10.1




EMPLOYMENT AGREEMENT




This Employment Agreement (this “Agreement”) is made and entered into intending to be
effective on September 20, 2007 (the “Commencement Date”) by and between Morgans Hotel Group Co.,
with a principal place of business at 475 Tenth Avenue, New York, NY 10018 (the “Company” or the
“Employer”) and Fred J. Kleisner (the “Employee”).



WHEREAS, the former President and Chief Executive Officer of the company resigned from that
position on the Commencement Date;



WHEREAS, the Employee has over 40 years of executive experience in the management of large
hotels and leisure business operations and currently serves on the Board of Directors of the
Company;



WHEREAS, upon the resignation of its former President and Chief Executive Officer, the Company
approached Employee because of his significant experience with the Company’s business and the
industry and requested that he immediately assume those positions;



WHEREAS, the Company desires to employ Employee as the Interim President and Chief Executive
Officer, and Employee desires to be employed by the Company; and



WHEREAS, on the Commencement Date the Employee’s employment as Interim President and Chief
Executive Officer of the Company commenced on the terms and conditions stated below.




NOW, THEREFORE, the Parties agree as follows:




1. Employment.



a. Company hereby agrees to employ Employee and Employee hereby accepts such employment, upon
the terms and conditions contained in this Agreement.



b. Employee will perform the job duties of Interim President and Chief Executive Officer.
Employee agrees to devote substantially his full time, energies and best efforts to the performance
of his duties for Company, to the exclusion of all other business or employment activities.



2. Compensation.



The Company shall pay to the Employee, and the Employee hereby accepts, as payment for the
services Employee renders to the Company remuneration in the following amounts and forms:



a. Salary. The Company will pay Employee a base salary equal to Sixty Five Thousand
Dollars ($65,000.00) per month (the “Base Salary”) which shall be paid on the Company’s regular
payroll schedule. Any adjustments in Employee’s Base Salary shall be made at the discretion of the
Company’s Board of Director’s Compensation Committee (the “Comp Committee”).


 


 









 





b. Bonus. Employee shall be eligible to receive a performance bonus with a target of
100% of Employee’s Base Salary annualized, and a maximum bonus of 200% of Employee’s Base Salary
annualized (the “Performance Bonus”). Employee’s Performance Bonus shall be pro-rated for the
length of time Employee works during any partial calendar year, whether or not Employee is employed
by the Company on the date bonuses are paid to the Company’s similarly situated employees. The
amount of Employee’s Performance Bonus for 2007 shall be determined in the sole discretion of the
Comp Committee based on two elements: (1) 75% of such Performance Bonus shall be calculated based
on the quantitative results of the Company upon which performance bonuses for the Company’s other
executive officers are based; and (2) 25% of the Performance Bonus shall be based on individual
objectives determined by the Comp Committee. Criteria for Employee’s 2008 Performance Bonus shall
be determined by the Comp Committee. This section 2b shall not be construed to prevent or limit
the authority of the Comp Committee in its sole and absolute discretion to award Employee
additional incentive or performance based compensation for the services rendered by Employee.



c. Expenses. During the term of this Agreement, Employee shall be entitled to
reimbursement of all reasonable and actual out-of-pocket business and living expenses incurred by
him in connection with his employment by the Company, including, without limitation the expenses
set forth on Schedule A, , provided that the expenses are reasonably accounted for by the Employee.
To the extent that any reimbursed expense constitutes taxable income to the Employee for Federal
State or local income tax purposes, the Company will, to the extent permitted by law, “gross up”
such reimbursement to cover the cost of such taxes by increasing the amount of the reimbursement by
the amount necessary to fully gross up Employer for all Federal, New York State and New York City
taxes attributable to such reimbursements. The gross up percentage for 2007 is 76.286 percent of
all taxable reimbursed expenses. The applicable tax rates and methodology for calculating the
gross up percentage is set forth on Schedule A and shall be adjusted in subsequent taxable years
consistent with the methodology set forth on Schedule A if the tax rates for any of the applicable
jurisdictions or the taxes imposed on Employee’s taxable income change.



e. Fringe Benefits. Employee will be eligible for benefits, including medical,
dental, life insurance 401(k), and paid vacation, on the same basis as other, similarly situated
employees and in accordance with the terms of the various plans governing these benefits.



3. Term and Termination.



This Agreement shall commence on Employee’s first day of employment for the Company. Either
party may terminate this Agreement by providing the other party with written notice of its/his
intent to terminate this Agreement thirty (30) days in advance of the date of such termination.
Upon termination, Employee will be entitled to receive his base salary through the date of his
termination, as well as his pro-rata bonus through the termination date.


 


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4. Indemnification.



a. If the Employee is made a party, is threatened to be made a party, or reasonably
anticipates being made a party, to any Proceeding (as defined below) by reason of the fact that he
is or was a director, officer, employee, agent, manager, trustee, consultant or representative of the Company or any of its affiliates or is or was serving at the request of the Company or any
of its affiliates, or in connection with his service hereunder, as a director, officer, member,
employee, agent, manager, trustee, consultant or representative of another person or entity, or if
any Claim (as defined below) is made, is threatened to be made, or is reasonably anticipated to be
made, that arises out of or relates to the Employee’s service in any of the foregoing capacities,
then the Employee shall promptly be indemnified and held harmless to the fullest extent permitted
or authorized by the Certificate of Incorporation or Bylaws of the Company, or if greater, by
applicable law, against any and all costs, expenses, liabilities and losses (including, without
limitation, attorneys’ and other professional fees, judgments, interest, expenses of investigation,
penalties, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
incurred or suffered by the Employee in connection therewith or in connection with seeking to
enforce his rights under this Section4 (A), and such indemnification shall continue as to the
Employee even if he has ceased to be a director, member, employee, agent, manager, trustee,
consultant or representative of the Company or other person or entity and shall inure to the
benefit of the Employee’s heirs, executors and administrators. The Employee shall be entitled to
prompt advancement of any and all costs and expenses (including, without limitation, attorneys’ and
other professional fees and other charges) incurred by him in connection with any such Proceeding
or Claim, or in connection with seeking to enforce his rights under this Section 2(c)(iii), any
such advancement to be made within 15 days after he gives written notice, supported by reasonable
documentation, requesting such advancement. Such notice shall include, to the extent required by
applicable law, an undertaking by the Employee to repay the amount advanced if he is ultimately
determined not to be entitled to indemnification against such costs and expenses. Nothing in this
Agreement shall operate to limit or extinguish any right to indemnification, advancement of
expenses, or contribution that the Employee would otherwise have (including, without limitation, by
agreement or under applicable law). For purposes of this Agreement, “Claim” shall include, without
limitation, any claim, demand, request, investigation, dispute, controversy, threat, discovery
request, or request for testimony or information and “Proceeding” shall include, without
limitation, any actual, threatened, or reasonably anticipated, action, suit or proceeding, whether
civil, criminal, administrative, investigative, appellate, formal, informal or other.



b. A directors’ and officers’ liability insurance policy (or policies) shall be kept in place,
during the period that this Agreement is in effect and thereafter until the later of (x) the sixth
anniversary of the date on which the Employee’s employment with the Company terminates and (y) the
date on which all claims against the Employee that would otherwise be covered by the policy (or
policies) would become fully time barred, providing coverage to the Employee that is no less
favorable to him in any respect (including, without limitation, with respect to scope, exclusions,
amounts, and deductibles) than the coverage then being provided to any other present or former
senior executive or director of the Company.


 


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5. Treatment of Confidential Information.



As a Company employee, Employee will acquire Confidential Information in the course of
Employee’s employment. Employee agrees that, in consideration of employment with the Company,
Employee will treat such Confidential Information as strictly confidential. Employee will not,
directly or indirectly, at any time during employment with the Company or any time thereafter, and without regard to when or for what reason, if any, such employment shall terminate, use or
cause to be used any such Confidential Information, in connection with any activity or business
except in the normal course of performing his designated duties for the Company. Employee shall
not disclose or cause to be disclosed any such Confidential Information to any third parties unless
such disclosure has been authorized in writing by the Company or except as may be required by
regulatory body or governmental body. “Confidential Information” is any Company confidential
information not generally known to the public, including but not limited to trade secrets, mailing
lists, financial information, business plans and/or policies, methods of operations, customer lists
and information, sales and marketing plans, research and development plans, strategic plans, and
any other information Employee acquires in the course of employment with the Company that is not
readily available to the public.



6. Non-solicitation.



During the period that Employee is employed by the Company, and for a period of two (2) years
thereafter, regardless of the reason Employee’s employment with the Company terminates, Employee
will not directly or indirectly, either individually or through any entity with which Employee may
become associated, cause, solicit, entice or induce any present or future employee of the Company
to leave the employ of the Company and/or directly hire or directly or indirectly cause, solicit,
entice or induce any present or future employee of the Company to become employed or associated in
any capacity with a competitor of the Company.



7. Remedies.



Employee acknowledges that the breach or threatened breach of this Agreement will cause the
Company irreparable harm to its business and good will, for which there may be no adequate remedy
at law. Consequently, in the event that Employee breaches or threatens to breach the Agreement,
the Company shall be entitled to both: (i) the issuance by a court of competent jurisdiction of an
injunction, restraining order, or other equitable relief in favor of itself, without the necessity
of posting a bond, restraining Employee from committing or continuing to commit any violation; and
(ii) monetary damages insofar as they can be determined. Any right to obtain an injunction,
restraining order or other equitable relief under this paragraph 6 shall not be deemed a waiver of
any right to assert any other remedy the Company may have at law or in equity.



8. Tax Liability



It is the intention of the parties that payments or benefits payable under this Agreement not
be subject to the additional tax imposed pursuant to Section 409A of the Internal Revenue Code. To
the extent such potential payments or benefits could become subject to such Section, the parties
shall cooperate to amend this Agreement with the goal of giving Employee the economic benefits
described herein in a manner that does not result in such tax being imposed.



9. Severability



If a court of competent jurisdiction holds any provision of this Agreement to be illegal,
invalid or unenforceable, the remainder of the provisions of this Agreement shall continue in full
force and effect. Further, if any court of competent jurisdiction construes any portion of any of
the covenants contained in this Agreement to be unenforceable or unreasonable as to scope, the court
may and is requested by the Parties to modify and enforce the covenants to the extent reasonable.


 


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10. Entire Agreement; Amendment.



This Agreement expresses the entire and exclusive understanding of the parties to this
Agreement only with respect to the matters covered by this Agreement and incorporates any and all
prior agreements, understandings, negotiations and discussions relating hereto, whether written or
oral, all of which are hereby terminated and canceled. This Agreement may be modified or amended
only by a written instrument manually signed by all parties to this Agreement.




11. Applicable Law.



This Agreement has been made under and shall be construed and enforced in accordance with the
laws of the State of New York, notwithstanding its choice of law rules to the contrary.



12. Notice.



Any notice, statement or demand required to be given under this Agreement shall be in writing
and shall be sent by hand delivery against receipt, certified mail, return receipt requested or by
a nationally recognized overnight carrier to the address of the parties first listed above.



13. Waiver.



The failure of either party to insist upon strict performance of any of the terms or
provisions of this Agreement or to exercise any option, right or remedy contained in this
Agreement, shall not be construed as a waiver or as a relinquishment for the future of such term,
provision, option, right or remedy, but the same shall continue and remain in full force and
effect. No waiver by either party of any term or provision of this Agreement shall be deemed to
have been made unless expressed in writing and signed by such party.



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



	 	 	 	 	 	 	 
	EMPLOYER:	 	 	 	EMPLOYEE:
	 
	 	 	 	 	 	 
	MORGANS HOTEL GROUP CO.	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Richard Szymanski
	 	 	 	/s/ Fred J. Kleisner
	 

	 	 
	 	 	 	 
	
Name:

	 	
Richard Szymanski
	 	 	 	Fred J. Kleisner
	 
	 	 	 	 	 	 
	Title:

	 	Chief Financial Officer	 	 	 	 





 


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SCHEDULE A




REIMBURSEMENT EMPLOYEE EXPENSES





	1.	 	All Employee business travel expenses which shall specifically include fist class seating and
accommodations.

	 
	2.	 	All travel expenses of Employee’s spouse accompanying Employee in connection with Employee’s
business travel which shall specifically include first class seating and accommodations.

	 
	3.	 	Employee’s housing expenses for a residence in New York, New York, not to exceed $30,000 per
month before the tax gross up.

	 
	4.	 	Employee shall receive a relocation reimbursement to compensate Employee for the cost of
transporting personal items to New York, New York during the Initial Term.

	 
	5.	 	Employee shall be provided one reasonably satisfactory automobile by the Company or be
reimbursed for the cost of leasing one reasonably satisfactory automobile.

	 
	6.	 	All parking expenses in New York, New York for one automobile.

	 
	7.	 	All of Employee’s legal and accounting fees incurred in connection with the review,
negotiation and drafting of this Agreement, any amendment thereto and other documents related
thereto.






(Schedule 2c continued on following page)



 


 









 





TAX GROSS UP




	 	 	 	 	 	 	 
	Rates
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	(1)

	 	Federal Income Tax
	 	 	35.000	%
	 
	 	 	 	 	 	 
	(2)

	 	Federal Medicare Tax
	 	 	1.450	%
	 
	 	 	 	 	 	 
	(3)

	 	New York State Income Tax
	 	 	6.850	%
	 
	 	 	 	 	 	 
	(4)

	 	New York City Income Tax
	 	 	3.648	%
	 
	 	 	 	 	 	 
	 

	 	Less: 35% Federal Income Tax
Benefit for deduction of (3) and (4)
	 	 	( 3.674	%)
	 
	 	 	 	 	 	 
	 

	 	Initial Gross Up Percentage
	 	 	43.274	%
	 
	 	 	 	 	 	 
	 

	 	Full Gross Up Percentage
	 	76.286%1






 




	 	 	 	 	 	 	 	 	 	 	 
	1

	 	1	 	 	 	 	 	 	 	 
	 

	 	100% — 43.274%

	 	=
	 	 	76.286	%