Document:

Exhibit 10.6

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.

 

 

 

“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.

 

11

 

(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

 

12

 

(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.

 

13

 

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.

 

14

 

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).

 

15

 

(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.

 

16

 

(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.

 

17

 

(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.

 

18

 

(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]

 

19

 

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:

	 	 

 

20

 

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:   
             
     

 

21

 

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.

 

1

 

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.

 

2

 

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.

 

3

 

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     
            
           
             

 

B-1

 

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.

 

B-2Exhibit 10.7

Exhibit 10.7

MORGANS HOTEL GROUP CO.

2011 EXECUTIVE PROMOTED INTEREST BONUS POOL AWARD AGREEMENT

2011 EXECUTIVE PROMOTED INTEREST BONUS POOL 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 long-term bonus pool awards (“2011
Bonus Pool Awards”) 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” or this “Award Agreement”) and thereby provide
additional incentive for them to promote the progress and success of the business of the Company
and its Affiliates. 2011 Bonus Pool Awards were approved by the Committee pursuant to authority
delegated to it by the Board. This Agreement evidences one award (this “Award”) in a series
of substantially identical 2011 Bonus Pool 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 participation percentage in the promoted interest bonus pool provided
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 Bonus Pool Awards shall be administered by the Committee;
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 make at any time any
provision 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:

“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.

“Award Participation” has the meaning set forth in Section 3.

 

 

 

“Award Period” means the period from and after the date of Grantee’s admission as an
Employee Member and to and including the earlier to occur of (i) the third anniversary of the
Effective Date and (ii) the termination of Grantee’s Continuing Service.

“Baseline Value” means $8.87.

“Bonus Pool Unit” means a unit of membership interest in Promote Pool LLC. The
Bonus Pool Units shall be issued in different series, with each series corresponding to a
separate Eligible Promoted Interest held by Promote Pool LLC or a wholly-owned subsidiary
thereof.

“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.

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.

“Code” means the Internal Revenue Code of 1986, as amended.

 

2

 

“Common Share” means a share 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).

“Common Share Return Condition” shall be deemed to be satisfied as of any date of
determination if the Common Share Price, as of such date, shall be at least equal to (x) the
Baseline Value multiplied by (y) an amount equal to (i) the sum of one plus the Target
Return raised to (ii) the n/365th power, where “n” equals the number of days that has
elapsed from and including the Effective Date to but excluding the date of determination.

“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.

“Designated Participation Percentage” means, with respect to any series of Employee
Units, the lesser of 50% or the percentage determined by the Independent Committee at the time it
approves the contribution of the applicable Eligible Promoted Interest in Promote Pool LLC, if such
Eligible Promoted Interest did not satisfy the Safe Harbor Requirements as of the applicable
Initial Closing.

“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.

 

3

 

“Eligible Promoted Interest” means a Promoted Interest that the Company or any entity
through which the Company directly or indirectly acquires or has the right to acquire, or is
created, in a transaction as to which the Initial Closing occurs during the Award Period and that
satisfies either of the following requirements as of the Initial Closing:

(i) The Investment Committee (with the affirmative vote of its independent member)
shall have determined in good faith that the applicable Promoted Interest satisfies the Safe
Harbor Requirements; or

(ii) The terms of the hotel acquisition or development transaction, including the
contribution of the applicable Promoted Interest to Promote Pool LLC, shall have been
approved in good faith by the Independent Committee.

The determination as to whether a Promoted Interest that does not satisfy the Safe Harbor
Requirements shall be deemed to be an Eligible Promoted Interest, and the Designated Participation
Percentage with respect to such Eligible Promoted Interest, shall be made in good faith by the
Independent Committee and shall be conclusive.

In the case of an Eligible Promoted Interest that the Company, the Operating Company, Promote
Pool LLC, or a wholly owned subsidiary of the Company acquires or has the right to acquire, the
Eligible Promoted Interest will consist of the entire applicable Promoted Interest. In the case of
an Eligible Promoted Interest that any other entity in which the Company or the Operating Company
has a direct or indirect equity interest acquires, or has the right to acquire, the “Eligible
Promoted Interest” will, at the election of the Managing Member, consist of either (x) an
assignment of the proceeds received by the Company, the Operating Company, or a wholly owned
subsidiary of the Company with respect to the applicable Promoted Interest, or (y) a special
allocation of the portion of such direct or indirect interest in the Eligible Promoted Interest
that is owned by the Company, the Operating Company, or a wholly owned subsidiary that represents
their respective direct or indirect interest in the Promoted Interest owned by such other entity.

An Eligible Promoted Interest can consist of either an equity interest in a Hotel Investment
Entity or a contractual right to share in some or all of the profits, losses, or gains of a Hotel
Investment Entity (a “Contractual Right”) or one or more hotel properties owned by a Hotel
Investment Entity.

For the avoidance of doubt, an incentive management fee or other amount measured by a
percentage of gross revenues, gross operating profit, net house profit, or similar performance
measure and payable to the Company, or any entity through which the Company, directly or
indirectly, holds an equity interest or a Contractual Right, as compensation for the performance of
management services shall not be an Eligible Promoted Interest.

For the further avoidance of doubt, no Promoted Interest as to which the Initial Closing
occurs after the Award Period shall be deemed to be an “Eligible Promoted Interest.”

“Employee Member” means a member of Promote Pool LLC other than the Managing Member or
any other subsidiary of the Company.

“Employee Unit” means any Bonus Pool Unit that is held by an Employee Member or a
permitted transferee thereof (other than Managing Member or any other subsidiary of the Company).

 

4

 

“Fair Market Value” means, as of any given date, the fair market value of a security,
an Eligible Promoted Interest, or other property 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.

“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:

(iii) 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;

(iv) 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;

(v) 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

(vi) 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

 

5

 

(vii) 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;

“Hotel Investment Entity” means a limited liability company, limited partnership,
corporation, or other form of business entity that owns, directly or indirectly, or proposes to
acquire or develop, one or more hotels or other hospitality-related properties. Neither the
Company nor any consolidated subsidiary of the Company shall be deemed to be a Hotel Investment
Entity.

“Independent Committee” means a committee (either standing or ad hoc) of the Board
that has the responsibility and authority for determining whether a Promoted Interest that does not
satisfy the Safe Harbor Requirements will nonetheless be contributed to Promote Pool LLC and, if
so, what the Designated Participation Percentage with respect to such Promoted Interest will be.

“Initial Closing” means, with respect to any Eligible Promoted Interest, the date of
the closing of the transaction as the result of which the Company, a consolidated subsidiary
thereof, Promote Pool LLC, or any entity through which such Eligible Promoted Interest is held, and
one or more unaffiliated persons become equity owners of the Hotel Investment Entity (or obtains a
Contractual Right) related to such Eligible Promoted Interest. The independent member of the
Investment Committee shall determine, in good faith, when the Initial Closing occurs with respect
to any Eligible Promoted Interest.

“Investment Committee” means a management committee, established by the Board that
includes at least one independent director that is delegated authority, among other things, to
approve the terms of investments in Hotel Investment Entities and determine whether Promoted
Interests in Hotel Investment Entities satisfy the Safe Harbor Requirements.

“LLC Agreement” means the limited liability company agreement of Promote Pool LLC, as
it may be amended from time to time in accordance with its terms, that the Managing Member will
enter in accordance with Section 7(a). The LLC Agreement will contain the provisions set
forth on Exhibit A attached hereto and such other terms and conditions as the Committee
shall in good faith determine are necessary or appropriate for implementing the provisions and
accomplishing the objectives of this Award Agreement and the Award Agreements of other recipients
of 2011 Bonus Pool Awards.

“Managing Member” means the Operating Company, or a wholly-owned subsidiary thereof,
in its capacity as managing member of Promote Pool LLC.

“Member” means a member of Promote Pool LLC, which shall be either the Managing Member
or an Employee Member.

“Opening” means, with respect to any Eligible Promoted Interest, the date on or after
the Initial Closing on which all construction, development, and major renovation work is completed
and substantially all of the rooms and other facilities in the applicable hotel are open for
business. If the applicable hotel is operating as of the Initial Closing and the business plan
relating to the hotel does not contemplate a substantial renovation or redevelopment of the hotel
that will result in material disruption of the operations of the hotel for an extended period, the
Opening shall be deemed to occur at the same time as the Initial Closing. If the business plan for
such hotel contemplates such
renovation or redevelopment, the Opening shall be deemed to occur following the completion of
such renovation or redevelopment and substantially all of the rooms and other facilities in the
applicable hotel are open for business. With respect to an Eligible Promoted Interest in a Hotel
Investment Entity that owns direct or indirect interests in more than one hotel property, an
Opening shall be deemed to occur with respect to any such hotel property when such hotel property
meets the foregoing requirements. The independent member of the Investment Committee shall in good
faith determine when an Opening occurs with respect to any Eligible Promoted Interest.

 

6

 

“Partial Sale Event” means, with respect to any Eligible Promoted Interest, the date
on which (x) the applicable Hotel Investment Entity’s direct or indirect ownership interest in the
applicable hotel property is reduced by reason of a disposition of an interest in such property to
a third party; or (y) Promote Pool LLC’s direct or indirect ownership interest in such Eligible
Promoted Interest is reduced by reason of a disposition of an interest in such Eligible Promoted
Interest to a third party. With respect to an Eligible Promoted Interest in a Hotel Investment
Entity that owns direct or indirect interests in more than one hotel property, a Partial Sale Event
described in clause (x) above with respect to any such hotel property shall be deemed to occur when
the Hotel Investment Entity’s direct or indirect ownership interest in such hotel property is
reduced. The independent member of the Investment Committee shall in good faith determine when a
Partial Sales Event occurs with respect to any Eligible Promoted Interest.

“Participation Amount” has the meaning set forth in Section 3.

“Participation Percentage” means, as of any date of determination, the
percentage 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).

“Promoted Interest” means an interest in a Hotel Investment Entity, or other
Contractual Right, that represents a right to participate in profits, losses, and gains of the
Hotel Investment Entity in excess of amounts attributable to the percentage of capital
contributions made by the Company and its subsidiaries in the Hotel Investment Entity. For the
avoidance of doubt, an incentive management fee or other amount measured by a percentage of gross
revenues, gross operating profit, net house profit, or similar performance measure and payable to
the Company or any entity holding such Interests as compensation for the performance of management
services shall not be a Promoted Interest .

“Promoted Interest Proceeds” means, with respect to any Eligible Promoted
Interest, the amount of any cash (or cash equivalent) distributions or dividends received
by Promote Pool LLC with respect to such Eligible Promoted Interest or, if Promote Pool LLC
receives any other property in exchange for or as a distribution with respect to an
Eligible Promoted Interest, any cash (or cash equivalents) received as a distribution or
dividend with respect to or upon the sale or disposition of such other property. In the
case of the removal by the Company of the designation of an Eligible Promoted Interest as
part of the Promoted Interest Bonus Pool, such removal shall be treated as a disposition of
the Eligible Promoted Interest for an amount of cash equal to its Fair Market Value and an
amount equal to such Fair Market Value shall be deemed to be Promoted Interest Proceeds
hereunder.

 

7

 

“Promote Pool LLC” means MHG Employee Promoted Interest LLC, a to-be-formed
Delaware limited liability company, or its successor.

“Qualified Management Agreement” means a hotel management agreement under
which the Company or a consolidated subsidiary of the Company is the manager that contains
terms that satisfy the requirements set forth in that certain letter delivered by the
Company to Grantee concurrently with the execution of this Award, as determined by the
Investment Committee in good faith.

“Qualified Termination” has the meaning set forth in Section 4.

“Safe Harbor Requirements” means, with respect to any Eligible Promoted Interest, the
following requirements:

(i) The Company or one of its consolidated subsidiaries is manager of the hotel
properties owned, directly or indirectly, by the Hotel Investment Entity pursuant to a
Qualified Management Agreement;

(ii) The percentage interest acquired by the Company or any of its consolidated
subsidiaries in the applicable Hotel Investment Entity does not exceed twenty percent (20%),
without taking into account the applicable Promoted Interest;

(iii) The value of the aggregate capital contribution or capital commitment of the
Company and its consolidated subsidiaries does not exceed $20 million; and

(iv) The equity investment by the Company and its consolidated subsidiaries must be on
no less favorable terms, in any material respect, than the equity investment to the other
investors in the Hotel Investment Entity (without taking into account the applicable
Promoted Interest) or, if the equity investment by the other investors was made more than
one year before the Initial Closing with respect to such Eligible Promoted Interest is
anticipated to occur, the equity investment by the Company and its consolidated subsidiaries
must be made based on the Fair Market Value of the interests acquired in the Hotel
Investment Entity.

The determination by the Investment Committee as to whether a Promoted Interest satisfies the Safe
Harbor Requirements shall be made in good faith and shall be conclusive.

“Sale Event” means, with respect to any Eligible Promoted Interest, the earlier of the
date on which (x) the applicable Hotel Investment Entity no longer holds a direct or indirect
ownership interest in the applicable hotel property or (ii) Promote Pool LLC no longer holds,
directly or indirectly, such Eligible Promoted Interest. With respect to an Eligible Promoted
Interest in a Hotel Investment Entity that owns direct or indirect interests in more than one hotel
property, a Sale Event described in clause (x) above with respect to any such hotel property shall
be deemed to occur when the Hotel Investment Entity no longer owns a direct or indirect ownership
interest in such hotel property. The independent member of the Investment Committee shall in good
faith determine when a Sales Event occurs with respect to any Eligible Promoted Interest.

“Securities Act” means the Securities Act of 1933, as amended.

 

8

 

“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.

“Subsidiary” means any “subsidiary corporation” of the Company within the
meaning of Section 424(f) of the Code.

“Target Return” shall be equal to nine percent (9%) per annum, compounded
annually.

“Transfer” has the meaning set forth in Section 6.

3. Promoted Interest Bonus Pool Award; Vesting

(a) The Operating Company hereby grants to Grantee this Award consisting of the right, subject
to the terms and conditions of this Award Agreement, to be admitted as an Employee Member of
Promote Pool LLC and to receive the Participation Percentage of each series of the Employee Units
issued by Promote Pool LLC during the Award Period (the “Award Participation”). The Award
Participation (A) will be subject to forfeiture as provided in Section 3(c) and in
Section 4 and (B) will be subject to vesting as provided below in Section 3(b) and
in Section 4. At any time, the Committee may grant additional 2011 Bonus Pool Awards with
such Participation Percentages set forth therein as the Committee may determine, in its sole
discretion, provided that the total Participation Percentages of all 2011 Bonus Pool Awards
(including this Award) outstanding at any time shall not exceed 100%.

(b) The interest of Grantee in each series of Employee Units issued to Grantee during the
Award Period shall be eligible for vesting based on a combination of (i) the satisfaction of the
vesting conditions relating to the hotel properties applicable to the Eligible Promoted Interest
related to such series of Employee Units, as set forth below in this Section 3(b) and (ii)
the passage of time (three years or a shorter period in certain circumstances as provided in
Section 4) as provided in this Section 3(b). The Grantee’s interest in a series of
Employee Units shall become vested in the following amounts, at the following times, and upon the
following conditions, provided that the Continuous Service of the Grantee continues through
and on the applicable vesting date described below or the accelerated vesting date provided in
Section 4 hereof, as applicable:

	 	(i)	 	one-third of Grantee’s interest in such series of Employee Units shall become
vested on the later to occur of —

	 	(A)	 	the third anniversary of the Effective Date (or any accelerated
vesting date provided in Section 4 hereof, if applicable ) and

	 	(B)	 	the Initial Closing with respect to the applicable Eligible
Promoted Interest; and

 

9

 

	 	(ii)	 	one-third of Grantee’s interest in such series of Employee Units shall become
vested on the later of to occur of —

	 	(A)	 	the third anniversary of the Effective Date (or any accelerated
vesting date provided in Section 4 hereof, if applicable ) and

	 	(B)	 	the Opening with respect to the applicable Eligible Promoted
Interest;

provided that, in the case of an Eligible Promoted Interest in Hotel
Investment Entity that owns direct or indirect interests in more than one hotel
property, a percentage of Grantee’s interest in such series of Employee Units equal
to (I) one-third divided by (II) the number of such hotel properties shall
become vested on the later of to occur of (x) the date specified in paragraph (A)
above and (y) the Opening of any such hotel property; and

	 	(iii)	 	one-third of Grantee’s interest in such series of Employee Units shall become
vested on the later of to occur of —

	 	(A)	 	the third anniversary of the Effective Date and

	 	(B)	 	the Sale Event with respect to the applicable Eligible Promoted
Interest.

provided that, in the case of an Eligible Promoted Interest in a Hotel
Investment Entity that owns direct or indirect interests in more than one hotel
property, a percentage of Grantee’s interest in such series of Employee Units equal
to (I) one-third divided by (II) the number of such hotel properties, shall
become vested on the later to occur of (x) the date specified in paragraph (A) above
and (y) the Sale Event with respect to any such hotel property; and

provided further that, in the event a Partial Sale Event occurs with respect
to an Eligible Promoted Interest, a percentage of Grantee’s interest in such series
of Employee Units equal to (I) one-third multiplied by (II) the percentage of
the Fair Market Value of the direct or indirect interest in the applicable Hotel
Investment Entity or hotel property that was disposed of in such Partial Sale Event,
as determined in good faith by the Investment Committee, shall become vested on the
later to occur of (x) the date specified in paragraph (A) above and (y) the Partial
Sale Event with respect to any such hotel property; and

provided further that, in the event a Partial Sale Event occurs with respect
to a particular hotel property in the case of a Hotel Investment Entity that holds
more than one property, a percentage of Grantee’s interest in such series of Employee
Units equal to (I) one-third multiplied by (II) the percentage of the Fair
Market Value of the direct or indirect interest in the applicable hotel property that
was disposed of in such Partial Sale Event, as determined in good faith by the
Investment Committee, divided by (III) the number of such hotel properties
owned by such Hotel Investment Entity, shall become vested on the later of to occur
of (x) the date specified in paragraph (A) above and (y) the Partial Sale Event with
respect to any such hotel property; and

provided further that, in the event a Sale Event occurs with respect to an
Eligible Promoted Interest (or with respect to a particular hotel property in the
case of a Hotel Investment Entity that holds more than one property) without an
Opening having
occurred with respect thereto, then such Sale Event shall also be deemed to
constitute the Opening with respect to such Eligible Promoted Interest for purpose of
Section 3(b)(ii).

 

10

 

(c) Any portion of Grantee’s interest in any series of Employee Units that has not become
vested pursuant to Section 3(b) and Grantee’s Award Participation shall, without payment of
any consideration by the Company or Promote Pool LLC, automatically and without notice be forfeited
and be and become null and void upon the termination of the Continuous Service of Grantee (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 portion of the Grantee’s Employee Units and in future
issuances of Employee Units by Promote Pool LLC.

(d) In the event that a Hotel Investment Entity with respect to which Promote Pool LLC holds
an Eligible Promoted Interest receives a new hotel property in exchange for another hotel property,
with the result that Promote Pool LLC thereafter holds an Eligible Promoted Interest in such new
hotel property, the vesting percentage that applied to the applicable series of Employee Units
immediately prior to such exchange shall remain in effect with respect to such series following the
exchange.

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 applicable provisions of this Section 4 shall govern the treatment of the
Grantee’s Award Participation, 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
vesting occur with respect to this Award other than as specifically provided in Section
3(b) and this Section 4.

(b) In the event of termination of the Grantee’s Continuous Service by (A) the Company without
Cause, (B) the Grantee for Good Reason, or (C) by reason of the death or Disability of Grantee
(each of the events described in (A), (B) and (C), a “Qualified Termination”), then the
Award Participation shall terminate with respect to any future issuances of Employee Units and the
Award Period shall terminate, each effective upon termination of Grantee’s Continuing Service, but
the following provisions of this Section 4(b) shall modify the vesting of each series of
Employee Units then held by Grantee:

(i) the vesting conditions set forth in Sections 3(b)(i)(A) and
3(b)(ii)(A) (but not under Section 3(b)(iii)(A)) shall be deemed to have
been satisfied with respect to each series of Employee Units held by Grantee as of the
effective date of such Qualified Termination; and

 

11

 

(ii) the Grantee’s interest in each series of Employee Units then held by Grantee shall
vest under Sections 3(b)(i) and 3(b)(ii), to the extent provided in such
sections, upon the satisfaction of the vesting conditions set forth in Sections
3(b)(i)(B) and 3(b)(ii)(B), as applicable (to the extent that any such condition
shall not previously have been satisfied), as if such Qualified Termination had not
occurred.

Upon the occurrence of a Qualified Termination, the unvested portion of Grantee’s interest in each
series of Employee Units then held by Grantee that is subject to vesting upon the conditions set
forth in Section 3(b)(iii) shall be forfeited, with the consequences set forth in the LLC
Agreement.

(c) In the event of a termination of the Grantee’s Continuous Service other than a Qualified
Termination, the Award Participation shall terminate with respect to any future issuances of
Employee Units and the Award Period shall terminate, each effective upon termination of Grantee’s
Continuing Service, and Grantee’s unvested interest in each series of Employee Units then held by
Grantee shall be forfeited, with the consequences set forth in the LLC Agreement as described in
Exhibit A, and shall no longer be subject to future vesting pursuant to Section
3(b)(i), 3(b)(ii), or 3(b)(iii), without payment of any consideration by the
Company or Promote Pool LLC, automatically and without notice, 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 or such unvested interest in any series of Employee
Units, other than with respect to any interest in any series of Employee Units that may have vested
pursuant to Section 3(b)(i), 3(b)(ii), or 3(b)(iii)prior to such
termination of Grantee’s Continuous Service.

5. Promote Pool LLC Units

(a) Formation of Promote Pool LLC. Prior to the Initial Closing of the first
transaction in which the Company or any entity will receive an Eligible Promoted Interest after the
Effective Date, the Company will organize Promote Pool LLC and enter into the LLC Agreement.

(b) Contribution of Eligible Promoted Interests. At the Initial Closing with respect
to any Eligible Promoted Interest, Promote Pool LLC (or a wholly owned subsidiary thereof) will
become a member or partner in, or acquire a Contractual Right with respect to, the applicable Hotel
Investment Entity and, in that capacity, will acquire the Eligible Promoted Interest, or the
Operating Company (or a subsidiary thereof) shall contribute the Eligible Promoted Interest to
Promote Pool LLC.

(c) Issuance of Employee Units. Concurrently with the Initial Closing with respect to
any Eligible Promoted Interest, the Managing Member shall amend the LLC Agreement to create a new
series of Bonus Pool Units relating to the Eligible Promoted Interest. The portion of the Bonus
Pool Units issued to Employee Members concurrently with the Initial Closing shall, as of such date,
represent an aggregate interest in the applicable Eligible Promoted Interest equal to the
Designated Participation Percentage with respect to such series of Bonus Pool Units. If the
Initial Closing with respect to such Eligible Promoted Interest occurs during the Award Period,
Promote Pool LLC shall issue to Grantee, concurrently with such Initial Closing, a percentage of
the applicable series of Employee Units equal to the product of (i) his or her Participation
Percentage as of such date times (ii) the Designated Participation Percentage with respect
to such series of Bonus Pool Units.

 

12

 

(d) Distributions. Following the receipt by Promote Pool LLC or any of its
wholly-owned subsidiaries of any Promoted Interest Proceeds, Promote Pool LLC shall distribute such
Promoted
Interest Proceeds to the Members in accordance with the terms and conditions of the LLC
Agreement. The LLC Agreement will include provisions relating to distributions in substantially
the form set forth on Exhibit A attached hereto.

6. Restrictions on Transfer

Subject to the next sentence, no portion of the Award Participation 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”).
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.
Notwithstanding the foregoing, in the event Managing Member elects to sell or otherwise dispose of
all or any portion of its interest in any series of interests in Promote Pool LLC to an
unaffiliated third party, Managing Member shall ensure that such third party offers to acquire all
or the comparable percentage (as the case may be) of the Employee Units in such Series held by each
holder of such series of Employee Units, on the same terms and conditions as such unaffiliated
third-party is acquiring the interests of the Managing Member, in accordance with such procedures
for such offer and purchase as the Managing Member shall reasonably establish for such purpose.

7. 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
and adversely affecting the rights or obligations 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 adversely affect the Grantee’s rights
or obligations 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 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) 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) Bonus Pool 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; (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; and (H) the Grantee will
provide services to Promote Pool LLC.

 

13

 

(ii) The Grantee hereby acknowledges that: (A) there will be no public market for Bonus
Pool Units and neither the Operating Company nor the Company has any obligation or intention
to create such a market; (B) transfers sales of Bonus Pool Units are subject to restrictions
under the Securities Act and applicable state securities laws, in addition to the
restrictions set forth herein and in the LLC Agreement; and (C) because of the restrictions
on transfer or assignment of Bonus Pool 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 any
Bonus Pool Units issued as a result of this Award for an indefinite period of time.

(d) Section 83(b) Election. In connection with each separate issuance of Bonus Pool
Units under this Award, the Grantee hereby agrees to make an election to include in gross income in
the year of transfer the applicable Bonus Pool 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 Promote Pool LLC to file such election on the Grantee’s behalf) within
thirty (30) days after the issuance of the Bonus Pool 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 Bonus Pool Units are
awarded to the Grantee. So long as the Grantee holds any Bonus Pool Units, the Grantee shall
disclose to Promote Pool LLC in writing such information as may be reasonably requested with
respect to ownership of Bonus Pool Units as Promote Pool LLC may deem reasonably necessary to
ascertain and to establish compliance with provisions of the Code applicable to Promote Pool LLC or
to comply with requirements of any other appropriate taxing authority.

(e) 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.

(f) 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.

(g) 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.

(h) 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.

 

14

 

(i) 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.

(j) 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.

(k) 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.

(l) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and any successors to the 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.

(m) 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, to the extent necessary to exempt it from, or bring it into compliance with Section 409A
of the Code.

[signature page follows]

 

15

 

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:  	 	 
	 

	 	 	 
	GRANTEE
	 	 
	 
	 	 
	 

Name:

	 	 

 

16

 

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

	 	 	 	 	 
	 	MORGANS GROUP LLC

 	 
	 	By:  	 	 
	 	 	Name: 	 
	 	 	Title: 	 

 

17

 

SCHEDULE A TO 2011 PROMOTED INTEREST BONUS POOL

AWARD AGREEMENT

	 
	Date of Award Agreement: ________________

	Name of Grantee: ________________________

	Participation Percentage: ___________________

	Grant Date: ______________________

Initials of Company representative:                      Initials of Grantee:                     

 

18

 

EXHIBIT A

CERTAIN PROVISIONS OF THE LLC AGREEMENT

The LLC Agreement will include the following provisions in substantially the form set forth
below (capitalized terms shall have the meanings set forth in the Award Agreement to which this
Exhibit A is attached, if defined therein, or in Section 8 hereof, and Section
numbers shall refer to sections of this Exhibit A, unless otherwise stated ):

1. Distributions.

(a) Promptly following the receipt by Promote Pool LLC or any of its wholly owned subsidiaries
of any Promoted Interest Proceeds, including the receipt of any proceeds assigned to Grantee in
respect of any Eligible Promoted Interest, Promote Pool LLC shall distribute such Promoted Interest
Proceeds (with respect to any distribution, the “Aggregate Proceeds”) to the Members on the
following terms and conditions:

(i) If the Employee Unit Distribution Conditions are satisfied as of the date of
receipt of such Promoted Interest Proceeds by Promote Pool LLC or any of its wholly owned
subsidiaries, an amount equal to the product of (x) the Aggregate Employee Participation
Percentage then outstanding in the series of Bonus Pool Units related to the Eligible
Promoted Interest with respect to which the Promoted Interest Proceeds were received
times (y) the Aggregate Proceeds shall be paid, or set aside for future payment, in
accordance with Section 1(b) or 1(c); and

(ii) The remainder of such Aggregate Proceeds shall be paid to the Managing Member.

(b) All amounts referred to in Section 1(a)(i) (with respect to any distribution, the
“Employee Member Share”) shall be applied as follows:

(i) An amount equal to the product of (x) each Employee Member’s Vested Participation
Percentage at such time in such series of Bonus Pool Units times (y) the Aggregate
Proceeds shall be paid to such Employee Member ;and

(ii) The remainder of the Employee Member Share shall be set aside and held by Promote
Pool LLC for future payment in accordance with Section 1(c).

(c) All amounts referred to in Section 1(b)(ii) shall be applied as follows:

(i) At such time as any Employee Member’s Vested Participation Percentage in the
applicable series of Bonus Pool Units increases after the initial distribution of the
applicable Aggregate Proceeds under Section 1(b), an amount equal to (x) the product of (I)
such Employee Member’s Vested Participation Percentage (after such increase) in such series
of Bonus Pool Units times (II) the Aggregate Proceeds minus (y) the
aggregate amount of such Aggregate Proceeds that previously paid to such Employee Member
under Section 1(b)(i) or this Section 1(c)(i).

 

 

 

(ii) At such time as any Employee Member’s unvested Bonus Pool Units in the applicable
series are forfeited pursuant to Section 4 of such Employee’s Award Agreement, an amount
equal to the product of (x) a fraction, the numerator of which is the number of unvested
Bonus Pool Units in the applicable series so forfeited and the denominator of which is the
aggregate number of outstanding Bonus Pool Units in such series times (y) the
applicable Aggregate Proceeds.

2. Management of the LLC. Except as otherwise provided in the LLC Agreement or by law,
management of Promote Pool LLC is reserved to and shall be vested solely and exclusively in the
Managing Member. The rights and authority of the Managing Member shall include, without
limitation, the right and authority, in its sole discretion, to —

	 	(a)	 	exercise all consent and voting rights with respect to the
Eligible Promoted Interests,

	 	(b)	 	sell, transfer, or otherwise dispose of the interest of Promote
Pool LLC in any Eligible Promoted Interest, subject to compliance with the
provisions of Section 7 below, and

	 	(c)	 	issue additional Employee Units to persons granted 2011 Bonus
Pool Awards, subject to the proviso at the end of Section 3(a) of the
Award Agreements.

3. Amendments. The LLC Agreement, or any term or provision thereof, may be amended, waived,
modified or supplemented from time to time by the Managing Member in its sole discretion;
provided that any amendment to the provisions relating to the distribution of Promoted
Interest Proceeds or the defined terms used therein that would materially adversely affect the
rights or obligations of the holders of Employee Units granted hereunder shall require the consent
of each Employee Member adversely affected thereby. .

4. Transfer of Employee Units. No Employee Member may Transfer all or any part of his or her
Employee Units, or any interest therein, directly or indirectly, without the consent of the
Managing Member, which consent may be withheld in the Managing Member’s sole discretion. No
Transfer of Employee Units, or any interest therein, in violation of this Agreement shall be made
or recorded on the books of Promote Pool LLC and any such Transfer shall be null and void, ab
initio. An Employee Member shall have no right to grant an assignee of his or her Employee Units,
or any interest therein, the right to become a substituted member in Promote Pool LLC. As used
herein, “Transfer” means the sale, encumbrance, mortgage, hypothecation, assignment,
pledge, exchange or other disposition or transfer (including by operation of law), directly or
indirectly, of all or any portion of an Interest. For the avoidance of doubt, any indirect
Transfer by an Employee Member or the Company through the transfer or issuance of any equity
interest in any entity formed for the purpose of holding Employee Units or Managing Member Units,
respectively, or any interest therein, shall constitute a Transfer.

5. Effect of Forfeiture of Unvested Units. At such time as any unvested Employee Units of any
Employee Member in any series are forfeited pursuant to Section 4 of the such Employee Member’s
award agreement, such unvested Employee Units shall be cancelled and the Manager Percentage
Interest shall be increased by a percentage equal to the product of (x) the Unit Percentage
Interest with respect to such series in effect immediately prior to such forfeiture
times (y) the number of Employee Units in such series that were then forfeited.

 

20

 

6. Issuance of Additional Employee Units. The Managing Member, in its sole discretion, shall
be entitled to issue additional Employee Units in any series at any time, which additional Employee
Units may be accompanied by a reduction in the Manager Percentage Interest with respect to such
series and a corresponding increase in the Aggregate Employee Participation Percentage for such
series, or may represent the issuance of additional Employee Units without a change in the
Aggregate Employee Participation Percentage, subject to the proviso at the end of [Section
3(a)] of the Award Agreements.

7. Ownership and Control of Eligible Promoted Interests. If the Managing Member elects to
Transfer an Eligible Promoted Interest prior to the occurrence of the Sale Event with respect to
such Eligible Promoted Interest (or the Sale Events with respect to all hotel properties related to
such Eligible Promoted Interest), the vesting conditions set forth in Sections 3(b)(i)(B),
3(b)(ii)(B) and 3(b)(iii)(B) of the Award Agreements with respect to such Eligible
Promoted Interest will be deemed to have been satisfied (to the extent that any such condition
shall not previously have been satisfied) and the net proceeds received by Promote Pool LLC in
connection with such Transfer shall be deemed to constitute Promoted Interest Proceeds, and shall
be distributable in accordance with Section 1, subject to satisfaction of the Payment Conditions
and subject to satisfaction of the vesting conditions set forth in Sections 3(b)(i)(A),
3(b)(ii)(A) and 3(b)(iii)(A) of the Award Agreements with respect to individual
Employee Members (to the extent that such condition shall not previously have been satisfied). Any
Transfer of an Eligible Promoted Interest to the Company or a subsidiary of the Company shall be
made for an amount of cash equal to its Fair Market Value.

8. Certain Defined Terms. Capitalized terms defined in the Award Agreement to which this
Exhibit A is attached shall have the meanings ascribed therein to such terms. The
following capitalized terms used in this Exhibit A shall have the meanings set forth below:

(a) “Aggregate Employee Participation Percentage” means, with respect to any series of
Bonus Pool Units and as of any date of determination, a percentage equal to (i) one hundred percent
(100%) minus (ii) the Manager Percentage Interest with respect to such series then in
effect.

(b) “Award Agreement” means, with respect to any Employee Member, the award agreement
pursuant to which such Employee Member was granted a 2011 Bonus Pool Award.

(c) “Employee Unit Distribution Conditions” means, as of the date of any receipt by
Promote Pool LLC or any of its wholly-owned subsidiaries of any Promoted Interest Proceeds, the
following:

(i) the Common Share Return Condition shall be satisfied; and

(ii) the Company or a consolidated subsidiary of the Company continues to manage the
applicable hotel property immediately following the applicable event giving rise to the
Promoted Interest Proceeds.

 

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(d) “Manager Percentage Interest” means, with respect to any series of Bonus Pool
Units and as of any date of determination, a percentage equal to (i) one hundred percent (100%)
minus
(ii) the Designated Participation Percentage with respect to such series plus (iii)
the aggregate increases in the Manager Percentage Interest with respect to such series pursuant to
Section 5 minus (iv) the aggregate decreases in the Manager Percentage Interest
with respect to such series pursuant to Section 6 in connection with the issuances of
additional Employee Units with respect to such series.

(e) “Unit Percentage Interest” means, with respect to a single Employee Unit of any
series as of the date of determination, a fraction (expressed as a percentage) equal to (i) the
Aggregate Employee Participation Percentage with respect to such series as of such date divided
by (ii) the aggregate number of Employee Units in such series then outstanding.

(f) “Vested Participation Percentage” means, with respect to any Employee Member and
any series of Bonus Pool Units and as of any date of determination, a fraction, (x) the numerator
of which is the aggregate number of Employee Units in such series held by such Employee Member that
have vested in accordance with Section 3(b) of such Employee’s Award Agreement and (y) the
denominator of which is the aggregate number of Employee Units in such series then outstanding.

 

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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                      Bonus Pool Units (Series
[_____]) (the “Bonus Pool Units”) in MHG Employee Promoted Interest LLC (the
“Company”).

3. The date on which the Bonus Pool Units were transferred is
 _____ 

______, 20_. The taxable
year to which this election relates is calendar year 20_.

	 	4. Nature of restrictions to which the Bonus Pool Units are subject:

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

	 	(b)	 	The Taxpayer’s Bonus Pool Units (vest in accordance with the
vesting provisions described in Annex 1 attached hereto. Unvested Bonus
Pool 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 Bonus Pool Units with respect
to which this election is being made was $_____ per Bonus Pool Unit .

6. The amount paid by the Taxpayer for the Award LTIP Units was $0 per Bonus Pool Unit.

7. A copy of this statement has been furnished to the Company and Morgans Group LLC.

	 	 	 
	Dated:                     , 20_____ 

	 	Signature                     

 

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ANNEX 1

Vesting Provisions of Bonus Pool Units

The Bonus Pool 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
the achievement of certain goals relating to hotel properties in which Morgans Group LLC or a
subsidiary acquires an equity interest and becomes the hotel manager. Under the time-based vesting
provisions, one hundred percent (100%) of the Bonus Pool 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 Bonus Pool Units are subject to forfeiture in the event of failure to vest
based on the passage of time or the determination of the performance-based percentage. The right to
receive any payments with respect to vested Bonus Pool Units depends on a specified Morgan Hotel
Group Co.’s (the “Company’s”) per-share total return to shareholders of Morgans Hotel Group
Co. for the period from [                    ], 2011, to the proposed payment date.

 

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