Document:

Exhibit 10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

(DAVID HAMAMOTO)

This EMPLOYMENT AGREEMENT (this “Agreement”), dated on March 20, 2011 between Morgans Hotel
Group Co., a Delaware corporation (the “Company”), and David Hamamoto (the “Executive”) shall
become effective as of March 20, 2011 (the “Effective Date”).

1. Employment Period

The Company hereby employs the Executive, and the Executive hereby accepts employment with
the Company, on the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of the Effective Date (the “Employment Period”),
subject to the provisions for early termination or extension as hereinafter provided. The Company
(but not the Executive) will have the right to offer (the “Extension Offer”) to extend the
Employment Period by six (6) months (the “Extension Period”) by giving notice to Executive of such
offer no less than seventy-five (75) days prior to the end of the initial Employment Period.
During any Extension Period, the Executive shall receive compensation on substantially the same
terms as being provided at the end of the initial Employment Period and, if eligible for a cash
bonus, will receive a cash bonus, payable on the last day of the Extension Period, in an amount
equal to one-half of the Annual Bonus paid to the Executive with respect to the 2013 fiscal year.
In the event that the parties hereafter agree to extend Executive’s employment beyond the end of
the Extension Period the amount of the pro-rated cash bonuses paid by the Company with respect to
the Extension Period and the period from January 1, 2014 to the third anniversary of the Effective
Date will be taken into account and be credited against any cash bonus that may become payable to
Executive for fiscal 2014. The Executive shall have the right to accept or reject the Extension
Offer; if the Executive rejects the Extension Offer and terminates employment, such termination
will be deemed to be a termination due to non-renewal of the Agreement by the Company for purposes
of Section 4(d) below and shall not be considered a termination under Section 4(c) below.

2. Terms of Employment

(a) Position and Duties

(i) During the Employment Period, the Executive shall, subject to Section 2(a)(ii),
serve as Executive Chairman of the Company with the customary and usual duties and
responsibilities attendant to a position of such nature in a company that also has a Chief
Executive Officer and Chief Operating Officer and in which the Executive Chairman is not a
full-time employee, and any other duties that may reasonably be assigned by the Company’s
Board of Directors (the “Board”) consistent with his position as Executive Chairman and the
part-time nature of his employment (taking into consideration that the Company has a Chief
Executive Officer and Chief Operating Officer), and subject to such policies and procedures
for coordinating and consulting with the Chief Executive Officer consistent with the
foregoing as the Board, after consultation with the Executive, may adopt, from time to time.
It is understood that a portion of the
Executive’s duties and responsibilities contemplated above shall be provided to Morgans
Group LLC (the “Operating Company”). The Executive shall report to the Board.

 

 

 

(ii) During the Employment Period, and excluding any periods of vacation and sick leave
to which the Executive is entitled, the Executive agrees to devote a sufficient portion of
the Executive’s business time, attention and energies to the performance of the duties
contemplated by Section 2(a)(i) so that Executive can fulfill those duties, and to perform
such duties faithfully, diligently and to the best of the Executive’s abilities and subject
to such laws, rules, regulations and policies from time to time applicable to the Company’s
executives. The Company acknowledges that the Executive is committed to devote at least a
majority of his business time, attention, and energies to performance of his duties under
his employment agreement with NorthStar Realty Finance Corp. (together with its
subsidiaries, as the context may require, “NorthStar”) and as a director of NorthStar, and
agrees that Executive’s doing so shall not constitute “Cause” or a violation of this
Agreement.

(iii) During the Employment Period, (i) the Executive agrees to continue to serve as a
director of the Company; and (ii) the Company agrees that the Executive shall be nominated
for election as a director of the Company at each annual meeting of the Company’s
stockholders or other meeting of the Company’s stockholders at which directors are elected.
Any failure by the Board to nominate the Executive for election as a director of the Company
in accordance with clause (ii) above, failure to be elected to the Board, failure to be
elected Chairman of the Board or failure to be appointed to serve as Chairman of the
Investment Committee of the Company shall constitute Good Reason for the Executive to
terminate his employment in accordance with Section 3(c) of this Agreement.

(b) Compensation

(i) Annual Base Salary. If the Company so elects under Section 2(b)(iv), with
respect to any year during the Employment Period after the first year of the Employment
Period, the Executive shall receive an annual base salary for such year (“Annual Base
Salary”) equal to $375,000 (payable semi-monthly), which shall be subject to annual
performance reviews and may be increased at the good faith discretion of the Board or the
Compensation Committee of the Board (the “Compensation Committee”). The term “Annual Base
Salary” as utilized in this Agreement shall refer to Annual Base Salary as so increased.
Annual Base Salary shall not be less than $375,000 without the prior written consent of the
Executive.

(ii) Annual Bonus. If the Company so elects under Section 2(b)(iv), with
respect to any year during the Employment Period after the first year of the Employment
Period, the Executive will be eligible for an annual cash bonus for each of such year
(“Annual Bonus”) with a target payout of 100% of Annual Base Salary. The target payout for
the Annual Bonus for any applicable year will be prorated, based on the number of days in
such year during which the Executive is entitled to receive an Annual Base Salary. By way
of example, if the Company elects to pay an Annual Base Salary and Annual Bonus in lieu of
granting LTIP Units for the second year of the Employment

 

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Period (and the second year only), the Executive shall be eligible for an Annual Bonus
for a portion of each of 2012, 2013 and 2014, with a prorated target payout during each such
year based on the number of days in such year during which the Executive is entitled to
receive an Annual Base Salary. The Annual Bonus will range from 50% up to 150% of target.
The actual Annual Bonus for any applicable year shall be determined after consultation with
the Executive in good faith by the Compensation Committee based upon actual corporate and
individual performance for such year and shall be payable in accordance with the procedures
specified by the Compensation Committee. The Executive’s Annual Bonus will be paid no later
than seventy-five (75) days after the end of the applicable bonus period (or, if earlier, as
provided in Section 4 below). Except as provided in Section 4 of this Agreement, Employee
must be employed by the Company on the date bonuses are paid to Company employees in order
to be entitled to receive a bonus. To the extent the Annual Bonus exceeds 100 % of Annual
Base Salary, the Compensation Committee may in its discretion, and subject to applicable
law, cause the Company to pay such excess in the form of fully vested equity compensation
awards under one of Company’s equity compensation plans (which award may be subject to other
conditions that the Compensation Committee may determine).

(iii) Stock Option Award. On the Effective Date, the Company shall grant to
the Executive a non-qualified option to purchase 600,000 shares of the Company’s common
stock (the “Stock Option”) under the Morgans Hotel Group Co. Amended and Restated 2007
Omnibus Incentive Plan (the “Incentive Plan”). Except as otherwise provided in Section 4
upon certain events of termination, subject to the Executive’s continued employment with the
Company, the Stock Option shall vest and become exercisable with respect to 33-1/3% of the
 shares subject thereto on each of the first, second, and third anniversaries of the
Effective Date. Consistent with the foregoing, the terms and conditions of the Stock Option
shall be set forth in an award agreement (the “Stock Option Agreement”) in the form attached
as Exhibit A, to be entered into by the Company and the Executive concurrently
herewith and which shall evidence the grant of the Stock Option. The Company shall
determine whether future awards will be awarded to the Executive in its good faith
discretion.

(iv) Equity Award. On the Effective Date, the Company shall grant to the
Executive 75,000 long term incentive units (the “LTIP Units”) under the Incentive Plan.
Except as otherwise provided in Section 4 upon certain events of termination, subject to the
Executive’s continued employment with the Company, the LTIP Units shall vest pro-rata on a
monthly basis beginning on the first monthly anniversary of the Effective Date so that they
will be 100% vested on the first anniversary of the Effective Date. Consistent with the
foregoing, the terms and conditions of such award shall be set forth in an award agreement
(the “LTIP Agreement”) in the form attached as Exhibit B, to be entered into by the
Company and the Executive and which shall evidence the grant of such award. As of each
anniversary of the Effective Date, the Executive shall receive an additional grant of LTIP
Units valued at $675,000 (subject to increase at the good faith discretion of the Board or
the Compensation Committee) on the same terms and conditions pursuant to which the LTIP
Units granted on the Effective Date were granted; provided, that the Company may, in lieu of
making any such grant of LTIP Units on an anniversary of the Effective Date, elect, in its
sole discretion, to pay an Annual Base Salary and an Annual
Bonus for the year of the Employment Period following such anniversary pursuant to
Sections 2(b)(i) and (ii) above.

 

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(v) Outperformance Award. On the Effective Date, the Company shall grant to
the Executive a performance incentive award entitling the Executive to 35% of the “Total
Outperformance Pool,” as such term is defined in the Outperformance Award Agreement attached
as Exhibit C hereto, subject to the terms and conditions of such award agreement.

(vi) Additional Performance Incentive Award. On the Effective Date, the
Company shall grant to the Executive an additional performance incentive award entitling the
Executive to 35% of the “Promoted Interest Pool,” as such term is defined in the Promoted
Interest Pool Award Agreement attached as Exhibit D hereto, subject to the terms and
conditions of such award agreement.

(c) Benefits

(i) Employee Benefits. During the Employment Period, the Executive shall be
entitled to participate in all employee benefit and other plans, practices, policies and
programs and fringe benefits and perquisites on a basis no less favorable than that provided
to other senior executives of the Company.

(ii) Vacations. The Executive shall be eligible for up to five weeks of annual
vacation to be accrued in accordance with the Company’s policy for its other senior
executives.

3. Termination of Employment

(a) Death or Disability. The Executive’s employment shall terminate automatically upon
the Executive’s death during the Employment Period. If the Executive becomes Disabled during the
Employment Period, the Company upon such event shall give to the Executive written notice of its
intention to terminate the Executive’s employment. In such event, the Executive’s employment with
the Company shall terminate effective on the 30th day after receipt of such notice by the Executive
(the “Disability Effective Date”), provided that, within the 30 days after such receipt, the
Executive shall not have returned to performance of the Executive’s duties in accordance with this
Agreement. For purposes of this Agreement, “Disability” or becoming “Disabled” shall mean the
inability of the Executive to perform the Executive’s duties in accordance with this Agreement with
the Company 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 Executive or the Executive’s legal
representative.

 

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(b) Cause. The Company may terminate the Executive’s employment during the Employment
Period with or without Cause. For purposes of this Agreement, “Cause” shall mean the occurrence of
any one or more of the following events unless the Executive has commenced and is diligently
pursuing steps to correct the circumstances constituting Cause (in those instances where such
circumstances can be corrected) within fifteen (15) business days after receipt of the Notice of
Termination and cures in all material respects such circumstances within
forty-five (45) business days after receipt of the Notice of Termination (as defined below):

	 	(i)	 	the Executive’s willful and continued failure to substantially perform his
duties with the Company as contemplated by Section 2(a)(i) (other than any such failure
resulting from the Executive’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 Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed his duties;

	 	(ii)	 	a material breach by the Executive of his obligations under this Agreement
resulting in substantial economic or financial injury to the Company;

	 	(iii)	 	the Executive’s willful commission of an act of fraud, theft or dishonesty
resulting in substantial economic or financial injury to the Company;

	 	(iv)	 	the Executive’s conviction of, or entry by the Executive of a guilty or no
contest plea to, the commission of a felony; or

	 	(v)	 	the Executive willfully engages in misconduct that is materially injurious to
the Company.

For purposes of this provision, no act or omission on the part of the Executive 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 that was directed or
authorized by the Board, or approved, consented to, or acquiesced to by the Board, or based on
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 Executive
shall not be deemed to be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by at least 66 2/3% of the Board (excluding the
Executive and the Chief Executive Officer, to the extent either of them are members of the Board)
at a meeting of the Board called and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together with counsel, to be heard before
the Board) finding that, in the good faith opinion of the Board, the Executive is guilty of the
conduct giving rise to Cause for termination, and specifying the particulars thereof in detail.

(c) Good Reason. The Executive’s employment may be terminated by the Executive with or
without Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any
of the following events without the written consent of the Executive:

(i) any change in the Executive’s title or the assignment to the Executive of duties
materially inconsistent with the Executive’s title, position, status, reporting
relationships, authority, duties or responsibilities as contemplated by Section 2(a)(i), or
any other action by the Company which results in a material diminution or material adverse
change in the Executive’s title, position, status, reporting relationships, authority,
duties or responsibilities, other than (x) 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 Executive, or (y) other than allocations of or
changes in duties and responsibilities between the Executive and the Chief Executive
Officer;

 

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(ii) any material failure by the Company to comply with any of the provisions of this
Agreement or any Related Agreement (as defined below), 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 Executive;

(iii) any failure by the Company to comply with and satisfy Section 10(c);

(iv) any failure by the Board to nominate the Executive for election as a director of
the Company in accordance with Section 2(a)(iii), or any failure of the Executive to be
elected by the Company’s shareholders to be a member of the Board, to be elected by the
Board to be Chairman or to be appointed chairman of the investment committee of the Company;
or

(v) any requirement that the Executive’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 Executive’s residence to his new place
of employment;

provided that the Executive’s resignation shall only constitute a resignation for Good Reason
hereunder if (x) the Executive provides the Company with a Notice of Termination (as defined below)
within 90 days after the initial existence of the facts or circumstances constituting Good Reason,
(y) the Company has failed to cure such facts or circumstances within 30 days after receipt of the
Notice of Termination, and (z) subject to the last sentence of Section 4(e), the Date of
Termination (as defined below) occurs no later than 120 days after the initial occurrence of the
facts or circumstances constituting Good Reason.

(d) Notice of Termination. Any termination by the Company or by the Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a
“Notice of Termination” means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the Date of Termination. The failure by
the Executive or the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights
hereunder.

 

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(e) Date of Termination. “Date of Termination” means (i) if the Executive’s employment
is terminated by the Company other than for Disability, the date of receipt of the Notice of
Termination or any later date specified therein within 30 days of such notice, (ii) if the
Executive’s employment is terminated by the Executive, 30 days after receipt of the Notice of
Termination (provided, that, the Company may accelerate the Date of Termination to an earlier date
by providing the Executive with notice of such action, or, alternatively, the Company may place the
Executive on paid leave during such period), (iii) if the Executive’s employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be, and (iv) if the Executive’s employment is
terminated due to the non-renewal of the Agreement at the end of the Employment Period, the Date of
Termination shall be the last day of the Employment Period. Notwithstanding the foregoing, if
within thirty (30) days after any Notice of Termination is given, the party receiving such Notice
of Termination notifies the other party that a dispute exists concerning the termination, the Date
of Termination shall be the date on which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).

(f) Termination of Services; No Resignation from Board upon Termination. Upon the
termination of the Executive’s employment for any reason (other than for Cause), the Executive
shall have no obligation whatsoever to resign from the Board. A termination of the Executive’s
employment shall mean a termination of services of both the Company and the Operating Company.

4. Obligations of the Company upon Termination

(a) Other Than for Cause or For Good Reason. If, during the Employment Period, the
Company terminates the Executive’s employment other than for Cause or Disability or the Executive
terminates his employment for Good Reason (each, a “Qualifying Termination”):

(i) The Company shall pay to the Executive an amount in a single lump sum within 10
days after the end of the revocation period for the Release Agreement provided in Section
4(e) below, equal to the sum of:

	 	(A)	 	an amount equal to the Executive’s Annual Base
Salary (at the rate then being paid to Executive) accruing through the
Date of Termination to the extent theretofore unpaid (the “Accrued Base
Salary”) plus

	 	(B)	 	the amount of any Annual Bonus that, had he
remained employed, would otherwise have been paid to the Executive
pursuant to Section 2(b)(ii) to the extent not previously paid (the
“Prior Year Bonus”), plus

	 	(C)	 	(without duplication of the amount in clause
(B)) a pro rata portion of the Annual Bonus (if any) for the partial
year in which the Date of Termination occurs in an amount equal to the
product of (1) the Annual Bonus calculated as of the Date of
Termination based on the extent to which the financial performance
targets applicable to such Annual Bonus (prorated based on the number
of days in such partial
year through the Date of Termination and as if the entire Annual Bonus
was based solely on such financial performance targets for such partial
year) are actually achieved as of the Date of Termination, and (2) the
Pro Rated Bonus Factor (as defined below) (the “Pro Rated Annual Bonus”),
plus
	 
	 	(D)	 	an amount equal to $1,500,000.

 

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“Pro Rated Bonus Factor” shall mean (x) in the event of a termination during a
calendar year prior to March 20 (the “Anniversary Date”), a fraction, the numerator
of which is the number of days in the year of termination through the Date of
Termination and the denominator of which is the number of days in the year of
termination through the Anniversary Date, and (y) in the event of a termination
during a calendar year after the Anniversary Date, a fraction, the numerator of which
is the number of days in the year of termination from the Anniversary Date through
the Date of Termination and the denominator of which is the number of days in the
year of termination from the Anniversary Date through December 31.

(ii) During the period commencing on the Date of Termination and ending on the date 18
months after the Date of Termination (the “COBRA Period”), provided that the Executive
properly elects to receive group health insurance continuation coverage under Section 4980B
of the Code and the regulations thereunder (“COBRA”), the Company shall pay directly or
reimburse the Executive for premiums for such coverage; provided, however, that if the
Executive becomes re-employed with another employer and is eligible to receive group health
insurance coverage under another employer’s plans, the Company’s obligations under this
Section 4(a)(ii) shall be reduced to the extent comparable coverage is actually provided to
the Executive and the Executive’s eligible family members, and any such coverage shall be
reported by the Executive to the Company. Notwithstanding the foregoing, (A) if any plan
pursuant to which the Company is providing such coverage is not, or ceases prior to the
expiration of the period of continuation coverage to be, exempt from the application of Code
Section 409A under Treasury Regulation Section 1.409A-1(a)(5), or (B) the Company is
otherwise unable to continue to cover the Executive under its group health plans, then, in
either case, an amount equal to the monthly plan premium payment shall thereafter be paid to
the Executive as currently taxable compensation in substantially equal monthly installments
over the COBRA Period (or the remaining portion thereof).

All Company equity awards and other performance incentive awards, other than awards provided
pursuant to Sections 2(b)(v) and (vi) (which shall vest as set forth in the applicable award
agreement), shall fully vest on the Date of Termination to the extent not vested. The Executive
shall retain any vested equity awards, which may not be revoked or annulled by the Company. Each
vested award (to the extent subject to exercise) shall be exercisable until the later of (A) the
twelve month anniversary of the Date of Termination and (B) the four year anniversary of the date
such award was granted. Notwithstanding this Section 4(a), in the event that the Executive is
terminated other than for Cause or the Executive terminates employment for Good Reason following a
Transactional Change in Control (as defined in the Outperformance Award
Agreement) and where the Common Share Price (as defined in the Outperformance Award Agreement) does
not represent at least 4.5% compound annual growth rate since the Effective Date, the amount
payable by the Company pursuant to Section 4(a)(i)(D) shall equal $750,000.

 

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(b) Death; Disability. If, during the Employment Period, the Executive’s employment
shall terminate on account of death (other than via death after delivery of a valid Notice of
Termination for Good Reason or without Cause) or Executive becoming Disabled, the Company shall pay
to or provide the Executive (or his estate) the following:

(i) The Company shall pay to or provide the Executive (or his estate) the following
within 10 business days after the Executive’s death or the date on which the Executive
becomes Disabled: (A) the Accrued Base Salary through the Date of Termination to the extent
theretofore unpaid, (B) the Prior Year Bonus to the extent theretofore unpaid, and (C) the
Pro Rated Annual Bonus (if any), and (D) an amount equal to $375,000; and

(ii) During the 12 month period following the Date of Termination, provided that the
Executive’s estate or beneficiaries or the Executive, as applicable, properly elects to
receive group health insurance continuation coverage under COBRA, the Company shall pay
directly or reimburse the Executive’s estate or beneficiaries or the Executive, as
applicable, for premiums for such coverage; provided, however, that if the Executive becomes
re-employed with another employer and is eligible to receive group health insurance coverage
under another employer’s plans, the Company’s obligations under this Section 4(b)(ii) shall
be reduced to the extent comparable coverage is actually provided to the Executive and the
Executive’s eligible family members, and any such coverage shall be reported by the
Executive to the Company. Notwithstanding the foregoing, (A) if any plan pursuant to which
the Company is providing such coverage is not, or ceases prior to the expiration of the
period of continuation coverage to be, exempt from the application of Code Section 409A
under Treasury Regulation Section 1.409A-1(a)(5), or (B) the Company is otherwise unable to
continue to cover the Executive under its group health plans, then, in either case, an
amount equal to the monthly plan premium payment shall thereafter be paid to the Executive
as currently taxable compensation in substantially equal monthly installments over the 12
month period following the Date of Termination (or the remaining portion thereof).

All Company equity awards and other performance incentive awards, other than awards provided
pursuant to Sections 2(b)(v) and (vi) (which shall vest as set forth in the applicable award
agreement), shall fully vest on the Date of Termination to the extent not vested. The Executive
shall retain any vested equity awards, which may not be revoked or annulled by the Company. Each
vested award (to the extent subject to exercise) shall be exercisable until the later of (A) the
twelve month anniversary of the Date of Termination and (B) the four year anniversary of the date
such award was granted.

 

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(c) For Cause; Other than For Good Reason. If, during the Employment Period, the
Company shall terminate the Executive’s employment for Cause or the Executive terminates his
employment without Good Reason (including the failure by the Executive to renew the Agreement at
the end of the Employment Period after the Company offers to do so no less than
seventy-five (75) days prior to the end of the Employment Period, as it may be extended,
pursuant to an employment agreement with at least a three year term, aggregate cash and equity- and
performance-based compensation at least as favorable as the same provided for hereunder and
otherwise on terms no less favorable to Executive as those set forth herein (any such non-renewal,
an “Executive Non-Renewal”) the Company shall pay to or provide the Executive (or his estate) the
following within 10 business days after the Date of Termination: (A) the Accrued Base Salary
through the Date of Termination to the extent theretofore unpaid and (B) in the event of an
Executive Non-Renewal, the Prior Year Bonus to the extent theretofore unpaid. The Executive shall
retain any vested equity awards, which may not be revoked or annulled by the Company. Each vested
award (to the extent subject to exercise) shall be exercisable (i) in the event of an Executive
Non-Renewal, until the later of (A) the twelve month anniversary of the Date of Termination and (B)
the four year anniversary of the date such award was granted, or (ii) in the event of the
termination of Executive’s employment for Cause or without Good Reason (other than an Executive
Non-Renewal), within ninety (90) days after the Date of Termination.

(d) Expiration of Employment Period due to the Company’s Non-renewal of the Agreement.
If the Executive’s employment with the Company terminates by reason of the expiration of the
Employment Period other than due to an Executive Non-Renewal, the Company shall pay to or provide
the Executive the following within 10 business days after the Date of Termination:

(i) the Accrued Base Salary through the Date of Termination to the extent theretofore
unpaid;

(ii) the Prior Year Bonus to the extent theretofore unpaid;

(iii) Subject to execution of the Release Agreement provided in Section 4(e) below, the
Company shall pay to the Executive an amount equal to $750,000 in a single lump sum within
10 days after the end of the revocation period for the Release Agreement; and

(iv) During the 12 month period following the Date of Termination, provided that the
Executive’s estate or beneficiaries or the Executive, as applicable, properly elects to
receive group health insurance continuation coverage under COBRA, the Company shall pay
directly or reimburse the Executive’s estate or beneficiaries or the Executive, as
applicable, for premiums for such coverage; provided, however, that if the Executive becomes
re-employed with another employer and is eligible to receive group health insurance coverage
under another employer’s plans, the Company’s obligations under this Section 4(d)(iv) shall
be reduced to the extent comparable coverage is actually provided to the Executive and the
Executive’s eligible family members, and any such coverage shall be reported by the
Executive to the Company. Notwithstanding the foregoing, (A) if any plan pursuant to which
the Company is providing such coverage is not, or ceases prior to the expiration of the
period of continuation coverage to be, exempt from the application of Code Section 409A
under Treasury Regulation Section 1.409A-1(a)(5), or (B) the Company is otherwise unable to
continue to cover the Executive under its group health plans, then, in either case, an
amount equal to the monthly plan premium payment shall thereafter be paid to the Executive
as currently taxable compensation in
substantially equal monthly installments over the 12 month period following the Date of
Termination (or the remaining portion thereof).

 

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All Company equity awards and other performance incentive awards, other than awards provided
pursuant to Sections 2(b)(v) and (vi) (which shall vest as set forth in the applicable award
agreement), shall fully vest on the Date of Termination to the extent not vested. The Executive
shall retain any vested equity awards, which may not be revoked or annulled by the Company. Each
vested award (to the extent subject to exercise) shall be exercisable until the later of (A) the
twelve month anniversary of the Date of Termination and (B) the four year anniversary of the date
such award was granted.

(e) Release Agreement. The Company shall not be required to make the payments and
provide the benefits specified in this Section 4 (other than the payment of any Accrued Base
Salary) unless the Executive (or his estate, as applicable) executes and delivers to the Company an
agreement releasing the Company, its affiliates and its officers, directors and employees from all
liability (other than the payments and benefits under this Agreement) in the form attached hereto
as Exhibit E (the “Release Agreement”) within thirty (30) days after the Date of
Termination and the period for revocation of such Release Agreement shall have lapsed, which
Release Agreement shall also provide that the Company shall release the Executive from all
liability; provided, that in all events, subject to Executive’s execution and delivery of the
Release Agreement, the payments and benefits specified in this Section 4 will be made or provided
before March 15 following the end of Executive’s first taxable year in which his right to such
payment is no longer subject to a substantial risk of forfeiture.

5. Application of Section 409A

(a) If any compensation or benefits provided by this Agreement may result in the application
of Section 409A of the Code, the Company shall, in consultation with the Executive, modify the
Agreement in the least restrictive manner necessary in order to, where applicable, (i) exclude such
compensation from the definition of “deferred compensation” within the meaning of such Section 409A
or (ii) comply with the provisions of Section 409A, other applicable provision(s) of the Code
and/or any rules, regulations or other regulatory guidance issued under such statutory provisions
and to make such modifications, in each case, without any diminution in the value of the payments
to the Executive.

(b) Anything in this Agreement to the contrary notwithstanding, if (A) on the date of
termination of Executive’s employment with the Company or a subsidiary, any of the Company’s stock
is publicly traded on an established securities market or otherwise (within the meaning of Section
409A(a)(2)(B)(i) of the Internal Revenue Code, as amended (the “Code”)), (B) Executive is
determined to be a “specified employee” within the meaning of Section 409A(a)(2)(B), (C) the
payments exceed the amounts permitted to be paid pursuant to Treasury Regulations section
1.409A-1(b)(9)(iii), and (D) such delay is required to avoid the imposition of the tax set forth in
Section 409A(a)(1), as a result of such termination, the Executive would receive any payment that,
absent the application of this Section 5(b), would be subject to interest and additional tax
imposed pursuant to Section 409A(a) as a result of the application of Section 409A(2)(B)(i), then
no such payment shall be payable prior to the date that is the earliest of (1) six (6) months and
one day after the Executive’s termination date, (2) the Executive’s death or
(3) such other date (the “Delay Period”) as will cause such payment not to be subject to such
interest and additional tax (with a catch-up payment equal to the sum of all amounts that have been
delayed to be made as of the date of the initial payment). In particular, with respect to any lump
sum payment otherwise required hereunder, in the event of any delay in the payment date as a result
of Section 409A(a)(2)(A)(i) and (B)(i), the Company will adjust the payments to reflect the
deferred payment date by crediting interest thereon at the prime rate in effect at the time such
amount first becomes payable, as quoted by the Company’s principal bank.

 

11

 

(c) To the extent that the provision of health insurance following the Date of Termination is
so delayed, the Executive shall be entitled to COBRA continuation coverage under Section 4980B of
the Code (“COBRA Coverage”) during such period of delay, and the Company shall reimburse the
Executive for any Company portions of such COBRA Coverage in the seventh month following the Date
of Termination.

(d) To the extent that any benefits to be provided during the Delay Period are considered
deferred compensation under Code Section 409A provided on account of a “separation from service,”
and such benefits are not otherwise exempt from Section 409A, the Executive shall pay the cost of
such benefits during the Delay Period, and the Company shall reimburse the Executive, to the extent
that such costs would otherwise have been paid by the Company or to the extent that such benefits
would otherwise have been provided by the Company at no cost to the Executive, the Company’s share
of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall
be reimbursed or provided by the Company in accordance with the procedures specified herein.

(e) Any provisions of this Agreement or any other compensation plan notwithstanding, the
Company shall have no right to accelerate any such payment hereunder or thereunder except to the
extent permitted under Section 409A.

(f) For purposes of Section 409A, each payment made after termination of employment, including
COBRA continuation reimbursement payments, will be considered one of a series of separate payments.

(g) A termination of employment shall not be deemed to have occurred for purposes of any
provision of this Agreement providing for the payment of any amounts or benefits upon or following
a termination of employment unless such termination is also a “separation from service” within the
meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a
“termination,” “termination of employment” or like terms shall mean “separation from service.”

(h) Any amount that Executive is entitled to be reimbursed under this Agreement that may be
treated as taxable compensation will be reimbursed to Executive as promptly as practical and in
any event not later than sixty (60) days after the end of the calendar year in which the expenses
are incurred; provided that Executive shall have provided a reimbursement request to the Company no
later than thirty (30) days prior to the date the reimbursement is due. The amount of the expenses
eligible for reimbursement during any calendar year will not affect the amount of expenses for
reimbursement in any other calendar year, except as may be required pursuant to an arrangement
providing for the reimbursement of expenses referred to in Section
105(b) of the Code.

 

12

 

(i) The Company shall not be obligated to reimburse Executive for any tax penalty or interest
or provide a gross-up in connection with any tax liability of Executive under Section 409A.

6. Parachute Payment Limitations

Notwithstanding any other provision of this Agreement or of any other agreement, contract, or
understanding heretofore or hereafter entered into by the Executive and the Company or any of the
Company’s affiliates, except an agreement, contract, or understanding hereafter entered into that
expressly modifies or excludes application of this Section 6 (the “Other Agreements”), and
notwithstanding any formal or informal plan or other arrangement heretofore or hereafter adopted by
the Company or any of the Company’s affiliates for the direct or indirect compensation of the
Executive (including groups or classes of participants or beneficiaries of which the Executive is a
member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit
to or for the Executive (a “Benefit Arrangement”), if the Executive is a “disqualified individual,”
as defined in Section 280G(c) of the Code, any right to receive any payment or other benefit under
this Agreement shall not become exercisable or vested (i) to the extent that such right to
exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits
to or for Executive under the Agreement, all Other Agreements, and all Benefit Arrangements, would
cause any payment or benefit to the Executive under this Agreement to be considered a “parachute
payment” within the meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (ii) if, as a result of receiving a Parachute Payment, the aggregate
after-tax amounts received by the Executive from the Company or any of the Company’s affiliates
under this Agreement, all Other Agreements, and all Benefit Arrangements would be less than the
maximum after-tax amount that could be received by Executive without causing any such payment or
benefit to be considered a Parachute Payment. In the event that the receipt of any such right to
exercise, vesting, payment, or benefit under this Agreement, in conjunction with all other rights,
payments, or benefits to or for the Executive under the Agreement, any Other Agreement or any
Benefit Arrangement would cause the Executive to be considered to have received a Parachute Payment
under this Agreement that would have the effect of decreasing the after-tax amount received by the
Executive as described in clause (ii) of the preceding sentence, then the Executive shall have the
right, in the Executive’s sole discretion, to designate those rights, payments, or benefits under
this Agreement, any Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the payment or benefit to the Executive under this Agreement be
deemed to be a Parachute Payment; provided, however, that, to the extent any payment or benefit
constitutes deferred compensation under Section 409A, in order to comply with Section 409A, the
reduction or elimination will be performed in the following order: (A) reduction of cash payments;
(B) reduction of COBRA benefits; (C) cancellation of acceleration of vesting on any equity awards
for which the exercise price exceeds the then fair market value of the underlying equity; and (D)
cancellation of acceleration of vesting of equity awards not covered under (C) above; provided,
however that in the event that acceleration of vesting of equity awards is to be cancelled, such
acceleration of vesting shall be cancelled in the reverse order of the date of grant of such equity
awards, that is, later granted equity awards shall be canceled before earlier granted equity
awards.

 

13

 

7. Non-Competition; Non-Solicitation; Confidential Information; Standstill

(a) Non-Competition. Executive acknowledges that the services to be rendered by him to
the Company are of a special and unique character. In consideration of his employment hereunder,
Executive agrees that, during the term of Executive’s employment with the Company and for a
six-month period after the date the Executive’s employment is terminated for any reason, provided
in connection with a termination of employment pursuant to Sections 4(a) or (d), the Company is not
in material breach in the performance of its obligations to the Executive pursuant to those
Sections, the Executive shall not directly or indirectly (without the prior written consent of the
Company) engage, directly or indirectly, whether as principal, agent, representative, consultant,
employee, partner, stockholder, limited partner, other investor or otherwise (other than a passive
investment of not more than two and one-half percent (2.5%) of the stock, equity or other ownership
interest of any corporation, partnership or other entity) in any business entity primarily engaged,
directly or indirectly through subsidiaries, and the Executive shall not be personally engaged,
directly or indirectly, in the business of hotel management within the United States of America or
Western Europe. The Executive shall not pursue any prospects listed on a deal pipeline list
prepared by the Company and the Executive for a one-year period following the Date of Termination.
Notwithstanding the foregoing, neither Executive’s performance of his duties under his employment
agreement with NorthStar, nor his ownership of any equity interest therein or in any other business
or entity in which he holds an equity interest as of the date hereof, shall be considered a
violation of this Section 7(a).

(b) Non-Solicitation. During the term of his employment with the Company pursuant to
this Agreement and for a one-year period after the Executive’s employment is terminated pursuant to
this Agreement for any reason, provided the Company is not in material breach in the performance of
its obligations to the Executive as of the Date of Termination and is performing all of its
obligations under Section 4 of this Agreement upon and following the Date of Termination, the
Executive shall not, in any manner, directly or indirectly (without the prior written consent of
the Company), solicit, induce, or encourage any employee, consultant or agent of the Company or any
of its subsidiaries to terminate their employment, agency, or other such business relationship with
the Company and its subsidiaries or to cease to render services to the Company and its subsidiaries
and the Executive shall not initiate discussions with any such person for any such purpose or
authorize or knowingly cooperate with or encourage the taking of any such actions by any other
individual or entity; provided, however, that this paragraph shall not preclude the hiring or
retention of any such person by any other individual or entity who (i) responds to a general
employment advertisement by newspaper or similar advertisement, or (ii) is referred to another
individual or entity by an employment agency or other similar entity, provided that Executive did
not identify the person or the Company as a potential source of employees to such agency or similar
entity. During the term of Executive’s employment pursuant to this Agreement and for a six (6)
month period after the Executive’s employment is terminated pursuant to this Agreement for any
reason, provided the Company is not in material breach in the performance of its obligations to the
Executive as of the Date of Termination and is performing all of its obligations under Section 4 of
this Agreement upon and following the Date of Termination, the Executive shall not, in any manner
(without the prior written consent of the Company), solicit, induce or encourage any customer,
vendor, or other party doing business with the Company to terminate their business relationship
with the Company and its subsidiaries or to transfer their business from the Company or any of its
subsidiaries, and the Executive shall not
initiate discussions with any such person for any such purpose or authorize or knowingly
cooperate with or encourage the taking of any such actions by any other individual or entity.

 

14

 

(c) Treatment of Confidential Information. As a Company executive, Executive will
acquire Confidential Information (as defined below) in the course of Executive’s employment.
Executive agrees that, in consideration of employment with the Company, Executive will treat such
Confidential Information as strictly confidential. Executive will not, directly or indirectly, at
any time during employment with the Company or any time thereafter, and without regard to when or
for what reason, if any, such employment shall terminate, use or cause to be used any such
Confidential Information, in connection with any activity or business except in the normal course
of performing his designated duties for the Company. Executive shall not disclose or cause to be
disclosed any such Confidential Information to any third parties unless such disclosure is in
accordance with the disclosure policies adopted by the Board or has been authorized in writing by
the Board or except as may be required by law or legal process after providing the Company with
prior written notice and an opportunity to respond to such disclosure (unless such notice is
prohibited by law). For purposes of this Agreement, “Confidential Information” shall mean
confidential or proprietary information, knowledge or data concerning the Company and its
subsidiary companies’ businesses, strategies, operations, financial affairs, organizational
matters, personnel matters, budgets, business plans, marketing plans, studies, policies,
procedures, products, ideas, processes, software systems, trade secrets and technical know-how.
Notwithstanding the foregoing, Confidential Information shall not include information which (i) is
or becomes generally available to the public or is, at the time in question, in the public domain
other than as a result of a disclosure by Executive not permitted hereunder, (ii) was available to
Executive on a non-confidential basis prior to the date of this Agreement, or (iii) becomes
available to Executive from a source other than the Company, its agents or representatives (or
former agents or representatives).

(d) Standstill. During the term of his employment and for a period of six months
after the date the Executive’s employment is terminated, Executive shall not, directly or
indirectly or in concert with any other person, engage in any of the following:

	 	(i)	 	purchase, offer to purchase, or agree to purchase or otherwise acquire, by
means of a purchase, tender or exchange offer, business combination or in any other
manner (including rights or options to acquire such ownership), (x) beneficial
ownership of any common stock of the Company (“Common Stock”), or securities
convertible into or exchangeable for Common Stock of the Company, that would result in
the Executive, the Executive’s affiliates, and the members of any “group” of persons
with which the Executive or his affiliates are acting in concert beneficially owning,
in the aggregate (taking into account shares of Common Stock issuable upon conversion
or exchange of any securities held by such the Executive and such other persons), more
than 14.9% of the voting power of the outstanding Common Stock, or (y) material
beneficial ownership of any debt obligations on hotel properties owned by the Company
or any of its consolidated subsidiaries or any material assets owned by the Company or
any of its consolidated subsidiaries;

 

15

 

	 	(ii)	 	other than in his capacity as an officer or director of the Company, seek or
propose
to influence, advise, change or control the management, Board, governing instruments
or policies or affairs of the Company or any of its affiliates, including, without
limitation, by means of a solicitation of proxies or seeking to influence, advise or
direct the vote of any holder of voting securities of the Company; or

	 	(iii)	 	be employed by any person (other than NorthStar) that, directly or through its
affiliates, engages in any of the foregoing.

Notwithstanding anything in this Section 7(d) to the contrary, no action described above
taken by NorthStar (whether directly or indirectly, voluntarily or involuntarily) shall be
considered to be a violation of this Section 7(d) by Executive. Exercise of options,
conversion of LTIP Units, vesting and delivery of shares of Common Stock pursuant to equity
or other awards, plans and arrangements and any other Common Stock received or otherwise
acquired by the Executive in connection with or as a result of the Executive’s employment
with the Company or service on its Board are not prohibited by this Section 7(d). In
addition, if persons with whom the Executive has in no way participated, assisted or
cooperated with have taken actions that would be prohibited by Sections 7(d) above such that
the Company would be considered to be in “play” through no act of the Executive, the
Executive will no longer be subject to the limitations of Sections 7(d).

(e) Survival. Any termination of the Executive’s employment or of this Agreement (or
breach of this Agreement by the Executive or the Company) shall have no effect on the continuing
effectiveness of this Section 7, Sections 4, 5, 6 and 8 or any other provision hereof that by the
nature of its terms is contemplated to survive any such termination.

(f) Validity. The terms and provisions of this Section 7 are intended to be separate
and divisible provisions and if, for any reason, any one or more of them is held to be invalid or
unenforceable, neither the validity nor the enforceability of any other provision of this Agreement
shall thereby be affected. The parties hereto acknowledge that the potential restrictions on the
Executive’s future employment imposed by this Section 7 are reasonable in both duration and
geographic scope and in all other respects. If for any reason any court of competent jurisdiction
shall find any provisions of this Section 7 unreasonable in duration or geographic scope or
otherwise, the Executive and the Company agree that the restrictions and prohibitions contained
herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

(g) Consideration. The parties acknowledge that this Agreement would not have been
entered into and the benefits described in Section 2, 4 or 6 would not have been promised in the
absence of the Executive’s promises under this Section 7.

 

16

 

8. Indemnification

(a) If the Executive is made a party, is threatened to be made a party, or reasonably
anticipates being made a party, to any Proceeding (as defined below) by reason of the fact that he
is or was a director, officer, executive, agent, manager, trustee, consultant or representative of
the Company or any of its affiliates or is or was serving at the request of the Company or any of
its affiliates, or in connection with his service hereunder, as a director, officer, member,
executive,
agent, manager, trustee, consultant or representative of another person or entity, or if any
Claim (as defined below) is made, is threatened to be made, or is reasonably anticipated to be
made, that arises out of or relates to the Executive’s service in any of the foregoing capacities,
then the Executive shall promptly be indemnified and held harmless to the fullest extent permitted
or authorized by the Certificate of Incorporation or Bylaws of the Company, or if greater, by
applicable law, against any and all costs, expenses, liabilities and losses (including, without
limitation, attorneys’ and other professional fees, judgments, interest, expenses of investigation,
penalties, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
incurred or suffered by the Executive in connection therewith or in connection with seeking to
enforce his rights under this Section 8, and such indemnification shall continue as to the
Executive even if he has ceased to be a director, officer, member, executive, agent, manager,
trustee, consultant or representative of the Company or other person or entity and shall inure to
the benefit of the Executive’s heirs, executors and administrators. The Executive shall be entitled
to prompt advancement of any and all costs and expenses (including, without limitation, attorneys’
and other professional fees and other charges) incurred by him in connection with any such
Proceeding or Claim, or in connection with seeking to enforce his rights under this Section 8, any
such advancement to be made within 15 days after he gives written notice, supported by reasonable
documentation, requesting such advancement. Such notice shall include, to the extent required by
applicable law, an undertaking by the Executive to repay the amount advanced if he is ultimately
determined not to be entitled to indemnification against such costs and expenses. Nothing in this
Agreement shall operate to limit or extinguish any right to indemnification, advancement of
expenses, or contribution that the Executive would otherwise have (including, without limitation,
by agreement or under applicable law). For purposes of this Agreement, “Claim” shall include,
without limitation, any claim, demand, request, investigation, dispute, controversy, threat,
discovery request, or request for testimony or information and “Proceeding” shall include, without
limitation, any actual, threatened, or reasonably anticipated, action, suit or proceeding, whether
civil, criminal, administrative, investigative, appellate, formal, informal or other.

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

9. Other Matters

(a) The Executive represents and warrants that the execution and delivery of this Agreement
and the performance of his duties and responsibilities as contemplated by Section 2(a)(i) will not
result in a breach of, or conflict with his obligations under, his employment agreement with
NorthStar.

 

17

 

(b) The Company acknowledges that Executive has and will continue to acquire knowledge of
confidential information regarding the business and affairs of NorthStar, some of
which confidential information may relate to dealings or potential dealings between NorthStar,
on the one hand, and the Company and its subsidiaries, on the other hand. The Company hereby
instructs and authorizes Executive not to disclose any such confidential information to any
officer, director, employee, adviser, or other representative of the Company and not to make any
use of such confidential information in the performance of Executive’s duties on behalf of the
Company and such non-disclosure shall not constitute “Cause” or otherwise constitute a violation of
this Agreement.

10. Successors

(a) This Agreement is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns, provided that the Company may not assign this Agreement other than as
described in Section 10(c) below.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid.

11. Disputes

(a) Mandatory Arbitration. Subject to the provisions of this Section 11, any
controversy or claim between the Executive and the Company arising out of or relating to or
concerning this Agreement (including the covenants contained in Section 7) or any aspect of the
Executive’s employment with the Company or the termination of that employment (together, an
“Employment Matter”) will be finally settled by arbitration in the County of New York administered
by the American Arbitration Association (the “AAA”) under its Commercial Arbitration Rules then in
effect. However, the AAA’s Commercial Arbitration Rules will be modified in the following ways:
(i) notwithstanding any provision of the AAA rules to the contrary, the arbitration shall be heard
by a panel of three neutral arbitrators, with each party appointing one arbitrator, who shall
jointly appoint a third, (ii) each arbitrator will agree to treat as confidential evidence and
other information presented to them, (iii) there will be no authority to award punitive damages
(and the Executive and the Company agree not to request any such award), (iv) the optional Rules
for Emergency Measures of Protections will apply, (v) there will be no authority to amend or modify
the terms of this Agreement except as provided in Section 12(a) (and the Executive and the Company
agree not to request any such amendment or modification) and (vi) a decision must be rendered
within ten business days of the parties’ closing statements or submission of post-hearing briefs.
The Executive and the Company agree that, to the extent permitted by law, a decision made by the
arbitration panel with respect to any Employment Matter will be conclusive and binding on the
Executive and the Company.

 

18

 

(b) Injunctions and Enforcement of Arbitration Awards. The Executive or the Company
may bring an action or special proceeding in a state or federal court of competent jurisdiction
sitting in the County of New York to enforce any arbitration award under Section 11(a). Also, the
Company may bring such an action or proceeding, in addition to its rights under Section 11(a) and
whether or not an arbitration proceeding has been or is ever initiated, to temporarily,
preliminarily or permanently enforce any part of Section 7. The Executive agrees that (i) violating
any part of Section 7 would cause damage to the Company that cannot be measured or repaired, (ii)
the Company therefore is entitled to seek an injunction, restraining order or other equitable
relief restraining any actual or threatened violation of Section 7, (iii) no bond will need to be
posted for the Company to receive such an injunction, order or other relief and (iv) no proof will
be required that monetary damages for violations of Section 7 would be difficult to calculate and
that remedies at law would be inadequate.

(c) Jurisdiction and Choice of Forum. The Executive and the Company irrevocably submit
to the exclusive jurisdiction of any state or federal court located in the County of New York over
any Employment Matter that is not otherwise arbitrated or resolved according to Section 11(a).
This includes any action or proceeding to compel arbitration or to enforce an arbitration award.
Both the Executive and the Company (i) acknowledge that the forum stated in this Section 11(c) has
a reasonable relation to this Agreement and to the relationship between the Executive and the
Company and that the submission to the forum will apply even if the forum chooses to apply
non-forum law, (ii) waive, to the extent permitted by law, any objection to personal jurisdiction
or to the laying of venue of any action or proceeding covered by this Section 11(c) in the forum
stated in this Section 11(c), (iii) agree not to commence any such action or proceeding in any
forum other than the forum stated in this Section 11(c) and (iv) agree that, to the extent
permitted by law, a final and non-appealable judgment in any such action or proceeding in any such
court will be conclusive and binding on the Executive and the Company. However, nothing in this
Agreement precludes the Executive or the Company from bringing any action or proceeding in any
court for the purpose of enforcing the provisions of Section 11(a) and this Section 11(c).

(d) Waiver of Jury Trial. To the extent permitted by law, the Executive and the
Company waive any and all rights to a jury trial with respect to any Employment Matter.

(e) Costs. The Company will reimburse as incurred any reasonable expenses, including
reasonable attorney’s fees, the Executive incurs as a result of any Employment Matter, provided
that if the Executive is not the prevailing party on at least one material issue in the Employment
Matter, the Executive shall promptly return any such reimbursements. In addition, if the
Executive is not the prevailing party on at least one material issue in the Employment Matter, the
Executive shall promptly reimburse the Company any reasonable expenses, including reasonable
attorney’s fees, the Company has incurred as a result of the Employment Matter, provided that such
reimbursement shall not exceed fifty percent (50%) of the expenses, including attorney’s fees,
incurred by the Executive.

 

19

 

12. Miscellaneous

(a) Amendment; Waiver. This Agreement may not be amended or modified, or any provision
hereof waived, other than by a written agreement executed by the parties hereto or any
of their respective successors and assigns.

(b) Notices. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by overnight courier or registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

at the Executive’s primary residential address

as shown on the records of the Company

If to the Company:

Morgans Hotel Group Co.

475 Tenth Avenue

New York, NY 10018

Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee;
provided that any notice made by hand delivery shall be deemed to have been received on
the date it is actually delivered, any notice made by overnight courier shall be deemed to have
been received on the date after such notice was so sent and any notice made by registered or
certified mail, return receipt shall be deemed to have been received on the date that is five (5)
business days after such notice was so sent.

(c) Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) Withholding. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant
to any applicable law or regulation.

(e) Full Settlement. The Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. The Executive shall not be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement, and such amounts shall not be reduced whether or not the
Executive obtains other employment.

(f) Governing Law. This Agreement will be governed by and construed in accordance with
the law of the State of New York applicable to contracts made and to be performed entirely within
that State.

 

20

 

(g) No Waiver. The Executive’s or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any right the Executive or
the Company may have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason (subject to the proviso at the end of Section 3(c)) or the
Company’s right to terminate the Executive for Cause (subject to the limitation in the last
sentence of Section 3(b)), shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.

(h) Entire Agreement; Conflict. This Agreement, together with the Stock Option
Agreement, LTIP Agreement, Outperformance Award Agreement, and Promoted Interest Pool Award
Agreement (collectively, the “Related Agreements”), constitutes the final, complete and exclusive
agreement between the Executive 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. In the event of any conflict or
inconsistency between the provisions of, or definitions contained in, this Agreement, on the one
hand, and any Related Agreement or any other agreement or instrument related to the Executive’s
employment to which he is subject, on the other hand, the provisions or definitions, as the case
may be, the terms of the Related Agreements shall govern (notwithstanding the termination hereof)
but this Agreement shall govern if in conflict with any plan document or other document or
instrument related thereto (other than a Related Agreement).

(i) Section References. Any reference to a Section herein is a reference to a section
of this Agreement unless otherwise stated.

(j) Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the same document.

THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK.

SIGNATURES APPEAR ON THE NEXT PAGE.

 

21

 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from its Board of Directors, the Company has caused these presents to be executed in
its name on its behalf, all as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	EMPLOYER:	 	 	 	EXECUTIVE:
	 
	 	 	 	 	 	 	 	 
	MORGANS HOTEL GROUP CO.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Jeffrey M. Gault
	 	 	 	/s/ David Hamamoto	 	 
	 

	 	 

Name: Jeffrey M. Gault
	 	 	 	 

David Hamamoto
	 	 

 

22

 

Exhibit A

Stock Option Agreement

 

23

 

Option No.:                     

MORGANS HOTEL GROUP CO.

AMENDED AND RESTATED 2007 OMNIBUS INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

Morgans Hotel Group Co., a Delaware corporation (the “Company”), hereby grants an option to
purchase shares of its common stock, $.01 par value, (the “Stock”) to the optionee named below.
Additional terms and conditions of the grant are set forth in this cover sheet and in the
attachment (collectively the “Agreement”), and in the Company’s Amended and Restated 2007 Omnibus
Incentive Plan (the “Plan”).

Grant Date: March 20, 2011

Name of Optionee: David Hamamoto

Optionee’s Employee Identification Number:                     -                    -                    

Number of Shares Covered by Option: 600,000

Option Price per Share: $8.87 (At least 100% of Fair Market Value)

Vesting Start Date: March 20, 2011

By signing this cover sheet, you agree to all of the terms and conditions described in the
attached Agreement and in the Plan, a copy of which is also attached. You acknowledge that you
have carefully reviewed the Plan, and agree that this Agreement will control in the event any
provision of this Agreement should appear to be inconsistent with the Plan. Certain capitalized
terms used in this Agreement are defined in the Plan, and have the meaning set forth in the Plan.

	 	 	 	 	 
	Optionee:

	 	/s/ David Hamamoto	 	 
	 

	 	 

(Signature)
	 	 
	 
	 	 	 	 
	Company:

	 	/s/ Richard Szymanski	 	 
	 

	 	 

(Signature)
	 	 
	 
	 	 	 	 
	 

	 	Title: Chief Financial Officer, Morgans Hotel Group	 	 

This is not a stock certificate or a negotiable instrument.

 

 

 

MORGANS HOTEL GROUP CO.

AMENDED AND RESTATED 2007 OMNIBUS INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

	 	 	 
	Non-Qualified Stock Option

	 	This option is not intended to be
an incentive stock option under
Section 422 of the Internal Revenue
Code and will be interpreted
accordingly.
	 
	 	 
	Vesting

	 	This option is only exercisable
before it expires and then only
with respect to the vested portion
of the option. Subject to the
preceding sentence, you may
exercise this option, in whole or
in part, to purchase a whole number
of vested shares not less than 100
shares, unless the number of shares
purchased is the total number
available for purchase under the
option, by following the procedures
set forth in the Plan and below in
this Agreement.
	 
	 	 
	 

	 	Your right to the Stock under this
Agreement vests as to one-third
(1/3rd) of the total number of
shares of Stock covered by this
grant, as shown on the cover sheet,
each year on each of the first
three one-year anniversaries of the
Vesting Start Date. The resulting
aggregate number of vested shares
will be rounded down to the nearest
whole number, and you cannot vest
in more than the number of shares
covered by this option.
	 
	 	 
	 

	 	Except as otherwise provided in the
employment agreement between you
and the Company, no additional
shares of Stock will vest after
your Service has terminated for any
reason.
	 
	 	 
	Term

	 	Your option will expire in any
event at the close of business at
Company headquarters on the day
before the 10th anniversary of the
Grant Date, as shown on the cover
sheet. Your option will expire
earlier if your Service terminates,
as described below.
	 
	 	 
	Termination

	 	Except as otherwise provided in the
employment agreement between you
and the Company, if your Service
terminates for any reason, your
option will expire at the close of
business at Company headquarters on
the 90th day after your termination
date.
	 
	 	 
	Notice of Exercise

	 	When you wish to exercise this
option, you must notify the Company
by filing the proper “Notice of
Exercise” form at the address given
on the form. Your notice must
specify how many shares you wish to
purchase (in a parcel of at least
100 shares generally). Your notice
must also specify how your shares
of Stock should be registered (e.g.
in your name only or in your and
your spouse’s names as joint
tenants with right of
survivorship). The notice will be
effective when it is received by
the Company.
	 
	 	 
	 

	 	If someone else wants to exercise
this option after your death, that
person must prove to the Company’s
satisfaction that he or she is
entitled to do so.

 

 

 

	 	 	 
	Form of Payment

	 	When you submit your notice of
exercise, you must include payment
of the option price for the shares
you are purchasing. Payment may be
made in one (or a combination) of
the following forms:
	 
	 	 
	 

	 	• Cash, your personal check,
a cashier’s check, a money order or
another cash equivalent acceptable
to the Company.
	 
	 	 
	 

	 	• Shares of Stock which have
already been owned by you and which
are surrendered to the Company.
The value of the shares, determined
as of the effective date of the
option exercise, will be applied to
the option price.
	 
	 	 
	 

	 	• By delivery (on a form
prescribed by the Company) of an
irrevocable direction to a licensed
securities broker acceptable to the
Company to sell Stock and to
deliver all or part of the sale
proceeds to the Company in payment
of the aggregate option price and
any withholding taxes.
	 
	 	 
	Withholding Taxes

	 	You will not be allowed to exercise
this option unless you make
acceptable arrangements to pay any
withholding or other taxes that may
be due as a result of the option
exercise or sale of Stock acquired
under this option. In the event
that the Company determines that
any federal, state, local or
foreign tax or withholding payment
is required relating to the
exercise or sale of shares arising
from this grant, the Company shall
have the right to require such
payments from you, or withhold such
amounts from other payments due to
you from the Company or any
Affiliate. Subject to the prior
approval of the Company, which may
be withheld by the Company, in its
sole discretion, you may elect to
satisfy this withholding
obligation, in whole or in part, by
causing the Company to withhold
shares of Stock otherwise issuable
to you or by delivering to the
Company shares of Stock already
owned by you. The shares of Stock
so delivered or withheld must have
an aggregate Fair Market Value
equal to the withholding obligation
and may not be subject to any
repurchase, forfeiture, unfulfilled
vesting, or other similar
requirements.
	 
	 	 
	Corporate Transaction

	 	Notwithstanding the vesting
schedule set forth above, upon the
consummation of a Corporate
Transaction, this option will
become 100% vested if it is not
assumed, or equivalent options are
not substituted for the options, by
the Company or its successor.
Notwithstanding any other provision
in this Agreement but subject to
the employment agreement between
you and the Company, if assumed or
substituted for, the option will
expire one year after the date of
termination of Service.

 

 

 

	 	 	 
	Transfer of Option

	 	During your lifetime, only you (or,
in the event of your legal
incapacity or incompetency, your
guardian or legal representative)
may exercise the option. You
cannot transfer or assign this
option. For instance, you may not
sell this option or use it as
security for a loan. If you
attempt to do any of these things,
this option will immediately become
invalid. You may, however, dispose
of this option in your will or it
may be transferred upon your death
by the laws of descent and
distribution.
	 
	 	 
	 

	 	Regardless of any marital property
settlement agreement, the Company
is not obligated to honor a notice
of exercise from your spouse, nor
is the Company obligated to
recognize your spouse’s interest in
your option in any other way.
	 
	 	 
	Retention Rights

	 	Neither your option nor this
Agreement give you the right to be
retained by the Company (or any
Subsidiary or Affiliate) in any
capacity. The Company (and any
Subsidiary or Affiliate) reserve
the right to terminate your Service
at any time and for any reason,
subject to the employment agreement
between you and the Company.
	 
	 	 
	Shareholder Rights

	 	You, or your estate or heirs, have
no rights as a shareholder of the
Company until a certificate for
your option’s shares has been
issued (or an appropriate book
entry has been made). No
adjustments are made for dividends
or other rights if the applicable
record date occurs before your
stock certificate is issued (or an
appropriate book entry has been
made), except as described in the
Plan.
	 
	 	 
	Adjustments

	 	In the event of a stock split, a
stock dividend or a similar change
in the Stock, the number of shares
covered by this option and the
option price per share shall be
adjusted (and rounded down to the
nearest whole number) pursuant to
the Plan. Your option shall be
subject to the terms of the
agreement of merger, liquidation or
reorganization in the event the
Company is subject to such
corporate activity in accordance
with the terms of the Plan.
	 
	 	 
	Applicable Law

	 	This Agreement will be interpreted
and enforced under the laws of the
State of New York, other than any
conflicts or choice of law rule or
principle that might otherwise
refer construction or
interpretation of this Agreement to
the substantive law of another
jurisdiction.
	 
	 	 
	The Plan

	 	The text of the Plan is
incorporated in this Agreement by
reference.
	 
	 	 
	 

	 	This Agreement and the Plan
constitute the entire understanding
between you and the Company
regarding this option. Any prior
agreements, commitments or
negotiations concerning this option
are superseded.

 

 

 

	 	 	 
	Data Privacy

	 	In order to administer the Plan,
the Company may process personal
data about you. Such data includes
but is not limited to the
information provided in this
Agreement and any changes thereto,
other appropriate personal and
financial data about you such as
home address and business addresses
and other contact information,
payroll information and any other
information that might be deemed
appropriate by the Company to
facilitate the administration of
the Plan.
	 
	 	 
	 

	 	By accepting this option, you give
explicit consent to the Company to
process any such personal data.
You also give explicit consent to
the Company to transfer any such
personal data outside the country
in which you work or are employed,
including, with respect to non-U.S.
resident Optionees, to the United
States, to transferees who shall
include the Company and other
persons who are designated by the
Company to administer the Plan.
	 
	 	 
	Consent to Electronic Delivery

	 	The Company may choose to deliver
certain statutory materials
relating to the Plan in electronic
form. By accepting this option
grant you agree that the Company
may deliver the Plan prospectus and
the Company’s annual report to you
in an electronic format. If at any
time you would prefer to receive
paper copies of these documents, as
you are entitled to, the Company
would be pleased to provide copies.
Please contact David Smail at
(212) 277-4100 to request paper
copies of these documents.
	 
	 	 
	Electronic Signature

	 	All references to signatures and
delivery of documents in this
Agreement can be satisfied by
procedures the Company has
established or may establish for an
electronic signature system for
delivery and acceptance of any such
documents, including this
Agreement. Your electronic
signature is the same as, and shall
have the same force and effect as,
your manual signature. Any such
procedures and delivery may be
effected by a third party engaged
by the Company to provide
administrative services related to
the Plan.

By
signing the cover sheet of this Agreement, you agree to all of the terms and 
conditions described above and in the Plan.

 

 

 

Exhibit B

LTIP Agreement

 

 

 

LTIP UNIT VESTING AGREEMENT

UNDER THE MORGANS HOTEL GROUP CO.

AMENDED AND RESTATED 2007 OMNIBUS INCENTIVE PLAN

	 	 	 
	Name of Grantee: David Hamamoto

	 	(“Grantee”)
	No. of LTIP Units: 75,000
	 	 
	Grant Date: March 20, 2011

	 	(the “Grant Date”)
	Final Acceptance Date: March 20, 2011

	 	(the “Final Acceptance Date”)

Pursuant to the Morgans Hotel Group Co. Amended and Restated 2007 Omnibus Incentive Plan (the
“Plan”) of Morgans Hotel Group Co. (the “Company”) a Delaware corporation, and the
Limited Liability Company Agreement (the “LLC Agreement”) of Morgans Group LLC (the
“LLC”), a Delaware limited liability company, the LLC hereby grants to the Grantee named
above an Other Stock-Based Award (as defined in the Plan, referred to herein as an “Award”)
in the form of, and by causing the LLC to issue to the Grantee, the number of LTIP Units (as
defined in the LLC Agreement) set forth above (the “Award LTIP Units”) having the rights,
voting powers, restrictions, limitations as to distributions, qualifications and terms and
conditions of redemption and conversion set forth herein and in the LLC Agreement. Upon the close
of business on the Final Acceptance Date, if this LTIP Unit Vesting Agreement (this
“Agreement”) is accepted, the Grantee shall receive the number of LTIP Units specified
above, subject to the restrictions and conditions set forth herein, in the Plan and in the LLC
Agreement. Unless otherwise indicated, capitalized terms used herein but not defined shall have
the meanings given to those terms in the Plan.

1. Acceptance of Agreement.

(a) Unless the Grantee is already a Member (as defined in the LLC Agreement), Grantee must
sign, as a Member, and deliver to the LLC a counterpart signature page to the LLC Agreement
(attached hereto as Exhibit A). Upon signing and delivery of the signature page, to the
extent required, the Grantee shall be admitted as a Member of the LLC, as of the Grant Date, with
beneficial ownership of the number of LTIP Units specified above, the LLC Agreement shall be
amended to reflect the issuance to the Grantee of the Award LTIP Units and the LLC shall deliver to
the Grantee a certificate of the Company certifying the number of LTIP Units then issued to the
Grantee. Thereupon, the Grantee shall have all the rights of a Member of the LLC with respect to
the number of LTIP Units specified above, as set forth in the LLC Agreement, subject, however, to
the restrictions and conditions specified herein and in the LLC Agreement.

(b) In order to confirm receipt of this Agreement, Grantee must sign and deliver to the
Company a copy of this Agreement.

 

 

 

2. Vesting of LTIP Units.

(a) Except as provided in Sections 2(b) and 2(c) below, one twelfth (1/12) of the Award LTIP Units
shall vest monthly on each of the first twelve monthly anniversaries of the Grant Date, (each such
date on which Award LTIP Units vest is referred to herein as a “Vesting Date”); provided that upon
termination of Grantee’s employment with, cessation of consulting
relationship with or cessation of service to the Company and its Subsidiaries for any reason, the
LTIP Units that have not yet vested shall, without payment of any consideration by the LLC,
automatically and without notice terminate, be forfeited and be and become null and void, and
neither the Grantee nor any of his successors, heirs, assigns, or personal representatives will
thereafter have any further rights or interests in such LTIP Units. In the event Grantee becomes a
consultant, advisor or Non-Employee Director, such change in status shall not be deemed a
termination of employment or service with the Company at the time of such change in status or
thereafter so long as the Grantee continues in one of such positions.

(b) Notwithstanding any other term or provision of this Agreement, if a Corporate Transaction
occurs and the LTIP Units subject to this Agreement are not assumed or substituted for any
restrictions and conditions on all LTIP Units subject to this Agreement shall be deemed waived by
the Company and all LTIP Units granted hereby that have not previously been forfeited shall
automatically become fully vested. Notwithstanding any other provision in this Agreement, if
assumed or substituted for, but subject to Section 2(c), the award will expire one year after the
date of termination.

(c) Other Vesting Terms. Notwithstanding anything to the contrary in this Section 2, to
the extent the Grantee is a party to another agreement or arrangement with the Company that
provides accelerated vesting of the Award LTIP Units in the event of certain types of employment
terminations or any other applicable vesting-related events or provides more favorable vesting
provisions than provided for in this Agreement, the more favorable vesting terms of such other
agreement or arrangement shall control.

3. Distributions. Distributions on the LTIP Units shall be paid currently to the
Grantee in accordance with the terms of the LLC Agreement.

4. Rights with Respect to LTIP Units. 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 a 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 structure of the Company, or any distribution to holders of Common Stock other than regular
cash dividends, shall occur or (iii) any other event shall occur which in the judgment of the
Administrator necessitates action by way of adjusting the terms of the Agreement, then and in that
event, the Administrator shall take any such action as in its discretion shall be necessary to
maintain the Grantee’s rights hereunder so that they are substantially proportionate to the rights
existing under this Agreement prior to such event, including but not limited to, adjustments in the
number of LTIP Units then subject to this Agreement.

5. Legend. The records of the LLC evidencing the Award LTIP Units shall bear an
appropriate legend, as determined by the LLC in its sole discretion, to the effect that such LTIP
Units are subject to restrictions as set forth herein, in the Plan and in the LLC Agreement.

 

 

 

6. Restrictions on Transfer. None of the Award LTIP Units 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”), or converted
into Membership Units in accordance with the LLC Agreement (a) prior to vesting, or (b) unless such
Transfer is in compliance with all applicable securities laws (including, without limitation, the
Securities Act of 1933, as amended (the “Securities Act”)), and such Transfer is in
accordance
with the applicable terms and conditions of the LLC Agreement; provided that, upon the approval of,
and subject to the terms and conditions specified by, the Administrator, unvested Award LTIP Units
may be Transferred to members of the Grantee’s Immediate Family, which for purposes of this
Agreement shall include family limited partnerships and similar entities which are primarily for
the benefit of the Grantee and his or her Immediate Family, provided that the transferee agrees in
writing with the Company and the LLC to be bound by all of the terms and conditions of this
Agreement. In connection with any Transfer of Award LTIP Units, the LLC may require the Grantee to
provide an opinion of counsel, satisfactory to the LLC, that such Transfer is in compliance with
all federal and state securities laws (including, without limitation, the Securities Act). Any
attempted Transfer of Award LTIP Units not in accordance with the terms and conditions of this
Section 6 shall be null and void, and the LLC shall not reflect on its records any change
in record ownership of any 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 LTIP
Units. 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, the laws of descent and
distribution or the transfer provisions specified above in this Section 6.

7. Incorporation of Plan. The provisions of the Plan are hereby incorporated by
reference as if set forth herein. If and to the extent that any provision contained in this
Agreement is inconsistent with the Plan, this Agreement shall govern.

8. Investment Representation; Registration. The Grantee hereby makes the covenants,
representations and warranties set forth on Exhibit B attached hereto as of the date of
acceptance of this Agreement and each Vesting Date. All of such covenants, warranties and
representations shall survive the execution and delivery of this Agreement by the Grantee. The
Grantee shall immediately notify the LLC upon discovering that any of the representations or
warranties set forth on Exhibit B were false when made or have, as a result of changes in
circumstances, become false. The LLC will have no obligation to register under the Securities Act
any LTIP Units or any other securities issued pursuant to this Agreement or upon conversion or
exchange of the LTIP Units.

9. Section 83(b) Election. The Grantee hereby agrees to make an election to include
in gross income in the year of transfer the Award LTIP Units pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended (the “Code”), substantially in the form attached
hereto as Exhibit C and to supply the necessary information in accordance with the
regulations promulgated thereunder.

10. Amendment. The Grantee acknowledges that the Plan may be amended or discontinued
in accordance with Section 12 thereof and that this Agreement may be amended or canceled by the
Administrator of the Plan, on behalf of the LLC, for the purpose of satisfying changes in law or
for any other lawful purpose, provided that no such action shall impair the Grantee’s rights under
this Agreement without the Grantee’s written consent.

11. 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 the Award LTIP Units, the Grantee will pay
to the Company or, if appropriate, any of its affiliates, or make arrangements satisfactory to the
Administrator 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.

12. No Obligation to Continue Employment. Neither the Company, the LLC nor any
subsidiary of any of them is obligated by or as a result of the Plan or this Agreement to continue
to have the Grantee provide services to it or to continue the Grantee in employment and neither the
Plan nor this Agreement shall interfere in any way with the right of the Company, the LLC or any
subsidiary of any of them to terminate its relationship with the Grantee or the employment of the
Grantee at any time, subject to the employment agreement between you and the Company.

13. Notices. Notices hereunder shall be mailed or delivered to the LLC at its
principal place of business and shall be mailed or delivered to the Grantee at the address on file
with the LLC or, in either case, at such other address as one party may subsequently furnish to the
other party in writing.

14. Section 409A. Subject to any agreement or arrangement to which the Grantee and
the Company are parties to, if any compensation provided by this Agreement may result in the
application of Section 409A of the Code (“Section 409A”), the Company shall, in
consultation with and at the request of the Grantee, modify the Agreement in the least restrictive
manner necessary in order to, where applicable, (a) exclude such compensation from the definition
of “deferred compensation” within the meaning of such Section 409A or (b) comply with the
provisions of Section 409A, other applicable provision(s) of the Code and/or any rules, regulations
or other regulatory guidance issued under such statutory provisions and to make such modifications,
in each case, without any diminution in the value of the payments to the Grantee.

15. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, applied without regard to conflict of law principles. The
parties hereto agree that any action or proceeding arising directly, indirectly or otherwise in
connection with, out of, related to or from this Agreement, any breach hereof or any action covered
hereby, shall be resolved within the State of New York and the parties hereto consent and submit to
the jurisdiction of the federal and state courts located within the City of New York, New York.
The parties hereto further agree that any such action or proceeding brought by either party to
enforce any right, assert any claim, obtain any relief whatsoever in connection with this Agreement
shall be brought by such party exclusively in federal or state courts located within the State of
New York.

16. Electronic Signature. All references to signatures and delivery of documents in
this Agreement can be satisfied by procedures the Company has established or may establish for an
electronic signature system for delivery and acceptance of any such documents, including this
Agreement. The Grantee’s electronic signature is the same as, and shall have the same force and
effect as, Grantee’s manual signature. Any such procedures and delivery may be effected by a third
party engaged by the Company to provide administrative services related to the Plan.

(Signature Page Follows)

 

 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the
20th day of March, 2011.

	 	 	 	 	 
	 	MORGANS HOTEL GROUP CO.

 	 
	 	By:  	/s/ Jeffrey M. Gault
 	 
	 	 	Name:  	Jeffrey M. Gault 	 
	 	 	 	 	 
	 	MORGANS GROUP LLC

 	 
	 	By:  	Morgans Hotel Group Co., its
 	 
	 	 	managing member 	 

	 	 	 	 	 
	 	 	 
	 	By:  	                       /s/ Jeffrey M. Gault
 	 
	 	 	Name:  	Jeffrey M. Gault 	 

	 	 	 	 	 
	 	GRANTEE

 	 
	 	/s/ David Hamamoto
 	 
	 	Name:  	David Hamamoto 	 
	 	Address: 	 

 

 

 

EXHIBIT A

FORM OF MEMBER SIGNATURE PAGE

The Grantee, desiring to become one of the within named Members of Morgans Group LLC, hereby
accepts all of the terms and conditions of, and becomes a party to, the Limited Liability Company
Agreement of Morgans Group LLC (the “LLC Agreement”). The Grantee agrees that this signature page
may be attached to any counterpart of the LLC Agreement.

Signature Line for Member:

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Name:  	 	 
	 	Date: 	 
	 

Address of Member:

 

 

 

EXHIBIT B

GRANTEE’S COVENANTS, REPRESENTATIONS AND WARRANTIES

The Grantee hereby represents, warrants and covenants as follows:

(a) The Grantee has received and had an opportunity to review the following documents (the
“Background Documents”):

(i) The Company’s latest Annual Report to Stockholders that has been provided to
stockholders after the Company’s initial public offering, if available;

(ii) The Company’s Proxy Statement for its most recent Annual Meeting of Stockholders
following the Company’s initial public offering, if available;

(iii) The Company’s Report on Form 10-K for the fiscal year most recently ended
following the Company’s initial public offering, if available;

(iv) If any of the documents described in clauses (i) — (iii) above or (v) or (vi)
below is not available, the Company’s Registration Statement on Form S-1 registering the
Company’s initial public offering of its common stock;

(v) The Company’s Form 10-Q for the most recently ended quarter if one has been filed
by the Company with the Securities and Exchange Commission since the filing of the Form 10-K
described in clause (iii) above or, if a Form 10-K has not been filed by the Company, since
the filing of the Form S-1 described in clause (iv) above;

(vi) Each of the Company’s Current Report(s) on Form 8-K, if any, filed since the later
of the end of the fiscal year most recently ended for which a Form 10-K has been filed by
the Company or the filing of the Form S-1 described in clause (iv) above;

(vii) The LLC Agreement;

(viii) The Plan; and

(ix) The Company’s Certificate of Incorporation, as amended.

The Grantee also acknowledges that any delivery of the Background Documents and other information
relating to the Company and the LLC prior to the determination by the LLC of the suitability of the
Grantee as a holder of LTIP Units shall not constitute an offer of LTIP Units until such
determination of suitability shall be made.

 

 

 

(b) The Grantee hereby represents and warrants that

(i) The Grantee either (A) is an “accredited investor” as defined in Rule 501(a) under
the Securities Act of 1933, as amended (the “Securities Act”), or (B) by reason of the
business and financial experience of the Grantee, together with the business and financial
experience of those persons, if any, retained by the Grantee to represent or advise him, her
or it with respect to the grant to him, her or it of LTIP Units, the potential conversion of
LTIP Units into common units of the LLC (“Common Units”) and the
potential redemption of such Common Units for shares of common stock (“Shares”), has
such knowledge, sophistication and experience in financial and business matters and in
making investment decisions of this type that the Grantee (I) is capable of evaluating the
merits and risks of an investment in the LLC and potential investment in the Company and of
making an informed investment decision, (II) is capable of protecting his, her or its own
interest or has engaged representatives or advisors to assist him, her or it in protecting
his, her or its interests, and (III) is capable of bearing the economic risk of such
investment.

(ii) The Grantee understands that (A) the Grantee is responsible for consulting his,
her or its own tax advisors 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 the award of LTIP Units may become subject, to his, her or its particular
situation; (B) the Grantee has not received or relied upon business or tax advice from the
Company, the LLC or any of their respective employees, agents, consultants or advisors, in
their capacity as such; (C) the Grantee provides or will provide services to the LLC 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 LLC, as the Grantee believes to be
necessary and appropriate to make an informed decision to accept this Award of LTIP Units;
and (D) an investment in the LLC and/or the Company involves substantial risks. The Grantee
has been given the opportunity to make a thorough investigation of matters relevant to the
LTIP Units and has been furnished with, and has reviewed and understands, materials relating
to the LLC and the Company and their respective activities (including, but not limited to,
the Background Documents). The Grantee has been afforded the opportunity to obtain any
additional information (including any exhibits to the Background Documents) deemed necessary
by the Grantee to verify the accuracy of information conveyed to the Grantee. The Grantee
confirms that all documents, records, and books pertaining to his, her or its receipt of
LTIP Units which were requested by the Grantee have been made available or delivered to the
Grantee. The Grantee has had an opportunity to ask questions of and receive answers from
the LLC and the Company, or from a person or persons acting on their behalf, concerning the
terms and conditions of the LTIP Units. The Grantee has relied upon, and is making its
decision solely upon, the Background Documents and other written information provided to the
Grantee by the LLC or the Company. The Grantee did not receive any tax, legal or financial
advice from the LLC or the Company and, to the extent it deemed necessary, has consulted
with its own advisors in connection with its evaluation of the Background Documents and this
Agreement and the Grantee’s receipt of LTIP Units.

(iii) The LTIP Units to be issued, the Common Units issuable upon conversion of the
LTIP Units and any Shares issued in connection with the redemption of any such Common Units
will be acquired for the account of the Grantee for investment only and not with a current
view to, or with any intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein, without prejudice, however, to the Grantee’s right
(subject to the terms of the LTIP Units, the Plan and this Agreement) at all times to sell
or otherwise dispose of all or any part of his or her LTIP Units, Common Units or Shares in
compliance with the Securities Act, and applicable state
securities laws, and subject, nevertheless, to the disposition of his or her assets
being at all times within his or her control.

 

 

 

(iv) The Grantee acknowledges that (A) neither the LTIP Units to be issued, nor the
Common Units issuable upon conversion of the LTIP Units, have been registered under the
Securities Act or state securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws and, if such LTIP
Units or Common Units are represented by certificates, such certificates will bear a legend
to such effect, (B) the reliance by the LLC and the Company on such exemptions is predicated
in part on the accuracy and completeness of the representations and warranties of the
Grantee contained herein, (C) such LTIP Units, or Common Units, therefore, cannot be resold
unless registered under the Securities Act and applicable state securities laws, or unless
an exemption from registration is available, (D) there is no public market for such LTIP
Units and Common Units and (E) neither the LLC nor the Company has any obligation or
intention to register such LTIP Units or the Common Units issuable upon conversion of the
LTIP Units under the Securities Act or any state securities laws or to take any action that
would make available any exemption from the registration requirements of such laws, except,
that, upon the redemption of the Common Units for Shares, the Company currently intends to
issue such Shares under the Plan and pursuant to a Registration Statement on Form S-8 under
the Securities Act, to the extent that (I) the Grantee is eligible to receive such Shares
under the Plan at the time of such issuance, (II) the Company has filed an effective Form
S-8 Registration Statement with the Securities and Exchange Commission registering the
issuance of such Shares. The Grantee hereby acknowledges that because of the restrictions
on transfer or assignment of such LTIP Units acquired hereby and the Common Units issuable
upon conversion of the LTIP Units which are set forth in the LLC Agreement or this
Agreement, the Grantee may have to bear the economic risk of his, her or its ownership of
the LTIP Units acquired hereby and the Common Units issuable upon conversion of the LTIP
Units for an indefinite period of time.

(v) The Grantee has determined that the LTIP Units are a suitable investment for the
Grantee.

(vi) No representations or warranties have been made to the Grantee by the LLC or the
Company, or any officer, director, shareholder, agent, or affiliate of any of them, and the
Grantee has received no information relating to an investment in the LLC or the LTIP Units
except the information specified in Paragraph (b) above.

(c) So long as the Grantee holds any LTIP Units, the Grantee shall disclose to the LLC in writing
such information as may be reasonably requested with respect to ownership of LTIP Units as the LLC
may deem reasonably necessary to ascertain and to establish compliance with provisions of the Code,
applicable to the LLC or to comply with requirements of any other appropriate taxing authority.

 

 

 

(d) The Grantee hereby agrees to make an election under Section 83(b) of the Code with respect to
the LTIP Units awarded hereunder, and has delivered with this Agreement a completed, executed copy
of the election form attached hereto as Exhibit C. The Grantee agrees to file the election
(or to permit the LLC to file such election on the Grantee’s behalf) within
thirty (30) days after the Award of the LTIP Units hereunder with the IRS Service Center at which
such 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 LTIP Units are
awarded to the Grantee.

(e) The address set forth on the signature page of this Agreement is the address of the Grantee’s
principal residence, and the Grantee has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such residence is sited.

(f) The representations of the Grantee as set forth above are true and complete to the best of the
information and belief of the Grantee, and the LLC shall be notified promptly of any changes in the
foregoing representations.

 

 

 

EXHIBIT C

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                      LTIP Units in Morgans Group LLC
(the “LLC”).
	 
	 	3.	 	The date on which the LTIP Units were transferred is                     , 20_____. The
taxable year to which this election relates is calendar year 20_.
	 
	 	4.	 	Nature of restrictions to which the LTIP Units are subject:

	 	(a)	 	With limited exceptions, until the LTIP Units vest, the
Taxpayer may not transfer in any manner any portion of the LTIP Units without
the consent of the LLC.
	 
	 	(b)	 	The Taxpayer’s LTIP Units vest in accordance with the vesting
provisions described in the Schedule attached hereto. Unvested LTIP Units are
forfeited in accordance with the vesting provisions described in the Schedule
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 LTIP
Units with respect to which this election is being made was $0 per LTIP Unit.
	 
	 	6.	 	The amount paid by the Taxpayer for the LTIP Units was $0 per LTIP Unit.

	 	7.	 	A copy of this statement has been furnished to the LLC and to its managing
member, Morgans Hotel Group Co.

Dated: ___________, 20__

	 	 	 	 	 
	 

	 	 

Name:
	 	 

 

 

 

Schedule to Section 83(b) Election -Vesting Provisions of LTIP Units

LTIP Units are subject to time-based vesting with one-twelfth (1/12) vesting each month on the
first twelve monthly anniversaries of the date of grant, provided that the Taxpayer remains an
employee of Morgans Hotel Group Co. (the “Company”) or its subsidiaries through such dates, subject
to acceleration in the event of certain extraordinary transactions. Unvested LTIP Units are
subject to forfeiture in the event of failure to vest based on the passage of time and continued
employment with the Company or its subsidiaries.

 

 

 

Exhibit C

Outperformance Award Agreement 

 

 

 

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.

 

 

 

“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:

(vi) 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;

(vii) a material breach by Grantee of his Service Agreement;

(viii) the Grantee’s willful commission of an act of fraud, theft or dishonesty
resulting in economic, financial or material reputational injury to the Company;

(ix) the Grantee’s conviction of, or entry by the Grantee of a guilty or no contest
plea to, the commission of a felony; or

(x) 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.

“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

 

 

 

	 	(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.

 

 

 

“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.

“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.

 

 

 

“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 Section 4.2(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.

“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.

“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.

“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 45days following the Final Valuation Date.

(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

(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.

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.

 

 

 

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).

 

 

 

(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.

 

 

 

(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.

 

 

 

(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.

(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]

 

 

 

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:  	/s/ Richard Szymanski
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	CFO 	 
	 

	 	 	 	 	 
	 	MORGANS GROUP LLC

 	 
	 	By:  	/s/ Richard Szymanski
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	 	 
	 

GRANTEE

	 	 	 
	/s/ David Hamamoto
	 	 
	 

Name: David Hamamoto

	 	 

 

 

 

SCHEDULE A TO 2011 OUTPERFORMANCE PLAN AWARD AGREEMENT

	 	 	 
	Date of Award Agreement:
	 	March 20, 2011
	Name of Grantee:
	 	David Hamamoto
	Participation Percentage:
	 	35%
	Grant Date:
	 	March 20, 2011
	Initial Grant of Award LTIP Units (if applicable)
	 	551,250

Initials of Company representative: /s/RS Initials of Grantee: /s/DH

 

 

 

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.

 

 

 

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.

 

 

 

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.

 

 

 

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                      
                   

 

 

 

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.

 

 

 

Exhibit D

Promoted Interest Pool Award Agreement

 

 

 

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.

“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.

 

 

 

“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).

 

 

 

“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

(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.

 

 

 

“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.

“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.

“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

	 	(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).

(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:

(iv) 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

(v) 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.

(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.

(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.

(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]

 

 

 

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:  	/s/ Richard Szymanski
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	CFO 	 

	 	 	 
	GRANTEE
	 	 
	 
	 	 
	/s/ David Hamamoto
 

Name: David Hamamoto

	 	 

 

 

 

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

	 	 	 	 	 
	 	MORGANS GROUP LLC

 	 
	 	By:  	/s/ Richard Szymanski
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	 	 

 

 

 

SCHEDULE A TO 2011 PROMOTED INTEREST BONUS POOL

AWARD AGREEMENT

	 	 	 	 	 
	Date of Award Agreement:

	 	March 20, 2011

	Name of Grantee:

	 	David Hamamoto

	Participation Percentage:

	 	35%
	Grant Date:

	 	March 20, 2011

Initials of Company representative: /s/RS Initials of Grantee: /s/DH

 

 

 

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.

 

 

 

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.

(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.

 

 

 

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                                                             

 

 

 

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.

 

 

 

Exhibit E

Release Agreement

 

 

 

RELEASE AGREEMENT

THIS RELEASE AGREEMENT (this “Release”) is entered into as of [                    ] (the “Effective
Date”), by                                          (“Executive”) in consideration of severance pay and other
benefits (the “Severance Payment”) provided to Executive by Morgans Hotel Group Co., a Delaware
corporation (the “Company”), pursuant to Section 4 of the Employment Agreement by and between the
Company and Executive (the “Employment Agreement”).

1. Release. Subject to the last sentence of the first paragraph of this Section 1,
Executive, on his own behalf and on behalf of his heirs, executors, administrators, attorneys and
assigns, hereby unconditionally and irrevocably releases, waives and forever discharges the Company
and each of its affiliates, parents, successors, predecessors, and the subsidiaries, directors,
owners, members, shareholders, officers, agents, and employees of the Company and its affiliates,
parents, successors, predecessors, and subsidiaries (collectively, all of the foregoing are
referred to as the “Employer”), from any and all causes of action, claims and damages, including
attorneys’ fees, whether known or unknown, foreseen or unforeseen, presently asserted or otherwise
arising through the date of his signing of this Release, concerning his employment or separation
from employment. Subject to the last sentence of the first paragraph of this Section 1, this
Release includes, but is not limited to, any payments, benefits or damages arising under any
federal law (including, but not limited to, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Employee Retirement Income Security Act of 1974, the
Americans with Disabilities Act, Executive Order 11246, the Family and Medical Leave Act, and the
Worker Adjustment and Retraining Notification Act, each as amended); any claim arising under any
state or local laws, ordinances or regulations (including, but not limited to, any state or local
laws, ordinances or regulations requiring that advance notice be given of certain workforce
reductions); and any claim arising under any common law principle or public policy, including, but
not limited to, all suits in tort or contract, such as wrongful termination, defamation, emotional
distress, invasion of privacy or loss of consortium. Notwithstanding any other provision of this
Release to the contrary, this Release does not encompass, and Executive does not release, waive or
discharge, the obligations of the Company (a) to make the payments and provide the other benefits
contemplated by the Employment Agreement or any other Agreement with Executive, or (b) under any
restricted stock unit agreement, option agreement or other agreement pertaining to Executive’s
equity ownership or other awards, or (c) under any indemnification or similar agreement with
Executive, or (d) under this Release.

Executive understands that by signing this Release, he is not waiving any claims or
administrative charges which cannot be waived by law. He is waiving, however, any right to
monetary recovery or individual relief should any federal, state or local agency (including the
Equal Employment Opportunity Commission) pursue any claim on his behalf arising out of or related
to his employment with and/or separation from employment with the Company (other than with respect
to those matters described in clauses (a), (b), (c) and (d) above.

Executive further agrees without any reservation whatsoever, never to sue the Employer or
become a party to a lawsuit on the basis of any and all claims of any type lawfully and validly
released in this Release.

 

 

 

2. Acknowledgments. Executive is signing this Release knowingly and voluntarily. He
acknowledges that:

	 	(a)	 	He is hereby advised in writing to consult an
attorney before signing this Release;

	 	(b)	 	He has relied solely on his own judgment and/or
that of his attorney regarding the consideration for and the terms of
this Release and is signing this Release knowingly and voluntarily of
his own free will;

	 	(c)	 	He is not entitled to the Severance Payment
unless he agrees to and honors the terms of this Release;

	 	(d)	 	He has been given at least twenty-one (21)
calendar days to consider this Release, or he expressly waives his
right to have at least twenty-one (21) days to consider this Release;

	 	(e)	 	He may revoke this Release within seven (7)
calendar days after signing it by submitting a written notice of
revocation to the Employer. He further understands that this Release
is not effective or enforceable until after the seven (7) day period of
revocation has expired without revocation, and that if he revokes this
Release within the seven (7) day revocation period, he will not receive
the Severance Payment;

	 	(f)	 	He has read and understands the Release and
further understands that, subject to the limitations contained herein,
it includes a general release of any and all known and unknown,
foreseen or unforeseen claims presently asserted or otherwise arising
through the date of his signing of this Release that he may have
against the Employer; and

	 	(g)	 	No statements made or conduct by the Employer
has in any way coerced or unduly influenced him or her to execute this
Release.

3. No Admission of Liability. This Release does not constitute an admission of
liability or wrongdoing on the part of the Employer, the Employer does not admit there has been any
wrongdoing whatsoever against the Executive, and the Employer expressly denies that any wrongdoing
has occurred.

4. Entire Agreement. There are no other agreements of any nature between the Employer
and Executive with respect to the matters discussed in this Release, except as expressly stated
herein, and in signing this Release, Executive is not relying on any agreements or representations,
except those expressly contained in this Release.

5. Execution. It is not necessary that the Employer sign this Release following
Executive’s full and complete execution of it for it to become fully effective and
enforceable.

 

 

 

6. Severability. If any provision of this Release is found, held or deemed by a court
of competent jurisdiction to be void, unlawful or unenforceable under any applicable statute or
controlling law, the remainder of this Release shall continue in full force and effect.

7. Governing Law. This Release shall be governed by the laws of the State of New
York, excluding the choice of law rules thereof.

8. Headings. Section and subsection headings contained in this Release are inserted
for the convenience of reference only. Section and subsection headings shall not be deemed to be a
part of this Release for any purpose, and they shall not in any way define or affect the meaning,
construction or scope of any of the provisions hereof.

IN WITNESS WHEREOF, the undersigned has duly executed this Release as of the day and year
first herein above written.

EXECUTIVE:Exhibit 10.3

Exhibit 10.3

EMPLOYMENT AGREEMENT

(MICHAEL GROSS)

This EMPLOYMENT AGREEMENT (this “Agreement”), dated on March 20, 2011, between Morgans Hotel
Group Co., a Delaware corporation (the “Company”), and Michael Gross (the “Executive”) shall become
effective as of March 20, 2011 (the “Effective Date”).

1. Employment Period

The Company hereby employs the Executive, and the Executive hereby accepts employment with
the Company, on the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of the Effective Date (the “Employment Period”),
subject to the provisions for early termination or extension as hereinafter provided. The Company
(but not the Executive) will have the right to offer (the “Extension Offer”) to extend the
Employment Period by six (6) months (the “Extension Period”) by giving notice to Executive of such
offer no less than seventy-five (75) days prior to the end of the initial Employment Period.
During any Extension Period, the Executive shall receive compensation on substantially the same
terms as being provided at the end of the initial Employment Period and will receive a cash bonus,
payable on the last day of the Extension Period, in an amount equal to one-half of the Annual Bonus
paid to the Executive with respect to the 2013 fiscal year. In the event that the parties
hereafter agree to extend Executive’s employment beyond the end of the Extension Period the amount
of the pro-rated cash bonuses paid by the Company with respect to the Extension Period and the
period from January 1, 2014 to the third anniversary of the Effective Date will be taken into
account and be credited against any cash bonus that may become payable to Executive for fiscal
2014. The Executive shall have the right to accept or reject the Extension Offer; if the Executive
rejects the Extension Offer and terminates employment, such termination will be deemed to be a
termination due to non-renewal of the Agreement by the Company for purposes of Section 4(d) below
and shall not be considered a termination under Section 4(c) below.

2. Terms of Employment

(a) Position and Duties

(i) During the Employment Period, the Executive shall serve as Chief Executive Officer
of the Company with the customary and usual authority, duties and responsibilities attendant
to such position and any other duties that may reasonably be assigned by the Company’s Board
of Directors (the “Board”) (taking into consideration that the Company has an Executive
Chairman and Chief Operating Officer), and subject to such policies and procedures for
coordinating and consulting with the Executive Chairman consistent with the foregoing as the
Board, after consultation with the Executive, may adopt, from time to time. It is
understood that a portion of the Executive’s duties and responsibilities contemplated above
shall be provided to Morgans Group LLC (the “Operating Company”). The Executive shall
report to the Board.

 

 

 

(ii) During the Employment Period, and excluding any periods of vacation and sick leave
to which the Executive is entitled, the Executive agrees to devote substantially all of the
Executive’s business time, attention and energies to the performance of the duties so that
Executive can perform the duties contemplated by Section 2(a)(i), and to perform such duties
faithfully, diligently and to the best of the Executive’s abilities and subject to such
laws, rules, regulations and policies from time to time applicable to the Company’s
executives. Notwithstanding the above, Executive shall be entitled to attend to personal and
family affairs and investments, be involved in not for profit, charitable and professional
activities and, with the Board’s prior consent, serve on boards of other organizations,
provided that all of the foregoing does not, in the aggregate, materially interfere with
Executive’s responsibilities hereunder.

(iii) During the Employment Period, (i) the Executive agrees to continue to serve as a
director of the Company; and (ii) the Company agrees that the Executive shall be nominated
for election as a director of the Company at each annual meeting of the Company’s
stockholders or other meeting of the Company’s stockholders at which directors are elected
and be nominated as a member of the investment committee of the Board of Directors. Any
failure by the Board to nominate the Executive for election as a director of the Company in
accordance with clause (ii) above or failure to be elected to the Board or to the investment
committee shall constitute Good Reason for the Executive to terminate his employment in
accordance with Section 3(c) of this Agreement.

(b) Compensation

(i) Annual Base Salary. During the Employment Period, the Executive shall
receive an annual base salary (“Annual Base Salary”) equal to $750,000 (payable
semi-monthly), which shall be subject to annual performance reviews and may be increased at
the good faith discretion of the Board or the Compensation Committee of the Board (the
“Compensation Committee”) in accordance with standard practices of the Company. The term
“Annual Base Salary” as utilized in this Agreement shall refer to Annual Base Salary as so
increased. Annual Base Salary shall not be less than $750,000 without the prior written
consent of the Executive.

(ii) Annual Bonus. The Executive will be eligible for an annual cash bonus for
each of the Company’s 2011, 2012, and 2013 fiscal years (“Annual Bonus”) with a target
payout of 100% of Annual Base Salary. The target payout for the 2011 Annual Bonus shall be
pro rated, based on the number of days in the fiscal year from and including the Effective
Date to and including December 31, 2011, 50% of which shall be guaranteed. The remaining
50% of the 2011 Annual Bonus shall depend on the following performance metrics: 40% on
EBITDA and 10% on the RevPAR Index, both as established by the Compensation Committee of the
Board of Directors. For 2012 and 2013, the Annual Bonus will range from 50% up to 150% of
target. The actual Annual Bonus for each fiscal year shall be determined in good faith
after consultation with the Executive by the Compensation Committee based upon actual
corporate and individual performance for such year and shall be payable in accordance with
the procedures specified by the Compensation Committee. The Executive’s Annual Bonus will be
paid no later than seventy-five (75) days after the end of the applicable bonus period (or,
if
earlier, as provided in Section 4 below). Except as provided in Section 4 of this
Agreement, Employee must be employed by the Company on the date bonuses are paid to Company
employees in order to be entitled to receive a bonus. To the extent the Annual Bonus
exceeds 100% of Annual Base Salary, the Compensation Committee may in its discretion, and
subject to applicable law, cause the Company to pay such excess in the form of fully vested
equity compensation awards under one of Company’s equity compensation plans (which award may
be subject to other conditions that the Compensation Committee may determine).

 

2

 

(iii) Stock Option Award. On the Effective Date, the Company shall grant to
the Executive a non-qualified option to purchase 300,000 shares of the Company’s common
stock (the “Stock Option”) under the Morgans Hotel Group Co. Amended and Restated 2007
Omnibus Incentive Plan (the “Incentive Plan”). Except as otherwise provided in Section 4
upon certain events of termination, subject to the Executive’s continued employment with the
Company, the Stock Option shall vest and become exercisable with respect to 33-1/3% of the
 shares subject thereto on each of the first, second, and third anniversaries of the
Effective Date. Consistent with the foregoing, the terms and conditions of the Stock Option
shall be set forth in an award agreement (the “Stock Option Agreement”) in the form attached
as Exhibit A hereto, to be entered into by the Company and the Executive
concurrently herewith and which shall evidence the grant of the Stock Option. The Company
shall determine whether future awards will be awarded to the Executive in its sole good
faith discretion.

(iv) Equity Award. On the Effective Date, the Company shall grant to the
Executive 125,000 long term incentive units (the “LTIP Units”) under the Incentive Plan.
Except as otherwise provided in Section 4 upon certain events of termination, subject to the
Executive’s continued employment with the Company, the LTIP Units shall vest with respect to
33-1/3% of the LTIP Units subject thereto on each of the first, second, and third
anniversaries of the Effective Date. Consistent with the foregoing, the terms and conditions
of such award shall be set forth in an award agreement (the “LTIP Agreement”) in the form
attached as Exhibit B hereto, to be entered into by the Company and the Executive
and which shall evidence the grant of such award.

(v) Outperformance Award. On the Effective Date, the Company shall grant to
the Executive a performance incentive award entitling the Executive to 35% of the “Total
Outperformance Pool,” as such term is defined in the Outperformance Award Agreement attached
as Exhibit C hereto, subject to the terms and conditions of such award agreement.

(vi) Additional Performance Incentive Award. On the Effective Date, the
Company shall grant to the Executive an additional performance incentive award entitling the
Executive to 35% of the “Promoted Interest Pool,” as such term is defined in the Promoted
Interest Pool Award Agreement attached as Exhibit D hereto, subject to the terms and
conditions of such award agreement.

 

3

 

(c) Benefits

(i) Employee Benefits. During the Employment Period, the Executive shall be
entitled to participate in all employee benefit and other plans, practices, policies and
programs and fringe benefits and perquisites on a basis no less favorable than that provided
to other senior executives of the Company.

(ii) Vacations. The Executive shall be eligible for up to five weeks of annual
vacation to be accrued in accordance with the Company’s policy for its other senior
executives.

3. Termination of Employment

(a) Death or Disability. The Executive’s employment shall terminate automatically upon
the Executive’s death during the Employment Period. If the Executive becomes Disabled during the
Employment Period, the Company upon such event shall give to the Executive written notice of its
intention to terminate the Executive’s employment. In such event, the Executive’s employment with
the Company shall terminate effective on the 30th day after receipt of such notice by the Executive
(the “Disability Effective Date”), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive’s duties. For purposes
of this Agreement, “Disability” or becoming “Disabled” shall mean the inability of the Executive to
perform the Executive’s duties with the Company on a full-time basis 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 Executive or the Executive’s legal representative.

(b) Cause. The Company may terminate the Executive’s employment during the Employment
Period with or without Cause. For purposes of this Agreement, “Cause” shall mean the occurrence of
any one or more of the following events unless the Executive has commenced and is diligently
pursuing steps to correct the circumstances constituting Cause (in those instances where such
circumstances can be corrected) within fifteen (15) business days after receipt of the Notice of
Termination and cures such circumstances in all material respects within forty-five (45) business
days after receipt of the Notice of Termination (as defined below):

	 	(i)	 	the Executive’s willful and continued failure to substantially perform his
duties with the Company as contemplated by Section 2(a)(i) (other than any such failure
resulting from the Executive’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 Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed his duties;

	 	(ii)	 	a material breach by the Executive of his obligations under this Agreement
resulting in substantial economic or financial injury to the Company;

	 	(iii)	 	the Executive’s willful commission of an act of fraud, theft or dishonesty
resulting in substantial economic or financial injury to the Company;

	 	(iv)	 	the Executive’s conviction of, or entry by the Executive of a guilty or no
contest
plea to, the commission of a felony; or

	 	(v)	 	the Executive willfully engages in misconduct that is materially injurious to
the Company.

 

4

 

For purposes of this provision, no act or omission on the part of the Executive 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 that was directed or
authorized by the Board, or approved, consented to, or acquiesced to by the Board, or based on
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 Executive
shall not be deemed to be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by at least 66 2/3% of the Board (excluding the
Executive and the Executive Chairman, to the extent either of them are members of the Board) at a
meeting of the Board called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct
giving rise to Cause for termination, and specifying the particulars thereof in detail.

(c) Good Reason. The Executive’s employment may be terminated by the Executive with or
without Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any
of the following events without the written consent of the Executive:

(i) any change in the Executive’s title or the assignment to the Executive of duties
materially inconsistent with the Executive’s title, position, status, reporting
relationships, authority, duties or responsibilities as contemplated by Section 2(a)(i), or
any other action by the Company which results in a material diminution or material adverse
change in the Executive’s title, position, status, reporting relationships, authority,
duties or responsibilities, other than (x) 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 Executive, or (y) other than allocations of or changes in
duties and responsibilities between the Executive and the Executive Chairman;

(ii) any material failure by the Company to comply with any of the provisions of this
Agreement or any Related Agreement (as defined below), 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 Executive;

(iii) any failure by the Company to comply with and satisfy Section 10(c);

(iv) any failure by the Board to nominate the Executive for election as a director of
the Company in accordance with Section 2(a)(iii), or any failure of the Executive to be
elected by the Company’s shareholders to be a member of the Board or to be elected by the
Board as a member of investment committee of the Company; or

(v) any requirement that the Executive’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 Executive’s residence
to his new place of employment;

 

5

 

provided that the Executive’s resignation shall only constitute a resignation for Good Reason
hereunder if (x) the Executive provides the Company with a Notice of Termination (as defined below)
within 90 days after the initial existence of the facts or circumstances constituting Good Reason,
(y) the Company has failed to cure such facts or circumstances within 30 days after receipt of the
Notice of Termination, and (z) subject to the last sentence of Section 4(e), the Date of
Termination (as defined below) occurs no later than 120 days after the initial occurrence of the
facts or circumstances constituting Good Reason.

(d) Notice of Termination. Any termination by the Company or by the Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a
“Notice of Termination” means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the Date of Termination. The failure by
the Executive or the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights
hereunder.

(e) Date of Termination. “Date of Termination” means (i) if the Executive’s employment
is terminated by the Company other than for Disability, the date of receipt of the Notice of
Termination or any later date specified therein within 30 days of such notice, (ii) if the
Executive’s employment is terminated by the Executive, 30 days after receipt of the Notice of
Termination (provided, that, the Company may accelerate the Date of Termination to an earlier date
by providing the Executive with notice of such action, or, alternatively, the Company may place the
Executive on paid leave during such period), (iii) if the Executive’s employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be and (iv) if the Executive’s employment is
terminated due to the non-renewal of the Agreement at the end of the Employment Period, the Date of
Termination shall be the last day of the Employment Period. Notwithstanding the foregoing, if
within thirty (30) days after any Notice of Termination is given, the party receiving such Notice
of Termination notifies the other party that a dispute exists concerning the termination, the Date
of Termination shall be the date on which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).

(f) No Resignation from Board upon Termination. Upon the termination of the
Executive’s employment for any reason (other than for Cause), the Executive shall have no
obligation whatsoever to resign from the Board. A termination of the Executive’s employment shall
mean a termination of services of both the Company and the Operating Company.

 

6

 

4. Obligations of the Company upon Termination

(a) Other Than for Cause or For Good Reason. If, during the Employment Period, the
Company terminates the Executive’s employment other than for Cause or Disability or the Executive
terminates his employment for Good Reason (each, a “Qualifying Termination”):

(i) The Company shall pay to the Executive an amount in a single lump sum within 10
days after the end of the revocation period for the Release Agreement provided in Section
4(e) below (provided, however, that the amounts payable pursuant to subparagraph (C) below,
if any, will be paid at the same time the bonuses for the year in which the Date of
Termination occurs are paid), equal to the sum of —

(A) an amount equal to the Executive’s Annual Base Salary (at the rate then
being paid to Executive) accruing through the Date of Termination to the extent
theretofore unpaid (the “Accrued Base Salary”) plus

(B) the amount of any Annual Bonus that, had he remained employed, would
otherwise have been paid to the Executive pursuant to Section 2 (b)(ii) above for any
fiscal year of the Company that ends on or before the Date of Termination to the
extent not previously paid (the “Prior Year Bonus”), plus

(C) (without duplication of the amount in clause (B)) a pro rata portion of the
Annual Bonus for the partial fiscal year in which the Date of Termination occurs in
an amount equal to the product of (A) the Annual Bonus calculated as of the Date of
Termination based on the extent to which the financial performance targets applicable
to such Annual Bonus (pro rated based on the number of days in such fiscal year
through the Date of Termination) are actually achieved for the year, and (B) a
fraction, the numerator of which is the number of days in the year of termination
through the Date of Termination and the denominator of which is 365 (the “Pro-Rated
Annual Bonus”) plus

(D) an amount equal to two (2) times Annual Base Salary.

(ii) During the period commencing on the Date of Termination and ending on the date 18
months after the Date of Termination (the “COBRA Period”), provided that the Executive
properly elects to receive group health insurance continuation coverage under Section 4980B
of the Code and the regulations thereunder (“COBRA”), the Company shall pay directly or
reimburse the Executive for premiums for such coverage ; provided, however, that if the
Executive becomes re-employed with another employer and is eligible to receive group health
insurance coverage under another employer’s plans, the Company’s obligations under this
Section 4(a)(ii) shall be reduced to the extent comparable coverage is actually provided to
the Executive and the Executive’s eligible family members, and any such coverage shall be
reported by the Executive to the Company. Notwithstanding the foregoing, (A) if any plan
pursuant to which the Company is providing such coverage is not, or ceases prior to the
expiration of the period of continuation coverage to be, exempt from the application of Code
Section 409A under Treasury Regulation Section 1.409A-1(a)(5), or (B) the Company is
otherwise unable to
continue to cover the Executive under its group health plans, then, in either case, an
amount equal to the monthly plan premium payment shall thereafter be paid to the Executive
as currently taxable compensation in substantially equal monthly installments over the COBRA
Period (or the remaining portion thereof).

 

7

 

All Company equity awards and other performance incentive awards, other than awards provided
pursuant to Sections 2(b)(v) and (vi), (which shall vest as set forth in the applicable award
agreement), shall fully vest on the Date of Termination to the extent not vested. The Executive
shall retain any vested equity awards, which may not be revoked or annulled by the Company. Each
vested award (to the extent subject to exercise) shall be exercisable until the later of (A) the
twelve month anniversary of the Date of Termination and (B) the four year anniversary of the date
such award was granted. Notwithstanding this Section 4(a), in the event that the Executive is
terminated other than for Cause or the Executive terminates employment for Good Reason following a
Transactional Change in Control (as defined in the Outperformance Award Agreement) and where the
Common Share Price (as defined in the Outperformance Award Agreement) does not represent at least
4.5% compound annual growth rate since the Effective Date, the amount payable by the Company
pursuant to Section 4(a)(i)(D) shall equal one (1) times the Annual Base Salary.

(b) Death; Disability. If, during the Employment Period, the Executive’s employment
shall terminate on account of death (other than via death after delivery of a valid Notice of
Termination for Good Reason or without Cause) or Disability, the Company shall have no further
obligations to the Executive other than to pay to or provide the Executive (or his estate) the
following:

(i) The Company shall pay to or provide the Executive (or his estate) the following
within 10 business days after the Executive’s death or the date on which the Executive
becomes Disabled: (A) the Accrued Base Salary through the Date of Termination to the extent
theretofore unpaid, (B) the Prior Year Bonus to the extent theretofore unpaid, (C) the Pro
Rated Annual Bonus (if any), and (D) an amount equal to one times Annual Base Salary;

(ii) During the 12 month period following the Date of Termination, provided that the
Executive’s estate or beneficiaries or the Executive, as applicable, properly elects to
receive group health insurance continuation coverage under COBRA, the Company shall pay
directly or reimburse the Executive’s estate or beneficiaries or the Executive, as
applicable, for premiums for such coverage; provided, however, that if the Executive becomes
re-employed with another employer and is eligible to receive group health insurance coverage
under another employer’s plans, the Company’s obligations under this Section 4(b)(ii) shall
be reduced to the extent comparable coverage is actually provided to the Executive and the
Executive’s eligible family members, and any such coverage shall be reported by the
Executive to the Company. Notwithstanding the foregoing, (A) if any plan pursuant to which
the Company is providing such coverage is not, or ceases prior to the expiration of the
period of continuation coverage to be, exempt from the application of Code Section 409A
under Treasury Regulation Section 1.409A-1(a)(5), or (B) the Company is otherwise unable to
continue to cover the Executive under its group health plans, then, in either case, an
amount equal to the monthly plan premium payment shall
thereafter be paid to the Executive as currently taxable compensation in substantially
equal monthly installments over the 12 month period following the Date of Termination (or
the remaining portion thereof);

 

8

 

All Company equity awards and other performance incentive awards, other than awards provided
pursuant to Sections 2(b)(v) and (vi) (which shall vest as set forth in the applicable award
agreement) shall fully vest on the Date of Termination to the extent not vested. The Executive
shall retain any vested equity awards, which may not be revoked or annulled by the Company. Each
vested award (to the extent subject to exercise) shall be exercisable until the later of (A) the
twelve month anniversary of the Date of Termination and (B) the four year anniversary of the date
such award was granted.

(c) For Cause; Other than For Good Reason. If, during the Employment Period, the
Company shall terminate the Executive’s employment for Cause or the Executive terminates his
employment without Good Reason (including the failure by the Executive to renew the Agreement at
the end of the Employment Period after the Company offers to do so no less than seventy-five (75)
days prior to the end of the Employment Period, as it may be extended pursuant to an employment
agreement with at least a three year term, aggregate cash and equity- and performance-based
compensation at least as favorable as the same provided for hereunder and otherwise on terms no
less favorable to Executive as those set forth herein (any such non-renewal, an “Executive
Non-Renewal”) the Company shall pay to or provide the Executive (or his estate) the following
within 10 business days after the Date of Termination: (A) the Accrued Base Salary through the
Date of Termination to the extent theretofore unpaid and (B) in the event of an Executive
Non-Renewal, the Prior Year Bonus to the extent theretofore unpaid. The Executive shall retain any
vested equity awards, which may not be revoked or annulled by the Company. Each vested award (to
the extent subject to exercise) shall be exercisable (i) in the event of an Executive Non-Renewal,
until the later of (A) the twelve month anniversary of the Date of Termination and (B) the four
year anniversary of the date such award was granted, or (ii) in the event of the termination of
Executive’s employment for Cause or without Good Reason (other than an Executive Non-Renewal),
within ninety (90) days after the Date of Termination.

(d) Expiration of Employment Period due to the Company’s Non-renewal of the Agreement.
If the Executive’s employment with the Company terminates by reason of the expiration of the
Employment Period other than due to an Executive Non-Renewal, the Company shall pay to or provide
the Executive the following within 10 business days after the Date of Termination:

(i) the Accrued Base Salary through the Date of Termination to the extent theretofore
unpaid;

(ii) the Prior Year Bonus to the extent theretofore unpaid;

(iii) Subject to execution of the Release Agreement provided in Section 4(e) below, the
Company shall pay to the Executive an amount equal to one (1) times the Annual Base Salary
in a single lump sum within 10 days after the end of the revocation period for the Release
Agreement; and

 

9

 

(iv) During the 12 month period following the Date of Termination, provided that the
Executive’s estate or beneficiaries or the Executive, as applicable, properly elects to
receive group health insurance continuation coverage under COBRA, the Company shall pay
directly or reimburse the Executive’s estate or beneficiaries or the Executive, as
applicable, for premiums for such coverage; provided, however, that if the Executive becomes
re-employed with another employer and is eligible to receive group health insurance coverage
under another employer’s plans, the Company’s obligations under this Section 4(d)(iv) shall
be reduced to the extent comparable coverage is actually provided to the Executive and the
Executive’s eligible family members, and any such coverage shall be reported by the
Executive to the Company. Notwithstanding the foregoing, (A) if any plan pursuant to which
the Company is providing such coverage is not, or ceases prior to the expiration of the
period of continuation coverage to be, exempt from the application of Code Section 409A
under Treasury Regulation Section 1.409A-1(a)(5), or (B) the Company is otherwise unable to
continue to cover the Executive under its group health plans, then, in either case, an
amount equal to the monthly plan premium payment shall thereafter be paid to the Executive
as currently taxable compensation in substantially equal monthly installments over the 12
month period following the Date of Termination (or the remaining portion thereof).

All Company equity awards and other performance incentive awards, other than awards provided
pursuant to Sections 2(b)(v) and (vi) (which shall vest as set forth in the applicable award
agreement) shall fully vest on the Date of Termination to the extent not vested. The Executive
shall retain any vested equity awards, which may not be revoked or annulled by the Company. Each
vested award (to the extent subject to exercise) shall be exercisable until the later of (A) the
twelve month anniversary of the Date of Termination and (B) the four year anniversary of the date
such award was granted.

(e) Release Agreement. The Company shall not be required to make the payments and
provide the benefits specified in this Section 4 (other than the payment of any Accrued Base
Salary) unless the Executive (or his estate, as applicable) executes and delivers to the Company an
agreement releasing the Company, its affiliates and its officers, directors and employees from all
liability (other than the payments and benefits under this Agreement) in the form attached hereto
as Exhibit E (the “Release Agreement”) within thirty (30) days after the Date of
Termination and the period for revocation of such Release Agreement shall have lapsed, which
Release Agreement shall also provide that the Company shall release the Executive from all
liability; provided, that in all events, subject to Executive’s execution and delivery of the
Release Agreement, the payments and benefits specified in this Section 4 will be made or provided
before March 15 following the end of Executive’s first taxable year in which his right to such
payment is no longer subject to a substantial risk of forfeiture.

5. Application of Section 409A

(a) If any compensation or benefits provided by this Agreement may result in the application
of Section 409A of the Code, the Company shall, in consultation with the Executive, modify the
Agreement in the least restrictive manner necessary in order to, where applicable, (i) exclude such
compensation from the definition of “deferred compensation” within the meaning of such Section 409A
or (ii) comply with the provisions of Section 409A, other applicable
provision(s) of the Code and/or any rules, regulations or other regulatory guidance issued
under such statutory provisions and to make such modifications, in each case, without any
diminution in the value of the payments to the Executive.

 

10

 

(b) Anything in this Agreement to the contrary notwithstanding, if (A) on the date of
termination of Executive’s employment with the Company or a subsidiary, any of the Company’s stock
is publicly traded on an established securities market or otherwise (within the meaning of Section
409A(a)(2)(B)(i) of the Internal Revenue Code, as amended (the “Code”)), (B) Executive is
determined to be a “specified employee” within the meaning of Section 409A(a)(2)(B), (C) the
payments exceed the amounts permitted to be paid pursuant to Treasury Regulations section
1.409A-1(b)(9)(iii), and (D) such delay is required to avoid the imposition of the tax set forth in
Section 409A(a)(1), as a result of such termination, the Executive would receive any payment that,
absent the application of this Section 5(b), would be subject to interest and additional tax
imposed pursuant to Section 409A(a) as a result of the application of Section 409A(2)(B)(i), then
no such payment shall be payable prior to the date that is the earliest of (1) six (6) months and
one day after the Executive’s termination date, (2) the Executive’s death or (3) such other date
(the “Delay Period”) as will cause such payment not to be subject to such interest and additional
tax (with a catch-up payment equal to the sum of all amounts that have been delayed to be made as
of the date of the initial payment). In particular, with respect to any lump sum payment otherwise
required hereunder, in the event of any delay in the payment date as a result of Section
409A(a)(2)(A)(i) and (B)(i), the Company will adjust the payments to reflect the deferred payment
date by crediting interest thereon at the prime rate in effect at the time such amount first
becomes payable, as quoted by the Company’s principal bank.

(c) To the extent that the provision of health insurance following the Date of Termination is
so delayed, the Executive shall be entitled to COBRA continuation coverage under Section 4980B of
the Code (“COBRA Coverage”) during such period of delay, and the Company shall reimburse the
Executive for any Company portions of such COBRA Coverage in the seventh month following the Date
of Termination.

(d) To the extent that any benefits to be provided during the Delay Period are considered
deferred compensation under Code Section 409A provided on account of a “separation from service,”
and such benefits are not otherwise exempt from Section 409A, the Executive shall pay the cost of
such benefits during the Delay Period, and the Company shall reimburse the Executive, to the extent
that such costs would otherwise have been paid by the Company or to the extent that such benefits
would otherwise have been provided by the Company at no cost to the Executive, the Company’s share
of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall
be reimbursed or provided by the Company in accordance with the procedures specified herein.

(e) Any provisions of this Agreement or any other compensation plan notwithstanding, the
Company shall have no right to accelerate any such payment hereunder or thereunder except to the
extent permitted under Section 409A.

(f) For purposes of Section 409A, each payment made after termination of employment, including
COBRA continuation reimbursement payments, will be considered one of a series of separate payments.

 

11

 

(g) A termination of employment shall not be deemed to have occurred for purposes of any
provision of this Agreement providing for the payment of any amounts or benefits upon or following
a termination of employment unless such termination is also a “separation from service” within the
meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a
“termination,” “termination of employment” or like terms shall mean “separation from service.”

(h) Any amount that Executive is entitled to be reimbursed under this Agreement that may be
treated as taxable compensation will be reimbursed to Executive as promptly as practical and in any
event not later than sixty (60) days after the end of the calendar year in which the expenses are
incurred; provided that Executive shall have provided a reimbursement request to the Company no
later than thirty (30) days prior to the date the reimbursement is due. The amount of the expenses
eligible for reimbursement during any calendar year will not affect the amount of expenses for
reimbursement in any other calendar year, except as may be required pursuant to an arrangement
providing for the reimbursement of expenses referred to in Section 105(b) of the Code.

(i) The Company shall not be obligated to reimburse Executive for any tax penalty or interest
or provide a gross-up in connection with any tax liability of Executive under Section 409A.

6. Parachute Payment Limitations

Notwithstanding any other provision of this Agreement or of any other agreement, contract, or
understanding heretofore or hereafter entered into by the Executive and the Company or any of the
Company’s affiliates, except an agreement, contract, or understanding hereafter entered into that
expressly modifies or excludes application of this Section 6 (the “Other Agreements”), and
notwithstanding any formal or informal plan or other arrangement heretofore or hereafter adopted by
the Company or any of the Company’s affiliates for the direct or indirect compensation of the
Executive (including groups or classes of participants or beneficiaries of which the Executive is a
member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit
to or for the Executive (a “Benefit Arrangement”), if the Executive is a “disqualified individual,”
as defined in Section 280G(c) of the Code, any right to receive any payment or other benefit under
this Agreement shall not become exercisable or vested (i) to the extent that such right to
exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits
to or for Executive under the Agreement, all Other Agreements, and all Benefit Arrangements, would
cause any payment or benefit to the Executive under this Agreement to be considered a “parachute
payment” within the meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (ii) if, as a result of receiving a Parachute Payment, the aggregate
after-tax amounts received by the Executive from the Company or any of the Company’s affiliates
under this Agreement, all Other Agreements, and all Benefit Arrangements would be less than the
maximum after-tax amount that could be received by Executive without causing any such payment or
benefit to be considered a Parachute Payment. In the event that the receipt of any such right to
exercise, vesting, payment, or benefit under this Agreement, in conjunction with all other rights,
payments, or benefits to or for the Executive under the Agreement, any Other Agreement or any
Benefit Arrangement would cause the Executive to be considered to have received a Parachute Payment
under this Agreement that

 

12

 

would have the effect of decreasing the after-tax amount received by the Executive as
described in clause (ii) of the preceding sentence, then the Executive shall have the right, in the
Executive’s sole discretion, to designate those rights, payments, or benefits under this Agreement,
any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to
avoid having the payment or benefit to the Executive under this Agreement be deemed to be a
Parachute Payment; provided, however, that, to the extent any payment or benefit constitutes
deferred compensation under Section 409A, in order to comply with Section 409A, the reduction or
elimination will be performed in the following order: (A) reduction of cash payments; (B) reduction
of COBRA benefits; (C) cancellation of acceleration of vesting on any equity awards for which the
exercise price exceeds the then fair market value of the underlying equity; and (D) cancellation of
acceleration of vesting of equity awards not covered under (C) above; provided, however that in the
event that acceleration of vesting of equity awards is to be cancelled, such acceleration of
vesting shall be cancelled in the reverse order of the date of grant of such equity awards, that
is, later granted equity awards shall be canceled before earlier granted equity awards.

7. Non-Competition; Non-Solicitation; Confidential Information; Standstill

(a) Non-Competition. Executive acknowledges that the services to be rendered by him to
the Company are of a special and unique character. In consideration of his employment hereunder,
Executive agrees that, during the term of Executive’s employment with the Company and for a
six-month period after the date the Executive’s employment is terminated for any reason, provided
in connection with a termination of employment pursuant to Sections 4(a) or (d), the Company is not
in material breach in the performance of its obligations to the Executive pursuant to those
Sections, the Executive shall not directly or indirectly (without the prior written consent of the
Company) engage, directly or indirectly, whether as principal, agent, representative, consultant,
employee, partner, stockholder, limited partner, other investor or otherwise (other than a passive
investment of not more than two and one-half percent (2.5%) of the stock, equity or other ownership
interest of any corporation, partnership or other entity) in any business entity primarily engaged,
directly or indirectly through subsidiaries, and the Executive shall not be personally engaged,
directly or indirectly, in the business of hotel management within the United States of America or
Western Europe. The Executive shall not pursue any prospects listed on a deal pipeline list
prepared by the Company and the Executive for a one-year period following the Date of Termination.
Notwithstanding the foregoing, the Executive’s ownership of any equity interest in any business or
entity in which he holds an equity interest as of the date hereof, shall be considered a violation
of this Section 7(a).

(b) Non-Solicitation. During the term of his employment with the Company pursuant to
this Agreement and for a one-year period after the Executive’s employment is terminated pursuant to
this Agreement for any reason, provided the Company is not in material breach in the performance of
its obligations to the Executive as of the Date of Termination and is performing all of its
obligations under Section 4 of this Agreement upon and following the Date of Termination, the
Executive shall not, in any manner, directly or indirectly (without the prior written consent of
the Company), solicit, induce, or encourage any employee, consultant or agent of the Company or any
of its subsidiaries to terminate their employment, agency, or other such business relationship with
the Company and its subsidiaries or to cease to render services to the Company and its subsidiaries
and the Executive shall not initiate discussions with any such

 

13

 

person for any such purpose or authorize or knowingly cooperate with or encourage the taking
of any such actions by any other individual or entity; provided, however, that this paragraph shall
not preclude the hiring or retention of any such person by any other individual or entity who (i)
responds to a general employment advertisement by newspaper or similar advertisement, or (ii) is
referred to another individual or entity by an employment agency or other similar entity, provided
that Executive did not identify the person or the Company as a potential source of employees to
such agency or similar entity. During the term of Executive’s employment pursuant to this
Agreement and for a six (6) month period after the Executive’s employment is terminated pursuant to
this Agreement for any reason, provided the Company is not in material breach in the performance of
its obligations to the Executive as of the Date of Termination and is performing all of its
obligations under Section 4 of this Agreement upon and following the Date of Termination, the
Executive shall not, in any manner (without the prior written consent of the Company), solicit,
induce or encourage any customer, vendor, or other party doing business with the Company to
terminate their business relationship with the Company and its subsidiaries or to transfer their
business from the Company or any of its subsidiaries, and the Executive shall not initiate
discussions with any such person for any such purpose or authorize or knowingly cooperate with or
encourage the taking of any such actions by any other individual or entity.

(c) Treatment of Confidential Information. As a Company executive, Executive will
acquire Confidential Information (as defined below) in the course of Executive’s employment.
Executive agrees that, in consideration of employment with the Company, Executive will treat such
Confidential Information as strictly confidential. Executive will not, directly or indirectly, at
any time during employment with the Company or any time thereafter, and without regard to when or
for what reason, if any, such employment shall terminate, use or cause to be used any such
Confidential Information, in connection with any activity or business except in the normal course
of performing his designated duties for the Company. Executive shall not disclose or cause to be
disclosed any such Confidential Information to any third parties unless such disclosure is in
accordance with the disclosure policies adopted by the Board or has been authorized in writing by
the Board or except as may be required by law or legal process after providing the Company with
prior written notice and an opportunity to respond to such disclosure (unless such notice is
prohibited by law). For purposes of this Agreement, “Confidential Information” shall mean
confidential or proprietary information, knowledge or data concerning the Company and its
subsidiary companies’ businesses, strategies, operations, financial affairs, organizational
matters, personnel matters, budgets, business plans, marketing plans, studies, policies,
procedures, products, ideas, processes, software systems, trade secrets and technical know-how.
Notwithstanding the foregoing, Confidential Information shall not include information which (i) is
or becomes generally available to the public or is, at the time in question, in the public domain
other than as a result of a disclosure by Executive not permitted hereunder, (ii) was available to
Executive on a non-confidential basis prior to the date of this Agreement, or (iii) becomes
available to Executive from a source other than the Company, its agents or representatives (or
former agents or representatives).

 

14

 

(d) Standstill. During the term of his employment and for a period of six months
after the date the Executive’s employment is terminated, Executive shall not, directly or
indirectly or in concert with any other person, engage in any of the following:

	 	(i)	 	purchase, offer to purchase, or agree to purchase or otherwise acquire, by
means
of a purchase, tender or exchange offer, business combination or in any other manner
(including rights or options to acquire such ownership), (x) beneficial ownership of
any common stock of the Company (“Common Stock”), or securities convertible into or
exchangeable for Common Stock of the Company, that would result in the Executive, the
Executive’s affiliates, and the members of any “group” of persons with which the
Executive or his affiliates are acting in concert beneficially owning, in the
aggregate (taking into account shares of Common Stock issuable upon conversion or
exchange of any securities held by such the Executive and such other persons), more
than 14.9% of the voting power of the outstanding Common Stock, or (y) material
beneficial ownership of any debt obligations on hotel properties owned by the Company
or any of its consolidated subsidiaries or any material assets owned by the Company
or any of its consolidated subsidiaries;

	 	(ii)	 	seek or propose to influence, advise, change or control the management, Board,
governing instruments or policies or affairs of the Company or any of its affiliates,
including, without limitation, by means of a solicitation of proxies or seeking to
influence, advise or direct the vote of any holder of voting securities of the Company;
or

	 	(iii)	 	be employed by any person that, directly or through its affiliates, engages in
any of the foregoing.

Exercise of options, conversion of LTIP Units, vesting and delivery of shares of Common
Stock pursuant to equity or other awards, plans and arrangements and any other Common Stock
received or otherwise acquired by the Executive in connection with or as a result of the
Executive’s employment with the Company or service on its Board are not prohibited by this
Section 7(d). In addition, if persons with whom the Executive has in no way participated,
assisted or cooperated with have taken actions that would be prohibited by Sections 7(d)
above such that the Company would be considered to be in “play” through no act of the
Executive, the Executive will no longer be subject to the limitations of Sections 7(d).

(e) Survival. Any termination of the Executive’s employment or of this Agreement (or
breach of this Agreement by the Executive or the Company) shall have no effect on the continuing
effectiveness of this Section 7, Section 4, 5, 6 and Section 8 or any other provision hereof that
by the nature of its terms is contemplated to survive any such termination.

(f) Validity. The terms and provisions of this Section 7 are intended to be separate
and divisible provisions and if, for any reason, any one or more of them is held to be invalid or
unenforceable, neither the validity nor the enforceability of any other provision of this Agreement
shall thereby be affected. The parties hereto acknowledge that the potential restrictions on the
Executive’s future employment imposed by this Section 7 are reasonable in both duration and
geographic scope and in all other respects. If for any reason any court of competent jurisdiction
shall find any provisions of this Section 7 unreasonable in duration or geographic scope or
otherwise, the Executive and the Company agree that the restrictions and prohibitions contained
herein shall be effective to the fullest extent allowed under applicable law
in such jurisdiction.

 

15

 

(g) Consideration. The parties acknowledge that this Agreement would not have been
entered into and the benefits described in Section 2, 4 or 6 would not have been promised in the
absence of the Executive’s promises under this Section 7.

8. Indemnification

(a) If the Executive is made a party, is threatened to be made a party, or reasonably
anticipates being made a party, to any Proceeding (as defined below) by reason of the fact that he
is or was a director, officer, executive, agent, manager, trustee, consultant or representative of
the Company or any of its affiliates or is or was serving at the request of the Company or any of
its affiliates, or in connection with his service hereunder, as a director, officer, member,
executive, agent, manager, trustee, consultant or representative of another person or entity, or if
any Claim (as defined below) is made, is threatened to be made, or is reasonably anticipated to be
made, that arises out of or relates to the Executive’s service in any of the foregoing capacities,
then the Executive shall promptly be indemnified and held harmless to the fullest extent permitted
or authorized by the Certificate of Incorporation or Bylaws of the Company, or if greater, by
applicable law, against any and all costs, expenses, liabilities and losses (including, without
limitation, attorneys’ and other professional fees, judgments, interest, expenses of investigation,
penalties, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
incurred or suffered by the Executive in connection therewith or in connection with seeking to
enforce his rights under this Section 8, and such indemnification shall continue as to the
Executive even if he has ceased to be a director, officer, member, executive, agent, manager,
trustee, consultant or representative of the Company or other person or entity and shall inure to
the benefit of the Executive’s heirs, executors and administrators. The Executive shall be entitled
to prompt advancement of any and all costs and expenses (including, without limitation, attorneys’
and other professional fees and other charges) incurred by him in connection with any such
Proceeding or Claim, or in connection with seeking to enforce his rights under this Section 8, any
such advancement to be made within 15 days after he gives written notice, supported by reasonable
documentation, requesting such advancement. Such notice shall include, to the extent required by
applicable law, an undertaking by the Executive to repay the amount advanced if he is ultimately
determined not to be entitled to indemnification against such costs and expenses. Nothing in this
Agreement shall operate to limit or extinguish any right to indemnification, advancement of
expenses, or contribution that the Executive would otherwise have (including, without limitation,
by agreement or under applicable law). For purposes of this Agreement, “Claim” shall include,
without limitation, any claim, demand, request, investigation, dispute, controversy, threat,
discovery request, or request for testimony or information and “Proceeding” shall include, without
limitation, any actual, threatened, or reasonably anticipated, action, suit or proceeding, whether
civil, criminal, administrative, investigative, appellate, formal, informal or other.

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

 

16

 

9. Other Matters

(a) The Executive represents and warrants that, as of the Effective Date, the only direct or
indirect investment or other economic relationships between Executive, on the one hand, and Ronald
W. Burkle, Yucaipa American Alliance Fund II. L.P., or any of their respective affiliates, on the
other hand regarding the Company and its subsidiaries consists of a passive investment in a fund
over which Executive has no direct or indirect control or authority. During the Employment Period,
Executive shall not, directly or indirectly, make or own any investment in or engage in any
economic relationship with any of Ronald W. Burkle, Yucaipa American Alliance Fund II. L.P., or any
of their respective affiliates other than the investments, including the investment referred to in
the preceding sentence, owned by Executive as of the Effective Date.

(b) During the Employment Period, the Executive shall recuse himself from all matters,
involving the Company or any of its subsidiaries, on the one hand, and any of Ronald W. Burkle,
Yucaipa American Alliance Fund II. L.P., or any of their respective affiliates, on the other hand,
including any consideration or voting with respect to such matters by the Board.

10. Successors

(a) This Agreement is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns, provided that the Company may not assign this Agreement other than as
described in Section 10(c) below.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid.

11. Disputes

(a) Mandatory Arbitration. Subject to the provisions of this Section 11, any
controversy or claim between the Executive and the Company arising out of or relating to or
concerning this Agreement (including the covenants contained in Section 7) or any aspect of the
Executive’s employment with the Company or the termination of that employment (together, an
“Employment Matter”) will be finally settled by arbitration in the County of New York administered
by the American Arbitration Association (the “AAA”) under its Commercial

 

17

 

Arbitration Rules then in effect. However, the AAA’s Commercial Arbitration Rules will be
modified in the following ways: (i) notwithstanding any provision of the AAA rules to the
contrary, the arbitration shall be heard by a panel of three neutral arbitrators, with each party
appointing one arbitrator, who shall jointly appoint a third, (ii) each arbitrator will agree to
treat as confidential evidence and other information presented to them, (iii) there will be no
authority to award punitive damages (and the Executive and the Company agree not to request any
such award), (iv) the optional Rules for Emergency Measures of Protections will apply, (v) there
will be no authority to amend or modify the terms of this Agreement except as provided in Section
12(a) (and the Executive and the Company agree not to request any such amendment or modification)
and (vi) a decision must be rendered within ten business days of the parties’ closing statements or
submission of post-hearing briefs. The Executive and the Company agree that, to the extent
permitted by law, a decision made by the arbitration panel with respect to any Employment Matter
will be conclusive and binding on the Executive and the Company.

(b) Injunctions and Enforcement of Arbitration Awards. The Executive or the Company
may bring an action or special proceeding in a state or federal court of competent jurisdiction
sitting in the County of New York to enforce any arbitration award under Section 11(a). Also, the
Company may bring such an action or proceeding, in addition to its rights under Section 11(a) and
whether or not an arbitration proceeding has been or is ever initiated, to temporarily,
preliminarily or permanently enforce any part of Section 7. The Executive agrees that (i) violating
any part of Section 7 would cause damage to the Company that cannot be measured or repaired, (ii)
the Company therefore is entitled to seek an injunction, restraining order or other equitable
relief restraining any actual or threatened violation of Section 7, (iii) no bond will need to be
posted for the Company to receive such an injunction, order or other relief and (iv) no proof will
be required that monetary damages for violations of Section 7 would be difficult to calculate and
that remedies at law would be inadequate.

(c) Jurisdiction and Choice of Forum. The Executive and the Company irrevocably submit
to the exclusive jurisdiction of any state or federal court located in the County of New York over
any Employment Matter that is not otherwise arbitrated or resolved according to Section 11(a).
This includes any action or proceeding to compel arbitration or to enforce an arbitration award.
Both the Executive and the Company (i) acknowledge that the forum stated in this Section 11(c) has
a reasonable relation to this Agreement and to the relationship between the Executive and the
Company and that the submission to the forum will apply even if the forum chooses to apply
non-forum law, (ii) waive, to the extent permitted by law, any objection to personal jurisdiction
or to the laying of venue of any action or proceeding covered by this Section 11(c) in the forum
stated in this Section 11(c), (iii) agree not to commence any such action or proceeding in any
forum other than the forum stated in this Section 11(c) and (iv) agree that, to the extent
permitted by law, a final and non-appealable judgment in any such action or proceeding in any such
court will be conclusive and binding on the Executive and the Company. However, nothing in this
Agreement precludes the Executive or the Company from bringing any action or proceeding in any
court for the purpose of enforcing the provisions of Section 11(a) and this Section 11(c).

(d) Waiver of Jury Trial. To the extent permitted by law, the Executive and the
Company waive any and all rights to a jury trial with respect to any Employment Matter.

 

18

 

(e) Costs. The Company will reimburse as incurred any reasonable expenses, including
reasonable attorney’s fees, the Executive incurs as a result of any Employment Matter, provided
that if the Executive is not the prevailing party on at least one material issue in the Employment
Matter, the Executive shall promptly return any such reimbursements. In addition, if the
Executive is not the prevailing party on at least one material issue in the Employment Matter, the
Executive shall promptly reimburse the Company any reasonable expenses, including reasonable
attorney’s fees, the Company has incurred as a result of the Employment Matter, provided that such
reimbursement shall not exceed fifty percent (50%) of the expenses, including attorney’s fees,
incurred by the Executive.

12. Miscellaneous

(a) Amendment; Waiver. This Agreement may not be amended or modified, or any provision
hereof waived, other than by a written agreement executed by the parties hereto or any of their
respective successors and assigns.

(b) Notices. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by overnight courier or registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

at
the Executive’s primary residential address 

as shown on the records of the Company

If to the Company:

Morgans Hotel Group Co.

475 Tenth Avenue

New York, NY 10018

Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee
provided that any notice made by hand delivery shall be deemed to have been received on
the date it is actually delivered, any notice made by overnight courier shall be deemed to have
been received on the date after such notice was so sent and any notice made by registered or
certified mail, return receipt shall be deemed to have been received on the date that is five (5)
business days after such notice was so sent.

(c) Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) Withholding. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant
to any applicable law or regulation.

 

19

 

(e) Full Settlement. The Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. The Executive shall not be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement, and such amounts shall not be reduced whether or not the
Executive obtains other employment.

(f) Governing Law. This Agreement will be governed by and construed in accordance with
the law of the State of New York applicable to contracts made and to be performed entirely within
that State.

(g) No Waiver. The Executive’s or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any right the Executive or
the Company may have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason (subject to the proviso at the end of Section 3(c)) or the
Company’s right to terminate the Executive for Cause (subject to the limitation in the last
sentence of Section 3(b)), shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.

(h) Entire Agreement; Conflict. This Agreement, together with the Stock Option
Agreement, LTIP Agreement, Outperformance Award Agreement, and Promoted Interest Pool Award
Agreement (collectively, the “Related Agreements”), constitutes the final, complete and exclusive
agreement between the Executive 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. In the event of any conflict or
inconsistency between the provisions of, or definitions contained in, this Agreement, on the one
hand, and any Related Agreement or any other agreement or instrument related to the Executive’s
employment to which he is subject, on the other hand, the provisions or definitions, as the case
may be, the terms of the Related Agreements shall govern (notwithstanding the termination hereof)
but this Agreement shall govern if in conflict with any plan document or other document or
instrument related thereto (other than a Related Agreement).

(i) Section References. Any reference to a Section herein is a reference to a section
of this Agreement unless otherwise stated.

(j) Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the same document.

THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK.

SIGNATURES APPEAR ON THE NEXT PAGE.

 

20

 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from its Board of Directors, the Company has caused these presents to be executed in
its name on its behalf, all as of the day and year first above written.

	 	 	 	 	 	 	 
	EMPLOYER:	 	EXECUTIVE:	 	 
	 
	 	 	 	 	 	 
	MORGANS HOTEL GROUP CO.	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Jeffrey M. Gault
 

Name: Jeffrey M. Gault
	 	/s/ Michael Gross
 

Michael Gross
	 	 

 

21

 

Exhibit A

Stock Option Agreement

 

22

 

Option No.: _______

MORGANS HOTEL GROUP CO.

AMENDED AND RESTATED 2007 OMNIBUS INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

Morgans Hotel Group Co., a Delaware corporation (the “Company”), hereby grants an option to
purchase shares of its common stock, $.01 par value, (the “Stock”) to the optionee named below.
Additional terms and conditions of the grant are set forth in this cover sheet and in the
attachment (collectively the “Agreement”), and in the Company’s Amended and Restated 2007 Omnibus
Incentive Plan (the “Plan”).

Grant Date: March 20, 2011

Name of Optionee: Michael Gross

Optionee’s Employee Identification Number: ____-___-_____

Number of Shares Covered by Option: 300,000

Option Price per Share: $8.87 (At least 100% of Fair Market Value)

Vesting Start Date: March 20, 2011

By signing this cover sheet, you agree to all of the terms and conditions described in the
attached Agreement and in the Plan, a copy of which is also attached. You acknowledge that you
have carefully reviewed the Plan, and agree that this Agreement will control in the event any
provision of this Agreement should appear to be inconsistent with the Plan. Certain capitalized
terms used in this Agreement are defined in the Plan, and have the meaning set forth in the Plan.

	 	 	 	 	 
	Optionee:
	 	/s/ Michael Gross 
	 	 
	 
	 	(Signature)	 	 
	 
	 	 	 	 
	Company:
	 	/s/ Richard Szymanski 
	 	 
	 
	 	(Signature)	 	 

This is not a stock certificate or a negotiable instrument.

 

 

 

MORGANS HOTEL GROUP CO.

AMENDED AND RESTATED 2007 OMNIBUS INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

	 	 	 
	Non-Qualified Stock Option

	 	This option is not intended to be
an incentive stock option under
Section 422 of the Internal Revenue
Code and will be interpreted
accordingly.
	 
	 	 
	Vesting

	 	This option is only exercisable
before it expires and then only
with respect to the vested portion
of the option. Subject to the
preceding sentence, you may
exercise this option, in whole or
in part, to purchase a whole number
of vested shares not less than 100
shares, unless the number of shares
purchased is the total number
available for purchase under the
option, by following the procedures
set forth in the Plan and below in
this Agreement.
	 
	 	 
	 

	 	Your right to the Stock under this
Agreement vests as to one-third
(1/3rd) of the total number of
shares of Stock covered by this
grant, as shown on the cover sheet,
each year on each of the first
three one-year anniversaries of the
Vesting Start Date. The resulting
aggregate number of vested shares
will be rounded down to the nearest
whole number, and you cannot vest
in more than the number of shares
covered by this option.
	 
	 	 
	 

	 	Except as otherwise provided in the
employment agreement between you
and the Company, no additional
shares of Stock will vest after
your Service has terminated for any
reason.
	 
	 	 
	Term

	 	Your option will expire in any
event at the close of business at
Company headquarters on the day
before the 10th anniversary of the
Grant Date, as shown on the cover
sheet. Your option will expire
earlier if your Service terminates,
as described below.
	 
	 	 
	Termination

	 	Except as otherwise provided in the
employment agreement between you
and the Company, if your Service
terminates for any reason, your
option will expire at the close of
business at Company headquarters on
the 90th day after your termination
date.
	 
	 	 
	Notice of Exercise

	 	When you wish to exercise this
option, you must notify the Company
by filing the proper “Notice of
Exercise” form at the address given
on the form. Your notice must
specify how many shares you wish to
purchase (in a parcel of at least
100 shares generally). Your notice
must also specify how your shares
of Stock should be registered (e.g.
in your name only or in your and
your spouse’s names as joint
tenants with right of
survivorship). The notice will be
effective when it is received by
the Company.

 

 

 

	 	 	 
	 

	 	If someone else wants to exercise
this option after your death, that
person must prove to the Company’s
satisfaction that he or she is
entitled to do so.
	 
	 	 
	Form of Payment

	 	When you submit your notice of
exercise, you must include payment
of the option price for the shares
you are purchasing. Payment may be
made in one (or a combination) of
the following forms:
	 
	 	 
	 

	 	• Cash, your personal check,
a cashier’s check, a money order or
another cash equivalent acceptable
to the Company.
	 
	 	 
	 

	 	• Shares of Stock which have
already been owned by you and which
are surrendered to the Company.
The value of the shares, determined
as of the effective date of the
option exercise, will be applied to
the option price.
	 
	 	 
	 

	 	• By delivery (on a form
prescribed by the Company) of an
irrevocable direction to a licensed
securities broker acceptable to the
Company to sell Stock and to
deliver all or part of the sale
proceeds to the Company in payment
of the aggregate option price and
any withholding taxes.
	 
	 	 
	Withholding Taxes

	 	You will not be allowed to exercise
this option unless you make
acceptable arrangements to pay any
withholding or other taxes that may
be due as a result of the option
exercise or sale of Stock acquired
under this option. In the event
that the Company determines that
any federal, state, local or
foreign tax or withholding payment
is required relating to the
exercise or sale of shares arising
from this grant, the Company shall
have the right to require such
payments from you, or withhold such
amounts from other payments due to
you from the Company or any
Affiliate. Subject to the prior
approval of the Company, which may
be withheld by the Company, in its
sole discretion, you may elect to
satisfy this withholding
obligation, in whole or in part, by
causing the Company to withhold
shares of Stock otherwise issuable
to you or by delivering to the
Company shares of Stock already
owned by you. The shares of Stock
so delivered or withheld must have
an aggregate Fair Market Value
equal to the withholding obligation
and may not be subject to any
repurchase, forfeiture, unfulfilled
vesting, or other similar
requirements.

 

 

 

	 	 	 
	Corporate Transaction

	 	Notwithstanding the vesting
schedule set forth above, upon the
consummation of a Corporate
Transaction, this option will
become 100% vested if it is not
assumed, or equivalent options are
not substituted for the options, by
the Company or its successor.
Notwithstanding any other provision
in this Agreement but subject to
the employment agreement between
you and the Company, if assumed or
substituted for, the option will
expire one year after the date of
termination of Service.
	 
	 	 
	Transfer of Option

	 	During your lifetime, only you (or,
in the event of your legal
incapacity or incompetency, your
guardian or legal representative)
may exercise the option. You
cannot transfer or assign this
option. For instance, you may not
sell this option or use it as
security for a loan. If you
attempt to do any of these things,
this option will immediately become
invalid. You may, however, dispose
of this option in your will or it
may be transferred upon your death
by the laws of descent and
distribution.
	 
	 	 
	 

	 	Regardless of any marital property
settlement agreement, the Company
is not obligated to honor a notice
of exercise from your spouse, nor
is the Company obligated to
recognize your spouse’s interest in
your option in any other way.
	 
	 	 
	Retention Rights

	 	Neither your option nor this
Agreement give you the right to be
retained by the Company (or any
Subsidiary or Affiliate) in any
capacity. The Company (and any
Subsidiary or Affiliate) reserve
the right to terminate your Service
at any time and for any reason,
subject to the employment agreement
between you and the Company.
	 
	 	 
	Shareholder Rights

	 	You, or your estate or heirs, have
no rights as a shareholder of the
Company until a certificate for
your option’s shares has been
issued (or an appropriate book
entry has been made). No
adjustments are made for dividends
or other rights if the applicable
record date occurs before your
stock certificate is issued (or an
appropriate book entry has been
made), except as described in the
Plan.
	 
	 	 
	Adjustments

	 	In the event of a stock split, a
stock dividend or a similar change
in the Stock, the number of shares
covered by this option and the
option price per share shall be
adjusted (and rounded down to the
nearest whole number) pursuant to
the Plan. Your option shall be
subject to the terms of the
agreement of merger, liquidation or
reorganization in the event the
Company is subject to such
corporate activity in accordance
with the terms of the Plan.
	 
	 	 
	Applicable Law

	 	This Agreement will be interpreted
and enforced under the laws of the
State of New York, other than any
conflicts or choice of law rule or
principle that might otherwise
refer construction or
interpretation of this Agreement to
the substantive law of another
jurisdiction.

 

 

 

	 	 	 
	The Plan

	 	The text of the Plan is
incorporated in this Agreement by
reference.
	 
	 	 
	 

	 	This Agreement and the Plan
constitute the entire understanding
between you and the Company
regarding this option. Any prior
agreements, commitments or
negotiations concerning this option
are superseded.
	 
	 	 
	Data Privacy

	 	In order to administer the Plan,
the Company may process personal
data about you. Such data includes
but is not limited to the
information provided in this
Agreement and any changes thereto,
other appropriate personal and
financial data about you such as
home address and business addresses
and other contact information,
payroll information and any other
information that might be deemed
appropriate by the Company to
facilitate the administration of
the Plan.
	 
	 	 
	 

	 	By accepting this option, you give
explicit consent to the Company to
process any such personal data.
You also give explicit consent to
the Company to transfer any such
personal data outside the country
in which you work or are employed,
including, with respect to non-U.S.
resident Optionees, to the United
States, to transferees who shall
include the Company and other
persons who are designated by the
Company to administer the Plan.
	 
	 	 
	Consent to Electronic Delivery

	 	The Company may choose to deliver
certain statutory materials
relating to the Plan in electronic
form. By accepting this option
grant you agree that the Company
may deliver the Plan prospectus and
the Company’s annual report to you
in an electronic format. If at any
time you would prefer to receive
paper copies of these documents, as
you are entitled to, the Company
would be pleased to provide copies.
Please contact David Smail at
(212) 277-4100 to request paper
copies of these documents.
	 
	 	 
	Electronic Signature

	 	All references to signatures and
delivery of documents in this
Agreement can be satisfied by
procedures the Company has
established or may establish for an
electronic signature system for
delivery and acceptance of any such
documents, including this
Agreement. Your electronic
signature is the same as, and shall
have the same force and effect as,
your manual signature. Any such
procedures and delivery may be
effected by a third party engaged
by the Company to provide
administrative services related to
the Plan.

By
signing the cover sheet of this Agreement, you agree to all of the terms and 
conditions described above and in the Plan.

 

 

 

Exhibit B

LTIP Agreement

 

 

 

LTIP UNIT VESTING AGREEMENT

UNDER THE MORGANS HOTEL GROUP CO.

AMENDED AND RESTATED 2007 OMNIBUS INCENTIVE PLAN

	 	 	 
	Name of Grantee: Michael Gross

	 	(“Grantee”)
	No. of LTIP Units: 125,000
	 	 
	Grant Date: March 20, 2011

	 	(the “Grant Date”)
	Final Acceptance Date: March 20, 2011

	 	(the “Final Acceptance Date”)

Pursuant to the Morgans Hotel Group Co. Amended and Restated 2007 Omnibus Incentive Plan (the
“Plan”) of Morgans Hotel Group Co. (the “Company”) a Delaware corporation, and the
Limited Liability Company Agreement (the “LLC Agreement”) of Morgans Group LLC (the
“LLC”), a Delaware limited liability company, the LLC hereby grants to the Grantee named
above an Other Stock-Based Award (as defined in the Plan, referred to herein as an “Award”)
in the form of, and by causing the LLC to issue to the Grantee, the number of LTIP Units (as
defined in the LLC Agreement) set forth above (the “Award LTIP Units”) having the rights,
voting powers, restrictions, limitations as to distributions, qualifications and terms and
conditions of redemption and conversion set forth herein and in the LLC Agreement. Upon the close
of business on the Final Acceptance Date, if this LTIP Unit Vesting Agreement (this
“Agreement”) is accepted, the Grantee shall receive the number of LTIP Units specified
above, subject to the restrictions and conditions set forth herein, in the Plan and in the LLC
Agreement. Unless otherwise indicated, capitalized terms used herein but not defined shall have
the meanings given to those terms in the Plan.

1. Acceptance of Agreement.

(a) Unless the Grantee is already a Member (as defined in the LLC Agreement), Grantee must
sign, as a Member, and deliver to the LLC a counterpart signature page to the LLC Agreement
(attached hereto as Exhibit A). Upon signing and delivery of the signature page, to the
extent required, the Grantee shall be admitted as a Member of the LLC, as of the Grant Date, with
beneficial ownership of the number of LTIP Units specified above, the LLC Agreement shall be
amended to reflect the issuance to the Grantee of the Award LTIP Units and the LLC shall deliver to
the Grantee a certificate of the Company certifying the number of LTIP Units then issued to the
Grantee. Thereupon, the Grantee shall have all the rights of a Member of the LLC with respect to
the number of LTIP Units specified above, as set forth in the LLC Agreement, subject, however, to
the restrictions and conditions specified herein and in the LLC Agreement.

(b) In order to confirm receipt of this Agreement, Grantee must sign and deliver to the
Company a copy of this Agreement.

2. Vesting of LTIP Units.

(a) Except as provided in Sections 2(b) and 2(c) below, the Award LTIP Units shall vest
one-third (1/3) each year on each of the first three one-year anniversaries of the Grant Date,
(each such date on which Award LTIP Units vest is referred to herein as a “Vesting Date”);
provided that upon termination of Grantee’s employment with, cessation of consulting
relationship with or cessation of service to the Company and its Subsidiaries for any reason, the
LTIP Units that have not yet vested shall, without payment of any consideration by the LLC,
automatically and without notice terminate, be forfeited and be and become null and void, and
neither the Grantee nor any of his successors, heirs, assigns, or personal representatives will
thereafter have any further rights or interests in such LTIP Units. In the event Grantee becomes a
consultant, advisor or Non-Employee Director, such change in status shall not be deemed a
termination of employment or service with the Company at the time of such change in status or
thereafter so long as the Grantee continues in one of such positions.

 

 

 

(b) Notwithstanding any other term or provision of this Agreement, if a Corporate Transaction
occurs and the LTIP Units subject to this Agreement are not assumed or substituted for any
restrictions and conditions on all LTIP Units subject to this Agreement shall be deemed waived by
the Company and all LTIP Units granted hereby that have not previously been forfeited shall
automatically become fully vested. Notwithstanding any other provision in this Agreement, if
assumed or substituted for, but subject to Section 2(c), the award will expire one year after the
date of termination.

(c) Other Vesting Terms. Notwithstanding anything to the contrary in this Section 2,
to the extent the Grantee is a party to another agreement or arrangement with the Company that
provides accelerated vesting of the Award LTIP Units in the event of certain types of employment
terminations or any other applicable vesting-related events or provides more favorable vesting
provisions than provided for in this Agreement, the more favorable vesting terms of such other
agreement or arrangement shall control.

3. Distributions. Distributions on the LTIP Units shall be paid currently to the
Grantee in accordance with the terms of the LLC Agreement.

4. Rights with Respect to LTIP Units. 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 a 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 structure of the Company, or any distribution to holders of Common Stock other than regular
cash dividends, shall occur or (iii) any other event shall occur which in the judgment of the
Administrator necessitates action by way of adjusting the terms of the Agreement, then and in that
event, the Administrator shall take any such action as in its discretion shall be necessary to
maintain the Grantee’s rights hereunder so that they are substantially proportionate to the rights
existing under this Agreement prior to such event, including but not limited to, adjustments in the
number of LTIP Units then subject to this Agreement.

5. Legend. The records of the LLC evidencing the Award LTIP Units shall bear an
appropriate legend, as determined by the LLC in its sole discretion, to the effect that such LTIP
Units are subject to restrictions as set forth herein, in the Plan and in the LLC Agreement.

 

 

 

6. Restrictions on Transfer. None of the Award LTIP Units 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”), or
converted into Membership Units in accordance with the LLC Agreement (a) prior to vesting, or (b)
unless such Transfer is in compliance with all applicable securities laws (including, without
limitation, the Securities Act of 1933, as amended (the “Securities Act”)), and such
Transfer is in accordance with the applicable terms and conditions of the LLC Agreement; provided
that, upon the approval of, and subject to the terms and conditions specified by, the
Administrator, unvested Award LTIP Units may be Transferred to members of the Grantee’s Immediate
Family, which for purposes of this Agreement shall include family limited partnerships and similar
entities which are primarily for the benefit of the Grantee and his or her Immediate Family,
provided that the transferee agrees in writing with the Company and the LLC to be bound by all of
the terms and conditions of this Agreement. In connection with any Transfer of Award LTIP Units,
the LLC may require the Grantee to provide an opinion of counsel, satisfactory to the LLC, that
such Transfer is in compliance with all federal and state securities laws (including, without
limitation, the Securities Act). Any attempted Transfer of Award LTIP Units not in accordance with
the terms and conditions of this Section 6 shall be null and void, and the LLC shall not
reflect on its records any change in record ownership of any 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 LTIP Units. 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, the laws of descent and distribution or the transfer provisions specified above in this
Section 6.

7. Incorporation of Plan. The provisions of the Plan are hereby incorporated by
reference as if set forth herein. If and to the extent that any provision contained in this
Agreement is inconsistent with the Plan, this Agreement shall govern.

8. Investment Representation; Registration. The Grantee hereby makes the covenants,
representations and warranties set forth on Exhibit B attached hereto as of the date of
acceptance of this Agreement and each Vesting Date. All of such covenants, warranties and
representations shall survive the execution and delivery of this Agreement by the Grantee. The
Grantee shall immediately notify the LLC upon discovering that any of the representations or
warranties set forth on Exhibit B were false when made or have, as a result of changes in
circumstances, become false. The LLC will have no obligation to register under the Securities Act
any LTIP Units or any other securities issued pursuant to this Agreement or upon conversion or
exchange of the LTIP Units.

9. Section 83(b) Election. The Grantee hereby agrees to make an election to include
in gross income in the year of transfer the Award LTIP Units pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended (the “Code”), substantially in the form attached
hereto as Exhibit C and to supply the necessary information in accordance with the
regulations promulgated thereunder.

10. Amendment. The Grantee acknowledges that the Plan may be amended or discontinued
in accordance with Section 12 thereof and that this Agreement may be amended or canceled by the
Administrator of the Plan, on behalf of the LLC, for the purpose of satisfying changes in law or
for any other lawful purpose, provided that no such action shall impair the Grantee’s rights under
this Agreement without the Grantee’s written consent.

 

 

 

11. 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 the Award LTIP Units, the Grantee will pay
to the Company or, if appropriate, any of its affiliates, or make arrangements satisfactory to the
Administrator 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.

12. No Obligation to Continue Employment. Neither the Company, the LLC nor any
subsidiary of any of them is obligated by or as a result of the Plan or this Agreement to continue
to have the Grantee provide services to it or to continue the Grantee in employment and neither the
Plan nor this Agreement shall interfere in any way with the right of the Company, the LLC or any
subsidiary of any of them to terminate its relationship with the Grantee or the employment of the
Grantee at any time, subject to the employment agreement between you and the Company.

13. Notices. Notices hereunder shall be mailed or delivered to the LLC at its
principal place of business and shall be mailed or delivered to the Grantee at the address on file
with the LLC or, in either case, at such other address as one party may subsequently furnish to the
other party in writing.

14. Section 409A. Subject to any agreement or arrangement to which the Grantee and
the Company are parties to, if any compensation provided by this Agreement may result in the
application of Section 409A of the Code (“Section 409A”), the Company shall, in
consultation with and at the request of the Grantee, modify the Agreement in the least restrictive
manner necessary in order to, where applicable, (a) exclude such compensation from the definition
of “deferred compensation” within the meaning of such Section 409A or (b) comply with the
provisions of Section 409A, other applicable provision(s) of the Code and/or any rules, regulations
or other regulatory guidance issued under such statutory provisions and to make such modifications,
in each case, without any diminution in the value of the payments to the Grantee.

15. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, applied without regard to conflict of law principles. The
parties hereto agree that any action or proceeding arising directly, indirectly or otherwise in
connection with, out of, related to or from this Agreement, any breach hereof or any action covered
hereby, shall be resolved within the State of New York and the parties hereto consent and submit to
the jurisdiction of the federal and state courts located within the City of New York, New York.
The parties hereto further agree that any such action or proceeding brought by either party to
enforce any right, assert any claim, obtain any relief whatsoever in connection with this Agreement
shall be brought by such party exclusively in federal or state courts located within the State of
New York.

16. Electronic Signature. All references to signatures and delivery of documents in
this Agreement can be satisfied by procedures the Company has established or may establish for an
electronic signature system for delivery and acceptance of any such documents, including this
Agreement. The Grantee’s electronic signature is the same as, and shall have the same force and
effect as, Grantee’s manual signature. Any such procedures and delivery may be effected by a
third party engaged by the Company to provide administrative services related to the Plan.

(Signature Page Follows)

 

 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the
20th day of March, 2011.

	 	 	 	 	 	 	 	 	 
	 	 	MORGANS HOTEL GROUP CO.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Jeffrey M. Gault	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Name: Jeffrey M. Gault	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	MORGANS GROUP LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Morgans Hotel Group Co., its 

managing member	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Jeffrey M. Gault
 

Name: Jeffrey M. Gault
	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	GRANTEE	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	/s/ Michael Gross	 	 
	 	 	 	 	 
	 	 	Name: Michael Gross	 	 
	 	 	Address:	 	 

 

 

 

EXHIBIT A

FORM OF MEMBER SIGNATURE PAGE

The Grantee, desiring to become one of the within named Members of Morgans Group LLC, hereby
accepts all of the terms and conditions of, and becomes a party to, the Limited Liability Company
Agreement of Morgans Group LLC (the “LLC Agreement”). The Grantee agrees that this signature page
may be attached to any counterpart of the LLC Agreement.

Signature Line for Member:

	 	 	 	 	 
	 

	 	/s/ Michael Gross
 

Name: Michael Gross
	 	 
	 

	 	Date: 3/20/2011	 	 
	 
	 	 	 	 
	 

	 	Address of Member:	 	 

 

 

 

EXHIBIT B

GRANTEE’S COVENANTS, REPRESENTATIONS AND WARRANTIES

The Grantee hereby represents, warrants and covenants as follows:

(a) The Grantee has received and had an opportunity to review the following documents (the
“Background Documents”):

(i) The Company’s latest Annual Report to Stockholders that has been provided to
stockholders after the Company’s initial public offering, if available;

(ii) The Company’s Proxy Statement for its most recent Annual Meeting of Stockholders
following the Company’s initial public offering, if available;

(iii) The Company’s Report on Form 10-K for the fiscal year most recently ended
following the Company’s initial public offering, if available;

(iv) If any of the documents described in clauses (i) — (iii) above or (v) or (vi)
below is not available, the Company’s Registration Statement on Form S-1 registering the
Company’s initial public offering of its common stock;

(v) The Company’s Form 10-Q for the most recently ended quarter if one has been filed
by the Company with the Securities and Exchange Commission since the filing of the Form 10-K
described in clause (iii) above or, if a Form 10-K has not been filed by the Company, since
the filing of the Form S-1 described in clause (iv) above;

(vi) Each of the Company’s Current Report(s) on Form 8-K, if any, filed since the later
of the end of the fiscal year most recently ended for which a Form 10-K has been filed by
the Company or the filing of the Form S-1 described in clause (iv) above;

(vii) The LLC Agreement;

(viii) The Plan; and

(ix) The Company’s Certificate of Incorporation, as amended.

The Grantee also acknowledges that any delivery of the Background Documents and other
information relating to the Company and the LLC prior to the determination by the LLC of the
suitability of the Grantee as a holder of LTIP Units shall not constitute an offer of LTIP Units
until such determination of suitability shall be made.

 

 

 

(b) The Grantee hereby represents and warrants that

(i) The Grantee either (A) is an “accredited investor” as defined in Rule 501(a) under
the Securities Act of 1933, as amended (the “Securities Act”), or (B) by reason of the
business and financial experience of the Grantee, together with the business and financial
experience of those persons, if any, retained by the Grantee to represent or
advise him, her or it with respect to the grant to him, her or it of LTIP Units, the
potential conversion of LTIP Units into common units of the LLC (“Common Units”) and the
potential redemption of such Common Units for shares of common stock (“Shares”), has such
knowledge, sophistication and experience in financial and business matters and in making
investment decisions of this type that the Grantee (I) is capable of evaluating the merits
and risks of an investment in the LLC and potential investment in the Company and of making
an informed investment decision, (II) is capable of protecting his, her or its own interest
or has engaged representatives or advisors to assist him, her or it in protecting his, her
or its interests, and (III) is capable of bearing the economic risk of such investment.

(ii) The Grantee understands that (A) the Grantee is responsible for consulting his,
her or its own tax advisors 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 the award of LTIP Units may become subject, to his, her or its particular
situation; (B) the Grantee has not received or relied upon business or tax advice from the
Company, the LLC or any of their respective employees, agents, consultants or advisors, in
their capacity as such; (C) the Grantee provides or will provide services to the LLC 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 LLC, as the Grantee believes to be
necessary and appropriate to make an informed decision to accept this Award of LTIP Units;
and (D) an investment in the LLC and/or the Company involves substantial risks. The Grantee
has been given the opportunity to make a thorough investigation of matters relevant to the
LTIP Units and has been furnished with, and has reviewed and understands, materials relating
to the LLC and the Company and their respective activities (including, but not limited to,
the Background Documents). The Grantee has been afforded the opportunity to obtain any
additional information (including any exhibits to the Background Documents) deemed necessary
by the Grantee to verify the accuracy of information conveyed to the Grantee. The Grantee
confirms that all documents, records, and books pertaining to his, her or its receipt of
LTIP Units which were requested by the Grantee have been made available or delivered to the
Grantee. The Grantee has had an opportunity to ask questions of and receive answers from
the LLC and the Company, or from a person or persons acting on their behalf, concerning the
terms and conditions of the LTIP Units. The Grantee has relied upon, and is making its
decision solely upon, the Background Documents and other written information provided to the
Grantee by the LLC or the Company. The Grantee did not receive any tax, legal or financial
advice from the LLC or the Company and, to the extent it deemed necessary, has consulted
with its own advisors in connection with its evaluation of the Background Documents and this
Agreement and the Grantee’s receipt of LTIP Units.

(iii) The LTIP Units to be issued, the Common Units issuable upon conversion of the
LTIP Units and any Shares issued in connection with the redemption of any such Common Units
will be acquired for the account of the Grantee for investment only and not with a current
view to, or with any intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein, without prejudice, however, to the Grantee’s right
(subject to the terms of the LTIP Units, the Plan and this Agreement)
at all times to sell or otherwise dispose of all or any part of his or her LTIP Units,
Common Units or Shares in compliance with the Securities Act, and applicable state
securities laws, and subject, nevertheless, to the disposition of his or her assets being at
all times within his or her control.

 

 

 

(iv) The Grantee acknowledges that (A) neither the LTIP Units to be issued, nor the
Common Units issuable upon conversion of the LTIP Units, have been registered under the
Securities Act or state securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws and, if such LTIP
Units or Common Units are represented by certificates, such certificates will bear a legend
to such effect, (B) the reliance by the LLC and the Company on such exemptions is predicated
in part on the accuracy and completeness of the representations and warranties of the
Grantee contained herein, (C) such LTIP Units, or Common Units, therefore, cannot be resold
unless registered under the Securities Act and applicable state securities laws, or unless
an exemption from registration is available, (D) there is no public market for such LTIP
Units and Common Units and (E) neither the LLC nor the Company has any obligation or
intention to register such LTIP Units or the Common Units issuable upon conversion of the
LTIP Units under the Securities Act or any state securities laws or to take any action that
would make available any exemption from the registration requirements of such laws, except,
that, upon the redemption of the Common Units for Shares, the Company currently intends to
issue such Shares under the Plan and pursuant to a Registration Statement on Form S-8 under
the Securities Act, to the extent that (I) the Grantee is eligible to receive such Shares
under the Plan at the time of such issuance, (II) the Company has filed an effective Form
S-8 Registration Statement with the Securities and Exchange Commission registering the
issuance of such Shares. The Grantee hereby acknowledges that because of the restrictions
on transfer or assignment of such LTIP Units acquired hereby and the Common Units issuable
upon conversion of the LTIP Units which are set forth in the LLC Agreement or this
Agreement, the Grantee may have to bear the economic risk of his, her or its ownership of
the LTIP Units acquired hereby and the Common Units issuable upon conversion of the LTIP
Units for an indefinite period of time.

(v) The Grantee has determined that the LTIP Units are a suitable investment for the
Grantee.

(vi) No representations or warranties have been made to the Grantee by the LLC or the
Company, or any officer, director, shareholder, agent, or affiliate of any of them, and the
Grantee has received no information relating to an investment in the LLC or the LTIP Units
except the information specified in Paragraph (b) above.

(c) So long as the Grantee holds any LTIP Units, the Grantee shall disclose to the LLC in
writing such information as may be reasonably requested with respect to ownership of LTIP Units as
the LLC may deem reasonably necessary to ascertain and to establish compliance with provisions of
the Code, applicable to the LLC or to comply with requirements of any other appropriate taxing
authority.

 

 

 

(d) The Grantee hereby agrees to make an election under Section 83(b) of the Code with respect
to the LTIP Units awarded hereunder, and has delivered with this Agreement a completed, executed
copy of the election form attached hereto as Exhibit C. The Grantee agrees to file the
election (or to permit the LLC to file such election on the Grantee’s behalf) within thirty (30)
days after the Award of the LTIP Units hereunder with the IRS Service Center at which such 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 LTIP Units are awarded
to the Grantee.

(e) The address set forth on the signature page of this Agreement is the address of the
Grantee’s principal residence, and the Grantee has no present intention of becoming a resident of
any country, state or jurisdiction other than the country and state in which such residence is
sited.

(f) The representations of the Grantee as set forth above are true and complete to the best of
the information and belief of the Grantee, and the LLC shall be notified promptly of any changes in
the foregoing representations.

 

 

 

EXHIBIT C

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
 _____ 

LTIP Units in Morgans Group LLC
(the “LLC”).

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

, 20_. The
taxable year to which this election relates is calendar year 20_.
	 
	 	4.	 	Nature of restrictions to which the LTIP Units are subject:

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

	 	(b)	 	The Taxpayer’s LTIP Units vest in accordance with the vesting
provisions described in the Schedule attached hereto. Unvested LTIP Units are
forfeited in accordance with the vesting provisions described in the Schedule
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 LTIP
Units with respect to which this election is being made was $0 per LTIP Unit.
	 
	 	6.	 	The amount paid by the Taxpayer for the LTIP Units was $0 per LTIP Unit.

	 	7.	 	A copy of this statement has been furnished to the LLC and to its managing
member, Morgans Hotel Group Co.

Dated: March 20, 2011

	 	 	 	 	 
	 	 	 
	 	/s/ Michael Gross 	 
	 	Name:  	Michael Gross 	 
	 	 	 

 

 

 

	 	 	 	 	 

Schedule to Section 83(b) Election -Vesting Provisions of LTIP Units

LTIP Units are subject to time-based vesting with one-third (1/3) vesting each year on the first
three one-year anniversaries of the date of grant, provided that the Taxpayer remains an employee
of Morgans Hotel Group Co. (the “Company”) or its subsidiaries through such dates, subject to
acceleration in the event of certain extraordinary transactions. Unvested LTIP Units are subject
to forfeiture in the event of failure to vest based on the passage of time and continued employment
with the Company or its subsidiaries.

 

 

 

 Exhibit C

Outperformance Award Agreement

 

 

 

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.

 

 

 

“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.

 

 

 

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

 

 

 

	 	(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.

 

 

 

“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.

“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.

 

 

 

“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 Section 4.2(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.

“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.

“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.

“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 45days following the Final Valuation Date.

(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

(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.

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.

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).

  (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.

 

 

 

(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.

 

 

 

(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.

(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]

 

 

 

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:
	 	/s/ Richard Szymanski
 

Name: Richard Szymanski
	 	 
	 

	 	 	 	Title: CFO	 	 
	 
	 	 	 	 	 	 
	 	 	MORGANS GROUP LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard Szymanski
 

Name: Richard Szymanski
	 	 
	 

	 	 	 	Title:	 	 

	 	 	 
	GRANTEE
	 	 
	 
	 	 
	/s/ Michael Gross
 

Name: Michael Gross

	 	 

 

 

 

SCHEDULE A TO 2011 OUTPERFORMANCE PLAN AWARD AGREEMENT

	 	 	 
	Date of Award Agreement:
	 	March 20, 2011
	Name of Grantee:
	 	Michael Gross
	Participation Percentage:
	 	35%
	Grant Date:
	 	March 20, 2011
	Initial Grant of Award LTIP Units (if applicable)
	 	551,250

Initials of Company representative: /s/RS Initials of Grantee: /s/MG

 

 

 

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.

 

 

 

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.

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.

 

 

 

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         
                               

 

 

 

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.

 

 

 

Exhibit d

Promoted Interest Pool Award Agreement 

 

 

 

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.

 

 

 

“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.

 

 

 

“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).

 

 

 

“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

 

 

 

(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.

 

 

 

“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.

“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.

“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

	 	(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).

 

 

 

(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
	 
	 	(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.

(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.

 

 

 

(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.

 

 

 

(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]

 

 

 

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:
	 	/s/ Richard Szymanski
 

Name: Richard Szymanski
	 	 
	 

	 	 	 	Title: CFO	 	 

	 	 	 
	GRANTEE
	 	 
	 
	 	 
	/s/ Michael Gross
 

Name: Michael Gross

	 	 

 

 

 

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

	 	 	 	 	 
	MORGANS GROUP LLC	 	 
	 
	 	 	 	 
	By:

	 	/s/ Richard Szymanski
 

Name: Richard Szymanski
	 	 
	 

	 	Title:	 	 

 

 

 

SCHEDULE A TO 2011 PROMOTED INTEREST BONUS POOL

AWARD AGREEMENT

	 	 	 	 	 
	Date of Award Agreement:

	 	March 20, 2011

	Name of Grantee:

	 	Michael Gross

	Participation Percentage:

	 	 	35	%
	Grant Date:

	 	March 20, 2011

Initials of Company representative: /s/RS  Initials of Grantee: /s/MG

 

 

 

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.

 

 

 

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.

(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.

 

 

 

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                                                            

 

 

 

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.

 

 

 

Exhibit e

Release Agreement

 

 

 

RELEASE AGREEMENT

THIS RELEASE AGREEMENT (this “Release”) is entered into as of [_____] (the “Effective
Date”), by
 _____ 

(“Executive”) in consideration of severance pay and other
benefits (the “Severance Payment”) provided to Executive by Morgans Hotel Group Co., a Delaware
corporation (the “Company”), pursuant to Section 4 of the Employment Agreement by and between the
Company and Executive (the “Employment Agreement”).

1. Release. Subject to the last sentence of the first paragraph of this Section 1,
Executive, on his own behalf and on behalf of his heirs, executors, administrators, attorneys and
assigns, hereby unconditionally and irrevocably releases, waives and forever discharges the Company
and each of its affiliates, parents, successors, predecessors, and the subsidiaries, directors,
owners, members, shareholders, officers, agents, and employees of the Company and its affiliates,
parents, successors, predecessors, and subsidiaries (collectively, all of the foregoing are
referred to as the “Employer”), from any and all causes of action, claims and damages, including
attorneys’ fees, whether known or unknown, foreseen or unforeseen, presently asserted or otherwise
arising through the date of his signing of this Release, concerning his employment or separation
from employment. Subject to the last sentence of the first paragraph of this Section 1, this
Release includes, but is not limited to, any payments, benefits or damages arising under any
federal law (including, but not limited to, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Employee Retirement Income Security Act of 1974, the
Americans with Disabilities Act, Executive Order 11246, the Family and Medical Leave Act, and the
Worker Adjustment and Retraining Notification Act, each as amended); any claim arising under any
state or local laws, ordinances or regulations (including, but not limited to, any state or local
laws, ordinances or regulations requiring that advance notice be given of certain workforce
reductions); and any claim arising under any common law principle or public policy, including, but
not limited to, all suits in tort or contract, such as wrongful termination, defamation, emotional
distress, invasion of privacy or loss of consortium. Notwithstanding any other provision of this
Release to the contrary, this Release does not encompass, and Executive does not release, waive or
discharge, the obligations of the Company (a) to make the payments and provide the other benefits
contemplated by the Employment Agreement or any other Agreement with Executive, or (b) under any
restricted stock unit agreement, option agreement or other agreement pertaining to Executive’s
equity ownership or other awards, or (c) under any indemnification or similar agreement with
Executive, or (d) under this Release.

Executive understands that by signing this Release, he is not waiving any claims or
administrative charges which cannot be waived by law. He is waiving, however, any right to
monetary recovery or individual relief should any federal, state or local agency (including the
Equal Employment Opportunity Commission) pursue any claim on his behalf arising out of or related
to his employment with and/or separation from employment with the Company (other than with respect
to those matters described in clauses (a), (b), (c) and (d) above.

Executive further agrees without any reservation whatsoever, never to sue the Employer or
become a party to a lawsuit on the basis of any and all claims of any type lawfully and validly
released in this Release.

 

 

 

2. Acknowledgments. Executive is signing this Release knowingly and voluntarily. He
acknowledges that:

	 	(a)	 	He is hereby advised in writing to consult an
attorney before signing this Release;

	 	(b)	 	He has relied solely on his own judgment and/or
that of his attorney regarding the consideration for and the terms of
this Release and is signing this Release knowingly and voluntarily of
his own free will;

	 	(c)	 	He is not entitled to the Severance Payment
unless he agrees to and honors the terms of this Release;

	 	(d)	 	He has been given at least twenty-one (21)
calendar days to consider this Release, or he expressly waives his
right to have at least twenty-one (21) days to consider this Release;

	 	(e)	 	He may revoke this Release within seven (7)
calendar days after signing it by submitting a written notice of
revocation to the Employer. He further understands that this Release
is not effective or enforceable until after the seven (7) day period of
revocation has expired without revocation, and that if he revokes this
Release within the seven (7) day revocation period, he will not receive
the Severance Payment;

	 	(f)	 	He has read and understands the Release and
further understands that, subject to the limitations contained herein,
it includes a general release of any and all known and unknown,
foreseen or unforeseen claims presently asserted or otherwise arising
through the date of his signing of this Release that he may have
against the Employer; and

	 	(g)	 	No statements made or conduct by the Employer
has in any way coerced or unduly influenced him or her to execute this
Release.

3. No Admission of Liability. This Release does not constitute an admission of
liability or wrongdoing on the part of the Employer, the Employer does not admit there has been any
wrongdoing whatsoever against the Executive, and the Employer expressly denies that any wrongdoing
has occurred.

4. Entire Agreement. There are no other agreements of any nature between the Employer
and Executive with respect to the matters discussed in this Release, except as expressly stated
herein, and in signing this Release, Executive is not relying on any agreements or representations,
except those expressly contained in this Release.

5. Execution. It is not necessary that the Employer sign this Release following
Executive’s full and complete execution of it for it to become fully effective and
enforceable.

 

 

 

6. Severability. If any provision of this Release is found, held or deemed by a court
of competent jurisdiction to be void, unlawful or unenforceable under any applicable statute or
controlling law, the remainder of this Release shall continue in full force and effect.

7. Governing Law. This Release shall be governed by the laws of the State of New
York, excluding the choice of law rules thereof.

8. Headings. Section and subsection headings contained in this Release are inserted
for the convenience of reference only. Section and subsection headings shall not be deemed to be a
part of this Release for any purpose, and they shall not in any way define or affect the meaning,
construction or scope of any of the provisions hereof.

IN WITNESS WHEREOF, the undersigned has duly executed this Release as of the day and year
first herein above written.

	 	 	 	 	 
	 

	 	EXECUTIVE:

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