Document:

Exhibit 10.20

 

INDEMNIFICATION
AGREEMENT

 

INDEMNIFICATION AGREEMENT (this “Agreement”),
dated February    , 2006, between Morgans Hotel Group LLC,
a Delaware limited liability company (“MHG LLC”),
and Morgans Group LLC, a Delaware limited liability company (“Morgans Group
LLC”).

 

RECITALS

 

WHEREAS, the Board of Directors of NorthStar Capital
Investment Corp., a Maryland corporation and the general partner of NorthStar
Partnership, L.P., a Delaware limited partnership that controls NorthStar
Hospitality LLC, a Delaware limited liability company that is the managing
member of MHG LLC, has determined that it is in the best interests of MHG LLC
and its members to complete an initial public offering (the “IPO”) of
shares of Morgans Hotel Group Co., a Delaware corporation (“MHG Co.”),
which will be the managing member of Morgans Group LLC;

 

WHEREAS, as a result of the IPO and the Formation and
Structuring Transactions (as defined below), Morgans Group LLC will no longer
be a wholly-owned subsidiary of MHG LLC; and

 

WHEREAS, in connection with the foregoing, the parties
desire to set forth certain agreements regarding releases and indemnification
following the separation.

 

NOW, THEREFORE, in consideration of the foregoing and
the covenants and agreements set forth below, MHG LLC and Morgans Group LLC
agree as follows:

 

ARTICLE I

DEFINITIONS

 

For the purpose of this Agreement the following
capitalized terms shall have the meanings specified herein.

 

“Action” means any demand, action, suit,
countersuit, arbitration, inquiry, proceeding or investigation by or before any
federal, state, local, foreign or international governmental authority or any
arbitration or mediation tribunal.

 

“Assumed Liabilities” shall mean (i) all
Liabilities relating to, arising out of or in connection with the ownership,
business or operations of the Transferred Business, whether arising before, in connection
with, on or after the effective date of the Formation and Structuring
Transactions, and (ii) all other Liabilities of the MHG LLC Group which
relates to acts or omissions of any such parties relating to ownership,
business or operations of the Transferred Business or the Formation and
Structuring Transactions and the other transactions contemplated thereby prior
to consummation of the Formation and Structuring Transactions (including the
IPO).  For the avoidance of doubt, the
term Assumed Liabilities shall include, without limitation, (i) all Liabilities
for income taxes,

 

 

indemnification obligations and other contingent liabilities of MHG LLC
and its direct and indirect subsidiaries relating to the ownership, business or
operations of the Transferred Business relating to periods ending on or prior
to the effective date of the Formation and Structuring Transactions, including
any Liabilities relating to the agreement with or claims by the hotel designer
described in Note 5 to the Combined Financial Statements of Morgans Hotel Group
Co. Predecessor included in the Registration Statement on Form S-1 filed
by MHG Co. in connection with the IPO, (ii) all Liabilities for New York
City or New York State transfer taxes in connection with the transactions
contemplated by the Formation and Structuring Transactions or the IPO,
including resulting from any subsequent transfers of common stock of MHG Co. by
the MHG LLC Group that are aggregated with the transfers contemplated by the
Formation and Structuring Transactions or the IPO, and (iii) all Liabilities
under that certain Agreement of Lease, dated as of December    ,
1997, by and between Adler Realty Company and ISH Operating Corp., a
wholly-owned subsidiary of Morgans Hotel Group Management LLC; provided,
however, that the amount of any Assumed Liability shall be reduced by
any benefits or amounts that are received by the MHG LLC after the effective date
of the Formation and Structuring Transactions, including any insurance or other
recoveries that are received by MHG LLC from third parties relating to, arising
out of or in connection with any Assumed Liability.

 

“Formation and Structuring Transactions” shall
have the meaning assigned thereto in the Registration Statement on Form S-1
filed by MHG Co. in connection with the IPO.

 

“Indemnifying Party” has the meaning set forth
in Section 2.4(a) hereof.

 

“Indemnitee” has the meaning set forth in Section 2.4(a) hereof.

 

“Information” means information, in written,
oral, electronic or other tangible or intangible forms, stored in any medium,
including studies, reports, records, books, contracts, instruments, computer
data, disks, diskettes, tapes, computer programs or other technical, financial,
employee or business information or data.

 

“IPO Closing Date” shall mean the date on which
shares of common stock of MHG Co. are issued pursuant to the IPO.

 

“Liabilities” means all debts, liabilities,
guarantees, assurances, commitments and obligations, whether fixed, contingent
or absolute, asserted or unasserted, matured or unmatured, liquidated or
un-liquidated, accrued or not accrued, known or unknown, due or to become due,
whenever or however arising (including, without limitation, whether arising out
of any contract or tort based on negligence or strict liability) and whether or
not the same would be required by generally accepted accounting principles and
accounting policies to be reflected in financial statements or disclosed in the
notes thereto.  For purposes of any
indemnification hereunder, “Liabilities” shall be deemed also to include any
and all damages, claims, suits, judgments, fines, penalties, costs and expenses
of any kind or character, including attorney’s reasonable fees.

 

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“MHG LLC Group” or “MHG LLC Indemnitees”
means MHG LLC and its wholly- and partially-owned direct and indirect
subsidiaries (other than members of the Morgans Group LLC Group) and its and their
respective members, affiliates, managers, directors, officers and employees (in
each case, other than members of the Morgans Group LLC Group) after giving
effect to the transactions contemplated by the Formation and Structuring
Transactions.  For purposes hereof, “MHG
LLC Group” and “MHG LLC Indemnities” shall include (i) NorthStar
Partnership, L.P., a Delaware limited partnership, (ii) any general or
limited partner of NorthStar Partnership, L.P., including, without limitation,
NorthStar Capital Investment Corp., a Maryland corporation and the general
partner of NorthStar Partnership, L.P., (iii) the Board of Directors of
NorthStar Capital Investment Corp., (iv) any direct or indirect member,
investor or beneficial owner of any equity interest in any partner of NorthStar
Partnership, L.P. that receives shares of common stock of MHG Co. initially
held by NorthStar Partnership, L.P., whether by distribution, redemption,
exchange or otherwise, (v) RSA Associates, L.P., a Delaware limited partnership,
(vi) any general or limited partner of RSA Associates, L.P., and (vii) any
direct or indirect member, investor or beneficial owner of any equity interest
in any partner of RSA Associates, L.P. that receives shares of common stock of
MHG Co. initially held by RSA Associates, L.P., whether by distribution,
redemption, exchange or otherwise.

 

“MHG Management Company” means Morgans Hotel
Group Management LLC, a Delaware limited liability company.

 

“Morgans Group LLC Group” or “Morgans Group
LLC Indemnitees” means Morgans Group LLC and its partially and wholly-owned
direct and indirect subsidiaries and their respective members, managers,
officers and employees after giving effect to the Formation and Structuring
Transactions.

 

“Third Party Claim” has the meaning set forth
in Section 2.4(a) of this Agreement.

 

“Transferred Business” means:  the business and operations of Morgans Group
LLC and its partially and wholly-owned direct and indirect subsidiaries after
giving effect to the consummation of the Formation and Structuring
Transactions, including, without limitation, (i) MHG LLC’s interest in the
ownership, business and operations of the following hotel properties, whether
conducted or occurring prior to, on or after the effective date of the
Formation and Structuring Transactions:

 

(1)                                  Morgans;

(2)                                  Mondrian;

(3)                                  Royalton;

(4)                                  Delano;

(5)                                  Hudson;

(6)                                  Clift;

(7)                                  Sanderson;

(8)                                  St.
Martins Lane; and

(9)                                  Shore
Club,

 

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(ii) the
ownership, business and operations of MHG Management Company, and (iii) MHG
LLC’s interest in the ownership, business and operations of the restaurant
joint ventures operating in the hotel properties named above.

 

ARTICLE II

MUTUAL RELEASES; INDEMNIFICATION

 

Section 2.1             Release
of Pre-Closing Claims.

 

(a)           Morgans
Group LLC Release.  Except as
provided in Section 2.1(c), effective as of the IPO Closing Date, Morgans
Group LLC does hereby, for itself and as agent for each member of the Morgans
Group LLC Group, release and forever discharge the MHG LLC Indemnitees from any
and all Assumed Liabilities and any and all other Liabilities whatsoever
related to, arising from or in connection with the Transferred Business
(whether arising at law or in equity (including any right of contribution), and
whether arising under any contract or agreement, by operation of law or
otherwise), existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the IPO Closing Date,
including, without limitation, any such acts, events or conditions on or before
the IPO Closing Date in connection with the Formation and Structuring
Transactions, including the IPO, other than any Liabilities attributable to
such member in its capacity as a selling stockholder in the IPO or asserted by
another member of the MHG LLC Group.

 

(b)           No
Actions as to Released Claims. 
Morgans Group LLC agrees, for itself and as agent for each member of the
Morgans Group LLC Group, not to make any claim or demand, or commence any
Action asserting any claim or demand, including any claim of contribution or
indemnification, against MHG LLC or any other person released pursuant to Section 2.1(a),
with respect to any Liabilities released pursuant to Section 2.1(a).

 

(c)           Excluded
Liabilities; No Impairment.  Nothing
contained herein shall release any claims under, or impair any right of any
person to enforce, this Agreement or the IPO underwriting agreement.

 

Section 2.2             Indemnification
by Morgans Group LLC.  Except as
otherwise provided in this Agreement, Morgans Group LLC shall indemnify, defend
and hold harmless the MHG LLC Indemnitees from and against any and all
Liabilities that any third party seeks to impose upon the MHG LLC Indemnitees,
or which are imposed upon the MHG LLC Indemnitees, if and to the extent such
Liabilities relate to, arise out of or result from any of the following items
(without duplication):

 

(i)            the Assumed Liabilities;

 

(ii)           the Transferred Business or the
Formation and Structuring Transactions, including the IPO, other than any
Liabilities attributable to such

 

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member in its capacity as a selling stockholder in the IPO or asserted
by another member of the MHG LLC Group;

 

(iii)          any breach by any member of the Morgans
Group LLC Group of this Agreement; and

 

(iv)          any Liabilities of the Morgans Group
LLC Group.

 

In the event that any member of the Morgans Group LLC
Group makes a payment to the MHG LLC Indemnitees hereunder, and any of the MHG
LLC Indemnitees subsequently diminishes the Liabilities on account of which
such payment was made, either directly or through a third-party recovery, MHG
LLC will promptly repay (or will procure an MHG LLC Indemnitee to promptly
repay) such member of the Morgans Group LLC Group the amount by which the
payment made by such member of the Morgans Group LLC Group exceeds the actual
cost to the MHG LLC Indemnitee of the associated indemnified Liability; provided,
however, that in the event that any indemnified Liability that was
diminished is subsequently reinstated such that the net amount paid by such
member of the Morgans Group LLC Group is less than the amount of the reinstated
Liability, such member of the Morgans Group LLC Group shall pay the difference
to MHG LLC or the MHG LLC Indemnitee, as applicable.

 

Section 2.3             Indemnification
by MHG LLC.  Except as otherwise
provided in this Agreement, MHG LLC shall indemnify, defend and hold harmless
the Morgans Group LLC Indemnitees from and against any and all Liabilities that
any third party seeks to impose upon the Morgans Group LLC Indemnitees, or
which are imposed upon the Morgans Group LLC Indemnitees, if and to the extent
such Liabilities relate to, arise out of or result from any of the following
items (without duplication):

 

(i)            any breach by any member of the MHG
LLC Group of this Agreement;

 

(ii)           any Liabilities of the MHG LLC Group
(other than the Assumed Liabilities); and

 

(iii)          any Liability resulting from a claim
by one member of the MHG LLC Group against another member of the MHG LLC Group.

 

In the event that any member of the MHG LLC Group
makes a payment to the Morgans Group LLC Indemnitees hereunder, and any of the Morgans
Group LLC Indemnitees subsequently diminishes the Liabilities on account of
which such payment was made, either directly or through a third-party recovery,
Morgans Group LLC will promptly repay (or will procure an Morgans Group LLC
Indemnitee to promptly repay) such member of the MHG LLC Group the amount by
which the payment made by such member of the MHG LLC Group exceeds the actual
cost to the Morgans Group LLC Indemnitee of the indemnified Liability;
provided, however, that in the event that any indemnified Liability
that was diminished is subsequently reinstated such that the net amount paid by
such member of the MHG LLC Group is less than the amount of the

 

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reinstated Liability, such member of the MHG LLC Group shall pay the
difference to Morgans Group LLC or the Morgans Group LLC Indemnitee, as
applicable.

 

Section 2.4             Procedures
for Defense, Settlement and Indemnification of Third Party Claims.

 

(a)           Notice
of Claims.  If an MHG LLC Indemnitee
or a Morgans Group LLC Indemnitee, as applicable (an “Indemnitee”),
receives notice or otherwise learns of the assertion by a person (including any
regulatory authority) who is not a member of the MHG LLC Group or the Morgans
Group LLC Group of any claim or of the commencement by any such person of any
Action (collectively, a “Third Party Claim”) with respect to which a
party (an “Indemnifying Party”) may be obligated to provide
indemnification to such Indemnitee pursuant to Section 2.2 or 2.3, MHG LLC
and Morgans Group LLC, as applicable, will ensure that such Indemnitee shall
give such Indemnifying Party written notice thereof within thirty (30) days
after becoming aware of such Third Party Claim. 
Any such notice shall describe the Third Party Claim in reasonable
detail.  Notwithstanding the foregoing,
the delay or failure of any Indemnitee or other person to give notice as
provided in this Section 2.4(a) shall not relieve the related
Indemnifying Party of its obligations under this Article II, except to the
extent that such Indemnifying Party is actually and substantially prejudiced by
such delay or failure to give notice; provided that the failure to
notify the Indemnifying Party shall not relieve it from any liability that it
may have to an Indemnitee otherwise than under this Article II.

 

(b)           Defense
of Claims.  An Indemnifying Party shall
retain counsel reasonably satisfactory to the Indemnitee and shall manage the
defense of and may settle or compromise any Third Party Claim so long as such
settlement or compromise contains a full and unconditional release of each
Indemnified Party and does not include any statement as to any admission of
fault, culpability or failure to act by or on behalf of any Indemnitee.  Within thirty (30) days after the receipt of
notice from an Indemnitee in accordance with Section 2.4(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee that the Indemnifying Party will assume
responsibility for managing the defense of such Third Party Claim.

 

(c)           Defense
By Indemnitee.  If an Indemnifying
Party fails to assume responsibility for managing the defense of a Third Party
Claim or to diligently defend such Third Party Claim, or fails to notify an
Indemnitee that it will assume responsibility as provided in Section 2.4(b),
such Indemnitee may manage the defense of such Third Party Claim and may settle
such Third Party Claim without the consent of the Indemnifying Party.  In any proceeding relating to a Third Party Claim, any Indemnitee shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnitee unless the named parties to
any such proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnitee and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them.  It is understood
that the Indemnifying Party shall not, in respect of the legal expenses of all
Indemnitees in connection with any Third Party Claim or related Third Party
Claims in the same

 

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jurisdiction, be liable for the reasonably incurred fees and expenses
of more than one separate firm (in addition to any local counsel) for all Indemnitees.

 

(d)           No
Settlement By Indemnitee Without Consent. 
Unless the Indemnifying Party has failed to manage the defense of the
Third Party Claim in accordance with the terms of this Agreement, or has failed
to notify an Indemnitee that it will assume responsibility as provided in Section 2.4(b),
no Indemnitee may settle or compromise any Third Party Claim without the
consent of the Indemnifying Party.

 

Section 2.5             Additional
Matters Regarding Indemnification.

 

(a)           Substitution.  In the event of an Action in which the
Indemnifying Party is not a named defendant, if either the Indemnitee or the
Indemnifying Party shall so request, the parties shall endeavor to substitute
the Indemnifying Party for the named defendant. 
If such substitution or addition cannot be achieved for any reason or is
not requested, the rights and obligations of the parties regarding
indemnification and the management of the defense of claims as set forth in
this Article II shall not be altered.

 

(b)           Subrogation.  In the event of payment by or on behalf of
any Indemnifying Party to or on behalf of any Indemnitee in connection with any
Third Party Claim, such Indemnifying Party shall be subrogated to and shall
stand in the place of such Indemnitee, in whole or in part based upon whether
the Indemnifying Party has paid all or only part of the Indemnitee’s Liability,
as to any events or circumstances in respect of which such Indemnitee may have
any right, defense or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any other
person.  Such Indemnitee shall cooperate
with such Indemnifying Party in a reasonable manner, and at the cost and
expense of such Indemnifying Party, in prosecuting any subrogated right,
defense or claim.

 

Section 2.6             Survival
of Indemnities.  The rights and
obligations of MHG LLC and Morgans Group LLC under this Article II shall
survive the sale or other transfer by any party of any assets or businesses or
the assignment by it of any Liabilities or the sale by any member of the MHG
LLC Group or the Morgans Group LLC Group of the capital stock or other equity
interests of any subsidiary to any person.

 

Section 2.7             Agreement
For Exchange of Information.  Subject
to applicable confidentiality restrictions and subject to providing the
contemplated Information only to those persons who require such Information in
the course of their duties, each of MHG LLC and Morgans Group LLC agree to
provide, or cause to be provided, to each other, at any time after the IPO
Closing Date, as soon as reasonably practicable after written request therefor,
any Information in the possession or under the control of such party that the
requesting party reasonably needs:

 

(a)           to
comply with reporting, disclosure, filing or other requirements imposed on the
requesting party by a regulatory authority having jurisdiction over the
requesting party or otherwise required by law;

 

7

 

(b)           for
use in any regulatory proceeding, judicial proceeding or other proceeding or in
order to satisfy audit, accounting, claims, regulatory, litigation or other
similar requirements;

 

(c)           to
comply with its obligations under this Agreement; or

 

(d)           in
connection with the ongoing businesses of MHG LLC or Morgans Group LLC as it
relates to the conduct of such businesses, as the case may be;

 

provided, however, that in
the event that either party determines that any such provision of Information
could be commercially detrimental, violate any applicable law or agreement, or
waive any attorney-client privilege, the parties shall take all reasonable
measures to permit the compliance with such obligations in a manner that avoids
any such harm or consequence.

 

Section 2.8             Other
Agreements.  MHG LLC and Morgans
Group LLC agree to execute and deliver, or to use their reasonable commercial
efforts to cause to be executed and delivered by the appropriate parties, such
other agreements, instruments and other documents as may be necessary or
desirable in order to effect the purposes of this Agreement and the Formation
and Structuring Transactions.  The
parties shall cooperate reasonably with each other in connection with any steps
required to be taken as part of their respective obligations under this
Agreement and the Formation and Structuring Transactions, and shall (a) furnish
upon request to each other such further information; and (b) do such other
acts and things, all as the other party may reasonably request for the purpose
of carrying out the intent of this Agreement and the Formation and Structuring Transactions.

 

ARTICLE III

MISCELLANEOUS

 

Section 3.1             Entire
Agreement.  This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and shall supersede all prior written and oral and all contemporaneous
oral agreements and understandings with respect to the subject matter hereof.

 

Section 3.2             Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.

 

Section 3.3             Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person, by facsimile with confirmation of receipt, by express or
overnight mail delivered by a nationally recognized air courier (delivery
charges prepaid), or by registered or certified mail (postage prepaid, return
receipt requested) as follows:

 

8

 

if to MHG
LLC:

 

Morgans
Hotel Group LLC

c/o NorthStar Partnership, L.P.

527 Madison Avenue, 16th Floor

New York, New York 10022

Attn: Richard McCready

Facsimile: (212) 319-4557

 

if to Morgans
Group LLC:

 

c/o Morgans
Hotel Group Co.

475 Tenth Avenue

New York, New York 10018

Attn.:  Chief Financial Officer

Facsimile:  (212) 277-4260

 

or to such other address as the party to whom notice
is given may have previously furnished to the other in writing in the manner
set forth above.  Any notice or
communication delivered in person shall be deemed effective on delivery.  Any notice or communication sent by facsimile
or by overnight air courier shall be deemed effective on the first Business Day
following the day on which such notice or communication was sent.  Any notice or communication sent by
registered or certified mail shall be deemed effective on the third Business
Day following the day on which such notice or communication was mailed.  As used in this Section 3.3, “Business
Day” means any day other than a Saturday, a Sunday or a day on which banking
institutions located in the State of New York are authorized or obligated by
law or executive order to close.

 

Section 3.4             Parties
in Interest.  This Agreement and the
other documents referred to herein, shall be binding upon MHG LLC and Morgans
Group LLC and inure solely to the benefit of the Morgans Group LLC Group and
the MHG LLC Group and their respective permitted assigns, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.

 

Section 3.5             Counterparts.  This Agreement and the other documents
referred to herein, may be executed in counterparts, each of which shall be
deemed to be an original but all of which shall constitute one and the same
agreement.

 

Section 3.6             Assignment.  The rights and obligations in this Agreement
may not be assigned or delegated by any party hereto, in whole or in part,
without the express prior written consent of the other party hereto.

 

Section 3.7             Severability.  If any term or other provision of this
Agreement is determined by a nonappealable decision by a court, administrative
agency or arbitrator to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force

 

9

 

and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.  Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible.

 

Section 3.8             Failure
or Indulgence Not Waiver.  No failure
or delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right.

 

Section 3.9             Amendment.  No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to this Agreement.

 

Section 3.10           Interpretation.  The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.  When a
reference is made in this Agreement to an Article or a Section, such
reference shall be to an Article or Section of this Agreement unless
otherwise indicated.

 

[signature
pages follow]

 

10

 

WHEREFORE, the parties have signed this Agreement
effective as of the date first set forth above.

 

	
  MORGANS HOTEL GROUP LLC

  	
   

  	
  MORGANS GROUP LLC 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Morgans Hotel Group Co.,

  	 

	
   

  	
   

  	
   

  	
  its managing member 

  	 

	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  By:

  	
   

  	
   

  	 

	
   

  	
  Title:

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
									

 

11Exhibit 10.28

 

MORGANS HOTEL GROUP CO.

ANNUAL BONUS PLAN

 

1.                                       PURPOSE OF PLAN

 

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

 

2.                                       ADMINISTRATION

 

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

 

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

 

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

 

3.                                       PARTICIPANTS

 

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

 

 

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

 

4.                                       PERFORMANCE PERIODS

 

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

 

5.                                       PERFORMANCE GOALS

 

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

 

6.                                       TARGET AND MAXIMUM BONUS OPPORTUNITIES

 

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

 

7.                                       ACTUAL BONUS AMOUNT

 

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

 

2

 

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

 

8.                                       ADOPTION DATE AND EFFECTIVE DATE

 

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

 

9.                                       AMENDMENT AND TERMINATION

 

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

 

10.                                 MISCELLANEOUS

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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