Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

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

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

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

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

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

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

NOW, THEREFORE, the Parties agree as follows:

1. Employment.

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

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

2. Compensation.

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

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

 

 

 

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

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

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

3. Term and Termination.

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

 

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4. Indemnification.

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

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

 

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5. Treatment of Confidential Information.

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

6. Non-solicitation.

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

7. Remedies.

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

8. Tax Liability

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

9. Severability

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

 

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10. Entire Agreement; Amendment.

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

11. Applicable Law.

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

12. Notice.

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

13. Waiver.

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

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

	 	 	 	 	 	 	 
	EMPLOYER:	 	 	 	EMPLOYEE:
	 
	 	 	 	 	 	 
	MORGANS HOTEL GROUP CO.	 	 	 	 
	 
	 	 	 	 	 	 
	By:

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

	 	 
	 	 	 	 
	
Name:

	 	
Richard Szymanski
	 	 	 	Fred J. Kleisner
	 
	 	 	 	 	 	 
	Title:

	 	Chief Financial Officer	 	 	 	 

 

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SCHEDULE A

REIMBURSEMENT EMPLOYEE EXPENSES

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

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

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

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

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

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

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

(Schedule 2c continued on following page)

 

 

 

TAX GROSS UP

	 	 	 	 	 	 	 
	Rates
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	(1)

	 	Federal Income Tax
	 	 	35.000	%
	 
	 	 	 	 	 	 
	(2)

	 	Federal Medicare Tax
	 	 	1.450	%
	 
	 	 	 	 	 	 
	(3)

	 	New York State Income Tax
	 	 	6.850	%
	 
	 	 	 	 	 	 
	(4)

	 	New York City Income Tax
	 	 	3.648	%
	 
	 	 	 	 	 	 
	 

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

	 	Initial Gross Up Percentage
	 	 	43.274	%
	 
	 	 	 	 	 	 
	 

	 	Full Gross Up Percentage
	 	76.286%1

 

	 	 	 	 	 	 	 	 	 	 	 
	1

	 	1	 	 	 	 	 	 	 	 
	 

	 	100% — 43.274%

	 	=
	 	 	76.286	%Filed by Bowne Pure Compliance

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made and entered into intending to be effective on October 1, 2007
(the “Commencement Date”) by and between Morgans Hotel Group Co., with a principal place of business at 475 Tenth
Avenue, New York, NY 10018 (the “Company” or
“Employer”) and Richard Szymanski (“Employee”).

WHEREAS, the Company desires to continue to employ Employee as the Chief Financial Officer, and Employee desires
to continue to be employed by the Company on the terms and conditions stated below;

NOW, THEREFORE, the Parties agree as follows:

1. Employment.

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

b. Employee will perform the job duties of Chief Financial Officer, or such other duties as the Company may assign
Employee from time to time, in its sole discretion, consistent with the duties and responsibilities of an executive at
Employee’s level. Employee agrees to continue to devote substantially his full time, energies and best efforts to the
performance of his duties for the Company, to the exclusion of all other business or employment activities. In the
performance of his duties hereunder, Employee shall report to the Chief Executive Officer.

2. Compensation.

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

a. Salary. The Company will pay Employee a base salary equal to $450,000 per year, ($18,750
semi-monthly), which may be increased at the Company’s sole discretion from time to time (the “Base Salary”). The
Company customarily conducts annual performance reviews and at that time a reevaluation of Employee’s Base Salary is
usual, provided, however, that Employee’s Base Salary shall not be less than $450,000 per year.

c. Bonus. Subject to Employee’s continued employment with the Company, the Company shall pay Employee an
annual bonus commensurate with the bonuses paid to other similarly situated employees of the Company. The exact amount
of Employee’s bonus shall be determined in the Company’s sole discretion. Employee’s bonus will be paid annually,
usually within two months after the end of the calendar year. 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.

 

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d. Expenses. During the term of this Agreement, Employee shall be entitled to reimbursement of all
reasonable and actual out-of-pocket expenses incurred by him in the performance of his services to the Company
consistent with corporate policies, provided that the expenses are properly accounted for, on the same basis as other,
similarly situated employees.

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

	 	3.	 	Term and Termination.

a. Term. This Agreement shall commence on the Commencement Date and may be terminated by either party as
provided below.

b. Termination by Employee without Good Reason. Employee may terminate this Agreement by providing the
Company with written notice of his intent to terminate employment 30 days in advance of the date of such termination.

c. Termination by Employee with Good Reason. Employee may terminate this Agreement for Good Reason, as
defined below, by notifying the Company of his intent to terminate his employment with Good Reason, and, thereafter,
the Employer shall: (1) pay Employee his pro-rata bonus, if any, for the current calendar year through the date of
termination; (2) continue to pay Employee his Base Salary for twenty four (24) months after his date of termination;
(3) pay Employee a bonus equal to the greater of (i) the bonus he actually received for the prior two years or (ii)
twice his annual target bonus; and (3) continue paying for Employee’s health insurance benefits for a period of twenty
four (24) months after such termination. Employee must notify the Company, in writing, within sixty (60) days after
Employee has knowledge that an event constituting Good Reason has occurred, in order for such event to constitute Good
Reason. The term Good Reason shall mean the occurrence of one or more of the following without Employee’s written
consent: (i) any failure by the Company to comply with any of the provisions of paragraph 2 of this 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 Employee; (ii) the assignment to Employee, or the removal from Employee, of any duties or
responsibilities that result in a material diminution of Employee’s authority; (iii) a material diminution of the
budget over which Employee has responsibility, other than for a bona fide business reason; (iv) any failure by the
Company to comply with and satisfy Section 8(c) of this Agreement; (v) the imposition of any requirement that Employee
relocate his office to a location other than Manhattan; or (vi) a material breach by the Company of any written
agreement between the Company and Employee; provided, however, that no termination for Good Reason shall be effective
unless the acts or omissions providing Good Reason to terminate continue after Employee has given the Company notice
thereof and 30 days in which to cure the same.

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d. Termination Upon Death or Disability. The Employee’s employment shall terminate automatically upon the
Employee’s death.  If the Company determines in good faith that the Disability of the Employee, as defined below, has
occurred during the term of this Agreement, it may give to the Employee written notice of its intention to terminate
the Employee’s employment.  In such event, the Employee’s employment with the Company shall terminate effective on the
30th day after receipt of such notice to the Employee (the “Disability Effective Date”), provided that, within the
30 days after such receipt, the Employee shall not have returned to full-time performance of the Employee’s duties. 
For purposes of this Agreement, “Disability” shall mean the inability of the Employee to perform his essential duties
for the Company on a full-time basis for 180 calendar days during any consecutive twelve month period as a result of
incapacity due to mental or physical illness. Upon termination as the result of Disability, Employer shall have no
further obligations to Employee.

e. Termination by the Company for Cause. The Company may terminate Employee’s employment at any time
during the term of this Agreement for Cause, as defined below, and the Company shall have no obligations to Employee
other than to pay Employee’s Base Salary through the date of termination. As used in this Agreement, “Cause” shall
mean: (i) Employee’s repeated failure to perform his duties commensurate with his position as determined in the sole
discretion of the Company; (ii) Employee’s refusal to follow the lawful policies and directives of his supervisors;
(iii) Employee’s material breach of the provisions of this Agreement; (iv) Employee’s engagement in any act of
dishonesty, gross negligence or willful misconduct that may have an adverse effect on the Company, its business
operations, financial condition, assets, prospects or reputation; (v) Employee’s breach of any fiduciary duty owed to
the Company or (vi) Employee’s knowing violation of any law, rule or regulation that affects his performance of or
ability to perform any of his duties or responsibilities with the Company; provided, however, that no termination
pursuant to clause (i), (ii) or (iii) shall be effective unless the conduct providing Cause to terminate continues
after Employee has been given notice thereof and 30 days in which to cure the same.

f. Termination by the Company without Cause. The Company may terminate Employee’s employment at any time
during the term of this Agreement without Cause (as defined above) by notifying the Employee in writing of its intent
to terminate Employee’s employment, and, thereafter, the Employer shall: (1) pay Employee his pro-rata bonus, if any,
for the current calendar year through the date of termination; (2) continue to pay Employee his Base Salary for twenty
four (24) months after his date of termination; (3) pay Employee a bonus equal to the greater of (i) the bonus he
actually received for the prior two years or (ii) twice his annual target bonus; and (3) continue paying for Employee’s
health insurance benefits for a period of twenty four (24) months after such termination.

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g. Termination as the Result of a Change in Control. If, at the time of or during the one-year period
following a Change in Control, the Company terminates Employee’s employment or Employee resigns for Good Reason: (1)
the Company shall pay employee his pro-rata bonus, if any, for the current calendar year through the date of
termination; (2) the Company shall continue to pay Employee his Base Salary for twenty four (24) months after his
termination; (3) the Company shall pay Employee a bonus equal to the greater of (i) the bonus he actually received for
the prior two years or (ii) twice his annual target bonus; (4) the Company shall continue to pay his health insurance
benefits for a period of Twenty Four (24) months after the date of his termination; and (4) all equity awards granted
to Employee by the Employer and held by Employee on the closing date of the Change in Control (the “Closing Date”),
which have not previously vested, shall become immediately vested and exercisable as of the Closing Date. As used in
this Agreement, a “Change in Control” shall mean a “Corporate Transaction” as set forth in the Company’s 2007 Omnibus
Incentive Plan, adopted by the Board of Directors and approved by the Company’s stockholders on May 22, 2007.

h. Release of Claims. Notwithstanding the foregoing or anything else contained in this Agreement to the
contrary, prior to the payment by Employer of the termination payments and benefits provided for in clause (c), (f) or
(g) of this paragraph 3, and as a condition to such payments, Employee shall sign a customary general release of all
potential claims he may have against the Company. If Employee does not deliver such release, the Company shall have no
obligation to provide Employee with any of the payments or benefits set forth in such clauses of this paragraph 3.

4. Treatment of Confidential Information.

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

5. Non-solicitation.

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

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4

 

6. Remedies.

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

7. Tax Liability

a. Anything in this Agreement to the contrary notwithstanding, if (A) on the date of termination of Employee’s
employment with the Company, 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 Code, (B) if it is determined that Employee is a
“specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, (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) of the Code as a result of such termination, Employee
would receive any payment that, absent the application of this Section 7, would be subject to interest and additional
tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(2)(B)(i) of the
Code, then no such payment shall be payable prior to the date that is the earliest of (1) 6 months after Employee’s
termination date, (2) Employee’s death or (3) such other date 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).

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

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8. Successors.

a. This Agreement is personal to the Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Employee’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 8(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.

9. Indemnification.

a. If the Employee is made a party, is threatened to be made a party, or reasonably anticipates being made a
party, to any Proceeding (as defined below) by reason of the fact that he is or was a director, officer, employee,
agent, manager, trustee, consultant or representative of the Company or any of its affiliates or is or was serving at
the request of the Company or any of its affiliates, or in connection with his service hereunder, as a director,
officer, member, employee, agent, manager, trustee, consultant or representative of another person or entity, or if any
Claim (as defined below) is made, is threatened to be made, or is reasonably anticipated to be made, that arises out of
or relates to the Employee’s service in any of the foregoing capacities, then the Employee shall promptly be
indemnified and held harmless to the fullest extent permitted or authorized by the Certificate of Incorporation or
Bylaws of the Company, or if greater, by applicable law, against any and all costs, expenses, liabilities and losses
(including, without limitation, attorneys’ and other professional fees, judgments, interest, expenses of investigation,
penalties, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) incurred or suffered by
the Employee in connection therewith or in connection with seeking to enforce his rights under this paragraph 9, and
such indemnification shall continue as to the Employee even if he has ceased to be a director, member, employee, agent,
manager, trustee, consultant or representative of the Company or other person or entity and shall inure to the benefit
of the Employee’s heirs, executors and administrators. The Employee shall be entitled to prompt advancement of any and
all costs and expenses (including, without limitation, attorneys’ and other professional fees and other charges)
incurred by him in connection with any such Proceeding or Claim, or in connection with seeking to enforce his rights
under this paragraph 9, any such advancement to be made within 15 days after he gives written notice, supported by
reasonable documentation, requesting such advancement. Such notice shall include, to the extent required by applicable
law, an undertaking by the Employee to repay the amount advanced if he is ultimately determined not to be entitled to
indemnification against such costs and expenses. Nothing in this Agreement shall operate to limit or extinguish any right to indemnification, advancement of
expenses, or contribution that the Employee would otherwise have (including, without limitation, by agreement or under
applicable law). For purposes of this Agreement, “Claim” shall include, without limitation, any claim, demand,
request, investigation, dispute, controversy, threat, discovery request, or request for testimony or information and
“Proceeding” shall include, without limitation, any actual, threatened, or reasonably anticipated, action, suit or
proceeding, whether civil, criminal, administrative, investigative, appellate, formal, informal or other.

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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 Employee’s
employment with the Company terminates and (y) the date on which all claims against the Employee that would otherwise
be covered by the policy (or policies) would become fully time barred, providing coverage to the Employee that is no
less favorable to him in any respect (including, without limitation, with respect to scope, exclusions, amounts, and
deductibles) than the coverage then being provided to any other present or former senior executive or director of the
Company.

10. Severability

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

11. Entire Agreement; Amendment.

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

12. Applicable Law.

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

13. Notice.

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

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14. Waiver.

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

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

	 	 	 
	EMPLOYER:

	 	EMPLOYEE:
	 

	 	 
	MORGANS HOTEL GROUP CO.

	 	 
	 

	 	 
	 

	 	 
	By: /s/ Fred Kleisner                                  

	 	/s/ Richard Szymanski                             
	       Fred Kleisner, Interim CEO

	 	Richard Szymanski

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8

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