Document:

ex10-1ethos.htm

     

    
      

      
EMPLOYMENT
      AGREEMENT

    
       

      THIS
        EMPLOYMENT AGREEMENT (the “Agreement”), effective as of January 1,
        2007, is entered into this 12th day of
        December
        2007 by and between Enrique de Vilmorin (“Employee”), and Ethos Environmental,
        Inc., a Nevada corporation (“Company”).

       

      RECITALS

       

      WHEREAS,
        the Employee has been serving as President and Chief Executive Officer of
        the
        Company and the parties hereto desire for the Employee to continue serving
        in
        such capacity; and

       

      WHEREAS,
        no formal document exists governing the relationship between the Company
        and the
        Employee, and the Company and Employee desire by the execution of this Agreement
        to create a document memorializing the terms and conditions of the Employee’s
        service with the Company; and

       

      WHEREAS,
        the Company has granted Employee, by unanimous written consent of the Board
        of
        Directors effective as of even date herewith, 5,000,000 shares of the
        Company’s Common Stock, $0.0001 par value per share, (the “Issued Stock”) as
        bonus consideration for past services and for services hereunder.

       

      NOW,
        THEREFORE, in consideration of the mutual agreements hereinafter set
        forth, Employee and the Company have agreed and do hereby agree as
        follows:

       

       

      AGREEMENT

       

      1.
        Duties. The Company hereby agrees to continue to employ and engage Employee
        as
        President and Chief Executive Officer of the Company, and Employee hereby
        accepts and agrees to such hiring, engagement, and employment. Employee agrees
        to perform any and all duties and to assume any and all responsibilities
        that
        may be assigned to him from time to time by the Board of Directors of the
        Company or as may be required by the Bylaws, Articles of Incorporation or
        other
        governing documents of the Company. During the duration of his employment,
        Employee will devote his full time, energy, and skill to the performance
        of his
        duties for the Company and for the benefit of the Company. Employee shall
        render
        such services to the Company and perform his duties at such place or places
        in
        as the Company shall require in accordance with its best interests, needs,
        business and opportunities. Employee will also exercise due diligence and
        care
        in the performance of Employee’s duties to the Company under this Agreement.
        During the term hereof, Employee shall not enter into the services of or
        be
        employed in any capacity or for any purposes whatsoever, whether directly
        or
        indirectly, by any person, firm, corporation or entity other than Company,
        and
        will not, during said period of time, be engaged in any business, enterprise
        or
        undertaking other than employment by the Company, except with the prior written
        consent of the Company.

       

      2.
        Employment Period. Employee’s employment with the Company shall be for an
        initial term of five (5) years (the “Initial Term”), commencing on the date
        hereof and shall continue thereafter until ended in accordance with this
        Agreement. In the absence of a Notice of Termination, as provided herein,
        this
        Agreement shall renew automatically on the anniversary date hereof, on a
        year by
        year term, for each of the successive ten (10) years (the “Extended Term”)
        following the Effective Date.  Provided, however, after the Initial
        Term, Employee’s employment will be “at will,” meaning that either Employee or
        the Company will be entitled to terminate the employment at any time and
        for any
        reason, with or without cause prior to the expiration of this
        Agreement.  Any contrary representations which may have been made to
        Employee are superseded by this Agreement. The “at will” nature of the
        employment after the Initial Term may only be changed in an express written
        agreement signed by Employee and a duly authorized officer of the
        Company.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      3.
        Compensation.

       

      (a)
        Base
        Salary. The Company shall pay Employee, and Employee agrees to accept from
        the
        Company in full payment for Employee’s services and promises to the Company
        (specifically including the covenants set forth in Sections 5 and 9), a base
        salary at the rate of $30,000 per month during the duration of Employee’s
        employment (“Base Salary”), payable in equal monthly installments or otherwise
        in accordance with the Company’s normal pay practices as the same may be altered
        from time to time by Company.

       

      (b)
        Bonus. At the discretion of the Board of Directors, and subject to the
        satisfaction of such conditions or performance criteria as may be established
        from time to time at the sole discretion of the Board of Directors, Employee
        may, at any time and from time to time, receive a bonus. This bonus may consist
        of, without limitation, either equity interests of the Company or
        cash.

       

      (c)
        Withholding Taxes. All forms of compensation paid or payable to Employee
        whether
        set forth in this Agreement or otherwise are subject to reduction to reflect
        applicable withholding and payroll taxes.

       

      (d)
        Reimbursement for Business Expenses. Employee shall receive reasonable and
        customary reimbursement for business expenses incurred on behalf of the Company;
        provided, however, that Employee shall provide appropriate receipts and
        documentation for any such expenses.

       

      (e)
        Vacation. Employee shall be entitled to vacation on the terms and subject
        to the
        conditions established by the Board of Directors of the Company.

       

      (f)
        Health Care Benefits. In addition to Employee’s Base Salary during the duration
        of the Employee’s employment, when and if the Company adopts health care
        benefits and/or life insurance benefits, Employee shall be eligible for
        participation in any such plan(s) on the terms and subject to the conditions
        established by the Board of Directors of the Company.

       

      4.
        Issued
        Stock; Transferability. The Issued Stock and the rights and privileges conferred
        in whole or in part hereby may not be transferred, assigned, pledged or
        hypothecated in any way (whether by operation of law or otherwise), and the
        Company shall have no obligation to transfer such shares, unless registered
        under the Securities Act of 1933, as amended (the “Act”) or, in the opinion of
        counsel to the Company, such transaction is in compliance with or exempt
        from
        the registration and prospectus requirements of the Act. The Employee shall
        pay
        all costs incurred by the Company in such a transaction, including but not
        limited to legal fees and costs. The Issued Stock shall not be subject to
        levy
        and execution, attachment or similar process. Upon any attempt to transfer,
        assign, pledge, hypothecate or otherwise dispose of the Issued Stock, or
        any
        right or privilege conferred hereby, contrary to the provisions of this
        Agreement, or upon the levy or execution, attachment or similar process on
        the
        Issued Stock or the rights and privileges conferred under this Agreement,
        the
        Company shall have the right to buy back the Issued Stock, in whole or in
        part,
        in the manner described in Section 6. Each certificate or other
        documentation evidencing the ownership of any shares of Issued Stock to be
        imprinted with a legend in substantially the following form:

       

      THE
        SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
        ACT
        OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
        MAY
        NOT BE REOFFERED, SOLD, TRANSFERRED, PLEDGED, OR ASSIGNED IN THE ABSENCE
        OF
        (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT
        AND THE STATE SECURITIES ACT OR BLUE SKY ACT OF ANY STATE HAVING JURISDICTION
        THEREOF, OR (B) AN OPINION OF COUNSEL, REASONABLY SATISFACTORY IN FORM,
        SCOPE AND SUBSTANCE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
        SAID
        ACT OR THE SECURITIES ACT OR BLUE SKY ACT OF ANY STATE HAVING JURISDICTION
        WITH
        RESPECT THERETO. ADDITIONALLY, THE SECURITIES REPRESENTED HEREBY ARE SUBJECT
        TO
        AN OPTION TO REPURCHASE IN FAVOR OF THE COMPANY AS DESCRIBED IN THAT CERTAIN
        EMPLOYMENT AGREEMENT DATED JANUARY 1, 2007.

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      The
        certificate may also bear additional inscriptions that the Company, in its
        sole
        and absolute discretion, otherwise deems are required by federal, state,
        foreign
        or local securities laws. All shares of Issued Stock shall be subject to
        such
        stop-transfer orders and other restrictions as the Company may deem advisable
        under the rules, regulations, and other requirements of the US Securities
        and
        Exchange Commission, any stock exchange upon which the Common Stock is then
        listed, and any applicable federal or state securities law, and the Company
        may
        cause a legend or legends to be put on any certificates evidencing such shares
        to make appropriate reference to such restrictions.

       

      5.
        Restrictions on the Issued Stock. The Issued Stock is subject to all
        restrictions in this Agreement. By acceptance of the Issued Stock, the Employee
        agrees that the Issued Stock will be held for investment and will not be
        held
        with a view to their distribution, as that term is used in the Act, unless
        in
        the opinion of counsel to the Company, such distribution is in compliance
        with
        or exempt from the registration and prospectus requirements of that Act.
        As a
        condition of this Agreement, the Company may require the Employee to confirm
        any
        factual matters reasonably requested by counsel for the Company.

       

      THE
        EMPLOYEE UNDERSTANDS THAT THE ISSUED STOCK WILL NOT BE REGISTERED AT THE
        TIME
        THIS AGREEMENT UNDER THE SECURITIES ACT. THE EMPLOYEE REPRESENTS THAT IT
        IS
        EXPERIENCED IN EVALUATING COMPANIES SUCH AS THE COMPANY, HAS SUCH KNOWLEDGE
        AND
        EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS AS TO BE CAPABLE OF EVALUATING
        THE
        MERITS AND RISKS OF ITS INVESTMENT, AND HAS THE ABILITY TO SUFFER THE TOTAL
        LOSS
        OF THE INVESTMENT. THE EMPLOYEE FURTHER REPRESENTS THAT IT HAS HAD THE
        OPPORTUNITY TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM THE COMPANY CONCERNING
        THE TERMS AND CONDITIONS OF THE ISSUED STOCK, THE COMMON STOCK, AND THE BUSINESS
        OF THE COMPANY, AND TO OBTAIN ADDITIONAL INFORMATION TO SUCH EMPLOYEE’S
        SATISFACTION. THE EMPLOYEE FURTHER REPRESENTS THAT IT IS AN “ACCREDITED
        INVESTOR” WITHIN THE MEANING OF REGULATION D UNDER THE ACT, AS PRESENTLY IN
        EFFECT.

       

      6.
        Resignation; Termination.

       

      (a)
        Resignation. Employee shall have the right to terminate this Agreement at
        any
        time upon thirty (30) days prior written notice to the Company of any such
        termination (“Employee Notice of Termination”). In the event that such
        resignation is for Good Reason (as that term is defined below), all of
        Employee’s rights and all of the Company’s obligations hereunder shall terminate
        effective on the date of Employee’s resignation and Employee shall be entitled
        to receive the unpaid portion of the Base Salary earned up to the date of
        such
        termination and all benefits payable to Employee as a result of such termination
        under the terms of the Company’s employee benefit plans. In the event Employee
        shall resign for other than Good Reason, Employee’s obligations and the
        Company’s rights under Sections 5, 6, 7, 8, 9 and 10 shall survive the
        termination of this Agreement for a period of one (1) year, and the Issued
        Stock will be subject to the Option to Repurchase as set forth below. The
        Employee may terminate the Employee’s employment with the Company at any time
        for “Good Reason”, if any of the following have occurred without the Employees
        consent:

       

      (i)
        the
        material reduction of the Employee’s authority, duties and responsibilities, or
        the assignment to the Employee of duties materially inconsistent with the
        Employee’s position or positions with the Company and its subsidiaries, except
        that the Company shall have thirty (30) days from the date on which the
        Employee gives the notice thereof to cure such event or condition and, if
        the
        Company does so, such event or condition shall not constitute Good Reason
        hereunder;

      
        
          
          

        

        
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      (ii)
        a
        reduction of the Annual Salary of the Employee, except that a reduction of
        the
        Employee’s Base Salary shall not constitute Good Reason for termination if
        (i) the Company cures such reduction no later than thirty (30) days
        from the date on which the Employee gives the Company notice that the reduction
        constitutes Good Reason for termination hereunder; or (ii) such reduction
        is made in connection with a reduction in compensation of not more than ten
        percent (10%) of the Employee’s Base Salary and such reduction is made
        generally applicable to all senior management employees of the
        Company;

       

      (iii)
        the
        failure by the Company to obtain an agreement in form and substance reasonably
        satisfactory to the Employee from any successor to the business of the Company
        to assume and agree to perform this Agreement;

       

      (iv)
        the
        Company’s material and willful breach of this Agreement, except that the Company
        shall have thirty (30) days from the date on which the Employee gives the
        notice thereof to cure such event or condition and, if the Company does so,
        such
        event or condition shall not constitute Good Reason hereunder;

       

      (v)
        a
        requirement by the Company that Employee’s work location be moved more than
        fifty (50) miles of the Company’s principal place of business in San Diego,
        California; or

       

      (vi)
        Change of Control: "Change of Control" means the occurrence of any of the
        following events:

       

      
        	
                (a)  

              	
                Any
                  "person" or group (as such terms and used in Sections 13(d) and
                  14(d) of
                  the Securities Exchange Act of 1934, as amended) is or becomes the
                  "beneficial owner" (as defined in Rule 13d-3 under said
                  Act), directly or indirectly, of securities of the Company
                  representing 20% or more of the total voting power represented by the
                  Company's then outstanding voting securities;
                  or

              

      

       

      
        	
                (b)  

              	
                A
                  change in the composition of the Board occurring within a two-year
                  period,
                  as a result of which fewer than a majority of the directors are
                  Incumbent Directors. "Incumbent Directors" shall mean directors who
                  either (A) are directors of the Company as of the date hereof;
                  or (B)
                  are elected, or nominated for election, to the Board with the
                  affirmative votes of at least a majority of the Incumbent Directors
                  at the time of such election or nomination (but shall not include an
                  individual whose election or nomination is in connection with an
                  actual or threatened proxy contest relating to the election of
                  directors for the Company); or

              

      

       

      
        	
                (c)  

              	
                The
                  stockholders of the Company approve any transaction which would
                  be a
                  reorganization under Nevada or California law and result in the
                  voting securities of the Company outstanding immediately
                  prior thereto continuing to represent (either by remaining
                  outstanding or by being converted into voting securities of the
                  surviving entity) less than fifty percent (50%) of the total voting
                  power represented by the voting securities of the surviving entity
                  outstanding immediately after such merger or
                  consolidation; or

              

      

       

      
        
          
          

        

        
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                (d)  

              	
                The
                  stockholders of the Company approve a plan of complete liquidation
                  of the
                  Company or an agreement for the sale or disposition by the Company of
                  all or substantially all the Company's
                  assets.

              

      

       

      (b)
        Termination for Cause. The Company may terminate Employee’s employment at any
        time for Cause (as defined below) with thirty (30) days written notice and
        opportunity to cure the violation “Employer Notice of Termination”). Such
        opportunity to cure will only be available if the violation is contained
        in one
        of the following paragraphs (contained below in this Subsection 6(b)): (iv),
        (viii), (ix), (x) (xi). If Employee’s employment is terminated pursuant to
        this Subsection 6(b), all of Employee’s rights and all of the Company’s
        obligations hereunder shall immediately terminate. As used in this section,
“for
        Cause” shall mean any of the following:

       

      (i)
        Willfully damaging the Company’s property, business, reputation or
        goodwill;

       

      (ii)
        Committing a felony;

       

      (iii)
        Death, theft, dishonesty, fraud or embezzlement;

       

      (iv)
        Using alcohol, narcotics or other controlled substances to the extent that
        it
        prevents the Employee from efficiently performing services for the
        Company;

       

      (v)
        Willfully injuring any other employee of the Company;

       

      (vi)
        Willfully injuring any person in the course of performance of services for
        the
        Company;

       

      (vii)
        Disclosing to a competitor or other unauthorized persons confidential or
        proprietary information or secrets of the Company;

       

                                       (viii)
        Soliciting business on behalf of a competitor or a potential
        competitor;

       

      (ix)
        Sexually harassing any other employee of the Company or committing any act
        which
        otherwise creates an offensive work environment for other employees of the
        Company;

       

      (x)
        Failing to comply with any provision of the Company’s policy manual as it
        applies to Employee; or

       

      (xi)
        Breaching this Agreement.

       

      (c)
        Termination of Employment Prior to a Change of Control: The
        following provisions shall apply with respect to termination of Employee's
        employment prior to a Change of Control:

      

      
        	
                (i)  

              	
                Termination
                  without Cause:

              

      

      

      
        	
                (a)  

              	
                General:  If,
                  prior to the end of the Initial Term and prior to a Change of Control
                  Employee's employment is terminated by the Company without Cause,
                  then the
                  Company shall:

              

      

      

      
        	
                (A)  

              	
                Cash
                  Severance Payments:  Pay to Employee severance payments of one
                  month's Base Salary for a period of 36 months following the date
                  of
                  termination; (the "Severance Period"). Such severance payments shall
                  be paid at regular payroll intervals, or in one lump sum within 30
                  days of the Termination Date, as determined by
                  Company.

              

      

      

      
        
          
          

        

        
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                (B)  

              	
                Accelerated
                  Vesting Option:  Give Employee (or his legal representative if
                  he is Disabled) 30 days to elect to accelerate the vesting of 80% all
                  unvested equity compensation (forfeiting the 20% balance of unvested
                  equity compensation) to the same extent as if it would have vested if
                  Employee remained employed through the required vesting
                  period.

              

      

      

      
        	
                (C)  

              	
                Continued
                  Group Health and Insurance Benefits: Continue to make available
                  to the
                  Employee and the covered dependents, and to pay directly or
                  indirectly for, to the same extent as paid prior to the Termination
                  Date, all group health plan, life and other similar insurance plans
                  or Company-sponsored arrangements providing comparable benefits in
                  which Employee or such covered dependents participate on the
                  Termination Date through the Severance
                  Period.

              

      

      

      
        	
                (b)  

              	
                Death:  In
                  the event of Employee's death while he is receiving benefits pursuant
                  to
                  Section 6(c)(i)(a) hereof, the Company shall continue providing and
                  paying severance and for group health plan, life and similar
                  insurance coverage or Company-sponsored arrangements
                  providing comparable benefits for the covered dependents through the
                  Severance Period.

              

      

      

      
        	
                (c)  

              	
                All
                  vested options or other equity compensation must be exercised within
                  12
                  months of the Termination Date.

              

      

      

      (d)  Termination
        for Cause; Resignation: If, during the Employment Period and prior to a
        Change of Control, Employee's employment is terminated by the Company for
        Cause, or if Employee resigns from his employment, then Employee shall be
        entitled only to payment of all amounts including benefits earned or owed
        to Employee and only to such equity compensation as is fully vested as of
        the Termination Date.

      

      (e)  Termination
        of Employment Following a Change of Control: The following provisions shall
        apply to termination of Employee's employment on or following a Change of
        Control:

      

      
        	
                (i)  

              	
                Termination
                  without Cause; Resignation for Good
                  Reason:

              

      

      

      
        	
                (a)  

              	
                General:  If,
                  following a Change of Control (A) Employee's employment is terminated
                  by
                  the Company without Cause, or (B) Employee resigns from his employment
                  hereunder for Good Reason, then the Company
                  shall:

              

      

      

      
        	
                (A)  

              	
                Cash
                  Severance Payments:  Pay to Employee a lump sum, within 30 days
                  of the Termination Date and in cash, equal to three times Employee’s
                  Base Salary for a twelve month
                  period.

              

      

      

      
        	
                (B)  

              	
                Accelerated
                  Vesting:  Cause the vesting of all restricted stock, stock
                  options and other equity-based compensation held on the date of
                  termination by Employee, to fully accelerate, as of the date
                  of termination, so that they become 100%
                  vested.

              

      

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
        	
                (C)  

              	
                Continued
                  Group Health and Insurance Benefits: Continue to make available
                  to the
                  Employee and the Covered Dependents, and pay for, to the same extent
                  as paid prior to the Change of Control and termination of the
                  employment or consulting relationship, all group health plan, life
                  and other similar insurance plans or Company-sponsored arrangements
                  providing comparable benefits in which Employee or such
                  Covered Dependents participate on the date of the Employee's
                  termination, and for the 10 year period following the Termination
                  Date.

              

      

      

      
        	
                (D)  

              	
                Stock
                  Bonus: Employee shall also receive within 30 days of the Termination
                  Date
                  a one-time issuance of shares of the Company’s common stock equal to
                  10,000,000 shares.

              

      

      

      
        	
                (b)  

              	
                Death
                  During Severance Period:  In the event of Employee's death while
                  he is receiving benefits pursuant to Section 6(e)(i)(a) hereof, the
                  Company shall continue providing and paying for group health
                  plan, life and similar insurance plan coverage or Company-sponsored
                  arrangements providing comparable benefits to the covered dependents
                  through period set forth in Section
                  6(e)(i)(a)(C).

              

      

      

      (f)
        Termination for Cause; Resignation Without Good Reason: If, following a
        Change of Control, Employee's employment is terminated by the Company for
        Cause, or if Employee resigns from his employment hereunder other than for
        Good Reason, then Employee shall be entitled only to payment of all amounts
        (including benefits) earned or owed to Employee, and only to such equity
        compensation as is fully vested as of the Termination Date. The Company
        shall not be limited to termination as a remedy for any improper or illegal
        act
        of Employee, but may also seek damages, injunction or such other remedy as
        it
        may deem appropriate under the circumstances. This shall include without
        limitation the option by the Company, in its sole and absolute discretion,
        to
        repurchase the Issued Stock, in whole or in part, for an amount of $5.00
        per
        share (the “Option to Repurchase”), immediately upon the termination of the
        Employee’s employment with the Company for Cause, or the Employee’s resignation
        without Good Reason; provided, however, that the Issued Stock subject to
        the
        Option to Repurchase shall be reduced by 1/12 for each month of Employee’s
        completed employment with the Company, beginning the date hereof and continuing
        hereafter. Upon the termination of the Employee for Cause, Employee’s
        obligations and the Company’s rights under Sections 7, 8, 9, 10, 11 and 12 shall
        survive the termination of this Agreement for a period of one
        (1) year.

      

      (g)
        Golden Parachute Limitation: The payments and benefits payable to Employee
        under
        this Agreement and all other contracts, arrangements, or programs with the
        Company shall not, in the aggregate exceed the maximum amount that may be
        paid to Employee without triggering golden parachute penalties under
        Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
        as determined in good faith by the Company's independent auditors. Employee
        agrees that, to the extent payments or benefits under this Agreement would
        not be deductible under Code Section 162(m) if made or provided
        when otherwise due under this Agreement, such payments and benefits shall
        be made or provided later, immediately after Section 162(m) ceases to
        preclude their deduction, with interest thereon at the rate provided in
        Code Section 1274(b)(2)(B). If even after such deferral the payments and
        benefits otherwise payable to Employee must be reduced to avoid triggering
        such penalties, the payments and benefits will be reduced in the priority
        order designated by the Employee, or, if the Employee fails promptly to
        designate an order, in the priority order designated by the Company. If an
        amount in excess of the limit set forth in this Section 6 is paid to Employee,
        Employee shall repay the excess amount to the Company upon demand. Employee
        and the Company agree to cooperate with each other in connection with any
        administrative or judicial proceedings concerning the existence or amount
        of golden parachute penalties on payments or benefits received by
        Employee.

       

      
        
          
          

        

        
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      7.
        Non-solicitation; Non-competition.

       

       

      (a)
        Employee agrees that he will not at any time during the Employee’s employment or
        the Restriction Period (“Restriction Period” shall mean the one (1) year
        subsequent to the end of Employee’s employment by the Company for any reason,
        which ending of employment shall be referred to as the “Termination Date”),
        whether voluntarily or involuntarily, directly or indirectly for himself
        or any
        other person or entity solicit, interfere with or endeavor to entice away
        from
        Company or any of its affiliates any other employee of Company or any of
        its
        affiliates. Additionally, Employee agrees that during the Restriction Period
        any
        employment by Employee or any entity in which he has an interest, directly
        or
        indirectly (other than a publicly traded company in which he has less than
        a 1%
        interest) of any person who was in the employ of the Company or any of its
        affiliates within the preceding year, shall be a violation of this Section.
        For
        the purposes of this Agreement indirect interests shall include interests
        held
        by Employee’s family members or any partner in a partnership, limited liability
        company or other entity in which he has a 10% or greater ownership
        interest.

       

      (b)
        Employee further agrees that he will not at any time during the Restriction
        Period, whether voluntarily or involuntarily, directly or indirectly, for
        himself or any other person or entity:

       

      (i)
        engage, directly or indirectly (either as an employee, officer, director,
        partner, shareholder, consultant or independent contractor), in any business
        substantially similar to that carried on by the Company, or any of its
        affiliates, or in providing services or products or offering to provide products
        or services of the kind provided by the Company or any of its affiliates
        as of
        the Termination Date within those areas in the United States, US Territories,
        Mexico, Central America and the Caribbean (the “Non-Competition Area”) which the
        Company or any of its affiliates is doing business as of the Termination
        Date or
        in which, at the time of the Termination Date, the Company or any of its
        affiliates contemplates doing business, or, for those customers of the Company
        or any of its affiliates for whom the Company or any of its affiliates:
        (A) is engaged in providing services or products as of the Termination
        Date, or (B) has either provided services or products within the twenty
        four month (24) period prior to the Termination Date, or (C) has
        contacted at any time during the twelve (12) months prior to the
        Termination Date, for the purpose of offering to provide services or products
        (all of which are hereinafter referred to as the “Clients”);

       

      (ii)
        Solicit or attempt to solicit those Clients for the purposes of providing
        or
        offering to provide any services or products of a type which the Company
        or any
        of its affiliates provides or contemplates providing as of the Termination
        Date,
        on behalf of those Clients, whether directly or through any other persons,
        partnerships, corporations, companies or other entities; or

       

      (iii)
        Take any other action which would impair the value of the business or assets
        of
        the Company or any of its affiliates, including, without limitation, any
        action
        which would tend to disparage or diminish the reputation of the Company or
        any
        of its affiliates.

       

      (c)
        If in
        any judicial proceeding, a court shall refuse to enforce this Agreement,
        whether
        because the time limit is too long or because the restrictions contained
        herein
        are more extensive (whether as to geographic area, scope of business or
        otherwise) than is necessary to protect the business and goodwill of the
        Company, it is expressly understood and agreed between the parties hereto
        that
        this Agreement is deemed modified to the extent necessary to permit this
        Agreement to be enforced in any such proceedings.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      (d)
        If
        the Company or its successors in interest shall make application to a court
        of
        competent jurisdiction for injunctive relief, then the Restriction Period
        specified herein shall be tolled from the time of application for injunctive
        relief until the date of final adjudication of the claim for injunctive relief.
        Additionally, Employee waives, to the greatest extent permissible, any
        requirement that the Company post bond or other security as a precondition
        to an
        injunction, whether temporary or permanent.

       

      (e)
        Employee agrees that compliance with this Section is necessary to protect
        the
        goodwill and other proprietary interests of the Company and that a breach
        of
        this Section will give rise to irreparable and continuing injury to the Company
        which is not adequately compensable in monetary damages or at law. Accordingly,
        Employee agrees that the Company, its successors and assigns may obtain
        injunctive relief against the breach or threatened breach of the foregoing
        provisions, in addition to any other legal remedies which may be available
        to it
        under this Agreement. Employee further acknowledges that in the event of
        his
        termination or expiration of employment with the Company, his knowledge,
        experience and capabilities are such that Employee can obtain employment
        in
        business activities which are of a different or noncompeting nature than
        those
        performed in the course of employment with the Company; and that the enforcement
        of a remedy hereunder by way of injunction will not prevent Employee from
        earning a reasonable livelihood.

       

      8.
        Accounting for Profits. Employee covenants and agrees that if he violates
        the
        provisions of Sections 7, 9, 11, or 12 the Company shall be entitled to an
        accounting and repayment of all profits, compensation, commissions, remuneration
        or other benefits that Employee has realized and/or may realize as a result
        of
        or in connection with any such violation. These remedies shall be in addition
        and not in limitation of any injunctive relief or other rights or remedies
        to
        which the Company is or may be entitled at law, in equity or under this
        Agreement.

       

      9.
        Assignment of Proprietary Information. Except as may be required in the course
        of employment by the Company, Employee agrees that any and all Proprietary
        Information, as hereinafter defined, which Employee has made, conceived of,
        developed or originated, either individually or jointly with any other person
        or
        persons at any time during the period of employment by the Company, or during
        a
        period of five (5) years after termination or expiration of said
        employment, whether during working hours or any other time, which relate
        in any
        way to the business or the type of business now or hereafter engaged in or
        contemplated by the Company during the period of Employee’s employment or which
        result from or may be suggested by any work Employee does for the Company
        or at
        the Company’s request, shall be the property of the Company. As used herein,
“Proprietary Information” shall mean any and all proprietary property including
        but not limited to all techniques, processes, devices, charts, manuals, payroll,
        and improvements thereto together with the names and identities of all clients
        and prospective clients, price lists, suppliers and all other information
        or
        materials which the Company may from time to time designate and treat as
        confidential and proprietary or as a trade secret.

       

      Employee
        shall promptly disclose and assign such Proprietary Information to the Company’s
        representatives and do all such acts, and execute and deliver all such
        documents, as may be necessary to vest in the Company the title to all such
        Proprietary Information and enable the Company to properly prepare and prosecute
        any and all applications for patents, trademarks or copyrights thereon as
        well
        as all reissues, renewals and extensions thereof, so that the Company shall
        be
        the sole and absolute owner of all right, title and interest in said proprietary
        property. It is understood and agreed that the words “which relate in any way to
        the business or the type of business now or hereafter carried on or contemplated
        by the Company” shall properly cover any reasonable development or extension of
        the Company’s field of operation. These obligations shall continue beyond the
        termination or expiration of Employee’s employment with respect to inventions,
        discoveries and developments conceived or made by Employee during the period
        of
        employment and shall be binding on Employee’s assigns, executors, heirs,
        administrators and other legal representatives. Employee agrees that all
        correspondence, drawings, reports, ideas, blueprints, manuals, letters, notes,
        analyses, notebooks, reports, charts, programs, proposals or any other documents
        concerning the Company’s customers or products or processes, whether or not
        prepared by and in the course of employment, alone or in conjunction with
        others, is the property of the Company and upon termination or expiration
        of
        employment for any reason, Employee shall promptly return to the Company
        any
        such documents in his possession, custody or control.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      10.
        Information and Testimony. Employee will, without expense to himself, give
        such
        true information and testimony under oath if requested, as may be requested
        of
        him by the Company relative to any Proprietary Information that is subject
        to
        disclosure to the Company under the terms hereof.

       

      11.
        Proprietary Information. Employee agrees that he will not at any time during
        or
        after the termination or expiration of his employment, except as authorized
        or
        directed in writing by the Company, use for Employee’s own benefit, copy,
        reveal, divulge or make known in any manner to any person, firm or the Company
        the contents of any methods, inventions, systems, processes, concepts,
        techniques, and devices related to such matters used or developed by the
        Company, whether or not owned by the Company, or the methods, processes or
        manner of the creation and sale of products or services provided by, sold
        or
        leased by the Company, all sometimes referred to as “Trade Secrets,” as defined
        below.

       

      Employee
        further agrees that he will not at any time during or after the termination
        or
        expiration of said employment, except as authorized or directed in writing
        by
        the Company, sell, exchange or give away or otherwise dispose of any methods,
        inventions, systems, processes, concepts, techniques and devices related
        to the
        business now or hereafter owned and operated by the Company, whether the
        same
        shall or may have been originated, discovered or otherwise created by Employee.
        Employee further agrees not to reveal, divulge or make known to any person,
        firm
        or the Company the name of any of the Company’s clients, price lists, suppliers
        or any secret, trade secret or other Proprietary Information whatsoever in
        connection with the Company, its business or its clients or anything pertaining
        thereto.

       

      Employee
        understands that if, either during employment or thereafter, he discloses
        to
        others, uses for his own benefit or for the benefit of any person or entity
        other than the Company, copies or makes notes of any such Trade Secrets,
        information or facilities, such conduct will constitute a breach of the
        confidence and trust bestowed upon Employee by the Company and will be a
        breach
        of this Agreement.

       

                  “Trade
        Secret” shall mean the whole or any portion of any formula, pattern, device,
        combination of devices, or compilation of information which is for use, or
        is
        used in the operation of the Company’s business and which provides the business
        an advantage, or an opportunity to obtain an advantage, over those who do
        not
        know or use it. Trade Secret includes any scientific, technical or commercial
        information, including any design, process, procedure, list of suppliers,
        list
        of customers, business code, sales or installation technique, or improvement
        thereof. For purposes of interpretation hereunder the following shall
        apply:

       

      (a)
        Irrespective of novelty, invention, patentability, the state of the prior
        art,
        and the level of skill in the business, art, or field to which the subject
        matter pertains, when the owner thereof takes measures to prevent it from
        becoming available to persons other than those selected by the owner to have
        access thereto for limited purposes, a trade secret is considered to be secret,
        of value, for use or in use by the business, and of advantage to the business,
        or providing an opportunity to obtain an advantage, over those who do not
        know
        or use it.

       

      (b)
        In
        addition, a “Trade Secret” shall include information (not readily compiled from
        publicly available sources) which has been made available to Employee during
        the
        course of his employment, including but not limited to the names, addresses,
        telephone number, qualifications, education, accomplishments, experience
        and
        resumes of all persons who have applied or been recruited for employment,
        for
        either or both permanent and temporary jobs, job order specifications and
        the
        particular characteristics and requirements of persons generally hired by
        the
        Company, as well as specific job listings from companies with whom the Company
        does, or attempts to do business, as well as mailing lists, computer runoffs,
        financial or other information not generally available to others, and all
        information defined as a trade secret by applicable California and/or Federal
        law.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (c)
        Employee further agrees that he is under no obligation to any former company
        which is in any way inconsistent with this Agreement or which imposes any
        restriction on behalf of the Company. The Employee also acknowledges that
        he has
        been instructed that during the term of employment by the Company, he is
        not to
        divulge to the Company, its employees or its consultants any confidential
        information obtained from any previous employers or any other
        person.

       

      12.
        Return of Records. On termination of employment, Employee shall deliver all
        records, notes, data, memoranda, models, and equipment of any nature that
        are in
        Employee’s possession or under his control and that are the property of the
        Company or relate to the employment or to the business of the
        Company.

       

      13.
        No
        Slander. Employee agrees not to in any way slander or injure the business
        reputation or goodwill of the Company, including, by way of illustration,
        through any contact with Clients, prospective clients, vendors, suppliers,
        employees or agents of the Company which could slander or injure the business
        reputation or goodwill of the Company.

       

                  14.
        Waiver or Modification. No waiver or modification of this Agreement or of
        any
        covenant, condition, or limitation herein contained shall be valid unless
        in
        writing and duly executed by the party to be charged therewith. Furthermore,
        no
        evidence of any modification or waiver shall be offered or received as evidence
        in any proceeding, arbitration or litigation between the parties arising
        out of
        or affecting this Agreement or the rights or obligations of any party hereunder,
        unless such waiver or modification is in writing, duly executed as aforesaid.
        The provisions of this Section may not be waived except as herein set
        forth.

       

      15.
        Choice of Law; Waiver of Jury Trial. This Agreement and the performance
        hereunder and all suits and special proceedings hereunder shall be construed
        in
        accordance with the laws of the State of California. In any action, special
        proceeding or other proceeding that may be brought arising out of, in connection
        with, or by reason of this Agreement, the laws of the State of California
        shall
        be applicable and shall govern to the exclusion of the law of any other forum,
        without regard to the jurisdiction in which the action or special proceeding
        may
        be instituted. All actions under this Agreement shall be taken in a court
        of
        competent jurisdiction within the State of California in which the Company’s
        principal place of business is located and Employee hereby waives and agrees
        that he shall not assert that such forum is inconvenient.

       

      EACH
        PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND
        A TRIAL
        BY JURY FOR ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY
        WAY
        RELATED TO THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES. THIS WAIVER
        EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING FROM ANY
        SOURCE,
        INCLUDING BUT NOT LIMITED TO THE CONSTITUTION OF THE UNITED STATES, THE
        CONSTITUTION OF ANY STATE, COMMON LAW OR ANY APPLICABLE STATUTE OR REGULATION.
        EACH PARTY HEREBY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING
        THE
        RIGHT TO DEMAND TRIAL BY JURY.

       

      16.
        Binding Effect of Agreement. This Agreement shall be binding upon and inure
        to
        the benefit of the parties hereto and their respective heirs, successors,
        assigns and legal representatives.

       

      17.
        Life
        Insurance. Inasmuch as the services of Employee are important to the success
        or
        failure of the Company, the Company may, by its sole discretion, purchase
        disability insurance or insurance on the life of the Employee during the
        term
        hereof in such amounts as the Company shall determine appropriate. Such
        insurance shall be owned by the Company, the Company shall be the sole
        beneficiary, and all premiums therefor shall be paid by the Company. The
        Employee agrees to cooperate with the reasonable requirements of the Company
        and/or its insurance carriers as necessary to obtain such insurance, including
        submitting to any and all necessary medical examinations.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      18.
        Invalid Provision. The invalidity or unenforceability of a particular provision
        of this Agreement shall not effect the other provisions hereto, and this
        Agreement shall be construed in all respects as if such invalid or unenforceable
        provisions were omitted.

       

      19.
        Costs
        of Enforcement. In the event either party initiates action to enforce his,
        her
        or its rights hereunder, the substantially prevailing party shall recover
        from
        the substantially non-prevailing party its reasonable expenses, court costs,
        including taxed and untaxed costs, and reasonable attorneys’ fees, whether suit
        be brought or not (jointly referred as to “Expenses”). As used herein, Expenses
        include expenses incurred in any appellate or bankruptcy proceeding. All
        such
        Expenses shall bear interest at the highest rate allowable under the laws
        of the
        Province of British Columbia from the date the substantially prevailing party
        pays such Expenses until the date the substantially non-prevailing party
        repays
        such Expenses. Expenses incurred in enforcing this Section shall be covered
        by
        this Section. For this purpose, the court is requested by the parties to
        award
        actual costs and attorneys’ fees incurred by the substantially prevailing party,
        it being the intention of the parties that the substantially prevailing party
        be
        completely reimbursed for all such costs and fees. The parties request that
        inquiry by the court as to the fees and costs shall be limited to a review
        of
        whether the fees charged and hourly rates for such fees are consistent with
        the
        fees and hourly rates routinely charged by the attorneys for the substantially
        prevailing party.

       

      20.
        Assignment. This Agreement shall be construed as a contract for personal
        services by Employee to the Company and shall not be assignable by Employee.
        This Agreement may be assigned by the Company.

       

      21.
        Strict Construction. This Agreement was the joint, negotiated product of
        the
        parties. Therefore, neither party shall advance a position that any provision
        hereof should be more strictly construed against the other party on the basis
        that such other party prepared such provision.

       

      22.
        Cumulative Rights. Unless otherwise provided herein, all rights, powers and
        privileges conferred upon the parties by law, this Agreement or otherwise
        shall
        be cumulative.

       

      23.
        Waiver. No failure of any party to exercise any power given such party hereunder
        or to insist upon strict compliance by any party with its obligations hereunder,
        and no custom or practice of the parties in variance with the terms hereof
        shall
        constitute a waiver of the parties’ right to demand exact compliance with the
        terms hereof.

       

      24.
        Survival. The provisions of this Agreement shall continue and survive the
        closing hereof unless or until there is a completion and fulfillment of all
        the
        conditions, covenants and warranties herein.

       

      25.
        Time.
        Time is of the essence of this Agreement.

       

      26.
        Notices. All notices, requests, demands and other communications required
        or
        permitted hereunder shall be in writing and shall be deemed to have been
        duly
        given when delivered by hand or when mailed by certified registered mail,
        return
        receipt requested, with postage prepaid to their current address or to such
        other address as they request in writing.

       

                 
           27. Counterparts. This Agreement may be executed in one or
        more counterparts, each of which shall be deemed an original, but all of
        which
        shall constitute the same instrument.

       

      28.
        Singular/Plural Feminine/Masculine, Successors or Assigns. All references
        as
        used herein shall include male and female, singular and plural, and successors
        or assigns in the use of a corporation, partnership, individual or entity
        in any
        place or places herein in which the context may require or permit such
        substitution, substitutions or designations.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      29.
        Legal
        Representation. Employee acknowledges having carefully read and reviewed
        this
        Agreement and Employee acknowledges that Employer has advised him to seek
        independent legal counsel to review this Agreement and to advise him of his
        rights hereunder.  Employee acknowledges having had an opportunity to
        ask questions about this Agreement and to consult other legal
        counsel.  Employee understands and acknowledges that Employer is
        represented by an attorney responsible for drafting the provisions of this
        Agreement in accordance with the wishes of the Company.

       

      29.
        Complete Agreement. This written Agreement contains the sole and entire
        agreement between the parties as to the matters contained herein, and supersedes
        any and all other agreements between them. The parties acknowledge and agree
        that neither of them has made any representation with respect to such matters
        of
        this Agreement or any representations except as are specifically set forth
        herein, and each party acknowledges that he or it has relied on his or its
        own
        judgment in entering into this Agreement. The parties further acknowledge
        that
        statements or representations that may have been heretofore made by either
        of
        them to the other are void and of no effect and that neither of them has
        relied
        thereon in connection with his or its dealing with the other.

       

      IN
        WITNESS WHEREOF, the parties have executed this Agreement as of the
        date first set forth above.

       

       

      
        	   
	
                ETHOS
                  ENVIRONMENTAL, INC.

              
	 
	
                By:

              	
                 

              

      

       

      DATED:

       

      
        	 
	
                ENRIQUE
                  de VILMORIN

              
	 
	By:	 
	
                 

              

      

       

      DATED:

        
          
            
            

          

          
            13Filed by Bowne Pure Compliance

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment
Agreement (this “Agreement”) is made and entered into intending to
be effective on December 10, 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 Fred J. Kleisner (“Employee”).

WHEREAS, the
Company employed the Employee as its interim Chief Executive Officer effective
September 20, 2007 pursuant to an employment agreement dated as of that
date (the “Interim Employment Agreement”) ;

WHEREAS, the
Company now desires to employ Employee as its full time Chief Executive
Officer, and Employee desires to be employed by the Company in that capacity on
the terms and conditions stated below;

WHEREAS, the
Interim Employment Agreement will be terminated effective as of the
Commencement Date, subject to the final performance of payment and other
obligations accrued thereunder through the Commencement Date.

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 Chief Executive Officer, or such other duties as the
Board of Directors of the Company (the “Board”) may assign Employee
from time to time, in its sole discretion, consistent with the duties and
responsibilities of a Chief Executive Officer. 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.

c.       During the term of
this Agreement, Employee shall report to the Board, and he shall serve as a
member of the Board, for so long as he is so elected by the shareholders.
Employee’s office shall be located in Manhattan.

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.        Initial
Stock Option Grant. Promptly after the Commencement Date, the Company shall
grant Employee 215,000 options (“Stock Options”) to purchase shares
of Common Stock under the Company’s 2007 Omnibus Stock Incentive Plan
(the “2007 SIP”) 95,000 of which shall have a strike price equal to
the share price of the grant date and 120,000 of which shall have a strike
price that is 140 percent of the share price on the grant date.

1

 

b.        Initial
Matching Grant. Promptly after the Commencement Date, Employee will
purchase shares of the Company’s Common Stock equal to Five Hundred
Thousand ($500,000) Dollars. Upon completion of such purchase, the Company will
grant Employee 55,000 LTIP Units (as defined in the 2007 SIP) under the 2007
SIP.

c.        Salary.
The Company will pay Employee a base salary equal to $900,000 per year,
($37,500 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 the
Compensation Committee may reevaluate Employee’s Base Salary, provided,
however, that Employee’s Base Salary shall not be less than $900,000 per
year.

d.        Annual
Bonus and Annual Grant. Employee will be eligible for an annual cash bonus
each calendar year (the “Annual Bonus”) with a target payout of 75%
of Base Salary, and an annual equity bonus with a maximum value on the grant
date (determined in accordance with the Black-Scholes valuation model or other
customary equity valuation models) of up to Two Million Four Hundred Twenty
Five Thousand ($2,425,000) Dollars (the “Annual Grant”). Before the
last day of February of each calendar year, Employee and the Compensation
Committee of the Board (the “Compensation Committee”) shall, in
good faith, set objective performance metrics (the “Performance
Metrics”) against which the Compensation Committee will evaluate
Employee’s performance in determining the amount, if any, of the Annual
Bonus and Annual Grant. The exact amount of Employee’s Annual Bonus and
the exact value of the Annual Grant and type of Equity Award that comprises the
Annual Grant shall be determined by the Compensation Committee in its sole
discretion, provided, however, that the Compensation Committee will base
75 percent of the Annual Bonus and Annual Grant on the Performance
Metrics, and it will base 25 percent on Employee’s subjective
performance as determined by the Compensation Committee. Employee’s
Annual Bonus will be paid and certificates or other evidence of the Equity
Award delivered annually, no later than four months after the end of the
calendar year. Except as provided in paragraph 3 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. Employee shall
remain eligible to receive the prorata annual bonus provided for in the Interim
Employment Agreement for the period of September 20, 2007 through
December 10, 2007 in accordance with its terms.

e.        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, and provide further that Employee’s
travel expenses shall include first class travel and accommodations. The
Company will reimburse Employee for such other reasonable and necessary
business expenses as the Compensation Committee specifically approves.

f.        Relocation
Expenses. The Company will reimburse Employee for reasonable moving
expenses associated with the shipment of household goods and personal effects
of Employee and his family to New York. Employee shall obtain at least two bids
with regard to such expenses and shall accept the lower of such bids. Employee
shall provide copies of invoices or other appropriate documentation with
respect to such expenses. The Company agrees to use its reasonable best efforts
to cooperate with the Executive in minimizing the tax on such amount.

2

 

g.        Fringe
Benefits. Employee will be eligible for benefits, including medical,
dental, life insurance and 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.

h.        Equity
Agreements. The Stock Options and LTIP Units awarded pursuant to this
paragraph 2 (the “Equity Awards”) shall be evidenced by award
agreements (the “Equity Agreements”) in the form approved by the
Board and which have been signed by the Employee and the Company from time to
time. The Equity Awards shall vest one-third on each of the first three
anniversaries of the effective date of grant. The terms of the Equity
Agreements will govern the Equity Awards, provided, however, that
notwithstanding the foregoing or anything else contained in this Agreement or
in the Equity Agreements to the contrary, if Employee’s employment is
terminated without Cause (as defined below) or with Good Reason (as defined
below), the period of time after such termination during which the Employee may
exercise those Stock Options that have vested on or before the termination date
shall be one year from and after the Employee’s termination date. To the
extent of any conflict between the terms of this Agreement and the terms of any
Equity Agreement with respect to the definitions of Cause, Good Reason or
otherwise, the terms of this Agreement shall prevail. In addition to the Equity
Agreements, this paragraph 2.g. and paragraph 3.g. of this Agreement shall be
deemed an Award Agreement as such term is defined in the 2007 SIP. All
corporate actions necessary for the authorization and approval of the Equity
Agreements and this Agreement by the Board or any Committee thereof have been
taken or will be taken promptly after the execution of this Agreement.

i.        Vacations.
Employee shall be eligible for up to five weeks vacation per calendar year
accrued in accordance with Employer’s policy for other senior executives.

3.        Term
and Termination.

a.        Term.
This Agreement shall commence on the Commencement Date and shall terminate on
December 31, 2010 (the “Employment Period”), unless earlier
terminated by either party as provided below. If the parties have failed to
extend this Agreement or enter into a new agreement on or before the end of the
Employment Period, and Employee’s employment terminates, for any reason,
at the end of the Employment Period, the Company’s only obligation to
Employee upon such termination will be to accelerate the vesting of all Equity
Awards granted prior to December 31, 2010 and to pay any remaining earned
but unpaid Base Salary. Notwithstanding the foregoing or anything else
contained in this Agreement to the contrary, if Employee is employed through
December 31, 2010, the Board shall determine the amount of any Annual
Bonus and/or Annual Grant, if any, to award Employee for calendar year 2010
based on the criteria set forth in paragraph 2. d. of this Agreement, and shall
pay such award or make such grant, if any, on the date in 2011 on which the
Company’s other Employees receive bonuses, regardless of whether Employee
in employed by the Company on that date.

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
90 days in advance of the date of such termination.

3

 

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 Annual 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; 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 are capable of
being cured and such acts or omissions continue after Employee has given the
Company notice thereof and 30 days in which to cure the same.

d.        Termination
Upon Death or Disability. The Employee’s employment shall terminate
automatically upon the Employee’s death. If the Board 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 or death, Employer shall pay Employee his pro-rata Annual Bonus
through the last day on which he performed services for Employer prior to his
Disability or death, and Employer shall have no further obligations to Employee
hereunder.

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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 Board; (ii) Employee’s refusal to follow
the lawful policies and directives of the Board; (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 Annual 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; and
(3) continue paying for Employee’s health insurance benefits for a
period of twenty four (24) months after such termination.

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) pay
Employee his pro-rata Annual Bonus, if any, for the current calendar year
through the date of termination; (2) the Company shall pay Employee an amount
equal to two times his then Base Salary; (3) 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 2007 SIP.

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 4, and as a condition to such payments, Employee shall sign a
customary general release of all potential claims he may have against the
Company. The Company shall have no obligation to provide Employee with any of
the payments or benefits set forth in such clauses of this paragraph 4 until
Employee delivers such release.

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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.

6.        Non-compete.

Employee shall not
directly or indirectly compete with the business activities conducted by the
Company by providing any services to any other company, entity or individual
engaged in the business of owning and/or operating hotels, as an employee,
officer, director, agent, independent contractor, consultant, joint venturer,
shareholder (other than owning less than 1% of the stock of a public company),
partner, proprietor or any other type of principal in any person, firm or
business entity during the period Employee is employed by the Company, and for
a period of two (2) years after Employee’s employment with the
Company terminates, for any reason.

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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

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.

9.
       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.

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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.

10.        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.

8

 

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.

11.        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.

12.        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.

13.        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.

14.        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.

15.        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.

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

	 	 	 	 	 
	EMPLOYER:	 	EMPLOYEE:
	 
	 	 	 	 
	MORGANS HOTEL GROUP CO.	 	 
	 
	 	 	 	 
	By:

	 	/s/ David Hamamoto
	 	/s/ Fred J. Kleisner
	 

	 	 
	 	 
	 

	 	David Hamamoto,
	 	Fred J. Kleisner
	 

	 	Chairman, Board of Directors	 	 

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