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.
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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.
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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.
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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 agre
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