AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), dated on April 11, 2008,
between Morgans Hotel Group Co., a Delaware corporation (the “Company”), and Xxxx Xxxxxx (the
“Executive”) shall become effective as of April 1, 2008 (the “Effective Date”), the original
Employment Agreement having been dated as of February 14, 2006 between the Company and the
Executive.
The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees
to continue to work in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the third anniversary of
the Effective Date (the “Employment Period”). Commencing on the third anniversary of the Effective
Date and on each anniversary thereafter, the Employment Period shall be automatically extended for
one year terms unless either the Company or the Executive shall give the other party not less than
90 days prior written notice of the intention to not extend this Agreement (a “Non-Renewal
Notice”).
(a) Position and Duties.
(i) During the Employment Period, the Executive shall serve as Chief Investment Officer and
Executive Vice President, Capital Markets of the Company with the appropriate authority, duties and
responsibilities attendant to such position and any other duties that may reasonably be assigned by
the Company’s Chief Executive Officer or the Company’s Board of Directors (the “Board”) consistent
with his position as Chief Investment Officer and Executive Vice President, Capital Markets.
Executive shall report to the Chief Executive Officer. At such time after the execution of this
Agreement as the Board is expanded to include additional independent Directors, the Company shall
recommend that the Corporate Governance and Nominating Committee and the Board nominate Executive
on the proxy ballot for election to the Board at the Company’s next shareholder meeting at which it
is practicable to do so. Thereafter, Executive shall serve as a member of the Board, for so long
as he is so elected by the shareholders of the Company.
(ii) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote substantially all of the
Executive’s business time, attention and energies to the performance of the duties assigned to the
Executive hereunder, and to perform such duties faithfully, diligently and to the best of the
Executive’s abilities and subject to such laws, rules, regulations and policies from time to time
applicable to the Company’s other executives. Notwithstanding the above, Executive shall be
entitled to attend to personal and family affairs and investments, be involved in not for profit,
charitable and professional activities and serve on up to two for profit boards, provided that the
foregoing does not, in the aggregate, materially interfere with Executive’s responsibilities
hereunder.
(i) willfully and continually refuses to substantially perform the Executive’s
responsibilities under this Agreement, after demand for substantial performance has been given by
the Board that specifically identifies how the Executive has refused to perform such
responsibilities;
(ii) willfully engages in misconduct (including violations of Sections 7(a), (b) or (c) of
this Agreement) which is materially and demonstrably injurious to the Company; or
(iii) is convicted of a felony or pleads guilty or nolo contendere to a felony.
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For purposes of this provision, no act or omission on the part of the Executive shall be considered
“willful” unless it is done or omitted in bad faith or without reasonable belief that the act or
omission was in the best interests of the Company. Any act or omission based upon a resolution duly
adopted by the Board or advice of counsel for the Company shall be conclusively presumed to have
been done or omitted in good faith and in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not
less than 75% of the entire membership of the Board (excluding the Executive) at a meeting of the
Board called and held for such purpose (after reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive is guilty of the conduct giving rise to
Cause for termination, and specifying the particulars thereof in detail. Notwithstanding the
foregoing, if a majority of the Board (excluding Executive) reasonably believes in good faith that
facts exist that may justify a termination for Cause, a majority of the Board (excluding Executive)
may affirmatively vote to adopt a resolution to (i) immediately suspend the Executive’s employment
but shall continue to pay Executive his Base Salary as provide for in Section 2(b)(i) hereof and
continue his benefits as provided in Section 2(c)(i) hereof), and (ii) call the Board meeting and
comply with the other requirements described in the preceding sentence within 30 days thereafter
(the “Determination Period”). If the Company does not deliver to the Executive a Notice of
Termination within 90 days after the Board has knowledge that an event constituting Cause has
occurred, the event will no longer constitute Cause.
(i) the assignment to the Executive of duties materially inconsistent with the Executive’s
title, position, status, reporting relationships, authority, duties or responsibilities as
contemplated by Section 2(a)(i), or any other action by the Company which results in a diminution
in the Executive’s title, position, status, reporting relationships, authority, duties or
responsibilities, other than insubstantial or inadvertent actions not taken in bad faith which are
remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of Section 2(b) or 2(c),
other than insubstantial or inadvertent failures not in bad faith which are remedied by the Company
promptly after receipt of notice thereof given by the Executive; provided, however,
that a failure to pay Executive the Annual Bonus at the target level for calendar years 2008, 2009
or 2010, or the failure to grant the Executive an Annual Equity Award at the target level for
calendar years 2008, 2009 and 2010 shall constitute Good Reason but shall only entitle Executive to
the benefits set forth in Section 4(d) of this Agreement; and further provided, however, that if
such failure occurs following a Change in Control, Executive shall be entitled to receive the
benefits set forth in Section 4(f) of this Agreement;
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(iii) any purported termination by the Company of the Executive’s employment otherwise than as
expressly permitted by this Agreement;
(iv) any failure by the Company to comply with and satisfy Section 8(c);
(v) following a Change in Control, any requirement that the Executive’s principal place of
employment be at a location more than 50 miles from New York, New York; or
(vi) any material failure by the Company to comply with any other material provision of this
Agreement (including the equity award agreements).
Notwithstanding the foregoing, placing the Executive on a paid leave for up to 30 days, pending the
determination of whether there is a basis to terminate the Executive for Cause, shall not
constitute a “Good Reason” event; provided, further, that, if the Executive is subsequently
terminated for Cause, then the Executive shall repay any amounts paid by the Company to the
Executive during such paid leave period. If the Executive does not deliver to the Company a Notice
of Termination (as defined below) within 90 days after the Executive has knowledge that an event
constituting Good Reason has occurred, the event will no longer constitute Good Reason.
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(i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date
of Termination an amount equal to the sum of (A) the amount equal to the Executive’s Annual Base
Salary through the Date of Termination to the extent theretofore unpaid plus (B) a
pro-rated bonus based upon the number of days in the year of termination through the Date of
Termination relative to 365 and the greater of (i) the target Annual Bonus in the year the Date of
Termination occurs and (ii) the average of the Annual Bonuses earned for the two years prior to the
year the Date of Termination occurs (the higher of (i) and (ii), the “Applicable Bonus Amount”)
plus (C) 2 times the sum of the Annual Base Salary plus the Applicable Bonus Amount;
(ii) for 24 months following the Date of Termination, the Company shall continue to provide
medical and dental and life insurance benefits to the Executive, his spouse and his eligible
dependents on the same basis and at the same cost as such benefits are then currently provided to
the Executive (the “Welfare Benefits”); provided that such benefits shall be secondary to any other
coverage obtained by the Executive; provided, however, that if the Company’s welfare plans do not
permit such coverage, the Company will provide the Executive the Welfare Benefits with the same
after tax effect;
(iii) if applicable, the Executive shall be deemed to have an additional 30 months of service
credit under the Company’s retirement plans, programs, practices and policies;
(iv) all Company equity awards shall fully vest and all stock options and stock appreciation
rights shall remain exercisable for the lesser of (x) 30 months after the Date of Termination or
(y) the remainder of their term; and
(v) to the extent not theretofore paid or provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to be paid or provided or which the Executive
is eligible to receive under any plan, program, policy or practice or other contract or agreement
of the Company and its affiliated companies through the Date of Termination, including, but not
limited to, any accrued but unused vacation, any unreimbursed business expenses and the percentage
of target bonus payable to other senior executives of the Company with respect to any unpaid bonus
for any completed fiscal year prior to the Date of Termination (such other amounts and benefits
shall be hereinafter referred to as the “ Other Benefits ”).
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(i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date
of Termination an amount equal to the sum of (A) the amount equal to the Executive’s Annual Base
Salary through the Date of Termination to the extent theretofore unpaid plus (B) 1.0 times
the sum of the Annual Base Salary plus the Applicable Bonus Amount;
(ii) for 12 months following the Date of Termination, the Company shall continue to provide
the Welfare Benefits to the Executive, his spouse, and his eligible dependents; provided that such
benefits shall be secondary to any other coverage obtained by the Executive; provided, however,
that if the Company’s welfare plans do not permit such coverage, the Company will provide the
Executive the Welfare Benefits with the same after tax effect; and
(iii) any Company equity awards granted prior to the Date of Termination shall immediately
vest, and all vested stock options and stock appreciation rights shall remain exercisable for the
lesser of (x) the remainder of their term or (y) 12 months after the Date of Termination; and
(iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide
to the Executive the Other Benefits.
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(i) pay Executive his Base Salary through the Date of Termination;
(ii) any Company equity awards granted prior to the Date of Termination shall immediately
vest, and all vested stock options and stock appreciation rights shall remain exercisable for the
lesser of (x) the remainder of their term or (y) 12 months after the Date of Termination.
(i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date
of Termination an amount equal to the sum of (A) the amount equal to the Executive’s Annual Base
Salary through the Date of Termination to the extent theretofore unpaid plus (B) a
pro-rated bonus based upon the number of days in the year of termination through the Date of
Termination relative to 365 and the Applicable Bonus Amount plus (C) 2.5 times the sum of
the Annual Base Salary plus the Applicable Bonus Amount;
(ii) for 30 months following the Date of Termination, the Company shall continue to provide
Welfare Benefits to the Executive, his spouse, and his eligible dependents; provided that such
benefits shall be secondary to any other coverage obtained by the Executive; provided, however,
that if the Company’s welfare plans do not permit such coverage, the Company will provide the
Executive the Welfare Benefits with the same after tax effect;
(iii) if applicable, the Executive shall be deemed to have an additional 30 months of service
credit under the Company’s retirement plans, programs, practices and policies;
(iv) all Company equity awards shall fully vest and all stock options and stock appreciation
rights shall remain exercisable for the lesser of (x) 30 months after the Date of Termination or
(y) the remainder of their term; and
(v) to the extent not theretofore paid or provided, the Company shall timely pay or provide to
the Executive the Other Benefits.
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The Company’s obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the Executive or others.
In no event shall the Executive be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced whether or not the Executive obtains other
employment.
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(i) hold a 10% or greater equity (including stock options whether or not exercisable), voting
or profit participation interest in a Competitive Enterprise (excluding any investments of the
Executive held as of the Effective Date as set forth in Exhibit E hereto), or
(ii) Associate (including as a director, officer, employee, partner, consultant, agent or
advisor) with a Competitive Enterprise and in connection with the Executive’s association
engage, or directly or indirectly manage or supervise personnel engaged, in any activity:
(A) that is substantially related to any activity that the Executive was engaged in with the
Company or its subsidiary companies during the 12 months prior to the Date of Termination, or
(B) that is substantially related to any activity for which the Executive had direct
managerial or supervisory responsibility with the Company or its subsidiary companies during the 12
months prior to the Date of Termination.
Notwithstanding the foregoing, this Section 7(a)(ii) and Sections 7(b)(i), 7(b)(ii) and 7(b)(iii)
(provided that with respect to Section 7(b)(iii) only to the extent that an action under Section
7(b)(iii) occurs solely as a result of an action set forth in Section 7(b)(i) or Section 7(b)(ii))
below shall not prevent the Executive from having a managerial or supervisory role at a Competitive
Enterprise that does not primarily engage in a Competitive Activity or that holds a 20 percent or
greater equity, voting or profit participation interest in any enterprise that engages in a
Competitive Activity, as long as the Executive (1) has no direct role in such Competitive Activity
and (2) does not Solicit any Client with respect to such Competitive Activity.
For purposes of this Agreement, “Competitive Enterprise” means any business enterprise that
either (A) engages in the management and operation of a “full service hotel” business in North
America or Western Europe (a “Competitive Activity”) or (B) holds a 20 percent or greater equity,
voting or profit participation interest in any enterprise that engages in a Competitive Activity.
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(iii) interfere with or damage any relationship between the Company and a Client or (iv)
solicit anyone who is then an employee of the Company (or who was an employee of the Company within
the prior 12 months) to resign from the Company or to apply for or accept employment with any other
business or enterprise (other than general advertising not specifically directed at such current or
former employees of the Company), provided, however, that the covenants in Sections 7(b)(i),
7(b)(ii) and 7(b)(iii) (provided that with respect to Section 7(b)(iii) only to the extent that an
action under Section 7(b)(iii) occurs solely as a result of an action set forth in Section 7(b)(i)
or Section 7(b)(ii))shall cease to apply after a Qualifying Termination.
For purposes of this Agreement, a “Client” means any corporation, individual or other entity
that constitutes one of the top twenty clients of the Company or one of its subsidiary companies
over the preceding twelve month period (each a “Top Twenty Client”) to whom the Executive provided
services or for whom the Executive transacted business in any manner, directly or indirectly. A
client shall be considered a Top Twenty Client where the total revenue derived from such client,
either directly or indirectly, over the preceding calendar year period ranks it as one of the
Company’s twenty highest revenue generating clients. The Company will provide the Executive a list
of the Top Twenty Clients at the end of each calendar year during the Employment Period.
(c) Confidential Information. The Executive hereby acknowledges that, as an employee
of the Company, he will be making use of, acquiring and adding to Confidential Information of a
special and unique nature and value relating to the Company and its strategic plan and financial
operations. The Executive further recognizes and acknowledges that all Confidential Information is
the exclusive property of the Company, is material and confidential, and is critical to the
successful conduct of the business of the Company. Accordingly, the Executive hereby covenants and
agrees that he will use Confidential Information for the benefit of the Company only and shall not
at any time, directly or indirectly, during the term of this Agreement and thereafter divulge,
reveal or communicate any confidential information to any person, firm, corporation or entity
whatsoever, or use any confidential information for his own benefit or for the benefit of others.
Notwithstanding the foregoing, the Executive shall be authorized to disclose Confidential
Information (A) as may be required by law or legal process after providing the Company with prior
written notice and an opportunity to respond to such disclosure (unless such notice is prohibited
by law), (B) in any criminal proceeding against him
after providing the Company with prior written notice and an opportunity to seek protection for
such confidential information and (C) with the prior written consent of the Company.
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For purposes of this Agreement, “Confidential Information” shall mean confidential or proprietary
information, knowledge or data concerning the Company and its subsidiary companies’ businesses,
strategies, operations, financial affairs, organizational matters, personnel matters, budgets,
business plans, marketing plans, studies, policies, procedures, products, ideas, processes,
software systems, trade secrets and technical know-how. Notwithstanding the foregoing, Confidential
Information shall not include information which (i) is or becomes generally available to the public
or is, at the time in question, in the public domain other than as a result of a disclosure by
Executive, (ii) was available to Executive on a non-confidential basis prior to the date of this
Agreement or (iii) becomes available to Executive from a source other than the Company, its agents
or representatives (or former agents or representatives)
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(a) This Agreement is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns, provided that the Company may not assign this Agreement other than as
described in Section 8(c) below.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid.
(a) Mandatory Arbitration. Subject to the provisions of this Section 9, any
controversy or claim between the Executive and the Company arising out of or relating to or
concerning this Agreement (including the covenants contained in Section 7) or any aspect of the
Executive’s employment with the Company or the termination of that employment (together, an “
Employment Matter ”) will be finally settled by arbitration in the County of New York administered
by the American Arbitration Association (the “ AAA ”) under its Commercial Arbitration Rules then
in effect. However, the AAA’s Commercial Arbitration Rules will be modified in the following ways:
(i) notwithstanding any provision of the AAA rules to the contrary, the arbitration shall be heard
by a panel of three neutral arbitrators, with each party appointing one arbitrator, who shall
jointly appoint a third, (ii) each arbitrator will agree to treat as confidential evidence and
other information presented to them, (iii) there will be no authority to award punitive damages
(and the Executive and the Company agree not to request any such award), (iv) the optional Rules
for Emergency Measures of Protections will apply, (v) there will be no authority to amend or modify
the terms of this Agreement except as provided in Section 10(a) (and the Executive and the Company
agree not to request any such amendment or modification) and (vi) a decision must be rendered
within ten business days of the parties’ closing statements or submission of post-hearing briefs.
(b) Injunctions and Enforcement of Arbitration Awards. The Executive or the Company
may bring an action or special proceeding in a state or federal court of competent jurisdiction
sitting in the County of New York to enforce any arbitration award under Section 9(a). Also, the
Company may bring such an action or proceeding, in addition to its rights under Section 9(a) and
whether or not an arbitration proceeding has been or is ever initiated, to temporarily,
preliminarily or permanently enforce any part of Section 7. The Executive agrees that (i) violating
any part of Section 7 would cause damage to the Company that cannot be measured or repaired, (ii)
the Company therefore is entitled to seek an injunction, restraining
order or other equitable relief restraining any actual or threatened violation of Section 7, (iii)
no bond will need to be posted for the Company to receive such an injunction, order or other relief
and (iv) no proof will be required that monetary damages for violations of Section 7 would be
difficult to calculate and that remedies at law would be inadequate.
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(c) Jurisdiction and Choice of Forum. The Executive and the Company irrevocably submit
to the exclusive jurisdiction of any state or federal court located in the County of New York over
any Employment Matter that is not otherwise arbitrated or resolved according to Section 9(a). This
includes any action or proceeding to compel arbitration or to enforce an arbitration award. Both
the Executive and the Company (i) acknowledge that the forum stated in this Section 9(c) has a
reasonable relation to this Agreement and to the relationship between the Executive and the Company
and that the submission to the forum will apply even if the forum chooses to apply non-forum law,
(ii) waive, to the extent permitted by law, any objection to personal jurisdiction or to the laying
of venue of any action or proceeding covered by this Section 9(c) in the forum stated in this
Section 9(c), (iii) agree not to commence any such action or proceeding in any forum other than the
forum stated in this Section 9(c) and (iv) agree that, to the extent permitted by law, a final and
non-appealable judgment in any such action or proceeding in any such court will be conclusive and
binding on the Executive and the Company. However, nothing in this Agreement precludes the
Executive or the Company from bringing any action or proceeding in any court for the purpose of
enforcing the provisions of Section 9(a) and this Section 9(c).
(e) Governing Law. This Agreement will be governed by and construed in accordance with
the law of the State of New York applicable to contracts made and to be performed entirely within
that State.
(a) The captions of this Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
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If to the Executive:
at the Executive’s primary residential address
as shown on the records of the Company
as shown on the records of the Company
If to the Company:
or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
(e) If any compensation or benefits provided by this Agreement may result in the application
of Section 409A of the Code, the Company shall, in consultation with the Executive, modify the
Agreement in the least restrictive manner necessary in order to, where applicable, (a) exclude such
compensation from the definition of “deferred compensation” within the meaning of such Section 409A
or (b) comply with the provisions of Section 409A, other applicable provision(s) of the Code and/or
any rules, regulations or other regulatory guidance issued under such statutory provisions and to
make such modifications, in each case, without any diminution in the value of the payments to the
Executive. To the extent required in order to comply with Section 409A of the Code, amounts and
benefits to be paid or provided to the Executive under Section 4 of this Agreement shall be paid or
provided to the Executive on the first business day after the date that is six months following the
Date of Termination. To the extent that the Welfare Benefits are so delayed, the Executive shall be
entitled to COBRA continuation coverage under Section 4980B of the Code (“COBRA Coverage”) during
such period of delay, and the Company shall reimburse the Executive for any Company portions of
such COBRA Coverage in the seventh month following the Date of Termination.
(f) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to terminate employment
for Good Reason pursuant to Section 3(c) (subject to the limitation in the last sentence of Section
3(c)) or the Company’s right to terminate the Executive for Cause pursuant to Section 3(b) (subject
to the limitation in the last sentence of Section 3(b)), shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
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(g) It is the parties’ intention that this Agreement not be construed more strictly with
regard to the Executive or the Company.
(h) From and after the Effective Date, this Agreement shall supersede any other employment or
severance agreement or arrangements between the parties (and the Executive shall not be eligible
for severance benefits under any plan, program or policy of the Company).
(i) Any reference to a Section herein is a reference to a section of this Agreement unless
otherwise stated.
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EMPLOYER: | EXECUTIVE: | |||
MORGANS HOTEL GROUP CO. | ||||
By:
|
/s/ Xxxx X. Xxxxxxxx | /s/ Xxxx Xxxxxx | ||
Xxxx X. Xxxxxxxx | Xxxx Xxxxxx | |||
Chief Executive Officer |
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