-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WG4CkaKLTjnr1jfaCwGLrpRCQYbk42mHAU6Q+Unl4ysGbdYEe7CdD5schaQSL6iS BVvEb94DmgGRkkUYG4VhCg== 0000891836-07-000236.txt : 20070724 0000891836-07-000236.hdr.sgml : 20070724 20070724163840 ACCESSION NUMBER: 0000891836-07-000236 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20070724 DATE AS OF CHANGE: 20070724 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Morgans Hotel Group Co. CENTRAL INDEX KEY: 0001342126 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 161736884 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-81634 FILM NUMBER: 07996591 BUSINESS ADDRESS: STREET 1: 475 TENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 212-277-4100 MAIL ADDRESS: STREET 1: 475 TENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10018 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: NORTHSTAR CAPITAL INVESTMENT CORP /MD/ CENTRAL INDEX KEY: 0001057749 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 522072936 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 527 MADISON AVE STREET 2: 17TH FL CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123193400 MAIL ADDRESS: STREET 1: 527 MADISON AVE STREET 2: 17TH FL CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 sc0101.txt AMENDMENT NO. 1 UNITED STATES SECURITIES EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------------------------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1) Morgans Hotel Group Co. --------------------- (Name of Issuer) Common Stock, par value $0.01 per share --------------------------- (Title of Class of Securities) 61748W108 --------------------- (CUSIP Number) Richard J. McCready NorthStar Capital Investment Corp. 399 Park Avenue, 18th Floor New York, New York 10022 Telephone: (212) 547-2600 -------------------- (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications) July 19, 2007 -------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. (Continued on following pages) - ----------------------------- CUSIP NO. 61748W108 13D - ----------------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: NorthStar Capital Investment Corp. - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS: OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Maryland - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER: NUMBER OF 11,164,698 Shares SHARES ------------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER: OWNED BY 0 Shares REPORTING ------------------------------------------------------- PERSON 9. SOLE DISPOSITIVE POWER: WITH 11,164,698 Shares ------------------------------------------------------- 10. SHARED DISPOSITIVE POWER: 0 Shares - ---------------------------------------------- --------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH 11,164,698 REPORTING PERSON - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 33.8% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: CO -2- - ----------------------------- CUSIP NO. 61748W108 13D - ----------------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: NCIC MHG Subsidiary LLC - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS: OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER: NUMBER OF 9,122,521 Shares SHARES ------------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER: OWNED BY 0 Shares REPORTING ------------------------------------------------------- PERSON 9. SOLE DISPOSITIVE POWER: WITH 9,122,521 Shares ------------------------------------------------------- 10. SHARED DISPOSITIVE POWER: 0 Shares - ---------------------------------------------- --------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH 9,122,521 REPORTING PERSON - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.5% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: OO -3- - ----------------------------- CUSIP NO. 61748W108 13D - ----------------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: NorthStar Partnership, L.P. - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS: OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER: NUMBER OF 2,042,177 Shares SHARES ------------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER: OWNED BY 0 Shares REPORTING ------------------------------------------------------- PERSON 9. SOLE DISPOSITIVE POWER: WITH 2,042,177 Shares ------------------------------------------------------- 10. SHARED DISPOSITIVE POWER: 0 Shares - ---------------------------------------------- --------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH 2,042,177 REPORTING PERSON - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.2% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: PN -4- - ----------------------------- CUSIP NO. 61748W108 13D - ----------------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: W. Edward Scheetz - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS: OO/PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER: NUMBER OF 1,146,868 Shares SHARES ------------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER: OWNED BY 0 Shares REPORTING ------------------------------------------------------- PERSON 9. SOLE DISPOSITIVE POWER: WITH 1,146,868 Shares ------------------------------------------------------- 10. SHARED DISPOSITIVE POWER: 0 Shares - ---------------------------------------------- --------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH 1,146,868 REPORTING PERSON - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.5% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: IN -5- - ----------------------------- CUSIP NO. 61748W108 13D - ----------------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: David T. Hamamoto - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS: OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER: NUMBER OF 1,048,842 Shares SHARES ------------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER: OWNED BY 0 Shares REPORTING ------------------------------------------------------- PERSON 9. SOLE DISPOSITIVE POWER: WITH 1,048,842 Shares ------------------------------------------------------- 10. SHARED DISPOSITIVE POWER: 0 Shares - ---------------------------------------------- --------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH 1,048,842 REPORTING PERSON - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.2% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: IN -6- This Amendment No. 1, filed by NorthStar Capital Investment Corp ("NCIC"), NCIC MHG Subsidiary LLC ("NCIC MHG Subsidiary"), NorthStar Partnership, L.P. ("NorthStar LP"), Mr. W. Edward Scheetz and Mr. David T. Hamamoto (each, a "Reporting Person" and collectively, the "Reporting Persons")(1) relates to the common stock, par value $.01 per share (the "Common Stock"), of Morgans Hotel Group Co. (the "Company"), a Delaware corporation, and amends and supplements the Schedule 13D filed by the Reporting Persons on February 27, 2006. Capitalized terms used but otherwise not defined herein shall have the meanings ascribed to such terms in the Schedule 13D. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Item 3 is hereby amended in its entirety as follows: NorthStar LP acquired from the Company an aggregate of 15,694,341 shares of Common Stock in connection with the Company's initial public offering of Common Stock (the "IPO"), which was completed on February 17, 2006. Specifically, NorthStar LP acquired 15,694,341 shares of Common Stock in exchange for an equal number of membership units ("Membership Units") in the operating company of the Company, Morgans Group LLC. This exchange was made pursuant to the terms of the Formation and Structuring Agreement, dated as of October 25, 2005 (the "Formation and Structuring Agreement"), by and among Morgans Group LLC, Morgans Hotel Group LLC ("MHG LLC"), NorthStar LP, NorthStar Hospitality LLC ("NorthStar Hospitality") and other parties thereto. The Formation and Structuring Agreement is included herewith as Exhibit No. 1 and is incorporated herein by reference. NorthStar LP received the Membership Units for no consideration through a distribution from its wholly-owned subsidiary, NorthStar Hospitality, which received the Membership Units for no consideration through a distribution of its pro rata share of the Membership Units held by its majority-owned subsidiary, Residual Hotel Interest LLC (formerly MHG LLC), as a result of transactions (the "Formation and Structuring Transactions") described under the caption "Formation and Structuring Transactions" in the Company's final prospectus dated February 13, 2006 (File No. 333-129277, the "Final Prospectus"). Of the 15,694,341 shares of Common Stock that NorthStar LP received in the IPO, NorthStar LP distributed all but 2,000,000 shares of Common Stock to its partners in accordance with their partnership interests in NorthStar LP. NCIC, as the general partner of NorthStar LP, received 10,035,856 shares of Common Stock in that distribution which it in turn contributed to NCIC MHG Subsidiary for no consideration. Pursuant to the underwriting agreement for the IPO (included herewith as Exhibit No. 2), NCIC MHG Subsidiary in turn sold 1,871,158 of such shares of Common Stock in the IPO as a selling stockholder. Messrs. Scheetz and Hamamoto, as limited partners of NorthStar LP, each received 904,270 shares of Common Stock from NorthStar LP in that distribution and each sold 167,928 in the IPO as selling - ------------------- (1) Neither the present filing nor anything contained herein shall be construed as an admission that NCIC, NCIC MHG Subsidiary or NorthStar LP constitute a "person" for any purpose other than Section 13(d) of the Securities Exchange Act of 1934, as amended. -7- stockholders pursuant to the underwriting agreement for the IPO. Mr. Scheetz contributed the shares of Common Stock he received to WES Holdings LLC, of which he is the managing member, for no consideration, and Mr. Hamamoto contributed the shares of Common Stock he received to DTH Holdings LLC, of which he is the managing member, for no consideration. In the Formation and Structuring Transactions, Residual Hotel Interest LLC received and has thereafter held 1,000,000 Membership Units. By their terms, on February 17, 2007, each of those Membership Units became redeemable at the election of the holder for one share of Common Stock or, at the election of the Company in its capacity as managing member of Morgans Group LLC, cash equal to the fair market value of one share of Common Stock. As a result, (i) NorthStar LP, as managing member of NorthStar Hospitality, which is managing member of Residual Hotel Interest LLC, may be deemed to beneficially own the 1,000,000 shares of Common Stock that may be issued in redemption of the Membership Units, (ii) NCIC, as general partner of NorthStar LP, may be deemed to beneficially own the 1,000,000 shares of Common Stock that may be issued in redemption of the Membership Units, and (iii) Messrs. Scheetz and Hamamoto, as Co-Chief Executive Officers of NCIC, may be deemed to beneficially own the 1,000,000 shares of Common Stock that may be issued in redemption of the Membership Units. Messrs. Scheetz and Hamamoto disclaim beneficial ownership of the shares of Common Stock that may be issued in redemption of the Membership Units. As described in the Forms 4/A filed by Messrs. Scheetz and Hamamoto on July 12, 2007, Messrs. Scheetz and Hamamoto have an indirect economic interest in the Membership Units, but such units are not subject to their investment control. Any decisions to sell the Membership Units are made by the board of directors of NCIC upon the recommendation of a committee of directors not affiliated with management of NCIC. Messrs. Scheetz and Hamamoto are not members of that committee. On July 9, 2007, NorthStar LP transferred 957,823 shares of Common Stock to its general partner, NCIC, for no consideration as a distribution. NCIC in turn contributed those shares to NCIC MHG Subsidiary, its wholly-owned subsidiary for no consideration. In addition to the distribution of shares of Common Stock received by Mr. Scheetz as described above, Mr. Scheetz directly beneficially owns 83,358 shares of Common Stock purchased in open market transactions as follows(2): -------------------------- ----------------------- ------------------- Shares Price Date -------------------------- ----------------------- ------------------- 11,500 $19.8967 3/1/06 -------------------------- ----------------------- ------------------- 7,050 $13.5968 11/14/06 -------------------------- ----------------------- ------------------- 7,408 $13.9972 11/15/06 -------------------------- ----------------------- ------------------- 18,800 $14.2969 11/16/06 -------------------------- ----------------------- ------------------- 13,000 $14.3077 11/17/06 -------------------------- ----------------------- ------------------- - ------------------- (2) Purchases on June 18, 2007 and July 16, 2007 represent shares of Common Stock purchased in open market transactions pursuant to a Rule 10b5-1 trading plan adopted by Mr. Scheetz on May 18, 2007. -8- -------------------------- ----------------------- ------------------- Shares Price Date -------------------------- ----------------------- ------------------- 4,200 $23.75 5/10/07 -------------------------- ----------------------- ------------------- 1,500 $23.74 5/10/07 -------------------------- ----------------------- ------------------- 1,300 $23.73 5/10/07 -------------------------- ----------------------- ------------------- 1,000 $23.66 5/10/07 -------------------------- ----------------------- ------------------- 1,000 $23.64 5/10/07 -------------------------- ----------------------- ------------------- 1,000 $23.61 5/10/07 -------------------------- ----------------------- ------------------- 500 $24.40 5/15/07 -------------------------- ----------------------- ------------------- 500 $24.44 5/15/07 -------------------------- ----------------------- ------------------- 500 $24.48 5/15/07 -------------------------- ----------------------- ------------------- 800 $24.49 5/15/07 -------------------------- ----------------------- ------------------- 700 $24.50 5/15/07 -------------------------- ----------------------- ------------------- 100 $23.88 5/16/07 -------------------------- ----------------------- ------------------- 500 $23.90 5/16/07 -------------------------- ----------------------- ------------------- 234 $24.26 6/18/07 -------------------------- ----------------------- ------------------- 293 $24.27 6/18/07 -------------------------- ----------------------- ------------------- 100 $24.28 6/18/07 -------------------------- ----------------------- ------------------- 400 $24.29 6/18/07 -------------------------- ----------------------- ------------------- 600 $24.31 6/18/07 -------------------------- ----------------------- ------------------- 200 $24.32 6/18/07 -------------------------- ----------------------- ------------------- 173 $24.33 6/18/07 -------------------------- ----------------------- ------------------- 500 $24.35 6/18/07 -------------------------- ----------------------- ------------------- 1000 $24.36 6/18/07 -------------------------- ----------------------- ------------------- 600 $24.37 6/18/07 -------------------------- ----------------------- ------------------- 300 $24.39 6/18/07 -------------------------- ----------------------- ------------------- -9- -------------------------- ----------------------- ------------------- Shares Price Date -------------------------- ----------------------- ------------------- 200 $24.41 6/18/07 -------------------------- ----------------------- ------------------- 100 $24.42 6/18/07 -------------------------- ----------------------- ------------------- 100 $24.44 6/18/07 -------------------------- ----------------------- ------------------- 120 $24.45 6/18/07 -------------------------- ----------------------- ------------------- 80 $24.47 6/18/07 -------------------------- ----------------------- ------------------- 100 $24.52 6/18/07 -------------------------- ----------------------- ------------------- 400 $24.54 6/18/07 -------------------------- ----------------------- ------------------- 500 $24.55 6/18/07 -------------------------- ----------------------- ------------------- 100 $23.29 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.31 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.36 7/16/07 -------------------------- ----------------------- ------------------- 400 $23.37 7/16/07 -------------------------- ----------------------- ------------------- 400 $23.38 7/16/07 -------------------------- ----------------------- ------------------- 300 $23.39 7/16/07 -------------------------- ----------------------- ------------------- 400 $23.40 7/16/07 -------------------------- ----------------------- ------------------- 300 $23.41 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.48 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.49 7/16/07 -------------------------- ----------------------- ------------------- 500 $23.50 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.51 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.52 7/16/07 -------------------------- ----------------------- ------------------- 400 $23.53 7/16/07 -------------------------- ----------------------- ------------------- 700 $23.54 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.55 7/16/07 -------------------------- ----------------------- ------------------- -10- -------------------------- ----------------------- ------------------- Shares Price Date -------------------------- ----------------------- ------------------- 500 $23.56 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.57 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.58 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.59 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.61 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.63 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.64 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.70 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.71 7/16/07 -------------------------- ----------------------- ------------------- Each of Mr. Scheetz and Mr. Hamamoto also beneficially owns 150,000 vested stock options and 162,500 vested LTIP units convertible into Common Stock. Also, Mr. Scheetz may be deemed to beneficially own (i) 4,668 shares of Common Stock purchased in the IPO by two trusts for the benefit of Mr. Scheetz's two minor children, and (ii) 10,000 shares of Common Stock purchased in the IPO by Mr. Scheetz's spouse. These purchases were made from personal funds. As a result of the transactions described above, as of July 18, 2007: o NCIC, (i) as the managing member of NCIC MHG Subsidiary LLC, beneficially owned 9,122,521 shares of Common Stock through NCIC MHG Subsidiary, which acquired such shares of Common Stock as described above, and (ii) as the general partner of NorthStar LP, may be deemed to beneficially own 2,042,177 shares of Common Stock through NorthStar LP (consisting of 1,042,177 shares owned directly by NorthStar LP and 1,000,000 shares beneficially owned as the managing member of NorthStar Hospitality, which is the managing member of Residual Hotel Interest LLC, its majority-owned subsidiary), each of which acquired such shares of Common Stock or Membership Units as described above; o NCIC MHG Subsidiary beneficially owned 9,122,521 shares of Common Stock, which it acquired as described above; and o NorthStar LP (i) beneficially owned 1,042,177 shares of Common Stock, which it acquired as described above, and (ii) as the managing member of NorthStar Hospitality, may be deemed to beneficially own 1,000,000 shares of Common Stock, through the 1,000,000 Membership Units owned by Residual Hotel Interest LLC, its majority-owned subsidiary, which it acquired as described above. -11- Messrs. Scheetz and Hamamoto disclaim beneficial ownership of the shares of Common Stock held by NCIC MHG Subsidiary and NorthStar LP and of the shares of Common Stock that may be issued in redemption of the Membership Units held by Residual Hotel Interest LLC. As described in the Forms 4/A filed by Messrs. Scheetz and Hamamoto on July 12, 2007, Messrs. Scheetz and Hamamoto have an indirect economic interest in the shares of Common Stock held by NCIC MHG Subsidiary and NorthStar LP and of the shares of Common Stock that may be issued in redemption of the Membership Units held by Residual Hotel Interest LLC, but such shares and units are not subject to their investment control. Any decisions to sell the shares and units are made by the board of directors of NCIC upon the recommendation of a committee of directors not affiliated with management of NCIC. Messrs. Scheetz and Hamamoto are not members of that committee. None of the persons listed on Schedule I hereto has contributed any funds or other consideration towards the acquisition of the Common Stock, except insofar as they may be general or limited partners of, or own membership interests in, certain of the Reporting Persons and have made capital contributions to such Reporting Persons, as the case may be. ITEM 4. PURPOSE OF TRANSACTIONS Item 4 is hereby amended in its entirety as follows: Except for the 83,358 shares of Common Stock purchased by Mr. Scheetz in the open market subsequent to the IPO, each of the Reporting Persons acquired shares of Common Stock in connection with the Company's IPO for investment purposes or in the ordinary course of business. As of the date of this statement, none of the Reporting Persons, or to the knowledge and belief of the Reporting Persons, any of the persons listed on Schedule I hereto, has any present plan or proposals which would relate to or would result in any transaction event or action enumerated in paragraphs (a) through (j) of Item 4 of Schedule 13D, other than: On June 27, 2007, NCIC exercised its rights under the Registration Rights Agreement included herewith as Exhibit No. 9 to register for resale the shares of Common Stock owned by NCIC and NorthStar LP. On June 28, 2007, the Company filed a Registration Statement on Form S-3 with respect to certain securities and available for use by NCIC and NorthStar LP for their shares of Common Stock. Pursuant to that Registration Statement, on July 11, 2007, the Company filed a prospectus supplement contemplating an underwritten public offering of 14,000,000 shares of Common Stock, including 9,122,521 shares held directly by NCIC MHG Subsidiary and 1,042,177 shares held directly by NorthStar LP. On July 19, 2007 the Company issued a free writing prospectus amending that prospectus supplement and contemplating an underwritten public offering of 12,210,840 shares of Common Stock, including 8,250,706 shares held directly by NCIC MHG Subsidiary and 126,970 shares held directly by NorthStar LP. -12- On July 19, 2007, the shareholders of NCIC approved a plan of liquidation contemplating the sale, transfer or other disposition of the assets of NCIC, including the shares of Common Stock. On July 19, 2007, NCIC MHG Subsidiary and NorthStar LP entered into an Underwriting Agreement (the "Underwriting Agreement") with the Company, the other selling stockholder named therein and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated as representatives of the underwriters. Pursuant to the Underwriting Agreement, (i) NCIC MHG Subsidiary has agreed to sell 8,250,706 shares of Common Stock to the underwriters named therein at a per share price of $21.5157 per share (for aggregate proceeds of approximately $177.5 million) and (ii) NorthStar LP has agreed to sell 126,970 shares of Common Stock to the underwriters named therein at a per share price of $21.5157 per share (for aggregate proceeds of approximately $2.7 million). The closing of the offering is scheduled for July 25, 2007. In connection with the offering, certain of the Reporting Persons have agreed that, during the period between July 19, 2007 and October 17, 2007, subject to certain exceptions (including an exception for a private sale to a party agreeing to be bound to the lock-up for its remaining term), they will not, without prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated, offer, sell or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock. The full text of the lock-up agreement, including the exceptions thereto, is attached as an Exhibit to the Underwriting Agreement. The transactions pursuant to the Underwriting Agreement are subject to customary conditions, thus there can be no assurance that the transactions will be completed as contemplated or that the Reporting Persons will sell any or all of their shares of Common Stock. On July 20, 2007, NCIC and NorthStar LP entered into an Agreement and Plan of Merger with Messrs. Hamamoto and Scheetz contemplating the merger of an entity controlled by Messrs. Hamamoto and Scheetz into NCIC and the merger of an entity controlled by Messrs. Hamamoto and Scheetz into NorthStar LP. Whether or not the underwritten offering described above is consummated, each of the Reporting Persons expects to evaluate on an ongoing basis the Company's financial condition, business, operations and prospects, the market price of the Common Stock, conditions in the securities markets generally, general economic and industry conditions and other factors. Accordingly, each Reporting Person reserves the right to change its plans and intentions at any time, as it deems appropriate. In particular, any one or more of the Reporting Persons (and their respective affiliates) may purchase additional shares of Common Stock or other securities of the Company or may sell or transfer shares of Common Stock beneficially owned by them from time to time in public or private transactions, including pursuant to the registration statement referred to above, and/or may enter into privately negotiated derivative transactions with institutional counterparties to hedge the market risk of some or all of their positions in the shares of Common Stock or other securities and/or may cause any of the Reporting Persons to distribute in kind to their respective partners or members, as the case may be, shares of Common Stock or other -13- securities. With respect to NCIC, any of such sales, transfers or other distributions may occur pursuant to its plan of liquidation. Any such transactions may be effected at any time or from time to time subject to (i) the restrictions contained in the Registration Rights Agreement (described in Item 6 below) and (ii) any applicable limitations imposed on the sale of any of their Company securities by the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act") or other applicable law. To the knowledge of each Reporting Person, each of the persons listed on Schedule I hereto may make similar evaluations from time to time or on an ongoing basis and reserves the same rights. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) Based on information provided to the Reporting Persons by the Company, there were 32,003,121 shares of Common Stock outstanding as of the close of business on July 9, 2007. As of July 18, 2007, NCIC may be deemed to beneficially own an aggregate of 11,164,698 shares of Common Stock, representing in the aggregate approximately 33.8% of the outstanding shares of Common Stock. Of the 11,164,698 shares of Common Stock, (i) 9,122,521 shares of Common Stock are beneficially owned by NCIC through its wholly-owned subsidiary, NCIC MHG Subsidiary, and (ii) 2,042,177 shares of Common Stock may be deemed to be beneficially owned by NCIC through its majority-owned subsidiary, NorthStar LP. As of July 18, 2007, NCIC MHG Subsidiary beneficially owned 9,122,521 shares of Common Stock, representing in the aggregate approximately 28.5% of the outstanding shares of Common Stock. As of July 18, 2007, NorthStar LP may be deemed to beneficially own 2,042,177 shares of Common Stock, representing in the aggregate approximately 6.2% of the outstanding shares of Common Stock. As of July 18, 2007, Mr. Scheetz beneficially owned an aggregate of 1,146,868 shares of Common Stock, representing in the aggregate approximately 3.5% of the outstanding shares of Common Stock. Of the 1,146,868 shares of Common Stock beneficially owned by Mr. Scheetz, 4,668 shares of Common Stock are indirectly beneficially owned by Mr. Scheetz through two trusts which directly own such shares of Common Stock for the benefit of Mr. Scheetz's two minor children, 10,000 shares of Common Stock are indirectly beneficially owned by Mr. Scheetz through his spouse who directly beneficially owns such shares of Common Stock, 83,358 shares of Common Stock represent Mr. Scheetz's direct beneficial ownership of 83,358 shares of Common Stock purchased by Mr. Scheetz in the open market subsequent to the IPO, 312,500 shares of Common Stock represent Mr. Scheetz's beneficial ownership of 150,000 vested stock options and 162,500 LTIP units convertible into Common Stock, and 736,342 shares of Common Stock are indirectly beneficially owned by Mr. Scheetz through WES Holdings LLC. As of July 18, 2007, Mr. Hamamoto beneficially owned an aggregate of 1,048,842 shares of Common Stock, representing in the aggregate approximately 3.2% of the outstanding shares of Common Stock. Of the 1,048,842 shares of Common Stock beneficially owned by Mr. Hamamoto, 312,500 shares of Common Stock represent Mr. Hamamoto's beneficial ownership of 150,000 vested stock options and 162,500 LTIP units convertible into Common Stock, and 736,342 shares of Common Stock are indirectly beneficially owned by Mr. Hamamoto through DTH Holdings LLC. None of the shares of Common Stock reported in rows (11) and (13) of the cover pages to this Schedule 13D are shares as to which there is a right to acquire exercisable within 60 -14- days, except as set forth in the previous two paragraphs with respect to that portion of the stock options and LTIP units that vest in the next 60 days. None of the Reporting Persons or, to the knowledge of the Reporting Persons, any of the persons listed on Schedule I hereto, beneficially owned any shares of Common Stock as of July 18, 2007, other than as set forth herein. (b) Rows (7) through (10) of the cover pages to this Schedule 13D set forth (i) the number of shares of Common Stock as to which there is sole power to vote or direct the vote or to dispose or direct the disposition and (ii) the number of shares of Common Stock as to which there is shared power to vote or direct the vote or to dispose or direct the disposition. Each Reporting Person hereby disclaims beneficial ownership of any shares of Common Stock held by any other Reporting Person. (c) Except for the open market purchases by Mr. Scheetz set forth below, no transactions in the Common Stock were effected by the Reporting Persons, or, to the knowledge of any of the Reporting Persons, any of the persons listed on Schedule I hereto during the 60 days prior to and including July 18, 2007(3). Edward Scheetz -------------------------- ----------------------- ------------------- Shares Price Date -------------------------- ----------------------- ------------------- 234 $24.26 6/18/07 -------------------------- ----------------------- ------------------- 293 $24.27 6/18/07 -------------------------- ----------------------- ------------------- 100 $24.28 6/18/07 -------------------------- ----------------------- ------------------- 400 $24.29 6/18/07 -------------------------- ----------------------- ------------------- 600 $24.31 6/18/07 -------------------------- ----------------------- ------------------- 200 $24.32 6/18/07 -------------------------- ----------------------- ------------------- 173 $24.33 6/18/07 -------------------------- ----------------------- ------------------- 500 $24.35 6/18/07 -------------------------- ----------------------- ------------------- 1000 $24.36 6/18/07 -------------------------- ----------------------- ------------------- 600 $24.37 6/18/07 -------------------------- ----------------------- ------------------- 300 $24.39 6/18/07 -------------------------- ----------------------- ------------------- - ------------------- (3) Represents shares of Common Stock purchased in an open market transaction pursuant to a Rule 10b5-1 trading plan adopted by Mr. Scheetz on May 18, 2007. -15- -------------------------- ----------------------- ------------------- Shares Price Date -------------------------- ----------------------- ------------------- 200 $24.41 6/18/07 -------------------------- ----------------------- ------------------- 100 $24.42 6/18/07 -------------------------- ----------------------- ------------------- 100 $24.44 6/18/07 -------------------------- ----------------------- ------------------- 120 $24.45 6/18/07 -------------------------- ----------------------- ------------------- 80 $24.47 6/18/07 -------------------------- ----------------------- ------------------- 100 $24.52 6/18/07 -------------------------- ----------------------- ------------------- 400 $24.54 6/18/07 -------------------------- ----------------------- ------------------- 500 $24.55 6/18/07 -------------------------- ----------------------- ------------------- 100 $23.29 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.31 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.36 7/16/07 -------------------------- ----------------------- ------------------- 400 $23.37 7/16/07 -------------------------- ----------------------- ------------------- 400 $23.38 7/16/07 -------------------------- ----------------------- ------------------- 300 $23.39 7/16/07 -------------------------- ----------------------- ------------------- 400 $23.40 7/16/07 -------------------------- ----------------------- ------------------- 300 $23.41 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.48 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.49 7/16/07 -------------------------- ----------------------- ------------------- 500 $23.50 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.51 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.52 7/16/07 -------------------------- ----------------------- ------------------- 400 $23.53 7/16/07 -------------------------- ----------------------- ------------------- 700 $23.54 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.55 7/16/07 -------------------------- ----------------------- ------------------- -16- -------------------------- ----------------------- ------------------- Shares Price Date -------------------------- ----------------------- ------------------- 500 $23.56 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.57 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.58 7/16/07 -------------------------- ----------------------- ------------------- 200 $23.59 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.61 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.63 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.64 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.70 7/16/07 -------------------------- ----------------------- ------------------- 100 $23.71 7/16/07 -------------------------- ----------------------- ------------------- (d) No other person is known by any Reporting Person to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any shares of Common Stock beneficially owned by any Reporting Person. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Item 6 is hereby amended by inserting the following at the end thereof: On July 20, 2007, NCIC and NorthStar LP entered into an Agreement and Plan of Merger with Messrs. Hamamoto and Scheetz contemplating the merger of an entity controlled by Messrs. Hamamoto and Scheetz into NCIC and the merger of an entity controlled by Messrs. Hamamoto and Scheetz into NorthStar LP. -17- On July 19, 2007, NCIC MHG Subsidiary and NorthStar LP entered into the Underwriting Agreement with the Company, the other selling stockholder named therein and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated, as representatives of the underwriters. Pursuant to the Underwriting Agreement, (i) NCIC MHG Subsidiary has agreed to sell 8,250,706 shares of Common Stock to the underwriters named therein at a per share price of $21.5157 per share (for aggregate proceeds of approximately $177.5 million) and (ii) NorthStar LP has agreed to sell 126,970 shares of Common Stock to the underwriters named therein at a per share price of $21.5157 per share (for aggregate proceeds of approximately $2.7 million). The closing of the offering is scheduled for July 25, 2007. In connection with the offering, certain of the Reporting Persons have agreed that, during the period between July 19, 2007 and October 17, 2007, subject to certain exceptions (including an exception for a private sale to a party agreeing to be bound to the lock-up for its remaining term), they will not, without prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated, offer, sell or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock. The full text of the lock-up agreement, including the exceptions thereto, is attached as an Exhibit to the Underwriting Agreement. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Item 7 is hereby amended by inserting the following at the end thereof: Exhibit Description - ------------- ------------------------------------------------------------------ 16. Agreement and Plan of Merger, dated as of July 20, 2007, by and among W. Edward Scheetz, David T. Hamamoto, NorthStar Capital Investment Corp. and NorthStar Partnership, L.P. 17. Underwriting Agreement, dated as of July 19, 2007, by and among Morgans Hotel Group Co., the selling stockholders named in Schedule II thereto (including NCIC MHG Subsidiary and NorthStar LP) and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated, as representatives of the several underwriters named in Schedule I thereto. -18- SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 23, 2007 NORTHSTAR CAPITAL INVESTMENT CORP. By: /s/ Richard J. McCready --------------------------------------- Name: Richard J. McCready Title: Chief Operating Officer and Secretary NCIC MHG SUBSIDIARY LLC By: NorthStar Capital Investment Corp., Its Managing Member By: /s/ Richard J. McCready --------------------------------------- Name: Richard J. McCready Title: Chief Operating Officer and Secretary NORTHSTAR PARTNERSHIP, L.P. By: NorthStar Capital Investment Corp., Its General Partner By: /s/ Richard J. McCready --------------------------------------- Name: Richard J. McCready Title: Chief Operating Officer and Secretary /s/ W. Edward Scheetz - -------------------------------------------- W. Edward Scheetz /s/ David T. Hamamoto - -------------------------------------------- David T. Hamamoto -19- EXHIBIT INDEX Exhibit Description - ------------- ------------------------------------------------------------------ 1. Formation and Structuring Agreement, dated as of October 25, 2006, by and among Morgans Group LLC, Morgans Hotel Group LLC, NorthStar Hospitality LLC, NorthStar Partnership, L.P. and RSA Associates, L.P. (incorporated by reference to Exhibit 10.4 to the registration statement on Form S-1 (File No. 333-129277) filed by the Company)). 2. Underwriting Agreement, dated as of February 13, 2006, by and among Morgans Hotel Group Co., Morgans Group LLC, Morgans Hotel Group LLC and Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named in Schedule I thereto, and the selling stockholders named in Schedule II thereto (previously filed). 3. Lock-Up Agreement, dated as of February 13, 2006, by and between Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named in Schedule I of the Underwriting Agreement and NorthStar Capital Investment Corp. (previously filed). 4. Lock-Up Agreement, dated as of February 13, 2006, by and between Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named in Schedule I of the Underwriting Agreement and NCIC MHG Subsidiary LLC (previously filed). 5. Lock-Up Agreement, dated as of February 13, 2006, by and between Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named in Schedule I of the Underwriting Agreement and NorthStar Partnership, L.P. (previously filed). 6. Lock-Up Agreement, dated as of February 13, 2006, by and between Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named in Schedule I of the Underwriting Agreement and Mr. W. Edward Scheetz (previously filed). 7. Lock-Up Agreement, dated as of February 13, 2006, by and between Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named in Schedule I of the Underwriting Agreement and Mr. David T. Hamamoto (previously filed). -20- 8. Lock-Up Agreement, dated as of February 13, 2006, by and between Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named in Schedule I of the Underwriting Agreement and Mr. Richard J. McCready (previously filed). 9. Registration Rights Agreement, dated as of February 17, 2006, by and between Morgans Hotel Group Co. and NorthStar Partnership, L.P. (previously filed). 10. Joint Filing Agreement, dated as of February 22, 2006, by and among NorthStar Capital Investment Corp., NCIC MHG Subsidiary LLC, NorthStar Partnership, L.P., Mr. W. Edward Scheetz and Mr. David T. Hamamoto (previously filed). 11. Power of Attorney, dated February 22, 2006, relating to NorthStar Capital Investment Corp. (previously filed) 12. Power of Attorney, dated February 22, 2006, relating to NorthStar Partnership, L.P. (previously filed) 13. Power of Attorney, dated February 22, 2006, relating to NCIC MHG Subsidiary LLC (previously filed). 14. Power of Attorney, dated February 22, 2006, relating to Mr. W. Edward Scheetz (previously filed). 15. Power of Attorney, dated February 22, 2006, relating to Mr. David T. Hamamoto (previously filed). 16. Agreement and Plan of Merger, dated as of July 20, 2007, by and among Edward Scheetz, David T. Hamamoto, NorthStar Capital Investment Corp. and NorthStar Partnership, L.P. 17. Underwriting Agreement, dated as of July 19, 2007, by and among Morgans Hotel Group Co., the selling stockholders named in Schedule II thereto (including NCIC MHG Subsidiary and NorthStar LP), and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated, as representatives of the several underwriters named in Schedule I thereto. -21- EX-99.16 2 exh-16.txt MERGER AGREEMENT ================================================================================ AGREEMENT AND PLAN OF MERGER DATED AS OF JULY 20, 2007 BY AND AMONG W. EDWARD SCHEETZ, DAVID T. HAMAMOTO, NORTHSTAR CAPITAL INVESTMENT CORP. AND NORTHSTAR PARTNERSHIP, L.P. ================================================================================ TABLE OF CONTENTS PAGE ---- ARTICLE I THE MERGERS Section 1.1 The Mergers......................................................2 Section 1.2 Closing..........................................................3 Section 1.3 Effective Times..................................................3 ARTICLE II EFFECTS OF THE MERGERS; EXCHANGE OF SHARES Section 2.1 Merger Consideration.............................................3 Section 2.2 Partnership Merger Consideration.................................5 Section 2.3 Organizational Documents.........................................5 Section 2.4 Directors and Officers of the Surviving Company..................6 Section 2.5 Payment for Securities...........................................6 Section 2.6 No Further Ownership Rights......................................9 Section 2.7 Dissenting NCIC Common Shares....................................9 Section 2.8 Further Assurances..............................................10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF NCIC AND NSP Section 3.1 Organization and Good Standing..................................11 Section 3.2 Capitalization..................................................11 Section 3.3 Authority; No Violations........................................12 Section 3.4 Governmental Approvals and Notices..............................12 Section 3.5 Assets..........................................................13 Section 3.6 Inapplicability of Takeover Statutes and Certain Charter and Bylaw Provisions................................................13 Section 3.7 No Other Representations or Warranties..........................14 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER PARTIES Section 4.1 Organization and Good Standing..................................14 Section 4.2 Authority; No Violations........................................15 Section 4.3 Governmental Approvals and Notices..............................16 Section 4.4 Net Asset Values................................................16 -i- Section 4.5 Availability of Funds...........................................16 Section 4.6 Litigation......................................................16 Section 4.7 Certain Relationships...........................................16 Section 4.8 Solvency........................................................17 Section 4.9 No Other Representations or Warranties..........................17 ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGERS Section 5.1 Conduct of Business by NCIC.....................................17 ARTICLE VI ADDITIONAL COVENANTS Section 6.1 Proxy Statement; Stockholder Meeting............................19 Section 6.2 Reasonable Best Efforts.........................................20 Section 6.3 No Solicitation of Transactions.................................20 Section 6.4 Board Actions...................................................22 Section 6.5 Public Announcements............................................22 Section 6.6 Indemnification; Directors' and Officers' Insurance.............23 Section 6.7 Fairness Opinion................................................24 ARTICLE VII CONDITIONS PRECEDENT Section 7.1 Conditions to Each Party's Obligation to Effect the Mergers.....24 Section 7.2 Conditions to Obligations of Purchaser Parties..................25 Section 7.3 Conditions to Obligations of NCIC and NSP.......................26 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER Section 8.1 Termination.....................................................26 Section 8.2 Break-Up Fee....................................................27 Section 8.3 Effect of Termination...........................................28 Section 8.4 Authorization...................................................28 Section 8.5 Maximum Recovery................................................28 Section 8.6 Amendment.......................................................29 ARTICLE IX GENERAL PROVISIONS Section 9.1 Nonsurvival of Representations and Warranties...................29 -ii- Section 9.2 Notices.........................................................29 Section 9.3 Interpretation..................................................31 Section 9.4 Specific Performance............................................31 Section 9.5 Counterparts....................................................31 Section 9.6 Entire Agreement; No Third-Party Beneficiaries..................31 Section 9.7 Governing Law...................................................31 Section 9.8 Assignment......................................................31 Section 9.9 Severability....................................................32 Section 9.10 Exhibits; Disclosure Letter.....................................32 Section 9.11 Mutual Drafting.................................................32 Section 9.12 Jurisdiction; Venue.............................................32 Section 9.13 Waiver of Trial by Jury.........................................33 Section 9.14 Expenses........................................................33 ARTICLE X CERTAIN DEFINITIONS Section 10.1 Certain Definitions.............................................33 -iii- This AGREEMENT AND PLAN OF MERGER, dated as of July 20, 2007 ("Agreement"), by and among W. Edward Scheetz ("ES") and David T. Hamamoto ("DH"), NorthStar Capital Investment Corp., a Maryland corporation ("NCIC") and NorthStar Partnership, L.P., a Delaware limited partnership ("NSP") (each of NCIC and NSP, a "Stockholder" and, collectively, the "Stockholders"). W I T N E S S E T H WHEREAS, promptly following the execution of this Agreement, ES and DH shall form a Maryland corporation wholly owned by ES and DH ("NCIC Merger Sub") and shall form a Delaware limited liability company wholly owned by ES and DH ("Partnership Merger Sub" and, together with NCIC Merger Sub, ES and DH, collectively, the "Purchaser Parties"); WHEREAS, NCIC owns directly or indirectly, including through its subsidiary NorthStar MHG Subsidiary LLC, 9,122,521 shares (the "NCIC-Owned MHGC Shares") of common stock, par value $0.01 per share (the "MHGC Common Stock"), of Morgans Hotel Group Co., a Delaware corporation ("MHGC"), and NSP owns 1,042,177 shares of MHGC Common Stock (the "NSP-Owned MHGC Shares"). WHEREAS, it is proposed that NCIC Merger Sub shall merge with and into NCIC, with NCIC surviving the merger, all on the terms and subject to the conditions set forth in this Agreement and in accordance with the Maryland General Corporation Law (the "MGCL"), and pursuant to which each of the issued and outstanding shares of common stock, par value $0.01 per share, of NCIC (the "NCIC Common Shares"), other than the Excluded NCIC Shares (as defined below, but generally consisting of NCIC Common Shares held by ES and his affiliates and certain NCIC Common Shares held by DH and his affiliates) and Dissenting NCIC Shares (as defined herein), shall be converted into and become the right to receive the Merger Consideration, upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, it is proposed that Partnership Merger Sub shall merge with and into NSP, with NSP surviving the merger, all on the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware Revised Uniform Limited Partnership Act (the "DRULPA") and the LLC Act, and pursuant to which, upon the terms and subject to the conditions set forth in this Agreement, each partnership common unit of NSP (whether held by a limited partner or a general partner) (each, an "LP Unit"), other than the Excluded Units (as defined below, but generally consisting of LP Units held by ES and his affiliates and certain LP Units held by DH and his affiliates and by certain other persons), shall be converted into and become the right to receive the Partnership Merger Consideration; WHEREAS, the Stockholders and the NCIC Board of Directors have determined to sell 8,250,706 of the NCIC-Owned MHGC Shares and 126,970 of the NSP-Owned MHGC Shares (the "Non-Continuing MHGC Shares") in an underwritten sale (such underwritten sale, or other contemplated sale of the Non-Continuing MHGC Shares as may be approved in the sole discretion of the NCIC Board of Directors, to be referred to herein as the "Sale") and retain the balance of the NCIC-Owned MHGC Shares and the NSP-Owned Shares (the "Continuing MHGC Shares") and certain of the net proceeds of such sale, together with certain other consideration and less certain expenses of NCIC and NSP respectively shall together constitute the Merger Consideration and the Partnership Merger Consideration, as described herein, payable respectively to the shareholders of NCIC and the unitholders of NSP, in each case, other than with respect to Excluded NCIC Shares and Excluded Units; WHEREAS, certain holders of NCIC Common Shares and LP Units, in order to support and effectuate the transactions contemplated hereby have agreed to support and vote for the transactions contemplated hereby; WHEREAS, the Board of Directors of NCIC (the "NCIC Board of Directors") has determined that this Agreement, the Merger, and the other transactions contemplated hereby (including the NCIC Charter Amendment), taken together, are fair to, advisable and in the best interests of NCIC and the holders of NCIC Common Shares (other than the Excluded NCIC Shares); and WHEREAS, NCIC, in its capacity as sole general partner of NSP, has adopted this Agreement and approved the Partnership Merger pursuant to DRULPA, the LLC Act and Section 7.1A(3) of the NSP Partnership Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the terms and conditions hereof, and intending to be legally bound hereby, NCIC, NSP and the Purchaser Parties hereby agree as follows: ARTICLE I. THE MERGERS Section 1.1 The Mergers. (a) Before the Effective Time, upon the terms and subject to the conditions set forth in this Agreement, at the Partnership Merger Effective Time, Partnership Merger Sub shall be merged with and into NSP (the "Partnership Merger") in accordance with DRULPA and the LLC Act, and the separate existence of Partnership Merger Sub shall cease and NSP shall continue as the surviving partnership (the "Surviving Partnership"), with NCIC remaining as the general partner of the Surviving Partnership. The Partnership Merger shall have the effects set forth in the DRULPA, the LLC Act and this Agreement. Without limiting the generality of the foregoing, and subject thereto, at the Partnership Merger Effective Time, all of the property, rights, privileges and powers of NSP and Partnership Merger Sub will vest in the Surviving Partnership, and all of the debts, liabilities and duties of NSP and Partnership Merger Sub will become the debts, liabilities and duties of the Surviving Partnership. (b) Following the Partnership Merger Effective Time, upon the terms and subject to the conditions of this Agreement, at the Effective Time, NCIC Merger Sub shall merge with and into NCIC (the "Merger," and together with the Partnership Merger, the "Mergers") in accordance with Subtitle 1 of Title 3 of the MGCL, and the separate corporate existence of NCIC Merger Sub shall cease and NCIC shall continue as the surviving company (the "Surviving Company") in accordance with the MGCL. The Merger shall have the effects set forth in -2- the MGCL and this Agreement. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges and powers of NCIC and NCIC Merger Sub will vest in the Surviving Company, and all of the debts, liabilities and duties of NCIC and NCIC Merger Sub will become the debts, liabilities and duties of the Surviving Company. Section 1.2 Closing. The closing of the Mergers (the "Closing") will take place at 10:00 a.m., local time, as promptly as practicable but in no event later than the third (3rd) Business Day after the satisfaction or waiver of all of the conditions (other than those conditions that by their nature are to be satisfied by actions taken at Closing, but subject to the fulfillment or waiver of those conditions) set forth in Article VII (the "Closing Date"), at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019, unless another date or place is agreed to in writing by the parties. Section 1.3 Effective Times. (a) Subject to the provisions of this Agreement, as soon as reasonably practicable on the Closing Date, the parties shall file with the Delaware Secretary of State the certificate of merger or other appropriate documents (the "Partnership Certificate of Merger") in such form as is required by, and executed in accordance with, the relevant provisions of DRULPA and the LLC Act and make all other filings, recordings or publications required under DRULPA and the LLC Act in connection with the Partnership Merger. The Partnership Merger shall become effective at the time of the filing of the Partnership Certificate of Merger with, and acceptance for record of such Partnership Certificate of Merger by, the Delaware Secretary of State in accordance with DRULPA and the LLC Act, or at such other time as the parties shall agree as specified in such filings in accordance with applicable Law (the "Partnership Merger Effective Time"). (b) Subject to the provisions of this Agreement, as soon as reasonably practicable on the Closing Date, the parties shall file with the State Department of Assessments and Taxation of Maryland (the "Maryland Department") the articles of merger or other appropriate documents (the "Articles of Merger") in such form as is required by, and executed in accordance with, the relevant provisions of the MGCL and make all other filings, recordings or publications required under the MGCL in connection with the Merger. The Merger shall become effective at the time of the filing of the Articles of Merger with, and acceptance for record of such Articles of Merger by, the Maryland Department in accordance with the MGCL, or at such other time as the parties shall agree as specified in such filings in accordance with applicable Law (the "Effective Time"), it being understood that the parties shall cause the Effective Time to occur on the Closing Date following the Partnership Merger Effective Time. ARTICLE II. EFFECTS OF THE MERGERS; EXCHANGE OF SHARES Section 2.1 Merger Consideration. At the Effective Time, by virtue of the Merger and without any further action on the part of NCIC Merger Sub, NCIC or the holders of NCIC Common Shares: -3- (a) Each of the NCIC Common Shares issued and outstanding immediately prior to the Effective Time that are listed on Annex A, which NCIC Common Shares are owned by ES, DH or certain of their affiliates and by Marc Gordon (such shares the "Excluded NCIC Shares"), shall remain outstanding as a validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Company (a "Surviving Company Common Share"). (b) Each NCIC Common Share issued and outstanding immediately prior to the Effective Time, other than Excluded NCIC Shares and Dissenting NCIC Shares, automatically shall be converted into the right to receive an amount in cash per share equal to the sum of (i) $2.30 plus (ii) their "pro rata share" of the value of the Combined MHGC Shares (or upon an NCIC Distribution Election, their pro rata share of the number of Combined MHGC Shares), less (iii) the Per Share Transaction Expenses (such sum, the "Merger Consideration"). All such NCIC Common Shares, when so converted, shall no longer be outstanding and automatically shall be canceled and retired and shall cease to exist, and each holder of an NCIC Common Share shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration to be paid in consideration therefor in accordance with Section 2.5, without interest. For the purposes hereof, the "pro rata share" of the value of the Combined MHGC Shares shall equal (i) for each NCIC Common Share other than an Excluded NCIC Share, an amount equal to one (1) divided by the total number of Outstanding NCIC Common Shares, multiplied by the total number of Combined MHGC Shares and then multiplied by the average price per share of the MHGC Common Stock sold in the Sale. For purposes hereof, the "pro rata share" of the number of Combined MHGC Shares shall equal (i) for each NCIC Common Share other than an Excluded NCIC Share, an amount equal to one (1) divided by the total number of Outstanding NCIC Common Shares, multiplied by the total number of Combined MHGC Shares. For the purposes hereof, "Per Share Transaction Expenses" shall be an amount per share of NCIC Common Stock equal to the aggregate fees and expenses incurred in connection with the transactions contemplated hereby by NCIC, NSP, the NCIC Special Committee and the Purchaser Parties (including without limitation legal fees, premium and expenses incurred to obtain the policy contemplated by Section 6.6(d) to the extent in excess of $550,000, and including all the fees or expenses to be paid by NCIC, NSP or the NCIC Special Committee to obtain the Fairness Opinion referred to in Section 7.3(d) to the extent in excess of the amount set forth in Annex D) divided by the total number of Outstanding NCIC Common Shares and LP Units outstanding, provided that, the legal fees to be paid to the law firms listed on Annex C shall not exceed the amounts listed next to their names on such Annex. (c) Each share of common stock, par value $0.01 per share, of NCIC Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and be exchanged for one newly and validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Company. (d) Each NCIC Common Share issued and outstanding immediately prior to the Effective Time that is owned by any wholly owned Subsidiary of NCIC, NCIC Merger Sub or Partnership Merger Sub shall automatically be canceled and retired and shall cease to exist, and no payment shall be made with respect thereto. -4- Section 2.2 Partnership Merger Consideration. (a) At the Partnership Merger Effective Time, by virtue of the Partnership Merger and without any further action on the part of Partnership Merger Sub, NCIC, NSP or the holders of LP Units, each LP Unit issued and outstanding immediately prior to the Partnership Merger Effective Time, other than Excluded Units, automatically shall be converted into the right to receive cash, without interest thereon, in an amount per LP Unit equal to the sum of (i) $2.30 plus (ii) the pro rata share of the value of the NSP-Owned MHGC Shares (or upon the NCIC Distribution Election, a pro rata share of the NSP-Owned MHGC Shares), less (iii) the Per Share Transaction Expenses (such sum, the "Partnership Merger Consideration"). For the purposes hereof, the "pro rata share" of the value of the NSP-Owned MHGC Shares shall equal (i) for each LP Unit other than an Excluded Unit, the product of one (1) divided by the total number of LP Units outstanding, multiplied by the total number of NSP-Owned MHGC Shares, then multiplied by the average price per share of the MHGC Common Stock sold in the Sale. For purposes hereof, the "pro rata share" of the NSP-Owned MHGC Shares shall equal (i) for each LP Unit other than an Excluded Unit, the product of one (1) divided by the total number of LP Units outstanding, multiplied by the total number of NSP-Owned MHGC Shares. (b) At the Partnership Merger Effective Time, by virtue of the Partnership Merger and without any further action on the part of Partnership Merger Sub, NCIC, NSP or the holders of LP Units, (i) the general partnership interest of NSP owned by NCIC shall remain outstanding and constitute the only outstanding general partnership interest in the Surviving Partnership, (ii) all partnership common units in the aggregate of limited liability company interest in Partnership Merger Sub shall be converted into and be exchanged for a number of newly and validly issued, fully paid and nonassessable LP Units in the Surviving Partnership (a "Surviving Partnership Unit") equal to the number of LP Units exchanged for cash in the Partnership Merger multiplied by the quotient obtained (expressed as a decimal) by dividing the amount of cash provided by or on behalf of Partnership Merger Sub and its partners by the total amount of cash paid for LP Units in the Partnership Merger, and (iii) each LP Unit issued and outstanding immediately prior to the Effective Time that is listed on Annex A, which LP Units so listed are owned by ES, DH or certain of their affiliates and the Persons listed in such Annex, (each such LP Unit referred to in this clause (iii), an "Excluded Unit"), shall remain outstanding as a validly issued, fully paid and nonassessable Surviving Partnership Unit. Annex A may be amended from time to time up to the date that is ten (10) Business Days prior to the Effective Time to reflect any holders of LP Units (other than ES, DH and their affiliates) who elect to include their LP Units as Excluded Units. To the extent that LP Units receive cash provided by Partnership Merger Sub or its partners, such LP Units shall be treated as having been sold to the partners of Partnership Merger Sub. Section 2.3 Organizational Documents. (a) At the Effective Time, (i) the charter of the Surviving Company shall be the charter of NCIC Merger Sub as currently in effect (the "Merger Sub Charter") and (ii) the bylaws of the Surviving Company shall be the bylaws of Merger Sub as currently in effect (the "Merger Sub Bylaws"), in each case as currently in effect, and in each case until further amended by the stockholders of NCIC Merger Sub in accordance with the provisions thereof and with the MGCL. -5- (b) Following the Partnership Merger Effective Time, the certificate of limited partnership of NSP shall continue to be the certificate of limited partnership of the Surviving Partnership until further amended in accordance with the provisions thereof and with the DRULPA and the LLC Act. Section 2.4 Directors and Officers of the Surviving Company. The directors of NCIC Merger Sub immediately prior to the Effective Time shall be elected as the sole initial directors of the Surviving Company, each to hold office in accordance with the articles of incorporation and bylaws of the Surviving Company. The officers of NCIC immediately prior to the Effective Time shall be the sole initial officers of the Surviving Company, each to hold office in accordance with the articles of incorporation and bylaws of the Surviving Company. Section 2.5 Payment for Securities. (a) Exchange Agent. At or before the Effective Time, NCIC Merger Sub and Partnership NCIC Merger Sub shall appoint a bank or trust company reasonably satisfactory to NCIC to act as exchange agent (the "Exchange Agent") for the payment of the Merger Consideration and the Partnership Merger Consideration (collectively, such funds, the "Exchange Fund"). On or before the Effective Time, (i) NCIC and NSP shall deposit by wire transfer of immediately available funds in an amount equal to the net proceeds received from the sale of the Non-Continuing MHGC Shares (excluding the net proceeds from the sale of 700,000 of such shares) and NSP shall deposit by wire transfer of immediately available funds in an amount no less than $29 million (the "NCIC and NSP Contribution") and (ii) the Purchaser Parties shall deposit by wire transfer of immediately available funds in an amount equal to the difference between (i) the sum of the Merger Consideration and the Partnership Merger Consideration less (ii) the NCIC and NSP Contribution, in each case with the Exchange Agent for the benefit of the holders of NCIC Common Shares, other than the Excluded NCIC Shares, and LP Units, other than the Excluded Units, respectively. The Exchange Agent shall invest any cash included in the Exchange Fund representing the Merger Consideration as directed by the Surviving Company, and any amounts in the Exchange Fund representing the Partnership Merger Consideration as directed by the Surviving Partnership (so long as such directions do not impair the rights of the holders of NCIC Common Shares or LP Units, as the case may be, or the ability of the Exchange Agent to make timely payments as required hereby), in direct obligations of the United States of America or any state thereof, obligations for which the full faith and credit of the United States of America or any such state is pledged to provide for the payment of principal and interest, commercial paper either rated of the highest quality by Moody's Investors Service, Inc. or Standard & Poor's Corporation or certificates of deposit issued by, or other deposit accounts of, a commercial bank having at least $1,000,000,000 in capital and surplus, in each case with a maturity of three months or less; provided that no such investment or losses thereon shall affect the Merger Consideration, the Partnership Merger Consideration or other amounts payable pursuant to this Article II, and that the Purchaser Parties shall promptly provide, or shall cause the Surviving Company to provide, additional funds to the Exchange Agent in the amount of any shortfall in funds payable pursuant to this Article II. Any net earnings with respect thereto shall be paid to the Surviving Company or to the Surviving Partnership as and when requested by the Surviving Company or the Surviving Partnership, as the case may be. The Exchange Agent shall make payments of the Merger Consideration and the Partnership Merger Considera- -6- tion out of the Exchange Fund in accordance with this Agreement. The Exchange Fund shall not be used for any other purpose. (b) Merger Exchange Procedures. (i) The parties acknowledge and agree that the NCIC Common Shares may exist in book-entry form only and may not be evidenced by a certificate (the "Uncertificated NCIC Common Shares"), in which case the exchange of such Uncertificated NCIC Common Shares for the Merger Consideration shall be effected by book entry and the provisions of Section 2.5 with respect to the surrender of NCIC Common Share Certificates shall be inapplicable to such Uncertificated NCIC Common Shares. (ii) As promptly as practicable following the Effective Time (but in no event later than two (2) Business Days after the Effective Time), NCIC Merger Sub shall cause the Exchange Agent to mail to each holder of record of NCIC Common Shares that were converted into the right to receive the Merger Consideration pursuant to Section 2.1(b): (A) a letter of transmittal (a "Letter of Transmittal") which shall specify that delivery shall be effected and risk of loss and title to the NCIC Common Shares shall pass only upon delivery of the certificates, if any, representing the NCIC Common Shares (the "NCIC Common Share Certificates") (or affidavits of loss in lieu thereof in accordance with Section 2.5(f)) or Uncertificated NCIC Common Shares by book entry in accordance with the reasonable procedures established by the Exchange Agent for the delivery of Uncertificated NCIC Common Shares to the Exchange Agent and otherwise upon delivery of a duly executed Letter of Transmittal to the Exchange Agent and (B) instructions for use in effecting the surrender of the NCIC Common Share Certificates (or affidavits of loss in lieu thereof in accordance with Section 2.5(f)), if any, or Uncertificated NCIC Common Shares by book entry in exchange for the Merger Consideration, the form of the Letter of Transmittal and instructions to be reasonably agreed upon by NCIC Merger Sub and NCIC. (iii) Upon delivery of a Letter of Transmittal, duly executed, and any other documents reasonably required by the Exchange Agent or the Surviving Company, including any NCIC Common Share Certificates (or affidavits of loss in lieu thereof in accordance with Section 2.5(f)) or compliance with the reasonable procedures established by the Exchange Agent for the delivery of Uncertificated NCIC Common Shares, (A) the holder of such NCIC Common Shares shall be entitled to receive in exchange therefor a check in the amount equal to the amount of Merger Consideration that such holder has the right to receive pursuant to the provisions of Section 2.1(b); and (B) any NCIC Common Share Certificate or Uncertificated NCIC Common Share so surrendered shall forthwith be canceled. Each such holder's NCIC Common Shares and, if applicable, such holder's NCIC Common Share Certificate or Uncertificated NCIC Common Shares until surrendered as contemplated by this Section 2.5, shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender an amount equal to (1) the number of such holder's Common Shares, multiplied by (2) the Merger Consideration. (iv) In the event of a transfer of ownership of NCIC Common Shares that is not registered in the transfer records of NCIC, the Merger Consideration shall be paid to a transferee if (A) the NCIC Common Share Certificate evidencing such NCIC -7- Common Shares is presented to the Exchange Agent properly endorsed or accompanied by appropriate stock powers and otherwise in proper form for transfer and accompanied by all documents reasonably required by the Exchange Agent to evidence and effect such transfer; and (B) such transferee shall pay any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of the NCIC Common Share Certificate or establish to the satisfaction of the Exchange Agent and the Surviving Company that such Tax has been paid or is not applicable. (c) Partnership Merger Exchange Procedures. (i) As promptly as practicable following the Partnership Merger Effective Time (but in no event later than two (2) Business Days after the Effective Time), Partnership Merger Sub shall cause the Exchange Agent to mail to each holder of record of LP Units immediately prior to the Partnership Merger Effective Time: (A) a letter of transmittal (a "Unitholder Letter of Transmittal") and (B) instructions for use in effecting the surrender of the LP Units in exchange for the Partnership Merger Consideration, the form of the Unitholder Letter of Transmittal and instructions to be reasonably agreed upon by Partnership Merger Sub and NCIC. (ii) Upon surrender of an LP Unit for cancellation to the Exchange Agent, if applicable, together with a Unitholder Letter of Transmittal, duly executed, and any other documents reasonably required by the Exchange Agent or the Surviving Partnership, (A) the holder of such LP Unit shall be entitled to receive in exchange therefor a check in the amount equal to the amount of Partnership Merger Consideration that such holder has the right to receive pursuant to the provisions of Section 2.2(a); and (B) the LP Unit so surrendered shall forthwith be canceled. Until surrendered as contemplated by this Section 2.5, each such LP Unit shall be deemed at any time after the Partnership Merger Effective Time to represent only the right to receive upon such surrender the Partnership Merger Consideration. (d) Termination of Exchange Fund. Any portion of the Exchange Fund (including any interest and other income received with respect thereto) that remains undistributed to the former holders of NCIC Common Shares or LP Units for one year after the Effective Time shall be delivered to NCIC Merger Sub or Partnership Merger Sub, as the case may be, upon demand, and any former holders of NCIC Common Shares or LP Units who have not theretofore received any Merger Consideration or Partnership Merger Consideration, as applicable, to which they are entitled under this Article II, shall thereafter look only to NCIC Merger Sub or Partnership Merger Sub, as the case may be, for payment of their claims with respect thereto. (e) Escheat. None of the Purchaser Parties, the Surviving Company or the Surviving Partnership shall be liable to any holder of NCIC Common Shares or LP Units for any part of the Merger Consideration or Partnership Merger Consideration, as applicable, delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by holders of any such shares immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any federal, state or local government or any court, regulatory or administrative agency or commission, governmental arbitrator or other governmental authority or instrumentality, domestic or foreign (a "Governmental Entity"), shall, to the extent permitted by applicable Law, become the property of the -8- Surviving Company or the Surviving Partnership, as applicable, free and clear of any claims or interest of any such holders or their successors, assigns or personal representatives previously entitled thereto. (f) Lost, Stolen or Destroyed Certificates. If any NCIC Common Share Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such NCIC Common Share Certificate to be lost, stolen or destroyed and, if required by NCIC Merger Sub or the Surviving Company, the posting by such Person of a bond in such reasonable and customary amount as NCIC Merger Sub or the Surviving Company may direct as indemnity against any claim that may be made against it with respect to such NCIC Common Share Certificate, the Exchange Agent shall pay in exchange for such lost, stolen or destroyed NCIC Common Share Certificate the appropriate amount of the Merger Consideration. (g) Withholdings of Tax. NCIC Merger Sub, Partnership Merger Sub, the Surviving Company, the Surviving Partnership or the Exchange Agent shall be entitled to deduct and withhold from the Merger Consideration or the Partnership Merger Consideration otherwise payable pursuant to this Agreement to any holder of NCIC Common Shares or LP Units such amount as NCIC Merger Sub, Partnership Merger Sub, the Surviving Company, the Surviving Partnership, or the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign Tax Law. To the extent that amounts are so deducted or withheld and paid over to the applicable Governmental Entity, such deducted or withheld amounts shall be treated for all purposes of this Agreement as having been paid to the former holder of NCIC Common Shares or LP Units in respect of which such deduction and withholding was made. Section 2.6 No Further Ownership Rights. (a) The Merger Consideration paid upon the delivery of the Letter of Transmittal and, if applicable, surrender or exchange of the NCIC Common Share Certificates evidencing NCIC Common Shares in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such NCIC Common Shares and, after the Effective Time, there shall be no further registration of transfers on the transfer books of the Surviving Company of the NCIC Common Shares. If, after the Effective Time, NCIC Common Shares are presented to the Surviving Company, for any reason, they shall be canceled and exchanged as provided in this Article II. (b) The Partnership Merger Consideration paid with respect to the LP Units in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such LP Units and, after the Partnership Merger Effective Time, there shall be no further registration of transfers on the transfer books of the Surviving Partnership of the LP Units. If, after the Effective Time, LP Units are presented to the Surviving Company, for any reason, they shall be canceled and exchanged as provided in this Article II. Section 2.7 Dissenting NCIC Common Shares. No holder of NCIC Common Shares that has perfected a demand for appraisal rights with respect to its NCIC Common Shares pursuant to Subtitle 2 of Title 3 of the MGCL (a "Dissenting Stockholder") shall be entitled to receive -9- the Merger Consideration with respect to the NCIC Common Shares owned by such Dissenting Stockholder (the "Dissenting NCIC Shares"), unless and until such Dissenting Stockholder shall have effectively withdrawn or lost such Dissenting Stockholder's right to appraisal under the MGCL. Each Dissenting Stockholder shall be entitled to receive only the payment provided by Subtitle 2 of Title 3 of the MGCL with respect to Dissenting NCIC Shares. NCIC shall give NCIC Merger Sub (i) prompt notice upon receipt by NCIC of any written demands for appraisal, attempted withdrawals of such demands, any other instruments served pursuant to applicable Law that are received by NCIC relating to stockholders' rights of appraisal and (ii) the opportunity to direct all negotiations and proceedings with respect to any demand for appraisal under the MGCL. NCIC shall not, except with the prior written consent of NCIC Merger Sub, voluntarily make any payment with respect to any demands for appraisal of Dissenting NCIC Shares, offer to settle or settle any such demands or approve any withdrawal of any such demands. Section 2.8 Further Assurances. (a) If at any time after the Effective Time the Surviving Company shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are reasonably necessary or proper (i) to vest, perfect or confirm, of record or otherwise, in the Surviving Company its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either NCIC Merger Sub or NCIC, or (ii) otherwise to carry out the purposes of this Agreement, the Surviving Company and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either of NCIC Merger Sub and NCIC, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either NCIC Merger Sub or the Company, all such other acts and things as may be reasonably necessary or proper to vest, perfect or confirm the Surviving Company's right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of NCIC Merger Sub or NCIC and otherwise to carry out the purposes of this Agreement. (b) If at any time after the Partnership Merger Effective Time the Surviving Partnership shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are reasonably necessary or proper (i) to vest, perfect or confirm, of record or otherwise, in the Surviving Partnership its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either Partnership Merger Sub or NSP, or (ii) otherwise to carry out the purposes of this Agreement, the Surviving Partnership and its proper partners, officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either of Partnership Merger Sub and NSP, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either Partnership Merger Sub or NSP, all such other acts and things as may be reasonably necessary or proper to vest, perfect or confirm the Surviving Company's right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of Partnership Merger Sub or NSP and otherwise to carry out the purposes of this Agreement. -10- ARTICLE III. REPRESENTATIONS AND WARRANTIES OF NCIC AND NSP Except as (x) set forth in the disclosure letter, dated as of the date hereof and delivered to NCIC Merger Sub and Partnership Merger Sub in connection with the execution and delivery of this Agreement (the "NCIC Disclosure Letter") or (y) actually known to ES or DH, each of NCIC and NSP represents and warrants to the Purchaser Parties as follows: Section 3.1 Organization and Good Standing. (a) NCIC is a corporation duly organized, validly existing and in good standing under the Laws of the State of Maryland. NCIC has all of the requisite corporate power and authority and all necessary government approvals or licenses to own, lease, operate its properties, and to carry on its business as now being conducted, except for the absence of which would not, individually or in the aggregate, constitute an NCIC Material Adverse Effect. NCIC is duly qualified or licensed to do business and is in good standing in each jurisdiction (to the extent such concepts exist in such jurisdictions) in which the nature of the business it is conducting, or the ownership, operation or leasing of its properties or the management of properties for others, makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, constitute an NCIC Material Adverse Effect. (b) NSP is a limited partnership duly formed, validly existing and in good standing under the Laws of the State of Delaware. NSP has all of the requisite partnership power and authority and all necessary government approvals or licenses to own, lease, operate its properties, and to carry on its business as now being conducted, except for the absence of which would not, individually or in the aggregate, constitute an NCIC Material Adverse Effect. NSP is duly qualified or licensed to do business and is in good standing in each jurisdiction (to the extent such concepts exist in such jurisdictions) in which the nature of the business it is conducting, or the ownership, operation or leasing of its properties or the management of properties for others, makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, constitute an NCIC Material Adverse Effect. Section 3.2 Capitalization. (a) The authorized shares of stock of NCIC consist of (i) 500,000,000 NCIC Common Shares, par value $0.01 per share and (ii) 100,000,000 shares of preferred stock of NCIC, par value $0.01 per share. As of July 19, 2007 (the "Capitalization Date"), there are: (1) 20,946,891 NCIC Common Shares issued and outstanding and (2) no shares of preferred stock of NCIC issued or outstanding. Except as set forth in Section 3.2 of the NCIC Disclosure Letter, there are no issued and outstanding shares or other equity securities of NCIC (or shares or other equity securities of NCIC reserved for issuance), and there are no securities of NCIC convertible into or exchangeable for stock or other equity securities of NCIC, or other subscriptions, options, warrants, conversion rights, stock appreciation rights, "phantom" stock, stock units, calls, claims, rights of first refusal, rights (including preemptive rights), commitments, arrange- -11- ments or agreements to which NCIC is a party or by which it is bound in any case obligating NCIC to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, stock or other equity securities of NCIC, or obligating NCIC to grant, extend or enter into any such subscription, option, warrant, conversion right, stock appreciation right, call, right, commitment, arrangement or agreement. (b) As of the Capitalization Date, there are issued and outstanding (i) 27,787,468 aggregate units of general partner and limited partnership interest in NSP (the "Units") and (ii) NCIC is the sole general partner of NSP, holds all of the outstanding general partnership interests in NSP, and 20,946,891 Units (including its combined general and limited partnership interests). Section 3.3 Authority; No Violations. (a) NCIC and NSP each has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby (including the NCIC Charter Amendment), subject to the receipt of the affirmative vote of a majority of all the votes entitled to be cast by the holders of NCIC Common Shares at the Stockholder Meeting in favor of this Agreement, the Mergers, the NCIC Charter Amendment and all matters ancillary thereto (the "Stockholder Approval"); the filing of Articles of Merger pursuant to the MGCL and acceptance thereof by the Maryland Department; the filing of the Partnership Certificate of Merger pursuant to the DRULPA and the LLC Act and the acceptance thereof by the Delaware Secretary of State; and the filing of the NCIC Charter Amendment and the acceptance thereof by the Maryland Department. Each of the NCIC Board of Directors and NCIC, as general partner of NSP, has approved the execution and delivery of this Agreement and the transactions contemplated by this Agreement, including the Mergers and the NCIC Charter Amendment, and the NCIC Board of Directors has declared advisable the Merger and has directed that this Agreement and the transactions contemplated by this Agreement, including the Merger and the NCIC Charter Amendment, be submitted for approval by written consent of the holders of NCIC Common Shares or at a special meeting of the holders of NCIC Common Shares (the "Stockholder Meeting"). (b) This Agreement has been duly executed and delivered by NCIC and NSP and, subject to receipt of the Stockholder Approval and assuming due authorization, execution and delivery by each other party hereto, constitutes a legal, valid and binding obligation of NCIC and NSP, enforceable against NCIC and NSP in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other Laws of general applicability relating to or affecting creditors' rights and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 3.4 Governmental Approvals and Notices. No consent, approval, order or authorization of, or registration, declaration or filing with, notice to or permit from, any Governmental Entity, is required by or on behalf of NCIC or any NCIC Subsidiary in connection with the execution and delivery of this Agreement by NCIC or NSP or the consummation by NCIC or NSP of the transactions contemplated hereby, except for: (a) the filing with the Securities and Exchange Commission (the "SEC") of such reports under the Securities Exchange Act of 1934, -12- as amended (the "Exchange Act"), and such other compliance with the Exchange Act and the rules and regulations thereunder, as may be required in connection with this Agreement and the transactions contemplated thereby; (b) the filing and acceptance of the Articles of Merger pursuant to the MGCL; (c) the filing and acceptance of the Partnership Certificate of Merger pursuant to the DRULPA and the LLC Act; (d) the filing and acceptance of the NCIC Charter Amendment pursuant to the MGCL; (e) such filings and approvals as may be required by any applicable state securities or "blue sky" Laws; (f) such filings as may be required in connection with state or local transfer taxes; (g) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (h) compliance with any applicable requirements of laws, rules and regulations in other foreign jurisdictions governing antitrust or merger control matters; and (i) any such other consent, approval, order, authorization, registration, declaration, notice, filing or permit that the failure to obtain or make, individually or in the aggregate, would not constitute an NCIC Material Adverse Effect. Section 3.5 Assets. (a) NCIC is the owner, beneficially and of record, of 9,122,521 shares of MHGC Common Stock, free and clear of any Liens or restrictions (other than restrictions under applicable securities Laws, the Registration Rights Agreement, the Underwriting Agreement, and the Lock Up Agreements), and may transfer good and valid title to such shares of MHGC Common Stock free and clear of any Liens or restrictions (other than restrictions under applicable securities Laws, the Registration Rights Agreement, the Underwriting Agreement, and the Lock Up Agreements). (b) NSP is the owner, beneficially and of record, of 1,042,177 shares of MHGC Common Stock, free and clear of any Liens or restrictions (other than restrictions under applicable securities Laws, the Registration Rights Agreement, the Underwriting Agreement, and the Lock Up Agreements), and may transfer good and valid title to such shares of MHGC Common Stock free and clear of any Liens or restrictions (other than restrictions under applicable securities Laws, the Registration Rights Agreement, the Underwriting Agreement, and the Lock Up Agreements). Section 3.6 Inapplicability of Takeover Statutes and Certain Charter and Bylaw Provisions. NCIC has taken all appropriate and necessary actions to exempt the Merger, the Partnership Merger, this Agreement and the other transactions contemplated thereby from the restrictions of any applicable provision of Subtitles 6 and 7 of Title 3 of the MGCL, as applicable to a Maryland corporation (collectively, the "Takeover Statute"). No other "control share acquisition," "fair price," "moratorium" or other anti-takeover Laws apply to the Merger, the Partnership Merger, this Agreement or the other transactions contemplated thereby. NCIC and the NCIC Board of Directors have taken all appropriate and necessary actions to cause the Merger, the Partnership Merger, this Agreement and the other transactions contemplated hereby to comply with or be exempted from any provision contained in the NCIC Charter, NCIC Bylaws or in the comparable organizational document of any NCIC Subsidiary that would otherwise impose any limitations on ownership of (i) NCIC Common Shares as set forth in the NCIC Charter and (ii) the limited partner interests in NSP as set forth in the NSP Partnership Agreement, this Agreement and the other transactions contemplated hereby. -13- Section 3.7 No Other Representations or Warranties. Except for the representations and warranties contained in Article IV, each of NCIC or NSP acknowledges that none of the Purchaser Parties nor any other Person on behalf of any of the Purchaser Parties makes any other express or implied representation or warranty with respect to the Purchaser Parties or with respect to any other information provided to NCIC or NSP in connection with the Mergers, including any information, documents, projections, forecasts or other material made available to NCIC and NSP in connection with their due diligence investigation of the Mergers. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER PARTIES Except as set forth in the disclosure letter, dated as of the date hereof and delivered to NCIC in connection with the execution and delivery of this Agreement (the "Purchaser Parties Disclosure Letter"), each Purchaser Party represents and warrants to NCIC and NSP as follows: Section 4.1 Organization and Good Standing. (a) NCIC Merger Sub is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Maryland. NCIC Merger Sub has all of the requisite corporate power and authority and all necessary government approvals or licenses to own, lease and operate its properties, and to carry on its business as now being conducted, except for the absence of which would not, individually or in the aggregate, constitute a Purchaser Material Adverse Effect. NCIC Merger Sub is duly qualified or licensed to do business and is in good standing in each jurisdiction (to the extent such concepts exist in such jurisdictions) in which the nature of the business it is conducting, or the ownership, operation or leasing of its properties or the management of properties for others makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, constitute a Purchaser Material Adverse Effect. Since the date of its incorporation, NCIC Merger Sub has not engaged in any activities or conducted any operations other than in connection with or as contemplated by this Agreement. (b) Partnership Merger Sub is a limited liability company duly formed, validly existing and in good standing under the Laws of the State of Delaware. Partnership Merger Sub has all of the requisite limited liability company power and authority and all necessary government approvals or licenses to own, lease and operate its properties, and to carry on its business as now being conducted, except for the absence of which would not, individually or in the aggregate, constitute a Purchaser Material Adverse Effect. Partnership Merger Sub is duly qualified or licensed to do business and is in good standing in each jurisdiction (to the extent such concepts exist in such jurisdictions) in which the nature of the business it is conducting, or the ownership, operation or leasing of its properties or the management of properties for others makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, constitute a Purchaser Material Adverse Effect. Since the date of its formation, Partnership Merger Sub has not engaged in any activities or conducted any operations other than in connection with or as contemplated by this Agreement. -14- (c) NCIC Merger Sub and Partnership Merger Sub have heretofore made available to the Company complete and correct copies of the charter, bylaws or other organizational documents of each Purchaser Party, in each case as currently in effect. Section 4.2 Authority; No Violations. (a) Each Purchaser Party has all requisite corporate or limited liability company power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, subject to the filing and acceptance of the Articles of Merger and the Partnership Certificate of Merger. Each of the board of directors of NCIC Merger Sub, ES and DH, as sole stockholders of NCIC Merger Sub, and ES and DH, as the sole unitholders of Partnership Merger Sub, have approved the execution and delivery of this Agreement and the transactions contemplated by this Agreement, including the Mergers. No other approval of any equity holder or governing body of any Purchaser Party is required to approve or adopt this Agreement or the transactions contemplated by this Agreement. (b) This Agreement has been duly executed and delivered by each Purchaser Party and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding obligation of each Purchaser Party, enforceable against each Purchaser Party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other Laws of general applicability relating to or affecting creditors' rights and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c) The execution and delivery of this Agreement by the Purchaser Parties does not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, or the loss of a benefit under, or give rise to a right of purchase under, result in the creation of any Lien upon any of the properties or assets of any Purchaser Party or any of their Subsidiaries under, require the consent or approval of any third party, or otherwise result in a detriment or default to any Purchaser Party or any of their Subsidiaries under, any provision of (i) the charter or organizational documents of any Purchaser Party or any of their Subsidiaries, (ii) any loan or credit agreement or note, or any bond, mortgage, indenture, lease, contract or other agreement, instrument, permit, concession, franchise or license applicable to any Purchaser Party or any of their Subsidiaries, or to which their respective properties or assets are bound, or any guarantee by any Purchaser Party or any of their Subsidiaries of any of the foregoing, (iii) any joint venture or other ownership arrangement, or (iv) assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 4.3 are duly and timely obtained or made, any Law or Order applicable to or binding upon any Purchaser Party or any of their Subsidiaries, or any of their respective properties or assets, other than, in the case of any of the foregoing matters, any such conflicts, violations, defaults, rights, Liens or detriments that, individually or in the aggregate, would not materially impair or delay the ability of any Purchaser Party to perform its obligations hereunder or prevent the consummation by any of them of any of the transactions contemplated hereby. -15- Section 4.3 Governmental Approvals and Notices. No consent, approval, order or authorization of, or registration, declaration or filing with, notice to or permit from, any Governmental Entity is required by or on behalf of any Purchaser Party or any of their respective Subsidiaries in connection with the execution and delivery of this Agreement by any Purchaser Party or the consummation by any Purchaser Party of the transactions contemplated hereby, except for: (a) the filing with the SEC of such reports under the Exchange Act, and such other compliance with the Exchange Act and the rules and regulations thereunder, as may be required in connection with this Agreement and the transactions contemplated thereby; (b) the filing and acceptance of the Articles of Merger pursuant to the MGCL; (c) the filing and acceptance of the Partnership Certificate of Merger pursuant to DRULPA and the LLC Act; (d) such filings and approvals as may be required by any applicable state securities or "blue sky" Laws; (e) such filings as may be required in connection with state or local transfer taxes; (f) compliance with any applicable requirements of the HSR Act; (g) compliance with any applicable requirements of laws, rules and regulations in other foreign jurisdictions governing antitrust or merger control matters and (h) any such other consent, approval, order, authorization, registration, declaration, notice, filing or permit that the failure to obtain or make, individually or in the aggregate, would not constitute a Purchaser Material Adverse Effect. Section 4.4 Net Asset Values. No Purchaser Party is aware of any material information, which would reasonably be expected to render the NAV Calculations materially and adversely incorrect, as of the time made. The NAV Calculations were prepared in good faith and are based on underlying assumptions which the Purchaser Parties reasonably believe provide a reasonable basis for the NAV Calculations. Section 4.5 Availability of Funds. The Purchaser Parties shall have available at the Effective Time and the Partnership Merger Effective Time, funds (including but not limited to cash or binding and enforceable commitments) in aggregate amount sufficient to pay the aggregate Merger Consideration and Partnership Merger Consideration, as applicable, less the NCIC and NSP Contribution, and to enable the Purchaser Parties to perform all of their other respective obligations under this Agreement. Section 4.6 Litigation. To the actual knowledge of any Purchaser Party, there is no litigation, arbitration, claim, investigation, suit, action or proceeding pending or threatened against or affecting any Purchaser Party or any of its Subsidiaries, nor, to the actual knowledge of any Purchaser Party, is there any Order outstanding against any Purchaser Party or any of its Subsidiaries, in each case which would reasonably be expected to, individually or in the aggregate, (i) cause any of the transactions contemplated by this Agreement, including the Merger and the Partnership Merger, to be rescinded following their consummation, or (ii) materially impair or delay the ability of any Purchaser Party to perform its obligations hereunder or prevent the consummation by any of them of any of the transactions contemplated hereby. Section 4.7 Certain Relationships. Each of the Purchaser Parties acknowledges that ES and DH are directors and officers of NCIC and NSP and, as such, they are fully familiar with the financial condition and affairs of NCIC and NSP. Each of the Purchaser Parties agree that except for the representations and warranties contained in Article III, such Purchaser Party has not relied on any factual representations of NCIC or NSP or any of their Representatives. -16- Section 4.8 Solvency. Immediately after giving effect to the Mergers and the transactions contemplated hereby, including the payment of the Merger Consideration and the Partnership Merger Consideration, and payment of all related fees and expenses, the Surviving Company and the Surviving Partnership shall be Solvent. Section 4.9 No Other Representations or Warranties. Except for the representations and warranties contained in Article III, each of the Purchaser Parties acknowledges that none of NCIC, NSP nor any other Person on behalf of NCIC or NSP makes any other express or implied representation or warranty with respect to NCIC or NSP or with respect to any other information provided to the Purchaser Parties in connection with the Mergers, including any information, documents, projections, forecasts or other material made available to the Purchaser Parties in connection with their due diligence investigation of the Mergers. ARTICLE V. COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGERS Section 5.1 Conduct of Business by NCIC. (a) Subject to Section 5.1(c), during the period from the date of this Agreement to the earlier of the termination of this Agreement or the Effective Time, NCIC and NSP shall, and shall cause each of the other NCIC Subsidiaries to, except as otherwise expressly provided or permitted by this Agreement or to the extent consented to by NCIC Merger Sub in writing (which consent shall not be unreasonably withheld, delayed or conditioned), (i) carry on its businesses in the usual, regular and ordinary course and in compliance in all material respects with applicable Law and (ii) to the extent consistent with the foregoing clause (i), use its commercially reasonable efforts to preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties, and to keep available the services of their present officers and employees. (b) Without limiting the generality of the foregoing, but subject to Section 5.1(c), during the period from the date of this Agreement to the earlier of the termination of this Agreement or the Effective Time, except as otherwise expressly provided or permitted by this Agreement, as set forth in Section 5.1(b) of the NCIC Disclosure Letter, or to the extent consented to by NCIC Merger Sub in writing (which consent shall not be unreasonably withheld, delayed or conditioned), as required by existing agreements, or as required by NCIC's or its Affiliates' duties to joint venture partners or minority shareholders of any NCIC Affiliate, NCIC and NSP shall not and shall not authorize or commit or agree to, and shall cause the other NCIC Subsidiaries not to (and not to authorize or commit or agree to): (i) (A) declare, set aside for payment or pay any dividends on, or make any other actual, constructive or deemed distributions (whether in cash, shares, property or otherwise) in respect of, any of NCIC's shares, stock or the partnership interests, shares, stock or other equity interests in any NCIC Subsidiary that is not directly or indirectly wholly owned by NCIC, other than (1) dividends or distributions payable to holders of LP Units and GP Units, and (2) dividends or distributions declared, set aside or paid by any wholly owned NCIC Subsidiary to NCIC or any NCIC Subsidiary -17- that is, di-rectly or indirectly, wholly owned by NCIC; (B) split, combine or reclassify any shares, stock, partnership interests or other equity interests or issue or authorize the issuance of any securities in respect of, in lieu of or in substitution for shares of such shares, stock, partnership interests or other equity interests or; (C) purchase, redeem or otherwise acquire any NCIC Common Shares, stock, other equity interests or securities of NCIC or the partnership interests, stock, other equity interests or securities of any NCIC Subsidiary or any options, warrants or rights to acquire, or security convertible into, NCIC Common Shares, stock, other equity interest or securities of NCIC or the partnership interests, stock or other equity interests in any NCIC Subsidiary, except in each case pursuant to the terms of any LP Units or upon exercise of existing rights in favor of NCIC; (ii) (A) classify or re-classify any unissued NCIC Common Shares, shares of stock, units, interests, any other voting or redeemable securities (including LP Units or other partnership interests) or stock-based performance units of NCIC or any NCIC Subsidiary; (B) authorize for issuance, issue, deliver, sell, or grant NCIC Common Shares, shares of stock, units, interests, any other voting or redeemable securities (including LP Units or other partnership interests); or (C) authorize for issuance, issue, deliver, sell, or grant any option or other right in respect of, any NCIC Common Shares, shares of stock, units, interests, any other voting or redeemable securities (including LP Units or other partnership interests), or stock-based performance units of NCIC or any NCIC Subsidiary or any securities convertible into, or any rights, warrants or options to acquire, any such shares, units, interests, voting securities or convertible or redeemable securities (except, with respect to each of clauses (A), (B) and (C), as required under the NSP Partnership Agreement as presently in effect); (iii) amend the NCIC Charter or the NCIC Bylaws, or any other comparable charter or organizational documents of any NCIC Subsidiary, other than to amend the NCIC Charter to allow for the disparate treatment of the Excluded NCIC Shares and the other NCIC Common Shares (such amendment, the "NCIC Charter Amendment"); (iv) (A) merge, consolidate or enter into any other business combination transaction with any Person, (B) acquire (by merger, consolidation or acquisition) any corporation, partnership or other entity or (C) purchase any equity interest in, or all or substantially all of the assets of, any Person or any division or business thereof; (v) sell, transfer, subject to Lien, or otherwise dispose of any of the Continuing MHGC Shares, owned beneficially or of record by NCIC, NSP or any NCIC Subsidiary; (vi) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of NCIC or any of the NCIC Subsidiaries other than the adoption by the shareholders of NCIC of the plan of liquidation that was previously adopted by the NCIC Board of Directors on February 26, 2007 (the "Plan of Liquidation"), provided that, except as provided in Section 5.1(c) below, no action shall be -18- taken to sell assets as contemplated by the Plan of Liquidation on or before the earlier of the Termination Date or the Effective Time; or (vii) agree in writing or otherwise to take any action inconsistent with any of the foregoing. (c) Notwithstanding anything to the contrary contained in this Section 5.1, NCIC and NSP shall be permitted to take the following actions: (i) duly call, give notice of, convene and hold a stockholders meeting, for the purpose of obtaining stockholder approval of the Plan of Liquidation; (ii) sell all of the Non-Continuing MHGC Shares in the Sale, (iii) sell the assets of NSP listed on Annex B so long as the prices therefore are at least equal to the minimum prices set forth on Annex B and (iv) enter into and perform their respective obligations under the Underwriting Agreement, the Lock-Up Agreements, the NCIC Charter Amendment and documents ancillary thereto. ARTICLE VI. ADDITIONAL COVENANTS Section 6.1 Proxy Statement; Stockholder Meeting. (a) Proxy. As promptly as practicable after the date hereof, NCIC shall prepare a proxy statement or an information statement relating to the Stockholder Meeting (together with any amendments thereof or supplements thereto, the "Proxy Statement"). NCIC Merger Sub and Partnership Merger Sub shall furnish all information concerning the Purchaser Parties and their Affiliates that NCIC may reasonably request in connection with the preparation of the Proxy Statement. As promptly as practicable, NCIC shall mail the Proxy Statement to its stockholders. The Proxy Statement shall include the approval of the Mergers by the NCIC Board of Directors. (b) Changes. NCIC Merger Sub and Partnership Merger Sub shall promptly inform NCIC if, at any time prior to the Effective Time, any event or circumstance relating to any of the Purchaser Parties should be discovered by NCIC Merger Sub and Partnership Merger Sub that should be set forth in an amendment or a supplement to the Proxy Statement. NCIC shall promptly inform NCIC Merger Sub and Partnership Merger Sub if, at any time prior to the Effective Time, any event or circumstance relating to NCIC, NSP or any NCIC Subsidiary, should be discovered by NCIC that should be set forth in an amendment or a supplement to the Proxy Statement. (c) Accuracy of Information. Each Purchaser Party and each of NCIC and NSP agrees, as to itself and its Subsidiaries, that none of the information supplied by it or any of its Subsidiaries for inclusion or incorporation by reference in the Proxy Statement will, at the date of mailing to stockholders of NCIC or at the time of the Stockholder Meeting, contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. -19- (d) Calling of Shareholders Meeting; NCIC Recommendation. Subject to Sections 6.1(e) and 6.4, NCIC will, as soon as practicable following the date on which the Proxy Statement is mailed to the stockholders of NCIC, duly call, give notice of, convene and hold the Stockholder Meeting for the purpose of obtaining the Stockholder Approval. Except as provided in Sections 6.1(e) and 6.4, the NCIC Board of Directors shall recommend to its stockholders that they approve and adopt this Agreement and the transactions contemplated by this Agreement, including the Merger and the NCIC Charter Amendment (the "NCIC Recommendation"), and the Proxy Statement shall include the NCIC Recommendation. (e) Change in Recommendation. Notwithstanding any other provision of this Agreement to the contrary, in the event that NCIC has received a proposal from a Person for a Competing Transaction that the NCIC Board of Directors concludes in good faith, after consultation with its outside counsel, is a Superior Competing Transaction and that NCIC has complied with the provisions of Section 6.4(b), then the NCIC Board of Directors shall be permitted to (i) not recommend to the NCIC stockholders that they provide the Stockholder Approval, (ii) withdraw or modify in a manner adverse to the Purchaser Parties its recommendation to the NCIC stockholders that they give the Stockholder Approval, or (iii) recommend such Superior Competing Transaction (each action described in clauses (i) through (iii), a "Change in Recommendation"). Section 6.2 Reasonable Best Efforts. Upon the terms and subject to the conditions set forth in this Agreement, each of the Purchaser Parties, NCIC and NSP agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to fulfill all conditions applicable to such party pursuant to this Agreement and to consummate and make effective, as promptly as reasonably practicable (it being the understanding of the parties that they shall use all commercially reasonable efforts to cause the Closing Date to take place no later than fifty (50) days after the date of this Agreement), the Mergers and the other transactions contemplated by this Agreement, including (i) the obtaining of all necessary, proper or advisable actions or nonactions, waivers, consents and approvals from Governmental Entities and other third parties and the making of all necessary, proper or advisable registrations, filings and notices and the taking of all reasonable steps as may be necessary to obtain an approval, waiver, consent or exemption from any Governmental Entity, (ii) the obtaining of all necessary, proper or advisable consents, approvals, waivers or exemptions from non-governmental third parties, and (iii) the execution and delivery of any additional documents or instruments necessary, proper or advisable to consummate the transactions contemplated by, and to fully carry out the purposes of this Agreement. The parties shall cooperate with each other and promptly prepare and file all necessary documentation, effect all applications, notices, petitions and filings (including, to the extent necessary, any notification required by the HSR Act, which shall be filed by the Purchaser Parties no later than ten days after the date of this Agreement), and shall use reasonable best efforts to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Entities that are necessary, appropriate or advisable to consummate the Merger and the other transactions contemplated by this Agreement. Section 6.3 No Solicitation of Transactions. -20- (a) None of NCIC, NSP or any other NCIC Subsidiary shall, nor shall they authorize, directly or indirectly, any officer, director, employee, agent, investment banker, financial advisor, attorney, or other agent, representative or Affiliate of NCIC, NSP or any other NCIC Subsidiary acting on their behalf to initiate, solicit, knowingly encourage or knowingly facilitate (including by way of furnishing nonpublic information or assistance) any inquiries or the making of any proposal or other action that constitutes, or may reasonably be expected to lead to, any Competing Transaction, or enter into discussions or negotiate with any Person in furtherance of such inquiries or to obtain a Competing Transaction. NCIC and NSP shall take, and NCIC shall cause the other NCIC Subsidiaries to take, all actions reasonably necessary to cause their respective officers, directors, employees, investment bankers, financial advisors, attorneys, and any other agents, representatives or Affiliates to, immediately cease any discussions, negotiations or communications with any party or parties with respect to any Competing Transaction. NCIC, NSP and the NCIC Subsidiaries shall be responsible for any failure on the part of their respective officers, directors, employees, investment bankers, financial advisors, attorneys, brokers, finders and any other agents, representatives or Affiliates to comply with this Section 6.3(a). (b) NCIC and NSP shall notify the Purchaser Parties, promptly following receipt, of the material terms of any written proposal (including the identity of the parties) which any of NCIC, NSP or any of the other NCIC Subsidiaries or any such officer, director, employee, agent, investment banker, financial advisor, attorney, or other representative or Affiliate may receive after the date hereof relating to a Competing Transaction and shall keep the Purchaser Parties reasonably informed as to the status of and any material developments regarding any such proposal. (c) For purposes of this Agreement, a "Competing Transaction" means any of the following (other than the transactions expressly provided for in this Agreement): (i) any merger, consolidation, share exchange, business combination or similar transaction involving NCIC or NSP; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of any of the Continuing MHGC Shares (in each case, including by means of an issuance, sale or other disposition of voting securities) of NCIC and the NCIC Subsidiaries, taken as a whole, or of 15% or more of any class of voting securities of NCIC, NSP or any of the NCIC Subsidiaries, in a single transaction or series of related transactions, excluding any bona fide financing transactions that do not, individually or in the aggregate, have as a purpose or effect the sale or transfer of control of such assets; or (iii) any tender offer or exchange offer for 15% or more of any class of voting securities of NCIC or NSP. (d) Superior Competing Transaction. For purposes of this Agreement, a "Superior Competing Transaction" means a bona fide written proposal for (i) any merger, consolidation, share exchange, business combination or similar transaction involving NCIC, (ii) any sale, lease, exchange, mortgage, pledge transfer or other disposition of all or a substantial portion of the Continuing MHGC Shares of NCIC and the NCIC Subsidiaries, or of 50% or more of the voting securities of NCIC or (iii) any tender offer or exchange offer for 50% or more of the voting securities of NCIC that the NCIC Board of Directors determines, in good faith and after consultation with its legal advisors, is reasonably capable of being financed and consummated and is on terms that, if consummated, are more favorable to the NCIC stockholders, from a fi- -21- nancial point of view, than the Mergers (taking into account any changes to the Merger Consideration and Partnership Merger Consideration committed to in writing by the Purchaser Parties). Section 6.4 Board Actions. (a) Receipt of Proposal. Following the receipt by NCIC or any of its Subsidiaries of a proposal from a Person for a Competing Transaction as contemplated in Section 6.3(b), and provided that NCIC and NSP are not in breach of Section 6.3(a), the NCIC Board of Directors may, directly or through any of its Representatives, (i) contact such Person and its Representatives for the purpose of clarifying the proposal and any material terms thereof and the capability of consummation, so as to determine whether the proposal for a Competing Transaction is reasonably likely to lead to a Superior Competing Transaction and (ii) if the NCIC Board of Directors determines in good faith following consultation with its legal advisors that such proposal for a Competing Transaction is reasonably likely to lead to a Superior Competing Transaction, the NCIC Board of Directors may (directly or through its Representatives) (A) furnish non-public information with respect to NCIC and its Subsidiaries to the Person that made such proposal, (B) participate in discussions and negotiations with such Person regarding such proposal and (C) subject to Sections 6.3(b) and 6.4(b), following receipt of a proposal for a Competing Transaction that the NCIC Board of Directors determines in good faith is reasonably likely to lead to a Superior Competing Transaction, but prior to the Stockholder Approval, make a Change in Recommendation. Nothing in this Agreement shall prevent the NCIC Board of Directors from (1) complying with Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act with respect to a Competing Transaction, (2) issuing a "stop, look and listen" announcement, (3) complying with its disclosure obligations under U.S. federal or state law regarding a Competing Transaction or (4) taking any action that any court of competent jurisdiction orders NCIC to take. (b) Change in Recommendation. The NCIC Board of Directors shall not effect any Change in Recommendation with respect to a Superior Competing Transaction unless the NCIC Board of Directors has given the Purchaser Parties at least forty-eight (48) hours' notice of its intent to take such action. Section 6.5 Public Announcements. Except as provided in Section 6.3(a), NCIC, NSP and the Purchaser Parties shall consult with each other before issuing any press release or otherwise making any public statements or filings with respect to this Agreement or any of the transactions contemplated hereby and shall not issue any such press release or make any such public statement or filing without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that a party may, without the prior consent of the other party, issue such press release or make such public statement or filing as may be required by Law or the applicable rules of any stock exchange if it has used its commercially reasonable efforts to consult with the other party and to obtain such party's consent but has been unable to do so prior to the time such press release or public statement or filing is required to be released, filed or furnished pursuant to such Law. -22- Section 6.6 Indemnification; Directors' and Officers' Insurance. (a) In the event of any threatened or actual claim, action, suit, demand, proceeding or investigation, whether civil, criminal or administrative (each, an "Action"), including any Action in which any person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Effective Time, a trustee, director, officer or employee of the NCIC or any of its Subsidiaries (each, an "Indemnified Party" and collectively, the "Indemnified Parties") is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he or she is or was a trustee, director, officer, employee, or agent of NCIC or any of its Subsidiaries, or is or was serving at the request of NCIC or any of its Subsidiaries as a director, officer, employee, partner, member or agent of another corporation, partnership, joint venture, trust or other enterprise, in each case at or prior to the Effective Time or (ii) the negotiation, execution or performance of this Agreement, any agreement or document contemplated hereby or delivered in connection herewith, or any of the transactions contemplated hereby, from and after the Effective Time, the Surviving Company (together with the Company, the "Indemnitors"), shall jointly and severally indemnify and hold harmless, as and to the fullest extent that a Maryland corporation is permitted under applicable Law to indemnify its own officers and directors, each Indemnified Party against any losses, claims, damages, liabilities, costs, expenses (including reasonable attorneys' fees and expenses), judgments, fines and amounts paid in settlement in connection with any such Action (collectively, "Indemnifiable Amounts"), and in the event of any such Action (whether asserted before or after the Effective Time), the Indemnitors shall promptly (but in any event within ten (10) calendar days of written request) advance expenses pending the final disposition of any such Action to each Indemnified Party to the fullest extent permitted by applicable Law. (b) The Indemnitors shall have the right to defend each Indemnified Party in any Action that may give rise to the payment of Indemnifiable Amounts hereunder; provided, however, that the Indemnitors shall notify such Indemnified Party of any such decision to defend within twenty (20) calendar days of receipt of written notice of any such Action, and provided, further, that the Indemnitors shall not, without the prior written consent of such Indemnified Party, consent to the entry of any judgment against such Indemnified Party or enter into any settlement or compromise that (i) includes an admission of fault of such Indemnified Party or (ii) does not include, as an unconditional term thereof, the full release of such Indemnified Party from all liability in respect of such Action, which release shall be in form and substance reasonably satisfactory to such Indemnified Party. (c) Notwithstanding Section 6.6(b), if in an Action to which an Indemnified Party is a party by reason of the Indemnified Party's service as a trustee, director, officer, employee, or agent of NCIC or any of its Subsidiaries, (i) such Indemnified Party reasonably concludes, after consultation with counsel, that he or she may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with the position of other defendants in such Action, (ii) a conflict of interest or potential conflict of interest exists between such Indemnified Party and the Indemnitors, or (iii) the Indemnitors fail to assume the defense of such Action in a timely manner, such Indemnified Party shall be entitled to be represented by separate legal counsel of such Indemnified Party's choice at the expense of the Indemnitors; provided, however, that none of the Indemnitors shall be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld, con- -23- ditioned or delayed) and provided, further, that the Surviving Corporation shall not be responsible for more than one counsel for all Indemnified Parties, taken as a whole. Subject to the prior sentence, for the avoidance of doubt, each Indemnified Party represented by counsel in any Action on or prior to the Closing Date may, at such Indemnified Party's election, continue to be represented by such counsel at the expense of the Indemnitors. (d) The Purchaser Parties agree that all rights to indemnification and contribution existing in favor of, and all exculpations and limitations of the personal liability of, the Indemnified Parties provided for in the NCIC Charter or the NCIC Bylaws, as well as indemnification agreements, as in effect as of the date hereof, with respect to matters occurring at or prior to the Effective Time, including the Merger, shall continue in full force and effect in accordance with their terms. NCIC shall, prior to the Effective Time, obtain and fully pay for a policy (providing coverage for the Indemnified Parties) with a claims period of at least six (6) years from the Effective Time from an insurance carrier with the same or better credit rating as NCIC's current insurance carrier with respect to directors' and officers' liability insurance in an amount and scope no less favorable than NCIC's existing policies with respect to matters existing or occurring at or prior to the Effective Time. From and after the Effective Time, the Purchaser Parties and the Surviving Company shall maintain such policy in full force and effect for its full term and shall continue to honor NCIC's obligations thereunder. The Purchaser Parties will promptly notify the Indemnified Parties if for any reason such policy will lapse prior to the conclusion of its six-year term, upon the Purchaser Parties receiving notice thereof from the insurer or otherwise obtaining knowledge thereof. (e) This Section 6.6 is intended for the irrevocable benefit of, and to grant third party rights to, the Indemnified Parties and shall be binding on all successors and assigns of NCIC and the Surviving Company. Each of the Indemnified Parties shall be entitled to enforce the covenants contained in this Section 6.6. (f) In the event that the Surviving Company (i) consolidates with or merges into any other person or entity and shall not be the continuing or surviving entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person or entity, then, and in each such case, such continuing or surviving entity or transferee, as the case may be, shall assume the obligations set forth in this Section 6.6. Section 6.7 Fairness Opinion. NCIC shall use its commercially reasonable efforts to obtain as promptly as practicable a written opinion from a financial advisor approved by the NCIC Board of Directors regarding the fairness, from a financial point of view, of the Merger Consideration and the Partnership Merger Consideration to the holders of NCIC Common Shares and LP Units (in each case, other than ES, DH and their affiliates) (such opinion, the "Fairness Opinion"). ARTICLE VII. CONDITIONS PRECEDENT Section 7.1 Conditions to Each Party's Obligation to Effect the Mergers. The respective obligations of NCIC, NSP and the Purchaser Parties to effect the Mergers and the other -24- transactions contemplated by this Agreement on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions: (a) Stockholder Approval. The Stockholder Approval of the Merger and of the NCIC Charter Amendment shall have been obtained. (b) No Injunctions or Restraints. No applicable Law shall have been adopted, promulgated or enforced by any Governmental Entity, and no temporary restraining order, preliminary or permanent injunction or other Order issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the Merger, the Partnership Merger or any of the other transactions or agreements contemplated by this Agreement shall be in effect. (c) HSR Act Clearance. Any waiting periods applicable to the transaction shall have expired or been earlier terminated. (d) Transfer of Non-Continuing MHGC Shares. Either, (i) all of the Non-Continuing MHGC Shares shall have been sold in the Sale on or prior to August 10, 2007 (the "Sale Date"), or (ii) if the Sale has not been effected by the Sale Date, (x) the NCIC Board of Directors, shall, in its sole discretion, have elected to cause a distribution to the shareholders of NCIC of all of the Combined MHGC Shares and (y) NCIC, as the general partner and a limited partner of NSP, shall, in its sole discretion, have elected to cause a pro rata distribution in kind of all of the NSP-Owned MHGC Shares, such election in each case within 10 Business Days of the Sale Date (such actions described in clause (ii), collectively, the "NCIC Distribution Election"). For the avoidance of doubt, in no event shall either the NCIC Board of Directors or NCIC have any obligation whatsoever to make an NCIC Distribution Election or to cause a pro rata distribution in kind of any of the NCIC-Owned MHGC Shares or NSP-Owned MHGC Shares, respectively. (e) NCIC Charter Amendment. The NCIC Charter Amendment shall have been filed and accepted in accordance with the MGCL. Section 7.2 Conditions to Obligations of Purchaser Parties. The obligations of the Purchaser Parties to effect the Mergers and the other transactions contemplated by this Agreement on the Closing Date are further subject to the following conditions, any one or more of which may be waived by any of the Purchaser Parties, subject to applicable Law: (a) Representations and Warranties of NCIC. The representations and warranties of NCIC and NSP set forth in this Agreement shall be true and correct as of the date hereof and as of the Closing Date as if made on and as of the Closing Date (except to the extent that any such representation or warranty, by its terms, is expressly limited to a specific date, in which case, as of such specific date), except where the failure of any such representation or warranty to be so true and correct would not, individually or in the aggregate, constitute an NCIC Material Adverse Effect. (b) Performance of Covenants and Agreements of NCIC. NCIC and NSP shall have performed in all material respects all covenants and agreements required to be performed by them under this Agreement at or prior to the Effective Time. -25- (c) Officer's Certificate. Purchaser shall have received a certificate signed on behalf of NCIC by an executive officer of NCIC to the effect specified in Sections 7.2(a) and 7.2(b) Section 7.3 Conditions to Obligations of NCIC and NSP. The obligations of NCIC and NSP to effect the Mergers and the other transactions contemplated by this Agreement on the Closing Date are further subject to the following conditions, any one or more of which may be waived by NCIC and NSP, subject to applicable Law: (a) Representations and Warranties of Purchaser Parties. The representations and warranties of the Purchaser Parties set forth in this Agreement shall be true and correct as of the date hereof and as of the Closing Date as if made on and as of the Closing Date (except to the extent that any such representation or warranty, by its terms, is expressly limited to a specific date, in which case, as of such specific date), except where the failure of any such representation or warranty to be so true and correct would not, individually or in the aggregate, constitute a Purchaser Material Adverse Effect. (b) Performance of Covenants and Agreements of Purchaser Parties. The Purchaser Parties shall have performed in all material respects all covenants and agreements required to be performed by them under this Agreement at or prior to the Effective Time. (c) Officer's Certificate. NCIC shall have received a certificate signed on behalf of NCIC Merger Sub and Partnership Merger Sub by an executive officer of NCIC Merger Sub and Partnership Merger Sub to the effect specified in Sections 7.3(a) and 7.3(b). (d) Fairness Opinion. NCIC shall have received the Fairness Opinion. ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER Section 8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time whether before or after the Stockholder Approval: (a) by the mutual written consent of NCIC, NCIC Merger Sub and Partnership Merger Sub; (b) by NCIC or NCIC Merger Sub or Partnership Merger Sub, if the Merger shall not have occurred on or prior to the date that is 50 days from the date of this Agreement (the "Termination Date"); provided, however, that a party that has materially failed to comply with any obligation of such party set forth in this Agreement shall not be entitled to exercise its right to terminate under this Section 8.1(b); (c) by NCIC or NCIC Merger Sub or Partnership Merger Sub, if any Order by any Governmental Entity of competent authority preventing the consummation of the Merger shall have become final and nonappealable; or -26- (d) by NCIC or NCIC Merger Sub or Partnership Merger Sub if, upon a vote at the Stockholder Meeting (or any adjournment or postponement thereof), the Stockholder Approval shall not have been obtained. (e) by NCIC, if all the closing conditions set forth in Section 7.1 and Section 7.3 have been satisfied (or are capable of being satisfied) and the Exchange Fund shall not have been fully funded, no later than three (3) Business Days prior to the Termination Date, in accordance with Section 2.5(a); or (f) by NCIC or any Purchaser Party (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein), if (i) there shall have been a material breach of any of the representations, warranties, covenants or agreements set forth in this Agreement on the part of the other party, (ii) such breach has rendered the satisfaction of any conditions contained in Article VII hereof impossible, (iii) such breach has not been waived in writing by the terminating party; (iv) such breach has not been cured (following written notice thereof by the terminating party) on or prior to the third (3rd) Business Day prior to the Termination Date and (v) such breach has had or would have, individually or in the aggregate, a material adverse effect on the ability of the breaching party to timely consummate the Mergers and the other transactions contemplated hereby; or (g) by NCIC, if the Sale shall not have been consummated by the Sale Date, except if the NCIC Board of Directors have elected to cause the NCIC Distribution Election within ten (10) Business Days of the Sale Date as contemplated in Section 7.1(d). A terminating party shall provide written notice of termination to the other parties specifying with particularity the basis for such termination. If more than one provision in this Section 8.1 is available to a terminating party in connection with a termination, a terminating party may rely on any or all available provisions in this Section 8.1 for any such termination. Section 8.2 Break-Up Fee. NCIC, NSP and each Purchaser Party agree that: (a) NCIC, NSP and each Purchaser Party agree that: (i) if a Purchaser Party shall terminate this Agreement pursuant to (i) Section 8.1(d) (No Stockholder Approval), if prior to the Termination Date there shall have been a Superior Competing Proposal and a Change of Recommendation or (ii) 8.1(f) (Material Breach), then NCIC shall pay to the Purchaser Parties, collectively, an amount equal to the Break-Up Fee; and (ii) if NCIC shall terminate this Agreement pursuant to Section 8.1(e) (No Funding of Exchange Fund) or Section 8.1(f) (Material Breach), then the Purchaser Parties, collectively, shall pay to NCIC an amount equal to the Reverse Break-Up Fee. (b) For purposes of this Agreement, the "Break-Up Fee" shall be an amount equal to Five Million Dollars ($5,000,000). Payment of the Break-Up Fee shall be made, as directed by the Purchaser Parties, by wire transfer of immediately available funds. -27- (c) For purposes of this Agreement, the "Reverse Break-Up Fee" shall be an amount equal to Five Million Dollars ($5,000,000). Payment of the Reverse Break-Up Fee shall be made, at the election of the Purchaser Parties, (i) by wire transfer of immediately available funds and/or (ii) by allowing NCIC to retain and apply a portion (not to exceed the amount of the Reverse Break-Up Fee) of any proceeds otherwise distributable to ES or DH or their affiliates as a result of any sale by NCIC or NSP of the Continuing MHGC Shares or NSP-Owned MHGC Shares, as applicable or (if there is to be a distribution to stockholders of NCIC of MHGC Shares) a portion of any MHGC Shares otherwise to be distributed to ES or DH or their affiliates. NCIC shall have the absolute right to satisfy any obligations with respect to the Reverse Break-Up Fee which are not discharged by wire transfer of immediately available funds either by using the proceeds or by transfer of shares, duly endorsed or accompanied by an instrument of transfer, described in clause (ii) above. Section 8.3 Effect of Termination. In the event of termination of this Agreement by any party as provided in Section 8.1, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of any party, other than as provided in this Article VIII, provided, however, that nothing contained herein shall relieve any person of liability for fraud or a willful breach or NCIC Merger Sub and Partnership Merger Sub's failure to pay the Merger Consideration or the Partnership Merger Consideration upon the satisfaction or waiver of the conditions to Closing set forth in Article VII. Section 8.4 Authorization. Each of ES and DH hereby expressly authorizes NCIC to retain and apply from the portion (not to exceed the amount of the Reverse Break-Up Fee) of any proceeds otherwise distributable to ES or DH or their affiliates as a result of any sale by NCIC or NSP of the Continuing MHGC Shares or NSP-Owned MHGC Shares, or (if there is to be a distribution to stockholders of NCIC of MHGC Shares) the portion of any MHGC Shares otherwise to be distributed to ES, DH or their affiliates, the amount necessary to satisfy any obligations that exist with respect to the Reverse Break-Up Fee that have not been discharged by wire transfer of immediately available funds or by transfer of shares, duly endorsed or accompanied by an instrument of transfer, as described in Section 8.2(c) above. The obligations of ES and DH set forth in this Agreement are several and not joint. and shall be divided equally among them. ES as DH are each fully responsible for 50% of any obligations of the other Purchaser Parties. Section 8.5 Maximum Recovery. (a) Notwithstanding any other provision of this Agreement to the contrary, if any Purchaser Party fails to effect the Closing or otherwise are in breach of this Agreement, then the aggregate liability of the Purchaser Parties and any of their respective former, current and future direct or indirect equity holders, controlling persons, stockholders, directors, officers, employees, agents, Affiliates, members, managers, general or limited partners or assignees shall be limited to the amount of the Reverse Break-Up Fee and none of the Purchaser Parties or any of their respective former, current and future direct or indirect equity holders, controlling persons, stockholders, directors, officers, employees, agents, Affiliates, members, managers, general or limited partners or assignees shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated hereby except as expressly provided herein. -28- (b) Notwithstanding any other provision of this Agreement to the contrary, if NCIC and NSP fail to effect the Closing or otherwise are in breach of this Agreement, then the aggregate liability of NCIC, NSP and any of the respective former, current and future direct or indirect equity holders, controlling persons, stockholders, directors, officers, employees, agents, Affiliates, members, managers, general or limited partners or assignees shall be limited to the amount of the Break-Up Fee and none of the NCIC, NSP or any of their respective former, current and future direct or indirect equity holders, controlling persons, stockholders, directors, officers, employees, agents, Affiliates, members, managers, general or limited partners or assignees shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated hereby except as expressly provided herein. Section 8.6 Amendment. Notwithstanding anything to the contrary herein, this Agreement may be amended, and compliance with any provision hereof may be waived (or the time for performance of any obligation extended), by mutual agreement of NCIC Merger Sub, Partnership Merger Sub and NCIC in writing at any time before or after the Stockholder Approval is obtained and prior to the filing of the Articles of Merger with the Maryland Department with respect to the Merger; provided, however, that, after the Stockholder Approval is obtained, no such amendment, modification or supplement shall be made that would under applicable Law require the approval of the holders of NCIC Common Shares without obtaining such approval. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. ARTICLE IX. GENERAL PROVISIONS Section 9.1 Nonsurvival of Representations and Warranties. None of the representations, warranties or covenants in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, provided, however, that Section 6.6, Article VIII and Section 9.14 shall survive the Effective Time. Section 9.2 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing (and also made orally if so required pursuant to any Section of the Agreement) and shall be deemed given if delivered personally, sent by overnight courier (providing proof of delivery) to the parties or sent by telecopy (providing confirmation of transmission) at the following addresses or telecopy numbers (or at such other address or telecopy number for a party as shall be specified by like notice): if to Purchaser Parties, to: c/o Edward Scheetz 475 Tenth Avenue 11th Floor New York, New York 10018 Fax: (212) 472-6181 -29- with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Fax: (212) 403-2000 Attention: Adam O. Emmerich James Cole, Jr. if to NCIC or NSP, to: Northstar Capital Investment Corp. 399 Park Avenue, 18th Floor New York, New York 10022 Fax: (212) 319-4557 Attention: Richard J. McCready with a copy to: Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004 Fax: (212) 558-3588 Attention: Robert W. Downes and NCIC Special Committee c/o Grove International Partners LLP 126 East 56th Street Suite 1120 New York, New York 10022 Fax: (917) 591-7152 Attention: Dang T. Phan and Richards Kibbe & Orbe LLP One World Financial Center New York, New York 10281 Fax: (212) 530-1800 Attention: William Q. Orbe and -30- Venable LLP Two Hopkins Plaza, Suite 1800 Baltimore, Maryland 21201 Fax: (410) 244-7742 Attention: Michael D. Schiffer and Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Fax: (212) 403-2000 Attention: Adam O. Emmerich James Cole, Jr. Section 9.3 Interpretation. When a reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The words "hereof," "herein" and "hereby" refer to this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Section 9.4 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity. Section 9.5 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Facsimile transmission of any signature and/or retransmission of any signature will be deemed the same as delivery of an original. At the request of any party, the parties will confirm facsimile transmission by signing a duplicate original document. Section 9.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the Voting Agreements constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement. This Agreement is not intended to and shall not confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 9.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. Section 9.8 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned or delegated, in whole or in part, by operation -31- of law or otherwise by any of the parties without the prior written consent of the other parties, provided that each of NCIC Merger Sub and Partnership Merger Sub shall be permitted to transfer or assign to one of its Affiliates the right to enter into the transactions contemplated by this Agreement, but no such transfer or assignment shall relieve such Person of its obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. Section 9.9 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Entity to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. Section 9.10 Exhibits; Disclosure Letter. The Exhibits referred to herein and the NCIC Disclosure Letter, and all exhibits or attachments hereto or thereto, are intended to be and hereby are specifically made a part of this Agreement. Any matter set forth in any section or subsection of the NCIC Disclosure Letter shall be deemed to be a disclosure for all purposes of this Agreement and all other sections or subsections of the NCIC Disclosure Letter, but shall expressly not be deemed to constitute an admission by the NCIC or any of the NCIC Subsidiaries, or otherwise imply, that any such matter rises to the level of an NCIC Material Adverse Effect, or is otherwise material for purposes of this Agreement or the NCIC Disclosure Letter. Section 9.11 Mutual Drafting. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing this Agreement to be drafted. Section 9.12 Jurisdiction; Venue. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF MARYLAND AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF MARYLAND SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH DOCUMENT, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED SOLELY IN SUCH A MARYLAND STATE OR FEDERAL COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES -32- AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 9.2 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY APPLICABLE LAWS, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF. Section 9.13 Waiver of Trial by Jury. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.13. Section 9.14 Expenses. (a) Purchaser Parties. Notwithstanding any other provision of this Agreement to contrary, in the event that the Mergers are not consummated, each of the Purchaser Parties agrees that it will be responsible for payment of any legal expenses incurred by them in connection with this Agreement and the transactions contemplated hereby, and that it shall have no right to seek reimbursement of such expenses from any other party. In the event that the Mergers are consummated, all fees and expenses incurred by the Purchaser Parties in connection with this Agreement and the transactions contemplated hereby, shall be included in the Per Share Transaction Expenses. (b) NCIC, NSP and NCIC Special Committee. Notwithstanding any other provision of this Agreement to contrary, the expenses incurred by NCIC, NSP and the NCIC Special Committee, including, without limitation, the fees and expenses of Venable LLP, Sullivan & Cromwell LLP and Richards Kibbe & Orbe LLP, the fees for the Fairness Opinion, and the fees for the policy contemplated by Section 6.6(d), in connection with this Agreement and the transactions contemplated hereby shall be paid by NCIC. ARTICLE X. CERTAIN DEFINITIONS Section 10.1 Certain Definitions. (a) For purposes of this Agreement: -33- "Affiliate" of any Person has the meaning assigned thereto by Rule 12b-2 under the Exchange Act. "Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to be closed. "Combined MHGC Shares" means 9,908,114 MHGC Shares (which is determined by adding (i) the 9,122,521 NCIC-Owned MHGC Shares plus (ii) 75.38% of the 1,042,177 NSP-Owned MHGC Shares). "Code" means the Internal Revenue Code of 1986, as amended. "Delaware Secretary of State" means the Secretary of State of the State of Delaware. "Law" means any federal, state or local or foreign statute, law, regulation, permit, license, approval, authorization, rule, ordinance or code of any Governmental Entity, including any judicial or administrative interpretation thereof. "Liens" means any and all pledges, claims, liens, charges, proxies, preemptive rights, voting trusts, voting agreements, options, rights of first offer or refusal, encumbrances and security interests of any kind or nature whatsoever. "LLC Act" means the Delaware Limited Liability Company Act. "Lock Up Letters" means the Lock Up Letters dated on or about the date hereof to Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated in connection with the MHGC public offering of common stock, $.01 par value per share. "MHGC" means Morgans Hotel Group Co., a Delaware corporation. "MHGC Share" means a share of common stock, par value $0.01 per share, of MHGC. "NAV Calculations" means the net asset value calculations and related information, dated as of July 10, 2007, prepared by management and distributed to the NCIC Board of Directors. "NCIC Bylaws" means the bylaws of NCIC in effect as of the date hereof. "NCIC Charter" means the charter of NCIC in effect as of the date hereof. "NCIC Material Adverse Effect" means any change or effect that has a material adverse effect on the ability of NCIC or NSP to timely consummate the Mergers and the other transactions contemplated hereby. "NCIC Special Committee" means the special committee of the NCIC Board of Directors that was formed pursuant to resolutions dated April 16, 2007 and confirmed and ratified pursuant to resolutions dated April 26, 2007. -34- "NCIC Subsidiary" means each Subsidiary of NCIC; provided, however, the entities disclosed in Section 10.1 of the NCIC Disclosure Letter shall not be Subsidiaries of NCIC for purposes of this Agreement. "NSP Partnership Agreement" means the limited partnership agreement of NSP. "Order" means any award, judgment, injunction, consent, ruling, decree or order (whether temporary, preliminary or permanent) issued, adopted, granted, awarded or entered into by any Governmental Entity or private arbitrator of competent jurisdiction. "Outstanding NCIC Common Shares" means all outstanding NCIC Common Shares, less all such NCIC Common Shares owned by any wholly owned subsidiary of NCIC. As of the date hereof, there are 20,946,891 Outstanding NCIC Common Shares. "Person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity. "Purchaser Material Adverse Effect" means any change or effect that has a material adverse effect on the ability of any Purchaser Party to timely consummate the Mergers and the other transactions contemplated hereby. "Representatives" means, with respect to any Person, such Person's officers, trustees, directors, employees, agents, representatives, investment bankers, financial advisors, attorneys, brokers, finders, Affiliates and other representatives. "Solvent" means, with respect to any Person, as of the date of determination: (i) the fair value of the assets of such Person (individually) and such Person and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of such Person (individually) and such Person and its Subsidiaries on a consolidated basis, respectively; (ii) the present fair saleable value of the property of such Person (individually) and such Person and its Subsidiaries on a consolidated basis, will be greater than the amount that will be required to pay the probable liability of such Person (individually) and such Person and its Subsidiaries on a consolidated basis, respectively, on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) such Person (individually) and such Person and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) such Person (individually) and such Person and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date. "Subsidiary" of any Person means any corporation, partnership, limited liability company, joint venture or other legal entity of which (i) such Person, or its Subsidiary, is the general partner or manager or (ii) such Person (either directly or through or together with another Subsidiary of such Person) owns more than 50% of the voting stock or value of such corporation, partnership, limited liability company, joint venture or other legal entity. -35- "Tax" or "Taxes" means any U.S. federal, state, local and foreign taxes and similar governmental charges (together with any interest, penalties, or additions thereto), including income, gross receipts, license, withholding, property, recording, stamp, sales, use, franchise, employment, payroll, excise, environmental, value added, or gains taxes. "Underwriting Agreement" means the Underwriting Agreement dated on or about the date hereof among MHGC, Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated. (b) Each of the following additional terms is defined in the Section set forth opposite such term: TERM SECTION - ---- ------- Action.........................................................6.6(a) Agreement......................................................Preamble Articles of Merger.............................................1.3(b) Capitalization Date............................................3.2(a) Change in Recommendation.......................................6.1(e) Closing........................................................1.2. Closing Date...................................................1.2. Competing Transaction..........................................6.3(c) Continuing MHGC Shares.........................................Recitals DH.............................................................Preamble Dissenting NCIC Shares.........................................2.7. Dissenting Stockholder.........................................2.7. DRULPA.........................................................Recitals Effective Time.................................................1.3(b) ES.............................................................Preamble Exchange Act...................................................3.4. Exchange Agent.................................................2.5(a) Exchange Fund..................................................2.5(a) Excluded NCIC Shares...........................................2.1(a) Excluded Unit..................................................2.2(b) Fairness Opinion...............................................6.7 Governmental Entity............................................2.5(e) GP Units.......................................................3.2(b) HSR Act........................................................3.4. Indemnifiable Amounts..........................................6.6(a) Indemnified Parties............................................6.6(a) Indemnified Party..............................................6.6(a) Indemnitors....................................................6.6(a) Letter of Transmittal..........................................2.5(b)(ii) LP Unit........................................................Recitals Maryland Department............................................1.3(b) Merger.........................................................1.1(b) Merger Consideration...........................................2.1(b) Merger Sub Bylaws..............................................2.3(a) Merger Sub Charter.............................................2.3(a) -36- Mergers........................................................1.1(b) MHGC...........................................................Recitals MHGC Common Stock..............................................Recitals MGCL...........................................................Recitals NCIC...........................................................Preamble NCIC and NSP Contribution......................................2.5(a) NCIC Board of Directors........................................Recitals NCIC Charter Amendment.........................................5.1(b)(iii) NCIC Common Share Certificates.................................2.5(b)(ii) NCIC Common Shares.............................................Recitals NCIC Disclosure Letter.........................................Art. III NCIC Distribution Election.....................................7.1(d) NCIC Merger Sub................................................Preamble NCIC-Owned MHGC Common Stock...................................Recitals NCIC-Owned MHGC Shares.........................................Recitals NCIC Recommendation............................................6.1(d) Non-Continuing MHGC Shares.....................................Recitals NSP............................................................Preamble Partnership Certificate of Merger..............................1.3(a) Partnership Merger.............................................1.1(a) Partnership Merger Consideration...............................2.2(a) Partnership Merger Effective Time..............................1.3(a) Partnership Merger Sub.........................................Preamble Per Share Transaction Expenses.................................2.1(b) Plan of Liquidation............................................5.1(b)(vi) Proxy Statement................................................6.1(a) Purchaser Parties..............................................Preamble Purchaser Parties Disclosure Letter...........................Art. IV Sale...........................................................Recitals Sale Date......................................................7.1(d) SEC............................................................3.4. Stockholder....................................................Preamble Stockholder Approval...........................................3.3(a) Stockholder Meeting............................................3.3(a) Stockholders...................................................Preamble Superior Competing Transaction.................................6.3(d) Surviving Company..............................................1.1(b) Surviving Company Common Share.................................2.1(a) Surviving Partnership..........................................1.1(a) Surviving Partnership Unit.....................................2.2(b) Takeover Statute...............................................3.6. Termination Date...............................................8.1(b) Uncertificated NCIC Common Shares 2.5(b) Unitholder Letter of Transmittal...............................2.5(c)(i) ***** -37- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. /s/ W. EDWARD SCHEETZ ---------------------------------- W. EDWARD SCHEETZ /s/ DAVID T. HAMAMOTO ---------------------------------- DAVID T. HAMAMOTO [Signature Page to the Merger Agreement] NORTHSTAR CAPITAL INVESTMENT CORP. By: /s/ RICHARD J. McCREADY ------------------------------ Name: Richard J. McCready Title: President NORTHSTAR PARTNERSHIP, L.P. By: NORTHSTAR CAPITAL INVESTMENT CORP., its general partner By: /s/ RICHARD J. McCREADY ------------------------------ Name: Richard J. McCready Title: President [Signature Page to the Merger Agreement] EX-99.17 3 exh-17.txt UNDERWRITING AGREEMENT 12,210,840 SHARES MORGANS HOTEL GROUP CO. COMMON STOCK ($.01 PAR VALUE PER SHARE) UNDERWRITING AGREEMENT July 19, 2007 1 July 19, 2007 Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Stanley & Co. Incorporated As representatives of the several Underwriters Named in Schedule I hereto c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center, 250 Vesey Street New York, New York 10080 Dear Sirs and Mesdames: Morgans Hotel Group Co., a Delaware corporation (the "COMPANY") confirms its agreement with each of the several Underwriters named in Schedule I hereto (the "UNDERWRITERS"), for whom Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives (the "REPRESENTATIVES"), whereby the Company and certain shareholders of the Company (the "SELLING SHAREHOLDERS") named on Schedule II hereto severally propose to sell to the several Underwriters an aggregate of 12,210,840 shares of the common stock, $.01 par value per share, of the Company (the "FIRM SHARES"), of which 2,777,495 shares are to be issued and sold by the Company and an aggregate of 9,433,345 shares are to be sold by the Selling Shareholders, each Selling Shareholder selling the amount set forth opposite such Selling Shareholder's name in Schedule II hereto. The Company also proposes to issue and sell to the several Underwriters not more than an additional 1,831,600 shares of its common stock, $.01 par value per share (the "ADDITIONAL SHARES"), if and to the extent that you, as Representatives, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "SHARES." The shares of common stock, $.01 par value per share, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the "COMMON STOCK." The Company and the Selling Shareholders are hereinafter sometimes collectively referred to as the "SELLERS." The Company has filed with the Securities and Exchange Commission (the "COMMISSION") a registration statement on Form S-3 (No. 333-144150), including a prospectus, relating to the registration of certain shares of Common Stock (the "SHELF SECURITIES"), to be sold from time to time by the Selling Shareholders and the Company. The registration statement, as it relates to the Shares being sold in this offering, as amended to the date of this Agreement, including the information (if any) deemed to be part of such registration statement at the time of effectiveness pursuant to Rule 430A or Rule 430B under the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter referred 2 to as the "REGISTRATION STATEMENT"; and the related prospectus covering the Shelf Securities dated July 9, 2007 and in the form first used to confirm sales of the Shelf Securities (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the "BASIC PROSPECTUS." If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462 Registration Statement. The Basic Prospectus, as supplemented by the prospectus supplement specifically relating to the Shares in the form first used to confirm sales of the Shares (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the "PROSPECTUS," and the term "preliminary prospectus" means any preliminary form of the Prospectus. For purposes of this Agreement, "FREE WRITING PROSPECTUS" has the meaning set forth in Rule 405 under the Securities Act, "TIME OF SALE PROSPECTUS" means the preliminary prospectus identified on Schedule III hereto, together with the free writing prospectuses, if any, identified on Schedule III hereto and any other information identified in Schedule III hereto, and "BROADLY AVAILABLE ROAD SHOW" means a "BONA FIDE ELECTRONIC ROAD SHOW" as defined in Rule 433(h)(5) under the Securities Act that has been made available without restriction to any person. As used herein, the terms "Registration Statement," "Basic Prospectus," "preliminary prospectus," "Time of Sale Prospectus" and "Prospectus" shall include the documents, if any, incorporated by reference therein. The terms "SUPPLEMENT," "AMENDMENT," and "AMEND" as used herein with respect to the Registration Statement, the Basic Prospectus, the Time of Sale Prospectus, any preliminary prospectus or any free writing prospectus shall include all documents subsequently filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), that are incorporated by reference therein. 1. Representations and Warranties of the Company. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Company meets the requirements for use of Form S-3 under the Securities Act; the Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission. (b) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Time of Sale Prospectus or the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (ii) each part of the Registration Statement, when such part became 3 effective, did not contain, and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) the Registration Statement as of the date hereof does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) the Registration Statement complies, and the Prospectus, as of its date, will comply and the Registration Statement and the Prospectus, as amended or supplemented, if applicable, as of the Closing Date (as defined in Section 5), will comply, in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (v) the Time of Sale Prospectus, at the time of the communication of the public offering price and other information referred to in Schedule III hereto and at the Closing Date (as defined in Section 6), will not, and the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (vi) each broadly available road show, if any, and any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, when considered together as a whole with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (vii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement, the Time of Sale Prospectus, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act (and to which the Underwriters have not objected in accordance with the provisions of Section 7(c) of this Agreement), or the Prospectus based upon information furnished to the Company in writing by such Underwriter through you expressly for use therein. (c) Any statistical and market-related data included in the Registration Statement, the Time of Sale Prospectus or the Prospectus are in all material respects based on or derived from sources that the Company believes to be reliable and accurate. (d) The Company is not an "ineligible issuer" in connection with the offering pursuant to Rules 164, 405 and 433 under the Securities Act. Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the 4 Company complies or will comply in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Except for the free writing prospectuses, if any, identified in Schedule III hereto forming part of the Time of Sale Prospectus, and electronic road shows, if any, each furnished to you before first use, the Company has not prepared, used or referred to, and will not, without your prior consent, prepare, use or refer to, any free writing prospectus. (e) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware and has the necessary corporate power and authority to own its property and to conduct its business as described in the Time of Sale Prospectus. The Company is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which, the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the financial condition, business or results of operations of the Company and its subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT"). (f) Morgans Group LLC, a Delaware limited liability company (the "OPERATING COMPANY") has been duly organized, is validly existing as a limited liability company in good standing under the laws of the State of Delaware and has the necessary power and authority to own its property and to conduct its business as described in the Time of Sale Prospectus. The Operating Company is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect; and the Company is the managing member of the Operating Company and the holder of membership units in the Operating Company ("OC UNITS") representing an aggregate ownership interest in the Operating Company of approximately 97.1%. (g) Each entity set forth on Schedule IV hereto (each an "MHG BUSINESS ENTITY") has been duly organized, is validly existing as a corporation, limited liability company or limited partnership in good standing under the laws of the jurisdiction of its organization, has the power and authority to own its property and to conduct its business as currently conducted and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that a failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect; all of the issued shares of capital stock, membership interests or partnership interests of each MHG Business Entity have been duly and validly authorized and issued, are fully paid and non-assessable and are owned by the Company and by the Operating Company, directly or indirectly, free and clear of all liens, encumbrances, security 5 interests or similar claims. The Operating Company and the MHG Business Entities are collectively referred to herein as the "SUBSIDIARIES". (h) The authorized capital stock of the Company conforms as to legal matters in all material respects to the description thereof contained in each of the Time of Sale Prospectus and the Prospectus. (i) The shares of Common Stock outstanding prior to the issuance of the Shares to be sold by the Company (including the Shares to be sold by the Selling Shareholders) have been duly authorized and are validly issued, fully paid and non-assessable. (j) The Shares to be issued and sold by the Company to the Underwriters hereunder have been duly authorized and, when issued and delivered against payment therefor as provided herein, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights. (k) The Company has the power and authority to execute and deliver this Agreement and to consummate the transactions described herein. (l) This Agreement has been duly authorized, executed and delivered by the Company. (m) Except for restrictions imposed by agreements disclosed in the Time of Sale Prospectus, the Operating Company is not prohibited or restricted from making distributions with respect to the OC Units or from repaying to the Company or any other subsidiary of the Company any amounts which may from time to time become due under any loans or advances to the Operating Company. (n) Neither the Company nor any Subsidiary is in breach of or in default under (nor has any event occurred which with notice, lapse of time, or both would constitute a breach of, or default under) its respective organizational documents, or in the performance or observance of any obligation, agreement, covenant or condition contained in any license, indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument to which it is a party or by which it or any of its properties or assets may be bound, except for such breaches and defaults which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (o) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein and therein will not (A) conflict with, or result in any breach of, or constitute a default under nor constitute any event which (with notice, lapse of time, or both) would constitute a breach of, or default under: (1) any provision of the organizational documents of the Company or any Subsidiary, (2) any provision of any license, indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or 6 their assets or properties may be bound or affected, (3) any law or regulation binding upon or applicable to the Company or any Subsidiary or any of their respective properties or assets or (4) any decree, judgment or order applicable to the Company or any Subsidiary; or (B) result in the creation or imposition of any lien, security interest or similar claim upon any property or assets of the Company or any Subsidiary, except in each case described in clauses (A)(2) through (4) of this sentence for such conflicts, breaches, defaults and violations as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, and in the case described in clause (B) of this sentence for liens, security interests or similar claims in connection with certain indebtedness described in the Time of Sale Prospectus. (p) No consent, approval, authorization or order of or filing, registration or qualification with, any governmental body or agency is required in connection with the Company's execution, delivery and performance of this Agreement, the consummation of the transactions contemplated herein by the Company, including the Company's issuance of up to 4,609,095 shares in connection with this offering, other than (A) such as have been obtained and made or will have been obtained and made on or prior to the Closing Date, (B) any necessary qualification under the securities or "blue sky" laws of the various jurisdictions in which the Shares are being offered by the Underwriters, or (C) the absence of which would not reasonably be expected to have a Material Adverse Effect. (q) Each of the Company and the Subsidiaries has all necessary licenses, authorizations, consents and approvals and has made all necessary filings required under any U.S. federal, state, local or foreign law, regulation or rule, and has obtained all necessary authorizations, consents and approvals from other persons, required in order to conduct its business as described in the Time of Sale Prospectus, except to the extent that any failure to have any such licenses, authorizations, consents or approvals, to make any such filings or to obtain any such authorizations, consents or approvals would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; neither the Company nor any of the Subsidiaries is in violation of, in default under, or has received any notice regarding a possible violation, default or revocation of any such license, authorization, consent or approval or any U.S. federal, state, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Company or any Subsidiary, other than any such violations, defaults, or revocations that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (r) The Company and its subsidiaries have good and marketable title in fee simple to, or a valid leasehold interest in, all real property described in the Time of Sale Prospectus as owned by them (the "COMPANY PROPERTIES"), and ownership of all material personal property described in the Time of Sale Prospectus as owned by them, in each case free and clear of all liens, encumbrances, security interests, similar claims and defects in such title (collectively, the "ENCUMBRANCES"), except such Encumbrances that are 7 disclosed in the Time of Sale Prospectus or would not reasonably be expected to materially and adversely affect the value of such property or materially interfere with the use made or proposed to be made of such property by the Company and the Subsidiaries; and any real or personal property held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases (such leases, the "COMPANY LEASES") with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property. Neither the Company nor any of its subsidiaries is in default under any of the Company Leases, relating to, or any agreement evidencing an Encumbrance on, any Company Property that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and neither the Company nor any of the Subsidiaries knows of any event, which but for the passage of time or the giving of notice, or both, would constitute a default under any of such documents or agreements that would reasonably be expected to have a Material Adverse Effect. (s) Each parcel of real property leased or owned by the Company or the Subsidiaries complies with all applicable zoning laws, ordinances, regulations and deed restrictions or other covenants in all material respects, except such failure to comply, which does not materially and adversely affect the value of any such property and will not result in a forfeiture or reversion of title; neither the Company nor any Subsidiary has received from any governmental authority any written notice of any condemnation of or zoning change affecting any such property or any part thereof, and the Company does not know of any such condemnation or zoning change which is threatened and which, individually or in the aggregate, if consummated would reasonably be expected to have a Material Adverse Effect. (t) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the financial condition, or in the earnings, business or operations of the Company from that set forth in the Time of Sale Prospectus. (u) There are no legal or governmental proceedings pending or, to the Company's knowledge, threatened to which the Company or any Subsidiary is a party or to which any of the properties of the Company or any of its subsidiaries is subject (i) other than (A) proceedings accurately described in all material respects in the Time of Sale Prospectus or (B) proceedings that would not reasonably be expected to have a Material Adverse Effect, (ii) that would have a material adverse effect on the power or ability of the Company to perform its obligations under this Agreement, or (iii) that are required to be described in the Registration Statement or the Time of Sale Prospectus and are not so described; and there are no statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Time of Sale Prospectus or to be filed as exhibits to the Registration Statement that are not so described in all material respects or filed as required. 7 (v) Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder. (w) The Company is not, and after giving effect to the offering and sale of the Shares and the application of the Company's net proceeds thereof as described in the Prospectus will not be, required to register as an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (x) Except as would not be reasonably expected to have a Material Adverse Effect, (i) none of the Company, the Subsidiaries or, to the knowledge of the Company and the Subsidiaries, any director, officer, agent, employee or other person (in each case, while acting on behalf of the Company or the Subsidiaries) is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the "FCPA"), (ii) the Company and the Subsidiaries have conducted their businesses in compliance with the FCPA, and (iii) the Company and the Subsidiaries have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith. (y) Except as would not be reasonably expected to have a Material Adverse Effect, (i) the operations of the Company and the Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the "MONEY LAUNDERING LAWS") and (ii) no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or the Subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened. (z) The Company and the Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9 (aa) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (bb) All U.S. federal, state and other income tax returns of the Company and its subsidiaries required by law to be filed have been filed and all taxes shown by such returns or otherwise assessed, which are due and payable, have been paid or provision has been made for their payment, except for any such tax or other assessment that (i) is currently being contested in good faith, or (ii) would not have, or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (cc) Except as disclosed in the Time of Sale Prospectus, there are no persons with registration or other similar rights to have any equity or debt securities, including securities that are convertible into or exchangeable for equity securities, registered pursuant to the Registration Statement or otherwise registered by the Company under the Securities Act. (dd) Subsequent to the respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) the Company and the Subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and the Subsidiaries, except in each case as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, respectively. (ee) The Company and the Subsidiaries own or possess, or can acquire on reasonable terms, all material licenses, inventions, copyrights, know-how (including trade secrets and other confidential information, systems or procedures), trademarks, service marks and trade names currently employed by them in connection with the business now operated by them, except such as the failure to own, possess or be able to acquire on reasonable terms would not reasonably be expected to have a Material Adverse Effect, and neither the Company nor any of the Subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a Material Adverse Effect. (ff) Except as listed on Schedule VI hereto, (i) no material labor dispute with the employees of the Company or any of the Subsidiaries exists, or, to the 10 knowledge of the Company is imminent; and (ii) the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors which would reasonably be expected to have a Material Adverse Effect. (gg) The Company and each of the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes are prudent and customary in the businesses in which they are engaged; and neither the Company nor any of the Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Material Adverse Effect, except as described in the Time of Sale Prospectus. (hh) Each of the Company and the Subsidiaries maintains a system of internal controls over financial reporting sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the Time of Sale Prospectus, since the end of the Company's most recent audited fiscal year, there has been no material weakness in the Company's internal control over financial reporting (whether or not remediated). (ii) The Company is in compliance with all provisions of the Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated thereunder or implementing the provisions thereof (the "SARBANES-OXLEY ACT"). (jj) Except as described in the Time of Sale Prospectus, the Company has not sold, issued or distributed any shares of Common Stock during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or S of, the Securities Act, other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants. 2. Representations and Warranties of the Selling Shareholders. Each Selling Shareholder, severally and not jointly, represents and warrants to and agrees with each of the Underwriters that: (a) This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Shareholder. 11 (b) The execution and delivery by such Selling Shareholder of, and the performance by such Selling Shareholder of its obligations under, this Agreement will not contravene (A) any provision of applicable law, (B) the certificate of incorporation or by-laws or other organizational documents of such Selling Shareholder, (C) any agreement or other instrument binding upon such Selling Shareholder or (D) any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Shareholder, except in each case described in clauses (A), (C) and (D) of this sentence, such as would not, individually or in the aggregate, materially impair such Selling Shareholder from consummating the transactions contemplated hereby. (c) No consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by such Selling Shareholder of its obligations under this Agreement, except such as (A) would not, individually or in the aggregate, materially impair such Selling Shareholder from consummating the transactions contemplated hereby or (B) may be required by the securities or "blue sky" laws of the various states in connection with the offer and sale of the Shares. (d) Such Selling Shareholder has, and on the Closing Date will have the legal right and power, and all authorization and approval required by law, to sell, transfer and deliver the Shares to be sold by such Selling Shareholder or a security entitlement in respect of such Shares. (e) Upon payment of the purchase price by the Underwriters for the Shares being sold by such Selling Shareholder and the delivery by such Selling Shareholder to Cede & Co. ("CEDE") or such other nominee as may be designated by The Depository Trust Company ("DTC") of the Shares being sold by such Selling Shareholder registered in the name of Cede or such other nominee designated by DTC, both as provided for in this Agreement, and the crediting of such Shares to the account of the Underwriters with DTC, Cede or such other nominee designated by DTC will be a "protected purchaser" (as defined in Section 8-303 of the New York Uniform Commercial Code (the "CODE")) of such Shares, the Underwriters will acquire a valid "security entitlement" (within the meaning of Section 8-501 of the Code) to such Shares, and no action based on an "adverse claim" (as defined in Section 8-102 of the Code) may be asserted against the Underwriters with respect to such security entitlement (assuming that the Underwriters are without notice of any such adverse claim); for purposes of this representation, such Selling Shareholder may assume that when such payment, delivery and crediting occur, (x) such Shares will have been registered in the name of Cede or another nominee designated by DTC, in each case on the Company's share registry in accordance with its certificate of incorporation, bylaws and applicable law, (y) DTC will be registered as a "clearing corporation" within the meaning of Section 8-102 of the Code and (z) appropriate entries to the accounts of the several Underwriters on the records of DTC will have been made pursuant to the Code. 12 (f) Such Selling Shareholder (or in the case of NCIC MHG Subsidiary LLC or NorthStar Partnership, L.P., the committee of directors not affiliated with management of NorthStar Capital Investment Corp., in recommending the sale of its Shares to the board of directors of NorthStar Capital Investment Corp.) was not prompted by any material information concerning the business operations or strategy of the Company and its subsidiaries that is not either (a) publicly disclosed or (b) set forth in the Time of Sale Prospectus. (g) The name and address of such Selling Shareholder, the number of shares of Common Stock beneficially owned by such Selling Shareholder after giving effect to the sale of the Shares being sold by such Selling Shareholder and the number of Shares made available for sale by such Selling Shareholder (collectively, the "SELLING SHAREHOLDER INFORMATION") does not, and at the Closing Date (as defined in Section 5) will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3. Agreements to Sell and Purchase. Each Seller, severally and not jointly, hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from such Seller at $21.5157 a share (the "PURCHASE PRICE") the number of Firm Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the number of Firm Shares to be sold by such Seller as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares. On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have the right to purchase, severally and not jointly, up to 1,831,600 Additional Shares at the Purchase Price. You may exercise this right on behalf of the Underwriters in whole or from time to time in part by giving written notice not later than 30 days after the date of this Agreement. Any exercise notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Each purchase date must be at least two business days after the written notice is given and may not be earlier than the closing date for the Firm Shares nor later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 5 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. On each day, if any, that Additional Shares are to be purchased (an "OPTION CLOSING DATE"), each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the total number of Additional Shares to be 13 purchased on such Option Closing Date as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares. The Company hereby agrees that, without the prior written consent of the Representatives on behalf of the Underwriters, it will not, during the period ending 90 days after the date of the Prospectus, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (such shares of Common Stock and such securities convertible into or exercisable or exchangeable for common stock, together the "MHG CO. SECURITIES") or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of MHG Co. Securities, in cash or otherwise or (3) file any registration statement with the Commission relating to the offering of any MHG Co. Securities. The restrictions contained in the preceding paragraph shall not apply to (A) the Shares to be sold hereunder and (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof of which the Underwriters have been advised in writing, (C) the issuance by the Company of MHG Co. Securities under the Company's 2007 Omnibus Stock Incentive Plan described in the Time of Sale Prospectus, (D) the issuance by the Company of shares of Common Stock, or by the Operating Company of OC Units, as consideration for one or more acquisitions, provided that (i) the aggregate market value of all such shares of Common Stock, including shares of Common Stock issuable upon conversion of any such OC Units, does not exceed 15% of the market capitalization of the Company as of 4:30 p.m. (New York City time) on the Closing Date, and (ii) the recipients of any such shares of Common Stock or OC Units shall enter into a written agreement agreeing to the restrictions set forth in the preceding paragraph and this paragraph, and (E) the filing of any registration statement on Form S-8 in respect of any employee benefit plan. 4. Terms of Public Offering. The Sellers are advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares on the terms set forth in the Time of Sale Prospectus as soon after this Agreement has become effective as in your judgment is advisable. The Sellers are further advised by you that the Shares are to be offered to the public initially at $22.50 a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected by you at a price that represents a concession not in excess of $0.59 per share under the Public Offering Price. 5. Payment and Delivery. Payment for the Firm Shares to be sold by each Seller shall be made to such Seller in Federal or other funds immediately 14 available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on July 25, 2007, or at such other time on the same or such other date, not later than August 1, 2007, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "CLOSING DATE." Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the corresponding notice described in Section 3 or at such other time on the same or on such other date, in any event not later than August 31, 2007, as shall be designated in writing by you. The Firm Shares and Additional Shares shall be registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the applicable Option Closing Date, as the case may be. The Firm Shares and Additional Shares shall be delivered to you on the Closing Date or an Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor. 6. Conditions to the Underwriters' Obligations. The obligations of the Sellers to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the Prospectus, as amended or supplemented, in relation to the Shares, shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Securities Act; as of the Closing Date, no stop order suspending the effectiveness of the Registration Statement shall be in effect or shall be pending or, to the knowledge of the Company, threatened by the Commission. The several obligations of the Underwriters are subject to the following further conditions: (a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date: (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the securities of the Company or the Operating Company by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and 15 (ii) there shall not have occurred any change, or any development involving a prospective change, in the financial condition, or in the earnings, business or operations of the Company and the Subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus. (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer (i) of the Company, to the effect set forth in Section 6(a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied in all material respects with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date. Each officer signing and delivering such certificates may rely upon the best of his or her knowledge as to proceedings threatened. (c) The Underwriters shall have received on the Closing Date an opinion of Hogan & Hartson LLP, counsel for the Company, dated the Closing Date, substantially in the form attached hereto as Exhibit A. (d) The Underwriters shall have received on the Closing Date an opinion of counsel for each Selling Shareholder, dated the Closing Date, substantially in the form attached hereto as Exhibit B. (e) The Underwriters shall have received on the Closing Date an opinion, in form and substance satisfactory to the Underwriters, of Cravath, Swaine & Moore LLP, counsel for the Underwriters, dated the Closing Date. The opinion of Hogan & Hartson LLP described in Section 6(c) above (and any opinions of counsel for any Selling Shareholder referred to above) shall be rendered to the Underwriters at the request of the Company or one or more of the Selling Shareholders, as the case may be, and shall so state therein. (f) The Underwriters shall have received, on the date hereof a letter dated the date hereof from BDO Seidman, LLP, independent public accountants, substantially in the form attached hereto as Exhibit C. (g) The Underwriters shall have received, on the Closing Date, a "bring-down" letter dated the Closing Date of BDO Seidman, LLP that shall use a "cut-off date" not earlier than the date hereof. (h) The "lock-up" agreements, each substantially in the form attached as Exhibit D hereto, between you and the executive officers and directors of the Company listed on Schedule V hereto relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to 16 you on or before the date hereof, shall be in full force and effect on the Closing Date. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to you on the applicable Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares to be sold on such Option Closing Date and other matters related to the issuance of such Additional Shares. 7. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows: (a) To furnish to each Representative, without charge, a conformed copy of the Registration Statement (including exhibits thereto and documents incorporated by reference) and for delivery to each other Underwriter if requested by any such Underwriter a conformed copy of the Registration Statement (without exhibits thereto but including documents incorporated by reference, except for such documents that are publicly available on EDGAR) and to furnish to you in New York City, without charge, prior to 2:00 p.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 7(e) or 7(f) below, as many copies of the Time of Sale Prospectus, the Prospectus, any documents incorporated by reference therein, except for such documents that are publicly available on EDGAR, and any supplements and amendments thereto or to the Registration Statement as you may reasonably request. (b) Before amending or supplementing the Registration Statement, the Time of Sale Prospectus or the Prospectus prior to the completion of this offering, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. (c) To furnish to you a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company in connection with this offering of Shares and not to use or refer to any proposed free writing prospectus to which you reasonably object. (d) Without the consent of the Representatives, not to take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder. 17 (e) If the Time of Sale Prospectus is being used to solicit offers to buy the Shares at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the reasonable opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances when the Time of Sale Prospectus delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law. (f) If, during such period after the first date of the public offering of the Shares as in the reasonable opinion of counsel for the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is delivered to a purchaser, not misleading, or if, in the reasonable opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (g) To endeavor to qualify the Shares for offer and sale under the securities or "blue sky" laws of such jurisdictions as you shall reasonably request. (h) To make generally available to the Company's security holders and to you as soon as practicable an earning statement covering the twelve-month period ending September 30, 2008 that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. 18 8. Expenses. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, (a) the Company agrees to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares sold by the Company to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 7(g) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by the National Association of Securities Dealers, Inc., (v) all costs and expenses incident to listing the Shares on the Nasdaq Global Market, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the preparation or dissemination of any electronic roadshow, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants (but excluding the cost of any aircraft chartered in connection with the road show), (ix) the document production charges and expenses associated with printing this Agreement and (x) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section, and (b) whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, each Selling Shareholder severally agrees with the Underwriters to pay or cause to be paid all fees and expenses incident to the performance of such Selling Shareholder's obligations under this Agreement which are otherwise specifically provided for herein, including, but not limited to (i) fees and expenses of counsel and other advisors for such Selling Shareholder and (ii) 19 taxes incident to the sale and delivery of the Shares to be sold by such Selling Shareholder to the Underwriters hereunder. It is understood, however, that except as provided in this Section, Section 11 entitled "Indemnity and Contribution" and the last paragraph of Section 13 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make. The provisions of this Section shall not supersede or otherwise affect any agreement that the Company and the Selling Shareholders may otherwise have for the allocation of such expenses among themselves. 9. Covenants of the Selling Shareholders. Each Selling Shareholder severally covenants with the Company and the Underwriters not to create, use or refer to any proposed free writing prospectus without the consent of the Company and the Representatives. 10. Covenants of the Underwriters. Each Underwriter severally covenants with the Company not to take any action that would result in the Company being required to create, use or refer to any proposed free writing prospectus without the consent of the Company and the Representatives. 11. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) of the Securities Act or the Prospectus or any amendment or supplement thereto, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information furnished to the Company in writing by such Underwriter through you expressly for use therein. (b) The Company agrees to indemnify and hold harmless each Selling Shareholder and each person, if any, who controls any Selling Shareholder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities 20 (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) of the Securities Act or the Prospectus or any amendment or supplement thereto, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon the Selling Shareholder Information of such Selling Shareholder. (c) Each Selling Shareholder agrees, severally and not jointly, to indemnify and hold harmless the Underwriters and the Company, each person, if any, who controls any Underwriter or the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act to the same extent as the foregoing indemnity from the Company to such Selling Shareholder, but only with reference to the Selling Shareholder Information. The liability of each Selling Shareholder under the indemnity agreement contained in this paragraph, and under the contribution agreement contained in paragraph (f) of this Section 11, shall be limited to an amount equal to the aggregate Public Offering Price of the Shares sold by such Selling Shareholder under this Agreement. (d) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, each Selling Shareholder, the directors of the Company, the officers of the Company who sign the Registration Statement and each person, if any, who controls the Company or any Selling Shareholder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, any issuer free writing prospectus or the Prospectus or any amendment or supplement thereto. (e) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 11(a), 11(b), 11(c) or 11(d), such person (the "INDEMNIFIED PARTY") shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall 21 pay the reasonably incurred fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (i) the reasonably incurred fees and expenses of more than one separate firm (in addition to any local counsel) for all Underwriters and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or who are affiliates of any Underwriter within the meaning of Rule 405 under the Securities Act, (ii) the reasonably incurred fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (iii) the reasonably incurred fees and expenses of more than one separate firm (in addition to any local counsel) for all Selling Shareholders and all persons, if any, who control any Selling Shareholder within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Underwriters and such control persons and affiliates of any Underwriters, such firm shall be designated in writing by the Representatives. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. In the case of any separate firm for the Selling Shareholders and such control persons of any Selling Shareholders, such firm shall be designated in writing by the Selling Shareholders. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (f) To the extent the indemnification provided for in Section 11(a), 11(b), 11(c) or 11(d) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by 22 such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Shares or (ii) if the allocation provided by clause 11(f)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 11(f)(i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Shareholders on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be equal to the total net proceeds from the offering of the Shares (before deducting expenses) received by each Seller and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company and the Selling Shareholders on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 11 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. (g) The Company, each Selling Shareholder and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 11 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 11(f). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 11, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 11 are not exclusive and shall not limit any rights or 23 remedies which may otherwise be available to any indemnified party at law or in equity. (h) The indemnity and contribution provisions contained in this Section 11 and the representations, warranties and other statements of the Company and the Selling Shareholders contained in this Agreement shall remain operative and in full force and effect in accordance with their specified terms and duration regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter, any Selling Shareholder or any person controlling any Selling Shareholder, or by or on behalf of the Company, their officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 12. Termination. The Underwriters may terminate this Agreement by notice given by you to the Company, if after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq Global Market or the Nasdaq Global Select Market, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a material disruption in securities settlement, payment or clearance services in the United States shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in your judgment, impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus. 13. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date or an Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that 24 any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 13 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased on such date, and arrangements satisfactory to you, the Company and the Selling Shareholders for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Shareholders. In any such case either you or the relevant Sellers shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Time of Sale Prospectus, in the Prospectus or in any other documents or arrangements may be effected. If, on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased on such Option Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Additional Shares to be sold on such Option Closing Date or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company or any Selling Shareholder to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company or any Selling Shareholder shall be unable to perform its respective obligations under this Agreement, the Company and any defaulting Selling Shareholder (severally and not jointly) agree to promptly reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 14. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 15. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 25 16. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. 17. Notices. All communications hereunder shall be in writing and effective only upon receipt and if to the Underwriters shall be delivered, mailed or sent to you in care of Merrill Lynch, Pierce, Fenner & Smith Incorporated shall be delivered, mailed or sent to 4 World Financial Center, North Tower, 250 Vesey Street, New York, New York 10080, Attention: Equity Syndicate Desk, with a copy to the Office of General Counsel and Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department; if to the Company shall be delivered, mailed or sent to 475 Tenth Avenue, New York, New York 10018, Attention: Chief Legal Officer; and if to a Selling Shareholder shall be delivered, mailed or sent to NorthStar Capital Investment Corp., 399 Park Avenue, 18th Floor, New York, New York 10022, Attention: Chief Operating Officer and SORCO Interfund LLC, c/o Soros Fund Management LLC, 888 Seventh Avenue, New York, New York 10106, Attention: Robert Soros and Jay Schoenfarber, with a copy to Akin, Gump, Strauss, Hauer & Feld, LLP, 590 Madison Avenue, New York, New York 10027, Attention: Patrick Dooley. 18. No Fiduciary Duty. The Company acknowledges that in connection with the offering of the Shares: (i) the Underwriters have acted at arms length, are not agents of, and owe no fiduciary duties to, the Company or any other person, (ii) the Underwriters owe the Company only those duties and obligations set forth in this Agreement and prior written agreements (to the extent not superseded by this Agreement), if any, and (iii) the Underwriters may have interests that differ from those of the Company. The Company waives to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the Shares. 26 Very truly yours, MORGANS HOTEL GROUP CO., By: /s/ DAVID SMAIL ------------------------------- Name: David Smail Title: Executive Vice President and Chief Legal Officer 27 NCIC MHG SUBSIDIARY LLC, By: NORTHSTAR CAPITAL INVESTMENT CORP., its managing member By: /s/ RICHARD J. McCREADY ------------------------------ Name: Richard J. McCready Title: President NORTHSTAR PARTNERSHIP L.P., By: NORTHSTAR CAPITAL INVESTMENT CORP., its general partner /s/ RICHARD J. McCREADY ------------------------------- Name: Richard J. McCready Title: President 28 SORCO INTERFUND LLC, By: /s/ JAY A. SCHOENFARBER ------------------------------- Name: Jay A. Schoenfarber Title: Attorney-in-Fact 29 Accepted as of the date hereof Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Stanley & Co. Incorporated Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ ALEXANDER VIRTUE --------------------------------------------- Name: Alexander Virtue Title: Director, Investment Banking By: MORGAN STANLEY & CO. INCORPORATED By: /s/ CARL D. LEVIN --------------------------------------------- Name: Carl D. Levin Title: Vice President 30 SCHEDULE I NUMBER OF FIRM SHARES UNDERWRITER TO BE PURCHASED - --------------------------------------------------------- --------------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................. 4,273,795 Morgan Stanley & Co. Incorporated........................ 4,273,795 Citigroup Global Markets, Inc. .......................... 732,650 CIBC World Markets Corp.................................. 732,650 JMP Securities LLC....................................... 732,650 Thomas Weisel Partners LLC............................... 732,650 Wachovia Capital Markets, LLC............................ 732,650 --------------------- Total:.......................................... 12,210,840 --------------------- 31 SCHEDULE II NUMBER OF FIRM SHARES TO SELLING SHAREHOLDERS BE SOLD - --------------------------------------------------------- --------------------- NCIC MHG Subsidiary LLC.................................. 8,250,706 NorthStar Partnership, L.P. ............................. 126,970 SORCO Interfund LLC...................................... 1,055,669 --------------------- Total:.......................................... 9,433,345 --------------------- 32 SCHEDULE III TIME OF SALE PROSPECTUS 1. Preliminary Prospectus issued July 11, 2007. 2. Free Writing Prospectus dated July 19, 2007. 33 EXHIBIT D FORM OF LOCK-UP LETTER _____________, 2007 Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Stanley & Co. Incorporated c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center, 250 Vesey Street New York, New York 10080 Dear Sirs and Mesdames: The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN STANLEY") and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), as representatives of the several underwriters (the "UNDERWRITERS") named in the Underwriting Agreement, propose to enter into an Underwriting Agreement (the "UNDERWRITING AGREEMENT") with Morgans Hotel Group Co., a Delaware corporation (the "COMPANY") providing for the public offering (the "PUBLIC OFFERING") by the Underwriters of the common stock, $.01 par value per share, of the Company (the "COMMON STOCK"). To induce the Underwriters that may participate in the Public Offering to participate in the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley and Merrill Lynch on behalf of the Underwriters, the undersigned will not, during the period commencing on the date hereof and ending 90 days after the date of the final prospectus relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (such shares of Common Stock and such securities convertible into or exercisable or exchangeable for Common Stock, together the "MHG CO. SECURITIES"), or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of MHG Co. Securities, in cash or otherwise. The foregoing paragraph shall not apply to (a) transactions relating to MHG Co. Securities acquired in open market transactions after the completion of the Public Offering, provided that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") shall be required or 34 shall be voluntarily made in connection with subsequent sales of MHG Co. Securities acquired in such open market transactions, (b) transfers of MHG Co. Securities as a bona fide gift, (c) distributions or transfers of MHG Co. Securities; provided that in the case of any transfer or distribution pursuant to clause (b) or (c), (i) each donee, distributee or transferee shall agree to be bound by the lock-up restrictions set forth in this letter as if a party hereto and (ii) no filing under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of shares of Common Stock, shall be required or shall be voluntarily made during the restricted period referred to in the foregoing paragraph, (d) any disposition not effected in the public trading markets in response to a tender offer for MHG Co. Securities or otherwise in connection with a proposed business combination transaction involving the Company, (e) pledges permitted pursuant to, and subject to the provisions set forth in, the lock-up agreement signed by NorthStar Partnership L.P. in connection with the Public Offering or (f) any direct or indirect pledge, sale, transfer, disposition, or other transaction relating to the transactions contemplated by that certain Agreement and Plan of Merger dated as of or about July 19, 2007, by and among W. Edward Scheetz, David T. Hamamoto, Northstar Capital Investment Corp. and Northstar Partnership L.P. (the "Merger Agreement"), including, without limitation, with respect to the financing of the transactions contemplated by the Merger Agreement. In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley and Merrill Lynch on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 90 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any MHG Co. Securities. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company's transfer agent and registrar against the transfer of the undersigned's shares of Common Stock except in compliance with the foregoing restrictions. Notwithstanding the foregoing, the undersigned may enter into a trading plan designed to comply with SEC Rule 10b5-1, provided that no sales or other dispositions of any of the undersigned's Common Stock occurs during the 90-day restricted period. The undersigned understands that the Company and the Underwriters are relying upon this agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this agreement is irrevocable and shall be binding upon the undersigned's heirs, legal representatives, successors and assigns. 35 Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters. This agreement shall expire and be of no further force and effect if the Public Offering is not completed by August 10, 2007. Very truly yours, -------------------------------------------- (Name) -------------------------------------------- (Address) -----END PRIVACY-ENHANCED MESSAGE-----