8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 21, 2010

Morgans Hotel Group Co.

(Exact name of registrant as specified in its charter)

Delaware	001-33738	16-1736884
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

475 Tenth Avenue New York, NY	10018
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 277-4100

Not applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On April 21, 2010, Morgans Hotel Group Co. (the “Registrant”) entered into a Waiver Agreement (the “Waiver Agreement”) with Yucaipa American Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P. (collectively, the “Investors”). The Waiver Agreement permits the purchase by the Investors of up to $88 million in aggregate principal amount of the Registrant’s 2.375% Senior Subordinated Convertible Notes due 2014 (the “Convertible Notes”) within six months of April 21, 2010 and subject to the limitations and conditions set forth therein. Pursuant to the Waiver Agreement, in the event an Investor proposes to sell the Convertible Notes at a time when the market price of a share of common stock of the Registrant exceeds the then effective conversion price of the Convertible Notes, the Registrant is granted certain rights of first refusal for the purchase of the same from the Investors. In the event an Investor proposes to sell the Convertible Notes at a time when the market price of a share of common stock of the Registrant is equal to or less than the then effective conversion price of the Convertible Notes, the Registrant is granted certain rights of first offer to purchase the same from the Investors.

A copy of the Waiver Agreement is being filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Waiver Agreement.

Item 3.03. Material Modification to Rights of Security Holders.

The information set forth under “Item 1.01. Entry into a Material Definitive Agreement” is incorporated into this Item 3.03.

On April 21, 2010, the board of directors of the Registrant resolved to amend the Amended and Restated Stockholder Protection Rights Agreement (the “Rights Agreement”), dated as of October 1, 2009, between the Registrant and Mellon Investor Services LLC (“Mellon”), as Rights Agent, in connection with the entry into of the Waiver Agreement to exempt the ownership of the Convertible Notes by any person from the determination of the beneficial ownership of common stock of the Registrant by such person under the Rights Agreement for so long as the Convertible Notes have not been acquired in the two years preceding October 17, 2014 and provided further that at the time the Convertible Notes were acquired the market price of the shares of common stock of the Registrant did not exceed the conversion price applicable to the Convertible Notes. Thereafter, on April 21, 2010, the Registrant and Mellon entered into Amendment No. 2 to the Rights Agreement (“Amendment No. 2”) to amend the definition of “Beneficial Owner” to reflect such exemption.

A copy of Amendment No. 2 is being filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein by reference. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of Amendment No. 2.

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Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
4.1	Amendment No. 2, dated as of April 21, 2010, to Amended and Restated Stockholder Protection Rights Agreement, dated as of October 1, 2009, between the Registrant and Mellon Investor Services LLC, as Rights Agent
10.1	Waiver Agreement, dated as of April 21, 2010, by and among the Registrant, Yucaipa American Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: April 21, 2010	MORGANS HOTEL GROUP CO.
	By:	/s/ Richard Szymanski
		Name:	Richard Szymanski
		Title:	Chief Financial Officer and Secretary

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Exhibit Number	Description
4.1	Amendment No. 2, dated as of April 21, 2010, to Amended and Restated Stockholder Protection Rights Agreement, dated as of October 1, 2009, between the Registrant and Mellon Investor Services LLC, as Rights Agent
10.1	Waiver Agreement, dated as of April 21, 2010, by and among the Registrant, Yucaipa American Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P.

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EX-4.1

Exhibit 4.1

Amendment No. 2 to the
Amended and Restated Stockholder Protection Rights Agreement

This Amendment No. 2, dated as of April 21, 2010 (this “Amendment”), to the Amended and Restated Stockholder Protection Rights Agreement, dated as of October 1, 2009 (the “Rights Agreement”), between the Morgans Hotel Group Co. (the “Company”) and Mellon Investors Services LLC, as rights agent (the “Rights Agent”). Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Rights Agreement.

WHEREAS, pursuant to Section 5.4 of the Rights Agreement, the Company may amend the Rights Agreement in any respect prior to the Flip-in Date without the consent of the holders of Rights;

WHEREAS, the Flip-in Date has not occurred; and

WHEREAS, the Company would like to amend Section 1.1 of the Rights Agreement.

NOW, THEREFORE, the Company and the Rights Agent hereby agree to amend the Rights Agreement as follows:

Section 1. From and after the execution and delivery of this Amendment, the definition of the term “Beneficial Owner” in Section 1.1 of the Rights Agreement is hereby amended to add the following sentence to the end of such definition:

“Notwithstanding the foregoing, the ownership of the Company’s 2.375% Senior Subordinated Convertible Notes Due 2014 (the “Notes”) by any Person shall not be deemed to result in the Beneficial Ownership of the shares of Common Stock into which such Notes are convertible for so long as such Notes have not been acquired in the two years preceding October 17, 2014 and provided further that at the time the Notes were acquired the Market Price of the shares of Common Stock did not exceed the conversion price applicable to the Notes.”

Section 2 . THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE; EXCEPT THAT ALL PROVISIONS REGARDING THE RIGHTS, DUTIES AND OBLIGATIONS OF THE RIGHTS AGENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.

Section 3. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first above written.

MORGANS HOTEL GROUP CO.
By:	/s/ Marc Gordon
	Name:	Marc Gordon
	Title:	President
MELLON INVESTOR SERVICES LLC
By:	/s/ Kieran McGovern
	Name:	Kieran McGovern
	Title:	Senior Associate

EX-10.1

Exhibit 10.1

WAIVER AGREEMENT

WAIVER AGREEMENT (this “Agreement”), dated as of April 21, 2010, is made by and among MORGANS HOTEL GROUP CO., a Delaware corporation (the “Company”), and YUCAIPA AMERICAN ALLIANCE FUND II, L.P., a Delaware limited partnership (“YAAF II”), and YUCAIPA AMERICAN ALLIANCE (PARALLEL) FUND II, L.P., a Delaware limited partnership (“YAAF II-P” and together with YAAF II, the “Investors”).

WHEREAS, the Company and each of the Investors have entered into that certain Securities Purchase Agreement, dated as of October 15, 2009, as amended by Amendment No. 1 thereto, dated as of December 11, 2009 (as amended, the “Securities Purchase Agreement”) that, among other things, prohibits the Investors from acquiring beneficial ownership of securities of the Company and its subsidiaries under certain circumstances;

WHEREAS, on April 21, 2010, in connection with the proposed acquisition by the Investors of the Company’s 2.375% Senior Subordinated Convertible Notes due 2014 (the “Convertible Notes”), the Company entered into Amendment No. 2 to its Amended and Restated Stockholder Protection Rights Agreement (as amended, the “Rights Agreement”), dated as of October 1, 2009, between the Company and Mellon Investors Services LLC, as Rights Agent, to exempt under certain circumstances the ownership of the Convertible Notes by any person from the determination of the beneficial ownership of common stock of the Company (the “Common Stock”) by such person under the Rights Agreement; and

WHEREAS, in connection with the proposed acquisition of Convertible Notes by the Investors, the Company has agreed to waive certain provisions of the Securities Purchase Agreement and any other provisions of agreements and Company policies to which either of the Investors may be subject that would prohibit the Investors from acquiring Convertible Notes (together, the “Company Restrictions”), as set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

1. Waiver of Standstill Provisions. Subject to compliance by each Investor with the provisions of this Agreement, the Company hereby waives the applicable provisions of Section 5.13 of the Securities Purchase Agreement and all other Company Restrictions that, in each case, would prohibit the Investors from acquiring Convertible Notes, but only with respect to the acquisition by the Investors of up to $88,000,000 in aggregate principal amount of Convertible Notes within six months of the date hereof. For the avoidance of doubt, no waiver of the applicable provisions of Section 5.13 of the Securities Purchase Agreement or any other Company Restrictions is given for the conversion by the Investors of Convertible Notes into Common Stock. Should the Investors determine to purchase or enter into an agreement to purchase Convertible Notes (a) prior to the end of the 2nd Nasdaq Global Market trading day after issuance by the Company of its first quarter 2010 earnings report, prior thereto, the Investors shall obtain from the seller a nondisclosure and lock-up agreement in the form attached

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hereto as Exhibit A (a “Nondisclosure and Standstill Agreement”), and only engage in such purchase or enter into such agreement following disclosure of such information as the Company agrees is required to be disclosed or (b) after such 2nd Nasdaq Global Market trading day but within six months of the date hereof at a time at which insiders at the Company are not permitted to trade in Company securities or otherwise when any officers, directors, members, partners, managers or employees of the Investors have material non-public information concerning the Company or its Affiliates, prior thereto, the Investors shall obtain from the seller a nondisclosure and lock-up agreement substantially similar to Exhibit A, which the Company shall be a party to, and only engage in such purchase or enter into such agreement following disclosure of such information as the Company agrees is required to be disclosed. Subject to compliance by each Investor with the provisions of this Agreement, the Company hereby waives the provisions of any Company Restrictions applicable to the disclosure by Investor of Evaluation Material (as defined in the Nondisclosure and Standstill Agreement) to any potential seller of Convertible Notes party to a Nondisclosure and Standstill Agreement.

2. Full Force and Effect. Except as expressly set forth herein, the Securities Purchase Agreement (including the provisions thereof relating to the purchase or other acquisition of Common Stock, including upon conversion of the Convertible Notes) and other Company Restrictions shall continue in full force and effect in accordance with the provisions thereof.

3. Company Right of First Refusal and First Offer. From and after the date hereof:

(a) (i) Subject to the further terms and conditions of this Section 3, if an Investor proposes to sell Convertible Notes in a single transaction or series of related transactions at a time when the market price of a share of Common Stock exceeds the then effective Conversion Price (as defined in that certain Indenture, dated as of October 17, 2007 and as amended from time to time, by and among the Company, as issuer, Morgans Group LLC, as guarantor, and The Bank of New York, as trustee, relating to the Convertible Notes (the “Indenture”)), such Investor shall give the Company prior written notice thereof (an “Investor Notice”), including in reasonable detail the price and aggregate principal amount of Convertible Notes to be sold, and the other general terms, if any, upon which such Investor proposes to sell such Convertible Notes. Each such Investor Notice shall constitute an irrevocable offer by such Investor to the Company to sell all (but not less than all) of the Convertible Notes included in such Investor Notice upon the terms and conditions reflected in such Investor Notice. Notwithstanding the requirement to deliver an Investor Notice, the Investors shall use their commercially reasonable best efforts to advise the Company two Business Days prior to delivery of the Investor Notice of the development of any plans or proposals to sell Convertible Notes.

(ii) If at any time when the market price of a share of Common Stock is equal to or less than the then effective Conversion Price, if an Investor proposes to sell Convertible Notes in a single transaction or series of related transactions, such Investor shall give the Company prior written notice of such intent and set forth the aggregate principal amount of Convertible Notes which the Investor is proposing to sell to the Company (the “Offer Notice”). Within two Business Days after receipt of the Offer Notice, the Company may either decline in writing to offer to buy any such Convertible Notes, or may propose in writing a price at which the

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Company offers to buy all (but not less than all) such Convertible Notes (the “Company Offer”). The Investor shall have two Business Days after the receipt of the Company Offer to either accept in writing the Company Offer (an “Offer Acceptance”) or to decline in writing the Company Offer. If the Investor declines the Company Offer, the Investor may thereafter, for a period of thirty days after the date of the Company Offer, sell or enter into an agreement to sell any of the Convertible Notes covered by the Offer Notice at a price equal to or greater than the price offered in the Company Offer. If the Company declines to make a Company Offer, the Investor may thereafter, for a period of thirty days after the Company declines to make a Company Offer (or thirty two days after the delivery of the Offer Notice if the Company does not respond) sell the Convertible Notes covered by the Offer Notice at any price. If the Investor does not sell or enter into an agreement to sell the Convertible Notes within such period, any subsequent sale of such Convertible Notes shall be subject to the terms of this Section 3.

(b) The Company shall have the right to agree to purchase all (but not less than all) of the Convertible Notes described in an Investor Notice by delivering written notice (the “Company Notice”) to such Investor of its election to purchase such Convertible Notes prior to 4:00 p.m. (New York City time) on the second Business Day following the delivery of the applicable Investor Notice. The Company shall effect the purchase of all such Convertible Notes pursuant to the Company Notice or an Offer Acceptance, including payment of the purchase price, not later than 4:00 p.m. (New York City time) on the third Business Day after delivery of the Company Notice or, in the event of an Offer Acceptance, on the third Business Day after delivery of the Offer Acceptance. If an Investor Notice or an Offer Notice, Company Offer or Offer Acceptance is delivered after 4:00 p.m., New York City time, on any Business Day (as defined in the Securities Purchase Agreement), it shall be deemed received on the next succeeding Business Day.

(c) If and to the extent that the Company fails to exercise its right to purchase all of the Convertible Notes described in any Investor Notice pursuant to the foregoing clause (a)(i) within the period required for such election, then the Investor shall have 60 days thereafter to sell such Convertible Notes on terms no less favorable to the Investor (taken as a whole) than the terms set forth in the Investor Notice.

4. Conversion Cap. In consideration of the waiver granted hereunder, and without limitation to the provisions of Section 5.13 of the Securities Purchase Agreement or other Company Restrictions that restrict the conversion by Investors of Convertible Notes into Common Stock, but in addition thereto, the Investors hereby agree that:

(a) Subject to Section 4(b) below, an Investor or any Affiliate (as defined in Section 4(c) below) thereof holding Convertible Notes (a “Holder”) shall not be entitled to convert any Convertible Notes to the extent, and only to the extent, such conversion would cause such Holder, together with its Affiliates, to become the beneficial owner of more than 9.9% of the issued and outstanding shares of the Common Stock, as determined pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company shall, within one Business Day of delivery by a Holder of a Conversion Notice (as defined in Section 4(c) below), notify such Holder in writing of (i) the number of shares of Common Stock that would be issuable to such Holder if such conversion requested in such Conversion Notice were effected in full and (ii) the number of issued and outstanding shares of Common Stock (as determined

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pursuant to Section 13 of the Exchange Act) as of the most recent date such information is available to the Company, whereupon, notwithstanding anything to the contrary set forth herein, such Holder may within one Business Day of its receipt of the notice from the Company required by this Section revoke such Conversion Notice to the extent that it determines that such exercise would result in such Holder, together with its Affiliates, owning in excess of 9.9% of the issued and outstanding shares of Common Stock, as determined pursuant to Section 13 of the Exchange Act.

(b) Section 4(a) shall not limit a Holder from converting all or any portion of the Convertible Notes if: (i) the Holders and the Licensed Affiliates (as defined in Section 4(c) below) have obtained all Gaming Approvals necessary to hold, and to exercise or convert (as the case may be) in full, any and all exercisable or convertible securities of the Company (the “Company Securities”) held by the Holders and their Affiliates, and a Holder has notified the Company in writing thereof and has not revoked such notification, or (B) none of the Holders or the Licensed Affiliates are required under the Gaming Laws (as defined in Section 4(c) below) to obtain any Gaming Approval (as defined in Section 4(c) below) to hold, or to exercise or convert (as the case may be) in full, any such Company Securities (e.g., the Company does not own or hold any assets or rights that subject it to the authority or jurisdiction of a Gaming Authority (as defined in Section 4(c) below)), and a Holder has notified the Company in writing thereof and has not revoked such notification. In connection with the foregoing, the Company shall use its reasonable best efforts to keep the Investors apprised of all material facts pertaining to the business and affairs of the Company which have, or would reasonably be expected to have, a bearing upon the determination of whether any such Gaming Approvals are or continue to be required, including, without limitation, information pertaining to any acquisitions or dispositions of assets by the Company or any of its Affiliates that are subject to regulation under Gaming Laws, and shall, upon request from a Holder from time to time, provide any documents and records in its possession or in the possession of its Affiliates (to the extent available to the Company) that such Holder reasonably requests in order to determine whether such Gaming Approvals are required; provided, that, prior to receiving any documents and records, such Holder shall agree to comply with the Company’s insider trading policies as in effect and shall agree to keep the information contained therein confidential, including to the extent required so that the Company’s provision of such documents and records does not cause the Company to breach any confidentiality agreement to which it is a party.

(c) For purposes of this Section 4, the following capitalized terms shall have the following meanings ascribed thereto:

(i) “Affiliate” has the meaning ascribed to such term in Section 12 of the Exchange Act; provided, that, the existence of a management contract primarily for operational services provided by the Company or an Affiliate of the Company shall not be deemed to be control by the Company or such Affiliate, as the case may be.

(ii) “Conversion Notice” has the meaning ascribed to such term in the Indenture.

(iii) “Gaming Approval” means any approval or consent required under Gaming Laws to be obtained from any Gaming Authority, including, without limitation, any

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registration, finding of suitability or approval of an acquisition of control.

(iv) “Gaming Authority” means any governmental entity with regulatory control, authority or jurisdiction over casino, pari-mutuel, lottery or other gaming activities and operations within the State of Nevada, including, without limitation, the Nevada Gaming Commission, the Nevada State Gaming Control Board, the Clark County Liquor and Gaming Licensing Board and the City of Las Vegas.

(v) “Gaming Laws” means all laws, regulations, rules, ordinances or other pronouncements pursuant to which any Gaming Authority possesses regulatory, licensing or permit authority over casino, pari-mutuel, lottery or other gaming activities in any jurisdiction, including all rules and regulations established by any Gaming Authority.

(vi) “Licensed Affiliate” means a person who is associated or affiliated with a Holder or any of their respective Affiliates and is required under Gaming Laws to obtain a Gaming Approval for any Holder to hold, or to exercise in full, the Company Securities.

5. Agreement Regarding a Refinancing Transaction. In consideration of the waiver granted hereunder, the Investors hereby agree that, at any time any Investor is a holder of Convertible Notes, should any member of the Company’s board of directors initially designated or nominated by an Investor fail to recuse himself or herself with respect to any vote on any proposal or plan proposed by management of the Company to effect a repayment, extension or other refinancing of the Convertible Notes, such Investor or Investors will promptly take all action permissible under applicable law to designate or nominate a replacement for such director as promptly as possible. It is understood that the Investors, as holders of Convertible Notes, are not agreeing hereby to elect to participate in any such repayment, extension or other refinancing transaction.

6. Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter.

7. 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 such counterparts have been signed by each of the parties hereto and delivered to the other parties hereto.

8. Consent to Jurisdiction. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any New York state or federal court sitting in the Borough of Manhattan of The City of New York. The parties hereto hereby (a) submit to the exclusive jurisdiction of any state or federal court sitting in the Borough of Manhattan of The City of New York for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the action or proceeding is brought in an inconvenient forum, that the venue of the action is improper, or that this Agreement or the transactions contemplated

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by this Agreement may not be enforced in or by any of the above-named courts.

9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

10. Severability. If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other persons or circumstances.

11. Amendments and Waivers. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Any failure of any party to comply with any obligation, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 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 such rights.

12. Assignment. This Agreement and the rights and obligations hereunder shall not be assignable or transferable by any party without the prior written consent of the other parties hereto. Any attempted assignment in violation of this Section 12 shall be void.

[Signatures on next page.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

MORGANS HOTEL GROUP CO.
By:	/s/ Marc Gordon
	Name:	Marc Gordon
	Title:	President
YUCAIPA AMERICAN ALLIANCE FUND II, L.P.
By:	Yucaipa American Alliance Fund II, LLC
Its:	General Partner
By:	/s/ Robert P. Bermingham
	Name:	Robert P. Bermingham
	Title:	Vice President
YUCAIPA AMERICAN ALLIANCE (PARALLEL)  FUND II, L.P.
By:	Yucaipa American Alliance Fund II, LLC
Its:	General Partner
By:	/s/ Robert P. Bermingham
	Name:	Robert P. Bermingham
	Title:	Vice President