16 February 2007 ROYALTON EUROPE HOLDINGS LLC WALTON MG LONDON INVESTORS V, L.L.C. JOINT VENTURE AGREEMENT RELATING TO MORGANS HOTEL GROUP EUROPE LIMITED

1.2           In this Agreement the following words and expressions shall have the following meanings:

Acceptable Finance means the Facility Agreement or any finance with an institutional bank or lending institution which finance shall be:

(a)                                  on customary commercial terms;

(b)                                 secured by no more than a pledge over all of the shares in the capital of the Company or the subsidiary or a fixed charge over the Company’s and/or, as applicable, the Company’s subsidiary’s interest in the Hotel Properties and a floating charge over it’s other assets, but otherwise without recourse to the Shareholders (other than customary “bad-boy” recourse carve-outs); and

(c)                                  on terms such that Loan to Value is not greater than seventy-five to eighty percent. (75%-80%), with an objective to achieve 80% (or as close thereto as is reasonably possible).  “Value” shall be determined by the lender’s appraisal;

A Directors means A Directors of the Company appointed under the Articles;

Affiliate Agreement has the meaning given in clause 7.1(q);

Affiliated Shareholder has the meaning given in clause 7.1(q);

Agreed Form the form hereafter agreed between and signed by or on behalf of Royalton and Walton;

Appraisal means, with respect to each Hotel Property, the independent valuation (appraisal) prepared and delivered, by a reputable valuer (appraiser) of hotel properties of similar type, location and value of the Hotel Properties (or any of them, as applicable), to, the Company at its request;

Appraised Value means the value of any Hotel Property as indicated on the most recent Appraisal thereof, or, if no such Appraisal exists, the value agreed upon by the Shareholders;

Assignment Amount has the meaning given in clause 15.5;

Articles means the articles of association of the Company;

A Shares means the A Ordinary Shares in the capital of the Company owned by Royalton;

Auditors means the firm appointed by the Company;

B Director: means the B Directors of the Company appointed under the Articles;

B Shares means the B Ordinary Shares in the capital of the Company owned by Walton;

Board means the Board of Directors of the Company for the time being;

Business means the business of the Company as described in clause 3 and such other business as the Parties may agree pursuant to clause 7.1 from time to time in writing should be carried on by the Company;

Business Day means a day other than a Saturday or Sunday or public holiday in England and Wales on which banks are open in London for general commercial business;

Buy/Sell Notice shall have the meaning given in clause 13.1;

Capital Expenditures means, determined in accordance with the Determination Guidelines, for any period, the sum of all expenditures (whether paid in cash or accrued as a liability) by the Company which are capitalized on the consolidated balance sheet of the Company in conformity with GAAP, but excluding (i) all expenditures made with respect to the acquisition by the Company of any direct or indirect interest in real property; (ii) all expenditures made in the initial construction, rehabilitation or renovation of any Hotel Property; and (iii) capital expenditures made from the proceeds of insurance or compulsory purchase awards (or payments in lieu thereof) or indemnity payments received during such period by the Company from third parties;

Closing means completion of the sale and purchase of Sale Shares in accordance with clause 13.6;

Companies Acts means the Companies Act 1985, the Companies Consolidation (Consequential Provisions) Act 1985 and the Companies Act 1989;

Company means Morgans Hotel Group Europe Limited, a limited company with registered number 03203996 of 88 Wood Street, London EC2V 7AJ;

Contingent Obligation means as to any person, without duplication, (i) any contingent obligation of such person required to be shown on such person’s balance sheet in accordance with generally accepted accounting principles, and (ii) any obligation required to be disclosed in the footnotes to such person’s financial statements, guaranteeing partially or in whole any non-recourse Debt, lease, dividend or other obligation, exclusive of contractual indemnities (including, without limitation, any indemnity or price-adjustment provision relating to the purchase or sale of securities or other assets) and guarantees of non-monetary obligations (other than guarantees of completion) which have not yet been called on or quantified, of such person or of any other person.  The amount of any Contingent Obligation described in clause (ii) shall be deemed to be (a) with respect to a guarantee of interest or interest and principal, or operating income guarantee, the sum of all payments required to be made thereunder (which in the case of an operating income guarantee shall be deemed to be equal to the debt service for the note secured thereby), calculated at the applicable interest rate, through (i) in the case of an interest or interest and principal guarantee, the stated date of maturity of the obligation (and commencing on the date interest could first be payable thereunder); or (ii) in the case of an operating income guarantee, the date through which such guarantee will remain in effect, and (b) with respect to all guarantees not covered by the preceding clause (a), an amount equal to the stated or determinable amount of the primary obligation in respect of which such guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person required to perform thereunder) as recorded on the balance sheet and on the footnotes to the most recent financial statements of the Company.  Notwithstanding anything contained herein to the contrary, guarantees of completion shall not be deemed to be Contingent Obligations unless and until a claim for payment or performance has been made thereunder, at which time any such guarantee of completion shall be deemed to be a Contingent Obligation in an amount equal to any such claim;

control means, for the purposes of the definition of “Group Company” and similar uses of the term “control” made herein, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person or entity, whether through ownership of voting securities, by contract or otherwise;

Debt of any person means, without duplication, (i) as shown on such person’s consolidated balance sheet (a) all indebtedness of such person for borrowed money or for the deferred purchase price of property; and, (b) all indebtedness of such person evidenced by a note, bond, debenture or similar instrument (whether or not disbursed in full in the case of a construction loan); (ii) the face amount of all letters of credit issued for the account of such person and, without duplication, all un-reimbursed amounts drawn thereunder; (iii) all Contingent Obligations of such person; and (iv) all payment obligations of such person under any interest rate protection agreement (including, without limitation, any interest rate swaps, caps, floors, collars and similar

agreements) and currency swaps and similar agreements which were not entered into specifically in connection with Debt set forth in clauses (i), (ii) or (iii) hereof.  For the purposes hereof, Debt (other than Contingent Obligations) of the Company shall be deemed to include only the Company’s pro rata share (such share being based upon the Company’s percentage ownership interest as shown on the Company’s annual audited financial statements) of the Debt of any person in which the Company, directly or indirectly, owns an interest, provided that such Debt is non-recourse, both directly and indirectly, to the Company;

Deed of Adherence means a deed of adherence to this agreement in the form of Exhibit C;

Debt Service means, determined in accordance with the Determination Guidelines, measured as of the last day of each calendar quarter, an amount equal to the aggregate amount of interest and principal actually due and payable by the Company or any subsidiary of the Company, as applicable, on its Debt for the previous four consecutive quarters including the quarter then ended;

Determination Guidelines means the intention of the Parties to this Agreement that all calculations and distributions to be made under this Agreement be determined and distributed as if all Hotel Properties were owned directly by the Company and not through one or more intermediaries;

Director means any director for the time being of the Company including, where applicable, any alternate director;

Event of Default shall have the meaning given in clause 12;

Facility Agreement means the agreement between, inter alia, Morgans Hotel Group London Limited and Citigroup Global Markets Limited dated 24 November 2005 as amended;

GAAP means generally accepted accounting principles in effect from time to time in the United Kingdom;

Group Company means in relation to any Shareholder, a company controlled by that Shareholder, a subsidiary (company, limited liability company, limited partnership or other entity) of a company controlled by that Shareholder or a subsidiary owned by the owners of that Shareholder, provided that Shareholder owns beneficially at least fifty-one percent. (51 %) of the controlled company or such controlling company owns beneficially at least fifty-one percent. (51 %) of that Shareholder, as the case may be.  Anything herein to the contrary notwithstanding, a “Group Company” as to Walton shall include any company or other entity controlled by or under common control with Walton Street Capital L.L.C.;

Hotel means any lodging facility acquired wholly or in part, directly or indirectly, by the Company in Europe, including all management and operations systems thereof which, to the extent it is operated by the Operator, shall be operated to the standard required in the Master Management Agreement and the Property Management Agreements;

Hotel Properties Value means the aggregate of the Appraised Value of each of the Hotel Properties;

Hotel Property means, in respect of any Hotel, the land, buildings, appurtenances, easements, rights of way, fixtures, equipment, furnishings and any and all other real and personal property rights and capital items in connection therewith;

ICTA 1988 means the Income and Corporation Taxes Act 1988;

JV IPR means all intellectual property rights set out in Exhibit 2 to the Warranty Deed between Royalton, Walton, Morgans Group LLC and Walton Street Real Estate Fund V, L.P. dated 9 February 2007;

JV IPR Assignment means the assignment by the Company and its subsidiary of the JV IPR together with

(a) the goodwill in any the JV IPR; and

(b) the right to sue (and to retain damages recovered) in respect of any infringement or unauthorised use of any of the JV IPR which may have occurred before the date of this Deed,

to such person, at such time as Royalton may in its discretion decide;

Loan to Value means, as of any date of determination, the percentage of the aggregate amount of the Debt of the Company outstanding as of such date to the Hotel Properties Value as of such date;

London Stock Exchange means the London Stock Exchange plc;

Major Decision shall have the meaning set out in clause 7;

Master Management Agreement means the master management agreement, of even date herewith, between the Company and Morgans Hotel Group Management LLC, attached hereto as Exhibit B and as amended from time to time as agreed between the parties thereto in accordance with the provisions of clause 7.1(q);

Notified Price shall have the meaning given in clause 13.2;

Notifier shall have the meaning given in clause 13.1;

Notifier’s Shares shall have the meaning given in clause 13.1;

Offer Period shall have the meaning given in clause 13.3;

Operating Expenses means, determined in accordance with the Determination Guidelines, when used with respect to any Hotel Property, for any period, without duplication, all expenses paid or to be paid by the Company, or as applicable, a subsidiary of the Company, during such period in connection with the operation, management, maintenance, ownership, repair and use of the Hotel Property, determined on an accrual basis, and, except to the extent otherwise provided in this

definition, in accordance with GAAP.  Operating Expenses specifically shall include without duplication (i) all expenses incurred in the immediately preceding twelve (12) month period; (ii) all payments required to be made pursuant to any operating agreements; (iii) management fees, whether or not actually paid, equal to fees actually paid to the Hotel Property manager; and (iv) the real property taxes and assessments with respect to the Hotel Property.  Notwithstanding the foregoing, Operating Expenses shall not include (1) depreciation or amortization, (2) income taxes or other impositions in the nature of income taxes, (3) any expenses (including legal, accounting and other professional fees, expenses and disbursements) incurred in connection with any financing or the sale, exchange, transfer, financing or refinancing of all or any portion of the Hotel Property or in connection with the recovery of insurance or condemnation proceeds, (4) any expenses which the Auditors consider should be capitalized, (5) Debt Service, and (6) any item of expense which would otherwise be considered within Operating Expenses pursuant to the provisions above but is paid directly by any retail tenant or reimbursed by the tenant to the Company;

Operating Income means, determined in accordance with the Determination Guidelines, when used with respect to any Hotel Property, for any period without duplication, all income of the Company or, as applicable, a subsidiary of the Company, during such period from the operation of the Hotel Property as follows:

(a)                                  all income, computed on an accrual basis in accordance with GAAP, derived from the ownership and operation of the Hotel Property during such period from whatever source, including all guest room revenues, all food, beverage, and merchandise sales receipts, all interest income, if any, rent, utility charges, forfeited security deposits, service fees or charges, license fees, parking fees and business interruption insurance proceeds, (but excluding Value Added Tax, refunds and uncollectible accounts, sales of furniture, fixtures and equipment, proceeds of casualty insurance and compulsory purchase awards, interest on credit accounts and payments made on interest rate protection agreements entered into in connection with any financing);

(b)                                 all other amounts which in accordance with GAAP are included in the Company’s (or its applicable subsidiary’s) annual financial statements as operating income attributable to the Hotel Property, excepting therefrom amounts collected for onetime, nonrecurring reimbursements;

(c)                                  Operating Income shall not include (a) any compulsory purchase or insurance proceeds; (b) any proceeds resulting from the sale or other disposition of all or any portion of the Hotel Property; (c) any rent attributable to any retail lease at the Hotel Property prior to the date on which the actual payment of rent is required to commence thereunder; (d) any item of income otherwise includable in Operating Income but paid directly by any tenant to a person other than the Company (or its applicable subsidiary), provided such item of income is an item of expense (such as payments for utilities paid directly to a utility company) and is otherwise excluded from the definition of Operating Expense; or (e) security deposits received from any retail tenants until forfeited;

Operator means the “Operator” as defined in the Master Management Agreement;

Preferred Ordinary Share means the issued preferred non-voting ordinary share in the capital of the Company of £1;

Project Documents means the Master Management Agreement and the Property Management Agreements;

Property Management Agreements means the property specific management agreements in relation to each Hotel Property, of even date herewith, attached hereto as Exhibit A and as amended from time to time as agreed between the parties thereto in accordance with the provisions of clause 7.1(q);

Recipient shall have the meaning given in clause 13.1;

Recipient’s Shares shall have the meaning given in clause 13.1;

Relevant Person shall have the meaning given in clause 12;

Sale Shares shall have the meaning given in clause 13.7;

Sale Notice shall have the meaning given in clause 13.4;

Shareholders means Royalton and Walton, or, in respect of each of them, any person to whom shares in the Company may have been transferred by them in accordance with the provisions of this Agreement, and any other person to whom shares in the Company are issued in accordance with the provisions of this Agreement;

Shares means the A Shares, the B Shares, the Preferred Ordinary Share and any new shares in the capital of the Company created from time to time;

subsidiary and subsidiaries shall have the meanings set out in section 736 of the Companies Act 1985;

Termination Notice shall have the meaning given in clause 12.2(c)(B);

Transfer shall have the meaning given in clause 10.1;

Transfer Terms shall have the meaning given in clause 13.3;

Value Added Tax means value added tax at the rate in force when the relevant supply is made, and includes any similar tax from time to time replacing it or supplementing it or of a similar fiscal nature; and

Working Hours means 9.30 a.m. to 5.30 p.m. Greenwich Mean Time on a Business Day.

1.3           In this Agreement (unless the context requires otherwise):

(a)                                  words and expressions which are defined in the Companies Acts shall have the same meanings as are ascribed to them in the Companies Acts;

(b)                                 any question as to whether a person is connected with any other person shall be determined in accordance with the provisions of Section 839 ICTA 1988;

(c)                                  any reference to any statute or statutory provision shall be construed as including a reference to any modification, re-enactment or extension of such statute or statutory provision for the time being in force, to any subordinate legislation made under the same and to any former statute or statutory provision which it consolidated or re-enacted;

(d)                                 any reference to a Recital or clause is to a Recital or clause (as the case may be) of or to this Agreement; and

(e)                                  directly or indirectly shall (without limiting the expression) mean either alone or jointly with any other person, firm or body corporate and whether on his own account or in partnership with another or others or as the holder of any interest in or as officer, employee or agent of or consultant to any other person, firm or body corporate.