Exhibit 10.2
December 16, 2009
Confidential
Dear Michael:
As we have discussed, DiamondRock Hospitality Company (the “Company”) has made
the decision to terminate your employment with the Company effective
December 31, 2009. In accordance with the terms of that certain Severance
Agreement dated March 9, 2007 by and between you and the Company (the “Severance
Agreement”), you shall be entitled to severance payments and benefits to be
provided in connection with a termination without Cause, as set out more fully
below, conditioned upon your execution of this agreement and general release
(the “Agreement”) and good faith cooperation throughout, as contemplated in
Section 3(a) of the Severance Agreement.
Effective December 31, 2009, you are to cease all efforts on behalf of the
Company, except as the Company requires your assistance in accordance with your
obligations under Section 8(e) of the Severance Agreement (captioned Litigation
and Regulatory Cooperation. Furthermore, as of December 31, 2009, you are not to
hold yourself out as an employee, agent, or authorized representative of the
Company, or negotiate or enter into any agreements on behalf of the Company or
otherwise bind the Company.
In accordance with the terms of the Severance Agreement, the Company is prepared
to offer you the following severance package, contingent upon your agreement
with the following terms and with your execution of this Agreement:

  1.  
Your last day of employment with the Company will be December 31, 2009, and you
will be paid your accrued and unpaid 2009 base salary through that day.

  2.  
The Company also will pay you the amount of $200,244.00, less all lawful
deductions, which represents a pro-rata target bonus for the 2009 fiscal year,
calculated based on the target bonus for this fiscal year, in accordance with
Section 3(b)(i) of the Severance Agreement.

  3.  
In addition, pursuant to Section 3(b)(ii) of the Severance Agreement, the
Company will pay you the sum of $1,007,288.00, less all lawful deductions, which
represents two times the sum of (A) your current base salary ($303,400 per
year), and (B) your target bonus for this year. Subject to the eight day waiting
period, this sum will not be paid to you until January 15, 2010, and this sum
will be paid to you in one lump sum. Your severance check(s) will be mailed to
you at your home address, unless you request otherwise in writing.

 

 

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  4.  
You will be reimbursed for all ordinary and necessary reasonable business
related expenses incurred by you prior to December 31, 2009. You must submit
your request for reimbursement for these expenses, accompanied by proper
documentation, to Sean Mahoney on or before January 15, 2010.

  5.  
Your health insurance coverage will continue through December 31, 2009.
Thereafter, you may be eligible to continue your health insurance coverage for
an additional period of time under COBRA or its Maryland state law counterpart
(COBRA). This health insurance continuation coverage will be at your own
expense, subject to the provisions of the American Recovery and Reinvestment Act
of 2009 (as applicable). We will provide you with further details on these
conversion/continuation rights in a separate document. Provided that you meet
the eligibility requirements for health insurance continuation coverage and the
terms and conditions for such insurance coverage, the Company shall continue to
contribute toward your health insurance continuation coverage premiums for the
period of eighteen (18) months subsequent to December 31, 2009 (the “COBRA
Coverage Period”). If this coverage becomes unavailable to you or the Company’s
insurer refuses to cover you for any reason during the COBRA Coverage Period,
the Company will pay you monthly an amount equal to the Company’s premiums for
its health insurance plan(s), after reduction for income and employment taxes,
for the remainder of the COBRA Coverage Period. In addition, the Company will,
for the full COBRA Coverage Period, either (i) to the extent permissible (and
without the Company’s incurring an obligation to pay excise taxes) under the
applicable rules for health savings accounts, continue to make the monthly
employer contributions (as it may be increased for comparable active employees)
to your health savings account (“HSA”) that it was making at the time of your
termination or (ii) for periods in which a payment under Section 5(i) above is
not deemed reasonably feasible, pay you monthly a cash payment that is equal to
the amount of the contribution described in Section 5(i) grossed up for federal
and state income taxes (which are assumed to be payable at the highest marginal
rates of taxation).

  6.  
During your employment, you received a number of grants of common stock.
Currently, you have 197,951 unvested shares of the company’s common stock.
Pursuant to the terms of your Severance Agreement, as of the Effective Date of
this Agreement you shall vest in 100% of the unvested shares. Except as
expressly provided herein, your ownership in these unvested shares shall be
subject to the terms and conditions set forth in the Restricted Stock Agreement.

  7.  
In connection with your employment, you became eligible to receive a grant of
25,176 Stock Appreciation Rights from the Company pursuant to that certain Stock
Settled Stock Appreciation Rights Agreement Under the DiamondRock Hospitality
Company 2004 Stock Option and Incentive Plan dated March 4, 2008 (the “Stock
Appreciation Rights Agreement”), subject to vesting over a three (3) year
period. The Company, pursuant to its discretion under the Stock Appreciation
Rights Agreement, agrees to allow for the vesting of all your currently unvested
Stock Appreciation Rights. However, the Company will not extend the time period
you have to exercise the Stock Appreciation Rights beyond three months after
your termination from the Company.

 

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  8.  
Pursuant to the Dividend Equivalent Rights Agreement under the DiamondRock
Hospitality Company 2004 Stock Option and Incentive Plan dated March 4, 2008
(the “DER” or “Dividend Equivalent Rights Agreement”), you received a grant of
25,176 DER options. The Company, pursuant to its discretion under the Dividend
Equivalent Rights Agreement, agrees to allow for the vesting of all your
currently unvested DER options.

  9.  
You will have no further right to participate in the Company’s Retirement Income
Plan (the pension plan) or 401(k) plan; however, any vested rights in these
plans that you currently have shall not be affected by this Agreement, including
any matching funds through the date of termination.

  10.  
The Company will not contest any claim you may file for unemployment
compensation. Nothing in this Agreement shall preclude the Company from making
truthful disclosures required by law.

  11.  
You acknowledge and agree that the terms set forth above include compensation
you would not be entitled to receive absent your execution of this Agreement.
Furthermore, you acknowledge that, except as expressly set forth above, after
today, you will be entitled to no other or further compensation, remuneration or
benefits from Company, and any payments made to you, as noted above, shall, of
course, be less all applicable taxes and other deductions required by law.

  12.  
You agree that you will return to the Company any and all Company property in
your possession, including, but not limited to, software programs, other Company
equipment, tools, technical materials, client lists, marketing information,
pricing information, cellular phones, PDA/BlackBerry, personnel materials or
files, handbooks, manuals, policies, memoranda, notes, and drafts thereof, and
any other documents or property (and any summaries, excerpts or copies thereof),
unfinished versions or reproductions of any items developed by you and/or
obtained by you or on your behalf, directly or indirectly, pursuant to your
employment with the Company. You may keep the Company-issued iPhone and laptop
computer, but must remove all Company property before the termination date.

  13.  
You acknowledge that this Agreement is a full and accurate embodiment of the
understanding between the parties and that it supersedes any prior agreements or
understandings made by the parties, except the Severance Agreement (including
but not limited to the Non-Competition, Non-Disparagement, Non-Solicitation of
Employees and Litigation and Regulatory Cooperation provisions of the Severance
Agreement), which will remain in effect subsequent to the execution of this
Agreement. (The Severance Agreement is attached hereto.) The terms of this
Agreement may not be modified, except by mutual consent of the parties. Any and
all modifications must be reduced to writing and signed by the parties to be
effective.

 

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  14.  
In keeping with our intent to allow for an amicable separation, and in
consideration of the consideration being provided to you, you release the
Company of and from any and all claims, causes of action, demands, obligations,
agreements, promises, liability, damages, costs and/or fees arising out of or
relating to your employment, including your separation from employment, to the
greatest extent permitted under the applicable law. By this paragraph, you are
waiving any claims which may exist against the Company, DiamondRock Hospitality
Limited Partnership, any other members of the DiamondRock Group (as defined in
the Severance Agreement), their directors, officers, employees, attorneys,
agents, insurers and all other related or affiliated persons, firms or entities
(the “Releasees”). This includes all rights and obligations under any federal,
state or local laws pertaining to employment, including, but not limited to, all
employment discrimination laws, such as the Age Discrimination in Employment
Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act
of 1964, the Americans with Disabilities Act, the Civil Rights Act of 1866, the
Civil Rights Act of 1991, the Employee Retirement Income Security Act (ERISA),
the National Labor Relations Act, the health benefit provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA, or its Maryland state law
counterpart (Maryland Insurance Law Article § 15-409, and the Code of Maryland
Regulations (COMAR) § 31.11.04), the Maryland Human Relations Commission Act
(MHRCA) — Maryland State Government Code, §§ 20-101 et seq., any regulations
thereunder, and any human rights law of any Maryland county or municipality, the
Maryland Statutory Provision Regarding Retaliation/Discrimination for Filing a
Workers’ Compensation Claim — Md. Labor & Employment Code § 9-1105, the Maryland
Equal Pay Law — Md. Labor & Employment Code § 3-301 et seq., the Maryland
Adoption Leave Law — Md. Labor & Employment Code §§ 3-801 and 3-802, Maryland
Medical Information Bias Law — Md. Labor & Employment Code § 5-604, the Maryland
Military Leave Law — Md. Public Safety Code § 13-705, the Maryland law
protecting witnesses, jurors and victims who attend court proceedings, Md.
Courts and Judicial Proceedings Code §§ 8-105, 9-205, the Maryland Day of Rest
Law — Md. Labor & Employment Code § 3-704, the Maryland Wage and Hour Laws — Md.
Labor & Employment Code §§ 3-401 et seq. and 3-501 et seq., Maryland
Occupational Safety & Health Act, as amended — Md. Labor & Employment Code §
5-101 et seq., the Maryland Flexible Leave Act, Md. Labor & Employment Code §
3-801 et seq., the Maryland Pay Disparity Act, Md. Labor & Employment Code §
3-305, retaliatory discharge, breach of employment contract, conspiracy, fraud,
negligence (including negligent hiring and retention), prima facie tort,
defamation, negligent or intentional infliction of emotional distress, implied
contracts or implied covenants of good faith and fair dealing, and any and all
other federal, state and local statutes, cases, authorities or laws (including
common law) providing a cause of action that can be the subject of a release
under applicable law. THIS IS A GENERAL RELEASE. Nothing in this release shall
be construed to waive any claims that cannot be waived as a matter of law or to
waive any right to file an administrative charge that cannot be waived as a
matter of law. This general release does not waive any rights or claims that may
arise after the date the waiver is executed. Furthermore, nothing in this
paragraph will affect the ability of either party to enforce rights or
entitlements specifically provided for under this Agreement as set forth above.
Naturally, the Company’s obligations under this Agreement are contingent upon
your compliance with all terms and conditions provided for herein. A legal
challenge to the validity of your release of claims under the Age Discrimination
in Employment Act in this Agreement will not be considered a breach of this
Agreement; provided, however, that the severance benefits paid to you under this
Agreement may serve as restitution, recoupment, and/or setoff in the event you
prevail on the merits of such claim.

 

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  15.  
You acknowledge and agree that, as a condition of this Agreement, you expressly
release all rights and claims against the Company that you know about as well as
those claims you may not know about. For the purpose of implementing a full and
complete release and discharge of the Releasees, you expressly acknowledge that
this Agreement is intended to include and does include in its effect, without
limitation, all claims which you do not know or suspect to exist in you against
the Releasees, and that this Agreement contemplates the extinguishment of any
such claim or claims.

  16.  
You affirm that you have in the past and will continue to comply with your
obligation under paragraph 4 of your Severance Agreement dated March 9, 2007,
related to Non-Disparagement. That agreement provides as follows: “The Executive
agrees that he/she will not, whether during or after the Executive’s employment
with the REIT, make any statement, orally or in writing, regardless of whether
such statement is truthful, nor take any action, that (a) in any way could
disparage the DiamondRock Group or any officers, executives, directors,
partners, managers, members, principals, employees, representatives, or agents
of the DiamondRock Group, or which foreseeably could or reasonably could be
expected to harm the reputation or goodwill of any of those persons or entities,
or (b) in any way, directly or indirectly, could knowingly cause, encourage or
condone the making of such statements or the taking of such actions by anyone
else.”

  17.  
This Agreement will be interpreted and enforced in accordance with Maryland law.

  18.  
If any covenant or provision of this Agreement is determined to be invalid,
illegal or incapable of being enforced by reason of any rule of law,
administrative order, judicial decision or public policy, that covenant or
provision shall be deemed stricken, and all other covenants and provisions in
this Agreement shall, nevertheless, remain in full force and effect.

  19.  
To the extent that the payments or benefits being provided under this Agreement
would have the potential to trigger any penalty under Section 409A of the
Internal Revenue Code, the Company shall refrain from making any payment
hereunder before the date that is six (6) months after the date you separate
from service, as necessary to avoid incurring any penalty under Section 409A.

  20.  
In accordance with Section 8(e) of the Severance Agreement, you agree to comply
with Section 8(e) of the Severance Agreement.

 

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Please read the above carefully, and seek counsel from family members, friends,
or attorneys if you believe it is appropriate. If you need clarification of any
of the above provisions, please let me know.
In accordance with the Older Workers Benefits Protection Act, we will hold this
offer open for twenty-one (21) days from the date of this Agreement, although we
would hope to conclude this matter as quickly as possible. In addition, you may
revoke this Agreement at any time within seven (7) days after it is signed by
you. Any revocation must be in writing and delivered to the Company within eight
(8) days of signing this Agreement to be effective. Any revocations should be
transmitted to Sean Mahoney, Executive Vice President, Chief Financial Officer
and Treasurer, at fax 240.744.199 or e-mail SMahoney@drhc.com Because of your
right to revoke this Agreement, it shall not become effective until the eighth
(8th) day after it has been signed, and you will not be paid any severance pay
due you under this Agreement until after the eighth (8th) day after you sign
this document. The waiver of rights and claims under the ADEA does not extend to
any rights or claims arising after you execute this Agreement. You are advised
to consult with counsel regarding the terms of this Agreement.
Your signature below will confirm that you are entering into this Agreement
voluntarily and with a full understanding of all of the above terms. In
addition, once signed, this letter will set forth the entire agreement between
the Company and you. It will supersede any previous agreements or discussions
concerning your employment or the termination thereof. No changes in this
Agreement will be valid unless in writing and signed by both parties.
Even if this proposal is not acceptable, we nevertheless intend to proceed with
the termination of your employment. In that event, you will not be entitled to
severance pay or any of the other benefits or compensation stated above (other
than that which we are required by law to provide). Moreover, we will not
implement the terms of this Agreement, or begin paying you any of the benefits
offered, until we receive a signed copy of the Agreement back from you and the
seven day revocation period has passed.

 

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Please let me know if you have any questions. I wish you the best of success and
personal and professional fulfillment in the future.

            Sincerely,
      /s/ Mark W. Brugger       Mark W. Brugger   

I HAVE READ THE FOREGOING OFFER AND I FULLY UNDERSTAND ITS TERMS. I AM SIGNING
THIS AGREEMENT FREELY AND VOLUNTARILY, HAVING BEEN GIVEN A FULL AND FAIR
OPPORTUNITY TO CONSIDER IT AND CONSULT WITH ATTORNEYS OR ADVISORS OF MY CHOICE.
AGREED AND ACCEPTED:

         
/s/ Michael D. Schecter
      December 16, 2009
 
       
Michael D. Schecter
      Date

 

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ATTACHMENT

 

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SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the “Agreement”) is made this 9th day of March 2007,
by DiamondRock Hospitality Company, a Maryland corporation (the “REIT”), with
its principal place of business at 6903 Rockledge Drive, Suite 800, Bethesda,
Maryland 20817 and Michael D. Schecter, residing at 920 Independence Avenue, SE,
Washington, DC 20003 (the “Executive”).
1. Purpose
The REIT considers it essential to the best interests of its stockholders to
promote and preserve the continuous employment of key management personnel. The
Board of Directors of the REIT (the “Board of Directors”) recognizes that, as in
the case with many corporations, the possibility of a termination of employment
exists and that such possibility, and the uncertainty and questions that it may
raise among management, may result in the distraction of key management
personnel to the detriment of the REIT and its stockholders. Therefore, the
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
REIT’s key management. Nothing in this Agreement shall be construed as creating
an express or implied contract of employment and, except as otherwise agreed in
writing between the Executive and the REIT, the Executive shall not have any
right to be retained in the employ of the REIT.
2. Definitions
(a) Accrued Salary. “Accrued Salary” shall mean accrued and unpaid base salary
through the Date of Termination. In addition, in the event the Executive’s
annual bonus for the REIT’s most recently completed fiscal year has not yet been
paid to the Executive, then Accrued Salary also shall include such prior fiscal
year’s earned, accrued and unpaid bonus.
(b) Cause. “Cause” for termination shall mean a determination by the Board of
Directors in good faith that any of the following events has occurred:
(i) indictment of the Executive of, or the conviction or entry of a plea of
guilty or nolo contendere by the Executive to any felony, or any misdemeanor
involving moral turpitude; (ii) the Executive engaging in conduct which
constitutes a material breach of a fiduciary duty or duty of loyalty, including
without limitation, misappropriation of funds or property of the REIT,
DiamondRock Hospitality Limited Partnership (the “Operating Partnership”) and
their subsidiaries (the REIT, the Operating Partnership and their subsidiaries
are hereinafter referred to as the “DiamondRock Group”) other than an occasional
and de minimis use of Company property for personal purposes; (iii) the
Executive’s willful failure or gross negligence in the performance of his
assigned duties for the DiamondRock Group, which failure or gross negligence
continues for more than 5 days following the Executive’s receipt of written or
electronic notice of such willful failure or gross negligence from the Board of
Directors; (iv) any act or omission of the Executive that has a demonstrated and
material adverse impact on the DiamondRock Group’s reputation for honesty and
fair dealing or any other conduct of the Executive that would reasonably be
expected to result in injury to the reputation of the DiamondRock Group; or
(v) willful failure to cooperate with a bona fide internal investigation or an
investigation by regulatory or law enforcement authorities, after being
instructed by the REIT to cooperate, or the willful destruction or failure to
preserve documents or other materials known to be relevant to such investigation
or the willful inducement of others to fail to cooperate, destroy or fail to
produce documents or other materials.

 

 

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For purposes of this Section 2(b), any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board of Directors
or based upon the written advice of counsel for the DiamondRock Group shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the DiamondRock Group. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of the Board of Directors, finding that, in the
good faith opinion of the Board of Directors, the Executive has engaged in the
conduct described in this Section 2(b); provided, that if the Executive is a
member of the Board of Directors, the Executive shall not vote on such
resolution.
(c) Change in Control. “Change in Control” shall mean any of the following
events:

  (i)  
The conclusion of the acquisition (whether by a merger or otherwise) by any
Person (other than a Qualified Affiliate), in a single transaction or a series
of related transactions, of Beneficial Ownership of more than 50 % of (1) the
REIT’s outstanding common stock (the “Common Stock”) or (2) the combined voting
power of the REIT’s outstanding securities entitled to vote generally in the
election of directors (the “Outstanding Voting Securities”);

  (ii)  
The merger or consolidation of the REIT with or into any other Person other than
a Qualified Affiliate, if the directors immediately prior to the merger or
consolidation cease to be the majority of the Board of Directors at anytime
within 12 months of the completion of the merger or consolidation;

  (iii)  
Any one or a series of related sales or conveyances to any Person or Persons
(including a liquidation or dissolution) other than any one or more Qualified
Affiliates of all or substantially all of the assets of the REIT or the
Operating Partnership; or

  (iv)  
Incumbent Directors cease, for any reason, to be a majority of the members of
the Board of Directors, where an “Incumbent Director” is (1) an individual who
is a member of the Board of Directors on the effective date of this Agreement or
(2) any new director whose appointment by the Board of Directors or whose
nomination for election by the stockholders was approved by a majority of the
persons who were already Incumbent Directors at the time of such appointment,
election or approval, other than any individual who assumes office initially as
a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board of
Directors or as a result of an agreement to avoid or settle such a contest or
solicitation.

 

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A Change in Control shall also be deemed to have occurred upon the completion of
a tender offer for the REIT’s securities representing more than 50% of the
Outstanding Voting Securities, other than a tender offer by a Qualified
Affiliate.
For purposes of this definition of Change in Control, the following definitions
shall apply: (A) “Beneficial Ownership,” “Beneficially Owned” and “Beneficially
Owns” shall have the meanings provided in Exchange Act Rule 13d-3; (B) “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended; (C) “Person”
shall mean any individual, entity, or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act), including any natural person,
corporation, trust, association, company, partnership, joint venture, limited
liability company, legal entity of any kind, government, or political
subdivision, agency or instrumentality of a government, as well as two or more
Persons acting as a partnership, limited partnership, syndicate or other group
for the purpose of acquiring, holding or disposing of the REIT’s securities; and
(D) “Qualified Affiliate” shall mean (I) any directly or indirectly wholly owned
subsidiary of the REIT or the Operating Partnership; (II) any employee benefit
plan (or related trust) sponsored or maintained by the REIT or the Operating
Partnership or by any entity controlled by the REIT or the Operating
Partnership; or (III) any Person consisting in whole or in part of the Executive
or one or more individuals who are then the REIT’s Chief Executive Officer or
any other named executive officer (as defined in Item 402 of Regulation S-K
under the Securities Act of 1933) of the REIT as indicated in its most recent
securities filing made before the date of the transaction.
(d) Date of Termination. “Date of Termination” shall mean the actual date of the
Executive’s termination of employment with the REIT.
(e) Disability. “Disability” shall mean if the Executive is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months.
(f) Good Reason. “Good Reason” for termination shall mean the occurrence of one
of the following events, without the Executive’s prior written consent, provided
such event is not corrected within 15 days following the Board of Director’s
receipt of written or electronic notice of such event: (i) a material diminution
in the Executive’s duties or responsibilities or any material demotion from the
Executive’s current position at the REIT, including, without limitation: (A) if
the Executive is the CEO, either discontinuing his direct reporting to the Board
of Directors or a committee thereof or discontinuing the direct reporting to the
CEO by each of the senior executives responsible for finance, legal, acquisition
and operations or (B) if the Executive is not the CEO, discontinuing the
Executive reporting directly to the CEO or (C) if the Executive is the Chief

 

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Accounting Officer, discontinuing the Executive’s reporting directly to the
Chief Financial Officer or to the Chief Executive Officer; (ii) if the Executive
is a member of the Board of Directors, the failure of the REIT or its affiliates
to nominate the Executive as a Director of the REIT; (iii) a requirement that
the Executive work principally from a location outside the 50 mile radius from
the REIT’s address, except for required travel on the REIT’s business to the
extent substantially consistent with the Executive’s business travel obligations
on the date hereof; (iv) failure to pay the Executive any compensation, benefits
or to honor any indemnification agreement to which the Executive is entitled
within 30 days of the date due; or (v) the occurrence of any of the following
events or conditions in the year immediately following a Change in Control:
(A) a reduction in the Executive’s annual base salary or annual bonus
opportunity as in effect immediately prior to the Change in Control; (B) the
failure of the REIT to obtain an agreement, reasonably satisfactory to the
Executive, from any successor or assign of the REIT to assume and agree to adopt
this Agreement for a period of at least two years from the Change in Control.
(g) Restricted Period. The “Restricted Period” shall mean, the Executive’s
employment with the REIT, which period may be extended for an additional period
of 12 months if the Executive is entitled to, and receives, the Cash Severance
specified under Section 3(b)(2) hereof.
(h) Retirement. As used in this Agreement, “Retirement” shall mean a retirement
by the Executive if the Executive has been designated as an eligible retiree by
the Board of Directors, in the Board’s sole discretion.
3. Effect of Termination
(a) Any Termination. If the Executive’s employment with the REIT terminates for
any reason, the Executive shall be entitled to any Accrued Salary. The Executive
shall have no rights or claims against the DiamondRock Group except to receive
the payments and benefits described in this Section 3. The REIT shall have no
further obligations to Executive except as otherwise expressly provided under
this Agreement, provided any such termination shall not adversely affect or
alter Executive’s rights under any employee benefit plan of the REIT in which
Executive, at the Date of Termination, has a vested interest, unless otherwise
provided in such employee benefit plan or any agreement or other instrument
attendant thereto.
None of the benefits described in this Section 3 (other than Accrued Salary)
will be payable unless the Executive has signed a general release which has
become irrevocable, satisfactory to the REIT in the reasonable exercise of its
discretion, releasing the DiamondRock Group, its affiliates including the REIT,
and their officers, directors and employees, from any and all claims or
potential claims arising from or related to the Executive’s employment or
termination of employment. In addition, the benefits described in this Section 3
(other than Accrued Salary) are conditioned upon the Executive’s ongoing
compliance with his/her restrictions, covenants and promises under Sections 4,
5, 6 and 7 below (as applicable).

 

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In addition, in the event the Executive’s termination of employment occurs in
connection with or following a Change in Control, then:

  (i)  
In the event that any payment made pursuant to Section 3 hereof or any insurance
benefits, accelerated vesting, pro-rated bonus or other benefit payable to the
Executive under this Agreement or otherwise (the “Severance Payments”),
(1) constitute “parachute payments” within the meaning of Section 280G (as it
may be amended or replaced) of the Internal Revenue Code of 1986, as amended
(the “Code”) (“Parachute Payments”); (2) are subject to the excise tax imposed
by Section 4999 (as it may be amended or replaced) of the Code (the “Excise
Tax”); and (3) exceed the Threshold Amount by 10% or more, then the REIT shall
pay to the Executive an additional amount (the “Gross-Up Amount”) such that the
net benefits retained by the Executive after the deduction of the Excise Tax
(including interest and penalties) and any federal, or local income and
employment taxes (including interest and penalties) upon the Gross-Up Amount
shall be equal to the benefits that would have been delivered hereunder had the
Excise Tax not been applicable and the Gross-Up Amount not been paid.

  (ii)  
In the event that the Severance Payments (1) constitute Parachute Payments;
(2) are subject to the Excise Tax; and (3) exceed the Threshold Amount by less
than 10%, then the benefits payable under this Agreement shall be reduced (but
not below zero) to the extent necessary so that the Severance Payments shall not
exceed the Threshold Amount. To the extent that there is more than one method of
reducing the Severance Payments to bring them within the Threshold Amount,
Executive shall determine which method shall be followed; provided that if
Executive fails to make such determination within 15 days after the REIT has
sent Executive written notice of the need for such reduction, the REIT may
determine the amount of such reduction in its sole discretion.

  (iii)  
“Threshold Amount” shall mean three times Executive’s “base amount” within the
meaning of Section 280G(b)(3) of the Code and the regulations promulgated
thereunder less one dollar ($1.00).

  (iv)  
For purposes of determining the Gross-Up Amount: (1) Parachute Payments provided
under arrangements with the Executive other than under any bonus or other
incentive pay or stock plan or program of the REIT (collectively, the “Plan”)
and this Agreement, if any, shall be taken into account in determining the total
amount of Parachute Payments received by the Executive so that the amount of
excess Parachute Payments that are attributable to provisions of the Plan and
Agreement is maximized; and (2) the Executive shall be deemed to pay federal,
state and local income taxes at the highest marginal rate of taxation for the
Executive’s taxable year in which the Parachute Payments are includable in the
Executive’s income for purposes of federal, state and local income taxation.

 

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  (v)  
The determination of whether the Excise Tax is payable, the amount thereof, and
the amount of any Gross-Up Amount shall be made in writing in good faith by a
nationally recognized independent certified public accounting firm selected by
the REIT and approved by the Executive, such approval not to be unreasonably
withheld (the “Accounting Firm”). If such determination is not finally accepted
by the Internal Revenue Service (or state or local revenue authorities) on
audit, then appropriate adjustments shall be computed based upon the amount of
Excise Tax and any interest or penalties so determined; provided, however, that
the Executive in no event shall owe the REIT any interest on any portion of the
Gross-Up Amount that is returned to the REIT. For purposes of making the
calculations required by this Section 3(a)(v), to the extent not otherwise
specified herein, reasonable assumptions and approximations may be made with
respect to applicable taxes and reasonable, good faith interpretations of the
Code may be relied upon. The REIT and the Executive shall furnish such
information and documents as may be reasonably requested in connection with the
performance of the calculations under this Section 3(a)(v). The REIT shall bear
all costs incurred in connection with the performance of the calculations
contemplated by this Section 3(a)(v). The REIT shall pay the Gross-Up Amount to
the Executive no later than 60 days following receipt of the Accounting Firm’s
determination of the Gross-Up Amount.

(b) Termination by the REIT without Cause or by Executive for Good Reason. If
the REIT terminates the Executive’s employment without Cause, or the Executive
terminates his employment for Good Reason, then in addition to the benefits
under Section 3(a) above, the Executive shall be entitled to receive the
following:

  (i)  
a pro-rata bonus for the fiscal year determined through the Date of Termination
and calculated based on the target bonus for such fiscal year;

  (ii)  
an amount equal to (A) two times (B) the sum of (I) the Executive’s base salary
in effect immediately prior to the Date of Termination, and (II) the Executive’s
target annual bonus (collectively, the “Cash Severance”);

 

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  (iii)  
continued payment by the REIT for health insurance coverage for the Executive
and the Executive’s spouse and dependents for 18 months, consistent with COBRA
following the Date of Termination to the same extent that the REIT paid for such
coverage immediately prior to the termination of the Executive’s employment and
subject to the eligibility requirements and other terms and conditions of such
insurance coverage, provided that if any such insurance coverage shall become
unavailable and/or the REIT’s insurer refuses to continue coverage during the
18 month period, the REIT thereafter shall be obliged only to pay to the
Executive an amount which, after reduction for income and employment taxes, is
equal to the preexisting employer premiums for such insurance for the remainder
of such severance period.

  (iv)  
vesting as of the Date of Termination of 100% of all unvested time-based
restricted stock awards, to the extent permitted by law. The treatment of equity
compensation awards that are not time based vesting (such as restricted stock
which vests based on one or more performance metrics) granted after the
effective date of this agreement will be specified in individual grant
agreements covering such awards.

(c) Termination In the Event of Death or Disability. If the Executive’s
employment terminates because of the Executive’s death or Disability, then in
addition to the benefits under Section 3(a) above, the Executive (or his estate
or other legal representatives, as the case may be) shall be entitled to
receive:

  (i)  
a pro-rata bonus for the fiscal year determined through the Date of Termination
and calculated based on the target bonus for such fiscal year;

  (ii)  
continued payment by the REIT for health insurance coverage for the Executive
and the Executive’s spouse and dependents for 18 months, consistent with COBRA,
following the Date of Termination to the same extent that the REIT paid for such
coverage immediately prior to the termination of the Executive’s employment and
subject to the eligibility requirements and other terms and conditions of such
insurance coverage, provided that if any such insurance coverage shall become
unavailable and/or the REIT’s insurer refuses to continue coverage during the
18 month period, the REIT thereafter shall be obliged only to pay to the
Executive an amount which, after reduction for income and employment taxes, is
equal to the preexisting employer premiums for such insurance for the remainder
of such severance period.

  (iii)  
vesting as of the Date of Termination of 100% of all unvested time-based
restricted stock awards, to the extent permitted by law. The treatment of equity
compensation awards that are not time based vesting (such as restricted stock
which vests based on one or more performance metrics) granted after the
effective date of this agreement will be specified in individual grant
agreements covering such awards.

 

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(d) Termination In the Event of Retirement. If the Executive’s employment
terminates because of his Retirement, then in addition to the benefits under
Section 3(a) above, the Executive shall be entitled to receive the following:

  (i)  
a pro-rata bonus for the fiscal year determined through the Date of Termination
and calculated based on the target bonus for such fiscal year; and

  (ii)  
notwithstanding the Retirement by the Executive, all unvested time-based
restricted stock awards shall continue to vest at the times and on the terms as
set forth in the relevant restricted stock award agreements as if the Executive
remained continuously employed by the REIT from the Date of Termination through
each such vesting date. The treatment of non-time-based equity compensation
awards (such as restricted stock which vests based on one or more performance
metrics) granted after the effective date of this agreement will be specified in
individual grant agreements covering such awards.

4. Non-Disparagement
The Executive agrees that he/she will not, whether during or after the
Executive’s employment with the REIT, make any statement, orally or in writing,
regardless of whether such statement is truthful, nor take any action, that
(a) in any way could disparage the DiamondRock Group or any officers,
executives, directors, partners, managers, members, principals, employees,
representatives, or agents of the DiamondRock Group, or which foreseeably could
or reasonably could be expected to harm the reputation or goodwill of any of
those persons or entities, or (b) in any way, directly or indirectly, could
knowingly cause, encourage or condone the making of such statements or the
taking of such actions by anyone else.
5. Non-Competition
(a) Non-Competition. Subject to Section 5(b) hereof, the Executive agrees that
during the Restricted Period the Executive shall not, without the prior express
written consent of the REIT, directly or indirectly, anywhere in the United
States, own an interest in, join, operate, control or participate in, or be
connected as an owner, officer, executive, employee, partner, member, manager,
shareholder, or principal of or with, any lodging-oriented real estate
investment company. Notwithstanding the foregoing, the Executive may own up to
one percent (1%) of the outstanding stock of a real estate investment company.
The restrictions of this Section 5(a) shall not apply if the Executive’s
employment with the REIT is terminated for any reason by the Company or the
Executive effective during the 12 month period immediately following a Change in
Control.

 

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(b) Board’s Discretion. Notwithstanding anything contained herein, the Board of
Directors retains the right, in its sole discretion, to shorten or eliminate the
post-employment Restricted Period for any Executive.
6. Non-Solicitation of Employees. The Executive agrees that while he/she is
employed as an employee of the REIT and for a period of 12 months after the
termination of the Employee’s employment with the REIT for whatever reason, the
Employee shall not, without the express written consent of the REIT, hire,
solicit, recruit, induce or procure (or assist or encourage any other person or
entity to hire, solicit, recruit, induce or procure), directly or indirectly or
on behalf of himself or any other person or entity, any officer, executive,
director, partner, principal, member, or non-clerical employee of the
DiamondRock Group or any person who was an officer, executive, director,
partner, principal, member, or non-clerical employee of the DiamondRock Group at
any time during the final year of the Executive’s employment with the REIT, to
work for the Executive or any person or entity with which the Executive is or
intends to be affiliated or otherwise directly or indirectly encourage any such
person to terminate his or her employment or other relationship with the
DiamondRock Group without the prior express written consent of the REIT.
Notwithstanding anything contained herein, the foregoing shall not restrain the
Executive from hiring, soliciting, recruiting, inducing or procuring any person
to work for the Executive or any person or entity with which the Executive is or
intends to be affiliated if such person was either terminated by the REIT or
such person resigned for Good Reason. In addition, the Board of Directors
retains the right, in its sole discretion, to release any Executive from its
obligations under this Section.
7. Injunctive Relief. The Executive understands that the restrictions contained
in Section 4, 5 and 6 of this Agreement are intended to protect the REIT’s
interests in its proprietary information, goodwill, and its employee and
investor relationships, and agrees that such restrictions (and the scope and
duration thereof) are necessary, reasonable and appropriate for this purpose.
The Executive acknowledges and agrees that it would be difficult to measure any
damages caused to the REIT which might result from any breach by the Executive
of his promises and obligations under Sections 4, 5 and/or 6, that the REIT
would be irreparably harmed by such breach, and that, in any event, money
damages would be an inadequate remedy for any such breach. Therefore, the
Executive agrees and consents that the REIT shall be entitled to an injunction
or other appropriate equitable relief (in addition to all other remedies it may
have for damages or otherwise) to restrain any such breach or threatened breach
without showing or proving any actual damage to the REIT; and the REIT shall be
entitled to an award of its attorneys fees and costs incurred in enforcing the
Executive’s obligations under Sections 4, 5 and/or 6.
8. Miscellaneous
(a) 409A. Notwithstanding anything to the contrary, if the Executive is a “key
employee” (as defined in Section 416(i) of the Code without regard to paragraph
(5) thereof) and any of the REIT’s stock is publicly traded on an established
securities market or otherwise, to the extent necessary to avoid any penalties
under Section 409A of the Code, any payment hereunder may not be made before the
date that is six months after the date of separation from service.

 

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(b) Tax Withholding. All payments made by the REIT under this Agreement shall be
net of any tax or other amounts required to be withheld by the REIT under
applicable law.
(c) No Mitigation. The REIT agrees that, if the Executive’s employment by the
REIT is terminated during the term of this Agreement, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the REIT pursuant to Section 3 hereof. Further, the
amount of any payment provided for in this Agreement shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the REIT or otherwise.
(d) No Offset. The REIT’s obligation to make the payments provided for in this
Agreement and otherwise perform its obligations hereunder shall not be affected
by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the REIT, the Operating Partnership or
any of their subsidiaries may have against the Executive or others unless such
set-off, counterclaim, recoupment, defense, or other right arises from the
Executive engaging in conduct which constitutes a material breach of a fiduciary
duty or duty of loyalty, including without limitation, misappropriation of funds
or property of the Operating Partnership and their subsidiaries.
(e) Litigation and Regulatory Cooperation. During and after Executive’s
employment, Executive shall reasonably cooperate with the REIT in the defense or
prosecution of any claims or actions now in existence or which may be brought in
the future against or on behalf of the REIT which relate to events or
occurrences that transpired while Executive was employed by the REIT; provided,
however, that such cooperation shall not materially and adversely affect
Executive or expose Executive to an increased probability of civil or criminal
litigation. Executive’s cooperation in connection with such claims or actions
shall include, but not be limited to, being available to meet with counsel to
prepare for discovery or trial and to act as a witness on behalf of the REIT at
mutually convenient times. During and after Executive’s employment, Executive
also shall cooperate fully with the REIT in connection with any investigation or
review of any federal, state or local regulatory authority as any such
investigation or review relates to events or occurrences that transpired while
Executive was employed by the REIT. The REIT shall also provide Executive with
compensation on an hourly basis (to be derived from the sum of his Base Salary
and average annual incentive compensation) for requested litigation and
regulatory cooperation that occurs after his termination of employment, and
reimburse Executive for all costs and expenses incurred in connection with his
performance under this Section 8(e), including, but not limited to, reasonable
attorneys’ fees and costs.

 

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(f) Notices. All notices required or permitted under this Agreement shall be in
writing and shall be deemed effective (i) upon personal delivery, (ii) upon
deposit with the United States Postal Service, by registered or certified mail,
postage prepaid, or (iii) in the case of facsimile transmission or delivery by
nationally recognized overnight delivery service, when received, addressed as
follows:

  (i)   If to the REIT, to:

DiamondRock Hospitality Company
6903 Rockledge Drive, Suite 800
Bethesda, MD 20817
Facsimile: (240) 744-1199
Attn: 1) Lead Director; 2) Chairman of the Board and 3) Chairman of the
Compensation Committee

  (ii)   If to the Executive, to:

Michael D. Schecter
920 Independence Avenue, SE
Washington, DC 20003-3918
or to such other address or addresses as either party shall designate to the
other in writing from time to time by like notice.
(g) Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
(h) Entire Agreement. This Agreement constitutes the entire agreement between
the parties and supersedes all prior agreements and understandings, whether
written or oral, relating to the subject matter of this Agreement, including
without limitation the employment agreement dated as of June 4, 2004. For the
avoidance of doubt, such employment agreement is hereby terminated and the
Executive hereby waives any rights that he may have under such agreement.
(i) Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the REIT and the Executive.
(j) Governing Law and Forum. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Maryland, without regard to
its conflicts of laws principles, by a court of competent jurisdiction located
within the State of Maryland.
(k) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of both parties and their respective successors and assigns,
including any entity with which or into which the REIT may be merged or which
may succeed to its assets or business or any entity to which the REIT may assign
its rights and obligations under this Agreement; provided, however, that the
obligations of the Executive are personal and shall not be assigned or delegated
by him.
(l) Waiver. No delays or omission by the REIT or the Executive in exercising any
right under this Agreement shall operate as a waiver of that or any other right.
A waiver or consent given by the REIT or the Executive on any one occasion shall
be effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion.

 

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(m) Captions. The captions appearing in this Agreement are for convenience of
reference only and in no way define, limit or affect the scope or substance of
any section of this Agreement.
(n) Severability. In case any provision of this Agreement shall be held by a
court or arbitrator with jurisdiction over the parties to this Agreement to be
invalid, illegal or otherwise unenforceable, such provision shall be restated to
reflect as nearly as possible the original intentions of the parties in
accordance with applicable law, and the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby. In the
event that any portion or provision of this Agreement (including, without
limitation, any portion or provision of Sections 4, 5, and/or 6) is determined
by a court or arbitrator of competent jurisdiction to be invalid, illegal or
otherwise unenforceable by reason of excessive scope as to geographic, temporal
or functional coverage, such provision will be reformed and deemed to extend
only over the maximum geographic, temporal and functional scope as to which it
may be enforceable and shall be enforced by said court or arbitrator
accordingly.
(o) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.

 

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

            REIT
DIAMONDROCK HOSPITALITY COMPANY
      By:   /s/ Michael D. Schecter         Name:   Michael D. Schecter       
Title:   Executive Vice President,
General Counsel and Corporate Secretary        EXECUTIVE
MICHAEL D. SCHECTER
      /s/ Michael D. Schecter    

 

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