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.

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.

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.

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.

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).

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.”

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

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.

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.

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

/s/ Michael D. Schecter

 

Michael D. Schecter

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”);

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;

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

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.

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.

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.

“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).

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.

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.

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;

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”);

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.

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.

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;

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.

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.

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

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.