def14a
SCHEDULE 14A
INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
§ 240.14a-11(c)
or
§ 240.14a-12
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DiamondRock Hospitality Company
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement)
Payment of Filing Fee (Check the appropriate box):
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No fee required
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4)
and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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March 3, 2009
Dear Stockholder:
You are cordially invited to attend the 2009 annual meeting of
stockholders of DiamondRock Hospitality Company. The annual
meeting will be held on Thursday, April 30, 2009 at
3:00 p.m., local time, at the Bethesda Marriott Suites
Hotel, 6711 Democracy Boulevard, Bethesda, Maryland.
The attached proxy statement, with formal notice of the meeting
on the first page, describes the matters expected to be acted
upon at the meeting. We urge you to review these materials
carefully and to use this opportunity to take part in the
affairs of DiamondRock Hospitality Company by voting on the
matters described in this proxy statement. We hope that you will
be able to attend the meeting. Following the formal portion of
the meeting, our directors and management team will be available
to answer appropriate questions.
Your vote is important. Whether or not you plan to attend the
meeting, please complete the enclosed proxy card and return it
as promptly as possible or authorize a proxy to vote your shares
by calling the toll-free telephone number or via the Internet.
The enclosed proxy card contains instructions regarding all
three methods of voting. If you attend the meeting, you may
continue to have your shares voted as instructed in the proxy or
you may withdraw your proxy at the meeting and vote your shares
in person.
We look forward to seeing you at the meeting.
Sincerely,
Mark W. Brugger
Chief Executive Officer
DIAMONDROCK
HOSPITALITY COMPANY
6903 Rockledge Drive
Suite 800
Bethesda, MD 20817
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Be Held On April 30,
2009
The 2009 annual meeting of stockholders of DiamondRock
Hospitality Company, a Maryland corporation, will be held on
Thursday, April 30, 2009 at 3:00 p.m., local time, at
the Bethesda Marriott Suites Hotel, 6711 Democracy
Boulevard, Bethesda, Maryland, for the following purposes:
1. To elect directors, each to serve for a one-year term
and until their respective successors are duly elected and
qualify;
2. To ratify the appointment of KPMG LLP as independent
auditors of DiamondRock Hospitality Company to serve for
2009; and
3. To consider and act upon any other matters that are
properly brought before the annual meeting and at any
adjournments or postponements thereof.
You may vote if you were a stockholder of record as of the close
of business on March 3, 2009. If you do not plan to attend
the meeting and vote your shares of common stock in person,
please authorize a proxy to vote your shares in one of the
following ways:
Use the toll-free telephone number shown on your
proxy card (this call is toll-free if made in the United States
or Canada);
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Go to the website address shown on your proxy card and authorize
a proxy via the Internet; or
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Mark, sign, date and promptly return the enclosed proxy card in
the postage-paid envelope.
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Any proxy may be revoked at any time prior to its exercise at
the annual meeting.
By Order of the Board of
Directors
Michael D. Schecter
Corporate Secretary
March 3, 2009
TABLE OF
CONTENTS
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March 3,
2009
PROXY
STATEMENT
DiamondRock
Hospitality Company
6903
Rockledge Drive
Suite 800
Bethesda, MD 20817
This Proxy Statement and the enclosed proxy card are being
mailed to stockholders on or about March 3, 2009 and are
furnished in connection with the solicitation of proxies by the
Board of Directors of DiamondRock Hospitality Company, a
Maryland corporation (DiamondRock or the Company), for use at
the 2009 annual meeting of our stockholders to be held on
Thursday, April 30, 2009 at 3:00 p.m., local time, at
the Bethesda Marriott Suites Hotel, 6711 Democracy Boulevard,
Bethesda, Maryland, and at any adjournments or postponements
thereof.
INFORMATION
ABOUT THE ANNUAL MEETING
Purpose
of the Annual Meeting
At the annual meeting, stockholders will be asked to vote upon
the matters set forth in the accompanying notice of meeting,
including the election of directors and ratification of the
appointment of KPMG LLP as our independent auditors for 2009.
Attending
the Meeting
All stockholders of record of shares of our common stock at the
close of business on the record date, or their designated
proxies, are authorized to attend the annual meeting. Each
stockholder or proxy holder will be asked to present a form of
valid government issued picture identification, such as a
drivers license or passport.
Voting
If our records show that you were a stockholder as of the close
of business on March 3, 2009, which is referred to in this
proxy statement as the record date, you are entitled to receive
notice of the annual meeting and to vote the shares of common
stock that you held as of the close of business on the record
date. Each outstanding share of common stock entitles its holder
to cast one vote on each matter to be voted upon.
Voting in Person at the Meeting. If you are a
registered stockholder and attend the annual meeting, you may
vote in person at the meeting. If your shares of common stock
are held by a broker, bank or other nominee (i.e., in
street name) and you wish to vote in person at the
meeting, you will need to obtain a proxy form from the broker,
bank or other nominee that holds your shares of common stock of
record.
Authorizing a Proxy for Shares Registered Directly in the
Name of the Stockholder. If you hold your shares
in your own name as a holder of record, you may instruct the
proxy holders named in the enclosed proxy card how to vote your
shares of common stock by using the toll-free telephone number,
the website listed on the proxy card or by signing, dating and
mailing the proxy card in the postage-paid envelope provided.
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Authorize a Proxy by Telephone. If you hold
your shares of common stock in your own name as a holder of
record, you may authorize a proxy to vote your shares by
telephone by calling the toll-free number listed on the
accompanying proxy card. Authorizing a proxy by telephone is
available 24 hours per day until 11:59 p.m., Eastern
Time, on April 29, 2009. When you call, please have your
proxy card in hand, and you will receive a series of voice
instructions which will allow you to vote your shares of common
stock. IF YOU AUTHORIZE A PROXY BY TELEPHONE, YOU DO NOT NEED
TO RETURN YOUR PROXY CARD.
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Authorize a Proxy by Internet. You also have
the option to authorize a proxy to vote your shares via the
Internet. The website for authorizing a proxy is printed on your
proxy card. Authorizing a proxy by internet is available
24 hours per day until 11:59 p.m., Eastern Time, on
April 29, 2009. As with telephone voting, you will be given
the opportunity to confirm that your instructions have been
properly recorded. IF YOU AUTHORIZE A PROXY VIA THE INTERNET,
YOU DO NOT NEED TO RETURN YOUR PROXY CARD.
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Authorize a Proxy by Mail. If you would like
to authorize a proxy to vote your shares by mail, mark, sign and
date your proxy card and return in the postage-paid envelope
provided.
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Authorizing a Proxy for Shares Registered in Street
Name. If your shares of common stock are held in
street name, you will receive instructions from your broker,
bank or other nominee which you must follow in order to have
your shares of common stock voted.
Quorum
The presence, in person or by proxy, of stockholders entitled to
cast a majority of all the votes entitled to be cast at the
annual meeting constitutes a quorum for the transaction of
business at the annual meeting. As of the record date, there
were 90,050,264 shares of common stock outstanding and
entitled to vote at the annual meeting. Shares that reflect
votes withheld for director nominees, abstentions or
broker non-votes (i.e., shares represented at the
meeting held by brokers or other nominees as to which
instructions have not been received from the beneficial owners
or persons entitled to vote such shares and with respect to
which, on one or more but not all matters, the broker or nominee
does not have discretionary voting power to vote such shares)
will be counted for purposes of determining whether a quorum is
present for the transaction of business at the annual meeting.
Multiple
Stockholders Sharing the Same Address
The rules of the Securities and Exchange Commission, or the SEC,
allow for householding, which is the delivery of a single copy
of an annual report and proxy statement to any address shared by
two or more stockholders. Duplicate mailings can be eliminated
by allowing stockholders to consent to such elimination, or
through implied consent if (1) it is believed that the
stockholders are members of the same family, (2) the
stockholders are notified that householding is to be used and
(3) the stockholders do not request continuation of
duplicate mailings. If you own shares of common stock in your
own name as a holder of record, householding will not apply to
your shares. If your shares of common stock are held in street
name, depending upon the practices of your broker, bank or other
nominee, you may need to contact them directly to discontinue
duplicate mailings to your address. If you wish to revoke your
consent to householding, you must contact your broker, bank or
other nominee.
If you wish to request extra copies free of charge of our annual
report or proxy statement, please send your request to
DiamondRock Hospitality Company, 6903 Rockledge Drive,
Suite 800, Bethesda, MD 20817, Attention: Corporate
Secretary; or call us with your request at
(240) 744-1150.
Other
Matters
We are not currently aware of any other matters to be presented
at the annual meeting other than those described in this proxy
statement. If any other matters not described in the proxy
statement are properly presented at the meeting, any proxies
received by us will be voted in the discretion of the proxy
holders.
Right to
Revoke Proxy
You may revoke your proxy at any time before it has been
exercised by:
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filing a written revocation with our Corporate Secretary,
c/o DiamondRock
Hospitality Company, 6903 Rockledge Drive, Suite 800,
Bethesda, MD 20817;
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authorizing a new proxy by telephone, Internet or proxy card
after the date of the previously submitted proxy; or
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appearing in person, revoking your proxy and voting by ballot at
the annual meeting.
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Any stockholder of record as of the record date attending the
annual meeting may vote in person whether or not a proxy has
been previously given, but the presence (without further action)
of a stockholder at the annual meeting will not constitute
revocation of a previously given proxy.
Other
Information
For your review, our 2008 annual report, including a copy of our
annual report filed with the SEC on
Form 10-K
and financial statements for the fiscal year ended
December 31, 2008, is being mailed to stockholders
concurrently with this proxy statement. Although our annual
report is not part of the proxy solicitation material, we
recommend that you review our 2008 annual report prior to voting.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON APRIL 30, 2009:
Our proxy statement, form of proxy card and 2008 annual report
on
Form 10-K
are available at www.drhc.com/proxy_statements.asp.
3
CORPORATE
GOVERNANCE PRINCIPLES AND BOARD MATTERS
Our business is built on relationships with our
investors, with the brands we utilize for our hotels and with
the management companies who manage our hotels. We are committed
to keeping our relationships strong by communicating openly
about our business practices, being transparent about our
performance and remaining accountable for our conduct. We take
our commitments seriously.
At the core of these commitments, of course, is the role of the
Board of Directors in overseeing how management serves the
long-term interests of our stockholders. We believe that an
active, informed, independent and involved board is essential
for ensuring our integrity, transparency and long-term strength.
We believe that our Board of Directors embodies each of those
characteristics. We have assembled a Board of Directors that is
comprised of individuals with a wide breadth of experience
including: a member with several decades of real estate
experience, the retired chairman of Andersen Worldwide, a
leading corporate lawyer and a retired chief executive officer,
as well as our former Chief Executive Officer, current Chief
Executive Officer and our President and Chief Operating Officer.
We follow through on our commitment by implementing what we
believe are the best practices in corporate governance,
including:
Board
Structure
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All of the members of our Board of Directors are elected
annually;
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A majority of the members of our Board of Directors are
independent of the Company and its management;
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All members of the three standing committees of our Board of
Directors (Audit, Compensation and Nominating and Corporate
Governance) are independent of the Company and its
management; and
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The independent members of our Board of Directors as well as
each of the Committees meet regularly without the presence of
management.
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Change of
Control
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We do not have a stockholder rights plan (i.e., poison
pill); and
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We have opted out of the Maryland business combination and
control share acquisition statutes and have taken steps so that
we may only opt back into such statutes with the affirmative
vote of a majority of votes cast by stockholders entitled to
vote generally for directors and the affirmative vote of a
majority of continuing directors, meaning the initial directors
and the directors whose nomination for election by the
stockholders or whose election by the directors to fill
vacancies is approved by a majority of continuing directors then
serving as directors of the Company.
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Stock
Ownership Policies
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We have adopted policies requiring each member of our Board of
Directors to acquire stock of the Company with a value of three
times his or her annual cash retainer and for our Chairman of
our Board of Directors, our Chief Executive Officer and his
three direct reports to own stock with a value of between three
and four times the base salary of that officer.
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Clawback
Policy
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We have adopted a policy that would have the Company seek to
recoup any incentive cash compensation paid to an executive
based upon financial results that are later significantly
restated.
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The Board
of Directors and Its Committees
Board
of Directors
We are managed under the direction of our Board of Directors.
Our directors are: Daniel J. Altobello, Mark W. Brugger, W.
Robert Grafton, Maureen L. McAvey, William W. McCarten, Gilbert
T. Ray and John L. Williams. Mr. McCarten is the Chairman
of our Board of Directors and Mr. Grafton is our Lead
Director. Each of our seven directors stands for election
annually.
Director Independence. Our Board of Directors
has a policy that a majority of our directors must be
independent. In order to qualify as an independent
director under our independence standards, a director must
be independent within the meaning of the
requirements of the New York Stock Exchange, or the NYSE, which
provide that our Board of Directors must determine whether a
director has a material relationship with us (either directly or
as a partner, shareholder or officer of an organization that has
a relationship with us) and whether, within the past three years:
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the director was employed by our Company (except on an interim
basis);
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an immediate family member of the director was an officer of our
Company;
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the director or an immediate family member is a current partner
of a firm that is our internal or external auditor; the director
is a current employee of such a firm; the director has an
immediate family member who is a current employee of such a firm
and who participates in the firms audit, assurance or tax
compliance (but not tax planning) practice; or the director or
an immediate family member was within the last three years (but
is no longer) a partner or employee of such a firm and
personally worked on our audit within that time;
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the director or an immediate family member of the director was
employed by a company when a present officer of our Company sat
on that companys compensation committee;
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the director or an immediate family member received, during any
12-month
period, more than $100,000 in compensation from our Company,
other than director or committee fees or deferred
compensation; or
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the director is an employee, or an immediate family member is an
executive officer, of a company that makes payments to or
receives payments from our Company which exceed the greater of
$1 million or 2% of that companys consolidated gross
revenue over one fiscal year.
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In addition, our Board of Directors considers, among other
factors, whether the director, or an organization with which the
director is affiliated, has entered into any commercial,
consulting, or similar contracts with our Company; whether the
director receives any compensation or other fees from our
Company, other than director fees; and whether we
and/or any
of our affiliates make substantial contributions to tax-exempt
organizations with which the director, or the directors
spouse, is affiliated.
Our Board of Directors has determined that each of
Messrs. Altobello, Grafton and Ray and Ms. McAvey is
an independent director under our independence
standards and under the NYSE Corporate Governance Rules. These
four directors comprise a majority of our seven-member Board of
Directors.
Meetings. Our Board of Directors met eight
times during 2008. Each of our directors attended at least 75%
of the meetings of our Board of Directors. We expect each of our
directors to attend our annual meeting of stockholders in person
unless doing so would be impracticable due to unavoidable
conflicts. In 2008, all of our directors attended our annual
meeting of stockholders.
Directors who qualify as being non-management within
the meaning of the NYSE Corporate Governance Rules meet on a
regular basis in executive sessions without management
participation. The executive sessions occur after each regularly
scheduled meeting of our entire Board of Directors and at such
other times that our non-management directors deem appropriate.
Each director has the right to call an executive session. The
executive sessions are chaired by Mr. Grafton, the lead
director of our Board of Directors.
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Committees
Our Board of Directors has established an Audit Committee,
Nominating and Corporate Governance Committee and Compensation
Committee and has adopted written charters for each committee. A
copy of each of our Audit Committee charter, Compensation
Committee charter and Nominating and Corporate Governance
Committee charter is available on our website at
http://www.drhc.com
under the heading Corporate Governance and
subheading Committee Charters. These charters are
also available in print to any stockholder upon written request
addressed to Investor Relations,
c/o DiamondRock
Hospitality Company, 6903 Rockledge Drive, Suite 800,
Bethesda, MD 20817.
Our Board of Directors may from time to time establish special
or standing committees to facilitate the management of
DiamondRock or to discharge specific duties delegated to the
committee by our full Board of Directors.
Audit Committee. Our Audit Committee, pursuant
to its written charter, assists our Board of Directors in its
oversight of (i) our accounting and financial reporting
processes; (ii) the integrity and audits of our financial
statements; (iii) our compliance with legal and regulatory
requirements; (iv) the qualifications, independence and
performance of our independent auditors; and (v) the
performance of our internal audit function.
Our Audit Committee is comprised of all four of our independent
directors: W. Robert Grafton (Chairman), Daniel J. Altobello,
Maureen L. McAvey and Gilbert T. Ray. Each member of our Audit
Committee is independent as that term is defined by
the SEC and the NYSE. Our Board of Directors determined that
each of Mr. Grafton and Mr. Altobello qualifies as an
audit committee financial expert as such term is
defined under the rules of the SEC. In accordance with the
SECs safe harbor relating to audit committee financial
experts, a person designated or identified as an audit committee
financial expert will not be deemed an expert for
purposes of federal securities laws. In addition, such
designation or identification does not impose on such person any
duties, obligations or liabilities that are greater than those
imposed on such person as a member of the Audit Committee or
Board of Directors in the absence of such designation or
identification and does not affect the duties, obligations or
liabilities of any other member of the Audit Committee or Board
of Directors.
Our Audit Committee met five times during 2008 and each of the
members of the Audit Committee attended at least 75% of the
meetings of the Audit Committee.
The Report of the Audit Committee is included in this Proxy
Statement.
Nominating and Corporate Governance
Committee. Our Nominating and Corporate
Governance Committee, pursuant to its written charter, is
responsible for, among other things: (i) identifying and
recommending qualified individuals to become members of our
Board of Directors and the appointment of members to its various
committees; (ii) overseeing the annual performance
evaluation of our Board of Directors; and (iii) developing
and recommending to our Board of Directors a set of corporate
governance guidelines and policies and a code of ethics, and
periodically reviewing and recommending any changes to such
guidelines and code.
Our Nominating and Corporate Governance Committee is comprised
of all four of our independent directors, Gilbert T. Ray
(Chairman), Daniel J. Altobello, W. Robert Grafton and Maureen
L. McAvey. Our Nominating and Corporate Governance Committee met
four times during 2008 and each of the members of the Nominating
and Corporate Governance Committee attended at least 75% of the
meetings of the Nominating and Corporate Governance Committee.
Compensation Committee. Our Compensation
Committee, pursuant to its written charter, among other things,
(i) reviews and approves corporate goals and objectives
relevant to chief executive officer compensation, evaluates the
chief executive officers performance in light of those
goals and objectives, and determines and approves the chief
executive officers compensation levels based on its
evaluation and (ii) reviews and approves or makes
recommendations to our Board of Directors with respect to the
compensation for our other executive officers and non-employee
directors. Our Compensation Committee has the authority to
retain and
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terminate any compensation consultant to be used to assist in
the evaluation of the chief executive officer or other executive
officer compensation.
Our Compensation Committee is comprised of all four of our
independent directors, Daniel J. Altobello (Chairman), W. Robert
Grafton, Maureen L. McAvey and Gilbert T. Ray. Our Compensation
Committee met five times during 2008 and each of the members of
the Compensation Committee attended at least 75% of the meetings
of the Compensation Committee.
The Report of the Compensation Committee is included in this
Proxy Statement.
Consideration
of Director Nominees
Stockholder Recommendations. Our Nominating
and Corporate Governance Committees current policy is to
review and consider any director candidates who have been
recommended by stockholders in compliance with the procedures
established from time to time by our Nominating and Corporate
Governance Committee. All stockholder recommendations for
director candidates must be submitted to our Corporate Secretary
at DiamondRock Hospitality Company, 6903 Rockledge Drive,
Suite 800, Bethesda, MD 20817, who will forward all
recommendations to our Nominating and Corporate Governance
Committee. We did not receive any stockholder recommendations
for director candidates for election at our 2009 annual meeting.
All stockholder recommendations for director candidates for
election at our 2010 annual meeting of stockholders must be
submitted to our Corporate Secretary on or after
November 3, 2009 and on or before December 3, 2009 and
must include the following information:
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the name and address of record of the stockholder;
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a representation that the stockholder is a record holder of our
securities, or if the stockholder is not a record holder,
evidence of ownership in accordance with
Rule 14a-8(b)(2)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act);
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the name, age, business and residential address, educational
background, current principal occupation or employment, and
principal occupation or employment for the preceding five
(5) full fiscal years of the proposed director candidate;
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a description of the qualifications and background of the
proposed director candidate which addresses the minimum
qualifications and other criteria for Board of Directors
membership as approved by our Board of Directors from time to
time;
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a description of all arrangements or understandings between the
stockholder and the proposed director candidate;
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the consent of the proposed director candidate (1) to be
named in the proxy statement relating to our annual meeting of
stockholders and (2) to serve as a director if elected at
such annual meeting; and
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any other information regarding the proposed director candidate
that is required to be included in a proxy statement filed
pursuant to the rules of the SEC and the Bylaws of the Company
as in effect as that time.
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Board of Directors Membership Criteria. Our
Board of Directors has established criteria for Board of
Directors membership. These criteria include the following
specific, minimum qualifications that our Nominating and
Corporate Governance Committee believes must be met by a nominee
for a position on our Board of Directors, including that the
nominee shall:
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have the highest personal and professional integrity;
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have demonstrated exceptional ability and judgment; and
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be most effective, in conjunction with the other nominees to our
Board of Directors, in collectively serving the long-term
interests of our stockholders.
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7
In addition to the minimum qualifications for each nominee set
forth above, our Nominating and Corporate Governance Committee
will recommend director candidates to the full Board of
Directors for nomination, or present director candidates to the
full Board of Directors for consideration, to help ensure that:
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a majority of our Board of Directors will be
independent as defined by the NYSE Corporate
Governance Rules;
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each of its Audit, Compensation and Nominating and Corporate
Governance Committees will be comprised entirely of independent
directors; and
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at least one member of our Audit Committee will have such
experience, education and other qualifications necessary to
qualify as an audit committee financial expert as
defined by the rules of the SEC.
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Identifying and Evaluating Nominees. Our
Nominating and Corporate Governance Committee may solicit
recommendations for director nominees from any or all of the
following sources: non-management directors, our chairman and
chief executive officer, other executive officers, third-party
search firms or any other source it deems appropriate.
Our Nominating and Corporate Governance Committee will review
and evaluate the qualifications of any proposed director
candidate that it is considering or has been recommended to it
by a stockholder in compliance with our Nominating and Corporate
Governance Committees procedures for that purpose,
including conducting inquiries into the background of proposed
director candidates. In identifying and evaluating proposed
director candidates, our Nominating and Corporate Governance
Committee may consider, in addition to the minimum
qualifications for Board of Directors membership approved by our
Board of Directors, all facts and circumstances that it deems
appropriate or advisable, including, among other things, the
skills of the proposed director candidate, his or her depth and
breadth of business experience, his or her independence and the
needs of our Board of Directors. Other than circumstances in
which we are legally required by contract or otherwise to
provide third parties with the ability to nominate directors,
our Nominating and Corporate Governance Committee will evaluate
all proposed director candidates that it considers or who have
been properly recommended to it by a stockholder based on the
same criteria and in substantially the same manner, with no
regard to the source of the initial recommendation of the
proposed director candidate.
Communications
with our Board of Directors
If you wish to communicate with any of our directors or our
Board of Directors as a group, you may do so by writing to them
at [Name(s) of Director(s)/Board of Directors of DiamondRock
Hospitality Company],
c/o Corporate
Secretary, DiamondRock Hospitality Company, 6903 Rockledge
Drive, Suite 800, Bethesda, MD 20817.
If you wish to contact our Audit Committee to report complaints
or concerns regarding accounting, internal accounting controls
or auditing matters, you may do so by writing to the Chairman of
the Audit Committee of DiamondRock Hospitality Company,
c/o Corporate
Secretary, DiamondRock Hospitality Company, 6903 Rockledge
Drive, Suite 800, Bethesda, MD 20817. In addition, you may
do so online at www.drhc.com/whistleblower.asp. You are
welcome to make any such reports anonymously, but we prefer that
you identify yourself so that we may contact you for additional
information if necessary or appropriate.
If you wish to communicate with our non-management directors as
a group, you may do so by writing to Non-Management Directors of
DiamondRock Hospitality Company,
c/o Corporate
Secretary, DiamondRock Hospitality Company, 6903 Rockledge
Drive, Suite 800, Bethesda, MD 20817.
We recommend that all correspondence be sent via certified
U.S. mail, return receipt requested. All correspondence
received by the Corporate Secretary will be forwarded by the
Corporate Secretary promptly to the addressee(s).
8
Other
Corporate Governance Matters
Code
of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics, or our
Code of Ethics, relating to the conduct of our business by our
employees, executive officers and directors. Day-to-day
responsibility for administering and interpreting our Code of
Ethics has been delegated by our Board of Directors to Michael
Schecter, our compliance officer and our general counsel.
Our Code of Ethics contains compliance procedures, allows for
the anonymous reporting of a suspected violation of our Code of
Ethics and specifically forbids retaliation against any
executive officer or employee who reports suspected misconduct
in good faith. The provisions of our Code of Ethics may only be
waived or amended by our Board of Directors or, if permitted, a
committee of our Board of Directors. Such waivers or amendments
must be promptly disclosed to our stockholders. We intend to
disclose any amendments to our Code of Ethics, as well as any
waivers for executive officers, on our website.
A copy of the Code of Ethics is available on our website at
http://www.drhc.com
under the heading Corporate Governance and
subheading Corporate Governance Overview. A copy of
our Code of Ethics is also available, without charge, in print
to any stockholder upon written request addressed to Investor
Relations, DiamondRock Hospitality Company, 6903 Rockledge
Drive, Suite 800, Bethesda, MD 20817.
Corporate
Governance Guidelines
Our Board of Directors has adopted Corporate Governance
Guidelines, a copy of which is available on our website at
http://www.drhc.com
under the heading Corporate Governance and
subheading Corporate Governance Overview. Our
Corporate Governance Guidelines are also available, without
charge, in print to any stockholder upon written request
addressed to Investor Relations, DiamondRock Hospitality
Company, 6903 Rockledge Drive, Suite 800, Bethesda, MD
20817.
Conflicts
of Interest
Our Code of Ethics contains a conflicts of interest policy to
reduce potential conflicts of interest. Our conflicts of
interest policy provides that any material transaction or
relationship that reasonably could be expected to give rise to a
conflict of interest should be reported promptly to the
compliance officer, who must then notify our Board of Directors
or a committee of our Board of Directors. Actual or potential
conflicts of interest involving a director, executive officer or
the compliance officer should be disclosed directly to our
Chairman of our Board of Directors and the Chairperson of our
Nominating and Corporate Governance Committee. A conflict
of interest occurs when a directors, executive
officers or employees personal interest interferes
with our interests.
Maryland law provides that a contract or other transaction
between a corporation and any of the corporations
directors or any other entity in which that director is also a
director or has a material financial interest is not void or
voidable solely on the grounds of the common directorship or
interest, the fact that the director was present at the meeting
at which the contract or transaction is approved or the fact
that the directors vote was counted in favor of the
contract or transaction, if:
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the fact of the common directorship or interest is disclosed or
known to our Board of Directors or a committee of our Board of
Directors, and our Board of Directors or that committee
authorizes, approves or ratifies the contract or transaction by
the affirmative vote of a majority of the disinterested
directors, even if the disinterested directors constitute less
than a quorum;
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the fact of the common directorship or interest is disclosed to
stockholders entitled to vote on the contract or transaction,
and the contract or transaction is authorized, approved or
ratified by a majority of the votes cast by the stockholders
entitled to vote on the matter, other than votes of stock owned
of record or beneficially by the interested director,
corporation, firm or other entity; or
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the contract or transaction is fair and reasonable to the
corporation.
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9
DIRECTOR
COMPENSATION
The following chart summarizes the compensation paid to our
non-management directors in 2008. Messrs. McCarten, Brugger
and Williams receive no separate compensation for being members
of our Board of Directors:
Director
Compensation
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Fees Earned or
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Paid in
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Stock
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All Other
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Cash
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Awards(1)
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Compensation
|
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Total
|
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Name
|
|
($)
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|
($)
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($)(2)
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|
|
($)
|
|
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W. Robert Grafton
(Lead Director & Audit
Committee Chairperson)
|
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80,000
|
|
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50,000
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1,594
|
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131,594
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Daniel J. Altobello
(Compensation Committee
Chairperson)
|
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62,500
|
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50,000
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3,908
|
|
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116,408
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Maureen L. McAvey
(Director)
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55,000
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50,000
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|
|
|
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105,000
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Gilbert T. Ray
(Nominating and
Governance Committee
Chairperson)
|
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62,500
|
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|
50,000
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|
|
|
|
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112,500
|
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(1)
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The amounts set forth in this
column represent the compensation expense recognized during 2008
in connection with equity awards to the Directors. Each Director
received 5,688 fully vested shares of common stock on
July 28, 2008. Such shares had a market value of $50,000 on
such date, based on the closing price for shares of our common
stock on the NYSE. In accordance with SFAS 123R, the full
fair market value of such shares was immediately recognized as
compensation expense.
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(2)
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Reimbursement for lodging, meals,
parking and certain other expenses at one of our hotels or at a
hotel and resort managed or franchised by Marriott.
|
Cash
Compensation
In July of each year, the Compensation Committee of our Board of
Directors reviews the compensation of our non-employee
directors. In July of 2008 the Compensation Committee engaged
its independent consultant, Frederic W. Cook & Co.
Incorporated to review the compensation paid to members of the
board of directors of our competitive set. After reviewing the
study, the Committee concluded that a change in compensation for
the Board of Directors was not warranted.
Each of our non-employee directors receive an annual cash
retainer of $50,000 plus we pay an additional annual retainer to
our Lead Director ($10,000 annual fee) as well as to the
chairpersons of our Audit Committee ($15,000 annual fee),
Nominating and Corporate Governance Committee ($7,500 annual
fee) and Compensation Committee ($7,500 annual fee). We
compensate our directors through a single annual retainer as
opposed to per meeting fees. We have structured their
compensation in this manner in order to simplify and clarify
director compensation as each of our three standing committees
are comprised of the same four directors and often a meeting
might discuss matters involving the area of expertise of more
than one committee.
In addition, in July 2008 the Board of Directors formed a
special committee comprised of the four independent members of
the Board of Directors in order to evaluate candidates to become
our new Chief Executive Officer, as Mr. McCarten expressed
his desire to retire. The members of the special committee were
each paid a fixed fee of $5,000 for their services.
The following chart reflects the cash compensation paid to our
directors in 2008.
10
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Annual Fee
|
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|
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|
|
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Annual Fee
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for
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Board and
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|
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for
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Committee
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Committee
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Special
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Total
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Board
|
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Chairs &
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Meeting
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Committee
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Cash Fees
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Membership
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Lead Director
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Fees
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Fee
|
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Paid
|
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W. Robert Grafton
(Lead Director & Audit Committee
Chairperson)
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$
|
50,000
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$
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25,000
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$
|
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|
$
|
5,000
|
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$
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80,000
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Daniel J. Altobello
(Compensation Committee
Chairperson)
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$
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50,000
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|
$
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7,500
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|
$
|
|
|
|
$
|
5,000
|
|
|
$
|
62,500
|
|
Maureen L. McAvey
(Director)
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|
$
|
50,000
|
|
|
$
|
0
|
|
|
$
|
|
|
|
$
|
5,000
|
|
|
$
|
55,000
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|
Gilbert T. Ray
(Nomination and Governance
Committee Chairperson)
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|
$
|
50,000
|
|
|
$
|
7,500
|
|
|
$
|
|
|
|
$
|
5,000
|
|
|
$
|
62,500
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Equity
Compensation
As part of their regular annual compensation, in July of each
year, each of our non-employee directors receives fully vested
shares of common stock. On July 28, 2008, we issued to each
of our directors 5,688 shares of common stock, which had a
value of $50,000, based on the closing stock price for our
common stock on the NYSE on such day.
Expenses
and Perquisites
We reimburse our directors for their reasonable out-of-pocket
expenses incurred in attending meetings of our Board of
Directors or its committees.
In addition, each of the seven members of our Board of Directors
are entitled to reimbursement for up to $10,000 of lodging,
meals, parking and certain other expenses at all of our hotels
as well as at all hotels and resorts managed or franchised by
Marriott. All of such reimbursement was considered taxable
income to the member who stayed at the hotel or resort and is
disclosed in the All Other Compensation column of
the chart entitled Director Compensation.
Stock
Ownership Policy
Our Board of Directors requires each of our non-executive
directors, within five years of first being elected to our Board
of Directors, to own at all times during a year a number of
shares equal to the Ownership Target (as defined below). If
directors are not in compliance with the Ownership Target, they
are restricted from selling any stock in the Company until such
time as they are in compliance with the Ownership Target. This
restriction does not apply to any shares of stock that a member
of the Board of Directors has purchased.
The Ownership Target for a given year is determined by
multiplying the annual cash retainer for that year by three and
then dividing that result by the average closing price of the
Companys common stock during the first two weeks of the
year. We count towards this minimum equity ownership policy only
those fully vested shares of common stock that a director has
either purchased or received through our equity compensation
program.
Each of our non-executive directors was in compliance with the
stock ownership policy at all times during 2008. However, as the
price of our common stock has fallen significantly, the
Ownership Target has increased from 10,618 shares in 2008
to 30,800 shares in 2009. As a result, all of the
non-executive directors have fallen out of compliance with the
policy and thus are prohibited from selling any shares of our
stock, except for those shares that he or she has purchased in
the open market, until such time as they are in compliance with
our policy.
11
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Number of Shares
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2008
|
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2009
|
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Owned
|
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|
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Ownership
|
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Ownership
|
|
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(as of December 31,
|
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Percentage of 2009
|
|
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|
Target
|
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|
Target
|
|
|
2008)
|
|
|
Ownership Target
|
|
|
Daniel J. Altobello
|
|
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10,618
|
|
|
|
30,800
|
|
|
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23,768
|
|
|
|
77.2
|
%(1)
|
W. Robert Grafton
|
|
|
10,618
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|
|
|
30,800
|
|
|
|
21,768
|
|
|
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70.7
|
%(1)
|
Maureen L. McAvey
|
|
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10,618
|
|
|
|
30,800
|
|
|
|
18,768
|
|
|
|
60.9
|
%
|
Gilbert T. Ray
|
|
|
10,618
|
|
|
|
30,800
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|
|
|
18,768
|
|
|
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60.9
|
%
|
|
|
|
(1)
|
|
Messrs. Altobello and Grafton
have purchased 5,000 shares and 3,000 shares,
respectively, in the open market and such directors may sell
such shares at any time.
|
12
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Philosophy and Design
We have designed our executive compensation program with the
following objectives:
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to be straightforward, transparent and market-based;
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to create proper incentives for our executive team to maximize
long-term stockholder value; and
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to comply with best practices.
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Straightforward,
Transparent, Market-Based Compensation Program
We have a strong preference for a simple, transparent,
market-based compensation program.
We target our executive compensation at approximately the median
of the total compensation paid to members of our competitive set
in order to retain and motivate our executive team; the actual
compensation may be higher or lower than our target
compensation. We set our compensation targets only after
thoroughly studying compensation practices within our
competitive sets. Our primary competitive set is comprised of
the five largest lodging-focused self-managed REITs: LaSalle
Hotel Properties (NYSE: LHO), Strategic Hotels &
Resorts, Inc. (NYSE: BEE), Sunstone Hotel Investors, Inc. (NYSE:
SHO), Felcor Lodging Trust Incorporated (NYSE: FCH) and
Ashford Hospitality Trust (NYSE: AHT). We exclude Host
Hotels & Resorts, Inc. (NYSE: HST) from our
competitive set as it is substantially larger than us. We
confirm that our targets are in keeping with the overall market
by evaluating our compensation against a secondary competitive
set comprised of nine similarly-sized self-managed REITs which
invest in a variety of assets, including offices, apartments and
retail properties. A complete list of the secondary set is set
forth below under the heading Compensation Committee
Procedures, Compensation Consultant and Input of Named Executive
Officers on Compensation Use of Competitive
Set.
Moreover, our compensation program is transparent and
straightforward. We have not implemented a pension or a
nonqualified deferred compensation program and have very limited
perquisites. In addition, we have not implemented any multi-year
compensation programs, eliminating the potential for surprising
and out-of-market compensation; all of our executives
total compensation is granted on an annual basis. Finally,
before awarding any compensation, our Compensation Committee
reviews a tally sheet showing the value of all of
the compensation granted to our executive team since our
formation, utilizing the value of all equity awards both as of
the time of each stock grant and as updated for current stock
values.
Proper
Incentives to Maximize Long-Term Stockholder Value
Our compensation program is designed to create incentives for
our executive team to maximize long-term stockholder value. Less
than one-third of our five highest paid executives total
compensation opportunity is in the form of a fixed base salary.
The vast majority of our executives total compensation
opportunity is awarded through our cash incentive compensation
program, which rewards our executives for achieving our annual
budget and other corporate and individual objectives, and our
annual equity award program, where the ultimate value of the
awards is tied to our ability to maximize long-term stockholder
value.
We believe that our cash incentive compensation program
encourages our executive officers to take prudent steps to
achieve, and if possible exceed, our budgeted earnings, which we
believe will increase stockholder value. In 2008, 70% of our
executives potential cash incentive award was tied to the
achievement of our internal annual budget for Adjusted Funds
From Operations per share (or AFFO per share). We have not reset
our targets nor have we guaranteed our executives any minimum
cash incentive payments. In the event of poor performance, the
executives could receive no cash incentive compensation for the
year.
The largest individual component of our executive officers
compensation is equity compensation. Our philosophy has been to
target total compensation at approximately the median of our
competitive set and to ensure that approximately half of the
targeted compensation is in the form of equity. We believe that
half of our executives compensation should be in the form
of restricted stock or stock options for several reasons.
13
First, along with our minimum stock ownership policy, equity
grants help ensure that a significant portion of each of our
executives net worth is tied to the value of our stock,
aligning the interests of our executives with those of our
stockholders. Our view is that, if we have superior long-term
operating performance, our executives, through their significant
equity compensation, will eventually receive above market
compensation from dividends and capital appreciation in our
common stock. Conversely if we do not perform as well as our
competitors, our executives compensation will prove to be
(appropriately) below market over the long-term.
Second, we design our equity awards to be total stockholder
return vehicles, rewarding executives for both share price
appreciation as well as dividends we believe a focus
on total stockholder return will encourage our executives to
prudently increase earnings to ensure that our dividend is well
covered.
Third, our stock awards vest on a three-year schedule, thus
creating for our executive officers an incentive to remain with
the Company.
Comply
with Best Practices
In designing our executive compensation programs, our
Compensation Committee also consults with Frederic W.
Cook & Co. Incorporated, its own independent
compensation advisor, and with its own legal advisors to assess
our compliance with corporate governance best practices. For
example, we have adopted both a so-called clawback
policy in the event of a restatement of our financial
statements and an executive stock ownership policy.
Moreover, we strive to maximize the financial efficiency of our
compensation programs. For example, the amount of our cash
incentive compensation and the size of the equity grants vary
based on the degree to which our financial objectives are
achieved.
Finally our Compensation Committee regularly considers whether
our compensation program encourages our executives to prudently
manage enterprise risk.
Senior
Executive Compensation
The following table sets forth the compensation paid for the
last three years to our Chief Executive Officer, our Chief
Financial Officer and each of the three other named executive
officers. The five individuals set forth below are all of our
corporate officers.
Summary
Compensation Table
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Non-Equity
|
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|
|
|
|
|
|
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|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(1)
|
|
($)
|
|
($)(2)
|
|
($)
|
|
William W. McCarten
|
|
|
2008
|
|
|
|
564,000
|
|
|
|
1,008,332
|
|
|
|
208,333
|
|
|
|
425,820
|
|
|
|
31,846
|
|
|
|
2,238,331
|
|
Chairman of the Board and
|
|
|
2007
|
|
|
|
537,000
|
|
|
|
1,102,777
|
|
|
|
0
|
|
|
|
464,775
|
|
|
|
36,778
|
|
|
|
2,141,330
|
|
Former Chief Executive Officer(3)
|
|
|
2006
|
|
|
|
515,000
|
|
|
|
902,778
|
|
|
|
0
|
|
|
|
772,500
|
|
|
|
38,186
|
|
|
|
2,228,464
|
|
Mark W. Brugger
|
|
|
2008
|
|
|
|
450,000
|
|
|
|
534,721
|
|
|
|
118,056
|
|
|
|
294,435
|
|
|
|
33,527
|
|
|
|
1,430,739
|
|
Chief Executive Officer(3)
|
|
|
2007
|
|
|
|
357,000
|
|
|
|
655,554
|
|
|
|
0
|
|
|
|
275,748
|
|
|
|
31,940
|
|
|
|
1,320,242
|
|
|
|
|
2006
|
|
|
|
275,000
|
|
|
|
633,333
|
|
|
|
0
|
|
|
|
330,000
|
|
|
|
34,095
|
|
|
|
1,272,428
|
|
John L. Williams
|
|
|
2008
|
|
|
|
477,667
|
|
|
|
823,611
|
|
|
|
118,056
|
|
|
|
288,511
|
|
|
|
32,378
|
|
|
|
1,740,223
|
|
President and Chief
|
|
|
2007
|
|
|
|
432,000
|
|
|
|
791,666
|
|
|
|
0
|
|
|
|
299,118
|
|
|
|
32,087
|
|
|
|
1,554,871
|
|
Operating Officer
|
|
|
2006
|
|
|
|
412,000
|
|
|
|
797,221
|
|
|
|
0
|
|
|
|
494,400
|
|
|
|
26,669
|
|
|
|
1,730,290
|
|
Michael D. Schecter
|
|
|
2008
|
|
|
|
296,000
|
|
|
|
319,444
|
|
|
|
69,444
|
|
|
|
148,296
|
|
|
|
26,115
|
|
|
|
859,299
|
|
Executive Vice President and
|
|
|
2007
|
|
|
|
282,000
|
|
|
|
352,778
|
|
|
|
0
|
|
|
|
175,270
|
|
|
|
28,932
|
|
|
|
838,980
|
|
General Counsel
|
|
|
2006
|
|
|
|
245,000
|
|
|
|
298,612
|
|
|
|
0
|
|
|
|
220,500
|
|
|
|
28,844
|
|
|
|
792,956
|
|
Sean M. Mahoney
|
|
|
2008
|
|
|
|
239,667
|
|
|
|
121,523
|
|
|
|
38,194
|
|
|
|
100,349
|
|
|
|
31,045
|
|
|
|
530,778
|
|
Executive Vice President and
|
|
|
2007
|
|
|
|
207,000
|
|
|
|
104,163
|
|
|
|
0
|
|
|
|
85,771
|
|
|
|
29,108
|
|
|
|
426,042
|
|
Chief Financial Officer(3)
|
|
|
2006
|
|
|
|
175,000
|
|
|
|
63,888
|
|
|
|
0
|
|
|
|
105,000
|
|
|
|
23,088
|
|
|
|
366,976
|
|
|
|
|
(1)
|
|
The amounts set forth in this
column represent the compensation expense recognized during the
specified year in connection with equity awards. The
compensation expense is determined in accordance with
SFAS 123R. For purposes of determining both the size of the
grant and the expense associated with such awards under
SFAS 123(R), the value of restricted stock equaled the
closing price of
|
14
|
|
|
|
|
our common stock on the NYSE on the
date we issued the deferred and restricted stock. In addition,
we used a valuation study conducted by Towers Perrin to value
the stock appreciation rights (SARs) and dividend equivalent
rights (DERs). Towers Perrin valued the SARs using a binomial
option pricing model, using the assumptions called for by
Paragraph 16 and Appendix A of SFAS 123(R).
Towers Perrin assumed a seven year expected life, a risk free
rate of 3.17%, expected volatility of 29.8% and an expected
dividend yield of 5.5% (the average dividend yield on the four
dividend payment dates preceding the issuance of the SARs).
Towers Perrin valued the DERs using a discounted cash flow model
assuming a stream of dividends equal to 5.5% of the closing
stock price on the NYSE on the date that the DERs were issued
over the seven year expected life of the instrument. In
accordance with SFAS 123(R), the expense associated with
these awards is recognized over the requisite service period
(i.e., the vesting period of the restricted stock, deferred
stock units, SARs or DERs).
|
|
(2)
|
|
All other compensation represents
the employer safe harbor 401(k) match, health insurance
premiums, life and disability insurance premiums and
reimbursement of certain compensatory payments to our executive
officers and, for those officers who are also directors,
vacations at hotels either owned by us or managed or franchised
by Marriott. In addition, in 2006, all other compensation
includes reimbursement of tax return preparation fees and annual
medical examination costs. For more detail on these amounts,
please see 4. Perquisites and Other Benefits below.
|
|
(3)
|
|
On September 1, 2008,
Mr. McCarten retired as Chief Executive Officer but
retained his title of Chairman of the Board of Directors and
remains an executive officer of the Company. On that date,
Mr. Brugger was promoted from Chief Financial Officer to
Chief Executive Officer and Mr. Mahoney was promoted from
Chief Accounting Officer and Corporate Controller to Executive
Vice President and Chief Financial Officer.
|
Our compensation program seeks to promote the philosophy
described above through an appropriate mix of four core elements
of compensation:
1. base salary,
2. cash incentive compensation program,
3. equity grants, and
4. limited perquisites.
We traditionally review our executives base salaries
annually in December. However, in connection with the promotion
of Mr. Brugger to Chief Executive Officer and
Mr. Mahoney to Chief Financial Officer on September 1,
2008 and the retirement of Mr. McCarten as Chief Executive
Officer on that date, we reviewed the salaries of
Messrs. McCarten, Brugger, Mahoney and Williams on that
date. Consistent with past practices, we reviewed
Mr. Schecters and Mr. Mahoneys base
salaries in December of 2008.
Our primary compensation philosophy is to target our total
compensation at approximately the median of our competitive set
and to ensure that approximately half of the compensation paid
to our senior executives is in the form of equity. As a result,
our executives cash compensation may be targeted at a
level below or above the median cash compensation paid to
members of our primary competitive set. During our December
annual compensation review, we generally attempt to set the base
salaries within the range of base salaries paid to members of
our competitive sets and, whenever possible, we strive to pay
base salaries at the median of competitive base salaries.
However, we adjust base salaries to reflect our executives
assigned responsibilities, relevant levels of experience and
individual performance compared to other members of the
competitive set.
In connection with the CEO succession planning, our Compensation
Committee decided it would be appropriate to continue to pay
Mr. McCarten his existing base salary of $564,000 per year
for the remainder of 2008 and, commencing January 1, 2009,
to set his base salary for his new position at $300,000. The
2009 base salary level was determined with input from the
Compensation Committees independent consultant. The
consultant conducted a competitive analysis of compensation
levels, in relation to CEO pay levels, for executive chairmen at
public REITs, to assist the Committee in determining an
appropriate base salary level for Mr. McCarten, given
Mr. McCartens expected roles and responsibilities in
2009.
Our Compensation Committee also decided to pay, effective
September 1, 2008 through December 31, 2009,
Mr. Brugger a base salary of $600,000 per year and
Mr. Williams a base salary of $525,000 and to pay
Mr. Mahoney a base salary of $285,000 during the period
September 1, 2008 through December 31, 2008, with the
intention of reevaluating his salary in December of 2008. In
December 2008, the Compensation
15
Committee decided it would be appropriate to increase
Mr. Schecters salary 2.5% to $303,400 and
Mr. Mahoneys salary to $305,000, effective
January 1, 2009.
The base salaries for the named executive officers are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
William W. McCarten
|
|
$
|
300,000
|
|
|
$
|
564,000
|
|
|
$
|
537,000
|
|
Mark W. Brugger
|
|
$
|
600,000
|
|
|
$
|
375,000
|
|
|
$
|
357,000
|
|
John L. Williams
|
|
$
|
525,000
|
|
|
$
|
454,000
|
|
|
$
|
432,000
|
|
Michael D. Schecter
|
|
$
|
303,400
|
|
|
$
|
296,000
|
|
|
$
|
282,000
|
|
Sean M. Mahoney
|
|
$
|
305,000
|
|
|
$
|
217,000
|
|
|
$
|
207,000
|
|
|
|
2.
|
Cash
Incentive Compensation Program
|
We maintain an annual cash incentive compensation program
pursuant to which our executive officers are eligible to earn
cash bonuses based upon their achievement of certain objective
corporate goals as well as certain individual goals set by the
Compensation Committee at the beginning of the year for that
fiscal year. To date, no cash incentive compensation has been
paid to our executives other than in accordance with this
program.
The chart below shows the bonuses we have paid under our cash
incentive compensation program for the named executive officers.
We typically pay our bonuses during the first fiscal quarter
subsequent to the plan year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Compensation Plan Year
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
William W. McCarten
|
|
$
|
425,820
|
|
|
$
|
464,775
|
|
|
$
|
772,500
|
|
Mark W. Brugger
|
|
$
|
294,435
|
|
|
$
|
275,748
|
|
|
$
|
330,000
|
|
John L. Williams
|
|
$
|
288,511
|
|
|
$
|
299,118
|
|
|
$
|
494,400
|
|
Michael D. Schecter
|
|
$
|
148,296
|
|
|
$
|
175,270
|
|
|
$
|
220,500
|
|
Sean M. Mahoney
|
|
$
|
100,349
|
|
|
$
|
85,771
|
|
|
$
|
105,000
|
|
2008 Cash Incentive Compensation. Our
Compensation Committee established a bonus formula for 2008
under our cash incentive compensation program during the first
quarter of 2008, weighted as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
2008
|
Components of Cash Incentive Compensation Program
|
|
Weighting
|
|
|
Achievement
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Adjusted Funds From Operations per share (AFFO per share)(1)
|
|
|
70
|
%
|
|
$1.48 per share
|
|
$1.48 per share
|
|
$1.64 per share
|
|
$1.72 per share
|
Achievement of certain individual performance objectives
|
|
|
30
|
%
|
|
Various
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
(1)
|
|
We compute AFFO by adjusting Funds
From Operations (or FFO) (which we calculate in accordance with
the standards established by NAREIT) for certain non-cash items.
FFO is defined by NAREIT as net income determined in accordance
with GAAP, excluding depreciation, amortization and gains
(losses) from sales of property. We further adjust FFO to
eliminate the following non-cash items: non-cash ground rent,
non-cash amortization of unfavorable contract liabilities
recorded in conjunction with our acquisitions, cumulative
effects of any changes in accounting principles, gains or losses
from early extinguishment of debt, impairment losses,
acquisition costs and any other non-cash and/or non-recurring
items.
|
For the corporate metric, we adopted the threshold, target and
maximum numerical goals set forth above. No bonuses would have
been payable under the corporate metric of the incentive
compensation program if we had not achieved our threshold AFFO
per share of $1.48. Achievement of the corporate metric at the
threshold level of performance pays 50% of the target bonus for
such metric and achievement at the maximum level of performance
pays 150% of such target. Bonuses are calculated based on a
linear interpolation for achievement in between each of those
performance levels. At the beginning of 2008, we expected to
earn an AFFO of approximately $1.64 per share, which was our
target, and we expected it to be very unlikely that we would pay
out the corporate component of the bonus at either the threshold
or maximum levels.
16
The Compensation Committee chose to compensate the executives
based on the Company achieving its AFFO per share budget because
it believes that the achievement of the targeted results would
improve long-term stockholder value. In particular, AFFO per
share is one of the most commonly used non-GAAP financial
measures in the commercial real estate industry. It measures the
financial performance of our operations without regard to
specified non-cash items, such as real estate depreciation and
amortization and the gain or loss on the sale of assets.
Moreover, we utilize AFFO per share (as opposed to EBITDA or
some other commonly used measure) as AFFO per share takes into
account the impact of our capital structure by including shares
outstanding and interest expense.
In addition, the Compensation Committee established between five
and ten individual objectives for each of the executive
officers, which objectives varied by individual depending on
their corporate responsibilities. The primary individual
business objectives for 2008 were as follows:
|
|
|
Responsible Executive
|
|
2008 Objectives
|
|
All Executives
|
|
Achieve our 2008 budget
Complete planned capital expenditure programs
on time, on budget and with minimal scope changes
Sustain hotel profitability to the extent
practicable in light of the recession
Complete overall strategy evaluation and
present such strategy to our Board of Directors at its April
meeting
Benchmark certain competitors, study their
forecasting, management information and asset management roles
and processes. Implement any appropriate improvement to our
systems and processes
|
Mr. McCarten
|
|
Keep the organization productive through an
expected challenging 2008. Focus the organization on assertive
asset management and operational performance analysis to sustain
profitability
Provide leadership in achieving the
Company-wide 2008 goals
Reassess and modify our strategy in response
to capital market changes and the uncertain lodging
environment
Assist the Board and manage the organization
through the CEO succession transition
|
Mr. Brugger
(goals as Chief Financial Officer, prior to promotion to Chief
Executive Officer)
|
|
Arrange strategy review sessions for our
senior management
Refine our portfolio strategy and define
targeted markets and segments
Engage hotel brokers to evaluate the
disposition of certain non-core assets, and if appropriate sell
such assets
Update debt policy and leverage targets in
light of the recession
Develop and implement a share repurchase
strategy
Evaluate potential merger & acquisition
opportunities
|
Mr. Brugger
(goals as Chief Executive Officer, after
September 1st
promotion)
|
|
Responsible for all 2008 Company-wide goals
Revise dividend policy
Establish 2009 Company-wide goals
Establish 2009 performance objectives and
bonus plans for executives
|
Mr. Williams
|
|
Complete planned capital expenditure programs
on time, on budget and with minimal scope changes
Sustain hotel profitability to the extent
practicable in light of the recession
Participate in the overall strategy evaluation
and board presentation
Evaluate certain sales initiatives undertaken
by Marriott and work with Marriott to improve such
initiatives
Complete strategic evaluation of certain of
our assets
|
17
|
|
|
Responsible Executive
|
|
2008 Objectives
|
|
Mr. Schecter
|
|
Redraft the 2008 proxy in light of current
legal developments
Update our website to better reflect our
current focus
Ensure that the stock buy-back program
complies with all SEC and NYSE requirements.
Evaluate alternatives to existing property
insurance program and, if we decide to implement independent
program, ensure that the total cost of such program does not
exceed $3.9 million.
Complete certain human resource initiatives,
including systemizing compensation and performance reviews of
our associates.
Evaluate certain improvements to our
information technology and communication systems
|
Mr. Mahoney
(goals as Corporate Controller, prior to promotion to Chief
Financial Officer)
|
|
Primary responsibility for SOX compliance
Manage audit process
Monitor debt compliance
Design, coordinate and prepare the annual
budget
Help develop comprehensive operating
forecasts
Improve internal financial reporting
|
Mr. Mahoney
(goals as Chief Financial Officer, following his
September 1, 2008 promotion)
|
|
Conduct a study of an appropriate dividend
strategy
Create a comprehensive three year financing
plan
Redraft investor relations material
|
In 2008, DiamondRocks hotels operated in very difficult
operating conditions. In part due to our executives focus
beginning in late 2007 on controlling property level expenses,
we were able to achieve an AFFO per share of $1.48, which was
equal to the threshold for the corporate component of the
incentive compensation program. In addition, the Compensation
Committee requested each of the executives to prepare a report
as to whether they achieved their individual business
objectives, and the Compensation Committee asked the chief
executive officer to provide his assessment of each officer.
Following the chief executive officers review and a
discussion by the committee, the committee awarded the
individual component of the cash incentive compensation program.
For 2008, the Compensation Committee concluded that it would be
appropriate to pay each executive at a level equal to 90% of the
maximum payout for the individual component of each
executives bonus.
The annual incentive opportunity ranges for 2008 and the actual
cash incentive compensation earned for 2008 performance was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Cash Incentive Opportunity
|
|
|
2008 Cash Incentive Earned
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
% Base Salary
|
|
|
$ Value
|
|
|
William W. McCarten
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
76
|
%
|
|
$
|
425,820
|
|
Mark W. Brugger(1)
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
65
|
%
|
|
$
|
294,435
|
|
John L. Williams
|
|
|
40
|
%
|
|
|
80
|
%
|
|
|
120
|
%
|
|
|
60
|
%
|
|
$
|
288,511
|
|
Michael D. Schecter
|
|
|
33
|
%
|
|
|
66
|
%
|
|
|
100
|
%
|
|
|
50
|
%
|
|
$
|
148,296
|
|
Sean M. Mahoney(2)
|
|
|
33
|
%
|
|
|
66
|
%
|
|
|
100
|
%
|
|
|
42
|
%
|
|
$
|
100,349
|
|
|
|
|
(1)
|
|
Mr. Bruggers target cash
incentive compensation was originally set at 80% of the base
salary that he earned from January 1, 2008 through
August 30, 2008, with a maximum bonus of 120% of his base
salary and a threshold of 40% of his base salary for that
period. Following his promotion, for the period between
September 1, 2008 and December 31, 2008, his target
cash incentive compensation was increased to the percentages set
forth in the chart above.
|
|
(2)
|
|
Mr. Mahoneys target cash
incentive compensation was originally set at 50% of the base
salary that he earned from January 1, 2008 through
August 30, 2008, with a maximum bonus of 75% of his base
salary and a threshold of 25% of his base salary for that
period. Following his promotion, for the period between
September 1, 2008 and December 31, 2008, his target
cash incentive compensation was increased to the percentages set
forth in the chart above.
|
18
2009 Cash Incentive Compensation. Our
Compensation Committee established a bonus formula for 2009
under our cash incentive compensation program during the first
quarter of 2009, weighted as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
Less than
|
|
|
|
Low
|
|
|
|
High
|
|
|
Components of Cash Incentive Compensation Program
|
|
Weighting
|
|
|
Threshold
|
|
Threshold
|
|
Target
|
|
Target
|
|
Target
|
|
Maximum
|
|
|
|
|
|
(0%
|
|
(50%
|
|
(95%
|
|
(100%
|
|
(105%
|
|
(150%
|
|
|
|
|
|
Payout)
|
|
payout)
|
|
payout)
|
|
payout)
|
|
payout)
|
|
payout)
|
|
AFFO Per Share
|
|
|
50
|
%
|
|
<85% of
AFFO per
share
Budget
|
|
85% of
AFFO per
share
Budget
|
|
95% of
AFFO per
share
Budget
|
|
100% of
AFFO per
share
Budget
|
|
105% of
AFFO per
share
Budget
|
|
>115% of
AFFO per
share
Budget
|
Relative Hotel Performance
|
|
|
5
|
%
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Achievement of certain individual performance objectives
|
|
|
45
|
%
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
In 2009, our Compensation Committee adopted a bonus formula 55%
weighted to two corporate performance measures (AFFO per share
and Relative Hotel Performance) and 45% weighted to individual
performance measures. Our Compensation Committee decreased the
weighting of the AFFO per share corporate component from 70% in
2008 to 50% in 2009 as the Committee concluded that there was
greater uncertainty inherent in the Companys budget for
2009 than in prior years. The Compensation Committee was
concerned that, if the Company failed to properly forecast the
degree that the overall economy is expected to decline in 2009,
the executive team might be either over or undercompensated. In
addition, the Compensation Committee made it more difficult for
the executive team to achieve either a maximum or zero payout if
we significantly outperform or underperform our annual budget.
In 2008, the executive team would earn a maximum bonus, if the
Company achieved an AFFO per share equal to 105% of the
Companys budget and would earn no bonus if the Company
achieved an AFFO per share that was less than 90% of the
Companys budget. In 2009, by comparison, the maximum bonus
is set at 115% of the budgeted AFFO per share and threshold is
set at 85% of budgeted AFFO per share. Bonuses are calculated
based on a linear interpolation for achievement in between the
performance levels in the chart above.
The AFFO component is based on an internal budget adopted by the
Board of Directors at its meeting on February 26, 2009. The
Compensation Committee concluded that it is appropriate to
encourage our executives to be flexible in responding to the
recession in order to create long-term stockholder value. As a
result, the Committee concluded that it may, in its sole
discretion, adjust the Adjusted FFO Budget for the incurrence of
any additional debt, refinancing of any debt or repayment of any
debt as well as for the sale or repurchase of any equity or the
disposition or acquisition of assets not included in our
original 2009 corporate budget. In addition, as the current
recession constrains our ability to fairly estimate 2009
financial results, the Committee explicitly retained its
flexibility to use its upwards or downwards discretion in
awarding any 2009 bonuses if it concludes that the economic
assumptions underlying our 2009 budget were materially wrong.
In addition, the Compensation Committee created a new corporate
measure in 2009 for relative hotel performance. At the beginning
of the year, the Compensation Committee approved a competitive
set for each of our 20 hotels. During the year, for each hotel
that gains market share against its pre-approved competitive
set, as measured by Smith Travel Research, a respected third
party analyst, the executives will earn
1/20th of
this component of their bonus. Conversely, for each of our
twenty hotels that fail to gain market share, the executives
will not earn 1/20th of this component of their bonuses.
In addition, the Compensation Committee established between five
and fourteen individual objectives for each of the executive
officers, which objectives varied by individual depending on
their corporate responsibilities.
|
|
3.
|
Equity-Based
Incentive Compensation
|
Generally we target paying half of our executives total
compensation in the form of equity. However, our Compensation
Committee determines, in its sole discretion, the actual amount
of equity to be awarded to our executive officers each year
reflecting our performance in the prior year, individual
performance and competitive levels of long-term incentive
compensation among our primary competitive set. Our executive
officers are not guaranteed any minimum number of shares of
restricted stock.
19
The value of the equity awards since our initial public
offering, based on the grant date fair value of the equity,
received by the named executive officers is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
William W. McCarten
|
|
$
|
500,000
|
|
|
$
|
1,500,000
|
|
|
$
|
1,299,996
|
|
|
$
|
1,100,001
|
|
|
$
|
1,181,250
|
|
Mark W. Brugger
|
|
$
|
1,500,000
|
|
|
$
|
850,000
|
|
|
$
|
649,998
|
|
|
$
|
599,998
|
|
|
$
|
866,250
|
|
John L. Williams
|
|
$
|
850,000
|
|
|
$
|
2,850,000
|
|
|
$
|
750,006
|
|
|
$
|
699,992
|
|
|
$
|
1,102,500
|
|
Michael D. Schecter
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
$
|
399,996
|
|
|
$
|
350,004
|
|
|
$
|
603,750
|
|
Sean M. Mahoney
|
|
$
|
500,000
|
|
|
$
|
275,000
|
|
|
$
|
149,994
|
|
|
$
|
99,994
|
|
|
$
|
262,500
|
|
Types of Awards. Since our formation, we have
mainly issued shares of restricted stock and deferred stock
units. In 2008, we issued a combination of stock-settled stock
appreciation rights (SARs, each a SAR) and dividend equivalent
rights (DERs, each a DER), but due to a change in the
interpretation of tax law, we are unlikely to issue additional
SARs or DERs in the future. Each of these types of awards is
described in more detail below.
|
|
|
|
|
Restricted Stock. Our restricted stock
awards generally vest in three equal annual installments from
the date of grant. Prior to the 2009 award, such awards paid
dividends on a current basis. In 2009, we revised the awards so
that all dividends on unvested shares are reinvested in
additional shares of restricted stock and such additional shares
are received only when the underlying restricted shares vest. We
granted such time-based restricted stock in July 2004, August
2006, February 2007, March 2008 and March 2009. In addition, in
connection with the retirement of Mr. McCarten and
promotion of Mr. Brugger, we issued a special one-time
retention grant of restricted shares to Mr. Williams in
September 2008.
|
|
|
|
Deferred Stock Units. In 2005, in
connection with our initial public offering, we issued
382,500 shares of deferred stock unit awards to our five
named executive officers. The deferred stock unit awards are
fully vested and represent our promise to issue a number of
shares of our common stock upon the earlier of (i) a sale
event or (ii) July 2010. The awards are subject to
forfeiture should the executive be terminated for cause. We do
not pay current dividends on the shares of common stock
underlying the deferred stock units; instead, the dividends are
effectively re-invested as each of the executive
officers is credited with an additional number of deferred stock
units that have a fair market value (based on the closing stock
price on the day the dividend is paid) equal to the amount of
the dividend that would have been awarded for those shares.
|
|
|
|
Stock Appreciation Rights and Dividend Equivalent
Rights. On March 4, 2008, we issued
awards to our five most senior officers, the design of which
deviated from our historical practice of granting 100%
restricted stock. Fifty percent of the value of the annual grant
made on March 4, 2008 was comprised of restricted stock and
50% of the value was comprised of a combination of SARs and
DERs. We made this change to our annual grant type mix because
the Compensation Committee of our Board of Directors concluded
that a program comprised solely of restricted stock lacks what
some refer to as leverage. In particular, such a
program would require the grant of an unreasonably large number
of shares of restricted stock in order to create significant
changes in value to reflect a change in the value of
DiamondRocks stock. In order to provide such leverage and,
at the same time, create incentives to maintain our dividend,
the Compensation Committee concluded that it would be prudent to
issue SARs with DERs. The SARs and DERs vest in three equal
annual installments from the date of grant.
|
The strike price of the SARs was set at $12.59, the closing
price of our stock on the NYSE on the grant date. The SARs may
be exercised, in whole or in part, at any time after the
instrument vests and before the tenth anniversary of its
issuance. Upon exercise, the holder of a SAR will receive a
number of shares of our common stock equal to the positive
difference, if any, between the price of our common stock on the
NYSE at the time of the exercise compared to the strike
price, which is the closing price of our common stock on
the NYSE at the close of business on the day the SARs were
20
granted, divided by the price of our common stock on the NYSE at
the time that the holder exercises his or her SAR.
We issued one DER for each SAR. A DER will entitle the holder to
the value of the dividends issued on one share of common stock.
No dividends will be paid on a DER prior to its vesting, but
upon vesting, the holder of each DER will receive a lump sum
equal to all of the dividends paid on a share of common stock
from the date the DER was granted to the date the DER vested.
After vesting, the holder of each DER will receive a cash
payment equal to the value of the dividends paid on a share of
common stock at the same time dividends are paid to our common
stockholders. Initially, the DERs were to terminate on the
earlier of the 10th anniversary of the grant of the DER or
the date that the corresponding SAR is exercised. However, after
an official with the Internal Revenue Service stated that a DER
which terminates upon the exercise of an option or a stock
appreciation right should be characterized as deferred
compensation and subject to the provisions of Section 409A
of the Internal Revenue Code, we amended the DERs to shorten the
maturity of the existing DERs from 10 years from the grant
date to 8 years from the grant date and eliminate the
provision that required the awards to terminate, in whole or in
part, upon the exercise of the SAR that were issued
simultaneously with the DERs. The net impact of the award
modification did not result in a change in the value of the DERs.
Because we were obligated to change the structure of the DERs in
order to eliminate the tax uncertainty, we have decided not to
issue any further SARs/DERs until such time as the IRS clarifies
the status of the instruments.
On March 4, 2008, the named executive officers received the
following SAR and DER awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs
|
|
|
DERs
|
|
|
|
Value in Dollars
|
|
|
# of SARs
|
|
|
Value in Dollars
|
|
|
# of DERs
|
|
|
William W. McCarten
|
|
$
|
302,492
|
|
|
|
113,293
|
|
|
$
|
447,508
|
|
|
|
113,293
|
|
Mark W. Brugger
|
|
$
|
171,412
|
|
|
|
64,199
|
|
|
$
|
253,588
|
|
|
|
64,199
|
|
John L. Williams
|
|
$
|
171,412
|
|
|
|
64,199
|
|
|
$
|
253,588
|
|
|
|
64,199
|
|
Michael D. Schecter
|
|
$
|
100,831
|
|
|
|
37,764
|
|
|
$
|
149,169
|
|
|
|
37,764
|
|
Sean M. Mahoney
|
|
$
|
55,457
|
|
|
|
20,770
|
|
|
$
|
82,043
|
|
|
|
20,770
|
|
For purposes of determining both the size of the grant and the
expense associated with the SAR and DER awards under
SFAS 123(R), we engaged Towers Perrin to perform a
valuation study. Towers Perrin valued the SARs using a binomial
option pricing model, using assumptions called for by
Paragraph 16 and Appendix A of SFAS 123(R). Towers
Perrin assumed a seven year expected life, a risk free rate of
3.17%, expected volatility of 29.8% and an expected dividend
yield of 5.5% (the average dividend yield on the four dividend
payment dates preceding the issuance of the SARs). Towers Perrin
valued the DERs using a discounted cash flow model assuming a
stream of dividends equal to 5.5% of the closing stock price on
the NYSE on the date that the DERs were issued over the seven
year expected life of the instrument. In accordance with
SFAS 123(R), the expense associated with these awards is
recognized over the requisite service period (i.e., the vesting
period of the SARs and DERs).
|
|
4.
|
Perquisites
and other benefits
|
We currently have very few perquisites. Messrs. McCarten,
Brugger and Williams, as members of our Board of Directors, are
entitled to reimbursement of up to $10,000 of lodging, meals,
parking and certain other expenses at all of our hotels and at
all hotels and resorts managed or franchised by Marriott,
subject to certain limitations. See Director
Compensation. We provided very limited perquisites to our
executive officers until December 31, 2006, when the
perquisites were discontinued.
Our named executive officers, along with all of our employees on
a non-discriminatory basis, receive: (i) health and dental
insurance with our Company paying 100% of the premiums,
(ii) a $200,000 group term life insurance policy, and
(iii) long term disability coverage. We maintain a
retirement savings plan for all of
21
our employees under section 401(k) of the Code. All of our
employees, including our named executive officers, benefit from
the same company matching formula.
The following chart sets forth the perquisites and all other
benefits received by our executive officers over the last three
years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits
|
|
|
|
|
Perquisites
|
|
|
|
|
|
Life and
|
|
|
|
|
|
|
Tax
|
|
Annual
|
|
401-K
|
|
Health
|
|
Disability
|
|
|
|
|
Hotel
|
|
Return
|
|
Medical
|
|
Employer
|
|
Insurance
|
|
Insurance
|
|
|
|
|
Reimbursement
|
|
Preparation
|
|
Exam
|
|
Match
|
|
Premium
|
|
Premiums
|
|
William W. McCarten
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,500
|
|
|
$
|
10,436
|
|
|
$
|
560
|
|
|
|
|
2007
|
|
|
$
|
7,562
|
|
|
|
|
|
|
|
|
|
|
$
|
20,500
|
|
|
$
|
7,934
|
|
|
$
|
432
|
|
|
|
|
2006
|
|
|
$
|
4,237
|
|
|
$
|
2,000
|
|
|
$
|
3,186
|
|
|
$
|
20,000
|
|
|
$
|
7,875
|
|
|
$
|
888
|
|
Mark W. Brugger
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,500
|
|
|
$
|
17,467
|
|
|
$
|
560
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,500
|
|
|
$
|
16,008
|
|
|
$
|
432
|
|
|
|
|
2006
|
|
|
|
|
|
|
$
|
867
|
|
|
$
|
2,928
|
|
|
$
|
15,000
|
|
|
$
|
14,412
|
|
|
$
|
888
|
|
John L. Williams
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,500
|
|
|
$
|
10,918
|
|
|
$
|
560
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,500
|
|
|
$
|
10,805
|
|
|
$
|
432
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
|
$
|
5,781
|
|
|
$
|
888
|
|
Michael D. Schecter
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,500
|
|
|
$
|
10,055
|
|
|
$
|
560
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,500
|
|
|
$
|
13,000
|
|
|
$
|
432
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
|
$
|
12,956
|
|
|
$
|
888
|
|
Sean M. Mahoney
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,018
|
|
|
$
|
17,467
|
|
|
$
|
560
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,668
|
|
|
$
|
16,008
|
|
|
$
|
432
|
|
|
|
|
2006
|
|
|
|
|
|
|
$
|
550
|
|
|
|
|
|
|
$
|
7,238
|
|
|
$
|
14,412
|
|
|
$
|
888
|
|
Severance
Agreements
In March 2007, we entered into severance agreements with each of
our executive officers. Prior to entering into these severance
agreements, our Compensation Committee reviewed the severance
agreements and policies as well as the employment contracts for
the eight largest lodging self-managed REITs that were then
currently SEC reporting companies. In addition, our Compensation
Committees independent advisor, Frederic W.
Cook & Co., Incorporated, reviewed the proposed
severance agreements on behalf of the Compensation Committee and
provided advice on current market practices and emerging best
practices regarding severance agreements. The Compensation
Committee also engaged its own legal counsel to represent the
Company in the negotiation of the severance agreements with
management.
The severance agreements provide each named executive officer
with certain severance benefits if his employment ends under
certain circumstances. We believe that the severance agreements
will benefit us by helping to retain the executives and by
allowing them to focus on their duties without the distraction
of the concern for their personal situations in the event of a
termination of their employment, especially in connection with a
possible change in control of our Company.
Each named executive officer will be entitled to receive cash
severance benefits under their severance agreements if we
terminate such executives employment without cause or such
executive resigns with good reason. These severance agreements
therefore have so-called double triggers as the
executives are not entitled to receive any cash severance
benefits if, following a change of control, they resign without
demonstrating good reason. If the executive officers are
entitled to receive cash severance benefits, they will receive a
lump sum payment equal to three times, with respect to
Messrs. McCarten and Brugger, or two times, with respect to
each of the other named executive officers, of the sum of
(x) his then current base salary and (y) his target
bonus under our annual cash incentive compensation program. At
the present time, the Board of Directors intends that
Mr. McCartens severance agreement will continue as
long as he remains an executive of the Company.
In addition, if we terminate such executives employment
without cause or such executive resigns with good reason, or if
the executive dies or becomes disabled, the executive (or his
family) will be entitled to (i) a
22
pro-rated bonus under our cash incentive program at target,
(ii) continued life, health and disability insurance
coverage for himself, his spouse and dependents for eighteen
months and (iii) the immediate vesting of any unvested
portion of any restricted stock award previously issued to the
executive. In addition, the unvested SARs and the DERs will
immediately and fully vest upon the death or disability of an
executive and may be exercised by the holder, or his estate,
until the expiration dates of the SAR and DERs. Following a
change in control, if an executive is terminated without cause
or resigns for good reason, the SARs and DERs will continue to
vest on the original vesting schedule and, once vested, the
instruments may continue to be exercised until the earlier of
the expiration date of the instrument or the fifth anniversary
of the vesting. If there has not been a change in control and
the executive resigns with good reason or is terminated without
cause, the Board of Directors has sole discretion to decide
whether to vest any unvested SARs and DERs.
In the event that the executive retires, the executive will be
eligible to continue to vest in any outstanding unvested
restricted stock awards and SARs and DERs, but the executive
will not receive any cash severance or any continued life,
health, or disability coverage for himself or his spouse or
dependents.
In the event that the severance benefits described above are
paid in connection with a change in control of our Company and
deemed excess parachute payments under
Section 280G of the Code, the named executives may be
eligible to receive a tax gross up payment equal to
the additional taxes, if any, imposed on the executive under
Section 4999 of the Code in respect of such excess
parachute payments. This excise tax gross up is available only
to the extent that the value of the severance benefits payable
to an executive equals or exceeds 110% of the maximum amount the
executive could have received without being subject to any
excise tax under Section 4999 of the Code (the safe
harbor). In the event that the value of the severance
benefits payable to an executive is subject to the excise tax
but does not equal or exceed 110% of the safe
harbor, the amount of the severance benefits will be
reduced to an amount equal to the safe harbor.
The following table sets forth a summary of our payment
obligations pursuant to the severance agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination as a Result of
|
|
|
|
|
|
|
|
|
|
Terminated without
|
|
|
|
|
|
|
Terminated For
|
|
|
|
|
|
Cause or
|
|
|
|
|
|
|
Cause or
|
|
|
|
|
|
Resigned with
|
|
|
|
|
|
|
Resigned Without Good
|
|
|
Death or
|
|
|
Good
|
|
|
|
|
|
|
Reason(1)(2)
|
|
|
Disability
|
|
|
Reason(1)(2)
|
|
|
Retirement(3)
|
|
|
Pro-rated cash incentive plan compensation at target
|
|
|
No
|
|
|
|
Yes
|
|
|
|
Yes
|
|
|
|
Yes
|
|
Cash severance
|
|
|
No
|
|
|
|
No
|
|
|
|
Yes
|
|
|
|
No
|
|
Continued medical and dental benefits
|
|
|
No
|
|
|
|
Yes
|
|
|
|
Yes
|
|
|
|
No
|
|
Continued vesting of restricted stock
|
|
|
No
|
|
|
|
No
|
|
|
|
No
|
|
|
|
Yes
|
|
Full and immediate vesting of restricted stock
|
|
|
No
|
|
|
|
Yes
|
|
|
|
Yes
|
|
|
|
No
|
|
Continued vesting of SARs/DERs
|
|
|
No
|
|
|
|
No
|
|
|
|
Yes
|
(4)
|
|
|
Yes
|
|
Full and immediate vesting of SARs/DERs
|
|
|
No
|
|
|
|
Yes
|
|
|
|
No
|
|
|
|
No
|
|
Modified
tax-gross up
|
|
|
N.A.
|
|
|
|
N.A.
|
|
|
|
Yes
|
(5)
|
|
|
N.A
|
|
|
|
|
(1)
|
|
Cause
shall mean a determination by our Board of Directors in good
faith that any of the following events have 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 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 our funds or
property other than the occasional, customary and de minimis use
of our property for personal purposes; (iii) the
executives willful failure or gross negligence in the
performance of his assigned duties, which failure or gross
negligence continues for more than 15 days following the
executives receipt of written notice of such willful
failure or gross negligence from our Board of Directors;
(iv) any act or omission of the executive that has a
demonstrated and material adverse impact on our reputation for
honesty and fair dealing or any other conduct of the executive
that would reasonably be expected to result in material injury
to our reputation; 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 us to cooperate, or the willful
|
23
|
|
|
|
|
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 or to produce documents or other materials.
|
|
(2)
|
|
Good
Reason for
termination shall mean the occurrence of one of the following
events, without the executives prior written consent:
(i) a material diminution in the executives duties or
responsibilities or any material demotion from the
executives current position with us, including, without
limitation: (A) if the executive is the Chief Executive
Officer (or CEO), either discontinuing his direct reporting to
our 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; (ii) if the
executive is a member of our Board of Directors, our failure to
nominate the executive as one of our directors; (iii) a
requirement that the executive work principally from a location
outside the 50 mile radius from our current address, except
for required travel on our business to the extent substantially
consistent with the executives business travel obligations
on the date hereof; (iv) failure to pay the executive any
compensation or benefits or to honor any indemnification
agreement to which the executive is entitled within 15 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
executives annual base salary or annual cash incentive
plan opportunity as in effect immediately prior to the change in
control; (B) the failure by us to obtain an agreement,
reasonably satisfactory to the executive, from any of our
successors or assigns to assume and agree to adopt the severance
agreement for a period of at least two years from the change in
control.
|
|
(3)
|
|
Retirement
shall mean a retirement by the executive if the executive has
been designated as an eligible retiree by our Board of
Directors, in its sole discretion.
|
|
(4)
|
|
The SARs and DERs will continue to
vest if the executive is terminated without cause or resigns for
good reason following a change in control. If there has not been
a change in control, the unvested SARs and DERS will be
forfeited unless our Board of Directors, in its sole discretion,
chooses to vest such SARs and DERs.
|
|
(5)
|
|
The excise tax gross up is only
applicable if the executive is terminated without cause or
resigns for good reason following a change in control.
|
24
The following chart sets forth the cost that we would have
incurred if one of the executives were terminated as of
December 31, 2008 under the terms of our severance
agreements, assuming a stock price of $5.07, the closing market
price on the NYSE on December 31, 2008:
Cost of
Termination under Severance Agreements(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro-Forma
|
|
|
Continued
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
Medical
|
|
|
Shares of
|
|
|
Value of
|
|
|
|
Cost of
|
|
|
|
|
|
|
|
Bonus
|
|
|
and Dental
|
|
|
Unvested
|
|
|
Unvested
|
|
Value of
|
|
Excise Tax
|
|
Total
|
|
|
Cash
|
|
|
for Year of
|
|
|
Benefits
|
|
|
Stock
|
|
|
Shares
|
|
SARs/DERs
|
|
Gross Up
|
|
Cost of
|
|
|
Severance
|
|
|
Termination
|
|
|
(2)
|
|
|
(3)
|
|
|
(3)
|
|
(4)
|
|
(5)
|
|
Termination
|
|
Terminated For
Cause or Resigned
without Good Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William W. McCarten
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
130,765
|
|
|
100% forfeited
|
|
100% forfeited
|
|
n.a.
|
|
$
|
Mark W. Brugger
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
70,402
|
|
|
100% forfeited
|
|
100% forfeited
|
|
n.a.
|
|
$
|
John L. Williams
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
288,967
|
|
|
100% forfeited
|
|
100% forfeited
|
|
n.a.
|
|
$
|
Michael D. Schecter
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
42,005
|
|
|
100% forfeited
|
|
100% forfeited
|
|
n.a.
|
|
$
|
Sean M. Mahoney
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
18,571
|
|
|
100% forfeited
|
|
100% forfeited
|
|
n.a.
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
Terminated without
Cause or Resigned
with Good Reason
(without a change of
control)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William W. McCarten
|
|
$
|
3,384,000
|
|
|
$
|
564,000
|
|
|
$
|
19,800
|
|
|
|
130,765
|
|
|
$662,980
|
|
100% forfeited
|
|
n.a.
|
|
$4,630,780
|
Mark W. Brugger
|
|
$
|
3,600,000
|
|
|
$
|
450,000
|
|
|
$
|
19,800
|
|
|
|
70,402
|
|
|
$356,936
|
|
100% forfeited
|
|
n.a.
|
|
$4,426,736
|
John L. Williams
|
|
$
|
1,890,000
|
|
|
$
|
382,134
|
|
|
$
|
19,800
|
|
|
|
288,967
|
|
|
$1,465,061
|
|
100% forfeited
|
|
n.a.
|
|
$3,756,995
|
Michael D. Schecter
|
|
$
|
982,720
|
|
|
$
|
195,360
|
|
|
$
|
19,800
|
|
|
|
42,005
|
|
|
$212,964
|
|
100% forfeited
|
|
n.a.
|
|
$1,410,844
|
Sean M. Mahoney
|
|
$
|
946,200
|
|
|
$
|
158,180
|
|
|
$
|
19,800
|
|
|
|
18,571
|
|
|
$94,157
|
|
100% forfeited
|
|
n.a.
|
|
$1,218,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$15,443,692
|
Terminated without
Cause or Resigned
with Good Reason
(following a change
of control)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William W. McCarten
|
|
$
|
3,384,000
|
|
|
$
|
564,000
|
|
|
$
|
19,800
|
|
|
|
130,765
|
|
|
$662,980
|
|
$84,970
|
|
$
|
|
$4,715,750
|
Mark W. Brugger
|
|
$
|
3,600,000
|
|
|
$
|
450,000
|
|
|
$
|
19,800
|
|
|
|
70,402
|
|
|
$356,936
|
|
$48,149
|
|
$
|
|
$4,474,885
|
John L. Williams
|
|
$
|
1,890,000
|
|
|
$
|
382,134
|
|
|
$
|
19,800
|
|
|
|
288,967
|
|
|
$1,465,061
|
|
$48,149
|
|
$
|
|
$3,805,144
|
Michael D. Schecter
|
|
$
|
982,720
|
|
|
$
|
195,360
|
|
|
$
|
19,800
|
|
|
|
42,005
|
|
|
$212,964
|
|
$28,323
|
|
$
|
|
$1,439,167
|
Sean M. Mahoney
|
|
$
|
946,200
|
|
|
$
|
158,180
|
|
|
$
|
19,800
|
|
|
|
18,571
|
|
|
$94,157
|
|
$15,577
|
|
$
|
|
$1,233,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$15,668,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William W. McCarten
|
|
$
|
|
|
|
$
|
564,000
|
|
|
$
|
19,800
|
|
|
|
130,765
|
|
|
$662,980
|
|
$482,880
|
|
n.a.
|
|
$1,729,660
|
Mark W. Brugger
|
|
$
|
|
|
|
$
|
450,000
|
|
|
$
|
19,800
|
|
|
|
70,402
|
|
|
$356,936
|
|
$273,631
|
|
n.a.
|
|
$1,100,367
|
John L. Williams
|
|
$
|
|
|
|
$
|
382,134
|
|
|
$
|
19,800
|
|
|
|
288,967
|
|
|
$1,465,061
|
|
$273,631
|
|
n.a.
|
|
$2,140,626
|
Michael D. Schecter
|
|
$
|
|
|
|
$
|
195,360
|
|
|
$
|
19,800
|
|
|
|
42,005
|
|
|
$212,964
|
|
$160,959
|
|
n.a.
|
|
$589,083
|
Sean M. Mahoney
|
|
$
|
|
|
|
$
|
158,180
|
|
|
$
|
19,800
|
|
|
|
18,571
|
|
|
$94,157
|
|
$88,526
|
|
n.a.
|
|
$360,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$5,920,399
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William W. McCarten
|
|
$
|
|
|
|
$
|
564,000
|
|
|
$
|
|
|
|
|
130,765
|
|
|
$662,980
|
|
$482,880
|
|
n.a.
|
|
$1,709,860
|
Mark W. Brugger
|
|
$
|
|
|
|
$
|
450,000
|
|
|
$
|
|
|
|
|
70,402
|
|
|
$356,936
|
|
$273,631
|
|
n.a.
|
|
$1,080,567
|
John L. Williams
|
|
$
|
|
|
|
$
|
382,134
|
|
|
$
|
|
|
|
|
288,967
|
|
|
$1,465,061
|
|
$273,631
|
|
n.a.
|
|
$2,120,826
|
Michael D. Schecter
|
|
$
|
|
|
|
$
|
195,360
|
|
|
$
|
|
|
|
|
42,005
|
|
|
$212,964
|
|
$160,959
|
|
n.a.
|
|
$569,283
|
Sean M. Mahoney
|
|
$
|
|
|
|
$
|
158,180
|
|
|
$
|
|
|
|
|
18,571
|
|
|
$94,157
|
|
$88,526
|
|
n.a.
|
|
$340,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$5,821,399
|
|
|
|
(1)
|
|
Under our severance agreements, the
executives are not entitled to any accrued vacation pay or
continued life or disability insurance following a severance
event.
|
|
(2)
|
|
The cost of the medical and dental
insurance is based on the average cost paid by us for health
insurance for a family with dependent children during 2008. The
actual amount will vary based on the cost of health insurance at
the time of termination whether the individual is single or
married and whether the individual has dependant children.
|
25
|
|
|
(3)
|
|
The number of shares of unvested
stock is as of December 31, 2008 and the value of such
shares is calculated using $5.07 per share, the closing price on
the NYSE for our stock on December 31, 2008.
|
|
(4)
|
|
If there has not been a change of
control and an executive is terminated without cause or resigns
for good reason, all of that executives SARs and DERs
would terminate unless our Board of Directors in its sole
discretion chooses to vest such instruments. For purposes of
this chart, we have assumed that the unvested SARs and DERs
would be forfeited. The SARs and DERs automatically fully vest
upon the death or disability of an executive and would continue
to vest in the ordinary course upon a board authorized
retirement or following a termination without cause or
resignation for good reason following a change in control. For
valuation purposes, we have assumed that the executives are
terminated without cause or resign for good reason following a
change of control on December 31, 2008 at a stock price of
$5.07, the closing stock price on that date, and therefore the
SARs would expire worthless but the executives would be entitled
to receive, for each of their DERs, all of the dividends paid on
a share of our Common Stock (or $0.75) from the date we issued
the DER until December 31, 2008, the assumed change in
control and termination date. In the case of a death, disability
or retirement, we assumed that the Company would continue to pay
dividends each year in an amount equal to the 2008 distribution
(or $0.75 per share per year) through the expiration date of the
DER, with such amount discounted back to December 31, 2008
at the same discount rate that we originally used to value the
DERs, or 5.5%.
|
|
(5)
|
|
The cost of the excise tax gross up
is an estimate based on a number of assumptions including:
(i) DiamondRock is subject to a change of control on
December 31, 2008, (ii) all the named officers are
terminated on December 31, 2008 without cause following
that change of control, and (iii) the change of control
occurs at a price equal to our closing stock price on
December 31, 2008. The excise tax gross up was calculated
including five years of earnings data, including 2008, although
technically the 2008
W-2 would
not be available until after December 31, 2008.
|
The severance agreements contain non-competition covenants that
apply during the term and for 12 months after the
expiration or termination of such executives employment
with us to the extent that the executive receives a cash
severance payment. The non-competition covenants restrict the
executives from working for any lodging-oriented real estate
investment company located in the United States. The
non-competition covenants will not apply following a change of
control.
Mandatory
Minimum Equity Ownership Policy for Senior Executives
We believe that it is important to align the interests of those
in senior management positions with those of our stockholders.
As one concrete step to ensure such alignment, we adopted a
mandatory stock ownership requirement for each of our corporate
officers.
Under our mandatory stock ownership policy, each of our covered
executives, within five years of his or her date of hire or
promotion, must acquire and hold a certain number of shares. If
an executive is not in compliance with the Ownership Target, he
or she is restricted from selling any stock in the Company until
such time as he or she is in compliance with the Ownership
Target. An executive is permitted to sell any shares that the
executive has purchased.
We count towards this minimum equity ownership policy only those
shares which an officer has purchased or otherwise has received
through our equity compensation program to the extent that such
shares are fully vested and otherwise continue to be owned by
the executive. Under this policy our executives must own at all
times during a year a number of shares equal to the Ownership
Target for that year. The Ownership Target for an executive
officer for a given year is determined by multiplying that
officers base salary for a year by a multiple and then
dividing that result by the average closing price of the
Companys common stock during the first two weeks of the
year.
Each of our executives was in compliance with the stock
ownership policy at all times during 2008; the stock ownership
policy did not apply to Mr. Mahoney in 2008 as the policy
only applies to officers who are at least an Executive Vice
President of the Company on the first day of the year.
In 2008, the price of our common stock fell significantly. As a
result the 2009 Ownership Target has nearly tripled compared to
the Ownership Target in 2008. As a result, each of the
executives (except Mr. McCarten) has fallen out of
compliance with the policy and thus is prohibited from selling
any shares of our stock (except such shares as the executives
may have purchased in the open market) until such time as he or
she is in compliance with our policy.
26
The status of each executive under our stock ownership policy is
shown in the following chart:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
Owned
|
|
|
|
|
|
|
|
|
Number of
|
|
Compared to
|
|
|
|
|
2008
|
|
2009
|
|
Shares
|
|
2009
|
|
|
Base
|
|
Ownership
|
|
Ownership
|
|
Owned
|
|
Ownership
|
|
|
Salary
|
|
Target (# of
|
|
Target
|
|
(as of
|
|
Target
|
|
|
Multiple
|
|
Shares)
|
|
(# of Shares)
|
|
February 1, 2009)
|
|
(1)
|
|
William W. McCarten
|
|
|
4
|
|
|
|
159,689
|
|
|
|
246,407
|
|
|
|
410,445
|
|
|
|
167
|
%
|
Chairman of the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Brugger
|
|
|
4
|
|
|
|
79,632
|
|
|
|
492,813
|
|
|
|
189,764
|
|
|
|
39
|
%
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. Williams
|
|
|
3
|
|
|
|
96,408
|
|
|
|
323,409
|
|
|
|
312,709
|
|
|
|
97
|
%
|
President and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael D. Schecter
|
|
|
3
|
|
|
|
62,856
|
|
|
|
186,899
|
|
|
|
144,088
|
|
|
|
77
|
%
|
Executive Vice President and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean M. Mahoney
|
|
|
3
|
|
|
|
N.A.
|
|
|
|
187,885
|
|
|
|
35,664
|
|
|
|
19
|
%
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
In addition to any shares that may
be sold due to an executive owning more than his ownership
target, Messrs McCarten, Williams and Schecter have purchased
100,100 shares, 30,000 shares, and 10,000 shares,
respectively, in the open market and such executives may sell
such shares at any time. Such purchased shares are included in
the Number of Shares Owned column in the chart above.
|
Clawback
Policy
Our Board of Directors has adopted a policy that, in the event
of a significant restatement of our financial results, our Board
of Directors will review all cash incentive plan compensation
that was paid to the five most highly compensated executives on
the basis of having met or exceeded specific performance targets
for performance periods after the adoption of the policy
(December 31, 2006). If the bonuses paid pursuant to such
cash incentive program compensation would have been lower had
the bonuses been calculated based on such restated results, it
is the general policy of our Board of Directors to seek to
recoup, for the benefit of our Company, the portion of the
excess cash incentive program compensation that was received by
any individual senior executive who engaged in fraud,
intentional misconduct or illegal behavior in connection with
the financial results that were restated. Notwithstanding
anything stated or implied in the foregoing, our Board of
Directors will, in its reasonable business judgment, decide
whether or not to pursue such recoupment from an individual
based on those factors that our Board of Directors believes to
be reasonable.
Tax
Deductibility of Executive Compensation
Section 162(m) of the Code limits the deductibility on
DiamondRocks tax return of compensation over
$1 million to certain of our corporate officers unless, in
general, the compensation is paid pursuant to a plan which is
performance-related, non-discretionary and has been approved by
our stockholders. Because DiamondRock is a real estate
investment trust that generally does not pay corporate income
taxes, the loss of deductibility of compensation does not have a
significant adverse impact on us. In 2008, $1.0 million was
not deductible under Section 162(m).
Compensation
Committee Procedures, Compensation Consultant and Input of Named
Executive Officers on Compensation
The Compensation Committee of our Board of Directors is
responsible for determining the amount and composition of
compensation paid to our chief executive officer and four other
named executive officers. Our Compensation Committee exercises
its independent discretion in reviewing and approving the
executive compensation program as a whole, as well as specific
compensation levels for each executive officer.
27
Independent
Consultant
The Compensation Committee engages Frederic W. Cook &
Co. Incorporated (F.W. Cook) as its independent
compensation consultant to advise the Compensation Committee on
compensation program design and the amounts we should pay to our
executives. F.W. Cook also provides the Compensation Committee
with information on executive compensation trends, best
practices and advice for potential improvements to the executive
compensation program. F.W. Cook also advises the Compensation
Committee on the design of the compensation program for
non-employee directors. F.W. Cook does no work for management,
receives no compensation from our Company other than for its
work in advising the Compensation Committee, and maintains no
other economic relationships with our Company. As part of the
process of assessing the effectiveness of our Companys
compensation programs, F.W. Cook receives input from the Chief
Executive Officer regarding our Companys strategic goals
and the manner in which the compensation plans should support
these goals.
Use of
Competitive Set
Each year, the Compensation Committee of our Board of Directors
conducts a review of the executive compensation program in terms
of both design and compensation levels. This includes a
competitive analysis of our compensation practices versus those
of our peers with a focus on other lodging REITs and, to a
lesser extent, the real estate industry in general. For
compensation comparisons, we use the following two competitive
sets:
Lodging
REIT Competitive Set
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
Capitalization
|
|
|
|
|
|
|
(as of December 31,
|
|
|
|
Ticker Symbol
|
|
|
2008)(1)
|
|
|
Ashford Hospitality Trust
|
|
|
AHT
|
|
|
$
|
107 million
|
|
Felcor Lodging Trust Incorporated
|
|
|
FCH
|
|
|
$
|
117 million
|
|
LaSalle Hotel Properties
|
|
|
LHO
|
|
|
$
|
453 million
|
|
Strategic Hotels & Resorts, Inc.
|
|
|
BEE
|
|
|
$
|
125 million
|
|
Sunstone Hotel Investors, Inc
|
|
|
SHO
|
|
|
$
|
300 million
|
|
Non-Lodging
REIT Competitive Set
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
Capitalization (as
|
|
|
|
|
|
|
of December 31,
|
|
|
|
Ticker Symbol
|
|
|
2008)(1)
|
|
|
Colonial Realty Properties
|
|
|
CLP
|
|
|
$
|
400 million
|
|
Cousins Property
|
|
|
CUZ
|
|
|
$
|
712 million
|
|
Eastgroup Properties
|
|
|
EGP
|
|
|
$
|
892 million
|
|
Entertainment Properties
|
|
|
EPR
|
|
|
$
|
980 million
|
|
Healthcare Realty Trust
|
|
|
HR
|
|
|
$
|
1,381 million
|
|
Mid-America
Apartment
|
|
|
MAA
|
|
|
$
|
1,048 million
|
|
National Retail Properties
|
|
|
NNN
|
|
|
$
|
1,347 million
|
|
Omega Healthcare REIT
|
|
|
OHI
|
|
|
$
|
1,315 million
|
|
Tanger Factory Outlet Centers
|
|
|
SKT
|
|
|
$
|
1,191 million
|
|
|
|
|
(1)
|
|
Our market capitalization as of
December 31, 2008, was $461 million.
|
28
Annual
Process
During its December meeting, our Compensation Committee reviews
the total compensation of each of our executive officers for the
prior year, including an estimate of the incentive plan
compensation for the prior year, a summary of all executive
severance agreements and a calculation of potential change in
control costs. The Compensation Committee, at this meeting, also
reviews appropriate compensation studies and surveys. For each
of the named executives, Mr. Brugger makes a compensation
recommendation to the Compensation Committee and the
Compensation Committee considers these recommendations in
setting the compensation for the four other named executive
officers. Following that review, our Compensation Committee sets
an appropriate base salary for the executive officers along with
target bonuses and equity awards for the following year.
Once the financial results for the prior year are available and
the annual budget for the subsequent year is finalized, the
Compensation Committee finalizes the prior year bonuses, the
structure of the current year annual cash incentive compensation
program and the amount of the equity awards.
29
ADDITIONAL
EXECUTIVE COMPENSATION DATA
(For the
year ended December 31, 2008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise or
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Base
|
|
|
Fair Value of
|
|
|
|
Date of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
Stock and
|
|
|
|
Compensation
|
|
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan
Awards(1)
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
|
|
Committee
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
Name
|
|
Meeting
|
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($)(2)
|
|
|
William W. McCarten
|
|
|
2-27-2008
|
|
|
|
2-27-2008
|
|
|
|
282,000
|
|
|
|
564,000
|
|
|
|
846,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,571
|
|
|
|
|
|
|
|
|
|
|
|
750,000
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,293
|
|
|
|
12.59
|
|
|
|
302,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Brugger(3)
|
|
|
2-27-2008
|
|
|
|
2-27-2008
|
|
|
|
225,000
|
|
|
|
450,000
|
|
|
|
675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,757
|
|
|
|
|
|
|
|
|
|
|
|
425,000
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,199
|
|
|
|
12.59
|
|
|
|
171,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Williams
|
|
|
2-27-2008
|
|
|
|
2-27-2008
|
|
|
|
191,067
|
|
|
|
382,134
|
|
|
|
573,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,757
|
|
|
|
|
|
|
|
|
|
|
|
425,000
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,199
|
|
|
|
12.59
|
|
|
|
171,412
|
|
|
|
|
7-1-2008
|
|
|
|
9-1-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,766
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael D. Schecter
|
|
|
2-27-2008
|
|
|
|
2-27-2008
|
|
|
|
97,680
|
|
|
|
195,360
|
|
|
|
296,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,857
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,764
|
|
|
|
12.59
|
|
|
|
100,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean M. Mahoney(4)
|
|
|
2-27-2008
|
|
|
|
2-27-2008
|
|
|
|
67,183
|
|
|
|
134,367
|
|
|
|
202,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,921
|
|
|
|
|
|
|
|
|
|
|
|
137,500
|
|
|
|
|
2-27-2008
|
|
|
|
3-4-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,770
|
|
|
|
12.59
|
|
|
|
55,457
|
|
|
|
|
(1)
|
|
During February 2009, we paid each
of our executive officers, pursuant to the 2008 cash incentive
compensation program, the following amounts: Mr. McCarten
$425,820, Mr. Brugger $294,435, Mr. Williams $288,511,
Mr. Schecter $148,296 and Mr. Mahoney $100,349.
|
|
(2)
|
|
The grant date fair value is based
on the fair value on the grant date of the award, as determined
in accordance with SFAS 123R. For purposes of determining
both the size of the grant and the expense associated with such
awards under SFAS 123(R), the value of restricted stock
equaled the closing price of our common stock on the NYSE on the
date we issued the deferred and restricted stock. We used a
valuation study conducted by Towers Perrin to value the SARs and
DERs. Towers Perrin valued the SARs using a binomial option
pricing model, using the assumptions called for by
Paragraph 16 and Appendix A of SFAS 123(R).
Towers Perrin assumed a seven year expected life, a risk free
rate of 3.17%, expected volatility of 29.8% and an expected
dividend yield of 5.5% (the average dividend yield on the four
dividend payment dates preceding the issuance of the SARs).
Towers Perrin valued the DERs using a discounted cash flow model
assuming a stream of dividends equal to 5.5% of the closing
stock price on the NYSE on the date that the DERs were issued
over the seven year expected life of the instrument. In
accordance with SFAS 123(R), the expense associated with
these awards is recognized over the requisite service period
(i.e., the vesting period of the restricted stock, deferred
stock units, SARs or DERs).
|
|
(3)
|
|
Mr. Bruggers Non-Equity
Incentive Compensation Plan was amended by the Special Committee
of the Board of Directors, which was formed to appoint a
successor to Mr. McCarten upon his retirement, at its
meeting on June 25, 2008, when the Board decided to promote
him to Chief Executive Officer. At that time
Mr. Bruggers target cash incentive compensation was
increased from a target of 80% of his base salary to a target of
100% of his base salary. The chart set forth above, shows the
plan as amended.
|
|
(4)
|
|
Mr. Mahoneys Non-Equity
Incentive Compensation Plan was amended by the Compensation
Committee at its meeting on July 16, 2008, when the Board
decided to promote him to Chief Financial Officer, at that time
Mr. Mahoneys target cash incentive compensation was
increased from a target of 50% of his base salary to a target of
66% of his base salary. The chart set forth above, shows the
plan as amended.
|
30
Outstanding
Equity Awards at Fiscal Year-End
(As of December 31, 2008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
Stock
|
|
|
|
Awards
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
That
|
|
|
That
|
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Have Not
|
|
|
Have
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
Vested
|
|
|
Not
|
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
(1)(2)
|
|
|
Vested(1)(3)
|
|
Name
|
|
Unexercisable(4)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
William W. McCarten
|
|
|
113,293
|
|
|
|
12.59
|
|
|
|
March 4, 2018
|
|
|
|
130,765
|
|
|
|
662,980
|
|
Mark W. Brugger
|
|
|
64,199
|
|
|
|
12.59
|
|
|
|
March 4, 2018
|
|
|
|
70,402
|
|
|
|
356,936
|
|
John L. Williams
|
|
|
64,199
|
|
|
|
12.59
|
|
|
|
March 4, 2018
|
|
|
|
288,967
|
|
|
|
1,465,061
|
|
Michael D. Schecter
|
|
|
37,764
|
|
|
|
12.59
|
|
|
|
March 4, 2018
|
|
|
|
42,005
|
|
|
|
212,964
|
|
Sean M. Mahoney
|
|
|
20,770
|
|
|
|
12.59
|
|
|
|
March 4, 2018
|
|
|
|
18,571
|
|
|
|
94,157
|
|
|
|
|
(1)
|
|
Does not include fully vested, but
not distributed, deferred stock unit awards set forth in the
chart below
|
Shares of
deferred stock granted in 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Units
|
|
|
|
|
|
|
Received Through
|
|
|
|
Original
|
|
|
Dividend Reinvestment
|
|
|
|
Units
|
|
|
(as of December 31,
|
|
|
|
Granted
|
|
|
2008)
|
|
|
William W. McCarten
|
|
|
112,500 units
|
|
|
|
24,800 units
|
|
Mark W. Brugger
|
|
|
82,500 units
|
|
|
|
18,186 units
|
|
John L. Williams
|
|
|
105,000 units
|
|
|
|
23,147 units
|
|
Michael. D. Schecter
|
|
|
57,500 units
|
|
|
|
12,675 units
|
|
Sean M. Mahoney
|
|
|
25,000 units
|
|
|
|
5,511 units
|
|
(2) The restricted stock vests on the following schedule:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
Date of Grant
|
|
Remaining to Vest
|
|
Vesting Date
|
|
William W. McCarten
|
|
|
|
|
|
|
|
|
|
|
August 1, 2006
|
|
|
23,046
|
|
|
August 1, 2009
|
|
|
February 27, 2007
|
|
|
24,074
|
|
|
February 27, 2009
|
|
|
February 27, 2007
|
|
|
24,074
|
|
|
February 27, 2010
|
|
|
March 4, 2008
|
|
|
19,857
|
|
|
February 27, 2009
|
|
|
March 4, 2008
|
|
|
19,857
|
|
|
February 27, 2010
|
|
|
March 4, 2008
|
|
|
19,857
|
|
|
February 27, 2011
|
Mark W. Brugger
|
|
|
|
|
|
|
|
|
|
|
August 1, 2006
|
|
|
12,571
|
|
|
August 1, 2009
|
|
|
February 27, 2007
|
|
|
12,037
|
|
|
February 27, 2009
|
|
|
February 27, 2007
|
|
|
12,037
|
|
|
February 27, 2010
|
|
|
March 4, 2008
|
|
|
11,252
|
|
|
February 27, 2009
|
|
|
March 4, 2008
|
|
|
11,252
|
|
|
February 27, 2010
|
|
|
March 4, 2008
|
|
|
11,253
|
|
|
February 27, 2011
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
Date of Grant
|
|
Remaining to Vest
|
|
Vesting Date
|
|
John L. Williams
|
|
|
|
|
|
|
|
|
|
|
August 1, 2006
|
|
|
14,666
|
|
|
August 1, 2009
|
|
|
February 27, 2007
|
|
|
13,899
|
|
|
February 27, 2009
|
|
|
February 27, 2007
|
|
|
13,899
|
|
|
February 27, 2010
|
|
|
March 4, 2008
|
|
|
11,252
|
|
|
February 27, 2009
|
|
|
March 4, 2008
|
|
|
11,252
|
|
|
February 27, 2010
|
|
|
March 4, 2008
|
|
|
11,253
|
|
|
February 27, 2011
|
|
|
September 1, 2008
|
|
|
212,766
|
|
|
September 1, 2011
|
Michael D. Schecter
|
|
|
|
|
|
|
|
|
|
|
August 1, 2006
|
|
|
7,333
|
|
|
August 1, 2009
|
|
|
February 27, 2007
|
|
|
7,407
|
|
|
February 27, 2009
|
|
|
February 27, 2007
|
|
|
7,407
|
|
|
February 27, 2010
|
|
|
March 4, 2008
|
|
|
6,619
|
|
|
February 27, 2009
|
|
|
March 4, 2008
|
|
|
6,619
|
|
|
February 27, 2010
|
|
|
March 4, 2008
|
|
|
6,619
|
|
|
February 27, 2011
|
Sean M. Mahoney
|
|
|
|
|
|
|
|
|
|
|
August 1 2006
|
|
|
2,095
|
|
|
August 1, 2009
|
|
|
February 27, 2007
|
|
|
2,778
|
|
|
February 27, 2009
|
|
|
February 27, 2007
|
|
|
2,778
|
|
|
February 27, 2010
|
|
|
March 4, 2008
|
|
|
3,640
|
|
|
February 27, 2009
|
|
|
March 4, 2008
|
|
|
3,640
|
|
|
February 27, 2010
|
|
|
|
(3)
|
|
Calculated using $5.07 per share,
our stock price as of the close of trading on December 31,
2008.
|
|
(4)
|
|
All of such SARS were issued on
March 4, 2008 and the SARs vest in thirds on each of
February 27, 2009, February 27, 2010 and
February 27, 2011.
|
Option
Exercises and Stock Vested
(For the year ended December 31, 2008)
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value
|
|
|
|
Vesting
|
|
|
Realized on
|
|
Name
|
|
(#)(1)
|
|
|
Vesting
|
|
|
William W. McCarten
|
|
|
47,120
|
|
|
$
|
530,763
|
|
Mark W. Brugger
|
|
|
24,608
|
|
|
$
|
275,023
|
|
John L. Williams
|
|
|
28,555
|
|
|
$
|
318,817
|
|
Michael D. Schecter
|
|
|
14,740
|
|
|
$
|
165,533
|
|
Sean M. Mahoney
|
|
|
4,873
|
|
|
$
|
56,055
|
|
|
|
|
(1)
|
|
The number of shares acquired on
vesting and the value of those shares does not reflect the
withholding of shares to satisfy federal and state income tax
withholdings.
|
We have omitted tabular information regarding pension benefits
and nonqualified deferred compensation as we do not maintain any
pension or deferred compensation plans.
32
PROPOSAL 1:
ELECTION OF DIRECTORS
Introduction
Seven directors will be elected at our 2009 annual meeting of
stockholders to serve until our 2010 annual meeting of
stockholders. All directors are to hold office until our 2010
annual meeting and until their respective successors shall be
duly elected and qualify.
Each nominee to be a director was recommended by our Nominating
and Corporate Governance Committee, which considered a number of
factors, including the criteria for Board of Directors
membership approved by our Board of Directors, and then was
nominated by our Board of Directors. Each of the nominees is a
current member of our Board of Directors. The nominees are
Daniel J. Altobello, Mark W. Brugger, W. Robert Grafton,
Maureen L. McAvey, William W. McCarten, Gilbert T. Ray and John
L. Williams.
Our Board of Directors anticipates that the nominees will serve,
if elected, as directors. However, if any person nominated by
our Board of Directors is unable to serve or for good cause will
not serve, the proxies will be voted for the election of such
other person as our Board of Directors may recommend.
Vote
Required
Directors are elected by a plurality of the votes cast by proxy
or in person and entitled to vote on the election of directors
at the annual meeting. Votes may be cast for or withheld from
each nominee. Votes cast for any nominee and votes that are
withheld from any nominee will be counted when determining
whether a quorum is present.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ITS
NOMINEES. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD
WILL BE VOTED FOR EACH OF THE NOMINEES UNLESS
INSTRUCTIONS TO WITHHOLD OR TO THE CONTRARY ARE GIVEN.
Information
Regarding the Nominees and Executive Officers
The following biographical descriptions set forth certain
information with respect to the nominees for election as
directors at our 2009 annual meeting and the executive officers
who are not directors, based on information furnished to us by
each nominee and executive officer as of March 1, 2009.
Certain information regarding our directors and senior executive
officers is set forth below.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
William W. McCarten
|
|
|
60
|
|
|
Chairman of the Board of Directors and Director
|
Mark W. Brugger
|
|
|
39
|
|
|
Chief Executive Officer and Director
|
John L. Williams
|
|
|
57
|
|
|
President, Chief Operating Officer and Director
|
Daniel J. Altobello*
|
|
|
68
|
|
|
Director
|
W. Robert Grafton*
|
|
|
67
|
|
|
Lead Director
|
Gilbert T. Ray*
|
|
|
64
|
|
|
Director
|
Maureen L. McAvey*
|
|
|
62
|
|
|
Director
|
Michael D. Schecter
|
|
|
44
|
|
|
Executive Vice President, General Counsel and Corporate Secretary
|
Sean M. Mahoney
|
|
|
37
|
|
|
Executive Vice President, Chief Financial
|
|
|
|
|
|
|
Officer and Treasurer
|
33
The following is a summary of certain biographical information
concerning our nominees and senior executive officers:
Nominees
William W. McCarten has served as our Chairman of the
Board of Directors and has been a member of our Board of
Directors since our formation in 2004. Mr. McCarten was
also our Chief Executive Officer from our formation in 2004
until his retirement in September 2008.
Mr. McCarten worked for the Marriott Corporation, or
Marriott International, Inc., and its related entities for over
twenty-five years until January 2004. Among his many positions
during those twenty-five years, Mr. McCarten served as the
Chief Executive Officer of HMSHost Corporation, formerly Host
Marriott Services Corporation, a publicly held developer and
operator of restaurant and retail concessions in travel and
entertainment venues listed on the NYSE from 1995 to 2000. In
addition, Mr. McCarten served as non-executive Chairman of
HMSHost Corporation from 2000 to 2001.
Prior to joining Marriott, Mr. McCarten was an accountant
with Arthur Andersen & Co. from 1970 to 1979.
Mr. McCarten received his B.S. in Accounting from the
McIntire School of Commerce at the University of Virginia in
1970, and he served on the Advisory Board of the McIntire School
from 1981 to 1996.
Mark W. Brugger has served as our Chief Executive Officer
since September 1, 2008. Previously he served as our
Executive Vice President, Chief Financial Officer and Treasurer
since our formation in 2004 until he was promoted to our Chief
Executive Officer.
Previously, Mr. Brugger served as Vice
President Project Finance for Marriott
International, Inc. from 2000 to 2004. From 1997 to 2000,
Mr. Brugger served as Vice President Investment
Sales of Transwestern Commercial Services, formerly the Carey
Winston Company. From 1995 to 1997, Mr. Brugger was the
Land Development Director for Coscan Washington, Inc.
Mr. Brugger received a Juris Doctorate from American
University School of Law in 1995 and a B.A. from the University
of Maryland at College Park in 1992.
John L. Williams has served as our President and Chief
Operating Officer and has been a member of our Board of
Directors since our formation in 2004.
Mr. Williams worked for the Marriott Corporation, or
Marriott International, Inc., and its related entities for over
twenty-five years until he resigned to help
form DiamondRock in 2004. Mr. Williams most recently
served as Executive Vice President of North American Hotel
Development for Marriott International.
From 1991 to 1992, Mr. Williams, while on a leave of
absence from Marriott, served as the Chief Acquisition Executive
for Lodging Opportunities, the initial lodging fund sponsored by
the Thayer organization. Prior to joining the Marriott
Corporation, Mr. Williams was a senior consultant with
Laventhal and Horwath.
Mr. Williams received a BS/BA from Denver University with a
major in Hotel and Restaurant Management and a B.A. in American
Studies from Denver University in 1973. In addition,
Mr. Williams performed graduate coursework at the
University of Missouri at Kansas City with a concentration in
finance.
Daniel J. Altobello has been a member of our Board of
Directors since July 2004.
Mr. Altobello has been Chairman of Altobello Family LP
since 1991. Mr. Altobello also served as chairman of the
board of directors of Onex Food Services, Inc., the parent
corporation of Caterair International, Inc. and LSG/SKY Chefs
from 1995 to 2001. From 1989 to 1995, Mr. Altobello was the
Chairman, Chief Executive Officer and President of Caterair
International Corporation. He currently serves on the board of
directors of JER Investors Trust, Inc., MESA Air Group and
Friedman, Billings, Ramsey Group, Inc. In addition,
Mr. Altobello serves on the Advisory Board of Thayer
Capital Partners.
W. Robert Grafton has been a member of our Board of
Directors since July 2004 and serves as our Lead Director.
34
Mr. Grafton is a retired certified public accountant. He
retired from Andersen Worldwide S.C. in 2000. Andersen Worldwide
provided global professional auditing and consulting services
through its two service entities, Arthur Andersen and Andersen
Consulting. Mr. Grafton joined Arthur Andersen in 1963 and
was elected a member of the Board of Partners of Andersen
Worldwide in 1991. Mr. Grafton was elected Chairman of the
Board of Partners in 1994 and served as Managing
Partner Chief Executive from 1997 through 2000.
Mr. Grafton serves on the board of directors of Carmax
Inc., a publicly traded company listed on the NYSE, where he
also serves as Chairman of the Audit Committee.
Maureen L. McAvey has been a member of our Board of
Directors since July 2004.
Ms. McAvey is the Executive Vice President, Initiatives
Group at the Urban Land Institute, or ULI, in Washington, DC,
where she has worked in various positions since 2001. ULI is a
premier research and education organization within the real
estate and land use industry. Ms. McAvey was a member of
the board of trustees of ULI from 1995 to 2001. Prior to joining
ULI, from 1998 to 2001, Ms. McAvey was Director, Business
Development, for Federal Realty Investment Trust, an owner and
manager of retail developments and mixed-use developments and a
publicly traded company listed on the NYSE. Ms. McAvey also
has served as the Director of Development for the City of
St. Louis, a cabinet level position in the Mayors
office and she was Executive Director of the St. Louis
Development Corporation. Prior to working for the City of
St. Louis, Ms. McAvey led the real estate consulting
practices in Boston for Deloitte & Touche and
Coopers & Lybrand. Ms. McAvey directed the west
coast operations of Carley Capital Group, a national development
firm and also has experience as a private developer.
Ms. McAvey holds two masters degrees, one from the
University of Minnesota and one from the Kennedy School of
Government, Harvard University.
Gilbert T. Ray has been a member of our Board of
Directors since July 2004.
Mr. Ray was a partner in the law firm of
OMelveny & Myers LLP until his retirement in
2000. He practiced corporate law for almost three decades, and
has extensive experience with corporate and tax exempt
transactions, as well as international finance. Mr. Ray is
a member of the board of directors of Advance Auto Parts, Inc.,
Watson Wyatt & Company Holdings and IHOP Corp., each a
publicly traded company listed on the NYSE. In addition,
Mr. Ray is a member of the board of directors of Automobile
Club of Southern California and Sierra Monolithics, Inc.
Mr. Ray is also a trustee of SunAmerica Series Trust,
Seasons Series Fund and The John Randolph Haynes and Dora
Haynes Foundation.
Senior
Executive Officers
Michael D. Schecter has served as our Executive Vice
President, General Counsel and Corporate Secretary since our
formation in 2004. Previously, Mr. Schecter served as
Senior Counsel of Marriott International, Inc. from 1998 to
2004. From 1991 to 1998, Mr. Schecter was an associate at
Sullivan & Cromwell in their Washington, D.C. and
Melbourne, Australia offices. From 1990 to 1991,
Mr. Schecter served as a law clerk to the Honorable Frank
M. Johnson, Jr. of the United States Court of Appeals for
the Eleventh Circuit. Mr. Schecter received a Juris
Doctorate from Cornell Law School in 1990 and a B.A. from Bates
College in 1986.
Sean M. Mahoney is our Executive Vice President, Chief
Financial Officer and Treasurer since his promotion to that
position on September 1, 2008. Prior to his promotion, he
served as our Senior Vice President, Chief Accounting Officer
and Corporate Controller from his hiring in August 2004 until
September 1, 2008. Previously, Mr. Mahoney served as a
senior manager with Ernst & Young LLP in McLean
Virginia. During 2002 and 2003, Mr. Mahoney served as a
Director in the Dublin, Ireland audit practice of KPMG, LLP.
From 1993 to 2001, Mr. Mahoney worked in the audit practice
of Arthur Andersen LLP. Mr. Mahoney is a member of the
American Institute of Certified Public Accountants and is a
Virginia C.P.A. Mr. Mahoney received a B.S. from Syracuse
University in 1993.
35
PROPOSAL 2:
RATIFICATION OF THE APPOINTMENT OF KPMG AS INDEPENDENT
AUDITORS
Our Audit Committee has unanimously selected KPMG LLP as
DiamondRocks independent auditor for the current fiscal
year, and our Board of Directors is asking stockholders to
ratify that selection. Although current law, rules and
regulations, as well as the charter of our Audit Committee,
require DiamondRocks independent auditor to be engaged,
retained and supervised by our Audit Committee, our Board of
Directors considers the selection of the independent auditor to
be an important matter of stockholder concern and is submitting
the selection of KPMG LLP for ratification by stockholders as a
matter of good corporate practice. Representatives of KPMG LLP
will be present at the annual meeting and will be given the
opportunity to make a statement, if they desire to do so, and to
respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT
AUDITORS OF DIAMONDROCK FOR 2009.
INFORMATION
ABOUT OUR INDEPENDENT ACCOUNTANTS
KPMG LLP served as our independent accountants for the fiscal
years ended December 31, 2008 and 2007. Representatives of
KPMG LLP are expected to be present at the annual meeting, will
have an opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate
questions. Aggregate fees for professional services rendered by
KPMG LLP for the years ended December 31, 2008 and 2007
were as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Audit Fees
|
|
|
|
|
|
|
|
|
Recurring audit
|
|
$
|
264,000
|
|
|
$
|
264,000
|
|
Quarterly reviews
|
|
|
75,000
|
|
|
|
75,000
|
|
Comfort letters, consents and assistance with documents filed
with the SEC
|
|
|
40,638
|
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
379,638
|
|
|
|
394,000
|
|
Audit-Related Fees
|
|
|
|
|
|
|
|
|
Audits required by lenders and others
|
|
|
240,500
|
|
|
|
222,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
240,500
|
|
|
|
222,500
|
|
Tax-Related Fees
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
620,138
|
|
|
$
|
616,500
|
|
|
|
|
|
|
|
|
|
|
Auditor
Fees Policy.
Our Audit Committee has adopted a policy concerning the
pre-approval of audit and non-audit services to be provided by
KPMG LLP, our independent accountants. The policy requires that
all services provided by KPMG LLP to us, including audit
services, audit-related services, tax services and other
services, must be pre-approved by our Audit Committee. In some
cases, pre-approval is provided by the full Audit Committee for
up to a year, and relates to a particular category or group of
services and is subject to a particular budget. In other cases,
specific pre-approval is required. Our Audit Committee has
delegated authority to the Chairman of the Audit Committee to
pre-approve additional services, and any such pre-approvals must
then be communicated to the full Audit Committee.
Our Audit Committee approved all audit and non-audit services
provided to us by KPMG LLP during the 2008 and 2007 fiscal years.
36
We believe that people who were not KPMG, LLPs full-time,
permanent employees performed less than 50% of the hours
expended by KPMG, LLP during the audit of our financial
statements.
Policy
for Hiring Members of our Audit Engagement Team
Our Audit Committee has a policy regarding the hiring of audit
engagement team members to address the potential for impairment
of auditor independence when partners and other members of our
audit engagement team accept employment with us. Under the
policy, we may not hire any individuals below the partner level
who were members of our audit engagement team within two years
of completion of the most recent audit in which they
participated. In addition, we may not hire any partners who were
members of our audit engagement team within three years of
completion of the most recent audit in which they participated.
In all such cases, our Audit Committee must determine that the
relationship is in the best interests of stockholders. In
addition, we may not appoint a director who is affiliated with,
or employed by, our present or former auditor until three years
after the affiliation or auditing relationship has ended.
Other
Company Accountants and Auditors
We have engaged PricewaterhouseCoopers LLP as our internal
auditors. The purpose of the internal audit program is to
provide our Audit Committee and our management with ongoing
assessments of our risk management processes and to review the
effectiveness and design of internal controls at our properties
and our corporate office. In addition, we engaged
PricewaterhouseCoopers LLP as independent auditors on one of our
historical financial statements required to be audited in
conjunction with our initial public offering. Aggregate fees for
professional services rendered by PricewaterhouseCoopers LLP for
the years ended December 31, 2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
PricewaterhouseCoopers LLP Fees
|
|
|
|
|
|
|
|
|
Internal audit
|
|
$
|
472,145
|
|
|
$
|
370,047
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
472,145
|
|
|
$
|
370,047
|
|
|
|
|
|
|
|
|
|
|
Our Audit Committee approved all audit and non-audit services
provided to us by PricewaterhouseCoopers LLP during the 2008 and
2007 fiscal years.
37
PRINCIPAL
AND MANAGEMENT STOCKHOLDERS
The table below shows the amount of our common stock
beneficially owned as of February 27, 2009 by (i) each
director and nominee for director, (ii) our Chairman, our
Chief Executive Officer, our Chief Financial Officer and the two
other most highly compensated executive officers of our Company
whose compensation exceeded $100,000 during the fiscal year
ended December 31, 2008 (the named executive
officers), (iii) all of our directors,
director nominees and executive officers as a group; and
(iv) each person known by us to be the beneficial owner of
more than 5% of our outstanding common stock (the 5%
Holders).
The number of shares of common stock beneficially
owned by each stockholder is determined under rules issued
by the SEC regarding the beneficial ownership of securities.
This information is not necessarily indicative of beneficial
ownership for any other purpose. Under these rules, beneficial
ownership of common stock includes (i) any shares as to
which the person or entity has sole or shared voting power or
investment power and (ii) any shares as to which the person
or entity has the right to acquire beneficial ownership within
60 days after February 27, 2009, including any shares
which could be purchased by the exercise of options at or within
60 days after February 27, 2009.
Under the relevant SEC rules, each executive officer of our
Company may vote his or her unvested shares of restricted stock
so they are deemed to be beneficially owned by the
relevant executive officer. However, the executive officers have
no right to vote the shares of common stock underlying the
deferred stock units, as such deferred stock units merely
represent our unsecured obligation to deliver such underlying
shares in the future, thus such underlying shares are not deemed
to be beneficially owned by the relevant executive
officer.
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Beneficial Ownership
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Name of Beneficial Owner
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Number of Shares
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Percent(1)
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Directors and named executive officers:
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William W. McCarten
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403,910
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(2)
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*
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Mark W. Brugger
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159,481
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(3)
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*
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Daniel J. Altobello
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23,768
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*
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W. Robert Grafton
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21,768
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*
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Maureen L. McAvey
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18,768
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*
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Gilbert T. Ray
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18,768
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*
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John L. Williams
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473,529
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(4)
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*
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Michael D. Schecter
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115,918
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(5)
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*
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Sean M. Mahoney
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33,465
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(6)
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*
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Directors and named executive officers as a group
(9 persons)
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1,269,375
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1.4
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%
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5% Holders:
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AXA Financial Inc.(7)
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8,677,139
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9.6
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%
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Bank of America Corporation(8)
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7,733,159
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8.6
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%
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The Vanguard Group(9)
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7,567,111
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8.4
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%
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Donald Smith & Co.(10)
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5,402,860
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6.0
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%
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Barclays Global Investors, NA (and various affiliates)(11)
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4,864,965
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5.4
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%
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*
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Represents less than 1% of the
number of shares of common stock outstanding as of
February 27, 2009.
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(1)
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Calculated using
90,050,264 shares of common stock outstanding as of
February 15, 2009, which includes all unvested shares of
restricted stock but, in accordance with the SECs rules,
it does not include the shares of common stock underlying the
deferred stock units issued to the executive officers in
connection with our initial public offering. There were no
additional adjustments required by
Rule 13d-3(d)(i)
of the Exchange Act as no executive officer or director has any
right to acquire shares within 60 days in a manner similar
to those rights set forth in
Rule 13d-3(d)(i)
of the Exchange Act.
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(2)
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Mr. McCartens shares
include (i) 130,765 shares of unvested restricted
stock granted to him under our Incentive Plan, and
(ii) 273,145 shares of our common stock owned by him.
In accordance with the SEC rules, this does not include our
obligation to
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deliver 137,300 shares of
common stock underlying the deferred stock units issued to
Mr. McCarten in connection with our initial public offering
nor does it include 113,293 SARs issued on March 4, 2008.
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(3)
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Mr. Bruggers shares
include (i) 70,402 shares of unvested restricted stock
granted to him under our Incentive Plan and
(ii) 89,079 shares of our common stock owned by him.
In accordance with the SEC rules, this does not include our
obligation to deliver 100,686 shares of common stock
underlying the deferred stock units issued to Mr. Brugger
in connection with our initial public offering nor does it
include 64,199 SARs issued on March 4, 2008.
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(4)
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Mr. Williams shares
include (i) 288,967 shares of unvested restricted
stock granted to him under our Incentive Plan and
(ii) 184,562 shares of our common stock owned by him.
In accordance with the SEC rules, this does not include our
obligation to deliver 128,147 shares of common stock
underlying the deferred stock units issued to Mr. Williams
in connection with our initial public offering nor does it
include 64,199 SARs issued on March 4, 2008.
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(5)
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Mr. Schecters shares
include (i) 42,005 shares of unvested restricted stock
granted to him under our Incentive Plan and
(ii) 73,913 shares of our common stock owned by him.
In accordance with the SEC rules, this does not include our
obligation to deliver 70,175 shares of common stock
underlying the deferred stock units issued to Mr. Schecter
in connection with our initial public offering nor does it
include 37,764 SARs issued on March 4, 2008.
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(6)
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Mr. Mahoneys shares
include (i) 18,571 shares of unvested restricted stock
granted to him under our Incentive Plan and
(ii) 14,894 shares of our common stock owned by him.
In accordance with the SEC rules, this does not include our
obligation to deliver 30,511 shares of common stock
underlying the deferred stock units issued shares of deferred
stock issued to Mr. Mahoney in connection with our initial
public offering nor does it include 20,770 SARs issued on
March 4, 2008.
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(7)
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Based solely on information
contained in a Schedule 13G filed by AXA Financial, Inc. on
behalf of itself and certain of its affiliates, with the SEC on
December 10, 2008. The address of AXA Financial, Inc, is
1290 Avenue of the Americas, New York, New York 10104. The
percentage beneficial ownership has been readjusted to reflect
our actual shares outstanding as of February 15, 2009.
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(8)
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Based solely on information
contained in a Schedule 13G filed by Bank of America
Corporation, on behalf of itself and certain of its affiliates,
with the SEC on February 12, 2009. The address of Bank of
America Corporation is 100 North Tryon Street, Floor 25, Bank of
America Corporate Center, Charlotte, NC 28255. The percentage
beneficial ownership has been readjusted to reflect our actual
shares outstanding as of February 15, 2009.
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(9)
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Based solely on information
contained in a Schedule 13G filed by The Vanguard Group,
Inc. on behalf of itself and certain of its affiliates, with the
SEC on February 13, 2009. The address of The Vanguard
Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355. The
percentage beneficial ownership has been readjusted to reflect
our actual shares outstanding as of February 15, 2009.
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(9)
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Based solely on information
contained in a Schedule 13G filed by Donald
Smith & Co., Inc. with the SEC on February 11,
2009. The address of Donald Smith & Co., Inc. is
152 West 57th Street, New York, NY 10019. The percentage
beneficial ownership has been readjusted to reflect our actual
shares outstanding as of February 15, 2009.
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(10)
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Based solely on information
contained in a Schedule 13G filed by Barclays Global
Investors, NA (and certain of its affiliates) with the SEC on
February 6, 2009. The address of Barclays Global Investors,
NA. is 45 Fremont Street, San Francisco, CA 94105. The
percentage beneficial ownership has been readjusted to reflect
our actual shares outstanding as of February 15, 2009.
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Related
Party Transactions
There were no related party transactions during 2008. For a
description of our policies and procedures with regard to
related party transactions, please see Corporate
Governance Principles and Board Matters Other
Corporate Governance Matters Conflicts of
Interests elsewhere in this proxy statement.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive
officers and directors, and persons who own more than ten
percent of a registered class of our equity securities, to file
reports of ownership and changes in ownership with the SEC and
the NYSE. Our officers and directors and greater than ten
percent beneficial owners are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they
file. To our knowledge, based solely on our review of the copies
of such reports furnished to us and written representations that
no other reports were required during the fiscal year ended
December 31, 2008, all Section 16(a) filing
requirements applicable to our executive officers, directors and
greater than ten percent beneficial owners were satisfied on a
timely basis.
39
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The undersigned members of the Compensation Committee of the
Board of Directors of DiamondRock Hospitality Company submit
this report in connection with our review of the Compensation
Discussion and Analysis section of this Proxy Statement for the
fiscal year ended December 31, 2008.
The Compensation Committee notes that we have oversight
responsibilities only. We rely without independent verification
on the information provided to us and on the representations
made by management. Accordingly, our oversight does not provide
an independent basis to determine whether the Compensation
Discussion and Analysis section of this Proxy Statement is
accurate and complete. We also note that management has the
primary responsibility for the preparation of the Compensation
Discussion and Analysis section of this Proxy Statement.
We, however, have reviewed the Compensation Discussion and
Analysis and have discussed it with management; and in reliance
on the reviews and discussions referred to above, we recommended
to our Board of Directors that the Compensation Discussion and
Analysis section of this Proxy Statement be included in this
Proxy Statement.
Submitted by the Compensation Committee
Daniel J. Altobello, Chairman
W. Robert Grafton
Maureen L. McAvey
Gilbert T. Ray
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2008, the Compensation Committee consisted of
Messrs. Altobello, Grafton and Ray and Ms. McAvey.
None of them has served as an officer or employee of
DiamondRock. None of these persons had any relationships with
DiamondRock requiring disclosure under applicable rules and
regulations of the SEC. In addition, none of our executive
officers serves as a member of the compensation committee of any
entity that has one or more of its executive officers serving as
a member of our Board of Directors.
AUDIT
COMMITTEE REPORT
The undersigned members of the Audit Committee of the Board of
Directors of DiamondRock Hospitality Company (or DiamondRock)
submit this report in connection with the Audit Committees
review of the financial reports for the fiscal year ended
December 31, 2008. We note that we have oversight
responsibilities only and that we are not acting as experts in
accounting and auditing. We rely without independent
verification on the information provided to us and on the
representations made by management and the independent auditors.
Accordingly, our oversight does not provide an independent basis
to determine that DiamondRocks consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States or that the
audit of DiamondRocks consolidated financial statements by
independent auditors has been carried out in accordance with
auditing standards generally accepted in the United States.
Management has the primary responsibility for the preparation of
DiamondRocks 2008 consolidated financial statements and
the overall reporting process, including the systems of internal
control, and has represented to us that DiamondRocks 2008
consolidated financial statements were prepared in accordance
with accounting principles generally accepted in the United
States. We:
1. have reviewed and discussed with management the audited
financial statements for DiamondRock for the fiscal year ended
December 31, 2008;
2. have discussed with representatives of KPMG LLP the
matters required to be discussed with them under the provisions
of Statement on Auditing Standards No. 61 (Communication
with Audit Committees), as modified or supplemented; and
40
3. have received the written disclosures and the letter
from the independent auditors required by the applicable
requirements of the Public Company Accounting Oversight Board
regarding the independent accountants communications with
the Audit Committee concerning independence and have discussed
with KPMG LLP the auditors independence from our Company
and management.
In reliance on the reviews and discussions referred to above, we
recommended to our Board of Directors that the audited financial
statements be included in DiamondRocks Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 for filing with
the SEC.
Submitted by the Audit Committee:
W. Robert Grafton, Chairperson
Daniel J. Altobello
Maureen L. McAvey
Gilbert T. Ray
OTHER
MATTERS
Expenses
of Solicitation
We will bear the cost of the solicitation of proxies. In an
effort to have as large a representation at the annual meeting
as possible, we may solicit proxies, in certain instances,
personally or by telephone or mail by one or more of our
employees. We also may reimburse brokers, banks, nominees and
other fiduciaries for postage and reasonable clerical expenses
of forwarding the proxy material to their principals who are
beneficial owners of shares of our common stock.
Stockholder
Proposals for Annual Meetings
Any stockholder proposals submitted pursuant to Exchange Act
Rule 14a-8
for inclusion in our proxy statement and form of proxy for our
2010 annual meeting must be received by us no less than 120
calendar days before the one year anniversary of the date of
this proxy statement in order to be considered for inclusion in
our proxy statement and form of proxy. Such proposals must also
comply with the requirements as to form and substance
established by the SEC if such proposals are to be included in
the proxy statement and form of proxy. Any such proposal should
be mailed to: DiamondRock Hospitality Company, 6903 Rockledge
Drive, Suite 800, Bethesda, MD 20817, Attention: Corporate
Secretary
Stockholder proposals to be presented at our 2010 annual
meeting, other than stockholder proposals submitted pursuant to
Exchange Act
Rule 14a-8
for inclusion in our proxy statement and form of proxy for our
2010 annual meeting, must be received in writing at our
principal executive office on or after November 3, 2009 and
on or before December 3, 2009. Our current Bylaws state
that the stockholder must provide timely written notice of such
nomination or proposal and supporting documentation as well as
be present at such meeting, either in person or by a
representative. In order to be timely, a stockholders
notice must be received by us at our principal executive office
not less than ninety (90) days nor more than one hundred
twenty (120) days prior to the anniversary date of the
mailing of the notice for the immediately preceding years
annual meeting; provided, however, that in the event the annual
meeting is advanced or delayed by more than thirty
(30) days from the first anniversary of the date of the
preceding years annual meeting, a stockholders
notice shall be timely if received by us at our principal
executive office not earlier than the one hundred twentieth
(120th) day nor later than the later of the ninetieth
(90th)
day prior to the scheduled date of such annual meeting or the
tenth (10th) day following the day on which public announcement
of the date of such annual meeting is first made by us. Any such
proposals shall be mailed to: DiamondRock Hospitality Company,
6903 Rockledge Drive, Suite 800, Bethesda, MD 20817,
Attention: Corporate Secretary.
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