HIGHLAND HOSPITALITY CORP
EXHIBIT 10.3.2
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<TYPE>EX-10.3.2
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<DESCRIPTION>EXHIBIT 10.3.2
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<TITLE>Exhibit 10.3.2</TITLE>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 10.3.2 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>SECOND AMENDMENT TO EMPLOYMENT AGREEMENT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">This Second Amendment to Employment Agreement is made this
23</FONT><FONT FACE="Times New Roman" SIZE="1" COLOR="#000000"><SUP>rd</SUP></FONT><FONT FACE="Times New Roman" SIZE="2" COLOR="#000000"> day of May 2006, by Highland Hospitality Corporation, a Maryland Corporation (the &#147;REIT&#148;), with its
principal place of business at 8405 Greensboro Drive, Suite 500, McLean, VA 22102 and James L. Francis, residing at 7283 Kent Point Road, Stevensville, Maryland 21666 (the &#147;Executive&#148;). </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>WHEREAS,</B> the Company and the REIT entered into that certain Employment Agreement dated October&nbsp;24, 2003 and amended on March&nbsp;29, 2004
(the &#147;Employment Agreement&#148;) with the Executive; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>WHEREAS,</B> the parties have agreed to amend the Employment Agreement to
comply with the payment rules applicable to nonqualified deferred compensation under Section&nbsp;409A of the Internal Revenue Code of 1986, as amended; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><B>WHEREAS,</B> Highland Hospitality, L.P. has consented to this Second Amendment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>NOW THEREFORE,</B>
the parties agree that the Employment Agreement shall be amended as follows: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1. Section&nbsp;6(d)(v) is amended by the addition of a new
Sub-section 6(d)(v)(D) which shall read as follows: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT FACE="Times New Roman" SIZE="2">(D) Notwithstanding the preceding terms of this Section&nbsp;6(d)(v), in determining
the net benefits that that would have been retained by the Executive if the Excise Tax had not been applicable and for purposes of determining the Executive&#146;s highest marginal rate of taxation used in determining the Gross-Up Amount, any
interest or additional tax under Section&nbsp;409A(a)(1)(B) of the Code (applicable to certain nonqualified deferred compensation payments) shall disregarded. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">2. The Employment Agreement is amended by the addition of a new Section&nbsp;12, which shall read as follows: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">12. Section&nbsp;409A Compliance </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT FACE="Times New Roman" SIZE="2">Notwithstanding anything in this Agreement or any other agreements between the REIT or the
Company, and the Executive (&#147;Other Agreements&#148;) to the contrary, if, based on Internal Revenue Service guidance available as of the date the payment or provision of any amount or other benefit is required to be made under this Agreement
(including, but no limited to, any payment, accelerated vesting, benefit continuation right or Gross-Up Amount under Section&nbsp;6 hereof) or under any Other Agreements, the REIT reasonably determines that the payment or provision of such amount or
other benefit at such specified time may potentially subject the Executive to &#147;additional tax&#148; and &#147;interest&#148; under </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT FACE="Times New Roman" SIZE="2">Section&nbsp;409A(a)(1)(B) of the Code (together with any interest or penalties imposed with respect to,
or in connection with, such tax, a &#147;409A Tax&#148;), because the Executive is a &#147;specified employee&#148; within the meaning of Section&nbsp;409A(a)(2)(B)(i) of the Code or otherwise, and if payment of such amount or provision of such
benefit at a later date would likely avoid any such 409A Tax, then the payment or provision thereof shall be postponed to the earliest business day on which the REIT reasonably determines such amount or benefit can be paid or provided without
incurring any such 409A Tax, but in no event later than the first business day after the six-month anniversary of the Executive&#146;s severance from service within the meaning of Section&nbsp;409A(a)(2) of the Code (the &#147;Delayed Payment
Date&#148;). In the event a benefit is to be provided during the period commencing on the Executive&#146;s separation from service and ending on the Delayed Payment Date and the provision of such benefit during that period would be treated as a
payment of nonqualified deferred compensation in violation of Section&nbsp;409A(a)(2)(B)(i) of the Code, then continuation of such benefit during that period shall be conditioned on payment by the Executive of the full premium or other cost of
coverage and as of the Delayed Payment Date the REIT shall reimburse the Executive for the premiums or other cost of coverage paid by the Executive, which but for this paragraph would have been paid by the REIT. The REIT and the Executive may agree
to take other actions to avoid the imposition of 409A Tax at such time and in such manner as permitted under Section&nbsp;409A. The REIT shall have no liability to the Executive in the event that Executive shall be liable for a 409A Tax. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>IN WITNESS WHEREOF,</B> the parties have executed this Second Amendment to Employment Agreement as of the day and year first above written.
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">HIGHLAND HOSPITALITY CORPORATION</FONT></TD></TR>
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<TD HEIGHT="16" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Tracy M. J. Colden</FONT></P></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Tracy M. J. Colden</FONT></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Executive Vice President</FONT></TD></TR>
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<TD HEIGHT="16" COLSPAN="3"></TD></TR>
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<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">JAMES L. FRANCIS</FONT></TD></TR>
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<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ James L. Francis</FONT></P></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-2- </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2"><U>Consent of Highland Hospitality, L.P. </U></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2">Highland Hospitality, L.P. hereby consents to this Second Amendment to the Employment Agreement of James L. Francis. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">HIGHLAND HOSPITALITY, L.P.</FONT></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
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<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">HHC GP Corporation, its general partner</FONT></TD></TR>
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<TD HEIGHT="14"></TD>
<TD HEIGHT="14" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Tracy M. J. Colden</FONT></P></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Tracy M. J. Colden</FONT></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Executive Vice President</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">-3- </FONT></P>

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