[ARLINGTON HOSPITALITY, INC. LETTERHEAD]
FOR IMMEDIATE RELEASE
CONTACT:
JAMES B. DALE, CHIEF FINANCIAL OFFICER
847-228-5401 x 361
jimdale@arlingtonhospitality.com
ARLINGTON HOSPITALITY, INC.
ANNOUNCES CEO SUCCESSION PROGRESS AND SALE OF TWO HOTELS
CEO SEVERANCE AND SUCCESSION TIMING ISSUES FAVORABLY RESOLVED
SALE OF TWO HOTELS FOR BOOK AND CASH GAINS PLUS CENDANT FEES
ARLINGTON HEIGHTS, ILLINOIS, NOVEMBER 7, 2002. Arlington Hospitality, Inc.
(NASDAQ: HOST) today announced that it has entered into a series of agreements
with its outgoing CEO, Michael P. Holtz, (the "Settlement Agreements") designed
to result in a smooth transition of the Company's leadership, a mutually
beneficial severance settlement, and the profitable disposition of two of its
AmeriHost Inn hotel properties. The Settlement Agreements have been filed as
exhibits to a Form 8-K Current Report filed by the Company with the Securities
and Exchange Commission. The Settlement Agreements contain terms and conditions
in addition to those described in this release and stockholders are encouraged
to review the Settlement Agreements in their entirety. The Company has agreed to
pay Mr. Holtz one year's base salary of $325,000 plus approximately $58,000 in
fringe benefits for a one-year period in accordance with the terms of his
employment agreement, contingent upon the sale of two hotels (an 89-room hotel
in Vicksburg, Mississippi, and a 64-room hotel in Freeport, Illinois) to Mr.
Holtz for the aggregate amount of approximately $5.2 million, plus a contingent
participation in the appreciation of the property values over certain specified
amounts during the next five years, which may be prepaid by Mr. Holtz for
$340,000 under certain circumstances.
The Settlement Agreements, negotiated by a fully independent Ad Hoc Committee of
the Board of Directors with the assistance of independent counsel, were approved
unanimously by all the independent members of the Board. The parties have agreed
to use their best efforts to effect the closing of these agreements on or before
December 31, 2002. Upon closing, Mr. Holtz will resign as a director and officer
of the Company.
The Company has accrued $383,000 during the third quarter of 2002 for Mr.
Holtz's severance. The base salary of $325,000 will be paid to Mr. Holtz,
subject to withholding taxes, upon the closing of the anticipated sale of the
aforementioned hotels with the fringe benefits paid during the one-year period
after separation. As a result of these transactions, the Company expects to
receive approximately $787,000 in cash proceeds during the fourth quarter of
2002, including net proceeds after the payoff of the related mortgage debt from
the sale of the hotels and the related development incentive fees from the
Company's agreement with Cendant Corporation, net of the Holtz severance
payment. For book purposes, the Company expects to record pretax income of
approximately $550,000 from the sale of the hotels during the fourth quarter of
2002. In the event the closing occurs in 2003, these amounts may vary, but not
materially. These amounts are exclusive of any contingent purchase price
appreciation payments and future royalty sharing fees from Cendant.
The Board has also unanimously elected Kenneth M. Fell, currently Lead Director
and one of the Company's largest shareholders, as Chairman of the Board-elect,
with Chairmanship responsibilities effective upon the earlier of the hiring of a
new CEO or closing of the Settlement Agreements. The Board has also appointed
James B. Dale, its Chief Financial Officer, to serve as prospective interim CEO
of the Company, if needed, upon the closing of the Settlement Agreements until a
new CEO has been hired. The Company's CEO search remains on schedule, with the
expected naming of a new CEO by the end of the year who, with the ensuing
holidays, might not begin employment with the Company until the first quarter of
2003.
According to Mr. Fell, "The agreements provide a win-win situation that is
mutually beneficial to both parties. The Company has mapped a smooth path of
management transition, while increasing shareholder value. Through the sale of
two hotels to Mr. Holtz, the Company will not only generate profits, cash flow
and the reduction of debt, but also development incentive fees and ongoing
franchise royalty sharing fees, as part of our master AmeriHost Inn brand
development and royalty agreements with Cendant."
Fell continued, "On behalf of the entire Board, we would like to thank Mike for
his contributions to the Company, and we welcome his ongoing assistance during
the transition period. We are hopeful that he will continue to develop
additional AmeriHost Inn hotels as an independent operator, which would enhance
the AmeriHost Inn brand as well as create additional revenue streams for the
Company."
Outgoing Chairman and CEO Michael P. Holtz commented, "As a continuing
significant shareholder, I have complete confidence that Arlington's continuing
management team and Board are keenly focused on increasing the Company's return
on assets through the continued development, construction, management and sale
of additional AmeriHost Inn hotels. Although I am leaving the Company as its
President and CEO, I will continue to support the Company and its associates in
any way I can. Arlington Hospitality is stronger today than at any time in its
history. This Company has a great future, and I'm proud to say that I was able
to be a part of its success."
The sale transactions are contingent upon the procurement of an independent
appraisal of the hotels showing an aggregate value not greater than the total
purchase price, mortgage financing commitments for the purchase of the hotels by
Mr. Holtz, and the consent of the landlord to the assignment to Mr. Holtz of the
leasehold in one of the properties. The Company and Mr. Holtz are diligently
pursuing the consent of the landlord to the assignment of the leasehold. Upon
closing, the Company and its subsidiaries will be released from all mortgage and
leasehold obligations. Although the Company expects these contingencies to be
satisfied, there is no assurance that the Settlement Agreements and the
transactions therein will be successfully consummated. If the sale of both
hotels does not close by February 15, 2003, then the Settlement Agreements will
be deemed null and void.
This press release contains certain forward looking statements which are subject
to changing factors, risks and uncertainties, some of which are outside the
Company's control. The most significant of these is the risk that all the
agreements referenced above may be rendered null and void if the conditions to
closing are not met or the closings do not otherwise occur. There can be no
assurances that the Company will be successful in locating a suitable
replacement for Mr. Holtz, in continuing to dispose of hotels in a profitable
manner or in closing the transactions as contemplated above. In addition,
numerous other factors could occur which could adversely impact the above
forward looking statements.
Arlington Hospitality, Inc. is a publicly traded hotel management and
development Company that builds, manages and sells mid-priced hotels throughout
the United States, primarily under the AmeriHost brand, a trademark owned by
Cendant. Currently, Arlington Hospitality owns or manages 76 properties in 17
states, including 65 AmeriHost Inn hotels, for a total of 5,629 rooms, with four
additional AmeriHost Inn & Suites hotels under construction. Each hotel offers
an amenities package not often found in other mid-priced hotels. For additional
information on the Company, please visit us at
http://www.arlingtonhospitality.com.