OMNIBUS AGREEMENT
Agreement this 7th day of November, 2002, by and between Arlington
Hospitality, Inc., a Delaware corporation ("AHI") and Michael P. Holtz ("MPH").
RECITALS:
A. AHI and MPH entered into an employment agreement dated April 7, 1995,
which was subsequently amended by four separate amendments (the employment
agreement as amended is hereinafter referred to as the "Employment Agreement").
B. On August 15, 2002, MPH delivered notice of his intent to resign from
employment with AHI. The parties are desirous of setting forth the terms of
MPH's severance from AHI as set forth below.
C. AHI is desirous of retaining MPH to make himself available to consult
with AHI, and MPH is willing to do so, as set forth below.
D. AHI is desirous of selling to MPH (through designated affiliates of MPH
- -- the "Purchasers") the hotels owned by wholly-owned subsidiaries of AHI and
located in Vicksburg, Mississippi (the "Vicksburg Hotel") and Freeport, Illinois
(the "Freeport Hotel" -- together with the Vicksburg Hotel, collectively, the
"Hotels") and MPH is desirous of causing the Purchasers to purchase the Hotels
in accordance with the forms of purchase and sale agreements set forth in
Exhibit 1 and Exhibit 2 attached hereto and made a part hereof for the Vicksburg
Hotel and the Freeport Hotel, respectively (the "Purchase Agreements").
E. The consummation of all of the transactions contemplated herein is
contingent upon the simultaneous closing of the purchase and sales of the
Hotels.
NOW THEREFORE, in consideration of the premises and covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Recitals. The recitals set forth above are incorporated by reference
herein and made a part hereof as if fully rewritten.
2. Purchase Agreements. The conditions precedent to the consummation of the
transactions contemplated in this Agreement are the following; in the event any
of the conditions set forth below are not satisfied on or before February 15,
2003 (or in the case of subparagraph (a) below, on or before November 30, 2002),
then AHI may terminate this Agreement in its sole discretion, with no liability
to MPH for such termination at such point this Agreement would be deemed null
and void ab initio.
(a) Procurement by AHI of appraisals on the Hotels by Cushman &
Wakefield of a combined fair market value which is less than or equal to
the aggregate purchase price called for in the Hotels' Purchase Agreements
on or before November 30, 2002; and
(b) Procurement by MPH of sufficient financing for the Hotels to cause
the unconditional release of AHI and its subsidiaries of all mortgage debt
and land lease obligations and all franchise agreement guarantees with
respect to the Hotels; and
(c) Procurement from Cendant, Inc. of certification that the sale of
the Hotels to the Purchasers will entitle AHI to receive:
(i) The development fee on each Hotel on the closing of the
Purchase Agreements pursuant to the terms of the September 30, 2000
Development Agreement among AHI, AmeriHost Inn Franchising, Inc.,
AmeriHost Management, Inc., AmeriHost Development, Inc., Cendant
Finance Holding Corporation ("CFHC") and AmeriHost Franchise Systems,
Inc. ("AFSI"); and
(ii) Royalty sharing with respect to each Hotel on closing of the
Purchase Agreements pursuant to the September 30, 2000 Royalty Sharing
Agreement among AHI, CFHC and AFSI. The aforesaid fees payable to AHI
by Cendant with respect to the Hotels are hereinafter referred to as
the "Cendant Fees."
The Purchase Agreements contemplate a simultaneous sale of the Hotels by AHI's
subsidiaries to the Purchasers on or before February 17, 2003 (the actual date
of closing being the "Closing Date"). Absent written agreement between the
parties hereto to the contrary, should the aforesaid sales of the Hotels by AHI
to MPH or his designees not occur on or before February 17, 2003, then this
entire agreement shall be null and void in its entirety, except for the terms of
Section 4(d) below, provided however, if the reason for the closing(s) not
occurring is the breach by AHI on the one hand, or one or both of the Purchasers
on the other hand, of one or both of the Purchase Agreements, and subsequent to
such breach the nonbreaching party(ies) effect the sale of the Hotels to the
Purchasers, then effective on the closing of such sales, this Agreement shall be
deemed reinstated in its entirety.
3. Representations and Warranties.
(a) MPH represents, warrants and covenants that the Hotels will be
operated following the Closing Date in a manner necessary to ensure that
AHI will be entitled to the Cendant Fees for the period of seven (7) years
following the Closing Date. Should AHI be required to refund any of the
Cendant Fees it receives with respect to the Hotels or should Cendant
refuse to pay any of the Cendant Fees with respect to the Hotels, due to
the failure of the Hotels to continue to operate as AmeriHost Inns during
the seven (7) year period following the Closing Date, then MPH agrees to
reimburse AHI for the Cendant Fees that AHI would have received had the
Hotels continued to operate as AmeriHost Inns for the full seven (7) years
following the Closing Date (with AHI's royalty fees based upon the level of
operations that each such Hotel operated for the last full year that it
operated as an AmeriHost Inn).
(b) MPH represents and warrants that to the best of his knowledge:
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(i) The income statements for the Hotels as maintained by
AHI through the Closing Date fairly represent the income and
expenses of the Hotels for the periods indicated on the books and
records of AHI; and
(ii) The Vicksburg Hotel is not entitled to receive any
direct or indirect participation in the profits or gross receipts
of the casino to which it is immediately adjacent, except to the
extent such revenues have been reflected on the financial
statements of the Vicksburg Hotel.
(c) MPH represents and warrants that except for the agreements
contemplated in this Agreement and attached exhibits, neither he nor any of
his affiliates have any contracts or agreements with AHI or any of its
affiliates.
In causing its wholly-owned subsidiary to enter into the Purchase Agreements for
the sale of the Hotels to affiliates of MPH each of said subsidiaries and AHI
have relied upon the aforesaid representations, warranties and covenants of MPH,
and API shall be entitled to damages for all losses either it or either of its
subsidiaries incur as a result of the breach by MPH of any of the aforesaid
representations, warranties and covenants, which obligations shall survive the
closing of this Agreement and the Purchase Agreements.
4. Employment Agreement and Severance Matters. On the Closing Date MPH's
employment with the Company shall terminate and the Employment Agreement shall
be terminated in all respects, with no further obligations under the Employment
Agreement from MPH to AHI or from AHI to MPH with respect to the Employment
Agreement or otherwise, except as expressly set forth in this Agreement or any
of the Exhibits appended hereto. On the Closing Date, MPH shall resign as an
officer and as a director from each of AHI, its subsidiaries and affiliates.
(a) Severance Payment. On the Closing Date, in full settlement of
AHI's severance obligations to MPH under the Employment Agreement, AHI
shall tender a cash severance payment to MPH (subject to AHI deducting and
remitting therefrom the withholding amounts delineated below) the sum of
$325,000 as follows:
Description Amount
----------- ------
Severance Amount.............................. $325,000
Less Federal Tax Withholding.................. (125,450)
Less State Tax Withholding.................... (9,750)
Less Medicare Tax Withholding................. (4,713)
--------
NET CASH TO MPH: $185,087
========
(b) Releases. On the Closing Date, the parties shall deliver mutual
releases in the form of Exhibit 3.
(c) Base Compensation and Bonuses. AHI shall pay to MPH his annualized
salary payments through the Closing Date and shall reimburse MPH for all
out-of-pocket expenses reasonably incurred in the course of his employment
with respect to AHI matters through the Closing Date, subject to submittal
of customary documentation in
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accordance with AHI's policies and procedures. In addition, on the Closing
Date, AHI shall pay to MPH the amount of base compensation plus accrued
vacation MPH would have received per the terms of his Employment Agreement
had he continued to serve as CEO of AHI from the Closing Date through
February 15, 2003, subject to customary withholding. MPH agrees that on the
Closing Date he shall be entitled to no bonus with respect to services
rendered during any of 2002 (except to the extent already paid) or any
rights to stock, stock options or any other direct or indirect equity
interests in AHI or any of its affiliates, with the exception of stock or
stock options which have already been issued to him by AHI prior to the
date of execution of this Agreement.
(d) Vehicle. The vehicle leased by AHI for MPH's use is subject to a
purchase option, which AHI shall exercise on December 1, 2002, or as soon
as practicable thereafter and shall direct the leasing company to convey
title to the vehicle to MPH or his designees. The purchase price for the
car will be paid by MPH, subject to a contribution therefor by AHI equal to
the lease payments that would have otherwise been made by AHI had the
vehicle been leased for the period from the Closing Date through February
15, 2004 (prorated for partial months), based upon lease payments of
$574.46 per month; notwithstanding anything to the contrary herein, the
obligations of the parties with respect to this Section 4(d) shall survive
the termination of this Agreement.
(e) Legal Fees Reimbursement. On the Closing Date AHI shall reimburse
MPH for up to $10,000 of legal fees incurred by him in connection with the
negotiation and closing of this Agreement and the agreements referenced in
the Exhibits hereto, upon proof of proper documentation to evidence
aforesaid legal fees; this legal fee reimbursement has been allocated
$5,000 to each Hotel (subject to rights of reallocation) as provided in the
Purchase Agreements.
(f) Nonsolicitation. MPH agrees on behalf of himself and each of his
affiliates (collectively, the "MPH Group" and individually, each an "MPH
Group Member"), that from the date of this Agreement until two years
following the Closing Date, neither he nor any MPH Group Member shall
directly or indirectly solicit for hire, hire or engage in any discussions
which could lead to the hiring, whether hiring as an employee, independent
contractor, consultant, service provider or otherwise any of the employees
of AHI or any of its affiliates who either earn a base salary of at least
$80,000 per year or presently serve or in the future at any time during the
aforesaid two year period serve on the Operating Committee of AHI as of the
time of such solicitation or hiring. For purposes of this Agreement the
term "affiliate" shall have the same meaning as construed under Rule 405
promulgated under the Securities Act of 1933, as amended.
(g) Consulting Agreement. MPH agrees to respond to telephonic
inquiries at mutually convenient times not to exceed one hour per week for
the one year period following the Closing Date to answer questions from AHI
or its representatives regarding issues related to AHI officers. In
consideration for these undertakings, AHI agrees that effective on the
Closing Date, it shall take the following actions:
(i) AHI shall continue coverage subject to applicable employee
contributions to be paid by MPH or its employee health, dental and
disability
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plans for a period ending February 15, 2004, provided that to the
extent MPH is no longer eligible to continue as an insured any of such
plans for any reason, then it shall notify him promptly upon learning
of such fact and shall thereafter for the remainder of the period
(i.e., through February 15, 2004) remit to MPH a cash sum equal to the
premiums (net of employee contributions) that would have been paid had
he remained eligible for coverage under the latest plan then in
effect. As of the date of execution of this Agreement, the applicable
annual premiums and employee contributions are as follows:
Insurance Company Payment Employee Payment
--------- --------------- ----------------
Humana-Family Coverage (Health) $8,781.60 $1,054.30
Met Life (Dental) $ 919.56 $ 810.42
Guardian (Disability) $1,639.56 $ 0.00
(ii) On the Closing Date, AHI shall execute assignment forms for
the Transamerica Life ($1,000,000 face amount) life insurance policy
it maintains with the Holtz Family Trust as beneficiary, with the
Company to agree to pay over to MPH the unpaid premiums thereon
prorated through February 15, 2004, and MPH to be responsible for
making all premium payments on said policy ($1,590 annual premium);
and
(iii) The parties agree to pay their respective shares of the
premiums ($977.50 and $977.50 payable annually by AHI and MPH,
respectively) on the Minnesota Life Insurance Company ($2,000,000 face
amount) life insurance policy which presently names both AHI and MPH's
designee as equal beneficiaries. On the Closing Date, the Company
shall assign this policy in its entirety to MPH or his designees and
shall provide him a check for one-half of the unpaid for portion of
premium that would accrue on such policy for the period from closing
through February 15, 2004.
(iv) With respect to the Minnesota Life Insurance Company policy
standing in the name of the Holtz Family Trust, on the Closing Date
the Company shall tender to MPH a check in the amount of the unpaid
portion of the premium that would accrue thereon through February 15,
2004.
5. Miscellaneous.
(a) Survival. All representations, warranties and covenants of the
parties contained in this Agreement or made pursuant hereto, shall survive
the date of execution of this Agreement and remain in full force and
effect, and shall survive the termination or expiration of this Agreement.
(b) Counsel. All parties hereto have been represented by counsel, and
no inference shall be drawn in favor of or against any party by virtue of
the fact that such party's counsel was or was not the principal draftsman
of this Agreement.
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(c) Notices. All notices or other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally or sent by registered or certified mail,
postage prepaid or via national courier, addressed to the party entitled to
notice at the address set forth below, or such other address as is
subsequently provided by written notice from such party to the other
parties:
IF TO AHI: WITH A COPY TO:
Arlington Hospitality, Inc. Shefsky & Froelich Ltd.
2355 South Arlington Heights Road--Suite 400 444 North Michigan Avenue--Suite 2500
Arlington Heights, IL 60005 Chicago, IL 60611
Attention: James Dale, Chief Financial Officer Attention: Mitchell D. Goldsmith, Esq.
Telephone: 847-228-5400 Telephone: 312-836-4006
Facsimile: 847-228-5409 Facsimile: 312-527-3194
IF TO MPH: WITH A COPY TO:
Michael P. Holtz Piper Rudnick
490 East Route 22 203 North LaSalle Street--Suite 1800
North Barrington, IL 60010 Chicago, IL 60601
Telephone: 847-277-0068 Attention: David Glickstein, Esq.
E-Mail: mpholtz@aol.com Telephone: 312-368-4000
Facsimile: 312-236-7516
(d) No Assignment. Except as expressly noted below, this Agreement and
the rights of the parties under this Agreement may not be sold, assigned or
otherwise transferred without the prior written consent of the other party.
(e) Entire Agreement. This Agreement, and the documents appended
hereto, sets forth the entire agreement and understanding of the parties
hereto in respect of the subject matter contemplated hereby, and supersedes
all prior agreements, arrangements and understandings relating to the
subject matter hereof.
(f) Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois. Should any dispute
arise under this Agreement, it shall be litigated in the state or federal
courts situated in Cook County, Illinois, to which jurisdiction and venue
all parties consent.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which, whether photocopy, facsimile or ink, shall be
deemed an original, but all of which together shall constitute one
instrument.
(h) Approval. This Agreement shall be binding upon the parties, their
respective heirs, successors and assigns, and each entity party represents
and warrants that this Agreement has been duly approved by proper corporate
action.
(i) Remedies. No party hereunder shall be entitled to consequential
damages as a result of the breach by any other party of its obligations
hereunder. Each party's
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damages shall be limited to actual damages as a result of the breach of any
obligation hereunder.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first set forth above.
AHI: MPH:
ARLINGTON HOSPITALITY, INC., a Delaware
Corporation
MICHAEL P. HOLTZ
By: /s/ James Dale /s/ Michael P. Holtz
------------------------------------- ---------------------------------
James Dale, Secretary
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