Separation Agreement

Exhibit 10.1


SEPARATION AGREEMENT


This Separation Agreement ("Agreement") is made and entered into as of this 29th day of November (the "Execution Date") by and among Arlington Hospitality, Inc., a Delaware corporation (the "Company") and Jerry H. Herman ("Executive"). (The Company and Executive are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties").


WHEREAS, pursuant to the Employment Agreement, executed December 19, 2002 and effective January 7, 2003, by and between the Company and Executive (the "Employment Agreement"), Executive has served as president and chief executive officer of the Company;


WHEREAS, Executive desires to resign from his position, and the Company desires to accept Executive's resignation, on the terms and conditions set forth herein;


NOW, THEREFORE, for and in consideration of the promises and covenants made between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:


1. Termination of Employment and Directorship. Inasmuch as Executive has decided not to relocate to Chicago, Executive hereby resigns as the Company's president and chief executive officer with such resignation effective as of December 31, 2004 (the "Effective Date") and the Company hereby accepts such resignation effective as of the Effective Date. From the Execution Date through the Effective Date, Executive agrees to continue to perform his duties as set forth in the Employment Agreement and the Company agrees to continue to pay Executive his current Base Salary (as defined in the Employment Agreement) in accordance with the Company's payroll practices. Effective as of the Execution Date, Executive resigns as a member of the board of directors of the Company and agrees that, notwithstanding the provisions of Section 3 of the Employment Agreement, he shall have no further right to a position on the Company's board of directors, and the Company hereby accepts such resignation effective as of the Execution Date. Except as otherwise expressly provided herein, the Parties' rights and obligations under the Employment Agreement shall be terminated and the Employment Agreement shall be of no further force and effect.


2. Separation Payment. The Company agrees to pay Executive three months Base Salary which shall be payable from January 1, 2005 through March 31, 2005, in equal installments over such period in accordance with the Company's regular payroll practices, and which shall be subject to all customary federal, state and local deductions. Executive shall continue to participate in the Company's medical and dental insurance plans on terms available to senior executive officers of the Company through March 31, 2005.


3. Transition Assistance. From the Effective Date through June 30, 2005, Executive agrees to provide such reasonable assistance to the Company as is necessary for the Company to transition to a new president and chief executive officer, including being available at reasonable times by phone during regular business hours to answer any questions any director or officer of the Company may have with respect to the operations and finances of the Company; provided, however, so long as the directors and officers of the Company do not make more than a reasonable limited number of telephone calls per day and are cognizant of the other time


commitments and vacation schedule of Executive and Executive reasonably provides assistance under such circumstances, then under no circumstances shall any act or omission under this Section 3 affect the payments to Executive under Section 2 above.


4. Company Records and Equipment. On the Effective Date, Executive agrees to return to the Company any and all Company equipment, property, products, services, processes, technology, inventions, patents, business strategies, pricing information, current and prospective customer lists, marketing plans and any and all other materials relating to the Company or its business in Executive's possession in whatever form or medium whether written, electronic, recorded or otherwise. The Company hereby agrees that the Company's outside corporate counsel shall keep true and accurate copies of all board of director and board committee minutes that were taken during Executive's employment with the Company. Prior to the Effective Date, Executive agrees to take all actions necessary to remove himself as a signatory on the Company's bank accounts as of the Effective Date.


5. Non-Solicitation and Non-Competition. Executive acknowledges and agrees that the Restrictive Covenants of Section 8 of the Employment Agreement shall remain in full force and effect for the time periods set forth therein and reaffirms his obligations to abide by such Restrictive Covenants; provided, however, that Exhibit B to the Employment Agreement shall be deemed modified to limit the same only to AmeriHost Inn and any other Cendant Brand; and provided, further, that Executive covenants and agrees that he shall not, directly or indirectly, solicit, pursue, or interfere with the Company's negotiations with respect to, any potential hotel development site which the Company is investigating or pursuing, for a period of six months from the Effective Date.


6. Non-disparagement. Each Party agrees not to, directly or indirectly, slander, libel or otherwise disparage or make any false statements or take any action which is, or is intended to, or could reasonably be expected to, be detrimental to the other Party, its business or reputation.


7. Release.


(a) Except for the rights and obligations arising under this
Agreement and claims related thereto, and except as provided under
Section 10 below, Executive, for himself and his successors,
administrators, executors, trusts, trustees, beneficiaries, heirs and
assigns, hereby fully and generally releases, waives and forever
discharges the Company, its subsidiaries and affiliates and their
respective shareholders, directors, officers, employees, agents and
attorneys whether past or present (the "Released Parties"), from any
and all actions, suits, debts, demands, damages, claims, judgments,
liabilities, benefits or other remedial relief of ...