ARLINGTON HOSPITALITY INC
EMPLOYMENT AGREEMENT - RICHARD A. GERHART
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>9
<FILENAME>c81028exv10w21.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT - RICHARD A. GERHART
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.21


                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
1st day of July, 2002 by and between Arlington Hospitality Management, Inc.
("Company") and Richard A. Gerhart ("Executive").

                                   WITNESSETH:

     WHEREAS, the Company is engaged in the business of developing and
operating hotels.

     WHEREAS, pursuant to this Agreement, the Executive shall be employed by the
Company as its Senior Vice President of Hotel Operations, and the Company and
Executive desire to formalize the Executive's employment with this Agreement,
and the Executive desires to continue employment on the terms and conditions
described herein.

     NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements of the parties herein contained, the parties agree as follows:

     1.    EMPLOYMENT.    The Company hereby agrees to employ the Executive as
its Senior Vice President of Hotel Operations for the Term (as hereinafter
defined) and the Executive agrees to accept such employment on the terms and
conditions set forth herein.

     2.    DUTIES.   The Executive shall perform for the Company and all its
subsidiaries the responsibilities of the office of Senior Vice President of
Hotel Operations and the duties consistent with such office, subject to the
direction of the President of the Company. The Executive shall report to the
President of the Company or his designee.

     3.    TERM.     The initial term of the Executive's employment under this
Agreement (the "Initial Term") shall commence July 1, 2002, and shall continue
for three calendar years, unless earlier terminated as herein provided.

     4.    COMPENSATION AND OTHER BENEFITS.

     4.1.  COMPENSATION.  As compensation for all services to be rendered
pursuant to this Agreement, the Company shall pay the Executive during the Term,
Cash Compensation and Bonus at a rate specified in Exhibit A hereto ("Annual
Compensation") payable, unless otherwise specified, in accordance with the
payroll policies of the Company.

     4.2.  MISCELLANEOUS EMPLOYEE BENEFITS.   During the Term, the Executive
shall be permitted to participate in any group life, hospitalization, dental or
disability insurance plan, health program, pension plan, similar benefit plan or
other so-called "fringe benefits" of the Company (collectively, "Benefits"),
which may be available
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to other executive of the Company generally on the same terms as such other
executives.

          4.3.  GENERAL BUSINESS EXPENSES. The Company shall pay or reimburse
the Executive for all reasonable expenses reasonably and necessarily incurred
by the Executive during the Term in the performance of the Executive's services
under this Agreement. Such payment shall be made upon presentation of itemized
expense statements or vouchers or such other supporting information as the
Company may require.

          5.    TERMINATION BY THE COMPANY FOR CAUSE. The Company has the right,
at any time by serving notice, to terminate the Executive's employment under
this Agreement and to discharge the Executive for "Cause" (as hereinafter
defined). If such right is exercised, the Company's obligation to the Executive
shall be limited to the payment and/or satisfaction of unpaid Cash and Benefits
accrued up to the effective date specified in the Company's termination notice.
The Executive shall also be permitted to maintain health insurance benefits for
himself and covered dependents pursuant to COBRA commencing on the date the
Executive's employment is terminated. As used in this Section 5.1, the term
"Cause" shall mean and include (i) misappropriation of any money or other assets
or properties of the Company or an subsidiary of the Company other than an
isolated, insubstantial and unintentional misappropriation which is promptly
remedied by the Executive after receipt of written notice thereof given by the
Company; (ii) willful and material breach by the Executive of the terms of this
Agreement after a written demand for substantial performance is delivered to the
Executive by the President of the Company which specifically identifies the
manner in which the President of the Company believes that the Executive has not
substantially performed his duties and such breach continues after receipt of
such written notice; and (iii) illegal conduct which has a significant negative
effect on the reputation or business of the Company.

          6.    SEVERANCE UPON TERMINATION WITHOUT CAUSE. If the Company
terminates the Executive's employment without Cause, it shall continue to pay
the Executive all compensation specified in Exhibit A for a period ending six
(6) months after the termination date.

          7.    VOLUNTARY TERMINATION. If the Executive voluntarily terminates
his employment, the Executive agrees to provide the Company with at least
thirty (30) days written notice.

          8.    OTHER PROVISIONS.

          8.1.  CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:

               (i)  "Person: means any individual corporate, partnership, firm,
          joint venture, associate, joint-stock company, trust, incorporated
          organization, governmental or regulation body or other entity.
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          (ii) "Cash flow" for any period means net income plus depreciation
     and amortization for such period, all determined in accordance with
     generally accepted accounting principles.

     8.2. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission
or, if mailed, five (5) days after the date of deposit in the United States
mail, as follows:

          (i)  If to the Company, to:

               President
               Arlington Hospitality, Inc.
               2355 S. Arlington Heights Road, Suite 400
               Arlington Heights, IL 60005

          (ii) If to the Executive, to:

               Richard A. Gerhart
               4 Queens Way
               Lincolnshire, IL 60069

     Any party may change its address for notice hereunder by notice to the
other party hereto.

     8.3. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all prior agreements, written or oral, with respect thereto.

     8.4. WAIVERS AND AMENDMENTS. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms and conditions hereof may be
waived, only by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof. Nor shall any waiver on the part of any party of any such right, power
or privilege hereunder, nor any single or partial exercise of any right, power
or privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.

     8.5. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the internal laws of the State of Illinois applicable to
agreements made and to be performed entirely within such State.
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     8.6. SUCCESSORS.

     (a)  This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.

     (b)  This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.

     (c)  The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.

     8.7.  COUNTERPARTS.  This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

     8.7. HEADINGS. The headings in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.


EXECUTIVE                                 ARLINGTON HOSPITALITY MANAGEMENT, INC.

/s/ Richard A. Gerhart                    By: /s/ Michael P. Holtz
----------------------                    ------------------------
Richard A. Gerhart                        Michael P. Holtz
                                          President
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                                   EXHIBIT A

                                  RICK GERHART


BASE SALARY:

            Year One     $132,500
            Year Two      137,800
            Year Three    144,000

BONUS STRUCTURE:

            AMERIHOST INN HOTELS:

            Same Store Sales:

            The Senior Vice President of Operations will be entitled to
            participate in a quarterly incentive, based upon the Same Store
            Sales performance of the owned AmeriHost Inn hotels. Following are
            the percentages and incentive breakdowns:

<Table>
<Caption>
            % Increase/Same Store Sales           Incentive $
            ---------------------------           -----------
            <S>                                   <C>
                        6%                            $600
                        7%                            $900
                        8%                          $1,200
                        9%                          $1,800
</Table>

            Each additional increase of 1% in Same Store Sales will result in
            $300 of additional bonus.

            Increase in GOP Over Budget:

            The Senior Vice President of Operations will be entitled to a bonus
            of 3% of the Actual GOP over the budgeted GOP. The bonus will be
            calculated and paid on a quarterly basis, and based upon the
            "pooled" of all AmeriHost Inns under his direction. This will
            exclude the Bortle managed hotels.




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            Increase in GOP Over Last Year:

            The Senior Vice President of Operations will be entitled to a bonus
            of 2% of actual GOP over the previous year's GOP. In order to
            qualify for part of this bonus, the hotel must have been open for
            business for at least two (2) years. All hotels that were open more
            than two (2) years in the quarter will qualify for this plan. The
            bonus will be calculated and paid on a quarterly basis, based on the
            "pooled" performance of all the AmeriHost Inns that are managed by
            Arlington Hospitality. This excludes the Bortle managed hotels.

            NON-AMERIHOST HOTELS

            Same Store Sales:   None

            Increase in GOP Over Budget:

            The Senior Vice President of Operations will be entitled to a bonus
            potential of 3% of the actual GOP over the budgeted GOP. The bonus
            will be calculated and paid on a quarterly basis, and based upon the
            "pooled" performance of all of the non-AmeriHost hotels under his
            direction. The Diversified properties will be excluded from
            participation in the bonus calculations.

            Property Sales:

            The Senior Vice President of Operations will be paid a bonus of $500
            for each AmeriHost Inn that the Company sells and receives a fee
            from Cendant. This bonus will be paid at the time of the closing.

            Overall Company Performance:

            The Senior will receive a bonus equal to 10% of his base salary if
            the Company succeeds in achieving its budgeted net income, cash flow
            or EBITDA for the year. This will be due and payable within 10 days
            after the year end numbers are finalized. If the total of the above
            bonus plans paid to the Executive are equal to or greater than 10%
            of his base salary, no bonus will be due and payable to the
            Executive for Company performance. If the total of the above bonus
            plans paid to the Executive are less than 10% of his base salary,
            the Executive will be given bonus up to 10% of his base salary if
            the Company achieves its performance objectives.



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