Hotel Online Special Report 
AFM Hospitality Acquiring Marshall Management for Approximately CDN $10.2 million; Includes Twenty-two Management Contracts Toronto, Ontario (CANADA) – September 5, 2002 – AFM Hospitality Corporation (TSX:AFM) today announced that it has entered into a non-binding letter of intent to acquire all the issued and outstanding shares of Marshall Management, Inc. from Charles Marshall and various other members of the Marshall family of Salisbury, Maryland, U.S.A. AFM will complete the transaction through a new U.S. subsidiary to be incorporated.
The deal includes the management agreements of twenty-two hotels with more than three thousand rooms. The hotels are located in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, North Carolina, Florida, Kentucky and Louisiana operating under the Holiday Inn, Ramada, Hampton, Quality, Comfort, Sleep and Days Inn brands, plus numerous independent hotels.
After the completion of this acquisition, AFM through its subsidiaries Northwest Lodging International (USA) Inc., Northwest Lodging International (Canada) Inc. and Marshall Management, Inc., will have seventy-one hotels under management contract representing more than seven thousand rooms. “AFM’s continued management services expansion throughout the current year has exceeded its plan to reach the 60 property benchmark by the end of 2002. The Marshall management agreements alone will increase our fees by more than USD $2,200,000 per year and further extends AFM’s presence in the American hospitality sector,” said Stephen Phillips, Vice-Chairman and CEO of AFM Hospitality Corporation.
This agreement is tentatively scheduled to take effect October 31, 2002. Final terms and conditions are yet to be settled and the resulting deal will be subject to approval by AFM’s Audit Committee and Board of Directors, as well as the Toronto Stock Exchange. Under the present terms, in exchange for all the issued and outstanding shares of Marshall Management, Inc., members of the Marshall family will collectively receive approximately CDN $10,230,000 depending upon the currency exchange rate on the day of closing. AFM will deliver payment in the form of a 5-year promissory note for 1/3 of the purchase price bearing interest at prime plus 1%, with AFM common stock at the market price on the day of closing for the balance of the purchase price, together with an equivalent number of warrants. For example, based on a CDN $5.00 per share market price and a $1.55 CDN/USD exchange rate prevailing on the closing date, this would result in a 5-year promissory note of USD $2,200,000 at prime plus 1% with up to 1,364,000 common shares being issued together with up to 1,364,000 warrants exercisable within five years on a 1-for-1 basis for common shares of AFM at CDN $5.00 per share. All such securities will be held in escrow and released per a performance formula over three years.
“Our transaction with AFM will build on the synergies between both companies,” said Charles Marshall, Chairman and CEO of Marshall Management, Inc. “I am confident that the integration of our two companies will provide our guests with some of the best lodging experiences in the eastern United States. We look forward to our management team continuing as the newest regional center for AFM’s hotel management division. I am pleased that all Marshall Management employees will continue to provide their services under the new management.”
“AFM continues to demonstrate its ability to partner with property owners to deliver superior hotel management services,” stated Lawrence P. Horwitz, Chairman of AFM Hospitality Corporation, “Our mission is to make our hotel owners more competitive, to help them build market share, and also to enable them to attract and recruit the best available people. We look forward to expanding our management services throughout the United States. This acquisition provides us with an excellent base of operations to assist our growth in the eastern U.S.”
About AFM Hospitality Corporation Through its subsidiaries, AFM Hospitality Corporation, which also owns AFM Preferred Alliance Group (formerly known as HFS Purchasing Services Canada), AFM Asset Management Inc., Northwest Lodging International (USA) Inc. and Northwest Lodging International (Canada) Inc., is the exclusive Canadian Master Franchisor for ASTON“, Best Inns“, Hawthorn“ Suites, Howard Johnson“, Knights Inn“, Park Plaza, Park Inn, La Quinta, Ramada“, Traveller’s Inn“ and Villager“ Lodge. AFM Hospitality Corporation operates or has open and/or executed franchise and management agreements with more than 220 hotels in North America, representing an inventory of nearly 22,000 hotel rooms. The company’s primary focus is to increase the number of hotels franchised by the respective brands, franchise new brands, build the portfolio of hotel management agreements, and acquire other franchise businesses related to the hospitality industry, while making available property management services. AFM Hospitality Corporation is a publicly traded company listed on the Toronto Stock Exchange (TSX:AFM). AFM Hospitality Corporation system-wide sales for branded hotels in its franchise portfolio and properties operated by the company exceed CDN $325 million per year.
This Press Release contains certain forward-looking statements and information from AFM Hospitality Corporation relating, but not limited, to the company’s operations, anticipated financial performance, business prospects and strategies.
AFM Hospitality Corporation www.afmcorp.com Also See Marshall Management and Encore Enterprises Investing $175 Million to Acquire/Develop 12 Hotels / July 2000 Marshall Management Overseeing Construction and Management at Two New Resorts in Delaware and Maryland / May 2000