10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Period ended June 30, 2003

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to

Commission File No. 1-14537

LODGIAN, INC.

(Exact name of registrant as specified in its charter)

Delaware	52-2093696
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3445 Peachtree Road, N.E., Suite 700, Atlanta, GA	30326
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code   (404) 364-9400

(Former name, former address and former fiscal year, if changed since last report):  Not applicable

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x      No o

      Indicate by check mark whether the registrant is an accelerated filer as defined by section 12-b – 2 of the Act.   Yes o     No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.   Yes x      No o

      Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Class	Outstanding as of August 8, 2003
Common	6,682,667

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II – OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
INDEX TO EXHIBITS
EX-10.59 EMPLOYMENT AGREEMENT
EX-10.60 401(K) PLAN & TRUST AGREEMENT
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32 SECTION 906 CERTIFICATION OF CEO & CFO

LODGIAN, INC. AND SUBSIDIARIES
INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 (unaudited)		1
	Condensed Consolidated Statements of Operations for the Successor Three Months Ended June 30, 2003, the Predecessor Three Months Ended June 30, 2002, the Successor Six Months Ended June 30, 2003 and the Predecessor Six Months Ended June 30, 2002 (unaudited)		2
	Condensed Consolidated Statement of Stockholders’ Equity for the Successor Six Months Ended June 30, 2003 (unaudited)		3
	Condensed Consolidated Statements of Cash Flows for the Successor Six Months Ended June 30, 2003 and the Predecessor Six Months Ended June 30, 2002 (unaudited)		4
	Notes to Condensed Consolidated Financial Statements (unaudited)		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		29
Item 4.	Controls and Procedures		29
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		31
Item 2.	Changes in Securities		31
Item 4.	Submission of Matters to a Vote of Security Holders		31
Item 6.	Exhibits and Reports on Form 8-K		32
Signatures			33

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

					June 30, 2003			December 31, 2002
					(Unaudited in thousands, except per share data)
				ASSETS
Current assets:
			Cash and cash equivalents		$	7,476		$	10,875
			Cash, restricted			8,560			19,384
			Accounts receivable ( net of allowances: 2003 - $1,567; 2002 - $1,594)			12,194			10,681
			Inventories			5,754			7,197
			Prepaid expenses and other current assets			17,465			15,118
			Assets held for sale			69,707			—
				Total current assets		121,156			63,255
Property and equipment, net						590,248			664,565
Deposits for capital expenditures						15,374			22,349
Other assets						15,241			12,495
					$	742,019		$	762,664
				LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities not subject to compromise
	Current liabilities:
			Accounts payable		$	13,582		$	12,380
			Other accrued liabilities			37,256			43,625
			Advance deposits			2,406			1,786
			Current portion of long-term debt			16,247			14,550
			Liabilities related to assets held for sale			51,727			—
				Total current liabilities		121,218			72,341
Long-term debt						422,621			387,924
Liabilities subject to compromise						—			93,816
				Total liabilities		543,839			554,081
Minority interests						3,826			3,616
Commitments and contingencies
Mandatorily redeemable 12.25% cumulative preferred stock						134,104			126,510
Stockholders’ equity:
		Common stock, $.01 par value, 30,000,000 shares authorized; 7,000,000 issued and outstanding				70			70
		Additional paid-in capital				89,223			89,223
		Accumulated deficit				(29,955	)		(10,836	)
		Accumulated other comprehensive gain				912			—
				Total stockholders’ equity		60,250			78,457
					$	742,019		$	762,664

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

					(Unaudited in thousands, except per share data)
					Three months ended						Six months ended
					June 30, 2003			June 30, 2002			June 30, 2003			June 30, 2002
					Successor			Predecessor			Successor			Predecessor
Revenues:
			Rooms		$	64,098		$	68,938		$	119,573		$	126,727
			Food and beverage			20,077			21,658			37,342			39,141
			Other			2,891			3,730			5,796			7,094
						87,066			94,326			162,711			172,962
	Operating expenses:
		Direct:
				Rooms		17,670			18,212			33,756			34,084
				Food and beverage		13,170			14,737			25,507			27,665
				Other		1,936			2,536			3,979			4,707
						32,776			35,485			63,242			66,456
				Gross contribution		54,290			58,841			99,469			106,506
	General, administrative and other					37,212			35,254			73,804			69,363
	Depreciation and amortization					7,895			12,020			15,643			23,657
				Other operating expenses		45,107			47,274			89,447			93,020
						9,183			11,567			10,022			13,486
	Other income (expenses):
			Interest income and other			126			4,694			209			4,874
			Interest expense			(7,102	)		(7,598	)		(13,549	)		(16,008	)
	Income (loss) before income taxes reorganization items and minority interests					2,207			8,663			(3,318	)		2,352
	Reorganization items					(807	)		(2,205	)		(2,045	)		(8,032	)
	Income (loss) before income taxes and minority interest					1,400			6,458			(5,363	)		(5,680	)
	Minority interests					(69	)		(858	)		(217	)		(1,331	)
	Income (loss) before income taxes — continuing operations					1,331			5,600			(5,580	)		(7,011	)
	(Provision) benefit for income taxes — continuing operations					(76	)		(76	)		(151	)		(151	)
	Income (loss) — continuing operations					1,255			5,524			(5,731	)		(7,162	)
	Discontinued operations:
			Loss from discontinued operations before income taxes			(3,696	)		(2,061	)		(5,794	)		(3,805	)
			Income tax provision			—			—			—			—
			Loss from discontinued operations			(3,696	)		(2,061	)		(5,794	)		(3,805	)
	Net (loss) income					(2,441	)		3,463			(11,525	)		(10,967	)
	Preferred stock dividend					(3,818	)		—			(7,594	)		—
	Net (loss) income attributable to common stock				$	(6,259	)	$	3,463		$	(19,119	)	$	(10,967	)
Basic and diluted (loss) earnings per common share:
	Net (loss) income attributable to common stock				$	(0.89	)	$	0.12		$	(2.73	)	$	(0.38	)

Upon emergence from Chapter 11, the Company adopted fresh start reporting. As a result, all assets and liabilities were restated
to reflect their fair values. The consolidated financial statements of the new reporting entity (the “Successor”) are not
comparable to the reporting entity prior to the Company’s emergence from Chapter 11 (the “Predecessor”).

See notes to condensed consolidated financial statements.

2

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

											ACCUMULATED
		COMMON STOCK				ADDITIONAL					OTHER		TOTAL
						PAID-IN		ACCUMULATED			COMPREHENSIVE		STOCKHOLDERS'
		SHARES		AMOUNT		CAPITAL		DEFICIT			GAIN (net of tax)		EQUITY
		(Unaudited in thousands, except share data)
Balance, December 31, 2002			7,000,000	$	70	$	89,223	$	(10,836	)	$	—	$	78,457
Comprehensive loss:
	Net loss		—		—		—		(11,525	)		—		(11,525	)
	Currency translation adjustments (related taxes estimated at nil)		—		—		—		—			912		912
Total comprehensive loss			—		—		—		—			—		(10,613	)
Preferred dividends accrued (not declared)			—		—		—		(7,594	)		—		(7,594	)
			7,000,000	$	70	$	89,223	$	(29,955	)	$	912	$	60,250

                 The comprehensive loss for the three months ended June 30, 2003 was $1.9 million and the comprehensive income for the
            Predecessor three months ended June 30, 2002 was $4.4 million. The comprehensive loss for the Predecessor six months ended
            June 30, 2002 was $10.4 million.

See notes to condensed consolidated financial statements.

3

LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

					Six months ended
					June 30, 2003			June 30, 2002
					(Unaudited in thousands)
					Successor			Predecessor
Operating activities:
		Net loss			$	(11,525	)	$	(10,967	)
		Add: loss from discontinued operations				5,794			3,805
		Loss — continuing operations				(5,731	)		(7,162	)
		Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:
			Depreciation and amortization			15,643			23,657
			Gain on extinguishment of debt			—			(4,419	)
			Minority interests			217			1,331
			Write-off and amortization of deferred financing costs			1,398			—
			Other			2,203			(554	)
			Changes in operating assets and liabilities:
				Accounts receivable, net of allowances		(2,643	)		(3,236	)
				Inventories		(63	)		(39	)
				Prepaid expenses, other assets and restricted cash		7,732			(5,705	)
				Accounts payable		(1,785	)		8,136
				Other accrued liabilities		(8,274	)		8,683
				Advance deposits		860			507
Net cash provided by operating activities						9,557			21,199
Investing activities:
		Capital improvements				(16,057	)		(7,784	)
		Withdrawals (deposits) for capital expenditures				7,312			(1,576	)
		Other				(853	)		—
Net cash used in investing activities						(9,598	)		(9,360	)
Financing activities:
		Proceeds from issuance of long-term debt				80,000			—
		Principal payments on long-term debt				(78,791	)		(1,031	)
		Payments of deferred loan costs				(3,033	)		—
		Other				(1,270	)		—
Net cash used in financing activities						(3,094	)		(1,031	)
Cash flows used in discontinued operations:
	Net cash used in discontinued operations					(264	)		(165	)
Net (decrease) increase in cash and cash equivalents						(3,399	)		10,643
Cash and cash equivalents at beginning of period						10,875			14,007
						7,476			24,650
Less: cash of discontinued operations						(288	)		(552	)
Cash and cash equivalents at end of period					$	7,188		$	24,098
Supplemental cash flow information:
Cash paid during the period for:
		Interest, net of amount capitalized			$	13,491		$	17,320
		Income taxes, net of refunds			$	40		$	12
Supplemental disclosure of non-cash investing and financing activities:
		Preferred stock dividend accrued			$	7,594		$	—

Upon emergence from Chapter 11, the Company adopted fresh start reporting. As a result, all assets and liabilities were restated
to reflect their fair values. The consolidated financial statements of the new reporting entity (the “Successor”) are not
comparable to the reporting entity prior to the Company’s emergence from Chapter 11 (the “Predecessor”).

See notes to consolidated financial statements.

4

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. General

      The condensed consolidated financial statements include the accounts of Lodgian, Inc., its wholly-owned subsidiaries and four joint ventures in which Lodgian has a controlling financial interest (owns at least 50% of the voting interest) and exercises control (collectively “Lodgian” or the “Company”). Lodgian believes it has control of the joint ventures when the Company is the general partner and has control of the joint ventures’ assets and operations. One unconsolidated entity (the “Unconsolidated Entity”) which owns one hotel is accounted for using the equity method of accounting. All significant intercompany accounts and transactions have been eliminated in consolidation.

      The accounting policies followed for quarterly financial reporting are disclosed in Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2002, this Quarterly Report and the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003.

      As previously indicated in the Company’s Form 10-K for the year ended December 31, 2002, the Company and substantially all of its subsidiaries which owned hotel properties filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code on December 20, 2001, in the Southern District of New York. The Bankruptcy Court confirmed the Company’s First Amended Joint Plan of Reorganization (the “Joint Plan of Reorganization”) on November 5, 2002, and on November 25, 2002, the Company and entities owning 78 hotels officially emerged from Chapter 11. Pursuant to the terms of the Joint Plan of Reorganization, an additional eight wholly-owned hotels were returned to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease.

      Of the Company’s 97 hotel portfolio, eighteen hotels, previously owned by two subsidiaries (Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.), were not part of the Joint Plan of Reorganization. On April 24, 2003, the Bankruptcy Court confirmed the plan of reorganization relating to these eighteen hotels (the “Impac Plan of Reorganization”). These eighteen hotels remained in Chapter 11 until May 22, 2003, the date on which the Company, through eighteen newly-formed subsidiaries (one for each hotel), finalized an $80 million financing with Lehman Brothers Holdings, Inc. (the “Lehman Financing”). The Lehman Financing was primarily used to settle the remaining amount due to the secured lender of these hotels (See Note 7 to these Condensed Consolidated Financial Statements). The Impac Plan of Reorganization also provided for a pool of funds of approximately $0.3 million to be paid to the general unsecured creditors of the eighteen hotels.

      The effects of the Joint Plan of Reorganization were recorded in accordance with the American Institute of Certified Public Accountant’s Statement of Position (“SOP”) 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code,” effective November 22, 2002. SOP 90-7 required the application of Fresh Start Accounting. As a result, the Consolidated Financial Statements subsequent to the Company’s emergence from Chapter 11 are those of a new reporting entity (the “Successor”) and are not comparable with the financial statements of the Company prior to the effective date of the Joint Plan of Reorganization (the “Predecessor”).

      In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting primarily of normal recurring adjustments, necessary to present fairly the financial position of the Company as of June 30, 2003, the results of its operations for the three and six months ended June 30, 2003 (Successor) and 2002 (Predecessor) and its cash flows for the six months ended June 30, 2003 (Successor) and 2002 (Predecessor). The results for interim periods are not necessarily indicative of the results for the entire year. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Form 10-K for the year ended December 31, 2002.

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

5

LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Certain prior period amounts have been reclassified to conform to the current period’s presentation.

2. Discontinued operations

      As previously indicated, pursuant to the terms of the Joint Plan of Reorganization, eight wholly-owned hotels were returned to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, the assets, liabilities and results of operations of these nine hotels are reported in Discontinued Operations as of and for the three and six months ended June 30, 2003 and 2002. Due primarily to the application of fresh start accounting in November 2002, in which these and other assets were adjusted to their respective fair values, there was no gain or loss on this transaction.

      The following combined condensed table summarizes the assets and liabilities of these nine hotels as of December 31, 2002:

				December 31, 2002
				(In thousands)
ASSETS
Current assets:
	Cash and cash equivalents			$	177
	Accounts receivable, net				517
	Inventories				570
	Prepaid expenses and other current assets				432
			Total current assets		1,696
Property and equipment, net					15,649
Deposits for capital expenditures					904
Other assets					20
				$	18,269
LIABILITIES
Liabilities not subject to compromise
Current liabilities:
		Accounts payable		$	330
		Other accrued liabilities			1,267
		Advance deposits			60
		Total current liabilities			1,657
Long-term debt subject to compromise					15,922
		Total liabilities		$	17,579

      In addition, in June 2003, the Company embarked on a plan to sell 14 hotels, 3 land parcels and an office building. The strategy to sell these assets is part of management’s plans to:

• pay down the Lehman Financing by at least $20 million to minimize interest costs (See Note 7 of the Condensed Consolidated Financial Statements);

• provide additional funding for the Company’s capital expenditure program to comply with franchisor requirements and improve brand quality; and

• dispose of certain hotels which are performing below the standard set by management for the entire portfolio.

      In connection with this strategy, where the carrying values of the assets exceeded the estimated fair values, net of selling costs, the carrying values were reduced and impairment charges were recorded. Fair value is determined using quoted market prices, when available, or other accepted valuation techniques. The impairment charges recorded related to 4 hotels and 2 land parcels and approximated $3.4 million. Where the estimated selling prices, net of selling costs, exceeded the carrying values, no adjustments were made. Management plans to dispose of these assets within the next year. While the

6

LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

completion of these dispositions is probable, there can be no assurance that the Company will finalize the sale of any or all of these assets within the next year, if at all. In accordance with SFAS No. 144, the results of operations of all assets identified as held for sale (including the related impairment charges) are reported in Discontinued Operations for the three and six months ended June 30, 2003 and 2002. The assets held for sale and the liabilities related to these assets are separately disclosed on the face of the Condensed Consolidated Balance Sheet as of June 30, 2003.

      The following combined condensed table summarizes the assets and liabilities relating to the properties identified as held for sale as of June 30, 2003:

				June 30, 2003
				(In thousands)
			ASSETS
Accounts receivable, net of allowances				$	1,681
Inventories					979
Prepaid expenses and other current assets					416
Property and equipment, net					62,644
Other assets					3,987
				$	69,707
		LIABILITIES
Accounts payable				$	1,253
Other accrued liabilities					3,128
Advance deposits					256
Long-term debt					47,090
	Total liabilities			$	51,727

      The condensed combined results of operations included in Discontinued Operations for the three and six months ended June 30, 2003 and 2002 were as follows:

					Three months ended							Six months ended
					June 30, 2003			June 30, 2002				June 30, 2003				June 30, 2002
					(Unaudited in thousands)
					Successor			Predecessor				Successor				Predecessor
Revenues:
			Rooms		$	9,621			$	15,011			$	17,194			$	27,007
			Food and beverage			2,076				3,682				3,777				6,730
			Other			438				685				790				1,367
						12,135				19,378				21,761				35,104
	Operating expenses:
		Direct:
				Rooms		2,774				4,633				5,247				8,561
				Food and beverage		1,555				2,916				2,979				5,362
				Other		300				492				589				988
						4,629				8,041				8,815				14,911
				Gross contribution		7,506				11,337				12,946				20,193
	General, administrative and other					5,948				10,589				12,020				18,416
	Depreciation and amortization					1,190				2,700				2,314				5,327
	Impairment of long-lived assets					3,448				—				3,448				—
				Other operating expenses		10,586				13,289				17,782				23,743
						(3,080	)			(1,952	)			(4,836	)			(3,550	)
		Interest expense				(616	)			(109	)			(958	)			(255	)
	Loss before income taxes					(3,696	)			(2,061	)			(5,794	)			(3,805	)
	Provision for income taxes					—				—				—				—
	Net loss				$	(3,696	)		$	(2,061	)		$	(5,794	)		$	(3,805	)

7

LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

3. Cash, restricted

      Restricted cash as of June 30, 2003 consists of amounts reserved for letter of credit collateral and cash reserved pursuant to certain loan agreements (includes reserves for debt service, taxes, insurance and other lender-restricted cash balances).

4. Property and equipment, net

      As previously disclosed, pursuant to the terms of the Joint Plan of Reorganization, eight wholly-owned hotels were returned to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease. In addition, during the second quarter of 2003, the Company embarked on a plan to sell 14 hotels, 3 land parcels and an office building (See Note 2 of these Condensed Consolidated Financial Statements).

5. Earnings per share

      The following table sets forth the computation of basic and diluted earnings (loss) per share:

			(Unaudited in thousands)
			Three months ended						Six months ended
			June 30, 2003			June 30, 2002			June 30, 2003			June 30, 2002
			Successor			Predecessor			Successor			Predecessor
	Income (loss) — continuing operations		$	1,255		$	5,524		$	(5,731	)	$	(7,162	)
	Loss from discontinued operations, net of taxes			(3,696	)		(2,061	)		(5,794	)		(3,805	)
	Net (loss) income			(2,441	)		3,463			(11,525	)		(10,967	)
	Preferred stock dividend			(3,818	)		—			(7,594	)		—
	Net (loss) income attributable to common stock			(6,259	)		3,463			(19,119	)		(10,967	)
	Income (loss) — continuing operations			1,255			5,524			(5,731	)		(7,162	)
	Preferred stock dividend			(3,818	)		—			(7,594	)		—
	(Loss) income from continuing operations attributable to common stock before discontinued operations		$	(2,563	)	$	5,524		$	(13,325	)	$	(7,162	)
Denominator:
		Denominator for basic and diluted earnings (loss) per share — weighted-average shares		7,000			28,480			7,000			28,480
Basic and diluted earnings (loss) per common share:
	(Loss) income from continuing operations attributable to common stock before discontinued operations			(0.37	)		0.19			(1.90	)		(0.25	)
	Income (loss) — continuing operations			0.18			0.19			(0.82	)		(0.25	)
	Loss from discontinued operations			(0.53	)		(0.07	)		(0.83	)		(0.13	)
	Net (loss) income			(0.35	)		0.12			(1.65	)		(0.38	)
	Net (loss) income attributable to common stock		$	(0.89	)	$	0.12		$	(2.73	)	$	(0.38	)

      The computation of diluted loss per share for the Successor periods ended June 30, 2003, as calculated above, did not include shares associated with the assumed conversion of the A and B warrants because their inclusion would have been antidilutive. The computation of diluted earnings (loss) per share for the Predecessor periods ended June 30, 2002, as calculated above, did not include shares associated with the assumed conversion of the CRESTS (8,169,935 shares) or stock options because their inclusion would have been antidilutive.

8

LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

6. Other accrued liabilities

      At June 30, 2003 and December 31, 2002, other accrued liabilities consisted of the following:

	Successor			Predecessor
	June 30, 2003			December 31, 2002
	(In thousands)
Salaries and related costs	$	16,655		$	17,293
Property and sales taxes		15,914			16,668
Professional fees		821			807
Provision for state income taxes		2,419			2,219
Franchise fee accrual		1,905			1,388
Accrued interest		78			1,524
Accrual for allowed claims		1,314			1,749
Other		1,278			1,977
		40,384			43,625
Less : accrued liabilities related to assets held for sale		(3,128	)		—
	$	37,256		$	43,625

7. Long-term debt

      As previously discussed, on May 22, 2003, the Company completed an $80 million financing underwritten by Lehman Brothers Holdings, Inc. which was primarily utilized to settle debts secured by the eighteen hotels previously owned by Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. (both Lodgian subsidiaries). The Lehman Financing, provided to eighteen newly-formed subsidiaries (one for each hotel), is a two-year term loan with an optional one-year extension and bears interest at the higher of 7.25% or LIBOR plus 5.25%. The one-year extension is only available if, at the time of electing to extend and at the initial maturity date, there are no events of default. If the Company opts for the one-year extension, an extension fee of $3.0 million is payable. Pursuant to the terms of the agreement, additional interest of $4.4 million is also payable prior to the initial maturity date (May 22, 2005). If, however, the Company makes one or more prepayments totaling at least $20 million in aggregate on or before March 1, 2004, the additional interest payable will reduce to $3.6 million. Payments of principal and interest on the Lehman Facility are due monthly. If an event of default occurs, default interest, which equates to an additional 3.25%, is payable for the period of the default.

      On November 25, 2002, the effective date of the Joint Plan of Reorganization, loans approximating $83.5 million, secured by 20 hotel properties, were substantially reinstated on their original terms, except for the extension of certain maturities. The terms of one loan, in the amount of $2.5 million and secured by one hotel, were amended to provide for a new interest rate as well as a new maturity date.

      On emergence from Chapter 11 on November 25, 2002, the Company also received exit financing of $309 million with and through Merrill Lynch Mortgage Lending, Inc. (“Merrill”), secured by 57 hotel properties. The exit financing was initially comprised of three separate components as follows:

• Senior debt of $224.0 million accruing interest at the rate of LIBOR plus 2.2442%, secured by, among other things, first mortgage liens on the fee simple and leasehold interests in 55 of the Company’s hotels;

• Mezzanine debt of $78.7 million accruing interest at the rate of LIBOR plus 9.00%, secured by the equity interest in the subsidiaries of 56 hotels (the 55 which secure the Senior Debt and one additional hotel); and

• Debt provided through Computershare Trust Company of Canada, a Canadian lender, of $10.0 million Canadian dollars (equated to approximately $6.3 million U.S. dollars at inception) maturing in December 2007 accruing interest at the rate of 7.879% secured by a mortgage on the Windsor property.

9

LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

      In March 2003, as permitted by the terms of the Senior and Mezzanine debt agreements, Merrill exercised the right to “resize” the Senior and Mezzanine debt amounts, prior to the securitization of the mortgage loan. As a result, the principal amount of the Senior Debt was decreased from $223.5 million (initially $224.0 less $0.5 million of principal payments) to $218.1 million, and the initial principal amount of the Mezzanine Debt was increased from $78.7 million to $84.1 million. Though the blended interest rate on the Merrill debt remained at LIBOR plus 4% at the date of the resizing, the interest rate on the Senior debt was modified to LIBOR plus 2.36% and the interest rate on the Mezzanine debt was modified to LIBOR plus 8.2546%.

      The Senior and Mezzanine debts mature in November 2004. There are, however, three one-year options to renew which could extend the facility for an additional three years. The first option to extend the maturity date of the Senior and Mezzanine debts by up to one year (i.e. to November 2005) is available only if no events of default occur in respect of the payment of principal, interest and other required payments. The second and third extension terms are available only if no events of default (as defined by the agreement) exist and are subject to minimum Debt Service Coverage Ratio and Debt Yield requirements (as defined). Payments of principal and interest on all three portions of the facility are due monthly; however, the principal payments on the Senior and Mezzanine debts may be deferred during the first twelve months of the agreement.

      The Senior and Mezzanine debt agreements provide that when either the Debt Yield (as defined) for the trailing 12-month period is below 12.75% during the first year of the loan ending November 2003 (13.25% during the second year) or the Debt Service Coverage Ratio (as defined) is below 1.20, excess cash flows (after payment of operating expenses, management fees, required reserves, principal and interest) produced by the 56 properties must be deposited in a special deposit account. These funds cannot be transferred to the parent company, but can be used for capital expenditures on these properties with lender’s approval, or for principal and interest payments. Funds placed into the special deposit account are released to the borrowers when the Debt Yield and the Debt Service Coverage Ratio are sustained above the minimum requirements for three consecutive months. As of March 31, 2003, the Debt Yield for the 56 properties was below the 12.75% threshold and, therefore, the excess cash produced by the 56 properties is being retained in the special deposit account until the Debt Yield increases above the minimum requirements. As of June 30, 2003, the Debt Yield remained below the minimum requirements.

      The Company through its wholly owned subsidiaries owes approximately $10.9 million under Industrial Revenue Bonds (“IRB’s”) issued on the Holiday Inn Lawrence, Kansas and Holiday Inn Manhattan, Kansas properties. The IRB’s require a minimum debt service coverage ratio (“DSCR”) (as defined), calculated as of the end of each calendar year. For the year ended December 31, 2002, the cash flows of the two properties were insufficient to meet the minimum DSCR requirements due in part to renovations that were being performed at the properties during 2002. The trustee of the IRB’s may give notice of default, at which time the Company could remedy the default by depositing with the trustee an amount currently estimated at approximately $1 million. In the event a default is declared and not cured, the properties could be subject to foreclosure and the Company would be obligated pursuant to a partial guaranty of approximately $1.0 million. The total revenues for these two hotels approximated $2.2 million and $2.0 million for the Second Quarter 2003 and 2002, respectively, and $3.9 million and $3.5 million for the 2003 Period and the 2002 Period, respectively.

      On September 30, 2003, first mortgage debt of approximately $7.2 million of Macon Hotel Associates, L.L.C. (“MHA”) will become due. MHA’s sole asset is the Crowne Plaza Hotel in Macon Georgia. The Company is in discussions with the lender to extend the term of this debt to December 31, 2003 while the Company explores alternative financing opportunities. However there can be no assurance that the lender will grant the extension or that the Company will complete a refinancing on or before the due date. If the lender does not grant the extension and the Company is not able to refinance the debt, the property could be subject to foreclosure. Total revenues for the Crowne Plaza Hotel in Macon, Georgia were approximately $1.5 million each for the three months ended June 30, 2003 and 2002, respectively, and $2.9 million and $3.2 million for the six months ended June 30, 2003 and 2002, respectively. The Company’s net investment in MHA as of June 30, 2003 and December 31, 2002 was $2.4 million and $2.6

10

LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

million, respectively. The debt of approximately $7.2 million is included in the current portion of long-term debt in the accompanying condensed consolidated balance sheet.

      Substantially all of the Company’s property and equipment are pledged as collateral for long-term obligations. Certain of the mortgage notes are subject to a prepayment penalty if repaid prior to their maturity.

      The Company is subject to certain property maintenance and quality standard compliance requirements under its franchise agreements. The Company periodically receives notifications from its franchisors of events of non-compliance with such agreements. In the past, management has cured most cases of non-compliance within the applicable cure periods and the events of non-compliance did not result in events of default under the respective loan agreements. However, in selected situations and based on economic evaluations, management may elect to not comply with the franchisor requirements. In such situations, the Company will either select an alternative franchisor or operate the property independent of any franchisor (See Note 9 to these Condensed Consolidated Financial Statements).

8. Income taxes

      The Company recorded income tax provisions of $0.1 million and $0.2 million for the three and six months ended June 30, 2003, respectively. The provisions for the Predecessor three and six months ended June 30, 2002 were also $0.1 million and $0.2 million, respectively. Both related primarily to provisions for state income taxes.

9. Commitments and Contingencies

      As of August 11, 2003, the Company had received termination notices from franchisors with respect to 3 properties (this does not include one hotel for which the Company has met all of the requirements to “cure” but has not yet received the cure letter from the franchisor). Also, the Company was not in strict compliance with the terms of one other franchise agreement. The notices from the franchisors resulted from physical conditions being below brand standards. The Company is working with the franchisors to cure the default conditions and has a capital improvement program to address the capital improvements required by the franchisors, the re-branding of several hotels and general renovation projects intended to ultimately improve the operations of the hotels. During the two years ending December 2004, the Company expects to spend approximately $76.0 million in aggregate on all 97 hotels, with approximately $15.4 million currently escrowed for such improvements.

      While it is the Company’s belief that it will cure all defaults under the franchise agreements before the applicable termination dates, there can be no assurance that it will be able to do so or be able to obtain additional time in which to cure the defaults. The license agreements are subject to cancellation in the event of a default, including the failure to operate the hotel in accordance with the quality standards and specification of the licensors. In the event of a franchise termination, management may seek to license the hotel with another nationally-recognized brand. The Company believes that the loss of a license for any individual hotel would not have a material adverse effect on the Company’s financial condition and results of operations, since the Company would either select an alternative franchisor or operate the hotel independent of a franchisor.

      As part of the Impac Plan of Reorganization, the Company elected to reject its license agreement relating to its hotel in Cincinnati, Ohio and ceased operating this hotel as a Holiday Inn on May 23, 2003; the hotel is currently being operated as an independent hotel. In addition, the Company made the following franchise changes during the second quarter of 2003:

• The previously independent hotel in Pensacola, Florida was converted to a Holiday Inn Express on April 4, 2003;

• The previously independent hotel in Dothan, Alabama was converted to a Holiday Inn Express on May 23, 2003;

11

LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

• The former Holiday Inn – Dothan in Alabama was converted to a Quality Inn on May 23, 2003;

• The former Hurstbourne Hotel and Conference Center in Louisville, Kentucky was converted to a Clarion Hotel on June 2, 2003.

      The Company is contingently liable with respect to three irrevocable letters of credit totaling $4.9 million issued as guarantees to Zurich American Insurance Company, Donlen Fleet Management Services and U.S. Food Services. The letters of credit expire in November 2003 but may require renewal beyond those dates.

      The Company is self insured up to certain limits (deductibles) with respect to employee medical, employee dental, property insurance, general liability insurance, personal injury claims, workers’ compensation and auto liability. The Company establishes liabilities for these self-insured obligations annually, based on actuarial valuations and the Company’s history of claims. Should unanticipated events cause these claims to escalate beyond normal expectations, the Company’s financial condition and results of operations could be adversely affected. As of June 30, 2003, the Company had approximately $7.6 million accrued for such liabilities.

      The Company was a party in litigation with Hospitality Restoration and Builders, Inc. (“HRB”), a general contractor hired to perform work on six of the Company’s hotels. The litigation involved hotels in Texas (filed in the District Court of Harris County in October 1999), Illinois (in the United States District Court, Northern District of Illinois, Eastern Division in February 2000) and New York (filed in the Supreme Court, New York County in July 1999). In general, HRB claimed that the Company breached contracts to renovate the hotels by not paying for work performed. The Company contended that it was over-billed by HRB and that a significant portion of the completed work was defective. In July 2001, the parties agreed to settle the litigation pending in Texas and Illinois. In exchange for mutual dismissals and full releases, the Company paid HRB $750,000. With respect to the matter pending in the state of New York, HRB claimed that it was owed $10.7 million. The Company asserted a counterclaim of $7 million. In February 2003, the Company and HRB agreed to settle the litigation pending in the state of New York. In exchange for mutual dismissals and full releases, the Company paid HRB $625,000. The Company provided fully for this liability in its Consolidated Financial Statements for the year ended December 31, 2002 (was reflected in general, administrative and other expenses in the Statement of Operations).

      The Company is party to other legal proceedings arising in the ordinary course of business, the impact of which would not, either individually or in the aggregate, in management’s opinion, have a material adverse effect on its financial position or results of operations. Certain of these claims are limited to the amounts available under the Company’s disputed claims reserve.

10. New Accounting Pronouncements

      In November 2002, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”) which elaborates on the disclosures to be made by a guarantor in its financial statements. It also requires a guarantor to recognize a liability for the fair value of the obligation undertaken in issuing the guarantee at the inception of a guarantee. The disclosure requirements of FIN 45 were effective for the Company as of December 31, 2002. The recognition provisions of FIN 45 will be applied on a prospective basis to guarantees issued after December 31, 2002. The requirements of FIN 45 did not have a material impact on the Company’s financial position and results of operations.

      In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 addresses consolidation by a business of variable interest entities in which it is the primary beneficiary. FIN 46 is effective immediately for certain disclosure requirements for variable interest entities created after January 31, 2003 and effective for periods beginning after June 15, 2003 for existing variable interest entities. At June 30, 2003, the Company had no variable interest entities and therefore the Company does not expect the effects of FIN 46 to have a material impact on its financial position and results of operations.

12

LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

      On April 30, 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” which amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 requires that contracts with comparable characteristics be accounted for similarly. In particular, SFAS No. 149 clarifies the circumstances under which a contract with an initial net investment meets the characteristics of a derivative as discussed in SFAS No. 133. In addition, SFAS No. 149 clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 amends certain other existing pronouncements, resulting in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company adopted SFAS No. 149 on July 1, 2003. The adoption did not have a material impact on its financial position and results of operations.

      On May 15, 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” which aims to eliminate diversity in practice by requiring that certain types of freestanding instruments be reported as liabilities by their issuers including mandatorily redeemable instruments issued in the form of shares which unconditionally obligate the issuer to redeem the shares for cash or by transferring other assets. Until now, these types of instruments have been presented in various ways, as part of liabilities, as part of equity, or between the liabilities and equity sections (sometimes referred to as “mezzanine” reporting). The provisions of SFAS No. 150, which also include a number of new disclosure requirements, are effective for instruments entered into or modified after May 31, 2003. For pre-existing instruments, SFAS No. 150 is effective as of the beginning of the first interim period which commences after June 15, 2003 (July 1, 2003 for the Company). The Company adopted SFAS No. 150 in the third quarter of 2003. The adoption impacted the treatment of the Company’s Mandatorily Redeemable 12.25% Cumulative Preferred Stock (“Preferred Stock”), presented in these Condensed Consolidated Financial Statements between total liabilities and stockholders’ equity. For periods subsequent to June 30, 2003, the Preferred Stock will be reported as a liability and the related dividends will be included in interest expense. Prior periods will be restated for comparability.

11. Related party transactions

      Richard Cartoon, the Company’s Executive Vice President and Chief Financial Officer, is a principal in a business that the Company retained in October 2001 to provide Richard Cartoon’s services as Chief Financial Officer and other restructuring support and services. In addition to amounts paid for Richard Cartoon’s services, the Company was billed $69,000 and $122,000, including expenses, for other support and services provided by associates of Richard Cartoon, LLC for the three and six months ended June 30, 2003, respectively.

12. Subsequent event

      In August 2003, management committed to a plan to sell one additional hotel. Management expects to dispose of this hotel within the next year. However, there can be no assurance that the Company will finalize the sale of this asset within the next year, if at all. This hotel is included in the accompanying Condensed Consolidated Financial Statements as an asset held for use. The net carrying value of the property, plant and equipment of this hotel as of June 30, 2003 and December 31, 2002 was $1.9 million and $2.0 million, respectively; related long-term debt approximated $1.8 million as of June 30, 2003 and December 31, 2002, respectively. Total revenues were $0.7 million for each of the three months ended June 30, 2003 and 2002, respectively, and $0.9 million and $1.0 million for the six months ended June 30, 2003 and 2002, respectively.

13

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Chapter 11 proceedings

      As previously discussed in the Notes to the unaudited Condensed Consolidated Financial Statements included in this Form 10-Q, the Company and substantially all of its subsidiaries which owned hotel properties filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code on December 20, 2001, in the Southern District of New York. The Bankruptcy Court confirmed the Company’s First Amended Joint Plan of Reorganization (the “Joint Plan of Reorganization”) on November 5, 2002 and on November 25, 2002, the Company and entities owning 78 hotels officially emerged from Chapter 11. Pursuant to the terms of the Joint Plan of Reorganization, eight wholly-owned hotels were returned to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease.

      Of the Company’s 97 hotel portfolio, eighteen hotels, previously owned by two subsidiaries (Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.), were not part of the Joint Plan of Reorganization. On April 24, 2003, the Bankruptcy Court confirmed the plan of reorganization relating to these eighteen hotels (the “Impac Plan of Reorganization”). These eighteen hotels remained in Chapter 11 until May 22, 2003, the date on which the Company, through eighteen newly-formed subsidiaries (one for each hotel), finalized an $80 million financing with Lehman Brothers Holdings, Inc. (the “Lehman Financing”). The Lehman Financing was primarily used to settle the remaining amount due to the secured lender of these hotels. The Impac Plan of Reorganization also provided for a pool of funds of approximately $0.3 million to be paid to the general unsecured creditors of the eighteen hotels.

      The effects of the Joint Plan of Reorganization were recorded in accordance with the American Institute of Certified Public Accountant’s Statement of Position (“SOP”) 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code,” effective November 22, 2002. SOP 90-7 required the application of Fresh Start Accounting. As a result, the Consolidated Financial Statements subsequent to the Company’s emergence from Chapter 11 are those of a new reporting entity (the “Successor”) and are not comparable with the financial statements of the Company prior to the effective date of the Joint Plan of Reorganization (the “Predecessor”).

Discontinued operations

      Pursuant to the terms of the Joint Plan of Reorganization, eight wholly-owned hotels were returned to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease. The assets, liabilities and results of operations of these nine hotels are reported in Discontinued Operations as of and for the three and six months ended June 30, 2003 and 2002. Due primarily to the application of fresh start accounting in November 2002, in which these and other assets were adjusted to their respective fair values, there was no gain or loss on this transaction.

      In addition, in June 2003, the Company embarked on a plan to sell 14 hotels, 3 land parcels and an office building. The strategy to sell these assets is part of management’s plans to:

• pay down the Lehman Financing by at least $20 million to minimize interest costs (See Note 7 to the Condensed Consolidated Financial Statements presented elsewhere in this report);

• provide additional funding for the Company’s capital expenditure program to comply with franchisor requirements and improve brand quality; and

• dispose of certain hotels which are performing below the standard set by management for the entire portfolio.

      In connection with this strategy, where the carrying values of the assets exceeded the estimated fair values, net of selling costs, the carrying values were reduced and impairment charges were recorded. The impairment charges recorded related to 4 hotels and 2 land parcels and approximated $3.4 million. Fair value is determined using quoted market prices, when available, or other accepted valuation

14

techniques. Where the estimated selling prices, net of selling costs, exceeded the carrying values, no adjustments were made. Management plans to dispose of these assets within the next year. While the completion of these dispositions is probable, there can be no assurance that the Company will finalize the sale of any or all of these assets within the next year, if at all. The results of operations of all assets identified as held for sale (including the related impairment charges) are reported in Discontinued Operations for the three and six months ended June 30, 2003 and 2002. The assets held for sale and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheet as of June 30, 2003.

      In August 2003, management committed to a plan to sell one additional hotel. Management expects to dispose of this hotel within the next year. However, there can be no assurance that the Company will finalize the sale of this asset within the next year, if at all. This hotel is included in the Condensed Consolidated Financial Statements, presented elsewhere in this report, as an asset held for use. The net carrying value of the property, plant and equipment of this hotel as of June 30, 2003 and December 31, 2002 was $1.9 million and $2.0 million, respectively; related long-term debt approximated $1.8 million as of June 30, 2003 and December 31, 2002, respectively. Total revenues were $0.7 million for each of the three months ended June 30, 2003 and 2002, respectively, and $0.9 million and $1.0 million for the six months ended June 30, 2003 and 2002, respectively.

Forward-looking statements/risk factors

      The following discussion should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and related notes thereto included elsewhere herein.

      The discussion below and elsewhere in this Form 10-Q includes statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These include management’s expectations, statements that describe anticipated revenues, capital expenditures, other financial items, the Company’s business plans and objectives, the expected impact of competition, government regulation, litigation and other factors on the Company’s future financial condition and results of operations. The words “may,” “should,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “plan”, and similar expressions are intended to identify forward-looking statements. Such risks and uncertainties, any one of which may cause actual results to differ materially from those described in the forward-looking statements, include or relate to, among other things:

• Risks associated with the Company’s ability to maintain its existing franchise affiliations which could affect the Company’s revenue generating capabilities;

• The impact of potential litigation and/or governmental inquiries and investigation involving the Company;

• The effect of competition and the economy on the Company’s ability to maintain margins on existing operations, including uncertainties relating to competition;

• The Company’s ability to generate sufficient cash flows from operations to meet its obligations;

• The effectiveness of changes in management and the ability of the Company to retain qualified individuals to serve in senior management positions;

• Risks associated with reductions in hotel values which are dependent upon the successful operation of the hotels;

• Risks associated with increases in the cost of debt;

• Risks associated with the holders of the Company’s common stock exercising significant control over the Company and selling large blocks of shares;

• Risks associated with the Company’s ability to meet the continuing listing requirements of the American Stock Exchange;

• Risks associated with self-insured claims escalating beyond expectations;

• Risks associated with the Company’s ability to comply with the terms of its loan agreements;

• Risks associated with the Company’s short operating history since the effectiveness of its Joint Plan of Reorganization;

• Risks associated with environmental, state and federal regulations;

• Risks associated with normal collective bargaining contract negotiations;

• Risks associated with the Company’s high level of encumbered assets which could affect its ability to access additional working capital; and

15

• Risks as a result of the short time that the public market for the Company’s new securities has existed.

      Many of these factors are not within the Company’s control and readers are cautioned not to put undue reliance on these forward looking statements.

General Overview

      Management believes that the results of operations in the hotel industry are best explained by three key performance measures: occupancy, average daily rate (“ADR”) and revenue per available room (“RevPAR”) levels. These measures are influenced by a variety of factors including national, regional and local economic conditions, the degree of competition with other hotels in the area and changes in travel patterns. The demand for accommodations is also affected by normally recurring seasonal patterns since most of the Company’s hotels experience lower occupancy levels in the fall and winter months (November through February) which may result in lower revenues, lower net income and less cash flow during these months. RevPAR is derived by dividing room revenues by the number of available room nights for a given period or, alternatively, by multiplying the occupancy by the ADR.

      The following table shows room data, occupancy, average daily rate and RevPAR by category of hotel for the three and six months ended June 30, 2003 and 2002 (shown for those hotels owned and managed as of June 30, 2003, including a minority-owned hotel which the Company manages):

					Three months ended						Six months ended
			Capital Expenditure		June 30, 2003			June 30, 2002			June 30, 2003			June 30, 2002
			Six months ended
			June 30, 2003		Successor			Predecessor			Successor			Predecessor
Upper Upscale
	Number of properties	- continuing	$	5,925		4			4			4			4
	Number of rooms					825			825			825			825
	Occupancy					57.7	%		71.5	%		59.6	%		66.1	%
	Average daily rate				$	88.93		$	93.95		$	90.76		$	94.24
	RevPAR				$	51.35		$	67.17		$	54.11		$	62.30
Upscale
	Number of properties	- continuing		1,156		18			18			18			18
	Number of rooms					3,156			3,156			3,156			3,156
	Occupancy					68.5	%		71.5	%		67.3	%		68.8	%
	Average daily rate				$	82.65		$	83.54		$	84.48		$	85.44
	RevPAR				$	56.61		$	59.72		$	56.83		$	58.77
Midscale with Food & Beverage
	Number of properties	- continuing		6,684		49			48			49			48
		- discontinued		758		11			12			11			12
	Number of rooms					12,045			11,895			12,045			11,895
	Occupancy					60.5	%		64.1	%		55.6	%		58.5	%
	Average daily rate				$	71.66		$	71.82		$	70.18		$	70.27
	RevPAR				$	43.37		$	46.03		$	39.05		$	41.13
Midscale without Food & Beverage
	Number of properties	- continuing		1,297		9			8			9			8
		- discontinued		199		1			—			1			—
	Number of rooms					1,282			1,047			1,282			1,047
	Occupancy					59.4	%		63.6	%		52.2	%		58.8	%
	Average daily rate				$	58.25		$	57.12		$	58.07		$	57.06
	RevPAR				$	34.60		$	36.33		$	30.30		$	33.53
Independent Hotels
	Number of properties	- continuing		1,624		3			5			3			5
		- discontinued		1,783		2			2			2			2
	Number of rooms					957			1,342			957			1,342
	Occupancy					44.9	%		44.8	%		41.5	%		45.9	%
	Average daily rate				$	69.53		$	75.57		$	74.05		$	77.91
	RevPAR				$	31.20		$	33.83		$	30.71		$	35.78
All Hotels
	Number of properties	- continuing		16,659		83			83			83			83
		- discontinued		2,740		14			14			14			14
	Number of rooms					18,265			18,265			18,265			18,265
	Occupancy					60.9	%		64.2	%		56.8	%		59.7	%
	Average daily rate				$	73.54		$	74.55		$	73.45		$	74.17
	RevPAR				$	44.77		$	47.89		$	41.75		$	44.30

In accordance with the Smith Travel Research Chain Scales, the categories include the following brands:

      Upper Upscale: Hilton and Marriott

      Upscale: Courtyard by Marriott, Crowne Plaza, Radisson and Residence Inn

      Midscale with Food & Beverage: Clarion, Doubletree Club, Four Points, Holiday Inn, Holiday Inn Select, Holiday Inn SunSpree Resort and Quality Inn

      Midscale without Food & Beverage: Fairfield Inn, Hampton Inn and Holiday Inn Express

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      The following table shows room data, occupancy, average daily rate and RevPAR by geographic region for the three and six months ended June 30, 2003 and 2002 (shown for those hotels owned and managed as of June 30, 2003, including a minority-owned hotel which the Company manages):

					Three months ended						Six months ended
			Capital Expenditure		June 30, 2003			June 30, 2002			June 30, 2003			June 30, 2002
			Six months ended
			June 30, 2003		Successor			Predecessor			Successor			Predecessor
Northeast Region
	Number of properties	- continuing	$	4,191		33			33			33			33
		- discontinued		156		4			4			4			4
	Number of rooms					7,011			7,011			7,011			7,011
	Occupancy					64.1	%		69.0	%		57.6	%		60.2	%
	Average daily rate				$	80.31		$	79.13		$	78.38		$	77.22
	RevPAR				$	51.46		$	54.60		$	45.17		$	46.51
Southeast Region
	Number of properties	- continuing		3,537		26			26			26			26
		- discontinued		2,317		8			8			8			8
	Number of rooms					5,794			5,794			5,794			5,794
	Occupancy					61.4	%		61.0	%		57.6	%		58.9	%
	Average daily rate				$	68.14		$	69.66		$	67.75		$	69.70
	RevPAR				$	41.86		$	42.52		$	39.03		$	41.07
Midwest Region
	Number of properties	- continuing		5,707		17			17			17			17
		- discontinued		267		2			2			2			2
	Number of rooms					4,141			4,141			4,141			4,141
	Occupancy					55.0	%		60.9	%		52.3	%		57.2	%
	Average daily rate				$	68.25		$	72.10		$	69.49		$	71.45
	RevPAR				$	37.55		$	43.88		$	36.35		$	40.89
West Region
	Number of properties	- continuing		3,223		7			7			7			7
	Number of rooms					1,319			1,319			1,319			1,319
	Occupancy					59.8	%		63.8	%		63.6	%		68.3	%
	Average daily rate				$	74.59		$	76.07		$	82.54		$	84.04
	RevPAR				$	44.62		$	48.51		$	52.49		$	57.44
All Hotels
	Number of properties	- continuing		16,659		83			83			83			83
		- discontinued		2,740		14			14			14			14
	Number of rooms					18,265			18,265			18,265			18,265
	Occupancy					60.9	%		64.2	%		56.8	%		59.7	%
	Average daily rate				$	73.54		$	74.55		$	73.45		$	74.17
	RevPAR				$	44.77		$	47.89		$	41.75		$	44.30

The regions are defined as follows:

      Northeast: Canada, Connecticut, Massachusetts, Maryland, New Hampshire, New York, Ohio, Pennsylvania, Vermont, West Virginia

      Southeast: Alabama, Florida, Georgia, Kentucky, Louisiana, South Carolina, Tennessee

      Midwest: Arkansas, Iowa, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Oklahoma, Texas

      West: Arizona, California, Colorado, New Mexico

      Revenues. Revenues are comprised of room, food and beverage and other revenues. Room revenues are derived from guest room rentals, whereas food and beverage revenues primarily include sales from hotel restaurants, room service, hotel catering and meeting room rentals. Other revenues include charges for guests’ long-distance telephone service, laundry and parking. Approximately 73% of total revenues are derived from guest room rentals, primarily from transient demand (approximately 70%). Group demand makes up approximately 24% with contract demand comprising the remaining 6%.

      Operating Expenses. Operating expenses are comprised of direct expenses; general, administrative and other expenses; and depreciation and amortization. Direct expenses, including rooms, food and beverage and other operations, reflect expenses directly related to hotel operations. These expenses are variable with available rooms and occupancy, but contain fixed components. General, administrative and other expenses primarily represent property level expenses related to general operations such as marketing, utilities, repairs and maintenance and other property administrative costs. General, administrative and other expenses also include corporate overhead (such as accounting services, legal and professional fees, information technology and executive management) which are generally fixed. Also included in general, administrative and other expenses for the three and six months ended June 30, 2003 are expenses relating to the post-emergence reorganization activities.

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Results of Operations

      The discussion of results of operations, income taxes, liquidity and capital resources that follows is derived from the Company’s unaudited Condensed Consolidated Financial Statements set forth in “Item I. Financial Statements” included in this Form 10-Q (“the Consolidated Financial Statements”) and should be read in conjunction with such financial statements and notes thereto.

      At June 30, 2003, the Company managed a portfolio of 97 hotels. Of the 97 hotels, 92 were wholly-owned, four were owned in joint venture partnerships in which the Company had a 50% or greater financial interest and one was owned in a joint venture partnership in which the Company had a minority equity interest.

      At June 30, 2002, the Company managed a portfolio of 106 hotels. Of the 106 hotels, 101 were wholly-owned, four were owned in joint venture partnerships in which the Company had a 50% or greater financial interest and one was owned in a joint venture partnership in which the Company had a minority equity interest.

      Except for the hotel in which the Company had a minority equity interest (which is accounted for using the equity method of accounting), the assets, liabilities and results of operations of all the hotels are included in the Condensed Consolidated Financial Statements.

      Reported in Continuing Operations for the three and six months ended June 30, 2003, are 82 of the 97 hotels; 14 hotels are included in Discontinued Operations along with 3 land parcels and one office building; one hotel is not consolidated.

      Reported in Continuing Operations for the three and six months ended June 30, 2002, are 82 of the 106 hotels; 23 hotels are included in Discontinued Operations along with 3 land parcels and one office building; one hotel is not consolidated. The reduction in hotels from 106 to 97 is a result of the return of eight hotels to the lender and one hotel to the lessor of a capital lease in January 2003.

Three Months Ended June 30, 2003 (“Second Quarter 2003”) Compared to the Three Months Ended June 30, 2002 (“Second Quarter 2002”) and Six Months Ended June 30, 2003 (“2003 Period”) Compared to the Six Months Ended June 30, 2002 (“2002 Period”)

Continuing Operations -

Revenues

Second Quarter 2003 compared to Second Quarter 2002

      Revenues for the 82 hotels reported in Continuing Operations were $87.1 million for the Second Quarter 2003, a 7.7% decrease from revenues of $94.3 million for the Second Quarter 2002. RevPAR for these hotels declined 7.0% from the Second Quarter 2002 due to both declines in occupancy (declined by 5.1%) and ADR (declined by 1.9%). Revenues and RevPAR for the Second Quarter 2003 were adversely affected by business declines related to the softening of the U.S. economy as well as to large scale renovations being performed at some of the Company’s hotels, including all three Hilton hotels, which severely impacted the Company’s performance in the “Upper Upscale” category.

2003 Period compared to 2002 Period

      The factors described above also affected revenues for the 82 hotels reported in Continuing Operations for the 2003 Period. Revenues for these hotels for the 2003 Period were $162.7 million, a 6.0% decrease from revenues of $173.0 million for the 2002 Period. RevPAR for these hotels declined 5.6% from the 2002 Period due to both declines in occupancy (declined by 4.4%) and ADR (declined by 1.2%).

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Direct Operating Expenses

Second Quarter 2003 compared to Second Quarter 2002

      Direct operating expenses for the 82 hotels reported in Continuing Operations were $32.8 million (37.7% of direct revenues) for the Second Quarter 2003 and $35.5 million (37.6% of direct revenues) for the Second Quarter 2002. The $2.7 million decrease was primarily driven by the reduction in variable expenses related to the reduction in revenues.

2003 Period compared to 2002 Period

      Also primarily driven by the reduction in revenues, direct operating expenses for the 2003 Period for the 82 hotels reported in Continuing Operations decreased by $3.3 million (5.0%), from $66.5 million (38.4% of direct revenues) in the 2002 Period to $63.2 million (38.8% of direct revenues) in the 2003 Period.

General, administrative and other expenses

Second Quarter 2003 compared to Second Quarter 2002

      General, administrative and other expenses were $37.2 million for the Second Quarter 2003 and $35.3 million for the Second Quarter 2002. Contributing to this increase of $1.9 million were insurance ($0.8 million), utilities ($0.4 million), property and other taxes ($0.3 million) and severance payments of $0.8 million. Post-emergence expenses of $1.0 million related to the Chapter 11 filing for the 78 hotels that emerged from Chapter 11 in November 2002 and the nine properties that were disposed of in early January 2003 also contributed to the increase in general, administrative and other expenses. Post-emergence expenses include legal and professional fees related to the claims reconciliation process as well as fees payable to the United States Trustee of the Department of Justice, which are required as part of the reorganization process. These expenses were reported as reorganization items for the Second Quarter 2002. These increases were partially offset by other factors, particularly certain property level expenses which decreased primarily as a result of the decline in revenues (property level general and administrative expenses, advertising and promotion, franchise fees and equipment rentals decreased $1.4 million in aggregate).

2003 Period compared to 2002 Period

      General, administrative and other expenses were $73.8 million for the 2003 Period, an increase of $4.4 million over the 2002 Period ($69.4 million). As in the Second Quarter 2003, there were increases in certain general and administrative expenses which were partially offset by reductions in property level expenses, primarily as a result of reductions in revenues. Corporate overhead also decreased as a result of certain cost reduction initiatives at the corporate office, including reduction in office space and staff costs. Insurance, utilities, ground rent and severance payments accounted for increases of $1.4 million, $1.0 million, $0.3 million and $0.8 million, respectively. In addition, post-emergence expenses of $3.2 million contributed to the increase in general, administrative and other expenses. These increases were partially offset by reduced property level expenses, primarily related to the decline in revenues; property level general and administrative expenses, franchise fees and equipment rentals decreased $1.4 million in aggregate. The remaining reduction is primarily a result of the reductions in corporate overhead discussed above.

Depreciation and amortization expense

      As a result of the write-down of fixed assets recorded on the implementation of fresh start reporting on November 22, 2002, depreciation for both the Second Quarter 2003 and the 2003 Period were lower than the equivalent periods in 2002.

      Second Quarter 2003 compared to Second Quarter 2002 - Depreciation and amortization expense was $7.9 million in the Second Quarter 2003 and $12.0 million in the Second Quarter 2002.

      2003 Period compared to 2002 Period — Depreciation and amortization expense was $15.6 million in the 2003 Period and $23.7 million in the 2002 Period.

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Interest expense

      Second Quarter 2003 compared to Second Quarter 2002 — Interest expense was $7.1 million in the Second Quarter 2003 (including amortization of financing fees of $0.8 million) and $7.6 million in the Second Quarter 2002 (amortization of financing fees were nil). The reduction in interest expense was primarily attributable to a reduction in the cost of debt. The Company’s variable rate debt as of June 30, 2003, excluding the new Lehman Financing (which was completed on May 22, 2003), was approximately $308.8 million. Average LIBOR was 1.35% and 1.84% for the Second Quarter 2003 and Second Quarter 2002, respectively. Also, the interest spread on the Company’s variable rate debt was approximately 2% less than it was during 2002. The reduction in interest expense due to reductions in interest rates was offset by an increase of approximately $0.4 million of interest expense related to the Lehman Financing which replaced debt on which the Company paid no interest between December 20, 2001 and May 22, 2003 (as a result of its reorganization proceedings and with the approval of the Bankruptcy Court, the Company ceased paying interest on certain of its debts).

      2003 Period compared to 2002 Period — Interest expense was $13.5 million in the 2003 Period (including amortization of financing fees of $1.4 million) and $16.0 million in the 2002 Period (amortization of financing fees were de minimus). The reduction in interest expense was primarily attributable to a reduction in the cost of debt. Average LIBOR was 1.38% and 1.87% for the 2003 Period and the 2002 Period, respectively. Also, the interest spread on the Company’s variable rate debt was approximately 2% less than it was during the 2002 Period. In addition, capitalized interest costs for the 2003 period increased $0.3 million over the 2002 Period. The reduction in interest expense due to reductions in interest rates and increases in capitalized interest costs were offset by an increase of approximately $0.4 million of interest expense related to the Lehman Financing which replaced debt on which the Company paid no interest between December 20, 2001 and May 22, 2003 (as a result of its reorganization proceedings and with the approval of the Bankruptcy Court, the Company ceased paying interest on certain of its debts).

Other income (expenses)

      Other income (expenses) for the Second Quarter 2002 and the 2002 Period consisted primarily of gain on extinguishment of debt of $4.4 million. This gain related to a discharge of indebtedness (principal plus accrued interest) in respect of Macon Hotel Associates (a subsidiary of the Company) as a result of a Satisfaction and Release Agreement between Macon Hotel Associates and one of its lenders.

Reorganization items

      For the Second Quarter 2003 and the 2003 Period, reorganization items included only those Chapter 11 legal and professional costs directly attributable to the Impac Debtors, as well as extension fees paid to the secured lender of the Impac Debtors pursuant to the settlement agreement. For the Second Quarter 2002 and the 2002 Period, the Company recorded all costs incurred as a result of the Chapter 11 filing (mainly legal and professional fees) as reorganization items.

      Second Quarter 2003 compared to Second Quarter 2002 — Reorganization items were $0.8 million for the Second Quarter 2003 compared to $2.2 million for the Second Quarter 2002.

      2003 Period compared to 2002 Period — Reorganization items were $2.0 million for the 2003 Period compared to $8.0 million for the 2002 Period.

Minority interests

      Minority interests relate to the minority share of income or loss of certain joint venture partnerships and are therefore directly related to the operating results of the respective hotels. The reduction in minority interests in the Second Quarter 2003 over the Second Quarter 2002 and also the reduction for the 2003 Period over the 2002 Period are due to lower operating results of the respective hotels as well as to a reduced equity ownership for the minority partners in one hotel (50% in the Second Quarter 2002 and the 2002 Period was reduced to 18% in November 2002).

Second Quarter 2003 compared to Second Quarter 2002 — Minority interests were $69,000 and $0.9 million for the Second Quarter 2003 and the Second Quarter 2002, respectively.

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      2003 Period compared to 2002 Period — Minority interests were $0.2 million and $1.3 million for the 2003 Period and the 2002 Period.

Discontinued Operations

      The loss from Discontinued Operations for the Second Quarter 2003 was $3.7 million and $2.1 million for the Second Quarter 2002. For the 2003 Period and 2002 Period, the loss was $5.8 million and $3.8 million, respectively. The Condensed Combined Statement of Operations for the properties classified in Discontinued Operations is presented below along with a discussion of the changes between the periods.

							Three months ended						Six months ended
							June 30, 2003			June 30, 2002			June 30, 2003			June 30, 2002
							(Unaudited in thousands)
Revenues:
							Successor			Predecessor			Successor			Predecessor
		Rooms					$	9,621		$	15,011		$	17,194		$	27,007
		Food and beverage						2,076			3,682			3,777			6,730
		Other						438			685			790			1,367
					(1	)		12,135			19,378			21,761			35,104
Operating expenses:
	Direct:
				Rooms				2,774			4,633			5,247			8,561
				Food and beverage				1,555			2,916			2,979			5,362
				Other				300			492			589			988
					(2	)		4,629			8,041			8,815			14,911
			Gross contribution					7,506			11,337			12,946			20,193
General, administrative and other					(3	)		5,948			10,589			12,020			18,416
Depreciation and amortization					(4	)		1,190			2,700			2,314			5,327
Impairment of long-lived assets					(5	)		3,448			—			3,448			—
			Other operating expenses					10,586			13,289			17,782			23,743
								(3,080	)		(1,952	)		(4,836	)		(3,550	)
	Interest expense				(6	)		(616	)		(109	)		(958	)		(255	)
Loss before income taxes								(3,696	)		(2,061	)		(5,794	)		(3,805	)
Provision for income taxes								—			—			—			—
Net loss							$	(3,696	)	$	(2,061	)	$	(5,794	)	$	(3,805	)

(1)	The reduction in revenues was due primarily to the return of 8 properties to the lenders and one property to the lessor of a capital lease in January 2003. Total revenues for these 9 properties were $6.6 million for the Second Quarter 2002 and $11.5 million for the 2002 Period (revenues for these properties were immaterial during 2003). The remaining reduction in revenues ($0.7 million between the Second Quarter 2003 and the Second Quarter 2002 and $1.8 million between the 2003 Period and the 2002 Period) was due to the same factors discussed above for Continuing Operations (revenue section).
(2)	The reduction in direct operating expenses was primarily related to the reduction in revenues.
(3)	Of the reduction in general, administrative and other of $4.7 million for the Second Quarter 2003 over the Second Quarter 2002, $3.4 million was due to the elimination of the 9 properties from the portfolio. The remaining reductions are due to the similar factors discussed above for Continuing Operations.
(4)	Depreciation and amortization for the Second Quarter 2003 decreased $1.5 million compared to the Second Quarter 2002. For the 2003 period, depreciation and amortization decreased $3.0 million compared with the 2002 Period. Of these reductions, the elimination of the 9 properties from the portfolio accounted for $0.8 million and $1.6 million, respectively. The remaining reductions were due to the reduction in the carrying values of fixed assets which occurred on the implementation of fresh start accounting on November 22, 2002.
(5)	The impairment of long-lived assets of $3.4 million for the Second Quarter 2003 and the 2003 Period was recorded to reduce the carrying values of 4 hotels and 2 land parcels to their estimated selling prices less estimated costs to sell. In accordance with SFAS No. 144, where the estimated selling prices exceeded the carrying values, no gains were recorded.
(6)	Interest expense for the Second Quarter 2003 increased $0.5 million compared to the Second Quarter 2002. For the 2003 Period, interest expense increased by $0.7 million compared with the 2002 Period. For the Second Quarter 2003 and the 2003 period, the increase was primarily due to interest on the Lehman Financing of $0.2 million and to amortization of deferred financing fees in 2003 which were de minimus

21

for the Second Quarter of 2002 and the 2002 Period. The Lehman Financing replaced debt on which the Company paid no interest in the Second Quarter 2002 and the 2002 Period as a result of its reorganization proceedings.

Income Taxes

      As of December 31, 2002, Lodgian had net operating loss carry-forwards of approximately $206 million for federal income tax purposes, which expire in 2004 through 2021. Under the Joint Plan of Reorganization, substantial amounts of net operating losses were utilized to offset income from debt cancellations. The Company’s ability to use the remaining net operating loss carry-forwards to offset future income is subject to limitations which could increase over time. Due to these limitations, a portion or all of these net operating loss carry-forwards could expire unused. In addition, the Company recorded an income tax provision of $0.1 million for the Second Quarter 2003 and $0.2 million for the 2003 Period which related primarily to provisions for state income taxes.

Liquidity and Capital Resources

      As more fully discussed above, the Bankruptcy Court confirmed the Company’s Joint Plan of Reorganization on November 5, 2002 and on November 25, 2002, the Company and entities owning 78 hotels officially emerged from Chapter 11.

      Pursuant to the terms of the Joint Plan of Reorganization, eight other wholly-owned hotels were returned to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease. As a result of the surrender of these nine hotels, long-term debt approximating $15.9 million was extinguished. The results of operations for these nine hotels have been presented as Discontinued Operations in the Condensed Consolidated Statements of Operations.

      Eighteen hotels, previously owned by two subsidiaries (Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.), were not part of the Joint Plan of Reorganization. On April 24, 2003, the Bankruptcy Court confirmed the Impac Plan of Reorganization which related to these eighteen hotels. These eighteen hotels remained in Chapter 11 until May 22, 2003, the date on which the Company, through eighteen newly-formed subsidiaries (one for each hotel), finalized an $80 million financing with Lehman Brothers Holdings, Inc. (the “Lehman Financing”). The Lehman Financing was primarily used to settle the remaining amount due to the secured lender of these hotels. The Impac plan of reorganization also provided for a pool of funds (approximately $0.3 million) to be paid to the general unsecured creditors of the eighteen hotels.

      The Lehman Financing is a two-year term loan with an optional one-year extension and bears interest at the higher of 7.25% or LIBOR plus 5.25%. The one-year extension is only available if, at the time of electing to extend and at the initial maturity date, there are no events of default. If the Company opts for the one-year extension, an extension fee of $3.0 million is payable. Pursuant to the terms of the agreement, additional interest of $4.4 million is also payable prior to the initial maturity date (May 22, 2005). If, however, the Company makes one or more prepayments totaling at least $20 million in aggregate on or before March 1, 2004, the additional interest payable will reduce to $3.6 million. Payments of principal and interest on the Lehman Facility are due monthly. If an event of default occurs, default interest, which equates to an additional 3.25%, is payable for the period of the default.

      In addition to the Lehman Financing, long-term debt includes loans approximating $83.5 million which were substantially reinstated on their original terms (except for the extension of certain maturities), on November 25, 2002, the effective date of the Joint Plan of Reorganization. These loans are secured by 20 hotel properties. On the same date, the terms of one loan, in the amount of $2.5 million and secured by one hotel were amended to provide for a new interest rate as well as a new maturity date.

      The other major component of the Company’s long-term debt is the exit financing of $309 million which it received through Merrill Lynch Mortgage Lending, Inc. (“Merrill”), secured by 57 hotel properties. Also received on the date of emergence from Chapter 11, the exit financing was initially comprised of three separate components as follows:

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• Senior debt of $224.0 million accruing interest at the rate of LIBOR plus 2.2442%, secured by, among other things, first mortgage liens on the fee simple and leasehold interests in 55 of the Company’s hotels;

• Mezzanine debt of $78.7 million accruing interest at the rate of LIBOR plus 9.00%, secured by the equity interest in the subsidiaries of 56 hotels (the 55 which secure the Senior Debt and one additional hotel); and

• Debt provided through Computershare Trust Company of Canada, a Canadian lender, of $10.0 million Canadian dollars (equated to approximately $6.3 million U.S. dollars at inception) maturing in December 2007 accruing interest at the rate of 7.879% secured by a mortgage on the Windsor property.

      In March 2003, as permitted by the terms of the Senior and Mezzanine debt agreements, Merrill exercised the right to “resize” the Senior and Mezzanine debt amounts, prior to the securitization of the mortgage loan. As a result, the principal amount of the Senior Debt was decreased from $223.5 million (initially $224.0 less $0.5 million of principal payments) to $218.1 million, and the initial principal amount of the Mezzanine Debt was increased from $78.7 million to $84.1 million. Though the blended interest rate on the Merrill debt remained at LIBOR plus 4% at the date of the resizing, the interest rate on the Senior debt was modified to LIBOR plus 2.36% and the interest rate on the Mezzanine debt was modified to LIBOR plus 8.2546%.

      The Senior and Mezzanine debts mature in November 2004. There are, however, three one-year options to renew which could extend the facility for an additional three years. The first option to extend the maturity date of the Senior and Mezzanine debts by up to one year (i.e. to November 2005) is available only if no events of default occur in respect of the payment of principal, interest and other required payments. The second and third extension terms are available only if no events of default (as defined by the agreement) exist and are subject to minimum Debt Service Coverage Ratio and Debt Yield requirements. Payments of principal and interest on all three portions of the facility are due monthly; however, the principal payments on the Senior and Mezzanine debts may be deferred during the first twelve months of the agreement.

      The Senior and Mezzanine debt agreements provide that when either the Debt Yield (as defined) for the trailing 12-month period is below 12.75% during the first year of the loan ending November 2003 (13.25% during the second year) or the Debt Service Coverage Ratio (as defined) is below 1.20, excess cash flows (after payment of operating expenses, management fees, required reserves, principal and interest) produced by the 56 properties must be deposited in a special deposit account. These funds cannot be transferred to the parent company, but can be used for capital expenditures on these properties with lender’s approval, or for principal and interest payments. Funds placed into the special deposit account are released to the borrowers when the Debt Yield and the Debt Service Coverage Ratio (as defined) are sustained above the minimum requirements for three consecutive months. As of March 31, 2003, the Debt Yield for the 56 properties was below the 12.75% threshold and, therefore, the excess cash produced by the 56 properties is being retained in the special deposit account until the Debt Yield increases above the minimum requirements. As of June 30, 2003, the Debt Yield remained below the minimum requirements.

      The Company through its wholly owned subsidiaries owes approximately $10.9 million under Industrial Revenue Bonds (“IRB’s”) issued on the Holiday Inn Lawrence, Kansas and Holiday Inn Manhattan, Kansas properties. The IRB’s require a minimum debt service coverage ratio (“DSCR”) (as defined), calculated as of the end of each calendar year. For the year ended December 31, 2002, the cash flows of the two properties were insufficient to meet the minimum DSCR requirements due in part to renovations that were being performed at the properties during 2002. The trustee of the IRB’s may give notice of default, at which time the Company could remedy the default by depositing with the trustee an amount currently estimated at approximately $1 million. In the event a default is declared and not cured, the properties could be subject to foreclosure and the Company would be obligated pursuant to a partial guaranty of approximately $1.0 million. The total revenues for these two hotels approximated $2.2 million and $2.0 million for the Second Quarter 2003 and 2002, respectively and $3.9 million and $3.5 million for the 2003 Period and the 2002 Period, respectively.

      On September 30, 2003, first mortgage debt of approximately $7.2 million of Macon Hotel Associates, L.L.C. (“MHA”) will become due. MHA’s sole asset is the Crowne Plaza Hotel in Macon Georgia. The Company is in discussions with the lender to extend the term of this debt to December 31, 2003 while the Company explores alternative financing opportunities. However there can be no assurance

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that the lender will grant the extension or that the Company will complete a refinancing on or before the due date. If the lender does not grant the extension and the Company is not able to refinance the debt, the property could be subject to foreclosure. Total revenues for the Crowne Plaza Hotel in Macon, Georgia were approximately $1.5 million each for the three months ended June 30, 2003 and 2002, respectively, and $2.9 million and $3.2 million for the six months ended June 30, 2003 and 2002, respectively. The Company’s net investment in MHA as of June 30, 2003 and December 31, 2002 was $2.4 million and $2.6 million, respectively. The debt of approximately $7.2 million is included in the current portion of long-term debt in the condensed consolidated balance sheet included elsewhere in this report.

      Property, plant and equipment which are encumbered by the long-term obligations discussed above are summarized, by lender pool, in the table below:

				June 30, 2003
	Number			Property, plant			Long-term
	of Hotels			and equipment, net			Obligations
Merrill Lynch Mortgage Lending, Inc.		56		$	411,741		$	301,563
Computer Share Trust Company of Canada		1			13,813			7,378
Lehman Brothers Holdings, Inc.- May 22, 2003		18			75,292			80,000
Column Financial, Inc. — January 1, 1995		9			61,418			28,335
Lehman Brothers Holdings, Inc.- June 30, 1997		5			38,998			23,631
JP Morgan Chase Bank		2			9,289			10,899
DDL Kinser		1			3,301			2,430
First Union Bank		1			4,412			3,383
Column Financial, Inc. — June 6, 1995		1			5,682			9,128
Column Financial, Inc. — January 1, 1995		1			6,238			3,270
Robb Evans, Trustee		1			11,078			7,243
		96			641,262			477,260
Other		—			11,630			8,698
		96			652,892		$	485,958
Held for sale		(14	)		(62,644	)		(47,090	)
		82		$	590,248		$	438,868

      As of June 30, 2003, the Company was also contingently liable with respect to three irrevocable letters of credit totaling $4.9 million issued as guarantees to Zurich American Insurance Company, Donlen Fleet Management Services and U.S. Food Services. The letters of credit expire in November 2003 but may require renewal beyond those dates.

      The Company is self insured up to certain limits (deductibles) with respect to employee medical, employee dental, property insurance, general liability insurance, personal injury claims, workers’ compensation and auto liability. The Company establishes liabilities for these self-insured obligations annually, based on actuarial valuations and the Company’s history of claims. Should unanticipated events cause these claims to escalate beyond normal expectations, the Company’s financial condition and results of operations could be adversely affected. As of June 30, 2003, the Company had approximately $7.6 million accrued for such liabilities.

      The Company’s ability to make scheduled principal payments, to pay interest, or to refinance its indebtedness depends on its future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the hotel and vacation industry and to the general economic, political, financial, competitive, legislative and regulatory environment. These factors, including the severity and duration of the current economic downturn, are beyond the Company’s control.

      The Company’s franchise, occupancy and liquor licenses are material to its business operations.

      Franchise licenses – these are generally granted for periods of between 10 to 20 years and are renewable at the expiration dates, subject to the achievement of certain quality and guest satisfaction standards. As of August 11, 2003, the Company had received termination notices from franchisors with respect to 3 properties (this does not include one hotel for which the Company has met all of the requirements to “cure” but has not yet received the cure letter from the franchisor). Also, the Company was not in strict compliance with the terms of one other franchise agreement. The notices from the franchisors resulted from physical conditions being below brand standards. The Company is working with the franchisors to cure the default conditions and has a capital improvement program to address the capital improvements required by the franchisors, the re-branding of several hotels and general renovation projects intended to ultimately improve the operations of the hotels. During the two years ending December 2004,

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the Company expects to spend approximately $76.0 million in aggregate on all 97 hotels, with approximately $15.4 million currently escrowed for such improvements.

      While it is the Company’s belief that it will cure all defaults under the franchise agreements before the applicable termination dates, there can be no assurance that it will be able to do so or be able to obtain additional time in which to cure the defaults. The license agreements are subject to cancellation in the event of a default, including the failure to operate the hotel in accordance with the quality standards and specification of the licensors. In the event of a franchise termination, management may seek to license the hotel with another nationally-recognized brand. The Company believes that the loss of a license for any individual hotel would not have a material adverse effect on the Company’s financial condition and results of operations, since the Company would either select an alternative franchisor or operate the hotel independent of a franchisor.

      As part of the Impac Plan of Reorganization, the Company elected to reject its license agreement relating to its hotel in Cincinnati, Ohio and ceased operating this hotel as a Holiday Inn on May 23, 2003; the hotel is currently being operated as an independent hotel. In addition, the Company made the following franchise changes during the second quarter of 2003:

• The previously independent hotel in Pensacola, Florida was converted to a Holiday Inn Express on April 4, 2003;

• The previously independent hotel in Dothan, Alabama was converted to a Holiday Inn Express on May 23, 2003;

• The former Holiday Inn – Dothan in Alabama was converted to a Quality Inn on May 23, 2003; and

• The former Hurstbourne Hotel and Conference Center in Louisville, Kentucky was converted to a Clarion Hotel on June 2, 2003.

      Occupancy licenses – these are obtained prior to the opening of a hotel and require renewal if there has been a major renovation. The loss of the occupancy license for an individual hotel could have a material adverse effect on the Company’s financial condition and results of operations if this relates to one of the larger hotels.

      Liquor licenses – these licenses are required for the hotels to be able to serve alcoholic beverages and are renewable annually. The loss of a liquor license for an individual hotel would not have a material adverse effect on the Company’s financial condition and results of operations.

      Lodgian utilizes its cash flows for operating expenses, capital expenditures and debt service. Currently, the Company’s principal sources of liquidity consist of existing cash balances and cash flow from operations. Cash flow from operations could, however, suffer from a reduction in demand for lodging as well as large scale renovations being performed at the Company’s hotels. Whereas a downturn in the airline industry could affect demand for travel, such a decline would not be expected to materially impact liquidity. The Company has identified for sale 14 hotels, 3 land parcels and an office building. Though there can be no assurances, management plans to dispose of these assets within the next year and expects that the aggregate sale of these assets will provide additional cash to pay down the Lehman debt and fund a portion of its capital expenditures.

      The Company intends to continue to use its cash for ongoing operations, debt service and capital expenditures and, therefore, does not anticipate paying dividends on the new common stock in the near future. The dividends on the preferred stock due November 25, 2003 will be paid via the issuance of additional shares of preferred stock. For the Second Quarter 2003 and the 2003 Period, the Company accrued $3.8 million and $7.6 million, respectively, of the total preferred stock dividends due November 25, 2003. Also, until the claims distribution process is complete and the remaining entities exit Chapter 11, the Company will continue to make payments in respect of cash claims, bankruptcy court fees and professional fees relating to the distribution of shares.

      Net cash provided by operating activities for the 2003 Period totaled $9.6 million compared to $21.2 million for the 2002 Period.

      For the 2003 Period, cash flows used in investing activities approximated $9.6 million compared to $9.4 million for the 2002 Period. Investing activities for both periods consisted primarily of capital

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expenditures on the Company’s properties ($16.1 million and $ 7.8 million for the 2003 Period and the 2002 Period, respectively). The investment in capital expenditures for the 2003 Period was partially offset by net withdrawals from capital expenditure escrows of $7.3 million, while the investing activities for the 2002 Period were increased by net additions to capital expenditure escrows of $1.6 million. Other investing activities for the 2003 period ($0.9 million) consisted of other deposits and payments of franchise application fees net of refunds.

      Cash flows used in financing activities were $3.1 million for the 2003 Period and $1.0 million for the 2002 Period. Financing activities for the 2003 Period consisted primarily of proceeds of long-term obligations of $80.0 million relating to the Lehman Financing, offset by repayment of long-term obligations of $78.8 million (primarily relating to the repayment of the secured lender of the eighteen hotels which emerged from Chapter 11 on May 22, 2003). For the 2003 Period, financing activities also consisted of payments of deferred loan fees of $3.0 million and other financing activities both primarily related to the Lehman Financing. For the 2002 period, financing activities consisted of repayment of long-term obligations of $1.0 million.

      At June 30, 2003, after classifying assets held for sale as current liabilities and liabilities related to the assets held for sale as current liabilities, the Company had a working capital deficit of $62,000 compared with $9.1 million at December 31, 2002.

      There can be no assurance that the Company will have sufficient liquidity to be able to meet its capital expenditure or other requirements, and the Company could lose the right to operate certain hotels under nationally recognized brand names. Furthermore, the termination of one or more franchise agreements could trigger a default under certain loan agreements as well as obligations to pay liquidated damages under the franchise agreements.

      However, management believes that the combination of its current cash position, cash flows from operations, capital expenditure escrows and asset sales will be sufficient to meet its liquidity needs in the short-term. The Company’s ability to meet its long-term obligations and to make payments of preferred dividends is dependent on the recovery of the economy, improved operating results and the Company’s ability to obtain financing. In the short-term, the Company continues to monitor its costs and has already reduced corporate overhead including costs for office space (management negotiated reduced costs for office space at the corporate office, effective July 1, 2003). Any projections of future financial needs and sources of working capital are however, subject to uncertainty. See “Results of Operations” and “Forward-Looking Statements” for further discussion of conditions that could adversely affect management’s estimates of future financial needs and sources of working capital.

Corporate governance and senior executive management changes

      On May 23, 2003, David E. Hawthorne, the Company’s former President and Chief Executive Officer, resigned. In accordance with his employment agreement, Mr. Hawthorne was paid severance of $0.8 million (included in general, administrative and other in the Condensed Consolidated Statement of Operations, included elsewhere in this report).

      Concurrently with Mr. Hawthorne’s resignation, the board of directors named W. Thomas Parrington as the Company’s Interim President and Chief Executive Officer. On July 15, 2003, Mr. Parrington was appointed President and Chief Executive Officer. Mr. Parrington has been involved in the hospitality industry for over 30 years. He was President and Chief Executive Officer of Interstate Hotels Company (“Interstate”) until he retired in December 1998. Interstate was a publicly traded company until it merged with Wyndam Hotels in June 1998. During his 17-year tenure with Interstate, Mr. Parrington also served as Chief Financial Officer and Chief Operating Officer. Upon leaving Interstate, Mr. Parrington focused on real estate investments (primarily hotels) and consultancy as well as the management of his personal investments.

      Mr. Parrington was appointed to the Lodgian Board of Directors on the Company’s emergence from Chapter 11 on November 25, 2002. While on the Board, Mr. Parrington served as member of the executive committee, the compensation committee and was the Chairman of the audit committee. Upon his appointment as Chief Executive Officer, he resigned from the audit and compensation committees and continues to serve as director and member of the executive committee.

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      The Board of Directors has named Stephen Grathwohl as the new Chairman of the audit committee, effective June 5, 2003. Mr. Grathwohl has been a director since the Company’s emergence from Chapter 11 on November 25, 2002. He is a member of the executive committee of the Board of Directors and has been a Principal at Burr Street Equities, LLC (a boutique real estate advisory company) since 1997. Mr. Grathwohl is also director of Shorebank, a commercial bank chartered by the State of Illinois, headquartered in Chicago, Illinois, Shorebank Development Corporation, a Chicago real estate development and management company, and Shorebank Advisory Services, an international financial research and consulting company.

Inflation

      The Company cannot determine the precise impact of inflation. However, the Company believes that the rate of inflation has not had a material effect on its revenues or expenses in recent years. It is difficult to predict whether inflation will have a material effect on the Company’s results in the long-term.

Changes in Accounting Standards

      In November 2002, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”) which elaborates on the disclosures to be made by a guarantor in its financial statements. It also requires a guarantor to recognize a liability for the fair value of the obligation undertaken in issuing the guarantee at the inception of a guarantee. The disclosure requirements of FIN 45 were effective for the Company as of December 31, 2002. The recognition provisions of FIN 45 will be applied on a prospective basis to guarantees issued after December 31, 2002. The requirements of FIN 45 did not have a material impact on the Company’s financial position and results of operations.

      In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 addresses consolidation by a business of variable interest entities in which it is the primary beneficiary. FIN 46 is effective immediately for certain disclosure requirements for variable interest entities created after January 31, 2003 and effective for periods beginning after June 15, 2003 for existing variable interest entities. At June 30, 2003, the Company had no variable interest entities and therefore the Company does not expect the effects of FIN 46 to have a material impact on its financial position and results of operations.

      On April 30, 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” which amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 requires that contracts with comparable characteristics be accounted for similarly. In particular, SFAS No. 149 clarifies the circumstances under which a contract with an initial net investment meets the characteristics of a derivative as discussed in SFAS No. 133. In addition, SFAS No. 149 clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 amends certain other existing pronouncements, resulting in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company adopted SFAS No. 149 on July 1, 2003. The adoption did not have a material impact on its financial position and results of operations.

      On May 15, 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” which aims to eliminate diversity in practice by requiring that certain types of freestanding instruments be reported as liabilities by their issuers including mandatorily redeemable instruments issued in the form of shares which unconditionally obligate the issuer to redeem the shares for cash or by transferring other assets. Until now, these types of instruments have been presented in various ways, as part of liabilities, as part of equity, or between the liabilities and equity sections (sometimes referred to as “mezzanine” reporting). The provisions of SFAS No. 150, which also include a number of new disclosure requirements, are effective for instruments entered into or modified after May 31, 2003. For pre-existing instruments, SFAS No. 150 is effective as of the beginning of the first interim period which commences after June 15, 2003 (July 1, 2003 for the Company). The Company adopted SFAS No. 150 in the third quarter of 2003. The adoption impacted the treatment of the

27

Company’s Mandatorily Redeemable 12.25% Cumulative Preferred Stock (“Preferred Stock”), presented in these Condensed Consolidated Financial Statements between total liabilities and stockholders’ equity. For periods subsequent to June 30, 2003, the Preferred Stock will be reported as a liability and the related dividends will be included in interest expense. Prior periods will be restated for comparability.

Critical Accounting Policies

      The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The accounting policies followed for quarterly reporting are the same as those disclosed in Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Form 10-K for the year ended December 31, 2002. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from these estimates. The Company believes the following to be its critical accounting policies:

Capitalization and depreciable lives of assets

      Capital improvements are capitalized when they extend the useful lives of the related asset. Management estimates the depreciable lives of the Company’s fixed assets. All items considered to be repair and maintenance items are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets (buildings and improvements 10-40 years; furnishings and equipment 3-10 years). Property under capital leases is amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term.

Revenue recognition

      Revenues are recognized when the services are rendered. Revenues are comprised of rooms, food and beverage and other revenues. Room revenues are derived from guest room rentals, whereas food and beverage revenues primarily include sales from hotel restaurants, room service, hotel catering and meeting room rentals. Other revenues include charges for guests’ long-distance telephone service, laundry and parking.

Asset impairment evaluation

      Under GAAP, real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. As required by GAAP, the Company periodically evaluates its real estate assets to determine if there has been any impairment in carrying value and records impairment losses if there are indicators of impairment and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In connection with the Company’s emergence from Chapter 11, and the application of fresh start reporting, the Company recorded a net write-down of $222.1 million.

Self insured obligations

      The Company is self insured up to certain limits (deductibles) with respect to employee medical, employee dental, property insurance, general liability insurance, personal injury claims, workers’ compensation and auto liability. The Company establishes liabilities for these self-insured obligations annually, based on actuarial valuations and the Company’s history of claims. Should unanticipated events cause these claims to escalate beyond normal expectations, the Company’s financial condition and results of operations could be adversely affected. As of June 30, 2003, the Company had approximately $7.6 million accrued for such liabilities.

Income taxes

      The Company accounts for income taxes under Statement of Financial Accounting Standards (“SFAS”) 109 “Accounting for Income Taxes,” which requires the use of the liability method of accounting for deferred income taxes. As a result of the Company’s history of losses, the Company has provided a full

28

valuation allowance against its deferred tax asset as it is more likely than not that the deferred tax asset will not be realized.

      The list of critical accounting policies above is not intended to be a comprehensive list of all of the Company’s accounting policies. In many cases, the treatment of a particular transaction is specifically determined by generally accepted accounting principles with no need for management’s judgment in selecting from alternatives which would provide different results.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company is exposed to interest rate risks on its variable rate debt. At June 30, 2003 and December 31, 2003, the Company had outstanding variable rate debt of approximately $388.8 million and $310.2, respectively.

      In order to manage its exposure to fluctuations in interest rates with its exit financing ($301.6 million and $302.7 million at June 30, 2003 and December 31, 2002, respectively), the Company entered into two interest rate cap agreements, which allowed it to obtain exit financing at floating rates and effectively cap them at LIBOR of 6.4375% plus the spread (See the Liquidity and Capital Resources section). When LIBOR exceeds 6.4375%, the contracts require settlement of net interest receivable at specified intervals, which generally coincide with the dates on which interest is payable on the underlying debt. When LIBOR is below 6.4375%, there is no settlement from the interest rate caps. The Company is exposed to interest rate risks on the exit financing debt for increases in LIBOR up to 6.4375%. The one-month LIBOR as of June 30, 2003 was 1.12%. The notional principal amount of the interest rate caps outstanding was $302.8 million at June 30, 2003 and at December 31, 2002.

      On May 22, 2003, the Company finalized an $80 million financing with Lehman Brothers Holdings, Inc. (the “Lehman Financing”). The Lehman Financing is a two-year term loan with an optional one-year extension and bears interest at the higher of 7.25% or LIBOR plus 5.25%. In order to manage its exposure to fluctuations in interest rates with the Lehman Financing, the Company entered into an interest rate cap agreement, which allowed it to obtain this financing at a partial floating rate and effectively caps the interest rate at LIBOR of 5.00% plus 5.25%. When LIBOR exceeds 5%, the contracts require settlement of net interest receivable at specified intervals, which generally coincide with the dates on which interest is payable on the underlying debt. When LIBOR is below 5.00%, there is no settlement from the interest rate cap. The Company is exposed to interest rate risks on the Lehman Financing for LIBOR of between 2% and 5%. The notional principal amount of the interest rate cap outstanding was $80.0 million at June 30, 2003.

      With respect to the fair market value of the three interest rate caps, (the two related to the exit financing and the one related to the Lehman Financing), the Company believes that its interest rate risk at June 30, 2003 and December 31, 2003 was minimal. The impact on annual results of operations of a hypothetical one-point interest rate reduction on the interest rate caps as of June 30, 2003 and December 31, 2002 would be a reduction in net income of approximately $0.1 million and $14,000, respectively . These derivative financial instruments are viewed as risk management tools and are entered into for hedging purposes only. The Company does not use derivative financial instruments for trading or speculative purposes. However, the Company has not elected the hedging requirements of SFAS 133.

      The fair value of the three interest rate caps as of June 30, 2003 and the two interest rate caps at December 31, 2002 were approximately $15,000 and $0.1 million, respectively The fair values of the interest rate caps were recognized on the balance sheet in other assets. Adjustments to the carrying values of the interest rate caps are reflected in interest expense.

      The nature of Lodgian’s fixed rate obligations does not expose the Company to fluctuations in interest payments. The impact on the fair value of Lodgian’s fixed rate obligations of a hypothetical one-point interest rate increase on the outstanding fixed-rate debt as of June 30, 2003 and December 31, 2002 would be approximately $2.9 and $3.1 million, respectively.

ITEM 4. CONTROLS AND PROCEDURES

a) Based on an evaluation of the Company’s disclosure controls and procedures carried out as of June 30, 2003, the Company’s Chief Executive Officer and Chief Financial

29

Officer concluded that the Company’s disclosure controls and procedures were effective since they would cause material information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 to be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

b) During the quarter ended June 30, 2003, there were no changes in the Company’s internal controls over financial reporting which materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      As previously indicated in the Company’s Form 10-K for the year ended December 31, 2002, the Company and substantially all of its subsidiaries which owned hotel properties filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code on December 20, 2001 in the Southern District of New York. The Bankruptcy Court confirmed the Company’s First Amended Joint Plan of Reorganization (the “Joint Plan of Reorganization”) on November 5, 2002, and on November 25, 2002, the Company and entities owning 78 hotels officially emerged from Chapter 11. Pursuant to the terms of the Joint Plan of Reorganization, eight wholly-owned hotels were returned to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease.

      Of the Company’s 97 hotel portfolio, eighteen hotels, previously owned by two subsidiaries (Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.), were not part of the Joint Plan of Reorganization. On April 24, 2003, the Bankruptcy Court confirmed the plan of reorganization relating to these eighteen hotels (the “Impac Plan of Reorganization”). These eighteen hotels remained in Chapter 11 until May 22, 2003, the date on which the Company, through eighteen newly-formed subsidiaries (one for each hotel), finalized an $80 million financing with Lehman Brothers Holdings, Inc. (the “Lehman Financing”). The Lehman Financing was used, primarily, to settle the remaining amount due to the secured lender of these hotels. The Impac Plan of Reorganization also provided for a pool of funds of approximately $0.3 million to be paid to the general unsecured creditors of the eighteen hotels.

      The Company was a party in litigation with Hospitality Restoration and Builders, Inc. (“HRB”), a general contractor hired to perform work on six of the Company’s hotels. The litigation involved hotels in Texas (filed in the District Court of Harris County in October 1999), Illinois (in the United States District Court, Northern District of Illinois, Eastern Division in February 2000) and New York (filed in the Supreme Court, New York County in July 1999). In general, HRB claimed that the Company breached contracts to renovate the hotels by not paying for work performed. The Company contended that it was over-billed by HRB and that a significant portion of the completed work was defective. In July 2001, the parties agreed to settle the litigation pending in Texas and Illinois. In exchange for mutual dismissals and full releases, the Company paid HRB $750,000. With respect to the matter pending in the state of New York, HRB claimed that it was owed $10.7 million. The Company asserted a counterclaim of $7 million. In February 2003, the Company and HRB agreed to settle the litigation pending in the state of New York. In exchange for mutual dismissals and full releases, the Company paid HRB $625,000. The Company provided fully for this liability in its Consolidated Financial Statements for the year ended December 31, 2002.

      The Company is party to other legal proceedings arising in the ordinary course of business, the impact of which would not, either individually or in the aggregate, in management’s opinion, have a material adverse effect on its financial position or results of operations. Certain of these claims are limited to the amounts available under the Company’s disputed claims reserve.

ITEM 2. CHANGES IN SECURITIES

      The Company intends to use its cash for ongoing operations, debt service and capital expenditures and does not anticipate paying dividends on the new common stock in the near future. The dividends on the preferred stock due November 25, 2003 will be paid via the issuance of additional shares of preferred stock.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      The Company held its Annual Meeting of Shareholders on June 5, 2003. The stockholders voted on (1) the election of directors to serve until the Annual Meeting of Stockholders of the Company in 2004 and until their successors have been appointed and (2) to ratify the appointment of Deloitte & Touche LLP

31

as independent public accountants of the Company. The votes cast on each of the above matters were as follows:

ELECTION OF DIRECTORS

NOMINEE			VOTES FOR		VOTES WITHHELD
	Russel S. Bernard			4,960,636		514,012
	Sean F. Armstrong			4,957,923		516,725
		Stewart J. Brown		4,960,636		514,012
Stephen P. Grathwohl				4,960,636		514,012
		Jonathan D. Gray		4,960,626		514,022
	Kenneth A. Caplan			4,960,670		513,978
	Kevin C. McTavish			4,960,627		514,021
W. Thomas Parrington				4,960,652		513,996

INDEPENDENT PUBLIC ACCOUNTANTS

FOR	AGAINST		ABSTAIN
5,473,959		518		171

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits

      A list of the exhibits required to be filed as part of this Report on Form 10-Q, is set forth in the “Exhibit Index” which immediately precedes such exhibits, and is incorporated herein by reference.

      (b) Reports on Form 8-K

      A report on Form 8-K was filed on May 29, 2003 announcing the completion of the $80 million financing underwritten by Lehman Brothers Holdings, Inc.

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SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LODGIAN, INC.
Date: August 14, 2003	By: /s/ W. THOMAS PARRINGTON
	W. THOMAS PARRINGTON President and Chief Executive Officer
Date: August 14, 2003	By: /s/ RICHARD CARTOON
	RICHARD CARTOON Executive Vice President and Chief Financial Officer

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INDEX TO EXHIBITS

EXHIBIT
NO.		DESCRIPTION
10.59	—	Interim Employment Agreement for W. Thomas Parrington*
10.60	—	Lodgian, Inc. 401(k) Plan and Trust Agreement as Amended and Restated on December 31, 2002, effective January 1, 2002 (except as otherwise provided)
31.1	—	Sarbanes – Oxley Section 302 certification by the CEO
31.2	—	Sarbanes – Oxley Section 302 certification by the CFO
32	—	Sarbanes – Oxley Section 906 certification by the CEO and CFO

* The agreement filed herewith reflects Mr. Parrington’s agreement with Lodgian, Inc. while he was the Interim President and Chief Executive Officer. Mr. Parrington was offered and accepted formal appointment as President and Chief Executive Officer on July 15, 2003; his new agreement has not yet been finalized.

34 EX-10.59 3 g84528exv10w59.txt EX-10.59 EMPLOYMENT AGREEMENT EXHIBIT 10.59 [LODGIAN LETTERHEAD] June 4, 2003 W. Thomas Parrington 504 Beaver Road Sewickley, PA 15143-1006 Dear Tom: On behalf of Lodgian Inc. (the "Company"), I am pleased to offer you a position as the Interim Chief Executive Officer of the Company on the terms and conditions set forth in this letter. The board of directors of the Company (the "Board") shall announce your position as Interim Chief Executive Officer at such time as the Board deems appropriate, provided, that such announcement shall stress the interim nature of your position and that the Company is currently searching for a permanent chief executive officer. Your employment shall commence no earlier than May 21, 2003 and no later than June 5, 2003, as mutually agreed between you and the Board. You shall have such duties, responsibilities and authorities as the Board shall determine are appropriate for your position. Without limiting the generality of the foregoing, you will be expected to actively participate in, and use your best efforts to facilitate, the Company's search for a permanent Chief Executive Officer and reassure potential candidates for such position that you will not be an impediment to their ability to perform the function of Chief Executive Officer. You agree to devote your full business time and best efforts to the performance of your duties hereunder and agree that you will not engage in any other business, profession or occupation for compensation or otherwise without the prior written consent of the Board. In addition, during the term of your employment hereunder, you shall continue to serve as a member of the Board; provided that, you shall resign from all committees of the Board. With respect to compensation for your services as Interim Chief Executive Officer of the Company, subject to your continued employment with the Company, during the term of your employment hereunder you will receive the following compensation and benefits, from which the Company shall be entitled to withhold any amounts required by applicable law: (i) The Company shall pay you a base salary ("Base Salary") at the rate of $40,000 per month, prorated for any partial month; provided, that your Base Salary shall be reviewed by the Board ninety (90) days following the commencement of your employment. Such Base Salary shall be payable in accordance with the normal payroll practices of the Company. (ii) The Company shall provide you a furnished apartment in Buckhead, Georgia that contains a minimum of two bedrooms and two bathrooms. In addition, the Company shall reimburse you for (A) your moving expenses from your current residences to the apartment in Buckhead, Georgia, and other reasonable expenses incurred by you due to the short-term nature of your assignment (as approved by the Company), up to a maximum of $20,000 and (B) two weekend trips per month to your other residences; provided, that such trips shall be combined, where possible, with other Company 2 business travel to minimize the cost to the Company. The reimbursement of moving and other expenses described in (A) above in the amount of $10,000 shall be paid by the Company to you as soon as practicable (but in no event later than five (5) business days) following the commencement of your employment and the Company shall reimburse you for such other moving and other expenses (to the extent incurred and subject to the aggregate $20,000 maximum) thirty (30) days thereafter. (iii) The Company shall reimburse you for the cost of your current medical insurance premium. Any annual or long-term incentive compensation that is paid to you will be in the sole discretion of the Board (i.e., no minimum or guaranteed incentive compensation). The Company shall provide you with two weeks paid vacation from September 16, 2003 until September 30, 2003; provided, that your employment has not been previously terminated. Your employment with the Company is for an unspecified duration and constitutes "at-will" employment, and this employment relationship may be terminated at any time, with or without good cause or for any or no cause, at your or the Company's option, with or without notice without further obligation of either party hereunder; provided that you will be obligated to give the Company 30 days advance written notice of any resignation of your employment and the Company will be obligated to give you thirty (30) days advance written notice of any termination by the Company without Cause (as defined below). For purposes of this letter agreement, "Cause" shall mean (i) your continued failure to perform your duties to the Company (other than as a result of your total or partial incapacity due to accident or physical or mental illness) for a period of 10 days following written notice of such failure from the Company, (ii) your conviction of, or entry of plea of guilty or nolo contendere to a felony under the laws of the United States or any State thereof or (iii) your willful act or omission which results in demonstrable injury to the financial condition or business reputation of the Company or its subsidiaries or affiliates. The termination of your employment hereunder shall not affect your continued service as a member of the Board and following such termination of employment, provided that you remain a member of the Board, you shall be reappointed by the Board to the committees you served on prior to the commencement of your employment with the Company. All notices or communications hereunder shall be in writing, addressed: (i) to the Company at its principal corporate headquarters, to the attention of the [General Counsel] and (ii) to you at the most recent residential address contained within the personnel records of the Company (or to such other address as such party may designate in a notice duly delivered as described below). Any such notice or communication shall be delivered by telecopy, by hand, by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above, and in the case of delivery other than by hand, the third business day after the actual date of mailing shall constitute the time at which notice was given. Any controversy or claim arising out of or relating to this letter agreement or the breach of this letter agreement that cannot be resolved by you and the Company shall be construed, 3 interpreted and governed in accordance with the laws of State of Georgia, without regard to the conflicts of law provisions thereof. This letter agreement contains the entire understanding of the parties with respect to your employment with the Company and there are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This letter agreement may not be altered, modified or amended, except by written instrument signed by the parties hereto and may be executed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. The failure of a party to insist upon strict adherence to any term of this letter agreement on any occasion shall not be considered a waiver of such party's rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this letter agreement. You hereby represent to the Company that (i) the services provided by you to or for the benefit of the Company through the date hereof have not constituted and (ii) the execution and delivery of this letter agreement by you and the Company and the performance of your duties hereunder shall not constitute, in either case, a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which you are a party or otherwise bound. This letter agreement shall not be assignable by you but may be assigned by the Company to an entity that is a successor in interest to substantially all of the business operations of the Company. If the foregoing terms and conditions are acceptable and agreed to by you, please sign on the line provided below to signify such acceptance and agreement and return the executed copy to the undersigned. LODGIAN INC. By: ------------------------------- Name: ----------------------------- Title: --------------------------- Accepted and Agreed This __ day of June, 2003 - --------------------------- W. Thomas Parrington EX-10.60 4 g84528exv10w60.txt EX-10.60 401(K) PLAN & TRUST AGREEMENT EXHIBIT 10.60 LODGIAN, INC. 401(K) PLAN AND TRUST AGREEMENT AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2002 (EXCEPT AS OTHERWISE PROVIDED) TABLE OF CONTENTS

Page ss. 1. DEFINITIONS................................................................................................1 1.1. Account.........................................................................................1 1.2. Affiliate.......................................................................................1 1.3. Beneficiary.....................................................................................1 1.4. Board...........................................................................................1 1.5. Break in Service................................................................................1 1.6. Code............................................................................................1 1.7. Compensation....................................................................................2 1.8. Election........................................................................................2 1.9. Eligible Employee...............................................................................2 1.10. Eligible Participant............................................................................3 1.11. Employee........................................................................................3 1.12. ERISA...........................................................................................3 1.13. Forfeiture......................................................................................3 1.14. 401(k) Account..................................................................................3 1.15. 401(k) Contributions............................................................................3 1.16. Highly Compensated Employee.....................................................................3 1.17. Hour of Service.................................................................................4 1.18. Leased Employee.................................................................................5 1.19. Lodgian Stock...................................................................................5 1.20. Matching Account................................................................................5 1.21. Matching Contribution...........................................................................5 1.22. Nonhighly Compensated Employee..................................................................5 1.23. Participant.....................................................................................5 1.24. Participating Employer..........................................................................5 1.25. Plan............................................................................................5 1.26. Plan Administrator..............................................................................5 1.27. Plan Sponsor....................................................................................5 1.28. Plan Year.......................................................................................5 1.29. Rollover Account................................................................................6 1.30. Rollover Contribution...........................................................................6 1.31. Safe Harbor Matching Contribution...............................................................6 1.32. Safe Harbor Matching Contribution Account.......................................................6 1.33. Trust Agreement.................................................................................6 1.34. Trustee.........................................................................................6 1.35. Trust Fund......................................................................................6 1.36. Valuation Date..................................................................................6 1.37. Vested Benefit..................................................................................6 1.38. Year of Service.................................................................................6

-i- ss. 2. PARTICIPATION..............................................................................................7 2.1. General Participation for 2002 Plan Year and Prior Years........................................7 2.2. General Participation After December 31, 2002...................................................7 2.3. Reemployment....................................................................................8 2.4. Change in Status................................................................................8 2.5. Not a Contract of Employment....................................................................8 2.6. USERRA..........................................................................................8 ss. 3. EMPLOYEE CONTRIBUTIONS.....................................................................................8 3.1. 401(k) Contributions............................................................................8 (a) General................................................................................8 (b) Amount of 401(k) Contributions.........................................................8 (c) 401(k) Accounts........................................................................9 3.2. Rate Changes....................................................................................9 (a) General................................................................................9 (b) Change in Eligibility Status...........................................................9 (c) Hardship Withdrawal....................................................................9 (d) Leave of Absence.......................................................................9 3.3. Payment of 401(k) Contributions to Trustee......................................................9 3.4. Rollover Contributions..........................................................................9 (a) General................................................................................9 (b) Rollover Accounts......................................................................9 ss. 4. EMPLOYER CONTRIBUTIONS....................................................................................10 4.1. Employer Matching Contributions...............................................................10 (a) Matching Contributions for the 2002 Plan Year.........................................10 (b) Safe Harbor Matching Contributions after December 31, 2002............................10 (c) Application of Forfeitures............................................................10 (d) No Matching Contributions or Safe Harbor Matching Contributions on Refunds............10 (e) Allocation............................................................................11 4.2. Application of Suspense Account................................................................11 4.3. Top Heavy Contributions........................................................................11 4.4. Payment of Employer Contributions..............................................................11 ss. 5. ACCOUNT INVESTMENTS AND ALLOCATIONS.......................................................................11 5.1. General........................................................................................11 5.2. Investment Elections...........................................................................12 5.3. Amounts Available for Investment...............................................................12 5.4. Allocations to Accounts........................................................................12 5.5. Allocation Corrections.........................................................................12 5.6. Transition Period to Implement Plan Changes....................................................12 5.7. Special Rules Concerning Investment in Lodgian Stock Fund......................................13 (a) Dividends.............................................................................13 (b) Purchase of Lodgian Stock.............................................................13 (c) Voting of Lodgian Stock...............................................................13 (d) Restrictions..........................................................................13 -ii- ss. 6. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS..............................................................14 6.1. Ordering Rule..................................................................................14 6.2. Code ss. 415 Limitations.......................................................................14 (a) General...............................................................................14 (b) Annual Additions......................................................................14 (c) Coordination Rules....................................................................15 (d) Corrections...........................................................................15 6.3. Code ss. 402(g) Limitations....................................................................15 (a) This Plan and Other Affiliate Plans...................................................15 (b) Other Plans or Arrangements...........................................................15 (c) Action to Satisfy 402(g) Limitation...................................................16 ss. 7. PLAN BENEFITS.............................................................................................16 7.1. Participant....................................................................................16 (a) Distribution Events...................................................................16 (b) Vested Benefit........................................................................17 (c) Vesting Schedule for Participants without an Hour of Service on or after April 1, 2002.......................................................................17 (d) Vesting Schedule for Participants with an Hour of Service on or after April 1, 2002...18 (e) Forfeiture............................................................................18 (f) Reemployment..........................................................................18 7.2. Death of Participant...........................................................................19 7.3. In-Service Withdrawals.........................................................................19 (a) Hardship Withdrawals..................................................................19 (b) Age 59 1/2 Withdrawals................................................................21 (c) Rollover Account Withdrawals..........................................................21 (d) Limitations...........................................................................21 ss. 8. BENEFIT PAYMENT...........................................................................................22 8.1. Methods........................................................................................22 (a) General...............................................................................22 (b) Automatic Single Sum in Certain Cases.................................................22 (c) Installment Rules.....................................................................23 (d) Limitations...........................................................................23 8.2. Timing.........................................................................................23 (a) General...............................................................................23 (b) Deferral of Payment...................................................................24 (c) Participant's Required Beginning Date.................................................24 (d) Beneficiary...........................................................................24 8.3. Direct Rollover................................................................................24 (a) Eligible Rollover Distribution........................................................25 (b) Eligible Retirement Plan..............................................................25 (c) Distributee...........................................................................25 (d) Direct Rollover.......................................................................25 -iii- 8.4. Claim for Benefit..............................................................................25 8.5. No Estoppel of Plan............................................................................26 8.6. Legally Incompetent............................................................................26 8.7. Missing Person.................................................................................26 8.8. Other Payment Rules............................................................................27 (a) Withholding Obligations...............................................................27 (b) Waiver of Notices.....................................................................27 (c) Account Balance.......................................................................27 (d) Order of Withdrawal...................................................................27 (e) Reemployment..........................................................................27 ss. 9. NAMED FIDUCIARIES AND ADMINISTRATION......................................................................27 9.1. Named Fiduciaries..............................................................................27 9.2. Plan Administrator Appointment and Term of Office..............................................28 9.3. Organization of Plan Administrator.............................................................28 9.4. Plan Administrator Powers and Duties...........................................................28 (a) General...............................................................................28 (b) Liquidity Requirements................................................................28 (c) Records...............................................................................28 (d) Information from Others...............................................................28 9.5. Indemnification................................................................................29 9.6. Reporting and Disclosure.......................................................................29 ss. 10. DUTIES AND AUTHORITY OF TRUSTEE.........................................................................29 10.1. General Fiduciary Duties.......................................................................29 10.2. Deposits to Trust Fund.........................................................................29 10.3. Value Assets...................................................................................30 10.4. Segregation of Accounts........................................................................30 10.5. Tax Returns and Reports........................................................................30 10.6. Powers.........................................................................................30 10.7. Expenses.......................................................................................31 10.8. Litigation.....................................................................................32 ss. 11. LOANS....................................................................................................32 11.1. Administration.................................................................................32 11.2. Statutory Requirements.........................................................................32 (a) General...............................................................................32 (b) Repayments............................................................................32 (c) Limitations on Amounts................................................................33 11.3. Distribution and Default.......................................................................33 11.4. USERRA.........................................................................................33 ss. 12. AMENDMENT AND TERMINATION................................................................................33 12.1. Amendment......................................................................................33 12.2. Termination....................................................................................34 ss. 13. MISCELLANEOUS............................................................................................34 -iv- 13.1. Headings and Construction......................................................................34 13.2. Nontransferability.............................................................................34 13.3. Benefits Supported Only by Trust Fund..........................................................34 13.4. Nondiscrimination..............................................................................35 13.5. Nonreversion...................................................................................35 13.6. Merger, Consolidation or Similar Transaction...................................................35 (a) General...............................................................................35 (b) Authorization.........................................................................35 (c) No Annuities..........................................................................35 13.7. Qualified Domestic Relations Order.............................................................36 13.8. Top Heavy Plan.................................................................................36 (a) Determination of Top-Heavy Status.....................................................36 (b) Special Top Heavy Plan Rules..........................................................38 Appendix A.......................................................................................................40 Appendix B.......................................................................................................44 Appendix C.......................................................................................................46 -v- LODGIAN, INC. 401(K) PLAN AND TRUST AGREEMENT AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2002 (EXCEPT AS OTHERWISE PROVIDED) The Servico, Inc. 401(k) Plan (the "Plan") was adopted by Servico, Inc. ("Servico") effective July 1, 1984 and previously amended several times. Servico and Impac Hotel Group, LLC ("Impac") combined their respective businesses through a series of corporate mergers the result of which is that Servico and Impac became wholly-owned subsidiaries of Lodgian, Inc. ("Lodgian") effective on December 11, 1998. Effective January 1, 1999, Lodgian assumed sponsorship of the Plan and changed the name to the Lodgian, Inc. 401(k) Plan. The Plan was amended and restated effective as of January 1, 1997, and subsequently amended. This amendment and restatement of the Plan incorporates the terms of the Plan's trust agreement and is effective January 1, 2002, unless otherwise provided. This amendment and reinstatement of the Plan reflects certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") and is intended to be in good faith compliance with the requirements of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued thereunder. ss. 1. DEFINITIONS The following terms have the following meanings for purposes of this Plan. 1.1. Account -- means the bookkeeping account maintained for each Participant and, where appropriate, Beneficiary or alternate payee, to show his or her interest in this Plan. 1.2. Affiliate -- means the Plan Sponsor and any trade or business, whether or not incorporated, that is considered to be a single employer with the Plan Sponsor under Code ss. 414(b), (c), (m) or (o). Solely for purposes of the Code ss. 415 limitations in ss. 6.2, the term Affiliate means each entity that would be an Affiliate if the phrase "more than 50%" is substituted for the phrase "at least 80%" each place it appears in Code ss. 1563(a)(1). 1.3. Beneficiary -- means the person or persons so designated in accordance with ss. 7.2 by a Participant or by operation of this Plan to receive any Plan benefits payable on account of the Participant's death. 1.4. Board -- means the Board of Directors of the Plan Sponsor. 1.5. Break in Service -- means for an Employee any Plan Year during which he or she fails to complete more than 500 Hours of Service. 1.6. Code -- means the Internal Revenue Code of 1986, as amended, and the regulations thereunder. 1.7. Compensation -- means the sum of the Participant's "taxable wages" and "pre-tax contributions" received by the Participant for the portion of the Plan Year during which he or she was a Participant. Taxable wages are the wages and. other compensation paid by the Affiliates to the Employee that are reportable as wages, tips and other compensation on Form W-2 or any other form that the Affiliate is required to provide the Employee under Code ss.ss. 3401(a), 6041(d), 6051(a)(3) and 6052 excluding any severance payments. Pre-tax contributions are the Employee's 401(k) Contributions, and any other contributions or deferrals made on the Employee's behalf by an Affiliate to a Code ss. 401(k) plan, Code ss. 125 cafeteria plan or any other Affiliate plan or program that are excludible from the Participant's taxable income for the Plan Year under Code ss.ss. 125, 132(f), 401(k), 402(h), 403(b), 414(v) or 457(b). The annual Compensation of each Employee taken into account under the Plan will not exceed $200,000 as adjusted for cost-of-living increases in accordance with Code ss. 401(a)(17). The cost-of-living adjustment in effect for a calendar year applies to any Plan Year beginning in that calendar year. If a Plan Year consists of fewer than 12 months, this annual Compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the Plan Year and the denominator of which is 12. 1.8. Election -- means an election or designation made on a form or by any other method authorized by the Plan Administrator, properly completed and timely delivered in accordance with rules adopted by the Plan Administrator from time to time. 1.9. Eligible Employee -- means each individual who is classified on the payroll of a Participating Employer as an Employee of that Participating Employer, other than: (a) an Employee who is included in unit of employees covered by a collective bargaining agreement, unless the agreement by specific reference to this Plan permits participation in this Plan; (b) a Leased Employee; (c) an Employee who is a nonresident alien receiving no earned income from a Participating Employer from sources within the United States (as described more fully in Code ss. 410(b)(3)(C)): or (d) an Employee who performs intermittent services for a Participating Employer and is classified in the job of "on-call" employee as reflected on the payroll of a Participating Employer. Under no circumstances will an individual who performs services for a Participating Employer, but who is not classified on the payroll as an employee of the Participating Employer, for example, an individual performing services for a Participating Employer under a leasing arrangement or an independent contractor, be treated as an Eligible Employee, even if that individual is treated as an "employee" of a Participating Employer as a result of common law principals, the leased employee rules under Code ss.ss. 414(n) or (o). Further, if an individual -2- performing services for a Participating Employer is retroactively reclassified as an "employee" of a Participating Employer for any reason, the reclassified individual will not be treated as an Eligible Employee for any period prior to the actual date (and not the effective date) of the reclassification unless the Participating Employer determines the reclassification is necessary to correct an inadvertent payroll classification error. 1.10. Eligible Participant -- means for any Plan Year: (a) a Participant who is an Eligible Employee (or on an authorized leave of absence as an Eligible Employee) on the last day of that Plan Year; and (b) a Participant who has completed a Year of Service during such Plan Year. For purposes of this ss. 1.10, a Participant who terminated employment during the Plan Year due to death or after attaining age 65 shall be considered an Eligible Participant for such Plan Year. Further, if the Participating Employer elects to apply the provisions in ss. 4.1(b) hereof for a Plan Year, Eligible Participant shall include for purposes of the Safe Harbor Matching Contribution any Participant who has made 401(k) Contributions during such Plan Year. 1.11. Employee -- means a person who is treated as an employee of an Affiliate either as a result of common law principles or under the leased employee rules of Code ss. 414(n). 1.12. ERISA -- means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder. 1.13. Forfeiture -- means the dollar amount forfeited from an Account in accordance with this Plan. 1.14. 401(k) Account -- means the subaccount of a Participant's Account attributable to his or her 401(k) Contributions. 1.15. 401(k) Contributions -- means that part of a Participant's Compensation that is contributed to his or her 401(k) Account pursuant to his or her Election under ss. 3.1. 1.16. Highly Compensated Employee -- means each Participant who performs services for an Affiliate during the Plan Year and who: (a) is a 5% owner of an Affiliate (as defined in Code ss. 416(i)(1)(B)(i)) at any time during the Plan Year or the preceding 12-month period; or (b) receives Compensation in excess of $85,000 (adjusted for cost-of-living increases in accordance with Code ss. 414(q)) for the preceding 12-month period. The determination of which Participants are Highly Compensated Employees is subject to Code ss. 414(q) and any regulations, rulings, notices or procedures under that section. In determining whether an Employee is a Highly Compensated Employee for any Plan Year, the Plan -3- Administrator may use any alternatives and elections authorized under the applicable regulations, rulings or revenue procedures. 1.17. Hour of Service -- (a) General. The term Hour of Service means each hour for which an Employee: (1) is paid, or entitled to payment, by an Affiliate for the performance of duties as an Employee; (2) is directly or indirectly paid, or entitled to payment, by an Affiliate for a period of time when he or she performs no duties as an Employee due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence; and (3) is paid for any reason an amount as back pay by an Affiliate, irrespective of mitigation of damages; (b) Additional Rules. (1) An Employee will not receive an Hour of Service credit for service performed for which he or she is paid, or entitled to payment, on account of a period during which he or she performs no duties as an Employee if the payment is made or is due under a plan maintained solely to comply with applicable worker's compensation laws, unemployment compensation laws or disability insurance laws. (2) No more than 501 Hours of Service will be credited to an Employee for any single continuous period during which he or she performs no duties as an Employee. (3) An Hour of Service will not be credited to an Employee on account of a payment that solely reimburses the Employee for medical, or medically related, expenses incurred by or on behalf of the Employee. (4) Hour of Service credit, if any, for periods when no duties are performed as an Employee will be calculated in accordance with ss. 2530.200b-2(b) and (c) of the Department of Labor Regulations, which are incorporated as part of this Plan by this reference. (5) In lieu of actually recording each Hour of Service that is completed by an Employee that is exempt from the minimum wage and overtime requirements of the Federal Fair Labor Standards Act, that Employee will receive credit for 45 Hours of Service for each week in which he or she completes at least one Hour of Service. For each Employee who is not exempt from those requirements, Hours of Service credited for the performance of duties will be the actual number of Hours of Service completed by that Employee. 1.18. Leased Employee -- means an Employee (other than a common-law employee) who has performed services for an Affiliate on a substantially full-time basis for a period of at least one year under the primary direction and control of the Affiliate pursuant to an agreement between the Affiliate and any other person, as determined under Code ss. 414(n)(6). 1.19. Lodgian Stock -- means Lodgian, Inc. common stock, including any common stock substituted for a previously issued class of common stock, provided such stock is a "qualifying employer security" as defined in ERISA ss. 407(d)(5). Such term shall not include any warrants to purchase or otherwise acquire Lodgian Stock, which rights shall be referred to herein as "Lodgian Warrants". 1.20. Matching Account -- means the subaccount of a Participant's Account attributable to Matching Contributions made prior to January 1, 2003. 1.21. Matching Contribution -- means the matching contribution made by a Participating Employer or the Plan Sponsor on behalf of the Participating Employer in accordance with ss. 4.1(a) for Plans Years ending on or before December 31, 2002. 1.22. Nonhighly Compensated Employee -- means each Participant who performs services for an Affiliate during the Plan Year and who is not a Highly Compensated Employee. 1.23. Participant -- means (a) each Eligible Employee who has met the eligibility requirements to participate in this Plan pursuant to ss. 2.1 and (b) each other person (other than an alternate payee as defined in Code ss. 414(p)(8) or a Beneficiary) for whom an Account is being maintained as a result of contributions made under this Plan or another plan that are transferred to this Plan pursuant to ss. 13.6. 1.24. Participating Employer -- means the Plan Sponsor and any other Affiliate that, with approval of the Board, has adopted this Plan during such period that the adoption of the Plan is in effect. 1.25. Plan -- means this Lodgian, Inc. 401(k) Plan and Trust Agreement as set forth in this document and all subsequent amendments to this document. 1.26. Plan Administrator -- means the person, committee or entity appointed by the Board to administer this Plan on behalf of the Plan Sponsor as provided in ss. 9. If no person, committee or entity is appointed, the Plan Sponsor shall be the Plan Administrator. 1.27. Plan Sponsor -- means Lodgian, Inc. or any successor organization to that company. 1.28. Plan Year -- means the calendar year. -5- 1.29. Rollover Account -- means the subaccount of a Participant's Account attributable to Rollover Contributions. 1.30. Rollover Contribution -- means an amount (or more than one amount) that qualifies as an eligible rollover distribution under Code ss. 402(c)(4) that is transferred to this Plan under ss. 3.5 other than after-tax contributions. 1.31. Safe Harbor Matching Contribution - means the contribution made by a Participating Employer in accordance with ss. 4.1(b). 1.32. Safe Harbor Matching Contribution Account - means the subaccount of a Participant's Account attributable to Safe Harbor Matching Contributions. 1.33. Trust Agreement -- means the trust agreement established as part of this Plan in ss. 10. 1.34. Trustee -- means the person or persons acting as trustee under the Trust Agreement. 1.35. Trust Fund -- means the assets held by the Trustee under the Trust Agreement. 1.36. Valuation Date -- means the last day of each Plan Year and any other date chosen by the Plan Administrator. 1.37. Vested Benefit -- means the sum of (a) the 401(k) Account, (b) the Rollover Account, (c) the Safe Harbor Matching Account, and (d) the vested portion of the Matching Account, as determined in accordance with ss. 7.1. 1.38. Year of Service -- (a) Vesting. For purposes of determining vesting service under ss. 7.1 of this Plan, a Year of Service means each Plan Year during which an Employee is credited with at least 1,000 Hours of Service as an Employee. Any Year of Service completed before a period of 5 or more consecutive Break in Service shall be excluded for purposes of determining a Participant's vested percentage if the Employee's vested percentage in his or her Matching Account was zero at all times before such Breaks in Service. (b) Eligibility. For purposes of determining eligibility service under ss. 2.1 and 2.2 of this Plan, a Year of Service means a twelve-consecutive-month period during which an Employee completes no less than 1,000 Hours of Service beginning on the date on which the Employee first performs an Hour of Service upon his employment or reemployment with a Participating Employer or, in the event the Employee fails to complete 1,000 Hours of Service in that twelve-consecutive-month period, any Plan Year thereafter during which the Employee completes not less than 1,000 Hours of Service, including the Plan Year which includes the first anniversary of the date the Employee first performed an Hour of Service upon his employment or reemployment. -6- (c) Service With All Related Employers. An Employee will be credited with service under this Plan for his or her service with all Affiliates. (d) Service With Predecessor Employers. An Employee will be credited with service under this Plan for his or her service with the employers identified in Appendix C on the same basis as is used to determine service with Affiliates. ss. 2. PARTICIPATION 2.1. General Participation for 2002 Plan Year and Prior Years. (a) Each Eligible Employee hired during the 2002 Plan Year will become a Participant on the January 1 or July 1 coinciding with or next following the date he or she: (1) attains age 21; (2) completes at least six months of service; and (3) completes at least 500 Hours of Service in: i) the 6 month period immediately preceding July 1st or ii) the 12 month period immediately preceding January 1st. (b) An Eligible Employee who does not satisfy the criteria in ss. 2.1(a) in his or her first 12 months of employment shall become a Participant as of the first payroll period beginning on or after the first January 1 or July 1 coinciding with or next following the date he or she completes a Year of Service and attains age 21. (c) If an Employee is not an Eligible Employee on a January 1st or July 1st but has otherwise satisfied either ss. 2.1(a) or (b), he or she will become a Participant as of the first day of the month thereafter on which he or she becomes an Eligible Employee. (d) Effective January 1, 2002, each Eligible Employee may make a Rollover Contribution to the Plan pursuant to ss. 3.5 prior to becoming a Participant. An Eligible Employee may not make any 401(k) Contributions to the Plan prior to satisfying the requirements of this ss. 2.1 or ss. 2.2, notwithstanding any Rollover Contribution made to the Plan prior to an Eligible Employee becoming a Participant. (e) For Plan Years ending on or before December 31, 2001, participation in the Plan shall be determined under the terms of the Plan as then in effect. 2.2. General Participation After December 31, 2002. Each Eligible Employee hired after December 31, 2002 will become a Participant effective with the first payroll period beginning on or after the first day of the month coinciding with or next following the date he or she completes a Year of Service and attains age 21. If an Employee is not an Eligible Employee on such date, he or she will become a Participant as of the first payroll period beginning on or after the first day of the month coincident with or immediately following the date on which he or she becomes an Eligible Employee. -2- 2.3. Reemployment. If a Participant terminates employment and is reemployed as an Eligible Employee, he or she will be reinstated as a Participant on the date of his or her reemployment. Each other former Employee who is reemployed will become a Participant in accordance with the general rule in ss.ss. 2.1 or 2.2, but his or her previous service shall be credited for purposes of determining his or her eligibility to participate upon reemployment if he or she had fewer than five consecutive Breaks in Service. 2.4. Change in Status. If the Plan Sponsor discovers that an individual was mistakenly treated as an Eligible Employee, it will cause the individual's 401(k) Contributions to be refunded as soon as practicable after the discovery. In no event will Matching Contributions or Safe Harbor Matching Contributions be made with respect to those refunded 401(k) Contributions. If the Plan Sponsor discovers that an Eligible Employee was not treated as covered under the Plan, it will take any action that it deems appropriate and proper under the circumstances to remedy the omission as soon as practicable after the discovery. 2.5. Not a Contract of Employment. This Plan is not a contract of employment. Thus participation in this Plan will not give any person the right to be retained as an Employee or, upon termination of a person's employment, the right to any interest in the Trust Fund other than as expressly provided in this Plan. 2.6. USERRA. Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code ss. 414(u). ss. 3. EMPLOYEE CONTRIBUTIONS 3.1. 401(k) Contributions. (a) General. Subject to the rules and limitations in this ss. 3 and in ss. 6, each Eligible Employee who has met the applicable eligibility requirements in ss. 2 may elect that his or her Participating Employer make 401(k) Contributions to this Plan on his or her behalf through payroll deductions, and 401(k) Contributions shall begin as soon as administratively possible on or after the date on which he or she has completed all election and enrollment forms required by the Plan Administrator. A Participant's initial contribution election will continue while the Participant is an Eligible Employee until the Participant changes the rate of his or her 401(k) Contributions in accordance with ss. 3.3 or suspends his or her 401(k) Contributions in accordance with ss. 3.4. (b) Amount of 401(k) Contributions. 401(k) Contributions must be made in 1% increments, from 1% to 10% prior to January 1, 2003 and up to 15% on or after January 1, 2003 of Compensation. The Plan Administrator has the right at any time unilaterally to reduce prospectively the amount or percentage of 401(k) Contributions elected by any -8- Highly Compensated Employee or by all Highly Compensated Employees as a group if it determines that a reduction is appropriate in light of the applicable limitations under ss. 6. (c) 401(k) Accounts. A Participant's 401(k) Contributions will be credited to his or her 401(k) Account. 3.2. Rate Changes. (a) General. A Participant may change or suspend his or her rate of 401(k) Contributions at any time by following the procedures established by the Plan Administrator for rate changes. (b) Change in Eligibility Status. A Participant's 401(k) Contributions will automatically stop when he or she ceases to be an Eligible Employee. If a Participant's status thereafter changes to an Eligible Employee (whether by reemployment or otherwise), he or she may elect to resume 401(k) Contributions at any time by following the procedures established by the Plan Administrator. (c) Hardship Withdrawal. A Participant's 401(k) Contributions will be suspended for the six month period following a hardship withdrawal in accordance with ss. 7.3(a)(4). A Participant may resume 401(k) Contributions at any time after the end of the suspension period. The suspension period for hardship withdrawals made prior to January 1, 2002 shall be twelve (12) months. (d) Leave of Absence. A Participant's 401(k) Contributions will continue to be deducted during any period of paid leave of absence during which the Participant continues to receive Compensation from a Participating Employer, provided he or she continues to be classified as an Eligible Employee during the leave. However, a Participant's 401(k) Contributions will be suspended during any period of unpaid leave of absence. A Participant returning from an unpaid leave may resume 401(k) Contributions at any time after he or she resumes active employment as an Eligible Employee. 3.3. Payment of 401(k) Contributions to Trustee. All 401(k) Contributions will be paid to the Trust Fund as soon as practicable after the related payroll deductions are made and, in any event, by the deadline, if any, established for making those payments under ERISA or the Code. 3.4. Rollover Contributions. (a) General. An Eligible Employee may elect to contribute a Rollover Contribution to the Trust Fund, provided it is made by the Eligible Employee (or transferred to this Plan in a direct rollover from another plan): (a) in cash or in a form acceptable to the Trustee and (b) in accordance with any rules that the Trustee, and the Plan Administrator deem appropriate under the circumstances. (b) Rollover Accounts. A Participant's Rollover Contributions will be credited to his or her Rollover Account. -9- ss.4. EMPLOYER CONTRIBUTIONS 4.1. Employer Matching Contributions. (a) Matching Contributions for the 2002 Plan Year. Subject to the rules and limitations in this ss. 4 and in ss. 6, the Board in its absolute discretion will determine the percentage, if any, of 401(k) Contributions made by its Eligible Participants that will be matched for each Plan Year and the maximum percentage or dollar limitation, if any, on those contributions. In no case will a Matching Contribution under this ss. 4.1(a) be made in the same Plan Year as a Safe Harbor Matching Contribution under ss. 4.1(b). Matching Contributions will be made only on behalf of Eligible Participants. This contribution will be made in cash as the Board may determine from time to time. No Matching Contribution will be made to the Plan for Plan Years beginning on or after January 1, 2003. (b) Safe Harbor Matching Contributions after December 31, 2002. Effective for Plan Years beginning after December 31, 2002, if the Plan Sponsor in its absolute discretion elects to have the Plan satisfy Code ss.ss. 401(k)(12) and 401(m)(10), a Safe Harbor Matching Contribution will be made in cash for each payroll period during such Plan Year for each Eligible Participant in an amount equal to: (1) one hundred percent (100%) of the first three percent (3%) of a Participant's Compensation deferred to the Plan pursuant to ss. 3.1, and (2) fifty percent (50%) of the next two percent (2%) of a Participant's Compensation deferred to the Plan pursuant toss.3.1. Within a reasonable period of time, before the beginning of the Plan Year, the Plan Administrator will notify each Eligible Employee that the Plan will comply with Code ss.ss. 401(k)(12) and 401(m)(10), and shall provide such notice to other Employees as they become eligible to participate in the Plan in accordance with the requirements of Code ss.ss. 401(k)(12) and 401(m)(10). (c) Application of Forfeitures. Forfeitures occurring in a Plan Year that are not used to make the corrective contributions and restorations described in ss.ss. 7.1(e) and 8.7 will, at the Plan Sponsor's discretion, be used to reduce Matching Contributions or Safe Harbor Matching Contributions, or to pay Plan expenses. (d) No Matching Contributions or Safe Harbor Matching Contributions on Refunds. No Matching Contribution or Safe Harbor Matching Contribution will be made with respect to any 401(k) Contributions that are refunded under ss. 6.3 or Appendix A to comply with the limitations under Code ss.ss. 402(g) or 401(k). Any Matching Contributions and Safe Harbor Matching Contributions attributable to those refunded 401(k) Contributions that have actually been credited to the Participant's Matching -10- Account or Safe Harbor Matching Account will be treated as a Forfeiture as soon as practicable after a determination is made that this corrective action is necessary. (e) Allocation. Matching Contributions made on an Eligible Participant's behalf for a Plan Year will be credited to his or her Matching Account as of the last day of that Plan Year. Safe Harbor Matching Contributions made on a Participant's behalf for a Plan Year will be credited to his or her Safe Harbor Matching Account each payroll period, or such time as determined by the Plan Sponsor in accordance with applicable sections of the Code and the regulations thereunder. The employer matching contribution described in section 4.2(c) of the prior plan document will be allocated in the 2002 Plan Year in accordance with such section of the prior plan document. 4.2. Application of Suspense Account. Excess amounts that are transferred to a Code ss. 415 suspense account for a Plan Year under ss. 6.2(d) will be treated as a Forfeiture for the current or next following Plan Year. 4.3. Top Heavy Contributions. If a determination is made that this Plan is top heavy under ss. 13.8(a) for a Plan Year, the Participating Employers will contribute the amount, if any, needed to satisfy the minimum allocation requirements under ss. 13.8(b). Those contributions will be credited as of the last day of that Plan Year to the affected Participants' Matching Accounts. 4.4. Payment of Employer Contributions. Except as otherwise provided herein, Matching Contributions and Safe Harbor Matching Contributions for a Plan Year shall be paid to the Trust Fund at the time determined by the Plan Sponsor in its discretion, but in no event later than the due date (including any extensions thereof) of the Plan Sponsor's or Participating Employer's federal income tax return for its taxable year ending with or within the Plan Year for which the contribution was made. ss. 5. ACCOUNT INVESTMENTS AND ALLOCATIONS 5.1. General. It is intended that Participants, Beneficiaries of deceased Participants and alternate payees will have an opportunity to direct the investment of their Accounts among investment funds selected by the Plan Sponsor in accordance with ss. 404(c) of ERISA. The Plan Sponsor will select four or more investment funds to make available under the Trust Fund, and each such investment fund will be described for Participants in the summary plan description for this Plan or in such other materials as the Plan Sponsor deems suitable under the circumstances. Investment funds may be added or eliminated at any time by the Plan Sponsor. The investment funds may include, but are not limited to, (1) mutual funds, (2) collective investment funds, (3) the Lodgian Stock Fund and (4) the Lodgian Warrant Funds A and B (collectively the "Lodgian Warrant Funds"). The Lodgian Warrant Funds are frozen investment funds that were established in December 2002 solely for the purpose of holding Lodgian Warrants received by the Trust Fund in connection with the court approved bankruptcy plan of reorganization of the Plan Sponsor. A Participant whose Account included an investment in the Lodgian Stock Fund on the date the Lodgian Warrants were received by the Trust Fund shall automatically have a portion of his or her Account invested in the Lodgian Warrant Funds in the same proportion that his interest -11- in the Lodgian Stock Fund bears to the total amount of all Accounts which are invested in the Lodgian Stock Fund at that time. The Lodgian Warrant Funds will remain frozen funds until the earlier of: (1) the sale of the Lodgian Warrants by the Trustee, as approved by the U. S. Department of Labor in connection with a prohibited transaction exemption, or (2) the exercise of the Lodgian Warrants by the Participants who have an interest in the Lodgian Warrant Funds, provided that no Lodgian Warrant may be exercised until the fair market value of a share of Lodgian Stock equals or exceeds the exercise price of a Lodgian Warrant. If such sale or exercise occurs, the cash proceeds shall be held in the Lodgian Warrant Funds for allocation to Participant Accounts in the Lodgian Warrant Funds and the cash proceeds shall thereafter be subject to the investment direction of Participants. If a Participant's interest in the Lodgian Warrant Funds includes a partial Lodgian Warrant, the Participant shall not be entitled to exercise any partial Lodgian Warrant. In that case, the Trustee shall exercise all partial Lodgian Warrants by aggregating all partial Lodgian Warrants into whole Lodgian Warrants. The Trustee may negotiate the sale of all Lodgian Warrants held in the Lodgian Warrant Funds on behalf of all Participants without the consent of Participants to the extent permitted by law or an exemption issued by the U. S. Department of Labor. The assets of the Plan may be commingled for investment purposes in a group trust and with the assets of other plans whether or not the assets of this Plan will be held in a separate investment fund. 5.2. Investment Elections. Each Participant, Beneficiary of a deceased Participant and alternate payee will have the right to elect how his or her Account will be invested among the available investment funds in accordance with procedures established from time to time by the Plan Administrator and the Trustee. An individual may revise his or her investment Election at such times and in accordance with such procedures as are established by the Plan Administrator, which may include restrictions on the investment of Accounts in the Lodgian Stock Fund and the Lodgian Warrant Funds. An individual's Account will continue to be invested in accordance with his or her most recent investment Election until such Election is properly changed. 5.3. Amounts Available for Investment. Contributions under this Plan will not be treated as part of an Account for investment purposes until such contributions are actually received by the Trust Fund and posted on its records as available for investment by the Participant, Beneficiary or alternate payee. 5.4. Allocations to Accounts. Subject to the limitations in ss. 6, all Accounts will be adjusted as of each Valuation Date for contributions, distributions, withdrawals and investment earnings or losses since the last Valuation Date in accordance with nondiscriminatory procedures for adjusting Account balances. Each Account will share in the investment earnings or losses for each investment fund based on the portion of the Account invested in that fund. 5.5. Allocation Corrections. If an error or omission is discovered in any Account, an appropriate equitable adjustment will be made to remedy the error or omission as soon as practicable after its discovery. 5.6. Transition Period to Implement Plan Changes. In connection with a change in record keepers, trustees, or other service providers for the Plan, a change in the methodology for valuing Accounts (including Lodgian Stock and/or Lodgian Warrants), a change in investment options, a -12- plan merger or other circumstances, a temporary interruption in the normal operations of the Plan may be required in order to properly implement such change or merger or take action in light of such circumstances. In such event or under such circumstances, the Plan Administrator, may take such action as it deems appropriate under the circumstances to implement such change or merger or in light of such circumstances, including authorizing a temporary interruption in a Participant's ability to obtain information about his or her Account, to take distributions from such Account and to make changes in the investment of that Account, provided the Plan Administrator will take appropriate action as to give Participants, Beneficiaries of a deceased Participant and alternate payees advance notice in accordance with the requirements of ERISA as possible and to minimize the scope and length of the interruption in normal Plan operations. In addition, when changing investment options, the Plan Administrator will take such action as it deems appropriate under the circumstances to direct the investment of the funds pending completion by the Trustee of the administrative processes necessary to transfer investment authority to the Participants, Beneficiaries of deceased Participants or alternate payees, including, but not limited to, mapping monies from old funds to new funds. 5.7. Special Rules Concerning Investment in Lodgian Stock Fund. Notwithstanding any other provision of the Plan to the contrary, the following rules shall apply to investments in the Lodgian Stock Fund. (a) Dividends. A Participant's allocation share of cash dividends (and other cash earnings) credited to the Lodgian Stock Fund will be reinvested in Lodgian Stock held in the Lodgian Stock Fund. Dividends on Lodgian Stock paid in the form of stock shall be credited to the Lodgian Stock Fund for allocation to Participant Accounts invested in such fund. (b) Purchase of Lodgian Stock. The Trustee is authorized to purchase Lodgian Stock from the Plan Sponsor or in the open market or in a privately negotiated transaction with another shareholder, including a party-in-interest with respect to the Plan unless such transaction is prohibited by ERISA. (c) Voting of Lodgian Stock. Each Participant may direct the Trustee as to the exercise of any voting or similar rights attributable to whole shares of Lodgian Stock allocated to the Participant's Account through the Account's investment in the Lodgian Stock Fund. Voting directions shall be provided to the Trustee by a Participant in writing, or by mailgram or similar means and shall be held in confidence by the Trustee and shall not be divulged to the Plan Sponsor, or any officer or employee thereof, or any other person. Upon receipt of voting directions, the Trustee shall vote the shares of Lodgian Stock held in the Participant's Account as directed by the Participant. The Trustee shall not vote shares of Lodgian Stock for which it has received no direction from the Participant. The Trustee shall vote any partial shares allocated to a Participant's Account in proportion to the shares for which it receives voting directions from Participants. (d) Restrictions. The ability of a Participant or a Beneficiary to engage in transactions with respect to the Lodgian Stock allocated to his or her Account (within the -13- Lodgian Stock Fund) will be subject to such restrictions as the Plan Administrator and the Trustee determine are necessary or appropriate to satisfy federal or state securities laws. ss. 6. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS 6.1. Ordering Rule. The allocation of contributions made under this Plan (other than Rollover Contributions) will be subject to the limitations of this ss. 6 as applied in the following order: (a) the Code ss. 415 limitations under ss. 6.2, (b) the Code ss. 402(g) limitations under ss. 6.3, (c) the Code ss. 401(k) limitations for Highly Compensated Employees under Appendix A for Plan Years in which a Safe Harbor Matching Contribution is not made to the Plan; and (d) the Code ss. 401(m) limitations for Highly Compensated Employees under Appendix A for Plan Years beginning prior to January 1, 2003. 6.2. Code ss. 415 Limitations. (a) General. The limitation year for purposes of Code ss. 415 and the related regulations is the Plan Year. The total annual additions (as described in ss. 6.2(b)) allocated to a Participant's Account for any Plan Year, when added to the contributions that are treated as made on behalf of the Participant for the Plan Year under the coordination rules in ss. 6.2(c), will not exceed the lesser of: (1) 100% of the Participant's compensation for the Plan Year, (2) $40,000, as adjusted for increases in the cost-of-living under Code ss. 415(d), or (3) any lesser amount as the Plan Sponsor deems necessary or appropriate to satisfy the requirements of Code ss. 415 (including any applicable transition rules) in light of ss. 6.2(c) and any benefits accrued and any contributions made for the Participant under any other employee benefit plan maintained by an Affiliate. For purposes of this ss. 6.2, the term "compensation" means compensation as defined in Code ss. 415(c)(3). (b) Annual Additions. The term annual additions for a Plan Year means the total 401(k) Contributions (other than 401(k) Contributions refunded pursuant to ss. 6.3), Matching Contributions, Safe Harbor Matching Contributions and Forfeitures allocated to a Participant's Account for that Plan Year. For purposes of this ss. 6.2, any corrective allocations made under this Plan will be treated as annual additions in the Plan Year to which those allocations relate. -14- (c) Coordination Rules. Any contributions allocated to an individual medical benefit account described in Code ss. 415(l) and contributions credited under a welfare benefit fund maintained by an Affiliate for any year to a reserve for post-retirement medical benefits for a Participant who is a key employee (within the meaning of Code ss. 416(i)) will be treated as a contribution made on his or her behalf under this Plan when, and to the extent, required under Code ss.ss. 415 or 419A(d). (d) Corrections. If crediting contributions or Forfeitures to a Participant's Account would exceed the restrictions in this ss. 6.2, the excess will be corrected in the following steps: (1) by refunding unmatched 401(k) Contributions (and any investment gain attributable to those refunded contributions); (2) by refunding matched 401(k) Contributions (and any investment gain attributable to those refunded contributions) and transferring the related Matching Contributions and Safe Harbor Matching Contributions to a Code ss. 415 suspense account; and (3) by transferring any remaining excess to a Code ss. 415 suspense account. Amounts transferred to a Code ss. 415 suspense account will not be allocated to the Participant's Account, but will be held unallocated in a separate suspense account and will be treated as a Forfeiture for the next Plan Year. The balance credited to the suspense account will be returned to the Participating Employers in the event this Plan is terminated prior to the date the suspense account has been applied in accordance with this ss. 6.2. Any 401(k) Contributions refunded under this ss. 6.2 will be disregarded for purposes of the Code ss. 402(g) limitations under ss. 6.3 and the Code ss. 401(k) limitations under Appendix A. 6.3. Code ss. 402(g) Limitations. (a) This Plan and Other Affiliate Plans. A Participant's total 401(k) Contributions under this Plan and elective deferrals (within the meaning of Code ss. 402(g)) under all other qualified plans, contracts and arrangements maintained by the Affiliates during any calendar year (other than amounts refunded to reduce a Code ss. 415 excess under ss. 6.2 or under those other plans) will not exceed the annual dollar limit under Code ss. 402(g). If a Participant's 401(k) Contributions together with other elective deferrals exceed this limitation, the Participant will be deemed to have requested a refund from this Plan and the excess will be refunded in accordance with this ss. 6.3. (b) Other Plans or Arrangements. Any elective deferrals (within the meaning of Code ss. 402(g)) made for a calendar year on a Participant's behalf under plans or -15- contracts of an employer that is not an Affiliate, such as another employer's Code ss. 401(k) plan or Code ss. 403(b) tax sheltered annuity, will be taken into account under this Plan for purposes of the limitations under this ss. 6.3 if requested by the Participant and approved by the Plan Administrator. (c) Action to Satisfy 402(g) Limitation. (1) Refund Request. If a Participant's 401(k) Contributions and other elective deferrals described in ss. 6.3(a) and (b) for a calendar year exceed the Code ss. 402(g) dollar limit, he or she may request a refund of that excess (or, if less, the Participant's 401(k) Contributions deducted for that calendar year) by filing an Election no later than March 1 of the following calendar year. A Participant's Election under this ss. 6.3(c) must specify the dollar amount of the excess and include a written statement that, absent the refund, the 401(k) Contributions made under this Plan and other elective deferrals described in ss. 6.3(a) and (b) will exceed the Code ss. 402(g) limitation for the calendar year. (2) Refund. Any refund timely requested or deemed requested under this ss. 6.3 (adjusted for investment gain or loss) will be made no later than the April 15 that immediately follows the date the refund is requested or deemed requested. (3) Treatment. Any 401(k) Contributions that exceed the Code ss. 402(g) limit will be taken into account for purposes of the ADP Test under Appendix A even if the excess 401(k) Contributions are refunded in accordance with this ss. 6.3(c). However, excess 401(k) Contributions refunded to a Nonhighly Compensated Employee will not be taken into account for purposes of the ADP Test to the extent the excess arises solely from 401(k) Contributions under this Plan and elective deferrals under all other qualified plans, contracts and arrangements maintained by the Affiliates pursuant to Code ss. 401(a)(30). Excess 401(k) Contributions refunded under this ss. 6.3 will not be taken into account for purposes of the Code ss. 415 limitations under ss. 6.2. (4) Determination of Investment Gain or Loss. Refunds of excess elective deferrals will be adjusted for investment gain or loss for the Plan Year for which the deferrals were made in accordance with the regulations under Code ss. 402(g) but will not be adjusted for investment gain or loss for the period between the end of the Plan Year and the date the deferrals are distributed. ss. 7. PLAN BENEFITS 7.1. Participant. (a) Distribution Events. A Participant's Vested Benefit will be payable to the Participant in accordance with ss. 8 upon his or her severance from employment (within the meaning of Code ss. 401(k)). In addition, a Participant may request an in-service withdrawal from his or her Vested Benefit before those events in accordance with ss. 7.3. -16- Finally, distributions must begin to a Participant who is a 5% owner in accordance with ss. 8.2(c). (b) Vested Benefit. A Participant's 401(k) Account, Rollover Account and Safe Harbor Matching Account are fully vested at all times. A Participant's Matching Account will become fully vested upon his or her: (1) death while an Employee, (2) reaching age 65 (which is the normal retirement date under the Plan) while an Employee, or (3) completing the number of Years of Service required to be fully vested in accordance with ss. 7.1(c) or ss. 7.1(d) as applicable. Otherwise, the vested portion of a Participant's Matching Account will be determined in accordance with the vesting schedule in ss. 7.1(c) or ss. 7.1(d) as applicable. (c) Vesting Schedule for Participants without an Hour of Service after March 31, 2002. (1) General. The vested percentage of the Matching Contribution Account of a Participant who does not complete one Hour of Service after March 31, 2002 shall be determined in accordance with the following vesting schedule: Full Years of Service Vested Portion --------------------- -------------- less than 3 0% 3 20% 4 40% 5 60% 6 80% 7 or more 100% (2) AMI Operating Partners, L.P. Vesting Schedule. The vested percentage of the portion of a Participant's Account which represents the employer matching account directly transferred to this Plan from the Winegardner & Hammons, Inc. Managed Properties Profit Sharing Plan - AMI Operating Partners as a result of the acquisition of AMI Operating Partner, L. P. by Servico, Inc. on May 28, 1998 shall be determined in accordance with the following vesting schedule: Full Years of Service Vested Portion less than 2 0% 2 20% 3 40% -17- 4 60% 5 80% 6 or more 100% (d) Vesting Schedule for Participants with an Hour of Service on or after April 1, 2002. The vested percentage of the Matching Contribution Account of a Participant who completed one Hour of Service on or after April 1, 2002 shall be determined in accordance with the following vesting schedule: Full Years of Service Vested Portion --------------------- -------------- less than 3 0% 3 or more 100% (e) Forfeiture. If a Participant has a severance from employment (within the meaning of Code ss. 401(k)), the nonvested portion of his or her Account will be treated as a Forfeiture after the earlier of (1) the occurrence of 5 consecutive Breaks in Service or (2) the date his or her Vested Benefit is distributed from the Plan. For this purpose, a Participant whose Matching Account has a Vested Benefit of zero will be deemed to receive a distribution from the Plan of his or her Matching Account when he or she has a severance from employment. Forfeitures occurring in a Plan Year will be applied as soon as practicable in the following steps: (1) to make the corrective contributions and restorations called for under ss.ss. 7.1(f) or 8.7, (2) to pay Plan expenses and (3) to offset Matching Contributions and Safe Harbor Matching Contributions in accordance with ss. 4.1. (f) Reemployment. (1) Before Forfeiture. If a former Employee is reemployed before the nonvested portion of his or her Account has been treated as a Forfeiture, that nonvested portion will remain a part of his or her Account subject to the vesting rules of this ss. 7.1. (2) After Forfeiture. If a former Employee is reemployed as an Employee before he or she has 5 consecutive Breaks in Service but after the nonvested portion of his or her Account has been treated as a Forfeiture, that nonvested portion will be restored without interest as of the first Valuation Date after his or her reemployment if the Employee repays to the Plan the full amount of the distribution attributable to Matching Contributions before the earlier of i) 5 years after the first date on which the Employee is subsequently reemployed by the Employer or ii) the date the Employee incurs 5 consecutive Breaks in Service following the date of the distribution. Restorations will be made first from Forfeitures and then from new contributions by the Participating Employer. If a Participant was not vested in any portion of his or her Matching Account and was deemed to receive a cash out of such Matching Account under ss. 7.1(e), the -18- Participant's Matching Account shall be credited with the amount forfeited as of the first Valuation Date after his or her reemployment if he or she has not incurred five consecutive Breaks in Service. 7.2. Death of Participant. If a Participant dies before receiving payment in full of his or her Vested Benefit, the remaining balance of that Vested Benefit will be payable in accordance with ss. 8 to his or her Beneficiary, determined in accordance with the following rules. (a) If the Participant is lawfully married at death, the Participant's Beneficiary will be the Participant's surviving spouse, except as otherwise provided below. (b) If the Participant is not lawfully married at death or if the Participant's surviving spouse consented in writing before a notary public to the designation of another person as the Participant's Beneficiary (or the Plan Administrator determines that spousal consent is not required under the Code or ERISA), the Participant's Beneficiary will be the person or persons so designated by a Participant in an Election. (c) If paragraphs (a) and (b) do not apply or if no Beneficiary designated under those paragraphs survives the Participant or can be located (after checking his or her last known mailing address) within 12 months after the Participant's death, the Participant's Beneficiary will be the personal representative of the Participant, provided the representative has qualified within 12 months after the Participant's death. (d) If paragraphs (a), (b) and (c) do not apply, the Participant's Beneficiary will be the Participant's heirs at law (including legally adopted children of the deceased Participant) who make their whereabouts known to the Plan Administrator within 12 months after the Participant's death. If the Participant designates a Beneficiary in more than one Election, the most recent valid Election completed and received by the Plan Administrator before the Participant's death will control. 7.3. In-Service Withdrawals. (a) Hardship Withdrawals. (1) General. Subject to the restrictions in ss. 7.3(a)(5), a Participant who is an Employee may withdraw all or any part of his or her 401(k) Account, and Rollover Account for a financial hardship. A hardship withdrawal will be granted if, and to the extent that, the Plan Administrator determines that the withdrawal is "necessary" to satisfy an "immediate and heavy financial need" as determined in accordance with this ss. 7.3(a). (2) Immediate and Heavy Financial Need. An "immediate and heavy financial need" means one or more of the following: -19- (i) expenses for medical care described in Code ss. 213(d) incurred by the Participant or the Participant's spouse or dependents (as defined in Code ss. 152) and amounts necessary for those individuals to obtain the medical care, (ii) the purchase (excluding mortgage payments) of a principal residence for the Participant, (iii) the payment of room and board, tuition and related educational fees for the next 12 months of post-secondary education for the Participant or the Participant's spouse, children or dependents (as defined in Code ss. 152), (iv) the prevention of the eviction of the Participant from his or her principal residence or the foreclosure on the mortgage of the Participant's principal residence or (v) any other events that the Internal Revenue Service identifies as a deemed immediate and heavy financial need pursuant to the regulations under Code ss. 401(k). (3) Withdrawal Necessary to Satisfy Need. A hardship withdrawal will be deemed to be "necessary" to satisfy an immediate and heavy financial need only if both of the following conditions are satisfied: (i) The withdrawal will not exceed the amount of the need and any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the withdrawal. (ii) The Participant has obtained all distributions and withdrawals (other than hardship withdrawals) and all nontaxable loans currently available from this Plan and all plans maintained by the Affiliates. However, a Participant will not be required to obtain a loan if the effect of the loan would be to increase the amount of the need. (4) Suspension of Contributions and Adjusted Limits. If any portion of the hardship withdrawal comes from the Participant's 401(k) Account, for the 6 month period following the date of the withdrawal, the Participant cannot make any 401(k) Contributions under this Plan or elective deferrals, employee contributions or catch-up contributions under any other plans maintained by the Affiliates. For this purpose, "other plans" means all qualified and nonqualified plans of deferred compensation, including a stock option, stock purchase or other similar plan, but excluding a health or welfare benefit plan (even if it is part of a cafeteria plan described in Code ss. 125). The contribution suspension period shall be twelve (12) months for a hardship withdrawal made prior to January 1, 2002. -20- (5) Restrictions On Hardship Withdrawals. A Participant's hardship withdrawals are subject to the following restrictions: (i) Investment gain on 401(k) Contributions made after January 1, 1989 are not available for hardship withdrawals. (ii) Effective January 1, 2003, a Participant may only make two hardship withdrawals per Plan Year. (6) Procedures. Any hardship withdrawal Election must be made in writing, describe in detail the nature of the hardship and the amount needed as a result of the hardship and must include any additional information that the Plan Administrator requests consistent with this ss. 7.3(a). Finally, the hardship withdrawal rules in this ss. 7.3(a) are intended to satisfy the safe harbor requirements in the Code ss. 401(k) regulations, and the Plan Administrator has the power to implement written procedures to modify these rules and to adopt additional rules to the extent permissible under those regulations. (7) Any withdrawal under this subsection 7.3(a) shall not be eligible for a direct rollover under ss. 8.3. (b) Age 59 1/2 Withdrawals. A Participant who is an Employee may make an Election to withdraw all or any portion of his or her Vested Benefit on or after reaching age 59 1/2. A Participant may only make one age 59 1/2 withdrawal in a Plan Year. (c) Rollover Account Withdrawals. A Participant who is an Employee may make an Election to withdraw all (but not less than all) of his or her Rollover Account at any time. (d) Limitations. If at anytime the Plan Administrator imposes restrictions on the sale or purchase of Lodgian Stock pursuant to ss. 5.2, the portion of a Participants' Account invested in the Lodgian Stock Fund will not be considered in the amount available for withdrawal under this ss. 7.3. Similarly, any interest in the Lodgian Warrant Funds will also be disregarded for a withdrawal under this ss. 7.3. ss. 8. BENEFIT PAYMENT 8.1. Methods. (a) General. A Participant's Vested Benefit that becomes payable under ss. 7 will be paid to the Participant or, in the event of his or her death, to his or her Beneficiary in one of the following methods, as specified in an Election made by the Participant or Beneficiary, as applicable: (1) an annuity; -21- (2) a single sum; or (3) installment distribution consisting of approximately equal annual or more frequent installments over a maximum of 10 years, not to exceed the life expectancy of the Participant. If an annuity option is available, and a Participant makes a valid Election to receive an annuity, the annuity rules in Appendix B shall apply. Notwithstanding the foregoing, the annuity option in ss.8.1(a)(1) will be eliminated effective January 1, 2003. A Participant may elect to receive his or her Vested Benefit in either a) cash, b) Lodgian Stock to the extent his or her Account is invested in the Lodgian Stock Fund at the time of the distribution, or c) a combination of cash and Lodgian Stock, unless distribution in Lodgian Stock is not permitted by applicable law. No distribution will be made of Lodgian Warrants or the portion of a Participant's Account which is invested in the Lodgian Warrant Funds until the Lodgian Warrants are sold or exercised and cash is substituted for such Lodgian Warrants in the Lodgian Warrant Funds. Distributions of Lodgian Stock may only be made in whole shares and cash shall be distributed for partial shares. (b) Automatic Single Sum in Certain Cases. Notwithstanding anything to the contrary in this ss. 8: (1) any in-service withdrawals under ss. 7.3 will be made in a single sum; (2) any distribution will be made in a single sum if the value of the Vested Benefit (excluding the value of any Rollover Account) is $5,000 or less. (3) if a Participant continues to participate in the Plan after being paid in a single sum upon his or her required beginning date (as described in ss. 8.2(c)), any additional amounts allocated to the Participant's Account will be paid in a single sum no later than the date required under Code ss. 401(a)(9) or the related regulations. (c) Installment Rules. (1) Distributions Beginning Before Death. If the Participant dies after installments have started but before the Vested Benefit has been paid in full, the remaining Vested Benefit will be distributed to his or her Beneficiary in installments at least as rapidly as the installments were being distributed to the Participant at his or her death. (2) Distributions Beginning After Death. The following rules apply if the Participant dies before distribution of his or her Vested Benefit has started: -22- (i) For installments payable to the Participant's surviving spouse, the installment period may not exceed the spouse's life expectancy. (ii) For installments payable to a Beneficiary who is not the Participant's spouse, the installment period may not exceed the period ending on December 31 of the calendar year containing the fifth anniversary of the date of the Participant's death. (3) Life Expectancy. A Participant's life expectancy and the life expectancy of the Participant's Beneficiary or spouse will be calculated in accordance with the tables under Code ss. 72. Life expectancies will not be recalculated. (4) Minimum Distribution Rule. All distributions under this Plan will be determined and made in accordance with the minimum distribution rules under Code ss. 401(a)(9) and the related regulations, including the minimum distribution incidental benefit requirements of Code ss. 401(a)(9)(G). (5) Acceleration. The remaining Vested Benefit will be paid in a single sum if this Plan is terminated or if the Participant (or, in the event of his or her death, his or her Beneficiary) so requests. (d) Limitations. If at anytime the Plan Administrator imposes restrictions on investments in the Lodgian Stock Fund pursuant to ss. 5.2, the portion of a Participant's Account invested in the Lodgian Stock Fund will not be considered in the amount available for a distribution under this ss. 8.1. Similarly, any interest in the Lodgian Warrant Funds will not be available for distribution until the Lodgian Warrants have been sold or exercised as provided herein. 8.2. Timing. (a) General. A Participant's Vested Benefit will become payable as soon as practicable after the occurrence of an event described in ss. 7. As a general rule, a Participant's Vested Benefit will be paid to him or her as soon as practicable after he or she has a severance from service, subject to the following: (1) The Participant's consent to payment will not be required if the value of the Vested Benefit (excluding the value of any Rollover Account) is $5,000 or less. (2) No payment will be made without the Participant's consent before the Participant's required beginning date (as described in ss. 8.2(c)) if the value of the Vested Benefit (excluding the value of any Rollover Account) exceeds $5,000. (b) Deferral of Payment. Unless the Participant elects otherwise, payment of a Participant's Vested Benefit will not be delayed beyond the 60th day after the close of the Plan Year in which the latest of the following events occurs: -23- (1) the date on which the Participant attains age 65 (which is the normal retirement date under the Plan); (2) the tenth anniversary of the Participant's participation in the Plan; and (3) the date the Participant separates from service. However, unless he or she consents to an earlier distribution, the Participant will be deemed to have elected to defer payment of his or her Vested Benefit (which deemed election will be in lieu of a written election described in Treasury Regulation ss. 1.401(a)-14) until the Participant's death or until the Participant's required beginning date (as described in ss. 8.2(c)), whichever comes first. (c) Participant's Required Beginning Date. Notwithstanding the foregoing, payment of a Participant's Vested Benefit will be made (or commence) to the Participant no later than April 1 of the calendar year following the calendar year in which he or she (1) reaches age 70 1/2 or (2) for a Participant who is not a 5% owner (as defined in Code ss. 416), terminates employment, whichever is later. (d) Beneficiary. A deceased Participant's Vested Benefit will become payable to his or her Beneficiary as soon as practicable after the Plan Administrator determines that the person has an interest in the Vested Benefit. A distribution generally must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. However, if the Vested Benefit is payable to the Participant's spouse in installments, distribution must begin no later than December 31 of the calendar year (1) in which the Participant would have reached age 70 1/2, or (2) containing the first anniversary of the Participant's death, whichever is later. 8.3. Direct Rollover. Notwithstanding any provision of this Plan to the contrary that would otherwise limit a distributee's election under this ss. 8, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. (a) Eligible Rollover Distribution. An eligible rollover distribution is any distribution or withdrawal of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include (1) any payment that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary or for a specified period of ten years or more; (2) any payment to the extent it is required under Code ss. 401(a)(9); and (3) the portion of any payment that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). Any amount that is distributed on account of hardship shall not be an eligible rollover distribution and the distributee may not elect to have any -24- portion of such a distribution paid directly to an eligible retirement plan. A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code ss. 408(a) or (b), or to a qualified defined contribution plan described in Code ss. 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. (b) Eligible Retirement Plan. An eligible retirement plan is (1) an individual retirement account described in Code ss. 408(a), (2) an individual retirement annuity described in Code ss. 408(b), (3) an annuity plan described in Code ss. 403(a), (4) a qualified trust described in Code ss. 401(a), (5) an annuity contract described in Code ss. 403(b) and (6) an eligible plan under Code ss. 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in Code ss. 414(p). (c) Distributee. A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code ss. 414(p), are distributees with regard to the interest of the spouse or former spouse. (d) Direct Rollover. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. Notwithstanding the foregoing, a hardship withdrawal under ss. 7.3 shall not be treated as an eligible rollover distribution. 8.4. Claim for Benefit. A Participant or Beneficiary may be required to complete and file a claim for a benefit in an Election as a condition to payment of that benefit. All claims will be processed in accordance with the claims procedure in the summary plan description for this Plan. Any payment to a Participant or Beneficiary (or to their legal representative or heirs-at-law) made in accordance with the provisions of this Plan will to the extent of that payment be in full satisfaction of all claims under this Plan against the Trustee, the Plan Administrator and each Participating Employer, any of whom may require that person (or his or her legal representative or heirs-at-law), as a condition precedent to that payment, to execute a receipt and release in a form acceptable to the Trustee, Plan Administrator or Participating Employer, as the case may be. 8.5. No Estoppel of Plan. No person is entitled to any benefit under this Plan except and to the extent expressly provided under this Plan. The fact that payments have been made from this Plan in connection with any claim for benefits under this Plan does not (a) establish the validity of the claim, (b) provide any right to have the benefits continue for any period of time or -25- (c) prevent this Plan from recovering the benefits paid to the extent that the Plan Administrator determines that there was no right to payment of the benefits under this Plan. Thus, if a benefit is paid to a person under this Plan and thereafter the Plan Administrator determines that the benefit should not have been paid (whether or not attributable to an error by that person, the Plan Administrator or any other person), the Plan Administrator may take any action it deems necessary or appropriate to correct the overpayment, including without limitation by (1) deducting the amount of any overpayment previously made to or on behalf of that person from any succeeding payments to or on behalf of that person under this Plan or from any amounts due or owing to that person by any Affiliate or under any other plan, program or arrangement benefiting the employees or former employees of any Affiliate or (2) otherwise recovering the overpayment from the person who benefited from it. If the Plan Administrator determines that an underpayment of benefits has been made, the Plan Administrator will take any action it deems necessary or appropriate to correct the underpayment. However, in no event will interest be paid on the amount of the underpayment other than the investment gain or loss credited to the Account pending payment. 8.6. Legally Incompetent. At the discretion of the Plan Administrator payments may be made (a) directly to an incompetent or disabled person, whether because of minority or mental or physical disability, (b) to an individual appointed by a court of competent jurisdiction as the guardian or custodian of that incompetent or disabled person or (3) to any person designated or authorized under any state statute to receive payments on behalf of that incompetent or disabled person, without further liability on the part of a Participating Employer, the Plan Administrator or the Trustee for the amount of the payments to the person on whose account the payment is made. 8.7. Missing Person. If a benefit is required to be paid under this Plan but the Plan Administrator is unable to locate (in accordance with reasonable procedures established for this purpose) the individual to whom payment is to be made, that individual's benefit will be treated as a Forfeiture as of the date determined by the Plan Administrator but no earlier than the last day of the Plan Year that includes the second anniversary of the date that benefit first became payable. However, the amount forfeited will be paid (from Forfeitures or from additional Participating Employer contributions) to the missing individual if he or she files a proper claim for the benefit while this Plan remains in effect. If the Plan Administrator is unable to locate a Participant or any Beneficiary for an Account and this Plan is terminated before the Account becomes a Forfeiture under this ss. 8.7, those persons will be presumed dead upon the Plan's termination and the Account will be applied thereafter to pay administrative expenses of the Plan and Trust Fund. 8.8. Other Payment Rules. (a) Withholding Obligations. The amount of any payment from an Account under this Plan will be reduced as necessary or appropriate to satisfy any applicable tax withholding requirements with respect to the payment. -26- (b) Waiver of Notices. A Participant or Beneficiary may waive the notice period under Code ss. 401(a)(31), 402(f) or 411(a)(11). (c) Account Balance. A payment or Forfeiture from an Account may be delayed pending completion of allocations to the Account if necessary to avoid underpayment or overpayment. (d) Order of Withdrawal. Unless otherwise expressly set forth in this Plan, any payment of less than the Participant's entire Vested Benefit will be deducted from the subaccounts in a Participant's Account and the investment funds in which the subaccount is invested in accordance with procedures established by the Plan Administrator. (e) Reemployment. Except for required distributions under ss. 8.2(c) or in-service withdrawals under ss. 7.3, no payment will be made to a Participant under this ss. 8 after he or she is reemployed as an Employee. ss. 9. NAMED FIDUCIARIES AND ADMINISTRATION 9.1. Named Fiduciaries. The Plan Sponsor and the Plan Administrator are the named fiduciaries responsible for the control, management and administration of this Plan. Any power or responsibility for the control, management or administration of this Plan that is not expressly assigned to a named fiduciary under the Plan, or with respect to which the proper assignment is in doubt, will be deemed to have been assigned to the Plan Sponsor. One named fiduciary will have no responsibility to inquire into the acts and omissions of the other named fiduciary in exercising its powers or discharging its responsibilities under this Plan. A named fiduciary, by written instrument filed by the Plan Administrator with the records of the Plan, may designate a person who is not a named fiduciary to carry out any of its responsibilities under this Plan. A named fiduciary or a person designated to perform any responsibility of a named fiduciary pursuant to the procedure described in this ss. 9.1 may employ one or more persons to render advice with respect to any responsibility assigned to the named fiduciary or allocated to that person under this Plan. Any person (including a member of a committee which is a Plan Administrator) may serve in more than one fiduciary capacity under this Plan, and a fiduciary may be a Participant if he or she otherwise satisfies the Plan's participation requirements. 9.2. Plan Administrator Appointment and Term of Office. If the Plan Administrator is a committee (the "Committee"), the Committee will (except on a temporary basis) consist of not less than three persons. The Committee members will be appointed by the Board and will serve without compensation. The Board has the right to remove any Committee member at any time, and a member may resign at any time by written resignation to the Board. The Board may fill by appointment any vacancy in the membership of the Committee. 9.3. Organization of Plan Administrator. If the Plan Administrator is a Committee, the Committee members may allocate among themselves by mutual consent specific Plan -27- Administrator responsibilities and functions for the operation and administration of this Plan, provided that allocation is reported in the records of the Committee. The Committee will act by majority vote. The Committee may appoint agents or advisors to perform any functions it deems necessary and helpful to the effective performance of its duties and the duties of the individual Committee members. The compensation of those agents or advisors will be fixed by the Committee within limits set by the Board and will constitute an expense of the Plan. 9.4. Plan Administrator Powers and Duties. (a) General. Except to the extent expressly reserved under this Plan to the Plan Sponsor, the Plan Administrator (or the Committee in the case of an appointment of a committee) has the exclusive responsibility and complete discretionary authority to control the operation, management and administration of this Plan, with all powers necessary to enable it properly to carry out those responsibilities, including (but not limited to) the power to construe this Plan, to determine eligibility for benefits, to settle disputed claims and to resolve all administrative, interpretive, operational, equitable and other questions that arise under this Plan. The decisions of the Plan Administrator on all matters within the scope of its authority will be final and binding. To the extent a discretionary power or responsibility under this Plan is expressly assigned to a person other than the Plan Administrator, that person will have complete discretionary authority to carry out that power or responsibility and that person's decisions on all matters within the scope of that person's authority will be final and binding. (b) Liquidity Requirements. The Plan Administrator will be responsible for determining the funding policy for the Plan, including any anticipated liquidity requirements and for communicating that policy to the Trustee when it deems appropriate. (c) Records. All Plan records will be maintained by or at the direction of the Plan Administrator. (d) Information from Others. The Plan Administrator, the Committee members, Participating Employers and their officers, directors, employees and agents will be entitled to rely upon all information and data in any certificate, report or other material prepared by any actuary, accountant, attorney, consultant or advisor selected by the Plan Administrator to perform services on behalf of this Plan. All action taken or omitted in good faith in reliance upon the advice or opinion of any of those persons will be conclusive upon all persons interested in this Plan. 9.5. Indemnification. To the extent that the Plan Administrator, Trustee or a member of the Committee is not protected and held harmless by or through insurance, and to the extent permissible under ERISA and any other applicable law, the Plan Sponsor will indemnify the Plan Administrator, Trustee and Committee members from and against any liability, assessment, loss, expense or other cost, of any kind or description whatsoever, including legal fees and expenses, actually incurred by the member on account of any action or proceeding, actual or threatened, -28- that arises as a result of his or her being the Trustee, Plan Administrator or a member of the Committee. 9.6. Reporting and Disclosure. The Plan Administrator will be responsible for satisfying any applicable reporting and disclosure requirement under federal or state law with respect to this Plan. ss.10. DUTIES AND AUTHORITY OF TRUSTEE 10.1. General Fiduciary Duties. Except as may be required or permitted by ERISA, the Trustee and all fiduciaries hereunder shall discharge their duties with respect to the Plan solely in the interest of the Participants, Beneficiaries and alternate payees and: (a) for the exclusive purpose of: (i) providing benefits to Participants, Beneficiaries and alternate payees; and (ii) defraying reasonable expenses of administering the Plan; (b) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims; (c) by diversifying the investments of the Plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and (d) in accordance with the Plan document insofar as the Plan document is consistent with Part 4 of Title I of ERISA. 10.2. Deposits to Trust Fund. The Trust Fund shall receive from the Participating Employers the payments made on account of contributions under the Plan, and made by Participants, if any, but the Trustee shall have no duty to compute any amount due from the Participating Employers or to collect the same. 10.3. Value Assets. The Trustee shall value the assets of the Trust Fund as of the close of the last day of each Plan Year at their fair market value and the Plan Administrator or its agent will allocate the sums contributed by the Participating Employers and by Participants, if any, plus the net income or minus the net loss of the Trust Fund and plus the net appreciation or minus the net depreciation in the Trust Fund to separate bookkeeping accounts in the names of the respective Participants under the Plan in accordance with the provisions of ss. 5. 10.4. Segregation of Accounts. When directed in writing by the Plan Administrator, the Trustee shall segregate the accounts of terminated Participants, and make payments out of the Trust Fund from time to time to the Participants, Beneficiaries or alternate payees, such -29- payments to be made in the manner and in the amounts as may be specified in the written instructions of the Plan Administrator. 10.5. Tax Returns and Reports. If the Trustee is a corporate fiduciary, then such Trustee shall prepare or cause to have prepared and filed, all tax returns, reports, and related documents, except as otherwise specifically provided in this Plan or unless the Plan Administrator, in writing, relieves the Trustee of such obligation, in part or entirely, in which case the Plan Administrator, or the person or persons it designates, shall be responsible for filing the tax returns, reports, and related filings, as provided by the Plan Administrator. The Trustee shall be entitled to rely on the accuracy of any written statement from the Plan Administrator or from an officer of the Plan Sponsor. 10.6. Powers. Subject to the right in ss. 5.2 of Participants to direct the investment of their Accounts, the Trustee is authorized and empowered to: (a) invest and reinvest the Trust Fund, without distinction between principal and income, in bank accounts, certificates of deposit, common stocks, preferred stocks, bonds, notes, debentures, mortgages, U.S. retirement plan bonds, and in other property, real or personal, so long as the incidents of ownership of such property are within the jurisdiction of the United States, and so long as such investments do not violate applicable law; (b) to acquire and hold up to 100% of the value of the assets in the Trust Fund in "qualifying employer securities" and "qualifying employer real property," as those terms are defined in ERISA if the Plan Administrator determines that such investments are permitted; (c) sell, exchange, convey, transfer, or otherwise realize the value of any property held by it; (d) convert any stocks, bonds, or other securities, to give general or special proxies or powers of attorney with or without power of substitution; to exercise any warrants, conversion privileges, subscription rights, or other options and to make any payment incidental thereto; to consent to or otherwise participate in corporate reorganizations or other changes affecting corporate securities and to delegate discretionary powers to pay any assessments or charges in connection therewith; and generally to exercise any of the powers of an owner with respect to stocks, bonds, securities or other properties held in the Trust Fund provided that the Trustee shall follow the directions of Participants on any voting and tender decisions concerning Lodgian Stock as provided in ss. 5.7. (e) make, execute, acknowledge, and deliver any and all documents of transfer and conveyance and any other instruments that may be necessary or appropriate to carry out the powers herein granted; (f) register any investments held in the Trust Fund in its own name or in the name of a nominee or nominees and to hold any investment in bearer form, but the books and -30- records of the Trustee shall at all times show that all such investments are part of the Trust Fund; (g) invest all or a part of the Trust Fund in deposits which bear a reasonable rate of interest in a bank or similar financial institution, even though such institution is a Trustee or other fiduciary, as defined in IRC ss. 4975(e)(3); (h) investment in a common or collective trust fund or pooled investment fund maintained by a bank or trust company or a pooled investment fund of an insurance company qualified to do business in a State even though such bank, trust company or insurance company is a disqualified person, as defined in IRC ss. 4975(e)(2); (i) make distributions to Participants, Beneficiaries or alternate payees in cash or any other property; (j) perform all such acts, although not specifically mentioned herein, as the Trustee may deem necessary to administer the Trust Fund and to carry out the purpose of the Trust, and (k) borrow or loan sums, except as prohibited by IRC ss. 4975(c) (without reference to IRC ss. 4975(d)), as the Trustee deems desirable, and for that purpose, to mortgage or pledge all or part of the Trust Fund. 10.7. Expenses. All brokerage costs, transfer taxes and similar expenses incurred in connection with the investment and reinvestment of the Trust Fund and all taxes of any kind whatsoever which may be levied or assessed under existing or future laws upon or in respect of the Trust Fund, and any interest which may be payable on money borrowed by the Trustee for the purpose of the Trust, shall be paid from the Trust Fund, and, until paid, shall constitute a charge upon the Trust Fund. All other administrative expenses incurred by the Trustee in the performance of its duties, including such compensation to the Trustee as may be agreed upon from time to time between the Plan Administrator and the Trustee (in accordance with the Trustee's standard schedule of fees in effect from time to time during the time it administers this Trust, if applicable) and all proper charges and disbursements of the Trustee, may be paid by the Participating Employers, and if not paid by the Participating Employers shall be paid from the Trust Fund, and until paid shall constitute a charge upon the Trust Fund. If the Plan Sponsor advises the Trustee in writing of its determination to make no further contribution to this Trust, the expenses of the Trustee shall thereafter be charged against and paid out of the Trust. However, no person who is a disqualified person (as defined in IRC ss. 4975(e)(2)) and who received full-time pay from the Plan Sponsor, may receive compensation from the Trust, except for reimbursement of expenses properly and actually incurred. 10.8. Litigation. The Trustee shall not be required to participate in any litigation either for the collection of monies or other property due the Trust Fund, or in defense of any claim against the Trust Fund unless the Trustee shall have been indemnified to its satisfaction against all expenses and liability to which the Trustee might become subject. -31- ss.11. LOANS. 11.1. Administration. The Plan Administrator will be the named fiduciary responsible for the administration of the loan program under this Plan. The Plan Administrator will establish objective nondiscriminatory written procedures for the loan program in compliance with ss. 2550.408b-1 of the Department of Labor regulations. Those procedures and any amendments to those procedures, to the extent not inconsistent with the terms of this Plan, are incorporated by this reference as part of this Plan. 11.2. Statutory Requirements. (a) General. All loans made under this Plan will comply with the following requirements under ERISA ss. 408(b)(1): (1) Loans will be made available to Participants and Beneficiaries who are eligible for a loan on a reasonably equivalent basis. (2) Loans will not be made available to Highly Compensated Employees in an amount greater than the amount made available to other Employees. (3) Loans will be made in accordance with specific provisions regarding loans set forth in this Plan and the written loan procedures described above. (4) Loans will bear a reasonable rate of interest. (5) Loans will be adequately secured by 1/2 of the Participant's Vested Benefit or, if less, the amount of the outstanding loan principal balance. (b) Repayments. Principal and interest on the loan must be repaid in substantially level installments with payments not less frequently than quarterly over a period of 5 years or less, unless such loan is used to acquire the principal residence of the Participant, then over a period of 10 years. The Plan Administrator may establish other payment rules, including rules regarding a grace period and suspension of payments during unpaid leaves of absence, in the written loan procedures. (c) Limitations on Amounts. The principal amount of a loan made under this Plan to a Participant or Beneficiary, together with the outstanding principal amount of any loan made under any plan maintained by an Affiliate that satisfies the requirements of Code ss. ss. 401 or 403, may not exceed the lesser of (1) 50% of that person's Vested Benefit at the time the loan is made, or (2) $50,000, reduced by the excess (if any) of (A) the highest outstanding balance of any previous loans from this Plan and any other plan maintained by an Affiliate during the one-year -32- period ending immediately before the date on which the current loan is made over (B) the outstanding balance of the previous loans on the date on which the current loan is made. (3) If at anytime the Plan Administrator imposes restrictions on investments in the Lodgian Stock Fund pursuant to ss. 5.2, the portion of a Participants' Account invested in the Lodgian Stock Fund will not be considered in the amount available for a loan under this ss. 11. Similarly, any interest in the Lodgian Warrant Funds will also be disregarded for purposes of determining the amount available for a loan unless such amount consists solely of cash. The Plan Administrator may establish other loan limits, including minimum loan amounts and rules regarding the subaccounts from which a loan may be made, in the written loan procedures. 11.3. Distribution and Default. The Vested Benefit actually payable to an individual who has an outstanding loan will be determined by reducing the Vested Benefit by the amount of the security interest in the Account (if any). Notwithstanding anything to the contrary in this Plan or in the written loan procedures described above, in the event of default, foreclosure on the note and execution of the security interest in an Account will not occur until a distributable event occurs under this Plan and interest will continue to accrue only to the extent permissible under applicable law. 11.4. USERRA. Loan repayments will be suspended under this Plan as permitted under ss. 414(u) of the Internal Revenue Code. ss. 12. AMENDMENT AND TERMINATION 12.1. Amendment. The Plan Sponsor on behalf of all Participating Employers has the right to amend this Plan in any respect whatsoever and at any time by action of the Board, or a committee of the Board to which such authority has been delegated. An officer of the Plan Sponsor has the right to amend the Plan if such amendment is to comply with law. No amendment will be made that (unless otherwise permissible under applicable law) would (a) divert any of the assets of the Trust Fund to any purpose other than the exclusive benefit of Participants and Beneficiaries, (b) eliminate or reduce an optional form of benefit, except as permitted by law or (c) decrease a Participant's accrued benefit under the Plan. However, this Plan may be amended retroactively to affect the Accounts maintained for any person if necessary to cause this Plan and the Trust Fund to be exempt from income taxes under the Code. 12.2. Termination. The Plan Sponsor expects this Plan to be continued indefinitely but, of necessity, it reserves the right to terminate or to partially terminate this Plan or to permanently discontinue contributions to this Plan at any time by action of the Board. Each other Participating Employer will have the right by action of its Board of Directors to terminate or to -33- partially terminate its participation in this Plan or to permanently discontinue its contributions to this Plan. In the case of any termination of or permanent discontinuance of contributions to this Plan, the Account of each affected Participant who is an Employee as of its effective date will become fully vested. Further, the Plan Administrator will, where appropriate, direct (1) the allocation of unallocated amounts to the Accounts of affected individuals, (2) distributions from those Accounts in accordance with procedures established by the Plan Administrator consistent with Code ss. 401(k), (3) any action necessary to implement the missing person provisions under ss. 8.7 and (4) the return of any Trust Fund assets attributable to a Code ss. 415 suspense account in accordance with ss. 13.5. ss. 13. MISCELLANEOUS 13.1. Headings and Construction. The headings and subheadings in this Plan have been inserted for convenience of reference only and are to be ignored in construction of the provisions of this Plan. All references to sections and to subsections are to sections and subsections of this Plan unless otherwise indicated. Where appropriate, the singular should be read as the plural and the plural as the singular. Any reference to a statute also includes any successor statute and, if any amendment renumbers a section of a statute referred to in this Plan, that reference automatically will become a reference to that section as renumbered. This Plan is to be construed in accordance with the laws of the State of Georgia to the extent that those laws are not preempted by federal law. This Plan does not, and should not be construed to, grant any rights or privileges to Participants or Beneficiaries in addition to those minimum rights and privileges required under the Code and ERISA. 13.2. Nontransferability. Except to the extent permitted by law and subject to ss. 13.7, no Account, benefit, payment or distribution under this Plan will be subject to the claim of, or legal process by, any creditor of a Participant or Beneficiary, and no Participant or Beneficiary will have any right to alienate, commute, anticipate or assign all or any portion of his or her Account, benefit, payment or distribution under this Plan. 13.3. Benefits Supported Only by Trust Fund. Any person having any claim for any benefit under this Plan must look solely to the assets of the Trust Fund for satisfaction of that claim. In no event will a Participating Employer, the Plan Administrator, the Trustee or any of their employees, officers, directors or agents be liable in their individual capacities to any person whomsoever for the payment of benefits under the provisions of this Plan. 13.4. Nondiscrimination. The Plan Administrator, will administer this Plan in a uniform and consistent manner with respect to all similarly situated Participants and Beneficiaries and will not permit discrimination in favor of highly compensated employees that would be prohibited under Code ss. 401(a). 13.5. Nonreversion. No part of the Trust Fund will ever be used for or be diverted to purposes other than for the exclusive benefit of Participants and Beneficiaries except that, upon direction of the Plan Administrator, the Trustee will return contributions to a Participating Employer in the following circumstances, to the extent permitted by the Code and ERISA: -34- (a) a contribution made by a mistake of fact will be returned, provided the return is made within one year after the payment of the contribution; (b) a nondeductible contribution will be returned, provided the return is made within one year after the Internal Revenue Service denies the deduction for the contribution, all Plan contributions being made expressly on the condition that the contributions are deductible in full for federal income tax purposes; and (c) any amount held in a Code ss. 415 suspense account (as described in ss. 6.2(d)) that cannot be allocated upon the termination of this Plan will be returned. 13.6. Merger, Consolidation or Similar Transaction. (a) General. In the case of any merger or consolidation of this Plan with, or transfer of assets or liabilities of this Plan to, any other employee benefit plan, each person for whom an Account is maintained will be entitled to receive a benefit from this Plan or the other plan, as applicable, if it is then terminated, that is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation or transfer, if this Plan had then been terminated. (b) Authorization. The Plan Administrator may authorize the Trustee to accept a transfer of assets from or to transfer Trust Fund assets to the trustee, custodian or insurance company holding assets of any other plan that satisfies the requirements of Code ss. 401(a), in connection with a merger or consolidation with or other transfer of assets to or from that plan, provided that (1) the transfer will not affect the qualification of this Plan under Code ss. 401(a) and (2) the assets to be transferred are acceptable to the Trustee. (c) No Annuities. No assets may be transferred directly to this Plan from a plan described in Code ss. 401(a)(11)(B) that is subject to the survivor annuity requirements in Code ss. 417, unless the transfer meets the requirements of Code ss. 414(l) and the person for whom the transfer is made has made an elective transfer that satisfies the requirements in Q&A-3(b) of Treas. Reg. ss. 1.411(d)-4. 13.7. Qualified Domestic Relations Order. In accordance with uniform and nondiscriminatory procedures established by the Plan Administrator from time to time, the Plan Administrator will, upon the receipt of a domestic relations order that seeks to require the distribution of a Participant's Account in whole or in part to an alternate payee (as defined in Code ss. 414(p)(8)), (a) promptly notify the Participant and alternate payee of the receipt of the order and of the procedure that the Plan Administrator will follow to determine whether the order constitutes a qualified domestic relations order (within the meaning of Code ss. 414(p)); (b) determine whether the order constitutes a qualified domestic relations order, notify the Participant and the alternate payee of the results of its determination and, if the -35- Plan Administrator determines that the order does constitute a qualified domestic relations order; (c) transfer any amounts that the Plan Administrator determines necessary or appropriate from the Participant's Account to a special account for the alternate payee; and (d) make any distributions to the alternate payee from the special account that the Plan Administrator deems called for under the terms of the order in accordance with Code ss. 414(p). Unless otherwise provided in the order, an alternate payee's special account shall be distributed as soon as practicable after the account has been established in a lump sum, without regard to whether a distribution would be permissible at that time to a Participant under the terms of this Plan. Unless otherwise provided in the order, if an alternate payee dies before his or her special account is paid in full, the balance in the account will be paid to the person designated by the alternate payee as his or her Beneficiary or, if no Beneficiary designation is made, to the alternate payee's estate. 13.8. Top Heavy Plan. (a) Determination of Top-Heavy Status. This section shall apply for purposes of determining whether the Plan is a top-heavy plan under Code ss. 416(g) and whether the Plan satisfies the minimum benefits requirements of Code ss. 416(c) for Plan Years beginning on or after January 1, 2002. If, as of the last day of any such Plan Year ("determination date"), the sum of the present value of the accrued benefits of key employees (as defined below) exceeds 60% of the sum of the present value of the accrued benefits of all employees as of that determination date, this Plan will be top heavy for the immediately following Plan Year. For this purpose, (1) Key Employee. Key employee means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of an Affiliate having annual compensation greater than $130,000 (as adjusted under Code ss. 416(i)(1) for Plan Years beginning after December 31, 2002), a 5-percent owner of an Affiliate, or a 1-percent owner of an Affiliate having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Code ss. 415(c)(3). The determination of who is a key employee will be made in accordance with Code ss. 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder. (2) Determination of Present Values and Amounts. This ss. 13.9(a) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the determination date. The present value of the accrued benefit of each employee will equal the sum of: -36- (i) the balance of his or her Account under this Plan (determined for this purpose as of each determination date); and (ii) the present value of his or her accrued benefit, if any, under each of the following plans (determined as of the valuation date that coincides with or precedes the determination date for that plan) under (A) each qualified plan (as described in Code ss. 401(a)) maintained by an Affiliate (i) in which a key employee is a participant or (ii) that enables any plan described in subclause (i) to meet the requirements of Code ss. ss. 401(a)(4) or 410, and (B) each other qualified plan maintained by an Affiliate (other than a plan described in clause (A)) that may be aggregated with this Plan and the plans described in clause (A), provided the aggregation group (including a plan described in this clause (B)) continues to meet the requirements of Code ss. ss. 401(a)(4) and 410. (3) Distribution During Year Ending on the Determination Date. The present values of accrued benefits and the amounts of account balances of an employee as of the determination date shall be increased by the distributions made with respect to the employee under the Plan and any plan aggregated with the Plan under Code ss. 416(g)(2) during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code ss. 416(g)(2)(A)(i). In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "5-year period" for "1-year period". (4) Employees Not Performing Services During Year Ending on the Determination Date. The accrued benefits and accounts of any individual who has not performed services for the employer during the 1-year period ending on the determination date shall not be taken into account. (b) Special Top Heavy Plan Rules. Notwithstanding any other rules to the contrary in this Plan, the following special rules will apply if the Plan Administrator determines that this Plan is top heavy for any Plan Year. (1) Minimum Contribution. A contribution will be made by the Participating Employer for the Plan Year for each Participant described in ss.1.23(a) who is not a key employee and who is an Eligible Employee on the last day of that Plan Year that, when added to the employer contributions and forfeitures otherwise allocated on behalf of such individual for such Plan Year under this Plan and any other defined contribution plan maintained by an Affiliate, is equal to (i) the excess, if any, of: -37- (A) the lesser of (a) 3% of the Participant's Compensation or (b) the largest amount (expressed as a percentage of Compensation) of Forfeitures, 401(k) Contributions and Matching Contributions allocated for the Plan Year to the Account of any key employee; over (B) the total Forfeitures and Matching Contributions allocated to the Participant's Account for the Plan Year; or (ii) for each such Eligible Employee who also participates in a top heavy defined benefit plan maintained by an Affiliate, 5% of such Eligible Employee's Compensation for such year; provided, however, that no such contribution shall be made under this ss. 13.8(b) for any Eligible Employee to the extent such Eligible Employee receives the top heavy minimum contributions (as described in Code ss. 416(c)) under another defined contribution plan maintained by an Affiliate for such Plan Year. (2) Matching Contributions. Matching Contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Code ss. 416(c)(2) of the Plan. The preceding sentence shall apply with respect to Matching Contributions and Safe Harbor Matching Contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the ACP Test and other requirements of Code ss. 401(m). IN WITNESS WHEREOF, the Plan Sponsor and the Participating Employers have caused this Plan to be executed by their duly authorized officers and each to have its seal to be affixed as of the date set forth below. LODGIAN, INC. By: ---------------------------------------- Title: ------------------------------------ Date: -------------------------------------- TRUSTEE: ------------------------------------------- Dan Ellis, as Trustee -38- Appendix A to the Lodgian, Inc. 401(k)Plan Effective January 1, 2002 The allocation of 401(k) Contributions made under the Plan will be subject to the limitations of this Appendix A for the Plan Year ending December 31, 2002 and any Plan Year beginning on or after January 1, 2003 in which the Participating Employers do not make a Safe Harbor Matching Contribution to the Plan. The allocation of Matching Contributions made under the Plan will be subject to the limitation of this Appendix A for the Plan Year ending December 31, 2002. No Matching Contributions will be made to the Plan for Plan Years beginning on or after January 1, 2003. The following terms have the following meanings for purposes of this Appendix A: ACP -- means the ratio (expressed as a percentage) of (a) the Matching Contributions credited to a Participant's Account for the applicable Plan Year to (b) his or her Compensation for the applicable Plan Year. ACP Test -- means the Code ss. 401(m) nondiscrimination test described in ss. 2 below. ADP -- means the ratio (expressed as a percentage) of (a) the 401(k) Contributions credited to a Participant's Account for the applicable Plan Year to (b) his or her Compensation for the applicable Plan Year. ADP Test -- means the Code ss. 401(k) nondiscrimination test described in ss. 1 below. Excess Aggregate Contributions -- means the excess of (a) the Matching Contributions actually made on behalf of Highly Compensated Employees for a Plan Year over (b) the maximum permissible amount of Matching Contributions for that Plan Year under the ACP Test described in this Appendix A. Excess Contributions -- means the excess of (a) the 401(k) Contributions actually made on behalf of Highly Compensated Employees for a Plan Year over (b) the maximum permissible amount of 401(k) Contributions for that Plan Year under the ADP Test described in this Appendix A. ss.1. Code ss. 401(k) Limitations for Highly Compensated Employees. (a) ADP Test. Each Plan Year a determination will be made whether the average of the Highly Compensated Employees' ADPs for that Plan Year, when compared to the average of the Nonhighly Compensated Employees' ADPs for the preceding Plan Year, satisfies either of the following tests: (1) the average of the ADPs for all Highly Compensated Employees is not more than 125% of the average of the ADPs for all Nonhighly Compensated Employees, or -39- (2) the average of the ADPs for all Highly Compensated Employees is not more than two times the average of the ADPs for all Nonhighly Compensated Employees, and the excess of the average of the ADPs for all Highly Compensated Employees over the average of the ADPs for all Nonhighly Compensated Employees is not more than two percentage points. In performing the ADP Test for a Plan Year, the applicable averages will be calculated taking into account each Participant who was an Eligible Employee at any time during that Plan Year. (b) Aggregation with Other Plans or Arrangements. For purposes of ss. 1 of this Appendix A, all contributions made on a Highly Compensated Employee's behalf under Code ss. 401(k) for a Plan Year under any other plan described in Code ss. 401(k) maintained by an Affiliate will be treated as if made under this Plan in determining his or her ADP for that Plan Year. If this Plan satisfies the coverage requirements of Code ss. 410(b) only if aggregated with one or more other plans or if one or more other plans satisfy the coverage requirements of Code ss. 410(b) only if aggregated with this Plan, this 1 of Appendix A will be applied by determining the ADPs of all Participants as if all those plans were a single plan. (c) Other Requirements and Elections. The determination and treatment of the 401(k) Contributions and ADP of any Participant will satisfy any other requirements prescribed by the Secretary of the Treasury, including any subsequent IRS guidance issued under Code ss. 401(k), and, in performing the ADP Test, the Plan Administrator may use any alternatives and elections authorized under the applicable regulations, rulings or revenue procedures. (d) Action to Satisfy ADP Test. (1) Refund of Excess Contributions. Excess Contributions for a Plan Year (adjusted for investment gain or loss) will be refunded no later than the last day of the immediately following Plan Year to Highly Compensated Employees on whose behalf the Excess Contributions were made. Refunds will be made on the basis of the amount of 401(k) Contributions, starting with the Highly Compensated Employee with the greatest dollar amount of 401(k) Contributions and ending when the Excess Contributions have been refunded in full. The Excess Contributions that would otherwise be refunded will be reduced (in accordance with the Code ss. 401(k) regulations) by any refund made to the Highly Compensated Employee under ss. 6.3 of the Plan. (2) Determination of Investment Gain or Loss. Excess Contributions will be adjusted for investment gain or loss for the Plan Year for which the contributions were made in accordance with the regulations under Code ss. 401(k) but will not be adjusted for investment gain or loss for the period between the end of the Plan Year and the date the Excess Contributions are distributed. -40- ss. 2. Code ss. 401(m) Limitations For Highly Compensated Employees. (a) Each Plan Year a determination will be made whether the average of the Highly Compensated Employees' ACPs for that Plan Year, when compared to the average of the Nonhighly Compensated Employees' ACPs for the preceding Plan Year, satisfies one of the following tests: (1) the average of the ACPs for all Highly Compensated Employees is not more than 125% of the average of the ACPs for all Nonhighly Compensated Employees, or (2) the average of the ACPs for all Highly Compensated Employees is not more than two times the average of the ACPs for all Nonhighly Compensated Employees, and the excess of the average of the ACPs for all Highly Compensated Employees over the average of the ACPs for all Nonhighly Compensated Employees is not more than two percentage points. In performing the ACP Test for a Plan Year, the applicable averages will be calculated taking into account each Participant who was an Eligible Employee at any time during that Plan Year. (b) Aggregation with Other Plans or Arrangements. For purposes of ss. 2 of this Appendix A, all employee contributions (within the meaning of Code ss. 401(m)) and matching contributions (within the meaning of Code ss. 401(m)(4)) allocated to a Highly Compensated Employee's account for a Plan Year under any other plan described in Code ss. ss. 401(a) or 401(k) maintained by an Affiliate will be treated as if made under this Plan in determining his or her ACP for that Plan Year. If this Plan satisfies the coverage requirements of Code ss. 410(b) only if aggregated with one or more other plans or if one or more other plans satisfy the coverage requirements of Code ss. 410(b) only if aggregated with this Plan, ss. 2 of this Appendix A will be applied by determining the ACPs of all Participants as if all those plans were a single plan. (c) Other Requirements. The determination and treatment of the Matching Contributions and ACP of any Participant will satisfy any other requirements prescribed by the Secretary of the Treasury, including any subsequent IRS guidance issued under Code ss. 401(m), and, in performing the ACP Test, the Plan Administrator may use any alternatives and elections authorized under the applicable regulations, rulings or revenue procedures. (d) Action to Satisfy ACP Test. (1) Distribution or Forfeiture of Excess Aggregate Contributions. Excess Aggregate Contributions for a Plan Year (adjusted for investment gain or loss) will be forfeited to the extent forfeitable under ss. 7.1 or distributed to the extent not so forfeitable from the Accounts of Highly Compensated Employees no later -42- than the last day of the immediately following Plan Year. The distributions or Forfeitures will be made on the basis of the amount of Matching Contributions, starting with the Highly Compensated Employee with the greatest dollar amount of Matching Contributions and ending when the Excess Aggregate Contributions have been distributed or forfeited in full. (2) Determination of Investment Gain or Loss. Excess Aggregate Contributions will be adjusted for investment gain or loss for the Plan Year for which the contributions were made in accordance with the regulations under Code ss. 401(m) but will not be adjusted for investment gain or loss for the period between the end of the Plan Year and the date the Excess Aggregate Contributions are distributed. -42- APPENDIX B TO THE LODGIAN, INC. 401(K) PLAN AND TRUST AGREEMENT If a Participant makes an Election, prior to January 1, 2003, that his or her Vested Benefit be paid in the form of an annuity, the rules of this Appendix B will apply to any withdrawal, loan or distribution from his or her Account at that time or any future time. (a) Normal Annuity Form. Any annuity distribution made (including withdrawals under ss. 7.3) will be paid (1) in the form of a single life annuity if he or she does not have a spouse on the Annuity Starting Date, or (2) in the form of a joint and survivor annuity with his or her spouse as beneficiary if he or she has a spouse on his or her Annuity Starting Date unless the Participant elects another form of payment and his or her spouse, if any, consents to that Election in accordance with this Appendix B. (b) Election Procedures for Annuity Benefits. If a Participant elects that his or her Account be paid in the form of an annuity, the Plan Administrator will (consistent with the regulations under Code ss. 417) furnish him or her with a written explanation of the normal annuity form, the optional payment forms and his or her rights under Code ss. 401(a)(11), ss. 411(a)(11), and ss. 417. A Participant who elects an annuity payment form may waive the normal annuity form and select an optional payment form on a properly completed Election before his or her Annuity Starting Date. The last properly completed Election before the Participant's Annuity Starting Date will control the payment of benefits under this Plan. A Participant's Election to waive the normal annuity form generally will not be effective unless (A) the Election designates the form of payment, (B) his or her spouse consents in writing to the waiver, (C) the spouse's consent acknowledges the effect of the waiver, and (D) the spouse's consent is witnessed by a Plan representative or a notary public. However, if the Participant establishes to the satisfaction of the Plan Administrator and in accordance with Code ss. 417 that written consent of his or her spouse may not be obtained because there is no spouse or the spouse cannot be located or because of such other circumstances as may be described in the regulations under Code ss. 417, the Participant's Election will be deemed to be a valid waiver. -43 A spouse's written consent will be irrevocable as to that spouse and will be binding only as against that spouse. A Participant may revoke (without the consent of his or her spouse) an election to waive the normal annuity form by completing another Election at any time prior to his or her Annuity Starting Date. (c) Loans. A Participant who has elected to have his or her Account paid in the form of an annuity may not pledge his or her Account as security for a loan under ss. 11 unless his or her spouse, if any, consents to that pledge in a manner described in this Appendix B. No loan will be made to the Participant in the absence of proper spousal consent. (d) Death Benefits. If a Participant who has elected to have his or her Account paid in the form of an annuity dies before his or her Annuity Starting Date, his or her Account balance will be applied to purchase a Preretirement Survivor Annuity for his or her surviving spouse if the Participant did not waive the Preretirement Survivor Annuity in accordance with the waiver procedures in this Appendix B. (e) Definitions. For purposes of this Appendix B, the following terms will have the meaning set forth below: (1) Annuity Starting Date - means for each Participant or spouse the first day of the first period for which an amount is paid or is to be paid as an annuity under this Plan. (2) Preretirement Survivor Annuity - means an annuity for the life of a Participant's surviving spouse, that is equal to the maximum amount of annuity benefit that can be purchased with the Participant's Account as of the Annuity Starting Date. -44- APPENDIX C TO THE LODGIAN, INC. 401(K) PLAN AND TRUST AGREEMENT An Employee will be credited with service under the Plan for his or her service with the following employers on the same basis as is used to determine service with an Affiliate under the Plan: - Servico Corporation; - Impac Hotel Group; - AMI Operating Partners, L.P.; - Any other employers for whom service was credited under the qualified retirement plan(s) of Servico Corporation, Impac Hotel Group, or AMI Operating Partners, L.P.; and - Any other employer required to be aggregated with any of the above three entities under Code ss. ss. 414(b), (c), (m) or (o). -45- EX-31.1 5 g84528exv31w1.txt EX-31.1 SECTION 302 CERTIFICATION OF THE CEO Exhibit 31.1 FORM OF SARBANES-OXLEY SECTION 302 (A) CERTIFICATION I, W. Thomas Parrington, certify that: 1) I have reviewed this quarterly report on Form 10-Q of Lodgian, Inc (the "Registrant"); 2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4) The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5) The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: August 14, 2003 By: /s/ W. THOMAS PARRINGTON --------------------------------- W. THOMAS PARRINGTON President and Chief Executive Officer EX-31.2 6 g84528exv31w2.txt EX-31.2 SECTION 302 CERTIFICATION OF THE CFO Exhibit 31.2 FORM OF SARBANES-OXLEY SECTION 302 (A) CERTIFICATION I, Richard Cartoon, certify that: 1) I have reviewed this quarterly report on Form 10-Q of Lodgian, Inc (the "Registrant"); 2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4) The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5) The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: August 14, 2003 By: /s/ RICHARD CARTOON ------------------------------------------- RICHARD CARTOON Executive Vice President and Chief Financial Officer EX-32 7 g84528exv32.txt EX-32 SECTION 906 CERTIFICATION OF CEO & CFO Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Lodgian, Inc., (the "Company") on Form 10-Q for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, W. Thomas Parrington, the Interim Chief Executive Officer and Richard Cartoon, the Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge and after reasonable inquiry: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. LODGIAN, INC. By: /s/ W. THOMAS PARRINGTON ------------------------------- W. THOMAS PARRINGTON President and Chief Executive Officer By: /s/ RICHARD CARTOON ------------------------------- RICHARD CARTOON Executive Vice President and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Lodgian, Inc. and will be retained by Lodgian, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.59

                                                                   EXHIBIT 10.59



                              [LODGIAN LETTERHEAD]


                                                                    June 4, 2003

W. Thomas Parrington
504 Beaver Road
Sewickley, PA  15143-1006

Dear Tom:

         On behalf of Lodgian Inc. (the "Company"), I am pleased to offer you a
position as the Interim Chief Executive Officer of the Company on the terms and
conditions set forth in this letter. The board of directors of the Company (the
"Board") shall announce your position as Interim Chief Executive Officer at such
time as the Board deems appropriate, provided, that such announcement shall
stress the interim nature of your position and that the Company is currently
searching for a permanent chief executive officer. Your employment shall
commence no earlier than May 21, 2003 and no later than June 5, 2003, as
mutually agreed between you and the Board. You shall have such duties,
responsibilities and authorities as the Board shall determine are appropriate
for your position. Without limiting the generality of the foregoing, you will be
expected to actively participate in, and use your best efforts to facilitate,
the Company's search for a permanent Chief Executive Officer and reassure
potential candidates for such position that you will not be an impediment to
their ability to perform the function of Chief Executive Officer. You agree to
devote your full business time and best efforts to the performance of your
duties hereunder and agree that you will not engage in any other business,
profession or occupation for compensation or otherwise without the prior written
consent of the Board. In addition, during the term of your employment hereunder,
you shall continue to serve as a member of the Board; provided that, you shall
resign from all committees of the Board.

         With respect to compensation for your services as Interim Chief
Executive Officer of the Company, subject to your continued employment with the
Company, during the term of your employment hereunder you will receive the
following compensation and benefits, from which the Company shall be entitled to
withhold any amounts required by applicable law:

                  (i) The Company shall pay you a base salary ("Base Salary") at
         the rate of $40,000 per month, prorated for any partial month;
         provided, that your Base Salary shall be reviewed by the Board ninety
         (90) days following the commencement of your employment. Such Base
         Salary shall be payable in accordance with the normal payroll practices
         of the Company.

                  (ii) The Company shall provide you a furnished apartment in
         Buckhead, Georgia that contains a minimum of two bedrooms and two
         bathrooms. In addition, the Company shall reimburse you for (A) your
         moving expenses from your current residences to the apartment in
         Buckhead, Georgia, and other reasonable expenses incurred by you due to
         the short-term nature of your assignment (as approved by the Company),
         up to a maximum of $20,000 and (B) two weekend trips per month to your
         other residences; provided, that such trips shall be combined, where
         possible, with other Company



                                                                               2

         business travel to minimize the cost to the Company. The reimbursement
         of moving and other expenses described in (A) above in the amount of
         $10,000 shall be paid by the Company to you as soon as practicable (but
         in no event later than five (5) business days) following the
         commencement of your employment and the Company shall reimburse you for
         such other moving and other expenses (to the extent incurred and
         subject to the aggregate $20,000 maximum) thirty (30) days thereafter.

                  (iii) The Company shall reimburse you for the cost of your
         current medical insurance premium.

         Any annual or long-term incentive compensation that is paid to you will
be in the sole discretion of the Board (i.e., no minimum or guaranteed incentive
compensation). The Company shall provide you with two weeks paid vacation from
September 16, 2003 until September 30, 2003; provided, that your employment has
not been previously terminated.

         Your employment with the Company is for an unspecified duration and
constitutes "at-will" employment, and this employment relationship may be
terminated at any time, with or without good cause or for any or no cause, at
your or the Company's option, with or without notice without further obligation
of either party hereunder; provided that you will be obligated to give the
Company 30 days advance written notice of any resignation of your employment and
the Company will be obligated to give you thirty (30) days advance written
notice of any termination by the Company without Cause (as defined below).

         For purposes of this letter agreement, "Cause" shall mean (i) your
continued failure to perform your duties to the Company (other than as a result
of your total or partial incapacity due to accident or physical or mental
illness) for a period of 10 days following written notice of such failure from
the Company, (ii) your conviction of, or entry of plea of guilty or nolo
contendere to a felony under the laws of the United States or any State thereof
or (iii) your willful act or omission which results in demonstrable injury to
the financial condition or business reputation of the Company or its
subsidiaries or affiliates.

         The termination of your employment hereunder shall not affect your
continued service as a member of the Board and following such termination of
employment, provided that you remain a member of the Board, you shall be
reappointed by the Board to the committees you served on prior to the
commencement of your employment with the Company.

         All notices or communications hereunder shall be in writing, addressed:
(i) to the Company at its principal corporate headquarters, to the attention of
the [General Counsel] and (ii) to you at the most recent residential address
contained within the personnel records of the Company (or to such other address
as such party may designate in a notice duly delivered as described below). Any
such notice or communication shall be delivered by telecopy, by hand, by courier
or sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above, and in the case of delivery other than by hand, the third
business day after the actual date of mailing shall constitute the time at which
notice was given.

         Any controversy or claim arising out of or relating to this letter
agreement or the breach of this letter agreement that cannot be resolved by you
and the Company shall be construed,




                                                                               3

interpreted and governed in accordance with the laws of State of Georgia,
without regard to the conflicts of law provisions thereof.

         This letter agreement contains the entire understanding of the parties
with respect to your employment with the Company and there are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter herein other than those expressly set forth
herein. This letter agreement may not be altered, modified or amended, except by
written instrument signed by the parties hereto and may be executed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. The failure of a
party to insist upon strict adherence to any term of this letter agreement on
any occasion shall not be considered a waiver of such party's rights or deprive
such party of the right thereafter to insist upon strict adherence to that term
or any other term of this letter agreement.

         You hereby represent to the Company that (i) the services provided by
you to or for the benefit of the Company through the date hereof have not
constituted and (ii) the execution and delivery of this letter agreement by you
and the Company and the performance of your duties hereunder shall not
constitute, in either case, a breach of, or otherwise contravene, the terms of
any employment agreement or other agreement or policy to which you are a party
or otherwise bound.

         This letter agreement shall not be assignable by you but may be
assigned by the Company to an entity that is a successor in interest to
substantially all of the business operations of the Company.

         If the foregoing terms and conditions are acceptable and agreed to by
you, please sign on the line provided below to signify such acceptance and
agreement and return the executed copy to the undersigned.


                                              LODGIAN INC.


                                              By:
                                                 -------------------------------

                                              Name:
                                                   -----------------------------
                                              Title:
                                                     ---------------------------

Accepted and Agreed
This __ day of June, 2003



- ---------------------------
W. Thomas Parrington

EX-10.60

                                                                 EXHIBIT 10.60


                  LODGIAN, INC. 401(K) PLAN AND TRUST AGREEMENT
                             AS AMENDED AND RESTATED
                         EFFECTIVE AS OF JANUARY 1, 2002
                         (EXCEPT AS OTHERWISE PROVIDED)






                                TABLE OF CONTENTS




                                                                                                                 Page
                                                                                                              
ss. 1. DEFINITIONS................................................................................................1

         1.1.     Account.........................................................................................1
         1.2.     Affiliate.......................................................................................1
         1.3.     Beneficiary.....................................................................................1
         1.4.     Board...........................................................................................1
         1.5.     Break in Service................................................................................1
         1.6.     Code............................................................................................1
         1.7.     Compensation....................................................................................2
         1.8.     Election........................................................................................2
         1.9.     Eligible Employee...............................................................................2
         1.10.    Eligible Participant............................................................................3
         1.11.    Employee........................................................................................3
         1.12.    ERISA...........................................................................................3
         1.13.    Forfeiture......................................................................................3
         1.14.    401(k) Account..................................................................................3
         1.15.    401(k) Contributions............................................................................3
         1.16.    Highly Compensated Employee.....................................................................3
         1.17.    Hour of Service.................................................................................4
         1.18.    Leased Employee.................................................................................5
         1.19.    Lodgian Stock...................................................................................5
         1.20.    Matching Account................................................................................5
         1.21.    Matching Contribution...........................................................................5
         1.22.    Nonhighly Compensated Employee..................................................................5
         1.23.    Participant.....................................................................................5
         1.24.    Participating Employer..........................................................................5
         1.25.    Plan............................................................................................5
         1.26.    Plan Administrator..............................................................................5
         1.27.    Plan Sponsor....................................................................................5
         1.28.    Plan Year.......................................................................................5
         1.29.    Rollover Account................................................................................6
         1.30.    Rollover Contribution...........................................................................6
         1.31.    Safe Harbor Matching Contribution...............................................................6
         1.32.    Safe Harbor Matching Contribution Account.......................................................6
         1.33.    Trust Agreement.................................................................................6
         1.34.    Trustee.........................................................................................6
         1.35.    Trust Fund......................................................................................6
         1.36.    Valuation Date..................................................................................6
         1.37.    Vested Benefit..................................................................................6
         1.38.    Year of Service.................................................................................6


                                       -i-


                                                                                                                
ss. 2. PARTICIPATION..............................................................................................7

         2.1.     General Participation for 2002 Plan Year and Prior Years........................................7
         2.2.     General Participation After December 31, 2002...................................................7
         2.3.     Reemployment....................................................................................8
         2.4.     Change in Status................................................................................8
         2.5.     Not a Contract of Employment....................................................................8
         2.6.     USERRA..........................................................................................8

ss. 3. EMPLOYEE CONTRIBUTIONS.....................................................................................8

         3.1.     401(k) Contributions............................................................................8
                  (a)      General................................................................................8
                  (b)      Amount of 401(k) Contributions.........................................................8
                  (c)      401(k) Accounts........................................................................9
         3.2.     Rate Changes....................................................................................9
                  (a)      General................................................................................9
                  (b)      Change in Eligibility Status...........................................................9
                  (c)      Hardship Withdrawal....................................................................9
                  (d)      Leave of Absence.......................................................................9
         3.3.     Payment of 401(k) Contributions to Trustee......................................................9
         3.4.     Rollover Contributions..........................................................................9
                  (a)      General................................................................................9
                  (b)      Rollover Accounts......................................................................9

ss. 4. EMPLOYER CONTRIBUTIONS....................................................................................10

         4.1.      Employer Matching Contributions...............................................................10
                  (a)      Matching Contributions for the 2002 Plan Year.........................................10
                  (b)      Safe Harbor Matching Contributions after December 31, 2002............................10
                  (c)      Application of Forfeitures............................................................10
                  (d)      No Matching Contributions or Safe Harbor Matching Contributions on Refunds............10
                  (e)      Allocation............................................................................11
         4.2.     Application of Suspense Account................................................................11
         4.3.     Top Heavy Contributions........................................................................11
         4.4.     Payment of Employer Contributions..............................................................11

ss. 5. ACCOUNT INVESTMENTS AND ALLOCATIONS.......................................................................11

         5.1.     General........................................................................................11
         5.2.     Investment Elections...........................................................................12
         5.3.     Amounts Available for Investment...............................................................12
         5.4.     Allocations to Accounts........................................................................12
         5.5.     Allocation Corrections.........................................................................12
         5.6.     Transition Period to Implement Plan Changes....................................................12
         5.7.     Special Rules Concerning Investment in Lodgian Stock Fund......................................13
                  (a)      Dividends.............................................................................13
                  (b)      Purchase of Lodgian Stock.............................................................13
                  (c)      Voting of Lodgian Stock...............................................................13
                  (d)      Restrictions..........................................................................13





                                      -ii-

                                                                                                              
ss. 6. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS..............................................................14

         6.1.     Ordering Rule..................................................................................14
         6.2.     Code ss. 415 Limitations.......................................................................14
                  (a)      General...............................................................................14
                  (b)      Annual Additions......................................................................14
                  (c)      Coordination Rules....................................................................15
                  (d)      Corrections...........................................................................15
         6.3.     Code ss. 402(g) Limitations....................................................................15
                  (a)      This Plan and Other Affiliate Plans...................................................15
                  (b)      Other Plans or Arrangements...........................................................15
                  (c)      Action to Satisfy 402(g) Limitation...................................................16

ss. 7. PLAN BENEFITS.............................................................................................16

         7.1.     Participant....................................................................................16
                  (a)      Distribution Events...................................................................16
                  (b)      Vested Benefit........................................................................17
                  (c)      Vesting Schedule for Participants without an Hour of Service on or after
                             April 1, 2002.......................................................................17
                  (d)      Vesting Schedule for Participants with an Hour of Service on or after April 1, 2002...18
                  (e)      Forfeiture............................................................................18
                  (f)      Reemployment..........................................................................18
         7.2.     Death of Participant...........................................................................19
         7.3.     In-Service Withdrawals.........................................................................19
                  (a)      Hardship Withdrawals..................................................................19
                  (b)      Age 59 1/2 Withdrawals................................................................21
                  (c)      Rollover Account Withdrawals..........................................................21
                  (d)      Limitations...........................................................................21

ss. 8. BENEFIT PAYMENT...........................................................................................22

         8.1.     Methods........................................................................................22
                  (a)      General...............................................................................22
                  (b)      Automatic Single Sum in Certain Cases.................................................22
                  (c)      Installment Rules.....................................................................23
                  (d)      Limitations...........................................................................23
         8.2.     Timing.........................................................................................23
                  (a)      General...............................................................................23
                  (b)      Deferral of Payment...................................................................24
                  (c)      Participant's Required Beginning Date.................................................24
                  (d)      Beneficiary...........................................................................24
         8.3.     Direct Rollover................................................................................24
                  (a)      Eligible Rollover Distribution........................................................25
                  (b)      Eligible Retirement Plan..............................................................25
                  (c)      Distributee...........................................................................25
                  (d)      Direct Rollover.......................................................................25





                                      -iii-



                                                                                                             
         8.4.     Claim for Benefit..............................................................................25
         8.5.     No Estoppel of Plan............................................................................26
         8.6.     Legally Incompetent............................................................................26
         8.7.     Missing Person.................................................................................26
         8.8.     Other Payment Rules............................................................................27
                  (a)      Withholding Obligations...............................................................27
                  (b)      Waiver of Notices.....................................................................27
                  (c)      Account Balance.......................................................................27
                  (d)      Order of Withdrawal...................................................................27
                  (e)      Reemployment..........................................................................27

ss. 9. NAMED FIDUCIARIES AND ADMINISTRATION......................................................................27

         9.1.     Named Fiduciaries..............................................................................27
         9.2.     Plan Administrator Appointment and Term of Office..............................................28
         9.3.     Organization of Plan Administrator.............................................................28
         9.4.     Plan Administrator Powers and Duties...........................................................28
                  (a)      General...............................................................................28
                  (b)      Liquidity Requirements................................................................28
                  (c)      Records...............................................................................28
                  (d)      Information from Others...............................................................28
         9.5.     Indemnification................................................................................29
         9.6.     Reporting and Disclosure.......................................................................29

ss. 10. DUTIES AND AUTHORITY OF TRUSTEE.........................................................................29

         10.1.    General Fiduciary Duties.......................................................................29
         10.2.    Deposits to Trust Fund.........................................................................29
         10.3.    Value Assets...................................................................................30
         10.4.    Segregation of Accounts........................................................................30
         10.5.    Tax Returns and Reports........................................................................30
         10.6.    Powers.........................................................................................30
         10.7.    Expenses.......................................................................................31
         10.8.    Litigation.....................................................................................32

ss. 11. LOANS....................................................................................................32

         11.1.    Administration.................................................................................32
         11.2.    Statutory Requirements.........................................................................32
                  (a)      General...............................................................................32
                  (b)      Repayments............................................................................32
                  (c)      Limitations on Amounts................................................................33
         11.3.    Distribution and Default.......................................................................33
         11.4.    USERRA.........................................................................................33

ss. 12. AMENDMENT AND TERMINATION................................................................................33

         12.1.    Amendment......................................................................................33
         12.2.    Termination....................................................................................34

ss. 13. MISCELLANEOUS............................................................................................34



                                      -iv-


                                                                                                              
         13.1.    Headings and Construction......................................................................34
         13.2.    Nontransferability.............................................................................34
         13.3.    Benefits Supported Only by Trust Fund..........................................................34
         13.4.    Nondiscrimination..............................................................................35
         13.5.    Nonreversion...................................................................................35
         13.6.    Merger, Consolidation or Similar Transaction...................................................35
                  (a)      General...............................................................................35
                  (b)      Authorization.........................................................................35
                  (c)      No Annuities..........................................................................35
         13.7.    Qualified Domestic Relations Order.............................................................36
         13.8.    Top Heavy Plan.................................................................................36
                  (a)      Determination of Top-Heavy Status.....................................................36
                  (b)      Special Top Heavy Plan Rules..........................................................38

Appendix A.......................................................................................................40


Appendix B.......................................................................................................44


Appendix C.......................................................................................................46




                                       -v-


               LODGIAN, INC. 401(K) PLAN AND TRUST AGREEMENT
                             AS AMENDED AND RESTATED
                         EFFECTIVE AS OF JANUARY 1, 2002
                         (EXCEPT AS OTHERWISE PROVIDED)

         The Servico, Inc. 401(k) Plan (the "Plan") was adopted by Servico, Inc.
("Servico") effective July 1, 1984 and previously amended several times. Servico
and Impac Hotel Group, LLC ("Impac") combined their respective businesses
through a series of corporate mergers the result of which is that Servico and
Impac became wholly-owned subsidiaries of Lodgian, Inc. ("Lodgian") effective on
December 11, 1998. Effective January 1, 1999, Lodgian assumed sponsorship of the
Plan and changed the name to the Lodgian, Inc. 401(k) Plan. The Plan was amended
and restated effective as of January 1, 1997, and subsequently amended.

         This amendment and restatement of the Plan incorporates the terms of
the Plan's trust agreement and is effective January 1, 2002, unless otherwise
provided. This amendment and reinstatement of the Plan reflects certain
provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA") and is intended to be in good faith compliance with the requirements
of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued
thereunder.


                               ss. 1. DEFINITIONS

The following terms have the following meanings for purposes of this Plan.

1.1. Account -- means the bookkeeping account maintained for each Participant
and, where appropriate, Beneficiary or alternate payee, to show his or her
interest in this Plan.

1.2.  Affiliate -- means the Plan Sponsor and any trade or business,  whether or
not  incorporated,  that is  considered  to be a single  employer  with the Plan
Sponsor under Code ss. 414(b),  (c), (m) or (o). Solely for purposes of the Code
ss. 415  limitations in ss. 6.2, the term Affiliate means each entity that would
be an Affiliate if the phrase "more than 50%" is substituted  for the phrase "at
least 80%" each place it appears in Code ss. 1563(a)(1).

1.3. Beneficiary -- means the person or persons so designated in accordance with
ss.  7.2 by a  Participant  or by  operation  of this Plan to  receive  any Plan
benefits payable on account of the Participant's death.

1.4. Board -- means the Board of Directors of the Plan Sponsor.

1.5. Break in Service -- means for an Employee any Plan Year during which he or
she fails to complete more than 500 Hours of Service.

1.6.  Code -- means the  Internal  Revenue  Code of 1986,  as  amended,  and the
regulations thereunder.




1.7. Compensation -- means the sum of the Participant's "taxable wages" and
"pre-tax contributions" received by the Participant for the portion of the Plan
Year during which he or she was a Participant. Taxable wages are the wages and.
other compensation paid by the Affiliates to the Employee that are reportable as
wages, tips and other compensation on Form W-2 or any other form that the
Affiliate is required to provide the Employee under Code ss.ss. 3401(a),
6041(d), 6051(a)(3) and 6052 excluding any severance payments. Pre-tax
contributions are the Employee's 401(k) Contributions, and any other
contributions or deferrals made on the Employee's behalf by an Affiliate to a
Code ss. 401(k) plan, Code ss. 125 cafeteria plan or any other Affiliate plan or
program that are excludible from the Participant's taxable income for the Plan
Year under Code ss.ss. 125, 132(f), 401(k), 402(h), 403(b), 414(v) or 457(b).

The annual Compensation of each Employee taken into account under the Plan will
not exceed $200,000 as adjusted for cost-of-living increases in accordance with
Code ss. 401(a)(17). The cost-of-living adjustment in effect for a calendar year
applies to any Plan Year beginning in that calendar year. If a Plan Year
consists of fewer than 12 months, this annual Compensation limit will be
multiplied by a fraction, the numerator of which is the number of months in the
Plan Year and the denominator of which is 12.

1.8. Election -- means an election or designation made on a form or by any other
method authorized by the Plan Administrator, properly completed and timely
delivered in accordance with rules adopted by the Plan Administrator from time
to time.

1.9. Eligible Employee -- means each individual who is classified on the payroll
of a Participating Employer as an Employee of that Participating Employer, other
than:

         (a)      an Employee who is included in unit of employees covered by a
         collective bargaining agreement, unless the agreement by specific
         reference to this Plan permits participation in this Plan;

         (b)      a Leased Employee;

         (c)      an Employee who is a nonresident alien receiving no earned
         income from a Participating Employer from sources within the United
         States (as described more fully in Code ss. 410(b)(3)(C)): or

         (d)      an Employee who performs intermittent services for a
         Participating Employer and is classified in the job of "on-call"
         employee as reflected on the payroll of a Participating Employer.

Under no circumstances will an individual who performs services for a
Participating Employer, but who is not classified on the payroll as an employee
of the Participating Employer, for example, an individual performing services
for a Participating Employer under a leasing arrangement or an independent
contractor, be treated as an Eligible Employee, even if that individual is
treated as an "employee" of a Participating Employer as a result of common law
principals, the leased employee rules under Code ss.ss. 414(n) or (o). Further,
if an individual


                                       -2-


performing services for a Participating Employer is retroactively reclassified
as an "employee" of a Participating Employer for any reason, the reclassified
individual will not be treated as an Eligible Employee for any period prior to
the actual date (and not the effective date) of the reclassification unless the
Participating Employer determines the reclassification is necessary to correct
an inadvertent payroll classification error.

1.10.    Eligible Participant -- means for any Plan Year:

         (a)      a Participant who is an Eligible Employee (or on an authorized
         leave of absence as an Eligible Employee) on the last day of that Plan
         Year; and

         (b)      a Participant who has completed a Year of Service during such
         Plan Year.

For purposes of this ss. 1.10, a Participant who terminated employment during
the Plan Year due to death or after attaining age 65 shall be considered an
Eligible Participant for such Plan Year. Further, if the Participating Employer
elects to apply the provisions in ss. 4.1(b) hereof for a Plan Year, Eligible
Participant shall include for purposes of the Safe Harbor Matching Contribution
any Participant who has made 401(k) Contributions during such Plan Year.

1.11.    Employee -- means a person who is treated as an employee of an
Affiliate either as a result of common law principles or under the leased
employee rules of Code ss. 414(n).

1.12.    ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.

1.13.    Forfeiture -- means the dollar amount forfeited from an Account in
accordance with this Plan.

1.14.    401(k) Account -- means the subaccount of a Participant's Account
attributable to his or her 401(k) Contributions.

1.15.    401(k) Contributions -- means that part of a Participant's Compensation
that is contributed to his or her 401(k) Account pursuant to his or her Election
under ss. 3.1.

1.16.    Highly Compensated Employee -- means each Participant who performs
services for an Affiliate during the Plan Year and who:

         (a)      is a 5% owner of an Affiliate (as defined in Code ss.
         416(i)(1)(B)(i)) at any time during the Plan Year or the preceding
         12-month period; or

         (b)      receives Compensation in excess of $85,000 (adjusted for
         cost-of-living increases in accordance with Code ss. 414(q)) for the
         preceding 12-month period.

The determination of which Participants are Highly Compensated Employees is
subject to Code ss. 414(q) and any regulations, rulings, notices or procedures
under that section. In determining whether an Employee is a Highly Compensated
Employee for any Plan Year, the Plan


                                      -3-


Administrator may use any alternatives and elections authorized under the
applicable regulations, rulings or revenue procedures.

1.17.    Hour of Service --

         (a)      General. The term Hour of Service means each hour for which an
                  Employee:

                  (1)      is paid, or entitled to payment, by an Affiliate for
                  the performance of duties as an Employee;

                  (2)      is directly or indirectly paid, or entitled to
                  payment, by an Affiliate for a period of time when he or she
                  performs no duties as an Employee due to vacation, holiday,
                  illness, incapacity (including disability), layoff, jury duty,
                  military duty or leave of absence; and

                  (3)      is paid for any reason an amount as back pay by an
                  Affiliate, irrespective of mitigation of damages;

         (b)      Additional Rules.

                  (1)      An Employee will not receive an Hour of Service
                  credit for service performed for which he or she is paid, or
                  entitled to payment, on account of a period during which he or
                  she performs no duties as an Employee if the payment is made
                  or is due under a plan maintained solely to comply with
                  applicable worker's compensation laws, unemployment
                  compensation laws or disability insurance laws.

                  (2)      No more than 501 Hours of Service will be credited to
                  an Employee for any single continuous period during which he
                  or she performs no duties as an Employee.

                  (3)      An Hour of Service will not be credited to an
                  Employee on account of a payment that solely reimburses the
                  Employee for medical, or medically related, expenses incurred
                  by or on behalf of the Employee.

                  (4)      Hour of Service credit, if any, for periods when no
                  duties are performed as an Employee will be calculated in
                  accordance with ss. 2530.200b-2(b) and (c) of the Department
                  of Labor Regulations, which are incorporated as part of this
                  Plan by this reference.

                  (5)      In lieu of actually recording each Hour of Service
                  that is completed by an Employee that is exempt from the
                  minimum wage and overtime requirements of the Federal Fair
                  Labor Standards Act, that Employee will receive credit for 45
                  Hours of Service for each week in which he or she completes at
                  least one Hour of Service. For each Employee who is not exempt
                  from those requirements, Hours





                           of Service credited for the performance of duties
                           will be the actual number of Hours of Service
                           completed by that Employee.

1.18.    Leased Employee -- means an Employee (other than a common-law employee)
who has performed services for an Affiliate on a substantially full-time basis
for a period of at least one year under the primary direction and control of the
Affiliate pursuant to an agreement between the Affiliate and any other person,
as determined under Code ss. 414(n)(6).

1.19.    Lodgian Stock -- means Lodgian, Inc. common stock, including any common
stock substituted for a previously issued class of common stock, provided such
stock is a "qualifying employer security" as defined in ERISA ss. 407(d)(5).
Such term shall not include any warrants to purchase or otherwise acquire
Lodgian Stock, which rights shall be referred to herein as "Lodgian Warrants".

1.20.    Matching Account -- means the subaccount of a Participant's Account
attributable to Matching Contributions made prior to January 1, 2003.

1.21.    Matching Contribution -- means the matching contribution made by a
Participating Employer or the Plan Sponsor on behalf of the Participating
Employer in accordance with ss. 4.1(a) for Plans Years ending on or before
December 31, 2002.

1.22.    Nonhighly Compensated Employee -- means each Participant who performs
services for an Affiliate during the Plan Year and who is not a Highly
Compensated Employee.

1.23.    Participant -- means (a) each Eligible Employee who has met the
eligibility requirements to participate in this Plan pursuant to ss. 2.1 and (b)
each other person (other than an alternate payee as defined in Code ss.
414(p)(8) or a Beneficiary) for whom an Account is being maintained as a result
of contributions made under this Plan or another plan that are transferred to
this Plan pursuant to ss. 13.6.

1.24.    Participating Employer -- means the Plan Sponsor and any other
Affiliate that, with approval of the Board, has adopted this Plan during such
period that the adoption of the Plan is in effect.

1.25.    Plan -- means this Lodgian, Inc. 401(k) Plan and Trust Agreement as set
forth in this document and all subsequent amendments to this document.

1.26.    Plan Administrator -- means the person, committee or entity appointed
by the Board to administer this Plan on behalf of the Plan Sponsor as provided
in ss. 9. If no person, committee or entity is appointed, the Plan Sponsor shall
be the Plan Administrator.

1.27.    Plan Sponsor -- means Lodgian, Inc. or any successor organization to
that company.

1.28.    Plan Year -- means the calendar year.


                                      -5-


1.29.    Rollover Account -- means the subaccount of a Participant's Account
attributable to Rollover Contributions.

1.30.    Rollover Contribution -- means an amount (or more than one amount) that
qualifies as an eligible rollover distribution under Code ss. 402(c)(4) that is
transferred to this Plan under ss. 3.5 other than after-tax contributions.

1.31.    Safe Harbor Matching Contribution - means the contribution made by a
Participating Employer in accordance with ss. 4.1(b).

1.32.    Safe Harbor Matching Contribution Account - means the subaccount of a
Participant's Account attributable to Safe Harbor Matching Contributions.

1.33.    Trust Agreement -- means the trust agreement established as part of
this Plan in ss. 10.

1.34.    Trustee -- means the person or persons acting as trustee under the
Trust Agreement.

1.35.    Trust Fund -- means the assets held by the Trustee under the Trust
Agreement.

1.36.    Valuation Date -- means the last day of each Plan Year and any other
date chosen by the Plan Administrator.

1.37.    Vested Benefit -- means the sum of (a) the 401(k) Account, (b) the
Rollover Account, (c) the Safe Harbor Matching Account, and (d) the vested
portion of the Matching Account, as determined in accordance with ss. 7.1.

1.38.    Year of Service --

         (a)      Vesting. For purposes of determining vesting service under ss.
         7.1 of this Plan, a Year of Service means each Plan Year during which
         an Employee is credited with at least 1,000 Hours of Service as an
         Employee. Any Year of Service completed before a period of 5 or more
         consecutive Break in Service shall be excluded for purposes of
         determining a Participant's vested percentage if the Employee's vested
         percentage in his or her Matching Account was zero at all times before
         such Breaks in Service.

         (b)      Eligibility. For purposes of determining eligibility service
         under ss. 2.1 and 2.2 of this Plan, a Year of Service means a
         twelve-consecutive-month period during which an Employee completes no
         less than 1,000 Hours of Service beginning on the date on which the
         Employee first performs an Hour of Service upon his employment or
         reemployment with a Participating Employer or, in the event the
         Employee fails to complete 1,000 Hours of Service in that
         twelve-consecutive-month period, any Plan Year thereafter during which
         the Employee completes not less than 1,000 Hours of Service, including
         the Plan Year which includes the first anniversary of the date the
         Employee first performed an Hour of Service upon his employment or
         reemployment.


                                      -6-


         (c)      Service With All Related Employers. An Employee will be
         credited with service under this Plan for his or her service with all
         Affiliates.

         (d)      Service With Predecessor Employers. An Employee will be
         credited with service under this Plan for his or her service with the
         employers identified in Appendix C on the same basis as is used to
         determine service with Affiliates.

                              ss. 2. PARTICIPATION

2.1.     General Participation for 2002 Plan Year and Prior Years.

         (a)      Each Eligible Employee hired during the 2002 Plan Year will
         become a Participant on the January 1 or July 1 coinciding with or next
         following the date he or she:

                  (1)      attains age 21;
                  (2)      completes at least six months of service; and
                  (3)      completes at least 500 Hours of Service in: i) the 6
                           month period immediately preceding July 1st or ii)
                           the 12 month period immediately preceding January
                           1st.

         (b)      An Eligible Employee who does not satisfy the criteria in ss.
         2.1(a) in his or her first 12 months of employment shall become a
         Participant as of the first payroll period beginning on or after the
         first January 1 or July 1 coinciding with or next following the date he
         or she completes a Year of Service and attains age 21.

         (c)      If an Employee is not an Eligible Employee on a January 1st or
         July 1st but has otherwise satisfied either ss. 2.1(a) or (b), he or
         she will become a Participant as of the first day of the month
         thereafter on which he or she becomes an Eligible Employee.

         (d)      Effective January 1, 2002, each Eligible Employee may make a
         Rollover Contribution to the Plan pursuant to ss. 3.5 prior to becoming
         a Participant. An Eligible Employee may not make any 401(k)
         Contributions to the Plan prior to satisfying the requirements of this
         ss. 2.1 or ss. 2.2, notwithstanding any Rollover Contribution made to
         the Plan prior to an Eligible Employee becoming a Participant.

         (e)      For Plan Years ending on or before December 31, 2001,
         participation in the Plan shall be determined under the terms of the
         Plan as then in effect.

2.2.     General Participation After December 31, 2002. Each Eligible Employee
hired after December 31, 2002 will become a Participant effective with the first
payroll period beginning on or after the first day of the month coinciding with
or next following the date he or she completes a Year of Service and attains age
21. If an Employee is not an Eligible Employee on such date, he or she will
become a Participant as of the first payroll period beginning on or after the
first day of the month coincident with or immediately following the date on
which he or she becomes an Eligible Employee.


                                      -2-


2.3.     Reemployment. If a Participant terminates employment and is reemployed
as an Eligible Employee, he or she will be reinstated as a Participant on the
date of his or her reemployment. Each other former Employee who is reemployed
will become a Participant in accordance with the general rule in ss.ss. 2.1 or
2.2, but his or her previous service shall be credited for purposes of
determining his or her eligibility to participate upon reemployment if he or she
had fewer than five consecutive Breaks in Service.

2.4.     Change in Status. If the Plan Sponsor discovers that an individual was
mistakenly treated as an Eligible Employee, it will cause the individual's
401(k) Contributions to be refunded as soon as practicable after the discovery.
In no event will Matching Contributions or Safe Harbor Matching Contributions be
made with respect to those refunded 401(k) Contributions.

If the Plan Sponsor discovers that an Eligible Employee was not treated as
covered under the Plan, it will take any action that it deems appropriate and
proper under the circumstances to remedy the omission as soon as practicable
after the discovery.

2.5.     Not a Contract of Employment. This Plan is not a contract of
employment. Thus participation in this Plan will not give any person the right
to be retained as an Employee or, upon termination of a person's employment, the
right to any interest in the Trust Fund other than as expressly provided in this
Plan.

2.6.     USERRA. Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Code ss. 414(u).


                          ss. 3. EMPLOYEE CONTRIBUTIONS

3.1.     401(k) Contributions.

         (a)      General. Subject to the rules and limitations in this ss. 3
         and in ss. 6, each Eligible Employee who has met the applicable
         eligibility requirements in ss. 2 may elect that his or her
         Participating Employer make 401(k) Contributions to this Plan on his or
         her behalf through payroll deductions, and 401(k) Contributions shall
         begin as soon as administratively possible on or after the date on
         which he or she has completed all election and enrollment forms
         required by the Plan Administrator. A Participant's initial
         contribution election will continue while the Participant is an
         Eligible Employee until the Participant changes the rate of his or her
         401(k) Contributions in accordance with ss. 3.3 or suspends his or her
         401(k) Contributions in accordance with ss. 3.4.

         (b)      Amount of 401(k) Contributions. 401(k) Contributions must be
         made in 1% increments, from 1% to 10% prior to January 1, 2003 and up
         to 15% on or after January 1, 2003 of Compensation. The Plan
         Administrator has the right at any time unilaterally to reduce
         prospectively the amount or percentage of 401(k) Contributions elected
         by any


                                      -8-

         Highly Compensated Employee or by all Highly Compensated Employees as a
         group if it determines that a reduction is appropriate in light of the
         applicable limitations under ss. 6.

         (c)      401(k) Accounts. A Participant's 401(k) Contributions will be
         credited to his or her 401(k) Account.

3.2.     Rate Changes.

         (a)      General. A Participant may change or suspend his or her rate
         of 401(k) Contributions at any time by following the procedures
         established by the Plan Administrator for rate changes.

         (b)      Change in Eligibility Status. A Participant's 401(k)
         Contributions will automatically stop when he or she ceases to be an
         Eligible Employee. If a Participant's status thereafter changes to an
         Eligible Employee (whether by reemployment or otherwise), he or she may
         elect to resume 401(k) Contributions at any time by following the
         procedures established by the Plan Administrator.

         (c)      Hardship Withdrawal. A Participant's 401(k) Contributions will
         be suspended for the six month period following a hardship withdrawal
         in accordance with ss. 7.3(a)(4). A Participant may resume 401(k)
         Contributions at any time after the end of the suspension period. The
         suspension period for hardship withdrawals made prior to January 1,
         2002 shall be twelve (12) months.

         (d)      Leave of Absence. A Participant's 401(k) Contributions will
         continue to be deducted during any period of paid leave of absence
         during which the Participant continues to receive Compensation from a
         Participating Employer, provided he or she continues to be classified
         as an Eligible Employee during the leave. However, a Participant's
         401(k) Contributions will be suspended during any period of unpaid
         leave of absence. A Participant returning from an unpaid leave may
         resume 401(k) Contributions at any time after he or she resumes active
         employment as an Eligible Employee.

3.3.     Payment of 401(k) Contributions to Trustee. All 401(k) Contributions
will be paid to the Trust Fund as soon as practicable after the related payroll
deductions are made and, in any event, by the deadline, if any, established for
making those payments under ERISA or the Code.

3.4.     Rollover Contributions.

         (a)      General. An Eligible Employee may elect to contribute a
         Rollover Contribution to the Trust Fund, provided it is made by the
         Eligible Employee (or transferred to this Plan in a direct rollover
         from another plan): (a) in cash or in a form acceptable to the Trustee
         and (b) in accordance with any rules that the Trustee, and the Plan
         Administrator deem appropriate under the circumstances.

         (b)      Rollover Accounts. A Participant's Rollover Contributions will
         be credited to his or her Rollover Account.


                                      -9-


                          ss.4. EMPLOYER CONTRIBUTIONS

4.1.              Employer Matching Contributions.

         (a)      Matching Contributions for the 2002 Plan Year. Subject to the
         rules and limitations in this ss. 4 and in ss. 6, the Board in its
         absolute discretion will determine the percentage, if any, of 401(k)
         Contributions made by its Eligible Participants that will be matched
         for each Plan Year and the maximum percentage or dollar limitation, if
         any, on those contributions. In no case will a Matching Contribution
         under this ss. 4.1(a) be made in the same Plan Year as a Safe Harbor
         Matching Contribution under ss. 4.1(b). Matching Contributions will be
         made only on behalf of Eligible Participants. This contribution will be
         made in cash as the Board may determine from time to time. No Matching
         Contribution will be made to the Plan for Plan Years beginning on or
         after January 1, 2003.

         (b)      Safe Harbor Matching Contributions after December 31, 2002.
         Effective for Plan Years beginning after December 31, 2002, if the Plan
         Sponsor in its absolute discretion elects to have the Plan satisfy Code
         ss.ss. 401(k)(12) and 401(m)(10), a Safe Harbor Matching Contribution
         will be made in cash for each payroll period during such Plan Year for
         each Eligible Participant in an amount equal to:

                  (1)      one hundred percent (100%) of the first three percent
                  (3%) of a Participant's Compensation deferred to the Plan
                  pursuant to ss. 3.1, and

                  (2)      fifty percent (50%) of the next two percent (2%) of a
                  Participant's Compensation deferred to the Plan pursuant
                  toss.3.1.

         Within a reasonable period of time, before the beginning of the Plan
         Year, the Plan Administrator will notify each Eligible Employee that
         the Plan will comply with Code ss.ss. 401(k)(12) and 401(m)(10), and
         shall provide such notice to other Employees as they become eligible to
         participate in the Plan in accordance with the requirements of Code
         ss.ss. 401(k)(12) and 401(m)(10).

         (c)      Application of Forfeitures. Forfeitures occurring in a Plan
         Year that are not used to make the corrective contributions and
         restorations described in ss.ss. 7.1(e) and 8.7 will, at the Plan
         Sponsor's discretion, be used to reduce Matching Contributions or Safe
         Harbor Matching Contributions, or to pay Plan expenses.

         (d)      No Matching Contributions or Safe Harbor Matching
         Contributions on Refunds. No Matching Contribution or Safe Harbor
         Matching Contribution will be made with respect to any 401(k)
         Contributions that are refunded under ss. 6.3 or Appendix A to comply
         with the limitations under Code ss.ss. 402(g) or 401(k). Any Matching
         Contributions and Safe Harbor Matching Contributions attributable to
         those refunded 401(k) Contributions that have actually been credited to
         the Participant's Matching


                                   -10-


         Account or Safe Harbor Matching Account will be treated as a Forfeiture
         as soon as practicable after a determination is made that this
         corrective action is necessary.

         (e)      Allocation. Matching Contributions made on an Eligible
         Participant's behalf for a Plan Year will be credited to his or her
         Matching Account as of the last day of that Plan Year. Safe Harbor
         Matching Contributions made on a Participant's behalf for a Plan Year
         will be credited to his or her Safe Harbor Matching Account each
         payroll period, or such time as determined by the Plan Sponsor in
         accordance with applicable sections of the Code and the regulations
         thereunder. The employer matching contribution described in section
         4.2(c) of the prior plan document will be allocated in the 2002 Plan
         Year in accordance with such section of the prior plan document.

4.2.     Application of Suspense Account. Excess amounts that are transferred to
a Code ss. 415 suspense account for a Plan Year under ss. 6.2(d) will be treated
as a Forfeiture for the current or next following Plan Year.

4.3.     Top Heavy Contributions. If a determination is made that this Plan is
top heavy under ss. 13.8(a) for a Plan Year, the Participating Employers will
contribute the amount, if any, needed to satisfy the minimum allocation
requirements under ss. 13.8(b). Those contributions will be credited as of the
last day of that Plan Year to the affected Participants' Matching Accounts.

4.4.     Payment of Employer Contributions. Except as otherwise provided herein,
Matching Contributions and Safe Harbor Matching Contributions for a Plan Year
shall be paid to the Trust Fund at the time determined by the Plan Sponsor in
its discretion, but in no event later than the due date (including any
extensions thereof) of the Plan Sponsor's or Participating Employer's federal
income tax return for its taxable year ending with or within the Plan Year for
which the contribution was made.


                   ss. 5. ACCOUNT INVESTMENTS AND ALLOCATIONS

5.1.     General. It is intended that Participants, Beneficiaries of deceased
Participants and alternate payees will have an opportunity to direct the
investment of their Accounts among investment funds selected by the Plan Sponsor
in accordance with ss. 404(c) of ERISA. The Plan Sponsor will select four or
more investment funds to make available under the Trust Fund, and each such
investment fund will be described for Participants in the summary plan
description for this Plan or in such other materials as the Plan Sponsor deems
suitable under the circumstances. Investment funds may be added or eliminated at
any time by the Plan Sponsor. The investment funds may include, but are not
limited to, (1) mutual funds, (2) collective investment funds, (3) the Lodgian
Stock Fund and (4) the Lodgian Warrant Funds A and B (collectively the "Lodgian
Warrant Funds"). The Lodgian Warrant Funds are frozen investment funds that were
established in December 2002 solely for the purpose of holding Lodgian Warrants
received by the Trust Fund in connection with the court approved bankruptcy plan
of reorganization of the Plan Sponsor. A Participant whose Account included an
investment in the Lodgian Stock Fund on the date the Lodgian Warrants were
received by the Trust Fund shall automatically have a portion of his or her
Account invested in the Lodgian Warrant Funds in the same proportion that his
interest


                                      -11-


in the Lodgian Stock Fund bears to the total amount of all Accounts which are
invested in the Lodgian Stock Fund at that time. The Lodgian Warrant Funds will
remain frozen funds until the earlier of: (1) the sale of the Lodgian Warrants
by the Trustee, as approved by the U. S. Department of Labor in connection with
a prohibited transaction exemption, or (2) the exercise of the Lodgian Warrants
by the Participants who have an interest in the Lodgian Warrant Funds, provided
that no Lodgian Warrant may be exercised until the fair market value of a share
of Lodgian Stock equals or exceeds the exercise price of a Lodgian Warrant. If
such sale or exercise occurs, the cash proceeds shall be held in the Lodgian
Warrant Funds for allocation to Participant Accounts in the Lodgian Warrant
Funds and the cash proceeds shall thereafter be subject to the investment
direction of Participants. If a Participant's interest in the Lodgian Warrant
Funds includes a partial Lodgian Warrant, the Participant shall not be entitled
to exercise any partial Lodgian Warrant. In that case, the Trustee shall
exercise all partial Lodgian Warrants by aggregating all partial Lodgian
Warrants into whole Lodgian Warrants. The Trustee may negotiate the sale of all
Lodgian Warrants held in the Lodgian Warrant Funds on behalf of all Participants
without the consent of Participants to the extent permitted by law or an
exemption issued by the U. S. Department of Labor. The assets of the Plan may be
commingled for investment purposes in a group trust and with the assets of other
plans whether or not the assets of this Plan will be held in a separate
investment fund.

5.2.     Investment Elections. Each Participant, Beneficiary of a deceased
Participant and alternate payee will have the right to elect how his or her
Account will be invested among the available investment funds in accordance with
procedures established from time to time by the Plan Administrator and the
Trustee. An individual may revise his or her investment Election at such times
and in accordance with such procedures as are established by the Plan
Administrator, which may include restrictions on the investment of Accounts in
the Lodgian Stock Fund and the Lodgian Warrant Funds. An individual's Account
will continue to be invested in accordance with his or her most recent
investment Election until such Election is properly changed.

5.3.     Amounts Available for Investment. Contributions under this Plan will
not be treated as part of an Account for investment purposes until such
contributions are actually received by the Trust Fund and posted on its records
as available for investment by the Participant, Beneficiary or alternate payee.

5.4.     Allocations to Accounts. Subject to the limitations in ss. 6, all
Accounts will be adjusted as of each Valuation Date for contributions,
distributions, withdrawals and investment earnings or losses since the last
Valuation Date in accordance with nondiscriminatory procedures for adjusting
Account balances. Each Account will share in the investment earnings or losses
for each investment fund based on the portion of the Account invested in that
fund.

5.5.     Allocation Corrections. If an error or omission is discovered in any
Account, an appropriate equitable adjustment will be made to remedy the error or
omission as soon as practicable after its discovery.

5.6.     Transition Period to Implement Plan Changes. In connection with a
change in record keepers, trustees, or other service providers for the Plan, a
change in the methodology for valuing Accounts (including Lodgian Stock and/or
Lodgian Warrants), a change in investment options, a


                                      -12-


plan merger or other circumstances, a temporary interruption in the normal
operations of the Plan may be required in order to properly implement such
change or merger or take action in light of such circumstances. In such event or
under such circumstances, the Plan Administrator, may take such action as it
deems appropriate under the circumstances to implement such change or merger or
in light of such circumstances, including authorizing a temporary interruption
in a Participant's ability to obtain information about his or her Account, to
take distributions from such Account and to make changes in the investment of
that Account, provided the Plan Administrator will take appropriate action as to
give Participants, Beneficiaries of a deceased Participant and alternate payees
advance notice in accordance with the requirements of ERISA as possible and to
minimize the scope and length of the interruption in normal Plan operations. In
addition, when changing investment options, the Plan Administrator will take
such action as it deems appropriate under the circumstances to direct the
investment of the funds pending completion by the Trustee of the administrative
processes necessary to transfer investment authority to the Participants,
Beneficiaries of deceased Participants or alternate payees, including, but not
limited to, mapping monies from old funds to new funds.

5.7.     Special Rules Concerning Investment in Lodgian Stock Fund.
Notwithstanding any other provision of the Plan to the contrary, the following
rules shall apply to investments in the Lodgian Stock Fund.

         (a)      Dividends. A Participant's allocation share of cash dividends
         (and other cash earnings) credited to the Lodgian Stock Fund will be
         reinvested in Lodgian Stock held in the Lodgian Stock Fund. Dividends
         on Lodgian Stock paid in the form of stock shall be credited to the
         Lodgian Stock Fund for allocation to Participant Accounts invested in
         such fund.

         (b)      Purchase of Lodgian Stock. The Trustee is authorized to
         purchase Lodgian Stock from the Plan Sponsor or in the open market or
         in a privately negotiated transaction with another shareholder,
         including a party-in-interest with respect to the Plan unless such
         transaction is prohibited by ERISA.

         (c)      Voting of Lodgian Stock. Each Participant may direct the
         Trustee as to the exercise of any voting or similar rights attributable
         to whole shares of Lodgian Stock allocated to the Participant's Account
         through the Account's investment in the Lodgian Stock Fund. Voting
         directions shall be provided to the Trustee by a Participant in
         writing, or by mailgram or similar means and shall be held in
         confidence by the Trustee and shall not be divulged to the Plan
         Sponsor, or any officer or employee thereof, or any other person. Upon
         receipt of voting directions, the Trustee shall vote the shares of
         Lodgian Stock held in the Participant's Account as directed by the
         Participant. The Trustee shall not vote shares of Lodgian Stock for
         which it has received no direction from the Participant. The Trustee
         shall vote any partial shares allocated to a Participant's Account in
         proportion to the shares for which it receives voting directions from
         Participants.

         (d)      Restrictions. The ability of a Participant or a Beneficiary to
         engage in transactions with respect to the Lodgian Stock allocated to
         his or her Account (within the

                                      -13-


         Lodgian Stock Fund) will be subject to such restrictions as the Plan
         Administrator and the Trustee determine are necessary or appropriate to
         satisfy federal or state securities laws.

               ss. 6. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS

6.1.     Ordering Rule. The allocation of contributions made under this Plan
(other than Rollover Contributions) will be subject to the limitations of
this ss. 6 as applied in the following order:

         (a)      the Code ss. 415 limitations under ss. 6.2,

         (b)      the Code ss. 402(g) limitations under ss. 6.3,

         (c)      the Code ss. 401(k) limitations for Highly Compensated
                  Employees under Appendix A for Plan Years in which a Safe
                  Harbor Matching Contribution is not made to the Plan; and

         (d)      the Code ss. 401(m) limitations for Highly Compensated
                  Employees under Appendix A for Plan Years beginning prior to
                  January 1, 2003.

6.2.     Code ss. 415 Limitations.

         (a)      General. The limitation year for purposes of Code ss. 415 and
         the related regulations is the Plan Year. The total annual additions
         (as described in ss. 6.2(b)) allocated to a Participant's Account for
         any Plan Year, when added to the contributions that are treated as made
         on behalf of the Participant for the Plan Year under the coordination
         rules in ss. 6.2(c), will not exceed the lesser of:

                  (1)      100% of the Participant's compensation for the Plan
                  Year,

                  (2)      $40,000, as adjusted for increases in the
                  cost-of-living under Code ss. 415(d), or

                  (3)      any lesser amount as the Plan Sponsor deems necessary
                  or appropriate to satisfy the requirements of Code ss. 415
                  (including any applicable transition rules) in light of ss.
                  6.2(c) and any benefits accrued and any contributions made for
                  the Participant under any other employee benefit plan
                  maintained by an Affiliate.

         For purposes of this ss. 6.2, the term "compensation" means
compensation as defined in Code ss. 415(c)(3).

         (b)      Annual Additions. The term annual additions for a Plan Year
         means the total 401(k) Contributions (other than 401(k) Contributions
         refunded pursuant to ss. 6.3), Matching Contributions, Safe Harbor
         Matching Contributions and Forfeitures allocated to a Participant's
         Account for that Plan Year. For purposes of this ss. 6.2, any
         corrective allocations made under this Plan will be treated as annual
         additions in the Plan Year to which those allocations relate.


                                      -14-


         (c)      Coordination Rules. Any contributions allocated to an
         individual medical benefit account described in Code ss. 415(l) and
         contributions credited under a welfare benefit fund maintained by an
         Affiliate for any year to a reserve for post-retirement medical
         benefits for a Participant who is a key employee (within the meaning of
         Code ss. 416(i)) will be treated as a contribution made on his or her
         behalf under this Plan when, and to the extent, required under Code
         ss.ss. 415 or 419A(d).

         (d)      Corrections. If crediting contributions or Forfeitures to a
         Participant's Account would exceed the restrictions in this ss. 6.2,
         the excess will be corrected in the following steps:

                  (1)      by refunding unmatched 401(k) Contributions (and any
                  investment gain attributable to those refunded contributions);

                  (2)      by refunding matched 401(k) Contributions (and any
                  investment gain attributable to those refunded contributions)
                  and transferring the related Matching Contributions and Safe
                  Harbor Matching Contributions to a Code ss. 415 suspense
                  account; and

                  (3)      by transferring any remaining excess to a Code
                  ss. 415 suspense account.

         Amounts transferred to a Code ss. 415 suspense account will not be
         allocated to the Participant's Account, but will be held unallocated in
         a separate suspense account and will be treated as a Forfeiture for the
         next Plan Year. The balance credited to the suspense account will be
         returned to the Participating Employers in the event this Plan is
         terminated prior to the date the suspense account has been applied in
         accordance with this ss. 6.2.

         Any 401(k) Contributions refunded under this ss. 6.2 will be
         disregarded for purposes of the Code ss. 402(g) limitations under ss.
         6.3 and the Code ss. 401(k) limitations under Appendix A.

6.3.     Code ss. 402(g) Limitations.

         (a)      This Plan and Other Affiliate Plans. A Participant's total
         401(k) Contributions under this Plan and elective deferrals (within the
         meaning of Code ss. 402(g)) under all other qualified plans, contracts
         and arrangements maintained by the Affiliates during any calendar year
         (other than amounts refunded to reduce a Code ss. 415 excess under ss.
         6.2 or under those other plans) will not exceed the annual dollar limit
         under Code ss. 402(g). If a Participant's 401(k) Contributions together
         with other elective deferrals exceed this limitation, the Participant
         will be deemed to have requested a refund from this Plan and the excess
         will be refunded in accordance with this ss. 6.3.

         (b)      Other Plans or Arrangements. Any elective deferrals (within
         the meaning of Code ss. 402(g)) made for a calendar year on a
         Participant's behalf under plans or


                                      -15-

         contracts of an employer that is not an Affiliate, such as another
         employer's Code ss. 401(k) plan or Code ss. 403(b) tax sheltered
         annuity, will be taken into account under this Plan for purposes of the
         limitations under this ss. 6.3 if requested by the Participant and
         approved by the Plan Administrator.

         (c)      Action to Satisfy 402(g) Limitation.

                  (1)      Refund Request. If a Participant's 401(k)
                  Contributions and other elective deferrals described in ss.
                  6.3(a) and (b) for a calendar year exceed the Code ss. 402(g)
                  dollar limit, he or she may request a refund of that excess
                  (or, if less, the Participant's 401(k) Contributions deducted
                  for that calendar year) by filing an Election no later than
                  March 1 of the following calendar year. A Participant's
                  Election under this ss. 6.3(c) must specify the dollar amount
                  of the excess and include a written statement that, absent the
                  refund, the 401(k) Contributions made under this Plan and
                  other elective deferrals described in ss. 6.3(a) and (b) will
                  exceed the Code ss. 402(g) limitation for the calendar year.

                  (2)      Refund. Any refund timely requested or deemed
                  requested under this ss. 6.3 (adjusted for investment gain or
                  loss) will be made no later than the April 15 that immediately
                  follows the date the refund is requested or deemed requested.

                  (3)      Treatment. Any 401(k) Contributions that exceed the
                  Code ss. 402(g) limit will be taken into account for purposes
                  of the ADP Test under Appendix A even if the excess 401(k)
                  Contributions are refunded in accordance with this ss. 6.3(c).
                  However, excess 401(k) Contributions refunded to a Nonhighly
                  Compensated Employee will not be taken into account for
                  purposes of the ADP Test to the extent the excess arises
                  solely from 401(k) Contributions under this Plan and elective
                  deferrals under all other qualified plans, contracts and
                  arrangements maintained by the Affiliates pursuant to Code ss.
                  401(a)(30). Excess 401(k) Contributions refunded under this
                  ss. 6.3 will not be taken into account for purposes of the
                  Code ss. 415 limitations under ss. 6.2.

                  (4)      Determination of Investment Gain or Loss. Refunds of
                  excess elective deferrals will be adjusted for investment gain
                  or loss for the Plan Year for which the deferrals were made in
                  accordance with the regulations under Code ss. 402(g) but will
                  not be adjusted for investment gain or loss for the period
                  between the end of the Plan Year and the date the deferrals
                  are distributed.

                              ss. 7. PLAN BENEFITS

7.1.     Participant.

         (a)      Distribution Events. A Participant's Vested Benefit will be
         payable to the Participant in accordance with ss. 8 upon his or her
         severance from employment (within the meaning of Code ss. 401(k)). In
         addition, a Participant may request an in-service withdrawal from his
         or her Vested Benefit before those events in accordance with ss. 7.3.


                                      -16-


         Finally, distributions must begin to a Participant who is a 5% owner in
         accordance with ss. 8.2(c).

         (b)      Vested Benefit. A Participant's 401(k) Account, Rollover
         Account and Safe Harbor Matching Account are fully vested at all times.
         A Participant's Matching Account will become fully vested upon his or
         her:

                  (1)      death while an Employee,

                  (2)      reaching age 65 (which is the normal retirement date
                  under the Plan) while an Employee, or

                  (3)      completing the number of Years of Service required to
                  be fully vested in accordance with ss. 7.1(c) or ss. 7.1(d) as
                  applicable.


         Otherwise, the vested portion of a Participant's Matching Account will
         be determined in accordance with the vesting schedule in ss. 7.1(c) or
         ss. 7.1(d) as applicable.

         (c)      Vesting Schedule for Participants without an Hour of Service
         after March 31, 2002.

                  (1)      General. The vested percentage of the Matching
                  Contribution Account of a Participant who does not complete
                  one Hour of Service after March 31, 2002 shall be determined
                  in accordance with the following vesting schedule:

                           Full Years of Service        Vested Portion
                           ---------------------        --------------

                                    less than 3                 0%
                                    3                          20%
                                    4                          40%
                                    5                          60%
                                    6                          80%
                                    7 or more                 100%

                  (2)      AMI Operating Partners, L.P. Vesting Schedule. The
                  vested percentage of the portion of a Participant's Account
                  which represents the employer matching account directly
                  transferred to this Plan from the Winegardner & Hammons, Inc.
                  Managed Properties Profit Sharing Plan - AMI Operating
                  Partners as a result of the acquisition of AMI Operating
                  Partner, L. P. by Servico, Inc. on May 28, 1998 shall be
                  determined in accordance with the following vesting schedule:

                           Full Years of Service        Vested Portion

                                    less than 2                 0%
                                    2                          20%
                                    3                          40%

                                      -17-



                                    4                          60%
                                    5                          80%
                                    6 or more                 100%

                  (d)      Vesting Schedule for Participants with an Hour of
                  Service on or after April 1, 2002. The vested percentage of
                  the Matching Contribution Account of a Participant who
                  completed one Hour of Service on or after April 1, 2002 shall
                  be determined in accordance with the following vesting
                  schedule:

                           Full Years of Service        Vested Portion
                           ---------------------        --------------
                                    less than 3                 0%
                                    3 or more                 100%

                  (e)      Forfeiture. If a Participant has a severance from
                  employment (within the meaning of Code ss. 401(k)), the
                  nonvested portion of his or her Account will be treated as a
                  Forfeiture after the earlier of (1) the occurrence of 5
                  consecutive Breaks in Service or (2) the date his or her
                  Vested Benefit is distributed from the Plan. For this purpose,
                  a Participant whose Matching Account has a Vested Benefit of
                  zero will be deemed to receive a distribution from the Plan of
                  his or her Matching Account when he or she has a severance
                  from employment.

                  Forfeitures occurring in a Plan Year will be applied as soon
                  as practicable in the following steps: (1) to make the
                  corrective contributions and restorations called for under
                  ss.ss. 7.1(f) or 8.7, (2) to pay Plan expenses and (3) to
                  offset Matching Contributions and Safe Harbor Matching
                  Contributions in accordance with ss. 4.1.

                  (f)      Reemployment.

                           (1)      Before Forfeiture. If a former Employee is
                           reemployed before the nonvested portion of his or her
                           Account has been treated as a Forfeiture, that
                           nonvested portion will remain a part of his or her
                           Account subject to the vesting rules of this ss. 7.1.

                           (2)      After Forfeiture. If a former Employee is
                           reemployed as an Employee before he or she has 5
                           consecutive Breaks in Service but after the nonvested
                           portion of his or her Account has been treated as a
                           Forfeiture, that nonvested portion will be restored
                           without interest as of the first Valuation Date after
                           his or her reemployment if the Employee repays to the
                           Plan the full amount of the distribution attributable
                           to Matching Contributions before the earlier of i) 5
                           years after the first date on which the Employee is
                           subsequently reemployed by the Employer or ii) the
                           date the Employee incurs 5 consecutive Breaks in
                           Service following the date of the distribution.
                           Restorations will be made first from Forfeitures and
                           then from new contributions by the Participating
                           Employer. If a Participant was not vested in any
                           portion of his or her Matching Account and was deemed
                           to receive a cash out of such Matching Account
                           under ss. 7.1(e), the


                                      -18-


                  Participant's Matching Account shall be credited with the
                  amount forfeited as of the first Valuation Date after his or
                  her reemployment if he or she has not incurred five
                  consecutive Breaks in Service.

7.2.     Death of Participant. If a Participant dies before receiving payment in
full of his or her Vested Benefit, the remaining balance of that Vested Benefit
will be payable in accordance with ss. 8 to his or her Beneficiary, determined
in accordance with the following rules.

         (a)      If the Participant is lawfully married at death, the
         Participant's Beneficiary will be the Participant's surviving spouse,
         except as otherwise provided below.

         (b)      If the Participant is not lawfully married at death or if the
         Participant's surviving spouse consented in writing before a notary
         public to the designation of another person as the Participant's
         Beneficiary (or the Plan Administrator determines that spousal consent
         is not required under the Code or ERISA), the Participant's Beneficiary
         will be the person or persons so designated by a Participant in an
         Election.

         (c)      If paragraphs (a) and (b) do not apply or if no Beneficiary
         designated under those paragraphs survives the Participant or can be
         located (after checking his or her last known mailing address) within
         12 months after the Participant's death, the Participant's Beneficiary
         will be the personal representative of the Participant, provided the
         representative has qualified within 12 months after the Participant's
         death.

         (d)      If paragraphs (a), (b) and (c) do not apply, the Participant's
         Beneficiary will be the Participant's heirs at law (including legally
         adopted children of the deceased Participant) who make their
         whereabouts known to the Plan Administrator within 12 months after the
         Participant's death.

If the Participant designates a Beneficiary in more than one Election, the most
recent valid Election completed and received by the Plan Administrator before
the Participant's death will control.

7.3.     In-Service Withdrawals.

         (a)      Hardship Withdrawals.

                  (1)      General. Subject to the restrictions in ss.
                  7.3(a)(5), a Participant who is an Employee may withdraw all
                  or any part of his or her 401(k) Account, and Rollover Account
                  for a financial hardship. A hardship withdrawal will be
                  granted if, and to the extent that, the Plan Administrator
                  determines that the withdrawal is "necessary" to satisfy an
                  "immediate and heavy financial need" as determined in
                  accordance with this ss. 7.3(a).

                  (2)      Immediate and Heavy Financial Need. An "immediate and
                  heavy financial need" means one or more of the following:



                                      -19-


                           (i)      expenses for medical care described in Code
                           ss. 213(d) incurred by the Participant or the
                           Participant's spouse or dependents (as defined in
                           Code ss. 152) and amounts necessary for those
                           individuals to obtain the medical care,

                           (ii)     the purchase (excluding mortgage payments)
                           of a principal residence for the Participant,

                           (iii)    the payment of room and board, tuition and
                           related educational fees for the next 12 months of
                           post-secondary education for the Participant or the
                           Participant's spouse, children or dependents (as
                           defined in Code ss. 152),

                           (iv)     the prevention of the eviction of the
                           Participant from his or her principal residence or
                           the foreclosure on the mortgage of the Participant's
                           principal residence or

                           (v)      any other events that the Internal Revenue
                           Service identifies as a deemed immediate and heavy
                           financial need pursuant to the regulations under Code
                           ss. 401(k).

                  (3)      Withdrawal Necessary to Satisfy Need. A hardship
                  withdrawal will be deemed to be "necessary" to satisfy an
                  immediate and heavy financial need only if both of the
                  following conditions are satisfied:

                           (i)      The withdrawal will not exceed the amount of
                           the need and any amounts necessary to pay any
                           federal, state or local income taxes or penalties
                           reasonably anticipated to result from the withdrawal.

                           (ii)     The Participant has obtained all
                           distributions and withdrawals (other than hardship
                           withdrawals) and all nontaxable loans currently
                           available from this Plan and all plans maintained by
                           the Affiliates. However, a Participant will not be
                           required to obtain a loan if the effect of the loan
                           would be to increase the amount of the need.

                  (4)      Suspension of Contributions and Adjusted Limits. If
                  any portion of the hardship withdrawal comes from the
                  Participant's 401(k) Account, for the 6 month period following
                  the date of the withdrawal, the Participant cannot make any
                  401(k) Contributions under this Plan or elective deferrals,
                  employee contributions or catch-up contributions under any
                  other plans maintained by the Affiliates. For this purpose,
                  "other plans" means all qualified and nonqualified plans of
                  deferred compensation, including a stock option, stock
                  purchase or other similar plan, but excluding a health or
                  welfare benefit plan (even if it is part of a cafeteria plan
                  described in Code ss. 125). The contribution suspension period
                  shall be twelve (12) months for a hardship withdrawal made
                  prior to January 1, 2002.


                                      -20-


                  (5)      Restrictions On Hardship Withdrawals. A Participant's
                  hardship withdrawals are subject to the following
                  restrictions:

                           (i)      Investment gain on 401(k) Contributions made
                           after January 1, 1989 are not available for hardship
                           withdrawals.

                           (ii)     Effective January 1, 2003, a Participant may
                           only make two hardship withdrawals per Plan Year.

                  (6)      Procedures. Any hardship withdrawal Election must be
                  made in writing, describe in detail the nature of the hardship
                  and the amount needed as a result of the hardship and must
                  include any additional information that the Plan Administrator
                  requests consistent with this ss. 7.3(a).

                  Finally, the hardship withdrawal rules in this ss. 7.3(a) are
                  intended to satisfy the safe harbor requirements in the Code
                  ss. 401(k) regulations, and the Plan Administrator has the
                  power to implement written procedures to modify these rules
                  and to adopt additional rules to the extent permissible under
                  those regulations.

                  (7)      Any withdrawal under this subsection 7.3(a) shall not
                  be eligible for a direct rollover under ss. 8.3.

         (b)      Age 59 1/2 Withdrawals. A Participant who is an Employee may
         make an Election to withdraw all or any portion of his or her Vested
         Benefit on or after reaching age 59 1/2. A Participant may only make
         one age 59 1/2 withdrawal in a Plan Year.

         (c)      Rollover Account Withdrawals. A Participant who is an Employee
         may make an Election to withdraw all (but not less than all) of his or
         her Rollover Account at any time.

         (d)      Limitations. If at anytime the Plan Administrator imposes
         restrictions on the sale or purchase of Lodgian Stock pursuant to ss.
         5.2, the portion of a Participants' Account invested in the Lodgian
         Stock Fund will not be considered in the amount available for
         withdrawal under this ss. 7.3. Similarly, any interest in the Lodgian
         Warrant Funds will also be disregarded for a withdrawal under this ss.
         7.3.

                             ss. 8. BENEFIT PAYMENT

8.1.     Methods.

         (a)      General. A Participant's Vested Benefit that becomes payable
         under ss. 7 will be paid to the Participant or, in the event of his or
         her death, to his or her Beneficiary in one of the following methods,
         as specified in an Election made by the Participant or Beneficiary, as
         applicable:

                  (1)      an annuity;


                                      -21-


                  (2)      a single sum; or

                  (3)      installment distribution consisting of approximately
                  equal annual or more frequent installments over a maximum of
                  10 years, not to exceed the life expectancy of the
                  Participant.

         If an annuity option is available, and a Participant makes a valid
         Election to receive an annuity, the annuity rules in Appendix B shall
         apply. Notwithstanding the foregoing, the annuity option in
         ss.8.1(a)(1) will be eliminated effective January 1, 2003.

         A Participant may elect to receive his or her Vested Benefit in either
         a) cash, b) Lodgian Stock to the extent his or her Account is invested
         in the Lodgian Stock Fund at the time of the distribution, or c) a
         combination of cash and Lodgian Stock, unless distribution in Lodgian
         Stock is not permitted by applicable law. No distribution will be made
         of Lodgian Warrants or the portion of a Participant's Account which is
         invested in the Lodgian Warrant Funds until the Lodgian Warrants are
         sold or exercised and cash is substituted for such Lodgian Warrants in
         the Lodgian Warrant Funds. Distributions of Lodgian Stock may only be
         made in whole shares and cash shall be distributed for partial shares.

         (b)      Automatic Single Sum in Certain Cases. Notwithstanding
         anything to the contrary in this ss. 8:

                  (1)      any in-service withdrawals under ss. 7.3 will be made
                  in a single sum;

                  (2)      any distribution will be made in a single sum if the
                  value of the Vested Benefit (excluding the value of any
                  Rollover Account) is $5,000 or less.

                  (3)      if a Participant continues to participate in the Plan
                  after being paid in a single sum upon his or her required
                  beginning date (as described in ss. 8.2(c)), any additional
                  amounts allocated to the Participant's Account will be paid in
                  a single sum no later than the date required under Code ss.
                  401(a)(9) or the related regulations.

         (c)      Installment Rules.

                  (1)      Distributions Beginning Before Death. If the
                  Participant dies after installments have started but before
                  the Vested Benefit has been paid in full, the remaining Vested
                  Benefit will be distributed to his or her Beneficiary in
                  installments at least as rapidly as the installments were
                  being distributed to the Participant at his or her death.

                  (2)      Distributions Beginning After Death. The following
                  rules apply if the Participant dies before distribution of his
                  or her Vested Benefit has started:


                                      -22-


                           (i)      For installments payable to the
                           Participant's surviving spouse, the installment
                           period may not exceed the spouse's life expectancy.

                           (ii)     For installments payable to a Beneficiary
                           who is not the Participant's spouse, the installment
                           period may not exceed the period ending on December
                           31 of the calendar year containing the fifth
                           anniversary of the date of the Participant's death.

                  (3)      Life Expectancy. A Participant's life expectancy and
                  the life expectancy of the Participant's Beneficiary or spouse
                  will be calculated in accordance with the tables under Code
                  ss. 72. Life expectancies will not be recalculated.

                  (4)      Minimum Distribution Rule. All distributions under
                  this Plan will be determined and made in accordance with the
                  minimum distribution rules under Code ss. 401(a)(9) and the
                  related regulations, including the minimum distribution
                  incidental benefit requirements of Code ss. 401(a)(9)(G).

                  (5)      Acceleration. The remaining Vested Benefit will be
                  paid in a single sum if this Plan is terminated or if the
                  Participant (or, in the event of his or her death, his or her
                  Beneficiary) so requests.

         (d)      Limitations. If at anytime the Plan Administrator imposes
         restrictions on investments in the Lodgian Stock Fund pursuant to ss.
         5.2, the portion of a Participant's Account invested in the Lodgian
         Stock Fund will not be considered in the amount available for a
         distribution under this ss. 8.1. Similarly, any interest in the Lodgian
         Warrant Funds will not be available for distribution until the Lodgian
         Warrants have been sold or exercised as provided herein.

8.2.     Timing.

         (a)      General. A Participant's Vested Benefit will become payable as
         soon as practicable after the occurrence of an event described in ss.
         7. As a general rule, a Participant's Vested Benefit will be paid to
         him or her as soon as practicable after he or she has a severance from
         service, subject to the following:

                  (1)      The Participant's consent to payment will not be
                  required if the value of the Vested Benefit (excluding the
                  value of any Rollover Account) is $5,000 or less.

                  (2)      No payment will be made without the Participant's
                  consent before the Participant's required beginning date (as
                  described in ss. 8.2(c)) if the value of the Vested Benefit
                  (excluding the value of any Rollover Account) exceeds $5,000.

         (b)      Deferral of Payment. Unless the Participant elects otherwise,
         payment of a Participant's Vested Benefit will not be delayed beyond
         the 60th day after the close of the Plan Year in which the latest of
         the following events occurs:


                                      -23-


                  (1)      the date on which the Participant attains age 65
                  (which is the normal retirement date under the Plan);

                  (2)      the tenth anniversary of the Participant's
                  participation in the Plan; and

                  (3)      the date the Participant separates from service.

         However, unless he or she consents to an earlier distribution, the
         Participant will be deemed to have elected to defer payment of his or
         her Vested Benefit (which deemed election will be in lieu of a written
         election described in Treasury Regulation ss. 1.401(a)-14) until the
         Participant's death or until the Participant's required beginning date
         (as described in ss. 8.2(c)), whichever comes first.

         (c)      Participant's Required Beginning Date. Notwithstanding the
         foregoing, payment of a Participant's Vested Benefit will be made (or
         commence) to the Participant no later than April 1 of the calendar year
         following the calendar year in which he or she (1) reaches age 70 1/2
         or (2) for a Participant who is not a 5% owner (as defined in Code ss.
         416), terminates employment, whichever is later.

         (d)      Beneficiary. A deceased Participant's Vested Benefit will
         become payable to his or her Beneficiary as soon as practicable after
         the Plan Administrator determines that the person has an interest in
         the Vested Benefit. A distribution generally must be completed by
         December 31 of the calendar year containing the fifth anniversary of
         the Participant's death. However, if the Vested Benefit is payable to
         the Participant's spouse in installments, distribution must begin no
         later than December 31 of the calendar year (1) in which the
         Participant would have reached age 70 1/2, or (2) containing the first
         anniversary of the Participant's death, whichever is later.

8.3.     Direct Rollover. Notwithstanding any provision of this Plan to the
contrary that would otherwise limit a distributee's election under this ss. 8, a
distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a direct
rollover.

         (a)      Eligible Rollover Distribution. An eligible rollover
         distribution is any distribution or withdrawal of all or any portion of
         the balance to the credit of the distributee, except that an eligible
         rollover distribution does not include (1) any payment that is one of a
         series of substantially equal periodic payments (not less frequently
         than annually) made for the life (or life expectancy) of the
         distributee or the joint lives (or joint life expectancies) of the
         distributee and the distributee's designated beneficiary or for a
         specified period of ten years or more; (2) any payment to the extent it
         is required under Code ss. 401(a)(9); and (3) the portion of any
         payment that is not includible in gross income (determined without
         regard to the exclusion for net unrealized appreciation with respect to
         employer securities). Any amount that is distributed on account of
         hardship shall not be an eligible rollover distribution and the
         distributee may not elect to have any


                                      -24-

         portion of such a distribution paid directly to an eligible retirement
         plan. A portion of a distribution shall not fail to be an eligible
         rollover distribution merely because the portion consists of after-tax
         employee contributions which are not includible in gross income.
         However, such portion may be transferred only to an individual
         retirement account or annuity described in Code ss. 408(a) or (b),
         or to a qualified defined contribution plan described in Code ss.
         401(a) or 403(a) that agrees to separately account for amounts so
         transferred, including separately accounting for the portion of such
         distribution which is includible in gross income and the portion of
         such distribution which is not so includible.

         (b)      Eligible Retirement Plan. An eligible retirement plan is (1)
         an individual retirement account described in Code ss. 408(a), (2) an
         individual retirement annuity described in Code ss. 408(b), (3) an
         annuity plan described in Code ss. 403(a), (4) a qualified trust
         described in Code ss. 401(a), (5) an annuity contract described in
         Code ss. 403(b) and (6) an eligible plan under Code ss. 457(b) which is
         maintained by a state, political subdivision of a state, or any agency
         or instrumentality of a state or political subdivision of a state and
         which agrees to separately account for amounts transferred into such
         plan from this Plan. The definition of eligible retirement plan shall
         also apply in the case of a distribution to a surviving spouse, or to a
         spouse or former spouse who is the alternate payee under a qualified
         domestic relation order, as defined in Code ss. 414(p).

         (c)      Distributee. A distributee includes an employee or former
         employee. In addition, the employee's or former employee's surviving
         spouse and the employee's or former employee's spouse or former spouse
         who is the alternate payee under a qualified domestic relations order,
         as defined in Code ss. 414(p), are distributees with regard to the
         interest of the spouse or former spouse.

         (d)      Direct Rollover. A direct rollover is a payment by the Plan to
         the eligible retirement plan specified by the distributee.
         Notwithstanding the foregoing, a hardship withdrawal under ss. 7.3
         shall not be treated as an eligible rollover distribution.

8.4.     Claim for Benefit. A Participant or Beneficiary may be required to
complete and file a claim for a benefit in an Election as a condition to payment
of that benefit. All claims will be processed in accordance with the claims
procedure in the summary plan description for this Plan. Any payment to a
Participant or Beneficiary (or to their legal representative or heirs-at-law)
made in accordance with the provisions of this Plan will to the extent of that
payment be in full satisfaction of all claims under this Plan against the
Trustee, the Plan Administrator and each Participating Employer, any of whom may
require that person (or his or her legal representative or heirs-at-law), as a
condition precedent to that payment, to execute a receipt and release in a form
acceptable to the Trustee, Plan Administrator or Participating Employer, as the
case may be.

8.5.     No Estoppel of Plan. No person is entitled to any benefit under this
Plan except and to the extent expressly provided under this Plan. The fact that
payments have been made from this Plan in connection with any claim for benefits
under this Plan does not (a) establish the validity of the claim, (b) provide
any right to have the benefits continue for any period of time or


                                      -25-


(c) prevent this Plan from recovering the benefits paid to the extent that the
Plan Administrator determines that there was no right to payment of the benefits
under this Plan.

Thus, if a benefit is paid to a person under this Plan and thereafter the Plan
Administrator determines that the benefit should not have been paid (whether or
not attributable to an error by that person, the Plan Administrator or any other
person), the Plan Administrator may take any action it deems necessary or
appropriate to correct the overpayment, including without limitation by (1)
deducting the amount of any overpayment previously made to or on behalf of that
person from any succeeding payments to or on behalf of that person under this
Plan or from any amounts due or owing to that person by any Affiliate or under
any other plan, program or arrangement benefiting the employees or former
employees of any Affiliate or (2) otherwise recovering the overpayment from the
person who benefited from it.

If the Plan Administrator determines that an underpayment of benefits has been
made, the Plan Administrator will take any action it deems necessary or
appropriate to correct the underpayment. However, in no event will interest be
paid on the amount of the underpayment other than the investment gain or loss
credited to the Account pending payment.

8.6.     Legally Incompetent. At the discretion of the Plan Administrator
payments may be made (a) directly to an incompetent or disabled person, whether
because of minority or mental or physical disability, (b) to an individual
appointed by a court of competent jurisdiction as the guardian or custodian of
that incompetent or disabled person or (3) to any person designated or
authorized under any state statute to receive payments on behalf of that
incompetent or disabled person, without further liability on the part of a
Participating Employer, the Plan Administrator or the Trustee for the amount of
the payments to the person on whose account the payment is made.

8.7.     Missing Person. If a benefit is required to be paid under this Plan but
the Plan Administrator is unable to locate (in accordance with reasonable
procedures established for this purpose) the individual to whom payment is to be
made, that individual's benefit will be treated as a Forfeiture as of the date
determined by the Plan Administrator but no earlier than the last day of the
Plan Year that includes the second anniversary of the date that benefit first
became payable. However, the amount forfeited will be paid (from Forfeitures or
from additional Participating Employer contributions) to the missing individual
if he or she files a proper claim for the benefit while this Plan remains in
effect. If the Plan Administrator is unable to locate a Participant or any
Beneficiary for an Account and this Plan is terminated before the Account
becomes a Forfeiture under this ss. 8.7, those persons will be presumed dead
upon the Plan's termination and the Account will be applied thereafter to pay
administrative expenses of the Plan and Trust Fund.

8.8.     Other Payment Rules.

         (a)      Withholding Obligations. The amount of any payment from an
                  Account under this Plan will be reduced as necessary or
                  appropriate to satisfy any applicable tax withholding
                  requirements with respect to the payment.


                                      -26-

         (b)      Waiver of Notices. A Participant or Beneficiary may waive the
         notice period under Code ss. 401(a)(31), 402(f) or 411(a)(11).

         (c)      Account Balance. A payment or Forfeiture from an Account may
         be delayed pending completion of allocations to the Account if
         necessary to avoid underpayment or overpayment.

         (d)      Order of Withdrawal. Unless otherwise expressly set forth in
         this Plan, any payment of less than the Participant's entire Vested
         Benefit will be deducted from the subaccounts in a Participant's
         Account and the investment funds in which the subaccount is invested in
         accordance with procedures established by the Plan Administrator.

         (e)      Reemployment. Except for required distributions under ss.
         8.2(c) or in-service withdrawals under ss. 7.3, no payment will be made
         to a Participant under this ss. 8 after he or she is reemployed as an
         Employee.


                   ss. 9. NAMED FIDUCIARIES AND ADMINISTRATION

9.1.     Named Fiduciaries. The Plan Sponsor and the Plan Administrator are the
named fiduciaries responsible for the control, management and administration of
this Plan. Any power or responsibility for the control, management or
administration of this Plan that is not expressly assigned to a named fiduciary
under the Plan, or with respect to which the proper assignment is in doubt, will
be deemed to have been assigned to the Plan Sponsor. One named fiduciary will
have no responsibility to inquire into the acts and omissions of the other named
fiduciary in exercising its powers or discharging its responsibilities under
this Plan.

A named fiduciary, by written instrument filed by the Plan Administrator with
the records of the Plan, may designate a person who is not a named fiduciary to
carry out any of its responsibilities under this Plan. A named fiduciary or a
person designated to perform any responsibility of a named fiduciary pursuant to
the procedure described in this ss. 9.1 may employ one or more persons to render
advice with respect to any responsibility assigned to the named fiduciary or
allocated to that person under this Plan. Any person (including a member of a
committee which is a Plan Administrator) may serve in more than one fiduciary
capacity under this Plan, and a fiduciary may be a Participant if he or she
otherwise satisfies the Plan's participation requirements.

9.2.     Plan Administrator Appointment and Term of Office. If the Plan
Administrator is a committee (the "Committee"), the Committee will (except on a
temporary basis) consist of not less than three persons. The Committee members
will be appointed by the Board and will serve without compensation. The Board
has the right to remove any Committee member at any time, and a member may
resign at any time by written resignation to the Board. The Board may fill by
appointment any vacancy in the membership of the Committee.

9.3.     Organization of Plan Administrator. If the Plan Administrator is a
Committee, the Committee members may allocate among themselves by mutual consent
specific Plan


                                      -27-

Administrator responsibilities and functions for the operation and
administration of this Plan, provided that allocation is reported in the records
of the Committee. The Committee will act by majority vote. The Committee may
appoint agents or advisors to perform any functions it deems necessary and
helpful to the effective performance of its duties and the duties of the
individual Committee members. The compensation of those agents or advisors will
be fixed by the Committee within limits set by the Board and will constitute an
expense of the Plan.

9.4.     Plan Administrator Powers and Duties.

         (a)      General. Except to the extent expressly reserved under this
         Plan to the Plan Sponsor, the Plan Administrator (or the Committee in
         the case of an appointment of a committee) has the exclusive
         responsibility and complete discretionary authority to control the
         operation, management and administration of this Plan, with all powers
         necessary to enable it properly to carry out those responsibilities,
         including (but not limited to) the power to construe this Plan, to
         determine eligibility for benefits, to settle disputed claims and to
         resolve all administrative, interpretive, operational, equitable and
         other questions that arise under this Plan. The decisions of the Plan
         Administrator on all matters within the scope of its authority will be
         final and binding. To the extent a discretionary power or
         responsibility under this Plan is expressly assigned to a person other
         than the Plan Administrator, that person will have complete
         discretionary authority to carry out that power or responsibility and
         that person's decisions on all matters within the scope of that
         person's authority will be final and binding.

         (b)      Liquidity Requirements. The Plan Administrator will be
         responsible for determining the funding policy for the Plan, including
         any anticipated liquidity requirements and for communicating that
         policy to the Trustee when it deems appropriate.

         (c)      Records. All Plan records will be maintained by or at the
         direction of the Plan Administrator.

         (d)      Information from Others. The Plan Administrator, the Committee
         members, Participating Employers and their officers, directors,
         employees and agents will be entitled to rely upon all information and
         data in any certificate, report or other material prepared by any
         actuary, accountant, attorney, consultant or advisor selected by the
         Plan Administrator to perform services on behalf of this Plan. All
         action taken or omitted in good faith in reliance upon the advice or
         opinion of any of those persons will be conclusive upon all persons
         interested in this Plan.

9.5.     Indemnification. To the extent that the Plan Administrator, Trustee or
a member of the Committee is not protected and held harmless by or through
insurance, and to the extent permissible under ERISA and any other applicable
law, the Plan Sponsor will indemnify the Plan Administrator, Trustee and
Committee members from and against any liability, assessment, loss, expense or
other cost, of any kind or description whatsoever, including legal fees and
expenses, actually incurred by the member on account of any action or
proceeding, actual or threatened,


                                      -28-


that arises as a result of his or her being the Trustee, Plan Administrator or a
member of the Committee.

9.6.     Reporting and Disclosure. The Plan Administrator will be responsible
for satisfying any applicable reporting and disclosure requirement under federal
or state law with respect to this Plan.

                     ss.10. DUTIES AND AUTHORITY OF TRUSTEE

10.1.    General Fiduciary Duties. Except as may be required or permitted by
ERISA, the Trustee and all fiduciaries hereunder shall discharge their duties
with respect to the Plan solely in the interest of the Participants,
Beneficiaries and alternate payees and:

         (a)      for the exclusive purpose of:

                  (i)      providing benefits to Participants, Beneficiaries and
                  alternate payees; and

                  (ii)     defraying reasonable expenses of administering the
                  Plan;

         (b)      with the care, skill, prudence, and diligence under the
         circumstances then prevailing that a prudent person acting in a like
         capacity and familiar with such matters would use in the conduct of an
         enterprise of like character and with like aims;

         (c)      by diversifying the investments of the Plan so as to minimize
         the risk of large losses, unless under the circumstances it is clearly
         prudent not to do so; and

         (d)      in accordance with the Plan document insofar as the Plan
         document is consistent with Part 4 of Title I of ERISA.

10.2.    Deposits to Trust Fund. The Trust Fund shall receive from the
Participating Employers the payments made on account of contributions under the
Plan, and made by Participants, if any, but the Trustee shall have no duty to
compute any amount due from the Participating Employers or to collect the same.

10.3.    Value Assets. The Trustee shall value the assets of the Trust Fund as
of the close of the last day of each Plan Year at their fair market value and
the Plan Administrator or its agent will allocate the sums contributed by the
Participating Employers and by Participants, if any, plus the net income or
minus the net loss of the Trust Fund and plus the net appreciation or minus the
net depreciation in the Trust Fund to separate bookkeeping accounts in the names
of the respective Participants under the Plan in accordance with the provisions
of ss. 5.

10.4.    Segregation of Accounts. When directed in writing by the Plan
Administrator, the Trustee shall segregate the accounts of terminated
Participants, and make payments out of the Trust Fund from time to time to the
Participants, Beneficiaries or alternate payees, such


                                      -29-


payments to be made in the manner and in the amounts as may be specified in the
written instructions of the Plan Administrator.

10.5.    Tax Returns and Reports. If the Trustee is a corporate fiduciary, then
such Trustee shall prepare or cause to have prepared and filed, all tax returns,
reports, and related documents, except as otherwise specifically provided in
this Plan or unless the Plan Administrator, in writing, relieves the Trustee of
such obligation, in part or entirely, in which case the Plan Administrator, or
the person or persons it designates, shall be responsible for filing the tax
returns, reports, and related filings, as provided by the Plan Administrator.
The Trustee shall be entitled to rely on the accuracy of any written statement
from the Plan Administrator or from an officer of the Plan Sponsor.

10.6.    Powers. Subject to the right in ss. 5.2 of Participants to direct the
investment of their Accounts, the Trustee is authorized and empowered to:

         (a)      invest and reinvest the Trust Fund, without distinction
         between principal and income, in bank accounts, certificates of
         deposit, common stocks, preferred stocks, bonds, notes, debentures,
         mortgages, U.S. retirement plan bonds, and in other property, real or
         personal, so long as the incidents of ownership of such property are
         within the jurisdiction of the United States, and so long as such
         investments do not violate applicable law;

         (b)      to acquire and hold up to 100% of the value of the assets in
         the Trust Fund in "qualifying employer securities" and "qualifying
         employer real property," as those terms are defined in ERISA if the
         Plan Administrator determines that such investments are permitted;

         (c)      sell, exchange, convey, transfer, or otherwise realize the
         value of any property held by it;

         (d)      convert any stocks, bonds, or other securities, to give
         general or special proxies or powers of attorney with or without power
         of substitution; to exercise any warrants, conversion privileges,
         subscription rights, or other options and to make any payment
         incidental thereto; to consent to or otherwise participate in corporate
         reorganizations or other changes affecting corporate securities and to
         delegate discretionary powers to pay any assessments or charges in
         connection therewith; and generally to exercise any of the powers of an
         owner with respect to stocks, bonds, securities or other properties
         held in the Trust Fund provided that the Trustee shall follow the
         directions of Participants on any voting and tender decisions
         concerning Lodgian Stock as provided in ss. 5.7.

         (e)      make, execute, acknowledge, and deliver any and all documents
         of transfer and conveyance and any other instruments that may be
         necessary or appropriate to carry out the powers herein granted;

         (f)      register any investments held in the Trust Fund in its own
         name or in the name of a nominee or nominees and to hold any investment
         in bearer form, but the books and


                                      -30-


         records of the Trustee shall at all times show that all such
         investments are part of the Trust Fund;

         (g)      invest all or a part of the Trust Fund in deposits which bear
         a reasonable rate of interest in a bank or similar financial
         institution, even though such institution is a Trustee or other
         fiduciary, as defined in IRC ss. 4975(e)(3);

         (h)      investment in a common or collective trust fund or pooled
         investment fund maintained by a bank or trust company or a pooled
         investment fund of an insurance company qualified to do business in a
         State even though such bank, trust company or insurance company is a
         disqualified person, as defined in IRC ss. 4975(e)(2);

         (i)      make distributions to Participants, Beneficiaries or alternate
         payees in cash or any other property;

         (j)      perform all such acts, although not specifically mentioned
         herein, as the Trustee may deem necessary to administer the Trust Fund
         and to carry out the purpose of the Trust, and

         (k)      borrow or loan sums, except as prohibited by IRC ss. 4975(c)
         (without reference to IRC ss. 4975(d)), as the Trustee deems desirable,
         and for that purpose, to mortgage or pledge all or part of the Trust
         Fund.

10.7.    Expenses. All brokerage costs, transfer taxes and similar expenses
incurred in connection with the investment and reinvestment of the Trust Fund
and all taxes of any kind whatsoever which may be levied or assessed under
existing or future laws upon or in respect of the Trust Fund, and any interest
which may be payable on money borrowed by the Trustee for the purpose of the
Trust, shall be paid from the Trust Fund, and, until paid, shall constitute a
charge upon the Trust Fund. All other administrative expenses incurred by the
Trustee in the performance of its duties, including such compensation to the
Trustee as may be agreed upon from time to time between the Plan Administrator
and the Trustee (in accordance with the Trustee's standard schedule of fees in
effect from time to time during the time it administers this Trust, if
applicable) and all proper charges and disbursements of the Trustee, may be paid
by the Participating Employers, and if not paid by the Participating Employers
shall be paid from the Trust Fund, and until paid shall constitute a charge upon
the Trust Fund. If the Plan Sponsor advises the Trustee in writing of its
determination to make no further contribution to this Trust, the expenses of the
Trustee shall thereafter be charged against and paid out of the Trust. However,
no person who is a disqualified person (as defined in IRC ss. 4975(e)(2)) and
who received full-time pay from the Plan Sponsor, may receive compensation from
the Trust, except for reimbursement of expenses properly and actually incurred.

10.8.    Litigation. The Trustee shall not be required to participate in any
litigation either for the collection of monies or other property due the Trust
Fund, or in defense of any claim against the Trust Fund unless the Trustee shall
have been indemnified to its satisfaction against all expenses and liability to
which the Trustee might become subject.


                                      -31-


                                 ss.11. LOANS.

11.1.    Administration. The Plan Administrator will be the named fiduciary
responsible for the administration of the loan program under this Plan. The Plan
Administrator will establish objective nondiscriminatory written procedures for
the loan program in compliance with ss. 2550.408b-1 of the Department of Labor
regulations. Those procedures and any amendments to those procedures, to the
extent not inconsistent with the terms of this Plan, are incorporated by this
reference as part of this Plan.

11.2.    Statutory Requirements.

         (a)      General. All loans made under this Plan will comply with the
         following requirements under ERISA ss. 408(b)(1):

                  (1)      Loans will be made available to Participants and
                  Beneficiaries who are eligible for a loan on a reasonably
                  equivalent basis.

                  (2)      Loans will not be made available to Highly
                  Compensated Employees in an amount greater than the amount
                  made available to other Employees.

                  (3)      Loans will be made in accordance with specific
                  provisions regarding loans set forth in this Plan and the
                  written loan procedures described above.

                  (4)      Loans will bear a reasonable rate of interest.

                  (5)      Loans will be adequately secured by 1/2 of the
                  Participant's Vested Benefit or, if less, the amount of the
                  outstanding loan principal balance.

         (b)      Repayments. Principal and interest on the loan must be repaid
         in substantially level installments with payments not less frequently
         than quarterly over a period of 5 years or less, unless such loan is
         used to acquire the principal residence of the Participant, then over a
         period of 10 years. The Plan Administrator may establish other payment
         rules, including rules regarding a grace period and suspension of
         payments during unpaid leaves of absence, in the written loan
         procedures.

         (c)      Limitations on Amounts. The principal amount of a loan made
         under this Plan to a Participant or Beneficiary, together with the
         outstanding principal amount of any loan made under any plan maintained
         by an Affiliate that satisfies the requirements of Code ss. ss. 401 or
         403, may not exceed the lesser of

                  (1)      50% of that person's Vested Benefit at the time the
                  loan is made, or

                  (2)      $50,000, reduced by the excess (if any) of

                           (A)      the highest outstanding balance of any
                           previous loans from this Plan and any other plan
                           maintained by an Affiliate during the one-year


                                      -32-


                           period ending immediately before the date on which
                           the current loan is made over

                           (B)      the outstanding balance of the previous
                           loans on the date on which the current loan is made.

                  (3)      If at anytime the Plan Administrator imposes
                  restrictions on investments in the Lodgian Stock Fund pursuant
                  to ss. 5.2, the portion of a Participants' Account invested in
                  the Lodgian Stock Fund will not be considered in the amount
                  available for a loan under this ss. 11. Similarly, any
                  interest in the Lodgian Warrant Funds will also be disregarded
                  for purposes of determining the amount available for a loan
                  unless such amount consists solely of cash.

         The Plan Administrator may establish other loan limits, including
         minimum loan amounts and rules regarding the subaccounts from which a
         loan may be made, in the written loan procedures.

11.3.    Distribution and Default. The Vested Benefit actually payable to an
individual who has an outstanding loan will be determined by reducing the Vested
Benefit by the amount of the security interest in the Account (if any).
Notwithstanding anything to the contrary in this Plan or in the written loan
procedures described above, in the event of default, foreclosure on the note and
execution of the security interest in an Account will not occur until a
distributable event occurs under this Plan and interest will continue to accrue
only to the extent permissible under applicable law.

11.4.    USERRA. Loan repayments will be suspended under this Plan as permitted
under ss. 414(u) of the Internal Revenue Code.


                        ss. 12. AMENDMENT AND TERMINATION

12.1.    Amendment. The Plan Sponsor on behalf of all Participating Employers
has the right to amend this Plan in any respect whatsoever and at any time by
action of the Board, or a committee of the Board to which such authority has
been delegated. An officer of the Plan Sponsor has the right to amend the Plan
if such amendment is to comply with law. No amendment will be made that (unless
otherwise permissible under applicable law) would (a) divert any of the assets
of the Trust Fund to any purpose other than the exclusive benefit of
Participants and Beneficiaries, (b) eliminate or reduce an optional form of
benefit, except as permitted by law or (c) decrease a Participant's accrued
benefit under the Plan. However, this Plan may be amended retroactively to
affect the Accounts maintained for any person if necessary to cause this Plan
and the Trust Fund to be exempt from income taxes under the Code.

12.2.    Termination. The Plan Sponsor expects this Plan to be continued
indefinitely but, of necessity, it reserves the right to terminate or to
partially terminate this Plan or to permanently discontinue contributions to
this Plan at any time by action of the Board. Each other Participating Employer
will have the right by action of its Board of Directors to terminate or to


                                      -33-


partially terminate its participation in this Plan or to permanently discontinue
its contributions to this Plan. In the case of any termination of or permanent
discontinuance of contributions to this Plan, the Account of each affected
Participant who is an Employee as of its effective date will become fully
vested. Further, the Plan Administrator will, where appropriate, direct (1) the
allocation of unallocated amounts to the Accounts of affected individuals, (2)
distributions from those Accounts in accordance with procedures established by
the Plan Administrator consistent with Code ss. 401(k), (3) any action necessary
to implement the missing person provisions under ss. 8.7 and (4) the return of
any Trust Fund assets attributable to a Code ss. 415 suspense account in
accordance with ss. 13.5.


                             ss. 13. MISCELLANEOUS

13.1.    Headings and Construction. The headings and subheadings in this Plan
have been inserted for convenience of reference only and are to be ignored in
construction of the provisions of this Plan. All references to sections and to
subsections are to sections and subsections of this Plan unless otherwise
indicated. Where appropriate, the singular should be read as the plural and the
plural as the singular. Any reference to a statute also includes any successor
statute and, if any amendment renumbers a section of a statute referred to in
this Plan, that reference automatically will become a reference to that section
as renumbered. This Plan is to be construed in accordance with the laws of the
State of Georgia to the extent that those laws are not preempted by federal law.
This Plan does not, and should not be construed to, grant any rights or
privileges to Participants or Beneficiaries in addition to those minimum rights
and privileges required under the Code and ERISA.

13.2.    Nontransferability. Except to the extent permitted by law and subject
to ss. 13.7, no Account, benefit, payment or distribution under this Plan will
be subject to the claim of, or legal process by, any creditor of a Participant
or Beneficiary, and no Participant or Beneficiary will have any right to
alienate, commute, anticipate or assign all or any portion of his or her
Account, benefit, payment or distribution under this Plan.

13.3.    Benefits Supported Only by Trust Fund. Any person having any claim for
any benefit under this Plan must look solely to the assets of the Trust Fund for
satisfaction of that claim. In no event will a Participating Employer, the Plan
Administrator, the Trustee or any of their employees, officers, directors or
agents be liable in their individual capacities to any person whomsoever for the
payment of benefits under the provisions of this Plan.

13.4.    Nondiscrimination. The Plan Administrator, will administer this Plan in
a uniform and consistent manner with respect to all similarly situated
Participants and Beneficiaries and will not permit discrimination in favor of
highly compensated employees that would be prohibited under Code ss. 401(a).

13.5.    Nonreversion. No part of the Trust Fund will ever be used for or be
diverted to purposes other than for the exclusive benefit of Participants and
Beneficiaries except that, upon direction of the Plan Administrator, the Trustee
will return contributions to a Participating Employer in the following
circumstances, to the extent permitted by the Code and ERISA:


                                      -34-


         (a)      a contribution made by a mistake of fact will be returned,
         provided the return is made within one year after the payment of the
         contribution;

         (b)      a nondeductible contribution will be returned, provided the
         return is made within one year after the Internal Revenue Service
         denies the deduction for the contribution, all Plan contributions being
         made expressly on the condition that the contributions are deductible
         in full for federal income tax purposes; and

         (c)      any amount held in a Code ss. 415 suspense account (as
         described in ss. 6.2(d)) that cannot be allocated upon the termination
         of this Plan will be returned.

13.6.    Merger, Consolidation or Similar Transaction.

         (a)      General. In the case of any merger or consolidation of this
         Plan with, or transfer of assets or liabilities of this Plan to, any
         other employee benefit plan, each person for whom an Account is
         maintained will be entitled to receive a benefit from this Plan or the
         other plan, as applicable, if it is then terminated, that is equal to
         or greater than the benefit he or she would have been entitled to
         receive immediately before the merger, consolidation or transfer, if
         this Plan had then been terminated.

         (b)      Authorization. The Plan Administrator may authorize the
         Trustee to accept a transfer of assets from or to transfer Trust Fund
         assets to the trustee, custodian or insurance company holding assets of
         any other plan that satisfies the requirements of Code ss. 401(a), in
         connection with a merger or consolidation with or other transfer of
         assets to or from that plan, provided that (1) the transfer will not
         affect the qualification of this Plan under Code ss. 401(a) and (2) the
         assets to be transferred are acceptable to the Trustee.

         (c)      No Annuities. No assets may be transferred directly to this
         Plan from a plan described in Code ss. 401(a)(11)(B) that is subject to
         the survivor annuity requirements in Code ss. 417, unless the transfer
         meets the requirements of Code ss. 414(l) and the person for whom the
         transfer is made has made an elective transfer that satisfies the
         requirements in Q&A-3(b) of Treas. Reg. ss. 1.411(d)-4.

13.7.    Qualified Domestic Relations Order. In accordance with uniform and
nondiscriminatory procedures established by the Plan Administrator from time to
time, the Plan Administrator will, upon the receipt of a domestic relations
order that seeks to require the distribution of a Participant's Account in whole
or in part to an alternate payee (as defined in Code ss. 414(p)(8)),

         (a)      promptly notify the Participant and alternate payee of the
         receipt of the order and of the procedure that the Plan Administrator
         will follow to determine whether the order constitutes a qualified
         domestic relations order (within the meaning of Code ss. 414(p));

         (b)      determine whether the order constitutes a qualified domestic
         relations order, notify the Participant and the alternate payee of the
         results of its determination and, if the


                                      -35-


                  Plan Administrator determines that the order does constitute a
                  qualified domestic relations order;

         (c)      transfer any amounts that the Plan Administrator determines
         necessary or appropriate from the Participant's Account to a special
         account for the alternate payee; and

         (d)      make any distributions to the alternate payee from the special
         account that the Plan Administrator deems called for under the terms of
         the order in accordance with Code ss. 414(p).

Unless otherwise provided in the order, an alternate payee's special account
shall be distributed as soon as practicable after the account has been
established in a lump sum, without regard to whether a distribution would be
permissible at that time to a Participant under the terms of this Plan. Unless
otherwise provided in the order, if an alternate payee dies before his or her
special account is paid in full, the balance in the account will be paid to the
person designated by the alternate payee as his or her Beneficiary or, if no
Beneficiary designation is made, to the alternate payee's estate.

13.8.    Top Heavy Plan.

         (a)      Determination of Top-Heavy Status. This section shall apply
         for purposes of determining whether the Plan is a top-heavy plan under
         Code ss. 416(g) and whether the Plan satisfies the minimum benefits
         requirements of Code ss. 416(c) for Plan Years beginning on or after
         January 1, 2002. If, as of the last day of any such Plan Year
         ("determination date"), the sum of the present value of the accrued
         benefits of key employees (as defined below) exceeds 60% of the sum of
         the present value of the accrued benefits of all employees as of that
         determination date, this Plan will be top heavy for the immediately
         following Plan Year. For this purpose,

                  (1)      Key Employee. Key employee means any employee or
                  former employee (including any deceased employee) who at any
                  time during the Plan Year that includes the determination date
                  was an officer of an Affiliate having annual compensation
                  greater than $130,000 (as adjusted under Code ss. 416(i)(1)
                  for Plan Years beginning after December 31, 2002), a 5-percent
                  owner of an Affiliate, or a 1-percent owner of an Affiliate
                  having annual compensation of more than $150,000. For this
                  purpose, annual compensation means compensation within the
                  meaning of Code ss. 415(c)(3). The determination of who is a
                  key employee will be made in accordance with Code ss.
                  416(i)(1) and the applicable regulations and other guidance of
                  general applicability issued thereunder.

                  (2)      Determination of Present Values and Amounts. This ss.
                  13.9(a) shall apply for purposes of determining the present
                  values of accrued benefits and the amounts of account balances
                  of employees as of the determination date. The present value
                  of the accrued benefit of each employee will equal the sum of:


                                      -36-


                           (i)      the balance of his or her Account under this
                           Plan (determined for this purpose as of each
                           determination date); and

                           (ii)     the present value of his or her accrued
                           benefit, if any, under each of the following plans
                           (determined as of the valuation date that coincides
                           with or precedes the determination date for that
                           plan) under

                                    (A)      each qualified plan (as described
                                    in Code ss. 401(a)) maintained by an
                                    Affiliate (i) in which a key employee is a
                                    participant or (ii) that enables any plan
                                    described in subclause (i) to meet the
                                    requirements of Code ss. ss. 401(a)(4) or
                                    410, and

                                    (B)      each other qualified plan
                                    maintained by an Affiliate (other than a
                                    plan described in clause (A)) that may be
                                    aggregated with this Plan and the plans
                                    described in clause (A), provided the
                                    aggregation group (including a plan
                                    described in this clause (B)) continues to
                                    meet the requirements of Code ss. ss.
                                    401(a)(4) and 410.

                  (3)      Distribution During Year Ending on the Determination
                  Date. The present values of accrued benefits and the amounts
                  of account balances of an employee as of the determination
                  date shall be increased by the distributions made with respect
                  to the employee under the Plan and any plan aggregated with
                  the Plan under Code ss. 416(g)(2) during the 1-year period
                  ending on the determination date. The preceding sentence shall
                  also apply to distributions under a terminated plan which, had
                  it not been terminated, would have been aggregated with the
                  Plan under Code ss. 416(g)(2)(A)(i). In the case of a
                  distribution made for a reason other than separation from
                  service, death, or disability, this provision shall be applied
                  by substituting "5-year period" for "1-year period".

                  (4)      Employees Not Performing Services During Year Ending
                  on the Determination Date. The accrued benefits and accounts
                  of any individual who has not performed services for the
                  employer during the 1-year period ending on the determination
                  date shall not be taken into account.

         (b)      Special Top Heavy Plan Rules. Notwithstanding any other rules
         to the contrary in this Plan, the following special rules will apply if
         the Plan Administrator determines that this Plan is top heavy for any
         Plan Year.

                  (1)      Minimum Contribution. A contribution will be made by
                  the Participating Employer for the Plan Year for each
                  Participant described in ss.1.23(a) who is not a key employee
                  and who is an Eligible Employee on the last day of that Plan
                  Year that, when added to the employer contributions and
                  forfeitures otherwise allocated on behalf of such individual
                  for such Plan Year under this Plan and any other defined
                  contribution plan maintained by an Affiliate, is equal to

                           (i)      the excess, if any, of:


                                      -37-


                                    (A)      the lesser of (a) 3% of the
                                    Participant's Compensation or (b) the
                                    largest amount (expressed as a percentage of
                                    Compensation) of Forfeitures, 401(k)
                                    Contributions and Matching Contributions
                                    allocated for the Plan Year to the Account
                                    of any key employee; over

                                    (B)      the total Forfeitures and Matching
                                    Contributions allocated to the Participant's
                                    Account for the Plan Year; or

                           (ii)     for each such Eligible Employee who also
                           participates in a top heavy defined benefit plan
                           maintained by an Affiliate, 5% of such Eligible
                           Employee's Compensation for such year;

                  provided, however, that no such contribution shall be made
                  under this ss. 13.8(b) for any Eligible Employee to the extent
                  such Eligible Employee receives the top heavy minimum
                  contributions (as described in Code ss. 416(c)) under another
                  defined contribution plan maintained by an Affiliate for such
                  Plan Year.

                  (2)      Matching Contributions. Matching Contributions shall
                  be taken into account for purposes of satisfying the minimum
                  contribution requirements of Code ss. 416(c)(2) of the Plan.
                  The preceding sentence shall apply with respect to Matching
                  Contributions and Safe Harbor Matching Contributions under the
                  Plan or, if the Plan provides that the minimum contribution
                  requirement shall be met in another plan, such other plan.
                  Matching Contributions that are used to satisfy the minimum
                  contribution requirements shall be treated as Matching
                  Contributions for purposes of the ACP Test and other
                  requirements of Code ss. 401(m).

IN WITNESS WHEREOF, the Plan Sponsor and the Participating Employers have caused
this Plan to be executed by their duly authorized officers and each to have its
seal to be affixed as of the date set forth below.

                                    LODGIAN, INC.

                                    By:
                                       ----------------------------------------

                                    Title:
                                           ------------------------------------

                                    Date:
                                         --------------------------------------



                                    TRUSTEE:

                                    -------------------------------------------
                                    Dan Ellis, as Trustee



                                      -38-

                            Appendix A to the
                            Lodgian, Inc. 401(k)Plan
                            Effective January 1, 2002

         The allocation of 401(k) Contributions made under the Plan will be
subject to the limitations of this Appendix A for the Plan Year ending December
31, 2002 and any Plan Year beginning on or after January 1, 2003 in which the
Participating Employers do not make a Safe Harbor Matching Contribution to the
Plan. The allocation of Matching Contributions made under the Plan will be
subject to the limitation of this Appendix A for the Plan Year ending December
31, 2002. No Matching Contributions will be made to the Plan for Plan Years
beginning on or after January 1, 2003.

The following terms have the following meanings for purposes of this Appendix A:

ACP -- means the ratio (expressed as a percentage) of (a) the Matching
Contributions credited to a Participant's Account for the applicable Plan Year
to (b) his or her Compensation for the applicable Plan Year.

ACP Test -- means the Code ss. 401(m) nondiscrimination test described in ss. 2
below.

ADP -- means the ratio (expressed as a percentage) of (a) the 401(k)
Contributions credited to a Participant's Account for the applicable Plan Year
to (b) his or her Compensation for the applicable Plan Year.

ADP Test -- means the Code ss. 401(k) nondiscrimination test described in ss. 1
below.

Excess Aggregate Contributions -- means the excess of (a) the Matching
Contributions actually made on behalf of Highly Compensated Employees for a Plan
Year over (b) the maximum permissible amount of Matching Contributions for that
Plan Year under the ACP Test described in this Appendix A.

Excess Contributions -- means the excess of (a) the 401(k) Contributions
actually made on behalf of Highly Compensated Employees for a Plan Year over (b)
the maximum permissible amount of 401(k) Contributions for that Plan Year under
the ADP Test described in this Appendix A.

ss.1. Code ss. 401(k) Limitations for Highly Compensated Employees.

         (a)      ADP Test. Each Plan Year a determination will be made whether
         the average of the Highly Compensated Employees' ADPs for that Plan
         Year, when compared to the average of the Nonhighly Compensated
         Employees' ADPs for the preceding Plan Year, satisfies either of the
         following tests:

                  (1) the average of the ADPs for all Highly Compensated
                  Employees is not more than 125% of the average of the ADPs for
                  all Nonhighly Compensated Employees, or


                                      -39-


                  (2) the average of the ADPs for all Highly Compensated
                  Employees is not more than two times the average of the ADPs
                  for all Nonhighly Compensated Employees, and the excess of the
                  average of the ADPs for all Highly Compensated Employees over
                  the average of the ADPs for all Nonhighly Compensated
                  Employees is not more than two percentage points.

         In performing the ADP Test for a Plan Year, the applicable averages
         will be calculated taking into account each Participant who was an
         Eligible Employee at any time during that Plan Year.

         (b)      Aggregation with Other Plans or Arrangements. For purposes
         of ss. 1 of this Appendix A, all contributions made on a Highly
         Compensated Employee's behalf under Code ss. 401(k) for a Plan Year
         under any other plan described in Code ss. 401(k) maintained by an
         Affiliate will be treated as if made under this Plan in determining his
         or her ADP for that Plan Year. If this Plan satisfies the coverage
         requirements of Code ss. 410(b) only if aggregated with one or more
         other plans or if one or more other plans satisfy the coverage
         requirements of Code ss. 410(b) only if aggregated with this Plan, this
         1 of Appendix A will be applied by determining the ADPs of all
         Participants as if all those plans were a single plan.

         (c)      Other Requirements and Elections. The determination and
         treatment of the 401(k) Contributions and ADP of any Participant will
         satisfy any other requirements prescribed by the Secretary of the
         Treasury, including any subsequent IRS guidance issued under Code ss.
         401(k), and, in performing the ADP Test, the Plan Administrator may use
         any alternatives and elections authorized under the applicable
         regulations, rulings or revenue procedures.

         (d)      Action to Satisfy ADP Test.

                  (1)      Refund of Excess Contributions. Excess Contributions
                  for a Plan Year (adjusted for investment gain or loss) will be
                  refunded no later than the last day of the immediately
                  following Plan Year to Highly Compensated Employees on whose
                  behalf the Excess Contributions were made. Refunds will be
                  made on the basis of the amount of 401(k) Contributions,
                  starting with the Highly Compensated Employee with the
                  greatest dollar amount of 401(k) Contributions and ending when
                  the Excess Contributions have been refunded in full. The
                  Excess Contributions that would otherwise be refunded will be
                  reduced (in accordance with the Code ss. 401(k) regulations)
                  by any refund made to the Highly Compensated Employee under
                  ss. 6.3 of the Plan.

                  (2)      Determination of Investment Gain or Loss. Excess
                  Contributions will be adjusted for investment gain or loss for
                  the Plan Year for which the contributions were made in
                  accordance with the regulations under Code ss. 401(k) but will
                  not be adjusted for investment gain or loss for the period
                  between the end of the Plan Year and the date the Excess
                  Contributions are distributed.


                                      -40-


ss. 2.  Code ss. 401(m) Limitations For Highly Compensated Employees.

         (a)      Each Plan Year a determination will be made whether the
         average of the Highly Compensated Employees' ACPs for that Plan Year,
         when compared to the average of the Nonhighly Compensated Employees'
         ACPs for the preceding Plan Year, satisfies one of the following tests:

                  (1)      the average of the ACPs for all Highly Compensated
                  Employees is not more than 125% of the average of the ACPs for
                  all Nonhighly Compensated Employees, or

                  (2)      the average of the ACPs for all Highly Compensated
                  Employees is not more than two times the average of the ACPs
                  for all Nonhighly Compensated Employees, and the excess of the
                  average of the ACPs for all Highly Compensated Employees over
                  the average of the ACPs for all Nonhighly Compensated
                  Employees is not more than two percentage points.

         In performing the ACP Test for a Plan Year, the applicable averages
         will be calculated taking into account each Participant who was an
         Eligible Employee at any time during that Plan Year.

         (b)      Aggregation with Other Plans or Arrangements. For purposes
         of ss. 2 of this Appendix A, all employee contributions (within the
         meaning of Code ss. 401(m)) and matching contributions (within the
         meaning of Code ss. 401(m)(4)) allocated to a Highly Compensated
         Employee's account for a Plan Year under any other plan described in
         Code ss. ss. 401(a) or 401(k) maintained by an Affiliate will be
         treated as if made under this Plan in determining his or her ACP for
         that Plan Year. If this Plan satisfies the coverage requirements of
         Code ss. 410(b) only if aggregated with one or more other plans or if
         one or more other plans satisfy the coverage requirements of Code ss.
         410(b) only if aggregated with this Plan, ss. 2 of this Appendix A will
         be applied by determining the ACPs of all Participants as if all those
         plans were a single plan.

         (c)      Other Requirements. The determination and treatment of the
         Matching Contributions and ACP of any Participant will satisfy any
         other requirements prescribed by the Secretary of the Treasury,
         including any subsequent IRS guidance issued under Code ss. 401(m),
         and, in performing the ACP Test, the Plan Administrator may use any
         alternatives and elections authorized under the applicable regulations,
         rulings or revenue procedures.

         (d)      Action to Satisfy ACP Test.

                  (1)      Distribution or Forfeiture of Excess Aggregate
                  Contributions. Excess Aggregate Contributions for a Plan Year
                  (adjusted for investment gain or loss) will be forfeited to
                  the extent forfeitable under ss. 7.1 or distributed to the
                  extent not so forfeitable from the Accounts of Highly
                  Compensated Employees no later


                                      -42-


                  than the last day of the immediately following Plan Year. The
                  distributions or Forfeitures will be made on the basis of the
                  amount of Matching Contributions, starting with the Highly
                  Compensated Employee with the greatest dollar amount of
                  Matching Contributions and ending when the Excess Aggregate
                  Contributions have been distributed or forfeited in full.

                  (2)      Determination of Investment Gain or Loss. Excess
                  Aggregate Contributions will be adjusted for investment gain
                  or loss for the Plan Year for which the contributions were
                  made in accordance with the regulations under Code ss. 401(m)
                  but will not be adjusted for investment gain or loss for the
                  period between the end of the Plan Year and the date the
                  Excess Aggregate Contributions are distributed.


                                      -42-


                                APPENDIX B TO THE
                  LODGIAN, INC. 401(K) PLAN AND TRUST AGREEMENT


If a Participant makes an Election, prior to January 1, 2003, that his or her
Vested Benefit be paid in the form of an annuity, the rules of this Appendix B
will apply to any withdrawal, loan or distribution from his or her Account at
that time or any future time.

         (a)      Normal Annuity Form. Any annuity distribution made (including
                  withdrawals under ss. 7.3) will be paid

                  (1)      in the form of a single life annuity if he or she
                  does not have a spouse on the Annuity Starting Date, or

                  (2)      in the form of a joint and survivor annuity with his
                  or her spouse as beneficiary if he or she has a spouse on his
                  or her Annuity Starting Date

                  unless the Participant elects another form of payment and his
                  or her spouse, if any, consents to that Election in accordance
                  with this Appendix B.

         (b)      Election Procedures for Annuity Benefits. If a Participant
                  elects that his or her Account be paid in the form of an
                  annuity, the Plan Administrator will (consistent with the
                  regulations under Code ss. 417) furnish him or her with a
                  written explanation of the normal annuity form, the optional
                  payment forms and his or her rights under Code ss. 401(a)(11),
                  ss. 411(a)(11), and ss. 417.

                  A Participant who elects an annuity payment form may waive the
                  normal annuity form and select an optional payment form on a
                  properly completed Election before his or her Annuity Starting
                  Date. The last properly completed Election before the
                  Participant's Annuity Starting Date will control the payment
                  of benefits under this Plan.

                  A Participant's Election to waive the normal annuity form
                  generally will not be effective unless (A) the Election
                  designates the form of payment, (B) his or her spouse consents
                  in writing to the waiver, (C) the spouse's consent
                  acknowledges the effect of the waiver, and (D) the spouse's
                  consent is witnessed by a Plan representative or a notary
                  public.

                  However, if the Participant establishes to the satisfaction of
                  the Plan Administrator and in accordance with Code ss. 417
                  that written consent of his or her spouse may not be obtained
                  because there is no spouse or the spouse cannot be located or
                  because of such other circumstances as may be described in the
                  regulations under Code ss. 417, the Participant's Election
                  will be deemed to be a valid waiver.


                                      -43


                  A spouse's written consent will be irrevocable as to that
                  spouse and will be binding only as against that spouse.

                  A Participant may revoke (without the consent of his or her
                  spouse) an election to waive the normal annuity form by
                  completing another Election at any time prior to his or her
                  Annuity Starting Date.

         (c)      Loans. A Participant who has elected to have his or her
                  Account paid in the form of an annuity may not pledge his or
                  her Account as security for a loan under ss. 11 unless his or
                  her spouse, if any, consents to that pledge in a manner
                  described in this Appendix B. No loan will be made to the
                  Participant in the absence of proper spousal consent.

         (d)      Death Benefits. If a Participant who has elected to have his
                  or her Account paid in the form of an annuity dies before his
                  or her Annuity Starting Date, his or her Account balance will
                  be applied to purchase a Preretirement Survivor Annuity for
                  his or her surviving spouse if the Participant did not waive
                  the Preretirement Survivor Annuity in accordance with the
                  waiver procedures in this Appendix B.

         (e)      Definitions. For purposes of this Appendix B, the following
                  terms will have the meaning set forth below:

                  (1)      Annuity Starting Date - means for each Participant or
                  spouse the first day of the first period for which an amount
                  is paid or is to be paid as an annuity under this Plan.

                  (2)      Preretirement Survivor Annuity - means an annuity for
                  the life of a Participant's surviving spouse, that is equal to
                  the maximum amount of annuity benefit that can be purchased
                  with the Participant's Account as of the Annuity Starting
                  Date.


                                      -44-


                                APPENDIX C TO THE
                  LODGIAN, INC. 401(K) PLAN AND TRUST AGREEMENT


An Employee will be credited with service under the Plan for his or her service
with the following employers on the same basis as is used to determine service
with an Affiliate under the Plan:

                  -        Servico Corporation;

                  -        Impac Hotel Group;

                  -        AMI Operating Partners, L.P.;

                  -        Any other employers for whom service was credited
                           under the qualified retirement plan(s) of Servico
                           Corporation, Impac Hotel Group, or AMI Operating
                           Partners, L.P.; and

                  -        Any other employer required to be aggregated with any
                           of the above three entities under Code ss. ss.
                           414(b), (c), (m) or (o).


                                      -45-

EX-31.1

                                                                    Exhibit 31.1

              FORM OF SARBANES-OXLEY SECTION 302 (A) CERTIFICATION

I, W. Thomas Parrington, certify that:

     1)  I have reviewed this quarterly report on Form 10-Q of Lodgian, Inc (the
         "Registrant");

     2)  Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

     3)  Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the Registrant as of, and for, the periods presented in
         this quarterly report;

     4)  The Registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) for the
         Registrant and have:

             a)   Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the Registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this quarterly report is being
                  prepared;

             b)   Evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures and presented in this quarterly report
                  our conclusions about the effectiveness of the disclosure
                  controls and procedures, as of the end of the period covered
                  by this report based on such evaluation; and

             c)   Disclosed in this report any change in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter that has
                  materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting; and

     5)  The Registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the Registrant's auditors and the audit committee of the
         Registrant's board of directors:

             a)   All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial information; and

             b)   Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal control over financial reporting.




Date:   August 14, 2003                 By:   /s/  W. THOMAS PARRINGTON
                                             ---------------------------------
                                                   W. THOMAS PARRINGTON
                                           President and Chief Executive Officer

EX-31.2

                                                                    Exhibit 31.2

              FORM OF SARBANES-OXLEY SECTION 302 (A) CERTIFICATION

I, Richard Cartoon, certify that:

     1)  I have reviewed this quarterly report on Form 10-Q of Lodgian, Inc (the
         "Registrant");

     2)  Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

     3)  Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the Registrant as of, and for, the periods presented in
         this quarterly report;

     4)  The Registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) for the
         Registrant and have:

             a)   Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the Registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this quarterly report is being
                  prepared;

             b)   Evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures and presented in this quarterly report
                  our conclusions about the effectiveness of the disclosure
                  controls and procedures, as of the end of the period covered
                  by this report based on such evaluation; and

             c)   Disclosed in this report any change in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter that has
                  materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting; and

     5)  The Registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the Registrant's auditors and the audit committee of the
         Registrant's board of directors:

             a)   All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial information; and

             b)   Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal control over financial reporting.



Date:   August 14, 2003           By:      /s/ RICHARD CARTOON
                                     -------------------------------------------
                                               RICHARD CARTOON
                                         Executive Vice President and
                                           Chief Financial Officer

EX-32

                                                                      Exhibit 32

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of Lodgian, Inc., (the "Company") on
Form 10-Q for the period ended June 30, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), we, W. Thomas Parrington,
the Interim Chief Executive Officer and Richard Cartoon, the Chief Financial
Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our
knowledge and after reasonable inquiry:

         1.       The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         2.       The information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company.





                                                     LODGIAN, INC.

                                            By:    /s/  W. THOMAS PARRINGTON
                                                 -------------------------------
                                                        W. THOMAS PARRINGTON
                                                 President and Chief Executive
                                                              Officer


                                            By:     /s/  RICHARD CARTOON
                                                 -------------------------------
                                                        RICHARD CARTOON
                                                 Executive Vice President and
                                                     Chief Financial Officer



A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Lodgian, Inc. and will be retained
by Lodgian, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request.