10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Period ended March 31, 2004
OR
o	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 þ          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 þ

      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 þ          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 May 5, 2004
Common	2,304,121

LODGIAN, INC. AND SUBSIDIARIES

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003 (unaudited)		2
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and March 31, 2003 (unaudited)		3
	Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2004 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and March 31, 2003 (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		36
Item 4.	Controls and Procedures		36
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		37
Item 2.	Changes in Securities		37
Item 4.	Submission of Matters to a Vote of Security Holders		38
Item 6.	Exhibits and Reports on Form 8-K		39
Signatures			40
EX-10.3 AMENDMENT NO.1 TO LODGIAN 401(K) PLAN
EX-10.4 EMPLOYMENT AGREEMENT / DANIEL ELLIS
EX-10.5 EMPLOYMENT AGREEMENT / MANUEL ARTIME
EX-10.6 EMPLOYMENT AGREEMENT / MICHAEL AMARAL
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

			March 31, 2004			December 31, 2003
			(Unaudited in thousands,
			except share data)
ASSETS
Current assets:
	Cash and cash equivalents		$	12,662		$	10,897
	Cash, restricted			7,447			7,084
	Accounts receivable (net of allowances: 2004 — $730; 2003 — $689)			11,483			8,169
	Inventories			5,666			5,609
	Prepaid expenses and other current assets			16,670			17,068
	Assets held for sale			55,788			68,567
		Total current assets		109,716			117,394
Property and equipment, net				561,461			563,818
Deposits for capital expenditures				13,577			15,782
Other assets, net				11,039			12,180
			$	695,793		$	709,174
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	7,456		$	7,131
	Other accrued liabilities			32,401			31,432
	Advance deposits			3,133			1,882
	Current portion of long-term debt			18,971			16,563
	Liabilities related to assets held for sale			47,340			57,948
		Total current liabilities		109,301			114,956
Long-term debt:
	12.25% Cumulative preferred shares subject to mandatory redemption			146,462			142,177
	Long-term obligations			404,044			409,115
		Total long-term debt		550,506			551,292
		Total liabilities		659,807			666,248
Minority interests				2,467			2,320
Commitments and contingencies
Stockholders’ equity:
	Common stock, $.01 par value, 30,000,000 shares authorized; 2,333,832 and 2,333,591 issued and outstanding at March 31, 2004 and December 31, 2003, respectively			23			23
	Additional paid-in capital			89,878			89,874
	Unearned stock compensation			(458	)		(508	)
	Accumulated deficit			(57,193	)		(50,107	)
	Accumulated other comprehensive income			1,269			1,324
		Total stockholders’ equity		33,519			40,606
			$	695,793		$	709,174

See notes to condensed consolidated financial statements.

2

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

			Three Months Ended
			March 31, 2004			March 31, 2003
			(Unaudited in thousands, except
			per share data)
Revenues:
	Rooms		$	57,563		$	53,914
	Food and beverage			16,488			16,607
	Other			2,754			2,858
				76,805			73,379
Operating expenses:
	Direct:
		Rooms		16,018			15,363
		Food and beverage		11,534			11,734
		Other		1,972			1,938
				29,524			29,035
				47,281			44,344
Other operating expenses:
	General, administrative and other			34,236			35,106
	Depreciation and amortization			6,805			7,422
		Other operating expenses		41,041			42,528
				6,240			1,816
Other income (expenses):
	Interest income and other			43			83
	Interest expense:
		Preferred stock dividend		(4,285	)		—
		Other interest expense (contractual interest: $8.2 million and $6.8 million for the three months ended March 31, 2004 and 2003, respectively)		(8,159	)		(6,279	)
Loss before income taxes, reorganization items and minority interests				(6,161	)		(4,380	)
Reorganization items				—			(1,237	)
Loss before income taxes and minority interest				(6,161	)		(5,617	)
Minority interests				(147	)		(148	)
Loss before income taxes — continuing operations				(6,308	)		(5,765	)
Provision for income taxes — continuing operations				(76	)		(76	)
Loss — continuing operations				(6,384	)		(5,841	)
Discontinued operations:
	Loss from discontinued operations before income taxes			(702	)		(3,243	)
	Income tax provision			—			—
	Loss from discontinued operations			(702	)		(3,243	)
Net loss				(7,086	)		(9,084	)
Preferred stock dividend				—			(3,776	)
Net loss attributable to common stock			$	(7,086	)	$	(12,860	)
Basic and diluted loss per common share:
	Net loss attributable to common stock		$	(3.04	)	$	(5.51	)

See notes to condensed consolidated financial statements.

3

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

														Accumulated
		Common Stock				Additional		Unearned						Other			Total
						Paid-in		Stock			Accumulated			Comprehensive			Stockholders’
		Shares		Amount		Capital		Compensation			Deficit			Loss (Net of Tax)			Equity
		(In thousands, except share data)
Balance December 31, 2003			2,333,591	$	23	$	89,874	$	(508	)	$	(50,107	)	$	1,324		$	40,606
Amortization of unearned stock compensation			—		—		—		50			—			—			50
Exercise of stock options			241		—		4		—			—			—			4
Comprehensive loss:
	Net loss		—		—		—		—			(7,086	)		—			(7,086	)
	Currency translation adjustments (related taxes estimated at nil)		—		—		—		—			—			(55	)		(55	)
Total comprehensive loss					—		—		—			—			—			(7,141	)
Balance March 31, 2004			2,333,832	$	23	$	89,878	$	(458	)	$	(57,193	)	$	1,269		$	33,519

The comprehensive loss for the three months ended March 31, 2003 was $8.7 million.

See notes to condensed consolidated financial statements.

4

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

				Three Months Ended
				March 31,			March 31,
				2004			2003
				(Unaudited in
				thousands)
Operating activities:
	Net loss			$	(7,086	)	$	(9,084	)
	Less: loss from discontinued operations				702			3,243
	Loss — continuing operations				(6,384	)		(5,841	)
	Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:
		Depreciation and amortization			6,805			7,422
		Amortization of unearned stock compensation			50			—
		Preferred stock dividends			4,285			—
		Minority interests			147			148
		Write-off and amortization of deferred financing costs			1,457			594
		Other			209			184
		Changes in operating assets and liabilities:
			Accounts receivable, net of allowances		(3,314	)		(2,275	)
			Inventories		(57	)		20
			Prepaid expenses, other assets and restricted cash		422			10,833
			Accounts payable		594			(55	)
			Other accrued liabilities		2,894			(3,508	)
			Advance deposits		1,251			1,062
Net cash provided by operating activities from continuing operations					8,359			8,584
Net cash used in operating activities from discontinued operations					(2,246	)		(2,269	)
Net cash provided by operating activities					6,113			6,315
Investing activities:
	Capital improvements				(5,001	)		(10,309	)
	Net proceeds from disposition of discontinued operations				13,983			—
	Withdrawals of deposits for capital expenditures				2,205			6,176
	Other				(42	)		(357	)
Net cash provided by (used in) investing activities					11,145			(4,490	)
Financing activities:
	Proceeds from exercise of stock options				4			—
	Principal payments on long-term debt				(14,936	)		(2,396	)
	Payments of deferred financing costs				(561	)		(352	)
Net cash used in financing activities					(15,493	)		(2,748	)
Effect of exchange rate changes on cash					—			—
Net increase in cash and cash equivalents					1,765			(923	)
Cash and cash equivalents at beginning of period					10,897			10,875
				$	12,662		$	9,952
Supplemental cash flow information:
Cash paid during the period for:
	Interest, net of the amounts capitalized shown below			$	7,561		$	6,432
	Interest capitalized				75			216
	Income taxes, net of refunds				234			—
Supplemental disclosure of non-cash investing and financing activities:
	Net non-cash debt increase (decrease)				44			(15,922	)
	Issuance of promissory notes as consideration for taxation liabilities				2,369			—

See notes to consolidated financial statements.

5

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Throughout this Form 10-Q, we will use the terms Lodgian, “we”, “our”, and “us”, to refer to Lodgian, Inc. and unless the context otherwise requires or expressly states, our subsidiaries).

1. Business Summary

      We are one of the largest independent owners and operators of full-service hotels in the United States in terms of our number of guest rooms and gross annual revenues, as reported by Hotel & Motel Management Magazine in September 2003. We are considered an independent owner and operator because we do not operate our hotels under our own name. We operate substantially all of our hotels under nationally recognized brands, such as “Crowne Plaza,” “Holiday Inn” and “Marriott.” As of May 10, 2004, we operated 88 hotels with an aggregate of 16,627 rooms, located in 30 states and Canada. Of the 88 hotels, 78 hotels, with an aggregate of 14,348 rooms, are part of our continuing operations, while 10 hotels, with an aggregate of 2,279 rooms, are held for sale. Our portfolio of 88 hotels consists of:

•  83 hotels that we wholly own and operate through subsidiaries;

•  four hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control; and

•  one hotel that we operate in a joint venture in which we have a 30% non-controlling equity interest.

      We consolidate all of these hotels in our financial statements, other than the one hotel in which we hold a non-controlling equity interest and which we account for under the equity method.

      Our hotels are primarily full-service properties that offer food and beverage services, meeting space and banquet facilities and compete in the midscale and upscale market segments of the lodging industry. As of May 10, 2004, we operated all but three of our hotels under franchises obtained from nationally recognized hospitality franchisors. We operated 60 of our hotels under franchises obtained from InterContinental Hotels Group as franchisor of the Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express brands. We operated 15 of our hotels under franchises from Marriott International as franchisor of the Marriott, Courtyard by Marriott, Fairfield Inn by Marriott and Residence Inn by Marriott brands. We operate another 10 hotels under other nationally recognized brands. We believe that these strong national brands afford us many benefits such as guest loyalty and market share premiums.

2. General

      Our condensed consolidated financial statements include the accounts of Lodgian, Inc., its wholly-owned subsidiaries and four joint ventures in which Lodgian, Inc. has a controlling financial interest (owns a 50% or greater voting equity interest and exercises control). We believe we have control of the joint ventures when we manage and have control of the joint ventures’ assets and operations. We report the third party partners’ share of the net income or loss of these joint ventures and their share of the joint ventures’ equity as minority interest. We include in other assets our investment in the hotel in which we hold a minority interest and which we account for under the equity method. We report our share of the income or loss of this minority-owned hotel as part of interest income and other. All significant intercompany accounts and transactions have been eliminated in consolidation.

      The accounting policies which we follow for quarterly financial reporting are the same as those which we disclosed in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2003.

      During 2003, we developed a portfolio improvement strategy which was consistent with our goals of operating a portfolio of profitable, well-maintained and appealing hotels at superior locations in strong markets. In accordance with this strategy and our efforts to reduce debt and interest costs, we identified 19 hotels, one office building and three land parcels for sale.

6

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Between November 1, 2003 and May 10, 2004, we sold the office building and nine of the nineteen hotels. As of May 10, 2004, our portfolio consisted of 88 hotels, 78 of which represent our continuing portfolio (including one hotel in which we have a non-controlling equity interest which we do not consolidate).

      In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting primarily of normal recurring adjustments, necessary to present fairly our financial position as of March 31, 2004, the results of our operations for the three months ended March 31, 2004 and 2003 and our cash flows for the three months ended March 31, 2004 and 2003. Our results for interim periods are not necessarily indicative of our results for the entire year. You should read these financial statements in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2003.

      As we prepare our financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP), we reclassify certain prior period amounts to conform to the current period’s presentation. We also make estimates and assumptions which affect:

•  the reported amounts of assets and liabilities;

•  the reported amounts of revenues and expenses during the reporting period; and

•  the disclosures of contingent assets and liabilities at the date of our financial statements.

      Our actual results could differ from our estimates.

Reverse Stock Split

      On April 27, 2004, our Board of Directors authorized a reverse stock split of our common stock in a ratio of one-for-three (1:3). The reverse split affected all of our issued and outstanding common shares, warrants and stock options. The record date for the reverse split was April 29, 2004 and our new common stock began trading under the split adjustment on April 30, 2004.

      Fractional shares which resulted from the reverse stock split are payable in cash. Each holder of a fractional share of common stock after the effective date of the reverse split has been or will be paid cash equal to the product of (i) the average of the closing prices of the common stock for the last ten trading days prior to April 30, 2004, multiplied by (ii) the fraction of a share of common stock held by such holder.

      All amounts for common stock, warrants, stock options, and all earnings per share computations have been retroactively adjusted to reflect this change in our capital structure.

3. Stock-based Compensation

      As disclosed in Note 2 above, on April 27, 2004, our Board of Directors authorized a reverse stock split of our common stock in a ratio of one-for-three (1:3). All stock option disclosures below have been retroactively adjusted to reflect the reverse stock split.

      As we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003, on November 25, 2002, we adopted a new stock incentive plan which replaced the Option Plan previously in place. In accordance with the Stock Incentive Plan, we can grant awards to acquire up to 353,333 shares of common stock to our directors, officers, or other key employees or consultants as determined by a committee appointed by our Board of Directors. Awards may consist of stock options, stock appreciation rights, stock awards, performance share awards, section 162(m) awards or other awards determined by the committee. We cannot grant stock options pursuant to the Stock Incentive Plan at an exercise price which is less than 100% of the fair market value per share on the date of the grant. Vesting,

7

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

exercisability, payment and other restrictions pertaining to any awards made pursuant to the Stock Incentive Plan are determined by the Committee. At our 2004 annual meeting, stockholders approved an amendment and restatement of the Stock Incentive Plan to, among other things, increase the number of shares of common stock available for issuance thereunder by 29,667 immediately and, in the event we consummate a firm commitment, underwritten public offering of our common stock, by an additional amount to be determined pursuant to a formula.

      We present below a summary of our stock option plan and the restricted stock units activity under the plan for the three months ended March 31, 2004:

					Weighted Average
		Options			Exercise Price
Balance, December 31, 2003			157,529		$	13.92
	Exercised		(241	)		15.21
	Forfeited		(3,164	)		15.21
Balance, March 31, 2004			154,124		$	13.91

		Restricted
		Stock Units
Balance, December 31, 2003			66,666
	Issued		—
	Forfeited		—
Balance, March 31, 2004			66,666	(1)

(1)  At March 31, 2004, none of the restricted stock had vested.

      In the following table, we summarize information for options outstanding and exercisable at March 31, 2004:

	Options Outstanding						Options Exercisable
			Weighted Average		Weighted Average				Weighted Average
Range of Prices	Number		Remaining Life (in Years)		Exercise Prices		Number		Exercise Prices
$9.00 to $10.50		33,333		9.3	$	9.00		—	$	9.00
$10.53 to $15.21		113,625		9.4	$	15.21		37,924	$	15.21
$15.24 to $15.66		7,166		9.5	$	15.66		2,389	$	15.66
		154,124		9.4	$	13.89		40,313	$	15.24

      We account for stock option grants in accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Under APB No. 25, if the exercise price of our employee stock options is equal to the market price of the underlying stock on the date of grant, no compensation expense is recognized. Under Statement of Financial Accounting Standard (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” (as amended by SFAS No. 148) compensation cost is measured at the grant date based on the estimated value of the award and is recognized over the service (or vesting) period. The income tax benefit, if any, associated with the exercise of stock options is credited to additional paid-in capital.

8

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Had the compensation cost of our Stock Option Plan been recognized under SFAS No. 123, based on the fair market value at the grant dates, our pro forma net loss and net loss per share would have been as follows:

		Three Months Ended
		March 31, 2004			March 31, 2003(1)
Loss — continuing operations
	As reported	$	(6,384	)	$	(5,841	)
	Pro forma		(6,509	)		(5,841	)
Loss from discontinued operations, net of taxes
	As reported		(702	)		(3,243	)
	Pro forma		(702	)		(3,243	)
Net loss:
	As reported		(7,086	)		(9,084	)
	Pro forma		(7,211	)		(9,084	)
Net loss attributable to common stock
	As reported		(7,086	)		(12,860	)
	Pro forma		(7,211	)		(12,860	)
Loss from continuing operations attributable to common stock before discontinued operations
	As reported		(6,384	)		(9,617	)
	Pro forma		(6,509	)		(9,617	)
Basic and diluted loss per common share:
Loss — continuing operations
	As reported	$	(2.74	)	$	(2.50	)
	Pro forma		(2.78	)		(2.50	)
Loss from discontinued operations, net of taxes
	As reported		(0.30	)		(1.39	)
	Pro forma		(0.30	)		(1.39	)
Net loss
	As reported		(3.04	)		(3.89	)
	Pro forma		(3.08	)		(3.89	)
Net loss attributable to common stock
	As reported		(3.04	)		(5.51	)
	Pro forma		(3.08	)		(5.51	)
Loss from continuing operations attributable to common stock before discontinued operations
	As reported		(2.74	)		(4.12	)
	Pro forma		(2.78	)		(4.12	)

(1)  There were no options outstanding between January 1, 2003 and March 31, 2003.

9

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. Discontinued Operations

      As discussed above, during 2003, we identified 19 hotels, one office building and three land parcels for sale as part of our portfolio improvement strategy, and in our efforts to reduce debt and interest costs. Between November 1, 2003 and May 10, 2004, we sold nine of the nineteen hotels and the office building for an aggregate sales price of $48.3 million. From the sale of these assets, we paid down debt of approximately $35.5 million.

      In accordance with SFAS No. 144, we have included the assets sold during 2003 and 2004 as well as the assets held for sale at March 31, 2004 (including any related impairment charges) in Discontinued Operations in the Consolidated Statements of Operations. The assets held for sale at March 31, 2004 and December 31, 2003 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets. Where the carrying values of the assets held for sale exceeded the estimated fair values, net of selling costs, we reduced the carrying values and recorded impairment charges. We determine fair values using quoted market prices, when available, or other accepted valuation techniques. During the three months ended March 31, 2004, we recorded impairment charges of $2.2 million on assets held for sale. Where the estimated selling prices, net of selling costs, of assets held for sale exceeded the carrying values, we did not increase the carrying values of the assets. Among other criteria, we classify an asset as held for sale if we expect to dispose of it within one year.

      At March 31, 2004, 13 hotels and three land parcels were held for sale. At December 31, 2003, 18 hotels and three land parcels were held for sale. The following condensed combined table summarizes the assets and liabilities relating to the properties identified as held for sale as of March 31, 2004 and December 31, 2003:

		March 31,		December 31,
		2004		2003
		(Unaudited in thousands)
ASSETS
Accounts receivable, net of allowances		$	1,066	$	1,252
Inventories			1,076		1,377
Prepaid expenses and other current assets			1,733		1,039
Property and equipment, net			49,582		61,624
Other assets			2,331		3,275
		$	55,788	$	68,567
LIABILITIES
Accounts payable		$	1,199	$	1,234
Other accrued liabilities			2,276		3,120
Advance deposits			571		390
Current portion of long-term debt			567		771
Long-term debt			42,727		52,433
	Total liabilities	$	47,340	$	57,948

10

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The condensed combined results of operations of the properties classified as Discontinued Operations as of March 31, 2004 were as follows:

			Three Months Ended
			March 31,			March 31,
			2004			2003
			(Unaudited in
			thousands)
Revenues:
		Rooms	$	7,944		$	9,134
		Food and beverage		2,318			2,359
		Other		478			793
				10,740			12,286
Operating expenses:
	Direct:
		Rooms		2,696			3,196
		Food and beverage		1,834			2,028
		Other		385			598
				4,915			5,822
				5,825			6,464
Other operating expenses:
	General, administrative and other			6,063			7,750
	Depreciation and amortization			133			1,447
	Impairment of long-lived assets			2,153			—
		Other operating expenses		8,349			9,197
				(2,524	)		(2,733	)
Interest expense				(1,185	)		(510	)
Gain on asset dispositions				3,007			—
Loss before income taxes				(702	)		(3,243	)
Provision for income taxes				—			—
Net loss			$	(702	)	$	(3,243	)

5. Cash, Restricted

      Our restricted cash as of March 31, 2004 consists of amounts reserved for letter of credit collateral, a deposit required by our bankers and cash reserved pursuant to certain loan agreements.

11

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Loss Per Share

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

			Three Months Ended
			March 31,			March 31,
			2004			2003
			(Unaudited in
			thousands, except per
			share data)
Basic and diluted loss per share:
	Numerator:
		Loss — continuing operations	$	(6,384	)	$	(5,841	)
		Loss from discontinued operations, net of taxes		(702	)		(3,243	)
		Net loss		(7,086	)		(9,084	)
		Preferred stock dividend		—			(3,776	)
		Net loss attributable to common stock		(7,086	)		(12,860	)
		Loss — continuing operations		(6,384	)		(5,841	)
		Preferred stock dividend		—			(3,776	)
		Loss from continuing operations attributable to common stock before discontinued operations	$	(6,384	)	$	(9,617	)
	Denominator:
		Denominator for basic and diluted loss per share — weighted-average shares		2,334			2,333
	Basic and diluted loss per common share:
		Loss — continuing operations	$	(2.74	)	$	(2.50	)
		Loss from discontinued operations, net of taxes		(0.30	)		(1.39	)
		Net loss		(3.04	)		(3.89	)
		Net loss attributable to common stock		(3.04	)		(5.51	)
		Loss from continuing operations attributable to common stock before discontinued operations	$	(2.74	)	$	(4.12	)

      We did not include the shares associated with the assumed conversion of the restricted stock units (66,666 shares) or the exercise of stock options (options to acquire 154,124 shares of common stock) and A and B warrants (rights to acquire 503,546 and 343,122 shares of common stock, respectively) in the computation of diluted loss per share for the period ended March 31, 2004 because their inclusion would have been antidilutive. We did not include the shares associated with the exercise of the A and B warrants (rights to acquire 503,546 and 343,122 shares of common stock, respectively) in the computation of diluted loss per share for the period ended March 31, 2003 because their inclusion would have been antidilutive.

12

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. Other Accrued Liabilities

      At March 31, 2004 and December 31, 2003, other accrued liabilities consisted of the following:

	March 31, 2004		December 31, 2003
	(Unaudited in thousands)
Salaries and related costs	$	17,760	$	16,211
Property and sales taxes		10,950		9,427
Professional fees		420		570
Provision for state income taxes		320		2,361
Franchise fee accrual		1,667		1,115
Accrued interest		491		526
Accrual for allowed claims		179		186
Other		614		1,036
	$	32,401	$	31,432

8. Debt

      Substantially all of our property and equipment are pledged as collateral for long-term obligations. Certain of our mortgage notes are subject to a prepayment or yield maintenance penalty if we repay them prior to their maturity. Set forth below, by debt pool, is a summary of our debt at March 31, 2004 along with the applicable interest rates and the related carrying values of the property, plant and equipment which collateralize these debts:

				March 31, 2004
		Number		Property, Plant		Debt		Interest
		of Hotels		and Equipment, net		Obligations		Rates
				(1)		(1)
				(Unaudited in thousands)
Exit financing
	Merrill Lynch Mortgage Lending, Inc. — Senior					$	210,160	LIBOR plus 2.36%
	Merrill Lynch Mortgage Lending, Inc. — Mezzanine						81,010	LIBOR plus 8.79%
	Merrill Lynch Mortgage Lending, Inc. — Total		53	$	391,249		291,170
	Computershare Trust Company of Canada		1		13,874		7,391	7.88%
Lehman financing
	Lehman Brothers Holdings, Inc.		15		65,141		71,071	Higher of LIBOR plus 5.25% or 7.25%
Other financing
	Column Financial, Inc.		9		61,505		26,761	10.59%
	Lehman Brothers Holdings, Inc.		5		37,976		23,292	$16,414 at 9.40%; $6,878 at 8.90%
	JP Morgan Chase Bank		2		8,806		10,516	7.25%
	DDL Kinser		1		3,166		2,360	8.25%
	First Union Bank		1		4,353		3,345	9.38%
	Column Financial, Inc.		1		7,762		8,847	9.45%

13

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

					March 31, 2004
		Number			Property, Plant			Debt			Interest
		of Hotels			and Equipment, net			Obligations			Rates
					(1)			(1)
					(Unaudited in thousands)
	Column Financial, Inc.		1			6,082			3,173		10.74%
	Robb Evans, Trustee		1 21			6,661 136,311			6,958 85,252		Prime plus 4.00%
	Total — other financing		90			606,575			454,884		6.4%(2)
Long-term debt — other			—			—			4,288
	Deferred interest — long-term
	Deferred rent on a long-term ground lease		—			—			2,549
	Tax notes issued pursuant to our Joint Plan of Reorganization		— —			— —			4,014 574
	Other		—			—			11,425
			—			4,468			—
Property, plant and equipment — other			90			611,043			466,309
			(13	)		(49,582	)		(43,294	)
Held for sale			77		$	561,461		$	423,015
Total March 31, 2004

(1)	Debt obligations and property, plant and equipment of one hotel in which we have a non-controlling equity interest that we do not consolidate are excluded from the table above.
(2)	The 6.4% in the table above represents our annual weighted average cost of debt at March 31, 2004.

Exit Financing

      The Merrill Lynch Mortgage senior and mezzanine debt agreements provide that when either (i) the debt yield for the trailing 12-month period is below 13.25% during year ending November 2004 (and if the loan is extended, 13.50%, 13.75% and 14.00% during each of the next three years of the loan, respectively) or (ii) the debt service coverage ratio is below 1.20x, excess cash flows produced by the mortgaged hotels (after payment of operating expenses, management fees, required reserves, loan service fees, principal and interest) must be deposited in a restricted cash account. These funds can be used for the prepayment of aggregate outstanding borrowings, capital expenditures reasonably approved by the lender, and up to an aggregate of $3.0 million of scheduled principal and interest payments due under these agreements. Funds would no longer be deposited into the restricted cash account if the debt yield and the debt service coverage ratio are sustained above the minimum requirements for three consecutive months. On March 31, 2003, the debt yield for the hotels securing the debt fell below the then applicable 12.75% minimum threshold and, therefore, the excess cash flow produced by the hotels securing the debt was retained in the restricted cash account starting on May 1, 2003. Between the inception date of the loan and May 10, 2004, $9.1 million was released from the restricted cash account for capital expenditures and scheduled interest and principal payments. As of May 10, 2004, $3.4 million was being retained in the restricted cash account. At March 31, 2004, the debt yield and debt service coverage ratios remained below the minimum requirements. Further, the mezzanine debt agreement with Merrill Lynch Mortgage requires that we maintain a minimum net worth of at least $10.0 million which we currently meet.

14

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Financings

      On September 30, 2003, first mortgage debt of approximately $7.0 million of MHA became due. We own 60% of MHA, and MHA’s sole asset is the Crowne Plaza Hotel in Macon, Georgia. The lender initially agreed to extend the term of the debt to December 31, 2003, and then to June 30, 2004, while we explore alternative financing opportunities. We have escrowed foreclosure documents that will allow the lender to foreclose on the property on June 30, 2004 if we have not repaid the mortgage debt by that date. There can be no assurance that we will complete a refinancing on or before the due date or that the lender will grant further extensions. If we are not able to refinance the debt and the lender does not grant further extensions, the property would be subject to foreclosure. A foreclosure on the property would constitute a default of the franchise agreement; therefore, we may be liable for $0.9 million in liquidated damages under the franchise agreement. Total revenues for this hotel were $1.4 million for the three months ended March 31, 2004 and also for the three months ended March 31, 2003. The debt of approximately $7.0 million is included in the current portion of long-term debt in our consolidated balance sheet as of March 31, 2004.

9. Commitments and Contingencies

Franchise Agreement and Capital Expenditures

      We benefit from the superior brand qualities of the Crowne Plaza, Holiday Inn, Marriott, Hilton and other brands, including the reputation of these brands, reservation bookings through their central reservation systems, global distribution systems, guest loyalty program and brand Internet booking sites. Reservations made by means of these franchisor facilities generally account for approximately 30% of our total reservations.

      To obtain these franchise affiliations, we enter into franchise agreements with hotel franchisors that generally have terms of between 10 and 20 years. The franchise agreements typically authorize us to operate the hotel under the franchise name, at a specific location or within a specified area, and require that we operate a hotel in accordance with the standards specified by the franchisor. As part of our franchise agreements, we are generally required to pay a royalty fee, an advertising/marketing fee, a fee for the use of the franchisor’s nationwide reservation system and certain ancillary charges. Royalty fees generally range from 3.0% to 6.0% of gross room revenues, advertising/marketing fees generally range from 1.0% to 4.0% of gross room revenues and reservation system fees generally range from 1.0% to 2.0% of gross room revenues. In the aggregate, royalty fees, advertising/marketing fees and reservation fees for the various brands under which we operate our hotels range from 5.0% to 12.0% of gross room revenues.

      These costs vary with revenues and are not fixed commitments. Franchise fees incurred for the three months ended March 31, 2004 and 2003 were as follows:

	Three Months Ended
	March 31, 2004		March 31, 2003
	(Unaudited in thousands)
Continuing operations	$	5,250	$	4,780
Discontinued operations		588		725
	$	5,838	$	5,505

      During the term of the franchise agreements, the franchisors may require us to upgrade facilities to comply with their current standards. Our current franchise agreements terminate at various times and have differing remaining terms, for example, the terms of 5, 13 and 9 of our franchise agreements are scheduled to expire in 2004, 2005, and 2006, respectively. As franchise agreements expire, we may apply for a franchise renewal. In connection with renewals, the franchisor may require payment of a renewal fee,

15

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

increased royalty and other recurring fees and substantial renovation of the facilities, or the franchisor may elect not to renew the franchise. The costs incurred in connection with these agreements are primarily monthly payments due to the franchisors based on a percentage of room revenues.

      If we do not comply with the terms of a franchise agreement, following notice and an opportunity to cure, the franchisor has the right to terminate the agreement, which could lead to a default under one or more of our loan agreements which could materially and adversely affect us. Prior to terminating a franchise agreement, franchisors are required to notify us of the areas of non-compliance and give us the opportunity to cure the non-compliance. In the past, we have been able to cure most cases of non-compliance and most defaults within the cure periods, and those events of non-compliance and defaults did not cause termination of our franchises or defaults on our loan agreements. If we perform an economic analysis of the hotel and determine that it is not economically feasible to comply with a franchisor’s requirements, we will either select an alternative franchisor or operate the hotel without a franchise affiliation.

      As of May 10, 2004, we have been notified that we were not in compliance with some of the terms of eight of our franchise agreements and have received default and termination notices from franchisors with respect to an additional three hotels. We cannot assure you that we will be able to complete our action plans (which we estimate will cost approximately $3.8 million) to cure the alleged defaults prior to the specified termination dates or be granted additional time in which to cure any defaults. We are not aware of any other instances of non-compliance with our franchise agreements.

      In addition, as part of our bankruptcy reorganization proceedings, we entered into stipulations with each of our major franchisors setting forth a timeline for completion of capital expenditures for some of our hotels. However, as of May 10, 2004, we have not completed the required capital expenditures for 32 hotels in accordance with the stipulations and estimate that completing those improvements will cost $24.6 million. Under the stipulations, the applicable franchisors could therefore seek to declare certain franchise agreements in default and, in certain circumstances, seek to terminate the franchise agreement.

      We believe that we will cure the non-compliance and defaults on these hotels before the applicable termination dates, but we cannot provide assurance that we will be able to do so or that we will be able to obtain additional time in which to do so. If a franchise agreement is terminated, we will either select an alternative franchisor or operate the hotel independently of any franchisor. However, terminating or changing the franchise affiliation of a hotel could require us to incur significant expenses, including liquidated damages, and capital expenditures.

      To comply with the requirements of our franchisors and to improve our competitive position in the individual markets, we plan to enhance our capital improvement program in 2004.

Letters of Credit

      As of March 31, 2004, we had issued two irrevocable letters of credit totaling $3.6 million as guarantees to Zurich American Insurance Company and Donlen Fleet Management Services. These letters of credit will expire in November 2004 but may require renewal beyond that date. All letters of credit are fully collateralized by our cash (classified as restricted cash in the accompanying Condensed Consolidated Balance Sheets).

Self-insurance

      We are self-insured up to certain limits with respect to employee medical, employee dental, property insurance, general liability insurance, personal injury claims, workers’ compensation and auto liability. We establish liabilities for these self-insured obligations annually, based on actuarial valuations and our history of claims. Should unanticipated events cause these claims to escalate beyond normal expectations, our financial condition and results of operations would be negatively impacted.

16

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of March 31, 2004, and December 31, 2003, we had approximately $10.3 million and $10.0 million accrued for these liabilities, respectively.

      There are other types of losses for which we cannot obtain insurance at all or at a reasonable cost, including losses caused by acts of war. If an uninsured loss or a loss that exceeds our insurance limits were to occur, we could lose both the revenues generated from the affected hotel and the capital that we have invested. We also could be liable for any outstanding mortgage indebtedness or other obligations related to the hotel. Any such loss could materially and adversely affect our financial condition and results of operations.

      We believe that we maintain sufficient insurance coverage for the operation of our business.

Litigation

      From time to time, as we conduct our business, legal actions and claims are brought against us. The outcome of these matters is uncertain. However, we believe that all currently pending matters will be resolved without a material adverse effect on our results of operations or financial condition. Claims relating to the period before we filed for Chapter 11 protection are limited to the amounts approved by the Bankruptcy Court for settlement of such claims and are payable out of the disputed claims reserves provided for in our plans of reorganization, which in the case of the Joint Plan of Reorganization, consists of our securities, and in the case of the Impac Plan of Reorganization, consists of $0.1 million of cash as of March 31, 2004. We have reserved for all claims approved by the Bankruptcy Court which have not yet been paid.

10. New Accounting Pronouncements

      On July 1, 2003, in accordance with SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, we reclassified the Preferred Stock to the liability section of the consolidated balance sheet and began presenting the related dividends in interest expense. Prior to the adoption of SFAS No. 150, we presented the Preferred Stock between liabilities and equity in our consolidated balance sheet (called the “mezzanine” section) and reported the Preferred Stock dividend as a deduction from retained earnings with no effect on our results of operations. In accordance with SFAS No. 150, the Preferred Stock and the dividends for the period prior to July 1, 2003, have not been reclassified. Thus the Preferred Stock dividend for the three months ended March 31, 2004 of $4.3 million is presented as part of interest expense while the Preferred Stock dividend for the three months ended March 31, 2003 of $3.8 million is presented as a deduction from retained earnings.

      In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”), to address perceived weaknesses in accounting for entities commonly known as special-purpose or off-balance-sheet. In addition to numerous FASB Staff Positions written to clarify and improve the application of FIN 46, the FASB recently announced a deferral for certain entities, and an amendment to FIN 46 entitled FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46R”). FIN 46 establishes consolidation criteria for entities for which “control” is not easily discernible under Accounting Research Bulletin 51, Consolidated Financial Statements, which is based on the premise that holders of the equity of an entity, control the entity by virtue of voting rights. FIN 46 provides guidance for identifying the party with a controlling financial interest resulting from arrangements or financial interests rather than from voting interests. FIN 46 defines the term “variable interest entity” (“VIE”) and is based on the premise that if a business enterprise absorbs a majority of the VIE’s expected losses and/or receives a majority of its expected residual returns (measure of risk and reward), that enterprise (the primary beneficiary) has a controlling financial interest in the VIE. The assets, liabilities, and results of the activities of the VIE should be included in the consolidated financial statements of the primary beneficiary.

17

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We were required to adopt the provisions of FIN 46R relating to any interests in special-purpose entities (SPEs) as of December 31, 2003. In addition, during the first quarter of 2004, we were required to apply the provisions of FIN 46R to any other entities falling within its scope. The adoption of FIN 46 and the counterpart revision (FIN 46R) has not had and is not expected to have a material impact on our financial position and results of operations.

11. Related Party Transactions

      Richard Cartoon, our Executive Vice President and Chief Financial Officer between October 4, 2001 and October 13, 2003, is a principal in a business which we 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 as Chief Financial Officer, we were billed $28,000 and $52,000, including expenses, for other support and services provided by associates of Richard Cartoon, LLC for the three months ended March 31, 2004 and 2003, respectively. Richard Cartoon, LLC may continue to provide restructuring support and services in the short-term.

12. Subsequent Events

      As previously discussed, between November 1, 2003 and May 10, 2004, we sold an office building and nine of the hotels identified for sale. One of these hotels was sold in 2003, five were sold in the first quarter of 2004 and three were sold subsequent to the first quarter 2004. Summarized below is certain financial data relating to the three hotels sold between April 1, 2004 and May 10, 2004:

	(Unaudited in thousands)
Aggregate sales price	$	20,678
Carrying value of property, plant and equipment at March 31, 2004		14,553
Debt paid down from sales proceeds		18,141
Total revenues for the three months ended March 31, 2004 ($2.6 million for the three months ended March 31, 2003)		2,793
Direct operating expenses for the three months ended March 31, 2004 ($1.2 million for the three months ended March 31, 2003)		1,153

18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

      You should read the discussion below in conjunction with the unaudited condensed consolidated financial statements and accompanying notes, set forth in “Item I. Financial Statements” included in this Form 10-Q. Also, the discussion which follows contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in our Form 10-K for the year ended December 31, 2003.

Executive Summary

      We are one of the largest independent owners and operators of full-service hotels in the United States in terms of our number of guest rooms and gross annual revenues, as reported by Hotel & Motel Management Magazine in September 2003. We are considered an independent owner and operator because we do not operate our hotels under our own name. We operate substantially all of our hotels under nationally recognized brands, such as “Crowne Plaza,” “Holiday Inn” and “Marriott.” As of May 10, 2004, we operated 88 hotels with an aggregate of 16,627 rooms, located in 30 states and Canada. Of the 88 hotels, 78 hotels, with an aggregate of 14,348 rooms, are part of our continuing operations, while 10 hotels, with an aggregate of 2,279 rooms, are held for sale. Our portfolio of 88 hotels consists of:

•  83 hotels that we wholly own and operate through subsidiaries;

•  four hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control; and

•  one hotel that we operate in a joint venture in which we have a 30% non-controlling equity interest.

      We consolidate all of these hotels in our financial statements, other than the one hotel in which we hold a minority interest and which we account for on the equity method.

      During 2003, we developed a portfolio improvement strategy which was consistent with our goals of operating a portfolio of profitable, well-maintained and appealing hotels at superior locations in strong markets. In accordance with this strategy and our efforts to reduce debt and interest costs, we identified 19 hotels, one office building and three land parcels for sale. Between November 1, 2003 and May 10, 2004, we sold the office building and nine of the nineteen hotels. As of May 10, 2004, our portfolio consisted of 88 hotels, 78 of which represent our continuing portfolio (including one hotel in which we have a non-controlling equity interest and which we do not consolidate).

Reverse Stock Split

      On April 27, 2004, our Board of Directors authorized a reverse stock split of our common stock in a ratio of one-for-three (1:3). The reverse split affected all of our issued and outstanding common shares, warrants and stock options. The record date for the reverse split was April 29, 2004 and our new common stock began trading under the split adjustment on April 30, 2004.

      Fractional shares which resulted from the reverse stock split are payable in cash. Each holder of a fractional share of common stock after the effective date of the reverse split has been or will be paid cash equal to the product of (i) the average of the closing prices of the common stock for the last ten trading days prior to April 30, 2004, multiplied by (ii) the fraction of a share of common stock held by such holder.

      All share disclosures, warrants, stock options and earnings per share computations have been retroactively adjusted to reflect this change in our capital structure.

19

Operating Summary

      Below is a summary of our results of operations, which are presented in more detail in “Results of Operations — Continuing Operations”:

•  Revenues increased as a result of an increase in leisure and business travel as the hospitality industry and the economy showed signs of recovery in the first quarter 2004. In addition, some of our hotels which were undergoing renovation in the first quarter 2003 experienced improved occupancy levels with the completion of renovation activities.

•  Operating expenses including direct hotel operating expenses, decreased approximately $1.0 million in the first quarter 2004 as compared to the first quarter 2003. Our hotels were negatively affected by increased benefit costs for 401k, worker’s compensation, union costs, group medical and state unemployment rate increases, higher utilities, advertising and repairs and maintenance costs. The hotels, however, benefited from stabilization in the insurance premium markets, successful appeals on property tax assessments, an adjustment to the additional base rent calculation for one hotel and reduced corporate overhead costs primarily due to reduced post emergence bankruptcy costs. Depreciation and amortization charges also decreased due to a reduced asset base as a result of impairment charges recorded after the first quarter of 2003.

•  Interest expense increased as a result of the Lehman Financing received in May 2003. This financing replaced debt on which we were not required to pay interest while the hotels collateralizing the debt were in Chapter 11.

•  Net loss attributable to common stock was $7.1 million for the first quarter 2004 and $12.9 million for the first quarter 2003.

Summary of Discontinued Operations

      As discussed above, during 2003, we identified 19 hotels, one office building and three land parcels for sale as part of our portfolio improvement strategy and our efforts to reduce debt and interest costs. Between November 1, 2003 and May 10, 2004, we sold nine of the nineteen hotels and the office building. Summarized below is certain financial data related to the nine hotels and one office building sold between November 1, 2003 and May 10, 2004:

	(Unaudited in thousands)
Aggregate sales price	$	48,263
Debt pay down (principal only)		35,513
Total revenues for the year ended December 31, 2003		23,755
Direct operating expenses for the year ended December 31, 2003		10,779

      In accordance with SFAS No. 144, we have included the assets sold during 2003 and 2004 as well as the assets held for sale at March 31, 2004 (including any related impairment charges) in Discontinued Operations in the Consolidated Statement of Operations. The assets held for sale at March 31, 2004 and December 31, 2003 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets. Where the carrying values of the assets held for sale exceeded the estimated fair values, net of selling costs, we reduced the carrying values and recorded impairment charges. We determine fair values using quoted market prices, when available, or other accepted valuation techniques. During the three months ended March 31, 2004, we recorded impairment charges of $2.2 million on assets held for sale. Where the estimated selling prices, net of selling costs, of assets held for sale exceeded the carrying values, we did not increase the carrying values of the assets. Among other criteria, we classify an asset as held for sale if we expect to dispose of it within one year.

      While we believe that the completion of these dispositions is probable, the sale of these assets is subject to market conditions and we cannot provide assurance that we will finalize the sale of all or any of these assets on favorable terms or at all.

20

      The results of operations of the other 77 hotels that we consolidate in our financial statements are reported in continuing operations. Our continuing operations reflect the results of operations of those hotels which we plan to retain in our portfolio for the foreseeable future.

Critical Accounting Policies and Estimates

      Our financial statements are prepared in accordance with GAAP. As we prepare our financial statements, we make estimates and assumptions which 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. Actual results could differ from our estimates. A summary of our significant accounting policies is included in Note 1 of the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2003. Also, our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the year ended December 31, 2003, and we believe no changes have occurred.

Income Statement Overview

      The discussion below focuses primarily on our continuing operations. In the continuing operations discussions, we compare the results of operations for the 77 consolidated hotels which we plan to retain in our portfolio for the foreseeable future, for the three months ended March 31, 2004 with the results of operations for the three months ended March 31, 2003. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Income Statement Overview” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 for a general description of the categorization of our revenues and expenses.

Results of Operations — Continuing Operations

First Quarter 2004 Compared to First Quarter 2003

Revenues — Continuing Operations

		Three Months Ended
		March 31, 2004			March 31, 2003			Increase (Decrease)
Revenues (unaudited in thousands):
	Rooms	$	57,563		$	53,914		$	3,649		6.8	%
	Food and beverage		16,488			16,607			(119	)	(0.7	)%
	Other		2,754			2,858			(104	)	(3.6	)%
	Total revenues	$	76,805		$	73,379		$	3,426		4.7	%
Occupancy			59.2	%		56.8	%				4.3	%
ADR		$	75.74		$	74.78		$	0.96		1.3	%
RevPAR		$	44.84		$	42.45		$	2.39		5.6	%

      The 6.8% increase in room revenues is a result of a 5.6% increase in RevPAR and the impact of the leap year. RevPAR increased as a result of a 4.3% increase in occupancy and a 1.3% increase in ADR. The increase in occupancy reflects an increase in both leisure and business travel in the first quarter 2004 as the economy strengthened. In addition, some of our hotels which were undergoing renovation during 2003 have now begun to realize a benefit from the renovations as well as the recovery in the economy. Some of our hotels are still being renovated or are in need of renovation and are therefore not achieving their full earning potential. As we renovate these hotels, we expect to see further improvements in occupancy which we believe should lead to improvements in room rates if business and leisure travel continue to improve.

      Food and beverage revenues were negatively affected by a reduction in group banquet and catering functions. Other revenues declined by 3.6% and were affected by a 21.8% decline in telephone revenues as

21

a result of the increased usage of cell phones by our guests as well as the availability of free high speed Internet access at some of our hotels. The reduction in telephone revenues was, however, offset by a 3.2% increase in other revenue activities such as in-room movies, parking services, laundry services and vending machine commission and sales, which increased as a result of the increase in hotel occupancy.

      To assist us in isolating the temporary effects on hotels which have undergone major change or are undergoing change, we have identified a group of hotels as “stabilized hotels.” Stabilized hotels are those hotels included in our portfolio on March 31, 2004 which:

•  Were not held for sale;

•  Were not undergoing major renovation during 2003 or 2004 (we consider a major renovation to be a renovation which in the aggregate exceeded $5,000 per room); or

•  Were not subject to brand changes during 2003 or 2004.

      The table below presents data on our stabilized hotels:

	Three Months Ended
							% Increase
	March 31, 2004			March 31, 2003			(Decrease)
Number of stabilized hotels		63			63
Number of rooms		11,558			11,558
Occupancy		58.7	%		57.2	%		2.6	%
ADR	$	74.43		$	73.29			1.6	%
RevPAR	$	43.66		$	41.91			4.2	%

      Of the 14 hotels included in continuing operations that are not considered stabilized hotels, 3 hotels went from independent to branded hotels and saw increases in occupancy ranging from 29.5% to 75.0% as compared to the first quarter 2003. Additionally, 4 hotels underwent renovations in 2003 that contributed to increases in occupancy ranging from 15.4% to 54.8% as compared to the first quarter 2003. These hotels helped drive the occupancy results for our hotels classified in continuing operations. As a result, the occupancy increase for our continuing operations group of hotels was stronger than the stabilized group of hotels, some of which are still in need of renovation.

      The 1.6% increase in ADR for our stabilized hotels compared to the 1.3% increase for our hotels classified in continuing operations was primarily due to an improved exchange rate between the U.S. and Canadian dollar, which enabled our Canadian hotel to report an increase in ADR of 13%.

Direct operating expenses — Continuing Operations

			Three Months Ended
									Increase
			March 31, 2004			March 31, 2003			(Decrease)
			(Unaudited in thousands)
Direct operating expenses:
	Rooms		$	16,018		$	15,363		$	655		4.3	%
	Food and beverage			11,534			11,734			(200	)	(1.7	)%
	Other			1,972			1,938			34		1.8	%
			$	29,524		$	29,035		$	489		1.7	%
		% of total revenues		38.4	%		39.6	%

      Rooms expenses, which vary with room revenues, were higher due to increased revenues. However, room expenses did not increase proportionately as room revenues increased due to the moderating effect of the fixed portion of our room expenses. Room expenses as a percentage of room revenues for the first quarter 2004 were 27.8% as compared to 28.5% for the first quarter 2003. Payroll and related benefits, on an actual cost per occupied room basis, were $13.48 for the first quarter 2004 as compared to $13.86 for the first quarter 2003. Other room expenses, on an actual cost per occupied room basis, increased from

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$7.45 in the first quarter 2003 to $7.59 for the first quarter 2004 primarily driven by increases in guest loyalty programs and credit card commissions.

      Although food and beverage revenues fell by 0.7%, food and beverage department expenses declined 1.7% in the first quarter 2004 compared with the first quarter 2003. Food and beverage costs as a percentage of revenues were lower in the first quarter 2004 as a result of our improved purchasing program and stronger inventory controls.

      Other direct operating expenses include telephone service expenses and the costs of providing ancillary services to our guests such as in-room movies, parking, laundry and vending machine sales. Other direct operating expenses for the first quarter 2004 increased 1.8% as compared to the first quarter 2003 while other revenues declined 3.6%. Telephone expenses for the first quarter 2004 declined 11.3% as compared to first quarter 2003 while ancillary service costs for the first quarter 2004 increased 8.5% as compared to first quarter 2003 primarily due to a 27.6% increase in movie costs.

Other operating expenses — Continuing Operations

			Three Months Ended
									Increase
			March 31, 2004			March 31, 2003			(Decrease)
			(Unaudited in thousands)
Other operating expenses:
	General, administrative and other		$	34,236		$	35,106		$	(870	)	(2.5	)%
	Depreciation and amortization			6,805			7,422			(617	)	(8.3	)%
			$	41,041		$	42,528		$	(1,487	)	(3.5	)%
		% of total revenues		53.4	%		58.0	%

      Included in general, administrative and other are the following categories of expenses:

•  Hotel operating costs;

•  Property and other taxes, insurance, leases; and

•  Corporate expenses.

      The hotel operating cost component of general, administrative and other increased due to the following:

•  Hotel administration costs increased $0.2 million, primarily as a result of salary and employee benefit increases;

•  Advertising and promotion costs increased $0.4 million, also primarily due to salary and employee benefit increases;

•  Franchise fees increased $0.5 million as a result of the increase in revenues as substantially all franchise fees are revenue-based;

•  Repairs and maintenance costs increased $0.3 million primarily as a result of our continuing preventative maintenance program and maintenance costs related to our renovation projects; and

•  Utility costs increased $0.3 million as a result of rate and consumption increases.

      Property and other taxes, insurance and leases fell as a result of stabilization in the insurance markets and improved loss experience, successful appeals related to property tax assessments, and an adjustment for the recalculation of additional base rent on one of our hotels.

      Corporate expenses fell as a result of the significant reduction in post-emergence legal, professional and other costs related to the Chapter 11 proceedings. For the first quarter 2004, these costs totaled $0.2 million compared to $2.2 million for the first quarter 2003 (not including the $1.2 million of reorganization items).

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      Depreciation and amortization expense declined as a result of our reduced asset base on the continuing operations hotels. The asset base on these hotels fell as a result of $12.7 million of impairment charges recorded after the first quarter 2003 on assets held for use.

Non-operating income (expenses) — Continuing Operations

			Three Months Ended
			March 31, 2004			March 31, 2003			Increase (Decrease)
			(Unaudited in thousands)
Non-operating income (expenses):
	Interest income and other		$	43		$	83		$	(40	)	(48.2	)%
	Interest expense:
		Preferred stock dividend		(4,285	)		—			4,285		n/m
		Other interest expense		(8,159	)		(6,279	)		1,880		29.9	%
	Reorganization items			—			(1,237	)		(1,237	)	(100.0	)%
	Minority interests			(147	)		(148	)		(1	)	(0.7	)%

      The Preferred Stock dividend relates to dividends on the Preferred Stock issued on November 25, 2002. Dividends for the period January 1, 2004 to March 31, 2004 totaled $4.3 million. In accordance with SFAS No. 150 effective for us on July 1, 2003, dividends relating to the period after the effective date are reported as interest expense. Dividends for the period prior to the effective date continue to be shown as a deduction from retained earnings with no effect on our results of operations. As a result, the $4.3 million dividend accrued for the period January 1, 2004 to March 31, 2004 is reported in interest expense while the $3.8 million dividend accrued for the period January 1, 2003 to March 31, 2003 is shown as a deduction from retained earnings.

      Other interest expense for the first quarter 2004 increased primarily as result of costs associated with the Lehman Financing obtained in May 2003. Though the Lehman Financing replaced previous debt, we paid no interest during the first quarter 2003 on the debt which it replaced, as approved by the Bankruptcy Court. In addition, included in other interest expense for the first quarter 2004 and 2003 are amortization of loan fees of $1.5 and $0.6 million, respectively. The increase in amortization of loan fees is also related to the Lehman Financing.

      Reorganization items for the first quarter 2003 of $1.2 million represent Chapter 11 expenses incurred between January 1, 2003 and March 31, 2003 relating to the 18 hotels which emerged from Chapter 11 on May 22, 2003. We continue to incur expenses related to the Chapter 11 proceedings but currently report these expenses as part of general, administrative and other expenses. In accordance with generally accepted accounting principles (“GAAP”), all Chapter 11 expenses incurred in the first quarter 2003 and related to the 18 hotels were reported as reorganization items.

      Minority interests represent the third party owners’ share of the net income of the four joint ventures in which we have a controlling equity interest. The aggregate results of these joint ventures for the first quarter 2004 were similar to the results for the first quarter 2003 and hence our share of the joint ventures’ income for the first quarter 2004 was flat compared to the first quarter 2003.

Results of Operations — Discontinued Operations

      Discontinued operations the include results of operations for both assets sold during the reporting period and assets that have been identified for sale. Consequently, the 13 hotels and three land parcels which were held for sale at March 31, 2004, as well as the 15 hotels and the office building that were disposed of between January 1, 2003 and March 31, 2004, are included in discontinued operations. We present the current quarter’s results of these hotels as discontinued operations as well as the comparative results for the prior quarter.

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      Set forth below are the condensed combined statement of operations for the properties classified as discontinued operations:

			Three Months Ended
			March 31,			March 31,			Increase
			2004			2003*			(Decrease)
			(Unaudited in thousands)
Revenues:
		Rooms	$	7,944		$	9,134		$	(1,190	)
		Food and beverage		2,318			2,359			(41	)
		Other		478			793			(315	)
				10,740			12,286			(1,546	)
Operating expenses:
	Direct:
		Rooms		2,696			3,196			(500	)
		Food and beverage		1,834			2,028			(194	)
		Other		385			598			(213	)
				4,915			5,822			(907	)
				5,825			6,464			(639	)
Other operating expenses:
	General, administrative and other			6,063			7,750			(1,687	)
	Depreciation and amortization			133			1,447			(1,314	)
	Impairment of long-lived assets			2,153			—			2,153
		Other operating expenses		8,349			9,197			(848	)
				(2,524	)		(2,733	)		209
Other income (expense):
	Interest expense			(1,185	)		(510	)		(675	)
	Gain on asset dispositions			3,007			—			3,007
	Loss before income taxes			(702	)		(3,243	)		2,541
	Benefit (provision) for income taxes			—			—			—
Net loss			$	(702	)	$	(3,243	)	$	2,541

*  The first quarter 2003 revenues and expenses in the table above includes de minimus amounts for the eight hotels conveyed to a lender in January 2003 and the one hotel returned to the lessor of a capital lease, also in January 2003.

     First quarter 2004 revenues and expenses reflected in discontinued operations above are not fully comparable with the first quarter 2003 revenues and expenses as a result of the following:

•  For the first quarter 2004 there are no revenues and expenses in the table for the hotel and office building sold during 2003. The hotel was sold in November 2003 and the office building was sold in December 2003. Hence, the first quarter 2003 results reflect the full quarter’s operations for these two properties. For the first quarter 2003, revenues for these two properties were $0.8 million and direct operating expenses were $0.3 million in aggregate.

•  Less than a quarter’s revenues and expenses are included in the results for the first quarter 2004 for the five hotels sold at various intervals during the quarter.

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      Additionally the following factors affected the results of the hotels included in discontinued operations:

•  Depreciation on these hotels was suspended by our classification of these assets as held for sale. All nineteen hotels identified for sale during 2003 were identified subsequent to the first quarter 2003 and hence the full quarter’s depreciation would have been recorded in the first quarter 2003 with no depreciation on these assets being recorded during the first quarter 2004. Impairment charges of $2.2 million recorded in the first quarter 2004 represent the excess of the carrying values of assets held for sale over the revised estimated selling prices less estimated selling costs.

•  Interest expense increased as a result of the Lehman Financing which was executed in May 2003 and which replaced debt on which we were not required to pay interest while the related hotels were in Chapter 11.

•  The gain on asset dispositions of $3.0 million represents the gain on sale of four of the five hotels sold during the first quarter 2004.

Income taxes

      At December 31, 2003, we had available net operating loss carryforwards of approximately $270 million for federal income tax purposes, which will expire in 2004 through 2023. Under our plans of reorganization, substantial amounts of net operating loss carryforwards were utilized to offset income from debt cancellations. Also, our reorganization under Chapter 11 resulted in an ownership change, as defined in Section 382 of the Internal Revenue Code. Consequently, our ability to use the net operating loss carryforwards to offset future income is subject to certain annual limitations. Due to these and other limitations, a portion or all of these net operating loss carryforwards could expire unused. At December 31, 2003, we established a valuation allowance of $140.0 million to fully offset our net deferred tax asset.

EBITDA

      We use earnings before interest, taxes, depreciation and amortization (“EBITDA”) to measure our performance and to assist us in the assessment of hotel property values. EBITDA is also a widely-used industry measure. However, EBITDA is a non-GAAP measure and should not be used as a substitute for measures such as net income (loss), cash flows from operating activities, or other measures computed in accordance with GAAP. Depreciation and amortization are significant non-cash expenses for us as a result of the high proportion of our assets which are long-lived, including property, plant and equipment. We depreciate property, plant and equipment over their estimated useful lives and amortize deferred financing and franchise fees over the term of the applicable agreements. We also believe that EBITDA provides pertinent information to investors as an additional indicator of our operating performance.

      The following table presents EBITDA, a non-GAAP measure, for the first quarter 2004 and 2003 and provides a reconciliation with loss from continuing operations, a GAAP measure:

		Three Months Ended
		March 31, 2004			March 31, 2003
		(Unaudited in thousands)
Continuing operations:
	Loss — continuing operations	$	(6,384	)	$	(5,841	)
	Depreciation and amortization		6,805			7,422
	Interest income and other		(43	)		(83	)
	Other interest expense		8,159			6,279
	Preferred stock dividends		4,285			—
	Provision for income taxes — continuing operations		76			76
	EBITDA	$	12,898		$	7,853

Loss — continuing operations is after deducting post-emergence Chapter 11 expenses, included in general, administrative and other on the consolidated statement of operations, of $0.2 million and $2.2 million for the first quarter 2004 and 2003, respectively, and is after deducting $1.2 million of reorganization expenses for the first quarter 2003.

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Hotel data by market segment and region

      The following two tables present data on occupancy, ADR and RevPAR for the hotels in our portfolio (including one hotel that we do not consolidate) at March 31, 2004, by market segment for the first quarter 2004 and the first quarter of 2003. From January 1, 2004 through May 10, 2004, we sold eight of the hotels included in the following table as part of our discontinued operations.

Combined Continuing and Discontinued Operations — 91 hotels

		Capital expenditures
		Three Months		Three Months Ended
		Ended
		March 31, 2004		March 31, 2004			March 31, 2003
		($ in thousands)
Upper Upscale
	Number of properties	$	447		4			4
	Number of rooms				825			825
	Occupancy				64.0	%		61.5	%
	Average daily rate			$	94.24		$	92.50
	RevPAR			$	60.31		$	56.90
Upscale
	Number of properties		1,673		18			18
	Number of rooms				3,156			3,156
	Occupancy				67.2	%		66.0	%
	Average daily rate			$	88.05		$	86.41
	RevPAR			$	59.14		$	57.06
Midscale with Food & Beverage
	Number of properties		2,612		55			55
	Number of rooms				11,198			11,048
	Occupancy				53.0	%		51.5	%
	Average daily rate			$	69.48		$	68.75
	RevPAR			$	36.80		$	35.42
Midscale without Food & Beverage
	Number of properties		121		9			7
	Number of rooms				1,067			833
	Occupancy				57.0	%		45.1	%
	Average daily rate			$	61.27		$	60.41
	RevPAR			$	34.95		$	27.23
Independent Hotels
	Number of properties		2		5			7
	Number of rooms				957			1,341
	Occupancy				35.1	%		38.8	%
	Average daily rate			$	87.21		$	73.40
	RevPAR			$	30.64		$	28.45
All Hotels
	Number of properties		4,855		91			91
	Number of rooms				17,203			17,203
	Occupancy				55.4	%		53.4	%
	Average daily rate			$	75.09		$	73.99
	RevPAR			$	41.57		$	39.48

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Continuing Operations — 78 hotels

		Capital Expenditures
		Three Months		Three Months Ended
		Ended
		March 31, 2004		March 31, 2004			March 31, 2003
		($ in thousands)
Upper Upscale
	Number of properties	$	447		4			4
	Number of rooms				825			825
	Occupancy				64.0	%		61.5	%
	Average daily rate			$	94.24		$	92.50
	RevPAR			$	60.31		$	56.90
Upscale
	Number of properties		1,609		17			17
	Number of rooms				3,002			3,002
	Occupancy				68.7	%		65.9	%
	Average daily rate			$	88.52		$	87.94
	RevPAR			$	60.78		$	57.95
Midscale with Food & Beverage
	Number of properties		2,518		45			44
	Number of rooms				8,919			8,526
	Occupancy				56.9	%		56.7	%
	Average daily rate			$	70.84		$	69.85
	RevPAR			$	40.30		$	39.62
Midscale without Food & Beverage
	Number of properties		121		9			7
	Number of rooms				1,067			833
	Occupancy				57.0	%		45.1	%
	Average daily rate			$	61.27		$	60.41
	RevPAR			$	34.95		$	27.23
Independent Hotels
	Number of properties		0		3			6
	Number of rooms				535			1,162
	Occupancy				34.9	%		36.2	%
	Average daily rate			$	58.20		$	58.38
	RevPAR			$	20.28		$	21.11

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		Capital Expenditures
		Three Months		Three Months Ended
		Ended
		March 31, 2004		March 31, 2004			March 31, 2003
		($ in thousands)
All Hotels
	Number of properties		4,695		78			78
	Number of rooms				14,348			14,348
	Occupancy				58.9	%		56.6	%
	Average daily rate			$	75.65		$	74.64
	RevPAR			$	44.59		$	42.23

      The categories in the tables above are based on the Smith Travel Research Chain Scales and are defined as:

• Upper Upscale: Hilton and Marriott;

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

• Midscale with Food & Beverage: Clarion, DoubleTree, Four Points, Holiday Inn, Holiday Inn Select, Holiday Inn SunSpree Resort and Quality Inn; and

• Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn Express.

      The following two tables present data on occupancy, ADR and RevPAR for the hotels in our portfolio (including one hotel that we do not consolidate) at March 31, 2004, for the first quarter 2004 and the first quarter 2003. From January 1, 2004 through May 10, 2004, we sold eight of the hotels included in the following table as part of our discontinued operations.

Combined Continuing and Discontinued Operations — 91 hotels

		Capital expenditures
		Three Months		Three Months Ended
		Ended March 31,
		2004		March 31, 2004			March 31, 2003
		($ in thousands)
Northeast Region
	Number of properties	$	991		35			35
	Number of rooms				6,722			6,722
	Occupancy				52.2	%		51.5	%
	Average daily rate			$	78.34		$	76.41
	RevPAR			$	40.87		$	39.33
Southeast Region
	Number of properties		1,702		31			31
	Number of rooms				5,267			5,267
	Occupancy				57.6	%		54.4	%
	Average daily rate			$	70.28		$	68.09
	RevPAR			$	40.46		$	37.04
Midwest Region
	Number of properties		321		18			18
	Number of rooms				3,895			3,895
	Occupancy				51.5	%		50.4	%
	Average daily rate			$	70.57		$	71.23
	RevPAR			$	36.32		$	35.93

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		Capital expenditures
		Three Months		Three Months Ended
		Ended March 31,
		2004		March 31, 2004			March 31, 2003
		($ in thousands)
West Region
	Number of properties		1,841		7			7
	Number of rooms				1,319			1,319
	Occupancy				74.2	%		67.4	%
	Average daily rate			$	87.64		$	89.67
	RevPAR			$	65.03		$	60.45
All Hotels
	Number of properties		4,855		91			91
	Number of rooms				17,203			17,203
	Occupancy				55.4	%		53.4	%
	Average daily rate			$	75.09		$	73.99
	RevPAR			$	41.57		$	39.48

Continuing Operations — 78 hotels

		Capital expenditures
		Three Months		Three Months Ended
		Ended March 31,
		2004		March 31, 2004			March 31, 2003
		($ in thousands)
Northeast Region
	Number of properties	$	840		28			28
	Number of rooms				5,154			5,154
	Occupancy				58.9	%		57.1	%
	Average daily rate			$	80.60		$	79.32
	RevPAR			$	47.45		$	45.26
Southeast Region
	Number of properties		1,708		27			27
	Number of rooms				4,612			4,612
	Occupancy				58.3	%		55.8	%
	Average daily rate			$	68.52		$	66.44
	RevPAR			$	39.92		$	37.10
Midwest Region
	Number of properties		306		16			16
	Number of rooms				3,263			3,263
	Occupancy				53.9	%		52.5	%
	Average daily rate			$	71.31		$	71.13
	RevPAR			$	38.42		$	37.32
West Region
	Number of properties		1,841		7			7
	Number of rooms				1,319			1,319
	Occupancy				74.2	%		67.4	%
	Average daily rate			$	87.64		$	89.67
	RevPAR			$	65.03		$	60.45

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		Capital expenditures
		Three Months		Three Months Ended
		Ended March 31,
		2004		March 31, 2004			March 31, 2003
		($ in thousands)
All Hotels
	Number of properties		4,695		78			78
	Number of rooms				14,348			14,348
	Occupancy				58.9	%		56.6	%
	Average daily rate			$	75.65		$	74.64
	RevPAR			$	44.59		$	42.23

      The regions in the tables above are defined as:

•  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; and

•  West: Arizona, California, Colorado, New Mexico.

Liquidity and Capital Resources

Working Capital

      We use our cash flows primarily for operating expenses, debt service, and capital expenditures. Currently, our principal sources of liquidity consist of cash flows from operations and existing cash balances. Cash flows from operations may be adversely affected by factors such as a reduction in demand for lodging or certain large scale renovations being performed at our hotels. To the extent that significant amounts of our accounts receivable are due from airline companies, a further downturn in the airline industry also could materially and adversely affect the collectibility of our accounts receivable, and hence our liquidity. At March 31, 2004, airline receivables represented approximately 16% of our accounts receivable, net of allowances. A further downturn in the airline industry could also affect our revenues by decreasing the aggregate levels of demand for travel. We expect that the sale of certain assets will provide additional cash to pay down outstanding debt and to fund a portion of our capital expenditures. Between November 1, 2003 and May 10, 2004, we sold nine hotels and an office building with another 10 hotels and three land parcels classified as assets held for sale, four of which were under contract as of May 10, 2004. The aggregate sales price from the sale of the nine hotels and office building sold between November 1, 2003 and May 10, 2004, was $48.3 million, $35.5 million of which was used to pay down debt and $9.4 million of which was used for general corporate purposes, including capital expenditures.

      Our ability to make scheduled debt service payments and fund operations and capital expenditures depends on our future performance and financial results, including the successful implementation of our business strategy and, to a certain extent, the general condition of the lodging industry and the general economic, political, financial, competitive, legislative and regulatory environment. In addition, our ability to refinance our indebtedness depends to a certain extent on these factors as well. Many factors affecting our future performance and financial results, including the severity and duration of macro-economic downturns, are beyond our control. See “Matters Which May Affect Future Results — Risks Related to Our Business” in our Annual Report on Form 10-K for the year ended December 31, 2003.

      During 2004, we will seek to raise capital through an offering to the public of our common stock, the purpose of which will be to redeem our outstanding Preferred Stock, to fund capital expenditures related to renovations and repositionings of selected hotels and for general corporate purposes including funding our growth strategy. In connection with this offering, we will seek to refinance approximately $370 million of our floating rate mortgage debt in order to extend maturities and to convert a substantial portion of floating rate debt to fixed rate debt.

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      We intend to continue to use our cash flow to make scheduled debt service payments and fund operations and capital expenditures and, therefore, do not anticipate paying dividends on our common stock in the foreseeable future. As provided by the terms of the Preferred Stock, we paid the dividends that were due on our Preferred Stock on November 21, 2003 by the issuance of additional shares of Preferred Stock with fractional shares paid in cash.

      Although we have emerged from Chapter 11, the distribution of shares to the general unsecured creditors is not complete as we continue to reconcile the claims made by these creditors. We have established a disputed claims reserve out of which those claims will be paid. Until this process is complete, we will continue to incur expenses in respect of these claims as well as Bankruptcy Court fees and professional fees.

      In accordance with GAAP, all assets held for sale, including assets that would normally be classified as long-term assets in the normal course of business, were reported as “assets held for sale” in current assets. Similarly, all liabilities related to assets held for sale were moved to the current liability category, including debt that would otherwise be classified as long-term liabilities in the ordinary course of business.

      At March 31, 2004, after reclassifying assets held for sale as current assets and liabilities related to the assets held for sale as current liabilities, we had working capital (current assets less current liabilities) of $0.4 million compared to $2.4 million at December 31, 2003. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Debt, Contractual Obligations and Franchise Agreements — Exit Financing” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 with respect to our decision to include the Merrill Lynch Mortgage debt financing in long-term debt.

      During the first quarter 2004, we spent approximately $4.7 million on renovations and, subject to completion of our proposed offering of common stock, we expect to spend an additional $35 million during the remainder of 2004, thereby completing substantially all of our deferred renovations.

      We believe that the combination of our current cash, cash flows from operations, capital expenditure escrows and the proceeds of asset sales will be sufficient to meet our liquidity needs for the next 24 months.

      Our ability to meet our long-term cash needs is dependent on the continuation and extent of the recovery of the economy and the lodging industry, improvement in our operating results, the successful implementation of our portfolio improvement strategy and our ability to obtain third party sources of capital on favorable terms as and when needed. In the short term, we continue to diligently monitor our costs. Our future liquidity needs and sources of working capital are subject to uncertainty and we can provide no assurance that we will have sufficient liquidity to be able to meet our operating expenses, debt service requirements, including scheduled maturities, and planned capital expenditures. We could lose the right to operate certain hotels under nationally recognized brand names, and furthermore, the termination of one or more franchise agreements could lead to defaults and acceleration under one or more loan agreements as well as obligations to pay liquidated damages under the franchise agreements. See “Matters Which May Affect Future Results — Risks Related to Our Business” in our Annual Report on Form 10-K for the year ended December 31, 2003, for further discussion of conditions that could adversely affect our estimates of future liquidity needs and sources of working capital.

Cash Flow

Operating Activities

      Net cash provided by operating activities was $6.1 million and $6.3 million for the first quarter 2004 and the first quarter 2003, respectively. Although EBITDA of $12.9 million for first quarter 2004 was $5.0 million higher than first quarter 2003, net cash provided by operating activities was $0.2 million lower in first quarter 2004 primarily as the result of the release of bankruptcy-related restricted cash during 2003.

32

      During the first quarter 2003, $7.6 million of restricted cash was released and made available for our operations.

Investing Activities

      Investing activities provided net cash flow of $11.1 million for the first quarter 2004 while investing activities accounted for a net cash outflow of approximately $4.5 million for the first quarter 2003. The increase in investing activities in the first quarter 2004 as compared to the first quarter 2003 is primarily a result of cash inflows from the sale of hotels during the first quarter 2004. Net proceeds from the sale of five hotels during the first quarter 2004 totaled $14.0 million. Investing activities for the first quarter 2004 also consisted of withdrawals of deposits from capital expenditure escrows of $2.2 million and capital expenditure outlays of $5.0 million. Due primarily to large scale renovations being performed at some of our hotels during the first quarter 2003, capital expenditures totaled $10.3 million, which were partially funded by withdrawals of $6.2 million from lender-controlled capital expenditure escrows.

Financing activities

      Primarily as a result of the sale of the five hotels, we paid down portions of our debt in the first quarter 2004. Principal payments, including scheduled principal payments, were approximately $14.9 million for the first quarter 2004 compared with principal payments of $2.4 million in the first quarter 2003. Financing activities also consisted of payments of financing costs of $0.6 million and $0.4 million for the first quarter 2004 and first quarter 2003, respectively.

      On September 18, 2003, we drew down the full availability of $2.0 million under a revolving credit facility with OCM Real Estate Opportunities Fund II, L.P. (the “OCM Fund”). The facility was secured by two land parcels located in California and New Jersey and expired on May 1, 2004. We did not renew the facility on May 1, 2004. Borrowings under the facility bore interest at the fixed rate of 10% per annum and were repaid in December 2003 out of the proceeds we received from the sale of an office building. We may pursue another working capital facility in the near future but currently believe that we will be able to fund our operations from funds generated from operations and from asset sales.

Debt, Contractual Obligations and Franchise Agreements

      See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Debt, Contractual Obligations and Franchise Agreements” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and the Notes to our unaudited condensed consolidated financial statements included in “Item 1. Financial Statements” herein for more information on our debt, contractual obligations and franchise agreements, including the following:

•  Our existing mortgage debt and refinancing plans;

•  Encumbrances on our properties;

•  Our Preferred Stock; and

•  Our franchise agreements and capital expenditures.

33

Off Balance Sheet Arrangements

      We have no off balance sheet arrangements.

Market Risk

      We are exposed to interest rate risks on our variable rate debt. At March 31, 2004 and December 31, 2003, we had outstanding variable rate debt of approximately $369.2 million and $382.8 million, respectively.

      In order to manage our exposure to fluctuations in interest rates with the U.S. portion of the exit financing received in November 2002 ($291.2 million and $299.3 million at March 31, 2004 and December 31, 2003, respectively), we entered into two interest rate cap agreements, which allowed us to obtain exit financing at floating rates and effectively cap them at LIBOR of 6.44% plus the spread. When LIBOR exceeds 6.44%, 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 6.44%, there is no settlement from the interest rate caps. Therefore, we are exposed to interest rate risks on the exit financing debt for increases in LIBOR up to 6.44% but we are not exposed to increases in LIBOR above 6.44% because settlements from the interest rate caps would offset the incremental interest expense. The one-month LIBOR as of March 31, 2004 was 1.09%. The notional principal amount of the interest rate caps outstanding was $302.2 million both at March 31, 2004 and at December 31, 2003, respectively.

      On May 22, 2003, we finalized the $80 million 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 our exposure to fluctuations in interest rates with the Lehman Financing, we entered into an interest rate cap agreement, which allowed us 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. We are 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 $79.2 million at March 31, 2004.

      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), we believe that our interest rate risk at March 31, 2004 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 March 31, 2004 would be a reduction in net income of approximately $1,000. These derivative financial instruments are viewed as risk management tools and are entered into for hedging purposes only. We do not use derivative financial instruments for trading or speculative purposes. However, we have not elected the hedging requirements of SFAS No. 133.

      The fair value of the three interest rate caps as of March 31, 2004 and at December 31, 2003 were approximately $1,000 and $15,000, 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 our fixed rate obligations does not expose us to fluctuations in interest payments. The impact on the fair value of our fixed rate obligations of a hypothetical one-point interest rate increase on the outstanding fixed-rate debt as of March 31, 2004 and December 31, 2003 would be approximately $2.9 million and $3.0 million, respectively.

      In addition, the hotel business is inherently capital intensive, as the vast majority of assets are hotels, which are long-lived. Lodgian’s exposure to market risk associated with changes in interest rates relates primarily to its debt obligations. Approximately 79.2% of the long-term debt carries floating rates of interest. For the balance of long-term debt, the nature of fixed rate obligations does not expose us to the risk of changes in the fair value of these instruments.

34

Our outstanding debt was $466.3 million, at March 31, 2004, including current maturities and long-term debt related to assets held for sale.

      At March 31, 2004, approximately $369.2 million of debt instruments outstanding were subject to changes in the LIBOR or PRIME rate. Without regard to additional borrowings under those instruments or scheduled amortization, the annualized effect of each twenty five basis point increase in LIBOR would be a reduction in income before income taxes of approximately $0.9 million. The fair value of the fixed rate debt (book value $85.7 million) at March 31, 2004 is estimated at $86.9 million.

Forward-looking Statements

      We make forward looking statements in this report and other reports we file with the SEC. In addition, management may make oral forward-looking statements in discussions with analysts, the media, investors and others. These statements include statements relating to our plans, strategies, objectives, expectations, intentions and adequacy of resources, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believes,” “anticipates,” “expects,” “intends,” “plans,” “estimates,” and “projects” and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and the impact of these events on our business, financial condition, results of operations and prospects are subject to many risks and uncertainties including the following:

•  The effects of regional, national and international economic conditions, including the magnitude and duration of the recent economic downturn in the United States;

•  Competitive conditions in the lodging industry and increases in room capacity;

•  The effects of actual and threatened terrorist attacks and international conflicts and their impact on domestic and international travel, including the potentially marked decrease in travel in connection with military action in Iraq or elsewhere;

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

•  Requirements of franchise agreements, including the right of some franchisors to immediately terminate their respective agreements if we breach certain provisions;

•  Seasonality of the hotel business;

•  The financial condition of the airline industry and its impact on air travel;

•  The effect that Internet reservation channels may have on the rates that we are able to charge for hotel rooms;

•  Increases in the cost of debt and our continued compliance with the terms of our loan agreements;

•  Our high level of secured debt;

•  Our ability to complete planned hotel and land parcel dispositions;

•  Our ability to meet the continuing listing requirements of the American Stock Exchange;

•  The effect of self-insured claims in excess of our reserves, or our ability to obtain adequate property and liability insurance to protect against losses, or to obtain insurance at reasonable rates;

•  Potential litigation and/or governmental inquiries and investigations;

•  Laws and regulations applicable to our business, including federal, state or local hotel, resort, restaurant or land use regulations, employment, labor or disability laws and regulations;

•  The short time that the public market for our new securities has existed; and

35

•  The risks identified under “Risks Related to Our Business” and “Risks Relating to Our Common Stock” in our Annual Report on Form 10-K for the year ended December 31, 2003.

      Any of these risks and uncertainties could cause actual results to differ materially from historical results or those anticipated. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained and caution you not to place undue reliance on such statements. We undertake no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances or their impact on our business, financial condition, results of operations and prospects. Many of these factors are not within our control and we caution you not to put undue reliance on forward looking statements.

Inflation

      We have not determined the precise impact of inflation. However, we believe that the rate of inflation has not had a material effect on our revenues or expenses in recent years. It is difficult to predict whether inflation will have a material effect on our results in the long-term.

New Accounting Pronouncements

      The table below summarizes recent accounting pronouncements and their effects on Lodgian:

		Month			Summary of Major
	Description	Issued		Effective date for Lodgian	Provisions	Effect on Lodgian
FIN No. 46	Consolidation of Variable Interest Entities		January-03	Special purpose entities -  December 31, 2003. Other entities — first quarter of 2004.	Addresses consolidation by a business of variable interest entities in which it is the primary beneficiary.	No impact, since we have no variable interest entities
SFAS No.  150	Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity		May-03	July-03	Aims to eliminate diversity by requiring that certain types of freestanding instruments be reported as liabilities including mandatorily redeemable shares which unconditionally obligate the issuer to redeem the shares for cash or by transferring other assets	Our Mandatorily Redeemable 12.25% Cumulative Preferred Stock has been reclassified to long-term debt in the Condensed Consolidated Financial Statements and the related dividends for the period January 1, 2004 to March 31, 2004 has been included in interest expense.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk.”

Item 4. Controls and Procedures

      a) Based on an evaluation of our disclosure controls and procedures carried out as of March 31, 2004, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective since they would cause material information required to be disclosed by us in the reports we file or submit 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.

36

      b) During the quarter ended March 31, 2004, there were no changes in our internal controls over financial reporting which materially affected, or are likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

      From time to time, as we conduct our business, legal actions and claims are brought against us. The outcome of these matters is uncertain. However, we believe that all currently pending matters will be resolved without a material adverse effect on our results of operations or financial condition. Claims relating to the period before we filed for Chapter 11 protection are limited to the amounts approved by the Bankruptcy Court for settlement of such claims and are payable out of the disputed claims reserves provided for in our plans of reorganization, which in the case of the Joint Plan of Reorganization, consists of our securities, and in the case of the Impac Plan of Reorganization, consists of $0.1 million of cash as of March 31, 2004. We have reserved for all claims approved by the Bankruptcy Court which have not yet been paid.

Item 2. Changes in Securities

      On April 27, 2004, our Board of Directors authorized a reverse stock split of our common stock in a ratio of one-for-three (1:3). The reverse split affected all of our issued and outstanding common shares, warrants and stock options. The record date for the reverse split was April 29, 2004 and our new common stock began trading under the split adjustment on April 30, 2004.

      At the annual meeting of stockholders on April 8, 2004, our stockholders authorized us to effect a reverse split of our common stock at one of the following ratios:

•  1-for-1 1/2;

•  1-for-2;

•  1-for-2 1/2;

•  1-for-3;

•  1-for-3 1/2; and

•  1-for-4

      as determined by the Board of Directors.

      Fractional shares which resulted from the reverse stock split are payable in cash. Each holder of a fractional share of common stock after the effective date of the reverse split has been or will be paid in cash equal to the product of (i) the average of the closing prices of the common stock for the last ten trading days prior to April 30, 2004, multiplied by (ii) the fraction of a share of common stock held by such holder.

      Also, at the annual meeting of stockholders on April 8, 2004, our stockholders authorized an increase in our authorized share capital from 30 million to 60 million shares.

      We have not declared or paid any cash dividends on our common stock and our board of directors do not anticipate declaring or paying any cash dividends in the foreseeable future. We anticipate that all of our earnings and other cash resources, if any, will be retained to fund our business and will be available for other strategic opportunities that may develop. Future dividend policy will be subject to the discretion of our board of directors, and will be contingent upon our results of operations, financial position, cash flow, liquidity, capital expenditure plan and requirements, general business conditions, restrictions imposed by financing arrangements, if any, legal and regulatory restrictions on the payment of dividends and other factors that our board of directors deems relevant.

37

      The Preferred Stock issued on November 25, 2002 (the date on which the first of the two plans of reorganization became effective) accrues dividends at the rate of 12.25% per annum. As required, we paid the dividend due on November 21, 2003 by issuing additional shares of Preferred Stock, except for fractional shares which we paid in cash. We have the option of paying the dividends due on November 21, 2004 and November 21, 2005 either in cash or by issuing additional shares of Preferred Stock.

Item 4. Submission of Matters to a Vote of Security Holders

We held our Annual Meeting on April 8, 2004. The stockholders voted as follows:

      1. For the election of eight directors to hold office until the 2005 Annual Meeting:

	For		Withheld
Sean F. Armstrong		5,995,987		26,815
Russel S. Bernard		5,995,987		26,815
Stewart J. Brown		5,993,487		29,315
Kenneth A. Caplan		5,995,987		26,815
Stephen P. Grathwohl		5,994,987		27,815
Jonathan D. Gray		5,763,908		258,894
Kevin C. McTavish		5,995,987		26,815
W. Thomas Parrington		5,994,942		27,860

      2. For the approval of an amendment and restatement of the Lodgian, Inc. 2002 Stock Incentive Plan:

	Common Stock
For		4,250,670
Against		329,265
Abstain		197
Broker Non Vote		1,442,670

      3. For the approval of a capital restructuring proposal to permit the board of directors, in its sole discretion, to amend our certificate of incorporation to implement a reverse stock split of our issued and outstanding common stock at one of the following ratios: 1-for-1 1/2, 1-for-2, 1-for-2 1/2, 1-for-3, 1-for-3 1/2, and 1-for-4:

	Common Stock		Preferred Stock
For		5,727,224		4,528,585
Against		295,023		251,792
Abstain		555		168

      4. For the approval of a Second Amended and Restated Certificate of Incorporation as described in the Proxy Statement for the Annual Meeting, among other things, (a) increasing the number of authorized shares of common stock, (b) providing our stockholders the right to remove any or all of the members of the board of directors with or without cause, (c) electing out of the Delaware law restricting business combinations with interested stockholders, (d) eliminating the designation of an obsolete series of preferred stock, and (e) implementing the reverse stock split (if Proposal 3 is approved):

	Common Stock		Preferred Stock
For		4,519,598		3,256,680
Against		59,734		53,126
Abstain		800		179
Broker Non Vote		1,442,670		1,470,560

38

      5. To ratify the appointment of Deloitte & Touche LLP as our independent public auditors:

	Common Stock
For		5,996,052
Against		1,279
Abstain		25,471

Item 6. Exhibits and Reports on Form 8-K

      (a) 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 Form 8-K was filed on March 11, 2004 announcing the filing of a Registration Statement with the Securities and Exchange Commission regarding a public offering of $175 million of common stock.

      A Form 8-K was filed on February 12, 2004 announcing our annual meeting which was held on April 8, 2004.

39

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.
	By: /s/ W. THOMAS PARRINGTON
Date: May 12, 2004	W. Thomas Parrington President and Chief Executive Officer
	By: /s/ MANUEL ARTIME
Date: May 12, 2004	Manuel Artime Executive Vice President and Chief Financial Officer

40

INDEX TO EXHIBITS

Exhibit
No.			Description
	10.1	—	Restricted Unit Award Agreement with W. Thomas Parrington, dated as of July 15, 2003 (incorporated by reference from Exhibit 10.15.1 of the Company’s Amendment No. 1 to Form S-1 (Commission File No. 333-113410) filed with the Commission on April 23, 2004).
	10.2	—	Restricted Unit Award Agreement with W. Thomas Parrington, dated as of April 9, 2004 (incorporated by reference from Exhibit 10.15.1 of the Company’s Amendment No. 1 to Form S-1 (Commission File No. 333-113410) filed with the Commission on April 23, 2004).
	10.3	—	Amendment No. 1 to the Lodgian, Inc. 401(K) Plan (As Amended and Restated Effective as of September 1, 2003)
	10.4	—	Employment Agreement between Lodgian, Inc. and Daniel E. Ellis dated May 2, 2004.
	10.5	—	Employment Agreement between Lodgian, Inc. and Manuel E. Artime dated May 10, 2004.
	10.6	—	Employment Agreement between Lodgian, Inc. and Michael W. Amaral dated May 4, 2004.
	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

EX-10.3

                                                                   EXHIBIT 10.3

                                AMENDMENT NO. 1
                                     TO THE
                           LODGIAN, INC. 401(K) PLAN
          (AS AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 1, 2003)
                                  (THE "PLAN")

         Pursuant to the power to amend reserved in Section 12.1 of the Plan,
and as authorized by the Board of Directors of Lodgian, Inc., Lodgian, Inc.
hereby amends the Plan, effective April 1, 2004, as follows:

1.       By amending Section 5.1 to read as follows:

         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 or, at the discretion of the Plan
         Sponsor, a committee, which committee may be the same Committee
         referenced in Section 9.2, in accordance with Section 404(c) of ERISA.
         The Plan Sponsor or committee 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 or the committee deem suitable under the circumstances.
         Investment funds may be added or eliminated at any time by the Plan
         Sponsor or the committee. 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"). Effective as of December
         6, 2001, the Lodgian Stock Fund is closed to new investments. The
         Lodgian Warrant Funds are frozen investment funds that were
         established on December 3, 2002 solely for the purpose of holding
         Lodgian Warrants received by the Trust Fund on that date 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 December 3, 2002, 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 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 U.S. Department of Labor issues a prohibited transaction
         exemption which permits the sale and exercise of Lodgian Warrants at
         the direction of individual Participants who have an interest in the
         Lodgian Warrant Fund. No Lodgian Warrant may be exercised or sold
         except as permitted under the terms of such prohibited transaction
         exemption, the terms of which are incorporated into the Plan by
         reference, and in compliance with applicable securities laws. 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.

2.       By amending Section 5.4 by inserting the following paragraph at the
         end of such section:

         The Plan Administrator may adjust the Accounts of some or all
         Participants for Plan administration expenses as of the last Valuation
         Date for a calendar quarter as permitted by law and applicable
         Internal Revenue Service and U.S. Department of Labor guidance on the
         payment of expenses with the Plan assets. The expenses may be charged
         to all Accounts or only to those Accounts of vested Participants who
         had terminated



         employment prior to the last Valuation Date for a calendar quarter. If
         the expenses are charged to the Accounts of some or all Participants,
         the amount allocated to each Account shall be on a per capita basis
         and shall not be allocated on the basis of the Account balance.

3.       By amending the first paragraph of Section 8.3 to read as follows:

         8.3      Direct Rollover. Notwithstanding any provision of this Plan
         to the contrary that would otherwise limit a distributee's election
         under this Section 8, a distributee who has a Vested Benefit of $200
         or more or has all or a portion of his or her Vested Benefit invested
         in the Lodgian Stock Fund 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.

4.       By amending Section 8.8 (c) to read as follows:

         (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. A Vested Benefit of
         less than $200 will be paid to a Participant or Beneficiary as soon as
         practicable in a cash lump sum payment without income tax withholding
         and without the direct rollover opportunity described in Section 8.3,
         unless all or any portion of such Participant's Vested Benefit is
         invested in the Lodgian Stock Fund.

5.       By amending the Plan to add Appendix C, a listing of the Participating
         Employers.

         Except as herein amended, the provisions of the Plan shall remain in
full force and effect.

         IN WITNESS WHEREOF, the Plan Sponsor, on behalf of itself and the
Participating Employers contained in Appendix C of the Plan, as amended from
time, have caused this Amendment No. 1 to be executed by the duly authorized
officer, as of the 12th day of April, 2004.

                                 LODGIAN, INC.




                                 By:  /s/ Daniel E. Ellis
                                    -------------------------------------------
                                 Title: Senior Vice President & General Counsel



                                       2

EX-10.4

                                                                    EXHIBIT 10.4










                         EXECUTIVE EMPLOYMENT AGREEMENT


                                     BETWEEN


                                  LODGIAN, INC.


                                       AND


                                 DANIEL E. ELLIS


                                   MAY 2, 2004





                              EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between Lodgian,
Inc. (the "Company"), and Daniel E. Ellis ("You" or "Your")(collectively, the
"Parties"), is entered into and effective as of the 2nd day of May, 2004 (the
"Effective Date").1

         WHEREAS, You are currently employed as Senior Vice President, General
Counsel and Secretary of the Company;

         WHEREAS, the Company desires that You continue to serve as Senior Vice
President, General Counsel and Secretary of the Company, and You desire to
continue said employment;

         WHEREAS, Your position is a position of trust and responsibility with
access to Confidential Information, Trade Secrets, and information concerning
employees and customers of the Company;

         WHEREAS, the Trade Secrets and Confidential Information, and the
relationship between the Company and each of its employees and customers are
valuable assets of the Company and may not be used for any purpose other than
the Company's Business;

         WHEREAS, the Company has agreed to continue to employ You in exchange
for Your compliance with the terms of this Agreement;

         WHEREAS, the Company and You desire to express the terms and conditions
of Your continued employment in this Agreement.

         NOW, THEREFORE, the Parties agree:

         1.       Employment and Duties

                  A.       Position. The Company shall employ You as Senior Vice
President, General Counsel and Secretary.

                  B.       Duties. You agree to perform all duties that are
consistent with Your position and that may otherwise be assigned to You by the
Company from time to time. The Company may increase or decrease Your duties in
its discretion.

                  C.       Reporting. You shall report directly to the President
and Chief Executive Officer of the Company or any other executive designated by
the Chief Executive Officer from time to time.

                  D.       Devotion of Time. You agree to (i) devote all
necessary working time required of Your position, (ii) devote Your best efforts,
skill, and energies to promote and





- --------
(1) Unless otherwise indicated, all capitalized terms used in this Agreement are
defined in the "Definitions" section attached as Exhibit A. Exhibit A is
incorporated by reference and is included in the Definition of "Agreement."



advance the business and/or interests of the Company, and (iii) fully perform
Your obligations under this Agreement. During Your employment, You shall not
render services to any other entity, regardless of whether You receive
compensation, if such services shall impede Your ability to perform Your duties
for the Company. You may, however, (A) engage in community, charitable, and
educational activities, (B) manage Your personal investments, and (C) with the
prior written consent of the Company, serve on corporate boards or committees,
provided that such activities do not conflict or interfere with the performance
of Your obligations under this Agreement or conflict with the interests of the
Company.

                  E.       Company Policies. You agree to comply with the
policies and procedures of the Company as may be adopted and changed from time
to time, including those described in the Company's employee handbook. If this
Agreement conflicts with such policies or procedures, this Agreement will
control.

         2.       Term. The term of this Agreement shall be for a period of two
(2) years, beginning on the Effective Date and ending on May 2, 2006 (the
"Employment Period"). Upon expiration of the Employment Period, this Agreement
will automatically renew for a one-year period (each a "Renewal Period"), unless
either Party notifies the other Party in writing at least one hundred eighty
(180) days prior to the end of the Employment Period or the Renewal Period that
the Agreement will not be renewed (the "180-Day Notice Period"). If this
Agreement is renewed in accordance with this Section, each Renewal Period shall
be included in the definition of "Employment Period" for purposes of this
Agreement. If this Agreement is not renewed in accordance with this Section,
then (i) Your employment will terminate upon expiration of the Employment
Period, and (ii) this Agreement will no longer be in effect; provided, however,
that the restrictive covenants and all post-termination obligations contained in
this Agreement shall survive termination of this Agreement.

         3.       Compensation.

                  A.       Base Salary. During the Employment Period, the
Company will pay You an annual minimum base salary ("Base Salary") of
$171,600.00, minus applicable withholdings, in accordance with the Company's
normal payroll practices. Your Base Salary may be increased at the Company's
discretion based upon Your performance and the Company's performance. Your Base
Salary will be reviewed on an annual basis.

                  B.       Bonus. During the Employment Period, You will be
eligible to receive an annual bonus if Your performance and the Company's
performance meets certain criteria established from year to year by the
Company's Compensation Committee (the "Bonus"). The Bonus will be subject to all
applicable withholdings and will be paid within 90 days after the end of the
calendar year. Upon termination of Your employment, Your entitlement to any
Bonus payment will be governed by Section 5 below.

                  C.       Benefits Plans. During the Employment Period, You
will be eligible to participate in all benefit plans in effect for executives
and employees of the Company, subject to the terms and conditions of such plans.


                                      -3-


                  D.       Vacation. During the Employment Period, You are
entitled to four (4) weeks paid vacation each year. In addition, You shall be
entitled to personal and/or sick days in accordance with the Company policies.

         4.       Termination. This Agreement may be terminated by any of the
following events:

                  A.       The Company's non-renewal of the Employment Period;

                  B.       Mutual written agreement between You and the Company
at any time;

                  C.       Your death;

                  D.       Your disability which renders You unable to perform
the essential functions of Your job even with reasonable accommodation, as
determined by the Company in its sole discretion;

                  E.       For Cause. For Cause shall mean a termination by the
Company because of any one of the following events:

                           1.       Your willful refusal to follow the lawful
                                    direction of the CEO and/or the person to
                                    whom You report or Your material failure to
                                    perform Your duties (other than by reason of
                                    disability, as defined in Section 4D above),
                                    in either case, only after You have been
                                    given written notice by the CEO and/or the
                                    person to whom You report detailing the
                                    directives You have refused to follow or the
                                    duties You have failed to perform and at
                                    least 30 days to cure;

                           2.       Your material and willful failure to comply
                                    with Company policies as applied to Company
                                    employees, only after You have been given
                                    written notice by the CEO and/or the person
                                    to whom You report detailing the policies
                                    with which You have failed to comply and at
                                    least 30 days to cure;

                           3.       Your engaging in any of the following
                                    conduct:

                                    (i)      an act of fraud or dishonesty that
                                             materially harms the Company or its
                                             affiliates,

                                    (ii)     a felony or any violation of any
                                             federal or state securities law or
                                             Your being enjoined from violating
                                             any federal or state securities law
                                             or being determined to have
                                             violated any such law;

                                    (iii)    willful or reckless misconduct or
                                             gross negligence in connection with
                                             any property or activity of the
                                             Company and its subsidiaries and
                                             affiliates, and successors;


                                      -4-


                                    (iv)     repeated and intemperate use of
                                             alcohol or illegal drugs after
                                             written notice from the CEO and/or
                                             the person to whom You report;

                                    (v)      material breach of any of Your
                                             obligations under this Agreement
                                             (other than by reason of physical
                                             or mental illness, injury, or
                                             condition), but only after You have
                                             been given written notice of the
                                             breach by the CEO and/or the person
                                             to whom You report and at least
                                             thirty (30) days to cure;

                                    (vi)     becoming barred or prohibited by
                                             the SEC from holding Your position
                                             with the Company;

                           4.       Your resignation for other than Good Reason;
                                    or

                           5.       Your non-renewal of the Employment Period.

                  F.       Your resignation for Good Reason; or

                  G.       Without Cause. Without Cause shall mean any
termination of Your employment by the Company which is not defined in
sub-sections A-F above.

         5.       Company's Post-Termination Obligations

                  A.       If this Agreement terminates for the reasons set
forth in Sections 4B or E above, then the Company will pay You all accrued but
unpaid wages, based on Your then current Base Salary, through the termination
date. The Company shall have no other obligations to You, including under this
Agreement, any Company policy, or otherwise; however, You shall continue to be
bound by Sections 7D and all other post-termination obligations to which You are
subject, including, but not limited to, the obligations contained in this
Agreement. You shall also not be entitled to any accelerated vesting of any
stock based compensation granted pursuant to the 2002 Lodgian, Inc. Stock
Incentive Plan or any other similar plan.

                  B.       If this Agreement terminates for any reason set forth
in Sections 4C, D, F, or G above, and Section 6 below does not apply, then the
Company shall (i) pay You (or Your estate if applicable) a lump sum payment
equal to the greater of: (a) Your then current Base Salary for the remainder of
the initial Employment Period or Renewal Period during which Your employment
terminates, whichever is applicable, or (b) Your then current Base Salary for a
period of twelve (12) months (the time period in the immediately preceding
sub-clause (a) or (b) to be referred to as the "Separation Pay Period"); (ii)
reimburse Your COBRA premiums under the Company's major medical group health
plan on a monthly basis for a period equal to the Separation Pay Period; (iii)
pay You a pro-rata portion of any Bonus to which You may be entitled under
Section 3B above based upon the number of days You are employed during the
calendar year in which Your employment terminates and based upon the criteria
set forth in Section 3B; and (iv) notwithstanding anything to the contrary in
any applicable stock option documents, accelerate the vesting of any stock
option(s) granted to You by the Company (the "Option(s)") so that the Option(s)
shall be immediately exercisable in full in accordance with the


                                      -5-


terms and conditions of all applicable stock option documents (collectively, the
payments and benefits set forth in the preceding sub-clauses (i) - (iv) to be
referred to as the "Separation Benefits"). The Company shall have no other
obligations to You, including under this Agreement, any Company policy, or
otherwise. The Separation Benefits shall constitute full satisfaction of the
Company's obligations under this Agreement. The Company's obligation to provide
the Separation Benefits shall be conditioned upon Your satisfaction of the
following conditions (the "Separation Benefits Conditions"):

                           (i)      Execution and non-revocation of a Separation
                                    & Release Agreement in a form prepared by
                                    the Company by which You release the Company
                                    from any and all liability and claims of any
                                    kind; and

                           (ii)     Compliance with the restrictive covenants
                                    (Section 7D) and all post-termination
                                    obligations, including, but not limited, the
                                    obligations contained in this Agreement.

                  If You do not execute an effective Separation & Release
Agreement as set forth above, the Company will not provide any Separation
Benefits to You under this Section 5B. The Company's obligation to provide the
Separation Benefits set forth in this Section 5B shall terminate immediately
upon any breach by You of any post-termination obligations to which You are
subject.

                  C.       If this Agreement terminates for the reason set forth
in Section 4A above and Section 6 below does not apply, then, upon expiration of
the Employment Period or Renewal Period, as applicable, the Company shall
provide to You the Separation Benefits set forth in Section 5B above; provided,
however, that (i) the Separation Pay Period shall equal six (6) months, and (ii)
Your right to receive the Separation Benefits under this Section 5C shall be
subject to the Separation Benefits Conditions set forth in Section 5B above. The
Separation Benefits to be provided under this Section 5C shall constitute full
satisfaction of the Company's obligations under this Agreement, any Company
policy, or otherwise.

         6.       Change of Control. If, within one hundred eighty (180) days
after a Change of Control, the Company or the successor entity to the Company
notifies You pursuant to Section 2 of this Agreement that the Agreement will not
be renewed, then, at the expiration of the Employment Period or Renewal Period,
as applicable, You shall receive the Separation Benefits set forth in Section 5B
above; provided, however, that Your right to receive the Separation Benefits
shall be subject to the Separation Benefits Conditions set forth in Section 5B
above. The Separation Benefits to be provided under this Section 6 shall
constitute full satisfaction of the Company's obligations under this Agreement,
any Company policy, or otherwise.

         7.       Your Post-Termination Obligations.

                  A.       Return of Materials. Upon the termination of Your
employment for any reason or upon the Company's request at any time, You will
return to the Company all of the Company's property, including, but not limited
to, keys, passcards, credit cards, customer lists, rolodexes, tapes, laptop
computer, software, computer files, marketing and sales materials, and


                                      -6-

any other property, record, document or piece of equipment belonging to the
Company. You will not (i) retain any copies of the Company's property, including
any copies existing in electronic form, which are in Your possession or control,
or (ii) destroy, delete, or alter any Company property, including, but not
limited to, any laptop computer, without the Company's consent.

                  B.       Set-Off. If You have any outstanding obligations to
the Company upon the termination of Your employment for any reason, You hereby
authorize the Company to deduct any amounts owed to the Company from Your final
paycheck and/or any amounts that would otherwise be due to You, including, but
not limited to, under Section 5B or 6 above.

                  C.       Non-Disparagement. During Your employment and upon
the termination of Your employment with the Company for any reason, You will not
make any disparaging or defamatory statements, whether written or oral,
regarding the Company.

                  D.       Restrictive Covenants. You acknowledge that the
restrictions contained in this Section 7D are reasonable and necessary to
protect the legitimate business interests of the Company, and will not impair or
infringe upon Your right to work or earn a living after Your employment with the
Company ends.

                           1.       Trade Secrets and Confidential Information.
You represent and warrant that: (i) You are not subject to any legal or
contractual duty or agreement that would prevent or prohibit You from performing
the duties contemplated by this Agreement or otherwise complying with this
Agreement, and (ii) You are not in breach of any legal or contractual duty or
agreement, including any agreement concerning trade secrets or confidential
information owned by any other party.

                           You agree that You will not: (i) use, disclose, or
reverse engineer the Trade Secrets or the Confidential Information for any
purpose other than the Company's Business, except as authorized in writing by
the Company; (ii) during Your employment with the Company, use, disclose, or
reverse engineer (a) any confidential information or trade secrets of any former
employer or third party, or (b) any works of authorship developed in whole or in
part by You during any former employment or for any other party, unless
authorized in writing by the former employer or third party; or (iii) upon Your
resignation or termination (a) retain Trade Secrets or Confidential Information,
including any copies existing in any form (including electronic form), which are
in Your possession or control, or (b) destroy, delete, or alter the Trade
Secrets or Confidential Information without the Company's written consent.

                           The obligations under this Section 7D(1) shall: (i)
with regard to the Trade Secrets, remain in effect as long as the information
constitutes a trade secret under applicable law, and (ii) with regard to the
Confidential Information, remain in effect during the Restricted Period. The
confidentiality, property, and proprietary rights protections available in this
Agreement are in addition to, and not exclusive of, any and all other rights to
which the Company is entitled under federal and state law, including, but not
limited to, rights provided under copyright laws, trade secret and confidential
information laws, and laws concerning fiduciary duties.


                                      -7-

                           2.       Non-Solicitation of Customers. During the
Restricted Period, You will not, directly or indirectly, solicit any Customer of
the Company for the purpose of providing any goods or services competitive with
the Business. The restrictions set forth in this Section 7D(2) apply only to the
Customers with whom You had Contact.

                           3.       Non-Recruit of Employees. During the
Restricted Period, You will not, directly or indirectly, solicit, recruit or
induce any Employee to (a) terminate his or her employment relationship with the
Company or (b) work for any other person or entity engaged in the Business.

                           4.       Non-Competition. During the Non-Competition
Restricted Period, You will not, on Your own behalf or on behalf of any person
or entity engaged in the Business, engage in or perform within the Territory any
of the activities which You performed, or which are substantially similar to
those which You performed, as Senior Vice President, General Counsel and
Secretary of the Company. Nothing in this Agreement shall be construed to
prohibit You from performing activities which You did not perform for the
Company. The Parties acknowledge and agree that the covenant set forth in this
Section 7D(4) shall not apply if Your employment terminates for the reason set
forth in Section 4A above.

                  E.       Post-Employment Disclosure. During the Restricted
Period, You shall provide a copy of this Agreement to persons and/or entities
for whom You work or consult as an owner, partner, joint venturer, employee or
independent contractor.

         8.       Injunctive Relief. You agree that if You breach Section 7 of
this Agreement: (i) the Company would suffer irreparable harm; (ii) it would be
difficult to determine damages, and money damages alone would be an inadequate
remedy for the injuries suffered by the Company, and (iii) if the Company seeks
injunctive relief to enforce this Agreement, You will waive and will not (a)
assert any defense that the Company has an adequate remedy at law with respect
to the breach, (b) require that the Company submit proof of the economic value
of any Trade Secret or Confidential Information, or (c) require the Company to
post a bond or any other security. Nothing contained in this Agreement shall
limit the Company's right to any other remedies at law or in equity.

         9.       Severability. The provisions of this Agreement are severable.
If any provision is determined to be invalid, illegal, or unenforceable, in
whole or in part, the remaining provisions and any partially enforceable
provisions shall remain in full force and effect.

         10.      Attorneys' Fees. In the event of litigation relating to this
Agreement, the prevailing party shall be entitled to recover attorneys' fees and
costs of litigation in addition to all other remedies available at law or in
equity.

         11.      Waiver. The Company's failure to enforce any provision of this
Agreement shall not act as a waiver of that or any other provision. The
Company's waiver of any breach of this Agreement shall not act as a waiver of
any other breach.

         12.      Entire Agreement. This Agreement, including Exhibit A which is
incorporated by reference, constitutes the entire agreement between the Parties
concerning the subject matter of this Agreement. This Agreement supersedes any
prior communications, agreements or


                                       -8-


understandings, whether oral or written, between the Parties relating to the
subject matter of this Agreement. Other than terms of this Agreement, no other
representation, promise or agreement has been made with You to cause You to sign
this Agreement.

         13.      Amendments. This Agreement may not be amended or modified
except in writing signed by both Parties.

         14.      Successors and Assigns. This Agreement shall be assignable to,
and shall inure to the benefit of, the Company's successors and assigns,
including, without limitation, successors through merger, name change,
consolidation, or sale of a majority of the Company's stock or assets, and shall
be binding upon You. You shall not have the right to assign Your rights or
obligations under this Agreement. The covenants contained in Section 7D of this
Agreement shall survive cessation of Your employment with the Company,
regardless of who causes the cessation or the reason for cessation.

         15.      Governing Law. Except as set forth in Section 20 below, the
laws of the State of Georgia shall govern this Agreement. If Georgia's conflict
of law rules would apply another state's laws, the Parties agree that Georgia
law shall still govern.

         16.      No Strict Construction. If there is a dispute about the
language of this Agreement, the fact that one Party drafted the Agreement shall
not be used in its interpretation.

         17.      Notice. Whenever any notice is required, it shall be given in
writing addressed as follows:

         To Company:                Lodgian, Inc.
                                    3445 Peachtree Rd., Suite 700
                                    Atlanta, Georgia 30326
                                    Attention: General Counsel


         To Executive:              Daniel E. Ellis
                                    4020 Rockingham Dr.
                                    Roswell, Georgia 30075

         Notice shall be deemed given and effective three (3) days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
Party may change the address to which notices shall be delivered or mailed by
notifying the other party of such change in accordance with this Section.

         18.      Consent to Jurisdiction and Venue. Except as set forth in
Section 20 below, You agree that any claim arising out of or relating to this
Agreement shall be (i) brought in the Superior Court of Fulton County, Georgia,
or (ii) brought in or removed to the United States District Court for the
Northern District of Georgia, Atlanta Division. You consent to the personal
jurisdiction of the courts identified above. You waive (i) any objection to
jurisdiction or venue, or (ii) any defense claiming lack of jurisdiction or
improper venue, in any action brought in such courts.


                                       -9-

         19.      Arbitration. Except as provided below in this Section 20, all
disputes arising out of Your employment or the cessation of Your employment,
including, but not limited to, claims arising under or relating to this
Agreement, claims for breach of contract, tort, employment discrimination,
retaliation, or harassment, as well as any other statutory or common law claims,
at law or in equity, recognized under any federal, state, or local law shall be
exclusively resolved by final and binding arbitration under the Federal
Arbitration Act, 9 U.S.C. ss. 1. Such claims shall be settled by final and
binding arbitration administered by the American Arbitration Association in
accordance with its National Rules for the Resolution of Employment Disputes,
and judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The Company will pay all filing fees and arbitrator
costs associated with such arbitration.

                  This arbitration provision shall not apply to any disputes or
claims relating to or arising out of unemployment, workers compensation, and/or
the restrictive covenants set forth in Section 7D of this Agreement, including,
but not limited to, any claims for equitable relief relating to such restrictive
covenants. Any claims relating to or arising out of Section 7D of this Agreement
shall be governed by the laws of the State of Georgia and shall be brought in a
state or federal court of competent jurisdiction in Georgia. You consent to the
personal jurisdiction of the state and/or federal courts located in Georgia. You
waive (i) any objection to jurisdiction or venue, or (ii) any defense claiming
lack of jurisdiction or improper venue, in any action brought in such courts.

         20.      AFFIRMATION. YOU ACKNOWLEDGE THAT YOU HAVE CAREFULLY READ THIS
AGREEMENT, YOU KNOW AND UNDERSTAND ITS TERMS AND CONDITIONS, AND YOU HAVE HAD
THE OPPORTUNITY TO ASK THE COMPANY ANY QUESTIONS YOU MAY HAVE HAD PRIOR TO
SIGNING THIS AGREEMENT.


                                      -10-



         IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first above written.


                                   LODGIAN, INC.

                                   By: /s/ W. Thomas Parrington
                                       -----------------------------------
                                       President & Chief Executive Officer


                                   Date: May 2, 2004


                                   DANIEL E. ELLIS

                                   /s/ Daniel E. Ellis
                                   -------------------

                                   Date: May 2, 2004


                                      -11-

                                    EXHIBIT A

                                   DEFINITIONS

A.       "Business" shall mean the business of owning and operating hotels
         including, but not limited to, full-service hotels which have food and
         beverage operations and meeting spaces.

B.       "Change of Control" means (i) the sale, transfer, or other disposition
         of eighty percent (80%) or more of the Company's assets, or (ii) a sale
         of fifty percent (50%) or more of the then outstanding voting stock of
         the Company in a single transaction or a series of related
         transactions.

C.       "Confidential Information" means (a) information of the Company, to the
         extent not considered a Trade Secret under applicable law, that (i)
         relates to the business of the Company, (ii) possesses an element of
         value to the Company, (iii) is not generally known to the Company's
         competitors, and (iv) would damage the Company if disclosed, and (b)
         information of any third party provided to the Company which the
         Company is obligated to treat as confidential. Confidential Information
         includes, but is not limited to, (i) future business plans, (ii) the
         composition, description, schematic or design of products, future
         products or equipment of the Company, (iii) communication systems,
         audio systems, system designs and related documentation, (iv)
         advertising or marketing plans, (v) information regarding independent
         contractors, employees, clients and customers of the Company, and (vi)
         information concerning the Company's financial structure and methods
         and procedures of operation. Confidential Information shall not include
         any information that (i) is or becomes generally available to the
         public other than as a result of an unauthorized disclosure, (ii) has
         been independently developed and disclosed by others without violating
         this Agreement or the legal rights of any party, or (iii) otherwise
         enters the public domain through lawful means.

D.       "Contact" means any interaction between You and a Customer which (i)
         takes place in an effort to establish, maintain, and/or further a
         business relationship on behalf of the Company and (ii) occurs during
         the last year of Your employment with the Company (or during Your
         employment if employed less than a year).

E.       "Customer" means any person or entity to whom the Company has sold its
         products or services, or solicited to sell its products or services.

F.       "Employee" means any person who (i) is employed by the Company at the
         time Your employment with the Company ends, or (ii) is employed by the
         Company during the Restricted Period.

G.       "Good Reason" shall exist if (i) the Company, without Your written
         consent, (A) takes any action which results in the material reduction
         of Your then current duties or responsibilities, (B) reduces the
         benefits to which You are entitled on the Effective Date, unless a
         similar reduction is made for other executive employees, (C) commits a
         material breach of this Agreement, or (D) requires You to relocate more
         than fifty (50) miles from the location of the Company's offices on the
         Effective Date; (ii) You provide written


                                      -12-


         notice to the Company of such action and provide the Company with
         thirty (30) days to remedy such action (the "Cure Period"), (iii) the
         Company fails to remedy such action within the Cure Period, and (iv)
         You resign within ten (10) days of the expiration of the Cure Period.
         Good Reason shall not include any isolated, insubstantial or
         inadvertent action that (i) is not taken in bad faith, and (ii) is
         remedied by the Company within the Cure Period.

H.       "Non-Competition Restricted Period" means the time period during Your
         employment with the Company, and for six (6) months after Your
         employment with the Company ends.

I.       "Restricted Period" means the time period during Your employment with
         the Company, and for two (2) years after Your employment with the
         Company ends.

J.       "Territory" means the fifteen (15) mile radius surrounding the
         Company's corporate office at 3445 Peachtree Rd., Suite 700, Atlanta,
         Georgia 30326.

K.       "Trade Secrets" means information of the Company, and its licensors,
         suppliers, clients and customers, without regard to form, including,
         but not limited to, technical or nontechnical data, a formula, a
         pattern, a compilation, a program, a device, a method, a technique, a
         drawing, a process, financial data, financial plans, product plans, or
         a list of actual or potential customers or suppliers which is not
         commonly known by or available to the public and which information (i)
         derives economic value, actual or potential, from not being generally
         known to, and not being readily ascertainable by proper means by, other
         persons who can obtain economic value from its disclosure or use, and
         (ii) is the subject of efforts that are reasonable under the
         circumstances to maintain its secrecy.



                                      -13-

EX-10.5

                                                                    EXHIBIT 10.5










                         EXECUTIVE EMPLOYMENT AGREEMENT


                                     BETWEEN


                                  LODGIAN, INC.


                                       AND


                                MANUEL E. ARTIME


                                  MAY 10, 2004





                              EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between Lodgian,
Inc. (the "Company"), and Manuel E. Artime ("You" or "Your")(collectively, the
"Parties"), is entered into and effective as of the 10th day of May, 2004 (the
"Effective Date").1

         WHEREAS, You are currently employed as Executive Vice President and
Chief Financial Officer of the Company;

         WHEREAS, the Company desires that You continue to serve as Executive
Vice President and Chief Financial Officer of the Company, and You desire to
continue said employment;

         WHEREAS, Your position is a position of trust and responsibility with
access to Confidential Information, Trade Secrets, and information concerning
employees and customers of the Company;

         WHEREAS, the Trade Secrets and Confidential Information, and the
relationship between the Company and each of its employees and customers are
valuable assets of the Company and may not be used for any purpose other than
the Company's Business;

         WHEREAS, the Company has agreed to continue to employ You in exchange
for Your compliance with the terms of this Agreement;

         WHEREAS, the Company and You desire to express the terms and conditions
of Your continued employment in this Agreement.

         NOW, THEREFORE, the Parties agree:

         1.       Employment and Duties

                  A.       Position. The Company shall employ You as Executive
Vice President and Chief Financial Officer.

                  B.       Duties. You agree to perform all duties that are
consistent with Your position and that may otherwise be assigned to You by the
Company from time to time. The Company may increase or decrease Your duties in
its discretion.

                  C.       Reporting. You shall report directly to the President
and Chief Executive Officer of the Company or any other executive designated by
the Chief Executive Officer from time to time.

                  D.       Devotion of Time. You agree to (i) devote all
necessary working time required of Your position, (ii) devote Your best efforts,
skill, and energies to promote and


- --------
(1) Unless otherwise indicated, all capitalized terms used in this Agreement are
defined in the "Definitions" section attached as Exhibit A. Exhibit A is
incorporated by reference and is included in the Definition of "Agreement."



advance the business and/or interests of the Company, and (iii) fully perform
Your obligations under this Agreement. During Your employment, You shall not
render services to any other entity, regardless of whether You receive
compensation, if such services shall impede Your ability to perform Your duties
for the Company. You may, however, (A) engage in community, charitable, and
educational activities, (B) manage Your personal investments, and (C) with the
prior written consent of the Company, serve on corporate boards or committees,
provided that such activities do not conflict or interfere with the performance
of Your obligations under this Agreement or conflict with the interests of the
Company.

                  E.       Company Policies. You agree to comply with the
policies and procedures of the Company as may be adopted and changed from time
to time, including those described in the Company's employee handbook. If this
Agreement conflicts with such policies or procedures, this Agreement will
control.

         2.       Term. The term of this Agreement shall be for a period of two
(2) years, beginning on the Effective Date and ending on May 10, 2006 (the
"Employment Period"). Upon expiration of the Employment Period, this Agreement
will automatically renew for a one-year period (each a "Renewal Period"), unless
either Party notifies the other Party in writing at least one hundred eighty
(180) days prior to the end of the Employment Period or the Renewal Period that
the Agreement will not be renewed (the "180-Day Notice Period"). If this
Agreement is renewed in accordance with this Section, each Renewal Period shall
be included in the definition of "Employment Period" for purposes of this
Agreement. If this Agreement is not renewed in accordance with this Section,
then (i) Your employment will terminate upon expiration of the Employment
Period, and (ii) this Agreement will no longer be in effect; provided, however,
that the restrictive covenants and all post-termination obligations contained in
this Agreement shall survive termination of this Agreement.

         3.       Compensation.

                  A.       Base Salary. During the Employment Period, the
Company will pay You an annual minimum base salary ("Base Salary") of
$218,874.24, minus applicable withholdings, in accordance with the Company's
normal payroll practices. Your Base Salary may be increased at the Company's
discretion based upon Your performance and the Company's performance. Your Base
Salary will be reviewed on an annual basis.

                  B.       Bonus. During the Employment Period, You will be
eligible to receive an annual bonus if Your performance and the Company's
performance meets certain criteria established from year to year by the
Company's Compensation Committee (the "Bonus"). The Bonus will be subject to all
applicable withholdings and will be paid within 90 days after the end of the
calendar year. Upon termination of Your employment, Your entitlement to any
Bonus payment will be governed by Section 5 below.

                  C.       Benefits Plans. During the Employment Period, You
will be eligible to participate in all benefit plans in effect for executives
and employees of the Company, subject to the terms and conditions of such plans.


                                      -3-

                  D.       Vacation. During the Employment Period, You are
entitled to four (4) weeks paid vacation each year. In addition, You shall be
entitled to personal and/or sick days in accordance with the Company policies.

         4.       Termination. This Agreement may be terminated by any of the
following events:

                  A.       The Company's non-renewal of the Employment Period;

                  B.       Mutual written agreement between You and the Company
at any time;

                  C.       Your death;

                  D.       Your disability which renders You unable to perform
the essential functions of Your job even with reasonable accommodation, as
determined by the Company in its sole discretion;

                  E.       For Cause. For Cause shall mean a termination by the
Company because of any one of the following events:

                           1.       Your willful refusal to follow the lawful
                                    direction of the CEO and/or the person to
                                    whom You report or Your material failure to
                                    perform Your duties (other than by reason of
                                    disability, as defined in Section 4D above),
                                    in either case, only after You have been
                                    given written notice by the CEO and/or the
                                    person to whom You report detailing the
                                    directives You have refused to follow or the
                                    duties You have failed to perform and at
                                    least 30 days to cure;

                           2.       Your material and willful failure to comply
                                    with Company policies as applied to Company
                                    employees, only after You have been given
                                    written notice by the CEO and/or the person
                                    to whom You report detailing the policies
                                    with which You have failed to comply and at
                                    least 30 days to cure;

                           3.       Your engaging in any of the following
                                    conduct:

                                    (i)      an act of fraud or dishonesty that
                                             materially harms the Company or its
                                             affiliates,

                                    (ii)     a felony or any violation of any
                                             federal or state securities law or
                                             Your being enjoined from violating
                                             any federal or state securities law
                                             or being determined to have
                                             violated any such law;

                                    (iii)    willful or reckless misconduct or
                                             gross negligence in connection with
                                             any property or activity of the
                                             Company and its subsidiaries and
                                             affiliates, and successors;


                                      -4-

                                    (iv)     repeated and intemperate use of
                                             alcohol or illegal drugs after
                                             written notice from the CEO and/or
                                             the person to whom You report;

                                    (v)      material breach of any of Your
                                             obligations under this Agreement
                                             (other than by reason of physical
                                             or mental illness, injury, or
                                             condition), but only after You have
                                             been given written notice of the
                                             breach by the CEO and/or the person
                                             to whom You report and at least
                                             thirty (30) days to cure;

                                    (vi)     becoming barred or prohibited by
                                             the SEC from holding Your position
                                             with the Company;

                           4.       Your resignation for other than Good Reason;
                                    or

                           5.       Your non-renewal of the Employment Period.

                  F.       Your resignation for Good Reason; or

                  G.       Without Cause. Without Cause shall mean any
termination of Your employment by the Company which is not defined in
sub-sections A-F above.

         5.       Company's Post-Termination Obligations

                  A.       If this Agreement terminates for the reasons set
forth in Sections 4B or E above, then the Company will pay You all accrued but
unpaid wages, based on Your then current Base Salary, through the termination
date. The Company shall have no other obligations to You, including under this
Agreement, any Company policy, or otherwise; however, You shall continue to be
bound by Sections 7D and all other post-termination obligations to which You are
subject, including, but not limited to, the obligations contained in this
Agreement. You shall also not be entitled to any accelerated vesting of any
stock based compensation granted pursuant to the 2002 Lodgian, Inc. Stock
Incentive Plan or any other similar plan.

                  B.       If this Agreement terminates for any reason set forth
in Sections 4C, D, F, or G above, and Section 6 below does not apply, then the
Company shall (i) pay You (or Your estate if applicable) a lump sum payment
equal to the greater of: (a) Your then current Base Salary for the remainder of
the initial Employment Period or Renewal Period during which Your employment
terminates, whichever is applicable, or (b) Your then current Base Salary for a
period of twelve (12) months (the time period in the immediately preceding
sub-clause (a) or (b) to be referred to as the "Separation Pay Period"); (ii)
reimburse Your COBRA premiums under the Company's major medical group health
plan on a monthly basis for a period equal to the Separation Pay Period; (iii)
pay You a pro-rata portion of any Bonus to which You may be entitled under
Section 3B above based upon the number of days You are employed during the
calendar year in which Your employment terminates and based upon the criteria
set forth in Section 3B; and (iv) notwithstanding anything to the contrary in
any applicable stock option documents, accelerate the vesting of any stock
option(s) granted to You by the Company (the "Option(s)") so that the Option(s)
shall be immediately exercisable in full in accordance with the


                                      -5-

terms and conditions of all applicable stock option documents (collectively, the
payments and benefits set forth in the preceding sub-clauses (i) - (iv) to be
referred to as the "Separation Benefits"). The Company shall have no other
obligations to You, including under this Agreement, any Company policy, or
otherwise. The Separation Benefits shall constitute full satisfaction of the
Company's obligations under this Agreement. The Company's obligation to provide
the Separation Benefits shall be conditioned upon Your satisfaction of the
following conditions (the "Separation Benefits Conditions"):

                           (i)      Execution and non-revocation of a Separation
                                    & Release Agreement in a form prepared by
                                    the Company by which You release the Company
                                    from any and all liability and claims of any
                                    kind; and

                           (ii)     Compliance with the restrictive covenants
                                    (Section 7D) and all post-termination
                                    obligations, including, but not limited, the
                                    obligations contained in this Agreement.

                  If You do not execute an effective Separation & Release
Agreement as set forth above, the Company will not provide any Separation
Benefits to You under this Section 5B. The Company's obligation to provide the
Separation Benefits set forth in this Section 5B shall terminate immediately
upon any breach by You of any post-termination obligations to which You are
subject.

                  C.       If this Agreement terminates for the reason set forth
in Section 4A above and Section 6 below does not apply, then, upon expiration of
the Employment Period or Renewal Period, as applicable, the Company shall
provide to You the Separation Benefits set forth in Section 5B above; provided,
however, that (i) the Separation Pay Period shall equal six (6) months, and (ii)
Your right to receive the Separation Benefits under this Section 5C shall be
subject to the Separation Benefits Conditions set forth in Section 5B above. The
Separation Benefits to be provided under this Section 5C shall constitute full
satisfaction of the Company's obligations under this Agreement, any Company
policy, or otherwise.

         6.       Change of Control. If, within one hundred eighty (180) days
after a Change of Control, the Company or the successor entity to the Company
notifies You pursuant to Section 2 of this Agreement that the Agreement will not
be renewed, then, at the expiration of the Employment Period or Renewal Period,
as applicable, You shall receive the Separation Benefits set forth in Section 5B
above; provided, however, that Your right to receive the Separation Benefits
shall be subject to the Separation Benefits Conditions set forth in Section 5B
above. The Separation Benefits to be provided under this Section 6 shall
constitute full satisfaction of the Company's obligations under this Agreement,
any Company policy, or otherwise.

         7.       Your Post-Termination Obligations.

                  A.       Return of Materials. Upon the termination of Your
employment for any reason or upon the Company's request at any time, You will
return to the Company all of the Company's property, including, but not limited
to, keys, passcards, credit cards, customer lists, rolodexes, tapes, laptop
computer, software, computer files, marketing and sales materials, and


                                      -6-

any other property, record, document or piece of equipment belonging to the
Company. You will not (i) retain any copies of the Company's property, including
any copies existing in electronic form, which are in Your possession or control,
or (ii) destroy, delete, or alter any Company property, including, but not
limited to, any laptop computer, without the Company's consent.

                  B.       Set-Off. If You have any outstanding obligations to
the Company upon the termination of Your employment for any reason, You hereby
authorize the Company to deduct any amounts owed to the Company from Your final
paycheck and/or any amounts that would otherwise be due to You, including, but
not limited to, under Section 5B or 6 above.

                  C.       Non-Disparagement. During Your employment and upon
the termination of Your employment with the Company for any reason, You will not
make any disparaging or defamatory statements, whether written or oral,
regarding the Company.

                  D.       Restrictive Covenants. You acknowledge that the
restrictions contained in this Section 7D are reasonable and necessary to
protect the legitimate business interests of the Company, and will not impair or
infringe upon Your right to work or earn a living after Your employment with the
Company ends.

                           1.       Trade Secrets and Confidential Information.
You represent and warrant that: (i) You are not subject to any legal or
contractual duty or agreement that would prevent or prohibit You from performing
the duties contemplated by this Agreement or otherwise complying with this
Agreement, and (ii) You are not in breach of any legal or contractual duty or
agreement, including any agreement concerning trade secrets or confidential
information owned by any other party.

                           You agree  that You will not: (i) use, disclose, or
reverse engineer the Trade Secrets or the Confidential Information for any
purpose other than the Company's Business, except as authorized in writing by
the Company; (ii) during Your employment with the Company, use, disclose, or
reverse engineer (a) any confidential information or trade secrets of any former
employer or third party, or (b) any works of authorship developed in whole or in
part by You during any former employment or for any other party, unless
authorized in writing by the former employer or third party; or (iii) upon Your
resignation or termination (a) retain Trade Secrets or Confidential Information,
including any copies existing in any form (including electronic form), which are
in Your possession or control, or (b) destroy, delete, or alter the Trade
Secrets or Confidential Information without the Company's written consent.

                           The obligations under this Section 7D(1) shall: (i)
with regard to the Trade Secrets, remain in effect as long as the information
constitutes a trade secret under applicable law, and (ii) with regard to the
Confidential Information, remain in effect during the Restricted Period. The
confidentiality, property, and proprietary rights protections available in this
Agreement are in addition to, and not exclusive of, any and all other rights to
which the Company is entitled under federal and state law, including, but not
limited to, rights provided under copyright laws, trade secret and confidential
information laws, and laws concerning fiduciary duties.


                                      -7-


                           2.       Non-Solicitation of Customers. During the
Restricted Period, You will not, directly or indirectly, solicit any Customer of
the Company for the purpose of providing any goods or services competitive with
the Business. The restrictions set forth in this Section 7D(2) apply only to the
Customers with whom You had Contact.

                           3.       Non-Recruit of Employees. During the
Restricted Period, You will not, directly or indirectly, solicit, recruit or
induce any Employee to (a) terminate his or her employment relationship with the
Company or (b) work for any other person or entity engaged in the Business.

                           4.       Non-Competition. During the Non-Competition
Restricted Period, You will not, on Your own behalf or on behalf of any person
or entity engaged in the Business, engage in or perform within the Territory any
of the activities which You performed, or which are substantially similar to
those which You performed, as Executive Vice President and Chief Financial
Officer of the Company. Nothing in this Agreement shall be construed to prohibit
You from performing activities which You did not perform for the Company. The
Parties acknowledge and agree that the covenant set forth in this Section 7D(4)
shall not apply if Your employment terminates for the reason set forth in
Section 4A above.

                  E.       Post-Employment Disclosure. During the Restricted
Period, You shall provide a copy of this Agreement to persons and/or entities
for whom You work or consult as an owner, partner, joint venturer, employee or
independent contractor.

         8.       Injunctive Relief. You agree that if You breach Section 7 of
this Agreement: (i) the Company would suffer irreparable harm; (ii) it would be
difficult to determine damages, and money damages alone would be an inadequate
remedy for the injuries suffered by the Company, and (iii) if the Company seeks
injunctive relief to enforce this Agreement, You will waive and will not (a)
assert any defense that the Company has an adequate remedy at law with respect
to the breach, (b) require that the Company submit proof of the economic value
of any Trade Secret or Confidential Information, or (c) require the Company to
post a bond or any other security. Nothing contained in this Agreement shall
limit the Company's right to any other remedies at law or in equity.

         9.       Severability. The provisions of this Agreement are severable.
If any provision is determined to be invalid, illegal, or unenforceable, in
whole or in part, the remaining provisions and any partially enforceable
provisions shall remain in full force and effect.

         10.      Attorneys' Fees. In the event of litigation relating to this
Agreement, the prevailing party shall be entitled to recover attorneys' fees and
costs of litigation in addition to all other remedies available at law or in
equity.

         11.      Waiver. The Company's failure to enforce any provision of this
Agreement shall not act as a waiver of that or any other provision. The
Company's waiver of any breach of this Agreement shall not act as a waiver of
any other breach.

         12.      Entire Agreement. This Agreement, including Exhibit A which is
incorporated by reference, constitutes the entire agreement between the Parties
concerning the subject matter of this Agreement. This Agreement supersedes any
prior communications, agreements or


                                      -8-

understandings, whether oral or written, between the Parties relating to the
subject matter of this Agreement. Other than terms of this Agreement, no other
representation, promise or agreement has been made with You to cause You to sign
this Agreement.

         13.      Amendments. This Agreement may not be amended or modified
except in writing signed by both Parties.

         14.      Successors and Assigns. This Agreement shall be assignable to,
and shall inure to the benefit of, the Company's successors and assigns,
including, without limitation, successors through merger, name change,
consolidation, or sale of a majority of the Company's stock or assets, and shall
be binding upon You. You shall not have the right to assign Your rights or
obligations under this Agreement. The covenants contained in Section 7D of this
Agreement shall survive cessation of Your employment with the Company,
regardless of who causes the cessation or the reason for cessation.

         15.      Governing Law. Except as set forth in Section 20 below, the
laws of the State of Georgia shall govern this Agreement. If Georgia's conflict
of law rules would apply another state's laws, the Parties agree that Georgia
law shall still govern.

         16.      No Strict Construction. If there is a dispute about the
language of this Agreement, the fact that one Party drafted the Agreement shall
not be used in its interpretation.

         17.      Notice. Whenever any notice is required, it shall be given in
writing addressed as follows:

         To Company:                Lodgian, Inc.
                                    3445 Peachtree Rd., Suite 700
                                    Atlanta, Georgia 30326
                                    Attention: General Counsel


         To Executive:              Manuel E. Artime
                                    852 Wellesley Drive
                                    Atlanta, Georgia 30326

         Notice shall be deemed given and effective three (3) days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
Party may change the address to which notices shall be delivered or mailed by
notifying the other party of such change in accordance with this Section.

         18.      Consent to Jurisdiction and Venue. Except as set forth in
Section 20 below, You agree that any claim arising out of or relating to this
Agreement shall be (i) brought in the Superior Court of Fulton County, Georgia,
or (ii) brought in or removed to the United States District Court for the
Northern District of Georgia, Atlanta Division. You consent to the personal
jurisdiction of the courts identified above. You waive (i) any objection to
jurisdiction or venue, or (ii) any defense claiming lack of jurisdiction or
improper venue, in any action brought in such courts.


                                      -9-


         19.      Arbitration. Except as provided below in this Section 20, all
disputes arising out of Your employment or the cessation of Your employment,
including, but not limited to, claims arising under or relating to this
Agreement, claims for breach of contract, tort, employment discrimination,
retaliation, or harassment, as well as any other statutory or common law claims,
at law or in equity, recognized under any federal, state, or local law shall be
exclusively resolved by final and binding arbitration under the Federal
Arbitration Act, 9 U.S.C. ss. 1. Such claims shall be settled by final and
binding arbitration administered by the American Arbitration Association in
accordance with its National Rules for the Resolution of Employment Disputes,
and judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The Company will pay all filing fees and arbitrator
costs associated with such arbitration.

                  This arbitration provision shall not apply to any disputes or
claims relating to or arising out of unemployment, workers compensation, and/or
the restrictive covenants set forth in Section 7D of this Agreement, including,
but not limited to, any claims for equitable relief relating to such restrictive
covenants. Any claims relating to or arising out of Section 7D of this Agreement
shall be governed by the laws of the State of Georgia and shall be brought in a
state or federal court of competent jurisdiction in Georgia. You consent to the
personal jurisdiction of the state and/or federal courts located in Georgia. You
waive (i) any objection to jurisdiction or venue, or (ii) any defense claiming
lack of jurisdiction or improper venue, in any action brought in such courts.

         20.      AFFIRMATION. YOU ACKNOWLEDGE THAT YOU HAVE CAREFULLY READ THIS
AGREEMENT, YOU KNOW AND UNDERSTAND ITS TERMS AND CONDITIONS, AND YOU HAVE HAD
THE OPPORTUNITY TO ASK THE COMPANY ANY QUESTIONS YOU MAY HAVE HAD PRIOR TO
SIGNING THIS AGREEMENT.



                                      -10-

         IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first above written.


                           LODGIAN, INC.

                           By: /s/ W. Thomas Parrington
                               -----------------------------------
                               President & Chief Executive Officer



                           Date: May 10, 2004


                           MANUEL E. ARTIME

                           /s/ Manuel E. Artime
                           --------------------

                           Date: May 10, 2004


                                      -11-

                                    EXHIBIT A

                                   DEFINITIONS

A.       "Business" shall mean the business of owning and operating hotels
         including, but not limited to, full-service hotels which have food and
         beverage operations and meeting spaces.

B.       "Change of Control" means (i) the sale, transfer, or other disposition
         of eighty percent (80%) or more of the Company's assets, or (ii) a sale
         of fifty percent (50%) or more of the then outstanding voting stock of
         the Company in a single transaction or a series of related
         transactions.

C.       "Confidential Information" means (a) information of the Company, to the
         extent not considered a Trade Secret under applicable law, that (i)
         relates to the business of the Company, (ii) possesses an element of
         value to the Company, (iii) is not generally known to the Company's
         competitors, and (iv) would damage the Company if disclosed, and (b)
         information of any third party provided to the Company which the
         Company is obligated to treat as confidential. Confidential Information
         includes, but is not limited to, (i) future business plans, (ii) the
         composition, description, schematic or design of products, future
         products or equipment of the Company, (iii) communication systems,
         audio systems, system designs and related documentation, (iv)
         advertising or marketing plans, (v) information regarding independent
         contractors, employees, clients and customers of the Company, and (vi)
         information concerning the Company's financial structure and methods
         and procedures of operation. Confidential Information shall not include
         any information that (i) is or becomes generally available to the
         public other than as a result of an unauthorized disclosure, (ii) has
         been independently developed and disclosed by others without violating
         this Agreement or the legal rights of any party, or (iii) otherwise
         enters the public domain through lawful means.

D.       "Contact" means any interaction between You and a Customer which (i)
         takes place in an effort to establish, maintain, and/or further a
         business relationship on behalf of the Company and (ii) occurs during
         the last year of Your employment with the Company (or during Your
         employment if employed less than a year).

E.       "Customer" means any person or entity to whom the Company has sold its
         products or services, or solicited to sell its products or services.

F.       "Employee" means any person who (i) is employed by the Company at the
         time Your employment with the Company ends, or (ii) is employed by the
         Company during the Restricted Period.

G.       "Good Reason" shall exist if (i) the Company, without Your written
         consent, (A) takes any action which results in the material reduction
         of Your then current duties or responsibilities, (B) reduces the
         benefits to which You are entitled on the Effective Date, unless a
         similar reduction is made for other executive employees, (C) commits a
         material breach of this Agreement, or (D) requires You to relocate more
         than fifty (50) miles from the location of the Company's offices on the
         Effective Date; (ii) You provide written



                                      -12-

         notice to the Company of such action and provide the Company with
         thirty (30) days to remedy such action (the "Cure Period"), (iii) the
         Company fails to remedy such action within the Cure Period, and (iv)
         You resign within ten (10) days of the expiration of the Cure Period.
         Good Reason shall not include any isolated, insubstantial or
         inadvertent action that (i) is not taken in bad faith, and (ii) is
         remedied by the Company within the Cure Period.

H.       "Non-Competition Restricted Period" means the time period during Your
         employment with the Company, and for six (6) months after Your
         employment with the Company ends.

I.       "Restricted Period" means the time period during Your employment with
         the Company, and for two (2) years after Your employment with the
         Company ends.

J.       "Territory" means the fifteen (15) mile radius surrounding the
         Company's corporate office at 3445 Peachtree Rd., Suite 700, Atlanta,
         Georgia 30326.

K.       "Trade Secrets" means information of the Company, and its licensors,
         suppliers, clients and customers, without regard to form, including,
         but not limited to, technical or nontechnical data, a formula, a
         pattern, a compilation, a program, a device, a method, a technique, a
         drawing, a process, financial data, financial plans, product plans, or
         a list of actual or potential customers or suppliers which is not
         commonly known by or available to the public and which information (i)
         derives economic value, actual or potential, from not being generally
         known to, and not being readily ascertainable by proper means by, other
         persons who can obtain economic value from its disclosure or use, and
         (ii) is the subject of efforts that are reasonable under the
         circumstances to maintain its secrecy.

                                      -13-

EX-10.6

                                                                   EXHIBIT 10.6

                         EXECUTIVE EMPLOYMENT AGREEMENT

                                    BETWEEN

                                 LODGIAN, INC.

                                      AND

                               MICHAEL W. AMARAL

                                  MAY 4, 2004



                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between Lodgian,
Inc. (the "Company"), and Michael W. Amaral ("You" or "Your")(collectively, the
"Parties"), is entered into and effective as of the 4th day of May, 2004 (the
"Effective Date").(1)

         WHEREAS, You are currently employed as Executive Vice President and
Chief Operating Officer of the Company;

         WHEREAS, the Company desires that You continue to serve as Executive
Vice President and Chief Operating Officer of the Company, and You desire to
continue said employment;

         WHEREAS, Your position is a position of trust and responsibility with
access to Confidential Information, Trade Secrets, and information concerning
employees and customers of the Company;

         WHEREAS, the Trade Secrets and Confidential Information, and the
relationship between the Company and each of its employees and customers are
valuable assets of the Company and may not be used for any purpose other than
the Company's Business;

         WHEREAS, the Company has agreed to continue to employ You in exchange
for Your compliance with the terms of this Agreement;

         WHEREAS, the Company and You desire to express the terms and
conditions of Your continued employment in this Agreement.

         NOW, THEREFORE, the Parties agree:

         1.       Employment and Duties

                  A.       Position. The Company shall employ You as Executive
Vice President and Chief Operating Officer.

                  B.       Duties. You agree to perform all duties that are
consistent with Your position and that may otherwise be assigned to You by the
Company from time to time. The Company may increase or decrease Your duties in
its discretion.

                  C.       Reporting. You shall report directly to the
President and Chief Executive Officer of the Company or any other executive
designated by the Chief Executive Officer from time to time.

                  D.       Devotion of Time. You agree to (i) devote all
necessary working time required of Your position, (ii) devote Your best efforts,
skill, and energies to promote and

- --------
(1) Unless otherwise indicated, all capitalized terms used in this Agreement are
defined in the "Definitions" section attached as Exhibit A. Exhibit A is
incorporated by reference and is included in the Definition of "Agreement."



advance the business and/or interests of the Company, and (iii) fully perform
Your obligations under this Agreement. During Your employment, You shall not
render services to any other entity, regardless of whether You receive
compensation, if such services shall impede Your ability to perform Your duties
for the Company. You may, however, (A) engage in community, charitable, and
educational activities, (B) manage Your personal investments, and (C) with the
prior written consent of the Company, serve on corporate boards or committees,
provided that such activities do not conflict or interfere with the performance
of Your obligations under this Agreement or conflict with the interests of the
Company.

                  E.       Company Policies. You agree to comply with the
policies and procedures of the Company as may be adopted and changed from time
to time, including those described in the Company's employee handbook. If this
Agreement conflicts with such policies or procedures, this Agreement will
control.

         2.       Term. The term of this Agreement shall be for a period of two
(2) years, beginning on the Effective Date and ending on May 4, 2006 (the
"Employment Period"). Upon expiration of the Employment Period, this Agreement
will automatically renew for a one-year period (each a "Renewal Period"),
unless either Party notifies the other Party in writing at least one hundred
eighty (180) days prior to the end of the Employment Period or the Renewal
Period that the Agreement will not be renewed (the "180-Day Notice Period"). If
this Agreement is renewed in accordance with this Section, each Renewal Period
shall be included in the definition of "Employment Period" for purposes of this
Agreement. If this Agreement is not renewed in accordance with this Section,
then (i) Your employment will terminate upon expiration of the Employment
Period, and (ii) this Agreement will no longer be in effect; provided, however,
that the restrictive covenants and all post-termination obligations contained
in this Agreement shall survive termination of this Agreement.

         3.       Compensation.

                  A.       Base Salary. During the Employment Period, the
Company will pay You an annual minimum base salary ("Base Salary") of
$260,000.00, minus applicable withholdings, in accordance with the Company's
normal payroll practices. Your Base Salary may be increased at the Company's
discretion based upon Your performance and the Company's performance. Your Base
Salary will be reviewed on an annual basis.

                  B.       Bonus. During the Employment Period, You will be
eligible to receive an annual bonus if Your performance and the Company's
performance meets certain criteria established from year to year by the
Company's Compensation Committee (the "Bonus"). The Bonus will be subject to
all applicable withholdings and will be paid within 90 days after the end of
the calendar year. Upon termination of Your employment, Your entitlement to any
Bonus payment will be governed by Section 5 below.

                  C.       Benefits Plans. During the Employment Period, You
will be eligible to participate in all benefit plans in effect for executives
and employees of the Company, subject to the terms and conditions of such
plans.


                                      -3-


                  D.       Vacation. During the Employment Period, You are
entitled to four (4) weeks paid vacation each year. In addition, You shall be
entitled to personal and/or sick days in accordance with the Company policies.

         4.       Termination. This Agreement may be terminated by any of the
following events:

                  A.       The Company's non-renewal of the Employment Period;

                  B.       Mutual written agreement between You and the Company
at any time;

                  C.       Your death;

                  D.       Your disability which renders You unable to perform
the essential functions of Your job even with reasonable accommodation, as
determined by the Company in its sole discretion;

                  E.       For Cause. For Cause shall mean a termination by the
Company because of any one of the following events:

                           1.       Your willful refusal to follow the lawful
                                    direction of the CEO and/or the person to
                                    whom You report or Your material failure to
                                    perform Your duties (other than by reason
                                    of disability, as defined in Section 4D
                                    above), in either case, only after You have
                                    been given written notice by the CEO and/or
                                    the person to whom You report detailing the
                                    directives You have refused to follow or
                                    the duties You have failed to perform and
                                    at least 30 days to cure;

                           2.       Your material and willful failure to comply
                                    with Company policies as applied to Company
                                    employees, only after You have been given
                                    written notice by the CEO and/or the person
                                    to whom You report detailing the policies
                                    with which You have failed to comply and at
                                    least 30 days to cure;

                           3.       Your engaging in any of the following
                                    conduct:

                                    (i)      an act of fraud or dishonesty that
                                             materially harms the Company or
                                             its affiliates,

                                    (ii)     a felony or any violation of any
                                             federal or state securities law or
                                             Your being enjoined from violating
                                             any federal or state securities
                                             law or being determined to have
                                             violated any such law;

                                    (iii)    willful or reckless misconduct or
                                             gross negligence in connection
                                             with any property or activity of
                                             the Company and its subsidiaries
                                             and affiliates, and successors;


                                      -4-


                                    (iv)     repeated and intemperate use of
                                             alcohol or illegal drugs after
                                             written notice from the CEO and/or
                                             the person to whom You report;

                                    (v)      material breach of any of Your
                                             obligations under this Agreement
                                             (other than by reason of physical
                                             or mental illness, injury, or
                                             condition), but only after You
                                             have been given written notice of
                                             the breach by the CEO and/or the
                                             person to whom You report and at
                                             least thirty (30) days to cure;

                                    (vi)     becoming barred or prohibited by
                                             the SEC from holding Your position
                                             with the Company;

                           4.       Your resignation for other than Good
                                    Reason; or

                           5.       Your non-renewal of the Employment Period.

                  F.       Your resignation for Good Reason; or

                  G.       Without Cause. Without Cause shall mean any
termination of Your employment by the Company which is not defined in
sub-sections A-F above.

         5.       Company's Post-Termination Obligations

                  A.       If this Agreement terminates for the reasons set
forth in Sections 4B or E above, then the Company will pay You all accrued but
unpaid wages, based on Your then current Base Salary, through the termination
date. The Company shall have no other obligations to You, including under this
Agreement, any Company policy, or otherwise; however, You shall continue to be
bound by Sections 7D and all other post-termination obligations to which You
are subject, including, but not limited to, the obligations contained in this
Agreement. You shall also not be entitled to any accelerated vesting of any
stock based compensation granted pursuant to the 2002 Lodgian, Inc. Stock
Incentive Plan or any other similar plan.

                  B.       If this Agreement terminates for any reason set
forth in Sections 4C, D, F, or G above, and Section 6 below does not apply,
then the Company shall (i) pay You (or Your estate if applicable) a lump sum
payment equal to the greater of: (a) Your then current Base Salary for the
remainder of the initial Employment Period or Renewal Period during which Your
employment terminates, whichever is applicable, or (b) Your then current Base
Salary for a period of twelve (12) months (the time period in the immediately
preceding sub-clause (a) or (b) to be referred to as the "Separation Pay
Period"); (ii) reimburse Your COBRA premiums under the Company's major medical
group health plan on a monthly basis for a period equal to the Separation Pay
Period; (iii) pay You a pro-rata portion of any Bonus to which You may be
entitled under Section 3B above based upon the number of days You are employed
during the calendar year in which Your employment terminates and based upon the
criteria set forth in Section 3B; and (iv) notwithstanding anything to the
contrary in any applicable stock option documents, accelerate the vesting of
any stock option(s) granted to You by the Company (the "Option(s)") so that the
Option(s) shall be immediately exercisable in full in accordance with the


                                      -5-


terms and conditions of all applicable stock option documents (collectively,
the payments and benefits set forth in the preceding sub-clauses (i) - (iv) to
be referred to as the "Separation Benefits"). The Company shall have no other
obligations to You, including under this Agreement, any Company policy, or
otherwise. The Separation Benefits shall constitute full satisfaction of the
Company's obligations under this Agreement. The Company's obligation to provide
the Separation Benefits shall be conditioned upon Your satisfaction of the
following conditions (the "Separation Benefits Conditions"):

                           (i)      Execution and non-revocation of a
                                    Separation & Release Agreement in a form
                                    prepared by the Company by which You
                                    release the Company from any and all
                                    liability and claims of any kind; and

                           (ii)     Compliance with the restrictive covenants
                                    (Section 7D) and all post-termination
                                    obligations, including, but not limited,
                                    the obligations contained in this
                                    Agreement.

                  If You do not execute an effective Separation & Release
Agreement as set forth above, the Company will not provide any Separation
Benefits to You under this Section 5B. The Company's obligation to provide the
Separation Benefits set forth in this Section 5B shall terminate immediately
upon any breach by You of any post-termination obligations to which You are
subject.

                  C.       If this Agreement terminates for the reason set
forth in Section 4A above and Section 6 below does not apply, then, upon
expiration of the Employment Period or Renewal Period, as applicable, the
Company shall provide to You the Separation Benefits set forth in Section 5B
above; provided, however, that (i) the Separation Pay Period shall equal six
(6) months, and (ii) Your right to receive the Separation Benefits under this
Section 5C shall be subject to the Separation Benefits Conditions set forth in
Section 5B above. The Separation Benefits to be provided under this Section 5C
shall constitute full satisfaction of the Company's obligations under this
Agreement, any Company policy, or otherwise.

         6.       Change of Control. If, within one hundred eighty (180) days
after a Change of Control, the Company or the successor entity to the Company
notifies You pursuant to Section 2 of this Agreement that the Agreement will
not be renewed, then, at the expiration of the Employment Period or Renewal
Period, as applicable, You shall receive the Separation Benefits set forth in
Section 5B above; provided, however, that Your right to receive the Separation
Benefits shall be subject to the Separation Benefits Conditions set forth in
Section 5B above. The Separation Benefits to be provided under this Section 6
shall constitute full satisfaction of the Company's obligations under this
Agreement, any Company policy, or otherwise.

         7.       Your Post-Termination Obligations.

                  A.       Return of Materials. Upon the termination of Your
employment for any reason or upon the Company's request at any time, You will
return to the Company all of the Company's property, including, but not limited
to, keys, passcards, credit cards, customer lists, rolodexes, tapes, laptop
computer, software, computer files, marketing and sales materials, and


                                      -6-


any other property, record, document or piece of equipment belonging to the
Company. You will not (i) retain any copies of the Company's property,
including any copies existing in electronic form, which are in Your possession
or control, or (ii) destroy, delete, or alter any Company property, including,
but not limited to, any laptop computer, without the Company's consent.

                  B.       Set-Off. If You have any outstanding obligations to
the Company upon the termination of Your employment for any reason, You hereby
authorize the Company to deduct any amounts owed to the Company from Your final
paycheck and/or any amounts that would otherwise be due to You, including, but
not limited to, under Section 5B or 6 above.

                  C.       Non-Disparagement. During Your employment and upon
the termination of Your employment with the Company for any reason, You will
not make any disparaging or defamatory statements, whether written or oral,
regarding the Company.

                  D.       Restrictive Covenants. You acknowledge that the
restrictions contained in this Section 7D are reasonable and necessary to
protect the legitimate business interests of the Company, and will not impair
or infringe upon Your right to work or earn a living after Your employment with
the Company ends.

                           1.       Trade Secrets and Confidential Information.
You represent and warrant that: (i) You are not subject to any legal or
contractual duty or agreement that would prevent or prohibit You from
performing the duties contemplated by this Agreement or otherwise complying
with this Agreement, and (ii) You are not in breach of any legal or contractual
duty or agreement, including any agreement concerning trade secrets or
confidential information owned by any other party.

                           You agree that You will not: (i) use, disclose, or
reverse engineer the Trade Secrets or the Confidential Information for any
purpose other than the Company's Business, except as authorized in writing by
the Company; (ii) during Your employment with the Company, use, disclose, or
reverse engineer (a) any confidential information or trade secrets of any
former employer or third party, or (b) any works of authorship developed in
whole or in part by You during any former employment or for any other party,
unless authorized in writing by the former employer or third party; or (iii)
upon Your resignation or termination (a) retain Trade Secrets or Confidential
Information, including any copies existing in any form (including electronic
form), which are in Your possession or control, or (b) destroy, delete, or
alter the Trade Secrets or Confidential Information without the Company's
written consent.

                           The obligations under this Section 7D(1) shall: (i)
with regard to the Trade Secrets, remain in effect as long as the information
constitutes a trade secret under applicable law, and (ii) with regard to the
Confidential Information, remain in effect during the Restricted Period. The
confidentiality, property, and proprietary rights protections available in this
Agreement are in addition to, and not exclusive of, any and all other rights to
which the Company is entitled under federal and state law, including, but not
limited to, rights provided under copyright laws, trade secret and confidential
information laws, and laws concerning fiduciary duties.


                                      -7-


                           2.       Non-Solicitation of Customers. During the
Restricted Period, You will not, directly or indirectly, solicit any Customer
of the Company for the purpose of providing any goods or services competitive
with the Business. The restrictions set forth in this Section 7D(2) apply only
to the Customers with whom You had Contact.

                           3.       Non-Recruit of Employees. During the
Restricted Period, You will not, directly or indirectly, solicit, recruit or
induce any Employee to (a) terminate his or her employment relationship with
the Company or (b) work for any other person or entity engaged in the Business.

                           4.       Non-Competition. During the Non-Competition
Restricted Period, You will not, directly or indirectly, without Employer's
prior written consent, engage in or perform within a five (5) mile radius of
any of the Primary Locations listed in Exhibit B any of the activities which
You performed, or which are substantially similar to those which You performed,
as Executive Vice President and Chief Operating Officer of the Company;
provided, however, that any Primary Location shall no longer be considered a
Primary Location if You have not had oversight responsibilities at that
location at any time during the three (3) month period prior to termination of
Your employment. As a material term under this Agreement, You agree that You
will sign an amendment to Exhibit B if, for any reason during Your employment,
the Primary Location(s) change in any way. You agree that You will not be
entitled to any additional consideration to execute the amendment to Exhibit B.
You agree that Your refusal to sign any amendment to Exhibit B shall constitute
a material breach of this Agreement. The Parties acknowledge and agree that the
covenant set forth in this Section 7D(4) shall not apply if Your employment
terminates for the reason set forth in Section 4A above.

                  E.       Post-Employment Disclosure. During the Restricted
Period, You shall provide a copy of this Agreement to persons and/or entities
for whom You work or consult as an owner, partner, joint venturer, employee or
independent contractor.

         8.       Injunctive Relief. You agree that if You breach Section 7 of
this Agreement: (i) the Company would suffer irreparable harm; (ii) it would be
difficult to determine damages, and money damages alone would be an inadequate
remedy for the injuries suffered by the Company, and (iii) if the Company seeks
injunctive relief to enforce this Agreement, You will waive and will not (a)
assert any defense that the Company has an adequate remedy at law with respect
to the breach, (b) require that the Company submit proof of the economic value
of any Trade Secret or Confidential Information, or (c) require the Company to
post a bond or any other security. Nothing contained in this Agreement shall
limit the Company's right to any other remedies at law or in equity.

         9.       Severability. The provisions of this Agreement are severable.
If any provision is determined to be invalid, illegal, or unenforceable, in
whole or in part, the remaining provisions and any partially enforceable
provisions shall remain in full force and effect.


                                      -8-


         10.      Attorneys' Fees. In the event of litigation relating to this
Agreement, the prevailing party shall be entitled to recover attorneys' fees
and costs of litigation in addition to all other remedies available at law or
in equity.

         11.      Waiver. The Company's failure to enforce any provision of
this Agreement shall not act as a waiver of that or any other provision. The
Company's waiver of any breach of this Agreement shall not act as a waiver of
any other breach.

         12.      Entire Agreement. This Agreement, including Exhibit A which
is incorporated by reference, constitutes the entire agreement between the
Parties concerning the subject matter of this Agreement. This Agreement
supersedes any prior communications, agreements or understandings, whether oral
or written, between the Parties relating to the subject matter of this
Agreement. Other than terms of this Agreement, no other representation, promise
or agreement has been made with You to cause You to sign this Agreement.

         13.      Amendments. This Agreement may not be amended or modified
except in writing signed by both Parties.

         14.      Successors and Assigns. This Agreement shall be assignable
to, and shall inure to the benefit of, the Company's successors and assigns,
including, without limitation, successors through merger, name change,
consolidation, or sale of a majority of the Company's stock or assets, and
shall be binding upon You. You shall not have the right to assign Your rights
or obligations under this Agreement. The covenants contained in Section 7D of
this Agreement shall survive cessation of Your employment with the Company,
regardless of who causes the cessation or the reason for cessation.

         15.      Governing Law. Except as set forth in Section 20 below, the
laws of the State of Georgia shall govern this Agreement. If Georgia's conflict
of law rules would apply another state's laws, the Parties agree that Georgia
law shall still govern.

         16.      No Strict Construction. If there is a dispute about the
language of this Agreement, the fact that one Party drafted the Agreement shall
not be used in its interpretation.

         17.      Notice. Whenever any notice is required, it shall be given in
writing addressed as follows:

         To Company:                Lodgian, Inc.
                                    3445 Peachtree Rd., Suite 700
                                    Atlanta, Georgia 30326
                                    Attention: General Counsel

         To Executive:              Michael W. Amaral
                                    14391 Club Circle Drive
                                    Alpharetta, Georgia 30004


                                      -9-


         Notice shall be deemed given and effective three (3) days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
Party may change the address to which notices shall be delivered or mailed by
notifying the other party of such change in accordance with this Section.

         18.      Consent to Jurisdiction and Venue. Except as set forth in
Section 20 below, You agree that any claim arising out of or relating to this
Agreement shall be (i) brought in the Superior Court of Fulton County, Georgia,
or (ii) brought in or removed to the United States District Court for the
Northern District of Georgia, Atlanta Division. You consent to the personal
jurisdiction of the courts identified above. You waive (i) any objection to
jurisdiction or venue, or (ii) any defense claiming lack of jurisdiction or
improper venue, in any action brought in such courts.

         19.      Arbitration. Except as provided below in this Section 20, all
disputes arising out of Your employment or the cessation of Your employment,
including, but not limited to, claims arising under or relating to this
Agreement, claims for breach of contract, tort, employment discrimination,
retaliation, or harassment, as well as any other statutory or common law
claims, at law or in equity, recognized under any federal, state, or local law
shall be exclusively resolved by final and binding arbitration under the
Federal Arbitration Act, 9 U.S.C. Section 1. Such claims shall be settled by
final and binding arbitration administered by the American Arbitration
Association in accordance with its National Rules for the Resolution of
Employment Disputes, and judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. The Company will pay all
filing fees and arbitrator costs associated with such arbitration.

                  This arbitration provision shall not apply to any disputes or
claims relating to or arising out of unemployment, workers compensation, and/or
the restrictive covenants set forth in Section 7D of this Agreement, including,
but not limited to, any claims for equitable relief relating to such
restrictive covenants. Any claims relating to or arising out of Section 7D of
this Agreement shall be governed by the laws of the State of Georgia and shall
be brought in a state or federal court of competent jurisdiction in Georgia.
You consent to the personal jurisdiction of the state and/or federal courts
located in Georgia. You waive (i) any objection to jurisdiction or venue, or
(ii) any defense claiming lack of jurisdiction or improper venue, in any action
brought in such courts.

         20.      AFFIRMATION. YOU ACKNOWLEDGE THAT YOU HAVE CAREFULLY READ
THIS AGREEMENT, YOU KNOW AND UNDERSTAND ITS TERMS AND CONDITIONS, AND YOU HAVE
HAD THE OPPORTUNITY TO ASK THE COMPANY ANY QUESTIONS YOU MAY HAVE HAD PRIOR TO
SIGNING THIS AGREEMENT.


                                     -10-


         IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first above written.


                                          LODGIAN, INC.




                                          By: /s/ W. Thomas Parrington
                                             -----------------------------------
                                             President & chief Executive Officer

                                          Date: May 4, 2004

                                          MICHAEL W. AMARAL




                                          /s/ Michael W. Amaral
                                          --------------------------------------

                                          Date: May 4, 2004


                                     -11-


                                   EXHIBIT A

                                  DEFINITIONS

A.       "Business" shall mean the business of owning and operating hotels
         including, but not limited to, full-service hotels which have food and
         beverage operations and meeting spaces.

B.       "Change of Control" means (i) the sale, transfer, or other disposition
         of eighty percent (80%) or more of the Company's assets, or (ii) a
         sale of fifty percent (50%) or more of the then outstanding voting
         stock of the Company in a single transaction or a series of related
         transactions.

C.       "Confidential Information" means (a) information of the Company, to
         the extent not considered a Trade Secret under applicable law, that
         (i) relates to the business of the Company, (ii) possesses an element
         of value to the Company, (iii) is not generally known to the Company's
         competitors, and (iv) would damage the Company if disclosed, and (b)
         information of any third party provided to the Company which the
         Company is obligated to treat as confidential. Confidential
         Information includes, but is not limited to, (i) future business
         plans, (ii) the composition, description, schematic or design of
         products, future products or equipment of the Company, (iii)
         communication systems, audio systems, system designs and related
         documentation, (iv) advertising or marketing plans, (v) information
         regarding independent contractors, employees, clients and customers of
         the Company, and (vi) information concerning the Company's financial
         structure and methods and procedures of operation. Confidential
         Information shall not include any information that (i) is or becomes
         generally available to the public other than as a result of an
         unauthorized disclosure, (ii) has been independently developed and
         disclosed by others without violating this Agreement or the legal
         rights of any party, or (iii) otherwise enters the public domain
         through lawful means.

D.       "Contact" means any interaction between You and a Customer which (i)
         takes place in an effort to establish, maintain, and/or further a
         business relationship on behalf of the Company and (ii) occurs during
         the last year of Your employment with the Company (or during Your
         employment if employed less than a year).

E.       "Customer" means any person or entity to whom the Company has sold its
         products or services, or solicited to sell its products or services.

F.       "Employee" means any person who (i) is employed by the Company at the
         time Your employment with the Company ends, or (ii) is employed by the
         Company during the Restricted Period.

G.       "Good Reason" shall exist if (i) the Company, without Your written
         consent, (A) takes any action which results in the material reduction
         of Your then current duties or responsibilities, (B) reduces the
         benefits to which You are entitled on the Effective Date, unless a
         similar reduction is made for other executive employees, (C) commits a
         material breach of this Agreement, or (D) requires You to relocate
         more than fifty (50) miles from the location of the Company's offices
         on the Effective Date; (ii) You provide written


                                     -12-


         notice to the Company of such action and provide the Company with
         thirty (30) days to remedy such action (the "Cure Period"), (iii) the
         Company fails to remedy such action within the Cure Period, and (iv)
         You resign within ten (10) days of the expiration of the Cure Period.
         Good Reason shall not include any isolated, insubstantial or
         inadvertent action that (i) is not taken in bad faith, and (ii) is
         remedied by the Company within the Cure Period.

H.       "Non-Competition Restricted Period" means the time period during Your
         employment with the Company, and for six (6) months after Your
         employment with the Company ends.

I.       "Restricted Period" means the time period during Your employment with
         the Company, and for two (2) years after Your employment with the
         Company ends.

J.       "Trade Secrets" means information of the Company, and its licensors,
         suppliers, clients and customers, without regard to form, including,
         but not limited to, technical or nontechnical data, a formula, a
         pattern, a compilation, a program, a device, a method, a technique, a
         drawing, a process, financial data, financial plans, product plans, or
         a list of actual or potential customers or suppliers which is not
         commonly known by or available to the public and which information (i)
         derives economic value, actual or potential, from not being generally
         known to, and not being readily ascertainable by proper means by,
         other persons who can obtain economic value from its disclosure or
         use, and (ii) is the subject of efforts that are reasonable under the
         circumstances to maintain its secrecy.


                                     -13-


                                   EXHIBIT B

                               PRIMARY LOCATIONS


                                     ADDRESS                   CITY         STATE      ZIP                PROPERTY NAME
                                                                                      CODE
                                                                               
ALABAMA                   4900 Hatch Boulevard            Sheffield          AL       35660   Holiday Inn Sheffield
                          3053 Ross Clark Circle          Dothan             AL       36301   Quality Inn Dothan
                          3071 Ross Clark Circle          Dothan             AL       36301   Holiday Inn Express Dothan
                          801 Cleveland Avenue            Gadsden            AL       35954   Holiday Inn Express Garden
ARIZONA                   1500 North 51st Avenue          Phoenix            AZ       85043   Holiday Inn Phoenix
                          3333 East University Drive      Phoenix            AZ       85034   Radisson Phoenix Hotel
                          4300 E. Washington              Phoenix            AZ       85034   Holiday Inn Airport Phoenix
ARKANSAS                  1001 McClain Road               Bentonville        AR       72712   Courtyard Bentonville
                          1401 S. Shackleford Road        Little Rock        AR       72211   Residence Inn Little Rock
CALIFORNIA                7675 Highway #111               Palm Desert        CA       92260   Holiday Inn Exp. Palm Desert
COLORADO                  16455 East 40th Circle          Denver             CO       80011   Marriott Hotel Denver Airport
                                                                                              Holiday Inn Frisco ( or HI Summit
                          1129 N. Summit Blvd.            Frisco             CO       80443   City)
                                                          East
CONNECTICUT               363 Roberts Street              Hartford           CT       06511   Holiday Inn East Hartford

                                                          West Palm
FLORIDA                   1601 Belvedere Road             Beach              FL       33406   Crowne Plaza West Palm Beach
                          7200 Plantation Road            Pensacola          FL       32504   Holiday Inn University Mall
                                                          Winter
                          1150 3rd Street, SW             Haven              FL       33880   Holiday Inn Winter Haven
                          2605 N. A1A                     Melbourne          FL       32903   Holiday Inn Melbourne
                          7330 Plantation Road            Pensacola          FL       32504   Holiday Inn Exp Pensacola-Umall
                          3000 Florida Avenue             Miami              FL       33131   Mayfair House Miami
GEORGIA                   5252 New Jesup Highway          Brunswick          GA       31525   Holiday Inn Brunswick
                          200 South Beachview Drive       Jekyll Island      GA       31527   Holiday Inn Jekyll Island
                          3332 Peachtree Road NE          Atlanta            GA       30326   Courtyard Buckhead Atlanta
                          108 First Street                Macon              GA       31211   Crowne Plaza Macon
                          2265 Kingston Court             Marietta           GA       30067   Holiday Inn Hotel Marietta
                          201 Boy Scout Road              Augusta            GA       30909   Fairfield Inn Augusta
                          1311 St. Augustine Road         Valdosta           GA       31601   Fairfield Inn Valdosta
                          1309 St. Augustine Road         Valdosta           GA       31601   Holiday Inn Valdosta
                                                          Rolling
ILLINOIS                  3405 Algonquin Road             Meadows            IL       60008   Holiday Inn Rolling Meadows
INDIANA                   1710 Kinser Pike                Bloomington        IN       47404   University Plaza Bloomington
                          1020 South Calhoun Street       Ft. Wayne          IN       46802   Hilton Fort Wayne
                          300 E. Washington Blvd.         Ft. Wayne          IN       46802   Holiday Inn Ft. Wayne
LOUISANA                  2150 Veterans Boulevard         Kenner             LA       70062   Plaza Hotel New Orleans
                          2261 North Causeway
                          Boulevard                       Metairie           LA       70001   Quality Hotel Metairie
                          214 E. Kaliste Saloom Road      LaFayette          LA       70508   Courtyard Lafayette
MARYLAND                  5485 Twin Knolls Road           Columbia           MD       21045   Hilton Inn Columbia
                          8777 Georgia Avenue             Silver             MD       20910   Holiday Inn Silver Spring



                                     -14-


                                                                               
                                                          Spring
                          301 W. Lombard Street           Baltimore          MD       21201   Holiday Inn Inner Harbor
                          6323 Governor Ritchie
                          Highway                         Glen Burnie        MD       21061   Holiday Inn Glen Burnie
                                                          Linthicum
                          890 Elkridge Landing Road       Heights            MD       21090   Holiday Inn BWI Airport
                          999 W. Patrick Street           Frederick          MD       21702   Holiday Inn Frederick
                          1100 Cromwell Bridge Road       Towson             MD       21286   Holiday Inn Cromwell Bridge
                                                          Cedar
IOWA                      350 1st Avenue NE               Rapids             IA       52401   Crowne Plaza Cedar Rapids
MINNESOTA                 1201 West Country Road E        St. Paul           MN       55112   Holiday Inn St. Paul
KENTUCKY                  3835 Technology Drive           Paducah            KY       42001   Courtyard Paducah
                          46 Cavalier Blvd.               Florence           KY       41042   Courtyard Florence
                          9700 Bluegrass Parkway          Louisville         KY       40299   Clarion Hotel Louisville
                          8050 Holiday Lane               Florence           KY       41042   Holiday Inn Florence
KANSAS                    530 Richards Drive              Manhattan          KS       66502   Holiday Inn Manhattan
                          200 McDonald Drive              Lawrence           KS       66044   Holiday Inn Lawrence
MISSOURI                  4545 N. Lindbergh Boulevard     St. Louis          MO       63044   Holiday Inn St. Louis North
MASSACHUSETTS             10 Lincoln Square               Worcester          MA       01608   Crowne Plaza Worcester
                          259 Elm Street                  Dedham             MA       02026   Residence Inn Dedham
NEW HAMPSHIRE             4 Amherst Road                  Merrimack          NH       03054   Fairfield Inn Merrimack
NEW MEXICO                4048 Cerrillos Road             Santa Fe           NM       87505   Holiday Inn Santa Fe
NEW YORK                  89 State Street                 Albany             NY       12207   Crowne Plaza Albany
                                                          Niagara
                          300 Third Street                Falls              NY       14303   Holiday Inn Select Niagara Falls
                                                          Niagara
                          114 Buffalo Avenue              Falls              NY       14303   Four Points Niagara Falls
                          150 W. 4th Street               Jamestown          NY       14701   Holiday Inn Jamestown
                          100 Winterhaven Road            Grand Island       NY       14072   Holiday Inn Grand Island
                          5440 Camp Road                  Hamburg            NY       14075   Holiday Inn Hamburg
OHIO                      175 East Town Street            Columbus           OH       43215   Holiday Inn Columbus
                          15471 Royalton Road             Strongsville       OH       44136   Holiday Inn Strongsville
OKLAHOMA                  3340 South 79 East Avenue       Tulsa              OK       74145   Courtyard Tulsa
PENNSYLVANIA              2750 Mosside Blvd.              Monroeville        PA       15146   Holiday Inn Monroeville
                          401 Holiday Drive               Pittsburgh         PA       15220   Holiday Inn Greentree
                          915 Brinton Road                Washington         PA       15221   Holiday Inn Parkway East
                          1160 Thorn Run Road
                          Extension                       Coraopolis         PA       15108   Crowne Plaza Pittsburgh
                          4859 McKnight Road              Pittsburgh         PA       15237   Holiday Inn McKnight/North Hills
                          340 Racetrack Road              Washington         PA       15301   Holiday Inn Meadowlands
                          9461 Roosevelt Blvd..           Philadelphia       PA       19114   Doubletree Club Philadelphia
                          334 Arsenal Road                York               PA       17402   Holiday Inn York
                          521 Greenfield Road             Lancaster          PA       17601   Holiday Inn Lancaster
MICHIGAN                  5500 Crooks Road                Troy               MI       48098   Hilton Inn Northfield
                          7501 W. Saginaw Highway         Lansing            MI       48917   Holiday Inn West Lansing
S.CAROLINA                1 South Forest Beach Drive      Hilton Head        SC       29928   Holiday Inn Hilton Head
                                                          N.
                          7401 Northwoods Boulevard       Charleston         SC       29406   Clarion Hotel Charleston
                                                          Surfside
                          1601 N. Ocean Blvd              Beach              SC       29575   Holiday Inn Myrtle Beach
TENNESSEE                 535 Wiley Parker Road           Jackson            TN       38305   Fairfield Inn Jackson
                          2144 Madison Avenue             Memphis            TN       38104   French Quarter Memphis




                                     -15-




                                                                               
                          6101 Shelby Oaks Drive          Memphis            TN       38134   Holiday Inn Memphis
TEXAS                     12801 NW Freeway US 290         Houston            TX       79606   Crowne Plaza Houston
                          4350 Ridgemont Drive            Abilene            TX       79606   Courtyard Abilene
                          3401 South IH-35                Austin             TX       78741   Holiday Inn Austin South
                          4441 Hwy. 114 @  Esters
                          Blvd.                           Dallas/Irving      TX       75063   Holiday Inn DFW Airport
VERMONT                   15 South Park Drive             Colchester         VT       05446   Fairfield Inn Burlington
W.VIRGINIA                930 East Grafton Road           Fairmont           WV       26554   Holiday Inn Fairmont
                          1400 Saratoga Avenue            Morgantown         WV       26505   Holiday Inn Morgantown
                          100 Lodgeville Road             Bridgeport         WV       26330   Holiday Inn Clarksburg
                                                                                      N9C
CANADA                    1855 Huron Church Road          Windsor          Canada     2L6     Holiday Inn Windsor




                                     -16-

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: May 12, 2004                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, Manuel Artime, 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: May 12, 2004               By:     /s/ MANUEL ARTIME
                                          -------------------------------------
                                                    MANUEL ARTIME
                                          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 March 31, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), we, W. Thomas
Parrington, the Chief Executive Officer and Manuel Artime, 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/  MANUEL ARTIME
                                    --------------------------------------------
                                                  MANUEL ARTIME
                                        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.