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 June 30, 2005
	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
(State or other jurisdiction of
incorporation or organization) 52-2093696
(I.R.S. Employer
Identification No.)

3445 Peachtree Road, N.E., Suite 700,
Atlanta, GA
(Address of principal executive offices) 30326
(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 12b-2 of the Act. Yes þ No o

     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 August 1, 2005
Common	24,646,454

LODGIAN, INC. AND SUBSIDIARIES

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004 (unaudited)		2
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and June 30, 2004 (unaudited)		3
	Condensed Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2005 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and June 30, 2004 (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 4.	Controls and Procedures		40
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		40
Item 6.	Exhibits		40
Signatures			41
EX-10.9 SIXTH AMENDMENT TO LEASE AGREEMENT
EX-10.22 AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.35 EXECUTIVE EMPLOYMENT AGREEMENT
EX-10.36 RESTRICTED STOCK AWARD AGREEMENT
EX-10.40 FORM OF RESTRICTED STOCK AWARD AGREEMENT
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2005			December 31, 2004
	(Unaudited in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	18,234		$	36,234
Cash, restricted		13,597			9,840
Accounts receivable (net of allowances: 2005 - $1,651; 2004 - $684)		9,726			7,967
Insurance receivable		3,333			3,280
Inventories		6,600			6,293
Prepaid expenses and other current assets		19,588			17,232
Assets held for sale		26,113			30,528
Total current assets		97,191			111,374
Property and equipment, net		586,833			569,371
Deposits for capital expenditures		26,059			34,787
Other assets		7,011			7,775
	$	717,094		$	723,307
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,106		$	10,957
Other accrued liabilities		33,091			31,475
Advance deposits		2,398			1,638
Insurance advances		17,834			2,000
Current portion of long-term liabilities		22,442			25,290
Liabilities related to assets held for sale		19,425			30,541
Total current liabilities		108,296			101,901
Long-term liabilities		384,462			393,143
Total liabilities		492,758			495,044
Minority interests		1,604			1,629
Commitments and contingencies
Stockholders’ equity:
Common stock, $.01 par value, 60,000,000 shares authorized; 24,563,961 and 24,579,255 issued at June 30, 2005 and December 31, 2004, respectively		246			246
Additional paid-in capital		308,198			306,943
Unearned stock compensation		(208	)		(315	)
Accumulated deficit		(87,151	)		(81,941	)
Accumulated other comprehensive income		1,723			1,777
Treasury stock, at cost, 7,211 shares at June 30, 2005 and December 31, 2004		(76	)		(76	)
Total stockholders’ equity		222,732			226,634
	$	717,094		$	723,307

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Six Months Ended
	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
	(Unaudited in thousands, except per share data)
Revenues:
Rooms	$	64,497		$	62,522		$	118,958		$	118,572
Food and beverage		18,817			19,167			33,718			35,394
Other		2,671			2,760			5,163			5,460
		85,985			84,449			157,839			159,426
Operating expenses:
Direct:
Rooms		17,632			16,357			33,127			31,814
Food and beverage		13,062			12,477			24,044			23,768
Other		2,098			2,038			4,029			3,968
		32,792			30,872			61,200			59,550
		53,193			53,577			96,639			99,876
Other operating expenses:
Other hotel operating costs		24,693			22,916			48,592			46,112
Property and other taxes, insurance, and leases		5,810			5,187			11,499			10,747
Corporate and other		5,870			4,691			10,528			9,025
Casualty losses		28			—			132			—
Depreciation and amortization		6,867			6,797			13,524			13,468
Impairment of long-lived assets		954			—			2,609			—
Other operating expenses		44,222			39,591			86,884			79,352
		8,971			13,986			9,755			20,524
Other income (expenses):
Business interruption insurance proceeds		1,729			—			1,729			—
Interest income and other		54			66			225			109
Interest expense and other financing costs:
Preferred stock dividend		—			(4,233	)		—			(8,518	)
Interest expense		(6,912	)		(19,507	)		(13,894	)		(27,531	)
Loss on preferred stock redemption		—			(1,592	)		—			(1,592	)
Income (loss) before income taxes and minority interests		3,842			(11,280	)		(2,185	)		(17,008	)
Provision for income taxes — continuing operations		(67	)		(76	)		(135	)		(151	)
Minority interests		(120	)		(71	)		25			(218	)
Income (loss) from continuing operations		3,655			(11,427	)		(2,295	)		(17,377	)
Discontinued operations:
(Loss) income from discontinued operations before income taxes		(1,781	)		4,180			(2,915	)		3,044
Income tax benefit		—			—			—			—
Income (loss) from discontinued operations		(1,781	)		4,180			(2,915	)		3,044
Net income (loss) attributable to common stock	$	1,874		$	(7,247	)	$	(5,210	)	$	(14,333	)
Basic and diluted income (loss) per common share:
Net income (loss) attributable to common stock	$	0.08		$	(2.04	)	$	(0.21	)	$	(4.87	)

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

															Accumulated
						Additional			Unearned						Other						Total
	Common Stock					Paid-In			Stock			Accumulated			Comprehensive			Treasury			Stockholders’
	Shares			Amount		Capital			Compensation			Deficit			Income			Stock			Equity (Deficit)
	(Unaudited in thousands, except share data)
Balance December 31, 2004		24,579,255		$	246	$	306,943		$	(315	)	$	(81,941	)	$	1,777		$	(76	)	$	226,634
Amortization of unearned stock compensation										107												107
Vesting of restricted stock units		1,382
Release of surplus accrual on final settlement of bankruptcy claims						$	1,292															1,292
Retirement of disputed claims shares		(16,676	)																			—
Other							(37	)														(37	)
Comprehensive loss:																						—
Net loss													(5,210	)								(5,210	)
Currency translation adjustments (related taxes estimated at nil)																(54	)					(54	)
Total comprehensive loss																						(5,264	)
Balance June 30, 2005		24,563,961		$	246	$	308,198		$	(208	)	$	(87,151	)	$	1,723		$	(76	)	$	222,732

The comprehensive income for the three months ended June 30, 2005 was $1.8 million.
The comprehensive loss for the three months and six months ended June 30, 2004 was $7.9 million and $14.6 million, respectively.
Accumulated Other Comprehensive Income represents currency translation adjustments.

See notes to condensed consolidated financial statements.

4

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	June 30, 2005			June 30, 2004
	(Unaudited in thousands)
Operating activities:
Net loss	$	(5,210	)	$	(14,333	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		13,650			13,826
Impairment of long-lived assets		6,327			2,604
Amortization of unearned stock compensation		107			100
Preferred stock dividends		—			8,518
Loss on redemption of preferred stock		—			1,592
Minority interests		(25	)		218
Gain on asset dispositions		(2,003	)		(7,249	)
Write-off and amortization of deferred financing costs		682			10,309
Other		(667	)		(151	)
Changes in operating assets and liabilities:
Accounts receivable, net of allowances		(2,124	)		(3,134	)
Insurance receivable		(53	)		—
Inventories		(462	)		(219	)
Prepaid expenses and other assets		(2,261	)		(2,808	)
Accounts payable		465			3,296
Other accrued liabilities		4,492			1,409
Advance deposits		811			720
Net cash provided by operating activities		13,729			14,698
Investing activities:
Capital improvements		(41,945	)		(14,000	)
Proceeds from sale of assets, net of related selling costs		12,908			33,890
(Deposits) withdrawals for capital expenditures		8,728			(20,452	)
Insurance advances related to hurricanes		15,834			—
Net increase in restricted cash		(3,757	)		(2,528	)
Other		(106	)		(60	)
Net cash used in investing activities		(8,338	)		(3,150	)
Financing activities:
Proceeds from issuance of long term debt		3,200			370,000
Proceeds from exercise of stock options and issuance of common stock		—			176,183
Principal payments on long-term debt		(26,409	)		(393,071	)
Shares redeemed from reverse stock split		—			(5	)
Payments of deferred financing costs		(174	)		(5,354	)
Net cash (used in) provided by financing activities		(23,383	)		147,753
Effect of exchange rate changes on cash		(8	)		—
Net (decrease) increase in cash and cash equivalents		(18,000	)		159,301
Cash and cash equivalents at beginning of period		36,234			10,897
Cash and cash equivalents at end of period	$	18,234		$	170,198
Supplemental cash flow information:
Cash paid during the period for:
Interest, net of the amounts capitalized shown below	$	13,784		$	22,018
Interest capitalized		1,047			190
Income taxes, net of refunds		162			586
Supplemental disclosure of non-cash activities:
Net non-cash debt decrease		(572	)		(228	)
Issuance of promissory notes as consideration for taxation liabilities		—			2,369
Release of surplus accrual on final settlement of bankruptcy claims		(1,292	)		—

See notes to condensed 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, as reported by Hotel Business in the 2005 Green Book issue published in December 2004. 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,” “Marriott,” and “Hilton.” As of August 1, 2005, we operated 80 hotels with an aggregate of 14,684 rooms, located in 30 states and Canada. Of the 80 hotels, 76 hotels, with an aggregate of 13,718 rooms, are part of our continuing operations, while four hotels, with an aggregate of 966 rooms, are held for sale and classified in discontinued operations. Our current portfolio of 80 hotels consists of:

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

• three hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control (see Note 2 for discussion on buyout of joint venture partner at one of our hotels); 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 August 1, 2005, we operated all but two of our hotels under franchises obtained from nationally recognized hospitality franchisors. We operate 51 of our hotels under franchises obtained from InterContinental Hotels Group (“IHG”) as franchisor of the Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express brands. We operate 16 of our hotels under franchises from Marriott International as franchisor of the Marriott, Courtyard by Marriott, Fairfield Inn by Marriott, Springhill Suites by Marriott and Residence Inn by Marriott brands. We operate another 11 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 three joint ventures in which Lodgian, Inc. has a controlling financial interest (owns a 50% or greater voting equity interest and exercises control). On April 18, 2005, we acquired for $0.7 million our joint venture partner’s 40% interest in the Crowne Plaza hotel located in Macon, Georgia, which is now consolidated as a wholly-owned subsidiary. 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 for the year ended December 31, 2004.

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     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. In January 2005, we classified three additional hotels as held for sale. Between November 1, 2003 and June 30, 2005, we sold the office building, 16 of the 22 hotels and two of the three land parcels. As of June 30, 2005, our hotel portfolio consisted of 82 hotels, 76 of which represent our continuing operations portfolio (including one hotel in which we have a non-controlling equity interest which we do not consolidate). We believe that our held for sale assets as of June 30, 2005 remain properly classified in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

     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 June 30, 2005, the results of our operations for the three and six months ended June 30, 2005 and June 30, 2004 and our cash flows for the six months ended June 30, 2005 and June 30, 2004. 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 Form 10-K.

     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.

Stock-based Compensation

     On November 25, 2002, we adopted a Stock Incentive Plan which replaced the stock option plan previously in place. In accordance with the Stock Incentive Plan, and prior to the completion of our public offering of common stock on June 25, 2004, we were permitted to 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, exercisability, payment and other restrictions pertaining to any awards made pursuant to the Stock Incentive Plan are determined by the Committee. At our annual meeting held on March 19, 2004, 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 consummated a public offering of our common stock, by an additional amount to be determined pursuant to a formula. With the completion of our public offering of common stock on June 25, 2004, the total number of shares available for issuance under our Stock Incentive Plan increased to 3,301,058 shares.

     On April 9, 2004, the Company issued to our CEO, Thomas Parrington, 1,382 restricted stock units in accordance with his employment agreement. The restricted stock units vested on April 9, 2005 and were converted into an equal number of shares of common stock.

     On May 9, 2005, the Company awarded stock options to acquire 392,500 shares of the Company’s common stock to certain of the Company’s employees and to independent members of the board of directors. Each of the four independent members of the board of directors received non-qualified options to acquire 5,000 shares of the Company’s common stock. The exercise price of the awards granted was $9.05, the average of the high and low

7

market prices of our common stock on the day of the grant, and the shares vest in three equal annual installments beginning on May 9, 2006. All options expire ten years from the date of grant.

     We present below a summary of our stock option plan and the restricted stock activity under the plan for the six months ended June 30, 2005:

				Weighted Average
	Options			Exercise Prices
Balance, December 31, 2004		526,410		$	11.46
Granted		427,500			9.26
Exercised		—			—
Forfeited		(56,329	)		11.69
Balance, June 30, 2005		897,581		$	10.40

	Restricted
	Stock Units
Balance, December 31, 2004		45,827
Granted		—
Shares converted to common stock		(1,382	)
Forfeited		—
Balance, June 30, 2005		44,445

     In the following table, we summarize information for options outstanding and exercisable at June 30, 2005:

	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		428,333		9.7	$	9.05		11,111	$	9.00
$10.51 to $15.00		367,500		9.0	$	10.63		111,632	$	10.52
$15.01 to $15.50		101,748		8.2	$	15.21		68,145	$	15.21
		897,581		9.3	$	10.40		190,888	$	12.11

     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. The income tax benefit, if any, associated with the exercise of stock options is credited to additional paid-in capital. 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 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.

     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 income (loss) and net income (loss) per share would have been as follows:

8

	Three Months ended						Six Months ended
	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
				($ in thousands, except share data)
Income (Loss) from continuing operations:
As reported	$	3,655		$	(11,427	)	$	(2,295	)	$	(17,377	)
Add: Stock-based compensation expense included in net income		50			50			107			100
Deduct: Total pro forma stock-based employee compensation expense		(468	)		(174	)		(933	)		(349	)
Pro forma		3,237			(11,551	)		(3,121	)		(17,626	)
(Loss) income from discontinued operations:
As reported		(1,781	)		4,180			(2,915	)		3,044
Add: Stock-based compensation expense included in net income		—			—			—			—
Deduct: Total pro forma stock-based employee compensation expense		—			—			—			—
Pro forma		(1,781	)		4,180			(2,915	)		3,044
Net Income (Loss) attributable to common stock:
As reported		1,874			(7,247	)		(5,210	)		(14,333	)
Add: Stock-based compensation expense included in net income		50			50			107			100
Deduct: Total pro forma stock based employee compensation expense		(468	)		(174	)		(933	)		(349	)
Pro forma	$	1,456		$	(7,371	)	$	(6,036	)	$	(14,582	)
Basic and diluted loss per common share
Income (Loss) from continuing operations:
As reported	$	0.15		$	(3.22	)	$	(0.09	)	$	(5.90	)
Add: Stock-based compensation expense included in net income		—			0.01			—			0.03
Deduct: Total pro forma stock-based employee compensation expense		(0.01	)		(0.05	)		(0.03	)		(0.12	)
Pro forma		0.14			(3.26	)		(0.12	)		(5.99	)
(Loss) income from discontinued operations:
As reported		(0.07	)		1.18			(0.12	)		1.03
Add: Stock-based compensation expense included in net income		—			—			—			—
Deduct: Total pro forma stock-based employee compensation expense		—			—			—			—
Pro forma		(0.07	)		1.18			(0.12	)		1.03
Net Income (Loss) attributable to common stock:
As reported		0.08			(2.04	)		(0.21	)		(4.87	)
Add: Stock-based compensation expense included in net income		—			0.01			—			0.03
Deduct: Total pro forma stock-based employee compensation expense		(0.01	)		(0.05	)		(0.03	)		(0.12	)
Pro forma	$	0.07		$	(2.08	)	$	(0.24	)		(4.96	)

3. Discontinued Operations

     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. At December 31, 2004, seven hotels and one land parcel were held for sale. In January 2005, we identified three additional hotels as held for sale. Between January 1, 2005 and June 30, 2005, we sold four hotels for an aggregate sales price of $13.5 million, all of which was used to pay down debt. Accordingly, at June 30, 2005, six hotels and one land parcel were held for sale.

     Management considers an asset held for sale when the following criteria per SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”) are met:

a)	Management commits to a plan to sell the asset;
b)	The asset is available for immediate sale in its present condition;
c)	An active marketing plan to sell the asset at a reasonable price has been initiated;
d)	The sale of the asset is probable within one year; and
e)	It is unlikely that significant changes to the plan to sell the asset will be made.

     Upon designation of a property as an asset held for sale and in accordance with the provisions of SFAS No. 144, the Company records the carrying value of the property at the lower of its carrying value or its estimated fair value, less estimated selling costs, and the Company ceases depreciation of the asset.

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     All losses and gains on assets sold and held for sale (including any related impairment charges) are included in “(Loss) income from discontinued operations before income taxes” in the Consolidated Statement of Operations. All assets held for sale and the liabilities related to these assets are separately disclosed in the Consolidated Balance Sheet. The amount the Company will ultimately realize could differ from the amount recorded in the financial statements.

     In accordance with SFAS No. 144, we have included the hotel assets sold during 2004 and 2005 as well as the hotel assets held for sale at June 30, 2005 (including any related impairment charges) in Discontinued Operations in the Consolidated Statements of Operations. The assets held for sale at June 30, 2005 and December 31, 2004 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets.

     Consistent with our accounting policy on asset impairment, and in accordance with SFAS No. 144, the reclassification of assets from held for use to held for sale necessitates a determination of fair value less costs of sale. The fair values of the assets held for sale are based on the estimated selling prices less estimated costs to sell. We determined the estimated selling prices in conjunction with our real estate brokers. The estimated selling costs are based on our experience with similar asset sales. We record impairment charges and write down respective hotel asset carrying values if their carrying values exceed the estimated selling prices less costs to sell. During the three months ended June 30, 2005 and June 30, 2004, we recorded impairment charges of $1.8 million and $0.5 million, respectively, on assets held for sale. For the six months ended June 30, 2005 and June 30, 2004, we recorded impairment charges of $3.7 million and $2.6 million, respectively, on assets held for sale. The impairment of long-lived assets held for sale of $1.8 million recorded in the three months ended June 30, 2005 represents the write-down of two hotels held for sale and a recapture of impairment of $0.1 million on two hotels that were previously impaired as outlined below:

a)	an additional $0.6 million on the Holiday Inn Rolling Meadows, IL to reflect the lowered estimated selling price of the hotel; and
b)	an additional $1.3 million on the Holiday Inn St. Louis North, MO to reflect the reduced selling price on this hotel.

          The impairment of long-lived assets held for sale of $0.5 million recorded in the three months ended June 30, 2004 represents the write-down of two hotels held for sale. As a result of these evaluations, during the second quarter of 2004 we recorded impairment losses as follows:

a)	$0.2 million on the Downtown Plaza Hotel Cincinnati, OH hotel to adjust for the further reduction in the estimated selling price of this hotel; and
b)	$0.3 million on the Holiday Inn Morgantown, WV to adjust for the further reduction in the estimated selling price of this hotel.

     We have changed the method for preparing the cash flow statement to combine cash flows for continuing and discontinued operations. All prior periods were changed to reflect this change in presentation. Discontinued operations have not been segregated in the consolidated statement of cash flows.

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     Assets related to discontinued operations consist primarily of real estate, net of accumulated depreciation. Liabilities related to discontinued operations consist primarily of mortgage notes payable. The following is a summary of the balance sheet information for discontinued operations:

	June 30, 2005		December 31, 2004
	(Unaudited in thousands)
Property and equipment, net		23,836		28,207
Other assets		2,277		2,321
Total assets	$	26,113	$	30,528
Other liabilities		4,395		3,305
Long-term debt		15,030		27,236
Total liabilities	$	19,425	$	30,541

     The following are summary consolidated statements of operations information for discontinued operations:

	Three months ended					Six months ended
	June 30, 2005			June 30, 2004		June 30, 2005			June 30, 2004
	(Unaudited in thousands)
Total revenues	$	7,696		$	13,416	$	13,903		$	25,982
Total expenses		7,651			13,026		15,103			27,583
Impairment of long-lived assets		1,827			451		3,718			2,604
Gain on asset dispositions		1			4,241		2,003			7,249
Gain(loss) from discontinued operations	$	(1,781	)	$	4,180	$	(2,915	)	$	3,044

4. Cash, Restricted

     At June 30, 2005, our $13.6 million of restricted cash consisted of amounts reserved for letter of credit collateral, a deposit required by our bankers, and cash reserved pursuant to certain loan agreements.

     In our Consolidated Statement of Cash Flows for the six months ended June 30, 2005, we changed the classification of changes in restricted cash balances to present such changes as an investing activity. We previously presented such changes as an operating activity. The Consolidated Statements of Cash Flows for the six months ended June 30, 2004, were changed to reflect this change which resulted in a $2.5 million decrease in investing cash flows and a corresponding increase to operating cash flows from the amounts previously reported.

5. Income (Loss) Per Share

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

	Three months ended						Six Months Ended
	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
	(Unaudited in thousands, except per share data)
Basic and diluted income (loss) per share:
Numerator:
Income (loss) from continuing operations	$	3,655		$	(11,427	)	$	(2,295	)	$	(17,377	)
(Loss) income from discontinued operations		(1,781	)		4,180			(2,915	)		3,044
Net income (loss) attributable to common stock	$	1,874		$	(7,247	)	$	(5,210	)	$	(14,333	)
Denominator:
Denominator for basic and diluted loss per share - weighted-average shares		24,573			3,554			24,573			2,944
Basic and diluted income (loss) per common share:
Income (loss) from continuing operations	$	0.15		$	(3.22	)	$	(0.09	)	$	(5.90	)
(Loss) income from discontinued operations		(0.07	)		1.18			(0.12	)		1.03
Net income (loss) attributable to common stock	$	0.08		$	(2.04	)	$	(0.21	)	$	(4.87	)

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     We did not include the shares associated with the assumed conversion of the restricted stock units (44,445 shares) or the exercise of stock options (options to acquire 897,581 shares of common stock) and Class A and Class 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 three and six months ended June 30, 2005 because their inclusion would have been antidilutive. We did not include the shares associated with the assumed conversion of the restricted stock units (68,048 shares) or the exercise of stock options (options to acquire 536,017 shares) and Class A and Class B warrants (rights to acquire 503,546 and 343,122 shares, respectively) in the computation of diluted loss per share for the three and six months ended June 30, 2004 because their inclusion would have been antidilutive.

6. Debt

     At June 30, 2005 and December 31, 2004, long-term liabilities consisted of the following:

	June 30,			December 31,
	2005			2004
	($ in thousands)
Refinancing Debt
Merrill Lynch Mortgage Lending, Inc. — Floating	$	83,669		$	102,617
Merrill Lynch Mortgage Lending, Inc. — Fixed	$	256,392			258,410
Merrill Lynch Mortgage Lending, Inc. — Total		340,061			361,027
Computer Share Trust Company of Canada		7,567			7,843
Other Financings
Column Financial, Inc.		23,846			25,058
Lehman Brothers Holdings, Inc.		22,668			22,927
JP Morgan Chase Bank, Trustee		10,064			10,110
DDL Kinser		2,225			2,286
Wachovia		3,196			—
Column Financial, Inc.		8,368			8,545
Column Financial, Inc.		—			3,069
Tax notes issued pursuant to Lodgian’s Joint Plan of Reorganization		2,837			3,302
Total — Other Financings		73,204			75,297
Long-term liabilities — other
Other long-term liabilities		1,303			1,865
		1,303			1,865
		422,135			446,032
Long-term liabilities related to assets held for sale		(15,231	)		(27,599	)
	$	406,904		$	418,433
Less: Current portion of long-term liabilities		(22,442	)		(25,290	)
Total long-term liabilities — continuing operations	$	384,462		$	393,143

     Substantially all of our property and equipment is pledged as collateral for long-term obligations with the exception of five hotels and one land parcel, of which three hotels and the land parcel are classified as held for sale. 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 June 30, 2005 along with the applicable interest rates and the related carrying values of the property, plant and equipment which collateralize these debts:

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				June 30, 2005
	Number			Property, plant			Long-term			Interest
	of Hotels			and equipment, net (1)			obligations (1)			rates
Refinancing Debt
Merrill Lynch Mortgage Lending, Inc. — Floating		21		$	104,703		$	83,669		LIBOR plus 3.40%
Merrill Lynch Mortgage Lending, Inc. — Fixed		35			326,523			256,392		6.58%
Merrill Lynch Mortgage Lending, Inc. — Total		56			431,226			340,061
Computer Share Trust Company of Canada		1			15,652			7,567		7.88%
Other Financings
Column Financial, Inc.		9			71,941			23,846		10.59%
Lehman Brothers Holdings, Inc.		5			45,233			22,668		$15,970 at 9.40%; $6,698 at 8.90%
JP Morgan Chase Bank		2			6,124			10,064		8.00%
DDL Kinser		1			3,082			2,225		8.25%
Wachovia		1			5,014			3,196		5.78%
Column Financial, Inc.		1			11,804			8,368		9.45%
Total — other financing		19			143,198			70,367
		76			590,076			417,995		7.10%(2)
Long-term liabilities — other
Tax notes issued pursuant to our Joint Plan of Reorganization		—			—			2,837
Other		—			—			1,303
		—			—			4,140
Property, plant and equipment — other		5			20,593			—
		81			610,669			422,135
Held for sale		(6	)		(23,836	)		(15,231	)
Total June 30, 2005 (3)		75		$	586,833		$	406,904

(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 7.10% in the table above represents our annual weighted average cost of debt at June 30, 2005, using a LIBOR of 3.34% as of June 30, 2005.
(3)	Debt obligations at June 30, 2005 include the current portion.

Mortgage Debt

     On June 25, 2004, we closed on the $370 million Merrill Lynch Mortgage Lending, Inc. (“Merrill Lynch Mortgage”) refinance (“Refinancing Debt”) secured by 64 of our hotels at the time of closing. As of August 1, 2005, nine hotels have since been sold. We refinanced (1) our outstanding mortgage debt (“Merrill Lynch Exit Financing”) with Merrill Lynch Mortgage which, as of June 25, 2004, had a balance of $290.9 million, (2) certain of our outstanding mortgage debt (the “Lehman Financing”) with Lehman Brothers Holdings, Inc. (“Lehman”) which, as of June 25, 2004, had a balance of $56.1 million, and (3) our outstanding mortgage debt on the Crowne Plaza Hotel in Macon, Georgia which, as of June 25, 2004, had a balance of $6.9 million.

     Immediately after closing, the Refinancing Debt consisted of a loan of $110 million bearing a floating rate of interest (the “Floating Rate Debt”). At June 30, 2005, 21 hotels secured this loan. When the loan was closed, 29 hotels secured this loan. Four loans totaling $260 million, each bearing a fixed interest rate of 6.58% (the “Fixed Rate Debt”), are secured by 35 of our hotels. Merrill Lynch Mortgage also has the right to further divide the Refinancing Debt into first priority mortgage loans and mezzanine loans. Three of the four loans had been securitized at June 30, 2005.

     Except for certain defeasance provisions, we cannot prepay the Fixed Rate Debt except during the 60 days prior to maturity. We may, after the earlier of June 25,2008 or the second anniversary of the securitization of any Fixed Rate Debt, defease such Fixed Rate Debt, in whole, or in part.

     On April 29, 2005, we entered into an amendment with Merrill Lynch to modify certain of the provisions of the Floating Rate Loan. Under the terms of the amendment, Merrill Lynch agreed to allow the release of the Holiday Inn St. Louis, Missouri as collateral under the loan in exchange for debt pay down of $4.8 million. Approximately $2.6 million of this amount was paid through the release of certain reserves held on other properties which were sold or were expected to be sold in the near future. We paid the balance of the release price, approximately $2.2 million, from our cash balances. In addition to the release of the St. Louis property from the collateral pool, the amendment provided for the following:

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• Extension of the initial maturity from June 30, 2006 to January 11, 2007. We still maintain the option, subject to certain conditions, to extend the loan for up to three years from the new initial maturity date in January 2007;

• Once the Holiday Inn Select in Niagara Falls, New York is sold, three additional properties in the floating rate pool will be classified as “sale properties.” Once classified as “sale properties,” these hotels will be able to be released from the collateral pool by payment of the greater of (a) 100% of the aggregate allocated loan amount (lowered from 125%) and (b) the net sales proceeds of the property;

• The prepayment penalty, which is currently 3% and dropped to 1% in July 2005, has been further reduced for the three additional sale properties after July 2005 to 0.5%; and

• Certain required capital and environmental repairs under the original Floating Rate Loan have been determined not to be necessary and have been removed as requirements under the loan.

     As a result of these modifications in the terms of the Floating Rate Loan, the Floating Rate Debt has an initial maturity of January 2007. The Floating Rate Debt is a 2 ¹/2 year loan (including the six month extension) with three one-year extension options and bears interest at LIBOR plus 3.40%. The first extension option will be available to us only if no defaults exist and we have entered into the requisite interest rate cap agreement. The second and third extension options will be available to us only if no defaults exist, a minimum debt yield ratio of 13% is met, and minimum debt service coverage ratios of 1.3x for the second extension and 1.35x for the third extension are met. An extension fee of 0.25% of the outstanding Floating Rate Debt is payable if we opt to exercise each of the second and third extensions. We may prepay the Floating Rate Debt in whole or in part, subject to a prepayment penalty in the amount of 1% of the amount prepaid. Repayments of debt related to assets held for sale at June 25, 2004, are exempt from the prepayment penalty except as noted above.

     The Refinancing Debt provides that when either (i) the debt yield ratio for the hotels securing the Floating Rate Debt or any Fixed Rate Loan for the trailing 12-month period is below 9% during the first year, 10% during the next 18 months and 11%, 12% and 13% during each of the next three years (in the case of the Floating Rate Debt to the extent extended), or (ii) in the case of the Floating Rate Debt (to the extent extended), the debt service coverage ratio is less than 1.30x in the fourth year or 1.35x in the fifth year, excess cash flows produced by the mortgaged hotels securing the applicable loan (after payment of operating expenses, management fees, required reserves, service fees, principal and interest) must be deposited in a restricted cash account. These funds can be used for the prepayment of the applicable loan in an amount required to satisfy the applicable test, capital expenditures reasonably approved by the lender with respect to the hotels securing the applicable loan, and scheduled principal and interest payments due on the Floating Rate Debt of up to $0.9 million or any Fixed Rate Loan of up to $525,000, as applicable. Funds will no longer be deposited into the restricted cash account when the debt yield ratio and, if applicable, the debt service coverage ratio are sustained above the minimum requirements for three consecutive months and there are no defaults.

     As of June 30, 2005, our debt yield ratios were above the minimum requirements for the four Fixed Rate Loans and the Floating Rate Loan.

     If the Company does 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 its loan agreements and which could materially and adversely affect the Company. If a franchise agreement is terminated, the Company will either select an alternative franchisor or operate the hotel independent of any franchisor. However, terminating or changing the franchise affiliation of a hotel could require the Company to incur significant expenses, including franchise termination payments and capital expenditures associated with the change of a brand. Moreover, the loss of a franchise agreement could have a material adverse effect upon the operations or the underlying value of the hotel covered by the franchise because of the loss of associated guest loyalty, name recognition, marketing support and centralized reservation systems provided by the franchisor. Loss of a franchise agreement may result in a default under, and acceleration of, the related mortgage debt. In particular, the Company would be in default under the Refinancing Debt if the Company experiences either:

• multiple franchise agreement defaults and the continuance thereof beyond all notice and grace periods for hotels whose allocated loan amounts total 10% or more of the outstanding principal amount of such Refinancing Debt;

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• with regard to the Floating Rate Debt, either the termination of franchise agreements for more than two properties or the termination of franchise agreements for hotels whose allocated loan amounts represent more than 5% of the outstanding principal amount of the floating rate debt, and such hotels continue to operate for more than five consecutive days without being subject to replacement franchise agreements;

• with regard to the Fixed Rate Debt, either the termination of franchise agreements for more than one property or the termination of franchise agreements for hotels whose allocated loan amounts represent more than 5% of the outstanding principal amount of the fixed rate loan, and such hotels continue to operate for more than five consecutive days without being subject to replacement franchise agreements; or

• a franchise termination for any hotel currently subject to a franchise agreement that remains without a franchise agreement for more than six months.

     A single franchise agreement termination could materially and adversely affect the Company’s revenues, cash flow and liquidity.

     Each loan comprising the Refinancing Debt is non-recourse; however, we have agreed to indemnify Merrill Lynch Mortgage in certain situations, such as fraud, waste, misappropriation of funds, certain environmental matters, asset transfers in violation of the loan agreements, or violation of certain single-purpose entity covenants. In addition, each loan comprising the Refinancing Debt will become a full recourse loan in certain limited cases such as bankruptcy of a borrower or Lodgian. During the term of the Refinancing Debt, we are required to fund, on a monthly basis, a reserve for furniture, fixtures and equipment equal to 4% of the previous month’s gross revenues from the hotels securing each of the respective loans comprising the Refinancing Debt.

     Other loan costs incurred as a part of the Refinancing Debt, totaling $5.4 million, were deferred and are being amortized using the effective yield method over five years for the Fixed Rate Debt and 3 ¹/2 years (including the six month extension) for the Floating Rate Debt.

     We incurred an additional $0.2 million in expenses in the three months ended June 30, 2005 related to the modifications on the Refinancing Debt. This amount is included in corporate and other expenses in the Company’s Consolidated Statement of Operations.

     As of June 30, 2005, we were not in compliance with the debt service coverage ratio (“DSCR”) requirement of the loan from Column Financial secured by nine of our hotels, primarily due to the fact that one of the hotels securing this loan (New Orleans Airport Plaza Hotel) was not, until recently, affiliated with a national brand and recently underwent a major renovation. The renovation is now complete and the hotel was reopened as a Radisson during May 2005. The total investment we made on renovating and rebranding this property was $5.7 million. In addition, we will be completing capital expenditures of approximately $8.8 million on three other hotels in this loan pool in 2005 and $0.5 million in 2006 to complete the renovation of one of these hotels.

     Under the terms of the Column Financial loan agreement, until the required DSCR is met, the lender is permitted to require the borrowers to deposit all revenues from the mortgaged properties into an account controlled by the lender. The revenues are then disbursed to pay property expenses in accordance with the loan agreement. In June 2005, the Company was notified by the lender that it was not in compliance with the debt service coverage requirement and would have to establish a restricted cash account whereby all cash generated by the property be deposited in an account from which all payments of interest, principal, operating expenses and escrows (insurance, property taxes and ground rent) would be disbursed. The lender may apply excess proceeds after payment of expenses to additional principal payments. As of June 30, 2005, the restricted cash account had not been established. This loan can be repaid in full without penalty on the first day of the month following a 30 day written notice.

     Additionally, as of June 30, 2005, the Company was not in compliance with the debt service coverage ratio requirement of the loan from Column Financial secured by one hotel in Phoenix, Arizona. The primary reason why the debt service coverage ratio was below the required threshold is that the property underwent an extensive renovation in 2004 and the first quarter of 2005 in order to convert from a Holiday Inn Select to a Crowne Plaza. The renovation caused substantial revenue displacement which, in turn, negatively affected the financial performance of this hotel. Under the terms of the Column Financial loan agreement until the required DSCR is met,

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the lender is permitted to require the borrower to deposit all revenues from the mortgaged property into an account controlled by the lender. Accordingly, in December 2004, the Company was notified by the lender that it was not in compliance with the debt service coverage ratio requirement and would have to establish a restricted cash account whereby all cash generated by the property be deposited in an account from which all payments of interest, principal, operating expenses and escrows (insurance, property taxes and ground rent) would be disbursed. The lender may apply excess proceeds after payment of expenses to additional principal payments. As of June 30, 2005, $0.7 million was retained in the restricted cash account for this hotel. This loan can be repaid in full without penalty on the first day of the month following a 30 day written notice.

     Through wholly-owned subsidiaries, we owe approximately $10.1 million under industrial revenue bonds (“IRBs”) secured by the Holiday Inns Lawrence, Kansas and Manhattan, Kansas. For the year ended December 31, 2004, the cash flows of the two hotels were insufficient to meet the minimum debt service coverage ratio requirements. On March 2, 2005, we notified the Trustee of the IRBs that we would not continue to make debt service payments. The Holiday Inn franchise agreements for both of these hotels expire on August 28, 2005, and each of these hotels will require substantial capital expenditures for renewal or rebranding. The failure to make debt service payments is a default under the bond indenture and also a default under the ground leases for these properties. The failure to make the bond payments subjects these hotels to foreclosure and a potential obligation pursuant to a partial guaranty of approximately $1.4 million. On July 26, 2005, we reached a tentative settlement with the Trustee and an ad hoc committee of the IRB holders. Under the terms of the proposed settlement, we will convey our rights and interests in the hotels to the Trustee or its nominee by deed-in-lieu of foreclosure or a “consensual” foreclosure and pay to the Trustee for the benefit of the bondholders the sum of $500,000 in exchange for a full release of all claims, including any claims related to the partial guaranty. Lodgian will also agree to immediately list the hotels for sale and cooperate with the Trustee in the sale process. It is anticipated that Lodgian will continue to manage the hotels until the closing of the sale of the hotels to a third party buyer. Further, the Trustee has agreed to cause a purchaser of the properties to assume or satisfy certain promissory notes executed by Lodgian for unpaid real estate taxes from 2001 in both taxing jurisdictions. As of June 30, 2005, the aggregate outstanding principal and interest on these promissory notes was $319,000. Except for the partial guaranty discussed above, the IRB’s are non-recourse debt and the proceeds from the sale of the hotels will be paid to the Trustee in full satisfaction of the outstanding debt.

     On July 25, 2005, we received a Notice of Event of Default and Acceleration from the Trustee relating to the IRBs. We have been advised by the Trustee’s counsel that the declaration of event of default and acceleration of the IRBs was a prerequisite for enabling the Trustee to enter into a compromise settlement on behalf of the bondholders with the proper authority. Thus, we believe that this declaration of event of default and acceleration will have no adverse effect on the tentative settlement agreement reached with the Trustee and the Committee. However, in the event Lodgian is unable to enter into definitive settlement agreements with the Trustee, the Trustee would be able to proceed with a judicial foreclosure sale of the properties pursuant to the requirements of Kansas law.

     Consistent with the tentative settlement agreement discussed above, on August 1, 2005, we did not make the scheduled tax note payments on these two hotels. This non-payment represents an event of default. Accordingly, as of June 30, 2005, the outstanding IRB obligation of $10.1 million and the outstanding tax note obligations of $0.3 million were listed as current liabilities on our consolidated balance sheet.

     The tentative settlement agreement reached on July 26, 2005 is subject to formal documentation. We cannot guarantee that a final settlement agreement will be reached, or that if reached, it will be on substantially the same terms as described above.

     At June 30, 2005, approximately 83% of our continuing operations mortgage debt (including current portion) bears interest at fixed rates and approximately 17% bears interest at a floating rate.

7. Commitments and Contingencies

   Franchise Agreements and Capital Expenditures

     We benefit from the superior brand qualities of Crowne Plaza, Holiday Inn, Marriott, Hilton and other brands. Included in the benefits of these brands are their reputation for quality and service, revenue generation through their

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central reservation systems, access to revenue through the global distribution systems, guest loyalty programs and brand Internet booking sites. Reservations made by means of these franchisor facilities generally account for approximately 35% of our total reservations.

     To obtain these franchise affiliations, we enter into franchise agreements with hotel franchisors that generally have terms of between 5 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 2.7% to 6.0% of gross room revenues, advertising/marketing fees generally range from 1.0% to 4.2% of gross room revenues, reservation system fees generally range from 1.0% to 2.6% of gross room revenues and club and restaurant fees range from 0% to 4.5%. In the aggregate, royalty fees, advertising/marketing fees, reservation fees and other ancillary fees for the various brands under which we operate our hotels range from 5.1% to 11.0% of gross room revenues. Total franchise fees through June 30, 2005 averaged 9.1% of gross room revenues for our continuing operations hotels.

     These costs vary with revenues and are not fixed commitments. Franchise fees incurred (which are reported in other hotel operating costs on our Condensed Consolidated Statement of Operations) for the three and six months ended June 30, 2005 and June 30, 2004 were as follows:

	Three months ended				Six months ended
	June 30, 2005		June 30, 2004		June 30, 2005		June 30, 2004
	(unaudited in thousands)
Continuing operation	$	5,848	$	5,703	$	10,781	$	10,810
Discontinued operations		536		863		960		1,595
	$	6,384	$	6,566	$	11,741	$	12,405

     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, 5, 12 and 7 of our franchise agreements are scheduled to expire in 2005, 2006, and 2007, respectively. For 2005, three of the five scheduled expirations (Holiday Inn Lawrence, Holiday Inn Manhattan and Holiday Inn Columbus) relate to hotels which we expect to sell or surrender to the lenders. As franchise agreements expire, we may apply for a franchise renewal. In connection with renewals, the franchisor may require payment of a renewal fee, 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 gross 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, and 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. However, terminating or changing the franchise affiliation of a hotel could require us to incur significant expenses, including liquidated damages, and capital expenditures. Our loan agreements generally prohibit us from operating a hotel without a franchise.

     As of August 1, 2005, 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 ten hotels summarized as follows:

a) Three of these hotels are held for sale;

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b)	Eight of the remaining hotels either recently completed a major renovation, are undergoing a major renovation or a major renovation is planned. The total cost of the renovations is projected to be $25.6 million of which $8.9 million has been spent;
c)	One of the remaining hotels has a franchise agreement that expires in 2006 and is expected to be renovated upon selection of a new franchise. The total cost of the renovation will not be known until the franchisor inspects the property;
d)	Two of the remaining hotels are currently above the required franchise thresholds. One of these hotels must remain above those levels until February 2006 to receive a “clean slate” letter, and the other hotel must remain above those levels until September 2005 to receive a cure letter;
e)	One of the remaining hotels is expected to be surrendered to the lender;
f)	One of the remaining hotels is being evaluated to determine if we will complete the renovation to retain the existing franchise or refranchise it under an alternate brand; and
g)	The remaining two hotels must operate above required thresholds through August 2008 to receive “clean slate” letters.

     We cannot be certain that we will be able to complete our action plans, which in aggregate are estimated to cost approximately $12.5 million, of which $6.2 million is reserved with our lenders, to cure the alleged defaults prior to the specified termination dates or any extended time granted to cure any defaults. We believe we are in compliance with our other franchise agreements in all material respects. While we can give no assurance that the steps taken to date, and planned to be taken during the balance of 2005, will return the properties to full compliance, we believe that we will make significant progress and we intend to continue to give franchise agreement compliance a high level of attention. The 18 hotels that are either in default or non-compliance under the respective franchise agreement are part of the collateral security for $396.6 million of mortgage debt at August 1, 2005, due to cross-collateralization provisions.

     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 August 1, 2005, we have not completed the required capital expenditures for 13 hotels in accordance with the stipulations and estimate that completing those improvements will cost $4.8 million, of which $3.7 million is reserved with our lenders. 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 have scheduled or have begun renovations on 9 of these hotels aggregating $3.3 million of the $4.8 million.

     In March 2005, we entered into letter agreements with IHG for our Holiday Inns in Strongsville, OH, Monroeville, PA and Washington-Meadowlands, PA which extends the deadline for us to complete renovations on these hotels. The letter agreements require us to complete various phases of the renovations by agreed-upon milestone dates. The capital expenditures related to these three hotels total $10.9 million, $3.5 million of which is reserved with our lenders. The agreed upon completion date for these three hotels is October 31, 2005, and we are subject to monetary penalties if we do not comply with the agreed upon milestone and completion dates. In addition, IHG may elect to terminate the franchise agreements for these three hotels if the renovations have not been completed, and in the event of a termination, we may be subject to liquidated damages. We anticipate that we will be able to meet these milestone and completion deadlines.

     During 2004, we entered into new franchise agreements for all 15 of our Marriott-branded hotels at that time and agreed to pay a fee aggregating approximately $0.5 million, of which $0.1 million has been paid, and $0.4 million is payable in 2007, subject to offsets. In connection with our agreement, Marriott may review the capital improvements we have made at our Marriott franchised hotels during 2004, and may, in its reasonable business judgment, require us to make additional property improvements and to place amounts into a reserve account for the purpose of funding those property improvements.

     To comply with the requirements of our franchisors, to improve our competitive position in individual markets, and repair hurricane damaged hotels, we plan to spend $85.4 million on our hotels in 2005. This includes committed hurricane repair capital expenditures of approximately $44.0 million, much of which we anticipate will be covered by insurance proceeds. This will substantially complete all of our deferred renovations. We spent $35.2 million on capital expenditures during 2004 on our continuing operations hotels.

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  Letters of Credit

     As of June 30, 2005, we had one irrevocable letter of credit for $3.4 million outstanding, fully collateralized by our cash (classified as restricted cash in the accompanying Condensed Consolidated Balance Sheets), as a guarantee to Zurich American Insurance Company. This letter of credit will expire in November 2005. We may be required to renew the letter of credit beyond that date at the same or a higher amount.

   Self-insurance

     We are self-insured up to certain limits with respect to employee medical, employee dental, property insurance, general liability insurance, workers’ compensation, auto liability and other forms of insurance. 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 affected. As of June 30, 2005, and December 31, 2004, we had approximately $12.2 million and $11.4 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.

  Casualty losses

     During August and September 2004, eight of our hotels were damaged (six extensively) from the hurricanes that made landfall in the Southeastern United States. Two of the hotels (Crowne Plaza West Palm Beach and Holiday Inn Melbourne) remain closed. The Crowne Plaza West Palm Beach hotel is expected to reopen in the 2005 fourth quarter and the Holiday Inn Melbourne hotel is expected to reopen in 2006 first quarter, respectively. All properties in our portfolio are covered by property casualty and business interruption insurance.

     With regard to physical property damage, we are recognizing repair expenses related to hurricane damage as we incur them. We have also written off the net book value (“NBV”) of the assets that were destroyed by the hurricane. As the combined repair expenses and NBV write-offs exceed the relevant insurance deductibles, we have recorded a receivable from the insurance carriers. For the three months ended June 30, 2005, we incurred approximately $28,000 in hurricane repair charges. For the six months ended June 30, 2005, we incurred $0.1 million in hurricane repair charges mainly representing $0.1 million in additional deductible costs. Hurricane costs incurred to date (including costs incurred September 2004 to December 2004) total $2.1 million for hurricane repair costs, $3.7 million written off in NBV of destroyed assets, and we have recorded a $3.3 million receivable due from the insurance company for amounts that exceed the deductibles, which results in a cumulative $2.5 million casualty loss as a result of the hurricanes. For the first six months of 2005, $15.8 million was released from our insurance carrier ($17.8 million in total) as advances for repairs on our Crowne Plaza West Palm Beach, Holiday Inn Melbourne, Holiday Inn Winter Haven, Holiday Inn Express Pensacola and Holiday Inn Pensacola University Mall hotels. All advances are forwarded to our lenders from which we receive reimbursements as we incur hurricane-related repair and capital expenditures. For the three months ended June 30, 2005, we received $7.6 million from our lenders for hurricane-related reimbursements. For the six months ended June 30, 2005, we received $12.7 million from our lenders for hurricane-related reimbursements. Cumulatively, since September 2004 when the first hurricane losses occurred through June 30, 2005, we have received $14.2 million from our lenders for hurricane-related reimbursements.

     We have filed business interruption claims for both hotels for the September through December 2004 period and for the January through June 2005 period. Through June 30, 2005, we have received and recorded as other income $1.7 million in business interruption proceeds which relate to business losses for 2004.

  Litigation

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     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 were limited to the amounts approved by the Bankruptcy Court for settlement of such claims and were payable out of a reserve for allowed claims that was recorded on our balance sheet. On July 26, 2004, the Preferred Stock was redeemed and cash of $2.2 million replaced the Preferred Stock shares held in the disputed claims reserve. Accordingly, when this liability was established it reduced Additional Paid-in Capital and did not flow through our Consolidated Statement of Operations. On June 30, 2005, we completed the final distribution for our bankruptcy claims and released the remaining unused accrual balance of $1.3 million with a corresponding adjustment to Additional Paid-in Capital in our Consolidated Statement of Stockholders’ Equity.

8. New Accounting Pronouncements

     On December 16, 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets – An Amendment of APB Opinion No. 29 (“SFAS No. 153”). The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have “commercial substance.” SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153 on June 15, 2005 did not have a material effect on the Company’s consolidated financial statements.

     In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payments (“SFAS No. 123(R)”). SFAS No. 123(R) would require the Company to measure all employee stock-based compensation awards using a fair-value method and record such expense in its consolidated financial statements. SFAS No. 123(R) was originally effective for periods beginning after June 15, 2005, however, in April 2005, the Securities and Exchange Commission (“SEC”) changed the effective date of SFAS No. 123(R) to fiscal years beginning after June 15, 2005 for non-small business issuers. SFAS No. 123(R) provides alternative methods of adoption, which include prospective application and a modified retroactive application. The Company plans to adopt the provisions of SFAS No. 123(R) effective January 1, 2006. The Company does not expect the adoption to have a material impact on its results of operations or financial position.

9. Subsequent Events

Appointment of President

     On July 15, 2005, Lodgian appointed Edward J. Rohling as president and W. Thomas Parrington resigned as president while remaining a member of the board of directors and the Company’s chief executive officer. Mr. Parrington will remain as chief executive officer through a transition period, after which the Company expects Mr. Rohling to assume Mr. Parrington’s duties as chief executive officer.

     Mr. Rohling and the Company entered into an employment agreement on July 12, 2005. The employment agreement term commences July 15, 2005 and continues through 2008. It provides for a base salary of $550,000 plus increases of not less than 5% per year, as well as minimum bonuses of $110,000 for 2005 and $220,000 for each of 2006, 2007 and 2008. The agreement further provides for a signing bonus of $594,000 in cash and 75,000 shares of restricted stock issued under the Company’s Amended and Restated 2002 Stock Incentive Plan. Half of the shares will vest on July 15, 2006 and the balance on July 15, 2007. The employment agreement also provides for additional cash and equity bonuses during the life of the contract, depending upon the achievement of certain goals and objectives, and for additional compensation in the event of a change in control of the Company for a price at a specified premium in excess of stated price thresholds. The employment agreement provides that Mr. Rohling will be promoted to be chief executive officer of the Company on or before July 1, 2006.

     Under the employment agreement, Mr. Rohling will be paid or reimbursed up to $100,000 in expenses associated with his relocation to Atlanta. The employment agreement contains severance benefits in the event of a termination without cause or a resignation for good reason (each as defined in the employment agreement), including the continuance of base salary for the lesser of two years or the balance of the term of the employment agreement, the acceleration of vesting of any unvested shares of restricted stock, and, if certain targets are achieved, a performance bonus and/or an equity award. In the event of nonrenewal of the employment agreement after December 31, 2008, Mr. Rohling’s unvested shares of restricted stock will vest, and he will be eligible to receive his final performance-based equity award and cash bonus, contingent upon the achievement of certain targets and goals.

     Under the employment agreement, Mr. Rohling has agreed to nondisclosure covenants and to a covenant not to compete with the Company within a limited geographic area, during the term of the employment agreement and for six months thereafter.

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Amendment to Employment Agreement

     On August 3, 2005, W. Thomas Parrington, our chief executive officer, and the Company entered into an amendment of Mr. Parrington’s employment agreement. The amendment changes the expiration date of the agreement from July 15, 2006 to December 31, 2005. The amendment further gives the Company the option to terminate Mr. Parrington’s employment and\or ask him to resign as a member of the board of directors prior to the new expiration date of the employment agreement. In exchange, the Company has agreed to continue Mr. Parrington’s base salary through December 31, 2005, regardless of whether his employment terminates sooner. In addition, all of Mr. Parrington’s unvested restricted stock units and options will become immediately vested on December 31, 2005. Mr. Parrington’s unvested restricted stock units (which total 22,222 as of August 1, 2005) will be immediately convertible into an equal number of shares of common stock, and his unvested stock options (which total 11,111 as of August 1, 2005) will be exercisable for 30 days, at which time they will expire. The Company has also agreed to pay Mr. Parrington’s COBRA premiums under its major medical group health plan through July 2006.

Sale of Two Hotels

     Between July 1, 2005 and August 1, 2005, the Company sold two hotels included in discontinued operations: the Holiday Inn in St. Louis, Missouri and the Holiday Inn Select in Niagara Falls, New York. The aggregate net proceeds of these two hotels were $16.7 million, of which $14.3 million was used to pay down debt.

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, 2004.

Executive Overview

     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 Business in the 2005 Green Book issue published in December 2004. 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,” “Marriott,” and “Hilton.” As of August 1, 2005, we operated 80 hotels with an aggregate of 14,684 rooms, located in 30 states and Canada. Of the 80 hotels, 76 hotels, with an aggregate of 13,718 rooms, are part of our continuing operations including two hotels that we intend to sell or surrender to the lender, while four hotels, with an aggregate of 966 rooms are held for sale and classified in discontinued operations. Our current portfolio of 83 hotels consists of:

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

• three 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 under 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. In January 2005, we identified three additional hotels as held for sale. Between November 1, 2003 and June 30, 2005, we sold the office building, 16 of the 22 hotels and two of the three land parcels. Subsequent to June 30, 2005, we sold two additional hotels. As of August 1, 2005, our portfolio consisted

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of 80 hotels, 76 of which represent our continuing operations portfolio (including one hotel in which we have a non-controlling equity interest and which we do not consolidate).

Overview of Continuing Operations

     Below is an overview of our results of operations for the three months ended June 30, 2005, which are presented in more detail in “Results of Operations — Continuing Operations:”

• Revenues for the three months ended June 30, 2005 increased from the prior year despite the continued closure of two hotels for hurricane renovations and eight hotels under renovation during the quarter. We saw improvements in the three and six months ended June 30, 2005 ADR and RevPAR as compared to the same period in 2004 with positive growth in occupancy for the three months ended June 30, 2005. RevPAR for our continuing operations hotels, less the two hotels closed for hurricane damage, was up 7.1% with 70% of the growth coming from a 5% increase in ADR.

• Operating expenses increased in the second quarter 2005 as compared to the second quarter 2004 as a result of higher revenues, an increase in workers’ compensation and group medical insurance claims, and brand-mandated upgrades in linen packages and property management systems. Corporate overhead expenses increased primarily due to the write-off of our investment and accounts receivable related to our 30%-owned Columbus hotel that we plan to surrender to the lender.

• Interest expense was lower for 2005 as a significant portion of the costs incurred in the second quarter 2004 were related to our refinance completed in June 2004.

• We recorded $1.0 million of impairment charges in the quarter primarily related to the write-down of the Holiday Inn, Hamburg, New York hotel to its estimated fair value based on a broker opinion.

• Net income attributable to common stock was $1.9 million for the second quarter 2005 compared with a net loss of $7.2 million for the second quarter 2004. For the six months ended June 30, 2005, the net loss attributable to common stock was $5.2 million as compared to a net loss of $14.3 million for 2004.

Overview of Discontinued Operations

     Between November 1, 2003 and August 1, 2005, we sold 18 hotels, an office building, and two land parcels. Summarized below is certain financial data related to these sales:

	($ in thousands)
Aggregate Sales Price	$	88,610
Debt pay down (principal only)	$	70,236

     In accordance with SFAS No. 144, we have included the hotel assets sold during 2004 and 2005 as well as the hotel assets held for sale at June 30, 2005 (including any related impairment charges) in Discontinued Operations in the Consolidated Statement of Operations. The assets held for sale at June 30, 2005 and December 31, 2004 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 the estimated selling prices in conjunction with our real estate brokers. The estimated selling prices are based on our experience with similar asset sales. During the three and six months ended June 30, 2005, we recorded impairment charges of $1.8 million and $3.7 million on assets held for sale, respectively. 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, an active marketing plan to sell the asset at a reasonable price has been initiated and it is unlikely that significant changes to the plan to sell the asset will be made.

     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

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favorable terms or at all. We believe that all our held for sale assets as of June 30, 2005 remain properly classified in accordance with SFAS No. 144.

     The results of operations of the other 75 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 are likely to retain in our portfolio for the foreseeable future with the exception of our two hotels in Kansas which will be sold or surrendered to the lender.

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, 2004. Also, our critical accounting policies and estimates are discussed in our Form 10-K, 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 75 consolidated hotels which we plan to retain in our portfolio for the foreseeable future with the exception of our two hotels in Kansas which will be sold or surrendered to the lender, for the three and six months ended June 30, 2005 and June 30, 2004. 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, 2004 for a general description of the categorization of our revenues and expenses.

Results of Operations — Continuing Operations

The analysis below compares the results of operations for the three months ended June 30, 2005 and June 30 2004.

Revenues – Continuing Operations

	Three months ended
	June 30, 2005			June 30, 2004			Increase (decrease)
Revenues (unaudited $ in thousands):
Rooms	$	64,497		$	62,522		$	1,975		3.2	%
Food and beverage		18,817			19,167			(350	)	(1.8	)%
Other		2,671			2,760			(89	)	(3.2	)%
Total revenues	$	85,985		$	84,449		$	1,536		1.8	%
Occupancy		66.2	%		65.1	%				1.6	%
ADR	$	82.64		$	78.94		$	3.70		4.7	%
RevPAR	$	54.67		$	51.38		$	3.29		6.4	%

     Second quarter 2005 revenues increased 1.8% despite the continued closure of two hotels (Crowne Plaza West Palm Beach and Holiday Inn Melbourne) for hurricane repairs and displacement at eight other hotels undergoing renovation during the quarter. Displacement refers to lost revenue and profit due to rooms out of order resulting from renovation or hurricane repairs. Second quarter 2004 room revenues for the Crowne Plaza West Palm Beach and Holiday Inn Melbourne were $2.8 million, food and beverage revenues were $1.0 million and other revenues were $0.1 million, for a total of $3.9 million decrease in revenues year over year. Displacement refers to lost revenue and profit due to rooms out of order resulting from renovation or hurricane repairs. The displaced revenue figures cited are only for the “hard” displacement that is documented when a hotel has sold all available rooms and denies additional reservations due to rooms out of order. The Company feels this method is conservative, as it does not account for the “soft” displacement associated with a renovation; for example, guests who depart earlier than planned due to the disruption caused by the renovation work, local customers or frequent guests who may choose an

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alternative hotel during the renovation, or local groups that may not solicit the hotel to house their groups during renovations. The eight hotels under renovation resulted in $1.2 million in displaced room revenues and $1.4 million in total revenue displacement. Accordingly, for the three months ended June 30, 2005, total room revenue displacement was $4.0 million and total revenue displacement was $5.3 million.

     Below is a chart that shows our occupancy, ADR, RevPAR and RevPAR Index (market share) for our continuing operations hotels for the three months ended June 30, 2005. To illustrate the impact of the two hotels closed due to hurricane damage on our continuing operations, the impact of renovations underway and completed, and the impact of branding, we have adjusted this information into seven different subsets. These subsets indicate that our Marriott and Hilton branded hotels outperformed our IHG branded hotels. In addition, these subsets indicate that where we have recently completed a major renovation, we see an increase in RevPAR that is greater then the average increase for all of our continuing operations hotels.

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Hotel	Room			Three Months Ended
Count	Count			June 30, 2005			June 30, 2004			Change % Change
75		13,478	All Continuing Operations
			Occupancy		66.2	%		65.1	%				1.6	%
			ADR	$	82.64		$	78.94		$	3.70		4.7	%
			RevPAR	$	54.67		$	51.38		$	3.29		6.4	%
73		12,964	Continuing Operations less two hotels closed due to hurricane damage
			Occupancy		66.2	%		64.9	%				2.0	%
			ADR	$	82.64		$	78.68		$	3.96		5.0	%
			RevPAR	$	54.67		$	51.04		$	3.63		7.1	%
			RevPAR Index		97.5	%		98.6	%				(1.1	)%
55		9,717	Continuing Operations less two hotels closed due to hurricane damage and hotels under renovation in the first & second quarters 2004 and 2005
			Occupancy		66.2	%		64.0	%				3.3	%
			ADR	$	80.57		$	76.76		$	3.81		5.0	%
			RevPAR	$	53.32		$	49.16		$	4.15		8.4	%
			RevPAR Index		100.0	%		100.5	%				(0.5	)%
21		3,013	Hotels completing major renovations in 2003 and 2004
			Occupancy		73.0	%		68.0	%				7.5	%
			ADR	$	87.36		$	81.77		$	5.59		6.8	%
			RevPAR	$	63.80		$	55.57		$	8.23		14.8	%
			RevPAR Index		107.7	%		104.1	%				3.4	%
16		1,845	Marriott Hotels
			Occupancy		74.8	%		70.7	%				5.8	%
			ADR	$	88.67		$	82.78		$	5.89		7.1	%
			RevPAR	$	66.34		$	58.53		$	7.80		13.3	%
			RevPAR Index		118.4	%		114.9	%				3.1	%
4		777	Hilton Hotels
			Occupancy		71.3	%		70.2	%				1.5	%
			ADR	$	96.77		$	91.53		$	5.24		5.7	%
			RevPAR	$	68.99		$	64.29		$	4.70		7.3	%
			RevPAR Index		94.2	%		94.8	%				(0.7	)%
45		8,830	IHG Hotels less two hotels closed due to hurricane damage
			Occupancy		66.5	%		66.1	%				0.6	%
			ADR	$	82.01		$	77.96		$	4.06		5.2	%
			RevPAR	$	54.52		$	51.53		$	2.99		5.8	%
			RevPAR Index		94.3	%		96.8	%				(2.6	)%
8		1,512	Other Brands and Independent Hotels
			Occupancy		51.1	%		48.3	%				5.8	%
			ADR	$	66.46		$	67.98		($	1.52	)	(2.2	)%
			RevPAR	$	33.99		$	32.86		$	1.13		3.4	%
			RevPAR Index		88.6	%		86.7	%				2.2	%

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     Lodgian’s competitive set RevPAR growth as compared to the industry has been trending positive over the past five quarters which, we believe, is a result of the improving condition of our hotel assets in the markets in which we operate. As shown in the following chart, in the first quarter 2004 the markets in which Lodgian operates grew RevPAR at only 58.4% of the U.S. industry average. By the second quarter 2005 the markets in which Lodgian operates grew RevPAR at 97.6% of the U.S. industry average Although our properties, due to renovation disruption, are not growing RevPAR as quickly as the markets in which we operate, we are encouraged that our markets are now behaving consistently with national averages as we complete our renovations and are poised to improve our RevPAR indices.

LGN Hotel		Lodgian
Count	Quarter	Comp Sets			Industry			Ratio
71	1st Qtr ’04		4.5	%		7.7	%		58.4	%
71	2nd Qtr ’04		5.6	%		8.6	%		65.1	%
71	3rd Qtr ’04		5.2	%		6.4	%		81.3	%
71	4th Qtr ’04		7.6	%		8.4	%		90.5	%
71	1st Qtr ’05		6.3	%		7.2	%		87.5	%
71	2nd Qtr ’05		8.1	%		8.3	%		97.6	%

Source: Smith Travel Research

Direct operating expenses – Continuing Operations

	Three months ended
	June 30, 2005			June 30, 2004			Increase (decrease)
	(unaudited in thousands)
Direct operating expenses:
Rooms	$	17,632		$	16,357		$	1,275	7.8	%
Food and beverage		13,062			12,477			585	4.7	%
Other		2,098			2,038			60	2.9	%
Total direct operating expenses	$	32,792		$	30,872		$	1,920	6.2	%
% of total revenues		38.1	%		36.6	%

     Direct operating expenses were 6.2% higher in the second quarter 2005 than in the second quarter 2004 and 38.1% of revenues as compared to 36.6% of revenues in 2004. Room expenses on a cost per occupied room (POR) basis were $22.59 in the second quarter 2005 as compared to $20.65 in the second quarter 2004. Room payroll and related benefits, on an actual POR basis, were $13.90 in the second quarter 2005 as compared to $13.03 in 2004, primarily due to increases in group medical and workers’ compensation costs as a result of higher claims experience. Other rooms expenses, on an actual POR basis, were $8.69 in the second quarter 2005 as compared to $7.62 in 2004. Increased costs for guest and operating supplies, guest loyalty programs, credit card commissions, reservation equipment and linen costs resulting from upgraded linen packages mandated by certain brands all contributed to the increase in other rooms costs.

Other operating expenses – Continuing Operations

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	Three months ended
	June 30, 2005			June 30, 2004			Increase (decrease)
	(unaudited in thousands)
Other operating expenses:
Other hotel operating costs:
General and administrative	$	5,403		$	4,949		$	454	9.2	%
Advertising and promotion		4,163			3,678			485	13.2	%
Franchise fees		5,849			5,703			146	2.6	%
Repairs and maintenance		4,762			4,304			458	10.6	%
Utilities		4,434			4,274			160	3.7	%
Other expenses		82			8			74	925.0	%
Total other hotel operating costs	$	24,693		$	22,916		$	1,777	7.8	%
Property and other taxes, insurance and leases	$	5,810		$	5,187		$	623	12.0	%
Corporate and other		5,870			4,691			1,179	25.1	%
Casualty losses		28			—			28	n/m
Depreciation and amortization		6,867			6,797			70	1.0	%
Impairment of long-lived assets		954			—			954	n/m
Total other operating expenses	$	44,222		$	39,591		$	4,631	11.7	%
% of total revenues		51.4	%		46.9	%

     Other hotel operating costs increased $1.8 million or 7.8% in the second quarter 2005 as compared to the same period in 2004 due to the following:

• Hotel general and administrative costs increased $0.5 million or 9.2% primarily as a result of increased costs related to our property management system conversions, an increase in group medical insurance claims, and additional payroll costs;

• Advertising and promotion costs increased $0.5 million or 13.2% primarily due to the addition of sales personnel and sales programs to promote our newly renovated properties and costs related to increased group medical insurance claims; and

• Repairs and maintenance costs increased $0.5 million or 10.6% primarily due to higher costs related to our on-going renovation program and an increase in workers’ compensation and group medical insurance claims.

     Property and other taxes, insurance and leases increased $0.6 million or 12.0% as the 2004 expense was reduced by $0.7 million for the settlement of a deferred ground rent obligation.

     Corporate and other costs increased $1.2 million or 25.1% primarily due to the $0.9 million write-off of the accounts receivable related to our 30%-owned Columbus hotel which we intend to surrender to the lender. We do not consolidate this asset in our financial statements, and as a result, there was a receivable from the Columbus hotel on our consolidated financial statements for which we have fully reserved as of June 30, 2005.

     Charges for the impairment of long-lived assets of $1.0 million represent a $0.9 million on the Holiday Inn Hamburg, New York hotel due to its undiscounted cash flows being less than its carrying value and the resulting broker opinion of value requiring a write-down of the asset to its estimated fair value and a $0.1 million write-off of the net book value of assets that were replaced in the second quarter 2005.

27

Non-operating income (expenses) – Continuing Operations

	Three months ended
	June 30, 2005			June 30, 2004			Increase (decrease)
	(unaudited in thousands)
Non-operating income (expenses):
Business interruption proceeds	$	1,729		$	—		$	1,729		n/m
Interest income and other		54			66			(12	)	(18.2)	%
Interest expense and other financing costs:
Preferred Stock dividend		—			(4,233	)		(4,233	)	(100.0)	%
Interest expense		(6,912	)		(19,507	)		(12,595	)	(64.6)	%
Loss on preferred stock redemption		—			(1,592	)		(1,592	)	(100.0)	%
Minority interests		120			71			49		69.0	%

     Business interruption proceeds of $1.7 million in the second quarter 2005 represents the amounts received by us on business interruption claims that relate to the September 2004 through December 2004 time period for the two hotels closed for hurricane renovations.

     The Preferred Stock dividend costs in 2004 relate to the 12.25% annual dividend on the Preferred Stock issued on November 25, 2002. Preferred Stock dividend expense is zero in the second quarter 2005 as the Preferred Stock was redeemed in its entirety on July 26, 2004.

     Interest expense decreased $12.6 million for the second quarter 2005 as compared to the same period in 2004 as 2004 expenses include $1.9 million net cost of a swaption contract, prepayment penalties of $2.7 million paid to Merrill Lynch, $6.7 million write-off in deferred loan costs, and $0.8 million in loan origination costs on the new debt refinanced in the second quarter of 2004.

     Loss on preferred stock redemption costs of $1.6 million in 2004 represent the 4% prepayment premium on the Preferred Stock that was exchanged for common stock immediately following the consummation of our equity offering on June 25, 2004.

The analysis below compares the results of operations for the six months ended June 30, 2005 and June 30, 2004.

Revenues – Continuing Operations

	Six months ended
	June 30, 2005			June 30, 2004			Increase (decrease)
Revenues (unaudited, $ in thousands ):
Rooms	$	118,958		$	118,572		$	386		0.3	%
Food and beverage		33,718			35,394			(1,676	)	(4.7)	%
Other		5,163			5,460			(297	)	(5.4)	%
Total revenues	$	157,839		$	159,426		$	(1,587	)	(1.0)	%
Occupancy		62.4	%		62.6	%				(0.4)	%
ADR	$	81.28		$	77.80		$	3.48		4.5	%
RevPAR	$	50.70		$	48.72		$	1.98		4.1	%

     Revenues for the first six months of 2005 decreased 1% primarily due to the continued closure of two hurricane damaged hotels (Crowne Plaza West Palm Beach and Holiday Inn Melbourne), displacement related to renovations at three other hurricane damaged hotels and displacement at ten hotels undergoing renovation during this period. Room revenues for the Crowne Plaza West Palm Beach and Holiday Inn Melbourne for the six months ended June 30, 2004, were $6.4 million, food and beverage revenues were $2.1 million and other revenues were $0.2 million, for a total decrease in revenues of $8.7 million from 2004. Total revenue displacement, primarily consisting of room revenue displacement, for the three other hurricane-damaged hotels was $0.1 million. The hotels under renovation during this period resulted in $2.1 million of displaced room revenues and $2.5 million in total revenues. Accordingly, for the six months ended June 30, 2005, total room revenue displacement for the hurricane-damaged or closed hotels and hotels under renovation was $8.6 million and total revenue displacement was $11.3 million.

28

     Below is a chart that shows our occupancy, ADR, RevPAR and RevPAR Index (market share) for our continuing operations hotels for the six months ended June 30, 2005. To illustrate the impact of the two hotels closed due to hurricane damage on our continuing operations, the impact of renovations underway and completed, and the impact of branding, we have adjusted this information into seven different subsets. These subsets indicate that our Marriott and Hilton branded hotels outperformed our IHG branded hotels. In addition, these subsets indicate that where we have recently completed a major renovation, we see an increase in RevPAR that is greater then the average increase for all of our continuing operations hotels.

29

Hotel	Room			Six Months Ended
Count	Count			June 30, 2005			June 30, 2004			Change % Change
75		13,478	All Continuing Operations
			Occupancy		62.4	%		62.6	%					(0.4	)%
			ADR	$	81.28		$	77.80			$	3.49		4.5	%
			RevPAR	$	50.70		$	48.72			$	1.98		4.1	%
73		12,964	Continuing Operations less two hotels closed due to hurricane damage
			Occupancy		62.4	%		62.2	%					0.3	%
			ADR	$	81.28		$	77.08			$	4.21		5.5	%
			RevPAR	$	50.70		$	47.92			$	2.78		5.8	%
			RevPAR Index		99.0	%		100.1	%					(1.1	)%
55		9,717	Continuing Operations less two hotels closed due to hurricane damage and hotels under renovation in the first & second quarters 2004 and 2005
			Occupancy		62.0	%		60.9	%					1.9	%
			ADR	$	79.28		$	75.55			$	3.73		4.9	%
			RevPAR	$	49.16		$	45.97			$	3.19		6.9	%
			RevPAR Index		100.9	%		101.3	%					(0.4	)%
21		3,013	Hotels completing major renovations in 2003 and 2004
			Occupancy		71.1	%		68.1	%					4.5	%
			ADR	$	88.62		$	82.72			$	5.90		7.1	%
			RevPAR	$	63.03		$	56.31			$	6.72		11.9	%
			RevPAR Index		110.6	%		106.9	%					3.5	%
16		1,845	Marriott Hotels
			Occupancy		70.9	%		68.6	%					3.4	%
			ADR	$	87.33		$	82.10			$	5.23		6.4	%
			RevPAR	$	61.93		$	56.32			$	5.61		10.0	%
			RevPAR Index		121.2	%		117.8	%					2.9	%
4		777	Hilton Hotels
			Occupancy		66.2	%		64.4	%					2.8	%
			ADR	$	95.71		$	89.98			$	5.73		6.4	%
			RevPAR	$	63.34		$	57.93			$	5.41		9.3	%
			RevPAR Index		96.5	%		93.4	%					3.3	%
45		8,830	IHG Hotels less two hotels closed due to hurricane damage
			Occupancy		63.0	%		63.1	%					(0.2	)%
			ADR	$	80.40		$	76.49			$	3.91		5.1	%
			RevPAR	$	50.61		$	48.27			$	2.34		4.8	%
			RevPAR Index		96.6	%		99.0	%					(2.4	)%
8		1,512	Other Brands and Independent Hotels
			Occupancy		46.6	%		48.2	%					(3.3	)%
			ADR	$	66.53		$	64.51			$	2.02		3.1	%
			RevPAR	$	30.99		$	31.08			($	0.09	)	(0.3	)%
			RevPAR Index		81.7	%		84.7	%					(3.6	)%

30

Direct operating expenses – Continuing Operations

	Six months ended
	June 30, 2005			June 30, 2004			Increase (decrease)
	(unaudited in thousands)
Direct operating expenses:
Rooms	$	33,127		$	31,814		$	1,313	4.1	%
Food and beverage		24,044			23,768			276	1.2	%
Other		4,029			3,968			61	1.5	%
Total direct operating expenses	$	61,200		$	59,550		$	1,650	2.8	%
% of total revenues		38.8	%		37.4	%

     Direct operating expenses increased $1.7 million or 2.8% in the first six months of 2005 and as a percentage of revenues increased to 38.8% from 37.4% for the same period in 2004. Room expenses on a cost per occupied room (POR) basis were $22.63 in the first six months of 2005 as compared to $20.87 in the same period in 2004. Rooms payroll and related benefits, on an actual POR basis, were $14.02 in the first six months of 2005 as compared to $13.24 in 2004. Other rooms expenses, on an actual POR basis, were $8.61 in the first six months of 2005 as compared to $7.63 in 2004, primarily due to increased costs in linen expense resulting from upgraded linen packages mandated by certain brands, increased guest and operating supplies, and increased guest loyalty program expenses.

Other operating expenses – Continuing Operations

	Six months ended
	June 30, 2005			June 30, 2004			Increase (decrease)
	(unaudited in thousands)
Other operating expenses:
Other hotel operating costs:
General and administrative	$	11,052		$	10,144		$	908		9.0	%
Advertising and promotion		8,217			7,564			653		8.6	%
Franchise fees		10,781			10,810			(29	)	(0.3	)%
Repairs and maintenance		8,955			8,545			410		4.8	%
Utilities		9,410			9,060			350		3.9	%
Other expenses		177			(11	)		188		n/m
Total other hotel operating costs	$	48,592		$	46,112		$	2,480		5.4	%
Property and other taxes, insurance and leases	$	11,499		$	10,747		$	752		7.0	%
Corporate and other		10,528			9,025			1,503		16.7	%
Casualty losses		132			—			132		n/m
Depreciation and amortization		13,524			13,468			56		0.4	%
Impairment of long-lived assets		2,609			—			2,609		n/m
Total other operating expenses	$	86,884		$	79,352		$	7,532		9.5	%
% of total revenues		55.0	%		49.8	%

     Other hotel operating costs increased $2.5 million or 5.4% in the six months ended June 30, 2005 as compared to the same period in 2004 due to the following:

• Hotel general and administrative costs increased $0.9 million or 9.0% primarily as a result of increased costs related to our property management system conversions, an increase in group medical insurance claims, additional payroll costs and an increase in vacation pay accruals; and

• Advertising and promotion costs increased $0.7 million or 8.6% primarily due to the addition of sales personnel and sales programs to promote our newly renovated properties and added costs related to increased group medical insurance claims.

     Property and other taxes, insurance and leases costs increased $0.8 million or 7.0% for the first six months of 2005 primarily as the 2004 expense was reduced by $0.7 million for the settlement of a deferred ground rent obligation.

31

      Corporate and other costs increased $1.5 million or 16.7% primarily due to $0.3 million of severance costs and succession planning professional fees and the $0.9 million write-off of the receivable from the 30% minority owned Holiday Inn City Center Columbus, Ohio hotel, which we do not consolidate on our financial statements as it is accounted for under the equity method of accounting.

      Charges for the impairment of long-lived assets of $2.6 million represent a $0.2 million write-off of the net book value of assets that were replaced in the first six months of 2005, a $1.6 million impairment charge on the Holiday Inn Lawrence hotel due to a reduced fair value appraisal on this hotel, and a $0.9 million on the Holiday Inn Hamburg, New York hotel due to its undiscounted cash flows being less than its carrying value and the resulting broker opinion of value requiring a write-down of the asset to its estimated fair value.

Non-operating income (expenses) – Continuing Operations

	Six months ended
	June 30, 2005			June 30, 2004			Increase (decrease)
	(unaudited in thousands)
Non-operating income (expenses):
Business interruption proceeds	$	1,729		$	—		$	1,729		n/m
Interest income and other		225			109			116		106.4	%
Interest expense and other financing costs:
Preferred Stock dividend		—			(8,518	)		(8,518	)	(100.0	)%
Interest expense		(13,894	)		(27,531	)		(13,637	)	(49.5	)%
Loss on preferred stock redemption		—			1,592			(1,592	)	(100.0	)%
Minority interests		(25	)		218			(243	)	(111.5	)%

     Business interruption proceeds of $1.7 million represents the amount received for business interruption claims from September 2004 to December 2004 on the two hotels that are closed for hurricane renovations.

     The Preferred Stock dividend relates to the 12.25% annual dividend on the Preferred Stock issued on November 25, 2002. Preferred Stock dividend expense is zero in the first six months of 2005 as the Preferred Stock was redeemed in its entirety on July 26, 2004.

     Interest expense decreased $13.6 million for the first six months of 2005 as compared to the same period in 2004 because the 2004 expenses reflect the costs associated with the debt refinance we completed on June 25, 2004 and the resultant write-off of the previously capitalized deferred loan costs.

     Loss on preferred stock redemption costs of $1.6 million in 2004 represent the 4% prepayment premium on the Preferred Stock that was exchanged for common stock immediately following the consummation of our equity offering on June 25, 2004.

Results of Operations — Discontinued Operations

32

     During second quarter 2005, we sold one hotel for a gross sales price of $4.0 million and applied the net proceeds to pay down debt. For the six months ended June 30, 2005, we sold four hotels for a gross sales price of $13.5 million, and applied the net proceeds to pay down debt. The aggregate gain from the sale of the assets in 2005 was $2.0 million.

     Impairment was recorded on assets held for sale in the three and six months ended June 30, 2005 and June 30, 2004. The $1.8 million impairment of long-lived assets held for sale recorded in the second quarter 2005 represents the write-down of two hotels held for sale, the net book value of assets held for sale that were replaced in the first quarter 2005 and adjustments to recapture previously recorded impairment on two hotels. The fair values of the assets held for sale are based on the estimated selling prices less estimated costs to sell. We determine the estimated selling prices in conjunction with our real estate brokers. The estimated selling costs are based on our experience with similar asset sales. We record impairment charges and write down respective hotel asset carrying values if their carrying values exceed the estimated selling prices less costs to sell. As a result of these evaluations, during the second quarter of 2005, we recorded impairment losses as follows:

a)	an additional $0.6 million on the Holiday Inn Rolling Meadows, IL to reflect the lowered estimated selling price of the hotel; and
b)	an additional $1.3 million on the Holiday Inn St. Louis North, MO to reflect the reduced selling price on this hotel.

     The impairment of long-lived assets held for sale of $0.5 million recorded in second quarter 2004 represents the write-down of two hotels held for sale. As a result of these evaluations, during the first quarter of 2004 we recorded impairment losses as follows:

a)	$0.2 million on the Downtown Plaza Hotel Cincinnati, OH hotel to adjust for the further reduction in the estimated selling price of this hotel; and
b)	$0.3 million on the Holiday Inn Morgantown, WV to adjust for the further reduction in the estimated selling price of this hotel.

Income taxes

     At December 31, 2004, we had available net operating loss carryforwards of approximately $314 million for federal income tax purposes, including an estimated current year tax loss of $75 million, which will expire in 2005 through 2024. The recently concluded equity offering resulted in an Internal Revenue Code (IRC) Section 382 change of ownership, limiting the Company’s ability to utilize these losses. As a result of the application of IRC Section 382, our ability to use these net operating loss carryforwards is subject to an annual limitation of approximately $8.3 million. Due to these and other limitations, a portion or all of the net operating loss carryforwards will likely expire unused. At December 31, 2004, we established a valuation allowance of $145.2 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, amortization and impairment 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. Preferred stock dividends are treated as interest expense and, hence, are added back to loss from continuing operations to derive EBITDA. We also believe that EBITDA provides pertinent information to investors and is an additional indicator of our operating performance.

33

     The following table presents EBITDA from continuing operations, a non-GAAP measure, for the three and six months ended June 30, 2005 and June 30, 2004, and provides a reconciliation with the income (loss) from continuing operations, a GAAP measure:

	Three months ended						Six months ended
	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
	(Unaudited in thousands)
Continuing operations:
Income (loss) from continuing operations	$	3,655		$	(11,427	)	$	(2,295	)	$	(17,377	)
Depreciation and amortization		6,867			6,797			13,524			13,468
Interest income		(205	)		(80	)		(425	)		(128	)
Interest expense		6,912			19,507			13,894			27,531
Preferred stock dividends		—			4,233			—			8,518
Loss on preferred stock redemption		—			1,592			—			1,592
Provision for income taxes — continuing operations		67			76			135			151
EBITDA from continuing operations	$	17,296		$	20,698		$	24,833		$	33,755

Income (loss) from continuing operations, and EBITDA from continuing operations, include the following items:

	Three months ended				Six months ended
	June 30, 2005		June 30, 2004		June 30, 2005		June 30, 2004
	(Unaudited in thousands)
Post-emergence Chapter 11 expenses, included in corporate and other on our consolidated statement of operations	$	52	$	135	$	162	$	330
Impairment loss		954		—		2,609		—
Casualty losses - 2004 hurricane damage		28		—		132		—
Write-off of receivable from non-consolidated hotel		946		—		946		—
Write-off of investment in joint venture for non-consolidated hotel		170		—		170		—
Guaranty payments on Kansas properties		500		—		500		—

Additional Financial Information Regarding Quarterly Results of Our Continuing Operations

     The following table presents certain quarterly data for our continuing operations for the eight quarters ended June 30, 2005. The data have been derived from our unaudited condensed consolidated financial statements for the periods indicated. Our unaudited consolidated financial statements have been prepared on substantially the same basis as our audited consolidated financial statements and include all adjustments, consisting primarily of normal recurring adjustments we consider to be necessary to present fairly this information when read in conjunction with our consolidated financial statements. The results of operations for certain quarters may vary from the amounts previously reported on our Forms 10-Q filed for prior quarters due to timing of our identification of assets held for sale during the course of the previous eight quarters. The allocation of results of operations between our continuing operations and discontinued operations, at the time of the quarterly filings, was based on the assets held for sale, if any, as of the dates of those filings. This table represents the comparative quarterly operating results for the 75 hotels classified in continuing operations at June 30, 2005:

34

	Three months ended
	6/30/05			3/31/05			12/31/04			9/30/04			6/30/04			3/31/04			12/31/03			9/30/03
	($ in thousands)
Revenues:
Rooms	$	64,497		$	54,461		$	50,672		$	62,660		$	62,522		$	56,050		$	50,726		$	60,424
Food and beverage		18,817			14,901			19,258			16,656			19,167			16,227			18,513			16,092
Other		2,671			2,492			2,294			2,752			2,760			2,701			2,510			2,771
		85,985			71,854			72,224			82,068			84,449			74,978			71,749			79,287
Operating expenses:
Direct:
Rooms		17,632			15,494			15,648			17,895			16,357			15,457			15,441			16,945
Food and beverage		13,062			10,982			13,936			12,328			12,477			11,289			12,307			11,773
Other		2,098			1,930			1,842			2,052			2,038			1,931			2,132			1,968
		32,792			28,406			31,426			32,275			30,872			28,677			29,880			30,686
		53,193			43,448			40,798			49,793			53,577			46,301			41,869			48,601
Other operating expenses:
Other hotel operating costs		24,693			23,900			22,763			24,457			22,916			23,194			21,677			23,206
Property and other taxes, insurance and leases		5,810			5,690			5,037			5,416			5,187			5,561			5,118			5,929
Corporate and other		5,870			4,658			3,451			4,412			4,691			4,335			4,537			4,127
Casualty gains and losses		28			104			295			2,019			—			—			—			—
Depreciation and amortization		6,867			6,658			6,523			6,955			6,797			6,671			6,982			7,308
Impairment of long-lived assets		954			1,655			4,878			—			—			—			7,062			2
Other operating expenses		44,222			42,665			42,947			43,259			39,591			39,761			45,376			40,572
		8,971			783			(2,149	)		6,534			13,986			6,540			(3,507	)		8,029
Other income (expenses):
Business interruption insurance proceeds		1,729			—			—			—			—			—			—			—
Interest income and other		54			171			360			212			66			43			486			114
Interest expense and other financing costs:
Preferred stock dividend		—			—			—			(866	)		(4,233	)		(4,285	)		(4,065	)		(4,027	)
Other interest expense		(6,912	)		(6,983	)		(7,456	)		(7,264	)		(19,507	)		(8,024	)		(7,583	)		(7,523	)
Gain on asset dispositions		—			—			—			—			—			—			444			—
Loss on preferred stock redemption		—			—			—			(4,471	)		(1,592	)		—			—			—
Income (loss) before income taxes, reorganization items and minority interests		3,842			(6,029	)		(9,245	)		(5,855	)		(11,280	)		(5,726	)		(14,225	)		(3,407	)
Reorganization items		—			—			—			—			—			—			647			—
Income (loss) before income taxes and minority interest		3,842			(6,029	)		(9,245	)		(5,855	)		(11,280	)		(5,726	)		(13,578	)		(3,407	)
Minority interests		(120	)		145			407			503			(71	)		(147	)		1,412			99
Income (loss) before income taxes — continuing operations		3,722			(5,884	)		(8,838	)		(5,352	)		(11,351	)		(5,873	)		(12,166	)		(3,308	)
(Provision) benefit for income taxes — continuing operations		(67	)		(67	)		259			(337	)		(76	)		(76	)		48			(76	)
Income (loss) from continuing operations		3,655			(5,951	)		(8,579	)		(5,689	)		(11,427	)		(5,949	)		(12,118	)		(3,384	)
Discontinued operations:
(Loss) income from discontinued operations before income taxes		(1,781	)		(1,134	)		(5,185	)		1,952			4,180			(1,136	)		(4,388	)		(262	)
Income tax benefit (provision)		—			—			—			—			—			—			—			—
(Loss) income from discontinued operations		(1,781	)		(1,134	)		(5,185	)		1,952			4,180			(1,136	)		(4,388	)		(262	)
Net income (loss)		1,874			(7,085	)		(13,764	)		(3,737	)		(7,247	)		(7,085	)		(16,506	)		(3,646	)
Preferred stock dividend		—			—			—			—			—			—			—			—
Net income (loss) attributable to common stock	$	1,874		$	(7,085	)	$	(13,764	)	$	(3,737	)	$	(7,247	)	$	(7,085	)	$	(16,506	)	$	(3,646	)

EBITDA Reconciliation of Continuing Operations

     The following table is a reconciliation of the quarterly EBITDA, a non-GAAP measure, for the past eight quarters for the hotels classified as continuing operations as of June 30, 2005, reflecting the reclassification of certain hotels from continuing operations to discontinued operations as discussed in connection with the preceding table:

	Three months ended
	6/30/05			3/31/05			12/31/04			9/30/04			6/30/04			3/31/04			12/31/03			9/30/03
	($ in thousands)
Continuing operations:
Income (loss) from continuing operations	$	3,655		$	(5,951	)	$	(8,579	)	$	(5,689	)	$	(11,427	)	$	(5,949	)	$	(12,118	)	$	(3,384	)
Depreciation and amortization		6,867			6,658			6,523			6,955			6,797			6,670			6,982			7,308
Interest income		(205	)		(220	)		(346	)		(176	)		(80	)		(48	)		(196	)		(72	)
Interest expense		6,912			6,982			7,456			7,264			19,507			8,025			7,583			7,523
Preferred stock dividends		—			—			—			866			4,233			4,285			4,065			4,027
Loss on preferred stock redemption		—			—			—			4,471			1,592			—			—			—
Provision (benefit) for income taxes — continuing operations		67			68			(259	)		337			76			76			(48	)		76
EBITDA from continuing operations	$	17,295		$	7,537		$	4,795		$	14,028		$	20,698		$	13,059		$	6,268		$	15,478

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Income (loss) from continuing operations, and EBITDA from continuing operations, include the following items:

	Three Months Ended
	6/30/05		3/31/05		12/31/04			9/30/04		6/30/04		3/31/04		12/31/03			9/30/03
	($ in thousands)
Post-emergence Chapter 11 expenses, included in corporate and other on consolidated statement of operations	$	52	$	110	$	61		$	67	$	135	$	195	$	1,289		$	320
Reorganization expenses		—		—		—			—		—		—		(647	)		—
Impairment loss		954		1,655		4,878			—		—		—		7,062			2
Gain on asset dispositions		—		—		—			—		—		—		(444	)		—
Casualty losses - 2004 hurricane damage		28		104		294			2,019		—		—		—			—
Adjustments to bankruptcy claims reserves		—		—		(38	)		—		—		—		(302	)		—
Write-off of receivable from non-consolidated hotel		946		—		—			—		—		—		—			—
Write-off of investment in subsidiary for non-consolidated hotel		170		—		—			—		—		—		—			—
Guaranty payments on Kansas properties		500		—		—			—		—		—		—			—

Hotel data by market segment and region

     Hotel data by market segment

     The following two tables present data on occupancy, ADR and RevPAR for hotels in our portfolio (including one hotel that we do not consolidate) for the three and six months ended June 30, 2005 and June 30, 2004, by market segment and the capital expenditures for the six months ended June 30, 2005. The following tables exclude three of our hotels because of year over year comparative issues as noted below:

• The Springhill Suites by Marriott hotel in Pinehurst, North Carolina (acquired in December 2004) is excluded since we do not have comparative figures for the three months ended June 30, 2004;

• The Holiday Inn Melbourne, Florida hotel since it is currently closed for hurricane renovations; and

• The Crowne Plaza West Palm Beach, Florida hotel since it is currently closed for hurricane renovations.

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Combined Continuing and Discontinued Operations — 77 hotels (excludes Pinehurst, West Palm Beach and Melbourne hotels)

	Capital expenditures		Three months ended						Six months ended
	Six Months Ended		June 30, 2005			June 30, 2004			June 20, 2005			June 30, 2004
	June 30, 2005
	(in thousands $)
Upper Upscale
Number of properties	$	252		4			4			4			4
Number of rooms				825			825			825			825
Occupancy				72.4	%		72.0	%		69.7	%		68.0	%
Average daily rate			$	100.82		$	95.43		$	100.55		$	94.87
RevPAR			$	73.02		$	68.74		$	70.11		$	64.53
Upscale
Number of properties		6,912		18			16			18			16
Number of rooms				3,322			2,779			3,322			2,779
Occupancy				70.2	%		67.7	%		67.3	%		67.1	%
Average daily rate			$	87.31		$	85.14		$	88.52		$	85.58
RevPAR			$	61.31		$	57.67		$	59.57		$	57.46
Midscale with Food & Beverage
Number of properties		16,498		43			45			43			45
Number of rooms				8,432			8,857			8,432			8,857
Occupancy				63.0	%		63.2	%		58.3	%		59.4	%
Average daily rate			$	78.83		$	75.95		$	76.38		$	73.49
RevPAR			$	49.69		$	48.02		$	44.50		$	43.69
Midscale without Food & Beverage
Number of properties		1,434		9			9			9			9
Number of rooms				1,067			1,067			1,067			1,067
Occupancy				67.6	%		63.5	%		63.9	%		60.3	%
Average daily rate			$	65.92		$	60.99		$	65.22		$	61.13
RevPAR			$	44.57		$	38.76		$	41.71		$	36.85
Economy
Number of properties		617		1			0			1			0
Number of rooms				126			0			126			0
Occupancy				54.5	%		0.0	%		60.3	%		0.0	%
Average daily rate			$	61.33		$	0.00		$	66.37		$	0.00
RevPAR			$	33.43		$	0.00		$	40.04		$	0.00
Independent Hotels
Number of properties		14		2			3			2			3
Number of rooms				291			535			291			535
Occupancy				41.5	%		43.4	%		35.7	%		39.1	%
Average daily rate			$	68.87		$	67.19		$	66.98		$	63.18
RevPAR			$	28.61		$	29.14		$	23.93		$	24.71
All Hotels
Number of properties		25,727		77			77			77			77
Number of rooms				14,063			14,063			14,063			14,063
Occupancy				65.1	%		63.9	%		61.0	%		60.8	%
Average daily rate			$	81.14		$	77.81		$	80.07		$	76.35
RevPAR			$	52.83		$	49.72		$	48.88		$	46.40

Continuing Operations — 73 hotels (excludes Pinehurst, West Palm Beach, Melbourne and held for sale hotels)

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	Capital expenditures		Three months ended						Six months ended
	Six Months Ended		June 30, 2005			June 30, 2004			June 20, 2005			June 30, 2004
	June 30, 2005
	(in thousands $)
Upper Upscale
Number of properties	$	252		4			4			4			4
Number of rooms				825			825			825			825
Occupancy				72.4	%		72.0	%		69.7	%		68.0	%
Average daily rate			$	100.82		$	95.43		$	100.55		$	94.87
RevPAR			$	73.02		$	68.74		$	70.11		$	64.53
Upscale
Number of properties		6,912		18			16			18			16
Number of rooms				3,322			2,779			3,322			2,779
Occupancy				70.2	%		67.7	%		67.3	%		67.1	%
Average daily rate			$	87.31		$	85.14		$	88.52		$	85.58
RevPAR			$	61.31		$	57.67		$	59.57		$	57.46
Midscale with Food & Beverage
Number of properties		16,363		40			41			40			41
Number of rooms				7,607			7,639			7,607			7,639
Occupancy				63.7	%		65.5	%		59.3	%		62.2	%
Average daily rate			$	80.54		$	76.64		$	77.76		$	74.11
RevPAR			$	51.33		$	50.23		$	46.09		$	46.07
Midscale without Food & Beverage
Number of properties		1,172		8			6			8			6
Number of rooms				926			692			926			692
Occupancy				70.2	%		63.3	%		67.8	%		60.8	%
Average daily rate			$	67.16		$	63.51		$	66.29		$	63.90
RevPAR			$	47.17		$	40.20		$	44.91		$	38.82
Economy
Number of properties		617		1			0			1			0
Number of rooms				126			0			126			0
Occupancy				54.5	%		0.0	%		60.3	%		0.0	%
Average daily rate			$	61.33		$	0.00		$	66.37		$	0.00
RevPAR			$	33.43		$	0.00		$	40.04		$	0.00
Independent Hotels
Number of properties		14		2			6			2			6
Number of rooms				291			1,162			291			1,162
Occupancy				41.5	%		45.1	%		35.7	%		43.1	%
Average daily rate			$	68.87		$	66.50		$	66.98		$	62.79
RevPAR			$	28.61		$	29.97		$	23.93		$	27.10
All Hotels
Number of properties		25,330		73			73			73			73
Number of rooms				13,097			13,097			13,097			13,097
Occupancy				65.8	%		64.5	%		62.0	%		61.8	%
Average daily rate			$	82.45		$	78.55		$	81.20		$	76.96
RevPAR			$	54.26		$	50.65		$	50.39		$	47.59

     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, Holiday Inn, Holiday Inn Select, and Quality Inn;

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

• Economy: Park Inn

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          Hotel data by region

     The following two tables present data on occupancy, ADR and RevPAR for hotels in our portfolio (including one hotel that we do not consolidate) for the three and six months ended June 30, 2005 and June 30, 2004, by region and the capital expenditures for the six months ended June 30, 2005. The following tables exclude three of our hotels because of year over year comparative issues as noted below:

• The Springhill Suites by Marriott hotel in Pinehurst, North Carolina (acquired in December 2004) is excluded since we do not have comparative figures for the six months ended June 30, 2004;

• The Holiday Inn Melbourne, Florida hotel since it is currently closed for hurricane renovations; and

• The Crowne Plaza West Palm Beach, Florida hotel since it is currently closed for hurricane renovations.

     Combined Continuing and Discontinued Operations — 77 hotels (excludes Pinehurst, West Palm Beach and Melbourne hotels)

	Capital expenditures		Three months ended						Six months ended
	Six Months Ended		June 30, 2005			June 30, 2004			June 20, 2005			June 30, 2004
	June 30, 2005
	(in thousands $)
Northeast Region
Number of properties	$	11,577		28			28			28			28
Number of rooms				5,155			5,155			5,155			5,155
Occupancy				68.5	%		69.2	%		62.4	%		64.0	%
Average daily rate			$	90.31		$	85.60		$	87.92		$	83.30
RevPAR			$	61.82		$	59.23		$	54.89		$	53.34
Southeast Region
Number of properties		10,699		26			26			26			26
Number of rooms				4,297			4,297			4,297			4,297
Occupancy				62.4	%		60.4	%		58.8	%		57.7	%
Average daily rate			$	73.90		$	71.68		$	70.84		$	67.54
RevPAR			$	46.12		$	43.29		$	41.63		$	38.99
Midwest Region
Number of properties		962		16			16			16			16
Number of rooms				3,295			3,295			3,295			3,295
Occupancy				63.3	%		62.1	%		57.8	%		57.2	%
Average daily rate			$	73.98		$	71.54		$	74.56		$	72.30
RevPAR			$	46.81		$	44.43		$	43.09		$	41.38
West Region
Number of properties		2,488		7			7			7			7
Number of rooms				1,316			1,316			1,316			1,316
Occupancy				65.4	%		59.2	%		71.2	%		66.7	%
Average daily rate			$	83.49		$	79.03		$	89.23		$	83.82
RevPAR			$	54.61		$	46.77		$	63.54		$	55.90
All Hotels
Number of properties		25,727		77			77			77			77
Number of rooms				14,063			14,063			14,063			14,063
Occupancy				65.1	%		63.9	%		61.0	%		60.8	%
Average daily rate			$	81.14		$	77.81		$	80.07		$	76.35
RevPAR			$	52.83		$	49.72		$	48.88		$	46.40

Continuing Operations — 73 hotels (excludes Pinehurst, West Palm Beach, Melbourne and held for sale hotels)

39

	Capital expenditures
	Six Months Ended
	June 30, 2005		Three months ended						Six months ended
	(in thousands $)		June 30, 2005			June 30, 2004			June 20, 2005			June 30, 2004
Northeast Region
Number of properties	$	11,577		28			28			28			28
Number of rooms				5,155			5,155			5,155			5,155
Occupancy				68.5	%		69.2	%		62.4	%		64.0	%
Average daily rate			$	90.31		$	85.60		$	87.92		$	83.30
RevPAR			$	61.82		$	59.23		$	54.89		$	53.34
Southeast Region
Number of properties		10,319		23			23			23			23
Number of rooms				3,753			3,753			3,753			3,753
Occupancy				63.4	%		60.7	%		60.1	%		58.9	%
Average daily rate			$	75.29		$	72.51		$	72.11		$	68.21
RevPAR			$	47.74		$	43.99		$	43.36		$	40.15
Midwest Region
Number of properties		945		15			15			15			15
Number of rooms				2,873			2,873			2,873			2,873
Occupancy				64.4	%		63.4	%		59.7	%		59.5	%
Average daily rate			$	76.20		$	72.09		$	76.17		$	72.50
RevPAR			$	49.05		$	45.74		$	45.45		$	43.15
West Region
Number of properties		2,488		7			7			7			7
Number of rooms				1,316			1,316			1,316			1,316
Occupancy				65.4	%		59.2	%		71.2	%		66.7	%
Average daily rate			$	83.49		$	79.03		$	89.23		$	83.82
RevPAR			$	54.61		$	46.77		$	63.54		$	55.90
All Hotels
Number of properties		25,330		73			73			73			73
Number of rooms				13,097			13,097			13,097			13,097
Occupancy				65.8	%		64.5	%		62.0	%		61.8	%
Average daily rate			$	82.45		$	78.55		$	81.20		$	76.96
RevPAR			$	54.26		$	50.65		$	50.39		$	47.59

     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 or the failure of an individual carrier that does business with us also could materially and adversely affect the ability to collect on accounts receivable, and hence our liquidity. A further downturn in the airline industry or the failure of an individual carrier that does business with us could also affect revenues by decreasing the aggregate levels of demand for our hotels by airline industry

40

employees. At June 30, 2005, airline receivables represented approximately 14.8% of our accounts receivable net of allowances.

     Between November 1, 2003 and August 1, 2005, we sold 18 hotels, one office building, and two land parcels and have another four hotels and one land parcel classified as assets held for sale. The aggregate sales price from the sale of the 18 hotels, the office building and two land parcels sold between November 1, 2003 and August 1, 2005, was $88.6 million and of the net proceeds $70.2 million was used to pay down debt and $11.9 million 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, 2004.

     In June 2004, we completed an offering to the public of our common stock, the purpose of which was 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 closed on the $370 million Merrill Lynch Mortgage Lending, Inc. refinance in order to extend maturities and to convert a substantial portion of floating rate debt to fixed rate debt.

     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.

     On June 30, 2005 we completed the final distribution of shares and cash to general unsecured creditors in connection with the conclusion of our bankruptcy claim distribution process. Because our final distribution was less than the liability established at the time of the stock offering to pay such claims, we have relieved the excess liability and retired the stock issued to settle the claims. We do not anticipate any additional material charges related to our Chapter 11 bankruptcy filing.

     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 reported as “liabilities related to assets held for sale” in current liabilities, including debt that would otherwise be classified as long-term liabilities in the ordinary course of business.

     At June 30, 2005, we had a working capital deficit (current assets less current liabilities) of $11.1 million compared to a working capital surplus of $9.5 million at December 31, 2004. The decrease in working capital was primarily due to a decrease in current assets as we used cash for our renovation program and an increase in current liabilities of $15.8 million related to insurance advances received from our insurance carrier for property damage claims. In 2004 with the completion of our common stock offering, we received net proceeds that approximated $175.9 million, of which approximately $25.7 million was used to fund reserve accounts with Merrill Lynch Mortgage pursuant to requirements in our June 2004 Refinancing Debt agreements. A reserve of $22.7 million was funded for capital expenditures and a reserve of $3.0 million was funded for requirements related to a hotel ground lease that was ultimately resolved at approximately $1.8 million. On July 26, 2004, we used approximately $114.0 million of the proceeds from our equity offering to redeem all of our outstanding shares of Series A Preferred Stock, including accrued dividends and a 4% prepayment premium. Approximately $2.2 million in cash replaced the 79,278 shares of Preferred Stock held in the disputed claims reserve. As of June 30, 2005, we completed our final distribution related to our bankruptcy filing and relieved the excess liability related to our bankruptcy claims and credited Additional Paid in Capital.

41

     During the three and six months ended June 30, 2005 we spent approximately $22.3 million and $41.9 million, respectively, on capital expenditures. For the remainder of 2005 we expect to spend an additional $47.2 million on our continuing operations hotels, of which $23.5 million represents committed hurricane repair capital expenditures, much of which we anticipate will be covered by insurance proceeds, 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 short and long-term cash needs over the next 24 months 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, including the sale of unencumbered non-core assets, 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 expenses and focus on the completion of our asset divesture program. 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, 2004, 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 $13.7 million for the first six months of 2005 as compared to net cash provided by operating activities of $14.7 million for the first six months of 2004.

  Investing Activities

     Net cash used in investing activities was $8.4 million for the first six months of 2005 as compared to net cash used in investing activities of $3.2 million in 2004. Capital improvements increased $27.9 million, proceeds from our dispositions program decreased by $21.0 million, withdrawals from capital expenditure escrows increased by $29.1 million as compared to the same period last year, and we received $15.8 million in insurance advances since January 1, 2005 to cover property damage to our hotels.

  Financing activities

     Net cash used in financing activities in the first six months of 2005 was $23.4 million, as compared to $147.8 million net cash provided by financing activities in 2004. Principal payments on long term debt were $26.4 million, $3.2 million of proceeds received with the financing of our Pinehurst, NC hotel, and $0.2 million for payments of deferred loan costs on this financing. Net cash provided by financing activities in 2004 is primarily the result of the equity offering and loan refinancing completed in June 2004.

Debt and Contractual Obligations

     See discussion of our Debt and Contractual Obligations in our Form 10-K for the year ended December 31, 2004 and Notes 6 and 7 to our Consolidated Financial Statements in this report.

Off Balance Sheet Arrangements

     We have no off balance sheet arrangements.

42

Market Risk

     We are exposed to interest rate risks on our variable rate debt. At June 30, 2005 and December 31, 2004, we had outstanding variable rate debt of approximately $83.7 million and $102.7 million, respectively.

     On June 25, 2004, we refinanced both the Merrill Lynch Exit Financing and Lehman Financing. The new refinancing is organized in four fixed rate pools and one floating rate pool. In order to manage our exposure to fluctuations in interest rates with the floating pool, we entered into an interest rate cap agreement, which allowed us to obtain this financing at a floating rate and effectively cap the interest rate at LIBOR of 5.00% plus 3.40%. When LIBOR exceeds 5.00%, the contract requires 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 floating pool for increases in LIBOR up to 5.00%, but we are not exposed to increases in LIBOR above 5.00% because settlements from the interest rate caps would offset the incremental interest expense. The notional principal amount of the interest rate cap outstanding was $110.0 million at June 30, 2005.

     The fair value of the interest rate cap related to Refinanced Debt as of June 30, 2005 and December 31, 2004, was $1,500 and $31,000, respectively. The fair value of the interest rate cap was recognized on the balance sheet in other assets. Adjustments to the carrying value of the interest rate cap are reflected in interest expense.

     As a result of having the interest rate cap, we believe that our interest rate risk at June 30, 2005 and December 31, 2004 is minimal. The impact on annual results of operations of a hypothetical one-point interest rate reduction on the interest rate cap as of June 30, 2005 would be a reduction in net income of approximately $1,500. This derivative financial instrument is viewed as a risk management tool. We do not use derivative financial instruments for trading or speculative purposes. However, we have not elected the hedging requirements of SFAS No. 133.

     At June 30, 2005, approximately $83.7 million of debt instruments outstanding were subject to changes in the LIBOR. 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 $0.2 million. The fair value of the fixed rate mortgage debt (book value $338.5. million) at June 30, 2005 is estimated at $340.3 million.

     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 June 30, 2005 and December 31, 2004 would be approximately $10.4 million and $12.1 million, respectively.

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 economic recovery 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;

43

• 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;

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

• Our ability to complete capital improvement projects on budget and on time;

• Seasonality of the hotel business;

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

• The effects of unpredictable weather such as hurricanes;

• 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;

• The effect of the majority of our assets being encumbered on our borrowings and future growth;

• Our ability to meet the continuing listing requirements of the Securities and Exchange Commission and 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;

• 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, 2004; and

• Our ability to collect insurance proceeds for both property damage and business interruption claims related to damage caused by hurricanes to certain hotels.

     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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

44

     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 June 30, 2005, 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.

     b) During the quarter ended June 30, 2005, there were no changes in our internal control 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. We completed our final bankruptcy distribution on June 30, 2005 and any excess amounts that remained in the reserve for allowed claims were credited to Additional Paid-in Capital. We do not anticipate any material charges related to the bankruptcy filing in the future.

Item 6. Exhibits

     (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.

45

SIGNATURES

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

	LODGIAN, INC.
Date: August 9, 2005	By:	/s/ W. THOMAS PARRINGTON
		W. Thomas Parrington
		Chief Executive Officer
Date: August 9, 2005	By:	/s/ LINDA BORCHERT PHILP
		Linda Borchert Philp
		Executive Vice President and
		Chief Financial Officer

46

EXHIBIT INDEX

Exhibit
Number	Description
1.1	Disclosure Statement for Joint Plan of Reorganization of Lodgian, Inc., et al (other than the CCA Debtors), Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code, dated September 26, 2002) (Incorporated by reference to Exhibit 10.6 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.2	First Amended Joint Plan of Reorganization of Lodgian, Inc., et al (Other than CCA Debtors), Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code, dated September 26, 2002) (Incorporated by reference to Exhibit 10.7 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.3	Order Confirming First Amended Joint Plan of Reorganization of Lodgian, Inc., et al issued on November 5, 2002 by the United States Bankruptcy Curt for the Southern District of New York (Incorporated by reference to Exhibit 10.8 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.4	Disclosure Statement for Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. Together with the Official Committee of Unsecured Creditors Under Chapter 11 of the Bankruptcy Code (Incorporated by reference to Exhibit 10.13.1 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.5	Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code (Incorporated by reference to Exhibit 10.13.2 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.6	Order Confirming Joint Plan of Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code (Incorporated by reference to Exhibit 10.13.3 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
1.7	Post Confirmation Order and Notice for Joint Plan of Reorganization of Impac Hotels III, L.L.C. Together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code (Incorporated by reference to Exhibit 10.13.4 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
3.1	Amended and Restated Certificate of Incorporation of Lodgian, Inc. (Incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-113410), filed on June 6, 2004).
3.2	Amended and Restated Bylaws of Lodgian, Inc. (Incorporated by reference to Exhibit 3.4 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
4.1	Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-113410), filed on June 6, 2004).
4.2	Class A Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia Bank, N.A. (Incorporated by reference to Exhibit 10.9 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
4.3	Class B Warrant Agreement, dated as of November 25, 2002, between Lodgian, Inc. and Wachovia Bank, N.A. (Incorporated by reference to Exhibit 10.10 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).

47

Exhibit
Number	Description
4.4	Registration Rights Agreement, dated as of November 25, 2002, between Lodgian, Inc. and the other signatories thereto (Incorporated by reference to Exhibit 10.11 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
4.5	Preferred Share Exchange Agreement, dated June 22, 2004, by and among Lodgian, Inc. and the record and/or beneficial stockholders as signatories thereto. (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
4.6	Registration Rights Agreement, dated June, dated June 22, 2004, by and among Lodgian, Inc. and the signatories thereto. (Incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.1	Loan Agreement, dated as of January 31, 1995, by and among Column Financial, Inc., Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motels Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and Moon Airport Hotel, Inc. (Incorporated by reference to Exhibit 10.1.1 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.2	Promissory Note, in original amount of $60.5 million, dated as of January 31, 1995, by Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motels Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and Moon Airport Hotel, Inc., in favor of Column Financial, Inc. (Incorporated by reference to Exhibit 10.1.2 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.3	Lease Agreement, dated April 7, 1997, by and between CSB-Georgia Limited Partnership and Impac Hotel Group, L.L.C. (Incorporated by reference to Exhibit 10.14.1 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.4	First Amendment to Lease Agreement, dated as of May 8, 1998, by and between Cousins LORET Venture, L.L.C. and Impac Hotel Group, L.L.C. (Incorporated by reference to Exhibit 10.14.2 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.5	Second Amendment to Lease Agreement, dated as of June 7, 2000, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc. (Incorporated by reference to Exhibit 10.14.3 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.6	Third Amendment to Lease Agreement, dated as of April 1, 2002, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc. (Incorporated by reference to Exhibit 10.14.4 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.7	Fourth Amendment to Lease Agreement, dated as of April 28, 2003, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc. (Incorporated by reference to Exhibit 10.14.5 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.8	Fifth Amendment to Lease Agreement, dated as of December 23, 2003, by and between Cousins LORET Venture, L.L.C. and Lodgian, Inc. (Incorporated by reference to Exhibit 10.14.6 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.9	Sixth Amendment to Lease Agreement, dated as of July 11, 2005, by and between ND Properties, Inc. and Lodgian, Inc.**
10.10	Loan and Security Agreement (Floating Rate), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.1.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.11	Promissory Note A in the original amount of $72,000,000.00, dated as of June 25, 2004, by the

48

Exhibit
Number	Description
	Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.1.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.12	Promissory Note B in the original amount of $38,000,000, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.1.3 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.13	Loan and Security Agreement (Fixed Rate #1), dated as of June 25, 2004, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.2.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.14	Promissory Note in the original amount of $63,801,000.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.2.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.15	Loan and Security Agreement (Fixed Rate #2), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.3.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.16	Promissory Note in the original amount of $67,864,000.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.3.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.17	Loan and Security Agreement (Fixed Rate #3), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.4.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.18	Promissory Note in the original amount of $66,818,500.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.4.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.19	Loan and Security Agreement (Fixed Rate #4), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.5.1 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.20	Promissory Note in the original amount of $61,516,500.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc. (Incorporated by reference to Exhibit 10.5.2 to the Company’s Quarterly Report for the period ended June 30, 2004 (File No. 1-14537), filed on August 16, 2004).
10.21	Employment Agreement with W. Thomas Parrington, dated December 18, 2003 (Incorporated by reference to Exhibit 10.12 to the Company’s Annual Report for the period ended December 31, 2003 (File No. 1-14537), filed on March 9, 2004).
10.22	Amendment to Employment Agreement between, Lodgian, Inc. and W. Thomas Parrington, dated August 3, 2005.**
10.23	Restricted Unit Award Agreement with W. Thomas Parrington, dated as of July 15, 2003 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.24	Restricted Unit Award Agreement with W. Thomas Parrington, dated as of April 9, 2004 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report for the period ended

49

Exhibit
Number	Description
	March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.25	Letter Agreement, dated January 21, 2005, between Thomas W. Parrington and Lodgian, Inc. related to Mr. Parrington’s waiver of his 2004 annual performance bonus. (Incorporated by reference to Exhibit 10.26 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.26	Employment Agreement between Lodgian, Inc. and Daniel E. Ellis, dated May 2, 2004 (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.27	Employment Agreement between Lodgian, Inc. and Manuel E. Artime, dated May 10, 2004 (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.28	Release Agreement, dated January 31, 2005, between Manuel E. Artime and Lodgian, Inc. (Incorporated by reference to Exhibit 10.29 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.29	Employment Agreement between Lodgian, Inc. and Michael W. Amaral, dated May 4, 2004 (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.30	Employment Agreement between Lodgian, Inc. and Samuel J. Davis, dated May 14, 2004 (Incorporated by reference to Exhibit 10.19 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (Registration Number 333-113410), filed with the Commission on June 4, 2004).
10.31	Executive Employment Agreement between Lodgian, Inc. and Linda B. Philp, dated February 7, 2005. (Incorporated by reference to Exhibit 10.32 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.32	Stock Option Award Agreement, dated January 31, 2005, between Linda B. Philp and Lodgian, Inc. (Incorporated by reference to Exhibit 10.33 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.33	Incentive Stock Option Award Agreement, dated January 31, 2005, between Linda B. Philp and Lodgian, Inc. (Incorporated by reference to Exhibit 10.34 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.34	Incentive Stock Option Award Agreement, dated February 28, 2005, between Daniel G. Owens and Lodgian, Inc. (Incorporated by reference to Exhibit 10.35 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.35	Executive Employment Agreement between Edward J. Rohling and Lodgian, Inc., dated July 12, 2005. **
10.36	Restricted Stock Award Agreement between Edward J. Rohling and Lodgian, Inc., dated July 15, 2005.**
10.37	2002 Amended and Restated Stock Incentive Plan of Lodgian, Inc. (Incorporated by reference to Exhibit 10.5 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-1113410), filed on June 6, 2004).
10.38	First Amendment to the Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc. dated April 28, 2005. (Incorporated by reference to Exhibit 10.34 to the Company’s Quarterly Report for the period ended March 31, 2005 (File No. 1-14537), filed with the Commission on May 10, 2005).
10.39	Form of Stock Option Award Agreement. (Incorporated by reference to Exhibit 10.37 to the Company’s Annual Report for the period ended December 31, 2004 (File No. 1-14537), filed with the Commission on March 23, 2005).
10.40	Form of Restricted Stock Award Agreement.**

50

Exhibit
Number	Description
10.41	Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective September 1, 2003 (Incorporated by reference to Exhibit 20.1.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-113410), filed on June 6, 2004).
10.42	Amendment No. 1 to the Lodgian, Inc. 401(k) Plan (As Amended and Restated Effective September 1, 2003) (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.43	Amendment No. 2 to the Lodgian, Inc. 401(K) Plan dated March 24, 2005 (As Amended and Restated Effective as of September 1, 2003). (Incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report for the period ended March 31, 2005 (File No. 1-14537), filed with the Commission on May 10, 2005).
10.44	Amendment No. 3 to the Lodgian, Inc. 401(K) Plan dated April 28, 2005 (As Amended and Restated Effective as of September 1, 2003). (Incorporated by reference to Exhibit 10.39 to the Company’s Quarterly Report for the period ended March 31, 2005 (File No. 1-14537), filed with the Commission on May 10, 2005).
10.45	Loan Modification Agreement (Floating Rate) between Merrill Lynch Mortgage Lending, Inc. and the Borrowers identified on the signature pages thereto dated April 29, 2005. (Incorporated by reference to Exhibit 10.40 to the Company’s Quarterly Report for the period ended March 31, 2005 (File No. 1-14537), filed with the Commission on May 10, 2005).
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.**

**     Filed herewith.

51

EX-10.9

                                                                    Exhibit 10.9

                       SIXTH AMENDMENT TO LEASE AGREEMENT

      THIS SIXTH AMENDMENT TO LEASE AGREEMENT (this "Sixth Amendment"), is made
effective as of the 11 day of July, 2005 (the "Effective Date"), by ND
PROPERTIES, INC., a Delaware corporation (as "Landlord"), and LODGIAN, INC., a
Delaware corporation (as "Tenant").

                                   WITNESSETH:

      WHEREAS, CSB-Georgia Limited Partnership ("CSB"), predecessor to Landlord,
and Impac Hotel Group, L.L.C., predecessor to Tenant, entered into that certain
Lease Agreement, dated as of April 7, 1997 as amended by that certain First
Amendment to Lease Agreement dated as of May 14, 1998, as amended by that
certain Second Amendment to Lease Agreement dated as of June 7, 2000, as amended
by that certain Third Amendment to Lease Agreement dated as of April 1, 2002, as
amended by that certain Fourth Amendment to Lease Agreement dated as of April
28, 2003, as amended by that certain Fifth Amendment to Lease Agreement dated as
of December 23, 2003 (as so amended, the "Lease"), for approximately 21,817
square feet of net rentable area known as Suite 700 in that certain building
known as Two Live Oak (the "Building"), as such space is more particularly
described in the Lease (the "Leased Premises"); and

      WHEREAS, Landlord and Tenant desire to further modify and amend the Lease,
in the manner and for the purposes herein set forth.

      NOW, THEREFORE, for and in consideration of the mutual premises, and for
Ten and No/100 Dollars ($10.00) and other good and valuable consideration, paid
by the parties hereto to one another, the receipt and sufficiency of which are
acknowledged by the parties hereto, the parties hereto hereby covenant and agree
as follows:

      1. Defined Terms. All capitalized terms not defined in this Sixth
Amendment shall have the same meaning as set forth in the Lease.

      2. Term. Section 1.02(a) of the Lease is hereby amended to provide that
the Term is extended to, and shall expire on, March 31, 2011.

      3. Rent. Section 2.02 of the Lease is hereby amended as follows:

            (a) The total Net Rental and Additional Rental ("Gross Rental") for
the Leased Premises shall be as follows during the period beginning as of May 1,
2005, and ending August 31, 2005:



    PERIOD           GROSS RENTAL RATE     ANNUAL GROSS RENTAL     MONTHLY GROSS RENTAL
    ------           -----------------     -------------------     --------------------
                                                          
5/1/05 - 8/31/05          $18.50                $403,614.50             $33,634.54




            (b) Commencing on September 1, 2005, Net Rental for the Leased
Premises shall be as follows:



    PERIOD           NET RENTAL RATE     ANNUAL NET RENTAL      MONTHLY NET RENTAL
    ------           ---------------     -----------------      ------------------
                                                       
9/1/05 - 3/31/06          $ 0.00            $      0.00            $     0.00
4/1/06 - 8/31/06          $ 9.50            $207,261.50            $17,271.79
9/1/06 - 8/31/07          $ 9.74            $212,497.58            $17,708.13
9/1/07 - 8/31/08          $ 9.98            $217,733.66            $18,144.47
9/1/08 - 8/31/09          $10.23            $223,187.91            $18,598.99
9/1/09 - 8/31/10          $10.49            $228,860.33            $19,071.69
9/1/10 - 3/31/11          $10.75            $234,532.75            $19,544.40


      4. Additional Rental. Section 2.03 of the Lease is hereby amended to
provide that notwithstanding anything in this Lease to the contrary, Tenant will
be responsible for Tenant's Percentage Share of all taxes, assessments and
governmental charges, costs of all insurance relating to the Building,
utilities, snow removal, landscaping and charges assessed against or attributed
to the Building pursuant to any applicable declaration of protective covenants
("Uncontrollable Operating Expenses"), without regard to the level of increase
in any or all of the above in any year or other period of time. Tenant's
obligation to pay all other Operating Expenses that are not Uncontrollable
Operating Expenses (herein "Controllable Operating Expenses") shall be limited
to a five percent (5%) per annum increase, on a cumulative basis, over the
amount the Controllable Operating Expenses for the immediately preceding
calendar year would have been had the Controllable Operating Expenses increased
at the rate of five percent (5%), on a cumulative basis, in all previous
calendar years, beginning with the actual Controllable Operating Expenses for
the year ending December 31, 2005.

      5. Security Deposit. Section 2.05 of the Lease is hereby amended to
provide as follows:

      (a) As security for the faithful performance by Tenant throughout the
Term, and any extensions or renewals thereof, of all the terms and conditions of
this Lease on the part of Tenant to be performed, Tenant shall deposit with
Landlord a Security Deposit in the amount of $34,543.00. Such amount shall be
returned to Tenant, without interest, within thirty (30) days after the day set
for the expiration of the Term, or any extension or renewal thereof, provided
Tenant has fully and faithfully observed and performed all of the terms,
covenants, agreements, warranties and conditions hereof on its part to be
observed and performed. Landlord shall have the right, at any time, to apply all
or any part of said Security Deposit toward the cure of any default of Tenant,
the repair of any damage to the Leased Premises or otherwise caused by Tenant,
or the amount of any Rent owing under the Lease. No application of the Security
Deposit shall be construed to limit Landlord's right to recover additional sums
from Tenant for damages to the Leased Premises. If all or any part of said
Security Deposit is so applied by Landlord, then Tenant shall immediately pay to
Landlord an amount sufficient to return said Security Deposit to the balance on
deposit with Landlord prior to said application.

                                        2


            (b) In no event shall Tenant be entitled to apply the Security
Deposit to any Rent due under the Lease. In the event of an act of bankruptcy by
or insolvency of Tenant, or the appointment of a receiver for Tenant or a
general assignment for the benefit of Tenant's creditors, then the Security
Deposit shall be deemed immediately assigned to Landlord. The right to retain
the Security Deposit shall be in addition and not alternative to Landlord's
other remedies under the Lease or as may be provided by law and shall not be
affected by summary proceedings or other proceedings to recover possession of
the Leased Premises.

            (c) In the event of a sale or transfer of Landlord's interest in the
Leased Premises or the Building or a lease by Landlord of the Building, Landlord
shall have the right to transfer the within described security deposit to the
purchaser or lessee, as the case may be, and Landlord shall be relieved of all
liability to Tenant for the return of such Security Deposit. Tenant shall look
solely to the new owner or lessee for the return of said Security Deposit. The
Security Deposit shall not be mortgaged, assigned or encumbered by Tenant. In
the event of a permitted assignment or subletting under the Lease by Tenant, the
Security Deposit shall be held by Landlord as a deposit made by the permitted
assignee or subtenant and the Landlord shall have no further liability with
respect to the return of said Security Deposit to the original Tenant.

            (d) Landlord shall not be required to keep the Security Deposit
separate from its general accounts.

      6. Renewal Option. Landlord hereby grants to Tenant a Renewal Option as
set forth on Exhibit H attached to this Sixth Amendment.

      7. Right of First Offer. Landlord hereby grants to Tenant a Right of First
Offer as set forth on Exhibit I attached to this Sixth Amendment.

      8. Tenant Improvement Allowance. As of September 1, 2005, Landlord shall
provide Tenant with an Allowance equal to $10.00 per square foot of net rentable
area in the Leased Premises ($218,170.00), and Tenant shall apply such allowance
to the upgrade and improvement of the Leased Premises (including but not limited
to cabling and wiring of the Leased Premises) pursuant to mutually agreeable
plans and specifications. Tenant shall pay Landlord promptly, as additional
rental under the Lease and within thirty (30) days of being invoiced therefore,
the cost of any such improvements, less the amount of such Allowance; provided,
however, if Tenant has not used the entire Allowance by September 1, 2006,
Tenant may elect to use up to $3.00 per square foot of net rentable area in the
Leased Premises ($65,451.00) of the Allowance to offset the Net Rental next
coming due under the Lease. The provisions of Exhibit D to the Lease, as
applicable, shall apply with respect to all improvements in the Leased Premises.
Notwithstanding the foregoing, Tenant may perform all such work to the Leased
Premises with a contractor approved by in advance by Landlord, provided that (i)
any mechanical, electrical and plumbing ("MEP") work must be approved in advance
and drawn by Landlord's MEP architect, and (ii) all MEP-related work must be
performed by subcontractors approved in advance by Landlord. In addition, Tenant
shall pay to Landlord construction management fee equal to five percent (5%) of
the total cost of all work associated with such improvements to the Leased
Premises. Such fee shall be paid to Landlord or Landlord's designated agent, and
may be funded out of the Allowance, to the extent available.

                                        3


      9. Parking. Section 3.04 of the Lease is amended to provide that Tenant
shall be entitled to use up to seventy-six (76) Parking Permits at a monthly
rate of $58.53 per Unassigned Parking Permit and $71.64 per Assigned Parking
Permit, such rates to increase by 3% every January 1st during the Term. Tenant
shall have the right to designate up to six (6) such Parking Permits as Assigned
Parking Permits. In addition, Landlord shall permit Tenant the use of an
additional four (4) Assigned Parking Permits on a month to month basis, to the
extent available.

      10. Broker. Cousins Property Services, L.P. ("Landlord's Broker") has
represented Landlord in this transaction. Ackerman & Co. ("Tenant's Broker") has
represented Tenant in this transaction. Landlord will pay each of Landlord's
Broker and Tenant's Broker a commission due by virtue of this Second Amendment,
which leasing commissions shall be paid by Landlord in accordance with the terms
of separate agreements. Tenant represents and warrants to Landlord that (except
for Tenant's Broker) no broker, agent, commission salesperson, or other person
has represented Tenant with respect to this Second Amendment and that (except
for Tenant's Broker) no commissions, fees, or compensation of any kind are due
and payable in connection herewith to any broker, agent, commission salesperson,
or other person as a result of any act or agreement of Tenant. Tenant agrees to
indemnify and hold Landlord harmless from all loss, liability, damage, claim,
judgment, cost or expense (including reasonable attorneys' fees and court costs)
suffered or incurred by Landlord as a result of a breach by Tenant of the
representation and warranty contained in the immediately preceding sentence or
as a result of Tenant's failure to pay commissions, fees, or compensation due to
any broker who represented Tenant, whether or not disclosed, or as a result of
any claim for any fee, commission or similar compensation with respect to this
Lease made by any broker, agent or finder (other than Tenant's Broker) claiming
to have dealt with Tenant, whether or not such claim is meritorious. Landlord
represents and warrants to Tenant that (except for Landlord's Broker) no broker,
agent, commission salesperson, or other person has represented Landlord with
respect to this Second Amendment and that (except for Landlord's Broker and
Tenant's Broker) no commissions, fees, or compensation of any kind are due and
payable in connection herewith to any broker, agent, commission salesperson, or
other person as a result of any act or agreement of Landlord. Landlord agrees to
indemnify and hold Tenant harmless from all loss, liability, damage, claim,
judgment, cost or expense (including reasonable attorneys' fees and court costs)
suffered or incurred by Tenant as a result of a breach by Landlord of the
representation and warranty contained in the immediately preceding sentence or
as a result of Landlord's failure to pay commissions, fees, or compensation due
to any broker who represented Landlord, whether or not disclosed, or as a result
of any claim for any fee, commission or similar compensation with respect to
this Lease made by any broker, agent or finder (other than Landlord's Broker or
Tenant's broker) claiming to have dealt with Landlord, whether or not such claim
is meritorious.

      11. Patriot Act. The following paragraph is added to the Lease, as Section
9.03 therein:

            "Patriot Act. Tenant (which for this purpose includes its partners,
      members, principal stockholders and any other constituent entities) (i)
      has not been designated as a "specifically designated national and blocked
      person" on the most current list published by the U.S. Treasury Department
      Office of Foreign Assets Control at its official website,
       or

                                        4


      at any replacement website or other replacement official publication of
      such list; (ii) is currently in compliance with and will at all times
      during the term of this Lease (including any extension thereof) remain in
      compliance with the regulations of the Office of Foreign Asset Control of
      the Department of the Treasury and any statute, executive order (including
      the September 24, 2001, Executive Order Blocking Property and Prohibiting
      Transactions with Persons Who Commit, Threaten to Commit, or Support
      Terrorism), or other governmental action relating thereto; and (iii) has
      not used and will not use funds from illegal activities for any payment
      made under the Lease."

      12. No Other Modifications. Except as expressly modified herein, the Lease
shall remain in full force and effect and, as modified herein, is expressly
ratified and confirmed by the parties hereto. In the event of a conflict between
the terms of the Lease and the terms of this Sixth Amendment, the terms of this
Sixth Amendment shall control.

      IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the day, month and year first above written.

LANDLORD:

ND PROPERTIES, INC.,
a Delaware corporation

By:  s/ Harry St. Clair
     ------------------------------
     Harry St. Clair  (print or type name)
Its: Assistant Secretary

             (CORPORATE SEAL)

TENANT:

LODGIAN, INC.,
a Delaware corporation

By:  s/ Daniel E. Ellis
     ------------------------------
     Daniel E. Ellis (print or type name)
Its: Senior Vice President, General Counsel & Secretary

             (CORPORATE SEAL)

                                        5


                                    EXHIBIT H

                                 RENEWAL OPTION

Tenant shall have the right to renew the Term of this Lease for one (1)
additional period of five (5) years (the "Renewal Term"), by giving Landlord
prior written notice no less than nine (9) months prior to the otherwise
effective expiration of the Term, that Tenant intends to exercise either of such
renewal rights, subject to the following conditions:

            (a) Tenant shall be in possession of the Leased Premises and there
shall not be an event of default under any of the terms or provisions of this
Lease at the time such notice is given or at the time of the commencement of the
Renewal Term.

            (b) Tenant shall occupy the Leased Premises during the Renewal Term
under the same terms and conditions as specified in this Lease, except Tenant
shall be entitled to no additional tenant improvement allowance and the Net
Rental for any Renewal Term shall be the then Market Rate.

            (c) As used herein, the term "Market Rate" shall be determined by
Landlord as the amount of base annual rent per square foot then being charged in
comparable first-class office buildings located in the Buckhead area of Atlanta,
Georgia for space comparable to the Leased Premises and taking into
consideration all other relevant factors establishing similarity or
dissimilarity between the comparable lease and the leasing of the Leased
Premises to Tenant for the Renewal Term, including without limitation,
escalations (including type, base year and stop), concessions, length of Term,
size and location of the Leased Premises, building standard work letter and/or
tenant improvement allowances, amenities offered, location of building, the cost
and provision of parking spaces, and other generally applicable concessions,
allowances, terms and conditions of tenancy. In determining the Market Rate, the
greatest weight shall be accorded to leases in the Building for comparable space
entered into in the twelve (12) months preceding the date on which the Market
Rate is determined.

            (d) Within thirty (30) days after Landlord receives the notice of
Tenant's exercise of the renewal option, Landlord shall notify Tenant of the
proposed Market Rate. In the event that Landlord and Tenant are not able to
agree as to the Market Rate within sixty (60) days of good faith negotiation,
Tenant's right of renewal as provided herein shall terminate.

            (e) In the event Tenant fails timely to notify Landlord in the
manner herein specified, Tenant shall be conclusively deemed to have waived its
right to enter into any Renewal Term.

            (f) This renewal right shall be subject to review and approval by
Landlord, in its reasonable discretion, of Tenant's credit and financial
condition at the time of such renewal.

                                        6


                                    EXHIBIT I

                              RIGHT OF FIRST OFFER

Subject to the rights of existing tenants, Landlord hereby grants to Tenant a
right of first offer to lease any space of less than 5,000 square feet of net
rentable area located on the sixth (6th) floor of the Building, which right
shall be exercised by Tenant or its parent, subsidiary, or affiliate, by written
notice given to Landlord within ten (10) business days after Landlord provides
written notice to Tenant that Landlord is negotiating to lease the ROFO Space to
another occupant (Tenant's failure to provide such notice by the expiration of
such ten (10) business day period being deemed Tenant's waiver of any right to
lease the ROFO Space), subject to the following conditions:

            (a) Tenant, or its parent, subsidiary, or affiliate, shall be in
possession of the Leased Premises and there shall not be an Event of Default by
Tenant under any of the terms or provisions of this Lease at the time Landlord
provides such notice to Tenant.

            (b) Tenant, or its parent, subsidiary, or affiliate, shall occupy
the Leased Premises (including but not limited to the ROFO Space) during the
Renewal Term under the same terms and conditions as specified in this Lease,
except that:

                  (i) Landlord shall provide to Tenant an Allowance with respect
      to the ROFO Space equal to the product of (A) the Allowance per square
      foot of rentable area originally provided to Tenant under the Lease,
      multiplied by (B) a fraction, the numerator of which is the number of
      months remaining in the Term of the Lease at the time Tenant first
      occupies the ROFO Space, and the denominator of which is the number of
      months in the entire Term at the time Tenant first occupies the ROFO
      Space;

                  (ii) To the extent Landlord is then offering additional tenant
      concessions, Landlord shall provide to Tenant such concessions prorated as
      set forth in clause (i) above; and

                  (iii) In the event less than thirty-six (36) months remain in
      the Term at the time Tenant first occupies the ROFO Space, the Term of the
      Lease (as to both the original Leased Premises and the ROFO Space)
      automatically shall be extended to expire on the date that is thirty-six
      (36) months after the date Tenant first occupies the ROFO Space.

            (c) Tenant's right of first offer shall not be applicable during any
Renewal Term.

                                        7

EX-10.22

                                                                   Exhibit 10.22

                        AMENDMENT TO EMPLOYMENT AGREEMENT

      This Amendment to the Employment Agreement by and between Lodgian, Inc.
(the "Company") and W. Thomas Parrington ("Employee")(collectively the
"Parties"), is entered into and effective as of the 3rdth day of August, 2005
(the "Effective Date").

      WHEREAS, the Employee is currently employed by the Company pursuant to an
Employment Agreement between the Company and the Employee dated December 18,
2003 (the "Employment Agreement");

      WHEREAS, the Company and the Employee have agreed to modify certain terms
and conditions of Employee's employment as set forth in the Employment
Agreement;

      WHEREAS, the Company and the Employee desire to modify the Employment
Agreement, which modification shall be contemporaneous with the effectiveness of
this Amendment to the Employment Agreement (the "Amendment");

      WHEREAS, except as otherwise amended in this Amendment, the Employment
Agreement shall remain in full force and effect;

      WHEREAS, the Company has agreed to enter into the Separation and Release
Agreement attached to this Amendment as Exhibit A (the "Separation Agreement")
in exchange for this Amendment, and Employee has relied upon Company's promise
to enter into such agreement as a condition precedent to this Amendment; and

      WHEREAS, on December 31, 2005, Employee acknowledges and agrees that
Employee will execute and not revoke the Separation Agreement.

      NOW, THEREFORE, the Parties agree:

      1. Amendments. The Parties agree to the following amendments of the
Employment Agreement:

            (a)   The first sentence in Section 1 of the Employment Agreement
                  shall be amended and restated to read as follows:

                  TERM OF EMPLOYMENT. My employment under this Agreement shall
                  commence on July 1, 2003 and shall end on December 31, 2005
                  (Expiration Date), or such earlier date on which my employment
                  is terminated under Section 5 of this Agreement ("Employment
                  Term").

            (b)   The first sentence in Section 2 of the Employment Agreement
                  shall be amended and restated to read as follows:

                  NATURE OF DUTIES. I shall be the Company's Chief Executive
                  Officer reporting solely to the Board of Directors (Board).
                  Except as noted herein, I shall work exclusively for the
                  Company and shall have all of the customary powers and duties
                  associated with the position of Chief Executive Officer.

                                    Page 1 of 2



            (c)   New Section 19 shall be added to the Employment Agreement and
                  it shall read as follows:

                  EARLY TERMINATION OF POSITION/TITLE/DUTIES. Notwithstanding
                  anything to the contrary contained in this Agreement, the
                  Company may ask me, at any time and for any reason, (i) not to
                  report to work, (ii) not to perform any duties under Section
                  2, (iii) to resign as Chief Executive Officer of the Company,
                  and/or (iv) to resign as a member of the Board of Directors.
                  If the Company implements (i), (ii), and/or (iii) in the
                  preceding sentence, the Company shall continue to pay my Base
                  Salary through the Expiration Date. Further, if the Company
                  implements (iii) or (iv) above, I shall immediately sign a
                  letter indicating that I have resigned as Chief Executive
                  Officer of the Company or as a member of the Board of
                  Directors of the Company, as the case may be.

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

      IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of
the Effective Date.

                                LODGIAN, INC.:

                                By: s/ Daniel E. Ellis
                                    --------------------------------------------

                                Printed Name: Daniel E. Ellis

                                Title: Senior VP, General Counsel & Secretary

                                Date: August 3, 2005

                                W. THOMAS PARRINGTON:

                                s. W. Thomas Parrington

                                Date: August 3, 2005

                                    Page 2 of 2



                                    EXHIBIT A

                        [EXHIBIT A LOCATED ON NEXT PAGE]



                        SEPARATION AND RELEASE AGREEMENT

                                December 31, 2005

W. Thomas Parrington

      Re:   Your resignation from Lodgian, Inc.

Dear Thomas:

This letter will confirm that you and Lodgian, Inc. (the "Company")1 have agreed
to the separation of your employment effective December 31, 2005 (the
"Separation Date"). This separation and release agreement (the "Separation
Agreement") sets forth the terms under which your employment with the Company is
ending. In addition, except as set forth below, this Separation Agreement
effectively terminates (i) the Employment Agreement between you and the Company
dated December 18, 2003 (the "Employment Agreement"), and (ii) any amendments to
the Employment Agreement, including, but not limited to, the Amendment to the
Employment Agreement dated August 3, 2005 (the "Amendment"). We desire to
resolve any and all issues relating to your employment and the conclusion of
your employment with the Company amicably and on mutually satisfactory terms.
Specifically, you ("You" or "Your") and the Company (collectively, the
"Parties") agree:

A. SEPARATION TERMS

      1. Separation Benefits. Provided that You satisfy the conditions of this
Separation Agreement and do not revoke this Separation Agreement, the Company
will:

      (a)   Payment of COBRA Premiums. Pay Your COBRA premium under the
            Company's major medical group health plan on a monthly basis through
            July, 2006;

      (b)   Accelerated Option Vesting. Accelerate and immediately vest all of
            Your unvested options to acquire shares of the Company's common
            stock (the "Options"). As a result, You will be vested in a total of
            33,333 shares as of the Separation Date. Your right to exercise the
            Options shall terminate thirty (30) days following the Separation
            Date. Except as provided in this provision, the Options will
            continue to be governed by the Amended and Restated 2002 Stock
            Incentive Plan of Lodgian, Inc.; and

      (c)   Restricted Stock Units. Accelerate and immediately vest all of Your
            restricted stock units (the "Units"). As a result, You will be
            vested in a total of 22,222 Units, which will immediately be
            convertible into an equal number of shares of common stock, as of
            the Separation Date. The Units will continue to be governed by the
            Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc.

- ----------

(1) The term "Company" includes the company's parents, subsidiaries, affiliates
and all related companies, as well as their respective officers, directors,
shareholders, employees, agents and any other representatives, any employee
benefits plan of the Company, and any fiduciary of those plans.

                                 Page 1 of 5



The separation benefits stated above will be subject to applicable withholdings,
including taxes and Social Security. Because You are no longer employed, Your
rights to any particular employee benefit will be governed by applicable law and
the terms and provisions of the Company's various employee benefit plans and
arrangements. You acknowledge that Your Separation Date will be the date used in
determining benefits under all Company employee benefit plans. The Company's
obligations listed in sub-sections A(1)(a) - A(1)(c) above shall terminate
immediately upon any breach by You of the Release Agreement and/or the
Separation Agreement.

2. Release. In exchange for the separation benefits stated above, You release
and discharge the Company from any claim or liability, whether known or unknown,
arising out of any event, act or omission occurring on or before the day You
sign this Separation Agreement, including, but not limited to, claims arising
out of Your employment or the cessation of Your employment, claims arising out
of the Employment Agreement, claims arising out of any amendment to the
Employment Agreement, claims arising out of the Amendment, claims arising by
virtue of Your status as an officer or director of the Company, 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. You also release any claims
for unpaid back pay, sick pay, vacation pay, expenses, bonuses, claims to stock
options, claims to the vesting of stock options, claims to restricted stock
units, claims to the vesting of restricted stock units, commissions, attorneys'
fees, or any other compensation.

You acknowledge and agree that You are not entitled to any additional payment or
benefits from the Company, except as set forth in this Separation Agreement. You
further acknowledge and agree that You have suffered no harassment, retaliation,
employment discrimination, or work-related injury or illness.

Notwithstanding anything to the contrary in this Section A(2), the Parties
acknowledge and agree that (a) this Separation Agreement does not waive Your
right to (i) claim or receive indemnification as an officer or director of the
Company under any applicable state laws, the Company's Articles of
Incorporation, or the Company's By-laws, or (ii) claim or receive insurance
coverage or be defended under any officers or directors insurance coverage which
applies to officers and/or directors of the Company and which applies to You in
Your capacity as a former President, Chief Executive Officer, and director of
the Company; and (b) You do not waive any claims arising under this Separation
Agreement.

3. ADEA/OWBPA Waiver. By agreeing to this provision, You release and waive any
right or claim against the Company arising out of Your employment or the
termination of Your employment with the Company under the Age Discrimination in
Employment Act, as amended, 29 U.S.C. Section 621 et seq. ("ADEA"), the Older
Workers Benefit Protection Act, 29 U.S.C. Section 621 et seq. ("OWBPA"), or the
Georgia Prohibition of Age Discrimination in Employment, O.C.G.A. Section
34-1-2, (the "Waiver"). You understand and agree that:

      (a)   this Separation Agreement is written in a manner that You
            understand;

      (b)   You do not release or waive rights or claims that may arise after
            You sign this Separation Agreement;

      (c)   You waive rights and claims You may have had under the ADEA and the
            OWBPA, but only in exchange for payments and/or benefits in addition
            to anything of value to which You are already entitled;

                                 Page 2 of 5



      (d)   You have been advised to consult with an attorney before signing
            this Separation Agreement;

      (e)   You have 21 days (the "Second Offer Period") from receipt of this
            Separation Agreement to consider whether to sign it. If You sign
            before the end of the Second Offer Period, You acknowledge that Your
            decision to do so was knowing, voluntary, and not induced by fraud,
            misrepresentation, or a threat to withdraw, alter, or provide
            different terms prior to the expiration of the Second Offer Period.
            You agree that changes or revisions to this Separation Agreement,
            whether material or immaterial, do not restart the running of the
            Second Offer Period;

      (f)   You have 7 days after signing this Separation Agreement to revoke
            this Separation Agreement (the "Revocation Period"). If You revoke,
            the Separation Agreement shall not be effective or enforceable and
            You shall not be entitled to the separation benefits stated above.
            To be effective, the revocation must be in writing and received by
            the Senior Vice President, General Counsel & Secretary, Daniel
            Ellis, at Lodgian, Inc., 3445 Peachtree Rd., Suite 700, Atlanta,
            Georgia 30326, or his successor, within the Revocation Period; and

      (g)   this Waiver will not become effective or enforceable until the
            Revocation Period has expired.

B. YOUR ONGOING OBLIGATIONS

1. Resignation as Officer/Director. You will, at the same time You execute this
Separation Agreement, resign from every officer position You hold with the
Company or with the Company's subsidiaries on the Separation Date, if any, by
executing a resignation letter to be prepared by the Company.

C. GENERAL PROVISIONS

1. No Admission of Liability. This Separation Agreement is not an admission of
liability by the Company. The Company denies any liability whatsoever. The
Company enters into this Separation Agreement to reach a mutual agreement
concerning Your separation from the Company.

2. Attorneys' Fees. In the event of litigation relating to this Separation
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.

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

4. Severability. The provisions of this Separation 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.

5. Governing Law. The laws of the State of Georgia shall govern this Separation
Agreement. If Georgia's conflict of law rules would apply another state's laws,
the Parties agree that Georgia law shall still govern.

                                 Page 3 of 5



6. Entire Agreement. This Separation Agreement constitutes the entire agreement
between the Parties; provided, however, that Sections 6(a), 6(b), 6(d), 6(e) and
6(f) of the Employment Agreement are incorporated by reference, shall remain in
full force and effect, and shall survive (i) the termination of the Employment
Agreement and any amendments to the Employment Agreement, including, but not
limited to, the Amendment, and (ii) the cessation of Your employment. Section 6
(c) of the Employment Agreement will have no further force or effect upon
execution of this Separation Agreement. This Separation Agreement supersedes any
prior communications, agreements or understandings, whether oral or written,
between the Parties arising out of or relating to Your employment and the
termination of that employment; provided, however, that the Parties acknowledge
and agree that this Separation Agreement does not supersede Your
post-termination obligations contained in Sections 6(a), 6(b), 6(d), 6(e) and
6(f) of the Employment Agreement. Other than this Separation Agreement, no other
representation, promise or agreement has been made with You to cause You to sign
this Separation Agreement.

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

8. Consent to Jurisdiction. You agree that any claim arising out of or relating
to this Separation Agreement 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.

9. Successors and Assigns. This Separation 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 and Your heirs and assigns.

10. Voluntary Agreement. You acknowledge the validity of this Separation
Agreement and represent that You have the legal capacity to enter into this
Separation Agreement. You acknowledge that You have carefully read this
Separation Agreement, know and understand the terms and conditions, including
its final and binding effect, and sign it voluntarily.

If the terms set forth in this Separation Agreement are acceptable, please sign
below and return the signed original to me on or before January 7, 2006. If the
Company does not receive a signed original on or before the above-stated date,
then this offer shall be revoked and You shall not be entitled to the separation
benefits stated above.

                                                 Sincerely,

                                                 Daniel Ellis
                                                 Senior Vice President, General
                                                 Counsel & Secretary

I acknowledge the validity of this Separation Agreement and represent that I
have the legal capacity to enter into this Separation Agreement. I have
carefully read the Separation

                                 Page 4 of 5



Agreement, know and understand the terms and conditions, including its final and
binding effect, and sign it voluntarily.

_________________________________      _________________________________
W. Thomas Parrington                   Date

                                 Page 5 of 5

EX-10.35

                                                                   Exhibit 10.35

                         EXECUTIVE EMPLOYMENT AGREEMENT

This EXECUTIVE EMPLOYMENT AGREEMENT is entered into by and between Edward J.
Rohling, ("Executive") and Lodgian, Inc. ("Company") as of the 12 day of July,
2005 ("Agreement").

NOW THEREFORE, in exchange of mutual consideration set forth herein and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:

1. TERM OF EMPLOYMENT. Executive's employment under this Agreement shall
commence on July 15, 2005 and shall end on December 31, 2008 ("Expiration
Date"), or such earlier date on which Executive's employment is terminated under
Section 5 of this Agreement ("Employment Term").

2. NATURE OF DUTIES. Executive shall be the Company's President reporting
jointly to the Company's CEO and the Company's Board of Directors ("Board").
Prior to, but no later than July 1, 2006 Executive shall become the Company's
Chief Executive Officer, reporting solely to the Board. Except as noted herein,
Executive shall work exclusively for the Company and shall have all of the
customary powers and duties associated with these positions. Executive shall
devote Executive's full business time and effort to the performance of
Executive's duties for the Company, which Executive shall perform faithfully and
to the best of Executive's ability. Executive shall be subject to the Company's
policies, procedures, and approval practices, as generally in effect from
time-to-time and applied to its senior executives.

Notwithstanding the foregoing, Executive shall be able to serve on up to two
boards of directors of other for-profit entities. With Board approval, which
shall not be unreasonably withheld, Executive shall be permitted to exceed this
limit of two. Nothing herein shall be construed as limiting Executive's ability
to serve on the board of non-profit entities or otherwise engage in activities
for charities. However, nothing in this Section 2 shall permit Executive to
serve on the board of directors of any entity to the extent that doing so would
(a) interfere with Executive's duties to the Company, and/or (b) conflict with
the interests of the Company.

3. PLACE OF PERFORMANCE. Executive's primary office location shall be at 3445
Peachtree Road, Suite 700, Atlanta, Georgia, except for required travel on the
Company's business.

4. COMPENSATION AND RELATED MATTERS.

      (a) BASE SALARY. The Company shall pay Executive base salary at an annual
rate of $550,000, which rate shall be increased by the Company on each
anniversary of the commencement of this Agreement by at least 5% of the then
current base salary rate. Executive's base salary shall be paid in conformity
with the Company's salary payment practices generally applicable to other
similarly situated Company senior executives, but no less often than once
monthly.



      (b) SIGNING BONUS - STOCK.

            (i) The Company shall pay Executive a signing bonus in the form of:
75,000 restricted shares of the Company's common stock ("Common Stock") to be
granted to Executive on July 15, 2005.

            (ii) The restricted stock shares in this Section 4(b) shall be
subject to the terms of the restricted stock plan and agreement under which they
were issued. The restricted stock shares are intended to qualify as "qualified
performance based compensation" for purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended ("Code").

            (iii) If Executive remains employed by the Company through the
vesting date as set forth below, subject to Section 5, one-half of the
restricted stock shares granted in this Section 4(b) shall vest on July 15,
2006. The remaining one-half of the restricted stock shares granted shall vest
on July 15, 2007. However, subject to Section 5, vesting shall be postponed
during any health-related leave of absence until Executive returns to work,
unless such postponement is prohibited by law.

      (c) SIGNING BONUS - CASH PAYMENT. The Company shall pay Executive a
signing bonus of $594,000 in one payment on July 15, 2005.

      (d) ANNUAL PERFORMANCE BONUS.

            (i) Subject to Section 5, Executive shall be eligible to receive an
annual performance bonus in the amount shown in the applicable row on the table
attached hereto and incorporated herein for all purposes as Exhibit A for each
of the calendar years 2005-2008 as indicated, if Executive remains employed
through December 31 of each such calendar year ("Vesting Date"). Prior to
payment of the annual performance bonus, the Board shall review the actual
operating EBITDA performance, and determine the percentage of Target EBITDA (as
defined herein) that the Company achieved for the applicable calendar year. The
Board shall not unreasonably withhold approval of the payment of annual
performance bonus upon its determination of the Company's actual EBITDA and the
corresponding bonus due for that level of performance. The Company shall pay the
performance bonus for a given year on (and not earlier or later than) May 1 of
the following year.

            (ii) For calendar year 2005, Executive's partial year of employment
is reflected by the bonus amount in Exhibit A, but the minimum bonus amount for
year 2005 shall be no less than $110,000.00, regardless of the Company's EBITDA.

            (iii) Subject to section (iv) below, the Company's "Target EBITDA"
as used herein for calendar years 2005, 2006, 2007, and 2008 is, respectively,
$60.0 million, $72.0 million, $79.0 million, and $87.0 million.

            (iv) EBITDA is as defined in Exhibit A; provided, however, that, for
purposes of this Section 4, the Board has the final and sole discretion to
determine the calculation of EBITDA, provided that such calculation is
consistent with generally accepted accounting principles. If changes to the
Company's portfolio are made, the Company shall adjust the applicable Target
EBITDA as follows:

                                       -2-


                  (1) If a property is sold or otherwise transferred to a third
party, the Target EBITDA for the Year in which the sale occurs shall be reduced
by the sold property's EBITDA for the trailing 12 full months through the date
of the sale, and actual EBITDA for the Year shall exclude the sold property's
EBITDA. For each subsequent Year, Target EBITDA shall be reduced by the sum of
the reduction for the Year of sale plus 10 percent of that reduction for each
Year since the Year of sale.

                  (2) If a property is acquired, the Target EBITDA for the Year
in which the purchase occurs shall be increased by the acquired property's
EBITDA for the trailing 12 full months through the date of purchase, and actual
EBITDA for the Year of purchase shall include the acquired property's EBITDA as
if it had been acquired on the first day of the Year. For each subsequent Year,
Target EBITDA shall be increased by the sum of the increase for the Year of
purchase plus 10 percent of that increase for each Year since the Year of
purchase.

                  (3) For purposes of clauses (1) and (2), above, "Year" shall
be deemed to be the annual performance bonus calendar year in question or, with
respect to Section 4(e), the long-term compensation fiscal year in question.

            (v) The Company shall pay each performance bonus in cash on (and not
earlier or later than) May 1st of the year immediately following the year to
which the performance bonus relates.

      (e) LONG-TERM COMPENSATION.

            (i) Subject to Section 5, if Executive remains employed through
December 31 of a calendar year during the Employment Term, the Company shall
grant Executive 20,000 restricted shares of Common Stock for each such calendar
year if (x) 100% of Target EBITDA is achieved for such calendar year, or (y) the
average closing price of the Company's Common Stock for the last thirty (30)
calendar days of such calendar year is at least at the Stock Price Threshold for
such calendar year as described in Exhibit A. Such grant, if any, will occur on
(and not earlier or later than) May 1 of the year immediately following the
calendar year during which the event described in the preceding sub-clause (x)
or (y), whichever applicable, occurs.

            (ii) Subject to Section 5, if Executive remains employed through
December 31 of a calendar year during the Employment Term, in addition to
Section 4(e)(i) above, the Company shall also grant Executive 10,000, 20,000,
30,000 and 40,000 restricted shares of Common Stock for 2005, 2006, 2007 and
2008 respectively: (x) upon achievement of 110% of Target EBITDA for such
calendar year, or (y) if substantially all of the assets of the Company are sold
or a merger is consummated for at least a 20% premium over the respective Stock
Price Threshold (determined as of the day before the sale or merger is approved
by the Board) for such calendar year. Such grant, if any, will occur on (and not
earlier or later than) May 1 of the year immediately following the calendar year
during which the event described in the preceding sub-clause (x) or (y),
whichever applicable, occurs.

            Subject to Section 4(e)(iii) and 5, the restricted share grants in
this Section 4(e) shall vest in three (3) equal annual installments beginning on
March 15 of the year immediately following the year of each grant as described
in Section 4(e)(i) and 4(e)(ii) above.

                                       -3-


            (iii) The restricted stock granted under this Section 4(e) shall be
subject to the terms of the stock plan and agreement under which they are
issued. Notwithstanding Section 4(e)(ii) but subject to Section 5, vesting shall
be postponed during any health-related leave of absence until Executive returns
to work, unless such postponement is prohibited by law.

      (f) STANDARD BENEFITS. During Executive's employment, Executive shall be
eligible to participate in all employee benefit plans and programs, including
but not limited to paid vacations, medical/health/prescription and short and
long term disability income protection coverage, to the same extent generally
available to other similarly situated Company senior executives, in accordance
with the terms of those plans and programs. During any waiting period (not to
exceed one-hundred twenty (120) days) applicable to such employee medical plans
and programs occurring during 2005, the Company will reimburse (within sixty
(60) days of such reimbursement request, but in no event later than March 15,
2006) Executive and Executive's eligible dependents' COBRA premium to continue
coverage under the health plan(s) in effect for Executive and Executive's
eligible dependents immediately prior to the commencement of Executive's
employment with the Company, if any.

      (g) INTEGRATION WITH DISABILITY BENEFITS. If Executive is absent due to a
health-related disability, the Company compensation otherwise payable to
Executive for that period shall be reduced by payments for that period from
Company-provided short or long term disability coverage and Workers'
Compensation wage replacement benefits.

      (h) INDEMNIFICATION. The Company shall indemnify Executive to the fullest
extent permitted by applicable law with regard to Executive's action or inaction
on behalf of the Company, which indemnification shall include the advancement of
legal fees and other expenses on a current basis to the fullest extent permitted
by law, which shall survive termination of Executive's employment. In addition,
the Company shall extend to Executive the same indemnification arrangements as
are generally provided to other similarly situated Company senior executives,
which shall survive termination of Executive's employment. Moreover, the Company
shall provide a Director's and Officer's Liability insurance policy covering
Executive's duties hereunder during the Employment Term, which shall survive the
termination of Executive's employment.

      (i) EXPENSES. Executive shall be entitled to receive prompt reimbursement
(within sixty (60) days after submission of the expense) for all reasonable and
customary travel and business expenses Executive incurs in connection with
Executive's employment, provided that Executive accounts for those expenses in
accordance with the policies and procedures established by the Company and as
applied to senior executives.

      (j) SARBANES-OXLEY ACT LOAN PROHIBITION. Notwithstanding this Agreement or
any other Company policy or program, the Company shall not make a loan to
Executive that would violate the Sarbanes-Oxley Act, and this Agreement does not
contemplate any such loans.

      (k) OTHER BENEFITS. Executive shall be entitled to the following benefits:
(1) reimbursement and/or payment of up to a total of $100,000 for expenses
incurred by Executive and/or paid directly by the Company in connection with
Executive's and Executive's family's

                                       -4-


relocation to the Atlanta, Georgia area, which expenses shall include: (i) the
costs of packing and moving Executive's and his family's household goods and
personal effects to Atlanta, Georgia, provided that the Company will select the
moving company to be used by Executive, and all moving costs will be billed
directly to the Company, (ii) commissions that Executive is required to pay to a
real estate broker in connection with the sale of Executive's primary residence
in the Dallas, Texas area (the "Dallas Residence"), (iii) real estate closing
costs associated with Executive's sale of the Dallas Residence, (iv) payment of
the monthly mortgage interest, homeowners' insurance, and property taxes for:
(x) the Dallas Residence, or (y) the residence Executive purchases in the
Atlanta, Georgia area, whichever is lesser, provided that the Company will make
such payments under this sub-clause (iv) until the earlier of: (w) the sale of
the Dallas Residence, or (z) January 15, 2006, and (v) real estate closing costs
and other ancillary costs (including, but not limited to, house hunting trips
for Executive and Executive's family) associated with Executive's purchase of a
primary residence in the Atlanta, Georgia area; and (2) reimbursement of up to
$10,000 for reasonable fees and expenses for legal and tax advice arising in
connection with the negotiation and documentation of this Agreement. Provided
that Executive provides documentation of such expenses in accordance with the
policies and procedures of the Company, the Company will reimburse Executive for
approved expenses under this Section 4(k), but only to the extent that the
expense has been incurred by the Executive during 2005 or while employed by the
Company. For purposes of the preceding sentence, an expense shall be considered
to have been incurred by the Executive at the time that the expense was
authorized by, or at the time that the services associated with such expense
were requested by, the Executive. Approved expenses under this Section 4(k)
shall be reimbursed or paid by the Company within sixty (60) days after
submission of the expense.

      (l) CODE SECTION 409A. Payments made pursuant to this Agreement are
intended to, and the parties agree to amend this Agreement as necessary to,
comply with Code Section 409A.

5. TERMINATION.

      (a) RIGHTS AND DUTIES. If Executive's employment is terminated, Executive
shall be entitled to the payment of the amounts and/or benefits set forth below,
subject to the balance of this Section 5. The Company and Executive shall have
no further obligations to each other, except the Company's ongoing
indemnification obligation under Section 4 and Executive's post-termination
obligations under Sections 6 and 17, or as set forth in any written agreement
Executive subsequently enters into with the Company.

            (i) DISCHARGE FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON If the
Company terminates Executive's employment for Cause or Executive resigns without
Good Reason, then Executive shall receive payment of (1) any unpaid base salary,
reimbursement of expenses incurred, and unused vacation days accrued prior to
the date of termination, to be paid within thirty (30) days after the date of
termination, and (2) other unpaid vested amounts or benefits under Company
compensation, incentive, and benefit plans, in accordance with the terms and
provisions of such compensation, incentive, and benefit plans.

            (ii) DISABILITY If Executive's employment terminates as a result of
Executive's Disability, then Executive shall receive payment of (a) any unpaid
base salary,

                                       -5-


reimbursement of expenses incurred, and unused vacation days accrued prior to
the date of termination, to be paid within thirty (30) days after the date of
termination, and (b) other unpaid vested amounts or benefits under Company
compensation, incentive, and benefit plans, in accordance with the terms and
provisions of such compensation, incentive, and benefit plans. In addition, (1)
the Company shall pay COBRA premiums for Executive and Executive's eligible
dependents under the Company's major medical group health plan on a monthly
basis, beginning as of the date on which the first such COBRA premiums would be
required of the Executive and continuing until the earlier of (x) the Expiration
Date, or (y) the date that is eighteen (18) months from the date of termination
under this Section 5(a)(ii), (2) the Company shall pay a prorated annual
performance bonus under Section 4(d), calculated by multiplying the applicable
bonus by a percentage equal to the total number of days that Executive was
employed for the bonus year in question, divided by 365, which prorated bonus is
to be paid on (and not earlier or later than) May 1 of the year following the
year in which the termination occurs, (3) all restricted stock shares previously
granted pursuant to Sections 4(b) and 4(e) shall immediately become fully vested
as of the date of termination, (4) if Executive's termination occurs on or prior
to May 1 of a calendar year, the Company shall grant to Executive, without
restrictions, the number of shares of Common Stock to which Executive is
entitled under Section 4(e) for the immediately preceding calendar year, but
only if and to the extent the Target EBITDA or the Stock Price Thresholds under
Sections 4(e)(i) or (ii) are met for such immediately preceding year (such grant
to be made on (and not earlier or later than) May 1 of the year in which the
termination occurs), (5) the Company shall grant to Executive, without
restrictions, the number of shares of Common Stock to which Executive would be
entitled under Section 4(e) for the calendar year in which the termination
occurs, but only if and to the extent the Target EBITDA or the Stock Price
Thresholds under Sections 4(e)(i) or (ii) are met for the year in which the
termination occurs (such grant to be made on (and not earlier or later than) May
1 of the year immediately following the year in which the termination occurs),
and (6) the Company shall pay a lump sum amount equal to the difference, if any,
between Executive's monthly base salary and Executive's monthly Company-provided
short term disability benefits (to the extent Executive elects to participate in
such short-term disability benefit plan and is eligible to receive such
benefits) or, if applicable, Workers' Compensation wage replacement benefits for
up to 6 months, or the date that Executive's Company-provided long-term
disability benefits commence (to the extent Executive elects to participate in
such long-term disability benefit plan and is eligible to receive such
benefits), whichever is shorter, which lump sum payment shall be paid within
thirty (30) days after the date of termination. Executive shall be eligible to
receive the benefits and/or payments in clauses (1) through (6) only if
Executive is terminated by the Company due to Disability, but not if Executive
resigns.

            (iii) DISCHARGE WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON If the
Company terminates Executive's employment without Cause or Executive's resigns
for Good Reason, then Executive shall receive payment of (a) any unpaid base
salary, reimbursement of expenses incurred, and unused vacation days accrued
prior to the date of termination, to be paid within thirty (30) days after the
date of termination, and (b) other unpaid vested amounts or benefits under
Company compensation, incentive, and benefit plans, in accordance with the terms
and provisions of such compensation, incentive, and benefit plans. In addition,
in exchange for Executive's execution of a release in accordance with Section
5(d), (1) Executive shall receive continuation of Executive's base salary in
section 4(a) through the Expiration Date or two (2) years, whichever is shorter,
which payment shall be made over the

                                       -6-


applicable time period in accordance with the Company's normal payroll
practices, (2) Executive shall receive payment of COBRA premiums for Executive
and Executive's eligible dependents under the Company's major medical group
health plan on a monthly basis, beginning as of the date on which the first such
COBRA premiums would be required of the Executive and continuing until the
earlier of (x) the Expiration Date, or (y) the date that is eighteen (18) months
from the date of termination under this Section 5(a)(iii), (3) Executive shall
continue to be eligible to receive the annual performance bonus in section 4(d)
through the Expiration Date or two (2) years after the date of termination,
whichever is shorter, which bonus payments shall be made on (and not earlier or
later than) May 1 of the year immediately following the calendar year to which
the bonus relates, (4) if Executive's termination occurs on or prior to May 1 of
a calendar year, the Company shall grant to Executive, without restrictions, the
number of shares of Common Stock to which Executive is entitled under Section
4(e) for the immediately preceding calendar year, but only if and to the extent
the Target EBITDA or the Stock Price Thresholds under Sections 4(e)(i) or (ii)
are met for such immediately preceding year (such grant to be made on (and not
earlier or later than) May 1 of the year in which the termination occurs), (5)
all restricted stock shares previously granted pursuant to Sections 4(b) and
4(e) shall immediately become fully vested as of the date of termination, and
(6) the Company shall grant to Executive, without restrictions, the number of
shares of Common Stock to which Executive would be entitled under Section 4(e)
for the calendar year in which the termination occurs, but only if and to the
extent the Target EBITDA or the Stock Price Thresholds under Sections 4(e)(i) or
(ii) are met for the year in which the termination occurs (such grant to be made
on (and not earlier or later than) May 1 of the year immediately following the
year in which the termination occurs). The annual performance bonus (if any) set
forth in sub-clause (3) of the preceding sentence shall be determined and paid
as set forth in Section 4(d) as if Executive's employment had continued through
the Expiration Date, or for two (2) years after the date of termination,
whichever is shorter, and such bonus payments shall be pro-rated for any partial
calendar year during which Executive continues to be eligible to receive such
bonus under this Section 5(a)(iii).

            (iv) DEATH If Executive's employment terminates as a result of
Executive's death, Executive's estate shall receive payment of (a) any unpaid
base salary, reimbursement of expenses incurred, and unused vacation days
accrued prior to the date of death, to be paid within thirty (30) days after the
date of Executive's death, and (b) other unpaid vested amounts or benefits under
Company compensation, incentive, and benefit plans, in accordance with the terms
and provisions of such compensation, incentive, and benefit plans. In addition,
(1) the Company shall make payment of COBRA premiums for Executive's eligible
dependents under the Company's major medical group health plan on a monthly
basis, beginning as of the date on which the first such COBRA premiums would be
required and continuing until the earlier of (x) the Expiration Date, or (y) the
date that is eighteen (18) months from the date of death, (2) all restricted
stock shares previously granted pursuant to Sections 4(b) and 4(e) shall
immediately become fully vested as of the date of death, (3) if Executive's
death occurs on or prior to May 1 of a calendar year, the Company shall grant to
Executive's estate, without restrictions, the number of shares of Common Stock
to which Executive is entitled under Section 4(e) for the immediately preceding
calendar year, but only if and to the extent the Target EBITDA or the Stock
Price Thresholds under Sections 4(e)(i) or (ii) are met for such immediately
preceding year (such grant to be made on (and not earlier or later than) May 1
of the year in which death occurs), (4) the Company shall pay to Executive's
estate a prorated annual performance bonus

                                       -7-


under Section 4(d), calculated by multiplying the applicable bonus by a
percentage equal to the total number of days that Executive was employed for the
year in which death occurs, divided by 365, which prorated bonus is to be paid
on (and not earlier or later than) May 1 of the year following the year in which
death occurs, and (5) the Company shall grant to Executive's estate, without
restrictions, the number of shares of Common Stock to which Executive would be
entitled under Section 4(e) for the calendar year in which death occurs, but
only if and to the extent the Target EBITDA or the Stock Price Thresholds under
Sections 4(e)(i) or (ii) are met for the year in which death occurs (such grant
to be made on (and not earlier or later than) May 1 of the year immediately
following the year in which death occurs).

            (v) TERMINATION OF EMPLOYMENT AT EXPIRATION DATE If Executive's
employment terminates upon the Expiration Date, then (1) Executive shall receive
payment of any unpaid base salary, reimbursement of expenses incurred, and
unused vacation days accrued prior to the date of termination, to be paid within
thirty (30) days after the date of termination, (2) Executive shall receive
payment of other unpaid vested amounts or benefits under Company compensation,
incentive, and benefit plans, in accordance with the terms and provisions of
such compensation, incentive, and benefit plans, and (3) all restricted stock
shares previously granted pursuant to Sections 4(b) and 4(e) shall immediately
become fully vested, (4) the Company shall grant to Executive, without
restrictions, the number of shares of Common Stock to which Executive would be
entitled under Section 4(e) for 2008, but only if and to the extent the Target
EBITDA or the Stock Price Thresholds under Sections 4(e)(i) or (ii) are met for
2008 (such grant to be made on (and not earlier or later than) May 1, 2009), and
(5) Executive shall be deemed to have remained employed through December 31,
2008 for purposes of eligibility for the annual performance bonus under Section
4(d) for 2008.

      (b) DISCHARGE FOR CAUSE. The Company may terminate Executive's employment
at any time if it believes in good faith that it has Cause to terminate
Executive. However, Executive's termination shall not be deemed for Cause unless
the Company sends Executive a written notice detailing the reasons it believes
it has Cause to terminate Executive on or before the date it intends to do so.
"Cause" shall mean:

            (i) Executive's willful refusal to follow the Board's lawful
directions or Executive's material failure to perform Executive's duties (other
than by reason of physical or mental illness, injury, or condition), in either
case, only after Executive has been given written notice by the Board detailing
the directives Executive has refused to follow or the duties Executive has
failed to perform and granting Executive at least 30 days to cure;

            (ii) Executive's material and willful failure to comply with Company
policies as applied to senior executives, only after Executive has been given
written notice by the Board detailing the policies with which Executive has
failed to comply and granting Executive at least 30 days to cure;

            (iii) Executive's:

                  (1) engaging in an act of fraud or dishonesty that materially
harms the Company or its affiliates;

                                       -8-


                  (2) conviction of a felony or conviction for any violation of
any federal or state securities law;

                  (3) gross negligence in connection with any property or
activity of the Company or its subsidiaries or affiliates ("Group");

                  (4) repeated and intemperate use of alcohol or illegal drugs
after written notice from the Board;

                  (5) material breach of any of Executive's obligations under
this Agreement (other than by reason of physical or mental illness, injury, or
condition), but only after Executive has been given written notice by the Board
of the breach and granting Executive at least 30 days to cure; or

                  (6) becoming barred or prohibited by the SEC from holding
Executive's position with the Company.

In the event Executive has tendered Executive's resignation, the Company may not
then or thereafter terminate Executive for Cause.

      (c) TERMINATION FOR DISABILITY. Except as prohibited by applicable law,
the Company may terminate this Agreement on account of Executive's Disability,
or may transfer Executive to inactive employment status, which shall have the
same effect under this Agreement as a termination for Disability.

"Disability" means a physical or mental illness, injury, or condition that
prevents Executive from performing substantially all of Executive's material
duties under this Agreement for at least 90 consecutive calendar days or for at
least 120 calendar days, whether or not consecutive, in any 365 calendar day
period.

      (d) DISCHARGE WITHOUT CAUSE. The Board may terminate Executive's
employment at any time without Cause for any reason by providing Executive with
30 days advance written notice (the "Notice Period'); provided, however, that
that the Board may elect to terminate Executive's employment prior to the
expiration of such Notice Period, in which event the Company will pay Executive
his then-current base salary through the expiration of the Notice Period (the
"Notice Period Payment"). The Company's obligation to pay Executive the Notice
Period Payment shall be in addition to any payments owed to Executive under
Section 5(a)(iii) above. If Executive is terminated by the Company without
Cause, Executive shall only receive the special benefits provided under the
applicable provisions of Section 5(a)(iii) if: (x) Executive complies with the
restrictive covenants (Section 6) and all post-termination obligations to which
Executive is subject, including, but not limited, the obligations contained in
this Agreement, and (y) Executive signs a release form, subject to negotiation
as provided below, within the time prescribed by the Company which shall be no
later than 45 days after Executive receives the release from the Company and
before asserting any claims covered by the release against the Company other
than claims pertaining to (i) Executive's right to severance benefits, (ii) the
Company's continuing indemnification obligations to Executive under Section 4,
and (iii) claims for defamation, slander and/or libel (the conditions set forth
in the preceding sub-clauses (x) and (y) to be referred to as the "Separation
Conditions"). The Company shall furnish the release to

                                       -9-


Executive at Executive's termination. Subject to the exceptions in clauses (i)
through (iii) of the second preceding sentence, the parties shall in good faith
negotiate the final form of such release, but it shall include provisions
customary in formal settlement agreements and general releases, including, but
not limited to, such things as Executive's release of the Company and all
related persons or entities ("affiliates") from all known and unknown claims,
Executive's covenant never in the future to pursue any released claim,
Executive's promise never seek employment with the Company or any affiliate in
the future, but not including any provision that expands Executive's obligations
to the Company as set forth in Section 5(i) below. The Company and Executive
acknowledge that the severance benefits for which the release is required are
intended to effect Executive's peaceful transition from the Company. If
Executive chooses not to sign the release, Executive shall have the right to
pursue any claims Executive may have, but Executive shall not be eligible to
receive the severance benefits set forth in sub-clauses (1) through (6) of
Section 5(a)(iii). Executive also acknowledges that the Company's obligation to
provide any severance benefits under Section 5(a)(iii) shall terminate
immediately upon any breach by Executive of any post-termination obligations to
which he is subject; provided that the Company has provided prior written notice
to Executive setting forth the post-termination obligations Executive is alleged
to have breached and granting Executive 30 days to cure.

      (e) RESIGNATION FOR GOOD REASON. Executive may resign from employment for
GOOD REASON, which shall mean the occurrence of any of the following without
Executive's express written consent:

            (i) Relocation of Executive's primary office location more than 50
miles from the current location, as set forth in Section 3;

            (ii) Any change in or the Company's refusal to comply with the
provisions of Section 2;

            (iii) Any diminution in Executive's title, or material diminution in
his compensation or duties;

            (iv) Material failure by the Company to keep any promise or make any
payment provided herein;

            (v) Change in Control as defined in Section 7 below;

            (vi) Any transfer to any subsidiary or affiliate or other change
that removes Executive from the position of Chief Executive and President of the
Company;

            (vii) Failure by the Company to continue, or continue Executive's
participation in, any compensation plan in which Executive participates or is
entitled to participate such that Executive's total compensation is reduced by
more than five percent (5%); or

            (viii) Failure by the Company to continue, or continue Executive's
participation in, any benefit plan in which Executive participates unless an
equivalent substitute is adopted or made available on a basis not less favorable
to Executive and Executive's spouse.

                                      -10-


            However, an event that is or would constitute Good Reason shall
cease to be Good Reason if: (i) Executive does not provide the Company with
written notice of Executive's intent to terminate Executive's employment due to
an event that would constitute Good Reason within the earlier of 30 days after
the occurrence of such event or 30 days after Executive is officially notified
or it is officially announced that the Company will take any actions that would
constitute Good Reason to resign, (ii) the Company reverses the action or cures
the default that constitutes Good Reason within 30 days after receiving such
written notice, (iii) Executive does not terminate employment within 60 days
after the event occurs, (iv) Executive is a primary instigator of the Good
Reason event other than a Change in Control and the circumstances make it
inappropriate for Executive to receive benefits under this Agreement (e.g.,
Executive initiates a relocation of the Company's headquarters); or (v) the
Company in good faith temporarily suspends Executive for no more than 30 days
(with full pay) to investigate any suspected wrongdoing that, if substantiated,
would give the Company reason to terminate Executive for Cause.

            If Executive resigns from employment for Good Reason as defined in
this Section 5(e), Executive shall only receive the severance benefits set forth
in sub-clauses (1) through (6) of Section 5(a)(iii) if Executive satisfies the
Separation Conditions and any other obligations set forth in Section 5(d) above.

      (f) RESIGNATION WITHOUT GOOD REASON. Executive may terminate Executive's
employment hereunder at any time without Good Reason upon providing the Company
with 30 days written notice of Executive's intention to do so; provided,
however, that (i) the Company shall be entitled to accept Executive's
resignation as of any earlier date, and (ii) the Board may elect to terminate
Executive's employment prior to the expiration of the 30-day notice period, in
which event the Company will pay Executive his then-current base salary through
the expiration of such notice period. Executive's termination under this Section
5(f) shall only entitle him to be eligible to receive the benefits in Section
5(a)(i).

Notwithstanding anything to the contrary in this Agreement or any other
document, restricted stock shares and all other performance or incentive
compensation shall cease vesting when Executive gives notice of resignation
under this Section 5(f).

      (g) DEATH. If Executive dies while employed under this Agreement, the
payments required by Section 5(a)(iv) in the event of Executive's death shall be
made.

      (h) AMOUNTS OWED TO THE COMPANY. Any amounts payable to Executive under
this Section shall first be applied to repay any liquidated amounts Executive
owes the Company (i.e., personal expenses on Executive's credit card).

      (i) NO FURTHER OBLIGATIONS. Upon termination of employment for any reason,
the Company and Executive shall have no further obligations to each other,
except the Company's ongoing indemnification obligation under Section 4, and
Executive's post-termination obligations under Sections 6 and 17, or as set
forth in any written agreement Executive subsequently enters into with the
Company.

                                      -11-


      (j) DELAY IN PAYMENTS TO COMPLY WITH CODE Section 409A. Notwithstanding
any provision of this Section 5 to the contrary, if Executive is a "specified
employee" within the meaning of Code Section 409A(a)(2)(B)(i), then any payment
that is required to be made under the foregoing provisions of this Section 5
within the first six (6) months following Executive's "separation from service"
(within the meaning of Code Section 409A(a)(2)(A)(i)) with the Company shall not
be paid prior to the date that is six (6) months after the date of the
Executive's "separation from service" and shall be paid in a single lump sum
payment after such six (6) month period has elapsed.

6. RESTRICTIVE COVENANTS. Executive acknowledges that: (i) his position is a
position of trust and responsibility with access to Confidential Information,
Trade Secrets, and information concerning employees and customers of the
Company, (ii) 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, (iii) the Company will invest its time and money in the
development of Executive's skills in the Business, and (iv) the restrictions
contained in this Section 6 are reasonable and necessary to protect the
legitimate business interests of the Company, and will not impair or infringe
upon Executive's right to work or earn a living after Executive's employment
with the Company ends.

      (a) PROMISE NOT TO DISCLOSE. Executive agrees that he 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 Executive's 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 Executive during any former employment or for
any other party, unless authorized in writing by the former employer or third
party; or (iii) upon Executive's resignation or termination for any reason (a)
retain Trade Secrets or Confidential Information, including any copies existing
in any form (including electronic form), which are in Executive's possession or
control, or (b) destroy, delete, or alter the Trade Secrets or Confidential
Information without the Company's prior written consent. The obligations under
this Section 6(a) 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
Executive's employment with the Company and for a period of two (2) years after
Executive's employment with the Company ends for any reason. 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.

      (b) PROMISE NOT TO SOLICIT. During Executive's employment and for a period
of six (6) months after Executive's employment with the Company ends for any
reason, Executive 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.

                                      -12-


      (c) PROMISE NOT TO ENGAGE IN CERTAIN EMPLOYMENT. During Executive's
employment and for a period of six (6) months after Executive's employment with
the Company ends for any reason, Executive will not, on his 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 Executive performed, or which
are substantially similar to those which Executive performed, as President
and/or Chief Executive Officer of the Company. Nothing in this Agreement shall
be construed to prohibit Executive from performing activities which he did not
perform for the Company. Executive and the Company acknowledge and agree that
the covenant set forth in this Section 6(c) shall not apply if Executive's
employment terminates as a result of the expiration and non-extension of the
Employment Term as set forth in Section 5(a)(v) above.

      (d) The capitalized terms set forth in sub-sections 6(a), (b), and (c)
above shall be defined as follows:

            (i) "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.

            (ii) "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 (the "Third Party") provided to the Company which the Company is obligated
to treat as confidential, including, but not limited to, information provided to
the Company by its licensors, suppliers, or customers. 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 any Third Party, independent contractors, employees,
clients, customers, licensors, and/or suppliers of the Company, and (vi)
information concerning the Company's or any Third Party'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. For purposes of this definition of "Confidential
Information" only, the term "Company" shall include the Company's parents,
subsidiaries, affiliates, and all related companies; provided, however that the
definition of "Confidential Information" shall only apply to information which
Executive acquired or used by virtue of Executive's employment with the Company.

            (iii) "Employee" means any person who (i) is employed by the Company
at the time Executive's employment with the Company ends, (ii) was employed by
the Company during the last year of Executive's employment with the Company (or
during Executive's employment if employed less than a year), or (iii) is
employed by the Company during the six (6) month period following the
termination of Executive's employment.

                                      -13-


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

            (v) "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, clients, licensors, 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. For purposes of this
definition of "Trade Secrets" only, the term "Company" shall include the
Company's parents, subsidiaries, affiliates, and all related companies;
provided, however that the definition of "Trade Secrets" shall only apply to
information which Executive acquired or used by virtue of Executive's employment
with the Company.

      (e) INJUNCTIVE RELIEF. Executive agrees that if he breaches Section 6(a),
(b), and/or (c) of this Agreement: (i) the Company would suffer irreparable
harm; (ii) it would be difficult to determine damages, and (iii) money damages
alone would be an inadequate remedy for the injuries suffered by the Company.
The alleged breach of such Sections shall be enforceable in a court of equity
and appropriate injunctive relief may be applied for and granted in connection
therewith. Nothing contained in this Agreement shall limit the Company's right
to any other remedies at law or in equity.

      (f) RETURN OF INFORMATION. When Executive's employment with the Company
ends, Executive shall promptly deliver to the Company, or, at its written
instruction, destroy, all documents, data, drawings, manuals, letters, notes,
reports, electronic mail, recordings, and copies thereof, of or pertaining to it
or any Group member in Executive's possession or control. In addition, during
Executive's employment with the Company, Executive shall meet with Company
personnel and, based on knowledge or insights Executive gained during
Executive's employment with the Company, answer any question they may have
related to the Company or the Group. The Company shall pay Executive for
attending such meetings at a rate not less than the hourly equivalent of
Executive's base salary, plus reimbursement of reasonable expenses in accordance
with the Company's reimbursement policy for senior executives.

      (g) PROMISE TO DISCUSS PROPOSED ACTIONS IN ADVANCE. Executive promises
that before he discloses or uses Confidential Information, and before he
commences employment, solicitations, or any other activity that could violate
the promises he has previously made, Executive shall discuss his proposed
actions with the Chairman of the Board, who shall advise Executive in writing
whether he believes that Executive's proposed actions would violate this
Agreement.

      (h) INTELLECTUAL PROPERTY. Intellectual property (including such things as
all inventions, plans, developments, software, data, configurations, materials
(whether written or machine-readable), designs, drawings, illustrations, and
photographs, that may be protectable, in

                                      -14-


whole or in part, under any patent, copyright, trademark, trade secret, or other
intellectual property law), developed, created, conceived, made, or reduced to
practice during Executive's employment hereunder (except intellectual property
that has no relation to the Group or any Group customers that Executive
developed, purely on Executive's own time and at Executive's own expense), shall
be the sole and exclusive property of the Company, and Executive hereby assigns
all Executive's rights, title, and interest in any such intellectual property to
the Company.

7. CHANGE IN CONTROL.

      (a) EVENTS TRIGGERING CHANGE IN CONTROL. Change in Control shall mean the
first of the following to occur after the date of this Agreement:

            (i) Acquisition of Controlling Interest. Any Person becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing 51 percent or more of the combined voting power of the Company's
then outstanding securities, except that a voting agreement or other voting
activity shall not make the Person a Beneficial Owner unless the voting activity
in question is intended to accomplish a Change in Control under Sections
7(a)(ii), (iii), or (iv). In applying the preceding sentence, securities
acquired directly from the Company or its affiliates by or for the Person shall
not be taken into account.

            (ii) Change in Board Control. During a consecutive 2-year period
commencing after the date of this Agreement, individuals who constituted the
Board at the beginning of the period cease for any reason to constitute a
majority of the Board. In determining whether such a change in Board membership
has occurred, any Approved Replacement Director shall be treated as if he/she
had been a director at the beginning of the two-year period. For purposes of
this Section, "Approved Replacement Director" shall mean a director whose
election (or nomination for election) was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the two-year period or were themselves Approved Replacement
Directors.

            (iii) Merger Approved. The shareholders of the Company approve a
merger or consolidation of the Company with any other corporation unless: (a)
the voting securities of the Company outstanding immediately before the merger
or consolidation would continue to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) at least 51
percent of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation.

            (iv) Sale of Assets. The shareholders of the Company approve an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets in a transaction or series of transactions to an entity
that is not owned, directly or indirectly, by the Company's Common Stock
shareholders in substantially the same proportions as the owners of the
Company's Common Stock before such transaction or series of transactions.

Notwithstanding the foregoing, a Change in Control shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of Common
Stock immediately prior to such transaction or series of transactions continue
to have substantially the same proportionate ownership in an

                                      -15-


entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.

      (b) CERTAIN DEFINITIONS.

            (i) "Beneficial Owner" has the meaning set forth in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended."

            (ii) Management Action" means any event, circumstance, or
transaction that results from the action of the Management Group.

            (iii) "Management Group" means any entity or group that includes, is
affiliated with, or is wholly or partly controlled by one or more executive
officers of the Company.

            (iv) "Person" has the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended, and as modified and used in Section
13(d) of that Act, and shall include a "group," as defined in Rule 13d-5
promulgated thereunder. However, a Person shall not include: (i) the Company or
any of its subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its subsidiaries, (iii)
an underwriter temporarily holding securities pursuant to an offering of such
securities, (iv) Oaktree Capital Management, LLC, (v) the Blackstone Group, or
(vi) a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock of the
Company.

8. NOTICE.

      (a) TO THE COMPANY. Executive shall send all communications required by
this Agreement to the Company in writing by hand delivery or overnight, both
requiring signature acknowledging receipt, addressed as follows:

If Mailed to Company:

Lodgian Inc.

Attention: Daniel Ellis, Senior Vice President and General Counsel, 3445
Peachtree Road NE, Suite 700 Atlanta, Georgia 30326

With a copy to Lodgian Inc.

Attention: Chairman of the Board, 3445 Peachtree Road NE, Suite 700 Atlanta,
Georgia 30326

      (b) TO EXECUTIVE. Company shall send all communications required by this
Agreement to Executive in writing by hand delivery or overnight, both requiring
Executive's signature acknowledging receipt, addressed as follows: Edward J.
Rohling, 5310 Nakoma Drive, Dallas, Texas 75209.

                                      -16-


      (c) TIME NOTICE DEEMED GIVEN. Written notice as required by this Agreement
shall be deemed to have been given to either party when signed by such party or
its representative acknowledging receipt.

9. GOLDEN PARACHUTE LIMITATION. Executive's payments and benefits under this
Agreement and all other contracts, arrangements, or programs shall not, in the
aggregate, exceed the maximum amount that may be paid to Executive without
triggering golden parachute penalties under Section 280G and related provisions
of the Internal Revenue Code, as determined in good faith by an independent
auditor mutually satisfactory to the Company and Executive. If any benefits must
be cut back to avoid triggering such penalties, Executive's benefits shall be
cut back in the priority order designated by the Company but in no event may the
payment in Section 4(a) be reduced. The Company and Executive shall cooperate
with each other in connection with any administrative or judicial proceedings
concerning the existence or amount of golden parachute penalties with respect to
payments or benefits Executive receives.

10. AMENDMENT. No provisions of this Agreement may be modified, waived, or
discharged except by a written document signed by the Chairman of the Board and
Executive. Thus, for example, promotions, commendations, and/or bonuses shall
not, by themselves, modify, amend, or extend this Agreement. A waiver of any
conditions or provisions of this Agreement in a given instance shall not be
deemed a waiver of such conditions or provisions at any other time.

11. INTERPRETATION; EXCLUSIVE FORUM. The validity, interpretation, construction,
and performance of this Agreement shall be governed by the laws of the state of
Georgia (excluding any that mandate the use of another jurisdiction's laws). Any
litigation or similar proceeding with respect to such matters only may be
brought within that state, and all parties to this Agreement consent to that
state's jurisdiction and agree that venue anywhere in that state would be
proper.

12. SUCCESSORS. This Agreement shall be binding upon, and shall inure to the
benefit of, Executive and Executive's estate, but Executive may not assign or
pledge this Agreement or any rights arising under it, except to the extent
permitted under the terms of the benefit plans in which Executive participates.
Without Executive's consent, the Company may not assign this Agreement to a
successor that agrees in writing to be bound by this Agreement, after which any
reference to the "Company" in this Agreement shall be deemed to be a reference
to the successor. Thereafter, the Company shall have no further primary,
secondary or other responsibilities or liabilities under this Agreement of any
kind.

13. TAXES. The Company shall withhold taxes from payments it makes pursuant to
this Agreement as required by applicable law.

14. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

                                      -17-


15. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute the same instrument.

16. ENTIRE AGREEMENT. All oral or written agreements or representations, express
or implied, with respect to the subject matter of this Agreement are set forth
in this Agreement. However, this Agreement does not override other subsequent
written agreements Executive may executed relating to specific aspects of
Executive's employment, such as conflicts of interest.

17. FORMER EMPLOYERS. Except for the non-compete agreement with Pittsburgh
Greentree Radisson Hotel, as previously disclosed by Executive, Executive is not
subject to any employment, confidentiality, or other agreement or restriction
that would prevent Executive from fully satisfying Executive's duties under this
Agreement or that would be violated if Executive did so. Without the Company's
prior written approval, Executive shall not disclose proprietary information
belonging to a former employer or other entity without its written permission.

Executive shall indemnify and hold the Company harmless from any liabilities,
including defense costs, it may incur because Executive is alleged to have
violated the provisions of this Section 17 or improperly revealed or used
proprietary information of a former employer without its permission, or if a
former employer challenges Executive's entering into this Agreement or rendering
services pursuant to it.

18. INDEPENDENT ENFORCEMENT. The covenants set forth in Section 6 of this
Agreement shall be construed as agreements independent of any other agreements
or any other provision in this Agreement, and the existence of any claim or
cause of action by Executive against the Company, whether predicated on this
Agreement or otherwise, regardless of who was at fault and regardless of any
claims that either Executive or the Company may have against the other, shall
not constitute a defense to the enforcement by the Company of the covenants set
forth in Section 6 of this Agreement. The Company shall not be barred from
enforcing the restrictive covenants set forth in Section 6 of this Agreement by
reason of any breach of any other part of this Agreement or any other agreement
with Executive.

Executive acknowledges that all understandings and agreements between the
Company and Executive relating to the subjects covered in this Agreement are
contained in it and that Executive has entered into this Agreement voluntarily
and not in reliance on any promises or representations by the Company other than
those contained in this Agreement itself.

Executive further acknowledges that he has carefully read this Agreement, that
he understands all of it, and that he has been given the opportunity to discuss
this Agreement with his personal legal counsel and has availed himself of that
opportunity to the extent he wished to do so.

                                      -18-


                                        LODGIAN, INC.

                                        By: s/ Linda Philp
                                            ------------------------------------
                                        Name:  Linda Philp
                                        Title: Chief Financial Officer
                                        Date:  7-12-05

                                        EDWARD J. ROHLING

                                        By: s/ Edward J. Rohling
                                            ------------------------------------
                                        Name: Edward J. Rohling
                                        Date: 7-12-05

                                      -19-


                                    Exhibit A

IF THE COMPANY'S EBITDA ACHIEVES THE PERCENTAGE OF TARGET EBITDA FOR THE
CALENDAR YEAR IN QUESTION, COMPANY SHALL PAY EXECUTIVE THE ANNUAL PERFORMANCE
BONUS OF



% of Target EBITDA Achieved               Cash Award
- ---------------------------               ----------
                                       
Less than 90% of Target EBITDA            2005:  $110,000
                                          2006 - 2008: $220,000
90 - 99.99% of Target EBITDA              2005: $200,000
                                          2006 - 2008: $400,000
100 - 107.49% of Target EBITDA            2005:  $250,000
                                          2006 - 2008: $500,000
107.5 - 114.99% of Target EBITDA          2005:  $316,250
                                          2006 - 2008: $632,500
115 - 124.99% of Target EBITDA            2005:  $343,750
                                          2006 - 2008: $687,500
125 - 134.99% of Target EBITDA            2005:  $371,250
                                          2006 - 2008: $742,500
135 - 144.99% of Target EBITDA            2005:  $426,250
                                          2006 - 2008: $852,500
Greater than 145% of Target EBITDA        2005:  $481,250
                                          2006 - 2008: $962,500


EBITDA

For all purposes herein, EBITDA shall be defined as the Company's reported
Adjusted EBITDA. Adjusted EBITDA is defined as EBITDA for the Company's
Continuing Operations Hotels, excluding the effects of certain charges such as
pre-emergence reorganization expenses, post-emergence Chapter 11 expenses
included in corporate and other on the Company's consolidated statement of
operations, impairment losses and casualty losses for damage caused to the
Company's properties by the hurricanes that struck the southeastern United
States in the 2004 third quarter. Furthermore, for 2005, EBITDA (and Adjusted
EBITDA) shall not include the results of operations of the Crowne Plaza Hotel in
West Palm Beach, Florida, and the Holiday Inn in Melbourne, Florida, both of
which are currently closed. Nor shall EBITDA (and Adjusted EBITDA) include
business interruption proceeds received by the Company related to these two (2)
hotels. For all purposes, the Company's Continuing Operations Hotels include all
hotels that the Company operates which are (i) not classified as "held for
sale," and/or (ii) otherwise excluded under this paragraph.

                                      -20-


TARGET EBITDA

Target EBITDA is defined in Section 4 (d) (iii) of the Agreement.

STOCK PRICE THRESHOLD

Stock Price Threshold shall mean:



                     
2005:                   $12.00 per share
2006:                   $15.00 per share
2007:                   $18.00 per share
2008:                   $21.00 per share


                                     -21-

EX-10.36

                                                                   Exhibit 10.36

                                  LODGIAN, INC.

                        RESTRICTED STOCK AWARD AGREEMENT

      THIS AGREEMENT (the "Agreement") is made and entered into as of July 15,
2005 (the "Award Date"), by and between Lodgian, Inc. (the "Company"), a
Delaware corporation and Edward J. Rohling (the "Recipient").

                                   WITNESSETH:

      WHEREAS, the Company has adopted the Amended and Restated 2002 Stock
Incentive Plan of Lodgian, Inc. (the "Plan"); and

      WHEREAS, the Board of Directors of the Company (the "Board") or a
committee thereof has authorized the grant to Recipient of a restricted stock
award under the Plan of the common stock of the Company ("Common Stock"), and
the Company and Recipient wish to confirm herein the terms, conditions, and
restrictions of the restricted stock award;

      NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree as follows:

                                    SECTION 1
                                 AWARD OF SHARES

      1.1 Award of Shares. Subject to the terms, restrictions, limitations, and
conditions stated herein, in that certain Executive Employment Agreement between
the Recipient and the Company dated July 12, 2005 (the "Employment Agreement),
and in the Plan, the Company hereby awards to Recipient 75,000 shares of Common
Stock (the "Award Shares"). This award represents the compensation to be paid to
Recipient pursuant to Section 4(b) of the Employment Agreement.

      1.2 Vesting of Award Shares. Recipient shall become vested in a portion of
the Award Shares based upon the terms and conditions of the Employment
Agreement. In the event of any ambiguity in this Restricted Stock Award
Agreement or in the terms of the Employment Agreement which relate to the Award
Shares, the good faith interpretation of the Compensation Committee of the
Company's Board of Directors shall in all cases control. If the calculation of
vested Shares in accordance with the Employment Agreement would result in a
fraction of a share, any such fraction will be rounded to zero. Notwithstanding
the foregoing, the Board of Directors may, in its sole discretion, accelerate
the vesting of the Award Shares in whole or in part. The Award Shares which have
become vested pursuant to the Employment Agreement or by virtue of such
acceleration are herein referred to as the "Vested Award Shares" and all Award
Shares which are not Vested Award Shares are sometimes herein referred to as the
"Unvested Award Shares."



      1.3 Additional Condition to Award Shares. In order not to forfeit the
Award Shares, Recipient must deliver to the Company, within the ten day period
(the "Withholding Period") commencing on the date of occurrence of an event
pursuant to which some or all of the Award Shares become "substantially vested"
within the meaning of Section 83 of the Internal Revenue Code of 1986, as
amended, either a check payable to the Company in the amount of all withholding
or other tax obligations (whether federal, state or local) imposed on the
Company by reason of the vesting of the Award Shares, or the Withholding
Election described in Section 1.4. Upon receipt of payment in full of all
withholding tax obligations, the Company shall cause a certificate representing
the Award Shares which are the Vested Award Shares to be issued and delivered by
the Share Custodian to the Recipient pursuant to the instructions of Recipient.

      1.4 Optional Withholding Election. In lieu of paying the withholding tax
obligation in cash, as described in Section 1.3, Recipient may elect to have the
actual number of Vested Award Shares reduced by the smallest number of whole
shares of Common Stock which, when multiplied by the fair market value of the
Common Stock on the Vesting Date as determined by the Board of Directors, is
sufficient to satisfy the amount of the withholding tax obligations imposed on
the Company by reason of the vesting of the Award Shares (the "Withholding
Election"). Recipient may make a Withholding Election only if all of the
following conditions are met:

            (a) the Withholding Election must be made on or prior to the end of
      the Withholding Period by executing and delivering to the Company a
      properly completed Notice of Withholding Election, in substantially the
      form of EXHIBIT A attached hereto;

            (b) any Withholding Election made will be irrevocable; and

            (c) If Recipient is an Insider (an individual who is, on the
      relevant date, an officer, director or ten percent (10%) beneficial owner
      of any class of the Company's equity securities that is registered
      pursuant to Section 12 of the Exchange Act, all as defined under Section
      16 of the Exchange Act), then a Withholding Election may only be made to
      the extent that such withholding of Shares (1) has met the requirements of
      an exemption under Rule 16b-3 promulgated under the Exchange Act, or (2)
      is a subsequent transaction the terms of which were provided for in a
      transaction initially meeting the requirements of an exemption under Rule
      16b-3 promulgated under the Exchange Act.

      1.5 Investment Representations. Recipient hereby represents, warrants,
covenants, and agrees with the Company as follows:

            (a) The Award Shares being acquired by Recipient will be acquired
      for Recipient's own account without the participation of any other person,
      with the intent of holding the Award Shares for investment and without the
      intent of participating, directly or indirectly, in a distribution of the
      Award Shares and not with a view to, or for resale in connection with, any
      distribution of the Award Shares, nor is Recipient aware of the existence
      of any distribution of the Award Shares;

                                       -2-


            (b) Recipient is not acquiring the Award Shares based upon any
      representation, oral or written, by any person with respect to the future
      value of, or income from, the Award Shares but rather upon an independent
      examination and judgment as to the prospects of the Company;

            (c) The Award Shares were not offered to Recipient by means of
      publicly disseminated advertisements or sales literature, nor is the
      Recipient aware of any offers made to other persons by such means;

            (d) Recipient is able to bear the economic risks of the investment
      in the Award Shares, including the risk of a complete loss of Recipient's
      investment therein;

            (e) The Award Shares cannot be offered for sale, sold or transferred
      by Recipient other than (A) in a transaction in compliance with the 1933
      Act; and (B) upon presentation of evidence satisfactory to the Company of
      compliance with the applicable securities laws of other jurisdictions. The
      Company shall be entitled to rely upon an opinion of counsel satisfactory
      to it with respect to compliance with the above laws;

            (f) The Company will be under no obligation to register the Award
      Shares for resale or to comply with any exemption available for sale of
      the Award Shares without registration or filing, and the information or
      conditions necessary to permit routine sales of securities of the Company
      under Rule 144 of the 1933 Act are not now available and no assurance has
      been given that it or they will become available. The Company is under no
      obligation to act in any manner so as to make Rule 144 available with
      respect to the Award Shares; and

            (g) The agreements, representations, warranties, and covenants made
      by Recipient herein extend to and apply to all of the Award Shares of the
      Company issued to Recipient pursuant to this restricted stock award.
      Acceptance by Recipient of the certificate representing such Award Shares
      shall constitute a confirmation by Recipient that all such agreements,
      representations, warranties, and covenants made herein shall be true and
      correct at that time.

                                    SECTION 2
                           FORFEITURE OF AWARD SHARES

      Any Unvested Award Shares that are held for the benefit of the Recipient,
at and after the termination of employment of the Recipient by the Company,
shall, unless the Employment Agreement otherwise expressly provides, be
forfeited by the Recipient at such time and returned, marked "cancelled," to the
Company. Until an Award Share has been released to the Recipient, or cancelled
and returned to the Company as provided herein or in the Employment Agreement,
it shall be held by the General Counsel of the Company, acting as share
custodian (the "Share Custodian"), for the benefit of the Recipient, and subject
to the terms and conditions of this Agreement and the Employment Agreement.
RECIPIENT ACKNOWLEDGES AND AGREES THAT HE

                                       -3-


HAS BEEN FULLY ADVISED TO CONSULT WITH HIS OWN TAX CONSULTANTS REGARDING THE
APPLICABILITY OF HIS MAKING A CODE SECTION 83(B) ELECTION WITH RESPECT TO THE
AWARD SHARES.

                                    SECTION 3
                               GENERAL PROVISIONS

      3.1 Change in Capitalization. If the number of outstanding shares of the
Common Stock shall be increased or decreased by a change in par value, split-up,
stock split, reverse stock split, reclassification, distribution of common stock
dividend, or other similar capital adjustment, an appropriate adjustment shall
be made by the Board of Directors in the number and kind of Award Shares, such
that Recipient's proportionate interest shall be maintained as before the
occurrence of the event. No fractional shares shall be issued in making such
adjustment. All adjustments made by the Board of Directors under this Section
shall be final, binding, and conclusive.

      3.2 Legends. Each certificate representing the Award Shares shall be
endorsed with the following legend and Recipient shall not make any transfer of
the Award Shares without first complying with the restrictions on transfer
described in such legend:

                             TRANSFER IS RESTRICTED

   THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
   TRANSFER SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT DATED JULY 15, 2005,
   A COPY OF WHICH IS AVAILABLE FROM THE COMPANY.

   THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
   ASSIGNED, OR HYPOTHECATED UNLESS (1) THE TRANSFER IS MADE IN COMPLIANCE WITH
   RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, OR (2) THE ISSUER
   RECEIVES AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
   STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM
   THE REGISTRATION REQUIREMENTS OF SUCH ACT.

Recipient agrees that the Company may also endorse any other legends required by
applicable federal or state securities laws. The Company need not register a
transfer of the Award Shares, and may also instruct its transfer agent, if any,
not to register the transfer of the Award Shares unless the conditions specified
in the foregoing legends are satisfied.

      3.3 Removal of Legend and Transfer Restrictions. The restrictions
described in the second sentence of the legend set forth in Section 3.2 may be
removed at such time as permitted by Rule 144(k) promulgated under the
Securities Act.

      3.4 Governing Laws. This Agreement shall be construed, administered and
enforced according to the laws of the State of Delaware.

                                       -4-


      3.5 Successors. This Agreement shall be binding upon and inure to the
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.

      3.6 Notice. Except as otherwise specified herein, all notices and other
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered or if sent by registered or certified
United States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient. Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.

      3.7 Severability. In the event that any one or more of the provisions or
portion thereof contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.

      3.8 Entire Agreement. Subject to the terms and conditions of the Plan and
the Employment Agreement, this Agreement expresses the entire understanding and
agreement of the parties with respect to the subject matter. This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same instrument.

      3.9 Violation. Any transfer, pledge, sale, assignment, or hypothecation of
Unvested Award Shares or any portion thereof shall be a violation of the terms
of this Agreement and shall be null, void and without effect ab initio.

      3.10 Headings. Paragraph headings used herein are for convenience of
reference only and shall not be considered in construing this Agreement.

      3.11 Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.

      3.12 No Employment Rights Created. Neither the establishment of the Plan
nor the award of Award Shares hereunder shall be construed as giving Recipient
the right to continued employment with the Company.

      3.13 Capitalized Terms. All capitalized terms used in this Agreement shall
have the meanings given to them herein or in the Plan.

      3.14 No Disclosure Duty. The Recipient and the Company acknowledge and
agree that neither the Company nor its directors, officers or employees have any
duty or obligation to

                                       -5-


disclose to the Recipient any material information regarding the business of the
Company or affecting the value of the Award Shares, other than as required under
the law with respect to the Company's duty to its other shareholders.

           IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first set forth above.

COMPANY:                                 RECIPIENT:
LODGIAN, INC.:

                                         s/ Edward J. Rohling
                                         --------------------------------
By: s/ Daniel E. Ellis
    --------------------------------
Its: Senior Vice President, General
Counsel & Secretary

Attest:

By: s/ Linda Borchert Philp
    --------------------------------
Its: CFO

                                       -6-


                                    EXHIBIT A
                         NOTICE OF WITHHOLDING ELECTION

TO:   Lodgian, Inc.                        RESTRICTED STOCK AGREEMENT:
                                           Restricted Stock Agreement between
FROM:                                      ______________ and Lodgian, Inc. (the
      __________________________________   "Company") Date of Agreement:
                                           _________________________ Total
RE:   Withholding Election                 Number of Restricted Shares:
                                           ____________

TO:   Lodgian, Inc.
FROM:____________________________
RE:  Withholding Election with respect to Restricted Stock Agreement Noted Above

________________________________________________________________________________

This election relates to ____________ shares of Common Stock of the Company
vesting on ___________________. I hereby certify that:

   i. My correct name and social security number and my current address are set
forth at the end of this document.

   ii. I am (check one, whichever is applicable):

[ ] the original recipient of the Restricted Stock Grant.

[ ] the legal representative of the estate of the original recipient of the
Restricted Stock Grant.

[ ] a legatee of the original recipient of the Restricted Stock Grant.

[ ] the legal guardian of the original recipient of the Restricted Stock Grant.

   iii. In connection with any future vesting of the Restricted Stock Grant with
respect to the Restricted Shares, I hereby elect to have certain of the shares
issuable pursuant to the exercise withheld by the Company for the purpose of
having the value of the shares applied to pay federal, state, and local, if any,
taxes arising from the exercise. The shares to be withheld shall have, as of the
tax date applicable to the exercise, a fair market value equal to the minimum
statutory tax-withholding requirement under federal, state, and local law in
connection with the exercise.

   iv. This Withholding Election is made prior to the tax date and is otherwise
timely made pursuant to the Agreement.

   v. I understand that this Withholding Election may not be revised, amended or
revoked by me but is subject to the disapproval of the Board.

   vi. I further understand that the Company shall withhold from the Vested
Restricted Shares a number of shares of Common Stock having the value specified
in Paragraph iii above.

   vii. I have read and understand the Restricted Stock Agreement and I have no
reason to believe that any of the conditions therein to the making of this
Withholding Election have not been met. Capitalized terms used in this Notice of
Withholding Election without definition herein shall have the meanings given to
them in the Restricted Stock Agreement.

Dated this ______ day of ________, 20__.

                                       -7-


                                           _____________________________________
Address:                                   Signature

________________________________________
                                           _____________________________________
________________________________________   Printed Name

________________________________________   _____________________________________
                                           Social Security Number

                                      -8-

EX-10.40

                                                                   EXHIBIT 10.40


                                  LODGIAN, INC.

                        RESTRICTED STOCK AWARD AGREEMENT


         THIS AGREEMENT (the "Agreement") is made and entered into as of
_______, 20 (the "Award Date"), by and between Lodgian, Inc. (the "Company"), a
Delaware corporation and ________________ (the "Recipient").

                              W I T N E S S E T H:

         WHEREAS, the Company has adopted the Amended and Restated 2002 Stock
Incentive Plan of Lodgian, Inc. (the "Plan"); and

         WHEREAS, the Board of Directors of the Company (the "Board") or a
committee thereof has authorized the grant to Recipient of a restricted stock
award under the Plan of the common stock of the Company ("Common Stock"), and
the Company and Recipient wish to confirm herein the terms, conditions, and
restrictions of the restricted stock award;

         NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree as follows:

                                    SECTION 1
                                 AWARD OF SHARES

         1.1      Award of Shares. Subject to the terms, restrictions,
limitations, and conditions stated herein, in that certain Executive Employment
Agreement between the Recipient and the Company dated ________________, 20 (the
"Employment Agreement), and in the Plan, the Company hereby awards to Recipient
___________ shares of Common Stock (the "Award Shares").

         1.2      Vesting of Award Shares. Recipient shall become vested in a
portion of the Award Shares based upon the terms and conditions of the
Employment Agreement. In the event of any ambiguity in this Restricted Stock
Award Agreement or in the terms of the Employment Agreement which relate to the
Award Shares, the good faith interpretation of the Compensation Committee of the
Company's Board of Directors shall in all cases control. If the calculation of
vested Shares in accordance with the Employment Agreement would result in a
fraction of a share, any such fraction will be rounded to zero. Notwithstanding
the foregoing, the Board of Directors may, in its sole discretion, accelerate
the vesting of the Award Shares in whole or in part. The Award Shares which have
become vested pursuant to the Employment Agreement or by virtue of such
acceleration are herein referred to as the "Vested Award Shares" and all Award
Shares which are not Vested Award Shares are sometimes herein referred to as the
"Unvested Award Shares."


         1.3      Additional Condition to Award Shares. In order not to forfeit
the Award Shares, Recipient must deliver to the Company, within the ten day
period (the "Withholding Period") commencing on the date of occurrence of an
event pursuant to which some or all of the Award Shares become "substantially
vested" within the meaning of Section 83 of the Internal Revenue Code of 1986,
as amended, either a check payable to the Company in the amount of all
withholding or other tax obligations (whether federal, state or local) imposed
on the Company by reason of the vesting of the Award Shares, or the Withholding
Election described in Section 1.4. Upon receipt of payment in full of all
withholding tax obligations, the Company shall cause a certificate representing
the Award Shares which are the Vested Award Shares to be issued and delivered by
the Share Custodian to the Recipient pursuant to the instructions of Recipient.

         1.4      Optional Withholding Election. In lieu of paying the
withholding tax obligation in cash, as described in Section 1.3, Recipient may
elect to have the actual number of Vested Award Shares reduced by the smallest
number of whole shares of Common Stock which, when multiplied by the fair market
value of the Common Stock on the Vesting Date as determined by the Board of
Directors, is sufficient to satisfy the amount of the withholding tax
obligations imposed on the Company by reason of the vesting of the Award Shares
(the "Withholding Election"). Recipient may make a Withholding Election only if
all of the following conditions are met:

                  (a)      the Withholding Election must be made on or prior to
         the end of the Withholding Period by executing and delivering to the
         Company a properly completed Notice of Withholding Election, in
         substantially the form of EXHIBIT A attached hereto;

                  (b)      any Withholding Election made will be irrevocable;
         and

                  (c)      If Recipient is an Insider (an individual who is, on
         the relevant date, an officer, director or ten percent (10%) beneficial
         owner of any class of the Company's equity securities that is
         registered pursuant to Section 12 of the Exchange Act, all as defined
         under Section 16 of the Exchange Act), then a Withholding Election may
         only be made to the extent that such withholding of Shares (1) has met
         the requirements of an exemption under Rule 16b-3 promulgated under the
         Exchange Act, or (2) is a subsequent transaction the terms of which
         were provided for in a transaction initially meeting the requirements
         of an exemption under Rule 16b-3 promulgated under the Exchange Act.

         1.5      Investment Representations. Recipient hereby represents,
warrants, covenants, and agrees with the Company as follows:

                  (a)      The Award Shares being acquired by Recipient will be
         acquired for Recipient's own account without the participation of any
         other person, with the intent of holding the Award Shares for
         investment and without the intent of participating, directly or
         indirectly, in a distribution of the Award Shares and not with a view
         to, or for resale in connection with, any distribution of the Award
         Shares, nor is Recipient aware of the existence of any distribution of
         the Award Shares;


                                      -2-


                  (b)      Recipient is not acquiring the Award Shares based
         upon any representation, oral or written, by any person with respect to
         the future value of, or income from, the Award Shares but rather upon
         an independent examination and judgment as to the prospects of the
         Company;

                  (c)      The Award Shares were not offered to Recipient by
         means of publicly disseminated advertisements or sales literature, nor
         is the Recipient aware of any offers made to other persons by such
         means;

                  (d)      Recipient is able to bear the economic risks of the
         investment in the Award Shares, including the risk of a complete loss
         of Recipient's investment therein;

                  (e)      The Award Shares cannot be offered for sale, sold or
         transferred by Recipient other than (A) in a transaction in compliance
         with the 1933 Act; and (B) upon presentation of evidence satisfactory
         to the Company of compliance with the applicable securities laws of
         other jurisdictions. The Company shall be entitled to rely upon an
         opinion of counsel satisfactory to it with respect to compliance with
         the above laws;

                  (f)      The Company will be under no obligation to register
         the Award Shares for resale or to comply with any exemption available
         for sale of the Award Shares without registration or filing, and the
         information or conditions necessary to permit routine sales of
         securities of the Company under Rule 144 of the 1933 Act are not now
         available and no assurance has been given that it or they will become
         available. The Company is under no obligation to act in any manner so
         as to make Rule 144 available with respect to the Award Shares; and

                  (g)      The agreements, representations, warranties, and
         covenants made by Recipient herein extend to and apply to all of the
         Award Shares of the Company issued to Recipient pursuant to this
         restricted stock award. Acceptance by Recipient of the certificate
         representing such Award Shares shall constitute a confirmation by
         Recipient that all such agreements, representations, warranties, and
         covenants made herein shall be true and correct at that time.

                                    SECTION 2
                           FORFEITURE OF AWARD SHARES

         Any Unvested Award Shares that are held for the benefit of the
Recipient, at and after the termination of employment of the Recipient by the
Company, shall, unless the Employment Agreement otherwise expressly provides, be
forfeited by the Recipient at such time and returned, marked "cancelled," to the
Company. Until an Award Share has been released to the Recipient, or cancelled
and returned to the Company as provided herein or in the Employment Agreement,
it shall be held by the General Counsel of the Company, acting as share
custodian (the "Share Custodian"), for the benefit of the Recipient, and subject
to the terms and conditions of this Agreement and the Employment Agreement.
RECIPIENT ACKNOWLEDGES AND AGREES THAT HE


                                      -3-

HAS BEEN FULLY ADVISED TO CONSULT WITH HIS OWN TAX CONSULTANTS REGARDING THE
APPLICABILITY OF HIS MAKING A CODE SECTION 83(B) ELECTION WITH RESPECT TO THE
AWARD SHARES.


                                    SECTION 3
                               GENERAL PROVISIONS

         3.1      Change in Capitalization. If the number of outstanding shares
of the Common Stock shall be increased or decreased by a change in par value,
split-up, stock split, reverse stock split, reclassification, distribution of
common stock dividend, or other similar capital adjustment, an appropriate
adjustment shall be made by the Board of Directors in the number and kind of
Award Shares, such that Recipient's proportionate interest shall be maintained
as before the occurrence of the event. No fractional shares shall be issued in
making such adjustment. All adjustments made by the Board of Directors under
this Section shall be final, binding, and conclusive.

         3.2      Legends. Each certificate representing the Award Shares shall
be endorsed with the following legend and Recipient shall not make any transfer
of the Award Shares without first complying with the restrictions on transfer
described in such legend:

                             TRANSFER IS RESTRICTED

     THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
     TRANSFER SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT DATED
     _________________, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY.

     THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
     ASSIGNED, OR HYPOTHECATED UNLESS (1) THE TRANSFER IS MADE IN COMPLIANCE
     WITH RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, OR (2) THE
     ISSUER RECEIVES AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE
     COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
     EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.

Recipient agrees that the Company may also endorse any other legends required by
applicable federal or state securities laws. The Company need not register a
transfer of the Award Shares, and may also instruct its transfer agent, if any,
not to register the transfer of the Award Shares unless the conditions specified
in the foregoing legends are satisfied.

         3.3      Removal of Legend and Transfer Restrictions. The restrictions
described in the second sentence of the legend set forth in Section 3.2 may be
removed at such time as permitted by Rule 144(k) promulgated under the
Securities Act.

         3.4      Governing Laws. This Agreement shall be construed,
administered and enforced according to the laws of the State of Delaware.


                                      -4-


         3.5      Successors. This Agreement shall be binding upon and inure to
the benefit of the heirs, legal representatives, successors, and permitted
assigns of the parties.

         3.6      Notice. Except as otherwise specified herein, all notices and
other communications under this Agreement shall be in writing and shall be
deemed to have been given if personally delivered or if sent by registered or
certified United States mail, return receipt requested, postage prepaid,
addressed to the proposed recipient at the last known address of the recipient.
Any party may designate any other address to which notices shall be sent by
giving notice of the address to the other parties in the same manner as provided
herein.

         3.7      Severability. In the event that any one or more of the
provisions or portion thereof contained in this Agreement shall for any reason
be held to be invalid, illegal, or unenforceable in any respect, the same shall
not invalidate or otherwise affect any other provisions of this Agreement, and
this Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.

         3.8      Entire Agreement. Subject to the terms and conditions of the
Plan and the Employment Agreement, this Agreement expresses the entire
understanding and agreement of the parties with respect to the subject matter.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same
instrument.

         3.9      Violation. Any transfer, pledge, sale, assignment, or
hypothecation of Unvested Award Shares or any portion thereof shall be a
violation of the terms of this Agreement and shall be null, void and without
effect ab initio.

         3.10     Headings. Paragraph headings used herein are for convenience
of reference only and shall not be considered in construing this Agreement.

         3.11     Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.

         3.12     No Employment Rights Created. Neither the establishment of the
Plan nor the award of Award Shares hereunder shall be construed as giving
Recipient the right to continued employment with the Company.

         3.13     Capitalized Terms. All capitalized terms used in this
Agreement shall have the meanings given to them herein or in the Plan.

         3.14     No Disclosure Duty. The Recipient and the Company acknowledge
and agree that neither the Company nor its directors, officers or employees have
any duty or obligation to


                                      -5-

disclose to the Recipient any material information regarding the business of the
Company or affecting the value of the Award Shares, other than as required under
the law with respect to the Company's duty to its other shareholders.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.

COMPANY:                                              RECIPIENT:
LODGIAN, INC.:



By:
   -------------------------------------------
Its: Senior Vice President, General Counsel &
Secretary

Attest:



By:
   ---------------------------------------------------
Its:


                                      -6-



                                    EXHIBIT A
                         NOTICE OF WITHHOLDING ELECTION



                                     
TO:      Lodgian, Inc.                  RESTRICTED STOCK AGREEMENT:
                                        Restricted Stock Agreement between
FROM:    _______________________        ______________ and Lodgian, Inc. (the "Company")
                                        Date of Agreement: _________________________
RE:      Withholding Election           Total Number of Restricted Shares: ____________


TO:      Lodgian, Inc.
FROM:
         ------------------------
RE:      Withholding Election with respect to Restricted Stock Agreement
         Noted Above


- -------------------------------------------------------------------------------

This election relates to ____________ shares of Common Stock of the Company
vesting on ___________________. I hereby certify that:

i.      My correct name and social security number and my current address are
        set forth at the end of this document.

ii.     I am (check one, whichever is applicable):

[ ]     the original recipient of the Restricted Stock Grant.

[ ]     the legal representative of the estate of the original recipient of the
        Restricted Stock Grant.

[ ]     a legatee of the original recipient of the Restricted
        Stock Grant.

[ ]     the legal guardian of the original recipient of the Restricted
Stock Grant.

iii.    In connection with any future vesting of the Restricted Stock
Grant with respect to the Restricted Shares, I hereby elect to have certain of
the shares issuable pursuant to the exercise withheld by the Company for the
purpose of having the value of the shares applied to pay federal, state, and
local, if any, taxes arising from the exercise. The shares to be withheld shall
have, as of the tax date applicable to the exercise, a fair market value equal
to the minimum statutory tax-withholding requirement under federal, state, and
local law in connection with the exercise.


iv.     This Withholding Election is made prior to the tax date and is otherwise
timely made pursuant to the Agreement.

v.      I understand that this Withholding Election may not be revised, amended
or revoked by me but is subject to the disapproval of the Board.

vi.     I further understand that the Company shall withhold from the Vested
Restricted Shares a number of shares of Common Stock having the value specified
in Paragraph iii above.

vii.    I have read and understand the Restricted Stock Agreement and I have no
reason to believe that any of the conditions therein to the making of this
Withholding Election have not been met. Capitalized terms used in this Notice of
Withholding Election without definition herein shall have the meanings given to
them in the Restricted Stock Agreement.

Dated this ________ day of ____________, 20__.



Address:

                                         --------------------------------------
                                         Signature
- ----------------------------------

- ----------------------------------       --------------------------------------
                                         Printed Name
- ----------------------------------
                                         --------------------------------------
                                         Social Security Number



                                      -7-

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)) and internal
      control over financial reporting (as defined in Exchange Act rules
      13a-15(f) and 15d-15(f)) for the Registrant and have:

         a) Designed such disclosure controls and procedures 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) Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, to provide reasonable assurance regarding the
            reliability of financial reporting and the preparation of financial
            statements for external purposes in accordance with generally
            accepted accounting principles;

         c) Evaluated the effectiveness of the Registrant's disclosure controls
            and procedures and presented in this 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

         d) Disclosed in this report any change in the Registrant's internal
            control over financial reporting that occurred during the
            Registrant's recent fiscal quarter (the registrants fourth quarter
            in the case of an annual report) that has materially affected, or is
            reasonably likely to materially affect, the Registrant's internal
            control over financial reporting; and

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

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

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

Date: August 9, 2005          By: W. Thomas Parrington
                                  ----------------------------------
                                  W. THOMAS PARRINGTON
                                  Chief Executive Officer

EX-31.2

                                                                    Exhibit 31.2

              FORM OF SARBANES-OXLEY SECTION 302 (a) CERTIFICATION

I, Linda Borchert Philp, 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)) and internal
      control over financial reporting (as defined in Exchange Act rules
      13a-15(f) and 15d-15(f)) for the Registrant and have:

         a) Designed such disclosure controls and procedures 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) Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, to provide reasonable assurance regarding the
            reliability of financial reporting and the preparation of financial
            statements for external purposes in accordance with generally
            accepted accounting principles;

         c) Evaluated the effectiveness of the Registrant's disclosure controls
            and procedures and presented in this 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

         d) Disclosed in this report any change in the Registrant's internal
            control over financial reporting that occurred during the
            Registrant's recent fiscal quarter (the registrants fourth quarter
            in the case of an annual report) that has materially affected, or is
            reasonably likely to materially affect, the Registrant's internal
            control over financial reporting; and

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

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

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

Date: August 9, 2005        By: s/ Linda Borchert Philp
                                --------------------------------------
                                LINDA BORCHERT PHILP
                            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 Quarterly period ended June 30, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), we, W.
Thomas Parrington, the Chief Executive Officer and Linda Borchert Philp, 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
                               Chief Executive Officer

                          By: s/ Linda Borchert Philp
                              -----------------------------------
                              LINDA BORCHERT PHILP
                          Executive Vice President and Chief Financial Officer

Date: August 9, 2005

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.