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 quarterly period ended June 30, 2007

OR

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

For the transition period from               to

Commission file no. 1-14537

Lodgian, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o                     Accelerated filer þ                    Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

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

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

Class	Outstanding as of August 1, 2007
Common	24,685,375

LODGIAN, INC. AND SUBSIDIARIES

INDEX

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006 (unaudited)	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and June 30, 2006 (unaudited)	4
	Condensed Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2007 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and June 30, 2006 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 6.	Exhibits	44
Signatures		45
EX-10.10 AMENDED AND RESTATED 2002 STOCK INCENTIVE PLAN
EX-10.13 LODGIAN, INC. 401(K) PLAN AS AMENDED
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32 SECTION 906 CERTIFICATIONS OF THE CEO AND CFO

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2007			December 31, 2006
	(Unaudited in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	97,581		$	48,188
Cash, restricted		10,096			13,791
Accounts receivable (net of allowances: 2007 — $417; 2006 — $277)		11,915			7,404
Insurance receivable		2,566			2,347
Inventories		2,950			2,893
Prepaid expenses and other current assets		26,658			22,450
Assets held for sale		21,868			89,437
Total current assets		173,634			186,510
Property and equipment, net		488,654			487,022
Deposits for capital expenditures		17,908			19,802
Other assets		5,961			5,824
	$	686,157		$	699,158
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,704		$	7,742
Other accrued liabilities		29,856			27,724
Advance deposits		2,252			1,384
Insurance advances		2,000			2,063
Current portion of long-term liabilities		17,909			46,557
Liabilities related to assets held for sale		13,269			68,351
Total current liabilities		73,990			153,821
Long-term liabilities		359,914			292,301
Total liabilities		433,904			446,122
Minority interests		10,264			10,922
Commitments and contingencies
Stockholders’ equity:
Common stock, $.01 par value, 60,000,000 shares authorized; 24,903,783 and 24,860,321 issued at June 30, 2007 and December 31, 2006, respectively		249			249
Additional paid-in capital		328,829			327,634
Accumulated deficit		(85,236	)		(84,816	)
Accumulated other comprehensive income		3,125			2,088
Treasury stock, at cost, 402,470 and 251,619 shares at June 30, 2007 and December 31, 2006, respectively		(4,978	)		(3,041	)
Total stockholders’ equity		241,989			242,114
	$	686,157		$	699,158

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	(Unaudited in thousands, except per share data)
Revenues:
Rooms	$	56,216		$	53,788		$	106,459		$	101,657
Food and beverage		16,779			15,636			30,623			27,746
Other		2,453			2,154			4,514			4,103
Total revenues		75,448			71,578			141,596			133,506
Direct operating expenses:
Rooms		13,756			13,310			26,435			25,513
Food and beverage		11,021			10,469			21,005			19,488
Other		1,642			1,657			3,154			3,182
Total direct operating expenses		26,419			25,436			50,594			48,183
		49,029			46,142			91,002			85,323
Other operating expenses:
Other hotel operating costs		20,478			18,755			40,491			37,317
Property and other taxes, insurance, and leases		5,212			4,717			10,823			9,118
Corporate and other		5,930			5,292			11,612			10,209
Casualty (gains) losses, net		—			31			(1,867	)		197
Depreciation and amortization		7,960			7,704			15,762			15,062
Impairment of long-lived assets		222			16			487			210
Total other operating expenses		39,802			36,515			77,308			72,113
Operating income		9,227			9,627			13,694			13,210
Other income (expenses):
Business interruption proceeds		272			695			272			695
Interest income and other		822			848			1,747			1,157
Interest expense		(6,767	)		(6,227	)		(12,965	)		(12,569	)
Loss on debt extinguishment		(3,411	)		—			(3,411	)		—
Income (loss) before income taxes and minority interests		143			4,943			(663	)		2,493
Minority interests (net of taxes, nil)		(56	)		(136	)		(421	)		(140	)
(Provision) benefit for income taxes — continuing operations		(19	)		(2,245	)		667			(1,520	)
Income (loss) from continuing operations		68			2,562			(417	)		833
Discontinued operations:
(Loss) income from discontinued operations before income taxes		(565	)		1,853			1,617			6,665
Benefit (provision) for income taxes — discontinued operations		234			(414	)		(1,620	)		(2,123	)
(Loss) income from discontinued operations		(331	)		1,439			(3	)		4,542
Net (loss) income attributable to common stock	$	(263	)	$	4,001		$	(420	)	$	5,375
Basic net (loss) income per share attributable to common stock	$	(0.01	)	$	0.16		$	(0.02	)	$	0.22
Diluted net (loss) income per share attributable to common stock	$	(0.01	)	$	0.16		$	(0.02	)	$	0.22

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

													Accumulated
							Additional						Other							Total
	Common Stock						Paid-In			Accumulated			Comprehensive		Treasury Stock					Stockholders’
	Shares			Amount			Capital			Deficit			Income		Shares		Amount			Equity
										(Unaudited in thousands, except share data)
Balance, December 31, 2006		24,860,321			249			327,634			(84,816	)		2,088		251,619		(3,041	)		242,114
Amortization of unearned stock compensation		—			—			656			—			—		—		—			656
Issuance and vesting of restricted and nonvested shares		25,420			1			(1	)		—			—		—		—			—
Exercise of stock options		19,415			—			186			—			—		—		—			186
Repurchases of treasury stock		—			—			—			—			—		150,851		(1,937	)		(1,937	)
Realization of pre-emergence deferred tax asset		—			—			300			—			—		—		—			300
Other		(1,373	)		(1	)		54			—			—		—		—			53
Comprehensive income:
Net loss		—			—			—			(420	)		—		—		—			(420	)
Currency translation adjustments (related taxes estimated at nil)		—			—			—			—			1,037		—		—			1,037
Total comprehensive income																					617
Balance, June 30, 2007		24,903,783			249			328,829			(85,236	)		3,125		402,470		(4,978	)		241,989

Comprehensive income for the three months ended June 30, 2007 was $0.7 million. Comprehensive income for the three and six months ended June 30, 2006 was $4.5 million and $5.9 million, respectively. Accumulated other comprehensive income is comprised of currency translation adjustments.

See notes to condensed consolidated financial statements.

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

	Six Months Ended
	June 30, 2007			June 30, 2006
	(Unaudited in thousands)
Operating activities:
Net (loss) income	$	(420	)	$	5,375
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		15,762			17,963
Impairment of long-lived assets		2,564			8,234
Stock compensation expense		656			845
Casualty gain, net		(4,525	)		—
Deferred income taxes		300			3,377
Minority interests		421			140
Gain on asset dispositions		(197	)		(1,483	)
Loss (gain) on extinguishment of debt		4,522			(10,869	)
Amortization of deferred financing costs		656			676
Other		—			202
Changes in operating assets and liabilities:
Accounts receivable, net of allowances		(4,514	)		(3,838	)
Insurance receivable		958			5,945
Inventories		(29	)		(480	)
Prepaid expenses and other assets		345			(3,528	)
Accounts payable		(562	)		1,674
Other accrued liabilities		1,836			2,463
Advance deposits		957			340
Net cash provided by operating activities		18,730			27,036
Investing activities:
Capital improvements		(19,000	)		(26,206	)
Proceeds from sale of assets, net of related selling costs		64,800			9,404
Acquisition of minority partner’s interest		(2,862	)		—
Withdrawals for capital expenditures		1,909			4,900
Insurance receipts related to casualty claims, net		1,023			1,852
Net decrease in restricted cash		3,695			671
Other		8			(71	)
Net cash provided by (used in) investing activities		49,573			(9,450	)
Financing activities:
Proceeds from issuance of long term debt		130,000			44,954
Proceeds from exercise of stock options and issuance of common stock		186			287
Principal payments on long-term debt		(141,733	)		(34,134	)
Purchase of treasury stock		(1,937	)		(543	)
Payments of deferred financing costs		(1,659	)		(870	)
Payments of defeasance costs		(3,895	)		—
Other		(15	)		10
Net cash (used in) provided by financing activities		(19,053	)		9,704
Effect of exchange rate changes on cash		143			48
Net increase in cash and cash equivalents		49,393			27,338
Cash and cash equivalents at beginning of period		48,188			19,097
Cash and cash equivalents at end of period	$	97,581		$	46,435
Supplemental cash flow information:
Cash paid during the period for:
Interest, net of the amounts capitalized shown below	$	14,663		$	17,680
Interest capitalized		21			117
Income taxes, net of refunds		876			590
Supplemental disclosure of non-cash investing and financing activities:
Net non-cash debt decrease		—			10,195
Treasury stock repurchases traded, but not settled		—			94
Purchases of property and equipment on account		2,544			5,197

See notes to condensed consolidated financial statements.

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LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Business Summary

Lodgian, Inc. (the “Company”) is one of the largest independent owners and operators of full-service hotels in the United States in terms of the number of guest rooms, as reported by Hotel Business in the 2007 Green Book published in December 2006. The Company is considered an independent owner and operator because the Company does not operate its hotels under its own name. The Company operates substantially all of its hotels under nationally recognized brands, such as “Crowne Plaza”, “Hilton”, “Holiday Inn”, and “Marriott”. The Company’s 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. Management believes that these strong national brands provide many benefits such as guest loyalty and market share premiums.

As of June 30, 2007, the Company operated 51 hotels with an aggregate of 9,166 rooms, located in 26 states and Canada. Of the 51 hotels, 44 hotels, with an aggregate of 8,116 rooms, were held for use, while 7 hotels with an aggregate of 1,050 rooms, were held for sale. The Company consolidated all of these hotels in its financial statements. The 51 hotels consisted of:

• 49 hotels that were wholly owned and operated through subsidiaries; and

• two hotels that were operated in joint ventures in which the Company has a 50% voting equity interest and exercises control.

On March 20, 2007, the Company acquired its joint venture partner’s 18% interest in the Radisson New Orleans Airport Plaza Hotel for $2.9 million. As a result, this hotel is now consolidated as a wholly-owned subsidiary.

As of June 30, 2007, the Company operated all but two of its hotels under franchises obtained from nationally recognized hospitality franchisors. The Company operated 31 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. The Company operated 12 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. The Company operated an additional 6 hotels under other nationally recognized brands.

2. General

The condensed consolidated financial statements include the accounts of Lodgian, Inc., its wholly-owned subsidiaries and two joint ventures. The Company believes it has control of the joint ventures when it manages and has control of the joint ventures’ assets and operations. The Company reports 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.

The accounting policies which the Company follows for quarterly financial reporting are the same as those that were disclosed in Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, except as discussed in Notes 9 and 10.

In Management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting primarily of normal recurring adjustments, necessary to present fairly the financial position as of June 30, 2007, the results of operations for the three and six months ended June 30, 2007 and June 30, 2006 and cash flows for the six months ended June 30, 2007 and June 30, 2006. The Company’s results for interim periods are not necessarily indicative of the results for the entire year. You should read these financial statements in conjunction with the consolidated financial statements and related notes included in the Form 10-K.

In the preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP), the Company makes estimates and assumptions which affect:

• the reported amounts of assets and liabilities;

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

7

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

Actual results could differ from those estimates.

3. Stock-Based Compensation

The Company has a Stock Incentive Plan which permits awards to be made to directors, officers, other key employees and consultants. The Stock Incentive Plan is administered by the Compensation Committee of the Board of Directors. The Stock Incentive Plan provides that 3,301,058 shares are available for issuance as stock options, stock appreciation rights, stock awards, performance share awards, Section 162 (m) awards or other awards as determined by the Compensation Committee.

The following schedule summarizes the activity for the six months ended June 30, 2007:

Available under the plan, less previously issued as of December 31, 2006	2,568,029
Nonvested stock issued January 26, 2007	(63,000	)
Nonvested stock issued February 12, 2007	(46,000	)
Nonvested stock issued March 30, 2007	(18,800	)
Shares of nonvested stock withheld from awards to satisfy tax withholding obligations	4,226
Nonvested shares forfeited in 2007	1,259
Stock options forfeited in 2007	26,833
Available for issuance, June 30, 2007	2,472,547

Stock Options

The outstanding stock options generally vest in three equal annual installments and expire ten years from the grant date. The exercise price of the awards is the average of the high and low market prices on the date of the grant. The fair value of each stock option grant is estimated on the date of the grant using the Black-Scholes-Merton option pricing model. There were no stock option grants during the six months ended June 30, 2007.

A summary of stock option activity during the six months ended June 30, 2007 is summarized below:

				Weighted Average
	Stock Options			Exercise Price
Balance, December 31, 2006		356,313		$	10.60
Exercised		(19,415	)		9.61
Forfeited		(26,833	)		10.78
Balance, June 30, 2007		310,065		$	10.65

The amount of cash received from the exercise of stock options during the six months ended June 30, 2007 was $187,000. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2007 was $105,000.

A summary of options outstanding and exercisable (vested), and expected to vest at June 30, 2007 is as follows:

8

	Options outstanding						Options exercisable
			Weighted average		Weighted				Weighted average		Weighted
			remaining life		average				remaining life		average
Range of prices	Number		(in years)		exercise price		Number		(in years)		exercise price
$7.83 to $9.39		141,825		7.7	$	9.05		83,000		7.5	$	9.05
$9.40 to $10.96		114,424		6.9	$	10.49		108,592		6.9	$	10.50
$10.97 to $15.66		53,816		5.7	$	15.21		53,816		5.7	$	15.21
		310,065		7.1	$	10.65		245,408		6.8	$	11.04
Expected to vest		300,366		7.0	$	10.70

	($ in thousands)
Aggregate intrinsic value of stock options outstanding	$	1,358
Aggregate intrinsic value of stock options expected to vest	$	1,301
Aggregate intrinsic value of stock options exercisable	$	979

Restricted Stock

A summary of restricted stock activity during the six months ended June 30, 2007 is summarized below:

				Weighted Average
	Restricted Stock			Exercise Price
Balance, December 31, 2006		7,694		$	12.88
Expiration of restrictions		(7,694	)		12.88
Balance, June 30, 2007		—		$	—

Nonvested Stock

On January 26, 2007, the Company granted 63,000 shares of nonvested stock awards to certain employees. The shares vest in equal annual installments on the next three anniversary dates. The shares were valued at $12.84, the closing price of the Company’s common stock on the date of the grant. The aggregate value of the grant is being recorded as compensation expense over the vesting period.

On February 12, 2007, the Company granted 46,000 shares of nonvested stock awards to all non-employee members of the Board of Directors. The shares vest in three equal annual installments commencing on January 30, 2008. The shares were valued at $12.95, the closing price of the Company’s common stock on the date of the grant. Two members of the Board of Directors did not stand for reelection at the April 2007 annual meeting of stockholders and the Board elected to accelerate the vesting of the shares for these individuals as of April 24, 2007. Therefore, the aggregate value of their grant is being recorded as compensation expense over an accelerated vesting period. The aggregate value of the remaining grant is being recorded as compensation expense over the entire vesting period.

On March 30, 2007, the Company granted 18,800 shares of nonvested stock awards to certain employees. The shares vest in equal annual installments on the next three anniversary dates. The shares were valued at $13.36, the closing price of the Company’s common stock on the date of the grant. The aggregate value of the grant is being recorded as compensation expense over the vesting period.

A summary of nonvested stock activity during the six months ended June 30, 2007 is as follows:

9

				Weight Average
	Nonvested Stock			Exercise Price
Balance, December 31, 2006		82,607		$	11.63
Granted		127,800			12.96
Forfeited		(1,259	)		13.26
Vested		(25,420	)		12.76
Balance, June 30, 2007		183,728		$	12.39

The aggregate fair value of nonvested stock awards that vested during the six months ended June 30, 2007 was $0.4 million.

A summary of unrecognized compensation expense and the remaining weighted-average amortization period as of June 30, 2007 is as follows:

	Unrecognized		Weighted-Average
	Compensation		Amortization
Type of Award	Expense ($000’s)		Period (in years)
Stock Options	$	291		0.89
Nonvested Stock		1,539		2.41
Total	$	1,830		2.36

Compensation expense for the three months ended June 30, 2007 and 2006 is summarized below:

	Three Months Ended June 30, 2007						Three Months Ended June 30, 2006
	Compensation			Income Tax			Compensation		Income Tax
Type of Award	Expense			Benefit			Expense		Benefit
	(Unaudited in thousands)
Stock Options	$	(208	)	$	(81	)	$	209	$	81
Nonvested Stock		372			144			131		51
Other		—			—			37		14
Total	$	164		$	63		$	377	$	146

Compensation expense for the six months ended June 30, 2007 and 2006 is summarized below:

	Six Months Ended June 30, 2007						Six Months Ended June 30, 2006
	Compensation			Income Tax			Compensation		Income Tax
Type of Award	Expense			Benefit			Expense		Benefit
	(Unaudited in thousands)
Stock Options	$	(2	)	$	(1	)	$	415	$	161
Nonvested Stock		658			255			235		91
Restricted Stock		—			—			161		62
Other		—			—			37		14
Total	$	656		$	254		$	848	$	328

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Accounting for Stock-Based Compensation”, the Company records compensation expense based on estimated forfeitures and revises compensation expense, if necessary, in subsequent periods if actual forfeitures differ from those estimates. During the three months ended June 30, 2007, the Company determined that the estimated forfeiture rate for certain stock option awards was lower than actual. As a result, the Company recorded a $0.4 million adjustment to reduce compensation expense related to stock options. In addition, the Company determined that the estimated forfeiture rate for certain nonvested stock awards was higher than actual, which resulted in a $0.1 million adjustment to increase compensation expense related to nonvested stock.

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4. Treasury Stock

During the six months ended June 30, 2007, 25,420 shares of nonvested stock awards vested, of which 4,226 shares were withheld to satisfy tax obligations and were included in the treasury stock balance of the Company’s balance sheet. The aggregate cost of these shares was approximately $54,000.

In May 2006, the Board of Directors of the Company approved a $15 million share repurchase program which expired in May 2007. During the six months ended June 30, 2007, the Company repurchased 146,625 shares at an aggregate cost of $1.9 million. The Company may use its treasury stock for the issuance of future stock-based compensation awards or for acquisitions.

5. Dispositions and Discontinued Operations

Dispositions

In November 2006, the Company announced a major strategic initiative to reconfigure its hotel portfolio. The Company redefined its held for use portfolio, which contains 44 hotels with 8,116 rooms (including the Holiday inn Marietta, GA hotel, which is currently closed following a fire). In accordance with this new strategy, the Company sold two hotels and identified 12 additional hotels for sale in November and December 2006.

In January 2007, the Company sold the University Plaza Bloomington, IN for a gross sales price of $2.4 million. An impairment charge of $0.1 million was recorded upon the disposition of the hotel. Additionally, in March 2007, the Company sold the Holiday Inn Hamburg, NY for a gross sales price of $3.4 million, realized a gain of $0.8 million, and used $2.0 million to pay down debt. The remaining net proceeds, after paying settlement costs, were used for general corporate purposes.

In June 2007, the Company sold the Holiday Inn Sheffield, AL, which was previously written down to its estimated net selling price, for a gross sales price of $4.1 million. The net proceeds, after paying settlement costs, were used for general corporate purposes. Also in June 2007, the Company sold the following 15 hotels:

• Clarion Louisville, KY

• Crowne Plaza Cedar Rapids, IA

• Augusta West Inn Augusta, GA

• Holiday Inn Greentree, PA

• Holiday Inn Lancaster East, PA

• Holiday Inn Lansing, MI

• Holiday Inn Pensacola, FL

• Holiday Inn Winter Haven, FL

• Holiday Inn York, PA

• Holiday Inn Express Dothan, AL

• Holiday Inn Express Pensacola, FL

• Park Inn Brunswick, GA

• Quality Inn Dothan, AL

• Ramada Plaza Macon, GA

• Ramada Inn North Charleston, SC

These 15 hotels, along with an additional hotel expected to be sold later in the year, were negotiated in a single purchase-sale agreement to an individual buyer. The agreement met the criteria for recognition as a group sale and the aggregate transaction is expected to result in a gain. $60.8 million of the aggregate purchase price was allocated to the 15 hotels and the net proceeds, after paying settlement costs, were used for general corporate purposes. The gain, which will be deferred until the remaining hotel is sold, is included in Liabilities Related to Assets Held for Sale in the Company’s Balance Sheet.

Assets Held for Sale and Discontinued Operations

Management considers an asset to be 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;

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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.

In accordance with SFAS No. 144, the Company has included the hotel assets sold as well as the hotel assets held for sale (including any related impairment charges) in Discontinued Operations in the related Condensed Consolidated Statements of Operations. The assets held for sale at June 30, 2007 and December 31, 2006 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets. All losses and gains on assets sold and held for sale (including any related impairment charges) are included in “Income (loss) from discontinued operations before income taxes” in the Condensed Consolidated Statement of Operations. The amount the Company will ultimately realize on these asset sales could differ from the amount recorded in the financial statements.

Consistent with the accounting policy on asset impairment, and in accordance with SFAS No. 144, the reclassification of assets from held for use to held for sale requires 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. The Company engages real estate brokers to assist in determining the estimated selling price. The estimated selling costs are based on the Company’s experience with similar asset sales. The Company records an impairment charge and writes down a hotel asset’s carrying value if the carrying value exceeds the estimated selling price less costs to sell.

The impairment of long-lived assets held for sale of $0.6 million recorded during the three months ended June 30, 2007 related mainly to the Holiday Inn Jamestown, NY to reflect the estimated selling price.

The impairment of long-lived assets held for sale of $2.1 million recorded during the six months ended June 30, 2007 included the following (amounts below are individually rounded):

• $1.3 million on the Holiday Inn Clarksburg, WV to reflect the estimated selling price;

• $0.6 million on the Holiday Inn Jamestown, NY to reflect the estimated selling price;

• $0.1 million on the University Plaza Bloomington, IN to record the final disposition of the hotel; and

• $0.1 million related to various other held-for-sale properties primarily to write-off the remaining net book value of disposed fixed assets.

The impairment of long-lived assets held for sale of $0.8 million recorded during the three months ended June 30, 2006 included the following (amounts below are individually rounded):

• $0.7 million on the University Plaza Bloomington, IN hotel which was classified as held for sale during the second quarter, to reduce the carrying value to the estimated selling price less costs to sell; and

• $36,000 related to various other held-for-sale properties primarily to reduce the carrying values to estimated selling prices less costs to sell, and to record the final disposition of certain properties.

The impairment of long-lived assets held for sale of $8.0 million recorded during the six months ended June 30, 2006 included the following (amounts below are individually rounded):

• $3.9 million on the Holiday Inn Manhattan, KS to record the final disposition of the hotel;

• $2.2 million on the Holiday Inn Lawrence, KS to record the final disposition of the hotel;

• $0.5 million on the Holiday Inn Sheffield, AL to reflect the estimated selling costs as the hotel was identified for sale during the first quarter of 2006;

• $0.3 million on the Holiday Inn McKnight, PA to reflect the lowered estimated selling price and to reflect the write-off of capital improvements that did not add incremental value or revenue generating capacity;

• $0.2 million on the Holiday Inn Valdosta, GA to reflect the estimated selling costs as the hotel was identified for sale during the first quarter of 2006; and

• $0.1 million on the Azalea Inn Valdosta, GA to reflect the estimated selling costs as the hotel was identified for sale during the first quarter 2006

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• $0.7 million on the University Plaza Bloomington, IN hotel which was classified as held for sale during the second quarter, to reduce the carrying value to the estimated selling price less costs to sell; and

• $36,000 related to various other held-for-sale properties primarily to reduce the carrying value to estimated selling price less costs to sell and to record the final disposition of certain properties.

Assets held for sale consist primarily of property and equipment, net of accumulated depreciation. Liabilities related to assets held for sale consist primarily of accounts payable, other accrued liabilities and long term debt. At June 30, 2007, the held for sale portfolio consisted of 7 hotels:

• Holiday Inn Clarksburg, WV

• Holiday Inn Fairmont, WV

• Holiday Inn Frederick, MD

• Holiday Inn Fort Wayne, IN

• Holiday Inn Jamestown, NY

• Holiday Inn St. Paul, MN

• Vermont Maple Inn Colchester, VT

Summary balance sheet information for assets held for sale is as follows:

	June 30, 2007		December 31, 2006
	(Unaudited in thousands)
Property and equipment, net	$	18,903	$	83,462
Other assets		2,965		5,975
Assets held for sale	$	21,868	$	89,437
Other liabilities	$	6,900	$	10,630
Long-term debt		6,369		57,721
Liabilities related to assets held for sale	$	13,269	$	68,351

Summary statement of operations information for discontinued operations is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
				(Unaudited in thousands)
Total revenues	$	17,330		$	25,726		$	35,363		$	47,621
Total expenses		(15,200	)		(22,273	)		(31,840	)		(42,945	)
Impairment of long-lived assets		(612	)		(818	)		(2,077	)		(8,024	)
Business interruption proceeds		—			457			—			457
Interest income and other		—			—			1			10
Interest expense		(362	)		(1,506	)		(1,574	)		(3,044	)
Casualty gains, net		—			274			2,658			239
(Loss) gain on asset disposition		(610	)		(7	)		197			1,482
(Loss) gain on extinguishment of debt		(1,111	)		—			(1,111	)		10,869
Benefit (provision) for income taxes		234			(414	)		(1,620	)		(2,123	)
(Loss) income from discontinued operations	$	(331	)	$	1,439			(3	)		4,542

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In addition to the assets held for sale listed above, the hotels that were sold during the six months ended June 30, 2007 (as discussed above), were included in the statement of operations for discontinued operations, as well as the properties that were sold prior to 2007.

Discontinued operations are not segregated in the condensed consolidated statements of cash flows.

6. Income (Loss) Per Share

The computation of basic and diluted income (loss) per share is as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2007			2006		2007			2006
	(Unaudited in thousands, except per share data)
Numerator:
Income (loss) from continuing operations	$	68		$	2,562	$	(417	)	$	833
(Loss) income from discontinued operations		(331	)		1,439		(3	)		4,542
Net (loss) income attributable to common stock	$	(263	)	$	4,001	$	(420	)	$	5,375
Denominator:
Basic weighted average shares		24,483			24,634		24,490			24,635
Diluted weighted average shares		24,483			24,743		24,490			24,731
Basic (loss) income per common share:
Loss from continuing operations	$	—		$	0.10	$	(0.02	)	$	0.03
Income from discontinued operations		(0.01	)		0.06		—			0.18
Net (loss) income attributable to common stock	$	(0.01	)	$	0.16	$	(0.02	)	$	0.22
Diluted (loss) income per common share:
Loss from continuing operations	$	—		$	0.10	$	(0.02	)	$	0.03
Income from discontinued operations		(0.01	)		0.06		—			0.18
Net (loss) income attributable to common stock	$	(0.01	)	$	0.16	$	(0.02	)	$	0.22

The Company did not include the shares associated with the assumed exercise of stock options (options to acquire 310,065 shares of common stock), the assumed conversion of 183,728 shares of nonvested stock in the computation of diluted income per share for the three and six months ended June 30, 2007, and the assumed conversion of Class A and B warrants (rights to acquire 503,546 and 343,122 shares of common stock, respectively) because their inclusion would have been antidilutive.

For the three and six months ended June 30, 2006, the Company did not include the shares associated with the assumed exercise of stock options (options to acquire 69,812 shares of common stock), the assumed conversion of 51,000 shares of nonvested stock in the computation of diluted income per share, and the assumed conversion of Class A and B warrants (rights to acquire 503,546 and 343,122 shares of common stock, respectively) in the computation of diluted income per share because their inclusion would have been antidilutive.

7. Long-Term Liabilities

As of June 30, 2007, 43 of the 51 hotels were pledged as collateral for mortgage debt. Certain mortgage notes are subject to prepayment, yield maintenance, or defeasance obligations if the Company repays them prior to their maturity. Approximately 56% of the mortgage debt bears interest at fixed rates and approximately 44% of the debt is subject to floating rates of interest. A summary of the Company’s long-term debt by debt pool, along with the applicable interest rates and the related carrying values of the property and equipment which collateralize the debt, is summarized below:

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				June 30, 2007						December 31, 2006
	Number			Property, plant			Long-term			Long-term
	of Hotels			and equipment, net			obligations			obligations			Interest rates at June 30, 2007
Mortgage Debt
Merrill Lynch Mortgage Lending, Inc. — Floating		—		$	—		$	—		$	58,118
Merrill Lynch Mortgage Lending, Inc. — Fixed		22			237,217			163,969			239,383		6.58%
Goldman Sachs Commercial Mortgage Capital, L.P.		10			120,262			130,000			—		LIBOR plus 1.50%; capped at 8.5%
Computer Share Trust Company of Canada		1			16,987			8,142			7,551		7.88%
Lehman Brothers Holdings, Inc.		2			29,921			6,380			15,194		8.90%
Wachovia		4			37,005			35,755			36,081		$9,756 at 6.03%; $3,084 at 5.78%; 22,915 at 6.04%
IXIS		4			36,398			40,308			40,500		$18,883 at LIBOR plus 2.90%, capped at 8.4%; $21,425 at LIBOR plus 2.95%, capped at 8.45%
Total		43			477,790			384,554			396,828		6.85%(1)
Long-term liabilities — other
Tax notes issued pursuant to our Joint Plan of Reorganization		—			—			938			1,263
Other		—			—			447			1,038
		—			—			1,385			2,301
Property, plant and equipment — Unencumbered		8			29,767			—			—
		51			507,557			385,939			399,129
Held for sale		(7	)		(18,903	)		(8,116	)		(60,271	)
Total June 30, 2007 (2)		44		$	488,654		$	377,823		$	338,858

(1)	Represents the Company’s annual weighted average cost of debt at June 30, 2007.
(2)	Includes the current portion.

In April 2007, the Company entered into a $130 million loan agreement (the “loan”) with Goldman Sachs Commercial Mortgage Capital, L.P. The loan is secured by ten hotels and has an initial term of two years, with the option to extend the loan for three additional one-year periods. The loan bears interest at LIBOR plus 150 basis points. The loan can be repaid at any time, subject to a prepayment penalty of 1% of the outstanding balance during the first six months and 0.5% of the outstanding balance during the following six months. There is no prepayment penalty after the first anniversary of the loan. The Company purchased an interest rate protection agreement which capped the maximum interest rate at 8.5%.

After paying closing costs and establishing required reserve balances totaling $8.6 million, the loan proceeds were used as follows:

• $46.1 million of the loan proceeds, along with $9.7 million in funds held in reserve by Merrill Lynch, were used to pay off the $55.8 million Merrill Lynch Floating Rate Loan, which was secured by 14 hotels (2 hotels were classified as held for use, while 12 hotels were classified as held for sale). The unamortized deferred loan costs of $0.3 million were recorded as a Loss on Debt Extinguishment in the statement of operations. Of this amount, approximately $0.1 million was recorded in continuing operations and approximately $0.3 million was recorded in discontinued operations.

• $59.6 million of the loan proceeds, along with $11.7 million of the Company’s cash, were used to defease the Merrill Lynch Fixed Rate #2 Loan, as discussed below.

• $15.7 million was held in a restricted cash account, pending resolution or settlement of the terms of a ground lease relating to one of the ten hotels securing the loan. In June 2007, the terms of the ground lease were settled and $15.4 million of the restricted cash balance was transferred into an unrestricted cash account.

In April 2007, the Company defeased the entire $67.7 million balance of the Merrill Lynch Fixed Rate #2 Loan, which was secured by 9 hotels (6 hotels were classified as held for use, while 3 hotels were classified as held for sale). The Company purchased $71.1 million of US Government treasury securities (“Treasury Securities”) to cover the monthly debt service payments under the terms of the loan agreement. The Treasury Securities were then substituted for the nine hotels that had served as collateral for the loan. The Treasury Securities and the debt were assigned to an unaffiliated entity, which became liable for all obligations of the defeased debt. The Company has no further obligation with regard to the defeased loan. Accordingly, the defeased loan is no longer reflected on the Company’s balance sheet. As a result of the defeasance, the Company recorded $3.8 million as a Loss on Debt Extinguishment in the statement of operations. Of this amount, $3.3 million was recorded in continuing operations, and $0.5 million was recorded in discontinued operations.

In May 2007, the Company repaid two loans totaling $8.6 million, each of which was secured by one hotel. Both loans had reached their scheduled maturity dates.

Also, in May 2007, the Company defeased $5.7 million of the $60.9 million balance of one of the Company’s mortgage loans, which was secured by seven hotels. The Company purchased $6.0 million of Treasury Securities to cover the monthly debt service payments under the terms of the loan agreement. The Treasury Securities were then substituted for the two hotels that originally served as collateral for the defeased portion of the loan. Both hotels were classified as held for sale. The Treasury Securities and the debt were assigned to an unaffiliated entity, which became liable for all obligations under the partially defeased portion of the original debt. The transaction was deemed a partial defeasance because the Company continues to be liable for the remaining (undefeased)

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portion of the debt. The defeased portion of the debt is no longer reflected in the Company’s Consolidated Balance Sheet. As a result of the defeasance, the Company recorded a $0.4 million Loss on Debt Extinguishment in the statement of operations. The entire amount was recorded in discontinued operations.

8. Commitments and Contingencies

Franchise Agreements and Capital Expenditures

The Company benefits 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 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 accounted for approximately 42% of total reservations during the six months ended June 30, 2007.

To obtain these franchise affiliations, the Company has entered into franchise agreements with various hotel chains which require annual payments for license fees, reservation services and advertising fees. The license agreements generally have original terms of 10 to 20 years. As part of the franchise agreements, the Company is 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. These costs vary with revenues and are not fixed commitments. Franchise fees incurred (which are reported in other hotel operating costs on the Condensed Consolidated Statement of Operations) for the three and six months ended June 30, 2007 and 2006 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
			(Unaudited in thousands)
Continuing operations	$	5,342	$	5,068	$	10,013	$	9,405
Discontinued operations		1,346		2,574		2,574		4,068
	$	6,688	$	7,642	$	12,587	$	13,473

During the terms of the franchise agreements, the franchisors may require the Company to upgrade facilities to comply with the current standards. The Company’s franchise agreements terminate at various times and have differing remaining terms. For example, the terms of three, eight, and three of the franchise agreements for the held for use hotels are scheduled to expire in 2007, 2008, and 2009, respectively. One and five of the franchise agreements for the held for sale hotels are scheduled to expire in 2007 and 2008, respectively. 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.

When a hotel does not meet the terms of its franchise license agreement, a franchisor reserves the right to issue a notice of non-compliance to the licensee. This notice of non-compliance provides the franchisee with a cure period which typically ranges from 3 to 24 months. At the end of the cure period, the franchisor will review the criteria for which the non-compliance notice was issued and either acknowledge a cure under the franchise agreement, returning the hotel to good standing, or issue a notice of default and termination, giving the franchisee another opportunity to cure the non-compliant issue. At the end of the default and termination period, the franchisor will review the criteria for which the non-compliance notice was issued and either acknowledge a cure of the default under the franchise agreement, issue an extension which will grant the franchisee additional time to cure, or terminate the franchise agreement.

As of August 1, 2007, the Company has been or expects to be notified that it is in default with respect to the agreements at two hotels, and is awaiting cure letters from the franchisor for an additional three hotels, summarized as follows:

• Two hotels are in default of the franchise agreements.

• One hotel is held for sale. The Company is currently negotiating a license extension with the franchisor in an effort to maintain the license until the hotel is sold.

• One hotel is in default of the franchise agreement for failure to complete a Property Improvement Plan. The Company has met with the franchisor and is in the planning and diligence phase of renovation.

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• The Company expects to earn “clean slate” letters for the remaining three hotels in February 2009, August 2009, and February 2010, respectively.

The corporate operations team, as well as each property’s general manager and associates, have focused their efforts to cure each of these non-compliance, or default issues through enhanced service, increased cleanliness, and product improvements by the required cure date.

The Company believes that it will cure the non-compliance and defaults for which the franchisors have given notice on or before the applicable termination dates, but the Company cannot provide assurance that it will be able to complete the action plans (which are estimated to cost approximately $4.5 million) to cure the alleged defaults of noncompliance and default prior to the specified termination dates or be granted additional time in which to cure any defaults or noncompliance. If a franchise agreement is terminated, the Company will select an alternative franchisor, operate the hotel independently of any franchisor or sell the hotel. 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, and in certain circumstances could lead to acceleration of parts of indebtedness. This could adversely affect the Company.

In addition, as part of the bankruptcy reorganization proceedings, the Company entered into stipulations with each of its major franchisors setting forth a timeline for completion of capital expenditures for some of the hotels. As of August 1, 2007, the Company had not completed the required capital expenditures for 3 hotels (2 of which are held for sale and 1 of which is held for use). However, the Company has sufficient cash and escrow reserves with the lenders to fund the related capital expenditures, pursuant to the terms of the respective loan agreements. A franchisor could, nonetheless, seek to declare its franchise agreement in default of the stipulations and could seek to terminate the franchise agreement.

Letters of Credit

As of June 30, 2007, the Company had three irrevocable letters of credit totaling $3.6 million which were fully collateralized by cash. The cash is classified as restricted cash in the accompanying Condensed Consolidated Balance Sheets and serves as a guarantee for self-insured losses and certain utility and liquor bonds. The letters of credit will expire in October 2007, November 2007 and January 2008, but may be renewed beyond those dates.

Self-insurance

The Company is self-insured up to certain limits with respect to employee medical, employee dental, general liability insurance, personal injury claims, workers’ compensation and auto liability. The Company establishes liabilities for these self-insured obligations annually, based on actuarial valuations and its history of claims. If these claims escalate beyond the Company’s expectations, this could have a negative impact on its future financial condition and results of operations. At June 30, 2007 and December 31, 2006, the Company had accrued $13.3 million and $11.5 million, respectively, for these liabilities.

There are other types of losses for which the Company 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 the Company’s insurance limits were to occur, the Company could lose both the revenues generated from the affected hotel and the capital that it has invested. The Company also could be liable for any outstanding mortgage indebtedness or other obligations related to the hotel. Any such loss could materially and adversely affect the financial condition and results of operations.

The Company believes it maintains sufficient insurance coverage for the operation of the business.

Casualty gains (losses) and business interruption insurance

In August 2005, Hurricane Katrina made landfall in the U.S. Gulf Coast region and two hotels in the New Orleans area were damaged. Additionally, in January 2006, one hotel suffered a fire and remains closed.

All of the Company’s hotels are covered by property, casualty and business interruption insurance. The business interruption coverage begins on the date of closure and continues for six months following the opening date of the hotel, to cover the revenue ramp-up period. Management believes the Company has sufficient coverage for business interruption and to pay claims that may be asserted against the Company by guests or others.

At December 31, 2006, the casualty claims were not finalized for the two hotels that were damaged by Hurricane Katrina and the hotel that was damaged by a fire. Additionally, the business interruption claims were not finalized for the hotel that was damaged by a fire because the hotel remains closed.

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During the six months ended June 30, 2007, the Company finalized the casualty claims for the two hotels that were damaged by Hurricane Katrina. As a result, the Company recorded net casualty gains of $1.9 million in continuing operations for the hotel that is classified as held for use and $2.7 million in discontinued operations for the hotel that was sold in December 2006.

During the six months ended June 30, 2007, the Company recorded business interruption proceeds of $0.3 million and insurance advances for casualty claims of $1.0 million for the hotel that remains closed. At June 30, 2007, the casualty and business interruption claims were not finalized for this hotel.

Litigation

From time to time, as the Company conducts its business, legal actions and claims are brought against it. The outcome of these matters is uncertain. However, management believes that all currently pending matters will be resolved without a material adverse effect on the Company’s results of operations or financial condition.

On January 15, 2006, the Holiday Inn Marietta, GA suffered a fire. There was one death associated with the fire and several guests have made claims for injuries allegedly caused by the fire. Some of the injury claims are in various stages of litigation and the Company expects additional claims may be filed.

All pending and threatened claims are covered by the Company’s general liability insurance policies, subject to a self-insurance retention of $250,000, which has already been paid. Management believes that the Company has adequate insurance protection to cover all claims related to this incident and that the resolution of those claims will not have a material adverse effect on the Company’s results of operations or financial condition.

9. Income Taxes

For the year ended December 31, 2006, the Company had estimated taxable income of $20.3 million. Because the Company had net operating losses available for federal income tax purposes, federal alternative minimum taxes of $0.3 million were paid for the year ended December 31, 2006. A net loss was reported for federal income tax purposes for the year ended December 31, 2005 and no federal income taxes were paid. At December 31, 2006, available net operating loss carryforwards of $318.9 million were reported for federal income tax purposes of which $221.6 million were available for use. The net operating losses will expire in years 2019 through 2025, including the utilization of an estimated tax net operating loss carryforward of $20.3 million for the year ended December 31, 2006. The 2002 reorganization under Chapter 11 and 2004 secondary stock offering resulted in “ownership changes,” as defined in Section 382 of the Internal Revenue Code. As a result of the most recent Section 382 ownership change, the Company’s ability to utilize net operating loss carryforwards generated prior to June 24, 2004 is subject to an annual limitation of $8.3 million. Net operating loss carryforwards generated during the 2004 calendar year after June 24, 2004 as well as those generated during the 2005 calendar year, are not subject to Section 382 limitations. The amount of losses subject to Section 382 limitations is $149.1 million; losses not subject to 382 limitations are $72.2 million. At December 31, 2006, available Section 382 net operating loss carryforwards of approximately $0.3 million were available for federal income tax purposes.

In 2007, the Company may be subject to Federal income tax under the alternative minimum tax system. The current year’s taxable income, if applicable, would be sheltered by net operating loss carryforwards.

Furthermore, at December 31, 2006, a valuation allowance of $121.4 million fully offset the Company’s net deferred tax asset. Approximately $97.3 million of this balance was attributable to pre-emergence deferred tax assets and may be credited to additional paid-in capital in future periods. At June 30, 2007, the valuation allowance decreased to $81.7 million. Approximately $77.0 million of this balance was attributable to pre-emergence deferred tax assets and may be credited to additional paid-in capital in future periods. The release of the valuation allowance relates to $0.3 million of pre-emergence deferred tax assets to offset income from discontinued operations, resulting in a non-cash charge to deferred income tax expense on the financial statements, with an offsetting credit to additional paid-in capital in accordance with SOP 90-7. The release also relates to $39.4 million of net operating losses that will expire unused due to Section 382 limitations. At June 30, 2007, net operating loss carryforwards of $221.6 million were reported for federal income tax purposes, which will expire in years 2019 through 2025 and reflect only those losses available for use.

In July 2006, the FASB issued Interpretation 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,” an interpretation of SFAS No. 109, “Accounting for Income Taxes”. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109. FIN 48 applies to all tax positions accounted for in accordance with SFAS No. 109 and requires a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in an income tax return. Subsequent recognition, derecognition, and measurement is based on management’s best judgment given the facts, circumstances and information available at the reporting date. FIN 48 is effective for fiscal years beginning after December 15, 2006.

The Company was required to adopt the provisions of FIN 48 with respect to all the Company’s tax positions as of January 1, 2007. While FIN 48 was effective on January 1, 2007, the new standards apply to all open tax years. The only major tax jurisdiction in which the Company files income taxes is Federal. The tax years which are open for examination are calendar years ended 1992, 1998, 1999, 2000 and 2001, due to losses generated that may be utilized in current or future filings. Additionally, the statutes of limitation for calendar years ended 2003, 2004, 2005 and 2006 remain open. The Company has no significant unrecognized tax benefits; therefore, the adoption of FIN 48 had no impact on the Company’s financial statements. Additionally, no increases in unrecognized tax benefits are expected in the next twelve months. Interest and penalties on unrecognized tax benefits will be classified as income tax expense if recorded in a future period.

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10. Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). This Statement defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating the impact that the adoption of SFAS No. 157 will have on the results of operations and financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115” (“SFAS No. 159”). This Statement provides an opportunity to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating the impact that the adoption of SFAS No. 159 will have on the results of operations and financial condition.

In June 2006, the FASB issued EITF 06-03, “How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation)”. The EITF concluded that disclosures should be applied retrospectively to interim and annual financial statements for all periods presented, if those amounts are significant. The disclosure of those taxes described under the consensus can be made on an aggregate basis. Since the Issue requires only the presentation of additional disclosures, at the date of adoption an entity would not be required to reevaluate its existing policies related to taxes assessed by a governmental authority that are imposed concurrently on a specific revenue-producing transaction between a seller and a customer. If the taxes are reported on a gross basis and the taxes are significant, an entity should disclose its policy of presenting taxes and the amount of taxes. If the taxes are reported on a net basis, disclosure of the amount of taxes collected is not required. An entity that chooses to reevaluate its existing policies and elects to change the presentation of taxes within the scope of this Issue must follow the requirements of SFAS No. 154, which provides that an entity may voluntarily change its accounting principles only to adopt a preferable accounting principle.

EITF 06-03 was effective for interim and annual reporting periods beginning after December 15, 2006. The Company adopted EITF 06-03 on January 1, 2007. The Company records such taxes on a net basis and chooses not to reevaluate its existing policies.

11. Subsequent Events

In July 2007, the Company:

• repaid two loans totaling $6.4 million, each of which was secured by one hotel. Both loans had reached their scheduled maturity dates.

• sold the Holiday Inn Clarksburg, WV for a gross sales price of $2.9 million and the Holiday Inn Ft. Wayne, IN for a gross sales price of $2.8 million. The net proceeds, after paying settlement costs, were used for general corporate purposes. As of August 1, the held for sale portfolio consisted of 5 hotels.

• defeased $3.1 million of the $65.3 million balance of one of the Company’s mortgage loans, which was secured by nine hotels. The Company purchased $3.2 million of Treasury Securities to cover the monthly debt service payments under the terms of the loan agreement. The Treasury Securities were then substituted for the one hotel that originally served as collateral for the undefeased portion of the loan. The hotel was classified as held for sale. The Treasury Securities and the debt were assigned to an unaffiliated entity, which became liable for all obligations under the partially defeased portion of the original debt. The transaction was deemed a partial defeasance because the Company continues to be liable for the remaining (undefeased) portion of the debt. Accordingly, the defeased portion of the debt will not be reflected in the Company’s consolidated balance sheet in the future. As a result of the defeasance, the Company will record a Loss on Debt Extinguishment of approximately $0.2 million. The entire amount will be recorded in discontinued operations in the Company’s statement of operations.

• acquired its joint venture partner’s 50% interest in the Crowne Plaza Melbourne, FL for $13.5 million.

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

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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, 2006.

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, as reported by Hotel Business in the 2007 Green Book issue published in December 2006. 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”, “Hilton”, “Holiday Inn”, and “Marriott”. 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. We believe that these strong national brands afford us many benefits such as guest loyalty and market share premiums.

As of June 30, 2007, we operated 51 hotels with an aggregate of 9,166 rooms, located in 26 states and Canada. Of the 51 hotels, 44 hotels, with an aggregate of 8,116 rooms, were held for use, while 7 hotels with an aggregate of 1,050 rooms, were held for sale. We consolidated all of these hotels in our financial statements.

Our portfolio of 51 hotels consisted of:

• 49 hotels that are wholly owned and operated through subsidiaries; and

• two hotels that are operated in joint ventures in which we have a 50% voting equity interest and exercise control.

On March 20, 2007, the Company acquired its joint venture partner’s 18% interest in the Radisson New Orleans Airport Plaza hotel for $2.9 million. As a result, this hotel is now consolidated as a wholly-owned subsidiary.

As of June 30, 2007, we operated all but two of our hotels under franchises obtained from nationally recognized hospitality franchisors. We operated 31 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 operated 12 hotels under franchises from Marriott International as franchisor of the Marriott, Courtyard by Marriott, Fairfield Inn by Marriott, Residence Inn by Marriott, and Springhill Suites by Marriott brands. We operated an additional 6 hotels under other nationally recognized brands.

Overview of Continuing Operations

Below is an overview of our results of operations for the three months ended June 30, 2007 as compared to the three months ended June 30, 2006, which are presented in more detail in “Results of Operations — Continuing Operations:”

• Revenues increased $3.9 million, or 5.4%, driven by increases in ADR and occupancy of 3.8% and 0.7%, respectively. RevPAR grew 4.5%. 29 of our hotels generated an aggregate RevPAR growth of 12.0%, driven primarily by segmentation mix and market penetration. 14 of our hotels experienced an aggregate 9.9% decline in RevPAR. These declines were driven by hotels that experienced a decline in Hurricane Katrina related business, hotels under renovation, locations where market supply had increased yet is quickly being absorbed, and hotels whose markets were impacted by changes in the convention calendar and market events. While in general, we expect these hotels to show improved performance in the 3rd and 4th quarters of 2007, the hotels that experienced the prior year Katrina lift and which were under renovation will continue to show declines in RevPAR year over year. Overall, we outperformed the market with a RevPAR index of 103.7%, an increase of 1.7% compared with the same period one year ago.

• Operating income decreased $0.4 million. As a percentage of total revenues, total operating expenses increased from 86.6% in the first quarter of 2006 to 87.8% in the first quarter of 2007. The following costs, which increased as a percentage of revenues, contributed to the decline in operating income: advertising and promotion costs, hotel general and administrative costs, corporate overhead costs, and property taxes and insurance.

Overview of Discontinued Operations

In November 2006, we announced a major strategic initiative to reconfigure our hotel portfolio. We redefined our held for use portfolio, which contains 44 hotels with 8,116 rooms (including the Holiday inn Marietta, GA hotel, which is currently closed following a fire). In accordance with this new strategy, we sold two hotels and identified 12 additional hotels for sale in November and December 2006.

The following dispositions took place during the first quarter of 2007:

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• In January 2007, we sold the University Plaza Bloomington, IN for a gross sales price of $2.4 million. An impairment charge of $0.1 million was recorded upon the disposition of this hotel.

• Additionally, in March 2007, we sold the Holiday Inn Hamburg, NY for a gross sales price of $3.4 million, realized a gain of $0.8 million, and used $2.0 million to pay down debt. The remaining net proceeds, after paying settlement costs, were used for general corporate purposes.

The following dispositions took place during the second quarter of 2007:

• In June 2007, we sold the Holiday Inn Sheffield, AL, which was previously written down to its estimated net selling price, for a gross sales price of $4.1 million. The net proceeds, after paying settlement costs, were used for general corporate purposes.

• In June 2007, we sold 15 hotels. These hotels, along with an additional hotel expected to be sold later in the year, were negotiated in a single purchase-sale agreement to an individual buyer. The agreement met the criteria for recognition as a group sale and the aggregate transaction is expected to result in a gain. $60.8 million of the aggregate purchase price was allocated to the 15 hotels and the net proceeds, after paying settlement costs, were used for general corporate purposes. The gain, which will be deferred until the remaining hotel is sold, is included in Liabilities Related to Assets Held for Sale in our Balance Sheet.

The condensed consolidated statements of operations for discontinued operations for the three and six months ended June 30, 2007 and 2006 include the results of operations for the 7 hotels classified as held for sale at June 30, 2007, as well as all properties that have been sold in accordance with SFAS No. 144.

The assets held for sale at June 30, 2007 and December 31, 2006 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets. Among other criteria, we classify an asset as held for sale if we expect to dispose of it within one year, we have initiated an active marketing plan to sell the asset at a reasonable price 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 favorable terms or at all. We believe that all our held for sale assets as of June 30, 2007 remain properly classified in accordance with SFAS No. 144.

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. During the six months ended June 30, 2007, we recorded impairment charges of $2.1 million on assets held for sale.

Our continuing operations reflect the results of operations of those hotels which we are likely to retain in our portfolio for the foreseeable future as well as those assets which do not currently meet the held for sale criteria in SFAS No. 144. We periodically evaluate the assets in our portfolio to ensure they continue to meet our performance objectives. Accordingly, from time to time, we could identify other assets for disposition.

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 revenues 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, 2006. In addition, our critical accounting policies and estimates are discussed in Item 7 of our Form 10-K, and we believe no material changes have occurred except as described below.

In July 2006, the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006.

The Company was required to adopt the provisions of FIN 48 with respect to all the Company’s tax positions as of January 1, 2007. While FIN 48 was effective on January 1, 2007, the new standards apply to all open tax years. The only major tax jurisdiction in which the Company files income taxes is Federal. The tax years which are open for examination are calendar years ended 1992,

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1998, 1999, 2000 and 2001 due to losses generated that may be utilized in current or future filings. Additionally, the statutes of limitation for calendar years ended 2003, 2004, 2005 and 2006 remain open. The Company has no significant unrecognized tax benefits; therefore, there was no impact and no additional increases are expected in the next twelve months. Interest and penalties on unrecognized tax benefits will be recorded as income tax expense should an unrecognized tax benefit be recorded in a future period to which interest or penalties apply.

Income Statement Overview

The discussion below relates to our 44 continuing operations hotels (including the Holiday Inn Marietta, GA, which is closed following a fire), for the three months ended June 30, 2007. 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, 2006 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, 2007 and 2006.

Revenues — Continuing Operations

	Three Months Ended June 30,
	2007			2006			Increase (decrease)
	(unaudited in thousands)
Revenues:
Rooms	$	56,216		$	53,788		$	2,428	4.5	%
Food and beverage		16,779			15,636			1,143	7.3	%
Other		2,453			2,154			299	13.9	%
Total revenues	$	75,448		$	71,578		$	3,870	5.4	%
Occupancy		72.3	%		71.8	%			0.7	%
ADR	$	107.85		$	103.87		$	3.98	3.8	%
RevPar	$	77.97		$	74.59		$	3.38	4.5	%

Revenues for the second quarter of 2007 increased $3.9 million or 5.4% as room revenues increased 4.5%, food & beverage revenues increased 7.3%, and other revenues rose 13.9%. The growth in room revenue was driven by a 3.8% increase in average daily rate and a 0.7% increase in occupancy. Transient revenue rose 2.4%, group revenue increased 8.4% and contract revenue grew 16.2% for the quarter. A la carte food & beverage revenue increased 2.1% (1.4% on a per occupied room basis) and banquet food revenues increased 10.6%. Other revenues increased 13.9% as telephone revenue declined 26.7%, but was more than offset by an 18.6% increase in all other operating revenues.

The second quarter of 2007 was adversely affected by displacement. Displacement refers to lost revenues and profits due to rooms being out of service as a result of renovation. Revenue is considered “displaced” only when a hotel has sold all available rooms and denies additional reservations due to rooms out of service. The Company feels this method is conservative, as it does not include estimated “soft” displacement costs associated with a renovation. During a renovation, there is significant disruption of normal business operations. In many cases, renovations result in the relocation of front desk operations, restaurant and bar services, and meeting rooms. In addition, the construction activity itself can be disruptive to our guests. As a result, guests may depart earlier than planned due to the disruption caused by the renovation work, local customers or frequent guests may choose an alternative hotel during the renovation, and local groups may not solicit the hotel to house their groups during renovations. These “soft” displacement costs are difficult to quantify and are excluded from our displacement calculation. Total revenue displacement during the second quarter of 2007 for four hotels under renovation was $0.2 million. There was no revenue displacement in the second quarter of 2006.

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, 2007 and 2006. To illustrate the impact of the hotel closed due to fire, the impact of the hotel that benefited from Hurricane Katrina, the impact of renovations underway and completed, and the impact of branding, we have presented this information in seven different subsets.

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Hotel	Room			Three Months Ended June 30,
Count	Count			2007			2006			Increase (decrease)
			Continuing Operations less one hotel
43		7,923	closed in 2006 due to fire
			Occupancy		72.3	%		71.8	%				0.7	%
			ADR	$	107.85		$	103.87		$	3.98		3.8	%
			RevPAR	$	77.97		$	74.59		$	3.38		4.5	%
			RevPAR Index		103.7	%		102.0	%				1.7	%
			Continuing Operations less one hotel
			closed in 2006 due to fire and Radisson
42		7,679	New Orleans Airport hotel
			Occupancy		72.4	%		72.2	%				0.3	%
			ADR	$	108.47		$	103.10		$	5.37		5.2	%
			RevPAR	$	78.49		$	74.48		$	4.01		5.4	%
			RevPAR Index		103.7	%		102.5	%				1.2	%
			Continuing Operations less one hotel
			closed in 2006 due to fire and hotels
			under renovation in the first and second
38		6,790	quarters of 2006 and/or 2007
			Occupancy		73.5	%		70.6	%				4.1	%
			ADR	$	106.35		$	104.16		$	2.19		2.1	%
			RevPAR	$	78.13		$	73.49		$	4.64		6.3	%
			RevPAR Index		105.3	%		100.8	%				4.5	%
12		1,398	Marriott Hotels
			Occupancy		76.0	%		77.5	%				(1.9	%)
			ADR	$	114.51		$	105.67		$	8.84		8.4	%
			RevPAR	$	87.02		$	81.88		$	5.14		6.3	%
			RevPAR Index		104.1	%		105.4	%				(1.2	%)
4		777	Hilton Hotels
			Occupancy		73.0	%		68.7	%				6.3	%
			ADR	$	110.03		$	104.19		$	5.84		5.6	%
			RevPAR	$	80.36		$	71.54		$	8.82		12.3	%
			RevPAR Index		103.7	%		97.6	%				6.2	%
24		5,240	IHG Hotels
			Occupancy		71.6	%		71.8	%				(0.3	%)
			ADR	$	107.62		$	103.14		$	4.48		4.3	%
			RevPAR	$	77.05		$	74.02		$	3.03		4.1	%
			RevPAR Index		104.3	%		103.2	%				1.1	%
3		508	Other Brands and Independent Hotels
			Occupancy		68.2	%		61.6	%				10.7	%
			ADR	$	86.36		$	105.78			($19.42	)	(18.4	%)
			RevPAR	$	58.86		$	65.15			($6.29	)	(9.7	%)
			RevPAR Index		99.5	%		88.6	%				12.3	%

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Direct operating expenses — Continuing Operations

												% of total revenues
	Three Months Ended June 30,											Three Months Ended June 30,
	2007			2006			Increase (decrease)					2007			2006
	(unaudited in thousands)
Direct operating expenses:
Rooms	$	13,756		$	13,310		$	446		3.4	%		18.2	%		18.6	%
Food and beverage		11,021			10,469			552		5.3	%		14.6	%		14.6	%
Other		1,642			1,657			(15	)	(0.9	%)		2.2	%		2.3	%
Total direct operating expenses	$	26,419		$	25,436		$	983		3.9	%		35.0	%		35.5	%
Direct operating margin (by revenue source):
Rooms	$	42,460		$	40,478		$	1,982		4.9	%
Food and beverage		5,758			5,167			591		11.4	%
Other		811			497			314		63.2	%
Total direct operating margin	$	49,029		$	46,142		$	2,887		6.3	%
Direct operating margin % (by revenue source):
Rooms		75.5	%		75.3	%
Food and beverage		34.3	%		33.0	%
Other		33.1	%		23.1	%
Total direct operating margin		65.0	%		64.5	%

We use certain “non-GAAP financial measures,” which are measures of our historical financial performance that are not calculated and presented in accordance with GAAP, within the meaning of applicable SEC rules. For instance, we use the term direct operating margin to mean total revenues less total direct operating expenses as presented in the condensed consolidated statement of operations. We assess profitability by measuring changes in our direct operating margin and direct operating margin percentage, which is direct operating margin as a percentage of the applicable revenue source. These measures assist management in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations or from other factors. We believe that direct operating margin, when combined with the presentation of GAAP operating profit, revenues and expenses, provides useful information to management.

Total direct operating expenses increased $1.0 million, or 3.9%, but decreased as a percentage of total revenues from 35.5% in 2006 to 35.0% in 2007. Direct operating margin expanded $2.9 million or 6.3%. Direct operating margin as a percentage of total revenues improved 50 basis points from 64.5% in 2006 to 65.0% in 2007.

Rooms expenses increased $0.4 million, or 3.4%. On a cost per occupied room (POR) basis, rooms expenses increased 2.7%, from $25.70 in 2006 to $26.39 in 2007. Direct operating margin for rooms improved 20 basis points from 75.3% in 2006 to 75.5% in 2007. The increase in rooms expenses were driven primarily by the following:

• Higher payroll costs, up 2.5% on a POR basis. Payroll benefits were up $0.50 POR or 3.2% due to higher worker’s compensation expenses. The increase in worker’s compensation costs were partially offset by lower payroll wages, down $0.13 POR or 1.0%.

• Increased costs in other operating areas including cable television, walked guest expense, other commissions and costs related to our rooms cleaning program.

As a percentage of total revenues, rooms expenses decreased 40 basis points from 18.6% in 2006 to 18.2% in 2007.

Food and beverage expenses increased $0.6 million, or 5.3%. Direct operating margin for food and beverage grew $0.6 million or 11.4%. Food and beverage profit margin rose 130 basis points, largely driven by a 110 basis point improvement in payroll costs and a 40 basis point improvement in food other expenses.

Other direct operating expenses remained fairly constant, decreasing $15,000. Other direct operating margin grew $0.3 million.

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Other operating expenses and operating income — Continuing Operations

										% of total revenues
	Three Months Ended June 30,									Three Months Ended June 30,
	2007		2006		Increase (decrease)					2007			2006
	(unaudited in thousands)
Other operating expenses:
Other hotel operating costs
General and administrative	$	4,439	$	3,836	$	603		15.7	%		5.9	%		5.4	%
Advertising and promotion		3,826		3,019		807		26.7	%		5.1	%		4.2	%
Franchise fees		5,342		5,068		274		5.4	%		7.1	%		7.1	%
Repairs and maintenance		3,222		3,460		(238	)	(6.9	%)		4.3	%		4.8	%
Utilities		3,431		3,322		109		3.3	%		4.5	%		4.6	%
Other expenses		218		50		168		336.0	%		0.3	%		0.1	%
Other hotel operating costs		20,478		18,755	$	1,723		9.2	%		27.1	%		26.2	%
Property and other taxes, insurance, and leases		5,212		4,717		495		10.5	%		6.9	%		6.6	%
Corporate and other		5,930		5,292		638		12.1	%		7.9	%		7.4	%
Casualty (gains) losses, net		—		31		(31	)	(100.0	%)		0.0	%		0.0	%
Depreciation and amortization		7,960		7,704		256		3.3	%		10.6	%		10.8	%
Impairment of long-lived assets		222		16		206		1287.5	%		0.3	%		0.0	%
Total other operating expenses	$	39,802	$	36,515	$	3,287		9.0	%		52.8	%		51.0	%
Total operating expenses	$	66,221	$	61,951	$	4,270		6.9	%		87.8	%		86.6	%
Operating income	$	9,227	$	9,627	$	(400	)	(4.2	%)		12.2	%		13.4	%

Operating income decreased $0.4 million, or 4.2% in the second quarter of 2007. Other hotel operating costs increased $1.7 million, or 9.2%, and increased 90 basis points as a percentage of total revenues. The increase in other hotel operating costs was a result of the following factors:

• General and administrative costs increased $0.6 million, or 15.7%, primarily as a result of higher payroll, legal and professional fees, and training and travel expenses. The increase in payroll costs of $0.4 million was primarily due to fewer vacant positions. The increase in legal and professional fees of $0.1 million was largely driven by the current cycle of union contract negotiations.

• Advertising and promotion costs increased $0.8 million, or 26.7%, due largely to higher sales staffing levels, higher bonuses driven by revenue growth, and promotion expenses.

• Franchise fees increased $0.3 million, or 5.4%, driven in large part by higher room revenues. As a percentage of total revenues, franchise fees remained flat. As a percentage of room revenues, franchise fees increased 10 basis points from 9.4% to 9.5%.

• Repairs and maintenance expenses decreased $0.2 million, or 6.9%, as a result of improved preventive maintenance programs and execution of our capital expenditures plan. As a percentage of revenues, repairs and maintenance expenses decreased 50 basis points from 4.8% to 4.3%.

• Utilities increased $0.1 million, or 3.3% (2.7% on a cost POR basis), primarily because of higher electricity rates. As a percentage of total revenues, utilities decreased 10 basis points.

• Other expenses increased $0.2 million due primarily to costs associated with the planned conversion of one of our hotels to another brand.

Property and other taxes, insurance and leases increased $0.5 million, or 10.5%. As a percentage of total revenues, property and other taxes, insurance and leases increased 30 basis points. Property and other taxes increased $0.3 million, primarily because of higher assessed values due to the completion of several major renovation projects in 2005 and 2006. Insurance costs increased $0.3 million. The annual renewal cycle for our property insurance policies occurred near the end of the second quarter and we negotiated lower insurance rates, the effects of which were experienced beginning in June 2007.

Corporate and other costs increased $0.6 million, or 12.1%, due primarily to the following factors:

• In January 2007, we announced a review of strategic alternatives to enhance shareholder value. During the second quarter, we incurred $0.3 million in consulting and other related costs.

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• Costs associated with our corporate operations team increased $0.3 million. In November 2006, we announced a major strategic initiative to reconfigure our hotel portfolio and dispose of our non-core hotels. In conjunction with this initiative, we restructured our operations team to focus on the different needs of our core and non-core (held for sale) hotels. We expect these costs to decline following the sale of all of our non-core hotels.

Depreciation and amortization increased $0.3 million, or 3.3%, due to the completion of several renovation projects in 2006 as well as purchases of furniture, fixtures and equipment during the first six months of 2007. As a percentage of total revenues, depreciation and amortization declined 20 basis points.

Non-operating income (expenses) – Continuing Operations

	Three Months Ended June 30,
	2007			2006			Increase (decrease)
	(unaudited in thousands)
Non-operating income (expenses):
Business interruption proceeds	$	272		$	695		$	(423	)	(60.9	%)
Interest income and other		822			848			(26	)	(3.1	%)
Interest expense		(6,767	)		(6,227	)		540		8.7	%
Loss on debt extinguishment		(3,411	)		—			3,411		n/m

The decrease in business interruption proceeds was a result of the settlement of insurance claims in 2006 associated with our two hotels in Florida that were closed in 2005 because of hurricane damage. Business interruption proceeds of $0.3 million in the second quarter of 2007 relate to our hotel in Marietta, Georgia which remains closed following a fire in January 2006. Interest expense increased $0.5 million due to the refinancing that occurred in April 2007. We entered into a $130 million loan agreement with Goldman Sachs Commercial Mortgage Capital, L.P., defeased the entire $67.7 million balance of the Merrill Lynch Fixed Rate #2 Loan, and paid off the $55.8 million Merrill Lynch Floating Rate Loan. The refinancing decreased our overall interest expense, but resulted in higher interest expense for continuing operations and lower interest expense for discontinued operations based on the hotels that were encumbered by the debt facilities. The $3.4 million loss on debt extinguishment was a result of the refinancing.

The analysis below compares the results of operations for the six months ended June 30, 2007 and June 30, 2006.

Revenues — Continuing Operations

	Six Months Ended June 30,
	2007			2006			Increase (decrease)
	(unaudited in thousands)
Revenues:
Rooms	$	106,459		$	101,657		$	4,802	4.7	%
Food and beverage		30,623			27,746			2,877	10.4	%
Other		4,514			4,103			411	10.0	%
Total revenues	$	141,596		$	133,506		$	8,090	6.1	%
Occupancy		68.7	%		68.9	%			(0.3	%)
ADR	$	108.03		$	103.12		$	4.91	4.8	%
RevPar	$	74.23		$	71.05		$	3.18	4.5	%

Revenues for the first six months of 2007 increased $8.1 million or 6.1%. Room revenues grew $4.8 million, food & beverage revenues increased $2.9 million, and other revenues increased $0.4 million. Higher room revenues were driven by a 4.8% improvement in average daily rate, partially offset by a 0.3% decline in occupancy. Transient revenue grew 3.8%, group revenue rose 4.6% and contract revenue increased 19.5% for the six months ended June 30, 2007. A la carte food & beverage revenues increased 5.5% (5.5% on a per occupied room basis) and banquet food revenues grew 13.5%. Other revenues increased 10.0% as telephone revenue declined 21.2%, but was more than offset by a 13.9% increase in all other operating revenues.

The first six months of 2007 were adversely affected by displacement. Displacement refers to lost revenues and profits due to rooms being out of service as a result of renovation. Revenue is considered “displaced” only when a hotel has sold all available rooms and denies additional reservations due to rooms out of service. The Company feels this method is conservative, as it does not include estimated other or “soft” displacement associated with a renovation; for example, guests who depart earlier than planned due to the

26

disruption caused by the renovation work, local customers or frequent guests who may choose an alternative hotel during the renovation, or local groups that may not solicit the hotel to house their groups during renovations. Total revenue displacement during the first half of 2007 for four hotels under renovation was $0.4 million. Total revenue displacement for the same period in 2006 was $0.3 million.

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, 2007 and 2006. To illustrate the impact of the hotel closed due to fire, the impact of the hotel that benefited from Hurricane Katrina, the impact of renovations underway and completed, and the impact of branding, we have presented this information in seven different subsets.

27

Hotel		Room			Six Months Ended June 30,
Count		Count			2007			2006			Increase (decrease)
	43		7,923	Continuing Operations less one hotel closed in 2006 due to fire
				Occupancy		68.7	%		68.9	%				(0.3	%)
				ADR	$	108.03		$	103.25		$	4.78		4.6	%
				RevPAR	$	74.23		$	71.13		$	3.10		4.4	%
				RevPAR Index		103.3	%		102.1	%				1.2	%
	42		7,679	Continuing Operations less one hotel closed in 2006 due to fire and Radisson New Orleans Airport hotel
				Occupancy		68.8	%		68.6	%				0.3	%
				ADR	$	108.37		$	102.09		$	6.28		6.2	%
				RevPAR	$	74.52		$	70.08		$	4.44		6.3	%
				RevPAR Index		103.5	%		102.1	%				1.4	%
	38		6,790	Continuing Operations less one hotel closed in 2006 due to fire and hotels under renovation in the first and second quarters of 2006 and/or 2007
				Occupancy		69.8	%		68.4	%				2.0	%
				ADR	$	107.52		$	104.28		$	3.24		3.1	%
				RevPAR	$	75.08		$	71.33		$	3.75		5.3	%
				RevPAR Index		104.4	%		101.1	%				3.3	%
	12		1,398	Marriott Hotels
				Occupancy		71.0	%		74.3	%				(4.4	%)
				ADR	$	114.58		$	104.26		$	10.32		9.9	%
				RevPAR	$	81.34		$	77.42		$	3.92		5.1	%
				RevPAR Index		102.6	%		104.8	%				(2.1	%)
	4		777	Hilton Hotels
				Occupancy		65.9	%		64.9	%				1.5	%
				ADR	$	109.04		$	104.30		$	4.74		4.5	%
				RevPAR	$	71.89		$	67.65		$	4.24		6.3	%
				RevPAR Index		99.7	%		98.0	%				1.7	%
	24		5,240	IHG Hotels
				Occupancy		68.5	%		67.8	%				1.0	%
				ADR	$	107.00		$	101.63		$	5.37		5.3	%
				RevPAR	$	73.35		$	68.88		$	4.47		6.5	%
				RevPAR Index		105.0	%		102.9	%				2.0	%
	3		508	Other Brands and Independent Hotels
				Occupancy		68.4	%		71.6	%				(4.5	%)
				ADR	$	98.54		$	114.68			($16.14	)	(14.1	%)
				RevPAR	$	67.41		$	82.14			($14.73	)	(17.9	%)
				RevPAR Index		97.2	%		97.0	%				0.2	%

28

Direct operating expenses — Continuing Operations

												% of total revenues
	Six Months Ended June 30,											Six Months Ended June 30,
	2007			2006			Increase (decrease)					2007			2006
	(unaudited in thousands)
Direct operating expenses:
Rooms	$	26,435		$	25,513		$	922		3.6	%		18.7	%		19.1	%
Food and beverage		21,005			19,488			1,517		7.8	%		14.8	%		14.6	%
Other		3,154			3,182			(28	)	(0.9	%)		2.2	%		2.4	%
Total direct operating expenses	$	50,594		$	48,183		$	2,411		5.0	%		35.7	%		36.1	%
Direct operating margin (by revenue source):
Rooms	$	80,024		$	76,144		$	3,880		5.1	%
Food and beverage		9,618			8,258			1,360		16.5	%
Other		1,360			921			439		47.7	%
Total direct operating margin	$	91,002		$	85,323		$	5,679		6.7	%
Direct operating margin % (by revenue source):
Rooms		75.2	%		74.9	%
Food and beverage		31.4	%		29.8	%
Other		30.1	%		22.4	%
Total direct operating margin		64.3	%		63.9	%

During the six months ended June 30, 2007, total direct operating expenses increased $2.4 million, or 5.0%, but decreased as a percentage of total revenues from 36.1% in 2006 to 35.7% in 2007. Direct operating margin rose $5.7 million, or 6.7%. Direct operating margin as a percentage of total revenues expanded 40 basis points from 63.9% in 2006 to 64.3% in 2007.

Rooms expenses increased $0.9 million, or 3.6%. On a cost per occupied room (POR) basis, rooms expenses increased 3.7%, from $25.88 in 2006 to $26.83 in 2007. Direct operating margin for rooms rose 30 basis points from 74.9% in 2006 to 75.2% in 2007. The increase in rooms expenses were caused by the following:

• Higher fee-based expenses, including reservations, travel agent and credit card commissions, driven by a 4.8% increase in ADR.

• Higher payroll costs, up 3.1% on a POR basis.

• Increased costs in other operating areas including room promotion, cable television, other commissions, walked guest expense and costs associated with our rooms cleaning program.

As a percentage of total revenues, rooms expenses decreased 40 basis points from 19.1% in 2006 to 18.7% in 2007.

Food and beverage expenses increased $1.5 million, or 7.8%. Direct operating margin for food and beverage increased $1.4 million or 16.5%. Food and beverage profit margin expanded 160 basis points, largely driven by a 150 basis point improvement in payroll costs.

Other direct operating expenses decreased $28,000, while direct operating margin grew $0.4 million.

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Other operating expenses and operating income — Continuing Operations

											% of total revenues
	Six Months Ended June 30,										Six Months Ended June 30,
	2007			2006		Increase (decrease)					2007			2006
	(unaudited in thousands)
Other operating expenses:
Other hotel operating costs
General and administrative	$	8,855		$	7,663	$	1,192		15.6	%		6.3	%		5.7	%
Advertising and promotion		7,538			6,394		1,144		17.9	%		5.3	%		4.8	%
Franchise fees		10,013			9,405		608		6.5	%		7.1	%		7.0	%
Repairs and maintenance		6,536			6,621		(85	)	(1.3	%)		4.6	%		5.0	%
Utilities		7,329			7,060		269		3.8	%		5.2	%		5.3	%
Other expenses		220			174		46		26.4	%		0.2	%		0.1	%
Other hotel operating costs		40,491			37,317	$	3,174		8.5	%		28.6	%		28.0	%
Property and other taxes, insurance, and leases		10,823			9,118		1,705		18.7	%		7.6	%		6.8	%
Corporate and other		11,612			10,209		1,403		13.7	%		8.2	%		7.6	%
Casualty (gains) losses, net		(1,867	)		197		(2,064	)	(1047.7	%)		(1.3	%)		0.1	%
Depreciation and amortization		15,762			15,062		700		4.6	%		11.1	%		11.3	%
Impairment of long-lived assets		487			210		277		131.9	%		0.3	%		0.2	%
Total other operating expenses	$	77,308		$	72,113	$	5,195		7.2	%		54.6	%		54.0	%
Total operating expenses	$	127,902		$	120,296	$	7,606		6.3	%		90.3	%		90.1	%
Operating income	$	13,694		$	13,210	$	484		3.7	%		9.7	%		9.9	%

Operating income increased $0.5 million, or 3.7% during the first six months of 2007. Other hotel operating costs increased $3.2 million, or 8.5%, an increase of 60 basis points as a percentage of total revenues. The increase in other hotel operating costs was a result of the following factors:

• General and administrative costs increased $1.2 million, or 15.6%, driven largely by higher payroll, legal, professional fees and training and travel costs.

• Advertising and promotion costs increased $1.1 million, or 17.9%, due primarily to increased sales staffing.

• Franchise fees increased $0.6 million, or 6.5%, driven largely by higher room revenues. As a percentage of room revenues, franchise fees increased 10 basis points from 9.3% to 9.4%.

• Repairs and maintenance expenses decreased $0.1 million, or 1.3%, resulting from improved preventive maintenance programs and execution of our capital expenditures plan. Repairs and maintenance expenses declined 40 basis points as a percentage of revenues.

• Utilities increased $0.3 million, or 3.8% (3.9% on a cost POR basis), primarily as a result of higher electricity rates. As a percentage of total revenues, utilities decreased 10 basis points.

Property and other taxes, insurance and leases increased $1.7 million, or 18.7%. As a percentage of total revenue, property and other taxes, insurance and leases increased 80 basis points. $1.2 million of the increase was attributable to higher property insurance costs. The annual renewal cycle for our property insurance policies occurred near the end of the second quarter and we negotiated lower insurance rates, the effects of which were experienced beginning in June 2007. Property and other taxes increased $0.6 million, primarily as a result of higher assessed values due to the completion of several major renovation projects in 2005 and 2006.

Corporate and other costs increased $1.4 million, or 13.7%, due largely to the following:

• In January 2007, we announced a review of strategic alternatives to enhance shareholder value. During the first six months of 2007, we incurred $0.6 million in consulting and other related costs.

• Costs associated with our corporate operations team increased $0.6 million. In November 2006, we announced a major strategic initiative to reconfigure our hotel portfolio and dispose of our non-core hotels. In conjunction with this initiative, we restructured our operations team to focus on the different needs of our core and non-core (held for sale) hotels. We expect these costs to decline following the sale of all of our non-core hotels.

30

• $0.2 million was related to the amortization of non-vested stock awards granted to our Board of Directors in February 2007. Two members of the Board did not stand for reelection at the April 2007 annual meeting of stockholders and the Board elected to accelerate the vesting of the awards for those individuals as of April 24, 2007. The stock awarded to the remaining members of our Board of Directors is being amortized over a three-year vesting period.

Casualty gains of $1.9 million in the first six months of 2007 related to the settlement of a property damage claim at our Radisson New Orleans Airport hotel, which was damaged by Hurricane Katrina.

Depreciation and amortization increased $0.7 million, or 4.6%, due to the completion of several renovation projects in 2006 as well as purchases of furniture, fixtures and equipment during the first six months of 2007. As a percentage of total revenues, depreciation and amortization declined 20 basis points.

Non-operating income (expenses) — Continuing Operations

	Six Months Ended June 30,
	2007			2006			Increase (decrease)
	(unaudited in thousands)
Non-operating income (expenses):
Business interruption proceeds	$	272		$	695		$	(423	)	(60.9	%)
Interest income and other		1,747			1,157			590		51.0	%
Interest expense		(12,965	)		(12,569	)		396		3.2	%
Loss on debt extinguishment		(3,411	)		—			3,411		n/m

The decrease in business interruption proceeds was a result of the settlement of insurance claims in 2006 associated with our two hotels in Florida that were closed in 2005 because of hurricane damage. Business interruption proceeds of $0.3 million in 2007 relate to our hotel in Marietta, Georgia which remains closed following a fire in January 2006. Interest income and other increased $0.6 million, driven by higher balances in our interest-bearing cash and escrow accounts and higher interest rates. Interest expense increased $0.4 million due to the refinancing that occurred in April 2007. We entered into a $130 million loan agreement with Goldman Sachs Commercial Mortgage Capital, L.P., defeased the entire $67.7 million balance of the Merrill Lynch Fixed Rate #2 Loan, and paid off the $55.8 million Merrill Lynch Floating Rate Loan. The refinancing decreased our overall interest expense, but resulted in higher interest expense for continuing operations and lower interest expense for discontinued operations based on the hotels that were encumbered by the debt facilities. The $3.4 million loss on debt extinguishment was a result of the refinancing.

Results of Operations — Discontinued Operations

During the six months ended June 30, 2007, 18 hotels were sold for an aggregate sales price of $70.7 million, of which $2.0 million was used to pay down debt. The remaining proceeds, after paying selling costs, were used for general corporate purposes.

Impairment was recorded on assets held for sale in the six months ended June 30, 2007 and 2006. The fair value of an asset held for sale is based on the estimated selling price less estimated selling costs. We engage independent real estate brokers to assist us in determining the estimated selling price. The estimated selling costs are based on our experience with similar asset sales. We record impairment charges and write down the carrying value of an asset if the carrying value exceeds the estimated selling price less costs to sell.

The impairment of long-lived assets held for sale of $0.6 million recorded during the three months ended June 30, 2007 related to the Holiday Inn Jamestown, NY to reflect the estimated selling price.

The impairment of long-lived assets held for sale of $2.1 million recorded during the six months ended June 30, 2007 included the following (amounts below are individually rounded):

• $1.3 million on the Holiday Inn Clarksburg, WV to reflect the estimated selling price;

• $0.6 million on the Holiday Inn Jamestown, NY to reflect the estimated selling price;

• $0.1 million on the University Plaza Bloomington, IN to record the final disposition of the hotel; and

• $0.1 million related to various other held-for-sale properties primarily to write-off the remaining net book value of disposed fixed assets.

The impairment of long-lived assets held for sale of $0.8 million recorded during the three months ended June 30, 2006 included the following (amounts below are individually rounded):

• $0.7 million on the University Plaza Bloomington, IN hotel which was classified as held for sale during the second quarter, to reduce the carrying value to the estimated selling price less costs to sell; and

31

• $36,000 related to various other held-for-sale properties primarily to reduce the carrying values to estimated selling prices less costs to sell, and to record the final disposition of certain properties.

The impairment of long-lived assets held for sale of $8.0 million recorded during the six months ended June 30, 2006 included the following:

• $3.9 million on the Holiday Inn Manhattan, KS to record the final disposition of the hotel;

• $2.2 million on the Holiday Inn Lawrence, KS to record the final disposition of the hotel;

• $0.5 million on the Holiday Inn Sheffield, AL to reflect the estimated selling costs as the hotel was identified for sale during the first quarter of 2006;

• $0.3 million on the Holiday Inn McKnight, PA to reflect the lowered estimated selling price and to reflect the write-off of capital improvements that did not add incremental value or revenue generating capacity;

• $0.2 million on the Holiday Inn Valdosta, GA to reflect the estimated selling costs as the hotel was identified for sale during the first quarter of 2006; and

• $0.1 million on the Azalea Inn Valdosta, GA to reflect the estimated selling costs as the hotel was identified for sale during the first quarter 2006

• $0.7 million on the University Plaza Bloomington, IN hotel which was classified as held for sale during the second quarter, to reduce the carrying value to the estimated selling price less costs to sell; and

• $36,000 related to various other held-for-sale properties primarily to reduce the carrying value to estimated selling price less costs to sell and to record the final disposition of certain properties.

During the six months ended June 30, 2007, the Company finalized the casualty claim for the one hotel that was sold in December 2006 which was damaged by Hurricane Katrina. As a result, the Company recorded a net casualty gain of $2.7 million in discontinued operations.

During the three months ended June 30, 2007, the Company recorded a $0.6 million loss on asset disposition related to the sale of the Quality Inn Metairie, LA, which was sold in December 2006, because it is unlikely that the Company will recover the remaining net receivable balance. During the six months ended June 30, 2007, the Company recorded a net gain on asset disposition of $0.2 million, which included a $0.8 million gain on the sale of the Holiday Inn Hamburg, NY in the three months ended March 31, 2007, partially offset by a $0.6 million loss recorded in the three months ended June 30, 2007 as previously discussed.

During the three and six months ended June 30, 2007, the Company recorded a $1.1 million loss on debt extinguishment related to the refinancing that occurred in April 2007.

Income Taxes

For the year ended December 31, 2006, we had estimated taxable income of $20.3 million. Because we had net operating losses available for federal income tax purposes, federal alternative minimum taxes of $0.3 million were paid for the year ended December 31, 2006. A net loss was reported for federal income tax purposes for the year ended December 31, 2005 and no federal income taxes were paid. At December 31, 2006, available net operating loss carryforwards of $318.9 million were reported for federal income tax purposes of which $221.6 million were available for use. The net operating losses will expire in years 2019 through 2025, including the utilization of an estimated tax net operating loss carryforward of $20.3 million for the year ended December 31, 2006. The 2002 reorganization under Chapter 11 and 2004 secondary stock offering resulted in “ownership changes,” as defined in Section 382 of the Internal Revenue Code. As a result of the most recent Section 382 ownership change, our ability to utilize net operating loss carryforwards generated prior to June 24, 2004 is subject to an annual limitation of $8.3 million. Net operating loss carryforwards generated during the 2004 calendar year after June 24, 2004 as well as those generated during the 2005 calendar year, are not subject to Section 382 limitations. The amount of losses subject to Section 382 limitations is $149.1 million; losses not subject to 382 limitations are $72.2 million. At December 31, 2006, available Section 382 net operating loss carryforwards of approximately $0.3 million were available for federal income tax purposes.

In 2007, we may be subject to Federal income tax under the alternative minimum tax system. The current year’s taxable income, if applicable, would be sheltered by net operating loss carryforwards.

32

Furthermore, at December 31, 2006, a valuation allowance of $121.4 million fully offset our net deferred tax asset. Approximately $97.3 million of this balance was attributable to pre-emergence deferred tax assets and may be credited to additional paid-in capital in future periods. At June 30, 2007, the valuation allowance decreased to $81.7 million. Approximately $77.0 million of this balance was attributable to pre-emergence deferred tax assets and may be credited to additional paid-in capital in future periods. The release of the valuation allowance relates to $0.3 million of pre-emergence deferred tax assets to offset income from discontinued operations, resulting in a non-cash charge to deferred income tax expense on the financial statements, with an offsetting credit to additional paid-in capital in accordance with SOP 90-7. The release also relates to $39.4 million of net operating losses that will expire unused due to Section 382 limitations and other prior period corrections. At June 30, 2007, net operating loss carryforwards of $221.6 million were reported for federal income tax purposes, which will expire in years 2019 through 2025 and reflect only those losses available for use.

In July 2006, the FASB issued Interpretation 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,” an interpretation of SFAS No. 109, “Accounting for Income Taxes”. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109. FIN 48 applies to all tax positions accounted for in accordance with SFAS No. 109 and requires a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in an income tax return. Subsequent recognition, derecognition, and measurement is based on management’s best judgment given the facts, circumstances and information available at the reporting date. FIN 48 is effective for fiscal years beginning after December 15, 2006.

We were required to adopt the provisions of FIN 48 with respect to all of our tax positions as of January 1, 2007. While FIN 48 was effective on January 1, 2007, the new standards apply to all open tax years. The only major tax jurisdiction in which we file income taxes is Federal. The tax years which are open for examination are calendar years ended 1992, 1998, 1999, 2000 and 2001 due to losses generated that may be utilized in current or future filings. Additionally, the statutes of limitation for calendar years ended 2003, 2004, 2005 and 2006 remain open. We have no significant unrecognized tax benefits; therefore, the adoption of FIN 48 had no impact on the Company’s financial statements. Additionally, no increases in unrecognized tax benefits are expected in the next twelve months. Interest and penalties on unrecognized tax benefits will be classified as income tax expense if recorded in a future period.

33

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, 2007. The data were derived from our unaudited condensed consolidated financial statements for the periods indicated. Our unaudited condensed consolidated financial statements were 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 44 hotels classified as held for use at June 30, 2007:

	2007						2006												2005
	Second			First			Fourth			Third			Second			First			Fourth			Third
	Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter
	(Unaudited in thousands)
Revenues:
Rooms	$	56,216		$	50,243		$	45,617		$	50,445		$	53,788		$	47,869		$	40,957		$	44,652
Food and beverage		16,779			13,844			15,134			12,912			15,636			12,110			11,973			11,570
Other		2,453			2,061			2,066			2,105			2,154			1,949			1,849			2,014
		75,448			66,148			62,817			65,462			71,578			61,928			54,779			58,236
Direct operating expenses:
Rooms		13,756			12,679			12,462			13,297			13,310			12,203			11,253			11,766
Food and beverage		11,021			9,984			10,363			9,772			10,469			9,019			8,444			8,277
Other		1,642			1,512			1,456			1,523			1,657			1,525			1,484			1,517
		26,419			24,175			24,281			24,592			25,436			22,747			21,181			21,560
		49,029			41,973			38,536			40,870			46,142			39,181			33,598			36,676
Other operating expenses:
Other hotel operating costs		20,478			20,013			18,304			19,078			18,755			18,562			17,265			17,813
Property and other taxes, insurance and leases		5,212			5,611			5,813			5,862			4,717			4,401			3,937			4,357
Corporate and other		5,930			5,682			4,959			5,592			5,292			4,917			4,314			5,771
Casualty (gain) losses, net		—			(1,867	)		—			(3,085	)		31			166			(28,754	)		190
Depreciation and amortization		7,960			7,802			7,770			7,886			7,704			7,358			7,002			5,250
Impairment of long-lived assets		222			265			225			323			16			194			1,018			83
Other operating expenses		39,802			37,506			37,071			35,656			36,515			35,598			4,782			33,464
		9,227			4,467			1,465			5,214			9,627			3,583			28,816			3,212
Other income (expenses):
Business interruption insurance proceeds		272			—			530			2,706			695			—			1,772			6,094
Interest income and other		822			925			664			786			848			309			271			340
Other interest expense		(6,767	)		(6,198	)		(6,297	)		(6,482	)		(6,227	)		(6,342	)		(5,485	)		(5,285	)
Loss on debt extinguishment		(3,411	)		—			—			—			—			—			—			—
Income (loss) before income taxes and minority interests		143			(806	)		(3,638	)		2,224			4,943			(2,450	)		25,374			4,361
Minority interests (net of taxes, nil)		(56	)		(365	)		335			100			(136	)		(4	)		(8,486	)		(1,127	)
Income (loss) before income taxes — continuing operations		87			(1,171	)		(3,303	)		2,324			4,807			(2,454	)		16,888			3,234
(Provision) benefit for income taxes — continuing operations		(19	)		686			(9,082	)		(1,039	)		(2,245	)		725			(8,383	)		(12	)
Income (loss) from continuing operations		68			(485	)		(12,385	)		1,285			2,562			(1,729	)		8,505			3,222
Discontinued operations:
(Loss) income from discontinued operations before income taxes		(565	)		2,182			(12,765	)		(1,917	)		1,853			4,812			(1,014	)		6,487
(Provision) benefit for income taxes		234			(1,854	)		4,437			794			(414	)		(1,709	)		313			—
(Loss) income from discontinued operations		(331	)		328			(8,328	)		(1,123	)		1,439			3,103			(701	)		6,487
Net (loss) income attributable to common stock	$	(263	)	$	(157	)	$	(20,713	)	$	162		$	4,001		$	1,374		$	7,804		$	9,709

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 for the three and six months ended June 30, 2007 and 2006, by market. The tables exclude the Holiday Inn Marietta, GA since it was closed on January 15, 2006 due to fire damage.

The categories in the following tables 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, Residence Inn by Marriott, and Springhill Suites by Marriott;

• Midscale with Food & Beverage: Doubletree Club, Holiday Inn, Holiday Inn Select; and

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

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Combined Continuing and Discontinued Operations — 50 hotels (excludes 1 hotel)

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Upper Upscale
Number of properties		4			4			4			4
Number of rooms		825			825			825			825
Occupancy		74.8	%		68.3	%		70.8	%		67.8	%
Average daily rate	$	121.83		$	114.24		$	120.65		$	113.23
RevPAR	$	91.19		$	78.04		$	85.38		$	76.82
Upscale
Number of properties		20			20			20			20
Number of rooms		3,577			3,577			3,577			3,577
Occupancy		73.5	%		72.0	%		70.8	%		71.4	%
Average daily rate	$	110.06		$	107.20		$	114.07		$	109.24
RevPAR	$	80.86		$	77.18		$	80.77		$	78.02
Midscale with Food & Beverage
Number of properties		22			22			22			22
Number of rooms		4,104			4,104			4,104			4,104
Occupancy		69.4	%		71.4	%		64.4	%		64.7	%
Average daily rate	$	96.97		$	93.91		$	93.27		$	90.35
RevPAR	$	67.31		$	67.09		$	60.07		$	58.45
Midscale without Food & Beverage
Number of properties		2			3			2			3
Number of rooms		245			362			245			362
Occupancy		62.2	%		60.0	%		60.1	%		56.1	%
Average daily rate	$	89.64		$	81.46		$	98.12		$	85.90
RevPAR	$	55.75		$	48.84		$	58.99		$	48.18
Independent Hotels
Number of properties		2			1			2			1
Number of rooms		222			105			222			105
Occupancy		47.1	%		57.7	%		42.4	%		56.5	%
Average daily rate	$	56.28		$	53.43		$	53.73		$	53.06
RevPAR	$	26.52		$	30.84		$	22.77		$	29.98
All Hotels
Number of properties		50			50			50			50
Number of rooms		8,973			8,973			8,973			8,973
Occupancy		70.8	%		70.8	%		66.9	%		67.2	%
Average daily rate	$	103.96		$	100.30		$	104.21		$	99.95
RevPAR	$	73.58		$	70.96		$	69.70		$	67.18

35

Continuing Operations — 43 hotels (excludes 1 hotel and held for sale hotels)

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Upper Upscale
Number of properties		4			4			4			4
Number of rooms		825			825			825			825
Occupancy		74.8	%		68.3	%		70.8	%		67.8	%
Average daily rate	$	121.83		$	114.24		$	120.65		$	113.23
RevPAR	$	91.19		$	78.04		$	85.38		$	76.82
Upscale
Number of properties		20			19			19			19
Number of rooms		3,579			3,335			3,335			3,335
Occupancy		73.5	%		73.0	%		70.8	%		71.0	%
Average daily rate	$	110.06		$	105.65		$	114.07		$	107.11
RevPAR	$	80.86		$	77.12		$	80.77		$	76.10
Midscale with Food & Beverage
Number of properties		16			16			16			16
Number of rooms		3,171			3,171			3,171			3,171
Occupancy		71.4	%		73.7	%		66.8	%		67.3	%
Average daily rate	$	104.41		$	100.26		$	99.78		$	95.74
RevPAR	$	74.59		$	73.84		$	66.66		$	64.41
Midscale without Food & Beverage
Number of properties		2			2			2			2
Number of rooms		245			245			245			245
Occupancy		62.2	%		63.3	%		60.1	%		61.9	%
Average daily rate	$	89.64		$	84.84		$	98.12		$	91.83
RevPAR	$	55.75		$	53.66		$	58.99		$	56.85
Independent Hotels
Number of properties		1			2			2			2
Number of rooms		105			349			349			349
Occupancy		61.4	%		58.2	%		58.9	%		70.5	%
Average daily rate	$	48.09		$	109.67		$	47.91		$	115.95
RevPAR	$	29.51		$	63.83		$	28.20		$	81.69
All Hotels
Number of properties		43			43			43			43
Number of rooms		7,925			7,925			7,925			7,925
Occupancy		72.3	%		71.8	%		68.7	%		68.9	%
Average daily rate	$	107.85		$	103.87		$	108.03		$	103.25
RevPAR	$	77.97		$	74.59		$	74.23		$	71.13

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Hotel data by region

The following two tables present data on occupancy, ADR and RevPAR for hotels in our portfolio for the three and six months ended June 30, 2007 and 2006, by region. The tables exclude the Holiday Inn Marietta, GA because it was closed on January 15, 2006 due to fire damage.

The regions in the following tables are defined as:

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

• Southeast: Florida, Georgia, Kentucky, Louisiana, North Carolina, South Carolina, Tennessee;

• Midwest: Arkansas, Indiana, Michigan, Minnesota, Oklahoma, Texas; and

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

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Combined Continuing and Discontinued Operations — 50 hotels (excludes 1 hotel)

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Northeast Region
Number of properties		22			22			22			22
Number of rooms		4,149			4,149			4,149			4,149
Occupancy		70.2	%		72.0	%		64.3	%		65.6	%
Average daily rate	$	103.95		$	101.32		$	101.00		$	98.45
RevPAR	$	72.94		$	72.97		$	64.96		$	64.55
Southeast Region
Number of properties		11			11			11			11
Number of rooms		1,729			1,729			1,729			1,729
Occupancy		77.0	%		72.6	%		71.0	%		68.9	%
Average daily rate	$	113.05		$	116.34		$	114.14		$	115.52
RevPAR	$	87.10		$	84.49		$	81.04		$	79.64
Midwest Region
Number of properties		10			10			10			10
Number of rooms		1,779			1,779			1,779			1,779
Occupancy		65.7	%		69.5	%		61.8	%		66.4	%
Average daily rate	$	93.89		$	85.22		$	93.27		$	85.32
RevPAR	$	61.72		$	59.26		$	57.64		$	56.70
West Region
Number of properties		7			7			7			7
Number of rooms		1,316			1,316			1,316			1,316
Occupancy		71.3	%		65.9	%		76.4	%		71.2	%
Average daily rate	$	103.60		$	95.02		$	112.59		$	103.29
RevPAR	$	73.88		$	62.67		$	86.02		$	73.52
All Hotels
Number of properties		50			50			50			50
Number of rooms		8,973			8,973			8,973			8,973
Occupancy		70.8	%		70.8	%		66.9	%		67.2	%
Average daily rate	$	103.96		$	100.30		$	104.21		$	99.95
RevPAR	$	73.58		$	70.96		$	69.70		$	67.18

38

Continuing Operations — 43 hotels (excludes 1 hotel and held for sale hotels)

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Northeast Region
Number of properties		17			17			17			17
Number of rooms		3,463			3,463			3,463			3,463
Occupancy		72.4	%		73.6	%		66.9	%		67.6	%
Average daily rate	$	109.60		$	106.67		$	105.99		$	103.14
RevPAR	$	79.38		$	78.50		$	70.89		$	69.71
Southeast Region
Number of properties		11			11			11			11
Number of rooms		1,731			1,731			1,731			1,731
Occupancy		77.0	%		72.6	%		71.0	%		68.9	%
Average daily rate	$	113.05		$	116.34		$	114.14		$	115.52
RevPAR	$	87.10		$	84.49		$	81.04		$	79.64
Midwest Region
Number of properties		8			8			8			8
Number of rooms		1,415			1,415			1,415			1,415
Occupancy		67.1	%		71.9	%		63.2	%		69.9	%
Average daily rate	$	100.14		$	88.99		$	99.82		$	88.97
RevPAR	$	67.17		$	64.02		$	63.13		$	62.16
West Region
Number of properties		7			7			7			7
Number of rooms		1,316			1,316			1,316			1,316
Occupancy		71.3	%		65.9	%		76.4	%		71.2	%
Average daily rate	$	103.60		$	95.02		$	112.59		$	103.29
RevPAR	$	73.88		$	62.67		$	86.02		$	73.52
All Hotels
Number of properties		43			43			43			43
Number of rooms		7,925			7,925			7,925			7,925
Occupancy		72.3	%		71.8	%		68.7	%		68.9	%
Average daily rate	$	107.85		$	103.87		$	108.03		$	103.25
RevPAR	$	77.97		$	74.59		$	74.23		$	71.13

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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, proceeds relating to the sale of assets, and existing cash balances.

Cash flows from operations may be adversely affected by factors such as a reduction in demand for lodging or displacement from large scale renovations being performed at our hotels. To the extent that significant amounts of our accounts receivable are due from airline companies, a further downturn in the airline industry also could materially and adversely affect the collectibility of our accounts receivable. At June 30, 2007, airline receivables represented approximately 13% of our consolidated gross accounts receivable. A further downturn in the airline industry could also affect our revenues by decreasing the aggregate levels of demand for travel. We expect that the sale of certain assets will provide additional cash to pay down outstanding debt, fund a portion of our capital expenditures and provide additional working capital. At June 30, 2007, we had 7 hotels classified as held for sale.

Our ability to make scheduled debt service payments and fund operations and capital expenditures depends on our future performance and financial results, 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 Item 1A, “Risk Factors” of our Form 10-K for the year ended December 31, 2006.

We intend to continue to use our cash flow to make scheduled debt service payments, fund operations and fund capital expenditures. At this point in time, we do not intend to pay dividends on our common stock.

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, 2007, we had working capital (current assets less current liabilities) of $99.6 million compared to $32.7 million at December 31, 2006. The increase in working capital was primarily the result of the April 2007 refinancing, which resulted in a reclassification of debt from current to long-term. The refinancing reallocated our debt portfolio, resulting in a lower portion of our debt being secured by held for sale assets. The debt balances secured by our held for sale assets are included in current liabilities (Liabilities related to assets held for sale) in the consolidated balance sheets, while the debt balances secured by our held for use assets are included in long-term liabilities (excluding the current portion).

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

Our ability to meet our long-term cash needs is dependent on the market conditions of the lodging industry, improved operating results, the successful implementation of our portfolio improvement strategy, and our ability to obtain third party sources of capital on favorable terms when and as needed. In the short term, we continue to diligently monitor our costs. Our future financial needs and sources of working capital are, however, 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 trigger defaults and acceleration under one or more loan agreements as well as obligations to pay liquidated damages under the franchise agreements if we are unable to find a suitable replacement franchisor.

Cash Flow

Discontinued operations were not segregated in the consolidated statements of cash flows. Therefore, amounts for certain captions will not agree with respective data in the balance sheets and related statements of operations.

Operating activities

Operating activities generated cash of $18.7 million in the first six months of 2007, compared with $27.0 million of cash in the first six months of 2006. The decrease in cash generated by operations was largely attributable to the winddown of business interruption insurance claim activity. In addition, we operated fewer properties in 2007 than in 2006.

40

Investing activities

Investing activities generated $49.6 million of cash in the first six months of 2007. We received $64.8 million in net proceeds from the sale of assets. In addition, we withdrew $3.7 million and $1.9 million in restricted cash and capital expenditure reserves, respectively, and collected $1.0 million in insurance receipts related to casualty claims. Capital improvements totaled $19.0 million and we paid $2.9 million to acquire the minority partner’s interest in one of our hotels.

Investing activities used $9.5 million of cash in the first six months of 2006. Capital improvements were $26.2 million. We received $9.4 million in proceeds from the sale of assets, and we withdrew $4.9 million from capital expenditure reserves. We also received $1.9 million in property damage claims.

Financing activities

Financing activities used cash of $19.1 million in the first six months of 2007. We received $130.0 million in gross proceeds associated with the April 2007 refinancing and used the net proceeds to payoff existing debt. We made principal payments of $141.7 million, purchased $1.9 million of treasury stock, paid deferred financing costs of $1.7 million, and paid defeasance costs of $3.9 million.

Financing activities generated cash of $9.7 million in the first six months of 2006. We refinanced the mortgages on five hotels, with gross proceeds of $45.0 million. The proceeds were used to paydown existing debt and for general corporate purposes. We paid deferred loan costs of $0.9 million associated with these financings. Additionally, we made principal payments of $34.1 million, including the previously mentioned paydown.

Debt and Contractual Obligations

See discussion of our Debt and Contractual Obligations in our Form 10-K for the year ended December 31, 2006 and Notes 7 and 8 to our Condensed Consolidated Financial Statements in this report.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements.

Market Risk

We are exposed to interest rate risks on our variable rate debt. At June 30, 2007 and December 31, 2006, we had outstanding variable rate debt (including debt secured by assets held for sale) of approximately $170.3 million and $98.6 million, respectively. Without regard to additional borrowings under those instruments or scheduled amortization, the annualized effect of a twenty-five basis point increase in LIBOR would be a reduction in income before income taxes of approximately $0.4 million.

We have interest rate caps in place for all of our variable rate debt loan agreements in an effort to manage our exposure to fluctuations in interest rates. The combined fair value of the interest rate caps totaled $12,000 and is recorded on the balance sheet in other assets. Adjustments to the carrying values of the interest rate caps are recorded in interest expense. As a result of having interest rate caps, we believe that our interest rate risk at June 30, 2007 and December 31, 2006 was not material. The impact on annual results of operations of a hypothetical one-point interest rate reduction on the interest rate caps as of June 30, 2007 would be a reduction in income before income taxes of approximately $12,000.

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 at June 30, 2007 would be approximately $4.3 million.

Forward-looking Statements

We make forward looking statements in this report and other reports we file with the SEC. In addition, management may make oral forward-looking statements in discussions with analysts, the media, investors and others. These statements include statements relating to our plans, strategies, objectives, expectations, intentions and adequacy of resources, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believes,” “anticipates,” “expects,” “intends,” “plans,” “estimates,” “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. Our business is exposed to many risks, difficulties and uncertainties, including the following:

41

• The effects of regional, national and international economic conditions;

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

• The effects of actual and threatened terrorist attacks and international conflicts in the Middle East and elsewhere, and their impact on domestic and international travel;

• 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 franchisors to immediately terminate their respective agreements if we breach certain provisions;

• Our ability to complete planned hotel dispositions;

• Seasonality of the hotel business;

• The effects of unpredictable weather events such as hurricanes;

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

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

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

• 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 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;

• A downturn in the economy due to several factors, including but not limited to, high energy costs, natural gas and gasoline prices; and

• The risks identified in our Form 10-K for the year ended December 31, 2006 under “Risks Related to Our Business” and “Risks Related to Our Common Stock”.

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.

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

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

42

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Based on an evaluation of our disclosure controls and procedures carried out as of June 30, 2007, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. There were no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the foregoing evaluation that occurred during the quarter ended June 30, 2007, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

43

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.

Item 6. Exhibits

(a) A list of the exhibits 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.

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SIGNATURES

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

	LODGIAN, INC.
	By:	/s/ EDWARD J. ROHLING
		Edward J. Rohling
Date: August 8, 2007		President and Chief Executive Officer
	By:	/s/ JAMES A. MACLENNAN
		James A. MacLennan
Date: August 8, 2007		Executive Vice President and Chief Financial Officer

45

EXHIBIT INDEX

Exhibit
Number	Description
2.1	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).
2.2	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).
2.3	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).
2.4	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).
2.5	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).
2.6	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).
2.7	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	Certificate of Correction to the Second Amended and Restated Certificate of Incorporation and Second 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 4, 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).

Exhibit
Number	Description
10.1	Amended and Restated Executive Employment Agreement between Lodgian, Inc. and Daniel E. Ellis, dated March 29, 2007 (Incorporated be reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 1-12537), filed with the Commission on March 30, 2007).
10.2	Participation Form for Daniel E. Ellis under the Lodgian, Inc. Executive Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 1-14537), filed with the Commission on February 6, 2006).
10.3	Agreement for Consulting Services between Lodgian, Inc. and Linda Borchert Philp dated December 19, 2005 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-14537), filed with the Commission on December 22, 2005).
10.4	Release Agreement between Lodgian, Inc. and Linda Borchert Philp dated December 16, 2005 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 1-14537), filed with the Commission on December 22, 2005).
10.5	Amended and Restated Executive Employment Agreement between Edward J. Rohling and Lodgian, Inc., dated April 23, 2007 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-14537). Filed with the Commission on April 26, 2007).
10.6	Restricted Stock Award Agreement between Edward J. Rohling and Lodgian, Inc., dated July 15, 2005 (Incorporated by reference to Exhibit 10.36 to the Company’s Quarterly Report for the period ended June 30, 2005 (File No. 1-14537), filed with the Commission on August 9, 2005).
10.7	Amended and Restated Executive Employment Agreement between Lodgian, Inc. and James A. MacLennan dated March 29, 2007 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.1-14537), filed with the Commission on March 30, 2007).
10.8	Restricted Stock Award Agreement between Lodgian, Inc. and James A. MacLennan dated March 1, 2006 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 1-14537), filed with the Commission on March 3, 2006).
10.9	Participation Form for James A. MacLennan under the Lodgian, Inc. Executive Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 1-14537), filed with the Commission on March 3, 2006).
10.10	Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc. (as amended through April 24, 2007. **
10.11	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).
10.12	Form of Restricted Stock Award Agreement (Incorporated by reference to Exhibit 10.40 to the Company’s Quarterly Report for the period ended June 30, 2005 (File No. 1-14537), filed with the Commission on August 9, 2005).
10.13	Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective as of January 1, 2006. **
10.14	Amended and Restated Executive Employment Agreement between Mark D. Linch and Lodgian, Inc. dated March 29, 2007 (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 1-14537), filed with the Commission on March 30, 2007).
10.15	Executive Employment Agreement between Donna B. Cohen and Lodgian, Inc. dated March 29, 2007 (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 1-14537), filed with the Commission on March 30, 2007).
10.16	Lodgian, Inc. Executive Incentive Plan (Covering the calendar years 2006-2008). (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-14537), filed with the Commission on February 6, 2006).
10.17	Form of Restricted Stock Award Agreement for Employees (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A (File No. 1-14537), filed with the Commission on March 6, 2007).

Exhibit
Number	Description
10.18	Form of Restricted Stock Award Agreement for Non-Employee Directors (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A (File No. 1-14537), filed with the Commission on March 6, 2007).
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.

EX-10.10

Exhibit 10.10

AMENDED AND RESTATED 2002 STOCK INCENTIVE PLAN
OF
LODGIAN, INC.

(as amended through April 24, 2007)

LODGIAN, INC.

AMENDED AND RESTATED 2002 STOCK INCENTIVE PLAN
(as amended through April 24, 2007)

TABLE OF CONTENTS

		Page
Section 1	Purpose		1
Section 2.	Definitions		1
Section 3.	Administration of the Plan		3
Section 4.	Duration of Plan		4
Section 5.	Shares of Stock Subject to the Plan		4
Section 6.	Eligible Individuals		5
Section 7.	Awards Generally		5
Section 8.	Stock Options		6
Section 9.	Stock Appreciation Rights		7
Section 10.	Stock Awards		7
Section 11.	Performance Share Awards		7
Section 12.	Other Awards		7
Section 13.	Section 162(m) Awards		7
Section 14.	Non-Transferability		8
Section 15.	Recapitalization or Reorganization		8
Section 16.	Change in Control		9
Section 17.	Amendment of the Plan		10
Section 18.	Miscellaneous		10

 i

LODGIAN, INC.

AMENDED AND RESTATED 2002 STOCK INCENTIVE PLAN
(as amended through April 24, 2007)

               Section 1. Purpose. The purposes of the Lodgian, Inc. 2002 Amended and Restated Stock Incentive Plan (the “Plan”) are to attract, retain and motivate officers and other key employees and consultants of LODGIAN, INC., a Delaware corporation (the “Company”), and its Subsidiaries (as hereinafter defined), to compensate them for their contributions to the growth and profits of the Company and to encourage ownership by them of stock of the Company.

               Section 2. Definitions. For purposes of the Plan, the following terms shall be defined as follows:

               “Administrator” means the individual or individuals to whom the Committee delegates authority under the Plan in accordance with Section 3(d).

               “Affiliate” and “Associate” have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

               “Award” means an award made pursuant to the terms of the Plan to an Eligible Individual in the form of Stock Options, Stock Appreciation Rights, Stock Awards, Performance Share Awards, Section 162(m) Awards or other awards determined by the Committee.

               “Award Agreement” means a written agreement or certificate granting an Award. An Award Agreement shall be executed by an officer on behalf of the Company and shall contain such terms and conditions as the Committee deems appropriate and that are not inconsistent with the terms of the Plan. The Committee may in its discretion require that an Award Agreement be executed by the Participant to whom the relevant Award is made.

               “Beneficial Owner” has the meaning ascribed to such term in Rule 13d-3 promulgated under the Exchange Act.

               “Board” means the Board of Directors of the Company.

               A “Change in Control” of the Company shall be deemed to have occurred when:

     (a) any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any person or entity organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan), alone or together with its Affiliates and Associates (collectively, an “Acquiring Person”), shall become the Beneficial Owner of 40 percent or more of the then outstanding shares of Common Stock or the Combined Voting Power of the Company,

     (b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director who is a representative or nominee of an Acquiring Person) whose election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (collectively, the “Continuing Directors”), cease for any reason to constitute a majority of the Board,

     (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the Surviving Entity (as defined in Section 16 hereof) or any Parent of such Surviving Entity) at least a majority of the Combined Voting Power of the Company, such Surviving Entity or the Parent of such Surviving Entity outstanding immediately after such merger or consolidation;

     (d) the consummation of a plan of reorganization (other than a reorganization under the United States Bankruptcy Code) or complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale of all or substantially all of the Company’s assets to a transferee, the majority of whose voting securities are held by the Company; or

     (e) 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.

               “Code” means the Internal Revenue Code of 1986, as amended, and the applicable rulings and regulations thereunder.

               “Combined Voting Power” means the combined voting power of the Company’s or other relevant entity’s then outstanding voting securities.

               “Committee” means the Compensation Committee of the Board, any successor committee thereto or if no such committee has yet been established, the Board. The Committee shall consist of at least two people as the Board may appoint to administer the Plan. Unless the Board is acting as the Committee or the Board specifically determines otherwise, each member of the Committee shall, at the time he takes any action with respect to an Option under the Plan, be an Eligible Director; provided that the mere fact a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Option granted by the Committee which Option is otherwise validly made under the Plan.

               “Common Stock” means the Common Stock, par value $.01 per share, of the Company.

               “Eligible Individuals” means the individuals described in Section 6 who are eligible for Awards under the Plan.

               “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder.

               “Eligible Director” means a person who is (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, or a person meeting any similar requirement under any successor rule or regulation and (ii) an “outside director” within the meaning of Section 162(m) of the Code, and the Treasury Regulations promulgated thereunder.

               “Fair Market Value” means, in the event the Common Stock is traded on a recognized securities exchange or quoted by the National Association of Securities Dealers Automated Quotations on National Market Issues, an amount equal to the average of the high and low prices of the Common Stock on such exchange or such quotation on the date set for valuation or, if no sales of Common Stock were made on said exchange or so quoted on that date, the average of the high and low prices of the Common Stock on the next preceding day on which sales were made on such exchange or quotations; or, if the Common Stock is not so traded or quoted, that value determined, in its sole discretion, by the Committee.

               “Incentive Stock Option” means a Stock Option which is an “incentive stock option” within the meaning of Section 422 of the Code and designated by the Committee as an Incentive Stock Option in an Award Agreement.

               “Nonqualified Stock Option” means a Stock Option which is not an Incentive Stock Option.

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               “Parent” means any corporation which is a “parent corporation” within the meaning of Section 424(e) of the Code with respect to the relevant entity.

               “Participant” means an Eligible Individual to whom an Award has been granted under the Plan.

               “Performance Period” means a fiscal year of the Company or such other period that may be specified by the Committee in connection with the grant of a Section 162(m) Award.

               “Performance Share Award” means a conditional Award of shares of Common Stock granted to an Eligible Individual pursuant to Section 11 hereof.

               “Person” means any person, entity or “group” within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act.

               “Section 162(m) Participant” means, for a given fiscal year of the Company, any Participant designated by the Committee by not later than 90 days following the start of such year as a Participant (or such other time as may be required or permitted by Section 162(m) of the Code) whose compensation for such fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code.

               “Stock Appreciation Right” means an Award to receive all or some portion of the appreciation on shares of Common Stock granted to an Eligible Individual pursuant to Section 9 hereof.

               “Stock Award” means an Award of shares of Common Stock granted to an Eligible Individual pursuant to Section 10 hereof.

               “Stock Option” means an Award to purchase shares of Common Stock granted to an Eligible Individual pursuant to Section 8 hereof.

               “Subsidiary” means (i) any corporation which is a “subsidiary corporation” within the meaning of Section 424(f) of the Code with respect to the Company or (ii) any other corporation or other entity in which the Company, directly or indirectly, has an equity or similar interest and which the Committee designates as a Subsidiary for the purposes of the Plan.

               “Substitute Award” means an Award granted upon assumption of, or in substitution for, outstanding awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock.

               Section 3. Administration of the Plan.

               (a) Power and Authority of the Committee. The Plan shall be administered by the Committee, which shall have full power and authority, subject to the express provisions hereof, (i) to select Participants from the Eligible Individuals, (ii) to make Awards in accordance with the Plan, (iii) to determine the number of Shares subject to each Award or the cash amount payable in connection with an Award, (iv) to determine the terms and conditions of each Award, including, without limitation, those related to vesting, forfeiture, payment and exercisability, and the effect, if any, of a Participant’s termination of employment with the Company or, subject to Section 16 hereof, of a Change in Control on the outstanding Awards granted to such Participant, and including the authority to amend the terms and conditions of an Award after the granting thereof to a Participant in a manner that is not prejudicial to the rights of such Participant in such Award, (v) to specify and approve the provisions of the Award Agreements delivered to Participants in connection with their Awards, (vi) to construe and interpret any Award Agreement delivered under the Plan, (vii) to prescribe, amend and rescind rules and procedures relating to the Plan, (viii) to vary the terms of Awards to take account of tax, securities law and other regulatory requirements of foreign jurisdictions, (ix) subject to the provisions of the Plan and subject to such additional limitations and restrictions as the Committee may impose, to delegate to one or more officers of the Company some or all of its authority under the Plan, and (x) to make all other determinations and to formulate such procedures as may be necessary or advisable for the administration of the Plan.

3

               (b) Plan Construction and Interpretation. The Committee shall have full power and authority, subject to the express provisions hereof, to construe and interpret the Plan.

               (c) Determinations of Committee Final and Binding. All determinations by the Committee in carrying out and administering the Plan and in construing and interpreting the Plan shall be final, binding and conclusive for all purposes and upon all persons interested herein.

               (d) Delegation of Authority. The Committee may, but need not, from time to time delegate some or all of its authority under the Plan to an Administrator consisting of one or more members of the Committee or of one or more officers of the Company; provided, however, that the Committee may not delegate its authority (i) to make Awards to Eligible Individuals (A) who are Section 162(m) Participants or (B) who are officers of the Company who are delegated authority by the Committee hereunder, or (ii) under Sections 3(b) and 17 of the Plan. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation or thereafter. Nothing in the Plan shall be construed as obligating the Committee to delegate authority to an Administrator, and the Committee may at any time rescind the authority delegated to an Administrator appointed hereunder or appoint a new Administrator. At all times, the Administrator appointed under this Section 3(d) shall serve in such capacity at the pleasure of the Committee. Any action undertaken by the Administrator in accordance with the Committee’s delegation of authority shall have the same force and effect as if undertaken directly by the Committee, and any reference in the Plan to the Committee shall, to the extent consistent with the terms and limitations of such delegation, be deemed to include a reference to the Administrator.

               (e) Liability of Committee. No member of the Committee shall be liable for such person’s own willful misconduct. Under no circumstances shall any member of the Committee be liable for any act or omission of any other member of the Committee. In the performance of its functions with respect to the Plan, the Committee shall be entitled to rely upon information and advice furnished by the Company’s officers, the Company’s accountants, the Company’s counsel and any other party the Committee deems necessary, and no member of the Committee shall be liable for any action taken or not taken in reliance upon any such advice.

               Section 4. Duration of Plan. The Plan shall remain in effect until terminated by the Board of Directors and thereafter until all Awards granted under the Plan are satisfied by the issuance of shares of Common Stock or the payment of cash or are terminated under the terms of the Plan or under the Award Agreement entered into in connection with the grant thereof. Notwithstanding the foregoing, no Awards may be granted under the Plan after the tenth anniversary of the Effective Date (as defined in Section 18(k)).

               Section 5. Shares of Stock Subject to the Plan. Subject to adjustment as provided in Section 15(b) hereof, the number of shares of Common Stock that may be issued under the Plan pursuant to Awards shall not exceed, in the aggregate, 3,301,058 shares (the “Section 5 Limit”), of which the number of shares of Common Stock that may be issued under the Plan pursuant to Incentive Stock Options may not exceed, in the aggregate, 3,252,058 shares. For purposes of determining the number of shares that remain available for issuance under the Plan, the following rules shall apply:

               (a) the number of Shares subject to outstanding Awards shall be charged against the Section 5 Limit; and

               (b) the Section 5 Limit shall be increased by:

     (i) the number of shares subject to an Award (or portion thereof) which lapses, expires or is otherwise terminated without the issuance of such shares or is settled by, the delivery of consideration other than shares,

     (ii) the number of shares tendered to pay the exercise price of a Stock Option or other Award, and

     (iii) the number of shares withheld from any Award to satisfy a Participant’s tax withholding obligations or, if applicable, to pay the exercise price of a Stock Option or other Award.

4

In addition, any shares underlying Substitute Awards shall not be counted against the Section 5 Limit set forth in the first sentence of this Section 5.

               Section 6. Eligible Individuals.

               (a) Eligibility Criteria. Awards may be granted by the Committee to individuals (“Eligible Individuals”) who are officers or other key employees or consultants (including non-employee directors) of the Company or a Subsidiary with the potential to contribute to the future success of the Company or its Subsidiaries; provided, however, that no Incentive Stock Options shall be granted to any Eligible Individual who is not an employee of the Company or a “parent” or “subsidiary” of the Company, as such terms are used in Section 422(a)(s) of the Code. An individual’s status as an Administrator or a member of the Committee will not affect his or her eligibility to participate in the Plan.

               (b) Maximum Number of Shares Per Eligible Individual. In accordance with the requirements under Section 162(m) of the Code, no Eligible Individual shall receive grants of Awards with respect to an aggregate of more than 500,000 shares of Common Stock in respect of any fiscal year of the Company. For purposes of the preceding sentence, any Award that is made as bonus compensation, or is made in lieu of compensation that otherwise would be payable to an Eligible Individual, shall be considered made in respect of the fiscal year to which such bonus or other compensation relates or otherwise was earned.

               Section 7. Awards Generally. Awards under the Plan may consist of Stock Options, Stock Appreciation Rights, Stock Awards, Performance Share Awards, Section 162(m) Awards or other awards determined by the Committee. The terms and provisions of an Award shall be set forth in a written Award Agreement approved by the Committee and delivered or made available to the Participant as soon as practicable following the date of the award. The vesting, exercisability, payment and other restrictions applicable to an Award (which may include, without limitation, restrictions on transferability or provision for mandatory resale to the Company) shall be determined by the Committee and set forth in the applicable Award Agreement. Notwithstanding the foregoing, the Committee may accelerate (i) the vesting or payment of any Award, (ii) the lapse of restrictions on any Award or (iii) the date on which any Stock Option or Stock Appreciation Right first becomes exercisable. The date of a Participant’s termination of employment for any reason shall be determined in the sole discretion of the Committee. The Committee shall also have full authority to determine and specify in the applicable Award Agreement the effect, if any, that a Participant’s termination of employment for any reason will have on the vesting, exercisability, payment or lapse of restrictions applicable to an outstanding Award.

               Section 8. Stock Options.

               (a) Terms of Stock Options Generally. Subject to the terms of the Plan and the applicable Award Agreement, each Stock Option shall entitle the Participant to whom such Stock Option was granted to purchase the number of shares of Common Stock specified in the applicable Award Agreement and shall be subject to the terms and conditions established by the Committee in connection with the Award and specified in the applicable Award Agreement. Upon satisfaction of the conditions to exercisability specified in the applicable Award Agreement, a Participant shall be entitled to exercise the Stock Option in whole or in part and to receive, upon satisfaction or payment of the exercise price or an irrevocable notice of exercise in the manner contemplated by Section 8(d) below, the number of shares of Common Stock in respect of which the Stock Option shall have been exercised. Stock Options may be either Nonqualified Stock Options or Incentive Stock Options.

               (b) Exercise Price. The exercise price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant and set forth in the Award Agreement, provided, that the exercise price per share shall be no less than 100% of the Fair Market Value per share on the date of grant. Notwithstanding the foregoing, the exercise price per share of a Stock Option that is a Substitute Award may be less than the Fair Market Value per share on the date of award, provided that the excess of:

     (i) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over

5

     (ii) the aggregate exercise price thereof, does not exceed the excess of:

     (iii) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor entity that were subject to the award assumed or substituted for by the Company, over

     (iv) the aggregate exercise price of such shares.

               (c) Option Term. The term of each Stock Option shall be fixed by the Committee and set forth in the Award Agreement; provided, however, that a Stock Option shall not be exercisable after the expiration of ten (10) years after the date the Stock Option is granted.

               (d) Method of Exercise. Subject to the provisions of the applicable Award Agreement, the exercise price of a Stock Option may be paid in cash or previously owned shares or a combination thereof. In accordance with the rules and procedures established by the Committee for this purpose and only to the extent permitted by applicable law, the Stock Option may also be exercised through a “cashless exercise” procedure approved by the Committee involving a broker or dealer approved by the Committee, that affords Participants the opportunity to sell immediately some or all of the shares underlying the exercised portion of the Stock Option in order to generate sufficient cash to pay the Stock Option exercise price and/or to satisfy withholding tax obligations related to the Stock Option. When payment of the exercise price for a Stock Option consists of shares of the Company’s capital stock, such shares will not be accepted as payment unless the Participant has held such shares for the requisite period necessary to avoid a charge to the Company’s earnings for financial reporting purposes.

               (e) (i) Incentive Stock Option. Notwithstanding anything to the contrary in this Plan, if an Incentive Stock Option is granted to a Participant who owns stock representing more than ten percent of the voting power of all classes of stock of the Company, the Option Period shall not exceed five years from the Date of Grant of such Option and the Option Price shall be at least 110 percent of the Fair Market Value (on the Date of Grant) of the Stock subject to the Option.

     (ii) $100,000 Per Year Limitation for Incentive Stock Options. To the extent the aggregate Fair Market Value (determined as of the time of grant) of Stock for which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options.

               Section 9. Stock Appreciation Rights. Stock Appreciation Rights shall be subject to the terms and conditions established by the Committee in connection with the Award thereof and specified in the applicable Award Agreement. Upon satisfaction of the conditions to the payment specified in the applicable Award Agreement, each Stock Appreciation Right shall entitle a Participant to an amount, if any, equal to the Fair Market Value of a share of Common Stock on the date of exercise over the Stock Appreciation Right exercise price specified in the applicable Award Agreement. At the discretion of the Committee, payments to a Participant upon exercise of a Stock Appreciation Right may be made in Shares, cash or a combination thereof. A Stock Appreciation Right may be granted alone or in addition to other Awards, or in tandem with a Stock Option. If granted in tandem with a Stock Option, a Stock Appreciation Right shall cover the same number of shares of Common Stock as covered by the Stock Option (or such lesser number of shares as the Committee may determine) and shall be exercisable only at such time or times and to the extent the related Stock Option shall be exercisable, and shall have the same term and exercise price as the related Stock Option. Upon exercise of a Stock Appreciation Right granted in tandem with a Stock Option, the related Stock Option shall be cancelled automatically to the extent of the number of shares covered by such exercise; conversely, if the related Stock Option is exercised as to some or all of the shares covered by the tandem grant, the tandem Stock Appreciation Right shall be cancelled automatically to the extent of the number of shares covered by the Stock Option exercised.

               Section 10. Stock Awards. Stock Awards shall consist of one or more shares of Common Stock granted or offered for sale to an Eligible Individual, and shall be subject to the terms and conditions established by the Committee in connection with the Award and specified in the applicable Award Agreement. The shares of

6

Common Stock subject to a Stock Award may, among other things, be subject to vesting requirements or restrictions on transferability.

               Section 11. Performance Share Awards. Performance Share Awards shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee deems appropriate and which are not inconsistent with the terms of the Plan. Each Award Agreement shall set forth the number of shares of Common Stock to be earned by a Participant upon satisfaction of certain specified performance criteria and subject to such other terms and conditions as the Committee deems appropriate. Payment in settlement of a Performance Share Award shall be made as soon as practicable following the conclusion of the applicable performance period, or at such other time as the Committee shall determine, in shares of Common Stock, in an equivalent amount of cash or in a combination of Common Stock and cash, as the Committee shall determine.

               Section 12. Other Awards. The Committee shall have the authority to specify the terms and provisions of other forms of equity-based or equity-related Awards not described above which the Committee determines to be consistent with the purpose of the Plan and the interests of the Company, which Awards may provide for cash payments based in whole or in part on the value or future value of Common Stock, for the acquisition or future acquisition of Common Stock, or any combination thereof. Other Awards shall also include cash payments (including the cash payment of dividend equivalents) under the Plan which may be based on one or more criteria determined by the Committee which are unrelated to the value of Common Stock and which may be granted in tandem with, or independent of, other Awards under the Plan.

               Section 13. Section 162(m) Awards.

               (a) Terms of Section 162(m) Awards Generally. In addition to any other Awards under the Plan, the Company may make Awards that are intended to qualify as “qualified performance-based compensation” for purposes of Section 162(m) of the Code (“Section 162(m) Awards”). Section 162(m) Awards may consist of Stock Options, Stock Appreciation Rights, Stock Awards, Performance Share Awards or Other Awards the vesting, exercisability and/or payment of which is conditioned upon the attainment for the applicable Performance Period of specified performance targets related to designated performance goals for such period selected by the Committee from among the performance goals specified in Section 13(b) below. Section 162(m) Awards will be made in accordance with the procedures specified in applicable treasury regulations for compensation intended to be “qualified performance-based compensation.”

               (b) Performance Goals. For purposes of this Section 13, performance goals shall be limited to one or more of the following: (i) net revenue, (ii) net earnings, (iii) operating earnings or income, (iv) absolute and/or relative return on equity or assets, (v) earnings per share, (vi) cash flow, (vii) pretax profits, (viii) earnings growth, (ix) revenue growth, (x) book value per share, (xi) stock price and (xii) performance relative to peer companies, each of which may be established on a corporate-wide basis or established with respect to one or more operating units, divisions, acquired businesses, minority investments, partnerships or joint ventures.

               (c) Other Performance-Based Compensation. The Committee’s decision to make, or not to make, Section 162(m) Awards within the meaning of this Section 13 shall not in any way prejudice the qualification of any other Awards as performance based compensation under Section 162(m). In particular, Awards of Stock Options may, pursuant to applicable regulations promulgated under Section 162(m), be qualified as performance-based compensation for Section 162(m) purposes without regard to this Section 13.

               Section 14. Non-Transferability. No Award granted under the Plan or any rights or interests therein shall be sold, transferred, assigned, pledged or otherwise encumbered or disposed of except by will or by the laws of descent and distribution or pursuant to a “qualified domestic relations order” (“QDRO”) as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder; provided, however, that the Committee may, subject to such terms and conditions as the Committee shall specify, permit the transfer of an Award to a Participant’s family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members; provided, however, that the restrictions in this sentence shall not apply to the shares received in connection with an Award after the date that the restrictions on transferability of such shares set forth in the applicable Award Agreement have lapsed. During the lifetime of a Participant, a Stock Option or Stock Appreciation Right shall be exercisable only by, and payments in settlement of

7

Awards shall be payable only to, the Participant or, if applicable, the “alternate payee” under a QDRO or the family member or trust to whom such Stock Option, Stock Appreciation Right or other Award has been transferred in accordance with the previous sentence.

               Section 15. Recapitalization or Reorganization.

               (a) Authority of the Company and Shareholders. The existence of the Plan, the Award Agreements and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

               (b) Change in Capitalization . Notwithstanding any provision of the Plan or any Award Agreement, in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, reorganization, merger, consolidation, stock split, combination or exchange of shares or any other significant corporate event affecting the Common Stock, the Committee shall make proportionate adjustments to prevent diminution or enlargement of the rights of Participants under the Plan with respect to the aggregate number of shares of Common Stock for which Awards in respect thereof may be granted under the Plan, the number of shares of Common Stock covered by each outstanding Award, and the exercise or Award prices in respect thereof.

               Section 16. Change in Control. (a) The following provisions of this Section 16(a) shall apply to Awards granted prior to April 8, 2004, and shall not apply to any Awards granted after such date unless the holder of such an Award has agreed that the Award shall be governed by the provisions of Section 16(b): In the event of a Change in Control, (i) all Stock Options or Stock Appreciation Rights then outstanding shall become fully exercisable as of the date of the Change in Control, whether or not then exercisable, (ii) all restrictions and conditions of all Stock Awards then outstanding shall lapse as of the date of the Change in Control, (iii) all Performance Share Awards shall be deemed to have been fully earned as of the date of the Change in Control, and (iv) in the case of a Change in Control involving a merger of, or consolidation involving, the Company in which the Company is (A) not the surviving corporation (the “Surviving Entity”) or (B) becomes a wholly owned subsidiary of the Surviving Entity or any Parent thereof, each outstanding Stock Option granted under the Plan and not exercised (a “Predecessor Option”) will be converted into an option (a “Substitute Option”) to acquire common stock of the Surviving Entity or its Parent, which Substitute Option will have substantially the same terms and conditions as the Predecessor Option, with appropriate adjustments as to the number and kind of shares and exercise prices.

               (b) The following provisions of this Section 16(b) shall apply to Awards granted on or after April 8, 2004, and shall not apply to any Awards granted prior to such date unless the holder of such Award granted prior to such date has agreed that the Award will be governed by this Section 16(b): Except as otherwise provided in an Award Agreement, in the event of a Change in Control, (i) all Stock Options or Stock Appreciation Rights then outstanding shall become fully exercisable as of the date of the Change in Control, whether or not then exercisable, (ii) all restrictions and conditions of all Stock Awards then outstanding shall lapse as of the date of the Change in Control, and (iii) all Performance Share Awards shall be deemed to have been fully earned as of the date of the Change in Control. Except as otherwise provided in an Award Agreement with respect to an Award, in the case of a Change of Control involving a merger of, or consolidation involving, the Company in which the Company is (A) not the Surviving Entity or (B) becomes a wholly owned subsidiary of the Surviving Entity or any Parent thereof, each outstanding Award granted under the Plan and not exercised (a “Predecessor Award”) may, if the definitive agreement governing the terms of the Change of Control transaction so provides, be converted into, or otherwise assumed or substituted for, an Award (a “Substitute Award”) issued by the Surviving Entity or its Parent, which Substitute Award will have substantially the same terms and conditions as the Predecessor Award, with appropriate

8

adjustments as to the number and kind of shares and exercise prices and to reflect the accelerated vesting. Except as otherwise provided in an Award Agreement with respect to an Award, in the case of a Change of Control involving a merger of, or consolidation involving, the Company in which the Company is (A) not the Surviving Entity or (B) becomes a wholly owned subsidiary of the Surviving Entity or any Parent thereof and in which a Predecessor Award is not converted into a Substitute Award or otherwise assumed or substituted by the Surviving Entity or any Parent of the Surviving Entity in the Change of Control transaction pursuant to the definitive agreement governing the Change of Control transaction (a “Non-Assumed Award”), the Committee, in its sole and absolute discretion, may, with respect to any or all of such Non-Assumed Awards, take any or all of the following actions to be effective as of the date of the Change of Control (or as of any other date fixed by the Committee occurring within the thirty (30) day period immediately preceding the date of the Change of Control, but only if such action remains contingent upon the effectuation of the Change of Control) (such date is referred to as the “Action Effective Date”), unilaterally cancel such Non-Assumed Award in exchange for:

     (i) whole and/or fractional shares of Common Stock (or for whole shares of Common Stock and cash in lieu of any fractional share) or whole and/or fractional shares of capital stock of a successor (or for whole shares of capital stock of a successor and cash in lieu of any fractional share) that, in the aggregate, are equal in value to the excess of the Fair Market Value of the shares of Common Stock then subject to such Non-Assumed Award determined as of the Action Effective Date (taking into account the accelerated vesting), less the value of any consideration payable on exercise of such Non-Assumed Award; or

     (ii) cash or other property equal in value to the excess of the Fair Market Value of the shares of Common Stock then subject to such Non-Assumed Award determined as of the Action Effective Date (taking into account the accelerated vesting), less the value of any consideration payable on exercise of such Non-Assumed Awards.

     If a Change of Control occurs, then, except to the extent otherwise provided in the Award Agreement pertaining to a particular Award or as otherwise provided in this Plan, each Award shall be governed by applicable law and the documents effectuating the Change of Control.

               Section 17. Amendment of the Plan. The Board or Committee may at any time and from time to time terminate, modify, suspend or amend the Plan in whole or in part; provided, however, that no such termination, modification, suspension or amendment shall be effective without shareholder approval if such approval is required to comply with any applicable law or stock exchange rule; and provided, however, that the Board or Committee may not, without shareholder approval, increase the maximum number of shares issuable under the Plan. No termination, modification, suspension or amendment of the Plan shall, without the consent of a Participant to whom any Awards shall previously have been granted, adversely affect his or her rights under such Awards. Notwithstanding any provision herein to the contrary, the Board or Committee shall have broad authority to amend the Plan or any Stock Option to take into account changes in applicable tax laws, securities laws, accounting rules and other applicable state and federal laws.

               Section 18. Miscellaneous.

               (a) Tax Withholding. No later than the date as of which an amount first becomes includable in the gross income of the Participant for applicable income tax purposes with respect to any award under the Plan, the Participant shall pay to the Company or make arrangements satisfactory to the Committee regarding the payment of any federal, state or local taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, in accordance with rules and procedures established by the Committee, the minimum required withholding obligations may be settled with Common Stock, including Common Stock that is part of the award that gives rise to the withholding requirement. The obligation of the Company under the Plan shall be conditioned upon such payment or arrangements and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.

               (b) No Right to Grants or Employment. No Eligible Individual or Participant shall have any claim or right to receive grants of Awards under the Plan. Nothing in the Plan or in any Award or Award Agreement shall confer upon any employee of the Company or any Subsidiary any right to continued employment with the

9

Company or any Subsidiary, as the case may be, or interfere in any way with the right of the Company or a Subsidiary to terminate the employment of any of its employees at any time, with or without cause.

               (c) Unfunded Plan. The Plan is intended to constitute an unfunded plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or payments in lieu thereof with respect to awards hereunder.

               (d) Other Employee Benefit Plans. Payments received by a Participant under any Award made pursuant to the provisions of the Plan shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan or similar arrangement provided by the Company.

               (e) Securities Law Restrictions. The Committee may require each Eligible Individual purchasing or acquiring shares of Common Stock pursuant to a Stock Option or other Award under the Plan to represent to and agree with the Company in writing that such Eligible Individual is acquiring the shares for investment and not with a view to the distribution thereof. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, the American Stock Exchange or any other exchange upon which the Common Stock is then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. No shares of Common Stock shall be issued hereunder unless the Company shall have determined that such issuance is in compliance with, or pursuant to an exemption from, all applicable federal and state securities laws.

               (f) Compliance With Applicable Law.

     (i) The Plan is intended to comply with applicable law, including, without limitation, Rule 16b-3 under the Exchange Act or its successors under the Exchange Act, and the Committee shall interpret and administer the provisions of the Plan or any Award Agreement in a manner consistent therewith. To the extent any provision of the Plan or Award Agreement or any action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. Moreover, in the event the Plan or an Award Agreement does not include a provision required by applicable law, including, without limitation, Rule 16b-3 to be stated therein, such provision (other than one relating to eligibility requirements, or the price and amount of Awards) shall be deemed automatically to be incorporated by reference into the Plan or such Award Agreement.

     (ii) Notwithstanding anything contained in the Plan or any Award Agreement to the contrary, if the consummation of any transaction under the Plan would result in the possible imposition of liability on a Participant pursuant to Section 16(b) of the Exchange Act, the Committee shall have the right, in its sole discretion, but shall not be obligated, to defer such transaction to the extent necessary to avoid such liability.

               (g) Award Agreement. In the event of any conflict or inconsistency between the Plan and any Award Agreement, the Plan shall govern, and the Award Agreement shall be interpreted to minimize or eliminate any such conflict or inconsistency.

               (h) Expenses. The costs and expenses of administering the Plan shall be borne by the Company.

               (i) Applicable Law. Except as to matters of federal law, the Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to conflicts of law principles.

               (j) Reserved.

10

               (k) Effective Date. The Plan shall be effective as of November 25, 2002 (the “Effective Date”).

11

EX-10.13

Exhibit 10.13

LODGIAN, INC. 401(k) PLAN
AS AMENDED AND RESTATED
EFFECTIVE AS OF JANUARY 1, 2006
(EXCEPT AS OTHERWISE PROVIDED)

TABLE OF CONTENTS

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

	Page
1.39 Vested Benefit		6
1.40 Year of Service		6
(a) Vesting		6
(b) Eligibility		6
§ 2. PARTICIPATION		7
2.1. General Participation for 2002 Plan Year and Prior Years		7
2.2. General Participation After December 31, 2002		7
2.3. Reemployment		8
2.4. Change in Status		8
2.5. Not a Contract of Employment		8
2.6. USERRA		8
§ 3. EMPLOYEE CONTRIBUTIONS		9
3.1. 401(k) Contributions		9
(a) General		9
(b) Amount of 401(k) Contributions		9
(c) 401(k) Accounts		9
3.2. Rate Changes		9
(a) General		9
(b) Change in Eligibility Status		9
(c) Hardship Withdrawal		10
(d) Leave of Absence		10
3.3. Payment of 401(k) Contributions to Trustee		10
3.4. Rollover Contributions		10
(a) General		10
(b) Rollover Accounts		10
§ 4. EMPLOYER CONTRIBUTIONS		10
4.1. Employer Matching Contributions		10
(a) Matching Contributions for the 2002 Plan Year		10
(b) Safe Harbor Matching Contributions after December 31, 2002		11
(c) Application of Forfeitures		11
(d) No Matching Contributions or Safe Harbor Matching Contributions on Refunds		11
(e) Allocation		11
4.2. Application of Suspense Account		12
4.3. Top Heavy Contributions		12
4.4. Payment of Employer Contributions		12
§ 5. ACCOUNT INVESTMENTS AND ALLOCATIONS		12
5.1. General		12
5.2. Investment Elections		13
5.3. Amounts Available for Investment		13

ii

	Page
5.4. Allocations to Accounts		13
5.5. Allocation Corrections		13
5.6. Transition Period to Implement Plan Changes		14
5.7. Special Rules Concerning Investment in Lodgian Stock Fund		14
(a) Dividends		14
(b) Voting of Lodgian Stock and Other Similar Rights		14
(c) Restrictions		15
§ 6. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS		15
6.1. Ordering Rule		15
6.2. Code § 415 Limitations		15
(a) General		15
(b) Annual Additions		16
(c) Coordination Rules		16
(d) Corrections		16
6.3. Code § 402(g) Limitations		16
(a) This Plan and Other Affiliate Plans		16
(b) Other Plans or Arrangements		17
(c) Action to Satisfy 402(g) Limitation		17
§ 7. PLAN BENEFITS		18
7.1. Participant		18
(a) Distribution Events		18
(b) Vested Benefit		18
(c) Vesting Schedule for Participants without an Hour of Service after March 31, 2002		18
(d) Vesting Schedule for Participants with an Hour of Service on or after April 1, 2002		19
(e) Forfeiture		19
(f) Reemployment		19
7.2. Death of Participant		20
7.3. In-Service Withdrawals		20
(a) Hardship Withdrawals		20
(b) Age 591/2 Withdrawals		23
(c) Rollover Account Withdrawals		23
(d) Limitations		23
§ 8. BENEFIT PAYMENT		23
8.1. Methods		23
(a) General		23
(b) Automatic Single Sum in Certain Cases		24
(c) Installment Rules		24
(d) Limitations		24
(e) Minimum Distribution Rule		25
8.2. Timing		29
(a) General		29

iii

	Page
(b) Deferral of Payment		30
(c) Participant’s Required Beginning Date		30
(d) Beneficiary		30
8.3. Direct Rollover		30
(a) Eligible Rollover Distribution		31
(b) Eligible Retirement Plan		31
(c) Distributee		31
(d) Direct Rollover		31
8.4. Claim for Benefit		32
8.5. No Estoppel of Plan		32
8.6. Legally Incompetent		32
8.7. Missing Person		32
8.8. Other Payment Rules		33
(a) Withholding Obligations		33
(b) Waiver of Notices		33
(c) Account Balance		33
(d) Order of Withdrawal		33
(e) Reemployment		33
§ 9. NAMED FIDUCIARIES AND ADMINISTRATION		33
9.1. Named Fiduciaries		33
9.2. Plan Administrator Appointment and Term of Office		34
9.3. Organization of Plan Administrator		34
9.4. Plan Administrator Powers and Duties		34
(a) General		34
(b) Liquidity Requirements		34
(c) Records		35
(d) Information from Others		35
9.5. Indemnification		35
9.6. Reporting and Disclosure		35
§ 10. DUTIES AND AUTHORITY OF TRUSTEE		35
§ 11. LOANS		35
11.1. Administration		35
11.2. Statutory Requirements		35
(a) General		35
(b) Repayments		36
(c) Limitations on Amounts		36
11.3. Distribution and Default		37
11.4. USERRA		37
§ 12. AMENDMENT AND TERMINATION		37
12.1. Amendment		37
12.2. Termination		37

iv

	Page
§ 13. MISCELLANEOUS		37
13.1. Headings and Construction		37
13.2. Nontransferability		38
13.3. Benefits Supported Only by Trust Fund		38
13.4. Nondiscrimination		38
13.5. Nonreversion		38
13.6. Merger, Consolidation or Similar Transaction		38
(a) General		38
(b) Authorization		39
(c) No Annuities		39
13.7. Qualified Domestic Relations Order		39
13.8. Top Heavy Plan		40
(a) Determination of Top-Heavy Status		40
(b) Special Top Heavy Plan Rules		41
Appendix A		43
Appendix B		48

v

LODGIAN, INC. 401(k) PLAN
AS AMENDED AND RESTATED
EFFECTIVE AS OF JANUARY 1, 2006
(EXCEPT AS OTHERWISE PROVIDED)

     The Servico, Inc. 401(k) Plan (the “Plan”) was adopted by Servico, Inc. (“Servico”) effective July 1, 1984 and previously amended several times. Servico and Impac Hotel Group, LLC (“Impac”) combined their respective businesses through a series of corporate mergers, the result of which is that Servico and Impac became wholly-owned subsidiaries of Lodgian, Inc. (“Lodgian”) effective on December 11, 1998. Effective January 1, 1999, Lodgian assumed sponsorship of the Plan and changed the name to the Lodgian, Inc. 401(k) Plan. The Plan was amended and restated effective as of January 1, 1997, subsequently amended, and again amended and restated effective as of January 1, 2002 and September 1, 2003.

     The amendment and restatement of the Plan dated September 1, 2003 deleted the trust provisions in the Plan and a separate trust agreement was adopted effective as of September 1, 2003. This amendment and restatement of the plan is effective as of January 1, 2006 and is intended to comply with the final regulations under Code Sections 401(k) and (m) issued December 29, 2004.

§ 1. DEFINITIONS

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

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

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

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

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

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

1.6. Catch Up Contribution — means the deferral contributions made by the Participant to the Plan under Section 3.1(c) and Code § 414(v).

1.7. Catch Up Contribution Account — means the subaccount of a Participant’s Account contributable to Catch Up contributions.

1.8. Code — means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

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

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

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

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

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

(b) a Leased Employee;

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

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

2

Under no circumstances will an individual who performs services for a Participating Employer, but who is not classified on the payroll as an employee of the Participating Employer, for example, an individual performing services for a Participating Employer under a leasing arrangement or an independent contractor, be treated as an Eligible Employee, even if that individual is treated as an “employee” of a Participating Employer as a result of common law principals, the leased employee rules under Code §§ 414(n) or (o). Further, if an individual performing services for a Participating Employer is retroactively reclassified as an “employee” of a Participating Employer for any reason, the reclassified individual will not be treated as an Eligible Employee for any period prior to the actual date (and not the effective date) of the reclassification unless the Participating Employer determines the reclassification is necessary to correct an inadvertent payroll classification error.

1.12. Eligible Participant — means for any Plan Year:

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

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

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

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

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

1.15. Forfeiture — means the dollar amount forfeited from an Account in accordance with this Plan.

1.16. 401(k) Account — means the subaccount of a Participant’s Account attributable to his or her 401(k) Contributions.

1.17. 401(k) Contributions — means that part of a Participant’s Compensation that is contributed to his or her 401(k) Account pursuant to his or her Election under § 3.1.

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

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

3

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

The determination of which Participants are Highly Compensated Employees is subject to Code § 414(q) and any regulations, rulings, notices or procedures under that section. In determining whether an Employee is a Highly Compensated Employee for any Plan Year, the Plan Administrator may use any alternatives and elections authorized under the applicable regulations, rulings or revenue procedures.

1.19. Hour of Service —

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

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

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

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

(b) Additional Rules.

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

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

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

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

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

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

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

1.22. Matching Account — means the subaccount of a Participant’s Account attributable to Matching Contributions made prior to January 1, 2003.

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

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

1.25. Participant — means (a) each Eligible Employee who has met the eligibility requirements to participate in this Plan pursuant to §§ 2.1 and 2.2, and (b) each other person (other than an alternate payee as defined in Code § 414(p)(8) or a Beneficiary) for whom an Account is being maintained as a result of contributions made under this Plan or another plan that are transferred to this Plan pursuant to § 13.6.

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

1.27. Plan — means this Lodgian, Inc. 401(k) Plan as set forth in this document and all subsequent amendments to this document.

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

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1.29. Plan Sponsor — means Lodgian, Inc. or any successor organization to that company.

1.30. Plan Year — means the calendar year.

1.31. Rollover Account — means the subaccount of a Participant’s Account attributable to Rollover Contributions.

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

1.33. Safe Harbor Matching Contribution — means the contribution made by a Participating Employer in accordance with § 4.1(b).

1.34. Safe Harbor Matching Contribution Account — means the subaccount of a Participant’s Account attributable to Safe Harbor Matching Contributions.

1.35. Trust Agreement — means the separate trust agreement adopted to govern the Trust Fund established as part of the Plan, as such agreement may be amended from time to time.

1.36. Trustee — means the person or persons acting as trustee under the Trust Agreement.

1.37. Trust Fund — means the assets held by the Trustee under the Trust Agreement.

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

1.39. Vested Benefit — means the sum of (a) the 401(k) Account, (b) the Rollover Account, (c) the Safe Harbor Matching Account, (d) the Catch Up Contribution Account, and (e) the vested portion of the Matching Account, as determined in accordance with § 7.1.

1.40. Year of Service —

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

(b) Eligibility. For purposes of determining eligibility service under §§ 2.1 and 2.2 of this Plan, a Year of Service means a twelve-consecutive-month period during which an Employee completes no less than 1,000 Hours of Service beginning on the date on which the Employee first performs an Hour of Service upon his employment or reemployment with a Participating Employer or, in the event the Employee fails to complete 1,000 Hours of Service in that twelve-consecutive-month period, any Plan Year thereafter

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during which the Employee completes not less than 1,000 Hours of Service, including the Plan Year which includes the first anniversary of the date the Employee first performed an Hour of Service upon his employment or reemployment.

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

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

§ 2. PARTICIPATION

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

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

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

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

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

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

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

2.2. General Participation for Subsequent Periods.

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(a) Participation From January 1, 2003 through December 31, 2006. Each Eligible Employee hired after December 31, 2002 will become a Participant effective with the first payroll period beginning on or after the first day of the month coinciding with or next following the date he or she completes a Year of Service and attains age 21. If an Employee is not an Eligible Employee on such date, he or she will become a Participant as of the first payroll period beginning on or after the first day of the month coincident with or immediately following the date on which he or she becomes an Eligible Employee.

(b) Participation After December 31, 2006. Each Eligible Employee hired after June 30, 2006 will become a Participant effective with the first payroll period beginning on or after the first day of the month coinciding with or next following the date he or she completes 500 hours of Service in a six consecutive month period and attains age 21. If an Employee is not an Eligible Employee on such date, he or she will become a Participant as of the first payroll period beginning on or after the first day of the month coincident with or immediately following the date on which he or she becomes an Eligible Employee.

2.3. Reemployment. If a Participant terminates employment and is reemployed as an Eligible Employee, he or she will be reinstated as a Participant on the date of his or her reemployment. Each other former Employee who is reemployed shall be treated as a new Employee for participation and vesting purposes upon reemployment.

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

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

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

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

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§ 3. EMPLOYEE CONTRIBUTIONS

3.1. 401(k) Contributions.

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

(b) Amount of 401(k) Contributions. 401(k) Contributions must be made in 1% increments, from 1% to 10% prior to January 1, 2003 and up to 15% on or after January 1, 2003 of Compensation through December 31, 2006. The limit shall be increased to 25% effective as of January 1, 2007. The Plan Administrator has the right at any time unilaterally to reduce prospectively the amount or percentage of 401(k) Contributions elected by any Highly Compensated Employee or by all Highly Compensated Employees as a group if it determines that a reduction is appropriate in light of the applicable limitations under § 6.

(c) Catch Up Contributions. In addition to 401(k) Contributions, a Participant who will attain age fifty (50) before the last day of a Plan Year may make a Catch Up Contribution at any time during the Plan Year. A 401(k) Contribution will be treated as a Catch Up Contribution to the extent that:

(1) it exceeds the 401(k) Contribution limit; and

(2) it does not exceed the dollar limit in Code § 414(v) in effect for the applicable Plan year.

(d) 401(k) and Catch Up Contribution Accounts. A Participant’s 401(k) Contributions will be credited to his or her 401(k) Account. A Participant’s Catch Up Contributions will be credit to his or her Catch Up Contribution Account.

3.2. Rate Changes.

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

(b) Change in Eligibility Status. A Participant’s 401(k) Contributions and Catch Up Contributions will automatically stop when he or she ceases to be an Eligible Employee. If a Participant’s status thereafter changes to an Eligible Employee (whether by

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reemployment or otherwise), he or she may elect to resume 401(k) Contributions and Catch Up Contributions at any time by following the procedures established by the Plan Administrator.

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

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

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

3.4. Rollover Contributions.

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

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

§ 4. EMPLOYER CONTRIBUTIONS

4.1. Employer Matching Contributions.

(a) Matching Contributions for the 2002 Plan Year. Subject to the rules and limitations in this § 4 and in § 6, the Board in its absolute discretion will determine the percentage, if any, of 401(k) Contributions made by its Eligible Participants that will be matched for each Plan Year and the maximum percentage or dollar limitation, if any, on those contributions. In no case will a Matching Contribution under this § 4.1(a) be made

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in the same Plan Year as a Safe Harbor Matching Contribution under § 4.1(b). Matching Contributions will be made only on behalf of Eligible Participants. This contribution will be made in cash as the Board may determine from time to time. No Matching Contribution will be made to the Plan for Plan Years beginning on or after January 1, 2003.

(b) Safe Harbor Matching Contributions after December 31, 2002. Effective for Plan Years beginning after December 31, 2002, if the Plan Sponsor in its absolute discretion elects to have the Plan satisfy Code §§ 401(k)(12) and 401(m)(11), a Safe Harbor Matching Contribution will be made in cash for each payroll period during such Plan Year for each Eligible Participant in an amount equal to:

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

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

Within a reasonable period of time, before the beginning of the Plan Year, the Plan Administrator will notify each Eligible Employee that the Plan will comply with Code §§ 401(k)(12) and 401(m)(11), and shall provide such notice to other Employees as they become eligible to participate in the Plan in accordance with the requirements of Code §§ 401(k)(12) and 401(m)(11).

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

(d) No Matching Contributions or Safe Harbor Matching Contributions on Refunds. No Matching Contribution or Safe Harbor Matching Contribution will be made with respect to any 401(k) Contributions that are refunded under § 6.3 or Appendix A to comply with the limitations under Code §§ 402(g) or 401(k). Any Matching Contributions and Safe Harbor Matching Contributions attributable to those refunded 401(k) Contributions that have actually been credited to the Participant’s Matching Account or Safe Harbor Matching Account will be treated as a Forfeiture as soon as practicable after a determination is made that this corrective action is necessary.

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

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

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

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

§ 5. ACCOUNT INVESTMENTS AND ALLOCATIONS

5.1. General. It is intended that Participants, Beneficiaries of deceased Participants and alternate payees will have an opportunity to direct the investment of their Accounts among investment funds selected by the Plan Sponsor or, at the discretion of the Plan Sponsor, a committee, which committee may be the same Committee referenced in § 9.2, in accordance with § 404(c) of ERISA. The Plan Sponsor or Committee will select four or more investment funds to make available under the Trust Fund, and each such investment fund will be described for Participants in the summary plan description for this Plan or in such other materials as the Plan Sponsor or the Committee deem suitable under the circumstances. Investment funds may be added or eliminated at any time by the Plan Sponsor or the committee. The investment funds may include, but are not limited to, (1) mutual funds, (2) collective investment funds, (3) the Lodgian Stock Fund and (4) the Lodgian Warrant Funds A and B (collectively the “Lodgian Warrant Funds”). Effective as of December 6, 2001, the Lodgian Stock Fund is closed to new investments. The Lodgian Warrant Funds are investment funds that were established on December 3, 2002 solely for the purpose of holding Lodgian Warrants received by the Trust Fund on that date in connection with the court approved bankruptcy plan of reorganization of the Plan Sponsor. A Participant whose Account included an investment in the Lodgian Stock Fund on December 3, 2002, the date the Lodgian Warrants were received by the Trust Fund, shall automatically have a portion of his or her Account invested in the Lodgian Warrant Funds in the same proportion that his interest in the Lodgian Stock Fund bears to the total amount of all Accounts which are invested in the Lodgian Stock Fund at that time. The Lodgian Warrant Funds remained frozen funds until the U.S. Department of Labor issued a prohibited transaction exemption which permits the sale and exercise of Lodgian Warrants at the direction of individual Participants who have an interest in the Lodgian Warrant Fund. No Lodgian Warrant may be exercised or sold except as permitted under the terms of such prohibited transaction exemption, the terms of which are incorporated into the Plan by reference, and in compliance with applicable securities laws. The assets of the Plan may be commingled for investment purposes in a group

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trust and with the assets of other plans whether or not the assets of this Plan will be held in a separate investment fund.

Effective as of November 16, 2006 or as soon as administratively practicable thereafter, the Lodgian Stock Fund will be eliminated and liquidated. Prior to such date, Participants may direct the sale of their interests in the Lodgian Stock Fund and the investment of the sales proceeds in other investment funds offered by the Plan. A Participant whose Account includes an investment in the Lodgian Stock Fund on November 16, 2006 shall have the amount of such investment liquidated as soon as administratively practicable after November 16, 2006, and the proceeds shall be invested in the investment fund selected for such purpose by the Committee.

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

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

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

The Plan Administrator may adjust the Accounts of some or all Participants for Plan administration expenses as of the last Valuation Date for a calendar quarter as permitted by law and applicable Internal Revenue Service and U.S. Department of Labor guidance on the payment of expenses with the Plan assets. The expenses may be charged to all Accounts or only to those Accounts of vested Participants who had terminated employment prior to the last Valuation Date for a calendar quarter. If the expenses are charged to the Accounts of some or all Participants, the amount allocated to each Account shall be on a per capita basis and shall not be allocated on the basis of the Account balance. The Plan Administrator may charge the Participant a reasonable amount for any distribution.

5.5. Allocation Corrections. If an error or omission is discovered in any Account, an appropriate equitable adjustment will be made to remedy the error or omission as soon as practicable after its discovery, and may include the reduction of a Participant’s Account balance.

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5.6. Transition Period to Implement Plan Changes. In connection with a change in record keepers, trustees, or other service providers for the Plan, a change in the methodology for valuing Accounts (including Lodgian Stock and/or Lodgian Warrants), a change in investment options, a plan merger or other circumstances, a temporary interruption in the normal operations of the Plan may be required in order to properly implement such change or merger or take action in light of such circumstances. In such event or under such circumstances, the Plan Administrator may take such action as it deems appropriate under the circumstances to implement such change or merger or in light of such circumstances, including authorizing a temporary interruption in a Participant’s ability to obtain information about his or her Account, to take distributions from such Account and to make changes in the investment of that Account, provided the Plan Administrator will take appropriate action as to give Participants, Beneficiaries of a deceased Participant and alternate payees advance notice in accordance with the requirements of ERISA as possible and to minimize the scope and length of the interruption in normal Plan operations. In addition, when changing investment options, the Plan Administrator will take such action as it deems appropriate under the circumstances to direct the investment of the funds pending completion by the Trustee and recordkeeper of the administrative processes necessary to transfer investment authority to the Participants, Beneficiaries of deceased Participants or alternate payees, including, but not limited to, mapping monies from old funds to new funds.

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

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

(b) Voting of Lodgian Stock and Other Similar Rights. Each Participant may direct the Trustee as to the exercise of any voting or similar rights (including a response to a tender offer) attributable to whole shares of Lodgian Stock allocated to the Participant’s Account through the Account’s investment in the Lodgian Stock Fund. Participants shall communicate their voting or other directions to an agent appointed by the Employer for such purpose, and the agent shall communicate the instructions it receives from all Participants in total to the Trustee. Such instructions shall be held in confidence by the agent and Trustee and shall not be divulged to the Plan Sponsor, or any officer or employee thereof, or any other person except as required by law. Upon the timely receipt of voting or other instructions, the Trustee shall vote or tender the shares of Lodgian Stock held in the Participant’s Account as directed by the Participants. The Trustee shall vote shares of Lodgian Stock for which it has received no direction from the Participant and partial shares allocated to Participant Accounts in accordance with instructions to the Trustee from the Employer or a committee appointed by the Employer. Unless the Employer or authorized committee determines otherwise, the Employer or authorized committee shall direct the Trustee to vote any partial shares allocated to a Participant’s Account and shares for which the Participants have not given the agent timely voting

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instructions in proportion to the shares for which it receives voting directions from Participants. In the case of a tender offer, the Trustee shall only tender those shares for which a Participant has directed a tender and shares for which no Participant communication is timely received shall not be tendered.

(c) Restrictions. The ability of a Participant or a Beneficiary to engage in transactions with respect to the Lodgian Stock allocated to his or her Account (within the Lodgian Stock Fund) will be subject to such restrictions as the Plan Administrator determines are necessary or appropriate to satisfy federal or state securities laws.

§ 6. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS

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

(a)	the Code § 415 limitations under § 6.2,
(b)	the Code § 402(g) limitations under § 6.3,
(c)	the Code § 401(k) limitations for Highly Compensated Employees under Appendix A for Plan Years in which a Safe Harbor Matching Contribution is not made to the Plan; and
(d)	the Code § 401(m) limitations for Highly Compensated Employees under Appendix A for Plan Years beginning prior to January 1, 2003.

6.2. Code § 415 Limitations.

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

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

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

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

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

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

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

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

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

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

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

Amounts transferred to a Code § 415 suspense account will not be allocated to the Participant’s Account, but will be held unallocated in a separate suspense account and will be treated as a Forfeiture for the next Plan Year. The balance credited to the suspense account will be returned to the Participating Employers in the event this Plan is terminated prior to the date the suspense account has been applied in accordance with this § 6.2. If a suspense account is not permitted under Code § 415, the Plan Sponsor shall determine the applicable correction method under Code § 415.

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

6.3. Code § 402(g) Limitations.

(a) This Plan and Other Affiliate Plans. A Participant’s total 401(k) Contributions under this Plan and elective deferrals (within the meaning of Code § 402(g)) under all other qualified plans, contracts and arrangements maintained by the Affiliates during any

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calendar year (other than amounts refunded to reduce a Code § 415 excess under § 6.2 or under those other plans) will not exceed the annual dollar limit under Code § 402(g). If a Participant’s 401(k) Contributions together with other elective deferrals exceed this limitation, the Participant will be deemed to have requested a refund from this Plan and the excess will be refunded in accordance with this § 6.3.

(b) Other Plans or Arrangements. Any elective deferrals (within the meaning of Code § 402(g)) made for a calendar year on a Participant’s behalf under plans or contracts of an employer that is not an Affiliate, such as another employer’s Code § 401(k) plan or Code § 403(b) tax sheltered annuity, will be taken into account under this Plan for purposes of the limitations under this § 6.3 if requested by the Participant and approved by the Plan Administrator.

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

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

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

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

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

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§ 7. PLAN BENEFITS

7.1. Participant.

(a) Distribution Events. A Participant’s Vested Benefit will be payable to the Participant in accordance with § 8 upon his or her severance from employment (within the meaning of Code § 401(k)). In addition, a Participant may request an in-service withdrawal from his or her Vested Benefit before those events in accordance with § 7.3. Finally, distributions must begin to a Participant who is a 5% owner in accordance with § 8.2(c).

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

(1) death while an Employee,

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

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

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

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

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

Full Years of Service	Vested Portion
less than 3		0	%
3		20	%
4		40	%
5		60	%
6		80	%
7 or more		100	%

(2) AMI Operating Partners, L.P. Vesting Schedule. The vested percentage of the portion of a Participant’s Account which represents the employer matching account directly transferred to this Plan from the Winegardner & Hammons, Inc.

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Managed Properties Profit Sharing Plan — AMI Operating Partners as a result of the acquisition of AMI Operating Partner, L. P. by Servico, Inc. on May 28, 1998 shall be determined in accordance with the following vesting schedule:

Full Years of Service	Vested Portion
less than 2		0	%
2		20	%
3		40	%
4		60	%
5		80	%
6 or more		100	%

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

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

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

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

(f) Reemployment.

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

(2) After Forfeiture. If a former Employee is reemployed as an Employee before he or she has 5 consecutive Breaks in Service but after the nonvested portion of his or her Account has been treated as a Forfeiture, that nonvested

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

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

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

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

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

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

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

7.3. In-Service Withdrawals.

(a) Hardship Withdrawals.

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

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

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

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

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

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

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

Effective as of January 1, 2006, the following events will be added as hardship withdrawal events:

(vi) payments for burial or funeral expenses for the Employee’s deceased parent, spouse, children or dependents (as defined in Section 152, without regard to Section 152(d)(1)(B)); or

(vii) expenses for the repair of damage to the Employee’s principal residence that would qualify for the casualty deduction under Code Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income).

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

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

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

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

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

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

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

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

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

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

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(b) Age 59¹/2 Withdrawals. A Participant who is an Employee may make an Election to withdraw all or any portion of his or her Vested Benefit on or after reaching age 59¹/2. A Participant may only make one age 59¹/2 withdrawal in a Plan Year.

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

(d) Limitations. If at anytime the Plan Administrator imposes restrictions on the sale of Lodgian Stock pursuant to § 5.2, the portion of a Participants’ Account invested in the Lodgian Stock Fund will not be considered in the amount available for withdrawal under this § 7.3. Similarly, any interest in the Lodgian Warrant Funds will also be disregarded for in-service withdrawal purposes under this § 7.3 at anytime when the Lodgian Warrants may not be sold or exercised. All in-service withdrawals will be made in a cash lump sum.

§ 8. BENEFIT PAYMENT

8.1. Methods.

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

(1) a single sum; or

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

If an installment option is available, and a Participant makes a valid Election to receive installments, the installment rules of § 8.1(c) shall apply. Notwithstanding the forgoing, the installment distribution option in § 8.1(a)(2) will be eliminated effective February 1, 2004.

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

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

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

(2) any distribution will be made in cash in a single sum if the value of the Vested Benefit (excluding the value of any Rollover Account) is $5,000 or less. Effective as of March 28, 2005, the maximum value of the Vested Benefit for automatic cash out purposes shall be reduced from $5,000 to $999.

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

(c) Installment Rules.

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

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

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

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

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

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

(d) Limitations. If at anytime the Plan Administrator imposes restrictions on investments in the Lodgian Stock Fund pursuant to § 5.2, the portion of a Participant’s Account invested in the Lodgian Stock Fund will not be considered in the amount

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available for a distribution under this § 8.1. Similarly, any interest in the Lodgian Warrant Funds will not be available for distribution until the Lodgian Warrants have been sold or exercised as provided herein.

(e) Minimum Distribution Rule.

(1) Effective Date. The provisions of this § 8.1(e) will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.

(i) Precedence. The requirements of this § 8.1(e) will take precedence over any inconsistent provisions of the Plan. However, the only benefit payment options available from the Plan are contained in § 8.1(a). This § 8.1(e) does not provide for any benefit payment options that are not provided for in § 8.1(a).

(ii) Requirements of Treasury Regulations Incorporated. All distributions required under this § 8.1(e) will be determined and made in accordance with the Treasury regulations under Code § 401(a)(9).

(iii) TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this § 8.1(e), distributions may be made under a designation made before January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to section 242(b)(2) of TEFRA.

(2) Time and Manner of Distribution.

(i) Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date as defined in § 8.2(c).

(ii) Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(A) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, then, if the Vested Benefit is payable to the spouse in installments, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70-1/2, if later.

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(B) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died. Alternatively, distribution to the designated Beneficiary is not required to begin by the date specified above, if the Participant’s entire vested interest will be distributed to the designated Beneficiary by the December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(C) If there is no designated beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(D) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this § 8.1(e)(2), other than § 8.1(e)(2)(ii)(A), will apply as if the surviving spouse were the Participant.

For purposes of this § 8.1(e)(2) and § 8.1(e)(4), unless § 8.1(e)(2)(ii)(D) applies, distributions are considered to begin on the Participant’s Required Beginning Date. If § 8.1(e)(2)(ii)(D) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under § 8.1(e)(2)(ii)(A).

(iii) Forms of Distribution. Unless the Participant’s interest is distributed in the form of a single sum on or before the Required Beginning Date, as of the first distribution calendar year distributions will be made in accordance with § 8.1(e)(3) and (4).

(3) Required Minimum Distributions During Participant’s Lifetime.

(i) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(A) the quotient obtained by dividing the Participant’s Account balance by the distribution period in the Uniform Lifetime Table set forth in Treasury Regulation 1.401(a)(9)-9, using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or

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(B) if the Participant’s sole designated Beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account balance by the number in the Joint and Last Survivor Table set forth in Treasury Regulation 1.401(a)(9)-9 using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.

Required minimum distributions will be determined under this §8.1(e)(3) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

(4) Required Minimum Distributions After Participant’s Death.

(i) Death On or After Date Distributions Begin.

(A) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated Beneficiary, determined as follows:

(1)

The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(2)

If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

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(3) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, the designated Beneficiary’s remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(B) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(ii) Death before Date Distributions Begin.

(A)	Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the remaining life expectancy of the Participant’s designated Beneficiary, determined as provided in § 8.1(e)(4)(i).
(B)	No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
(C)	Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under § 8.1(e)(2)(ii)(A), this § 8.1(e)(4) will apply as if the surviving spouse were the Participant.

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(5) Definitions.

(i) Designated Beneficiary. The individual who is designated as the Beneficiary under § 1.3 and is the designated Beneficiary under Code § 401(a)(9) and Treasury Regulation 1.401(a)(9)-4, Q&A-1.

(ii) Distribution Calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under § 8.1(e)(2)(ii). The required minimum distribution for the Participant’s first distribution calendar year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s Required Beginning Date occurs, will be made on or before December 31 of that distribution calendar year.

(iii) Life Expectancy. Life expectancy as computed by use of the Single Life Table in Treasury Regulation 1.401(a)(9)-9.

(iv) Participant’s Account Balance. The Account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The Account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

(6) Required Beginning Date. The date specified in § 8.2(c).

8.2. Timing.

(a) General. A Participant’s Vested Benefit will become payable as soon as practicable after the occurrence of an event described in § 7. As a general rule, a Participant’s Vested Benefit will be paid to him or her as soon as practicable after he or she has a severance from employment following a thirty (30) day waiting period, unless on account of death, subject to the following:

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

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

Notwithstanding the foregoing, effective as of March 28, 2005, “$1,000” shall be substituted for “$5,000” in (1) and (2) above, so that automatic has outs shall only be made if the Vested Benefit is less then $1,000.

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

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

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

(3) the date the Participant separates from service.

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

(c) Participant’s Required Beginning Date. Notwithstanding the foregoing, payment of a Participant’s Vested Benefit will be made (or commence) to the Participant no later than April 1 of the calendar year following the calendar year in which he or she (1) reaches age 70¹/2 or (2) for a Participant who is not a 5% owner (as defined in Code § 416), terminates employment, whichever is later.

(d) Beneficiary. A deceased Participant’s Vested Benefit will become payable to his or her Beneficiary as soon as practicable after the Plan Administrator determines that the person has an interest in the Vested Benefit. Unless otherwise permitted by the Code, distribution generally must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death. However, if the Vested Benefit is payable to the Participant’s spouse in installments, distribution must begin no later than December 31 of the calendar year (1) in which the Participant would have reached age 70¹/2, or (2) containing the first anniversary of the Participant’s death, whichever is later.

8.3. Direct Rollover. Notwithstanding any provision of this Plan to the contrary that would otherwise limit a distributee’s election under this § 8, a distributee who has a Vested Benefit of

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$200 or more or has all or a portion of his or her Vested Benefit invested in the Lodgian Stock Fund may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

(a) Eligible Rollover Distribution. An eligible rollover distribution is any distribution or withdrawal of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include (1) any payment that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated beneficiary or for a specified period of ten years or more; (2) any payment to the extent it is required under Code § 401(a)(9); and (3) the portion of any payment that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). Any amount that is distributed on account of hardship shall not be an eligible rollover distribution and the distributee may not elect to have any portion of such a distribution paid directly to an eligible retirement plan. A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code §§ 408(a) or (b), or to a qualified defined contribution plan described in Code §§ 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

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

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

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

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

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

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

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

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

8.7. Missing Person. If a benefit is required to be paid under this Plan but the Plan Administrator is unable to locate (in accordance with reasonable procedures established for this purpose) the individual to whom payment is to be made, that individual’s benefit will be treated as a Forfeiture as of the date determined by the Plan Administrator but no earlier than the last

32

day of the Plan Year that includes the second anniversary of the date that benefit first became payable. However, the amount forfeited will be paid (from Forfeitures or from additional Participating Employer contributions) to the missing individual if he or she files a proper claim for the benefit while this Plan remains in effect. If the Plan Administrator is unable to locate a Participant or any Beneficiary for an Account and this Plan is terminated before the Account becomes a Forfeiture under this § 8.7, those persons will be presumed dead upon the Plan’s termination and the Account will be applied thereafter to pay administrative expenses of the Plan and Trust Fund.

8.8. Other Payment Rules.

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

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

(c) Account Balance. A payment or Forfeiture from an Account may be delayed pending completion of allocations to the Account if necessary to avoid underpayment or overpayment. A Vested Benefit of less than $200 will be paid to a Participant or Beneficiary as soon as practicable in a cash lump sum payment without income tax withholding and without the direct rollover opportunity described in § 8.3, unless all or any portion of such Participant’s Vested Benefit is invested in the Lodgian Stock Fund.

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

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

§ 9. NAMED FIDUCIARIES AND ADMINISTRATION

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

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

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

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

9.4. Plan Administrator Powers and Duties.

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

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

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

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

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

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

§ 10. DUTIES AND AUTHORITY OF TRUSTEE

The Trust Fund will be held, administered, controlled and invested by the Trustee subject to the terms of the Trust Agreement for the exclusive benefit of Participants and Beneficiaries.

§ 11. LOANS

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

11.2. Statutory Requirements.

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

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

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

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

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

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

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

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

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

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

(A) the highest outstanding balance of any previous loans from this Plan and any other plan maintained by an Affiliate during the one-year
period ending immediately before the date on which the current loan is made over

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

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

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

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

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

§ 12. AMENDMENT AND TERMINATION

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

12.2. Termination. The Plan Sponsor expects this Plan to be continued indefinitely but, of necessity, it reserves the right to terminate or to partially terminate this Plan or to permanently discontinue contributions to this Plan at any time by action of the Board. Each other Participating Employer will have the right by action of its Board of Directors to terminate or to partially terminate its participation in this Plan or to permanently discontinue its contributions to this Plan. In the case of any termination of or permanent discontinuance of contributions to this Plan, the Account of each affected Participant who is an Employee as of its effective date will become fully vested. Further, the Plan Administrator will, where appropriate, direct (1) the allocation of unallocated amounts to the Accounts of affected individuals, (2) distributions from those Accounts in accordance with procedures established by the Plan Administrator consistent with Code § 401(k), (3) any action necessary to implement the missing person provisions under § 8.7 and (4) the return of any Trust Fund assets attributable to a Code § 415 suspense account in accordance with § 13.5.

§ 13. MISCELLANEOUS

13.1. Headings and Construction. The headings and subheadings in this Plan have been inserted for convenience of reference only and are to be ignored in construction of the provisions of this Plan. All references to sections and to subsections are to sections and subsections of this Plan unless otherwise indicated. Where appropriate, the singular should be read as the plural and

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the plural as the singular. Any reference to a statute also includes any successor statute and, if any amendment renumbers a section of a statute referred to in this Plan, that reference automatically will become a reference to that section as renumbered. This Plan is to be construed in accordance with the laws of the State of Georgia to the extent that those laws are not preempted by federal law. This Plan does not, and should not be construed to, grant any rights or privileges to Participants or Beneficiaries in addition to those minimum rights and privileges required under the Code and ERISA.

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

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

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

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

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

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

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

13.6. Merger, Consolidation or Similar Transaction.

(a) General. In the case of any merger or consolidation of this Plan with, or transfer of assets or liabilities of this Plan to, any other employee benefit plan, each person for whom an Account is maintained will be entitled to receive a benefit from this Plan or the

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other plan, as applicable, if it is then terminated, that is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation or transfer, if this Plan had then been terminated.

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

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

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

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

(b) determine whether the order constitutes a qualified domestic relations order, notify the Participant and the alternate payee of the results of its determination and, if the Plan Administrator determines that the order does constitute a qualified domestic relations order;

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

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

Unless otherwise provided in the order, an alternate payee’s special account shall be distributed as soon as practicable after the account has been established in a lump sum, without regard to whether a distribution would be permissible at that time to a Participant under the terms of this Plan. Unless otherwise provided in the order, if an alternate payee dies before his or her special account is paid in full, the balance in the account will be paid to the person designated by the

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alternate payee as his or her Beneficiary or, if no Beneficiary designation is made, to the alternate payee’s estate.

13.8. Top Heavy Plan.

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

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

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

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

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

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

(B) each other qualified plan maintained by an Affiliate (other than a plan described in clause (A)) that may be aggregated with this Plan and the plans described in clause (A), provided the

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aggregation group (including a plan described in this clause (B)) continues to meet the requirements of Code §§ 401(a)(4) and 410.

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

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

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

(1) Minimum Contribution. A contribution will be made by the Participating Employer for the Plan Year for each Participant described in §1.25(a) who is not a key employee and who is an Eligible Employee on the last day of that Plan Year (regardless of the Partiicpant’s Hours of Service for such Plan Year), that, when added to the employer contributions and forfeitures otherwise allocated on behalf of such individual for such Plan Year under this Plan and any other defined contribution plan maintained by an Affiliate, is equal to

(v) the excess, if any, of:

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

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

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

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

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

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

LODGIAN, INC.

By:

Title:

Date:

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

     The allocation of 401(k) Contributions made under the Plan will be subject to the limitations of this Appendix A for the Plan Year ending December 31, 2002 and any Plan Year beginning on or after January 1, 2003 in which the Participating Employers do not make a Safe Harbor Matching Contribution to the Plan. The allocation of Matching Contributions made under the Plan will be subject to the limitation of this Appendix A for the Plan Year ending December 31, 2002 and any Plan Year beginning on or after January 1, 2003 in which the Participating Employers do not make a Safe Harbor Matching Contribution.

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

ACP — means the ratio (expressed as a percentage) of (a) the Matching Contributions credited to a Participant’s Account for the applicable Plan Year to (b) his or her Compensation for the applicable Plan Year, or while an Eligible Employee during the Plan Year (as determined by the Plan Sponsor).

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

ADP — means the ratio (expressed as a percentage) of (a) the 401(k) Contributions credited to a Participant’s Account for the applicable Plan Year to (b) his or her Compensation for the applicable Plan Year, or while an Eligible Employee during the Plan Year (as determined by the Plan Sponsor).

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

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

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

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

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

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

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

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

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

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

(d) Action to Satisfy ADP Test.

(1) Refund of Excess Contributions. Excess Contributions for a Plan Year (adjusted for investment gain or loss if required by the Code) will be refunded no later than the last day of the immediately following Plan Year to Highly Compensated Employees on whose behalf the Excess Contributions were made. The amount distributed will be determined by the Plan Administrator in accordance with Treas. Reg. § 1.401(k)-2(b)(2). The distribution of Excess Contributions to Highly Compensated Employees will be accomplished as follows:

(A)	All Highly Compensated Employees will be ranked in descending order based on the dollar amount of Pre-Tax Contributions they made for the Plan Year.
(B)	The Pre-Tax Contributions of the Highly Compensated

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Employee(s) with the greatest dollar amount of Normal Deferral contributions will be reduced until the excess Pre-Tax Contributions are eliminated, or until the Pre-Tax Contributions of the Highly Compensated Employee are reduced to the dollar amount of the Highly Compensated Employee with the next highest dollar amount of Pre-Tax Contributions.

(C) The Pre-Tax Contributions of both the Highly Compensated Employees with the greatest and the second greatest dollar amount of Pre-Tax Contributions will be reduced until the excess Pre-Tax Contributions are eliminated, or until the Pre-Tax Contributions of the Participant are reduced to the dollar amount of the Highly Compensated Employee with the next highest dollar amount of Pre-Tax Contributions, and this procedure will be repeated until the entire Excess Pre-Tax Contributions are eliminated.

If Pre-Tax Contributions are distributed to Participants, any Matching Contribution made with respect to the Pre-Tax Contributions which are distributed shall be forfeited.

The Excess Contributions that would otherwise be refunded will be reduced (in accordance with the Code § 401(k) regulations) by any refund made to the Highly Compensated Employee under § 6.3 of the Plan.

(2) Determination of Investment Gain or Loss. If required by the Code, Excess Contributions will be adjusted for investment gain or loss for the Plan Year for which the contributions were made in accordance with the regulations under Code § 401(k).

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

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

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

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

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

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

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

(d) Action to Satisfy ACP Test.

(1) Distribution or Forfeiture of Excess Aggregate Contributions. Excess Aggregate Contributions for a Plan Year (adjusted for investment gain or loss if required by the Code) will be forfeited to the extent forfeitable under § 7.1 or distributed to the extent not so forfeitable from the Accounts of Highly Compensated Employees no later than the last day of the immediately following Plan Year.

The distribution of ACP Excess Aggregate Contributions to Highly Compensated Employees will be accomplished as follows:

(A)	All Highly Compensated Employees will be ranked in descending order based on the dollar amount of Excess Aggregate Contributions they received for the Plan Year.
(B)	The Excess Aggregate Contributions of the Highly Compensated Employee(s) with the greatest dollar amount of Excess Aggregate Contributions will be reduced until the ACP Excess Aggregate Contributions are eliminated, or until the Excess Aggregate Contributions of the Highly Compensated Employee are reduced to the dollar amount of the Highly Compensated Employee with the next highest dollar amount of Excess Aggregate Contributions.
(C)	The Excess Aggregate Contributions of both the Highly Compensated Employees with the greatest and the second greatest

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dollar amount of Excess Aggregate Contributions will be reduced until the ACP Excess Aggregate Contributions are eliminated, or until the Excess Aggregate Contributions of the Participant are reduced to the dollar amount of the Highly Compensated Employee with the next highest dollar amount of Excess Aggregate Contributions, and this procedure will be repeated until the entire ACP Excess Aggregate Contributions are eliminated.

(2) Determination of Investment Gain or Loss. Excess Aggregate Contributions will be adjusted for investment gain or loss for the Plan Year for which the contributions were made in accordance with the regulations under Code § 401(m).

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Appendix B to the
Lodgian, Inc. 401(k) Plan

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

• Servico Corporation;

• Impac Hotel Group;

• AMI Operating Partners, L.P.;

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

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

• Any employer, all the assets or shares of stock of which are acquired by Lodgian, Inc. or any Affiliate thereof.

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EX-31.1

Exhibit 31.1

Sarbanes-Oxley Section 302 (a) Certification

I, Edward J. Rohling, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Lodgian, Inc (the “Registrant”);
2)	Based on my knowledge, this 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 report;
3)	Based on my knowledge, the financial statements, and other financial information included in this 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 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, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this 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 most recent fiscal quarter (the registrants fourth fiscal 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 (or persons performing the equivalent functions):

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 8, 2007	By:	/s/ Edward J. Rohling
		EDWARD J. ROHLING
		Chief Executive Officer

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EX-31.2

Exhibit 31.2

Sarbanes-Oxley Section 302 (a) Certification

I, James A. MacLennan, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Lodgian, Inc (the “Registrant”);
2)	Based on my knowledge, this 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 report;
3)	Based on my knowledge, the financial statements, and other financial information included in this 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 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, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this 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 most recent fiscal quarter (the registrants fourth fiscal 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 (or persons performing the equivalent functions):

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 8, 2007	By:	/s/ James A. MacLennan
		JAMES A. MACLENNAN
		Executive Vice President and Chief Financial Officer

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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, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Edward J. Rohling, the Chief Executive Officer, and James A. MacLennan, 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/ Edward J. Rohling
	EDWARD J. ROHLING
	Chief Executive Officer

By:	/s/ James A. MacLennan
	JAMES A. MACLENNAN
	Executive Vice President and Chief Financial Officer

Date: August 8, 2007

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.

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