Document:

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

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                                TABLE OF CONTENTS
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ss. 1. DEFINITIONS................................................................................................1

         1.1.     Account.........................................................................................1
         1.2.     Affiliate.......................................................................................1
         1.3.     Beneficiary.....................................................................................1
         1.4.     Board...........................................................................................1
         1.5.     Break in Service................................................................................1
         1.6.     Code............................................................................................1
         1.7.     Compensation....................................................................................2
         1.8.     Election........................................................................................2
         1.9.     Eligible Employee...............................................................................2
         1.10.    Eligible Participant............................................................................3
         1.11.    Employee........................................................................................3
         1.12.    ERISA...........................................................................................3
         1.13.    Forfeiture......................................................................................3
         1.14.    401(k) Account..................................................................................3
         1.15.    401(k) Contributions............................................................................3
         1.16.    Highly Compensated Employee.....................................................................3
         1.17.    Hour of Service.................................................................................4
         1.18.    Leased Employee.................................................................................5
         1.19.    Lodgian Stock...................................................................................5
         1.20.    Matching Account................................................................................5
         1.21.    Matching Contribution...........................................................................5
         1.22.    Nonhighly Compensated Employee..................................................................5
         1.23.    Participant.....................................................................................5
         1.24.    Participating Employer..........................................................................5
         1.25.    Plan............................................................................................5
         1.26.    Plan Administrator..............................................................................5
         1.27.    Plan Sponsor....................................................................................5
         1.28.    Plan Year.......................................................................................5
         1.29.    Rollover Account................................................................................6
         1.30.    Rollover Contribution...........................................................................6
         1.31.    Safe Harbor Matching Contribution...............................................................6
         1.32.    Safe Harbor Matching Contribution Account.......................................................6
         1.33.    Trust Agreement.................................................................................6
         1.34.    Trustee.........................................................................................6
         1.35.    Trust Fund......................................................................................6
         1.36.    Valuation Date..................................................................................6
         1.37.    Vested Benefit..................................................................................6
         1.38.    Year of Service.................................................................................6
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ss. 2. PARTICIPATION..............................................................................................7

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ss. 13. MISCELLANEOUS............................................................................................34
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         13.1.    Headings and Construction......................................................................34
         13.2.    Nontransferability.............................................................................34
         13.3.    Benefits Supported Only by Trust Fund..........................................................34
         13.4.    Nondiscrimination..............................................................................35
         13.5.    Nonreversion...................................................................................35
         13.6.    Merger, Consolidation or Similar Transaction...................................................35
                  (a)      General...............................................................................35
                  (b)      Authorization.........................................................................35
                  (c)      No Annuities..........................................................................35
         13.7.    Qualified Domestic Relations Order.............................................................36
         13.8.    Top Heavy Plan.................................................................................36
                  (a)      Determination of Top-Heavy Status.....................................................36
                  (b)      Special Top Heavy Plan Rules..........................................................38

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

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

Appendix C.......................................................................................................46
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                                       -v-

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

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

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

                               ss. 1. DEFINITIONS

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

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

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

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

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

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

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

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

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

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

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

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

         (b)      a Leased Employee;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1.17.    Hour of Service --

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

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

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

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

         (b)      Additional Rules.

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

1.28.    Plan Year -- means the calendar year.

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

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

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

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

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

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

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

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

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

1.38.    Year of Service --

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

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

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

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

                              ss. 2. PARTICIPATION

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

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

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

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

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

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

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

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

                                      -2-
<PAGE>

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

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

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

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

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

                          ss. 3. EMPLOYEE CONTRIBUTIONS

3.1.     401(k) Contributions.

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

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

                                      -8-
<PAGE>
         Highly Compensated Employee or by all Highly Compensated Employees as a
         group if it determines that a reduction is appropriate in light of the
         applicable limitations under ss. 6.

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

3.2.     Rate Changes.

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

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

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

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

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

3.4.     Rollover Contributions.

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

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

                                      -9-
<PAGE>

                          ss.4. EMPLOYER CONTRIBUTIONS

4.1.              Employer Matching Contributions.

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

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

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

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

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

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

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

                                   -10-
<PAGE>

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

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

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

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

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

                   ss. 5. ACCOUNT INVESTMENTS AND ALLOCATIONS

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

                                      -11-
<PAGE>

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

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

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

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

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

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

                                      -12-
<PAGE>

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

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

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

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

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

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

                                      -13-
<PAGE>

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

               ss. 6. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS

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

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

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

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

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

6.2.     Code ss. 415 Limitations.

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

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

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

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

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

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

                                      -14-
<PAGE>

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

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

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

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

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

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

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

6.3.     Code ss. 402(g) Limitations.

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

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

                                      -15-
<PAGE>
         contracts of an employer that is not an Affiliate, such as another
         employer's Code ss. 401(k) plan or Code ss. 403(b) tax sheltered
         annuity, will be taken into account under this Plan for purposes of the
         limitations under this ss. 6.3 if requested by the Participant and
         approved by the Plan Administrator.

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

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

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

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

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

                              ss. 7. PLAN BENEFITS

7.1.     Participant.

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

                                      -16-
<PAGE>

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

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

                  (1)      death while an Employee,

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

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

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

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

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

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

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

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

                           Full Years of Service        Vested Portion

                                    less than 2                 0%
                                    2                          20%
                                    3                          40%

                                      -17-
<PAGE>

                                    4                          60%
                                    5                          80%
                                    6 or more                 100%

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

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

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

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

                  (f)      Reemployment.

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

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

                                      -18-
<PAGE>

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

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

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

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

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

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

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

7.3.     In-Service Withdrawals.

         (a)      Hardship Withdrawals.

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

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

                                      -19-
<PAGE>

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

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

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

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

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

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

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

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

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

                                      -20-
<PAGE>

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

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

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

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

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

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

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

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

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

                             ss. 8. BENEFIT PAYMENT

8.1.     Methods.

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

                  (1)      an annuity;

                                      -21-
<PAGE>

                  (2)      a single sum; or

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

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

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

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

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

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

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

         (c)      Installment Rules.

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

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

                                      -22-
<PAGE>

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

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

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

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

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

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

8.2.     Timing.

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

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

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

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

                                      -23-
<PAGE>

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

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

                  (3)      the date the Participant separates from service.

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

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

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

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

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

                                      -24-
<PAGE>
         portion of such a distribution paid directly to an eligible retirement
         plan. A portion of a distribution shall not fail to be an eligible
         rollover distribution merely because the portion consists of after-tax
         employee contributions which are not includible in gross income.
         However, such portion may be transferred only to an individual
         retirement account or annuity described in Code ss. 408(a) or (b),
         or to a qualified defined contribution plan described in Code ss.
         401(a) or 403(a) that agrees to separately account for amounts so
         transferred, including separately accounting for the portion of such
         distribution which is includible in gross income and the portion of
         such distribution which is not so includible.

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

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

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

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

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

                                      -25-
<PAGE>

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

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

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

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

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

8.8.     Other Payment Rules.

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

                                      -26-
<PAGE>
         (b)      Waiver of Notices. A Participant or Beneficiary may waive the
         notice period under Code ss. 401(a)(31), 402(f) or 411(a)(11).

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

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

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

                   ss. 9. NAMED FIDUCIARIES AND ADMINISTRATION

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

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

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

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

                                      -27-
<PAGE>
Administrator responsibilities and functions for the operation and
administration of this Plan, provided that allocation is reported in the records
of the Committee. The Committee will act by majority vote. The Committee may
appoint agents or advisors to perform any functions it deems necessary and
helpful to the effective performance of its duties and the duties of the
individual Committee members. The compensation of those agents or advisors will
be fixed by the Committee within limits set by the Board and will constitute an
expense of the Plan.

9.4.     Plan Administrator Powers and Duties.

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

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

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

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

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

                                      -28-
<PAGE>

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

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

                     ss.10. DUTIES AND AUTHORITY OF TRUSTEE

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

         (a)      for the exclusive purpose of:

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

                  (ii)     defraying reasonable expenses of administering the
                  Plan;

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

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

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

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

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

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

                                      -29-
<PAGE>

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

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

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

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

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

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

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

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

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

                                      -30-
<PAGE>

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

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

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

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

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

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

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

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

                                      -31-
<PAGE>

                                 ss.11. LOANS.

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

11.2.    Statutory Requirements.

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

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

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

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

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

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

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

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

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

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

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

                                      -32-
<PAGE>

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

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

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

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

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

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

                        ss. 12. AMENDMENT AND TERMINATION

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

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

                                      -33-
<PAGE>

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

                             ss. 13. MISCELLANEOUS

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

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

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

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

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

                                      -34-
<PAGE>

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

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

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

13.6.    Merger, Consolidation or Similar Transaction.

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

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

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

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

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

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

                                      -35-
<PAGE>

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

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

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

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

13.8.    Top Heavy Plan.

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

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

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

                                      -36-
<PAGE>

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

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

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

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

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

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

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

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

                           (i)      the excess, if any, of:

                                      -37-
<PAGE>

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

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

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

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

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

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

                                    LODGIAN, INC.

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

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

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

                                    TRUSTEE:

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

                                      -38-
<PAGE>
                            Appendix A to the
                            Lodgian, Inc. 401(k)Plan
                            Effective January 1, 2002

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

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

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

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

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

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

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

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

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

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

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

                                      -39-
<PAGE>

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

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

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

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

         (d)      Action to Satisfy ADP Test.

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

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

                                      -40-
<PAGE>

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

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

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

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

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

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

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

         (d)      Action to Satisfy ACP Test.

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

                                      -42-
<PAGE>

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

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

                                      -42-

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

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

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

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

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

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

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

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

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

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

                                      -43
<PAGE>

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

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

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

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

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

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

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

                                      -44-
<PAGE>

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

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

                  -        Servico Corporation;

                  -        Impac Hotel Group;

                  -        AMI Operating Partners, L.P.;

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

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

                                      -45-<PAGE>
                                                                     Exhibit 4.1

================================================================================

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

                          SECURITIES PURCHASE AGREEMENT

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

                                 by and between

                        CORPORACION DURANGO, S.A. DE C.V.

                                       and

                   OPERADORA OMEGA INTERNACIONAL, S.A. DE C.V.

                           dated as of October 7, 2002

================================================================================

<PAGE>

                                TABLE OF CONTENTS

ARTICLE I DEFINITIONS..........................................................1

         SECTION 1.1. Certain Defined Terms....................................1
         SECTION 1.2. Certain Rules of Construction............................5

ARTICLE II SALE AND PURCHASE...................................................5

         SECTION 2.1. Agreement to Purchase and Sell...........................5
         SECTION 2.2. Closing..................................................6
         SECTION 2.3. Purchase Price...........................................6
         SECTION 2.4. Closing Deliveries.......................................6
         SECTION 2.5. Transfer Taxes...........................................6

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....................6

         SECTION 3.1. Organization of the Purchaser............................6
         SECTION 3.2. Corporate Power and Authority............................6
         SECTION 3.3. No Conflict..............................................7
         SECTION 3.4. Governmental Consents and Approvals......................7
         SECTION 3.5. Investment...............................................7
         SECTION 3.6. Brokers..................................................7

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER........................7

         SECTION 4.1. Organization of the Seller...............................7
         SECTION 4.2. Corporate Power and Authority............................7
         SECTION 4.3. Organization and Good Standing of the Company............8
         SECTION 4.4. Capitalization of the Company............................8
         SECTION 4.5. Title to the Securities..................................8
         SECTION 4.6. No Conflict. ............................................8
         SECTION 4.7. Subsidiaries and Equity Interests of the Company.........8
         SECTION 4.8. Governmental Consents and Approvals......................9
         SECTION 4.9. Brokers..................................................9
         SECTION 4.10. No Other Representations................................9

ARTICLE V CERTAIN AGREEMENTS OF THE PARTIES....................................9

         SECTION 5.1. Further Action by the Parties............................9
         SECTION 5.2. Publicity................................................9
         SECTION 5.3. Seller Option...........................................10
         SECTION 5.4. Use of Certain Trademarks and Corporate Names...........10
         SECTION 5.5. Termination of Tax Sharing Agreements...................10

                                       i
<PAGE>

ARTICLE VI CLOSING DELIVERIES.................................................11

         SECTION 6.1. Deliveries by the Seller................................11
         SECTION 6.2. Deliveries by the Purchaser.............................11

ARTICLE VII INDEMNIFICATION...................................................12

         SECTION 7.1. Survival................................................12
         SECTION 7.2. Indemnification Obligations of the Seller...............12
         SECTION 7.3. Indemnification Obligations of the Purchaser............12
         SECTION 7.4. Notice of Claim.........................................13
         SECTION 7.5. Defense.................................................13
         SECTION 7.6. Limitation of Losses....................................14
         SECTION 7.7. Exclusive Remedy........................................14

ARTICLE VIII MISCELLANEOUS....................................................14

         SECTION 8.1. Headings................................................15
         SECTION 8.2. Entire Agreement........................................15
         SECTION 8.3. Notices.................................................15
         SECTION 8.4. Governing Law; Jurisdiction; Waiver of Jury Trial.......16
         SECTION 8.5. Severability; Partial Invalidity........................17
         SECTION 8.6. Amendments; Waivers.....................................17
         SECTION 8.7. Counterparts; Facsimile Signatures......................17
         SECTION 8.8. Assignments and Permitted Transfers.....................17
         SECTION 8.9. Benefits Only to Parties................................17

                                       ii

<PAGE>

                  THIS SECURITIES PURCHASE AGREEMENT, dated as of October 7,
2002, is entered into by and between Corporacion Durango, S.A. de C.V., a
Mexican SOCIEDAD ANONIMA DE CAPITAL VARIABLE (the "SELLER"), and Operadora Omega
Internacional, S.A. de C.V., a Mexican SOCIEDAD ANONIMA DE CAPITAL VARIABLE (the
"PURCHASER" and, together with the Seller, the "PARTIES").

                              W I T N E S S E T H:
                               - - - - - - - - - -

                  WHEREAS, the Seller is (i) the owner of 1,000 issued and
outstanding shares of common stock, no par value, of Durango Paper Company, a
Delaware corporation (the "Company"), representing one hundred percent (100%) of
the total issued and outstanding capital stock of the Company (the "Shares") and
(ii) the holder of certain promissory notes made by the Company, in the
aggregate principal amount of $128,834,605.34 (the "Notes" and, together with
the Shares, the "Securities"); and

                  WHEREAS, the Seller proposes to sell to the Purchaser, and the
Purchaser proposes to purchase from the Seller, the Securities, in each case
upon the terms and conditions hereinafter set forth;

                  NOW, THEREFORE, in consideration of the premises and the
mutual agreements, covenants and provisions contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

                  SECTION 1.1. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:

                  "Affiliate" means, with respect to any Person, at any time,
(i) any other Person directly or indirectly controlling, controlled by, or under
common control with such Person or (ii) any other Person owning more than 10% of
the outstanding voting stock of such Person. A Person shall be deemed to
"control" another Person if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
other Person, whether through the ownership of voting securities, by contract or
otherwise.

                  "Agreement" means this Securities Purchase Agreement,
including any Exhibits, Schedules and Annexes hereto, as the same may be
modified, supplemented or amended from time to time in accordance with the terms
set forth herein.

                  "Business Day" means (i) with respect to the determination of
the Interest Determination Date or any Interest Period, a day (other than a
Saturday or Sunday) on which banks generally are open in London for the conduct
of substantially all of their commercial lending activities and on which
dealings in U.S. Dollars are carried on in the London interbank market and (ii)
<PAGE>

for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in New York, New York and Mexico City, Mexico for the conduct
of substantially all of their commercial lending activities.

                  "Closing" has the meaning set forth in Section 2.2.

                  "Closing Date" has the meaning set forth in Section 2.2.

                  "Company" has the meaning set forth in the Recitals.

                  "Contract" means, with respect to any Person, all contracts,
agreements, warranties, guaranties, indentures, debentures, bonds, notes,
instruments, options, deeds of trust, leases, mortgages, security agreements,
easements, licenses, concessions, grants, commitments, undertakings or binding
arrangements of any nature whatsoever, express or implied, written or oral,
entered into or binding upon such Person or to which the property or assets of
such Person may be subject.

                  "Exercise Notice" has the meaning set forth in Section 5.3(a).

                  "Governmental Authority" means any court or other tribunal,
any authority, agency, board, body, bureau, commission or instrumentality of any
government, or any other entity exercising legislative, judicial, regulatory or
administrative functions of or pertaining to government.

                  "Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing (whether pursuant to a guaranty,
a FIANZA, an AVAL or otherwise) any obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person:

                  (a) to purchase or pay (or advance or supply funds for the
         purchase or payment of) such obligation of such other Person (whether
         arising by virtue of partnership arrangements, or by agreements to
         keep-well, to purchase assets, goods, securities or services (unless
         such purchase arrangements are on arm's-length terms and are entered
         into in the ordinary course of business), to take-or-pay, or to
         maintain financial statement conditions or otherwise) or

                  (b) entered into for purposes of assuring in any other manner
         the obligee of such obligation of the payment thereof or to protect
         such obligee against loss in respect thereof (in whole or in part);

PROVIDED that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business.

                                       2
<PAGE>

                  "HG Estate Notes" means:

                  (a) that certain Promissory Note of Durango, dated May 28,
         2002, in favor of HG Estate, LLC and St. Marys Railroad Corporation in
         the principal amount of US$29,998,062.26;

                  (b) that certain Note A of Durango, dated May 28, 2002, in
         favor of HG Estate, LLC in the principal amount of US$12,100,000.00;
         and

                  (c) that certain Note B of Durango, dated May 28, 2002, in
         favor of HG Estate, LLC in the principal amount of US$6,000,000.00.

                  "Indemnified Party" means a Purchaser Indemnified Party or a
Seller Indemnified Party, as applicable.

                  "Indemnifying Party" means (i) the Seller, with respect to
Losses for which the Purchaser Indemnified Parties are entitled to
indemnification under Section 7.2, or (ii) the Purchaser, with respect to Losses
for which the Seller Indemnified Parties are entitled to indemnification under
Section 7.3, as applicable.

                  "Interest Determination Date" shall mean the second (2nd)
Business Day prior to the commencement of any Interest Period.

                  "Interest Period" shall mean: (i) initially, the period
commencing on the Closing Date and ending one (1) month after the Closing Date
and (ii) thereafter, each subsequent period commencing on the last day of the
next preceding Interest Period and ending one (1) month thereafter, PROVIDED
that:

                  (a) if any Interest Period would otherwise expire on a day
         that is not a Business Day, such Interest Period shall expire on the
         next succeeding Business Day unless the result of such extension would
         be to carry such Interest Period into another calendar month, in which
         event such Interest Period shall expire on the immediately preceding
         Business Day;

                  (b) any Interest Period that begins on the last Business Day
         of a calendar month (or on a day for which there is no numerically
         corresponding day in the calendar month at the end of such Interest
         Period) shall, subject to clause (c) below, expire on the last Business
         Day of the calendar month which is the specified number of months after
         the commencement of such Interest Period; and

                  (c) any Interest Period that would otherwise extend beyond the
         Option Closing Date shall expire on the Option Closing Date.

                  "Law" means any federal, state, local or foreign law, statute,
ordinance, regulation, rule, code, order, writ, judgment, injunction, decree,
directive, stipulation, determination, award, requirement or other pronouncement
having the effect of law, issued by or on behalf of any Governmental Authority.

                                       3
<PAGE>

                  "LIBOR" means the offered quotation to first-class banks in
the London interbank market by Citibank, N.A. for U.S. Dollar deposits of
amounts comparable to the Purchase Price with maturities comparable to the
applicable Interest Period, determined as of 11:00 A.M. (London time) on the
Interest Determination Date.

                  "Licensed Trademarks" means any trademarks, trademark
applications, service marks, service mark applications, corporate names, trade
names, trade dress and logos that incorporate the name "Durango".

                  "Lien" means any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, easement, lease,
third-party interest, lien (statutory or otherwise), charge, preference,
priority or security agreement, any option, warrant, attachment or right of
first refusal and any preemptive, conversion, put, call, claim or right or
restriction on transfer (other than restrictions imposed by applicable
Securities Laws).

                  "Option" has the meaning set forth in Section 5.3(a).

                  "Option Closing Date" has the meaning set forth in Section
5.3(a).

                  "Option Price" has the meaning set forth in Section 5.3(a).

                  "Option Shares" has the meaning set forth in Section 5.3(c).

                  "Parties" has the meaning set forth in the Preamble.

                  "Person" means any individual, corporation, limited liability
company, partnership, joint venture, firm, association, trust or any other
business, organization or entity, or any Governmental Authority.

                  "Purchase Price" has the meaning set forth in Section 2.3.

                  "Purchaser" has the meaning set forth in the Preamble.

                  "Purchaser Indemnified Parties" has the meaning set forth in
Section 7.2.

                  "Seller" has the meaning set forth in the Preamble.

                  "Seller Indemnified Parties" has the meaning set forth in
Section 7.3.

                  "Securities Law" means any of (i) the United States Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder,
as in effect from time to time; (ii) the United States Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder, as in
effect from time to time; (iii) any other U.S. federal or state securities Laws;
and (iv) the securities Laws of any other country or jurisdiction.

                  "Shares" has the meaning set forth in the Recitals.

                                       4
<PAGE>

                  "Subsidiary" and "Subsidiaries" each have the meaning set
forth in Section 4.7.

                  "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority, including: taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.

                  "Tax Returns" means all returns, claims for refund,
declarations, reports, information returns and statements relating to Taxes,
including any schedules or attachments thereto and supporting records.

                  "U.S. Dollars" and "U.S.$" each means the lawful currency of
the United States of America.

                  SECTION 1.2. Certain Rules of Construction.

                  (a) Any term defined herein in the singular form shall have a
comparable meaning when used in the plural form, and vice versa.

                  (b) When used herein, the words "hereof," "herein" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. References to the
Preamble, Recitals, Articles or Sections shall refer respectively to the
Preamble, Recitals, Articles or Sections of this Agreement, unless otherwise
expressly provided.

                  (c) When used herein, the terms "include," "includes," and
"including" are not limiting.

                  (d) Unless the context requires otherwise, derivative forms of
any term defined herein shall have a comparable meaning to that of such term.

                  (e) When a Party's consent is required hereunder, such Party's
consent may be granted or withheld in such Party's sole discretion, unless
otherwise specified.

                                   ARTICLE II

                                SALE AND PURCHASE

                  SECTION 2.1. Agreement to Purchase and Sell. Upon the terms
and subject to the conditions of this Agreement, at the Closing, the Seller will
sell, assign, endorse, transfer and deliver to the Purchaser, and the Purchaser
will purchase and acquire from the Seller, all right, title and interest of the
Seller in the Securities, free and clear of all Liens.

                                       5
<PAGE>

                  SECTION 2.2. Closing. Upon the terms and subject to the
conditions of this Agreement, the transactions contemplated by this Agreement
shall take place at a closing (the "Closing") to be held at the offices of White
& Case LLP, 200 South Biscayne Boulevard, Miami, Florida, United States, at
10:00 a.m., Miami time, on the date hereof, or at such other place or at such
other time or on such other date as the Purchaser and the Seller may mutually
agree (the day on which the Closing takes place being the "Closing Date").

                  SECTION 2.3. Purchase Price. The aggregate amount of cash
(such amount referred to as the "Purchase Price") to be paid by the Purchaser to
the Seller at the Closing shall be equal to an aggregate amount of U.S.$100,000,
to be allocated among the Shares and the Notes as the parties may mutually
agree. The Purchase Price shall be paid on the Closing Date to the Seller by
wire transfer of immediately available U.S. Dollars in accordance with the wire
instructions set forth on Annex A.

                  SECTION 2.4. Closing Deliveries. At the Closing, the Purchaser
and the Seller shall each deliver or cause to be delivered each of the items
required to be delivered by them as set forth in Article VI.

                  SECTION 2.5. Transfer Taxes. All transfer, documentary, sales,
use, stamp, registration and other such Taxes and fees payable in connection
with the sale and transfer of the Securities to the Purchaser shall be paid by
the Seller when due, and the Seller will, at its own expense, file all necessary
Tax Returns and other documentation with respect to all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable Law, the Seller will, and will cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.

                                  ARTICLE III

                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

                  As an inducement to the Seller to enter into this Agreement,
the Purchaser hereby represents and warrants to the Seller as of the Closing
Date as follows:

                  SECTION 3.1. Organization of the Purchaser. The Purchaser is a
SOCIEDAD ANONIMA DE CAPITAL VARIABLE duly formed and validly existing under the
laws of Mexico and has all requisite corporate power and authority to own,
operate or lease its properties and assets and to carry on its business as it
has been and is currently conducted and to perform all of its obligations.

                  SECTION 3.2. Corporate Power and Authority. The execution and
delivery by the Purchaser of this Agreement, the performance by the Purchaser of
its obligations hereunder and the consummation of the transactions contemplated
herein have been duly authorized by all requisite action on the part of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser,
and, assuming the due execution and delivery hereof by the Seller, constitutes
the legal, valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms.

                                       6
<PAGE>

                  SECTION 3.3. No Conflict. The execution, delivery and
performance by the Purchaser of this Agreement and the consummation of the
transactions contemplated herein does not and will not (i) conflict with, result
in any breach of, constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any Lien
on any of the assets or properties of the Purchaser, or result in any imposition
or acceleration of any payment, time of payment, vesting or increase in the
amount of compensation or benefit payable, pursuant to any Contract, (ii)
violate or conflict with any Law applicable to the Purchaser or any of its
assets or properties or any other restriction of any kind or character to which
the Purchaser or any of its assets or properties is subject or (iii) conflict
with or violate any provision of the organizational documents of the Purchaser.

                  SECTION 3.4. Governmental Consents and Approvals. The
execution, delivery and performance by the Purchaser of this Agreement and the
consummation of the transactions contemplated herein do not and will not require
any consent, approval, authorization or other order of, action by, filing with
or notification to any Governmental Authority.

                  SECTION 3.5. Investment. The Purchaser is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, any distribution thereof.

                  SECTION 3.6. Brokers. No broker, finder or investment bank is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser for which the Seller will be responsible.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

                  As an inducement to the Purchaser to enter into this
Agreement, the Seller hereby represents and warrants to the Purchaser as of the
Closing Date as follows:

                  SECTION 4.1. Organization of the Seller. The Seller is a
SOCIEDAD ANONIMA DE CAPITAL VARIABLE duly formed and validly existing under the
laws of Mexico and has all requisite corporate power and authority to own,
operate or lease its properties and assets and to carry on its business as it
has been and is currently conducted and to perform all of its obligations.

                  SECTION 4.2. Corporate Power and Authority. The execution and
delivery by the Seller of this Agreement, the performance by the Seller of its
obligations hereunder and the consummation by the Seller of the transactions
contemplated herein have been duly authorized by all requisite action on the
part of the Seller. This Agreement has been duly executed and delivered by the
Seller, and, assuming the due execution and delivery by each of the other
parties thereto, constitutes the legal, valid and binding obligation of the
Seller, enforceable against the Seller in accordance with their respective
terms.

                                       7
<PAGE>

                  SECTION 4.3. Organization and Good Standing of the Company.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and has all necessary power and authority to
own, operate or lease the properties and assets now owned, operated or leased by
it and to carry on its business as it has been and is currently conducted.

                  SECTION 4.4. Capitalization of the Company. The authorized
capital stock of the Company consists of 3,000 shares of common stock, no par
value. The Shares represent one hundred percent (100%) of the total issued and
outstanding capital stock of the Company and are duly authorized, validly
issued, fully subscribed to and paid for and non-assessable, and are free and
clear of any Liens. There are no options, warrants, convertible securities,
treasury securities, subscriptions, stock appreciation rights, phantom stock
plans or stock equivalents or other rights, agreements, arrangements or
commitments (contingent or otherwise) of any character issued or authorized
relating to the issued or unissued capital stock or ownership interests of the
Company obligating it to issue or sell any shares of capital stock or ownership
interests of, or options, warrants, convertible securities, subscriptions or
other equity interests in, the Company. There are no outstanding contractual
obligations to repurchase, redeem or otherwise acquire any shares of capital
stock or equity interests in the Company or to pay any dividend or make any
other distribution in respect thereof or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Person.

                  SECTION 4.5. Title to the Securities. Immediately prior to the
Closing, the Seller is the sole beneficial owner of the Securities. At Closing,
the Seller will convey good and marketable title to the Securities, free and
clear of all Liens.

                  SECTION 4.6. No Conflict. The execution, delivery and
performance by the Seller of this Agreement and the consummation of the
transactions contemplated herein does not and will not (a) conflict with, result
in any breach of, constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any Lien
on any of the assets or properties of the Seller, or result in any imposition or
acceleration of any payment, time of payment, vesting or increase in the amount
of compensation or benefit payable, pursuant to any Contract of the Seller, (b)
violate or conflict with any Law applicable to the Seller or any of its assets
or properties or any other restriction of any kind or character to which the
Seller or any of its assets or properties is subject or (c) conflict with or
violate any provision of the organizational documents of the Seller.

                  SECTION 4.7. Subsidiaries and Equity Interests of the Company.
Schedule 4.7 sets forth a true and complete list of all direct or indirect
subsidiaries of the Company (each individually, a "Subsidiary" and,
collectively, the "Subsidiaries"). There are no other corporations,
partnerships, joint ventures, associations or other entities in which the
Company owns, of record or beneficially, any direct or indirect equity or other
interest or any right (contingent or otherwise) to acquire the same. All of the
issued and outstanding shares of capital stock of the Subsidiaries have been
duly authorized, validly issued, fully subscribed to and paid for and
non-assessable, and are free and clear of any Liens. There are no options,

                                       8
<PAGE>

warrants, convertible securities, treasury securities, subscriptions, stock
appreciation rights, phantom stock plans or stock equivalents or other rights,
agreements, arrangements or commitments (contingent or otherwise) of any
character issued or authorized relating to the issued or unissued capital stock
or ownership interests of any Subsidiary obligating such Subsidiary to issue or
sell any shares of capital stock or ownership interests of, or options,
warrants, convertible securities, subscriptions or other equity interests in,
such Subsidiary.

                  SECTION 4.8. Governmental Consents and Approvals. The
execution, delivery and performance by the Seller of this Agreement and the
consummation of the transactions contemplated herein do not and will not require
any consent, approval, authorization or other order of, action by, filing with
or notification to any Governmental Authority.

                  SECTION 4.9. Brokers. No broker, finder or investment bank is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Seller for which the Purchaser will be responsible.

                  SECTION 4.10. No Other Representations. Except for the
representations and warranties contained in this Article IV, the Seller does not
make any express or implied representation or warranty, and the Seller disclaims
any such representation or warranty, whether by the Seller, the Company or any
of their respective officers, directors, employees, agents or representatives or
any other Person, with respect to the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby or the business or
assets of the Company, notwithstanding the delivery or disclosure to the
Purchaser, any of its officers, directors, employees, agents or representatives
or any other Person of any documentation or other information with respect to
the foregoing. The Purchaser hereby acknowledges and agrees that, except as set
forth in Article IV, the Purchaser is purchasing the Securities on an "As-Is"
and "Where-Is" basis.

                                   ARTICLE V

                        CERTAIN AGREEMENTS OF THE PARTIES

                  SECTION 5.1. Further Action by the Parties. On and after the
date hereof, each Party shall take such other actions and execute such other
documents as are necessary or desirable to carry out the intent and purpose of
this Agreement.

                  SECTION 5.2. Publicity. None of the Parties will release,
generate or permit any press release, public statement or other publicity
concerning this Agreement or the transactions contemplated herein nor submit
this Agreement or any document relating thereto to any Governmental Authority,
without first consulting with and obtaining the written consent of the other
Party, except to the extent required by Law.

                                       9
<PAGE>

                  SECTION 5.3. Seller Option.

                  (a) The Purchaser hereby grants to the Seller the irrevocable
right, but not the obligation (the "Option"), to purchase, at any time after the
date hereof and on or prior to the tenth anniversary of the date hereof, all,
but not less than all, of the issued and outstanding shares of capital stock of
the Company (the "Option Shares") and the Notes, at an aggregate exercise price
(the "Option Price") equal to the Purchase Price plus interest accruing at a
rate equal to LIBOR plus four percent (4%). The Seller may exercise the Option
by giving the Purchaser at least five (5) Business Day's prior written notice
(the "Exercise Notice").

                  (b) On the closing date of the exercise of the Option (the
"Option Closing Date"): (i) the Purchaser shall deliver to the Seller the Option
Shares and the Notes, free and clear of all Liens, by delivery of appropriate
transfer documents, duly endorsed in favor of the Seller, and with all required
transfer tax and other revenue stamps, acquired at the Purchaser's expense,
affixed; and (ii) the Seller shall deliver to the Purchaser in exchange therefor
the Option Price in cash, payable by wire transfer of immediately available U.S.
Dollars in accordance with wire instructions set forth in the Exercise Notice.

                  (c) The Purchaser shall not at any time prior to the Option
Closing Date (i) sell, or enter into any agreement (other than this Agreement)
to sell, any of the Option Shares or shares of capital stock of any Subsidiary
or the Notes, (ii) subject any of the Option Shares or shares of capital stock
of any Subsidiary or the Notes to any Liens (other than Liens imposed by this
Agreement) or (iii) sell any assets of the Company or any Subsidiary, other than
inventory sold in the ordinary course of business or pursuant to existing
commitments or in amounts that are not material.

                  SECTION 5.4. Use of Certain Trademarks and Corporate Names.
After the Closing Date, the Purchaser shall not, and shall cause each of the
Company, the Subsidiaries and their respective Affiliates not to, use any trade
names, corporate names, trademarks, service marks, trade dress, and logos,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, which incorporate the
Licensed Trademarks or any derivation in whole or in part thereof, individually
or in combination, in any way. The Purchaser will, within one week following the
Closing Date, change the corporate names of the Company and each of the
Subsidiaries that incorporate the name "Durango" to another corporate name that
does not incorporate the name "Durango".

                  SECTION 5.5. Termination of Tax Sharing Agreements. Any tax
sharing agreement between the Seller, on the one hand, and any of the Company
and any of its subsidiaries, on the other hand, is hereby terminated and will
have no further effect for any taxable year (whether the current year, a future
year or a past year).

                                       10
<PAGE>

                                   ARTICLE VI

                               CLOSING DELIVERIES

                  SECTION 6.1. Deliveries by the Seller. On or prior to the
Closing Date, the Seller shall deliver, or cause to be delivered, to the
Purchaser, in form and substance reasonably satisfactory to the Purchaser, the
following:

                  (a) Stock certificates or other evidence of ownership
representing the Shares, duly endorsed in favor of the Purchaser, or accompanied
by stock powers duly executed in favor of the Purchaser, and with all required
stock transfer tax and other revenue stamps, acquired at the Seller's expense,
affixed;

                  (b) The Notes, duly endorsed in favor of the Purchaser, and
with all required transfer taxes and other stamps, acquired at the Seller's
expense, affixed;

                  (c) A certificate duly executed by the Chief Financial Officer
of the Seller, in the form of Exhibit 6.1(b) hereto, dated as of the Closing
Date, certifying the accuracy of the Seller's representations and warranties set
forth in Article IV hereunder and that the Seller has performed and complied
with all agreements, covenants and agreements required hereunder;

                  (d) A certificate duly executed by the Secretary of the
Seller, in the form of Exhibit 6.1(c) hereto, dated as of the Closing Date, as
to the ESTATUTOS of the Seller, the resolutions adopted by the Board of
Directors of the Seller in connection with this Agreement and the incumbency of
certain officers of the Seller; and

                  (e) An Assignment of Claims, in the form of Exhibit 6.1(d)
hereto, dated as of the Closing Date, duly executed by the Company in favor of
the Seller assigning any and all claims of the Company against HG Estate, LLC,
St. Marys Railroad Corporation and W.O. Corporation arising under the Stock
Purchase Agreement, dated as of December 9, 1999, among HG Estate, LLC, St.
Marys Railroad Corporation, W.O. Corporation and the Company to the Seller.

                  SECTION 6.2. Deliveries by the Purchaser. On or prior to the
Closing Date, the Purchaser shall deliver, or cause to be delivered, to the
Seller, in form and substance reasonably satisfactory to the Seller, the
following:

                  (a) The Purchase Price;

                  (b) A certificate duly executed by the Chief Operating Officer
of the Purchaser, in the form of Exhibit 6.2(b) hereto, dated as of the Closing
Date, certifying the accuracy of the Purchaser's representations and warranties
set forth in Article III hereunder and that the Purchaser has performed and
complied with all agreements, covenants and agreements required hereunder; and

                  (c) A certificate duly executed by the Secretary of the
Purchaser, in the form of Exhibit 6.2(c) hereto, dated as of the Closing Date,
as to the ESTATUTOS of the Purchaser, the

                                       11
<PAGE>

resolutions adopted by the Board of Directors of the Purchaser in connection
with this Agreement and the incumbency of certain officers of the Purchaser.

                                   ARTICLE VII

                                 INDEMNIFICATION

                  SECTION 7.1. Survival. The representations and warranties
contained in this Agreement shall survive the Closing until the first
anniversary of the Closing Date and shall thereupon expire together with any
right to indemnification in respect thereof; PROVIDED, HOWEVER, that the
representations and warranties of the Purchase set forth in Sections 3.1 and 3.2
and the representations and warranties of the Seller set forth in Sections 4.1,
4.2, 4.3 and 4.5 shall not be extinguished, but shall survive and continue in
full force and effect.

                  SECTION 7.2. Indemnification Obligations of the Seller. The
Seller will indemnify, defend and hold harmless the Purchaser, the Company,
their Affiliates, and their respective successors or assigns and officers,
directors, employees, agents and representatives (other than any Person who is
obligated to indemnify any Purchaser Indemnified Party in this Agreement in his,
her or its capacity as a Seller) (collectively, the "Purchaser Indemnified
Parties") from and against any and all claims, liabilities, obligations, losses,
costs (including court costs), expenses (including costs of investigation and
defense and attorneys', accountants' and experts' fees and expenses), increases
in insurance premiums or retroactive premium adjustments, penalties, fines,
judgments and damages suffered or incurred (including amounts paid in
settlement, costs of investigation and reasonable attorneys' fees and expenses)
(collectively "Losses") by the Purchaser Indemnified Parties as a result of:

                  (a) any breach or inaccuracy of any representation or warranty
made by the Seller in this Agreement;

                  (b) any breach of any covenant, agreement or undertaking made
by the Seller in this Agreement; or

                  (c) any Taxes in connection with the transfer of the
Securities to the Purchaser pursuant to this Agreement.

                  SECTION 7.3. Indemnification Obligations of the Purchaser. The
Purchaser will indemnify and hold harmless the Seller and its Affiliates, and
their respective successors or assigns and officers, directors, employees,
agents and representatives (the "Seller Indemnified Parties") from and against
any and all Losses as a result of:

                  (a) any breach or inaccuracy of any representation or warranty
made by the Purchaser in this Agreement;

                  (b) any breach of any covenant, agreement or undertaking made
by the Purchaser in this Agreement;

                                       12
<PAGE>

                  (c) the conduct by the Company or any of its Subsidiaries of
their respective businesses after the Closing Date;

                  (d) any amounts paid by the Seller under any Guarantee by the
Seller existing on the Closing Date of any obligation of the Company or any of
the Subsidiaries; or

                  (e) any amount paid by the Seller pursuant to any of the HG
Estate Notes.

                  SECTION 7.4. Notice of Claim. The Indemnified Party shall
promptly notify the Indemnifying Party of any claim with respect to which such
Indemnified Party may be entitled to receive payment from the Indemnifying Party
for any Losses, specifying in reasonable detail the nature of the Loss, and, if
known, the amount, or an estimate of the amount, of the liability arising
therefrom; PROVIDED that any delay in notifying the Indemnifying Party will
relieve the Indemnifying Party from liability under this Agreement only if, and
only to the extent that, such delay actually prejudices the rights, remedies or
defenses otherwise available to it with respect to such claim. The Indemnified
Party shall provide to the Indemnifying Party, as promptly as practicable after
giving notice of such claim, information and documentation reasonably requested
by the Indemnifying Party to support and verify the claim asserted, unless the
Indemnified Party has been advised by counsel that there are no reasonable
grounds to assert a joint defense privilege with respect to such information and
documentation.

                  SECTION 7.5. Defense.

                  (a) If the facts pertaining to a Loss arise out of the claim
of any third party, or if there is any claim against a third party available by
virtue of the circumstances of the Loss, the Indemnifying Party shall have the
right to participate in, or by giving written notice to the Indemnified Party,
to elect to assume the defense of, or take full responsibility for, such audit,
investigation, action, claim or proceeding, including the employment of counsel
or accountants, in each case reasonably satisfactory to the Indemnified Party,
and the payment of the fees and disbursements of such counsel. If the
Indemnifying Party declines or fails to assume the defense of, or take full
responsibility for, the audit, investigation, action, claim or proceeding on the
terms provided above or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case within ten (10) Business Days following
receipt by the Indemnifying Party of notice of the claim, then the Indemnified
Party may employ counsel to represent or defend it in any such audit,
investigation, action, claim or proceeding and the Indemnifying Party will pay
the reasonable fees and disbursements of such counsel as incurred. In any audit,
investigation, action, claim or proceeding for which the Indemnifying Party has
assumed the defense, the Indemnified Party shall have the right to participate
in such matter and to retain its own counsel at the Indemnified Party's own
expense (except that the Indemnifying Party shall be responsible for the fees
and expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest). The Indemnifying Party shall at all times use reasonable
efforts to inform the Indemnified Party of the status of the defense of any
matter the defense of which the Indemnifying Party has assumed and to cooperate
in good faith with the Indemnified Party with respect to the defense of any such
matter.

                                       13
<PAGE>

                  (b) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent, which shall not be
unreasonably delayed or withheld, of the Indemnifying Party. No Indemnifying
Party may settle or compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought hereunder without the
prior written consent, which shall not be unreasonably delayed or withheld, of
the Indemnified Party, unless such settlement, compromise or consent (A)
includes an unconditional release of the Indemnified Party and its officers,
directors, employees and Affiliates from all liability arising out of such
claim, and (B) does not impose an injunction or other equitable relief upon the
Indemnified Party.

                  (c) Whether or not the Indemnifying Party chooses to defend a
claim, all Parties shall cooperate in the defense thereof and shall furnish such
records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably requested in
connection therewith. The Indemnifying Party shall be subrogated to all rights
and remedies of the Indemnified Party.

                  SECTION 7.6. Limitation of Losses.

                  (a) The indemnification obligations set forth in this
Agreement, including in this Article VII, shall be limited to indemnification
for actual damages suffered and shall not include loss of profit, incidental,
consequential, special, punitive or indirect damages; PROVIDED, HOWEVER, that
any such loss of profit damages recovered by a third party against a party
entitled to indemnity under this Agreement shall be included in the damages
recoverable pursuant to the indemnities herein.

                  (b) The payment of all indemnifications under Section 7.2 and
payment of all claims made by the Purchaser Indemnified Parties for
indemnification hereunder, for whatever reason, shall be limited to, and shall
not exceed an amount equal to the Purchase Price.

                  (c) No Party shall be entitled to indemnification under this
Article VII (i) to the extent, if any, that any Losses result from a failure on
the part of any Indemnified Party to exercise good faith in not jeopardizing or
prejudicing the interests of the Indemnifying Party or otherwise arises out of
any action taken or omitted to be taken by an Indemnified Party or (ii) unless
and until all rights and remedies of an Indemnified Party or its Affiliates
(including after the Closing Date the Company, in the case of a Purchaser
Indemnified Party) under any insurance policy or any other obligation of
indemnification in its favor shall have first been exhausted.

                  SECTION 7.7. Exclusive Remedy. The indemnification provided in
this Article VII shall constitute the exclusive remedy with respect to any
dispute arising out of or related to this Agreement or any Loss which any Party
may suffer, sustain or become subject to, as a result of or relating to this
Agreement and the transactions contemplated hereby.

                                       14
<PAGE>

                                  ARTICLE VIII

                                  MISCELLANEOUS

                  SECTION 8.1. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.

                  SECTION 8.2. Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the Parties in respect of the subject
matter contained herein, and there are no restrictions, promises,
representations, warranties, covenants, or undertakings with respect to the
subject matter hereof, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the Parties with respect to the subject matter hereof.

                  SECTION 8.3. Notices. All notices or other communications
required or permitted by this Agreement shall be in writing and shall be deemed
to have been duly received (a) if given by telecopier, when transmitted and the
appropriate telephonic confirmation is received if transmitted on a Business Day
and during normal business hours of the recipient, and otherwise on the next
Business Day following transmission, (b) if given by certified or registered
mail, return receipt requested, postage prepaid, when received and (c) if given
by courier or other means, when received or personally delivered, and, in any
such case, addressed as set forth below (or as otherwise provided by prior
notice to each other Party):

                  if to the Purchaser to:

                  Operadora Omega Internacional, S.A. de C.V.
                  Homero 1425
                  Suite 1102
                  Col. Morales Polanco
                  Mexico D.F., Mexico 11560
                  Attention: Martin Rincon
                  Facsimile: +011-52 (555) 557-0399
                  Telephone: +011-52 (555) 557-0080

                  if to the Seller to:

                  Corporacion Durango, S.A. de C.V.
                  Torre Corporativa Durango
                  Potasio 150
                  Cuidad Industrial
                  Durango, Durango, Mexico 34220
                  Attention:  Mayela Rincon de Velasco
                  Facsimile:  011-52 (618) 814-0048
                  Telephone:  011-52 (618) 814-1658

                                       15
<PAGE>

                  with a copy to:

                  White & Case LLP
                  First Union Financial Center
                  200 South Biscayne Boulevard
                  Suite 4900
                  Miami, Florida 33131-2352
                  Attention:  Emilio Alvarez-Farre
                  Facsimile:  (305) 358-5744
                  Telephone:  (305) 371-2700

                  SECTION 8.4. Governing Law; Jurisdiction; Waiver of Jury
Trial.

                  (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK
SITTING IN THE BOROUGH OF MANHATTAN, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH PARTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE SELLER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS DURANGO
MCKINLEY PAPER COMPANY WITH OFFICES ON THE DATE HEREOF AT 5605 NORTH MACARTHUR
BLVD., SUITE 360, IRVING, TEXAS 75038, ATTENTION: PRUDENCIO CALDERON, AS ITS
DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS
BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS,
SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR
PROCEEDING. THE PURCHASER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS
DURANGO PAPER COMPANY WITH OFFICES ON THE DATE HEREOF AT 1000 OSBORNE STREET,
ST. MARYS, GEORGIA 31558, ATTENTION: HERB BAEZ, AS ITS DESIGNEE, APPOINTEE AND
AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT
OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND
DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. EACH PARTY
COVENANTS AND AGREES THAT IT SHALL TAKE ANY AND ALL REASONABLE ACTION, INCLUDING
THE EXECUTION AND FILING OF ANY AND ALL DOCUMENTS THAT MAY BE NECESSARY TO
CONTINUE ITS FOREGOING DESIGNATION AND APPOINTMENT IN FULL FORCE AND EFFECT AND
TO CAUSE ITS AGENT FOR SERVICE OF PROCESS TO CONTINUE TO ACT IN SUCH CAPACITY.
IF FOR ANY REASON ITS DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE
TO ACT AS SUCH, EACH PARTY AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND
AGENT ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION REASONABLY
SATISFACTORY TO THE OTHER PARTY. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY
PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE OTHER PARTY IN ANY OTHER
JURISDICTION.

                                       16
<PAGE>

                  (b) EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN.

                  SECTION 8.5. Severability; Partial Invalidity. The invalidity
or unenforceability of any provisions of this Agreement in any jurisdiction
shall not affect the validity, legality or enforceability of the remainder of
this Agreement in such jurisdiction or the validity, legality or enforceability
of this Agreement, including any such provision, in any other jurisdiction, it
being intended that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by Law. Wherever possible, each
provision of this Agreement shall be interpreted in a manner as to be effective
and valid under applicable Law, but in case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such provision shall be ineffective to
the extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such provision or
provisions or any other provisions hereof, unless such a construction would be
unreasonable.

                  SECTION 8.6. Amendments; Waivers.

                  (a) No failure or delay on the part of any Party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof except
as explicitly provided herein, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.

                  (b) Any provision of this Agreement may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed, in the
case of an amendment, by each Party, or in the case of a waiver, by the Party
against whom the waiver is to be effective.

                  SECTION 8.7. Counterparts; Facsimile Signatures. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original and all of which together shall be one and the same
instrument. This Agreement may be delivered by facsimile and signatures on any
facsimile of this Agreement shall be valid and binding as an original signature.
Each Party agrees that if its signature is delivered by facsimile, an original
signature page of such Party shall subsequently be delivered to the other Party.

                  SECTION 8.8. Assignments and Permitted Transfers.

                  (a) This Agreement shall be binding upon and inure to the
benefit of the Purchaser and the Seller and their respective successors and
permitted assigns.

                  (b) This Agreement may not be assigned by either Party without
the prior written consent of the other Party.

                  SECTION 8.9. Benefits Only to Parties. Nothing expressed by or
mentioned in this Agreement is intended or shall be construed to give any
Person, other than the Parties and their respective successors and assigns, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be and are for the sole and exclusive benefit
of the Parties and their respective successors and assigns, and are for the
benefit of no other Person.

                            [SIGNATURES ON NEXT PAGE]

                                       17
<PAGE>

                  IN WITNESS WHEREOF, the Seller and the Purchaser have
executed, or caused this Agreement to be duly executed by their respective
authorized officers, as of the day and year first above written.

                                             OPERADORA OMEGA INTERNACIONAL, S.A.
                                             DE C.V.

                                             By: /s/ Martin Rincon
                                                 -------------------------------
                                                 Name: Martin Rincon
                                                 Title: Chief Operating Officer

                                             CORPORACION DURANGO, S.A. DE C.V.

                                             By: /s/ Mayela Rincon de Velasco
                                                 -------------------------------
                                                 Name: Mayela Rincon de Velasco
                                                 Title: Chief Financial Officer

                                       18
<PAGE>

                                                                    SCHEDULE 4.7

                           Subsidiaries of the Company

Durango Georgia Paper Company
Durango Georgia Receivables Company
Durango Georgia Converting Corporation
Durango Georgia Converting, LLC
St. Marys Railroad, LLC

<PAGE>

                                                                         ANNEX A

                           Wire Transfer Instructions

Bank Name:
Account Name:
Account Number:
ABA Number:
Account Holder:
Reference:
Attn:

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