As reported by the Company’s FORM 10-Q for the quarterly period ended March 31, 1999, the Company was a defendant in certain shareholder litigation filed on December 19, 1997 in federal court, Rudd, et al. v. Suburban Lodges of America, et al.; Civil Action No. 1-97-CV-3758-HTW (N.D. Ga.), related to the Company's stock offering on October 14, 1997. Management believed the claims were without merit and entered a motion for dismissal. By order and judgment entered March 31, 1999, the court granted defendants' motion to dismiss and entered judgment in favor of the defendants.

The complaint alleges that Suburban Lodges and certain of its officers and directors violated the Securities Act of 1933 by making false and misleading statements about the company's planned hotel openings in 1997 and the effect these openings would have on the company's fourth-quarter earnings. The complaint alleges that these statements were made in the prospectus for the company's secondary offering of its common stock conducted on October 14, 1997 through December 15, 1997.